0000109380us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2023-01-012023-06-300000109380zions:ProductsAndServicesWealthManagementFeesMemberzions:VectraBankColoradoSegmentMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023March 31, 2024 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) 844-8208
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered |
Common Stock, par value $0.001 | ZION | The NASDAQ Stock Market LLC |
Depositary Shares each representing a 1/40th ownership interest in a share of: | | |
Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock | ZIONP | The NASDAQ Stock Market LLC |
Series G Fixed/Floating-Rate Non-Cumulative Perpetual Preferred Stock | ZIONO | The NASDAQ Stock Market LLC |
6.95% Fixed-to-Floating Rate Subordinated Notes due September 15, 2028 | ZIONL | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Number of common shares outstanding at July 31, 2023 148,145,133April 30, 2024 147,654,732 shares
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Table of Contents
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Table of Contents
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
GLOSSARY OF ACRONYMS AND ABBREVIATIONS
| | | | | | | | | | | |
ACL | Allowance for Credit Losses | IPOHECL | Initial Public OfferingHome Equity Credit Line |
AFS | Available-for-Sale | LIBORHTM | London Interbank Offered RateHeld-to-Maturity |
ALLL | Allowance for Loan and Lease Losses | LIHTCIPO | Low-income Housing Tax CreditInitial Public Offering |
Amegy | Amegy Bank, a division of Zions Bancorporation, National Association | MunicipalitiesLIHTC | State and Local GovernmentsLow-income Housing Tax Credit |
AOCI | Accumulated Other Comprehensive Income or Loss | Municipalities | State and Local Governments |
ASC | Accounting Standards Codification | NAICS | North American Industry Classification System |
ASCASU | Accounting Standards CodificationUpdate | NASDAQ | National Association of Securities Dealers Automated Quotations |
ASUBOLI | Accounting Standards UpdateBank-Owned Life Insurance | NBAZ | National Bank of Arizona, a division of Zions Bancorporation, National Association |
BOLIbps | Bank-Owned Life InsuranceBasis Points | NIM | Net Interest Margin |
bps | Basis Points | NM | Not Meaningful |
BTFP | Bank Term Funding Program | NSBNM | Nevada State Bank, a division of Zions Bancorporation, National AssociationNot Meaningful |
CB&T | California Bank & Trust, a division of Zions Bancorporation, National Association | NSB | Nevada State Bank, a division of Zions Bancorporation, National Association |
CLTV | Combined Loan-to-Value Ratio | OCC | Office of the Comptroller of the Currency |
CECLCODM | Current Expected Credit LossChief Operating Decision Maker | OCI | Other Comprehensive Income or Loss |
CLTVCRE | Combined Loan-to-Value RatioCommercial Real Estate | OREO | Other Real Estate Owned |
CREDTA | Commercial Real EstateDeferred Tax Asset | PAM | Proportional Amortization Method |
CVADTL | Credit Valuation AdjustmentDeferred Tax Liability | PEI | Private Equity Investment |
DTAEaR | Deferred Tax AssetEarnings at Risk | PPNR | Pre-provision Net Revenue |
DTL | Deferred Tax Liability | PPP | Paycheck Protection Program |
EaREPS | Earnings at Riskper Share | ROU | Right-of-Use |
EPSEVE | Earnings per ShareEconomic Value of Equity | RULC | Reserve for Unfunded Lending Commitments |
EVEFASB | Economic Value of EquityFinancial Accounting Standards Board | S&P | Standard & Poor's |
FASBFDIC | Financial Accounting Standards BoardFederal Deposit Insurance Corporation | SBA | U.S. Small Business Administration |
FDICFHLB | Federal Deposit Insurance CorporationHome Loan Bank | SBIC | Small Business Investment Company |
FHLB | Federal Home Loan Bank | SEC | Securities and Exchange Commission |
FICO | Fair Isaac Corporation | SOFR | Secured Overnight Financing Rate |
FRB | Federal Reserve Board | TCBW | The Commerce Bank of Washington, a division of Zions Bancorporation, National Association |
FTPFRB | Funds Transfer Pricing | TDR | Troubled Debt Restructuring |
GAAP | Generally Accepted Accounting PrinciplesFederal Reserve Board | U.S. | United States |
GCFFTP | General Collateral FundingFunds Transfer Pricing | Vectra | Vectra Bank Colorado, a division of Zions Bancorporation, National Association |
HECLGAAP | Home Equity Credit LineGenerally Accepted Accounting Principles | Zions Bank | Zions Bank, a division of Zions Bancorporation, National Association |
HTMGCF | Held-to-MaturityGeneral Collateral Funding | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:
•Statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation, National Association and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
•Statements 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.
Forward-looking statements are not guarantees, nor should they be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those presented. Although the following list is not comprehensive, important factors that may cause material differences include:
•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 disruptions;challenges; changes in interest and reference rates, which could adversely affect our revenue and expenses, the value of assets and obligations,liabilities, and the availability and cost of capital and liquidity; deterioration in economic conditions that may result in increased loan and leases losses;
•SecuritiesThe effects of newly enacted and capital markets behavior, including volatilityproposed regulations affecting us and changes in market liquidity and our ability to raise capital;
•The impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; adverse media and other expressions of negative public opinion whether directed at us, other banks, the banking industry, generally, or otherwiseas well as 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 those that may adversely affect our reputationresult in decreases in revenue; increases in capital standards; and that of the banking industry;
•The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings;
•Our ability to recruitincreases in insurance assessments and retain talent, including increased competition for qualified candidates as a result of expanded remote-work opportunities and increased compensationother bank expenses;
•Competitive pressures and other factors that may affect aspects of our business, such as pricing and demand for our products and services, including theand our ability to recruit and retain talent;
•The impact of technological advancements, digital commerce, artificial intelligence, and artificial intelligence;other innovations affecting the banking industry;
•Our ability to complete projects and initiatives and execute on our strategic plans, manage our risks, control compensation and other expenses, and achieve our business objectives;
•Our ability to develop and maintain technology, information security systems and controls designed to guard against fraud, cybersecurity, and privacy risks;
•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 developNatural disasters, pandemics, catastrophic events and maintain technology, information security systemsother emergencies and controls designed to guard against fraud, cybersecurity,incidents and privacy risks;their impact on our and our customer’s operations and business and communities, including the increasing difficulty in, and the expense of, obtaining adequate insurance at reasonable prices;
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 pandemics and other health emergencies that may affect our business, employees, customers, and communities;
•The effects of wars and geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
•Natural disasters that may impact our and our customer's operations and business; and
•Governmental and social responses to environmental, social, and governance issues, including those with respect to climate change.change;
•Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital;
•The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and shareholders’ equity, but not on our regulatory capital;
•The impact of bank closures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
•Adverse news and other expressions of negative public opinion whether directed at us, other banks, the banking industry, or otherwise that may adversely affect our reputation and that of the banking industry generally;
•Protracted congressional negotiations and political stalemates regarding government funding and other issues, including those that increase the possibility of government shutdowns, downgrades in United States (“U.S.”) credit ratings, or other economic disruptions; and
•The effects of wars and geopolitical conflicts, such as the ongoing war between Russia and Ukraine, the war in the Middle East, and other local, national, or international disasters, crises, or conflicts that may occur in the future.
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 forward-looking statements 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:
•Generated deposit growth through a combination of competitive interest rates and expanded utilization of reciprocal and brokered deposit programs;
•Increased total available liquidity sources, which far exceed our level of uninsured deposits;
•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-yearprior year period unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they generally reflect a low starting point.
Executive SummaryFirst Quarter 2024 Financial Performance
Our financial results in the second quarter of 2023 reflected solid sequential customer deposit growth and continued strong credit quality. Diluted earnings per share (“EPS”) was $1.11, compared with $1.29 in the second quarter of 2022, as an increase in noninterest income was offset by higher noninterest expense and provision for credit losses. | | | | | | | | | | | | | | | | | | | | |
Net Earnings Applicable to Common Shareholders (in millions) | | Diluted EPS | | Adjusted PPNR (in millions) | | Efficiency Ratio |
Net interest income remained relatively stable at $591 million, compared with the prior year quarter, as higher earning asset yields were offset by an increase in interest paid on deposits and short-term borrowings. Net interest income was also impacted by a reduction in interest-earning assets and a significant increase in interest-bearing liabilities. The net interest margin (“NIM”) was 2.92%, compared with 2.87%.
The provision for credit losses was $46 million, compared with a $41 million provision in the prior year period, reflecting deterioration in economic forecasts.
Total customer-related noninterest income increased $8 million, or 5%, compared with the prior year period. The increase was driven primarily by improved commercial account activity, including treasury management fees, as well as loan syndication, swaps, and other capital markets income. Total noninterest income increased $17 million, or 10%, primarily due to a $13 million gain on the sale of a bank-owned property.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
TotalExecutive Summary
Our financial results in the first quarter of 2024 reflected low net charge-offs, reduced net interest income, loan growth, and sequential improvement of the net interest margin (“NIM”). Diluted earnings per share (“EPS”) was $0.96, compared with $1.33 in the first quarter of 2023, as lower revenue and slightly higher noninterest expense increased $44was partially offset by a lower provision for credit losses.
•Net interest income decreased $93 million, or 9%14%, relative to the prior year period, as higher funding costs more than offset higher earning asset yields. The net interest margin was 2.94%, compared with 3.33%, and was up from 2.91% in the fourth quarter driven largelyof 2023. Net interest income was also impacted by reduced interest-earning assets and 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.interest-bearing liabilities.
◦Average interest-earning assets decreased $1.5$2.2 billion, or 2%3%, 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$1.8 billion, or 9%3%, primarily due to $56.9 billion. The increase was primarilygrowth in the consumer 1-4 family residential mortgage commercial and industrial, commercial real estate term,(“CRE”) multi-family and consumerindustrial construction loan portfolios. Nonperforming assets decreased $37
◦Average interest-bearing liabilities increased $6.0 billion, or 12%, driven by an increase in average interest-bearing deposits, partially offset by a decline in average borrowed funds.
◦Total deposits increased $5.0 billion, or 7%, as an increase in interest-bearing deposits was partially offset by a decrease in noninterest-bearing demand deposits. Customer deposits (excluding brokered deposits) totaled $69.9 billion, compared with $63.8 billion at March 31, 2023, and included approximately $7.5 billion of reciprocal deposits at March 31, 2024.
•The provision for credit losses was $13 million, compared with $45 million in the prior year period.
•Customer-related noninterest income remained flat at $151 million, as an increase in capital markets fees was offset by a decrease in loan-related fees and income. Decreases in noncustomer-related noninterest income were due largely to higher mark-to-market valuation adjustments related to servicing rights in the prior year quarter, a decrease in dividends on Federal Home Loan Bank (“FHLB”) stock, and a valuation loss associated with one of our equity investments in the current period.
•Noninterest expense increased $14 million, or 18%3%, driven largely by an increase in deposit insurance and classified loans decreased $241regulatory expense, which included a $13 million or 24%. accrual associated with an updated special assessment estimate by the Federal Deposit Insurance Corporation (“FDIC”) during the quarter. This increase was partially offset by a decrease in salaries and employee benefits expense, primarily due to a decline in incentive compensation accruals.
•Net loan and lease charge-offs totaled $13$6 million, or 0.04% of average loans, compared with $9 million,zero net charge-offs in the prior year quarter. Classified loans increased $54 million, or 6%. Nonperforming assets increased to $254 million, or 0.44%, compared with $173 million, or 0.31%, of loans and leases, primarily due to a small number of loans in the commercial and industrial and term commercial real estate portfolios.
•Total depositsborrowed funds, consisting primarily of secured borrowings, decreased $4.7$7.3 billion, or 6%57%, from the prior year quarter, mainly due largely to decreasesan increase in larger-balanceinterest-bearing deposits 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 billiona decrease 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 2023 Financial Performance
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Net Earnings Applicable to Common Shareholders (in millions)interest-earning assets. | | Diluted EPS | | Adjusted PPNR (in millions) | | Efficiency Ratio |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net earnings applicable to common shareholders decreased from the second quarter of 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 decrease in interest-earning assets, an increase in interest-bearing liabilities, and an increase in associated funding costs. | | Diluted earnings per share declined from the second quarter of 2022 primarily as a result of decreased net earnings applicable to common shareholders. | | Adjusted pre-provision net revenue (“PPNR”) decreased from the second quarter of 2022, primarily due to higher adjusted noninterest expense, which was driven largely by higher FDIC insurance costs. This increase was largely offset by higher adjusted taxable-equivalent revenue. | | The efficiency ratio increased from the prior year quarter, as growth in adjusted noninterest expense exceeded growth in adjusted 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 June 30, | | Amount change | | Percent change | | Six Months Ended June 30, | | Amount change | | Percent change |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2023 | | 2022 | | Amount change | | Percent change | | 2023 | | 2022 | | Amount change | | Percent change |
| Interest and fees on loans 1 | Interest and fees on loans 1 | $ | 791 | | | $ | 468 | | | $ | 323 | | | 69 | % | | $ | 1,517 | | $ | 905 | | $ | 612 | | | 68 | % |
| Interest and fees on loans 1 | |
| Interest and fees on loans 1 | |
Interest on money market investments | |
Interest on money market investments | |
Interest on money market investments | Interest on money market investments | 48 | | | 12 | | | 36 | | | NM | | 105 | | 18 | | 87 | | | NM |
Interest on securities | Interest on securities | 138 | | | 128 | | | 10 | | | 8 | | | 275 | | 240 | | 35 | | | 15 | |
Interest on securities | |
Interest on securities | |
Total interest income | |
Total interest income | |
Total interest income | Total interest income | 977 | | | 608 | | | 369 | | | 61 | | | 1,897 | | 1,163 | | 734 | | | 63 | |
Interest on deposits | Interest on deposits | 220 | | | 7 | | | 213 | | | NM | | 302 | | 13 | | 289 | | | NM |
Interest on deposits | |
Interest on deposits | |
Interest on short- and long-term borrowings | |
Interest on short- and long-term borrowings | |
Interest on short- and long-term borrowings | Interest on short- and long-term borrowings | 166 | | | 8 | | | 158 | | | NM | | 325 | | 13 | | 312 | | | NM |
Total interest expense | Total interest expense | 386 | | | 15 | | | 371 | | | NM | | 627 | | 26 | | 601 | | | NM |
Total interest expense | |
Total interest expense | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | $ | 591 | | | $ | 593 | | | $ | (2) | | | — | % | | $ | 1,270 | | $ | 1,137 | | $ | 133 | | | 12 | % |
| Average interest-earning assets | Average interest-earning assets | $ | 82,500 | | | $ | 84,041 | | | $ | (1,541) | | | (2) | % | | $ | 83,161 | | $ | 85,061 | | $ | (1,900) | | | (2) | % |
| Average interest-earning assets | |
| Average interest-earning assets | |
Average interest-bearing liabilities | Average interest-bearing liabilities | $ | 52,453 | | | $ | 41,234 | | | $ | 11,219 | | | 27 | % | | $ | 50,742 | | $ | 41,683 | | $ | 9,059 | | | 22 | % |
| bps | | bps | |
Average interest-bearing liabilities | |
Average interest-bearing liabilities | |
| | | | | bps | |
| | | | | bps | |
| | | | | bps | |
Yield on interest-earning assets 2 | |
Yield on interest-earning assets 2 | |
Yield on interest-earning assets 2 | 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 | 1.88 | % | | 0.07 | % | | 181 | | | 1.54 | % | | 0.06 | % | | 148 | | |
Rate paid on total deposits and interest-bearing liabilities 2 | |
Rate paid on total deposits and interest-bearing liabilities 2 | |
Cost of total deposits 2 | |
Cost of total deposits 2 | |
Cost of total deposits 2 | Cost of total deposits 2 | 1.27 | % | | 0.03 | % | | 124 | | | 0.87 | % | | 0.03 | % | | 84 | | |
Net interest margin 2 | Net interest margin 2 | 2.92 | % | | 2.87 | % | | 5 | | | 3.13 | % | | 2.73 | % | | 40 | | |
Net interest margin 2 | |
Net interest margin 2 | |
1 Includes interest income recoveries of $2 million and $4 million for both the three months ended March 31, 2024, and $4 million and $6 million for the six months ended June 30, 2023, and 2022, respectively.2023.
2 Rates are calculated using amounts in thousands; taxable-equivalentTaxable-equivalent rates are used where applicable.
Net interest income accounted for approximately 76%79% of our net revenue (net interest income plus noninterest income) for the current quarter and remained relatively stable compared withdecreased $93 million, or 14%, relative to the prior year quarter, as higher funding costs more than offset higher earning asset yields were offset by an increase in interest paid on deposits and short-term borrowings. Net interest income was also impacted by a reduction in interest-earning assets and a significant increase in interest-bearing liabilities.
Average interest-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 was partially offset by an increase of $4.9 billion in average loans and 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.
yields. The NIM was 2.92%2.94%, compared with 2.87%. 3.33%, and was up from 2.91% in the fourth quarter of 2023.
The yield on average interest-earning assets was 4.81%5.25% in the secondfirst quarter of 2023,2024, an increase of 18776 basis points (“bps”), reflecting higher interest rates and a favorable mix change from money market investments to loans.higher-yielding assets. The yield on average loans and leases increased 198 basis points76 bps to 5.65%6.06%, and the yield on average securities increased 59 basis points38 bps to 2.56%. The yield on average securities benefited from a decrease2.84% in the market valuefirst quarter of AFS securities due to rising interest rates. 2024.
The rate paid on averagetotal deposits and interest-bearing liabilities increased to 2.95%was 2.34%, compared with 0.14%1.17% in the prior year quarter, and the cost of total deposits was 2.06%, compared with 0.47%, also reflecting the higher interest rate environment competitive pricing,as well as reduced noninterest-bearing deposits.
Net interest income was also impacted by reduced interest-earning assets and an increase in interest-bearing liabilities. Average interest-earning assets decreased $2.2 billion, or 3%, from the prior year quarter, driven by declines of $2.5 billion and $1.5 billion in average securities and average money market investments, respectively. The decrease in average securities was primarily due to principal reductions. These decreases were partially offset by an increase of $1.8 billion in average loans and leases.
Average interest-bearing liabilities increased $6.0 billion, or 12%, from the prior year quarter, driven by an increase of $12.0 billion in average interest-bearing deposits, as customers moved from noninterest-bearing to interest-bearing products in response to the higher interest rate environment. This increase was partially offset by a decrease of $6.0 billion in average borrowed funds.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following charts further illustrate the changes in average interest-earning assets and average interest-bearing liabilities:Average loans and leases increased $4.9$1.8 billion, or 9%3%, to $56.7$57.9 billion, mainlyprimarily due to growth in average consumer and commercial real estate loans. The yield on total loans increased 198 basis points to 5.65%, reflecting the higher interest rate environment.
Average securities decreased $4.5$2.5 billion, or 17%11%, to $22.0$20.4 billion, primarily due to approximately $3.6 billion inavailable-for-sale (“AFS”) securities 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 $11.2increased $3.2 billion, or 14%5%, to $69.7$73.4 billionat an average cost of 2.06%, from $70.2 billion at an average cost of 1.27%, from $80.9 billion at an average cost of 0.03%0.47% in the secondfirst quarter of 2022.2023. Average noninterest-bearing deposits as a percentage of total deposits were 43%decreased to 35%, compared with 51%49% during the same prior year period.
The decreaseloan-to-deposit ratio was 78%, compared with 81% in average deposits was driven by a decline in average noninterest-bearing deposits as interest rates increased. In recent years, particularly during the COVID-19 pandemic, we experienced a significant influx of deposits, which was impacted by considerable fiscal and 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.quarter.
Average borrowed funds, consisting primarily of secured borrowings, from the FHLB, increased $11.2decreased $6.0 billion, from the prior year quarteror 45%, to $7.2 billion, due largely to an increase in response to loan growthinterest-bearing deposits and the declinea decrease in noninterest-bearing deposits.interest-earning assets.
For more information on our investmentsinvestment securities portfolio and borrowed funds and how we manage liquidity risk, refer to the “Investment Securities Portfolio” section on page 1615 and the “Liquidity Risk Management” section on page 31. For further discussion of the effects of market rates on net interest income and how we manage interest rate risk, refer to the “Interest Rate and Market Risk Management” section on page 27.28.
The following schedule summarizes the average balances, the amount of interest earned or paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities.liabilities:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES | (Unaudited) | (Unaudited) | Three Months Ended June 30, 2023 | | Three Months Ended June 30, 2022 | (Unaudited) | Three Months Ended March 31, 2024 | | Three Months Ended March 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Average balance | | Amount of interest 1 | | Average yield/rate 1 | | Average balance | | Amount of interest 1 | | Average yield/rate 1 | (Dollar amounts in millions) | Average balance | | Interest | | Yield/ Rate 1 | | Average balance | | Interest | | Yield/ Rate 1 |
ASSETS | ASSETS | | | | | | | | | | | |
Money market investments: | Money market investments: | |
Money market investments: | |
Money market investments: | |
Interest-bearing deposits | |
Interest-bearing deposits | |
Interest-bearing deposits | Interest-bearing deposits | $ | 2,899 | | | $ | 37 | | | 5.08 | % | | $ | 3,113 | | | $ | 5 | | | 0.66 | % | $ | 1,447 | | | $ | | $ | 20 | | | 5.71 | | 5.71 | % | | $ | 2,724 | | | $ | | $ | 31 | | | 4.72 | | 4.72 | % |
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 | 3,683 | | | 48 | | | 5.20 | | | 5,655 | | | 12 | | | 0.87 | |
Securities: | Securities: | | | | | | | | |
Held-to-maturity | Held-to-maturity | 10,833 | | | 60 | | | 2.24 | | | 485 | | | 4 | | | 2.96 | |
Available-for-sale 2 | 11,180 | | | 80 | | | 2.85 | | | 25,722 | | | 123 | | | 1.91 | |
Held-to-maturity | |
Held-to-maturity | |
Available-for-sale | |
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 | 73 | | | 1 | | | 7.08 | | | 38 | | | — | | | 0.72 | |
Loans and leases | |
Loans and leases: 2 | |
Commercial | |
Commercial | |
Commercial | Commercial | 30,650 | | | 417 | | | 5.46 | | | 28,952 | | | 275 | | | 3.81 | |
Commercial real estate | Commercial real estate | 12,933 | | | 225 | | | 6.97 | | | 12,098 | | | 112 | | | 3.69 | |
Consumer | Consumer | 13,096 | | | 156 | | | 4.80 | | | 10,734 | | | 87 | | | 3.24 | |
Total loans and leases | Total loans and leases | 56,679 | | | 798 | | | 5.65 | | | 51,784 | | | 474 | | | 3.67 | |
Total interest-earning assets | Total interest-earning assets | 82,500 | | | 988 | | | 4.81 | | | 84,041 | | | 617 | | | 2.94 | |
Cash and due from banks | 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 | (619) | | | (480) | | |
Allowance for credit losses on loans and debt securities | |
Allowance for credit losses on loans and debt securities | |
Goodwill and intangibles | |
Goodwill and intangibles | |
Goodwill and intangibles | Goodwill and intangibles | 1,063 | | | 1,015 | | |
Other assets | Other assets | 5,524 | | | 4,712 | | |
Other assets | |
Other assets | |
Total assets | |
Total assets | |
Total assets | Total assets | $ | 89,121 | | | $ | 89,905 | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
Interest-bearing deposits: | Interest-bearing deposits: | |
Interest-bearing deposits: | |
Interest-bearing deposits: | |
Savings and money market | |
Savings and money market | |
Savings and money market | Savings and money market | $ | 30,325 | | | $ | 113 | | | 1.49 | % | | $ | 38,325 | | | $ | 6 | | | 0.06 | % | $ | 38,044 | | | $ | | $ | 259 | | | 2.73 | | 2.73 | % | | $ | 32,859 | | | $ | | $ | 62 | | | 0.77 | | 0.77 | % |
Time | Time | 9,494 | | | 107 | | | 4.55 | | | 1,488 | | | 1 | | | 0.24 | |
| Total interest-bearing deposits | Total interest-bearing deposits | 39,819 | | | 220 | | | 2.22 | | | 39,813 | | | 7 | | | 0.07 | |
Total interest-bearing deposits | |
Total interest-bearing deposits | |
Borrowed funds: | Borrowed funds: | | | | | | | | |
Federal funds and security repurchase agreements | |
Federal funds and security repurchase agreements | |
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 | 636 | | | 9 | | | 5.97 | | | 678 | | | 7 | | | 3.79 | |
Total borrowed funds | Total borrowed funds | 12,634 | | | 166 | | | 5.26 | | | 1,421 | | | 8 | | | 2.17 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 52,453 | | | 386 | | | 2.95 | | | 41,234 | | | 15 | | | 0.14 | |
Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | 29,830 | | | | | 41,074 | | | | |
Other liabilities | Other liabilities | 1,580 | | | 1,575 | | |
Other liabilities | |
Other liabilities | |
Total liabilities | |
Total liabilities | |
Total liabilities | Total liabilities | 83,863 | | | 83,883 | | |
Shareholders’ equity: | Shareholders’ equity: | |
Shareholders’ equity: | |
Shareholders’ equity: | |
Preferred equity | |
Preferred equity | |
Preferred equity | Preferred equity | 440 | | | 440 | | |
Common equity | Common equity | 4,818 | | | 5,582 | | |
Common equity | |
Common equity | |
Total shareholders’ equity | |
Total shareholders’ equity | |
Total shareholders’ equity | Total shareholders’ equity | 5,258 | | | 6,022 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 89,121 | | | $ | 89,905 | | |
Total liabilities and shareholders’ equity | |
Total liabilities and shareholders’ equity | |
Spread on average interest-bearing funds | |
Spread on average interest-bearing funds | |
Spread on average interest-bearing funds | Spread on average interest-bearing funds | | | 1.86 | % | | | | 2.80 | % | | | | | 1.83 | % | | | | | | 2.50 | % |
Net impact of noninterest-bearing sources of funds | Net impact of noninterest-bearing sources of funds | | 1.06 | % | | 0.07 | % | Net impact of noninterest-bearing sources of funds | | | | | 1.11 | % | | | | | | 0.83 | % |
Net interest margin | Net interest margin | | $ | 602 | | | 2.92 | % | | $ | 602 | | | 2.87 | % | Net interest margin | | | $ | 596 | | | 2.94 | | 2.94 | % | | | | $ | 688 | | | 3.33 | | 3.33 | % |
Memo: total cost of deposits | Memo: total cost of deposits | | 1.27 | % | | 0.03 | % | Memo: total cost of deposits | | | | | 2.06 | % | | | | | | 0.47 | % |
Memo: total deposits and interest-bearing liabilities | Memo: total deposits and interest-bearing liabilities | $ | 82,283 | | | 386 | | | 1.88 | % | | $ | 82,308 | | | 15 | | | 0.07 | % | Memo: total deposits and interest-bearing liabilities | $ | 80,580 | | | 468 | | 468 | | | 2.34 | | 2.34 | % | | $ | 83,375 | | | 241 | | 241 | | | 1.17 | | 1.17 | % |
1 Rates are calculated using amounts in thousands and a tax rate of 21% for the periods presented.Taxable-equivalent rates used where applicable.
2 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 | | Six Months Ended June 30, 2022 |
(Dollar amounts in millions) | Average balance | | Amount of interest 1 | | Average yield/rate 1 | | Average balance | | Amount of interest 1 | | Average yield/rate 1 |
ASSETS | | | | | | | | | | | |
Money market investments: | | | | | | | | | | | |
Interest-bearing deposits | $ | 2,771 | | | $ | 68 | | | 4.98 | % | | $ | 4,914 | | | $ | 8 | | | 0.34 | % |
Federal funds sold and securities purchased under agreements to resell | 1,428 | | | 37 | | | 5.19 | | | 2,422 | | | 10 | | | 0.84 | |
Total money market investments | 4,199 | | | 105 | | | 5.05 | | | 7,336 | | | 18 | | | 0.50 | |
Securities: | | | | | | | | | | | |
Held-to-maturity | 10,928 | | | 122 | | | 2.26 | | | 462 | | | 7 | | | 3.04 | |
Available-for-sale 2 | 11,500 | | | 156 | | | 2.73 | | | 25,485 | | | 229 | | | 1.81 | |
Trading | 78 | | | 1 | | | 2.14 | | | 370 | | | 9 | | | 4.91 | |
Total securities | 22,506 | | | 279 | | | 2.50 | | | 26,317 | | | 245 | | | 1.88 | |
Loans held for sale | 39 | | | 1 | | | 6.67 | | | 48 | | | — | | | 1.44 | |
Loans and leases | | | | | | | | | | | |
Commercial | 30,664 | | | 798 | | | 5.25 | | | 28,725 | | | 535 | | | 3.76 | |
Commercial real estate | 12,904 | | | 434 | | | 6.78 | | | 12,134 | | | 213 | | | 3.53 | |
Consumer | 12,849 | | | 300 | | | 4.71 | | | 10,501 | | | 169 | | | 3.24 | |
Total loans and leases | 56,417 | | | 1,532 | | | 5.48 | | | 51,360 | | | 917 | | | 3.60 | |
Total interest-earning assets | 83,161 | | | 1,917 | | | 4.65 | | | 85,061 | | | 1,180 | | | 2.80 | |
Cash and due from banks | 598 | | | | | | | 621 | | | | | |
Allowance for credit losses on loans and debt securities | (597) | | | | | | | (497) | | | | | |
Goodwill and intangibles | 1,064 | | | | | | | 1,015 | | | | | |
Other assets | 5,574 | | | | | | | 4,463 | | | | | |
Total assets | $ | 89,800 | | | | | | | $ | 90,663 | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | |
Savings and money market | $ | 31,585 | | | $ | 175 | | | 1.12 | % | | $ | 38,726 | | | $ | 11 | | | 0.05 | % |
Time | 6,232 | | | 127 | | | 4.11 | | | 1,538 | | | 2 | | | 0.25 | |
| | | | | | | | | | | |
Total interest-bearing deposits | 37,817 | | | 302 | | | 1.61 | | | 40,264 | | | 13 | | | 0.06 | |
Borrowed funds: | | | | | | | | | | | |
Federal funds and security repurchase agreements | 5,015 | | | 121 | | | 4.85 | | | 661 | | | 1 | | | 0.43 | |
Other short-term borrowings | 7,266 | | | 184 | | | 5.09 | | | 8 | | | — | | | — | |
Long-term debt | 644 | | | 20 | | | 6.42 | | | 750 | | | 12 | | | 3.17 | |
Total borrowed funds | 12,925 | | | 325 | | | 5.07 | | | 1,419 | | | 13 | | | 1.88 | |
Total interest-bearing liabilities | 50,742 | | | 627 | | | 2.49 | | | 41,683 | | | 26 | | | 0.12 | |
Noninterest-bearing demand deposits | 32,084 | | | | | | | 40,980 | | | | | |
Other liabilities | 1,817 | | | | | | | 1,422 | | | | | |
Total liabilities | 84,643 | | | | | | | 84,085 | | | | | |
Shareholders’ equity: | | | | | | | | | | | |
Preferred equity | 440 | | | | | | | 440 | | | | | |
Common equity | 4,717 | | | | | | | 6,138 | | | | | |
Total shareholders’ equity | 5,157 | | | | | | | 6,578 | | | | | |
Total liabilities and shareholders’ equity | $ | 89,800 | | | | | | | $ | 90,663 | | | | | |
Spread on average interest-bearing funds | | | | | 2.16 | % | | | | | | 2.68 | % |
Net impact of noninterest-bearing sources of funds | | | | | 0.97 | % | | | | | | 0.05 | % |
Net interest margin | | | $ | 1,290 | | | 3.13 | % | | | | $ | 1,154 | | | 2.73 | % |
Memo: total cost of deposits | | | | | 0.87 | % | | | | | | 0.03 | % |
Memo: total deposits and interest-bearing liabilities | $ | 82,826 | | | 627 | | | 1.54 | % | | $ | 82,663 | | | 26 | | | 0.06 | % |
1 Rates are calculated using amounts in thousands and a tax rate of 21% for the periods presented.
2 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, inon the income statement.consolidated statement of income. The ACL for debt securities is estimated separately from loans and is recordedincluded in investment securities“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 $46$13 million, compared with $41$45 million in the secondfirst quarter of 2022. 2023.
The ACL was $711$736 million at June 30, 2023,March 31, 2024, compared with $546$678 million at June 30, 2022.March 31, 2023. The increase in the ACL was primarily due toreflects incremental reserves associated with portfolio-specific risks including commercial real estate and modest deterioration in credit quality, partially offset by improvements in economic forecasts. The ratio of ACL to total loans and leases was 1.25%1.27% and 1.04%1.20% at June 30,March 31, 2024 and 2023, and 2022, respectively. The provision for securities losses was less than $1 million during both the secondfirst quarter of 20232024 and 2022.
2023.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The bar chart above illustrates the broad categories of change in the ACL from the prior year period. To estimate current expected losses, we use econometric loss models that include multiple economic scenarios that reflect optimistic, baseline, and stressed economic conditions. The results derived using these economic scenarios are weighted to produce the credit loss estimate. Management may adjust the weights to reflect their assessment of current conditions and reasonable and supportable forecasts. The second bar represents changes in these economic forecasts and current economic conditions, which increasedincluding management's judgment of the weighting of the economic forecasts. These changes contributed to a $90 million decrease in the ACL by $149 million from the prior year quarter.
The third bar represents changes in credit quality factors and includes risk-grade migration, portfolio-specific risks, and specific reserves against loans, which, when combined, increasedcontributed to a $193 million increase in the ACL, driven largely by $3 million, reflecting relatively stable credit quality. Nonperforming assets decreased $37 million, or 18%, and classified loans decreased $241 million, or 24%. Net loan and lease charge-offs totaled $13 million, or 0.09% annualized of average loans, compared with net charge-offs of $9 million, or 0.07% annualized of average loans in the prior year quarter.an increased focus on certain portfolio-specific risks, including commercial real estate.
The fourth bar represents changes in our loan portfolio changes, driven primarily by loan growth, as well ascomposition, including changes in portfolio mix,loan balances, the aging of the portfolio, and other qualitative risk factors; all of which resulted incontributed to a $13$45 million increasedecrease in the ACL.
