Zions Bancorporation, N.A. Q1 Earnings Call Highlights

Key Points

• Zions reported Q1 net earnings of $232 million ($1.56/share), up 37% year‑over‑year, driven by revenue growth, a lower credit provision and tax rate, though earnings fell 11% sequentially due to fewer days in the quarter and significantly lower securities gains; net interest margin was 3.27% (up 17 bps YoY, down 4 bps QoQ).
• Management expects moderately increasing net interest income and fee income (NII could rise ~7–8% over 12 months if rates hold), while expenses will rise moderately as the bank invests in fee businesses, deposit initiatives and technology, and it still forecasts positive operating leverage of 100–150 bps for 2026.
• Credit and capital remain solid: net charge‑offs ~3 bps, NPAs 48 bps, allowance 1.16% (239% coverage), CET1 11.5% flat and tangible book value +19% YoY; the bank is pursuing targeted acquisitions (including Basis mortgage platforms), repatriating $7–12bn of off‑balance‑sheet deposits, and sees potential Basel III standardized‑approach relief adding roughly 93 bps to CET1.

Zions Bancorporation, N.A. NASDAQ: ZION executives said the company delivered “meaningful year-over-year improvement” in first quarter 2026 results while continuing to invest in fee businesses, deposit gathering initiatives, and technology, according to remarks on the company’s earnings conference call.

Chairman and CEO Harris Simmons said management was “reasonably pleased” with the quarter, citing progress on long-term priorities and the continued build-out of its capital markets platform. CFO Ryan Richards added that the bank’s outlook contemplates modest improvement in net interest income and fee income, with expenses also expected to rise moderately as the company invests for growth.

First quarter profitability and balance sheet trends

Simmons reported net earnings of $232 million, or $1.56 per diluted share, up 37% from a year earlier. He attributed the year-over-year increase to revenue growth, a lower provision for credit losses, and a lower effective tax rate. Compared to the prior quarter, earnings fell 11%, which Simmons said primarily reflected lower revenue—including two fewer days in the period and “significantly lower securities gains”—as well as seasonal compensation expense patterns.

The bank’s net interest margin was 3.27%, down 4 basis points from the prior quarter and up 17 basis points from a year ago. Richards said earning asset yields fell faster than funding costs during the quarter, “most notably in January,” with variable-rate loan repricing reflecting December rate cuts. Deposit costs moved lower “but with a lag,” he said.

Average loans grew 2.4% on an annualized basis, led by commercial lending, while average deposits declined $540 million from the prior quarter, which Richards attributed to both lower average brokered deposits and seasonal runoff in business operating accounts early in the quarter. Management highlighted that period-end customer deposits increased $1.3 billion, or 1.8%, from year-end.

On funding, Richards said total funding costs declined 8 basis points linked-quarter to 1.68%. He added that short-term borrowings declined significantly as the bank replaced higher-cost wholesale funding with customer deposit growth and securities cash flows, while “remixing into senior debt.”

Fee income supported by capital markets and mortgage activity

Richards reported customer-related non-interest income of $172 million, compared with $177 million in the prior quarter and $158 million a year ago. Excluding net credit valuation adjustment, adjusted customer-related non-interest income was $174 million, roughly flat sequentially and up 10% year-over-year.

Richards said the year-over-year growth reflected “higher residential mortgage loan sales activity” and growth in retail and business banking, commercial account, and wealth management fees. He also said the company continued to see “attractive opportunities in capital markets” and entered the second quarter with “strong pipelines.”

President and COO Scott McLean said capital markets comparisons were affected by “a really large M&A transaction fee” in the year-ago quarter. He said first quarter strength came from syndications and interest rate hedging, and highlighted a newer commodity hedging effort focused on oil and gas clients. McLean said the practice began in the third and fourth quarters of last year and “has the potential to generate…$7 million-$10 million a year in revenue,” adding that about 30 to 35 of roughly 80 energy reserve-based lending clients have transacted with the bank on the hedging activity so far.

McLean also described real estate capital markets as “a soft quarter,” characterizing results as something that “can kind of ebb and flow,” while saying the business remained confident about the second half of the year. He added that the bank has invested in M&A advisory talent and that deal flow “looks good,” though he noted the business is “sporadic.”

Expense growth and operating leverage expectations

Adjusted non-interest expense was $558 million. Richards said expenses increased from the prior quarter primarily due to seasonal compensation and rose year-over-year due to higher marketing, technology costs, professional and outsourced services, and incentive compensation. He said the company would continue to manage expenses “prudently” while investing to support growth.

