Zions Bancorporation(ZION) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations for the quarter ended June 30, 2025, highlighting key performance drivers, balance sheet changes, and risk management strategies FORWARD-LOOKING INFORMATION This section outlines the nature of forward-looking statements and lists key factors that could cause actual results to differ materially from expectations, including economic conditions, regulatory changes, and market dynamics - Forward-looking statements include beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations, and performance[10] - Key factors that may cause material differences include the quality and composition of loan and investment portfolios, changes in general industry, political, and economic conditions (e.g., inflation, recessions, interest rates), regulatory actions, competitive pressures, emerging technologies (e.g., AI, blockchain), cybersecurity risks, geopolitical conflicts, natural disasters, and market volatility[10][15] RESULTS OF OPERATIONS The company reported solid financial performance in Q2 2025, with increased net earnings, diluted EPS, and adjusted PPNR, driven by lower funding costs, higher interest-earning assets, and an SBIC IPO gain Q2 2025 Financial Performance Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Diluted EPS | $1.63 | $1.28 | +$0.35 | | Net Interest Income | $648M | $597M | +$51M (+9%) | | Net Interest Margin | 3.17% | 2.98% | +19 bps | | Provision for Credit Losses | -$1M | +$5M | -$6M | | Customer-related Noninterest Income | +$11M (+7%) | | | | Net Securities Gains | +$10M | | | | Noninterest Expense | +$18M (+4%) | | | | Net Loan & Lease Charge-offs | $10M (0.07%) | $15M (0.10%) | -$5M | | Nonperforming Assets | $313M (0.51%) | $265M (0.45%) | +$48M | | Classified Loans | $2.7B | $1.3B | +$1.4B | | Total Borrowed Funds | +$845M (+14%) | | | - The acquisition of four FirstBank Coachella Valley, California branches in late March 2025 contributed approximately $390 million in loans and $585 million in deposits to the Q2 2025 totals[19] - Net securities gains included an $11 million unrealized gain related to the successful initial public offering (IPO) of one of the company's Small Business Investment Company (SBIC) investments, FatPipe, Inc[19][60] Net Interest Income and Net Interest Margin Net interest income increased by 9% in Q2 2025, driven by lower funding costs and growth in average interest-earning assets, leading to an improved net interest margin of 3.17% Net Interest Income & Margin (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :-------------- | | Total interest income | $1,051 | $1,073 | $(22) | (2)% | | Total interest expense | $403 | $476 | $(73) | (15)% | | Net interest income | $648 | $597 | $51 | 9% | | Net interest margin | 3.17% | 2.98% | 19 bps | | Average Balances (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :-------------- | | Average interest-earning assets | $83,566 | $82,098 | $1,468 | 2% | | Average interest-bearing liabilities | $57,305 | $55,882 | $1,423 | 3% | | Average loans and leases | $60,460 | $58,291 | $2,169 | 4% | | Average securities | $18,444 | $19,790 | $(1,346) | (7)% | | Average deposits | $74,266 | $74,228 | $38 | 0% | | Average interest-bearing deposits | $49,536 | $49,075 | $461 | 1% | | Average noninterest-bearing deposits | $24,730 | $25,153 | $(423) | (2)% | - The yield on average interest-earning assets declined 20 basis points (bps) in Q2 2025 compared to the prior year, while the total cost of deposits decreased 43 bps, and the rate paid on total deposits and interest-bearing liabilities decreased 39 bps[26][31] The Allowance and Provision for Credit Losses The Allowance for Credit Losses (ACL) increased slightly year-over-year to $732 million, primarily due to increased lending and more adverse economic scenarios, despite a negative provision for credit losses in Q2 2025 Allowance for Credit Losses (ACL) | Metric | June 30, 2025 (Millions) | June 30, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | | Total ACL | $732 | $726 | +$6 | | Ratio of ACL to total loans and leases | 1.20% | 1.24% | -0.04% | Provision for Credit Losses (Q2) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | | :-------------------------------- | :----------------- | :----------------- | :---------------- | | Total provision for credit losses | $(1) | $5 | $(6) | - The year-over-year increase in ACL was driven by a $36 million increase from economic forecasts and a $22 million increase from loan portfolio composition (period-end loan growth), partially offset by a $52 million decrease from credit quality factors, largely due to reduced emphasis on portfolio-specific risks associated with the Commercial Real Estate (CRE) loan portfolio[52][53][54] Noninterest Income Total noninterest income