See “Credit Risk Management” on page 20 and Note 6 in our 20222023 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 earned from products and services that generally have no associated interest rate or yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives.
Total noninterest income increased $17decreased $4 million, or 10%3%, relative to the prior year. Noninterest income accounted for approximately 24%21% and 22%19% of our net revenue (net interest income plus noninterest income) during the secondfirst quarter of 20232024 and 2022,2023, respectively. The following schedule presents a comparison of the major components of noninterest income.
NONINTEREST INCOME
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Amount change | | Percent change | | Six Months Ended June 30, | | Amount change | | Percent change |
(Dollar amounts in millions) | 2023 | | 2022 | | | 2023 | | 2022 | |
| | | | | | | | | | | | | | | |
Commercial account fees | $ | 45 | | | $ | 37 | | | $ | 8 | | | 22 | % | | $ | 88 | | | $ | 78 | | | $ | 10 | | | 13 | % |
Card fees | 25 | | | 25 | | | — | | | — | | | 49 | | | 50 | | | (1) | | | (2) | |
Retail and business banking fees | 16 | | | 20 | | | (4) | | | (20) | | | 32 | | | 40 | | | (8) | | | (20) | |
Loan-related fees and income | 19 | | | 21 | | | (2) | | | (10) | | | 40 | | | 43 | | | (3) | | | (7) | |
Capital markets fees | 27 | | | 21 | | | 6 | | | 29 | | | 44 | | | 36 | | | 8 | | | 22 | |
Wealth management fees | 14 | | | 13 | | | 1 | | | 8 | | | 29 | | | 27 | | | 2 | | | 7 | |
Other customer-related fees | 16 | | | 17 | | | (1) | | | (6) | | | 31 | | | 31 | | | — | | | — | |
Customer-related noninterest income | 162 | | | 154 | | | 8 | | | 5 | | | 313 | | | 305 | | | 8 | | | 3 | |
| | | | | | | | | | | | | | | |
Fair value and nonhedge derivative income | 1 | | | 10 | | | (9) | | | (90) | | | (2) | | | 16 | | | (18) | | | NM |
Dividends and other income (loss) | 26 | | | 7 | | | 19 | | | NM | | 37 | | | 9 | | | 28 | | | NM |
Securities gains (losses), net | — | | | 1 | | | (1) | | | NM | | 1 | | | (16) | | | 17 | | | NM |
Noncustomer-related noninterest income | 27 | | | 18 | | | 9 | | | 50 | | | 36 | | | 9 | | | 27 | | | NM |
Total noninterest income | $ | 189 | | | $ | 172 | | | $ | 17 | | | 10 | % | | $ | 349 | | | $ | 314 | | | $ | 35 | | | 11 | % |
Customer-related Noninterest Income
Total customer-related noninterest income increased $8 million, or 5%, compared with the prior year period. The increase was driven primarily by improved commercial account activity, including treasury management fees, as well as loan syndication, swaps, and other capital markets income. Retail and business banking fees decreased largely as a result of a change in our overdraft and non-sufficient funds practices effected during the third quarter of 2022.income:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NONINTEREST INCOME
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Amount change | | Percent change | | | | | | |
(Dollar amounts in millions) | 2024 | | 2023 | | | | | | |
| | | | | | | | | | | | | | | |
Commercial account fees | $ | 44 | | | $ | 43 | | | $ | 1 | | | 2 | % | | | | | | | | |
Card fees | 23 | | | 24 | | | (1) | | | (4) | | | | | | | | | |
Retail and business banking fees | 16 | | | 16 | | | — | | | — | | | | | | | | | |
Loan-related fees and income | 15 | | | 21 | | | (6) | | | (29) | | | | | | | | | |
Capital markets fees | 24 | | | 17 | | | 7 | | | 41 | | | | | | | | | |
Wealth management fees | 15 | | | 15 | | | — | | | — | | | | | | | | | |
Other customer-related fees | 14 | | | 15 | | | (1) | | | (7) | | | | | | | | | |
Customer-related noninterest income | 151 | | | 151 | | | — | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | |
Fair value and nonhedge derivative income | 1 | | | (3) | | | 4 | | | NM | | | | | | | | |
Dividends and other income (loss) | 6 | | | 11 | | | (5) | | | (45) | | | | | | | | | |
Securities gains (losses), net | (2) | | | 1 | | | (3) | | | NM | | | | | | | | |
Noncustomer-related noninterest income | 5 | | | 9 | | | (4) | | | (44) | | | | | | | | | |
Total noninterest income | $ | 156 | | | $ | 160 | | | $ | (4) | | | (3) | % | | | | | | | | |
Customer-related Noninterest Income
Customer-related noninterest income remained flat at $151 million. An increase in capital markets fees, driven largely by improved real estate capital markets and securities underwriting activity, was offset by a decrease in loan-related fees and income, primarily due to higher gains on loan sales in the prior year period and a decline in loan servicing income resulting from the sale of associated mortgage servicing rights in the third quarter of 2023.
Noncustomer-related Noninterest Income
Total noncustomer-relatedNoncustomer-related noninterest income increased $9decreased $4 million from the prior year quarter. Dividends and other income increased $19decreased $5 million, primarily due to higher mark-to-market valuation adjustments related to servicing rights in the prior year quarter and a $13 million gain on the sale of a bank-owned property, as well as an increasedecrease in dividends on FHLB stock. Net securities gains decreased $3 million, due to a $4 million valuation loss associated with one of our equity investments in the current period. These increasesdecreases were offset by a $9$4 million decreaseincrease in fair value and nonhedge derivative income, primarily due to a $10 million credit valuation adjustment (“CVA”) gain in the prior year period.adjustments on client-related interest rate swaps.
Noninterest Expense
The following schedule presents a comparison of the major components of noninterest expense.expense:
NONINTEREST EXPENSE
| | Three Months Ended June 30, | | Amount change | | Percent change | | Six Months Ended June 30, | | Amount change | | Percent change |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2023 | | 2022 | | Amount change | | Percent change | | 2023 | | 2022 | | Amount change | | Percent change |
| Salaries and employee benefits | Salaries and employee benefits | $ | 324 | | | $ | 307 | | | $ | 17 | | | 6 | % | | $ | 663 | | | $ | 619 | | | $ | 44 | | | 7 | % |
| Salaries and employee benefits | |
| Salaries and employee benefits | |
Technology, telecom, and information processing | |
Technology, telecom, and information processing | |
Technology, telecom, and information processing | Technology, telecom, and information processing | 58 | | | 53 | | | 5 | | | 9 | | | 113 | | | 105 | | | 8 | | | 8 | |
Occupancy and equipment, net | Occupancy and equipment, net | 40 | | | 36 | | | 4 | | | 11 | | | 80 | | | 74 | | | 6 | | | 8 | |
Occupancy and equipment, net | |
Occupancy and equipment, net | |
Professional and legal services | |
Professional and legal services | |
Professional and legal services | Professional and legal services | 16 | | | 14 | | | 2 | | | 14 | | | 29 | | | 28 | | | 1 | | | 4 | |
Marketing and business development | Marketing and business development | 13 | | | 9 | | | 4 | | | 44 | | | 25 | | | 17 | | | 8 | | | 47 | |
Marketing and business development | |
Marketing and business development | |
Deposit insurance and regulatory expense | |
Deposit insurance and regulatory expense | |
Deposit insurance and regulatory expense | Deposit insurance and regulatory expense | 22 | | | 13 | | | 9 | | | 69 | | | 40 | | | 23 | | | 17 | | | 74 | |
Credit-related expense | Credit-related expense | 7 | | | 7 | | | — | | | — | | | 13 | | | 14 | | | (1) | | | (7) | |
Other real estate expense, net | — | | | — | | | — | | | NM | | — | | | 1 | | | (1) | | | NM |
Credit-related expense | |
Credit-related expense | |
| Other | |
| Other | |
| Other | Other | 28 | | | 25 | | | 3 | | | 12 | | | 57 | | | 47 | | | 10 | | | 21 | |
Total noninterest expense | Total noninterest expense | $ | 508 | | | $ | 464 | | | $ | 44 | | | 9 | % | | $ | 1,020 | | | $ | 928 | | | $ | 92 | | | 10 | % |
Adjusted noninterest expense 1 | $ | 494 | | | $ | 463 | | | $ | 31 | | | 7 | % | | $ | 1,003 | | | $ | 927 | | | $ | 76 | | | 8 | % |
Total noninterest expense | |
Total noninterest expense | |
Adjusted noninterest expense (non-GAAP) | |
Adjusted noninterest expense (non-GAAP) | |
Adjusted noninterest expense (non-GAAP) | |
1 Table of ContentsFor information on non-GAAP financial measures, see “Non-GAAP Financial Measures” on page 35.ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Total noninterest expense increased $44$14 million, or 9%3%, relative to the prior year quarter. Salaries and benefits expense increased $17 million, or 6%, primarily due to $13 million in severance expense during the current quarter, reflecting our commitment to manage expenses.
Deposit insurance and regulatory expense increased $9$16 million, or 69%, driven largely by a $13 million accrual associated with an increased FDIC insurance base rate beginning in 2023 and changes in balance sheet composition. In May 2023,updated special assessment estimate by the FDIC issued a Notice of Proposed Rulemaking,during the current quarter, 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 equalwas related 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 latebank closures in early 2023.
Technology, telecom, and information processing expense increased $5$7 million, or 9%13%, primarily due to increases in software amortization expenses associated with the replacement of our core loan and deposit banking systems, as well as other related application software, license, and maintenance expenses. Salaries and related amortization expenses.employee benefits expense decreased $8 million, or 2%, primarily due to a decline in incentive compensation accruals.
Adjusted noninterest expense remained relatively flat at $511 million. The efficiency ratio was 62.5%67.9%, compared with 60.7%59.9%, as growth in adjusted noninterest expense outpaced growthprimarily due to a decline in adjusted taxable-equivalent revenue. For information on non-GAAP financial measures, see page 35.
Technology Spend
TechnologyConsistent with our strategic objectives, we invest in technologies that will make us more efficient and enable us to remain competitive. We generally consider these investments as technology spend, which represents expenditures associated with technology-related investments, operations, systems, and infrastructure, and includes current period expenses reportedpresented on ourthe consolidated statement of income, andas well as capitalized investments, net of related amortization and depreciation, reportedpresented on ourthe 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 March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
| | 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 | |
| Technology, telecom, and information processing expense | |
| Technology, telecom, and information processing expense | Technology, telecom, and information processing expense | $ | 58 | | | $ | 53 | | | $ | 5 | | | 9 | % | | $ | 113 | | | $ | 105 | | | $ | 8 | | | 8 | % |
Other technology-related expense | Other technology-related expense | 56 | | | 51 | | | 5 | | | 10 | | | 110 | | | 100 | | | 10 | | | 10 | |
Other technology-related expense | |
Other technology-related expense | |
Technology investments | |
Technology investments | |
Technology investments | Technology investments | 23 | | | 22 | | | 1 | | | 5 | | | 49 | | | 44 | | | 5 | | | 11 | |
Less: related amortization and depreciation | Less: related amortization and depreciation | (16) | | | (13) | | | (3) | | | 23 | | | (30) | | | (27) | | | (3) | | | 11 | |
Less: related amortization and depreciation | |
Less: related amortization and depreciation | |
Total technology spend | Total technology spend | $ | 121 | | | $ | 113 | | | $ | 8 | | | 7 | % | | $ | 242 | | | $ | 222 | | | $ | 20 | | | 9 | % |
Total technology spend | |
Total technology spend | |
Total technology spend increased $8decreased $4 million, or 3%, relative to the prior year quarter, largely due to technology-related compensation,as the aforementioned increase in technology, telecom, and information processing expense was offset by a decrease in certain technology investments, as the replacement of our core loan and deposit banking systems nears completion in application resiliency, and increases in application software and maintenance expense.2024.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Income Taxes
The following schedule summarizes the income tax expense and effective tax rates for the periods presented.presented:
INCOME TAXES
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Income before income taxes | Income before income taxes | $ | 226 | | | $ | 260 | | | $ | 508 | | | $ | 515 | |
| Income before income taxes | |
| Income before income taxes | |
Income tax expense | |
Income tax expense | |
Income tax expense | Income tax expense | 51 | | | 57 | | | 129 | | | 109 | |
Effective tax rate | Effective tax rate | 22.6 | % | | 21.9 | % | | 25.4 | % | | 21.2 | % |
Effective tax rate | |
Effective tax rate | |
The effective tax rate was 22.6%24.6% and 21.9%27.7% for the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively. The higher effective tax rate in the prior year period was the result of a change in a discrete item that affected the reserve for uncertain tax positions. See Note 12 of the Notes to Consolidated Financial Statements for more information about the factors that impacted the income tax rates, as well as information about deferred income tax assets and liabilities, and valuation allowances.liabilities.
Preferred Stock Dividends
Preferred stock dividends totaled $9$10 million and $8$6 million for the secondfirst quarter of 2024 and 2023, respectively. The increase was primarily due to changes in the timing and 2022, respectively.rates of dividend payments for certain series of preferred stock.
BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets have associated interest rates or yields, and generally consist of loans and leases, securities, and money market investments, securities, loans, and leases.investments. 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 10.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Investment Securities Portfolio
We invest in securities to actively manage liquidity and interest rate risk and to generate interest income. We primarily own securities that can readily provide us with cash and liquidity through secured borrowing agreements without the need to sell the securities. We also manage the duration extension risk of our investment securities portfolio. At June 30, 2023, the estimated duration of ourOur fixed-rate 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 managebalance 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 protectprotects the economic value of shareholders'shareholders’ equity. At March 31, 2024, the estimated duration, which measures price sensitivity to interest rate changes, of our securities portfolio was 3.6 percent, unchanged from December 31, 2023.
For information about our borrowing capacity associated with the investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 31. See also Note 3 and Note 5 of the Notes to Consolidated Financial Statements for more information on fair value measurements and the accounting for our investment securities portfolio.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the major components of our investment securities portfolio.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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
(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 | $ | 92 | | | $ | 92 | | | $ | 85 | | | $ | 93 | | | $ | 93 | | | $ | 87 | |
Agency guaranteed mortgage-backed securities | 11,748 | | | 9,776 | | | 9,696 | | | 11,966 | | | 9,935 | | | 10,041 | |
Municipal securities | 341 | | | 341 | | | 324 | | | 354 | | | 354 | | | 338 | |
Total held-to-maturity | 12,181 | | | 10,209 | | | 10,105 | | | 12,413 | | | 10,382 | | | 10,466 | |
Available-for-sale | | | | | | | | | | | |
U.S. Treasury securities | 585 | | | 584 | | | 481 | | | 585 | | | 585 | | | 492 | |
U.S. Government agencies and corporations: | | | | | | | | | | | |
Agency securities | 634 | | | 629 | | | 596 | | | 669 | | | 663 | | | 630 | |
Agency guaranteed mortgage-backed securities | 8,267 | | | 8,335 | | | 7,053 | | | 8,460 | | | 8,530 | | | 7,291 | |
Small Business Administration loan-backed securities | 509 | | | 543 | | | 518 | | | 535 | | | 571 | | | 546 | |
Municipal securities | 1,228 | | | 1,336 | | | 1,259 | | | 1,269 | | | 1,385 | | | 1,318 | |
Other debt securities | 25 | | | 25 | | | 24 | | | 25 | | | 25 | | | 23 | |
Total available-for-sale | 11,248 | | | 11,452 | | | 9,931 | | | 11,543 | | | 11,759 | | | 10,300 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total HTM and AFS investment securities | $ | 23,429 | | | $ | 21,661 | | | $ | 20,036 | | | $ | 23,956 | | | $ | 22,141 | | | $ | 20,766 | |
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 HTMheld-to-maturity (“HTM”) and AFS investment securities decreased $1.5 billion,$480 million, or 6%2%, from December 31, 2022, primarily due to payments and maturities.2023. Approximately 8% and 7%of the total HTM and AFS investment securities were floating-rate instruments at both June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. Additionally, at June 30, 2023,March 31, 2024, we have $3.6 billion of pay-fixed swaps helddesignated 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. TotalMarch 31, 2024, total taxable-equivalent premium amortization for theseour investment securities was $22$17 million for the secondfirst quarter of 2023,2024, compared with $27$26 million for the same prior year period.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
In addition to HTM and AFS securities, we also have a trading securities portfolio, thatcomprised of municipal securities, which totaled $32$59 million at June 30, 2023,March 31, 2024, compared with $465$48 million at December 31, 2022. The prior year-end amount included $395 million of money market mutual sweep accounts. Beginning in the first quarter of 2023, related sweep balances were presented in “Money market investments” on the consolidated balance sheet.2023.
Refer to the “Interest Rate Risk Management” section on page 27,28, 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Municipal Investments and Extensions of Credit
We support our communities by providing products and services to state and local governments (“municipalities”), including deposit services, loans, and investment banking services. We also invest in securities issued by municipalities. Our municipal lending products generally include loans in which the debt service is repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
The following schedule summarizes our total investments and extensions of credit to municipalities:
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
| (In millions) | (In millions) | June 30, 2023 | | December 31, 2022 | (In millions) | March 31, 2024 | | December 31, 2023 |
| Loans and leases | |
Loans and leases | |
Loans and leases | Loans and leases | $ | 4,354 | | | $ | 4,361 | |
Held-to-maturity securities | Held-to-maturity securities | 368 | | | 405 | |
Available-for-sale securities | Available-for-sale securities | 1,391 | | | 1,634 | |
| Trading securities | Trading securities | 32 | | | 71 | |
Trading securities | |
Trading securities | |
Unfunded lending commitments | Unfunded lending commitments | 361 | | | 406 | |
Total | Total | $ | 6,506 | | | $ | 6,877 | |
Our municipal loans and 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. At June 30, 2023,March 31, 2024, we had no municipal loans on nonaccrual.
Municipal securities are internally graded, similar to loans, using risk-grading systems which vary based on the size and type of credit risk exposure. The internal risk grades assigned to our municipal securities follow our definitions of Pass, Special Mention, and Substandard, which are consistent with published definitions of regulatory risk classifications. At June 30, 2023,March 31, 2024, 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
We provide a wide range of lending products to commercial customers, generally small- and medium-sized businesses. We also provide various retail lending products and services to consumers and small businesses. The following schedule presents the composition of our loan and lease portfolio.portfolio:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
LOAN AND LEASE PORTFOLIO
| | June 30, 2023 | | December 31, 2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amount | | % of total loans | | Amount | | % of total loans | (Dollar amounts in millions) | Amount | | % of total loans | | Amount | | % of total loans |
Commercial: | Commercial: | | | | | | | |
Commercial and industrial | |
Commercial and industrial | |
Commercial and industrial | Commercial and industrial | $ | 16,622 | | | 29.2 | % | | $ | 16,377 | | | 29.4 | % | $ | 16,519 | | | 28.4 | | 28.4 | % | | $ | 16,684 | | | 28.9 | | 28.9 | % |
Leasing | Leasing | 388 | | | 0.7 | | | 386 | | | 0.7 | |
Owner-occupied | Owner-occupied | 9,328 | | | 16.4 | | | 9,371 | | | 16.8 | |
Municipal | Municipal | 4,354 | | | 7.6 | | | 4,361 | | | 7.8 | |
Total commercial | Total commercial | 30,692 | | | 53.9 | | | 30,495 | | | 54.8 | |
Commercial real estate: | Commercial real estate: | |
Construction and land development | Construction and land development | 2,498 | | | 4.4 | | | 2,513 | | | 4.5 | |
Construction and land development | |
Construction and land development | |
Term | Term | 10,406 | | | 18.3 | | | 10,226 | | | 18.4 | |
Total commercial real estate | Total commercial real estate | 12,904 | | | 22.7 | | | 12,739 | | | 22.9 | |
Consumer: | Consumer: | |
Home equity credit line | |
Home equity credit line | |
Home equity credit line | Home equity credit line | 3,291 | | | 5.8 | | | 3,377 | | | 6.1 | |
1-4 family residential | 1-4 family residential | 7,980 | | | 14.0 | | | 7,286 | | | 13.1 | |
Construction and other consumer real estate | Construction and other consumer real estate | 1,434 | | | 2.5 | | | 1,161 | | | 2.1 | |
Bankcard and other revolving plans | Bankcard and other revolving plans | 466 | | | 0.8 | | | 471 | | | 0.8 | |
Other | Other | 150 | | | 0.3 | | | 124 | | | 0.2 | |
Total consumer | Total consumer | 13,321 | | | 23.4 | | | 12,419 | | | 22.3 | |
Total loans and leases | Total loans and leases | $ | 56,917 | | | 100.0 | % | | $ | 55,653 | | | 100.0 | % | Total loans and leases | $ | 58,109 | | | 100.0 | | 100.0 | % | | $ | 57,779 | | | 100.0 | | 100.0 | % |
At June 30, 2023March 31, 2024 and December 31, 2022,2023, the ratio of loans and leases to total assets was 65%67% and 62%66%, respectively. The largest loan category was commercial and industrial loans, which constituted 28% and 29%of our total loan portfolio at both timefor the same respective periods.
During the first sixthree months of 2023,2024, the loan and lease portfolio increased $1.3 billion,$330 million, or 2%1%, to $56.9$58.1 billion at June 30, 2023, primarily due toMarch 31, 2024. Loan growth of $0.7 billionwas driven largely by increases in consumer 1-4 family residential mortgage loans, driven mainly from an increased demand for adjustable-rate mortgages.and term commercial real estate loans.
Other Noninterest-Bearing Investments
Other noninterest-bearing investments are equity investments that are held primarily for capital appreciation, dividends, or for certain regulatory requirements. The following schedule summarizes our related investments.investments:
OTHER NONINTEREST-BEARING INVESTMENTS
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | December 31, 2022 | | Amount change | | Percent change | (Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 | | Amount change | | Percent change |
| Bank-owned life insurance | |
Bank-owned life insurance | |
Bank-owned life insurance | Bank-owned life insurance | $ | 549 | | | $ | 546 | | | $ | 3 | | | 1 | % | $ | 555 | | | $ | | $ | 553 | | | $ | | $ | 2 | | | — | | — | % |
Federal Home Loan Bank stock | Federal Home Loan Bank stock | 111 | | | 294 | | | (183) | | | (62) | |
Federal Reserve stock | Federal Reserve stock | 65 | | | 68 | | | (3) | | | (4) | |
Farmer Mac stock | Farmer Mac stock | 21 | | | 19 | | | 2 | | | 11 | |
SBIC investments | SBIC investments | 177 | | | 172 | | | 5 | | | 3 | |
Other | Other | 33 | | | 31 | | | 2 | | | 6 | |
Total other noninterest-bearing investments | Total other noninterest-bearing investments | $ | 956 | | | $ | 1,130 | | | $ | (174) | | | (15) | % | Total other noninterest-bearing investments | $ | 922 | | | $ | | $ | 950 | | | $ | | $ | (28) | | | (3) | | (3) | % |
Total otherOther noninterest-bearing investments decreased $174$28 million, or 15%3%, during the first sixthree months of 2023,2024, primarily due to a $183$34 million decrease in FHLB stock. We are required to invest approximately 4% of our FHLB borrowings in FHLB stock to maintain our borrowing capacity. The decrease in period-end FHLB activity stock was driven largely by declines in FHLB borrowings during the second quarter of 2023 in response to an increase in total deposits.interest-bearing deposits and a decrease in interest-earning assets.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Visa Class B Shares
In 2007, we received 460,153 non-transferable Class B shares of Visa, Inc. in connection with a restructuring and public offering by Visa U.S.A. These shares are carried at no cost on our consolidated balance sheet. In January 2024, Visa’s previously announced exchange offer proposal was approved by common stockholders, which resulted, among other actions, in a redenomination of all Visa Class B common shares to Class B-1 common shares. In April 2024, Visa commenced its exchange offer allowing Class B-1 shareholders the option to exchange up to 50% of their Class B-1 shares for shares that would be convertible into freely transferable Visa Class A common shares following a temporary restriction period. We did not participate in the exchange offer, which expired on May 3, 2024, in view of contingent obligations associated with certain make-whole provisions required as a condition of the exchange.
Premises, Equipment, and Software
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 and second conversions the first of which waswere successfully completed in May 2023 and April 2024, respectively. We anticipate completing the second quartermigration of 2023. We expect to completesubstantially all of the remaining affiliate bank conversions inaccounts by late summer 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.years:
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| | June 30, 2023 |
| March 31, 2024 | | | March 31, 2024 |
(In millions) | (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total | (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total |
| Total amount of capitalized costs, less accumulated depreciation | Total amount of capitalized costs, less accumulated depreciation | $ | 25 | | | $ | 50 | | | $ | 221 | | | $ | 296 | |
Total amount of capitalized costs, less accumulated depreciation | |
Total amount of capitalized costs, less accumulated depreciation | |
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.portfolio:
DEPOSIT PORTFOLIO
| | June 30, 2023 | | March 31, 2023 | | December 31, 2022 | | | December 31, 2019 |
| March 31, 2024 | |
| March 31, 2024 | |
| March 31, 2024 | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amount | | % of total deposits | | Amount | | % of total deposits | | Amount | | % of total deposits | | | Amount | | % of total deposits |
Deposits by type | Deposits by type | | | | | | | | | | | | | | | | |
Deposits by type | |
Deposits by type | |
Noninterest-bearing demand | |
Noninterest-bearing demand | |
Noninterest-bearing demand | Noninterest-bearing demand | $ | 28,670 | | | 38.6 | % | | $ | 30,974 | | | 44.8 | % | | $ | 35,777 | | | 49.9 | % | | | $ | 23,576 | | | 41.3 | % |
Interest-bearing: | Interest-bearing: | | | |
Interest-bearing: | |
Interest-bearing: | |
Savings and money market | |
Savings and money market | |
Savings and money market | Savings and money market | 33,303 | | | 44.8 | | | 30,826 | | | 44.5 | | | 33,474 | | | 46.7 | | | | 28,249 | | | 49.5 | |
Time | Time | 3,897 | | | 5.2 | | | 2,024 | | | 2.9 | | | 1,484 | | | 2.1 | | | | 2,451 | | | 4.3 | |
Time | |
Time | |
Brokered | |
Brokered | |
Brokered | Brokered | 8,453 | | | 11.4 | | | 5,384 | | | 7.8 | | | 917 | | | 1.3 | | | | 2,809 | | | 4.9 | |
Total deposits | Total deposits | $ | 74,323 | | | 100.0 | % | | $ | 69,208 | | | 100.0 | % | | $ | 71,652 | | | 100.0 | % | | | $ | 57,085 | | | 100.0 | % |
Total deposits | |
Total deposits | |
Deposit-related metrics | |
Deposit-related metrics | |
Deposit-related metrics | Deposit-related metrics | | | | | | | | | | | | | | | | |
Estimated amount of insured deposits | Estimated amount of insured deposits | $ | 43,911 | | | 59 | % | | $ | 37,846 | | | 55 | % | | $ | 34,018 | | | 47 | % | | | $ | 28,802 | | | 50 | % |
Estimated amount of insured deposits | |
Estimated amount of insured deposits | |
Estimated amount of uninsured deposits | |
Estimated amount of uninsured deposits | |
Estimated amount of uninsured deposits | Estimated amount of uninsured deposits | $ | 30,412 | | | 41 | % | | $ | 31,362 | | | 45 | % | | $ | 37,634 | | | 53 | % | | | $ | 28,283 | | | 50 | % |
Estimated amount of collateralized deposits 1 | Estimated amount of collateralized deposits 1 | $ | 2,679 | | | 3.6 | % | | $ | 2,708 | | | 3.9 | % | | $ | 2,861 | | | 4.0 | % | | | $ | 1,928 | | | 3.4 | % |
Estimated amount of collateralized deposits 1 | |
Estimated amount of collateralized deposits 1 | |
Loan-to-deposit ratio | Loan-to-deposit ratio | 77 | % | | 81 | % | | 78 | % | | | 85 | % | |
Loan-to-deposit ratio | |
Loan-to-deposit ratio | |
1 Includes both insured and uninsured deposits.
Total deposits decreased $724 million, or 1%, from December 31, 2023. At March 31, 2024 and December 31, 2023, customer deposits (excluding brokered deposits) were $69.9 billion and $70.5 billion, and included approximately $7.5 billion and $6.8 billion, respectively, of reciprocal deposits.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Total deposits increased $5.1 billion, or 7%, fromAt 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, 2023,2024, the estimated total amount of uninsured deposits was $30.4$32.0 billion, or 41%43%, of total deposits, compared with $31.4$33.2 billion, or 45%44%, and $37.6 billion, or 53%, of total deposits at MarchDecember 31, 2023, and December 31, 2022, respectively. Our loan-to-deposit ratio was 77%78%, compared with 81% and 78%77% for the same respective time periods.
See “Liquidity Risk Management” on page 31 for additional information on liquidity, and borrowed funds.including the ratio of available liquidity to uninsured deposits.
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 prudently manage the risks to which our operations are exposed, including credit risk, market and interest rate risk, liquidity risk, strategic and business risk, operational risk, technology risk, cybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by various management committees including the Enterprise Risk Management Committee. For a more comprehensive discussion of these risks, see “Risk Factors” in our 20222023 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 20222023 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 Small Business Administration (“SBA”), Federal Housing Authority, U.S. Department of Veterans Affairs, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. At June 30, 2023, $593March 31, 2024, $540 million of related loans were guaranteed, primarily by the SBA, and included $125 million of Paycheck Protection Program (“PPP”) loans.SBA. The following schedule presents the composition of U.S. government agency guaranteed loans.loans:
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | Percent guaranteed | | December 31, 2022 | | Percent guaranteed | (Dollar amounts in millions) | March 31, 2024 | | Percent guaranteed | | December 31, 2023 | | Percent guaranteed |
| Commercial | Commercial | $ | 703 | | | 81 | % | | $ | 753 | | | 83 | % |
Commercial | |
Commercial | | $ | 654 | | | 79 | % | | $ | 664 | | | 80 | % |
Commercial real estate | Commercial real estate | 24 | | | 79 | | | 21 | | | 76 | |
Consumer | Consumer | 5 | | | 100 | | | 5 | | | 100 | |
Total loans | Total loans | $ | 732 | | | 81 | % | | $ | 779 | | | 83 | % | Total loans | $ | 683 | | | 79 | | 79 | % | | $ | 692 | | | 80 | | 80 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Commercial Lending
The following schedule provides information regarding lending exposures to certain industries in our commercial lending portfolio.portfolio:
COMMERCIAL LENDING BY INDUSTRY GROUP 1
| | June 30, 2023 | | December 31, 2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent |
| Real estate, rental, and leasing | $ | 2,923 | | | 9.5 | % | | $ | 2,802 | | | 9.2 | % |
Retail trade | Retail trade | 2,842 | | | 9.3 | | | 2,751 | | | 9.0 | |
Retail trade | |
Retail trade | | $ | 3,002 | | | 9.9 | % | | $ | 2,995 | | | 9.8 | % |
Real estate, rental and leasing | |
Finance and insurance | Finance and insurance | 2,634 | | | 8.6 | | | 2,992 | | | 9.8 | |
Healthcare and social assistance | Healthcare and social assistance | 2,495 | | | 8.1 | | | 2,373 | | | 7.8 | |
Public Administration | Public Administration | 2,376 | | | 7.7 | | | 2,366 | | | 7.8 | |
Manufacturing | Manufacturing | 2,319 | | | 7.5 | | | 2,387 | | | 7.8 | |
Wholesale trade | Wholesale trade | 1,918 | | | 6.3 | | | 1,880 | | | 6.2 | |
Transportation and warehousing | |
Utilities 2 | Utilities 2 | 1,590 | | | 5.2 | | | 1,418 | | | 4.6 | |
Transportation and warehousing | 1,501 | | | 4.9 | | | 1,464 | | | 4.8 | |
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 | 1,276 | | | 4.2 | | | 1,355 | | | 4.4 | |
Hospitality and food services | Hospitality and food services | 1,186 | | | 3.9 | | | 1,238 | | | 4.1 | |
Mining, quarrying, and oil and gas extraction | |
Professional, scientific, and technical services | |
Other Services (except Public Administration) | Other Services (except Public Administration) | 1,066 | | | 3.5 | | | 1,041 | | | 3.4 | |
Professional, scientific, and technical services | 1,032 | | | 3.3 | | | 995 | | | 3.3 | |
Other 3 | Other 3 | 2,922 | | | 9.5 | | | 2,782 | | | 9.1 | |
Total | Total | $ | 30,692 | | | 100.0 | % | | $ | 30,495 | | | 100.0 | % | Total | $ | 30,479 | | | 100.0 | | 100.0 | % | | $ | 30,588 | | | 100.0 | | 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 3.1%3.3%.
Commercial Real Estate Loans
At June 30, 2023March 31, 2024 and December 31, 2022,2023, our CRE loan portfolio totaled $12.9$13.6 billion and $12.7$13.4 billion, respectively, representing approximately 23% of the total loan portfolio for both periods. The majority of our CRE loans are secured by real estate primarily located within our geographic footprint. The following schedule presents the geographic distribution of our CRE loan portfolio based on the location of the primary collateral.collateral:
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL LOCATION
| | June 30, 2023 | | December 31, 2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | | Amount | | Percent | | Amount | | Percent | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent |
| Arizona | |
Arizona | |
Arizona | Arizona | | $ | 1,656 | | | 13 | % | | $ | 1,521 | | | 12 | % | $ | 1,727 | | | 12.7 | | 12.7 | % | | $ | 1,726 | | | 12.9 | | 12.9 | % |
California | California | | 3,772 | | | 29 | | | 3,805 | | | 30 | |
Colorado | Colorado | | 639 | | | 5 | | | 637 | | | 5 | |
Nevada | Nevada | | 1,030 | | | 8 | | | 910 | | | 7 | |
Texas | Texas | | 2,211 | | | 17 | | | 2,139 | | | 17 | |
Utah/Idaho | Utah/Idaho | | 2,202 | | | 17 | | | 2,397 | | | 19 | |
Washington/Oregon | Washington/Oregon | | 912 | | | 7 | | | 899 | | | 7 | |
Other | Other | | 482 | | | 4 | | | 431 | | | 3 | |
Total CRE | Total CRE | | $ | 12,904 | | | 100 | % | | $ | 12,739 | | | 100 | % | Total CRE | $ | 13,578 | | | 100.0 | | 100.0 | % | | $ | 13,371 | | | 100.0 | | 100.0 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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. 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.loans. At June 30, 2023,March 31, 2024, approximately 85% of our CRE loan portfolio was variable-rate, and approximately 20%21% 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 injectedincluded prior to any advances. Re-margining requirements (required equity infusions upon a decline in value or cash flow of the collateral) are 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 20222023 Form 10-K.