For full-year 2026, Richards said the company still expects positive operating leverage in the range of 100 to 150 basis points. In the Q&A, he indicated that “having no cuts is embedded” into that guide, referring to interest rate assumptions implied by the forward curve at quarter-end.

Outlook: NII and fee income “moderately increasing” amid rate uncertainty

Richards said that for the first quarter of 2027, the bank’s outlook for net interest income is “moderately increasing” given uncertainty in benchmark rates. He noted that the forward curve as of March 31 assumed no rate changes over the next 12 months and said that if that scenario plays out, management estimates net interest income growth of about 7% to 8%.

In response to analyst questions on loan yields, management said variable-rate repricing tied to benchmark moves was the largest driver of sequential loan yield compression. Richards also referenced a “72 basis point spread” between front-book and back-book yields for fixed-rate loan portfolios yet to reprice through.

On fees, Richards said adjusted customer-related fee income is also expected to be “moderately increasing” versus first quarter 2026, with broad-based growth and capital markets contributing “in an outsized way.” He said the company currently expects results “towards the top end of that range.”

Management also discussed deposit pricing dynamics. Richards said there is “still some trailing activity” in repricing down term deposits, particularly customer time deposits. McLean added that Zions has been running a campaign to bring client deposits held off-balance sheet back onto the balance sheet, noting the bank has had “anywhere from $7 billion-$12 billion in off-balance sheet deposits” and has been bringing more back at rates he described as attractive and “accretive versus broker deposits and overnight cost of borrowings.”

Credit quality, CRE exposure, and capital actions

Chief Credit Officer Derek Steward said credit performance remained strong, with net charge-offs at 3 basis points annualized of average loans and continued improvement in commercial real estate credit metrics. Richards said the non-performing assets ratio declined to 48 basis points and that classified and criticized balances also declined during the quarter. The allowance for credit losses ended the quarter at 1.16%, which Richards said equated to 239% coverage of non-accrual loans.

Richards noted the company’s $13.7 billion commercial real estate portfolio represents approximately 22% of total loans and described it as granular and well-diversified with conservative loan-to-value characteristics. During Q&A, Steward said the bank is seeing increased CRE activity as markets stabilize, while also observing “pricing pressure on CRE.” He characterized C&I pricing competition as present but “not significant.”

On capital, Richards said the common equity tier 1 ratio was 11.5%, flat in the quarter. He said earnings growth was offset by $77 million of common share repurchases and dividends, along with growth in risk-weighted assets. Richards also said tangible book value per share increased 19% versus the prior year, reflecting earnings generation and “continued balance sheet normalization.”

Asked about potential Basel III “endgame” impacts, Richards said the company’s initial work on the standardized approach suggested “between 9%-10% of RWA relief,” which he said would contribute “about 93 basis points” to CET1, all else equal, while noting the company was still studying other elements of the framework.

Management reiterated plans to pursue targeted growth initiatives and select acquisitions. Simmons pointed to an agreement announced in late March with Basis Investment Group to acquire Fannie Mae and Freddie Mac lending programs, related mortgage servicing rights, and a team supporting those platforms, subject to regulatory and customary approvals. Simmons said the transaction is expected to enhance the bank’s ability to serve commercial real estate clients across the Western U.S. and strengthen the capital markets franchise.

On consumer and small business deposits, Simmons discussed the rollout of the “Gold Account” and said the bank opened about 4,000 new accounts in the first quarter, adding that he hopes to ramp to about 20,000 new accounts for the year. He also said the companion small business product, “Business Beyond Account,” began piloting in Arizona and Colorado on March 26 and is expected to roll out across the organization later in May, with impacts expected to become clearer in the third and fourth quarters.

About Zions Bancorporation, N.A. NASDAQ: ZION

Zions Bancorporation, N.A. is a bank holding company headquartered in Salt Lake City, Utah, offering a full suite of banking and financial services to individuals, businesses and institutions. Through its primary subsidiary, Zions Bank, the company provides commercial banking, retail banking and wealth management solutions designed to serve the needs of small businesses, middle‐market firms and high‐net‐worth clients. Its service portfolio includes deposit accounts, cash‐management tools, lending products, mortgage origination, treasury services and investment advisory services.

The company's commercial banking segment delivers custom credit and treasury management services, including working capital lines of credit, equipment financing and international trade finance.

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