Zions Bancorporation(ZION) - 2025 Q1 - Quarterly Results

Financial Highlights First Quarter 2025 Performance Summary Zions Bancorporation achieved an 18% increase in Q1 2025 net earnings to $169 million, with diluted EPS of $1.13, driven by margin expansion and PPNR growth, despite a one-time $16 million tax expense Q1 2025 vs. Q1 2024 Earnings Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Earnings | $169 million | $143 million | | Diluted EPS | $1.13 | $0.96 | Q1 2025 Key Financial Metrics | Metric | Value | YoY Change | | :--- | :--- | :--- | | Net Interest Income | $624 million | +6% | | Net Interest Margin (NIM) | 3.10% | +16 bps | | Adjusted PPNR | $267 million | +10% | | Loans and Leases | $59.9 billion | +3% | | Total Deposits | $75.7 billion | +2% | | CET1 Capital Ratio (Est.) | 10.8% | +40 bps | - A notable item for the quarter was an additional income tax expense of $16 million, or $0.11 per share, due to the revaluation of Deferred Tax Assets (DTAs) resulting from new state tax legislation[4] CEO Commentary CEO Harris H. Simmons emphasized an 18% net income increase, margin expansion, and successful branch acquisition, while noting a one-time tax charge and expressing caution on the economic outlook - The CEO noted that the $0.11 per share tax charge is due to a beneficial Utah tax law change, and most of this charge is expected to accrete back into income over the life of the associated securities[4] - In late March, the company completed the acquisition of four branches from FirstBank of Denver, adding approximately $630 million in deposits and $420 million in loans[4] - Credit quality was described as being in "very good shape," with nonperforming assets stable at 0.51% of loans and annualized net charge-offs at 0.11%, however, the economic outlook is viewed as more uncertain[4] Results of Operations Net Interest Income and Margin Net interest income increased 6% to $624 million in Q1 2025, with net interest margin expanding by 16 basis points to 3.10%, driven by lower funding costs and a favorable asset mix Net Interest Income and Margin (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $624M | $586M | +$38M (+6%) | | Net Interest Margin | 3.10% | 2.94% | +16 bps | | Yield on Earning Assets | 5.08% | 5.25% | -17 bps | | Cost of Deposits | 1.76% | 2.06% | -30 bps | - The increase in NII was primarily driven by lower funding costs, as the rate paid on total deposits and interest-bearing liabilities decreased 33 basis points YoY to 2.01%[9][11] - Average interest-earning assets grew by $1.4 billion YoY, led by a $1.7 billion increase in average loans and a $1.3 billion increase in money market investments, which was partially offset by a $1.7 billion decline in average securities[12] Noninterest Income Total noninterest income rose 10% year-over-year to $171 million, primarily due to a $9 million increase in noncustomer-related income from securities gains and a 4% rise in customer-related fees Noninterest Income Breakdown (Q1 2025 vs. Q1 2024) | Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Customer-related | $158M | $152M | +$6M (+4%) | | Noncustomer-related | $13M | $4M | +$9M (NM) | | Total Noninterest Income | $171M | $156M | +$15M (+10%) | - The increase in noncustomer-related income was mainly due to an $8 million rise in net securities gains, largely from valuation adjustments in the Small Business Investment Company (SBIC) portfolio[15] Noninterest Expense Noninterest expense increased 2% to $538 million, driven by higher salaries and technology costs, but offset by a $12 million decrease in deposit insurance, improving the efficiency ratio to 66.6% Noninterest Expense Breakdown (Q1 2025 vs. Q1 2024) | Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $342M | $331M | +$11M (+3%) | | Technology, telecom, etc. | $70M | $62M | +$8M (+13%) | | Deposit insurance & regulatory | $22M | $34M | -$12M (-35%) | | Total Noninterest Expense | $538M | $526M | +$12M (+2%) | - The decrease in deposit insurance expense was mainly due to a $13 million accrual in the prior-year quarter related to an updated FDIC special assessment estimate[17] - The efficiency ratio improved to 66.6% from 67.9% in Q1 2024, as revenue growth outpaced the increase in adjusted noninterest expense[17] Balance Sheet Analysis Investment Securities Total investment securities declined 7% year-over-year to $18.7 billion due to principal reductions, with the portfolio structured to provide liquidity through secured borrowing agreements Investment Securities Portfolio (As of March 31) | Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Available-for-sale (fair value) | $9,223M | $9,931M | -$708M (-7%) | | Held-to-maturity (amortized cost) | $9,481M | $10,209M | -$728M (-7%) | | Total Investment Securities | $18,704M | $20,140M | -$1,436M (-7%) | Loans and Leases Total loans and leases increased 3% year-over-year to $59.9 billion, driven by growth in consumer and commercial loans, including $420 million from a branch acquisition Loans and Leases by Category (As of March 31) | Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Commercial | $31,010M | $30,479M | +$531M (+2%) | | Commercial Real Estate | $13,593M | $13,578M | +$15M (Flat) | | Consumer | $15,338M | $14,052M | +$1,286M (+9%) | | Total