The following schedule provides information regarding lending exposures to certain collateral types inpresents our CRE loan portfolio.portfolio by collateral type:
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
| | June 30, 2023 | | December 31, 2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent |
Commercial property | Commercial property | | | | | | | |
Multi-family | |
Multi-family | |
Multi-family | Multi-family | $ | 3,324 | | | 25.7 | % | | $ | 3,068 | | | 24.1 | % | $ | 3,854 | | | 28.4 | | 28.4 | % | | $ | 3,709 | | | 27.7 | | 27.7 | % |
Industrial | Industrial | 2,828 | | | 21.9 | | | 2,509 | | | 19.7 | |
Office | Office | 2,157 | | | 16.7 | | | 2,281 | | | 17.9 | |
Retail | Retail | 1,447 | | | 11.2 | | | 1,529 | | | 12.0 | |
Hospitality | Hospitality | 695 | | | 5.4 | | | 695 | | | 5.4 | |
Land | Land | 247 | | | 1.9 | | | 276 | | | 2.2 | |
Other 1 | Other 1 | 1,673 | | | 13.0 | | | 1,728 | | | 13.5 | |
Residential property 2 | Residential property 2 | |
Single family | Single family | 289 | | | 2.3 | | | 340 | | | 2.7 | |
Single family | |
Single family | |
Land | Land | 73 | | | 0.6 | | | 75 | | | 0.6 | |
Condo/Townhome | Condo/Townhome | 28 | | | 0.2 | | | 13 | | | 0.1 | |
Other 1 | Other 1 | 143 | | | 1.1 | | | 225 | | | 1.8 | |
Total | Total | $ | 12,904 | | | 100.0 | % | | $ | 12,739 | | | 100.0 | % | Total | $ | 13,578 | | | 100.0 | | 100.0 | % | | $ | 13,371 | | | 100.0 | | 100.0 | % |
1 Included in the total amount of the “Other” categorycommercial and residential categories was approximately $246$216 million and $301$202 million of unsecured loans at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively.
2 Residential property collateral type consists primarily of loans provided to commercial homebuilders for land, lot, and single-family housing developments.
OurAs previously described, our CRE portfolio is diversified across geography and collateral type, with the largest concentration in multi-family. We provide additional analysis of our multi-family and office CRE portfolioportfolios below in view of increased investor interest in thatthose collateral typetypes 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
Multi-family
At March 31, 2024 and December 31, 2023, our multi-family loan portfolio totaled $3.9 billion and $3.7 billion, representing 28% of the total CRE loan portfolio for both periods. Approximately 36% of the multi-family CRE loan portfolio is scheduled to mature in the next 12 months. The following schedule presents the composition of our multi-family CRE loan portfolio and other related credit quality metrics:
MULTI-FAMILY CRE LOAN PORTFOLIO
| | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 |
Multi-family CRE | | | |
Construction and land development | $ | 953 | | | $ | 902 | |
Term | 2,901 | | | 2,807 | |
Total multi-family CRE | $ | 3,854 | | | $ | 3,709 | |
Credit quality metrics | | | |
Criticized loan ratio | 10.1 | % | | 6.1 | % |
Classified loan ratio | 0.8 | % | | 0.5 | % |
Nonaccrual loan ratio | — | % | | — | % |
Delinquency ratio | — | % | | — | % |
Net charge-offs, annualized | — | % | | — | % |
Ratio of allowance for credit losses to multi-family CRE loans, at period end | 2.28 | % | | 1.70 | % |
The following schedules present our multi-family CRE loan portfolio by collateral location for the periods presented:
MULTI-FAMILY CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
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(Dollar amounts in millions) | | March 31, 2024 |
| Collateral Location | | |
Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Multi-family CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | | $ | 138 | | | $ | 167 | | | $ | 65 | | | $ | 62 | | | $ | 352 | | | $ | 49 | | | $ | 120 | | | $ | — | | | $ | 953 | |
Term | | 280 | | | 995 | | | 89 | | | 193 | | | 671 | | | 360 | | | 251 | | | 62 | | | 2,901 | |
Total Multi-family CRE | | $ | 418 | | | $ | 1,162 | | | $ | 154 | | | $ | 255 | | | $ | 1,023 | | | $ | 409 | | | $ | 371 | | | $ | 62 | | | $ | 3,854 | |
% of total | | 10.8 | % | | 30.2 | % | | 4.0 | % | | 6.6 | % | | 26.6 | % | | 10.6 | % | | 9.6 | % | | 1.6 | % | | 100.0 | % |
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(Dollar amounts in millions) | | December 31, 2023 |
| Collateral Location | | |
Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Multi-family CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | | $ | 118 | | | $ | 183 | | | $ | 46 | | | $ | 40 | | | $ | 359 | | | $ | 44 | | | $ | 112 | | | $ | — | | | $ | 902 | |
Term | | 322 | | | 994 | | | 90 | | | 188 | | | 578 | | | 345 | | | 228 | | | 62 | | | 2,807 | |
Total Multi-family CRE | | $ | 440 | | | $ | 1,177 | | | $ | 136 | | | $ | 228 | | | $ | 937 | | | $ | 389 | | | $ | 340 | | | $ | 62 | | | $ | 3,709 | |
% of total | | 11.9 | % | | 31.7 | % | | 3.7 | % | | 6.1 | % | | 25.3 | % | | 10.4 | % | | 9.2 | % | | 1.7 | % | | 100.0 | % |
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1 Other included $55 million of multi-family loans with collateral located in New Mexico at both March 31, 2024 and December 31, 2023.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Office CRE loan portfolio
At March 31, 2024 and December 31, 2023, our office CRE loan portfolio totaled $1.9 billion and $2.0 billion, representing 14% and 15% of the total CRE loan portfolio, respectively. Approximately 32% of the office CRE loan portfolio is scheduled to mature in the next 12 months. The following schedule presents the composition of our office CRE loan portfolio and other related credit quality metrics:
OFFICE CRE LOAN PORTFOLIO
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | December 31, 2022 | (Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 |
Office CRE | Office CRE | | | |
Construction and land development | |
Construction and land development | |
Construction and land development | Construction and land development | $ | 193 | | | $ | 208 | |
Term | Term | 1,964 | | | 2,073 | |
Total office CRE | Total office CRE | $ | 2,157 | | | $ | 2,281 | |
Credit quality metrics | Credit quality metrics | | | |
Criticized loan ratio | Criticized loan ratio | 6.4 | % | | 7.2 | % |
Criticized loan ratio | |
Criticized loan ratio | | 11.0 | % | | 11.9 | % |
Classified loan ratio | Classified loan ratio | 4.8 | % | | 5.8 | % | Classified loan ratio | 7.6 | % | | 8.9 | % |
Nonaccrual loan ratio | Nonaccrual loan ratio | — | % | | — | % | Nonaccrual loan ratio | 1.4 | % | | 2.4 | % |
Delinquency ratio | Delinquency ratio | — | % | | 1.5 | % | Delinquency ratio | 2.1 | % | | 2.3 | % |
Net charge-offs, annualized | Net charge-offs, annualized | — | % | | — | % | Net charge-offs, annualized | (0.1) | % | | 0.2 | % |
Allowance for credit losses | $ | 38 | | $ | 31 |
| Ratio of allowance for credit losses to office CRE loans, at period end | Ratio of allowance for credit losses to office CRE loans, at period end | 1.76 | % | | 1.36 | % |
Ratio of allowance for credit losses to office CRE loans, at period end | |
Ratio of allowance for credit losses to office CRE loans, at period end | | 4.01 | % | | 3.80 | % |
The following schedules present our office CRE loan portfolio by collateral location for the periods presented.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) | (Dollar amounts in millions) | | December 31, 2022 | (Dollar amounts in millions) | | March 31, 2024 |
| Collateral Location | |
Loan type | Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Loan type | |
Loan type | | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Office CRE | Office CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | |
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Construction and land development | Construction and land development | | $ | 8 | | | $ | 79 | | | $ | — | | | $ | 2 | | | $ | — | | | $ | 18 | | | $ | 101 | | | $ | — | | | $ | 208 | |
Term | Term | | 295 | | | 525 | | | 97 | | | 99 | | | 217 | | | 613 | | | 195 | | | 32 | | | 2,073 | |
Total Office CRE | Total Office CRE | | $ | 303 | | | $ | 604 | | | $ | 97 | | | $ | 101 | | | $ | 217 | | | $ | 631 | | | $ | 296 | | | $ | 32 | | | $ | 2,281 | |
% of total | % of total | | 13.1 | % | | 27.0 | % | | 4.3 | % | | 4.3 | % | | 9.6 | % | | 26.8 | % | | 13.5 | % | | 1.4 | % | | 100.0 | % | % of total | | 14.3 | % | | 21.5 | % | | 4.7 | % | | 4.6 | % | | 11.1 | % | | 26.5 | % | | 15.8 | % | | 1.5 | % | | 100.0 | % |
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(Dollar amounts in millions) | | December 31, 2023 |
| Collateral Location | | |
Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Office CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | | $ | — | | | $ | 64 | | | $ | — | | | $ | 2 | | | $ | 22 | | | $ | 29 | | | $ | 74 | | | $ | — | | | $ | 191 | |
Term | | 281 | | | 412 | | | 92 | | | 86 | | | 179 | | | 488 | | | 226 | | | 29 | | | 1,793 | |
Total Office CRE | | $ | 281 | | | $ | 476 | | | $ | 92 | | | $ | 88 | | | $ | 201 | | | $ | 517 | | | $ | 300 | | | $ | 29 | | | $ | 1,984 | |
% of total | | 14.2 | % | | 24.0 | % | | 4.6 | % | | 4.4 | % | | 10.1 | % | | 26.1 | % | | 15.1 | % | | 1.5 | % | | 100.0 | % |
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1 No other geography exceeds $18exceeded $17 million at both June 30, 2023March 31, 2024 and December 31, 2022.2023.
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 (“HECLs”). At June 30, 2023 and December 31, 2022, our HECL portfolio totaled $3.3 billion and $3.4 billion, respectively. Approximately 41% and 44% of our HECLs are secured by first liens for the same time periods.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
We also originate home equity credit lines (“HECLs”). At June 30,both March 31, 2024 and December 31, 2023, our HECL portfolio totaled $3.4 billion. Approximately 38% and 39% of our HECLs are secured by first liens for the same respective time periods.
At March 31, 2024, 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 a Fair Isaac Corporation (“FICO”) credit score greater than 700.
Approximately 90%91% 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.low, given the rate shock analysis performed at origination. The ratio of HECL net charge-offs (recoveries) for the trailing twelve months to average balances at June 30, 2023both March 31, 2024 and December 31, 20222023, was (0.03)% for both periods.0.05%. 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 include nonaccrual loans and other real estate owned (“OREO”) or foreclosed properties. The following schedule presents our nonperforming assets.assets:
NONPERFORMING ASSETS
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | | December 31, 2022 |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | | March 31, 2024 | | | | December 31, 2023 |
| Nonaccrual loans 1 | |
Nonaccrual loans 1 | |
Nonaccrual loans 1 | Nonaccrual loans 1 | $ | 162 | | | | $ | 149 | |
Other real estate owned 2 | Other real estate owned 2 | 2 | | | | — | |
Total nonperforming assets | 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 | 0.29 | % | | | 0.27 | % | Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2 | 0.44 | % | | | | 0.39 | % |
Accruing loans past due 90 days or more | Accruing loans past due 90 days or more | $ | 7 | | | | $ | 6 | |
Ratio of accruing loans past due 90 days or more to loans and leases 1 | Ratio of accruing loans past due 90 days or more to loans and leases 1 | 0.01 | % | | | 0.01 | % | 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 | $ | 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 | 0.30 | % | | | 0.28 | % | Ratio of nonperforming assets1 and accruing loans past due 90 days or more to loans and leases1 and other real estate owned 2 | 0.44 | % | | | | 0.40 | % |
| Nonaccrual loans1 current as to principal and interest payments | Nonaccrual loans1 current as to principal and interest payments | 70.4 | % | | | 57.7 | % |
Nonaccrual loans1 current as to principal and interest payments | |
Nonaccrual loans1 current as to principal and interest payments | | 56.0 | % | | | | 48.8 | % |
1 Includes loans held for sale.
2 Does not include banking premises held for sale.
Nonperforming assets as a percentage of loans and leases and OREO increased to 0.29%0.44% at June 30, 2023,March 31, 2024, compared with 0.27%0.39% at December 31, 2022.2023. Total nonaccrual loans at June 30, 2023March 31, 2024 increased to $162$248 million from $149$222 million at December 31, 2022,2023, primarily due to increasesa small number of loans in the commercial and industrial and owner-occupied nonaccrual loans.term commercial real estate portfolios. See Note 6 of the Notes to Consolidated Financial Statements for more information on nonaccrual loans.
Loan Modifications
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 temporary or permanent relief from the original contractual terms of the loan.
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings For the first three months of 2024 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 experiencing financial difficulties totaled $148 million.$123 million, and $97 million, respectively.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
If a modified loan is on nonaccrual and performs for at least six months according to the modified terms, and an analysis of the customer’s financial condition indicates that we are reasonably assured of repayment of the modified
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 modification is taken into account to determine whether a loan should be returned to accrual status.
ACCRUING AND NONACCRUING MODIFIED LOANS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
| | | | | | | |
(In millions) | June 30, 2023 | | |
| | | |
Modified loans – accruing | $ | 137 | | | |
Modified loans – nonaccruing | 11 | | | |
Total | $ | 148 | | | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2024 | | 2023 |
| | | |
Modified loans – accruing | $ | 116 | | | $ | 96 | |
Modified loans – nonaccruing | 7 | | | 1 | |
Total | $ | 123 | | | $ | 97 | |
For additional information regarding loan modifications to borrowers experiencing financial difficulty, including information related to TDRs prior to our adoption of ASU 2022-02, see Note 6 of the Notes to Consolidated Financial Statements.
Allowance for Credit Losses
The ACL includes the ALLL and the RULC. The ACL represents our estimate of current expected credit losses
related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. To determine
the adequacy of the allowance, our loan and lease portfolio is segmented based on loan type.
The RULC is a reserve for potential losses associated with off-balance sheet commitments remained stable during the first six months of 2023. The reserveand is separately recordedincluded in “Other
liabilities” on the consolidated balance sheet in “Other liabilities,” and anysheet. Any related increases or decreases in the reserve are recordedincluded in
“Provision for unfunded lending commitments” on the consolidated income statement in “Provision for unfunded lending commitments.”
The following schedule presents the changes in and allocation of the ACL.income.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SUMMARY OFThe following schedule presents the changes in and allocation of the ACL:
CHANGES IN THE ALLOWANCE FOR 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 | % |
LOSSES | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | Three Months Ended March 31, 2024 | | Twelve Months Ended December 31, 2023 | | Three Months Ended March 31, 2023 |
| | | | | |
Loans and leases outstanding | $ | 58,109 | | | $ | 57,779 | | | $ | 56,331 | |
Average loans and leases outstanding: | | | | | |
Commercial | 30,482 | | | 30,519 | | | 30,678 | |
Commercial real estate | 13,504 | | | 13,023 | | | 12,876 | |
Consumer | 13,921 | | | 13,198 | | | 12,599 | |
Total average loans and leases outstanding | $ | 57,907 | | | $ | 56,740 | | | $ | 56,153 | |
Allowance for loan and lease losses: | | | | | |
Balance at beginning of period | $ | 684 | | | $ | 572 | | | $ | 572 | |
Provision for loan losses | 21 | | | 148 | | | 46 | |
Charge-offs: | | | | | |
Commercial | 10 | | | 45 | | | 3 | |
Commercial real estate | — | | | 3 | | | — | |
Consumer | 4 | | | 14 | | | 4 | |
Total | 14 | | | 62 | | | 7 | |
Recoveries: | | | | | |
Commercial | 6 | | | 20 | | | 6 | |
Commercial real estate | 1 | | | — | | | — | |
Consumer | 1 | | | 6 | | | 1 | |
Total | 8 | | | 26 | | | 7 | |
Net loan and lease charge-offs | 6 | | | 36 | | | — | |
Balance at end of period | $ | 699 | | | $ | 684 | | | $ | 618 | |
Reserve for unfunded lending commitments: | | | | | |
Balance at beginning of period | $ | 45 | | | $ | 61 | | | $ | 61 | |
Provision for unfunded lending commitments | (8) | | | (16) | | | (1) | |
Balance at end of period | $ | 37 | | | $ | 45 | | | $ | 60 | |
Total allowance for credit losses: | | | | | |
Allowance for loan and lease losses | $ | 699 | | | $ | 684 | | | $ | 618 | |
Reserve for unfunded lending commitments | 37 | | | 45 | | | 60 | |
Total allowance for credit losses | $ | 736 | | | $ | 729 | | | $ | 678 | |
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Ratio of allowance for credit losses to net loans and leases, at period end | 1.27 | % | | 1.26 | % | | 1.20 | % |
Ratio of allowance for credit losses to nonaccrual loans, at period end | 297 | % | | 328 | % | | 396 | % |
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 293 | % | | 324 | % | | 392 | % |
Ratio of total net charge-offs to average loans and leases 1 | 0.04 | % | | 0.06 | % | | — | % |
Ratio of commercial net charge-offs to average commercial loans 1 | 0.05 | % | | 0.08 | % | | (0.04) | % |
Ratio of commercial real estate net charge-offs to average commercial real estate loans 1 | (0.03) | % | | 0.02 | % | | — | % |
Ratio of consumer net charge-offs to average consumer loans 1 | 0.09 | % | | 0.06 | % | | 0.10 | % |
1The 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.
TheDuring the first three months of 2024, the total ACL increased to $711$736 million from $636 million, during$729 million. The increase in the first six months of 2023,ACL primarily due toreflects incremental reserves associated with portfolio-specific risks including commercial real estate and modest deterioration in credit quality, partially offset by improvements 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 and market risk is the potential for reduced net interest incomerisk of losses to current or future earnings and other rate-sensitive income resultingcapital 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 orand other factors.market conditions. 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 20222023 Form 10-K.
Interest Rate Risk
We strive to position the Bank for interest rate changes and manage the balance sheet sensitivity to reduce the volatility of both net interest income and economic value of equity. equity (“EVE”). With a higher interest rate environment, customer deposit behavior has deviated from the trends observed during the relatively low interest rate period over the prior 15 years. As a result, customers have been more inclined to (1) move deposits to nonbanking products, such as money market mutual funds, that offer higher interest rates, and (2) reduce their balances in noninterest-bearing accounts. These recently observed changes in deposit behavior have been incorporated into our deposit models used in managing interest rate risk, giving more weight to the recently observed behavior, and increased both the deposit beta for interest-bearing products and the percentage of noninterest-bearing deposits assumed to migrate to interest-bearing products. Changes to models are independently reviewed by our Model Risk Management function. Management believes our deposit models are more likely to reflect future behavior of deposits, and therefore we manage our interest rate risk exposure on that basis.
We generally have granular deposit funding. Muchfunding, and much of this funding has an indeterminateindeterminable 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 naturallyhave historically been “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)We regularly use interest rate swaps, to synthetically increase the duration of the loan portfolio, (2) longer-durationinvestment in fixed-rate securities, and (3) longer-duration loansfunding strategies to reducemanage our interest rate risk. These strategies collectively have muted the assetexpected sensitivity to 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 declineto changes in interest rates would be more muted. Additionally, we have pay-fixed interest rate swaps to adjust the duration of the investment securities portfolio.
rates. 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.
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 migrate to interest-bearing products.
The following schedule presents deposit duration assumptions using both historical-based deposit behavior as well as the adjusted assumptions discussed previously.previously:
DEPOSIT ASSUMPTIONS
| | June 30, 2023 | | December 31, 2022 |
| Historical-based assumptions | | Adjusted assumptions | | Historical-based assumptions |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Product | Product | | Effective duration (unchanged) | | Effective duration (+200 bps) | | Effective duration (unchanged) | | Effective duration (+200 bps) | | Effective duration (unchanged) | | Effective duration (+200 bps) | Product | | Effective duration (unchanged) | | Effective duration (+200 bps) | | Effective duration (unchanged) | | Effective duration (+200 bps) |
| Demand deposits | Demand deposits | | 3.9% | | 3.7% | | 2.9% | | 2.7% | | 3.6% | | 3.5% |
Demand deposits | |
Demand deposits | | | 3.1% | | 2.9% | | 3.5% | | 3.2% |
Money market | Money market | | 2.2% | | 2.1% | | 1.5% | | 1.3% | | 2.3% | | 2.0% | Money market | | 1.4% | | 1.2% | | 1.5% | | 1.4% |
Savings and interest-bearing checking | Savings and interest-bearing checking | | 2.9% | | 2.6% | | 2.0% | | 1.6% | | 3.1% | | 2.8% | Savings and interest-bearing checking | | 2.0% | | 1.7% | | 2.2% | | 1.9% |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
As more rate-sensitive deposits have runoff, theThe effective duration of the deposits under the historical-based assumptions has lengthened due to the remaining deposits that are assumed to be less rate sensitive. Conversely, the effective duration of the deposits under the adjusted assumptions has shortened considerably due to faster deposit repricing.
As noted previously, we utilize derivatives to manage interest rate risk. The following schedule presents derivatives that are designated in qualifying hedging relationships at June 30, 2023.March 31, 2024. 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS
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| 2023 | | 2024 | | 2025 | | 3Q25 - 2Q26 | | 3Q26 - 2Q27 | | | | | | | | |
(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 of assets 1,2 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 2,550 | | $ | 2,250 | | $ | 1,817 | | $ | 1,483 | | $ | 1,050 | | $ | 550 | | $ | 350 | | $ | 350 | | $ | 221 | | $ | 100 | | | | | | | | |
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 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | — | | | $ | — | | | | | | | | | |
Weighted-average fixed-rate paid | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | — | % | | — | % | | | | | | | | |
| 2023 4 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 | | 2032 | | | | | | | | |
Fair value hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value hedges of assets 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | |
Weighted-average fixed-rate received | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | | | | | | | |
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(Dollar amounts in millions) | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | | | | | | | | | |
Cash flow hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges of assets 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 683 | | $ | 350 | | $ | 350 | | $ | 350 | | $ | 350 | | $ | 350 | | $ | 300 | | $ | 133 | | $ | 100 | | $ | — | | | | | | | | |
Weighted-average fixed-rate received | 2.55 | % | | 2.34 | % | | 2.34 | % | | 2.34 | % | | 2.34 | % | | 2.34 | % | | 2.13 | % | | 1.67 | % | | 1.65 | % | | — | % | | | | | | | | |
Cash flow hedges of liabilities 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | 500 | | $ | — | | $ | — | | $ | — | | $ | — | | | $ | — | | | | | | | | | |
Weighted-average fixed-rate paid | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | 3.67 | % | | — | % | | — | % | | — | % | | — | % | | — | % | | | | | | | | |
| 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 | | 2032 | | 2033 | | | | | | | | |
Fair value hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value hedges of assets 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 4,469 | | $ | 4,558 | | $ | 4,562 | | $ | 4,558 | | $ | 2,428 | | $ | 1,049 | | $ | 1,044 | | $ | 1,037 | | $ | 1,001 | | $ | 973 | | | | | | | | |
Weighted-average fixed-rate paid | 3.23 | % | | 3.21 | % | | 3.21 | % | | 3.21 | % | | 2.47 | % | | 1.84 | % | | 1.83 | % | | 1.83 | % | | 1.83 | % | | 1.82 | % | | | | | | | | |
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1 Cash flow hedges of assets consist of receive-fixed swaps hedging pools of floating-rate loans.
2 Cash The longest dated cash flow hedges of assets fullyhedge matures in February 2027. Amounts for 2027 have not been prorated to reflect this hedge maturing during the period.
32 Cash flow hedges of liabilities fullyconsists of a pay-fixed swap hedging rolling FHLB advances. This swap matures in May of 2025.
43 Fair value asset hedges of assets consist of pay-fixed interest rate swaps hedging AFS fixed-rate securities.
5Fair value hedges of debt consist of receive-fixed swaps hedging fixed-rate debt. The sole fair value hedgeAFS securities and fixed-rate commercial loans, as further discussed in Note 7 of debt wasthe Notes to Consolidated Financial Statements. Increasing notional amounts in 2025 are due to forward starting swaps.
At March 31, 2024, we had $173 million of net losses deferred in accumulated other comprehensive income (loss) (“AOCI”) related to terminated duringcash flow hedges. Amounts deferred in AOCI from terminated cash flow hedges will be amortized into interest income on a straight-line basis through the second quarteroriginal maturity dates of 2023.the hedges as long as the hedged forecasted transactions continue to be expected to occur. For more information on amounts deferred in AOCI related to terminated cash flow hedges, see “Interest Rate and Market Risk Management” in our 2023 Form 10-K.
Earnings at Risk (EaR) and Economic Value of Equity (EVE)
Incorporating the historical-based and adjustedour deposit assumptions and the impact of derivatives in qualifying hedging relationships previously discussed, the following schedule presents earnings at risk (“EaR”), or the percentage change in 12-month forward-looking net interest income, and our estimated percentage change in economic value of equity (“EVE”).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. These measures highlight the sensitivity to changes in interest rates across various scenarios; the outcomes are not intended to be forecasts of expected net interest income.
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
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| | March 31, 2024 | | December 31, 2023 |
| | 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) | | (3.3) | % | | — | % | | 3.7 | % | | 7.4 | % | | 11.2 | % | | (2.5) | % | | — | % | | 2.4 | % | | 4.9 | % | | 7.4 | % |
Economic Value of Equity (EVE) | | 4.8 | % | | — | % | | (2.6) | % | | (5.5) | % | | (8.0) | % | | 2.8 | % | | — | % | | (1.4) | % | | (3.3) | % | | (5.2) | % |
1 Assumes rates cannot go below zero in the negative rate shift.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
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| | 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) | % |
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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, theThe asset sensitivity, as measured by EaR, increased during the secondfirst quarter of 2023,2024, primarily due to an increase in pay-fixed interest rate swap notional, partially offset by deposit migration from low beta products (e.g., checking accounts) to high beta products.products (e.g., money market accounts) and a shift from short- to long-term fixed-rate borrowings. Under the adjustedour current deposit assumptions, asset sensitivity decreased significantly due to faster deposit repricing.
interest rate risk remains within policy limits. For interest-bearing deposits with indeterminateindeterminable maturities, the weighted average modeled beta is 32% under53%.
Prepayment assumptions are an important factor in how we manage interest rate risk. Certain assets in our portfolio, such as 1-4 family residential mortgages and mortgage-backed securities, can be prepaid at any time by the historical-based assumptions,borrower, which may significantly affect our expected cash flows. At March 31, 2024, lifetime prepayment speeds on loans and 55% under the adjusted assumptions.mortgage-backed securities were estimated to be 8.7% and 6.1%, respectively.
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,shorter-term rates increase slightly, but the ten-year rate increases only 30by 200 bps, the increase in EaR is modeled under the historical-based assumptions towould be approximately two-thirds of50 percent larger than the change associated with the parallel +200 bps rate change.
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, 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 reduceincrease net interest income by approximately 4%0.8% in the secondfirst quarter of 2024,2025, compared with the secondfirst quarter of 2023.2024.
Emergent interest rate sensitivity refers to future changes in net interest income based upon future interest rate movements and is measured from the latent level of net interest income. If interest rates rise consistent with the forward curve at June 30, 2023,March 31, 2024, we expect emergent sensitivity to increase net interest income by approximately 1%1.0% from the latent sensitivity level, for a cumulative 3% reduction1.8% increase in net interest income. For a +100 bps and -100 bps parallel interest rate shock to the implied forward rate path, the cumulative net interest income sensitivity would be 2.8% and -0.5%, respectively.
Our focus on business banking also plays a significant role in determining the nature of our asset-liability management posture. At June 30, 2023, $25.8March 31, 2024, $26.6 billion of our commercial lending and CRE loan balances were scheduled to reprice in the next six months. For these variable-rate loans, we have executed $2.9 billion$850 million of cash flow hedges by receiving fixed rates on interest rate swaps. At June 30, 2023,March 31, 2024, we also had $3.6$3.7 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.
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 implemented processes, procedures, and systems to mitigate contract risk. New originations, and any modifications or renewals of LIBOR-based contracts, contained fallback language to facilitate transition to an alternative reference rate. Additionally, under the Adjustable Interest Rate (LIBOR) Act of 2022, the Federal Reserve Board (“FRB”) identified benchmark replacement rates for LIBOR contracts lacking fallback provisions with a clearly defined or practical replacement benchmark rate. At June 30, 2023, we have remediated substantially all our LIBOR exposure through fallback language, replacement indices, or reliance upon the provisions under the LIBOR 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.
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”)AOCI for each financial reporting period. During the secondfirst quarter of 2023,2024, the $32$12 million after-tax increaseimprovement in AOCI loss related to investment securities was driven largely by declines in the fair value of the AFS securities primarily due to changes in benchmark interest rates.paydowns on the AFS securities. For more discussion regarding investment securities and AOCI, see the “Capital Management” section on page 33. See also Note 5 of the Notes to Consolidated Financial Statements for further information regarding the accounting for investment securities.
Our noninterest-bearing deposits are more valuable in a rising interest rate environment, 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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., FRBFederal Reserve (“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 proportional 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 Small Business Investment Company (“SBIC”) venture capital funds as a strategy to provide beneficial financing, growth, and expansion opportunities to diverse businesses generally in communities within our geographic footprint. Our equity exposure to these investments was approximately $177$196 million and $172$190 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, 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 liquidatingwe can liquidate 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Liquidity Risk Management
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 primarily include deposits, borrowings, equity, and unencumberedpaydowns of assets, such as loans and investment securities. Our investment securities are primarily held as a source of contingent liquidity. We primarilygenerally own securities that can readily provide us with cash and liquidity through secured borrowing agreements with securities pledged as collateral.
We maintain and regularly test a contingency funding plan to identify sources and uses of liquidity. Additionally, we have aOur 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. TheseThe 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 to the Bank Term Funding Program (“BTFP”), which provide additional contingent funding sources outside the normal operating hours of the FHLB and the GCF program. The BTFP offersoffered loans of up to one year in length to eligible
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
depository institutions pledging U.S. Treasuries, agency debt and government mortgage-backed securities, and other qualifying assets as collateral. Unlike other funding sources, borrowing capacityThe availability of advances under the program ended in mid-March 2024. At March 31, 2024, our outstanding borrowings under the BTFP is basedwere $3.0 billion, with $1.5 billion maturing on the par value, not the fair value, of collateral. Advances canDecember 31, 2024, and another $1.5 billion maturing on January 15, 2025. These advances may be requested under the program through mid-March 2024.
prepaid at any time without penalty. For more information on our liquidity risk management practices, see “Liquidity Risk Management” in our 20222023 Form 10-K.
For the first sixthree months of 2023,2024, the primary sources of cash came from a decrease in investment securities, a decreasean increase in money market investments,short-term borrowings, and net cash provided by operating activities. Uses of cash during the same period primarily included primarily a decrease in short-term borrowings,deposits, an increase in loans and leases, and dividends paid on common and preferred stock.an increase in money market investments. Cash payments for interest reflected in operating expenses were $546$491 million and $31$224 million for the first sixthree months of 20232024 and 2022,2023, respectively.
The FHLB and FRB have been, and continue to be, a significant source of back-up liquidity and funding. We are a member of the FHLB of Des Moines, which allows member banks to borrow against eligible loans and securities to satisfy liquidity and funding requirements. We are required to invest in FHLB and FRB stock to maintain our borrowing capacity. At June 30, 2023,March 31, 2024, our total investment in FHLB and FRB stock was $111$45 million and $65 million, respectively, compared with $294$79 million and $68$65 million at December 31, 2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
2023.At June 30, 2023,March 31, 2024, loans with a carrying value of $24.5$22.9 billion and $15.3$15.8 billion, compared with $23.7$24.8 billion and $3.9$11.5 billion at December 31, 2022,2023, were pledged at the FHLB and FRB, respectively, as collateral for current and potential borrowings.
At June 30, 2023March 31, 2024 and December 31, 2022,2023, investment securities with a carrying value of $21.1$19.8 billion and $13.5$20.5 billion, respectively, were pledged as collateral for potential borrowings. For the same time periods, these pledgespledged securities included $9.9$9.2 billion and $8.3$9.5 billion for available use through the GCF repo program, $7.1$5.4 billion and $1.0$5.5 billion to the FRB, and $4.1$5.1 billion and $4.2$5.5 billion to secure collateralized public and trust deposits, advances, and for other purposes.
