What Zions Bancorporation, N.A. (ZION) Said on Its Q3 Earnings Call

Key Points

• Third-quarter earnings improved: Zions reported net earnings of $262 million, or $1.78 per share, up 20% year over year, supported by higher net interest income, customer-related fees, modest loan growth and strong credit performance.
• Growth outlook remains positive despite margin pressure: Net interest margin declined to 3.23% as deposit costs rose, but management expects net interest income to increase 8%–12% in the third quarter of 2027 and projects 2%–4% loan growth.
• Multifamily lending acquisition expands fee strategy: Zions completed its Basis Investment Group acquisition, adding Fannie Mae and Freddie Mac agency lending capabilities. Management expects the platform to generate $17 million–$20 million of revenue in 2027, while credit quality and capital ratios remained stable.

Zions Bancorporation, N.A. NASDAQ: ZION reported third-quarter 2026 net earnings available to common shareholders of $262 million, or $1.78 per share, as higher net interest income and customer-related fee income helped drive year-over-year improvement.

Chairman and Chief Executive Officer Harris Simmons said earnings per share increased 20% from $1.48 in the third quarter of 2025. Adjusted for large equity securities gains in the prior quarter, earnings were also up 2% sequentially from $1.74 per share.

“We are reasonably pleased with our financial results for the third quarter,” Simmons said, citing growth in net interest income, customer-related non-interest income, modest loan growth and “exceptional credit performance.”

Margin pressure offset by higher net interest income

Tax-equivalent net interest income totaled $684 million, rising $7 million, or 1%, from the prior quarter and $12 million, or 2%, from a year earlier. Net interest margin was 3.23%, down 4 basis points from the second quarter and 5 basis points from the prior-year period.

Chief Financial Officer Ryan Richards said the sequential margin decline reflected higher deposit costs and growth in lower-yielding assets. Average customer deposits increased at an 8.8% annualized rate during the quarter, exceeding annualized loan growth of 3.7%.

The company used excess deposit funding to reduce short-term Federal Home Loan Bank borrowings and place residual funds in money market investments. Richards said those lower-yielding money market balances could eventually be used to fund loan growth or reduce brokered deposits as those deposits mature.

Total deposit costs increased 11 basis points sequentially to 1.59%. About 3 basis points of that increase resulted from a presentation change involving interest paid on cash collateral related to the company’s derivatives portfolio, Richards said. The change did not affect total funding costs.

For the third quarter of 2027, Zions expects net interest income to increase 8% to 12% from third-quarter 2026 levels, based on a forward curve as of Sept. 30 that assumes interest-rate increases in December, March and June. The outlook assumes deposit costs rise to approximately 2% from 1.59%, including some migration from noninterest-bearing deposits into interest-bearing products.

Richards said the bank expects deposit betas in the upper 40% to low 50% range under that scenario. He also said fixed-rate loan repricing and reinvestment of securities could lift earning-asset yields, while continued funding and asset mix changes may support margin expansion.

Fee income strategy includes multifamily agency acquisition

Customer-related non-interest income was $192 million, compared with $182 million in the preceding quarter and $163 million a year earlier. On an adjusted basis excluding a net credit valuation adjustment, customer-related fee income was $182 million, up 5% from the prior-year quarter.

Capital markets remained an important contributor to fee income, according to management. Simmons said the division has nearly doubled its annual fee-income contribution since its 2020 launch through investments in talent, technology and product capabilities including investment banking, commodities hedging, real estate capital markets and multifamily agency lending.

During the third quarter, Zions closed its acquisition of Basis Investment Group’s multifamily agency lending business. The acquired operation gives Zions direct access to Fannie Mae’s Delegated Underwriting and Servicing program and Freddie Mac’s Optigo program, alongside third-party CMBS conduit originations.

The company said it is now one of four banks combining those agency lending capabilities. Management plans to offer financing options across market-rate, affordable housing, construction, bridge, agency and CMBS products, with a particular focus on commercial real estate clients in the Western U.S.

The newly acquired platform contributed approximately $300,000 of revenue during the quarter, while personnel and integration costs totaled about $4 million. Zions expects the operation to produce $17 million to $20 million of revenue and $12 million to $13 million of expense in 2027. Over the medium term, management expects annual revenue of approximately $30 million to $40 million, although Simmons said interest-rate conditions could influence the pace of growth.

Zions expects adjusted customer-related fee income to grow 6% to 9% by the third quarter of 2027 compared with the $182 million reported for the latest quarter, led by continued capital-markets momentum.

Loans, deposits and expenses

Average loans increased 3.7% on an annualized basis in the third quarter, primarily led by commercial and industrial lending, and rose 2.7% from a year earlier. Ending loan balances declined slightly from the prior quarter.

Management expects loan growth of 2% to 4% in the third quarter of 2027 relative to the year-earlier period. The outlook reflects current pipelines, utilization trends and the economic environment, with more tempered growth expected in commercial real estate.

Chief Credit Officer Derek Steward said commercial real estate pipelines remain healthy but that the bank is maintaining underwriting and risk-selection discipline amid competitive conditions, supply-demand considerations and higher interest rates. President and Chief Operating Officer Scott McLean said the company’s Amegy affiliate in Texas had a softer quarter, though he characterized its pipelines as sound and said recent bank acquisitions in Texas could create opportunities through market disruption.

Average deposits increased $1.7 billion sequentially, primarily through interest-bearing deposits. Period-end customer deposits increased $1.8 billion, partially offset by a $448 million reduction in brokered deposits. Short-term borrowings fell $376 million from the preceding quarter and $2.7 billion from a year earlier.

Adjusted non-interest expense totaled $549 million, up $3 million sequentially. Beyond the Basis-related costs, technology, telecommunications and information-processing expense rose on software licensing and maintenance, while deposit and regulatory expense increased following a prior-quarter reduction in the FDIC special assessment.

Zions expects adjusted non-interest expense to rise 4% to 6% by the third quarter of 2027. For full-year 2026, it expects operating leverage of about 40 to 50 basis points including the Basis acquisition, or near the low end of its prior 100-to-150-basis-point outlook excluding the deal.

Credit quality and capital remain stable

Credit quality remained strong, with net charge-offs at 2 basis points of average loans on an annualized basis. The nonperforming asset ratio was 50 basis points, compared with 48 basis points in the prior quarter. Classified balances declined 12%, while criticized balances fell 8%.

The allowance for credit losses ended the quarter at 1.11% of loans and covered nonaccrual loans by 207%.

Zions’ common equity tier 1 ratio remained 11.8%, despite a $229 million increase in goodwill and intangible assets tied to the multifamily agency acquisition. Tangible book value per share rose 13% from a year earlier. Richards said the company sees potential for continued capital generation in a favorable operating environment, though future capital actions remain subject to board and regulatory approvals.

About Zions Bancorporation, N.A. (NASDAQ:ZION)

Zions Bancorporation, N.A. is a regional financial services company headquartered in Salt Lake City, Utah. Through its affiliated banks, the company provides banking and related financial services to individuals, small businesses, middle-market companies, and institutional clients.

Its offerings include commercial and industrial lending, commercial real estate financing, small-business banking, consumer loans, residential mortgages, deposit accounts, treasury management, investment services, and private banking.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.