Loans and Leases | $59,941M | $58,109M | +$1,832M (+3%) | - The loan portfolio at March 31, 2025 includes about $420 million in consumer and commercial loans from the acquisition of four FirstBank branches in California[20] Credit Quality Credit quality deteriorated year-over-year with provision for credit losses at $18 million and nonperforming assets at 0.51%, while classified loans significantly increased to $2.9 billion due to stricter risk grading in the CRE portfolio Key Credit Quality Metrics (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Provision for credit losses | $18M | $13M | | Net loan & lease charge-offs | $16M | $6M | | Nonperforming assets | $307M | $254M | | Classified loans | $2,891M | $966M | | Ratio of ACL to loans | 1.24% | 1.27% | | Ratio of NPA to loans | 0.51% | 0.44% | - The increase in classified loans was primarily in multifamily and industrial CRE portfolios, largely due to an increased emphasis in risk grading on current cash flows over collateral values and guarantor strength[23] - Weaker performance in the 2021-2023 construction loan vintages also contributed to the rise in classified loans, as borrowers faced challenges from longer lease-up periods, higher costs, and elevated interest rates[23] Deposits and Borrowed Funds Total deposits grew 2% to $75.7 billion, including $630 million from an acquisition, while total borrowed funds decreased 18% to $4.4 billion due to reduced short-term borrowings Deposits and Borrowed Funds (As of March 31) | Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Noninterest-bearing demand | $24,792M | $25,137M | -$345M (-1%) | | Total interest-bearing | $50,900M | $49,100M | +$1,800M (+4%) | | Total Deposits | $75,692M | $74,237M | +$1,455M (+2%) | | Short-term borrowings | $3,476M | $4,895M | -$1,419M (-29%) | | Long-term debt | $964M | $544M | +$420M (+77%) | | Total Borrowed Funds | $4,440M | $5,439M | -$999M (-18%) | - Customer deposits (excluding brokered) totaled $70.9 billion, up from $69.9 billion a year ago, with the loan-to-deposit ratio at 79%, compared to 78% in the prior year quarter[25] Shareholders' Equity and Capital Total shareholders' equity increased 9% to $6.3 billion, with the estimated CET1 capital ratio improving to 10.8%, supported by retained earnings and a $359 million AOCI loss reduction, alongside share repurchases and dividend increase Shareholders' Equity Components (As of March 31) | Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Retained Earnings | $6,805M | $6,293M | +$512M (+8%) | | AOCI (loss) | ($2,250M) | ($2,609M) | +$359M (+14%) | | Total Shareholders' Equity | $6,327M | $5,829M | +$498M (+9%) | - The estimated CET1 capital ratio was 10.8%, up from 10.4% in the prior year period, and tangible book value per common share increased significantly to $34.95 from $29.34[30] - During Q1 2025, the company repurchased 0.8 million common shares for $41 million and paid a common dividend of $0.43 per share, an increase from $0.41 in Q1 2024[27][28] Financial Statements and Supplemental Data Consolidated Financial Highlights This section presents a five-quarter summary of key financial data, highlighting a recovery in net interest margin and return on equity, alongside a strengthening CET1 capital ratio Five-Quarter Trend Highlights | Metric | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $1.13 | $1.34 | $1.37 | $1.28 | $0.96 | | Net Interest Margin | 3.10% | 3.05% | 3.03% | 2.98% | 2.94% | | CET1 Capital Ratio | 10.8% | 10.9% | 10.7% | 10.6% | 10.4% | | Return on Avg. Common Equity | 11.1% | 13.2% | 14.1% | 14.0% | 10.9% | Loan Portfolio Analysis The loan portfolio is primarily commercial (52%), with nonperforming assets totaling $307 million (0.51% of loans), and net charge-offs of $16 million driven by the commercial and industrial segment Loan Portfolio Composition (March 31, 2025) | Loan Category | Balance (in millions) | % of Total | | :--- | :--- | :--- | | Commercial | $31,010 | 51.7% | | Commercial Real Estate | $13,593 | 22.7% | | Consumer | $15,338 | 25.6% | | Total Loans & Leases | $59,941 | 100.0% | Nonaccrual Loans by Type (March 31, 2025) | Loan Category | Nonaccrual Balance (in millions) | | :--- | :--- | | Commercial | $158 | | Commercial Real Estate | $58 | | Consumer | $89 | | Total Nonaccrual Loans | $305 | Non-GAAP Financial Measures Reconciliation of Non-GAAP Measures Reconciliations of non-GAAP measures are provided to clarify operational performance, with Q1 2025 adjusted PPNR at $267 million, an efficiency ratio of 66.6%, and tangible book value per common share at $34.95 - The company uses non-GAAP measures like tangible common equity, adjusted PPNR, and the efficiency ratio to assess performance on a basis consistent with management and industry practices[46][48][53] Q1 2025 Adjusted PPNR and Efficiency Ratio Reconciliation | Metric | Amount (in millions) | | :--- | :--- | | Adjusted Taxable-Equivalent Revenue (non-GAAP) | $800 | | Less: Adjusted Noninterest Expense (non-GAAP) | $533 | | Adjusted PPNR (non-GAAP) | $267 | | Efficiency Ratio (non-GAAP) | 66.6% | Tangible Book Value Per Common Share (non-GAAP) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Tangible common equity | $5,157M | $4,332M | | Tangible book value per common share | $34.95 | $29.34 |