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ZIONS(ZIONL) - 2025 Q1 - Quarterly Results
ZIONSZIONS(US:ZIONL)2025-04-21 20:08

Financial Highlights & CEO Commentary This section presents Zions Bancorporation's Q1 2025 financial performance and the CEO's strategic insights First Quarter 2025 Financial Results Zions Bancorporation reported strong year-over-year growth in its first quarter 2025 results, with net earnings increasing 18% to $169 million and diluted EPS rising to $1.13 from $0.96. This performance was driven by a 16 basis point expansion in the net interest margin and a 10% increase in adjusted pre-provision net revenue. The results were impacted by a one-time $16 million income tax expense due to a revaluation of deferred tax assets from new Utah state tax legislation Q1 2025 Key Financial Metrics | Metric | 1Q25 | 1Q24 | 4Q24 | | :--- | :--- | :--- | :--- | | Net Earnings | $169 million | $143 million | $200 million | | Diluted EPS | $1.13 | $0.96 | $1.34 | | Net Interest Margin (NIM) | 3.10% | 2.94% | 3.05% | | Common Equity Tier 1 (CET1) Ratio | 10.8% (Est.) | 10.4% | 10.9% | - A notable item in the quarter was a $16 million additional income tax expense ($0.11 per share) from the revaluation of Deferred Tax Assets (DTAs) due to new Utah state tax legislation. The company expects most of this charge to accrete back into income over time4 CEO Commentary Chairman and CEO Harris H. Simmons highlighted the 18% year-over-year increase in net income, attributing it to margin expansion and PPNR growth. He noted the completion of a four-branch acquisition in California, adding approximately $630 million in deposits and $420 million in loans. While credit quality remains strong with stable nonperforming assets and low net charge-offs, the CEO expressed caution about economic uncertainty stemming from potential tariffs and trade policy changes - The company completed the acquisition of four branches in California's Coachella Valley from FirstBank, adding approximately $630 million in deposits and $420 million in loans4 - 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%4 - Management expressed confidence in the company's credit culture and strong reserves to navigate potential economic turbulence, despite a more uncertain economic outlook clouded by trade policy concerns4 Results of Operations This section details the company's revenue streams, including net interest income and noninterest income, alongside operational expenses Net Interest Income and Margin Net interest income increased 6% year-over-year to $624 million, primarily due to lower funding costs. The net interest margin (NIM) expanded by 16 basis points to 3.10% compared to Q1 2024. This improvement occurred despite a 17 basis point drop in the yield on interest-earning assets, as the cost of deposits and interest-bearing liabilities fell more significantly by 30 and 33 basis points, respectively Net Interest Income and Margin (YoY Comparison) | Metric | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $624 million | $586 million | +6% | | Net Interest Margin (NIM) | 3.10% | 2.94% | +16 bps | | Yield on Interest-Earning Assets | 5.08% | 5.25% | -17 bps | | Cost of Deposits | 1.76% | 2.06% | -30 bps | - The growth in net interest income was driven by lower funding costs and a favorable mix change in average interest-earning assets, with increases in loans and money market investments offsetting a decline in securities912 - Average interest-bearing liabilities grew by $2.3 billion (4%) YoY, driven by a $2.9 billion increase in interest-bearing deposits, partially offset by a decrease in borrowed funds13 Noninterest Income Total noninterest income rose 10% year-over-year to $171 million. The increase was driven by a 4% rise in customer-related income to $158 million, led by higher loan-related and capital markets fees. Noncustomer-related income also saw a significant increase, primarily due to an $8 million year-over-year improvement in net securities gains from valuation adjustments in the SBIC investment portfolio Noninterest Income Breakdown (YoY Comparison) | Category | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Customer-related noninterest income | $158 million | $152 million | +4% | | Noncustomer-related noninterest income | $13 million | $4 million | +225% | | Total noninterest income | $171 million | $156 million | +10% | - The growth in customer-related income was largely driven by higher loan-related fees and improved capital markets fees, particularly from increased investment banking advisory services14 - Noncustomer income increased mainly due to an $8 million rise in net securities gains, largely from valuation adjustments in the Small Business Investment Company (SBIC) portfolio15 Noninterest Expense Total noninterest expense increased by a modest 2% year-over-year to $538 million, while adjusted noninterest expense grew 4% to $533 million. The rise