A large portion of these pledged assets are unencumbered, but are pledged to provide immediate access to contingency sources of funds. The following schedule presents our total available liquidity including unused collateralized borrowing capacity.capacity:
AVAILABLE LIQUIDITY
| | March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
(Dollar amounts in billions) | | (Dollar amounts in billions) | FHLB | | FRB 1 | | GCF | | BTFP | | Total | | FHLB | | FRB 1 | | GCF | | BTFP | | Total |
| | | June 30, 2023 | | December 31, 2022 |
(In billions) | FHLB | | FRB | | GCF | | BTFP | | Total | | FHLB | | FRB | | GCF | | BTFP | | Total |
| Total borrowing capacity | |
| Total borrowing capacity | |
| Total borrowing capacity | Total borrowing capacity | $ | 17.1 | | | $ | 13.6 | | | $ | 10.0 | | | $ | 7.1 | | | $ | 47.8 | | | $ | 16.6 | | | $ | 4.0 | | | $ | 8.4 | | | $ | — | | | $ | 29.0 | |
Borrowings outstanding | Borrowings outstanding | 2.6 | | | — | | | 2.0 | | | — | | | 4.6 | | | 7.2 | | | — | | | 2.7 | | | — | | | 9.9 | |
Remaining capacity, at period end | 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 | Cash and due from banks | | 0.7 | | | 0.7 | |
Interest-bearing deposits 1 | | 1.5 | | | 1.3 | |
Cash and due from banks | |
Cash and due from banks | |
Interest-bearing deposits 2 | |
Total available liquidity | Total available liquidity | | $ | 45.4 | | | $ | 21.1 | |
Ratio of available liquidity to uninsured deposits | Ratio of available liquidity to uninsured deposits | | 149 | % | | 56 | % | Ratio of available liquidity to uninsured deposits | | | | | | | | | 130 | % | | | | | | | | | | 122 | % |
1 Represents borrowing capacity and borrowings outstanding at the Federal Reserve Bank discount window.
2Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
At June 30, 2023March 31, 2024 and December 31, 2022,2023, our total available liquidity was $45.4$41.6 billion, compared with $21.1$40.6 billion, respectively. At June 30, 2023,March 31, 2024, we had sources of liquidity whichthat exceeded our uninsured deposits without the need to sell any investment securities.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Credit Ratings
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 we receive from various rating agencies. The ratings not only influence the costs associated with borrowings, but can also influence the sources of the borrowings. All of the credit rating agencies rate our debt at an investment-grade level. 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 presents our current credit ratings.ratings:
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CREDIT RATINGS | | | | | | |
as of July 31, 2023:April 30, 2024: |
Rating agency | | Outlook | | Long-term issuer/senior debt rating | | Subordinated debt rating | | Short-term debt rating |
| | | | | | | | |
Kroll | | PositiveStable | | A- | | BBB+ | | K2 |
S&P | | Negative | | BBB+ | | BBB | | NR |
Fitch | | Stable | | BBB+ | | BBB | | F1F2 |
Moody's | | Stable | | Baa2 | | NR | | P2 |
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
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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
A strong capital position is vital to the achievement of our key corporate objectives, our continued profitability, and to promoting depositor and investor confidence. We seek to (1) maintain sufficient capital to support the current needs and growth of our businesses, consistent with our assessment of their potential to create value for shareholders, and (2) fulfill responsibilities to depositors and 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 toincluding the scenarios published by the FRB.FRB’s supervisory severely adverse scenario. The timing and amount of capital actions are subject to various factors, including our financial performance, business needs, prevailing and anticipated economic conditions, and the results of our internal stress testing, as well as Board and Office of the Comptroller of the Currency (“OCC”) approval. Shares may be repurchased occasionally in the open market or through privately negotiated transactions. For a more comprehensive discussion of our capital risk management, see “Capital Management” in our 20222023 Form 10-K.
SHAREHOLDERS' EQUITY
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | December 31, 2022 | | Amount change | | Percent change | (Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 | | Amount change | | Percent change |
Shareholders’ equity: | Shareholders’ equity: | | | | | | | |
Preferred stock | |
Preferred stock | |
Preferred stock | Preferred stock | $ | 440 | | | $ | 440 | | | $ | — | | | — | % | $ | 440 | | | $ | | $ | 440 | | | $ | | $ | — | | | — | | — | % |
Common stock and additional paid-in capital | Common stock and additional paid-in capital | 1,722 | | | 1,754 | | | (32) | | | (2) | |
Retained earnings | Retained earnings | 6,051 | | | 5,811 | | | 240 | | | 4 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (2,930) | | | (3,112) | | | 182 | | | 6 | |
Total shareholders' equity | Total shareholders' equity | $ | 5,283 | | | $ | 4,893 | | | $ | 390 | | | 8 | % | Total shareholders' equity | $ | 5,829 | | | $ | | $ | 5,691 | | | $ | | $ | 138 | | | 2 | | 2 | % |
Total shareholders’ equity increased $390$138 million, or 8%2%, to $5.3$5.8 billion at June 30, 2023,March 31, 2024, compared with $4.9$5.7 billion at December 31, 2022.2023. Common stock and additional paid-in capital decreased $32$26 million, primarily due to common stock repurchasesrepurchases. In February 2024, the Board approved a plan to repurchase up to $35 million of common shares outstanding during the year 2024. During the first quarter of 2023. As the macroeconomic environment remained uncertain,2024, we did not repurchaserepurchased 0.9 million common shares during the second quarteroutstanding for $35 million.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The AOCI balance was a $2.9loss of $2.6 billion loss at June 30, 2023,March 31, 2024, and forprimarily reflects the first six months of 2023, reflected (1) a $9 million decline in the fair value of fixed-rate AFSinvestment securities as a result of higher interest rates, offsetand includes $2.0 billion ($1.5 billion after tax) of unrealized losses on the securities previously transferred from AFS to HTM. During the first quarter of 2024, AOCI improved $83 million, driven largely by a $103$46 million increase in unrealized loss amortization of the discount onassociated with the securities transferred from AFS to HTM, during the fourth quarter of 2022, and (2) an $88$12 million increaseprimarily related to paydowns on AFS securities. AOCI was also positively impacted by a $25 million change in unrealized holding gains and other adjustments associated withnet deferred losses related to derivative instruments.instruments used for risk management purposes. Absent any sales or credit impairment of the AFS securities, the unrealized losses will not be recognized in earnings. We do not intend to sell any securities with unrealized losses. Although changes in AOCI are reflected in shareholders’ equity, they are excluded from regulatory capital, and therefore do not impact our regulatory ratios.
For more discussion on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CAPITAL DISTRIBUTIONS
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In millions, except share data) | |
(In millions, except share data) | |
(In millions, except share data) | (In millions, except share data) | 2023 | | 2022 | | 2023 | | 2022 | |
Capital distributions: | Capital distributions: | | | | | | | | |
Capital distributions: | |
Capital distributions: | |
Preferred dividends paid | |
Preferred dividends paid | |
Preferred dividends paid | Preferred dividends paid | $ | 9 | | $ | 8 | | $ | 15 | | $ | 16 | |
| Total capital distributed to preferred shareholders | Total capital distributed to preferred shareholders | 9 | | 8 | | 15 | | 16 | |
| Total capital distributed to preferred shareholders | |
| Total capital distributed to preferred shareholders | |
Common dividends paid | |
Common dividends paid | |
Common dividends paid | Common dividends paid | 61 | | 58 | | 122 | | 116 | |
Bank common stock repurchased 1 | Bank common stock repurchased 1 | — | | 50 | | 50 | | 101 | |
Bank common stock repurchased 1 | |
Bank common stock repurchased 1 | |
Total capital distributed to common shareholders | |
Total capital distributed to common shareholders | |
Total capital distributed to common shareholders | 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 | $ | 70 | | $ | 116 | | $ | 187 | | $ | 233 | |
Total capital distributed to preferred and common shareholders | |
Total capital distributed to preferred and common shareholders | |
Weighted average diluted common shares outstanding (in thousands) | |
Weighted average diluted common shares outstanding (in thousands) | |
Weighted average diluted common shares outstanding (in thousands) | 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) | 148,144 | | | 150,471 | | | 148,144 | | | 150,471 | | |
Common shares outstanding, at period end (in thousands) | |
Common shares outstanding, at period end (in thousands) | |
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.
Pursuant to the OCC’s “Earnings Limitation Rule,” our dividend payments are restricted to an amount equal to the sum of the total of (1) our net income for that year, and (2) retained earnings for the preceding two years, unless the OCC approves the declaration and payment of dividends in excess of such amount. At June 30, 2023,As of April 1, 2024, we had $1.7$1.1 billion of retained net profits available for distribution.
During the secondfirst quarter of 2023,2024, we paid dividends on preferred stock of $9$10 million and dividends on common stock of $61 million, or $0.41 per share. In July 2023,April 2024, the Board declared a regular quarterly dividend of $0.41 per common share, payable on August 24, 2023May 23, 2024 to shareholders of record on August 17, 2023.May 16, 2024. 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 that include certain minimum regulatory capital ratios. At June 30, 2023,March 31, 2024, 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 20222023 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.ratios:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CAPITAL AMOUNTS AND RATIOS
| (Dollar amounts in millions) | (Dollar amounts in millions) | June 30, 2023 | | December 31, 2022 | | June 30, 2022 | (Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 | | March 31, 2023 |
Basel III risk-based capital amounts: | Basel III risk-based capital amounts: | | | | | |
Common equity tier 1 capital | |
Common equity tier 1 capital | |
Common equity tier 1 capital | Common equity tier 1 capital | $ | 6,692 | | | $ | 6,481 | | | $ | 6,257 | |
Tier 1 risk-based | Tier 1 risk-based | 7,131 | | | 6,921 | | | 6,697 | |
Total risk-based | 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 | % |
Common equity tier 1 capital ratio | |
Common equity tier 1 capital ratio | | 10.4 | % | | 10.3 | % | | 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 | % |
Average equity to average assets (three months ended) | |
Average equity to average assets (three months ended) | | 6.5 | % | | 6.2 | % | | 5.6 | % |
Return on average common equity (three months ended) | 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 | 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“Non-GAAP Financial Measures”Measures” on page 35 for more information regarding these ratios.
During the third quarter of 2023, federal bank regulators issued a proposal to implement the Basel Committee on Banking Supervision’s finalization of the post-crisis bank regulatory capital reforms. The proposal, commonly referred to as the “Basel III Endgame,” would significantly revise the capital requirements applicable to large banking organizations, defined as those with total assets of $100 billion or more, and would potentially impact our current and future capital planning, including share repurchase activity. At March 31, 2024, we had $87.1 billion in total assets and do not currently qualify as a large banking organization. We continue to evaluate the potential impact of the proposal, as we expect it is more likely than not we would become subject to this proposal in the future, were it to be finalized in its current form.
Federal bank regulators also issued proposals that would (1) expand a long-term debt requirement to all banks with total assets of $100 billion or more, and (2) revise requirements for resolution planning. For more information about these regulatory proposals and their potential impact, see “Recent Regulatory Developments” in the Supervision and Regulation section of our 2023 Form 10-K.
NON-GAAP FINANCIAL MEASURES
This Form 10-Q presents non-GAAP financial measures, in addition to GAAPgenerally accepted accounting principles (“GAAP”) financial measures. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. We consider these adjustments to be relevant to ongoing operating results and provide a meaningful basis for period-to-period comparisons. We use these non-GAAP financial measures to assess our performance and financial position. We believe that presenting these non-GAAP financial measures permitsallows 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Tangible Common Equity and Related Measures
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization and AOCI. We excluded the effect of AOCI to align with its impact on certain incentive compensation plans that utilize return on tangible common equity as a performance metric.amortization. We believe these non-GAAP measures provide useful information about our use of shareholders’ equity and provide a basis for evaluating the performance of a business more consistently, whether acquired or developed internally.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
(Dollar amounts in millions) | | March 31, 2024 | | December 31, 2023 | | | | March 31, 2023 |
| | | | | | | | |
Net earnings applicable to common shareholders (GAAP) | | $ | 143 | | | $ | 116 | | | | | $ | 198 | |
Adjustment, net of tax: | | | | | | | | |
Amortization of core deposit and other intangibles | | 1 | | | 1 | | | | | 1 | |
Net earnings applicable to common shareholders, net of tax | (a) | $ | 144 | | | $ | 117 | | | | | $ | 199 | |
Average common equity (GAAP) | | $ | 5,289 | | | $ | 4,980 | | | | | $ | 4,614 | |
Average goodwill and intangibles | | (1,058) | | | (1,060) | | | | | (1,064) | |
| | | | | | | | |
Average tangible common equity (non-GAAP) | (b) | $ | 4,231 | | | $ | 3,920 | | | | | $ | 3,550 | |
Number of days in quarter | (c) | 91 | | | 92 | | | | | 90 | |
Number of days in year | (d) | 366 | | | 365 | | | | | 365 | |
Return on average tangible common equity (non-GAAP) 1 | (a/b/c)*d | 13.7 | % | | 11.8 | % | | | | 22.7 | % |
1 Excluding the effect of AOCI from average tangible common equity would result in associated returns of 8.4%, 6.7%, and 12.3% for the periods presented, respectively.
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)
| | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions, except per share amounts) | | March 31, 2024 | | December 31, 2023 | | | | March 31, 2023 |
| | | | | | | | |
Total shareholders’ equity (GAAP) | | $ | 5,829 | | | $ | 5,691 | | | | | $ | 5,184 | |
Goodwill and intangibles | | (1,057) | | | (1,059) | | | | | (1,063) | |
| | | | | | | | |
Tangible equity (non-GAAP) | (a) | 4,772 | | | 4,632 | | | | | 4,121 | |
Preferred stock | | (440) | | | (440) | | | | | (440) | |
Tangible common equity (non-GAAP) | (b) | $ | 4,332 | | | $ | 4,192 | | | | | $ | 3,681 | |
Total assets (GAAP) | | $ | 87,060 | | | $ | 87,203 | | | | | $ | 88,573 | |
Goodwill and intangibles | | (1,057) | | | (1,059) | | | | | (1,063) | |
| | | | | | | | |
Tangible assets (non-GAAP) | (c) | $ | 86,003 | | | $ | 86,144 | | | | | $ | 87,510 | |
Common shares outstanding (in thousands) | (d) | 147,653 | | | 148,153 | | | | | 148,100 | |
Tangible equity ratio (non-GAAP) | (a/c) | 5.5 | % | | 5.4 | % | | | | 4.7 | % |
Tangible common equity ratio (non-GAAP) | (b/c) | 5.0 | % | | 4.9 | % | | | | 4.2 | % |
Tangible book value per common share (non-GAAP) | (b/d) | $ | 29.34 | | | $ | 28.30 | | | | | $ | 24.85 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP) | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
(Dollar amounts in millions) | | June 30, 2023 | | March 31, 2023 | | | | June 30, 2022 |
| | | | | | | | |
Net earnings applicable to common shareholders (GAAP) | (a) | $ | 166 | | | $ | 198 | | | | | $ | 195 | |
Adjustment, net of tax: | | | | | | | | |
Amortization of core deposit and other intangibles | | 1 | | | 1 | | | | | — | |
Net earnings applicable to common shareholders, net of tax | (a) | $ | 167 | | | $ | 199 | | | | | $ | 195 | |
Average common equity (GAAP) | | $ | 4,818 | | | $ | 4,614 | | | | | $ | 5,582 | |
Average goodwill and intangibles | | (1,063) | | | (1,064) | | | | | (1,015) | |
Average accumulated other comprehensive loss (income) | | 2,931 | | | 3,030 | | | | | 1,702 | |
Average tangible common equity (non-GAAP) | (b) | $ | 6,686 | | | $ | 6,580 | | | | | $ | 6,269 | |
Number of days in quarter | (c) | 91 | | | 90 | | | | | 91 | |
Number of days in year | (d) | 365 | | | 365 | | | | | 365 | |
Return on average tangible common equity (non-GAAP) | (a/b/c)*d | 10.0 | % | | 12.3 | % | | | | 12.5 | % |
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES) | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions, except per share amounts) | | June 30, 2023 | | March 31, 2023 | | | | June 30, 2022 |
| | | | | | | | |
Total shareholders’ equity (GAAP) | | $ | 5,283 | | | $ | 5,184 | | | | | $ | 5,632 | |
Goodwill and intangibles | | (1,062) | | | (1,063) | | | | | (1,015) | |
Accumulated other comprehensive loss (income) | | 2,930 | | | 2,920 | | | | | 2,100 | |
Tangible equity (non-GAAP) | (a) | 7,151 | | | 7,041 | | | | | 6,717 | |
Preferred stock | | (440) | | | (440) | | | | | (440) | |
Tangible common equity (non-GAAP) | (b) | $ | 6,711 | | | $ | 6,601 | | | | | $ | 6,277 | |
Total assets (GAAP) | | $ | 87,230 | | | $ | 88,573 | | | | | $ | 87,784 | |
Goodwill and intangibles | | (1,062) | | | (1,063) | | | | | (1,015) | |
Accumulated other comprehensive loss (income) | | 2,930 | | | 2,920 | | | | | 2,100 | |
Tangible assets (non-GAAP) | (c) | $ | 89,098 | | | $ | 90,430 | | | | | $ | 88,869 | |
Common shares outstanding (in thousands) | (d) | 148,144 | | | 148,100 | | | | | 150,471 | |
Tangible equity ratio (non-GAAP) | (a/c) | 8.0 | % | | 7.8 | % | | | | 7.6 | % |
Tangible common equity ratio (non-GAAP) | (b/c) | 7.5 | % | | 7.3 | % | | | | 7.1 | % |
Tangible book value per common share (non-GAAP) | (b/d) | $ | 45.30 | | | $ | 44.57 | | | | | $ | 41.72 | |
Efficiency Ratio and Adjusted Pre-Provision Net Revenue
The efficiency ratio is a measure of operating expense relative to revenue. We believe the efficiency ratio provides useful information regarding the cost of generating revenue. We make adjustments to exclude certain items that are not generally expected to recur frequently, as identified in the subsequent schedule, which we believe allows for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how we are managing our expenses. Adjusted pre-provision net revenue (“PPNR”) enables management and others to assess our ability to generate capital. Taxable-equivalent net interest income allows us to assess the comparability of revenue arising from both taxable and tax-exempt sources.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Year Ended |
(Dollar amounts in millions) | | June 30, 2023 | | March 31, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 | | December 31, 2022 |
| | | | | | | | | | | | |
Noninterest expense (GAAP) | (a) | $ | 508 | | | $ | 512 | | | $ | 464 | | | $ | 1,020 | | | $ | 928 | | | $ | 1,878 | |
Adjustments: | | | | | | | | | | | | |
Severance costs | | 13 | | | 1 | | | 1 | | | 14 | | | 1 | | | 1 | |
Other real estate expense, net | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
| | | | | | | | | | | | |
Amortization of core deposit and other intangibles | | 1 | | | 2 | | | — | | | 3 | | | — | | | 1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SBIC investment success fee accrual 1 | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Total adjustments | (b) | 14 | | | 3 | | | 1 | | | 17 | | | 1 | | | 2 | |
Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 494 | | | $ | 509 | | | $ | 463 | | | $ | 1,003 | | | $ | 927 | | | $ | 1,876 | |
Net interest income (GAAP) | (d) | $ | 591 | | | $ | 679 | | | $ | 593 | | | $ | 1,270 | | | $ | 1,137 | | | $ | 2,520 | |
Fully taxable-equivalent adjustments | (e) | 11 | | | 9 | | | 9 | | | 20 | | | 17 | | | 37 | |
Taxable-equivalent net interest income (non-GAAP) | (d+e)=f | 602 | | | 688 | | | 602 | | | 1,290 | | | 1,154 | | | 2,557 | |
Noninterest income (GAAP) | g | 189 | | | 160 | | | 172 | | | 349 | | | 314 | | | 632 | |
Combined income (non-GAAP) | (f+g)=(h) | 791 | | | 848 | | | 774 | | | 1,639 | | | 1,468 | | | 3,189 | |
Adjustments: | | | | | | | | | | | | |
Fair value and nonhedge derivative gains | | 1 | | | (3) | | | 10 | | | (2) | | | 16 | | | 16 | |
Securities gains (losses), net 1 | | — | | | 1 | | | 1 | | | 1 | | | (16) | | | (15) | |
Total adjustments 2 | (i) | 1 | | | (2) | | | 11 | | | (1) | | | — | | | 1 | |
Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 790 | | | $ | 850 | | | $ | 763 | | | $ | 1,640 | | | $ | 1,468 | | | $ | 3,188 | |
Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 283 | | | $ | 336 | | | $ | 310 | | | $ | 619 | | | $ | 540 | | | $ | 1,311 | |
Adjusted PPNR (non-GAAP) | (j)-(c) | 296 | | | 341 | | | 300 | | | 637 | | | 541 | | | 1,312 | |
Efficiency ratio (non-GAAP) | (c/j) | 62.5 | % | | 59.9 | % | | 60.7 | % | | 61.2 | % | | 63.1 | % | | 58.8 | % |
1 The success fee accrual is associated with the gains and losses from our SBIC investments, which are excluded from the efficiency ratio through securities gains (losses), net.
2 Excluding the $13 million gain on sale of bank-owned premises recorded in dividends and other income, the efficiency ratio for the three months and six months ended June 30, 2023 would have been 63.6% and 61.6%, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | Year Ended |
(Dollar amounts in millions) | | March 31, 2024 | | December 31, 2023 | | March 31, 2023 | | | | | | December 31, 2023 |
| | | | | | | | | | | | |
Noninterest expense (GAAP) | (a) | $ | 526 | | | $ | 581 | | | $ | 512 | | | | | | | $ | 2,097 | |
Adjustments: | | | | | | | | | | | | |
Severance costs | | — | | | — | | | 1 | | | | | | | 14 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Amortization of core deposit and other intangibles | | 2 | | | 2 | | | 2 | | | | | | | 6 | |
Restructuring costs | | — | | | — | | | — | | | | | | | 1 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
FDIC special assessment | | 13 | | | 90 | | | — | | | | | | | 90 | |
Total adjustments | (b) | 15 | | | 92 | | | 3 | | | | | | | 111 | |
Adjusted noninterest expense (non-GAAP) | (c)=(a-b) | $ | 511 | | | $ | 489 | | | $ | 509 | | | | | | | $ | 1,986 | |
Net interest income (GAAP) | (d) | $ | 586 | | | $ | 583 | | | $ | 679 | | | | | | | $ | 2,438 | |
Fully taxable-equivalent adjustments | (e) | 10 | | | 10 | | | 9 | | | | | | | 41 | |
Taxable-equivalent net interest income (non-GAAP) | (f)=(d+e) | 596 | | | 593 | | | 688 | | | | | | | 2,479 | |
Noninterest income (GAAP) | g | 156 | | | 148 | | | 160 | | | | | | | 677 | |
Combined income (non-GAAP) | (h)=(f+g) | 752 | | | 741 | | | 848 | | | | | | | 3,156 | |
Adjustments: | | | | | | | | | | | | |
Fair value and nonhedge derivative gains | | 1 | | | (9) | | | (3) | | | | | | | (4) | |
Securities gains (losses), net | | (2) | | | (1) | | | 1 | | | | | | | 4 | |
Total adjustments | (i) | (1) | | | (10) | | | (2) | | | | | | | — | |
Adjusted taxable-equivalent revenue (non-GAAP) | (j)=(h-i) | $ | 753 | | | $ | 751 | | | $ | 850 | | | | | | | $ | 3,156 | |
Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 226 | | | $ | 160 | | | $ | 336 | | | | | | | $ | 1,059 | |
Adjusted PPNR (non-GAAP) | (j)-(c) | 242 | | | 262 | | | 341 | | | | | | | 1,170 | |
Efficiency ratio (non-GAAP) | (c/j) | 67.9 | % | | 65.1 | % | | 59.9 | % | | | | | | 62.9 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
(In millions, shares in thousands) | June 30, 2023 | | December 31, 2022 |
(Unaudited) | | |
ASSETS | | | |
Cash and due from banks | $ | 701 | | | $ | 657 | |
Money market investments: | | | |
Interest-bearing deposits | 1,531 | | | 1,340 | |
Federal funds sold and securities purchased under agreements to resell | 781 | | | 2,426 | |
Investment securities: | | | |
Held-to-maturity, at amortized cost (fair value: $10,768 and $11,239) | 10,753 | | | 11,126 | |
Available-for-sale, at fair value | 10,832 | | | 11,915 | |
Trading, at fair value | 32 | | | 465 | |
| | | |
Total investment securities | 21,617 | | | 23,506 | |
Loans held for sale | 36 | | | 8 | |
Loans and leases, net of unearned income and fees | 56,917 | | | 55,653 | |
Less allowance for loan and lease losses | 651 | | | 575 | |
Loans held for investment, net of allowance | 56,266 | | | 55,078 | |
Other noninterest-bearing investments | 956 | | | 1,130 | |
Premises, equipment and software, net | 1,414 | | | 1,408 | |
Goodwill and intangibles | 1,062 | | | 1,065 | |
Other real estate owned | 3 | | | 3 | |
Other assets | 2,863 | | | 2,924 | |
Total assets | $ | 87,230 | | | $ | 89,545 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Deposits: | | | |
Noninterest-bearing demand | $ | 28,670 | | | $ | 35,777 | |
Interest-bearing: | | | |
Savings and money market | 33,394 | | | 33,566 | |
Time | 12,259 | | | 2,309 | |
| | | |
Total deposits | 74,323 | | | 71,652 | |
Federal funds and other short-term borrowings | 5,513 | | | 10,417 | |
Long-term debt | 538 | | | 651 | |
Reserve for unfunded lending commitments | 60 | | | 61 | |
Other liabilities | 1,513 | | | 1,871 | |
Total liabilities | 81,947 | | | 84,652 | |
Shareholders’ equity: | | | |
Preferred stock, without par value; authorized 4,400 shares | 440 | | | 440 | |
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 148,144 and 148,664 shares) and additional paid-in capital | 1,722 | | | 1,754 | |
Retained earnings | 6,051 | | | 5,811 | |
Accumulated other comprehensive income (loss) | (2,930) | | | (3,112) | |
| | | |
| | | |
Total shareholders’ equity | 5,283 | | | 4,893 | |
Total liabilities and shareholders’ equity | $ | 87,230 | | | $ | 89,545 | |
| | | | | | | | | | | |
(In millions, shares in thousands) | March 31, 2024 | | December 31, 2023 |
(Unaudited) | | |
ASSETS | | | |
Cash and due from banks | $ | 709 | | | $ | 716 | |
Money market investments: | | | |
Interest-bearing deposits | 1,688 | | | 1,488 | |
Federal funds sold and securities purchased under agreements to resell | 894 | | | 937 | |
Investment securities: | | | |
Held-to-maturity, at amortized cost (fair value: $10,105 and $10,466) | 10,209 | | | 10,382 | |
Available-for-sale, at fair value | 9,931 | | | 10,300 | |
Trading, at fair value | 59 | | | 48 | |
| | | |
Total investment securities | 20,199 | | | 20,730 | |
Loans held for sale | 12 | | | 53 | |
Loans and leases, net of unearned income and fees | 58,109 | | | 57,779 | |
Less allowance for loan and lease losses | 699 | | | 684 | |
Loans held for investment, net of allowance | 57,410 | | | 57,095 | |
Other noninterest-bearing investments | 922 | | | 950 | |
Premises, equipment and software, net | 1,396 | | | 1,400 | |
Goodwill and intangibles | 1,057 | | | 1,059 | |
Other real estate owned | 6 | | | 6 | |
Other assets | 2,767 | | | 2,769 | |
Total assets | $ | 87,060 | | | $ | 87,203 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Deposits: | | | |
Noninterest-bearing demand | $ | 25,137 | | | $ | 26,244 | |
Interest-bearing: | | | |
Savings and money market | 38,879 | | | 38,721 | |
Time | 10,221 | | | 9,996 | |
| | | |
Total deposits | 74,237 | | | 74,961 | |
Federal funds and other short-term borrowings | 4,895 | | | 4,379 | |
Long-term debt | 544 | | | 542 | |
Reserve for unfunded lending commitments | 37 | | | 45 | |
Other liabilities | 1,518 | | | 1,585 | |
Total liabilities | 81,231 | | | 81,512 | |
Shareholders’ equity: | | | |
Preferred stock, without par value; authorized 4,400 shares | 440 | | | 440 | |
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 147,653 and 148,153 shares) and additional paid-in capital | 1,705 | | | 1,731 | |
Retained earnings | 6,293 | | | 6,212 | |
Accumulated other comprehensive income (loss) | (2,609) | | | (2,692) | |
| | | |
| | | |
Total shareholders’ equity | 5,829 | | | 5,691 | |
Total liabilities and shareholders’ equity | $ | 87,060 | | | $ | 87,203 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) | (Unaudited) | Three Months Ended June 30, | | Six Months Ended June 30, |
(Unaudited) | |
(Unaudited) | |
(In millions, except shares and per share amounts) | |
(In millions, except shares and per share amounts) | |
(In millions, except shares and per share amounts) | (In millions, except shares and per share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
Interest income: | Interest income: | | | | | | | |
Interest income: | |
Interest income: | |
Interest and fees on loans | |
Interest and fees on loans | |
Interest and fees on loans | Interest and fees on loans | $ | 791 | | | $ | 468 | | | $ | 1,517 | | | $ | 905 | |
Interest on money market investments | Interest on money market investments | 48 | | | 12 | | | 105 | | | 18 | |
Interest on money market investments | |
Interest on money market investments | |
Interest on securities | |
Interest on securities | |
Interest on securities | Interest on securities | 138 | | | 128 | | | 275 | | | 240 | |
Total interest income | Total interest income | 977 | | | 608 | | | 1,897 | | | 1,163 | |
Total interest income | |
Total interest income | |
Interest expense: | |
Interest expense: | |
Interest expense: | Interest expense: | | | | | | | |
Interest on deposits | Interest on deposits | 220 | | | 7 | | | 302 | | | 13 | |
Interest on deposits | |
Interest on deposits | |
Interest on short- and long-term borrowings | |
Interest on short- and long-term borrowings | |
Interest on short- and long-term borrowings | Interest on short- and long-term borrowings | 166 | | | 8 | | | 325 | | | 13 | |
Total interest expense | Total interest expense | 386 | | | 15 | | | 627 | | | 26 | |
Total interest expense | |
Total interest expense | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | 591 | | | 593 | | | 1,270 | | | 1,137 | |
Provision for credit losses: | Provision for credit losses: | |
Provision for credit losses: | |
Provision for credit losses: | |
Provision for loan and lease losses | Provision for loan and lease losses | 46 | | | 39 | | | 92 | | | 10 | |
Provision for loan and lease losses | |
Provision for loan and lease losses | |
Provision for unfunded lending commitments | |
Provision for unfunded lending commitments | |
Provision for unfunded lending commitments | Provision for unfunded lending commitments | — | | | 2 | | | (1) | | | (2) | |
| Total provision for credit losses | Total provision for credit losses | 46 | | | 41 | | | 91 | | | 8 | |
| Total provision for credit losses | |
| Total provision for credit losses | |
Net interest income after provision for credit losses | |
Net interest income after provision for credit losses | |
Net interest income after provision for credit losses | Net interest income after provision for credit losses | 545 | | | 552 | | | 1,179 | | | 1,129 | |
Noninterest income: | Noninterest income: | | | | | | | |
Noninterest income: | |
Noninterest income: | |
Commercial account fees | |
Commercial account fees | |
Commercial account fees | Commercial account fees | 45 | | | 37 | | | 88 | | | 78 | |
Card fees | Card fees | 25 | | | 25 | | | 49 | | | 50 | |
Card fees | |
Card fees | |
Retail and business banking fees | |
Retail and business banking fees | |
Retail and business banking fees | Retail and business banking fees | 16 | | | 20 | | | 32 | | | 40 | |
Loan-related fees and income | Loan-related fees and income | 19 | | | 21 | | | 40 | | | 43 | |
Loan-related fees and income | |
Loan-related fees and income | |
Capital markets fees | |
Capital markets fees | |
Capital markets fees | Capital markets fees | 27 | | | 21 | | | 44 | | | 36 | |
Wealth management fees | Wealth management fees | 14 | | | 13 | | | 29 | | | 27 | |
Wealth management fees | |
Wealth management fees | |
Other customer-related fees | |
Other customer-related fees | |
Other customer-related fees | Other customer-related fees | 16 | | | 17 | | | 31 | | | 31 | |
Customer-related noninterest income | Customer-related noninterest income | 162 | | | 154 | | | 313 | | | 305 | |
Customer-related noninterest income | |
Customer-related noninterest income | |
Fair value and nonhedge derivative income | |
Fair value and nonhedge derivative income | |
Fair value and nonhedge derivative income | Fair value and nonhedge derivative income | 1 | | | 10 | | | (2) | | | 16 | |
Dividends and other income (loss) | Dividends and other income (loss) | 26 | | | 7 | | | 37 | | | 9 | |
Dividends and other income (loss) | |
Dividends and other income (loss) | |
Securities gains (losses), net | |
Securities gains (losses), net | |
Securities gains (losses), net | Securities gains (losses), net | — | | | 1 | | | 1 | | | (16) | |
Total noninterest income | Total noninterest income | 189 | | | 172 | | | 349 | | | 314 | |
Total noninterest income | |
Total noninterest income | |
Noninterest expense: | |
Noninterest expense: | |
Noninterest expense: | Noninterest expense: | | | | | | | |
Salaries and employee benefits | Salaries and employee benefits | 324 | | | 307 | | | 663 | | | 619 | |
Salaries and employee benefits | |
Salaries and employee benefits | |
Technology, telecom, and information processing | |
Technology, telecom, and information processing | |
Technology, telecom, and information processing | Technology, telecom, and information processing | 58 | | | 53 | | | 113 | | | 105 | |
Occupancy and equipment, net | Occupancy and equipment, net | 40 | | | 36 | | | 80 | | | 74 | |
Occupancy and equipment, net | |
Occupancy and equipment, net | |
Professional and legal services | |
Professional and legal services | |
Professional and legal services | Professional and legal services | 16 | | | 14 | | | 29 | | | 28 | |
Marketing and business development | Marketing and business development | 13 | | | 9 | | | 25 | | | 17 | |
Marketing and business development | |
Marketing and business development | |
Deposit insurance and regulatory expense | |
Deposit insurance and regulatory expense | |
Deposit insurance and regulatory expense | Deposit insurance and regulatory expense | 22 | | | 13 | | | 40 | | | 23 | |
Credit-related expense | Credit-related expense | 7 | | | 7 | | | 13 | | | 14 | |
Other real estate expense, net | — | | | — | | | — | | | 1 | |
Credit-related expense | |
Credit-related expense | |
| Other | |
| Other | |
| Other | Other | 28 | | | 25 | | | 57 | | | 47 | |
Total noninterest expense | Total noninterest expense | 508 | | | 464 | | | 1,020 | | | 928 | |
Total noninterest expense | |
Total noninterest expense | |
Income before income taxes | |
Income before income taxes | |
Income before income taxes | Income before income taxes | 226 | | | 260 | | | 508 | | | 515 | |
Income taxes | Income taxes | 51 | | | 57 | | | 129 | | | 109 | |
Income taxes | |
Income taxes | |
Net income | |
Net income | |
Net income | Net income | 175 | | | 203 | | | 379 | | | 406 | |
| Preferred stock dividends | Preferred stock dividends | (9) | | | (8) | | | (15) | | | (16) | |
| | Preferred stock dividends | |
| Preferred stock dividends | |
| Net earnings applicable to common shareholders | |
| Net earnings applicable to common shareholders | |
| Net earnings applicable to common shareholders | Net earnings applicable to common shareholders | $ | 166 | | | $ | 195 | | | $ | 364 | | | $ | 390 | |
Weighted average common shares outstanding during the period: | Weighted average common shares outstanding during the period: | | | | | | | |
Weighted average common shares outstanding during the period: | |
Weighted average common shares outstanding during the period: | |
Basic shares (in thousands) | |
Basic shares (in thousands) | |
Basic shares (in thousands) | Basic shares (in thousands) | 147,692 | | | 150,635 | | | 147,852 | | | 150,958 | |
Diluted shares (in thousands) | Diluted shares (in thousands) | 147,696 | | | 150,838 | | | 147,865 | | | 151,264 | |
Diluted shares (in thousands) | |
Diluted shares (in thousands) | |
Net earnings per common share: | |
Net earnings per common share: | |
Net earnings per common share: | Net earnings per common share: | |
Basic | Basic | $ | 1.11 | | | $ | 1.29 | | | $ | 2.44 | | | $ | 2.56 | |
Basic | |
Basic | |
Diluted | Diluted | 1.11 | | | 1.29 | | | 2.44 | | | 2.56 | |
Diluted | |
Diluted | |
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) | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2024 | | 2023 | | | | |
| | | | | | | |
Net income for the period | $ | 153 | | | $ | 204 | | | | | |
Other comprehensive income, net of tax: | | | | | | | |
Net unrealized holding gains on investment securities | 12 | | | 77 | | | | | |
Unrealized loss amortization associated with the securities transferred from AFS to HTM | 46 | | | 49 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net unrealized holding gains (losses) on derivative instruments | (1) | | | 29 | | | | | |
Reclassification adjustment for decrease in interest income recognized in earnings on derivative instruments | 26 | | | 37 | | | | | |
| | | | | | | |
Other comprehensive income, net of tax | 83 | | | 192 | | | | | |
Comprehensive income | $ | 236 | | | $ | 396 | | | | | |
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) | (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) | |
(In millions, except shares and per share amounts) | | (In millions, except shares and per share amounts) | Preferred stock | | Common stock shares (in thousands) | | Accumulated paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total shareholders’ equity |
| | Balance at December 31, 2023 | |
| Balance at December 31, 2023 | |
| Balance at December 31, 2023 | |
Net income for the period | |
Other comprehensive income, net of tax | |
| Bank common stock repurchased | |
Bank common stock repurchased | |
Bank common stock repurchased | |
| Net activity under employee plans and related tax benefits | |
Net activity under employee plans and related tax benefits | |
Net activity under employee plans and related tax benefits | Net activity under employee plans and related tax benefits | | 44 | | | 7 | | | 7 | |
Dividends on preferred stock | Dividends on preferred stock | | (9) | | | (9) | |
Dividends on common stock, $0.41 per share | Dividends on common stock, $0.41 per share | | (61) | | | (61) | |
Change in deferred compensation | 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, 2024 | |
| Balance at March 31, 2022 | $ | 440 | | | 151,348 | | | $ | — | | | $ | 1,889 | | | $ | 5,311 | | | $ | (1,346) | | | $ | 6,294 | |
Balance at December 31, 2022 | |
Balance at December 31, 2022 | |
Balance at December 31, 2022 | |
Net income for the period | Net income for the period | | 203 | | | 203 | |
Other comprehensive loss, net of tax | | (754) | | | (754) | |
| Other comprehensive income, net of tax | |
Cumulative effect adjustment, due to adoption of ASU 2022-02, net of tax | |
Bank common stock repurchased | Bank common stock repurchased | | (936) | | | (50) | | | (50) | |
| Net activity under employee plans and related tax benefits | Net activity under employee plans and related tax benefits | | 59 | | | 6 | | | 6 | |
Net activity under employee plans and related tax benefits | |
Net activity under employee plans and related tax benefits | |
Dividends on preferred stock | Dividends on preferred stock | | (8) | | | (8) | |
Dividends on common stock, $0.38 per share | | (58) | | | (58) | |
Dividends on common stock, $0.41 per share | |
Change in deferred compensation | Change in deferred compensation | | (1) | | | (1) | |
Balance at June 30, 2022 | $ | 440 | | | 150,471 | | | $ | — | | | $ | 1,845 | | | $ | 5,447 | | | $ | (2,100) | | | $ | 5,632 | |
Balance at March 31, 2023 | |
See accompanying notes to consolidated financial statements.