increased by 6% in Q2 2025, primarily driven by a 7% rise in customer-related noninterest income, particularly from capital markets fees and retail/business banking fees Noninterest Income (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :-------------- | | Customer-related noninterest income | $164 | $153 | $11 | 7% | | Capital markets fees and income | $28 | $20 | $8 | 40% | | Retail and business banking fees | $19 | $16 | $3 | 19% | | Noncustomer-related noninterest income | $26 | $26 | $0 | NM | | Securities gains (losses), net | $14 | $4 | $10 | NM | | Dividends and other income | $12 | $22 | $(10) | (45)% | | Total noninterest income | $190 | $179 | $11 | 6% | - Net securities gains included an $11 million unrealized gain related to the successful IPO of one of the company's SBIC investments, FatPipe, Inc[60] Noninterest Expense Noninterest expense increased by 4% in Q2 2025, mainly due to higher incentive compensation accruals and other noninterest expenses, partially offset by reduced professional and legal services Noninterest Expense (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :-------------- | | Salaries and employee benefits | $336 | $318 | $18 | 6% | | Professional and legal services | $13 | $17 | $(4) | (24)% | | Other noninterest expense | $35 | $29 | $6 | 21% | | Total noninterest expense | $527 | $509 | $18 | 4% | - The efficiency ratio improved to 62.2% in Q2 2025, compared with 64.5% in Q2 2024, reflecting positive operating leverage[62] - Total technology spend increased $9 million, or 8%, to $125 million in Q2 2025, primarily driven by higher capitalized technology investments[65] Income Taxes The effective tax rate for Q2 2025 was 21.8%, down from 23.3% in Q2 2024, influenced by non-deductible FDIC premiums, executive compensation, and non-taxable municipal interest income Income Taxes (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------- | :-------------- | :-------------- | | Income before income taxes | $312 | $262 | | Income tax expense | $68 | $61 | | Effective tax rate | 21.8% | 23.3% | - The net Deferred Tax Asset (DTA) totaled $803 million at June 30, 2025, down from $904 million at December 31, 2024, primarily due to a revaluation resulting from new state tax legislation[294][295] Preferred Stock Dividends Preferred stock dividends decreased significantly to $1 million in Q2 2025 from $11 million in Q2 2024, due to the redemption of Series G, I, and J preferred stock in Q4 2024 Preferred Stock Dividends (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------- | :-------------- | :-------------- | | Preferred stock dividends | $1 | $11 | - The decrease in preferred stock dividends was due to the full redemption of the outstanding shares of Series G, I, and J preferred stock during the fourth quarter of 2024[68][175] BALANCE SHEET ANALYSIS The balance sheet analysis reveals a slight increase in total assets, driven by loan growth, while total deposits experienced a modest decline and investment securities decreased Interest-Earning Assets The company aims to maintain a high level of interest-earning assets relative to total assets, with detailed average balances and yields provided in the Average Balance Sheet Investment Securities Portfolio The investment securities portfolio, primarily for liquidity and interest rate risk management, saw its amortized cost decline by 3% from December 31, 2024, mainly due to principal reductions Investment Securities Portfolio (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | :-------------- | | Total amortized cost | $19,678 | $20,270 | $(592) | (3)% | | Estimated duration | 3.8 years | 3.4 years | +0.4 years | | | Floating-rate instruments | ~7% | ~7% | | | - The company had active pay-fixed interest rate swaps with an aggregate notional amount of $4.2 billion, designated as fair value hedges of fixed-rate available-for-sale (AFS) securities[72] Municipal Investments and Extensions of Credit Total municipal investments and extensions of credit slightly decreased to $6.289 billion at June 30, 2025, with all municipal securities rated 'Pass' and nonaccrual municipal loans decreasing Municipal Investments and Extensions of Credit | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | | Total | $6,289 | $6,350 | $(61) | | Nonaccrual municipal loans and leases | $5 | $11 | $(6) | - At June 30, 2025, all municipal securities were rated as 'Pass' internally[79] Loan and Lease Portfolio The total loan and lease portfolio increased by 2% to $60.8 billion during the first six months of 2025, driven by growth in commercial and industrial, residential mortgage, and term commercial real estate loans Loan and Lease Portfolio Composition | Loan Type | June 30, 2025 (Millions) | % of total loans | Dec 31, 2024 (Millions) | % of total loans | | :-------------------------------- | :----------------------- | :--------------- | :----------------------- | :--------------- | | Commercial and industrial | $17,526 | 28.8% | $16,891 | 28.4% | | Owner-occupied | $9,377 | 15.4% | $9,333 | 15.7% | | Municipal | $4,376 | 7.2% | $4,364 | 7.4% | | Leasing | $367 | 0.6% | $377 | 0.6% | | Total Commercial | $31,646 | 52.0% | $30,965 | 52.1% | | Term CRE | $11,186 | 18.4% | $10,703 | 18.0% | | Construction and land development CRE | $2,425 | 4.0% | $2,774 | 4.7% | | Total Commercial Real Estate | $13,611 | 22.4% | $13,477 | 22.7% | | 1-4 family residential | $10,431 | 17.2% | $9,939 | 16.7% | | Home equity credit line | $3,784 | 6.2% | $3,641 | 6.1% | | Construction and other consumer real estate | $743 | 1.2% | $810 | 1.4% | | Bankcard and other revolving plans | $496 | 0.8% | $457 | 0.8% | | Other consumer | $122 | 0.2% | $121 | 0.2% | | Total Consumer | $15,576 | 25.6% | $14,968 | 25.2% | | Total loans and leases | $60,833 | 100.0% | $59,410 | 100.0% | - The loan and lease portfolio increased by $1.4 billion, or 2%, to $60.8 billion during the first six months of 2025[81] - Total loans and leases at June 30, 2025, included approximately $390 million associated with the four FirstBank Coachella Valley, California branches acquired in late March 2025[82] Other Noninterest-Bearing Investments Other noninterest-bearing investments increased by 16% during the first six months of 2025, primarily due to higher FHLB stock holdings and valuation adjustments on SBIC investments, including an unrealized gain from an IPO Other Noninterest-Bearing Investments | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | :-------------- | | Total other noninterest-bearing investments | $1,182 | $1,020 | $162 | 16% | | FHLB stock | $258 | $124 | $134 | NM | | SBIC investments | $231 | $204 | $27 | 13% | - The increase in SBIC investments included an $11 million unrealized gain associated with the successful IPO of FatPipe, Inc[84][85] Premises, Equipment, and Software The company completed its core loan and deposit banking systems replacement project in July 2024 and continues to invest in technology initiatives, with capitalized costs totaling $241 million at June 30, 2025 - The final phase of the multi-year project to replace core loan and deposit banking systems was successfully completed in July 2024[86] Capitalized Costs Associated with Core System Replacement Project (June 30, 2025) | Phase | Total Capitalized Costs (Millions) | End of Scheduled Amortization | | :-------------------------------- | :------------------------------- | :---------------------------- | | Phase 1 | $12 | Q2 2027 | | Phase 2 | $32 | Q1 2029 | | Phase 3 | $197 | Q2 2033 | | Total | $241 | | Deposits Total deposits declined by 3% from December 31, 2024, primarily due to a reduction in interest-bearing deposits, partially offset by an increase in noninterest-bearing demand deposits due to a product migration Deposit Portfolio Composition | Deposit Type | June 30, 2025 (Millions) | % of total deposits | Dec 31, 2024 (Millions) | % of total deposits | | :-------------------------------- | :----------------------- | :--------------- | :----------------------- | :--------------- | | Noninterest-bearing demand | $25,413 | 34.4% | $24,704 | 32.4% | | Interest-bearing | $48,387 | 65.6% | $51,519 | 67.6% | | Total deposits | $73,800 | 100.0% | $76,223 | 100.0% | - Total deposits declined $2.4 billion, or 3%, from December 31, 2024, driven by a $3.1 billion reduction in interest-bearing deposits, partially offset by a $709 million increase in noninterest-bearing demand deposits[88] - The total estimated amount of uninsured deposits was $32.6 billion, or 44% of total deposits, at June 30, 2025, down from $34.4 billion, or 45%, at December 31, 2024. The loan-to-deposit ratio was 82% at June 30, 2025, compared with 78% at December 31, 2024[90] RISK MANAGEMENT The company employs various strategies to manage inherent business risks, including credit, market, interest rate, liquidity, and capital risks, with oversight through management committees Credit Risk Management The company manages credit risk through strong underwriting, early problem detection, and policies to avoid undue concentrations, with a diversified loan portfolio and increased nonperforming assets - At June 30, 2025, $583 million of loans were guaranteed by U.S. government agencies, primarily the Small Business Administration (SBA)[95] Loan and Lease Portfolio Composition | Loan Type | June 30, 2025 (Millions) | % of total loans | Dec 31, 2024 (Millions) | % of total loans | | :-------------------------------- | :----------------------- | :--------------- | :----------------------- | :--------------- | | Commercial and industrial | $17,526 | 28.8% | $16,891 | 28.4% | | Owner-occupied | $9,377 | 15.4% | $9,333 | 15.7% | | Municipal | $4,376 | 7.2% | $4,364 | 7.4% | | Leasing | $367 | 0.6% | $377 | 0.6% | | Total Commercial | $31,646 | 52.0% | $30,965 | 52.1% | | Term CRE | $11,186 | 18.4% | $10,703 | 18.0% | | Construction and land development CRE | $2,425 | 4.0% | $2,774 | 4.7% | | Total Commercial Real Estate | $13,611 | 22.4% | $13,477 | 22.7% | | 1-4 family residential | $10,431 | 17.2% | $9,939 | 16.7% | | Home equity credit line (HECL) | $3,784 | 6.2% | $3,641 | 6.1% | | Construction and other consumer real estate | $743 | 1.2% | $810 | 1.4% | | Bankcard and other revolving plans | $496 | 0.8% | $457 | 0.8% | | Other consumer | $122 | 0.2% | $121 | 0.2% | | Total Consumer | $15,576 | 25.6% | $14,968 | 25.2% | | Total loans and leases | $60,833 | 100.0% | $59,410 | 100.0% | Credit Quality Metrics (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Nonperforming assets | $313 | $298 | | Ratio of nonperforming assets to net loans and leases and OREO | 0.51% | 0.50% | | Classified loans | $2,697 | $2,870 | | Ratio of classified loans to total loans and leases | 4.43% | 4.83% | | Total allowance for credit losses | $732 | $741 | | Ratio of ACL to net loans and leases | 1.20% | 1.25% | | Ratio of total net charge-offs to average loans and leases (annualized, H1) | 0.09% | 0.10% | Interest Rate and Market Risk Management The company actively manages interest rate risk to reduce volatility in net interest income and Economic Value of Equity (EVE), using behavioral models for deposits and employing interest rate swaps - The weighted average modeled beta for interest-bearing deposits with indeterminable maturities was 47%[147] Earnings at Risk (EaR) and Economic Value of Equity (EVE) (June 30, 2025) | Repricing Scenario | -200 bps | -100 bps | 0 | +100 bps | +200 bps | | :-------------------------------- | :------- | :------- | :-- | :------- | :------- | | Earnings at Risk (EaR) | (8.7)% | (4.4)% | — % | 4.2 % | 8.3 % | | Economic Value of Equity (EVE) | (0.3)% | 0.1 % | — % | (1.0)% | (2.6)% | - Latent interest rate sensitivity is projected to increase net interest income by approximately 9.9% in Q2 2026 compared to Q2 2025. Emergent sensitivity is modeled to reduce net interest income by approximately 5.8% from the latent level, yielding a cumulative increase of 4.1%[151][152] Liquidity Risk Management The company maintains strong liquidity, with total available liquidity of $38.6 billion at June 30, 2025, exceeding uninsured deposits, with FHLB and FRB as key contingent liquidity sources Available Liquidity (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Billions) | Dec 31, 2024 (Billions) | Change (Billions) | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | | Total borrowing capacity | $41.5 | $40.9 | +$0.6 | | Borrowings outstanding | $5.5 | $2.9 | +$2.6 | | Remaining capacity | $36.0 | $38.0 | $(2.0) | | Cash and due from banks | $0.8 | $0.7 | +$0.1 | | Interest-bearing deposits | $1.8 | $2.9 | $(1.1) | | Total available liquidity | $38.6 | $41.6 | $(3.0) | - At June 30, 2025, the ratio of available liquidity to uninsured deposits was 118%[165] - Loans with a carrying value of $24.9 billion and $16.7 billion were pledged at the FHLB and FRB, respectively, as collateral for current and potential borrowings at June 30, 2025[162] Credit Ratings All credit rating agencies currently rate the company's debt at an investment-grade level, with stable outlooks from Kroll, Fitch, and Moody's, and a negative outlook from S&P Credit Ratings (as of July 31, 2025) | Rating Agency | Outlook | Long-term issuer/senior debt rating | Subordinated debt rating | Short-term debt rating | | :-------------------------------- | :------ | :---------------------------------- | :----------------------- | :--------------------- | | Kroll | Stable | A- | BBB+ | K2 | | S&P | Negative | BBB+ | BBB | NR | | Fitch | Stable | BBB+ | BBB | F2 | | Moody's | Stable | Baa2 | NR | P2 | Capital Management The company maintains a strong capital position, exceeding all Basel III capital adequacy requirements, with total shareholders' equity increasing by 8% due to retained earnings and AOCI improvement Shareholders' Equity (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | Percent Change | | :-------------------------------- | :----------------------- | :----------------------- | :---------------- | :-------------- | | Total shareholders' equity | $6,596 | $6,124 | $472 | 8% | | Retained earnings | $6,981 | $6,701 | $280 | 4% | | Accumulated other comprehensive loss | $(2,164) | $(2,380) | $216 | 9% | - The company repurchased 0.8 million common shares for $41 million during the first quarter of 2025[171] Capital Amounts and Ratios (June 30, 2025 vs. Dec 31, 2024 vs. June 30, 2024) | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | :------------ | | Common equity tier 1 capital | $7,570M | $7,363M | $7,057M | | Common equity tier 1 capital ratio | 11.0% | 10.9% | 10.6% | | Tangible book value per common share | $36.81 | $34.95 | $30.67 | NON-GAAP FINANCIAL MEASURES This section provides reconciliations of non-GAAP financial measures, such as tangible common equity, efficiency ratio, and adjusted pre-provision net revenue, to their GAAP equivalents for performance assessment Return on Average Tangible Common Equity (Non-GAAP) (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net earnings applicable to common shareholders (GAAP) | $243M | $190M | | Adjusted net earnings applicable to common shareholders (non-GAAP) | $245M | $191M | | Average tangible common equity (non-GAAP) | $5,260M | $4,394M | | Return on average tangible common equity (non-GAAP) | 18.7% | 17.5% | Tangible Equity Ratios (Non-GAAP) (June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Tangible equity ratio | 6.3% | 5.7% | | Tangible common equity ratio | 6.2% | 5.2% | | Tangible book value per common share | $36.81 | $30.67 | Efficiency Ratio and Adjusted PPNR (Non-GAAP) (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Noninterest expense (GAAP) | $527 | $509 | | Adjusted noninterest expense (non-GAAP) | $521 | $506 | | Net interest income (GAAP) | $648 | $597 | | Taxable-equivalent net interest income (non-GAAP) | $661 | $608 | | Noninterest income (GAAP) | $190 | $179 | | Adjusted taxable-equivalent revenue (non-GAAP) | $837 | $784 | | Pre-provision net revenue (non-GAAP) | $324 | $278 | | Adjusted PPNR (non-GAAP) | $316 | $278 | | Efficiency ratio (non-GAAP) | 62.2% | 64.5% | ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited consolidated financial statements, including the balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows, providing a snapshot of the company's financial position and performance Consolidated Balance Sheets The consolidated balance sheet shows total assets of $88.893 billion and total liabilities of $82.297 billion at June 30, 2025, with total shareholders' equity increasing to $6.596 billion Consolidated Balance Sheet (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Total assets | $88,893 | $88,775 | | Total liabilities | $82,297 | $82,651 | | Total shareholders' equity | $6,596 | $6,124 | | Loans and leases, net of unearned income and fees | $60,833 | $59,410 | | Total deposits | $73,800 | $76,223 | Consolidated Statements of Income The consolidated statements of income show net earnings applicable to common shareholders of $243 million for Q2 2025, up from $190 million in Q2 2024, with diluted EPS increasing to $1.63 Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Total interest income | $1,051 | $1,073 | | Total interest expense | $403 | $476 | | Net interest income | $648 | $597 | | Total provision for credit losses | $(1) | $5 | | Total noninterest income | $190 | $179 | | Total noninterest expense | $527 | $509 | | Income before income taxes | $312 | $262 | | Net income | $244 | $201 | | Preferred stock dividends | $(1) | $(11) | | Net earnings applicable to common shareholders | $243 | $190 | | Diluted EPS | $1.63 | $1.28 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income for Q2 2025 was $330 million, significantly higher than $261 million in Q2 2024, primarily due to a positive net change in unrealized gains on investment securities and unrealized loss amortization Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Net income for the period | $244 | $201 | | Other comprehensive income, net of tax | $86 | $60 | | Net change in unrealized gains (losses) on investment securities | $24 | $(14) | | Unrealized loss amortization (AFS to HTM) | $47 | $50 | | Net change in cash flow hedge derivatives | $15 | $23 | | Comprehensive income | $330 | $261 | Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity increased to $6.596 billion at June 30, 2025, from $6.327 billion at March 31, 2025, driven by net income and other comprehensive income, partially offset by dividends Consolidated Statements of Changes in Shareholders' Equity (Q2 2025) | Metric | Balance at March 31, 2025 (Millions) | Net Income (Millions) | Other Comprehensive Income (Millions) | Dividends (Millions) | Balance at June 30, 2025 (Millions) | | :-------------------------------- | :----------------------------------- | :-------------------- | :------------------------------------ | :------------------- | :----------------------------------- | | Total shareholders' equity | $6,327 | $244 | $86 | $(65) | $6,596 | Consolidated Statements of Cash Flows Net cash provided by operating activities was $117 million for H1 2025, while investing activities provided $1.030 billion and financing activities used $1.018 billion, primarily due to deposit changes Consolidated Statements