ZIONS(ZIONL) - 2024 Q4 - Annual Results

Fourth Quarter 2024 Financial Highlights Overview of Q4 2024 Performance The company reported strong Q4 earnings driven by higher net interest income and margin expansion Q4 2024 Key Financial Metrics vs. Prior Periods | Metric | Q4 2024 | Q4 2023 | Q3 2024 | | :--- | :--- | :--- | :--- | | Net Earnings | $200 million | $116 million | $204 million | | Diluted EPS | $1.34 | $0.78 | $1.37 | | Net Interest Income | $627 million | $583 million | $620 million | | Net Interest Margin (NIM) | 3.05% | 2.91% | 3.03% | | Adjusted PPNR | $312 million | $262 million | $299 million | | CET1 Capital Ratio (Est.) | 10.9% | 10.3% | 10.7% | - CEO Harris H. Simmons highlighted the continued improvement in financial performance, noting a 9% increase in adjusted taxable-equivalent revenue against a 4% rise in adjusted noninterest expense, leading to a 19% increase in adjusted PPNR compared to the year-ago period[3] - Credit quality showed a mixed picture: net loan losses increased to 0.24% annualized, mainly due to a single commercial credit, however, nonperforming loans decreased by 18% from the third quarter[3][4] Results of Operations Net Interest Income and Margin Net interest income and margin increased year-over-year due to lower funding costs and asset growth Net Interest Income and Margin Analysis (Q4 2024 vs. Q4 2023) | Metric | Q4 2024 | Q4 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Interest Income | $627 million | $583 million | +$44 million (+8%) | | Net Interest Margin | 3.05% | 2.91% | +14 bps | | Yield on Earning Assets | 5.13% | 5.15% | -2 bps | | Cost of Total Deposits | 1.93% | 2.06% | -13 bps | - The increase in net interest income was driven by a $2.3 billion (3%) growth in average interest-earning assets and a decrease in the rate paid on total deposits and interest-bearing liabilities to 2.12% from 2.25% in the prior year[7][9][10] Noninterest Income Noninterest income rose significantly, propelled by strong growth in capital markets fees and securities gains Noninterest Income Breakdown (Q4 2024 vs. Q4 2023) | Category | Q4 2024 | Q4 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Customer-Related Income | $173 million | $150 million | +15% | | - Capital Markets Fees | $37 million | $19 million | +95% | | Noncustomer-Related Income | $20 million | -$2 million | NM | | Total Noninterest Income | $193 million | $148 million | +30% | - The primary drivers of the increase in customer-related income were an $18 million rise in capital markets fees and a $4 million increase in both commercial account fees and loan-related fees[12] - Noncustomer-related income improved by $22 million, mainly due to a $12 million increase in fair value and nonhedge derivative income and a $9 million increase in net securities gains[13] Noninterest Expense Total noninterest expense declined due to a prior-year FDIC assessment, though adjusted expenses rose moderately Noninterest Expense Breakdown (Q4 2024 vs. Q4 2023) | Category | Q4 2024 | Q4 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Salaries and Employee Benefits | $321 million | $301 million | +7% | | Deposit Insurance & Regulatory | $17 million | $109 million | -84% | | Total Noninterest Expense | $509 million | $581 million | -12% | | Adjusted Noninterest Expense | $509 million | $489 million | +4% | - The significant YoY decrease in total noninterest expense was almost entirely due to a $90 million accrual for an FDIC special assessment in Q4 2023 that did not recur at the same level[14] - The efficiency ratio improved to 62.0% from 65.1% in the prior year, as growth in adjusted taxable-equivalent revenue outpaced the 4% increase in adjusted noninterest expense[15] Balance Sheet Analysis Investment Securities The investment securities portfolio decreased year-over-year, primarily due to principal reductions Investment Securities Portfolio (December 31, 2024) | Category | Dec 31, 2024 | Dec 31, 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Available-for-sale (fair value) | $9.1 billion | $10.3 billion | -12% | | Held-to-maturity (amortized cost) | $9.7 billion | $10.4 billion | -7% | | Total Investment Securities | $18.8 billion | $20.7 billion | -9% | Loans and Leases Total loans and leases experienced modest growth, led by the consumer and commercial loan portfolios Loan Portfolio Breakdown (December 31, 2024) | Category | Dec 31, 2024 | Dec 31, 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Commercial | $31.0 billion | $30.6 billion | +1% | | Commercial Real Estate | $13.5 billion | $13.4 billion | +1% | | Consumer | $15.0 billion | $13.8 billion | +8% | | Total Loans and Leases | $59.4 billion | $57.8 billion | +3% | Credit Quality Credit quality metrics showed signs of stress, with a significant increase in classified loans and net charge-offs Key Credit Quality Metrics (Q4 