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) | (In millions) | | Six Months Ended June 30, | (In millions) | | Three Months Ended March 31, |
| 2023 | | 2022 | | | | 2024 | | 2023 |
CASH FLOWS FROM OPERATING ACTIVITIES | CASH FLOWS FROM OPERATING ACTIVITIES | | | | |
Net income for the period | Net income for the period | | $ | 379 | | | $ | 406 | |
Net income for the period | |
Net income for the period | |
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 | |
| Provision for credit losses | Provision for credit losses | | 91 | | | 8 | |
Depreciation and amortization | Depreciation and amortization | | 72 | | | 45 | |
Share-based compensation | Share-based compensation | | 24 | | | 22 | |
Deferred income tax expense (benefit) | | (13) | | | 29 | |
Net decrease in trading securities | | 433 | | | 67 | |
Net decrease (increase) in loans held for sale | | (25) | | | 42 | |
Deferred income tax expense | |
Net decrease (increase) in trading securities | |
Net decrease in loans held for sale | |
Change in other liabilities | Change in other liabilities | | (363) | | | 389 | |
Change in other assets | Change in other assets | | 164 | | | (205) | |
Other, net | Other, net | | 57 | | | 1 | |
Net cash provided by operating activities | Net cash provided by operating activities | | 819 | | | 804 | |
CASH FLOWS FROM INVESTING ACTIVITIES | CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
Net decrease in money market investments | | 1,454 | | | 8,895 | |
Net decrease (increase) in money market investments | |
Net decrease (increase) in money market investments | |
Net decrease (increase) in money market investments | |
Proceeds from maturities and paydowns of investment securities held-to-maturity | 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 | | (21) | | | (220) | |
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 | | (301) | | | (5,773) | |
Net change in loans and leases | 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 | | 176 | | | (1) | |
Purchases of premises and equipment | Purchases of premises and equipment | | (53) | | | (102) | |
| Other, net | Other, net | | (18) | | | 11 | |
Other, net | |
Other, net | |
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 | | | | |
Net increase (decrease) in deposits | | 2,671 | | | (3,728) | |
Net decrease in deposits | |
Net decrease in deposits | |
Net decrease in deposits | |
Net change in short-term borrowed funds | Net change in short-term borrowed funds | | (4,904) | | | 115 | |
| Redemption of long-term debt | | (128) | | | (290) | |
| Proceeds from the issuance of common stock | |
| Proceeds from the issuance of common stock | |
| | Proceeds from the issuance of common stock | Proceeds from the issuance of common stock | | 2 | | | 8 | |
Dividends paid on common and preferred stock | Dividends paid on common and preferred stock | | (138) | | | (130) | |
Bank common stock repurchased | Bank common stock repurchased | | (50) | | | (101) | |
Other, net | Other, net | | (8) | | | (11) | |
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 | | 44 | | | (36) | |
Net decrease in cash and due from banks | |
Cash and due from banks at beginning of period | 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 | | $ | 701 | | | $ | 559 | |
Cash paid for interest | Cash paid for interest | | $ | 546 | | | $ | 31 | |
Net cash paid for income taxes | Net cash paid for income taxes | | 231 | | | 4 | |
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 | | 49 | | | 61 | |
| Loans held for investment reclassified to loans held for sale, net | |
| Loans held for investment reclassified to loans held for sale, net | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2023March 31, 2024
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Zions Bancorporation, National Association and its majority-owned subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. References to GAAP, including standards promulgated by the Financial Accounting Standards Board (“FASB”), are made according to sections of the Accounting Standards Codification (“ASC”).
The results of operations for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 are not necessarily indicative of the results that may be expected in future periods. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.Notes. Actual results could differ from those estimates. For further information, refer to the consolidated financial statements and accompanying footnotes included in our 20222023 Form 10-K.
We evaluated events that occurred between June 30, 2023March 31, 2024 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 7 of the Notes to Consolidated Financial Statements, 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 in 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
| | | | | | | | | | | | | | | | | | | | |
Standard | | Description | | Date of adoptionEffective date | | Effect on the financial statements or other significant matters |
| | | | | | |
Standards not yet adopted by the Bank as of March 31, 2024 |
| | | | | | |
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures | | This Accounting Standards Update (“ASU”) expands operating segment disclosures and requires all segment disclosures to be reported in both annual and interim periods. The new standard requires disclosure of the following: •Significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) for reportable segments; •The title and position of the CODM as well as how the CODM uses the reported measure(s) of profit and loss to assess segment performance; and •“Other segment items” by reportable segment and a description of its composition. | | Annual periods beginning January 1, 2024; Interim periods beginning January 1, 2025 | | The overall effect of this standard is not expected to have a material impact on our financial statements. |
| | | | | | |
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures | | This ASU expands tax disclosures to provide more information to better assess how an entity’s operations, related tax risks, and tax planning affect its tax rate and prospects for future cash flows. The enhancements in this ASU require that an entity disaggregate income taxes paid and income (or loss) from continuing operations before tax expense (or benefit), and income tax expense (or benefit) from continuing operations. The new standard requires disclosure of specific categories in the rate reconciliation and provides additional information for reconciling items that meet a quantitative threshold. | | January 1, 2025 | | The overall effect of this standard is not expected to have a material impact on our financial statements. |
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| | | | | | |
Standards adopted by the Bank during the first quarter of 2024 |
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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. | | January 1, 2024 | | We adopted the new standard on January 1, 2024. The adoption of this standard did not have a material effect on our financial statements. |
ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
| | This Accounting Standards Update (“ASU”)ASU expands the optional use of the proportional amortization method (“PAM”), previously limited to investments in low-income housing tax credit (“LIHTC”) structures, to any eligible equity investments made primarily for the purpose of receiving income tax credit and other tax benefits when certain criteria are met. PAM results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit). This ASU allows for an accounting policy election to apply PAM on a tax-credit-program-by-tax-credit-program basis. The ASU also includes additional disclosure requirements about equity investments accounted for using PAM. 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 | | We do not currently have any additional equity investments that are eligible for PAM underadopted the provisions of this ASU. We will continue to evaluate its use for new investments. The overall effect of the guidance is not expected to have a material impact on our financial statements. We do not plan to early adopt this new 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.
|
| | | | | | |
Standards adopted by the Bank |
| | | | | | |
ASU 2022-02,
Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
| | This ASU eliminated the recognition and measurement requirements for troubled debt restructurings (“TDRs”) for creditors that have adopted ASC 326 (“CECL”), eliminated certain TDR disclosures, and required enhanced disclosures about loan modifications for borrowers experiencing financial difficulty.
The new standard also required public companies to present current period gross charge-offs (on a current year-to-date basis for interim-period disclosures) by year of origination in their vintage disclosures.
| | Periods beginning after December 15, 2022 | | We adopted this ASU on a modified retrospective basis on January 1, 2023. It2024. The adoption of this standard did not have a material impacteffect on our financial statements.
|
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
3. FAIR VALUE
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 20222023 Form 10-K.
Fair Value Hierarchy
The following schedule presents assets and liabilities measured at fair value on a recurring basis:
| (In millions) | (In millions) | June 30, 2023 | (In millions) | March 31, 2024 |
Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | | Total |
ASSETS | ASSETS | | | | | | | |
Available-for-sale securities: | Available-for-sale securities: | |
Available-for-sale securities: | |
Available-for-sale securities: | |
U.S. Treasury, agencies, and corporations | |
U.S. Treasury, agencies, and corporations | |
U.S. Treasury, agencies, and corporations | U.S. Treasury, agencies, and corporations | $ | 475 | | | $ | 8,943 | | | $ | — | | | $ | 9,418 | |
Municipal securities | Municipal securities | | 1,391 | | | 1,391 | |
| Other debt securities | |
Other debt securities | |
Other debt securities | Other debt securities | | 23 | | | 23 | |
Total available-for-sale | Total available-for-sale | 475 | | | 10,357 | | | — | | | 10,832 | |
Trading securities | Trading securities | | 32 | | | 32 | |
Other noninterest-bearing investments: | Other noninterest-bearing investments: | |
Bank-owned life insurance | Bank-owned life insurance | | 549 | | | 549 | |
Bank-owned life insurance | |
Bank-owned life insurance | |
Private equity investments 1 | Private equity investments 1 | 3 | | | 84 | | | 87 | |
Other assets: | Other assets: | |
Agriculture loan servicing and interest-only strips | | 17 | | | 17 | |
Loans held for sale | | 20 | | | 20 | |
Agriculture loan servicing | |
Agriculture loan servicing | |
Agriculture loan servicing | |
| Deferred compensation plan assets | |
Deferred compensation plan assets | |
Deferred compensation plan assets | Deferred compensation plan assets | 114 | | | 114 | |
Derivatives | Derivatives | | 491 | | | 491 | |
Total assets | Total assets | $ | 592 | | | $ | 11,449 | | | $ | 101 | | | $ | 12,142 | |
LIABILITIES | LIABILITIES | | | | | | | |
Securities sold, not yet purchased | Securities sold, not yet purchased | $ | 347 | | | $ | — | | | $ | — | | | $ | 347 | |
Securities sold, not yet purchased | |
Securities sold, not yet purchased | |
Other liabilities: | Other liabilities: | |
Derivatives | Derivatives | | 409 | | | 409 | |
Derivatives | |
Derivatives | |
Total liabilities | 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 publicly traded.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| (In millions) | (In millions) | December 31, 2022 | (In millions) | December 31, 2023 |
Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | | Total |
ASSETS | ASSETS | | | | | | | |
Available-for-sale securities: | Available-for-sale securities: | |
Available-for-sale securities: | |
Available-for-sale securities: | |
U.S. Treasury, agencies, and corporations | |
U.S. Treasury, agencies, and corporations | |
U.S. Treasury, agencies, and corporations | U.S. Treasury, agencies, and corporations | $ | 393 | | | $ | 9,815 | | | $ | — | | | $ | 10,208 | |
Municipal securities | Municipal securities | | 1,634 | | | 1,634 | |
| Other debt securities | Other debt securities | | 73 | | | 73 | |
Other debt securities | |
Other debt securities | |
| Total available-for-sale | |
Total available-for-sale | |
Total available-for-sale | Total available-for-sale | 393 | | | 11,522 | | | — | | | 11,915 | |
Trading securities | Trading securities | 395 | | | 70 | | | 465 | |
Other noninterest-bearing investments: | Other noninterest-bearing investments: | |
Bank-owned life insurance | Bank-owned life insurance | | 546 | | | 546 | |
Bank-owned life insurance | |
Bank-owned life insurance | |
Private equity investments 1 | Private equity investments 1 | 4 | | | 81 | | | 85 | |
Other assets: | Other assets: | |
Agriculture loan servicing and interest-only strips | | 14 | | | 14 | |
Agriculture loan servicing | |
Agriculture loan servicing | |
Agriculture loan servicing | |
Loans held for sale | |
Deferred compensation plan assets | Deferred compensation plan assets | 114 | | | 114 | |
Derivatives | Derivatives | | 386 | | | 386 | |
Total assets | Total assets | $ | 906 | | | $ | 12,524 | | | $ | 95 | | | $ | 13,525 | |
LIABILITIES | LIABILITIES | | | | | | | |
Securities sold, not yet purchased | Securities sold, not yet purchased | $ | 187 | | | $ | — | | | $ | — | | | $ | 187 | |
Securities sold, not yet purchased | |
Securities sold, not yet purchased | |
Other liabilities: | Other liabilities: | |
Derivatives | Derivatives | | 451 | | | 451 | |
Derivatives | |
Derivatives | |
Total liabilities | Total liabilities | $ | 187 | | | $ | 451 | | | $ | — | | | $ | 638 | |
1 The Level 1 PEIs relate to the portion of our SBIC investments that are publicly traded.
Level 3 Valuations
Our Level 3 financial instruments include PEIs and agriculture loan servicing, and interest-only strips.servicing. 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 20222023 Form 10-K.
Rollforward
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Roll-forward of Level 3 Fair Value Measurements
The following schedule presents a rollforwardroll-forward of assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs:
| | Level 3 Instruments |
| Three Months Ended | | | Six Months Ended | |
| June 30, 2023 | | June 30, 2022 | | | June 30, 2023 | | June 30, 2022 | |
| Level 3 Instruments | |
| Level 3 Instruments | |
| Level 3 Instruments | |
| Three Months Ended | |
| March 31, 2024 | |
| March 31, 2024 | |
| March 31, 2024 | |
(In millions) | |
(In millions) | |
(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 | |
| Balance at beginning of period | Balance at beginning of period | $ | 82 | | | $ | 18 | | | $ | 74 | | | $ | 12 | | | | $ | 81 | | | $ | 14 | | | $ | 66 | | | $ | 12 | | |
Unrealized securities gains (losses), net | (3) | | | — | | | — | | | — | | | | (3) | | | — | | | 5 | | | — | | |
| Balance at beginning of period | |
| Balance at beginning of period | |
| Other noninterest income (expense) | |
| Other noninterest income (expense) | |
| Other noninterest income (expense) | Other noninterest income (expense) | — | | | (1) | | | — | | | — | | | | — | | | 3 | | | — | | | — | | |
Purchases | Purchases | 5 | | | — | | | 3 | | | — | | | | 6 | | | — | | | 9 | | | — | | |
Purchases | |
Purchases | |
Cost of investments sold | |
Cost of investments sold | |
Cost of investments sold | Cost of investments sold | — | | | — | | | — | | | — | | | | — | | | — | | | (3) | | | — | | |
| Transfers out 1 | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | |
Transfers out | |
| Transfers out | |
| Transfers out | |
Balance at end of period | Balance at end of period | $ | 84 | | | $ | 17 | | | $ | 77 | | | $ | 12 | | | | $ | 84 | | | $ | 17 | | | $ | 77 | | | $ | 12 | | |
Balance at end of period | |
Balance at end of period | |
1 Represents the transfer of SBIC investments out of Level 3 and into Level 1 because they are publicly traded.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The rollforwardroll-forward of Level 3 instruments includes the following realized gains and losses recognized in securities“Securities gains (losses), net” on the consolidated statement of income for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | Three Months Ended | | | Six Months Ended
June 30,March 31, 2024 | | March 31, 2023 | | | June 30, 2022 | | June 30, 2023 | June 30, 2022 |
| | | | | | | |
| | | | | | | |
Securities gains (losses), net | $ | —2 | | | $ | — | | | | $ | — | | $ | (2) | |
| | | | | | | |
Nonrecurring Fair Value Measurements
Certain assets and liabilities may be measured at fair value on a nonrecurring basis, including impaired loans that have been measured based on the fair value of the underlying collateral, other real estate owned (“OREO”), and equity investments without readily determinable fair values. Nonrecurring fair value adjustments generally include changes in value resulting from observable price changes for equity investments without readily determinable fair values, write-downs of individual assets, or the application of lower of cost or fair value accounting. At June 30, 2023,March 31, 2024, we had $10$2 million of collateral-dependent loans classified in Level 2, and we recognized $4less than $1 million of losses from fair value changes related to these loans. At December 31, 2022, we had an insignificant amount of assets or liabilities that had fair value changes measured on a nonrecurring basis. For additional information regarding the measurement ofassets and liabilities measured at fair value for impaired loans, collateral-dependent loans, and OREO,on a nonrecurring basis, see Note 3 of our 20222023 Form 10-K.
Fair Value of Certain Financial Instruments
The following schedule presents the carrying values and estimated fair values of certain financial instruments: | | |
| | | June 30, 2023 | | December 31, 2022 | |
(In millions) | (In millions) | Carrying value | | Fair value | | Level | | Carrying value | | Fair value | | Level | |
(In millions) | |
(In millions) | |
Financial assets: | |
Financial assets: | |
Financial assets: | Financial assets: | | | | | | | | | | | | |
Held-to-maturity investment securities | Held-to-maturity investment securities | $ | 10,753 | | | $ | 10,768 | | | 2 | | $ | 11,126 | | | $ | 11,239 | | | 2 | |
Held-to-maturity investment securities | |
Held-to-maturity investment securities | |
Loans and leases (including loans held for sale), net of allowance | |
Loans and leases (including loans held for sale), net of allowance | |
Loans and leases (including loans held for sale), net of allowance | 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: | |
Financial liabilities: | |
Time deposits | |
Time deposits | |
Time deposits | Time deposits | 12,259 | | | 12,187 | | | 2 | | 2,309 | | | 2,269 | | | 2 | |
| Long-term debt | Long-term debt | 538 | | | 460 | | | 2 | | 651 | | | 635 | | | 2 | |
| Long-term debt | |
| Long-term debt | |
The previouspreceding schedule does not include certain financial instruments that are recorded at fair value on a recurring 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 20222023 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
The following schedules present gross and net information for selected financial instruments on the balance sheet.sheet:
| | June 30, 2023 |
| | Gross amounts not offset in the balance sheet | |
| | March 31, 2024 | | | | March 31, 2024 |
| | | | | | | | Gross amounts not offset on the balance sheet | |
(In millions) | |
(In millions) | |
(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 | | Gross amounts recognized | | Gross amounts offset on the balance sheet | | Net amounts presented on the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount |
Assets: | Assets: | | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | |
Federal funds sold and securities purchased under agreements to resell | |
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) | | 491 | | | — | | | 491 | | | (9) | | | (470) | | | 12 | |
Total assets | Total assets | | $ | 1,359 | | | $ | (87) | | | $ | 1,272 | | | $ | (9) | | | $ | (470) | | | $ | 793 | |
Liabilities: | Liabilities: | | | | | | | | | | | | |
Federal funds and other short-term borrowings | Federal funds and other short-term borrowings | | $ | 5,600 | | | $ | (87) | | | $ | 5,513 | | | $ | — | | | $ | — | | | $ | 5,513 | |
Federal funds and other short-term borrowings | |
Federal funds and other short-term borrowings | |
Derivatives (included in other liabilities) | Derivatives (included in other liabilities) | | 409 | | | — | | | 409 | | | (9) | | | (1) | | | 399 | |
Total liabilities | Total liabilities | | $ | 6,009 | | | $ | (87) | | | $ | 5,922 | | | $ | (9) | | | $ | (1) | | | $ | 5,912 | |
| | December 31, 2022 |
| | Gross amounts not offset in the balance sheet | |
| | December 31, 2023 | | | | December 31, 2023 |
| | | | | | | | Gross amounts not offset on the balance sheet | |
(In millions) | |
(In millions) | |
(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 | | Gross amounts recognized | | Gross amounts offset on the balance sheet | | Net amounts presented on the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount |
Assets: | Assets: | | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | |
Federal funds sold and securities purchased under agreements to resell | |
Federal funds sold and securities purchased under agreements to resell | Federal funds sold and securities purchased under agreements to resell | | $ | 2,451 | | | $ | (25) | | | $ | 2,426 | | | $ | — | | | $ | — | | | $ | 2,426 | |
Derivatives (included in other assets) | Derivatives (included in other assets) | | 386 | | | — | | | 386 | | | (10) | | | (367) | | | 9 | |
Total assets | Total assets | | $ | 2,837 | | | $ | (25) | | | $ | 2,812 | | | $ | (10) | | | $ | (367) | | | $ | 2,435 | |
Liabilities: | Liabilities: | | | | | | | | | | | | |
Federal funds and other short-term borrowings | Federal funds and other short-term borrowings | | $ | 10,442 | | | $ | (25) | | | $ | 10,417 | | | $ | — | | | $ | — | | | $ | 10,417 | |
Federal funds and other short-term borrowings | |
Federal funds and other short-term borrowings | |
Derivatives (included in other liabilities) | Derivatives (included in other liabilities) | | 451 | | | — | | | 451 | | | (10) | | | — | | | 441 | |
Total liabilities | Total liabilities | | $ | 10,893 | | | $ | (25) | | | $ | 10,868 | | | $ | (10) | | | $ | — | | | $ | 10,858 | |
Security repurchase and reverse repurchase agreements are offset, when applicable, inon the balance sheet according to master netting agreements. Security repurchase agreements are included within “Federal funds and other short-term borrowings.”borrowings” on the consolidated balance sheet. Derivative instruments may be offset under their master netting agreements; however, for accounting purposes, we present these items on a gross basis inon our balance sheet. See Note 7 for further information regarding derivative instruments.
5. INVESTMENTS
Investment Securities
Investment securities are classified as held-to-maturity (“HTM”), available-for-sale (“AFS”), or trading. HTM securities, which management has the intent and ability to hold until maturity, are measuredcarried 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. AFS securities are carried at fair value, and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to accumulated other comprehensive income (“AOCI”), net of related taxes. Trading securities are carried at fair value with gains and losses recognized in current period earnings.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The carrying values of our securities do not include accrued interest receivables of $58 million and $65 million at March 31, 2024 and December 31, 2023, respectively. These receivables are included in “Other assets” on the consolidated balance sheet.
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 either a premium or discount to the amortized cost basis of the HTM securities. The amortization of the unrealized gains or losses reported in accumulated other comprehensive income (“AOCI”)AOCI will offset the effect of the accretionamortization of the premium or discount in interest income that is created by the transfer. The discount associated with securities previously transferred from AFS to HTM was $2.0 billion ($1.5 billion after tax) at March 31, 2024.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
AFS securities are measured at fair value, and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to AOCI, net of related taxes. Trading securities are measured at fair value with gains and losses recognized in current period earnings. The carrying values of our securities do not include accrued interest receivables of $67 million and $75 million at June 30, 2023 and December 31, 2022, respectively. These receivables are presented on the consolidated balance sheet in “Other assets.” See Notes 3 and 5 of our 20222023 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 |
| March 31, 2024 | | | March 31, 2024 |
(In millions) | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | (In millions) | Amortized cost | | Gross unrealized gains 1 | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | Held-to-maturity | | | | | | | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
Agency securities | Agency securities | $ | 96 | | | $ | — | | | $ | 6 | | | $ | 90 | |
Agency guaranteed mortgage-backed securities 1 | 10,289 | | | 116 | | | 70 | | | 10,335 | |
Agency securities | |
Agency securities | |
Agency guaranteed mortgage-backed securities | |
Municipal securities | Municipal securities | 368 | | | — | | | 25 | | | 343 | |
Total held-to-maturity | Total held-to-maturity | 10,753 | | | 116 | | | 101 | | | 10,768 | |
Available-for-sale | Available-for-sale | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 565 | | | — | | | 90 | | | 475 | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | 717 | | | — | | | 40 | | | 677 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 8,991 | | | — | | | 1,344 | | | 7,647 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 646 | | | — | | | 27 | | | 619 | |
Municipal securities | Municipal securities | 1,480 | | | — | | | 89 | | | 1,391 | |
Other debt securities | Other debt securities | 25 | | | — | | | 2 | | | 23 | |
Total available-for-sale | Total available-for-sale | 12,424 | | | — | | | 1,592 | | | 10,832 | |
Total HTM and AFS investment securities | Total HTM and AFS investment securities | $ | 23,177 | | | $ | 116 | | | $ | 1,693 | | | $ | 21,600 | |
| | December 31, 2022 |
| December 31, 2023 | | | December 31, 2023 |
(In millions) | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | (In millions) | Amortized cost | | Gross unrealized gains 1 | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | Held-to-maturity | | | | | | | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
Agency securities | Agency securities | $ | 100 | | | $ | — | | | $ | 7 | | | $ | 93 | |
Agency guaranteed mortgage-backed securities 1 | 10,621 | | | 165 | | | 14 | | | 10,772 | |
Agency securities | |
Agency securities | |
Agency guaranteed mortgage-backed securities | |
Municipal securities | Municipal securities | 405 | | | — | | | 31 | | | 374 | |
Total held-to-maturity | Total held-to-maturity | 11,126 | | | 165 | | | 52 | | | 11,239 | |
Available-for-sale | Available-for-sale | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 557 | | | — | | | 164 | | | 393 | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | 782 | | | — | | | 46 | | | 736 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 9,652 | | | — | | | 1,285 | | | 8,367 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 740 | | | 1 | | | 29 | | | 712 | |
Municipal securities | Municipal securities | 1,732 | | | 1 | | | 99 | | | 1,634 | |
Other debt securities | Other debt securities | 75 | | | — | | | 2 | | | 73 | |
Total available-for-sale | Total available-for-sale | 13,538 | | | 2 | | | 1,625 | | | 11,915 | |
Total HTM and AFS investment securities | Total HTM and AFS investment securities | $ | 24,664 | | | $ | 167 | | | $ | 1,677 | | | $ | 23,154 | |
1During Gross unrealized gains for the fourth quarter of 2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of mortgage-backedrespective 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).security categories were individually less than $1 million.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Maturities
The following schedule presents the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at June 30, 2023.March 31, 2024. This schedule does not reflect the duration of the portfolio, which would incorporate amortization, expected prepayments, interest rate resets, and fair value hedges.hedges; the effects of which result in measured durations shorter than contractual maturities.
| | 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 |
| March 31, 2024 | | | March 31, 2024 |
| Total debt securities | | | Total debt securities | | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | (Dollar amounts in millions) | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield |
Held-to-maturity | Held-to-maturity | | | | | | | | | | | | | | | | | | | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | $ | 96 | | | 3.54 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 96 | | | 3.54 | % | $ | 92 | | | 3.52 | | 3.52 | % | | $ | — | | | — | | — | % | | $ | — | | | — | | — | % | | $ | — | | | — | | — | % | | $ | 92 | | | 3.52 | | 3.52 | % |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 10,289 | | | 1.84 | | | — | | | — | | | — | | | — | | | 46 | | | 2.02 | | | 10,243 | | | 1.84 | |
Municipal securities 1 | Municipal securities 1 | 368 | | | 3.15 | | | 27 | | | 2.77 | | | 135 | | | 2.98 | | | 168 | | | 3.33 | | | 38 | | | 3.19 | |
Total held-to-maturity securities | 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 | Available-for-sale | | | | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 565 | | | 3.12 | | | 164 | | | 5.01 | | | — | | | — | | | — | | | — | | | 401 | | | 2.35 | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | 717 | | | 2.65 | | | 114 | | | 1.07 | | | 191 | | | 3.13 | | | 218 | | | 2.63 | | | 194 | | | 3.12 | |
Agency guaranteed mortgage-backed securities | 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 | Small Business Administration loan-backed securities | 646 | | | 5.22 | | | — | | | — | | | 33 | | | 5.84 | | | 146 | | | 4.30 | | | 467 | | | 5.46 | |
Municipal securities 1 | Municipal securities 1 | 1,480 | | | 2.18 | | | 122 | | | 2.40 | | | 500 | | | 2.62 | | | 678 | | | 1.84 | | | 180 | | | 2.08 | |
Other debt securities | Other debt securities | 25 | | | 8.53 | | | — | | | — | | | — | | | — | | | 10 | | | 9.50 | | | 15 | | | 7.88 | |
Total available-for-sale securities | 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 | 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 | % | Total HTM and AFS investment securities | $ | 21,661 | | | 2.12 | | 2.12 | % | | $ | 508 | | | 3.29 | | 3.29 | % | | $ | 839 | | | 2.66 | | 2.66 | % | | $ | 2,663 | | | 2.30 | | 2.30 | % | | $ | 17,651 | | | 2.04 | | 2.04 | % |
1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents gross unrealized losses for AFS securities and the estimated fair value by length of time the securities have been in an unrealized loss position.position:
| | June 30, 2023 |
| Less than 12 months | | 12 months or more | | Total |
| March 31, 2024 | | | March 31, 2024 |
| Less than 12 months | | | 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 |
| Available-for-sale | Available-for-sale | | | | | | | | | | | |
| Available-for-sale | |
| Available-for-sale | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Treasury securities | U.S. Treasury securities | $ | — | | | $ | 55 | | | $ | 90 | | | $ | 311 | | | $ | 90 | | | $ | 366 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | 2 | | | 33 | | | 38 | | | 617 | | | 40 | | | 650 | |
Agency guaranteed mortgage-backed securities | 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 | — | | | 21 | | | 27 | | | 525 | | | 27 | | | 546 | |
Municipal securities | Municipal securities | 7 | | | 495 | | | 82 | | | 871 | | | 89 | | | 1,366 | |
Other | Other | — | | | — | | | 2 | | | 13 | | | 2 | | | 13 | |
| Total available-for-sale investment securities | Total available-for-sale investment securities | $ | 92 | | | $ | 1,086 | | | $ | 1,500 | | | $ | 9,477 | | | $ | 1,592 | | | $ | 10,563 | |
| Total available-for-sale investment securities | |
| Total available-for-sale investment securities | |
| | December 31, 2022 |
| Less than 12 months | | 12 months or more | | Total |
| December 31, 2023 | | | December 31, 2023 |
| Less than 12 months | | | 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 |
| Available-for-sale | Available-for-sale | | | | | | | | | | | |
| Available-for-sale | |
| Available-for-sale | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Treasury securities | U.S. Treasury securities | $ | 94 | | | $ | 308 | | | $ | 70 | | | $ | 85 | | | $ | 164 | | | $ | 393 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | |
Agency securities | |
Agency securities | |
Agency securities | Agency securities | 39 | | | 634 | | | 7 | | | 102 | | | 46 | | | 736 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 447 | | | 4,322 | | | 838 | | | 4,042 | | | 1,285 | | | 8,364 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 8 | | | 101 | | | 21 | | | 524 | | | 29 | | | 625 | |
Municipal securities | Municipal securities | 63 | | | 1,295 | | | 36 | | | 256 | | | 99 | | | 1,551 | |
Other | Other | 2 | | | 13 | | | — | | | — | | | 2 | | | 13 | |
| Total available-for-sale investment securities | Total available-for-sale investment securities | $ | 653 | | | $ | 6,673 | | | $ | 972 | | | $ | 5,009 | | | $ | 1,625 | | | $ | 11,682 | |
| Total available-for-sale investment securities | |
| Total available-for-sale investment securities | |
At June 30, 2023March 31, 2024 and December 31, 2022,2023, approximately 3,2192,940 and 3,5622,998 AFS investment securities were in an unrealized loss position, respectively.