of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Net cash provided by operating activities | $117 | $512 | | Net cash provided by (used in) investing activities | $1,030 | $(407) | | Net cash used in financing activities | $(1,018) | $(104) | | Net increase in cash and due from banks | $129 | $1 | - For H1 2025, key drivers included a $1,382 million decrease in money market investments (investing inflow), a $3,080 million decrease in deposits (financing outflow), and a $2,240 million increase in short-term borrowed funds (financing inflow)[192] Notes to Consolidated Financial Statements The notes provide detailed disclosures on the basis of presentation, recent accounting pronouncements, fair value measurements, and other financial statement components 1. BASIS OF PRESENTATION Zions Bancorporation, N.A. provides banking products and services across 11 Western and Southwestern states through seven affiliate banks, with consolidated financial statements prepared in accordance with GAAP - Zions Bancorporation, N.A. operates through seven separately managed affiliate banks (Zions Bank, California Bank & Trust, Amegy Bank, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington) across 11 Western and Southwestern states[193] - The unaudited consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and instructions to Form 10-Q[196] 2. RECENT ACCOUNTING PRONOUNCEMENTS The company is evaluating ASU 2024-03, which is not expected to materially impact financial statements, and adopted ASU 2023-09 in 2025 with no material impact - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' effective January 1, 2027 (annual) and January 1, 2028 (interim), is being evaluated, with no material impact expected on consolidated financial statements[200] - ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' adopted January 1, 2025, did not have a material impact on consolidated financial statements[200] 3. FAIR VALUE Fair value measurements are categorized into a three-level hierarchy, with total assets measured at fair value on a recurring basis reaching $10.630 billion at June 30, 2025 Assets Measured at Fair Value (Recurring Basis, June 30, 2025) | Category | Level 1 (Millions) | Level 2 (Millions) | Level 3 (Millions) | Total (Millions) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | :--------------- | | Trading securities | $0 | $180 | $0 | $180 | | Available-for-sale securities | $1,101 | $8,015 | $0 | $9,116 | | Loans held for sale | $0 | $100 | $0 | $100 | | Other noninterest-bearing investments | $16 | $567 | $116 | $699 | | Other assets (incl. Derivatives) | $139 | $376 | $20 | $535 | | Total assets | $1,256 | $9,238 | $136 | $10,630 | Liabilities Measured at Fair Value (Recurring Basis, June 30, 2025) | Category | Level 1 (Millions) | Level 2 (Millions) | Level 3 (Millions) | Total (Millions) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | :--------------- | | Securities sold, not yet purchased | $136 | $0 | $0 | $136 | | Derivatives | $0 | $274 | $0 | $274 | | Total liabilities | $136 | $274 | $0 | $410 | - Level 3 financial instruments include private equity investments ($116 million) and agriculture loan servicing ($20 million) at June 30, 2025[205][206] 4. OFFSETTING ASSETS AND LIABILITIES This note details the gross and net information for selected financial instruments, including federal funds sold, securities purchased under agreements to resell, and derivatives, highlighting the impact of master netting agreements - Derivative instruments are presented on a gross basis on the consolidated balance sheet, but may be offset under master netting agreements[209] - At June 30, 2025, net derivatives assets were $89 million, and net derivatives liabilities were $194 million, after accounting for financial instruments and cash collateral[209] 5. INVESTMENT SECURITIES The investment securities portfolio, classified as AFS or HTM, totaled $19.678 billion at amortized cost at June 30, 2025, with no impairment losses recognized on AFS securities Investment Securities (June 30, 2025) | Category | Amortized Cost (Millions) | Gross Unrealized Gains (Millions) | Gross Unrealized Losses (Millions) | Estimated Fair Value (Millions) | | :-------------------------------- | :------------------------ | :------------------------ | :------------------------- | :------------------------ | | Available-for-sale | $10,406 | $12 | $1,302 | $9,116 | | Held-to-maturity | $9,272 | $49 | $92 | $9,229 | | Total investment securities | $19,678 | $61 | $1,394 | $18,345 | - No impairment losses were recognized on AFS investment securities during the first six months of 2025 or 2024, as unrealized losses primarily reflect higher interest rates and are not credit-related[220] - At June 30, 2025, the Allowance for Credit Losses (ACL) on Held-to-Maturity (HTM) securities was less than $1 million, and all HTM securities were assigned a credit quality rating of 'Pass'[221] 6. LOANS, LEASES, AND ALLOWANCE FOR CREDIT LOSSES The loan and lease portfolio totaled $60.833 billion at June 30, 2025, with an ACL of $732 million, and nonaccrual and past due loans totaling $308 million and $210 million, respectively Loan and Lease Portfolio (June 30, 2025) | Category | Amount (Millions) | | :-------------------------------- | :---------------- | | Loans held for sale | $172 | | Commercial | $31,646 | | Commercial real estate | $13,611 | | Consumer | $15,576 | | Total loans and leases | $60,833 | Allowance for Credit Losses (ACL) (June 30, 2025) | Component | Amount (Millions) | | :-------------------------------- | :---------------- | | Allowance for loan losses (ALLL) | $690 | | Reserve for unfunded lending commitments (RULC) | $42 | | Total ACL | $732 | Nonaccrual and Past Due Loans (June 30, 2025) | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Total nonaccrual loans | $308 | | Total past due loans (accruing and nonaccruing) | $210 | | Loan modifications for borrowers experiencing financial difficulty (Q2 2025) | $259 | 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The company uses derivatives primarily to manage interest rate risk, with total notional amounts of $27.316 billion at June 30, 2025, and manages credit risk from counterparties Derivative Notional Amounts and Fair Values (June 30, 2025) | Category | Notional Amount (Millions) | Fair Value (Assets, Millions) | Fair Value (Liabilities, Millions) | | :-------------------------------- | :------------------------- | :---------------------------- | :----------------------------- | | Derivatives designated as hedging instruments | $7,416 | $87 | $0 | | Derivatives not designated as hedging instruments | $19,900 | $289 | $274 | | Total derivatives | $27,316 | $376 | $274 | - At June 30, 2025, the company pledged $13 million in cash collateral and $200 million in U.S. Treasuries for derivative liabilities[265] - The fair value of derivatives includes a net Credit Valuation Adjustment (CVA), which reduced the fair value of derivative liabilities by $9 million at June 30, 2025[266] 8. LEASES The company has operating and finance leases for branches, data centers, and offices, with operating lease ROU assets of $189 million and lease liabilities of $239 million at June 30, 2025 Lease Information (June 30, 2025) | Metric | Operating Leases (Millions) | Finance Leases (Millions) | | :-------------------------------- | :-------------------------- | :------------------------ | | ROU assets, net of amortization | $189 | $3 | | Lease liabilities | $239 | $4 | | Weighted average remaining lease term | 9.7 years | 15.1 years | | Weighted average discount rate | 3.9% | 3.1% | - Total lease expense for the second quarter of 2025 was $25 million[274] - The company originated equipment leases classified as sales-type or direct-financing leases totaling $367 million at June 30, 2025, generating $5 million in income for Q2 2025[275] 9. LONG-TERM DEBT AND SHAREHOLDERS' EQUITY Long-term debt totaled $970 million at June 30, 2025, primarily subordinated notes, while total shareholders' equity was $6.596 billion, with AOCI reflecting a net loss of $2.2 billion Long-Term Debt (June 30, 2025) | Component | Amount (Millions) | | :-------------------------------- | :---------------- | | Subordinated notes | $966 | | Finance lease obligations | $4 | | Total | $970 | Shareholders' Equity (June 30, 2025) | Component | Amount (Millions) | | :-------------------------------- | :---------------- | | Preferred stock | $66 | | Common stock and additional paid-in capital | $1,713 | | Retained earnings | $6,981 | | Accumulated other comprehensive income (loss) | $(2,164) | | Total shareholders' equity | $6,596 | - The Accumulated Other Comprehensive Income (AOCI) balance reflected a net loss of $2.2 billion at June 30, 2025, primarily attributable to a decline in the fair value of fixed-rate AFS securities[278] 10. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES The company has off-balance sheet financial instruments totaling $29.564 billion at June 30, 2025, and faces legal proceedings with reasonably possible losses up to $15 million in excess of accruals Off-Balance Sheet Financial Instruments (June 30, 2025) | Instrument | Contractual Amount (Millions) | | :-------------------------------- | :---------------------------- | | Unfunded lending commitments | $28,688 | | Standby letters of credit (Financial) | $600 | | Standby letters of credit (Performance) | $246 | | Commercial letters of credit | $30 | | Total unfunded commitments | $29,564 | - The estimated aggregate range of reasonably possible losses for certain legal matters is zero to approximately $15 