ZIONS(ZIONL) - 2024 Q4 - Annual Report

PART I Item 1. Business Zions Bancorporation is a regional bank with approximately $89 billion in assets, operating across 11 states through seven distinct brands and subject to extensive federal regulation - Zions Bancorporation, N.A. is a Salt Lake City-based bank with $3.1 billion in net revenue for 2024 and approximately $89 billion in total assets at year-end[18] - The bank serves over one million customers through 404 branches and various digital platforms across 11 states, employing 9,406 full-time equivalent staff as of December 31, 2024[18] - Operations are conducted through seven separately managed bank divisions, or "affiliates," each with local branding and management, supported by a centralized enterprise segment for governance, risk management, and technology[19] - The bank provides a wide array of products and services across several key areas: - Commercial and Small Business Banking: Includes lending, leasing, cash management, and municipal finance - Capital Markets and Investment Banking: Offers loan syndications, derivatives, foreign exchange, and advisory services - Commercial Real Estate Lending: Provides term and construction financing for various property types - Retail Banking: Encompasses residential mortgages, home equity lines, deposit accounts, and consumer loans - Wealth Management: Delivers investment management, fiduciary services, and estate planning[22][23][24] - The bank operates in a highly competitive environment, facing competition from commercial banks, credit unions, fintech companies, and private credit funds, some of which operate without a physical presence in its markets[25] - Key competitive differentiators include service quality, local community knowledge, branch convenience, a wide range of products, and strong customer relationships[26] - The bank is highly regulated by the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), and the Federal Deposit Insurance Corporation (FDIC)[28] Capital Ratios as of December 31, 2024 | Capital Ratio | Minimum Requirement with Buffer | Current Ratio | Minimum to be "Well Capitalized" | | :--- | :--- | :--- | :--- | | CET1 to risk-weighted assets | 7.0% | 10.9% | 6.5% | | Tier 1 risk-based capital to risk-weighted assets | 8.5% | 11.0% | 8.0% | | Total risk-based capital to risk-weighted assets | 10.5% | 13.3% | 10.0% | | Tier 1 leverage ratio | 4.0% | 8.3% | 5.0% | - The bank is monitoring several significant regulatory proposals, including the "Basel III Endgame" which would revise capital requirements for banks with over $100 billion in assets, and a proposal to require banks of that size to hold a minimum amount of long-term debt[40][41][42] - The FDIC implemented a special assessment to recover costs from the 2023 bank failures; Zions recorded approximately $101 million in related expenses during 2023 and 2024[43][45] - As of December 31, 2024, the bank had 9,406 full-time equivalent employees[63] - The workforce is diverse, with approximately 58% of associates being women and 38% self-identifying as part of a minority demographic[63] - The bank focuses on attracting, developing, and retaining talent through extensive training programs, tuition reimbursement, and formal mentoring; in 2024, it hosted over 1,000 training experiences[69][70] - Pay equity is assessed every two years by an independent third party, with the most recent review finding no meaningful differences in pay levels across the workforce[73] Item 1A. Risk Factors The company manages material risks including credit, interest rate, liquidity, strategic, operational, and legal threats overseen by its Board and ERM Committee - Credit risk is a significant concern, with potential for deterioration in credit quality due to rising interest rates, market volatility, or economic weakening[77] - The loan portfolio has concentrations in Commercial Real Estate (CRE), particularly multifamily, industrial, and office properties, as well as oil and gas-related lending[79][80] - A significant geographic concentration exists, with 70-77% of lending portfolios in Utah, Idaho, Texas, and California, making financial performance highly dependent on the economic conditions in these states[81][82] - Net interest income, the largest component of revenue, is highly sensitive to fluctuations in interest rates, which are influenced by economic conditions and Federal Reserve policies[86] - The primary source of liquidity is customer deposits, which experienced heightened volatility following the 2023 bank closures, impacting funding costs[89] - Access to capital markets and borrowing costs are influenced by credit ratings; downgrades could negatively impact liquidity and financial condition[91] - The company faces systemic risk, where concerns about other financial institutions can lead to market-wide disruptions and adversely affect Zions[93][94] - In July 2024, the company completed a multi-year project