Paul E. Burdiss
Chief Financial Officer at Zions Bancorporation, National Association
Thank you, Scott, and good evening, everyone and thanks for joining. Approximately three quarters of our revenue is net interest income, which is significantly influenced by loan and deposit growth and associated interest rates. Scott has already discussed loan growth. So if we move to Slide 14, we show our securities and money market investment portfolios over the last five quarters.
The size of the period end securities portfolio increased by more than $8 billion over the past year to nearly $25 billion, while money market investments increased by $5.6 billion to $12.4 billion. The combination of securities and money market investments has risen to 42% of total earning assets at period end, which compares to an average level in 2019 prior to the pandemic of 26%. We continue to exercise caution regarding duration extension risk by purchasing bonds with relatively short duration, both in the current and in an upward shock scenario.
The durations of both our listed on the bottom left side of this page. The $4.9 billion of securities purchases for the quarter had an average yield of 1.69%. Also shown on Page 14 is a summary of our interest rate swaps portfolio, maturity and yield information by quarter. This includes both maturing swaps and forward starting swaps that are in place today, but won't be reflected in our financial results until the start date. As the yield on the interest rate swaps footfalls over time due to the recent interest rate environment, some of that decline will be dampened by rising notional value.
Slide 15 is an overview of net interest income and the net interest margin. The chart on the left shows the recent five-quarter trend for both. The net interest margin in the white boxes has declined over the past year, reflecting the change in earning asset mix due to the rise in excess liquidity as described on the prior page. Recently, growth in deposits in excess of loans has impacted the composition of earning assets through a larger concentration and lower yielding money market and securities investments.
The weighted average yield of our securities and money market investments is 1.09% and with that concentration increasing by 3 percentage points in the quarter, it continues to weigh on our net interest margin. In fact, I estimate that the increase in concentration of money market investments from 7% of earning assets a year ago to 15% of earning assets in the most current quarter has accounted for 22 of the 37 basis points of net interest margin compression over the past year. Importantly, this decrease in the net interest margin does not reflect the decline in net interest income as the yield on our investments exceeds yield on our new deposits.
Slide 16 shows information about our interest rate sensitivity. Focusing on the upper left quadrant, as a general statement, we remain very asset sensitive. While we've deployed deposit driven cash into fixed rate securities as previously noted, deposit growth has been even stronger, which has resulted in $1.1 billion of growth in lower yielding, short-term money market assets. While not new to the fourth quarter, this estimated rate sensitivity assumes that the incremental deposits have modestly shorter duration characteristics when compared to the deposits on our balance sheet prior to the recent deposit surge.
We are continuing to deploy deposit driven cash into securities, which helps to moderate our natural asset sensitivity. Our estimated interest rate sensitivity was similar to that reported in the third quarter, such that our annual net interest income would improve by about 12% if rates were to rise by 100 basis points. As previously noted, we may continue to add interest rate swaps, including forward starting swaps, which would also help to damper our natural asset sensitivity.
Non-interest expenses on Slide 17 grew by $20 million from the prior quarter to $449 million. Adjusted non-interest expense increased $14 million or 3% to $446 million. The linked-quarter increase in adjusted non-interest expense was primarily due to a $10 million donation to the Zions Bancorporation foundation. If the charitable contribution were excluded, our adjusted noninterest expense increased about 1%.
Slide 18 details our allowance for credit losses or ACL. In the upper left, we show the recent declining trend in the ACL over the past several quarters with a slight uptick in the fourth quarter of 2021. At the end of the fourth quarter, the ACL was $553 million or 1.13% of non-PPP loans. The chart on the lower right side of this page shows the three broad categories that resulted in the ACL increase of $24 million, nearly all of the change was attributable to concerns over the impact that the omicron variant may have on the overall economy, as well as changes in the portfolio mix and composition such as the replacement of nearly risk-free PPP loans with more traditional commercial loans.
Our capital position is depicted on Slide 19. We repurchased $325 million of common stock in the fourth quarter and with the loan growth we achieved, we believe that our capital position is generally aligned with balance sheet risk and operating risk. We typically show the trailing five quarters in our slides, but in this case, we went back to year before the pandemic in order to provide a better perspective. In the chart at the top, you will note that we had reduced our common equity Tier 1 ratio to 10.2% in the fourth quarter of 2019 and with the onset of the pandemic and with line draws in the first quarter of 2020, we saw that ratio decline to 10.0%.
As we temporarily suspended share repurchases during the most uncertain period of the pandemic, the capital ratio climbed. And as the economic outlook improved, we have actively managed our capital to be more aligned with our risk profile. On the bottom left, we've displayed the quarterly return of shareholders' equity, measured as a percentage of our daily average market capitalization. The total capital returned, either through common dividend or share repurchases, sums to about one-third of the market value of the company in just three years.
From the other perspective, one can consider the reduction in average diluted shares, recall we had warrants outstanding that expired and resulted in no dilution to shareholders during this timeframe, as well as an active share buyback program. The results of these efforts was a reduction in average diluted shares of more than 45 million shares or 23% from 199 million diluted shares outstanding in the fourth quarter of 2018 to just under 154 million in the current quarter.
On the bottom right chart is an illustration of a significant divergence in the risk profile of our assets beginning in the fourth quarter of 2019 as measured with our risk-weighted assets and our total assets. The total risk-weighted assets have increased 10%, while our average total assets have increased 34%, which is again attributable to the strong inflow of deposits.
Our financial outlook, can be found on Slide 20. This is our best current estimate for financial performance in the fourth quarter of 2022 as compared to the actual results reported for the fourth quarter of 2021. The quarters in between are subject to normal seasonality and my comments are subject to our earlier reference to forward-looking statements on Slide 2.
Consistent with our outlook provided in recent quarters, due to the degree of uncertainty on the timing of customers submitting requests and the SBA approving those requests, our outlook for loan and net interest income excludes PPP loans. We reiterate our outlook for loan growth to be moderately increasing. We expect net interest income again excluding PPP loan revenue to increase over the next year. In addition to earning asset growth, achieved from loans, we expect continued deployment of cash into medium-term securities with limited duration extension risk. As highlighted on the page, this outlook does not assume an increase in short-term interest rates.
We had another successful quarter for customer-related fees and as Scott noted, still with a positive momentum, we are increasing our outlook for customer-related fees to slightly increasing from stable to slightly increasing. For adjusted non-interest expense, we are reiterating our expectation of moderately increasing. One factor in this outlook is persistent wage and price pressure. Despite this headwind, we expect positive operating leverage in 2022. As noted in the comments column on this page, this outlook excludes the charitable contribution made in the fourth quarter of 2021.
Finally, regarding capital management, we have repeatedly stated that it is our objective to operate with lower than average risk combined with a stronger than median common equity Tier 1 capital ratio. We believe that we have generally reached a point at which these two considerations are coming into balance. Meanwhile, with customer loan demand returning, it seems likely that during the next few quarters, more of the capital that we generate will be used to support loan growth and less will be used for share repurchases. Notably, share repurchases and dividends are decisions left to the Board and as such we expect to announce any capital actions for the first quarter when that information becomes available.
This concludes our prepared remarks. Twanda, could you please open the line for questions.