million in excess of amounts accrued at June 30, 2025[284] 11. REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue from contracts with customers is recognized when control of goods/services is transferred, with total noninterest income of $190 million for Q2 2025 disaggregated by operating business segment Consolidated Bank Noninterest Income (Three Months Ended June 30) | Category | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Total noninterest income from contracts with customers | $130 | $126 | | Customer-related noninterest income from other sources | $34 | $28 | | Noncustomer-related noninterest income | $26 | $25 | | Total noninterest income | $190 | $179 | 12. INCOME TAXES The effective income tax rate was 21.8% for Q2 2025, influenced by non-deductible expenses and non-taxable income, with new state tax legislation impacting the net DTA of $803 million - The effective income tax rate was 21.8% for Q2 2025, compared with 23.3% for Q2 2024[293] - The net Deferred Tax Asset (DTA) totaled $803 million at June 30, 2025, impacted by the enactment of new state tax legislation[294][295] 13. NET EARNINGS PER COMMON SHARE Basic and diluted net earnings per common share were $1.63 for Q2 2025, based on weighted average common shares outstanding of 147.044 million (basic) and 147.053 million (diluted) Net Earnings Per Common Share (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net earnings applicable to common shareholders | $243M | $190M | | Basic EPS | $1.63 | $1.28 | | Diluted EPS | $1.63 | $1.28 | | Weighted average basic shares outstanding (thousands) | 147,044 | 147,115 | | Weighted average diluted shares outstanding (thousands) | 147,053 | 147,120 | 14. OPERATING SEGMENT INFORMATION The company manages operations through seven separately managed affiliate banks across 11 states, emphasizing local authority and a wide range of banking products, with performance evaluated based on income/loss before taxes - The company operates through seven separately managed affiliate banks (Zions Bank, California Bank & Trust, Amegy Bank, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington) across 11 Western and Southwestern states[299] - At June 30, 2025, the company operated 409 branches, with Zions Bank having 119, CB&T 78, Amegy 76, NBAZ 56, NSB 43, Vectra 34, and TCBW 3[271][300] Consolidated Bank Income (Loss) Before Taxes by Segment (Three Months Ended June 30) | Segment | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Zions Bank | $83 | $73 | | CB&T | $102 | $80 | | Amegy | $56 | $28 | | NBAZ | $31 | $21 | | NSB | $19 | $14 | | Vectra | $13 | $6 | | TCBW | $9 | $9 | | Other | $(1) | $31 | | Consolidated Bank Total | $312 | $262 | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section refers to the detailed discussion on interest rate and market risk management provided within the Management's Discussion and Analysis of Financial Condition and Results of Operations - The most significant risks include interest rate and market risk, which are closely monitored by management[308] ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at June 30, 2025[309] - There were no changes in internal control over financial reporting during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[309] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section incorporates by reference the detailed information on legal proceedings from Note 10 of the Notes to Consolidated Financial Statements - Information regarding legal proceedings is incorporated by reference from Note 10 of the Notes to Consolidated Financial Statements[310] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A. Risk Factors in the 2024 Form 10-K[311] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[312] ITEM 5. OTHER INFORMATION No Rule 10b5-1(c) trading arrangements were adopted, modified, or terminated by directors or officers during Q2 2025 - None of the directors or officers adopted, modified, or terminated a Rule 10b5-1(c) trading arrangement during the three months ended June 30, 2025[313] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including articles of association, bylaws, change in control agreements, certifications, and Inline XBRL financial data - Exhibits include Second Amended and Restated Articles of Association and Bylaws, Amendments to Change in Control Agreements, Certifications by CEO and CFO (31.1, 31.2, 32), and Inline XBRL financial data (101, 104)[315] Signatures The report is duly signed by Harris H. Simmons, Chairman and Chief Executive Officer, and R. Ryan Richards, Executive Vice President and Chief Financial Officer, on August 7, 2025 - The report was signed by Harris H. Simmons, Chairman and Chief Executive Officer, and R. Ryan Richards, Executive Vice President and Chief Financial Officer, on August 7, 2025[319]