was primarily due to higher salaries and employee benefits (+3%) and technology-related costs (+13%). This was partially offset by a significant 35% decrease in deposit insurance and regulatory expenses, which was elevated in the prior-year quarter due to an FDIC special assessment accrual. The efficiency ratio improved to 66.6% from 67.9% a year ago Noninterest Expense Breakdown (YoY Comparison) | Category | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $342 million | $331 million | +3% | | Technology, telecom, and info processing | $70 million | $62 million | +13% | | Deposit insurance and regulatory expense | $22 million | $34 million | -35% | | Total noninterest expense | $538 million | $526 million | +2% | - The decrease in deposit insurance expense was mainly due to a $13 million accrual for an FDIC special assessment in the prior year quarter17 - The efficiency ratio improved to 66.6% from 67.9% in Q1 2024, as revenue growth outpaced the increase in adjusted noninterest expense17 Balance Sheet Analysis This section analyzes the company's financial position, including assets, liabilities, equity, and credit quality trends Investment Securities The total investment securities portfolio decreased by 7% year-over-year to $18.7 billion as of March 31, 2025. The decline was primarily driven by principal reductions in both the available-for-sale and held-to-maturity portfolios. The company utilizes its securities portfolio to manage liquidity and interest rate risk, with a focus on securities that can be used for secured borrowings to avoid sales Investment Securities Portfolio (YoY Comparison) | Category | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Available-for-sale, at fair value | $9,223 million | $9,931 million | -7% | | Held-to-maturity, at amortized cost | $9,481 million | $10,209 million | -7% | | Total investment securities | $18,704 million | $20,140 million | -7% | Loans and Leases Total loans and leases grew 3% year-over-year to $59.9 billion. The growth was led by a 9% increase in consumer loans, primarily in 1-4 family residential mortgages, and a 2% increase in commercial loans. The loan balances at quarter-end include approximately $420 million from the acquisition of four FirstBank branches Loans and Leases by Category (YoY Comparison) | Category | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Commercial | $31,010 million | $30,479 million | +2% | | Commercial real estate | $13,593 million | $13,578 million | 0% | | Consumer | $15,338 million | $14,052 million | +9% | | Total loans and leases | $59,941 million | $58,109 million | +3% | - The loan portfolio at March 31, 2025, includes about $420 million in loans acquired from the FirstBank branch purchase20 Credit Quality Credit quality metrics showed some stress compared to the prior year, though remained stable quarter-over-quarter. The provision for credit losses was $18 million, up from $13 million. Nonperforming assets rose to 0.51% of loans from 0.44% a year ago. Most notably, classified loans increased significantly to $2.9 billion (4.82% of loans) from $966 million (1.66%), primarily due to increased risk grading emphasis on cash flows in the CRE portfolio and weaker performance of recent construction loan vintages Key Credit Quality Metrics (YoY Comparison) | Metric | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Provision for credit losses | $18 million | $13 million | +$5 million | | Net loan and lease charge-offs | $16 million | $6 million | +$10 million | | Nonperforming assets | $307 million | $254 million | +$53 million | | Classified loans | $2,891 million | $966 million | +$1,925 million | | Ratio of nonperforming assets | 0.51% | 0.44% | +7 bps | | Ratio of classified loans | 4.82% | 1.66% | +316 bps | - The increase in classified loans was primarily in the multifamily and industrial CRE loan portfolios, driven by a shift in risk grading to emphasize current cash flows over collateral values and guarantor strength23 - 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 rates23 Deposits and Borrowed Funds Total deposits increased 2% year-over-year to $75.7 billion, including approximately $630 million from the FirstBank branch acquisition. The growth was in interest-bearing deposits, which rose by $1.8 billion, while noninterest-bearing demand deposits saw a slight decline. Total borrowed funds decreased by 18% to $4.4 billion, driven by a reduction in short-term borrowings, partially offset by an increase in long-term debt Deposits and Borrowed Funds (YoY Comparison) | Category | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Total Deposits | $75.7 billion | $74.2 billion | +2% | | - Noninterest-bearing | $24.8 billion | $25.1 billion | -1% | | - Interest-bearing | $50.9 billion | $49.1 billion | +4% | | Total Borrowed Funds | $4.4 billion | $5.4 billion | -18% | | - Short-term | $3.5 billion | $4.9 billion | -29% | | - Long-term | $1.0 