Impairment
On a quarterly basis, we review our investment securities portfolio for the presence of impairment on an individual security basis. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our 20222023 Form 10-K.
AFS Impairment
We did not recognize any impairment on our AFS investment securities portfolio during the first sixthree months of 2023.2024. Unrealized losses primarily relate to changes inhigher interest rates subsequent to the purchase of securities and are not attributable to credit; as such, absent any future sales, we would expect to receive the full principal value at maturity. At June 30, 2023,March 31, 2024, 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 measured at amortized cost. At June 30, 2023,March 31, 2024, the ACL on HTM securities was less than $1 million, all HTM securities were risk-graded as “Pass” in terms of credit quality, and none were considered past due.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Securities Gains and Losses Recognized in Income
The following schedule presents securities gains and losses recognized in the consolidated income statement.income:
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2023 | | 2022 | | 2023 | | 2022 | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| 2024 | |
| 2024 | |
| 2024 | |
(In millions) | |
(In millions) | Gross gains | | Gross losses | | Gross gains | | Gross losses | | Gross gains | | Gross losses | | Gross gains | | Gross losses | |
(In millions) | |
| | | Available-for-sale | |
| Available-for-sale | |
| Available-for-sale | Available-for-sale | $ | 71 | | | $ | 71 | | | $ | — | | | $ | — | | | $ | 72 | | | $ | 73 | | | $ | — | | | $ | — | | |
Trading | Trading | 7 | | | 7 | | | — | | | — | | | 10 | | | 9 | | | — | | | — | | |
Trading | |
Trading | |
Other noninterest-bearing investments | |
Other noninterest-bearing investments | |
Other noninterest-bearing investments | Other noninterest-bearing investments | 10 | | | 10 | | | 1 | | | — | | | 13 | | | 12 | | | 5 | | | 21 | | |
Total gains | Total gains | 88 | | | 88 | | | 1 | | | — | | | 95 | | | 94 | | | 5 | | | 21 | | |
Total gains | |
Total gains | |
Net gains (losses) 1 | |
Net gains (losses) 1 | |
Net gains (losses) 1 | Net gains (losses) 1 | | | $ | — | | | | | $ | 1 | | | | | $ | 1 | | | | | $ | (16) | | |
|
1 Net gains (losses) were recognized in securities“Securities gains (losses) in, net” on the income statement.consolidated statement of income.
The following schedule presents interest income by security type.type:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2023 | | 2022 |
(In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total |
Investment securities: | | | | | | | | | | | |
Held-to-maturity | $ | 59 | | | $ | 1 | | | $ | 60 | | | $ | 3 | | | $ | 1 | | | $ | 4 | |
Available-for-sale | 69 | | | 8 | | | 77 | | | 109 | | | 11 | | | 120 | |
Trading | — | | | 1 | | | 1 | | | — | | | 4 | | | 4 | |
Total securities | $ | 128 | | | $ | 10 | | | $ | 138 | | | $ | 112 | | | $ | 16 | | | $ | 128 | |
| | Six Months Ended June 30, |
| 2023 | | 2022 |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
(In millions) | (In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total | (In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total |
Investment securities: | Investment securities: | | | | | | | | | | | |
Held-to-maturity | |
Held-to-maturity | |
Held-to-maturity | Held-to-maturity | $ | 120 | | | $ | 2 | | | $ | 122 | | | $ | 5 | | | $ | 2 | | | $ | 7 | |
Available-for-sale | Available-for-sale | 138 | | | 14 | | | 152 | | | 205 | | | 19 | | | 224 | |
Trading | Trading | — | | | 1 | | | 1 | | | — | | | 9 | | | 9 | |
Total securities | 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) | June 30, 2023 | | December 31, 2022 |
| | | |
Loans held for sale | $ | 36 | | | $ | 8 | |
Commercial: | | | |
Commercial and industrial 1 | $ | 16,622 | | | $ | 16,377 | |
Leasing | 388 | | | 386 | |
Owner-occupied | 9,328 | | | 9,371 | |
Municipal | 4,354 | | | 4,361 | |
Total commercial | 30,692 | | | 30,495 | |
Commercial real estate: | | | |
Construction and land development | 2,498 | | | 2,513 | |
Term | 10,406 | | | 10,226 | |
Total commercial real estate | 12,904 | | | 12,739 | |
Consumer: | | | |
Home equity credit line | 3,291 | | | 3,377 | |
1-4 family residential | 7,980 | | | 7,286 | |
Construction and other consumer real estate | 1,434 | | | 1,161 | |
Bankcard and other revolving plans | 466 | | | 471 | |
Other | 150 | | | 124 | |
Total consumer | 13,321 | | | 12,419 | |
| | | |
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. | | | | | | | | | | | |
(In millions) | March 31, 2024 | | December 31, 2023 |
| | | |
Loans held for sale | $ | 12 | | | $ | 53 | |
Commercial: | | | |
Commercial and industrial | $ | 16,519 | | | $ | 16,684 | |
Leasing | 388 | | | 383 | |
Owner-occupied | 9,295 | | | 9,219 | |
Municipal | 4,277 | | | 4,302 | |
Total commercial | 30,479 | | | 30,588 | |
Commercial real estate: | | | |
Construction and land development | 2,686 | | | 2,669 | |
Term | 10,892 | | | 10,702 | |
Total commercial real estate | 13,578 | | | 13,371 | |
Consumer: | | | |
Home equity credit line | 3,382 | | | 3,356 | |
1-4 family residential | 8,778 | | | 8,415 | |
Construction and other consumer real estate | 1,321 | | | 1,442 | |
Bankcard and other revolving plans | 439 | | | 474 | |
Other | 132 | | | 133 | |
Total consumer | 14,052 | | | 13,820 | |
| | | |
Total loans and leases | $ | 58,109 | | | $ | 57,779 | |
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 $38$32 million and $49$37 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. Amortized cost basis does not include accrued interest receivables of $263$300 million and $247$299 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. These receivables are presented in the consolidated balance sheet within the “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 $229$237 million at June 30, 2023March 31, 2024 and $262$219 million at December 31, 2022.2023.
Loans with a carrying value of $39.8$38.7 billion at June 30, 2023March 31, 2024 and $27.6$36.3 billion at December 31, 20222023 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.
At the time of origination, we determine the classification of loans as either held for investment or held for sale. 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 (“CRE”) loans that are sold into securitization entities, and (2) conforming residential mortgages that are generally sold to U.S. government agencies. The following schedule presents loans added to, or sold from, the held for sale category during the periods presented.presented:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In millions) | |
(In millions) | |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Loans added to held for sale | Loans added to held for sale | $ | 220 | | | $ | 190 | | | $ | 306 | | | $ | 487 | |
| Loans added to held for sale | |
| Loans added to held for sale | |
Loans sold from held for sale | Loans sold from held for sale | 188 | | | 187 | | | 277 | | | 523 | |
Loans sold from held for sale | |
Loans sold from held for sale | |
Occasionally, we have continuing involvement in the sold loans in the form of servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was $3.4$0.5 billion and $3.5$0.4 billion at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. Income from sold loans, excluding servicing, was $2 million and $7$1 million for the three and six months ended June 30, 2023,March 31, 2024, and $4 million and $10$5 million for the three and six months ended June 30, 2022, respectively.March 31, 2023. Other income from loans sold includes fair value adjustments on loans that are included in “Capital markets fees” on the consolidated statement of income.
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 20222023 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 measured at amortized cost. See Note 5 of our 20222023 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 March 31, 2024 | | | Three Months Ended March 31, 2024 |
(In millions) | | (In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | |
| | | Three Months Ended June 30, 2023 |
(In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | | | | | | | |
Balance at beginning of period | |
| Balance at beginning of period | |
| Balance at beginning of period | Balance at beginning of period | $ | 313 | | | $ | 160 | | | $ | 145 | | | $ | 618 | |
Provision for loan losses | Provision for loan losses | 24 | | | 21 | | | 1 | | | 46 | |
Gross loan and lease charge-offs | Gross loan and lease charge-offs | 20 | | | — | | | 2 | | | 22 | |
Recoveries | Recoveries | 6 | | | — | | | 3 | | | 9 | |
Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 14 | | | — | | | (1) | | | 13 | |
Balance at end of period | Balance at end of period | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | | | | | | | |
Balance at beginning of period | Balance at beginning of period | $ | 19 | | | $ | 28 | | | $ | 13 | | | $ | 60 | |
Balance at beginning of period | |
Balance at beginning of period | |
Provision for unfunded lending commitments | Provision for unfunded lending commitments | 1 | | | 1 | | | (2) | | | — | |
Balance at end of period | 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 | | | | | | | |
Allowance for loan losses | Allowance for loan losses | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
Allowance for loan losses | |
Allowance for loan losses | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 20 | | | 29 | | | 11 | | | 60 | |
Total allowance for credit losses | Total allowance for credit losses | $ | 343 | | | $ | 210 | | | $ | 158 | | | $ | 711 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | Six Months Ended June 30, 2023 |
| Three Months Ended March 31, 2023 | | | Three Months Ended March 31, 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 | | | | | | | |
Balance at December 31, 2022 | $ | 300 | | | $ | 156 | | | $ | 119 | | | $ | 575 | |
Adjustment for change in accounting standard | — | | | (4) | | | 1 | | | (3) | |
Balance at beginning of period | |
Balance at beginning of period | |
Balance at beginning of period | Balance at beginning of period | $ | 300 | | | $ | 152 | | | $ | 120 | | | $ | 572 | |
Provision for loan losses | Provision for loan losses | 34 | | | 29 | | | 29 | | | 92 | |
Gross loan and lease charge-offs | Gross loan and lease charge-offs | 23 | | | — | | | 6 | | | 29 | |
Recoveries | Recoveries | 12 | | | — | | | 4 | | | 16 | |
Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 11 | | | — | | | 2 | | | 13 | |
Balance at end of period | Balance at end of period | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | | | | | | | |
| Balance at beginning of period | |
| Balance at beginning of period | |
| Balance at beginning of period | Balance at beginning of period | $ | 16 | | | $ | 33 | | | $ | 12 | | | $ | 61 | |
Provision for unfunded lending commitments | Provision for unfunded lending commitments | 4 | | | (4) | | | (1) | | | (1) | |
Balance at end of period | 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 | | | | | | | |
Allowance for loan losses | Allowance for loan losses | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
Allowance for loan losses | |
Allowance for loan losses | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 20 | | | 29 | | | 11 | | | 60 | |
Total allowance for credit losses | Total allowance for credit losses | $ | 343 | | | $ | 210 | | | $ | 158 | | | $ | 711 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
(In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | | | | | | | |
Balance at beginning of period | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
Provision for loan losses | 12 | | | 12 | | | 15 | | | 39 | |
Gross loan and lease charge-offs | 15 | | | — | | | 3 | | | 18 | |
Recoveries | 7 | | | — | | | 2 | | | 9 | |
Net loan and lease charge-offs (recoveries) | 8 | | | — | | | 1 | | | 9 | |
Balance at end of period | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
Reserve for unfunded lending commitments | | | | | | | |
| | | | | | | |
| | | | | | | |
Balance at beginning of period | $ | 14 | | | $ | 12 | | | $ | 10 | | | $ | 36 | |
Provision for unfunded lending commitments | (1) | | | 3 | | | — | | | 2 | |
Balance at end of period | $ | 13 | | | $ | 15 | | | $ | 10 | | | $ | 38 | |
Total allowance for credit losses at end of period | | | | | | | |
Allowance for loan losses | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
Reserve for unfunded lending commitments | 13 | | | 15 | | | 10 | | | 38 | |
Total allowance for credit losses | $ | 299 | | | $ | 129 | | | $ | 118 | | | $ | 546 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
(In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | | | | | | | |
Balance at beginning of period | $ | 311 | | | $ | 107 | | | $ | 95 | | | $ | 513 | |
Provision for loan losses | (12) | | | 7 | | | 15 | | | 10 | |
Gross loan and lease charge-offs | 28 | | | — | | | 7 | | | 35 | |
Recoveries | 15 | | | — | | | 5 | | | 20 | |
Net loan and lease charge-offs (recoveries) | 13 | | | — | | | 2 | | | 15 | |
Balance at end of period | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
Reserve for unfunded lending commitments | | | | | | | |
Balance at beginning of period | $ | 19 | | | $ | 11 | | | $ | 10 | | | $ | 40 | |
Provision for unfunded lending commitments | (6) | | | 4 | | | — | | | (2) | |
Balance at end of period | $ | 13 | | | $ | 15 | | | $ | 10 | | | $ | 38 | |
Total allowance for credit losses at end of period | | | | | | | |
Allowance for loan losses | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
Reserve for unfunded lending commitments | 13 | | | 15 | | | 10 | | | 38 | |
Total allowance for credit losses | $ | 299 | | | $ | 129 | | | $ | 118 | | | $ | 546 | |
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: | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 |
| Amortized cost basis | | Total amortized cost basis | | |
(In millions) | with no allowance | | with allowance | | | Related allowance |
| | | | | | | |
| | | | | | | |
Commercial: | | | | | | | |
Commercial and industrial | $ | 11 | | | $ | 60 | | | $ | 71 | | | $ | 33 | |
| | | | | | | |
Owner-occupied | 20 | | | 9 | | | 29 | | | 1 | |
| | | | | | | |
Total commercial | 31 | | | 69 | | | 100 | | | 34 | |
Commercial real estate: | | | | | | | |
| | | | | | | |
Term | 7 | | | 6 | | | 13 | | | 1 | |
Total commercial real estate | 7 | | | 6 | | | 13 | | | 1 | |
Consumer: | | | | | | | |
Home equity credit line | — | | | 12 | | | 12 | | | 3 | |
1-4 family residential | 2 | | | 35 | | | 37 | | | 5 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total consumer loans | 2 | | | 47 | | | 49 | | | 8 | |
Total | $ | 40 | | | $ | 122 | | | $ | 162 | | | $ | 43 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Amortized cost basis | | Total amortized cost basis | | |
(In millions) | with no allowance | | with allowance | | | Related allowance |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Commercial: | | | | | | | |
Commercial and industrial | $ | 8 | | | $ | 55 | | | $ | 63 | | | $ | 27 | |
| | | | | | | |
Owner-occupied | 13 | | | 11 | | | 24 | | | 1 | |
| | | | | | | |
Total commercial | 21 | | | 66 | | | 87 | | | 28 | |
Commercial real estate: | | | | | | | |
| | | | | | | |
Term | — | | | 14 | | | 14 | | | 2 | |
Total commercial real estate | — | | | 14 | | | 14 | | | 2 | |
Consumer: | | | | | | | |
Home equity credit line | 1 | | | 10 | | | 11 | | | 2 | |
1-4 family residential | 9 | | | 28 | | | 37 | | | 3 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total consumer loans | 10 | | | 38 | | | 48 | | | 5 | |
Total | $ | 31 | | | $ | 118 | | | $ | 149 | | | $ | 35 | |
The amortized cost basis of nonaccrual loans is summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Amortized cost basis | | Total amortized cost basis | | |
(In millions) | with no allowance | | with allowance | | | Related allowance |
| | | | | | | |
| | | | | | | |
Commercial: | | | | | | | |
Commercial and industrial | $ | 7 | | | $ | 103 | | | $ | 110 | | | $ | 25 | |
Leasing | — | | | 2 | | | 2 | | | 1 | |
Owner-occupied | 13 | | | 7 | | | 20 | | | 1 | |
| | | | | | | |
Total commercial | 20 | | | 112 | | | 132 | | | 27 | |
Commercial real estate: | | | | | | | |
Construction and land development | — | | | 1 | | | 1 | | | — | |
Term | 34 | | | 8 | | | 42 | | | 1 | |
Total commercial real estate | 34 | | | 9 | | | 43 | | | 1 | |
Consumer: | | | | | | | |
Home equity credit line | 4 | | | 23 | | | 27 | | | 4 | |
1-4 family residential | 8 | | | 36 | | | 44 | | | 6 | |
| | | | | | | |
Bankcard and other revolving plans | — | | | 1 | | | 1 | | | 1 | |
Other | — | | | 1 | | | 1 | | | — | |
Total consumer loans | 12 | | | 61 | | | 73 | | | 11 | |
Total | $ | 66 | | | $ | 182 | | | $ | 248 | | | $ | 39 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Amortized cost basis | | Total amortized cost basis | | |
(In millions) | with no allowance | | with allowance | | | Related allowance |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Commercial: | | | | | | | |
Commercial and industrial | $ | 11 | | | $ | 71 | | | $ | 82 | | | $ | 30 | |
Leasing | — | | | 2 | | | 2 | | | 1 | |
Owner-occupied | 12 | | | 8 | | | 20 | | | 1 | |
| | | | | | | |
Total commercial | 23 | | | 81 | | | 104 | | | 32 | |
Commercial real estate: | | | | | | | |
Construction and land development | 22 | | | — | | | 22 | | | — | |
Term | 37 | | | 2 | | | 39 | | | 1 | |
Total commercial real estate | 59 | | | 2 | | | 61 | | | 1 | |
Consumer: | | | | | | | |
Home equity credit line | 1 | | | 16 | | | 17 | | | 5 | |
1-4 family residential | 8 | | | 32 | | | 40 | | | 5 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total consumer loans | 9 | | | 48 | | | 57 | | | 10 | |
Total | $ | 91 | | | $ | 131 | | | $ | 222 | | | $ | 43 | |
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 six months ended June 30,March 31, 2024 and 2023, and 2022, there was no interest income recognized on a cash basis during the period the loans were on nonaccrual.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 June 30, | | Six Months Ended June 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In millions) | |
(In millions) | |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Commercial | Commercial | $ | 3 | | | $ | 4 | | | $ | 5 | | | $ | 8 | |
| Commercial | |
| Commercial | |
Commercial real estate | |
Commercial real estate | |
Commercial real estate | Commercial real estate | — | | | — | | | — | | | — | |
Consumer | Consumer | 1 | | | — | | | 1 | | | — | |
Consumer | |
Consumer | |
Total | Total | $ | 4 | | | $ | 4 | | | $ | 6 | | | $ | 8 | |
Total | |
Total | |
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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
(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 | $ | 16,480 | | | $ | 17 | | | $ | 22 | | | $ | 39 | | | $ | 16,519 | | | $ | 2 | | | $ | 87 | |
Leasing | 386 | | | 2 | | | — | | | 2 | | | 388 | | | — | | | — | |
Owner-occupied | 9,288 | | | 5 | | | 2 | | | 7 | | | 9,295 | | | — | | | 18 | |
Municipal | 4,276 | | | 1 | | | — | | | 1 | | | 4,277 | | | — | | | — | |
Total commercial | 30,430 | | | 25 | | | 24 | | | 49 | | | 30,479 | | | 2 | | | 105 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,682 | | | 3 | | | 1 | | | 4 | | | 2,686 | | | — | | | — | |
Term | 10,818 | | | 44 | | | 30 | | | 74 | | | 10,892 | | | — | | | 3 | |
Total commercial real estate | 13,500 | | | 47 | | | 31 | | | 78 | | | 13,578 | | | — | | | 3 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,361 | | | 11 | | | 10 | | | 21 | | | 3,382 | | | — | | | 14 | |
1-4 family residential | 8,740 | | | 15 | | | 23 | | | 38 | | | 8,778 | | | — | | | 16 | |
Construction and other consumer real estate | 1,321 | | | — | | | — | | | — | | | 1,321 | | | — | | | — | |
Bankcard and other revolving plans | 436 | | | 2 | | | 1 | | | 3 | | | 439 | | | 1 | | | — | |
Other | 131 | | | 1 | | | — | | | 1 | | | 132 | | | — | | | 1 | |
Total consumer loans | 13,989 | | | 29 | | | 34 | | | 63 | | | 14,052 | | | 1 | | | 31 | |
Total | $ | 57,919 | | | $ | 101 | | | $ | 89 | | | $ | 190 | | | $ | 58,109 | | | $ | 3 | | | $ | 139 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans | | Accruing loans 90+ days past due | | Nonaccrual loans that are current 1 |
| | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 16,631 | | | $ | 38 | | | $ | 15 | | | $ | 53 | | | $ | 16,684 | | | $ | 1 | | | $ | 65 | |
Leasing | 381 | | | 2 | | | — | | | 2 | | | 383 | | | — | | | — | |
Owner-occupied | 9,206 | | | 11 | | | 2 | | | 13 | | | 9,219 | | | 1 | | | 18 | |
Municipal | 4,301 | | | 1 | | | — | | | 1 | | | 4,302 | | | — | | | — | |
Total commercial | 30,519 | | | 52 | | | 17 | | | 69 | | | 30,588 | | | 2 | | | 83 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,645 | | | 2 | | | 22 | | | 24 | | | 2,669 | | | — | | | — | |
Term | 10,661 | | | 14 | | | 27 | | | 41 | | | 10,702 | | | — | | | 3 | |
Total commercial real estate | 13,306 | | | 16 | | | 49 | | | 65 | | | 13,371 | | | — | | | 3 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,334 | | | 17 | | | 5 | | | 22 | | | 3,356 | | | — | | | 9 | |
1-4 family residential | 8,375 | | | 17 | | | 23 | | | 40 | | | 8,415 | | | — | | | 13 | |
Construction and other consumer real estate | 1,442 | | | — | | | — | | | — | | | 1,442 | | | — | | | — | |
Bankcard and other revolving plans | 468 | | | 5 | | | 1 | | | 6 | | | 474 | | | 1 | | | — | |
Other | 132 | | | 1 | | | — | | | 1 | | | 133 | | | — | | | — | |
Total consumer loans | 13,751 | | | 40 | | | 29 | | | 69 | | | 13,820 | | | 1 | | | 22 | |
Total | $ | 57,576 | | | $ | 108 | | | $ | 95 | | | $ | 203 | | | $ | 57,779 | | | $ | 3 | | | $ | 108 | |
1 Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Credit Quality Indicators
In addition to the nonaccrual and past due criteria, we also analyze loans using loan risk-grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definition of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.
•Pass – A Pass asset is higher-quality and does not fit any of the other categories described below. The likelihood of loss is considered low.
•Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in our credit position at some future date.
•Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well-defined weaknesses and are characterized by the distinct possibility that we may sustain some loss if deficiencies are not corrected.
•Doubtful – A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable.
There were noThe balance of loans classified as Doubtful was $5 million at June 30, 2023 andMarch 31, 2024, compared with zero at December 31, 2022.2023.
For consumer loans and for commercial and commercial real estate (“CRE”)CRE loans with commitments greater than $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 classification as monitored by management. The schedule also summarizes the current period gross charge-offs by year of origination.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| 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) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total |
Commercial: | | | | | | | | | |
Commercial and industrial | | | | | | | | | |
Pass | $ | 361 | | $ | 2,617 | | $ | 2,200 | | $ | 1,133 | | $ | 568 | | $ | 968 | | $ | 7,978 | | $ | 166 | | $ | 15,991 | |
Special Mention | — | | 7 | | 90 | | 20 | | 3 | | 4 | | 72 | | 2 | | 198 | |
Accruing Substandard | 19 | | 30 | | 9 | | 13 | | 5 | | 40 | | 100 | | 4 | | 220 | |
Nonaccrual | — | | 4 | | 32 | | 1 | | 2 | | 47 | | 18 | | 6 | | 110 | |
Total commercial and industrial | 380 | | 2,658 | | 2,331 | | 1,167 | | 578 | | 1,059 | | 8,168 | | 178 | | 16,519 | |
Gross charge-offs | — | | 1 | | 3 | | 1 | | — | | — | | 4 | | 1 | | 10 | |
Leasing | | | | | | | | | |
Pass | 39 | | 94 | | 116 | | 42 | | 26 | | 57 | | — | | — | | 374 | |
Special Mention | — | | 2 | | 8 | | 1 | | 1 | | — | | — | | — | | 12 | |
Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | — | | — | | 2 | | — | | — | | — | | — | | — | | 2 | |
Total leasing | 39 | | 96 | | 126 | | 43 | | 27 | | 57 | | — | | — | | 388 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Owner-occupied | | | | | | | | | |
Pass | 248 | | 1,126 | | 1,852 | | 1,979 | | 975 | | 2,524 | | 209 | | 50 | | 8,963 | |
Special Mention | — | | 5 | | 9 | | 21 | | 14 | | 25 | | 15 | | 5 | | 94 | |
Accruing Substandard | 6 | | 10 | | 31 | | 28 | | 20 | | 115 | | 8 | | — | | 218 | |
Nonaccrual | — | | — | | 1 | | 1 | | 7 | | 11 | | — | | — | | 20 | |
Total owner-occupied | 254 | | 1,141 | | 1,893 | | 2,029 | | 1,016 | | 2,675 | | 232 | | 55 | | 9,295 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Municipal | | | | | | | | | |
Pass | 121 | | 598 | | 1,056 | | 1,014 | | 599 | | 855 | | 2 | | 3 | | 4,248 | |
Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | — | | 15 | | — | | 6 | | 3 | | 5 | | — | | — | | 29 | |
Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total municipal | 121 | | 613 | | 1,056 | | 1,020 | | 602 | | 860 | | 2 | | 3 | | 4,277 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total commercial | 794 | | 4,508 | | 5,406 | | 4,259 | | 2,223 | | 4,651 | | 8,402 | | 236 | | 30,479 | |
Total commercial gross charge-offs | — | | 1 | | 3 | | 1 | | — | | — | | 4 | | 1 | | 10 | |
Commercial real estate: | | | | | | | | | |
Construction and land development | | | | | | | |
Pass | 95 | | 613 | | 933 | | 273 | | 35 | | 12 | | 501 | | 124 | | 2,586 | |
Special Mention | — | | — | | 8 | | 70 | | — | | — | | — | | — | | 78 | |
Accruing Substandard | — | | 19 | | 1 | | — | | 1 | | — | | — | | — | | 21 | |
Nonaccrual | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | |
Total construction and land development | 95 | | 632 | | 942 | | 343 | | 36 | | 12 | | 502 | | 124 | | 2,686 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Term | | | | | | | | | |
Pass | 431 | | 1,735 | | 2,375 | | 1,680 | | 1,286 | | 2,136 | | 286 | | 109 | | 10,038 | |
Special Mention | 95 | | 74 | | 183 | | 103 | | 109 | | 4 | | — | | 10 | | 578 | |
Accruing Substandard | 41 | | 69 | | 30 | | 12 | | 17 | | 30 | | — | | 35 | | 234 | |
Nonaccrual | — | | 4 | | 26 | | — | | — | | 12 | | — | | — | | 42 | |
Total term | 567 | | 1,882 | | 2,614 | | 1,795 | | 1,412 | | 2,182 | | 286 | | 154 | | 10,892 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total commercial real estate | 662 | | 2,514 | | 3,556 | | 2,138 | | 1,448 | | 2,194 | | 788 | | 278 | | 13,578 | |
Total commercial real estate gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | March 31, 2024 | | | March 31, 2024 |
| Term loans | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
(In millions) | |
(In millions) | |
(In millions) | | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total |
| | | June 30, 2023 |
| | 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) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total |
Commercial: | |
Commercial and industrial | |
| Consumer: | |
| Consumer: | |
| Consumer: | |
Home equity credit line | |
Home equity credit line | |
Home equity credit line | |
Pass | |
Pass | |
Pass | Pass | $ | 1,442 | | $ | 2,955 | | $ | 1,550 | | $ | 758 | | $ | 600 | | $ | 703 | | $ | 8,039 | | $ | 177 | | $ | 16,224 | |
Special Mention | Special Mention | 1 | | 3 | | 7 | | 5 | | 1 | | 49 | | 88 | | 1 | | 155 | |
Accruing Substandard | Accruing Substandard | 1 | | 37 | | 3 | | 3 | | 33 | | 28 | | 65 | | 2 | | 172 | |
Nonaccrual | Nonaccrual | 5 | | 5 | | 2 | | 2 | | 1 | | 1 | | 52 | | 3 | | 71 | |
Total commercial and industrial | 1,449 | | 3,000 | | 1,562 | | 768 | | 635 | | 781 | | 8,244 | | 183 | | 16,622 | |
Total home equity credit line | |
Gross charge-offs | Gross charge-offs | — | | 6 | | 5 | | — | | — | | — | | 7 | | 2 | | 20 | |
Leasing | |
1-4 family residential | |
Pass | |
Pass | |
Pass | Pass | 53 | | 146 | | 58 | | 38 | | 54 | | 31 | | — | | — | | 380 | |
Special Mention | Special Mention | — | | 1 | | 1 | | — | | — | | — | | — | | — | | 2 | |
Accruing Substandard | Accruing Substandard | — | | 2 | | — | | — | | — | | 4 | | — | | — | | 6 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total leasing | 53 | | 149 | | 59 | | 38 | | 54 | | 35 | | — | | — | | 388 | |
Total 1-4 family residential | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Owner-occupied | |
Construction and other consumer real estate | |
Pass | |
Pass | |
Pass | Pass | 662 | | 2,027 | | 2,077 | | 1,058 | | 761 | | 2,128 | | 199 | | 48 | | 8,960 | |
Special Mention | Special Mention | 2 | | 5 | | 66 | | 3 | | 17 | | 13 | | 2 | | — | | 108 | |
Accruing Substandard | Accruing Substandard | 5 | | 32 | | 51 | | 20 | | 17 | | 102 | | 4 | | — | | 231 | |
Nonaccrual | Nonaccrual | 1 | | — | | 1 | | 12 | | 3 | | 11 | | 1 | | — | | 29 | |
Total owner-occupied | 670 | | 2,064 | | 2,195 | | 1,093 | | 798 | | 2,254 | | 206 | | 48 | | 9,328 | |
Total construction and other consumer real estate | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Municipal | |
Bankcard and other revolving plans | |
Pass | |
Pass | |
Pass | Pass | 250 | | 1,188 | | 1,194 | | 688 | | 407 | | 575 | | 4 | | — | | 4,306 | |
Special Mention | Special Mention | — | | 38 | | — | | — | | — | | — | | — | | — | | 38 | |
Accruing Substandard | Accruing Substandard | — | | — | | 6 | | 3 | | 1 | | — | | — | | — | | 10 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total municipal | 250 | | 1,226 | | 1,200 | | 691 | | 408 | | 575 | | 4 | | — | | 4,354 | |
Total bankcard and other revolving plans | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total commercial | 2,422 | | 6,439 | | 5,016 | | 2,590 | | 1,895 | | 3,645 | | 8,454 | | 231 | | 30,692 | |
Total commercial gross charge-offs | — | | 6 | | 5 | | — | | — | | — | | 7 | | 2 | | 20 | |
Commercial real estate: | |
Construction and land development | |
Other consumer | |
Pass | |
Pass | |
Pass | Pass | 182 | | 667 | | 667 | | 270 | | 36 | | 3 | | 490 | | 118 | | 2,433 | |
Special Mention | Special Mention | 5 | | — | | — | | 12 | | — | | — | | 15 | | — | | 32 | |
Accruing Substandard | Accruing Substandard | — | | 10 | | 1 | | — | | 22 | | — | | — | | — | | 33 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and land development | 187 | | 677 | | 668 | | 282 | | 58 | | 3 | | 505 | | 118 | | 2,498 | |
Total other consumer | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Term | |
Pass | 876 | | 2,704 | | 1,888 | | 1,673 | | 969 | | 1,639 | | 219 | | 173 | | 10,141 | |
Special Mention | 23 | | 17 | | 1 | | 41 | | 2 | | 9 | | — | | — | | 93 | |
Accruing Substandard | 30 | | 23 | | 1 | | 37 | | 27 | | 41 | | — | | — | | 159 | |
Nonaccrual | — | | — | | — | | — | | 4 | | 9 | | — | | — | | 13 | |
Total term | 929 | | 2,744 | | 1,890 | | 1,751 | | 1,002 | | 1,698 | | 219 | | 173 | | 10,406 | |
Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
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 consumer | |
Total consumer gross charge-offs | |
Total loans | |
Total gross charge-offs | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | June 30, 2023 |
| Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |
| Amortized cost basis by year of origination | |
| December 31, 2023 | | | December 31, 2023 |
| Term loans | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
(In millions) | (In millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | Total |
| | | Consumer: | |
Home equity credit line | |
(In millions) | |
(In millions) | | 2023 | 2022 | 2021 | 2020 | 2018 | Prior | Total |
Commercial: | |
Commercial and industrial | |
Commercial and industrial | |
Commercial and industrial | |
Pass | |
Pass | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 3,184 | | 93 | | 3,277 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 10 | | 2 | | 12 | |
Total home equity credit line | — | | — | | — | | — | | — | | — | | 3,196 | | 95 | | 3,291 | |
Total commercial and industrial | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | | Gross charge-offs | 1 | | 10 | 10 | | 6 | 6 | | — | — | | — | — | | 2 | 2 | | 24 | 24 | | 2 | 2 | | 45 | 45 |
1-4 family residential | |
Leasing | |
Pass | |
Pass | |
Pass | Pass | 651 | | 1,970 | | 1,664 | | 1,011 | | 620 | | 2,025 | | — | | — | | 7,941 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | — | | 2 | | 3 | | 4 | | 28 | | — | | — | | 37 | |
Total 1-4 family residential | 651 | | 1,970 | | 1,666 | | 1,014 | | 624 | | 2,055 | | — | | — | | 7,980 | |
Total leasing | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Construction and other consumer real estate | |
Owner-occupied | |
Pass | |
Pass | |
Pass | Pass | 74 | | 940 | | 372 | | 27 | | 12 | | 9 | | — | | — | | 1,434 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and other consumer real estate | 74 | | 940 | | 372 | | 27 | | 12 | | 9 | | — | | — | | 1,434 | |
Total owner-occupied | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Bankcard and other revolving plans | |
Municipal | |
Pass | |
Pass | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 462 | | 2 | | 464 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 464 | | 2 | | 466 | |
Total municipal | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | |
Other consumer | |
Total commercial | |
Total commercial gross charge-offs | |
Commercial real estate: | |
Construction and land development | |
Construction and land development | |
Construction and land development | |
Pass | |
Pass | |
Pass | Pass | 61 | | 48 | | 24 | | 8 | | 6 | | 3 | | — | | — | | 150 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total other consumer | 61 | | 48 | | 24 | | 8 | | 6 | | 3 | | — | | — | | 150 | |
Total construction and land development | |
Gross charge-offs | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total consumer | 786 | | 2,958 | | 2,062 | | 1,049 | | 642 | | 2,067 | | 3,660 | | 97 | | 13,321 | |
Total consumer gross charge-offs | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | |
Total loans | $ | 4,324 | | $ | 12,818 | | $ | 9,636 | | $ | 5,672 | | $ | 3,597 | | $ | 7,413 | | $ | 12,838 | | $ | 619 | | $ | 56,917 | |
Total gross charge-offs | $ | — | | $ | 6 | | $ | 5 | | $ | — | | $ | — | | $ | — | | $ | 9 | | $ | 2 | | $ | 22 | |
Term | |
Pass | |
Pass | |
Pass | |
Special Mention | |
Accruing Substandard | |
Nonaccrual | |
Total term | |
Gross charge-offs | |
Total commercial real estate | |
Total commercial real estate gross charge-offs | |
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 | |
| December 31, 2023 | | | December 31, 2023 |
| Term loans | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
| Amortized cost basis by year of origination | |
(In millions) | |
(In millions) | |
(In millions) | (In millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | Total | 2023 | 2022 | 2021 | 2020 | 2018 | Prior | Total |
| | | Consumer: | Consumer: | |
| Consumer: | |
| Consumer: | |
Home equity credit line | Home equity credit line | |
Home equity credit line | |
Home equity credit line | |
Pass | |
Pass | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 3,265 | | 98 | | 3,363 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 3 | | — | | 3 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 8 | | 3 | | 11 | |
Total home equity credit line | Total home equity credit line | — | | — | | — | | — | | — | | — | | 3,276 | | 101 | | 3,377 | |
Gross charge-offs | |
1-4 family residential | 1-4 family residential | |
Pass | |
Pass | |
Pass | Pass | 1,913 | | 1,503 | | 1,024 | | 638 | | 381 | | 1,788 | | — | | — | | 7,247 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | 2 | | 2 | | 4 | | 3 | | 26 | | — | | — | | 37 | |
Total 1-4 family residential | Total 1-4 family residential | 1,913 | | 1,505 | | 1,026 | | 642 | | 384 | | 1,816 | | — | | — | | 7,286 | |
Gross charge-offs | |
Construction and other consumer real estate | Construction and other consumer real estate | |
Pass | |
Pass | |
Pass | Pass | 583 | | 485 | | 64 | | 19 | | 5 | | 5 | | — | | — | | 1,161 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and other consumer real estate | Total construction and other consumer real estate | 583 | | 485 | | 64 | | 19 | | 5 | | 5 | | — | | — | | 1,161 | |
Gross charge-offs | |
Bankcard and other revolving plans | Bankcard and other revolving plans | |
Pass | |
Pass | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 468 | | 2 | | 470 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total bankcard and other revolving plans | Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 469 | | 2 | | 471 | |
Gross charge-offs | |
Other consumer | Other consumer | |
Pass | |
Pass | |
Pass | Pass | 68 | | 30 | | 12 | | 8 | | 4 | | 2 | | — | | — | | 124 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total other consumer | Total other consumer | 68 | | 30 | | 12 | | 8 | | 4 | | 2 | | — | | — | | 124 | |
Gross charge-offs | |
Total consumer | Total consumer | 2,564 | | 2,020 | | 1,102 | | 669 | | 393 | | 1,823 | | 3,745 | | 103 | | 12,419 | |
Total consumer gross charge-offs | |
Total loans | Total loans | $ | 13,059 | | $ | 10,344 | | $ | 6,360 | | $ | 4,239 | | $ | 2,347 | | $ | 5,667 | | $ | 13,064 | | $ | 573 | | $ | 55,653 | |
Total gross charge-offs | |
Loan Modifications
On January 1, 2023, we adopted 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. 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
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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
On an ongoing basis, we monitor the performance of all modified loans according to borrowers experiencing financial difficultytheir modified terms. The amortized cost of modified loans that had a payment default during the three and six months ended June 30,March 31, 2024 and 2023, which were still in default at period end, and were within 12 months or less of being modified.modified was approximately $18 million, primarily commercial real estate loans, and less than $1 million, respectively.