2024 vs. Q4 2023) | Metric | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | Provision for Credit Losses | $41 million | <$1 million | | Net Charge-offs (annualized) | 0.24% | 0.06% | | Nonperforming Assets | $298 million | $228 million | | Classified Loans | $2,870 million | $825 million | | Ratio of Classified Loans to Total Loans | 4.83% | 1.43% | - The increase in the Allowance for Credit Losses (ACL) to $741 million reflects loan growth, credit deterioration, and higher reserves for commercial real estate (CRE), offset by improved economic forecasts[18] - The significant increase in classified loans was primarily in multifamily and industrial CRE portfolios, attributed to a greater emphasis on current cash flows in risk grading and weaker performance of 2021-2022 construction loan vintages[20] Deposits and Borrowed Funds Total deposits grew slightly with a shift to interest-bearing accounts, while borrowed funds decreased Deposit Composition (December 31, 2024 vs. 2023) | Category | Dec 31, 2024 | Dec 31, 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Noninterest-bearing Demand | $24.7 billion | $26.2 billion | -6% | | Interest-bearing | $51.5 billion | $48.7 billion | +6% | | Total Deposits | $76.2 billion | $75.0 billion | +2% | - The loan-to-deposit ratio remained stable at 78% compared to 77% in the prior year quarter[21] - Long-term debt increased due to a new $500 million subordinated note issuance, which was partially offset by the redemption of $88 million of existing notes[22] Shareholders' Equity and Capital Shareholders' equity and capital ratios strengthened, supported by earnings and improved AOCI - The company redeemed all outstanding shares of its Series G, I, and J preferred stock for $374 million in Q4 2024[24] - Accumulated other comprehensive loss (AOCI) improved by $312 million from the prior year to a loss of $2.4 billion, reflecting changes in the fair value of available-for-sale securities[26] Capital Ratios and Book Value (December 31, 2024 vs. 2023) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | CET1 Capital Ratio (Est.) | 10.9% | 10.3% | | Tangible Book Value per Share | $33.85 | $28.30 | Full Year 2024 Performance Summary Full Year 2024 vs. 2023 Full-year earnings increased on stable net interest income, higher noninterest income, and lower expenses Full Year Income Statement Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Interest Income | $2,430 million | $2,438 million | | Provision for Credit Losses | $72 million | $132 million | | Total Noninterest Income | $700 million | $677 million | | Total Noninterest Expense | $2,046 million | $2,097 million | | Net Earnings to Common | $737 million | $648 million | | Diluted EPS | $4.95 | $4.35 | Supplemental Information Conference Call and Company Profile The company will host a conference call to discuss results and operates as a major financial firm in the western US - A supplemental presentation and conference call to discuss Q4 results are scheduled for 5:30 p.m. ET on January 21, 2025[28] - As of December 31, 2024, Zions Bancorporation, N.A. has approximately $89 billion in total assets and operates in 11 western states[29] Forward-Looking Information The report includes forward-looking statements that are subject to various economic and operational risks - The earnings release includes forward-looking statements regarding the company's plans, expectations, and future financial performance[30] - Key risk factors that could affect future results include changes in economic conditions, interest rates, regulatory policies, credit quality, and technological disruptions[31] Consolidated Financial Statements (Appendix) Financial Tables This section contains detailed unaudited consolidated financial statements and supporting schedules - The appendix includes comprehensive financial data supporting the results discussed in the press release, such as: Financial Highlights (p. 11), Consolidated Balance Sheets (p. 13), Consolidated Statements of Income (p. 14, 16), Loan Balances (p. 17), Nonperforming Assets (p. 17), Allowance for Credit Losses (p. 18), and Average Balance Sheets with Yields/Rates (p. 20-21)[34][35][36] Non-GAAP Financial Measures (Appendix) Reconciliation of Non-GAAP Measures This section reconciles non-GAAP metrics like Tangible Common Equity and Adjusted PPNR to their GAAP equivalents - The company provides reconciliations for non-GAAP measures to help investors assess performance on the same basis as management[45] Q4 2024 Non-GAAP Reconciliation Highlights | Metric | GAAP Value | Adjustment | Non-GAAP Value | | :--- | :--- | :--- | :--- | | Net Earnings to Common | $200 million | +$1 million | $201 million (Adjusted) | | Total Shareholders' Equity | $6,124 million | -$1,052 million | $5,072 million (Tangible) | | PPNR | $323 million | -$11 million | $312 million (Adjusted) |