billion | $0.5 billion | +77% | - Customer deposits (excluding brokered) totaled $70.9 billion, up from $69.9 billion a year ago. The loan-to-deposit ratio was 79%, compared to 78% in Q1 202425 Shareholders' Equity and Capital Total shareholders' equity increased 9% year-over-year to $6.3 billion. The estimated Common Equity Tier 1 (CET1) capital ratio improved to 10.8% from 10.4%. Tangible book value per common share saw a significant increase to $34.95 from $29.34, benefiting from higher retained earnings and a reduction in accumulated other comprehensive income (AOCI) losses. The company repurchased 0.8 million common shares for $41 million during the quarter Capital Ratios and Metrics (YoY Comparison) | Metric | 1Q25 | 1Q24 | Change | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $6,327 million | $5,829 million | +9% | | Estimated CET1 Capital Ratio | 10.8% | 10.4% | +40 bps | | Tangible Book Value per Share | $34.95 | $29.34 | +19% | | Common Dividends Paid | $65 million | $61 million | +7% | - The company repurchased 0.8 million common shares for $41 million in Q1 2025, compared to 0.9 million shares for $35 million in Q1 202428 - Accumulated other comprehensive income (AOCI) improved to a loss of $2.3 billion from a loss of $2.6 billion a year ago, primarily due to changes in the fair value of available-for-sale securities. These changes are excluded from regulatory capital ratios29 Appendix: Financial Statements and Reconciliations This appendix provides detailed financial statements, loan portfolio specifics, and reconciliations of non-GAAP financial measures Financial Highlights This section provides a five-quarter summary of key financial data, including balance sheet items, income statement components, per-share amounts, and selected performance and capital ratios. It offers a quick reference for trend analysis across recent periods Selected Ratios Trend | Ratio | 1Q25 | 4Q24 | 1Q24 | | :--- | :--- | :--- | :--- | | Return on average assets | 0.77% | 0.96% | 0.70% | | Return on average common equity | 11.1% | 13.2% | 10.9% | | Net interest margin | 3.10% | 3.05% | 2.94% | | Efficiency ratio | 66.6% | 62.0% | 67.9% | | Common equity tier 1 capital ratio | 10.8% | 10.9% | 10.4% | Consolidated Financial Statements This section contains the detailed, unaudited consolidated financial statements for the past five quarters, including the Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Average Balance Sheets with yields and rates. These statements form the basis for the financial analysis presented in the report - The Consolidated Balance Sheets detail the company's assets, liabilities, and shareholders' equity at the end of each of the last five quarters38 - The Consolidated Statements of Income present the company's revenues, expenses, and net income for each of the last five quarters39 - The Consolidated Average Balance Sheets provide average balances for assets and liabilities, along with the corresponding yields and rates, which are used to calculate net interest margin and other performance metrics45 Loan Portfolio and Credit Quality Details This section provides detailed breakdowns of the loan portfolio and credit quality metrics over the past five quarters. It includes tables for loan balances by type, nonperforming assets, the allowance for credit losses, nonaccrual loans by portfolio, and net charge-offs by portfolio, offering deeper insight into the bank's lending activities and risk profile Nonperforming Assets Trend | (In millions) | 1Q25 | 4Q24 | 1Q24 | | :--- | :--- | :--- | :--- | | Nonaccrual loans | $305 | $297 | $248 | | Other real estate owned | $2 | $1 | $6 | | Total nonperforming assets | $307 | $298 | $254 | Allowance for Credit Losses (ACL) Trend | (In millions) | 1Q25 | 4Q24 | 1Q24 | | :--- | :--- | :--- | :--- | | Balance at beginning of period | $696 | $694 | $684 | | Provision for loan losses | $17 | $38 | $21 | | Net loan and lease charge-offs | $16 | $36 | $6 | | Balance at end of period | $697 | $696 | $699 | Non-GAAP Financial Measures This section presents reconciliations of GAAP to non-GAAP financial measures used by management to assess performance. Key non-GAAP metrics include Tangible Common Equity, Tangible Book Value per Common Share, Adjusted Pre-Provision Net Revenue (PPNR), and the Efficiency Ratio. These measures are adjusted for items like intangible assets, amortization, and certain non-recurring expenses to provide what management believes is a more consistent basis for period-to-period comparison - The report provides reconciliations for tangible common equity measures, which exclude goodwill and intangible assets to offer a view of performance independent of acquisition accounting4852 - Adjusted PPNR and the Efficiency Ratio are reconciled by removing items not expected to recur frequently, such as severance costs and FDIC special assessments, to better reflect ongoing operational performance5354