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 |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
| Amortized cost associated with the following modification types: | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | | Interest rate reduction | | Maturity or term extension | | Principal forgiveness | | Payment deferral | | | | Multiple modification types 1 | | Total 2 | | Percentage of total loans 3 |
Commercial: | Commercial: | | | | | | | | | | | | |
Commercial and industrial | |
Commercial and industrial | |
Commercial and industrial | Commercial and industrial | $ | 1 | | | $ | 27 | | | $ | — | | | | $ | — | | | $ | 28 | | | 0.2 | % | $ | — | | | $ | | $ | 26 | | | $ | | $ | — | | | $ | | $ | — | | | | | $ | | | | $ | 4 | | | $ | | $ | 30 | | | 0.2 | | 0.2 | % |
Owner-occupied | Owner-occupied | — | | | 20 | | | — | | | | — | | | 20 | | | 0.2 | |
| Total commercial | Total commercial | 1 | | | 47 | | | — | | | | — | | | 48 | | | 0.2 | |
Total commercial | |
Total commercial | |
Commercial real estate: | Commercial real estate: | | | |
Construction and land development | |
Construction and land development | |
Construction and land development | Construction and land development | — | | | 18 | | | — | | | | — | | | 18 | | | 0.7 | |
Term | Term | — | | | 34 | | | — | | | | — | | | 34 | | | 0.3 | |
Total commercial real estate | Total commercial real estate | — | | | 52 | | | — | | | | — | | | 52 | | | 0.4 | |
Consumer: | Consumer: | | | |
| Home equity credit line | |
Home equity credit line | |
Home equity credit line | |
1-4 family residential | 1-4 family residential | — | | | — | | | 1 | | | | 1 | | | 2 | | | — | |
| Bankcard and other revolving plans | Bankcard and other revolving plans | — | | | 1 | | | — | | | | — | | | 1 | | | 0.2 | |
| Bankcard and other revolving plans | |
Bankcard and other revolving plans | |
Other | |
Total consumer loans | Total consumer loans | — | | | 1 | | | 1 | | | | 1 | | | 3 | | | — | |
Total | Total | $ | 1 | | | $ | 100 | | | $ | 1 | | | | $ | 1 | | | $ | 103 | | | 0.2 | % | Total | $ | — | | | $ | | $ | 114 | | | $ | | $ | 2 | | | $ | | $ | — | | | | | $ | | | | $ | 7 | | | $ | | $ | 123 | | | 0.2 | | 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 |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
| Amortized cost associated with the following modification types: | |
| Amortized cost associated with the following modification types: | |
| Amortized cost associated with the following modification types: | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
(Dollar amounts in millions) | |
Commercial: | |
Commercial: | |
Commercial: | Commercial: | | | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | $ | 1 | | | $ | 42 | | | $ | — | | | | $ | — | | | $ | 43 | | | 0.3 | % |
Commercial and industrial | |
Commercial and industrial | |
Owner-occupied | |
Owner-occupied | |
Owner-occupied | Owner-occupied | 4 | | | 22 | | | — | | | | — | | | 26 | | | 0.3 | |
| Total commercial | Total commercial | 5 | | | 64 | | | — | | | | — | | | 69 | | | 0.2 | |
| Total commercial | |
| Total commercial | |
Commercial real estate: | |
Commercial real estate: | |
Commercial real estate: | Commercial real estate: | | | |
Construction and land development | Construction and land development | — | | | 18 | | | — | | | | — | | | 18 | | | 0.7 | |
Construction and land development | |
Construction and land development | |
Term | |
Term | |
Term | Term | — | | | 58 | | | — | | | | — | | | 58 | | | 0.6 | |
Total commercial real estate | Total commercial real estate | — | | | 76 | | | — | | | | — | | | 76 | | | 0.6 | |
Total commercial real estate | |
Total commercial real estate | |
Consumer: | Consumer: | | | |
| Consumer: | |
Consumer: | |
Home equity credit line | |
Home equity credit line | |
Home equity credit line | |
1-4 family residential | |
1-4 family residential | |
1-4 family residential | 1-4 family residential | — | | | — | | | 1 | | | | 1 | | | 2 | | | — | |
| Bankcard and other revolving plans | Bankcard and other revolving plans | — | | | 1 | | | — | | | | — | | | 1 | | | 0.2 | |
| Bankcard and other revolving plans | |
| Bankcard and other revolving plans | |
Other | |
Other | |
Other | |
Total consumer loans | |
Total consumer loans | |
Total consumer loans | Total consumer loans | — | | | 1 | | | 1 | | | | 1 | | | 3 | | | — | |
Total | Total | $ | 5 | | | $ | 141 | | | $ | 1 | | | | $ | 1 | | | $ | 148 | | | 0.3 | % |
Total | |
Total | |
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$3 million and $8 millionat June 30, 2023.March 31, 2024 and March 31, 2023, respectively.
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:schedules:
| | 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) | |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | | | Three Months Ended March 31, 2023 |
| Weighted-average interest rate reduction (in percentage points) | |
Commercial: | Commercial: | | | | | | | | | |
Commercial: | |
Commercial: | |
Commercial and industrial | |
Commercial and industrial | |
Commercial and industrial | Commercial and industrial | 1.0 | % | | 8 | | | 1.0 | % | | 9 | |
| Owner-occupied | Owner-occupied | — | | | 7 | | | 4.4 | | | 7 | |
| Owner-occupied | |
| Owner-occupied | |
| Total commercial | |
| Total commercial | |
| Total commercial | Total commercial | 1.0 | | | 8 | | | 3.7 | | | 8 | |
Commercial real estate: | Commercial real estate: | | | | |
Commercial real estate: | |
Commercial real estate: | |
Construction and land development | |
Construction and land development | |
Construction and land development | Construction and land development | — | | | 6 | | | — | | | 6 | |
Term | Term | — | | | 18 | | | — | | | 17 | |
Term | |
Term | |
Total commercial real estate | |
Total commercial real estate | |
Total commercial real estate | Total commercial real estate | — | | | 14 | | | — | | | 15 | |
Consumer: 1 | Consumer: 1 | | | | |
| Consumer: 1 | |
Consumer: 1 | |
Home equity credit line | |
Home equity credit line | |
Home equity credit line | |
1-4 family residential | |
1-4 family residential | |
1-4 family residential | 1-4 family residential | 1.3 | | | 110 | | | 1.3 | | | 110 | |
| Bankcard and other revolving plans | Bankcard and other revolving plans | — | | | 65 | | | — | | | 61 | |
| Bankcard and other revolving plans | |
| Bankcard and other revolving plans | |
Other | |
Other | |
Other | |
Total consumer loans | |
Total consumer loans | |
Total consumer loans | Total consumer loans | 1.3 | | | 87 | | | 1.3 | | | 87 | |
Total weighted average financial impact | Total weighted average financial impact | 1.1 | % | | 12 | | | 3.4 | % | | 13 | |
Total weighted average financial impact | |
Total weighted average financial impact | |
1 Primarily relates to one loana small number of loans 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,March 31, 2024 and 2023 resulteddid not result in $1 million of principal forgiveness for any class of loan for each respective period.
The following schedule presents the totalaging of loans to borrowers experiencing financial difficulty that were modified on or after April 1, 2023 through March 31, 2024, presented by portfolio segment and loan portfolio for both periods.class:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total amortized cost of loans |
| | | | | | | | | |
Commercial: | | | | | | | | | |
Commercial and industrial | $ | 62 | | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | 68 | |
| | | | | | | | | |
Owner-occupied | 10 | | | — | | | — | | | — | | | 10 | |
Municipal | 8 | | | — | | | — | | | — | | | 8 | |
Total commercial | 80 | | | — | | | 6 | | | 6 | | | 86 | |
Commercial real estate: | | | | | | | | | |
Construction and land development | 23 | | | 1 | | | 1 | | | 2 | | | 25 | |
Term | 199 | | | 17 | | | 4 | | | 21 | | | 220 | |
Total commercial real estate | 222 | | | 18 | | | 5 | | | 23 | | | 245 | |
Consumer: | | | | | | | | | |
Home equity credit line | 2 | | | — | | | — | | | — | | | 2 | |
1-4 family residential | 2 | | | — | | | 2 | | | 2 | | | 4 | |
| | | | | | | | | |
Bankcard and other revolving plans | — | | | — | | | — | | | — | | | — | |
Other | 1 | | | — | | | — | | | — | | | 1 | |
Total consumer loans | 5 | | | — | | | 2 | | | 2 | | | 7 | |
Total | $ | 307 | | | $ | 18 | | | $ | 13 | | | $ | 31 | | | $ | 338 | |
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, (thethe date we adopted ASU 2022-02)2022-02, through June 30,March 31, 2023, presented by portfolio segment and loan class.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 2022 Form 10-K. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 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 | $ | 20 | | | $ | 16 | | | $ | — | | | $ | 16 | | | $ | 36 | |
| | | | | | | | | |
Owner-occupied | 10 | | | — | | | — | | | — | | | 10 | |
Municipal | — | | | — | | | — | | | — | | | — | |
Total commercial | 30 | | | 16 | | | — | | | 16 | | | 46 | |
Commercial real estate: | | | | | | | | | |
Construction and land development | — | | | — | | | — | | | — | | | — | |
Term | 49 | | | — | | | — | | | — | | | 49 | |
Total commercial real estate | 49 | | | — | | | — | | | — | | | 49 | |
Consumer: | | | | | | | | | |
Home equity credit line | — | | | — | | | — | | | — | | | — | |
1-4 family residential | — | | | 1 | | | — | | | 1 | | | 1 | |
| | | | | | | | | |
Bankcard and other revolving plans | 1 | | | — | | | — | | | — | | | 1 | |
Other | — | | | — | | | — | | | — | | | — | |
Total consumer loans | 1 | | | 1 | | | — | | | 1 | | | 2 | |
Total | $ | 80 | | | $ | 17 | | | $ | — | | | $ | 17 | | | $ | 97 | |
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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Amortized cost resulting from the following modification types: | | |
(In millions) | Interest rate below market | | Maturity or term extension | | Principal forgiveness | | Payment deferral | | Other 1 | | Multiple modification types 2 | | Total |
Accruing | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 1 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | 9 | | | $ | 28 | | | $ | 50 | |
Owner-occupied | — | | | 1 | | | — | | | 2 | | | 13 | | | 12 | | | 28 | |
Municipal | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total commercial | 1 | | | 13 | | | — | | | 2 | | | 22 | | | 40 | | | 78 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | — | | | — | | | — | | | — | | | — | | | 8 | | | 8 | |
Term | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 1 | | | 84 | |
Total commercial real estate | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 9 | | | 92 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | — | | | 1 | | | 4 | | | — | | | — | | | 1 | | | 6 | |
1-4 family residential | 2 | | | 1 | | | 2 | | | — | | | 1 | | | 15 | | | 21 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total consumer loans | 2 | | | 2 | | | 6 | | | — | | | 1 | | | 16 | | | 27 | |
Total accruing | 4 | | | 42 | | | 6 | | | 29 | | | 51 | | | 65 | | | 197 | |
Nonaccruing | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | — | | | — | | | — | | | 3 | | | 9 | | | 3 | | | 15 | |
Owner-occupied | 4 | | | — | | | — | | | — | | | — | | | 4 | | | 8 | |
| | | | | | | | | | | | | |
Total commercial | 4 | | | — | | | — | | | 3 | | | 9 | | | 7 | | | 23 | |
Commercial real estate: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Term | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
Total commercial real estate | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
1-4 family residential | — | | | 1 | | | — | | | — | | | 1 | | | 2 | | | 4 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total consumer loans | — | | | 1 | | | 1 | | | — | | | 1 | | | 2 | | | 5 | |
Total nonaccruing | 4 | | | 11 | | | 1 | | | 3 | | | 10 | | | 9 | | | 38 | |
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 related to TDRs totaled $7 million at December 31, 2022.
The total amortized cost of all TDRs in which interest rates were modified below market was $63 million at December 31, 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 year ended December 31, 2022 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.
The amortized cost of TDRs that had a payment default during the year ended December 31, 2022, which were still in default at period end, and were within 12 months or less of being modified as TDRs was approximately $10 million.
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:
| | March 31, 2024 | | | March 31, 2024 |
(Dollar amounts in millions) | | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
Commercial: | |
| | | June 30, 2023 |
(Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
Commercial: | | | | | |
Commercial and industrial | $ | 10 | | | Accounts Receivable | | 81% |
Owner-occupied | |
| Owner-occupied | |
| | Owner-occupied | Owner-occupied | 12 | | | Hospital | | 29% | $ | 7 | | | Hospital | | Hospital | | 51% |
| Commercial real estate: | Commercial real estate: | |
| Commercial real estate: | |
| Commercial real estate: | |
Construction and land development | |
Construction and land development | |
Construction and land development | | 1 | | | Lots / Homes | | 107% |
Term | Term | 3 | | | Hotel, Multi-family | | 89% | Term | 31 | | | Office Building | | Office Building | | 86% |
| Consumer: | |
Consumer: | |
Consumer: | |
Home equity credit line | |
Home equity credit line | |
Home equity credit line | | 3 | | | Residential | | 21% |
| Total | Total | $ | 25 | | |
| Total | |
| Total | |
| | December 31, 2022 |
| December 31, 2023 | | | December 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
Commercial: | Commercial: | | | | | |
| Owner-occupied | Owner-occupied | $ | 2 | | | Land, Warehouse | | 29% |
| Owner-occupied | |
| Owner-occupied | | $ | 7 | | | Hospital | | 17% |
| Commercial real estate: | Commercial real estate: | |
| Commercial real estate: | |
| Commercial real estate: | |
Construction and land development | |
Construction and land development | |
Construction and land development | | 22 | | | Office Building | | 92% |
Term | Term | 1 | | | Multi-family | | 55% | Term | 28 | | | Office Building | | Office Building | | 87% |
| Consumer: | Consumer: | |
Consumer: | |
Consumer: | |
Home equity credit line | Home equity credit line | 1 | | | Single family residential | | 13% |
1-4 family residential | 3 | | | Single family residential | | 41% |
Home equity credit line | |
Home equity credit line | | — | | | | | |
| | Total | Total | $ | 7 | | |
| Total | |
| Total | |
1 The fair value is based on the most recent appraisal or other collateral evaluation.
Foreclosed Residential Real Estate
At June 30, 2023 and December 31, 2022, we did not have anyThe balance of foreclosed residential real estate property.property was less than $1 million at March 31, 2024, compared with zero at December 31, 2023. The amortized cost basis of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure was $8 million and $10$11 million for the same periods, respectively.both periods.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Accounting
Our primary objective for using derivatives is to manage interest rate risk. We use derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or 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 20222023 Form 10-K.
Fair Value Hedges of Liabilities – During the second quarter of 2023, we terminated our remaining receive-fixed interest rate swap with a notional amount of $500 million that had been designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively converted the interest on our fixed-rate debt to floating until it was terminated. Prior to termination, changes in the fair value of derivatives designated
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
as fair value hedges of debt were offset by changes in the fair value of the hedged debt instruments as shown in the schedules on the following pages. The unamortized hedge basis adjustments resulting from the terminated hedging relationship will be amortized over the remaining life of the fixed-rate debt.
Fair Value Hedges of Assets – During the second quarter of 2023, we entered into new fair value hedges of a defined portfolio of AFS securities using pay-fixed, receive-floating swaps with an aggregate notional amount of $2.5 billion that are designated as hedges under the portfolio layer method described in ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. In July 2023, we entered into additional pay-fixed swaps with an aggregate notional amount of $1 billion that were designated as fair value hedges of a defined portfolio of fixed-rate commercial loans.
At June 30, 2023, we also had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $1.1 billion designated as fair value hedges of specifically identified AFS securities. Fair value hedges of fixed-rate AFS securitiesassets effectively convert the fixed interest income to a floating rate on the hedged portion of the securities.assets. Changes in fair value of derivatives designated as fair value hedges of fixed-rate AFS securitiesfinancial assets were largely offset by changes in the value of the hedged securities,assets, as shown in the schedules on the following pages. At March 31, 2024, we had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $3.6 billion designated as fair value hedges of fixed-rate AFS securities. We had an additional $1.0 billion of aggregate notional designated as hedges of fixed-rate commercial loans.
Cash Flow Hedges – Cash flow hedges of variable-rate assets and liabilities effectively convert the variable interest receipts and payments to fixed. At June 30, 2023,March 31, 2024, we had receive-fixed interest rate swaps with an aggregate notional amount of $2.9 billion$850 million designated as cash flow hedges of pools of floating-rate commercial loans. During the second quarter of 2023,Additionally, at March 31, 2024, we terminated cash flow hedging relationshipshad one pay-fixed interest rate swap with an aggregatea notional amount of $2.8 billion. At June 30, 2023, there was $222$500 million of losses deferred in AOCI related to terminateddesignated as a cash flow hedges that are expected to be fully amortized by October 2027.hedge of the variability in the interest payments on certain FHLB advances. Changes in the fair value of qualifying cash flow hedges during the quarter were recorded in 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 or payments occur (i.e., when the hedged forecasted transactions affect earnings). At March 31, 2024, there was $173 million of losses deferred in AOCI related to terminated cash flow hedges that are expected to be fully amortized by October 2027.
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 more information on how we incorporate counterparty credit risk in derivative valuations, see Note 3 of our 20222023 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our 20222023 Form 10-K.
Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit risk-related feature were triggered, such as a downgrade of our credit rating. In past situations, not all counterparties have not generally demanded that additional collateral be pledged when provided for by the contractual terms. At June 30, 2023,March 31, 2024, the fair value of our derivative liabilities was $409$388 million, for which we were required to pledge
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
cash collateral of $2less than $1 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at June 30, 2023,March 31, 2024, there would likely be no additional collateral required to be pledged.
Derivative Amounts
The following schedule presents information regarding notional amounts and recorded gross fair values at June 30, 2023March 31, 2024 and December 31, 2022,2023, and the related gain (loss) of derivative instruments.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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| 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 | $ | 850 | | | $ | — | | | $ | — | | | $ | 1,450 | | | $ | — | | | $ | — | |
Cash flow hedges of floating-rate liabilities: | | | | | | | | | | | |
Pay-fixed interest rate swaps | 500 | | — | | | — | | | 500 | | — | | | — | |
Fair value hedges: | | | | | | | | | | | |
Debt hedges: Receive-fixed interest rate swaps | — | | | — | | | — | | | — | | | — | | | — | |
Asset hedges: Pay-fixed interest rate swaps | 4,570 | | | 89 | | | — | | | 4,571 | | | 78 | | | — | |
Total derivatives designated as hedging instruments | 5,920 | | | 89 | | | — | | | 6,521 | | | 78 | | | — | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | |
Customer interest rate derivatives 1 | 14,694 | | | 389 | | | 387 | | | 14,375 | | | 337 | | | 330 | |
Other interest rate derivatives | 1,461 | | | 1 | | | — | | | 1,001 | | | 1 | | | — | |
Foreign exchange derivatives | 267 | | | 2 | | | 1 | | | 216 | | | 3 | | | 3 | |
Purchased credit derivatives | — | | | — | | | — | | | 35 | | | 1 | | | — | |
Total derivatives not designated as hedging instruments | 16,422 | | | 392 | | | 388 | | | 15,627 | | | 342 | | | 333 | |
Total derivatives | $ | 22,342 | | | $ | 481 | | | $ | 388 | | | $ | 22,148 | | | $ | 420 | | | $ | 333 | |
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 derivativederivatives as well as offsetting derivatives facing other dealer banks. The fair value of these derivatives include a net credit valuation adjustment (“CVA”) of $10$9 million, reducing the fair value of the liability at June 30, 2023,both March 31, 2024, and $13 million, reducing the fair value of the liability at December 31, 2022.2023.
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 sixthree months ended June 30,March 31, 2024 and 2023 and 2022 is presented in the schedules below.
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
(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 | | | | | | | | | |
| | | | | | | | | |
Interest rate swaps | (5) | | | | | (36) | | | — | | | |
Cash flow hedges of floating-rate liabilities: | | | | | | | | | |
Pay-fixed interest rate swaps | 4 | | | | | 2 | | | — | | | |
Fair value hedges:2 | | | | | | | | | |
Debt hedges: Receive-fixed interest rate swaps | — | | | | | — | | | (2) | | | |
| | | | | | | | | |
Asset hedges: Pay-fixed interest rate swaps | — | | | | | — | | | 23 | | | |
| | | | | | | | | |
Total derivatives designated as hedging instruments | $ | (1) | | | | | $ | (34) | | | $ | 21 | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | Three Months Ended June 30, 2023 | |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
(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 | |
Cash flow hedges of floating-rate assets:1 | 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 assets:1 | |
Cash flow hedges of floating-rate assets:1 | |
| Interest rate swaps | |
| Interest rate swaps | |
| Interest rate swaps | |
Cash flow hedges of floating-rate liabilities: | |
Cash flow hedges of floating-rate liabilities: | |
Cash flow hedges of floating-rate liabilities: | Cash flow hedges of floating-rate liabilities: | | | | |
Pay-fixed interest rate swaps | Pay-fixed interest rate swaps | 11 | | | | 1 | | | — | | |
Fair value hedges: | | | | |
Pay-fixed interest rate swaps | |
Pay-fixed interest rate swaps | |
Fair value hedges: 2 | |
Fair value hedges: 2 | |
Fair value hedges: 2 | |
Debt hedges: Receive-fixed interest rate swaps | 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 | — | | | | — | | | — | | |
Debt hedges: Receive-fixed interest rate swaps | |
Debt hedges: Receive-fixed interest rate swaps | |
Asset hedges: Pay-fixed interest rate swaps | |
Asset hedges: Pay-fixed interest rate swaps | |
Asset hedges: Pay-fixed interest rate swaps | |
Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | $ | (10) | | | | $ | (40) | | | $ | — | | |
Total derivatives designated as hedging instruments | |
Total derivatives designated as hedging instruments | |
| | | | | | | | | | | | | | | | | | | | | |
| 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 | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | |
Cash flow hedges of floating-rate assets: 1 | | | | | | | | | |
Purchased interest rate floors | $ | — | | | | | $ | — | | | $ | — | | | |
Interest rate swaps | (66) | | | | | 6 | | | — | | | |
Fair value hedges of liabilities: | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | | | — | | | 1 | | | |
Basis amortization on terminated hedges2 | — | | | | | — | | | — | | | |
Fair value hedges of assets: | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | | | — | | | (1) | | | |
Basis amortization on terminated hedges 2 | — | | | | | — | | | — | | | |
Total derivatives designated as hedging instruments | $ | (66) | | | | | $ | 6 | | | $ | — | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | |
Cash flow hedges of floating-rate assets: 1 | | | | | | | | | |
Purchased interest rate floors | $ | — | | | | | $ | 2 | | | $ | — | | | |
Interest rate swaps | (244) | | | | | 17 | | | — | | | |
Fair value hedges of liabilities: | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | | | — | | | 3 | | | |
Basis amortization on terminated hedges 2, 3 | — | | | | | — | | | 1 | | | |
Fair value hedges of assets: | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | | | — | | | (2) | | | |
Basis amortization on terminated hedges 2, 3 | — | | | | | — | | | — | | | |
Total derivatives designated as hedging instruments | $ | (244) | | | | | $ | 19 | | | $ | 2 | | | |
1 For the 12 months following June 30, 2023,March 31, 2024, we estimate that $106$102 million of losses will be reclassified from AOCI into interest income, compared with an estimate of $94$156 million of losses at June 30, 2022.March 31, 2023.
2 At June 30, 2023,March 31, 2024, the total cumulative unamortized basis adjustment for terminated fair value hedges of debt was $50$45 million. We did not have any cumulative unamortized basis adjustment for terminated fair value hedges of debt at June 30, 2022.March 31, 2023. We had $3 million and $7$10 million of cumulative unamortized basis adjustments from terminated fair value hedges of assets at June 30,March 31, 2024 and 2023, and 2022, respectively. Interest on fair value hedges presented above include the amortization of the remaining unamortized basis adjustments.
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) | |
| Other Noninterest Income/(Expense) | |
| Other Noninterest Income/(Expense) | |
(In millions) | (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: | |
Derivatives not designated as hedging instruments: | |
Customer-facing interest rate derivatives | |
Customer-facing interest rate derivatives | |
Customer-facing interest rate derivatives | Customer-facing interest rate derivatives | $ | 10 | | | $ | 11 | | | $ | 17 | | | $ | 30 | |
Other interest rate derivatives | Other interest rate derivatives | 3 | | | 3 | | | (1) | | | — | |
Other interest rate derivatives | |
Other interest rate derivatives | |
Foreign exchange derivatives | |
Foreign exchange derivatives | |
Foreign exchange derivatives | Foreign exchange derivatives | 7 | | | 15 | | | 8 | | | 14 | |
Purchased credit derivatives | Purchased credit derivatives | $ | (1) | | | $ | (1) | | | $ | — | | | $ | — | |
Purchased credit derivatives | |
Purchased credit derivatives | |
Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | $ | 19 | | | $ | 28 | | | $ | 24 | | | $ | 44 | |
Total derivatives not designated as hedging instruments | |
Total derivatives not designated as hedging instruments | |
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.presented:
| | Gain/(loss) recorded in income | |
| Three Months Ended June 30, 2023 | | Three Months Ended June 30, 2022 | |
| Gain/(loss) recorded in income | |
| Gain/(loss) recorded in income | |
| Gain/(loss) recorded in income | |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
(In millions) | |
(In millions) | |
(In millions) | (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 | $ | 2 | | | $ | (2) | | | $ | — | | | $ | (18) | | | $ | 18 | | | $ | — | | |
| Debt: Receive-fixed interest rate swaps 1, 2 | |
| Debt: Receive-fixed interest rate swaps 1, 2 | |
Assets: Pay-fixed interest rate swaps 1, 2 | Assets: Pay-fixed interest rate swaps 1, 2 | 66 | | | (67) | | | (1) | | | 97 | | | (97) | | | — | | |
Assets: Pay-fixed interest rate swaps 1, 2 | |
Assets: Pay-fixed interest rate swaps 1, 2 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gain/(loss) recorded in income |
| Six Months Ended June 30, 2023 | | Six 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 | $ | 14 | | | $ | (14) | | | $ | — | | | $ | (50) | | | $ | 50 | | | $ | — | |
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, fixed-rate AFS securities, and fixed-rate AFS securities.commercial loans. Gains and losses were recorded in net interest expense or income consistent with the hedged items.
2 The income/expense for derivatives does not reflect interest income/expense from periodic accruals and payments to be consistent with the presentation of the gains/(losses) on the hedged items.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule provides information regarding basis adjustments for hedged items.items:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Par value of hedged assets/(liabilities) | | Carrying amount of the hedged assets/(liabilities) 1 | | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item |
(In millions) | June 30, 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) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | March 31, 2024 | | December 31, 2023 | | March 31, 2024 | | December 31, 2023 | | March 31, 2024 | | December 31, 2023 |
| | | | | | | | | | | |
| | | | | | | | | | | |
Fixed-rate assets 2 | 12,039 | | | 12,389 | | | 11,761 | | | 12,209 | | | (278) | | | (180) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
1 Carrying amounts 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.
3These amounts include the amortized cost basis of defined portfolios of AFS securities and commercial loans 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,March 31, 2024, the amortized cost basis of the defined portfolios used in these hedging relationships was $10.1$11.0 billion; the cumulative basis adjustment associated with these hedging relationships was $36.8$50.5 million; and the notional amounts of the designated hedging instruments were $2.5$3.5 billion.
8. LEASES
We have operating and finance leases for branches, corporate offices, and data centers. At June 30, 2023,March 31, 2024, we had 412408 branches, of which 277278 are owned and 135130 are leased. We lease our headquarters in Salt Lake City, Utah. The remaining maturities of our lease commitments range from the year 20232024 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 20222023 Form 10-K.
The following schedule presents ROU assets and lease liabilities with associated weighted average remaining life and discount rate:
| | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2024 | | December 31, 2023 |
Operating leases | | | |
ROU assets, net of amortization | $ | 168 | | $ | 172 |
Lease liabilities | 193 | | 198 |
Finance leases | | | |
ROU assets, net of amortization | 3 | | 3 |
Lease liabilities | 4 | | 4 |
Weighted average remaining lease term (years) | | | |
Operating leases | 8.6 | | 8.7 |
Finance leases | 16.2 | | 16.5 |
Weighted average discount rate | | | |
Operating leases | 3.4 | % | | 3.4 | % |
Finance leases | 3.1 | % | | 3.1 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents ROU assets and lease liabilities with associated weighted average remaining life and discount rate.
| | | | | | | | | | | |
(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 | % |
Additionaladditional information related to lease expense is presented in the following schedule.expense:
| | Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In millions) | |
(In millions) | |
(In millions) | |
Lease expense: | |
Lease expense: | |
Lease expense: | |
Operating lease expense | |
Operating lease expense | |
Operating lease expense | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 |
Lease expense: | | | | | | | |
Operating lease expense | $ | 11 | | | $ | 12 | | | $ | 22 | | | $ | 24 | |
| Other expenses associated with operating leases 1 | |
| Other expenses associated with operating leases 1 | |
| Other expenses associated with operating leases 1 | Other expenses associated with operating leases 1 | 16 | | | 12 | | | 30 | | | 24 | |
| Total lease expense | Total lease expense | $ | 27 | | | $ | 24 | | | $ | 52 | | | $ | 48 | |
| Total lease expense | |
| Total lease expense | |
| Related cash disbursements from operating leases | Related cash disbursements from operating leases | $ | 12 | | | $ | 12 | | | $ | 24 | | | $ | 25 | |
| Related cash disbursements from operating leases | |
| Related cash disbursements from operating leases | |
1 Other expenses primarily include property taxes and building and property maintenance.
The following schedule presents the total contractual undiscounted lease payments for operating lease liabilities by expected due date for each of the next five years.years:
| (In millions) | (In millions) | Total undiscounted lease payments | (In millions) | Total undiscounted lease payments |
| 2023 1 | $ | 24 | |
2024 | 40 | |
2024 1 | |
2024 1 | |
2024 1 | |
2025 | 2025 | 32 | |
2026 | 2026 | 27 | |
2027 | 2027 | 18 | |
2028 | |
Thereafter | Thereafter | 87 | |
Total | Total | $ | 228 | |
1 Contractual maturities for the sixnine months remaining in 2023.2024.
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 $4 million and $3 million for both the secondfirst quarter of 20232024 and 2022, respectively, and $8 million and $7 million for the first six months of 2023 and 2022, respectively.2023.