to replace its core loan and deposit banking systems, but notes that such large-scale projects carry risks of not achieving intended results[98] - Competition from fintechs and the adoption of new technologies like AI and blockchain present both opportunities and risks, requiring continuous investment to remain technologically competitive[99] - Operational risks include disruptions from new projects, internal control failures, increasingly sophisticated fraud schemes, and catastrophic events like natural disasters[101][103][104] - The company relies heavily on information systems and is subject to continuous cybersecurity threats from actors using methods like ransomware, phishing, and social engineering, with risks heightened by new technologies like generative AI[110][111] - Regulatory requirements, including stress testing and capital standards under the National Bank Act, may limit the ability to increase dividends or repurchase shares[116] - The company had a net deferred tax asset of $904 million at year-end 2024, and its full realization depends on future taxable income and tax laws[120] - The financial services industry is subject to substantial and costly regulation, with ongoing changes that can impact profitability and business activities[122][124] - As a national bank, the company is governed by the National Bank Act, which has a less developed corporate and securities law framework than state charters, potentially complicating corporate transactions like mergers[131][132][133] Item 1B. Unresolved Staff Comments The company reports no unresolved written comments from SEC or OCC staff received 180 days or more before the fiscal year-end - There are no unresolved written comments from SEC or OCC staff[143] Item 1C. Cybersecurity Cybersecurity risk is managed via a formal ERM framework overseen by the Board's Risk Oversight Committee, with no material incidents reported to date - Cybersecurity risk is overseen by the Board and managed through an established ERM framework, with regular reporting to senior management and Board-level committees[145] - The CISO has over 20 years of technology leadership experience, and the CTOO has over 25 years of experience in audit, risk, and technology leadership[147] - As of December 31, 2024, risks from cybersecurity threats have not materially impacted the company's business strategy, results of operations, or financial condition[151] Item 2. Properties The company operates 404 branches, of which 275 are owned and 129 are leased, with its corporate headquarters also being leased - The company operates 404 branches, with 275 owned and 129 leased[153] Item 3. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 16 of the Notes to Consolidated Financial Statements - Details on legal proceedings are provided in Note 16 of the financial statements[154] Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - None[155] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on NASDAQ; it redeemed $374 million in preferred stock, repurchased common shares, and received approval for future buybacks - In December 2024, the company redeemed its Series G, I, and J preferred stock for a cash payment of approximately $374 million, resulting in a $6 million reduction to net earnings applicable to common shareholders[158] 2024 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | First quarter | 890,167 | $39.32 | | Second quarter | — | — | | Third quarter | 2,799 | $49.62 | | Fourth quarter | 7,759 | $59.93 | | Total 2024 | 900,725 | $39.53 | - In February 2025, the company received approval to repurchase up to $40 million of common shares during fiscal year 2025[162] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Net earnings increased in 2024 due to lower credit loss provisions, while net interest income remained flat amid rising funding costs and a slight margin decline Selected Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $2,430 M | $2,438 M | -0.3% | | Provision for Credit Losses | $72 M | $132 M | -45% | | Noninterest Income | $700 M | $677 M | +3% | | Noninterest Expense | $2,046 M | $2,097 M | -2% | | Net Income | $784 M | $680 M | +15% | | Diluted EPS | $4.95 | $4.35 | +14% | | Net Interest Margin | 3.00% | 3.02% | -2 bps | - The provision for credit losses decreased to $72 million in 2024 from $132 million in 2023[174] - Noninterest expense decreased by $51 million, largely due to a $90 million accrual for the FDIC special assessment in the prior year, which was partially offset by increased technology and salary expenses[174][216] - Classified loans increased significantly to $2.9 billion (4.83% of total loans) from $825 million (1.43% of total loans) in the prior year, primarily within the multifamily and industrial CRE portfolios[177] - The amortized cost of total investment securities decreased by $1.9 billion (8%) during 2024, primarily due to principal reductions[254] - The loan and lease portfolio increased by $1.6 billion (3%) to $59.4 billion, with growth concentrated in consumer 1-4 family residential mortgages, home equity lines, and commercial and industrial loans[261] - Total deposits increased by $1.3 billion (2%), with interest-bearing deposits growing by $2.8 billion while noninterest-bearing demand deposits decreased by $1.5 billion[269] - Estimated uninsured deposits were $34.4 billion, or 45% of total deposits, at year-end 2024, compared to $33.2 billion, or 44%, at year-end 2023[270] - Nonperforming assets increased to $298 million (0.50% of loans) from $228 million (0.39%) in the prior year[322] - Classified loans increased substantially to $2.9 billion (4.83% of total loans) from $825 million (1.43%) at year-end 2023, primarily in multifamily and industrial CRE loans[324] - The bank's asset sensitivity increased; a +100 bps parallel shift in rates is projected to increase 12-month forward net interest income by 4.4%, compared to a 2.4% increase projected at year-end 2023[345] - Total available liquidity was $41.6 billion, which is 121% of the estimated $34.4 billion in uninsured deposits[270][364] - The Common Equity Tier 1 (CET1) capital ratio improved to 10.9% from 10.3% in the prior year, exceeding the 7.0% minimum requirement with buffer[391][631] - The Allowance for Credit Losses (ACL) is a critical estimate; a sensitivity analysis showed that if the ACL were based solely on the baseline economic scenario, it would have been approximately $125 million lower at December 31, 2024[398] - Fair value estimates for certain assets and liabilities require significant judgment, especially when observable market prices (Level 1 inputs) are not available[399][401] - The annual goodwill impairment evaluation was performed in the fourth quarter of 2024 using a qualitative analysis, which concluded that goodwill was not impaired[410] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference the information provided in the "Interest Rate and Market Risk Management" section of Management's Discussion and Analysis - Information required by this item is included in the "Interest Rate and Market Risk Management" section of the MD&A on page 70[423] Item 8. Financial Statements and Supplementary Data This section contains the company's consolidated financial statements, management's report on internal controls, and the independent auditor's unqualified opinion - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2024, and concluded that it was effective, with no material weaknesses identified[428] - The independent auditor, Ernst & Young LLP, issued an unqualified opinion, stating that the consolidated financial statements present fairly the financial position and results of operations in conformity with U.S. GAAP[438] - The auditor also issued an unqualified opinion on the effectiveness of the Bank's internal control over financial reporting as of December 31, 2024[431] - The auditor identified the Allowance for Loan and Lease Losses (ALLL) as a Critical Audit Matter due to the complex and subjective judgments involved in weighing economic scenarios and determining qualitative adjustments[442][445] Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $88,775 | $87,203 | | Loans Held for Investment, Net | $58,714 | $57,095 | | Total Deposits | $76,223 | $74,961 | | Total Liabilities | $82,651 | $81,512 | | Total Shareholders' Equity | $6,124 | $5,691 | Consolidated Income Statement Highlights (in millions) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net Interest Income | $2,430 | $2,438 | $2,520 | | Provision for Credit Losses | $72 | $132 | $122 | | Noninterest Income | $700 | $677 | $632 | | Noninterest Expense | $2,046 | $2,097 | $1,878 | | Net Income | $784 | $680 | $907 | - The notes provide detailed explanations of significant accounting policies, fair value measurements, investment securities, loans and the allowance for credit losses, derivative instruments, leases, goodwill, debt, equity, regulatory matters, and segment information[457][471] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[693] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024 - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2024[694] Item 9B. Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the year ended December 31, 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1(c) trading arrangement during 2024[696] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable - None[697] PART III Items 10-14 Information for Items 10-14 is incorporated by reference from the company's 2025 Proxy Statement - Items 10, 11, 12, 13, and 14 are incorporated by reference from the company's Proxy Statement[699][700][702][703] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements and all exhibits filed with the Form 10-K report - This section lists the financial statements and all exhibits filed with the Form 10-K[705][706] Item 16. Form 10-K Summary This item is not applicable - Not applicable[712]