ZIONS(ZIONL) - 2025 Q2 - Quarterly Report

Financial Performance - Net earnings applicable to common shareholders increased, with diluted EPS rising to $1.63 from $1.28 year-over-year, reflecting solid growth in net interest income and noninterest income [19]. - Net income for the six months ended June 30, 2025, reached $414 million, a 16.9% increase from $354 million in the same period of 2024 [189]. - Basic earnings per common share for the three months ended June 30, 2025, was $1.63, up from $1.28 in the same period of 2024, representing a 27.5% increase [188]. - Comprehensive income for the three months ended June 30, 2025, was $330 million, compared to $261 million in the same period of 2024, marking a 26.5% increase [189]. Revenue Growth - Net interest income rose by $51 million, or 9%, primarily due to lower funding costs and an increase in average interest-earning assets, resulting in a net interest margin improvement to 3.17% from 2.98% [19]. - Customer-related noninterest income increased by $11 million, or 7%, primarily due to higher capital markets fees and improved retail and business banking fees [19]. - Noninterest income for the three months ended June 30, 2025, was $190 million, an increase of 6.1% compared to $179 million in the same period of 2024 [188]. - Total noninterest income for the six months ended June 30, 2025, was $361 million, an increase of $26 million, or 8%, compared to the same prior year period [58]. Loan and Deposit Activity - Total loans and leases increased by $2.4 billion, or 4%, driven by growth in the consumer 1-4 family residential mortgage and commercial and industrial loan portfolios [19]. - Customer deposits totaled $69.9 billion, a slight increase from $69.5 billion, with noninterest-bearing demand deposits rising while interest-bearing deposits declined [19]. - Total loans and leases reached $60,050 million, generating interest income of $1,743 million with a yield of 5.85% [44]. - Total deposits decreased to $73,800 million as of June 30, 2025, down 3.5% from $76,223 million at December 31, 2024 [187]. Credit Quality - The provision for credit losses was negative $1 million, compared to positive $5 million in the prior year period, indicating improved credit quality [19]. - Net loan and lease charge-offs totaled $10 million, or 0.07% of average loans and leases annualized, down from $15 million, or 0.10%, in the prior year quarter [22]. - Nonperforming assets rose to $313 million, or 0.51% of total loans and leases, compared to $265 million, or 0.45% in the prior year quarter [22]. - The allowance for credit losses (ACL) was $732 million as of June 30, 2025, compared to $726 million at June 30, 2024, reflecting increased lending activity and adverse economic scenarios [47]. Expense Management - Noninterest expense increased by $18 million, or 4%, primarily due to higher incentive compensation accruals and other noninterest expenses [22]. - The efficiency ratio improved, reflecting better management of noninterest expenses despite some increases [19]. - Adjusted noninterest expense rose by $15 million, or 3%, with an efficiency ratio improving to 62.2% from 64.5% [62]. - Total noninterest expense for the six months ended June 30, 2025, increased by $30 million, or 3%, primarily driven by a $29 million rise in salaries and employee benefits [63]. Capital and Liquidity - Total shareholders' equity increased by $472 million, or 8%, to $6.6 billion at June 30, 2025, compared to $6.1 billion at December 31, 2024 [171]. - At June 30, 2025, total available liquidity was $38.6 billion, a decrease from $41.6 billion at December 31, 2024, with sources exceeding uninsured deposits of $32.6 billion [166]. - The company exceeded all capital adequacy requirements under the Basel III capital rules as of June 30, 2025 [177]. - As of June 30, 2025, common equity tier 1 (CET1) capital totaled $7.57 billion, a 7% increase from $7.07 billion in the prior year [178]. Interest Rate Risk Management - The company actively manages interest rate and market risk to mitigate potential adverse impacts on earnings and capital, focusing on behavioral models to forecast sensitivity to interest rate movements [139]. - Earnings at Risk (EaR) shows a projected decrease of 8.7% under a -200 bps shift in interest rates for June 30, 2025, while Economic Value of Equity (EVE) decreases by 0.3% [147]. - The average outstanding notional amounts for cash flow hedges of assets are $750 million for Q3 2025, decreasing to $192 million by Q2 2029, with a weighted average fixed rate received of 3.17% [144]. - The company executed $750 million in cash flow hedges to manage interest rate exposure associated with $28.9 billion of commercial and CRE loans scheduled to reprice within six months [153].