We originated equipment leases, considered to be sales-type leases or direct financing leases, totaling $388$388 million and $386$383 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. We recorded income of $4 million$4 million and $3 million on these leases for both the secondfirst quarter of 20232024 and 2022, respectively, and $8 million and $6 million for the first six months of 2023 and 2022, respectively.2023.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
9. LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY
Long-Term Debt
The long-term debt carrying values presented inon the consolidated balance sheet represent the par value of the debt, adjusted for any unamortized premium or discount, unamortized debt issuance costs, and basis adjustments for interest rate swaps designated as fair value hedges.
The following schedule presents the components of our long-term debt.debt:
LONG-TERM DEBT
| (In millions) | |
(In millions) | |
(In millions) | (In millions) | June 30, 2023 | | December 31, 2022 | |
| | Subordinated notes 1 | Subordinated notes 1 | $ | 534 | | | $ | 519 | | |
Senior notes | — | | | 128 | | |
| Subordinated notes 1 | |
| Subordinated notes 1 | |
| Finance lease obligations | |
| Finance lease obligations | |
| Finance lease obligations | Finance lease obligations | 4 | | | 4 | | |
Total | Total | $ | 538 | | | $ | 651 | | |
Total | |
Total | |
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 $128 million, 4.50% matured senior notes during the second quarter of 2023.
Shareholders' Equity
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At June 30, 2023,March 31, 2024, there were 148.1147.7 million shares of $0.001 par value common stock outstanding. Common stock and additional paid-in capital decreased $32 million, or 2%, to $1.7 billion at June 30, 2023, from December 31, 2022, primarily due to common stock repurchases during the first quarter of 2023. As the macroeconomic environment remained uncertain, we did not repurchase common shares during the second quarter of 2023, nor do we expect to repurchase common shares during the third quarter of 2023.
AOCI was a $2.9 billion loss at June 30, 2023. 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 net unrealized gains/(losses) on investment securities reflected a $9 million decline in the fair value of fixed-rate AFS securities as a result of higher interest rates, offset by a $103 million increase in amortization of the discount on the securities transferred from AFS to HTM during the fourth quarter of 2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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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| | | | | | | | | | | | |
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| | | | | | | | | | | | |
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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 | | | | | |
outstanding. Common stock and additional paid-in capital decreased $26 million, or 2%, to $1.7 billion at March 31, 2024, from December 31, 2023, primarily due to common stock repurchases. During the first quarter of 2024, we repurchased 0.9 million common shares outstanding for $35 million at an average price of $39.32 per share.1 Positive reclassification amounts indicate increases to earningsThe AOCI balance was a loss of $2.6 billion at March 31, 2024, and primarily reflects the decline in the income statement.fair value of fixed-rate investment securities as a result of higher interest rates, and includes $2.0 billion ($1.5 billion after tax) of unrealized losses on the securities previously transferred from AFS to HTM. The following schedule presents the changes in AOCI by major component:
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | Net unrealized gains/(losses) on investment securities | | Net unrealized gains/(losses) on derivatives and other | | Pension and post-retirement | | Total |
Three Months Ended March 31, 2024 | | | | | | | |
Balance at December 31, 2023 | $ | (2,526) | | | $ | (165) | | | $ | (1) | | | $ | (2,692) | |
Other comprehensive income (loss) before reclassifications, net of tax | 12 | | | (1) | | | — | | | 11 | |
Amounts reclassified from AOCI, net of tax | 46 | | | 26 | | | — | | | 72 | |
Other comprehensive income | 58 | | | 25 | | | — | | | 83 | |
Balance at March 31, 2024 | $ | (2,468) | | | $ | (140) | | | $ | (1) | | | $ | (2,609) | |
Income tax expense included in OCI | $ | 19 | | | $ | 8 | | | $ | — | | | $ | 27 | |
Three Months Ended March 31, 2023 | | | | | | | |
Balance at December 31, 2022 | $ | (2,800) | | | $ | (311) | | | $ | (1) | | | $ | (3,112) | |
Other comprehensive income before reclassifications, net of tax | 77 | | | 29 | | | — | | | 106 | |
Amounts reclassified from AOCI, net of tax | 49 | | | 37 | | | — | | | 86 | |
Other comprehensive income | 126 | | | 66 | | | — | | | 192 | |
Balance at March 31, 2023 | $ | (2,674) | | | $ | (245) | | | $ | (1) | | | $ | (2,920) | |
Income tax expense included in OCI | $ | 41 | | | $ | 22 | | | $ | — | | | $ | 63 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amounts reclassified from AOCI | | | | |
(In millions) | | Three Months Ended March 31, | | | | | |
AOCI components | | 2024 | | 2023 | | | | | | | Affected line item on statement of income |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net unrealized gains (losses) on investment securities | | $ | (61) | | | $ | (65) | | | | | | | | | Securities gains (losses), net |
Less: Income tax expense (benefit) | | (15) | | | (16) | | | | | | | | | |
Total | | $ | (46) | | | $ | (49) | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net unrealized gains (losses) on derivative instruments | | $ | (34) | | | $ | (49) | | | | | | | | | Interest and fees on loans; Interest on short- and long-term borrowings |
Less: Income tax expense (benefit) | | (8) | | | (12) | | | | | | | | | |
Total | | $ | (26) | | | $ | (37) | | | | | | | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
10. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES
Commitments and Guarantees
The following schedule presents the contractual amounts related to off-balance sheet financial instruments used to meet the financing needs of our customers.customers:
| (In millions) | (In millions) | June 30, 2023 | | December 31, 2022 | (In millions) | March 31, 2024 | | December 31, 2023 |
| Unfunded lending commitments 1 | Unfunded lending commitments 1 | $ | 29,731 | | | $ | 29,628 | |
Unfunded lending commitments 1 | |
Unfunded lending commitments 1 | |
Standby letters of credit: | Standby letters of credit: | |
Financial | |
Financial | |
Financial | Financial | 579 | | | 667 | |
Performance | Performance | 178 | | | 184 | |
Commercial letters of credit | 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 | $ | 30,575 | | | $ | 30,513 | |
1 Net of participations.
2 Represents agreements with Farmer Mac to purchase securities backed by certain agricultural mortgage loans.
For more information about these commitments and guarantees including their terms and collateral requirements, see Note 16 of our 20222023 Form 10-K.
Legal Matters
We are involved in various legal proceedings or governmental inquiries, 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.
At June 30, 2023,March 31, 2024, we were subject to the following material litigation or governmental inquiries:litigation:
•Two 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 discovery phases. Trialthe late stages of discovery. No trial has not been scheduled in either case.set.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
•Sipple v. Zions Bancorporation, N.A., brought against us in the District Court of Clark County, Nevada in February 2021 with respect to foreign transaction fees. This case is in the early discovery phase and trial has not been scheduled.scheduled for October 2024. The parties are currently engaged in settlement discussions.
At least quarterly, we review outstanding and new legal matters, utilizing then availablethen-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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
In our review, we also assess whether we can determine the range of reasonably possible losses for significant matters in which we are unable to determine that the likelihood of a loss is remote. Because of the difficulty of predicting the outcome of legal matters, discussed subsequently, we are able to meaningfully estimate such a range only for a limited number of matters. Based on information available at June 30, 2023,March 31, 2024, we estimated that the aggregate range of reasonably possible losses for those matters to be from zero to approximately $5$10 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 represented approximately 80% of our total revenue in the second quarter of 2023.securities. 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 20222023 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Disaggregation of Revenue
The following schedule below presents net revenue by our operating business segmentssegment for the three months ended June 30, 2023March 31, 2024 and 2022.2023:
| | Zions Bank | | CB&T | | Amegy |
| Zions Bank | | | Zions Bank | | CB&T | | Amegy |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
| Commercial account fees | |
Commercial account fees | |
Commercial account fees | Commercial account fees | $ | 14 | | | $ | 12 | | | $ | 8 | | | $ | 7 | | | $ | 14 | | | $ | 11 | |
Card fees | Card fees | 13 | | | 14 | | | 5 | | | 5 | | | 8 | | | 8 | |
Retail and business banking fees | Retail and business banking fees | 5 | | | 6 | | | 3 | | | 3 | | | 4 | | | 4 | |
| Capital markets fees | |
Capital markets fees | |
Capital markets fees | Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | Wealth management fees | 6 | | | 6 | | | 1 | | | 1 | | | 4 | | | 4 | |
Other customer-related fees | Other customer-related fees | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | |
Total noninterest income from contracts with customers (ASC 606) | Total noninterest income from contracts with customers (ASC 606) | 40 | | | 40 | | | 19 | | | 18 | | | 32 | | | 29 | |
Other noninterest income (non-ASC 606 customer-related) | Other noninterest income (non-ASC 606 customer-related) | 6 | | | 6 | | | 14 | | | 8 | | | 8 | | | 13 | |
Total customer-related noninterest income | Total customer-related noninterest income | 46 | | | 46 | | | 33 | | | 26 | | | 40 | | | 42 | |
Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 3 | | | 3 | | | 2 | | | 1 | | | 15 | | | — | |
Total noninterest income | Total noninterest income | 49 | | | 49 | | | 35 | | | 27 | | | 55 | | | 42 | |
| Net interest income | Net interest income | 178 | | | 170 | | | 152 | | | 142 | | | 116 | | | 120 | |
Net interest income | |
Net interest income | |
Total net revenue | Total net revenue | $ | 227 | | | $ | 219 | | | $ | 187 | | | $ | 169 | | | $ | 171 | | | $ | 162 | |
| | NBAZ | | NSB | | Vectra |
| NBAZ | |
| NBAZ | |
| NBAZ | | | NSB | | Vectra |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
| Commercial account fees | |
Commercial account fees | |
Commercial account fees | Commercial account fees | $ | 2 | | | $ | 2 | | | $ | 3 | | | $ | 2 | | | $ | 2 | | | $ | 2 | |
Card fees | Card fees | 4 | | | 4 | | | 4 | | | 4 | | | 2 | | | 2 | |
Retail and business banking fees | Retail and business banking fees | 2 | | | 2 | | | 3 | | | 3 | | | 1 | | | 1 | |
| Capital markets fees | |
Capital markets fees | |
Capital markets fees | Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | Wealth management fees | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | — | |
Other customer-related fees | 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 | | | 9 | | | 11 | | | 10 | | | 7 | | | 6 | |
Other noninterest income (non-ASC 606 customer-related) | Other noninterest income (non-ASC 606 customer-related) | 1 | | | 1 | | | — | | | 2 | | | — | | | 2 | |
Total customer-related noninterest income | Total customer-related noninterest income | 10 | | | 10 | | | 11 | | | 12 | | | 7 | | | 8 | |
Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 1 | | | 1 | | | — | | | — | | | — | | | — | |
Total noninterest income | Total noninterest income | 11 | | | 11 | | | 11 | | | 12 | | | 7 | | | 8 | |
| Net interest income | Net interest income | 64 | | | 55 | | | 49 | | | 39 | | | 38 | | | 35 | |
Net interest income | |
Net interest income | |
Total net revenue | Total net revenue | $ | 75 | | | $ | 66 | | | $ | 60 | | | $ | 51 | | | $ | 45 | | | $ | 43 | |
| | TCBW | | Other | | Consolidated Bank |
| TCBW | |
| TCBW | |
| TCBW | | | Other | | Consolidated Bank |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
| Commercial account fees | |
Commercial account fees | |
Commercial account fees | Commercial account fees | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 45 | | | $ | 37 | |
Card fees | Card fees | 1 | | | 1 | | | — | | | (2) | | | 37 | | | 36 | |
Retail and business banking fees | Retail and business banking fees | — | | | — | | | (2) | | | 1 | | | 16 | | | 20 | |
| Capital markets fees | |
Capital markets fees | |
Capital markets fees | Capital markets fees | — | | | — | | | 1 | | | 1 | | | 1 | | | 1 | |
Wealth management fees | Wealth management fees | — | | | — | | | — | | | — | | | 14 | | | 13 | |
Other customer-related fees | Other customer-related fees | — | | | — | | | 8 | | | 9 | | | 15 | | | 16 | |
Total noninterest income from contracts with customers (ASC 606) | Total noninterest income from contracts with customers (ASC 606) | 2 | | | 2 | | | 8 | | | 9 | | | 128 | | | 123 | |
Other noninterest income (non-ASC 606 customer-related) | Other noninterest income (non-ASC 606 customer-related) | — | | | — | | | 5 | | | (1) | | | 34 | | | 31 | |
Total customer-related noninterest income | Total customer-related noninterest income | 2 | | | 2 | | | 13 | | | 8 | | | 162 | | | 154 | |
Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | — | | | — | | | 6 | | | 13 | | | 27 | | | 18 | |
Total noninterest income | Total noninterest income | 2 | | | 2 | | | 19 | | | 21 | | | 189 | | | 172 | |
| Net interest income | Net interest income | 15 | | | 15 | | | (21) | | | 17 | | | 591 | | | 593 | |
Net interest income | |
Net interest income | |
Total net revenue | Total net revenue | $ | 17 | | | $ | 17 | | | $ | (2) | | | $ | 38 | | | $ | 780 | | | $ | 765 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The schedule below presents net revenue by our operating business segments for the six months ended June 30, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | CB&T | | Amegy |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | |
Commercial account fees | $ | 28 | | | $ | 27 | | | $ | 15 | | | $ | 14 | | | $ | 28 | | | $ | 22 | |
Card fees | 26 | | | 27 | | | 10 | | | 10 | | | 16 | | | 16 | |
Retail and business banking fees | 9 | | | 12 | | | 6 | | | 6 | | | 7 | | | 8 | |
| | | | | | | | | | | |
Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | 12 | | | 11 | | | 2 | | | 2 | | | 8 | | | 8 | |
Other customer-related fees | 4 | | | 4 | | | 4 | | | 3 | | | 3 | | | 3 | |
Total noninterest income from contracts with customers (ASC 606) | 79 | | | 81 | | | 37 | | | 35 | | | 62 | | | 57 | |
Other noninterest income (non-ASC 606 customer-related) | 13 | | | 11 | | | 19 | | | 14 | | | 17 | | | 22 | |
Total customer-related noninterest income | 92 | | | 92 | | | 56 | | | 49 | | | 79 | | | 79 | |
Other noncustomer-related noninterest income | 7 | | | 3 | | | 3 | | | 2 | | | 17 | | | — | |
Total noninterest income | 99 | | | 95 | | | 59 | | | 51 | | | 96 | | | 79 | |
| | | | | | | | | | | |
Net interest income | 363 | | | 326 | | | 311 | | | 271 | | | 240 | | | 232 | |
Total net revenue | $ | 462 | | | $ | 421 | | | $ | 370 | | | $ | 322 | | | $ | 336 | | | $ | 311 | |
| | | | | | | | | | | |
| NBAZ | | NSB | | Vectra |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | |
Commercial account fees | $ | 5 | | | $ | 4 | | | $ | 7 | | | $ | 6 | | | $ | 3 | | | $ | 4 | |
Card fees | 7 | | | 7 | | | 8 | | | 7 | | | 4 | | | 4 | |
Retail and business banking fees | 4 | | | 5 | | | 5 | | | 6 | | | 2 | | | 2 | |
| | | | | | | | | | | |
Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | 2 | | | 2 | | | 3 | | | 2 | | | 1 | | | 1 | |
Other customer-related fees | 1 | | | 1 | | | — | | | — | | | 2 | | | 1 | |
Total noninterest income from contracts with customers (ASC 606) | 19 | | | 19 | | | 23 | | | 21 | | | 12 | | | 12 | |
Other noninterest income (non-ASC 606 customer-related) | 1 | | | 3 | | | — | | | 4 | | | 1 | | | 4 | |
Total customer-related noninterest income | 20 | | | 22 | | | 23 | | | 25 | | | 13 | | | 16 | |
Other noncustomer-related noninterest income | 1 | | | 1 | | | — | | | — | | | — | | | — | |
Total noninterest income | 21 | | | 23 | | | 23 | | | 25 | | | 13 | | | 16 | |
| | | | | | | | | | | |
Net interest income | 129 | | | 106 | | | 99 | | | 77 | | | 79 | | | 68 | |
Total net revenue | $ | 150 | | | $ | 129 | | | $ | 122 | | | $ | 102 | | | $ | 92 | | | $ | 84 | |
| | | | | | | | | | | |
| TCBW | | Other | | Consolidated Bank |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | | | | |
Commercial account fees | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 88 | | | $ | 78 | |
Card fees | 1 | | | 1 | | | — | | | — | | | 72 | | | 72 | |
Retail and business banking fees | — | | | — | | | (1) | | | 1 | | | 32 | | | 40 | |
| | | | | | | | | | | |
Capital markets fees | — | | | — | | | 2 | | | 2 | | | 2 | | | 2 | |
Wealth management fees | — | | | — | | | (1) | | | — | | | 27 | | | 26 | |
Other customer-related fees | 1 | | | — | | | 15 | | | 18 | | | 30 | | | 30 | |
Total noninterest income from contracts with customers (ASC 606) | 3 | | | 2 | | | 16 | | | 21 | | | 251 | | | 248 | |
Other noninterest income (non-ASC 606 customer-related) | — | | | 1 | | | 11 | | | (2) | | | 62 | | | 57 | |
Total customer-related noninterest income | 3 | | | 3 | | | 27 | | | 19 | | | 313 | | | 305 | |
Other noncustomer-related noninterest income | — | | | — | | | 8 | | | 3 | | | 36 | | | 9 | |
Total noninterest income | 3 | | | 3 | | | 35 | | | 22 | | | 349 | | | 314 | |
Other real estate owned gain from sale | — | | | — | | | — | | | — | | | — | | | — | |
Net interest income | 31 | | | 28 | | | 18 | | | 29 | | | 1,270 | | | 1,137 | |
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 generally not significant.
12. INCOME TAXES
The effective income tax rate was 22.6%24.6% for the secondfirst quarter of 2024, compared with 27.7% for the first quarter of 2023. The higher effective tax rate in the first quarter of 2023 compared with 21.9%was the result of a change in a discrete item that affected the reserve for the second quarter of 2022. The effectiveuncertain tax rates for the first six months of 2023 and 2022 were 25.4% and 21.2%, respectively.positions. The tax rates during both periods were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance (“BOLI”), and were increased by the non-deductibilitynondeductibility of Federal Deposit Insurance Corporation (“FDIC”) premiums, certain executive compensation plans, and other fringe benefits. The FDIC insurance premiums are nondeductible, whereas the FDIC special assessments are tax rate for the first six months of 2023 was higher relative to the same prior year period, primarily as a result of a discrete item that affected the reserve for uncertain tax positions during the first quarter of 2023.deductible.
At both June 30, 2023March 31, 2024 and December 31, 2022,2023, we had a net deferred tax asset (“DTA”) totaling $1.1$1.0 billion. OnThe net DTA or DTL is included in either “Other assets” or “Other liabilities,” respectively, on the consolidated balance sheet, the net DTA is included in “Other assets.”sheet.
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, the following:
•Future reversals of existing deferred tax liabilities (“DTLs”) — These DTLs have a reversal pattern generally consistent with DTAs and are used to realize the DTAs.
•Tax planning strategies — We have considered prudent and feasible tax planning strategies that we would implement to preserve the value of the DTAs, if necessary.
•Future projected taxable income — We expect future taxable income will offset the reversal of remaining net DTAs.
Based on this evaluation, we concluded that a valuation allowance was not required at both June 30, 2023March 31, 2024 and December 31, 2022.2023.
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 June 30, | | Six Months Ended June 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In millions, except shares and per share amounts) | |
(In millions, except shares and per share amounts) | |
(In millions, except shares and per share amounts) | (In millions, except shares and per share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
Basic: | Basic: | | | | | | | |
Basic: | |
Basic: | |
Net income | Net income | $ | 175 | | | $ | 203 | | | $ | 379 | | | $ | 406 | |
Net income | |
Net income | |
Less common and preferred dividends | |
Less common and preferred dividends | |
Less common and preferred dividends | Less common and preferred dividends | 70 | | | 66 | | | 138 | | | 132 | |
| Undistributed earnings | Undistributed earnings | 105 | | | 137 | | | 241 | | | 274 | |
| Undistributed earnings | |
| Undistributed earnings | |
Less undistributed earnings applicable to nonvested shares | |
Less undistributed earnings applicable to nonvested shares | |
Less undistributed earnings applicable to nonvested shares | Less undistributed earnings applicable to nonvested shares | 1 | | | 1 | | | 2 | | | 2 | |
Undistributed earnings applicable to common shares | Undistributed earnings applicable to common shares | 104 | | | 136 | | | 239 | | | 272 | |
Undistributed earnings applicable to common shares | |
Undistributed earnings applicable to common shares | |
Distributed earnings applicable to common shares | |
Distributed earnings applicable to common shares | |
Distributed earnings applicable to common shares | Distributed earnings applicable to common shares | 61 | | | 57 | | | 121 | | | 115 | |
Total earnings applicable to common shares | Total earnings applicable to common shares | $ | 165 | | | $ | 193 | | | $ | 360 | | | $ | 387 | |
Total earnings applicable to common shares | |
Total earnings applicable to common shares | |
Weighted average common shares outstanding (in thousands) | |
Weighted average common shares outstanding (in thousands) | |
Weighted average common shares outstanding (in thousands) | 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 | $ | 1.11 | | | $ | 1.29 | | | $ | 2.44 | | | $ | 2.56 | |
Net earnings per common share | |
Net earnings per common share | |
Diluted: | |
Diluted: | |
Diluted: | Diluted: | |
Total earnings applicable to common shares | Total earnings applicable to common shares | $ | 165 | | | $ | 193 | | | $ | 360 | | | $ | 387 | |
Total earnings applicable to common shares | |
Total earnings applicable to common shares | |
Weighted average common shares outstanding (in thousands) | |
Weighted average common shares outstanding (in thousands) | |
Weighted average common shares outstanding (in thousands) | 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) | 4 | | | 203 | | | 13 | | | 306 | |
| Dilutive effect of stock options (in thousands) | |
| Dilutive effect of stock options (in thousands) | |
Weighted average diluted common shares outstanding (in thousands) | |
Weighted average diluted common shares outstanding (in thousands) | |
Weighted average diluted common shares outstanding (in thousands) | 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 | $ | 1.11 | | | $ | 1.29 | | | $ | 2.44 | | | $ | 2.56 | |
Net earnings per common share | |
Net earnings per common share | |
The following schedule presents the weighted average stock awards that were anti-dilutive and not included in the calculation of diluted earnings per share:
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(In thousands) | |
(In thousands) | |
(In thousands) | (In thousands) | 2023 | | 2022 | | 2023 | | 2022 |
| Restricted stock and restricted stock units | Restricted stock and restricted stock units | 1,421 | | | 1,251 | | | 1,378 | | | 1,289 | |
| Restricted stock and restricted stock units | |
| Restricted stock and restricted stock units | |
Stock options | Stock options | 1,449 | | | 200 | | | 1,381 | | | 155 | |
Stock options | |
Stock options | |
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. Our affiliate banks are supported by an enterprise operating segment (referred to as the “Other” segment) that provides governance and risk management, allocates capital, establishes strategic objectives, and includes centralized technology, back-office functions, and certain lines of 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 process to report results of operations for business segments. This process is subject to change and refinement over time. Total average loans and deposits presented for the business segments include insignificant intercompany amounts between business segments and may also include deposits with the “Other” segment.
At June 30, 2023,March 31, 2024, Zions Bank operated 95 branches in Utah, 25 branches in Idaho, and one branch in Wyoming. CB&T operated 7775 branches in California. Amegy operated 75 branches in Texas. NBAZ operated 56 branches in
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Arizona. NSB operated 4643 branches in Nevada. Vectra operated 3334 branches in Colorado and one branch in New Mexico. TCBW operated two branches in Washington and one branch in Oregon.
Transactions between business segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. The following schedule presents average loans, average deposits, and income before income taxes because we use these metrics when evaluating performance and making decisions pertaining to the business segments. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the “Other” segment.
The following schedule presents selected operating segment information for the three months ended June 30, 2023March 31, 2024 and 2022:2023:
| | Zions Bank | | CB&T | | Amegy |
| Zions Bank | | | Zions Bank | | CB&T | | Amegy |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
SELECTED INCOME STATEMENT DATA | SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | $ | 178 | | | $ | 170 | | | $ | 152 | | | $ | 142 | | | $ | 116 | | | $ | 120 | |
Provision for credit losses | Provision for credit losses | 7 | | | 1 | | | 15 | | | 16 | | | 12 | | | 5 | |
Net interest income after provision for credit losses | Net interest income after provision for credit losses | 171 | | | 169 | | | 137 | | | 126 | | | 104 | | | 115 | |
Noninterest income | Noninterest income | 49 | | | 49 | | | 35 | | | 27 | | | 55 | | | 42 | |
Noninterest expense | Noninterest expense | 138 | | | 125 | | | 94 | | | 84 | | | 100 | | | 88 | |
Income (loss) before income taxes | Income (loss) before income taxes | $ | 82 | | | $ | 93 | | | $ | 78 | | | $ | 69 | | | $ | 59 | | | $ | 69 | |
SELECTED AVERAGE BALANCE SHEET DATA | SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | Total average loans | $ | 14,250 | | | $ | 13,120 | | | $ | 14,152 | | | $ | 12,895 | | | $ | 12,880 | | | $ | 11,934 | |
Total average loans | |
Total average loans | |
Total average deposits | Total average deposits | 19,191 | | | 25,035 | | | 13,333 | | | 16,663 | | | 11,873 | | | 16,253 | |
| | NBAZ | | NSB | | Vectra |
| NBAZ | |
| NBAZ | |
| NBAZ | | | NSB | | Vectra |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
SELECTED INCOME STATEMENT DATA | SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | $ | 64 | | | $ | 55 | | | $ | 49 | | | $ | 39 | | | $ | 38 | | | $ | 35 | |
Provision for credit losses | Provision for credit losses | 4 | | | 6 | | | 7 | | | 3 | | | 2 | | | 10 | |
Net interest income after provision for credit losses | Net interest income after provision for credit losses | 60 | | | 49 | | | 42 | | | 36 | | | 36 | | | 25 | |
Noninterest income | Noninterest income | 11 | | | 11 | | | 11 | | | 12 | | | 7 | | | 8 | |
Noninterest expense | Noninterest expense | 45 | | | 42 | | | 42 | | | 37 | | | 34 | | | 30 | |
Income (loss) before income taxes | Income (loss) before income taxes | $ | 26 | | | $ | 18 | | | $ | 11 | | | $ | 11 | | | $ | 9 | | | $ | 3 | |
SELECTED AVERAGE BALANCE SHEET DATA | SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | Total average loans | $ | 5,243 | | | $ | 4,888 | | | $ | 3,427 | | | $ | 2,914 | | | $ | 3,998 | | | $ | 3,527 | |
Total average loans | |
Total average loans | |
Total average deposits | Total average deposits | 6,873 | | | 8,447 | | | 6,630 | | | 7,546 | | | 3,271 | | | 4,189 | |
| | TCBW | | Other | | Consolidated Bank |
| TCBW | |
| TCBW | |
| TCBW | | | Other | | Consolidated Bank |
(In millions) | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | (In millions) | 2024 | | 2023 | | 2024 | | 2023 | | 2024 | | 2023 |
SELECTED INCOME STATEMENT DATA | SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | $ | 15 | | | $ | 15 | | | $ | (21) | | | $ | 17 | | | $ | 591 | | | $ | 593 | |
Provision for credit losses | Provision for credit losses | — | | | 1 | | | (1) | | | (1) | | | 46 | | | 41 | |
Net interest income after provision for credit losses | Net interest income after provision for credit losses | 15 | | | 14 | | | (20) | | | 18 | | | 545 | | | 552 | |
Noninterest income | Noninterest income | 2 | | | 2 | | | 19 | | | 21 | | | 189 | | | 172 | |
Noninterest expense | Noninterest expense | 6 | | | 6 | | | 49 | | | 52 | | | 508 | | | 464 | |
Income (loss) before income taxes | Income (loss) before income taxes | $ | 11 | | | $ | 10 | | | $ | (50) | | | $ | (13) | | | $ | 226 | | | $ | 260 | |
SELECTED AVERAGE BALANCE SHEET DATA | SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | Total average loans | $ | 1,689 | | | $ | 1,579 | | | $ | 1,040 | | | $ | 927 | | | $ | 56,679 | | | $ | 51,784 | |
Total average loans | |
Total average loans | |
Total average deposits | 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 six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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
Our most significant risks include interest rate and market risk, which are closely monitored by management as previously discussed. For more information regarding interest rate and market risk, see the “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, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures at June 30, 2023.March 31, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at June 30, 2023.March 31, 2024. There were no changes in our internal control over financial reporting during the secondfirst quarter of 20232024 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
We amendThere have been no material changes to the following two risk factors discussedas previously disclosed in Part I, Item 1A. Risk Factors in our 20222023 Form 10-K:10-K.
Changes
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following schedule summarizes our share repurchases for the first quarter of 2024:
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 | | |
| | | | | | | | | | | | | | |
January | | | — | | | | — | | | | — | | | | | | |
February | | | 890,167 | | | | $ | 39.32 | | | | 890,167 | | | | | | |
March | | | — | | | | — | | | | — | | | | | | |
First quarter 2024 | | | 890,167 | | | | 39.32 | | | | 890,167 | | | | | | |
1 Includes common shares acquired in levelsconnection with our stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and sourcesstock option exercise cost upon the exercise of liquiditystock options under provisions of an employee share-based compensation plan.
ITEM 5. OTHER INFORMATION
None of our directors or officers have adopted, modified, or terminated a Rule 10b5-1(c) trading arrangement during the three months ended March 31, 2024. Our directors and capital, includingofficers participate in certain of our benefits plans such as our Omnibus Incentive Plan and Payshelter 401(k) and Employee Stock Ownership Plan, and may from time to time make elections to have shares withheld to cover withholding taxes or pay the resulting effectsexercise price of recent events in the banking industry, may limit our operations and potential growth.
Our primary source of liquidity is deposits from our customers,options granted thereunder, which elections may be impacted by market-related forces suchdesigned to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements as increased competition for these deposits and a varietydefined in Item 408(c) 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, like many other banks, experienced some deposit outflows as customers spread deposits among several different banks to maximize their amount of FDIC insurance, moved deposits to institutions offering higher rates or banks deemed “too big to fail,” or removed deposits from the U.S. financial system entirely. Although our deposit levels have stabilized during the most recent quarter, our cost of funds has increased, and the potential for greater volatility remains, particularly if there is negative news surrounding us or perceived risks regarding our safety and soundness. If we are unable to continue to fund assets through customer bank deposits or access funding sources on favorable terms, or if we suffer an increase in borrowing costs or FDIC insurance assessments, or otherwise fail to manage liquidity effectively, our liquidity, operating margins, financial condition, and results of operations may be materially and adversely affected.
The Federal Reserve's tightened monetary policy may contribute to a decline in the value of our fixed-rate loans and investment securities that are pledged as collateral to support short-term borrowings, and other economic conditions may also affect our liquidity and efforts to manage associated risks. The FHLB system and Federal Reserve have been, and continue to be, a significant source of additional liquidity and funding. Changes in FHLB funding programs could adversely affect our liquidity and management of associated risks.
Problems encountered by other financial institutions could adversely affect financial markets generally and have indirect adverse effects on us.
The soundness and stability of many financial institutions may be closely interrelated as a result of credit, trading, clearing, or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, and exchanges, with which we interact on a daily basis, and therefore, could adversely affect us.This phenomenon has been evident in the recent events affecting the banking industry, as financial institutions, like us, have been impacted by concerns regarding the soundness or creditworthiness of other financial institutions. This has caused substantial and cascading disruption within the financial markets, increased expenses, and adversely impacted the market price and volatility of our common stock.Regulation S-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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. | * |
| | | |
| | Zions Bancorporation 2024-2026 Value Sharing Plan (filed herewith). | |
| | | |
| | Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
| | | |
| | Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
| | | |
| | Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith). | |
| | | |
101 | | Pursuant to Rules 405 and 406 of Regulation S-T, the following information is formatted in Inline XBRL (i) the Consolidated Balance Sheets as of June 30, 2023March 31, 2024 and December 31, 2022,2023, (ii) the Consolidated Statements of Income for the three months ended June 30,March 31, 2024 and March 31, 2023, and June 30, 2022 and the six months ended June 30, 2023 and June 30, 2022, (iii) the Consolidated Statements of Comprehensive Income for the three months ended June 30,March 31, 2024 and March 31, 2023, and June 30, 2022 and the six months ended June 30, 2023 and June 30, 2022, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended June 30,March 31, 2024 and March 31, 2023, and June 30, 2022 and the six months ended June 30, 2023 and June 30, 2022, (v) the Consolidated Statements of Cash Flows for the sixthree months ended June 30,March 31, 2024 and March 31, 2023, and June 30, 2022, and (vi) the Notes to Consolidated Financial Statements (filed herewith). | |
| | | |
104 | | The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL. | |
* Incorporated by reference
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt are not filed. We agree to furnish a copy thereof to the Securities and Exchange Commission and the Office of the Comptroller of the Currency upon request.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
|
ZIONS BANCORPORATION, NATIONAL ASSOCIATION |
|
/s/ Harris H. Simmons |
Harris H. Simmons, Chairman and Chief Executive Officer |
|
/s/ Paul E. BurdissR. Ryan Richards |
Paul E. Burdiss,R. Ryan Richards, Executive Vice President and Chief Financial Officer |
Date: August 4, 2023May 8, 2024