ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONP] Filings

10-Q 1 zions-20230331.htm 10-Q zions-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________

COMMISSION FILE NUMBER 001-12307

ZIONS BANCORPORATION, NATIONAL ASSOCIATION

(Exact name of registrant as specified in its charter)


United States of America			87-0189025
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
One South Main
Salt Lake City, Utah			84133-1109
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (801) 844-7637

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbols	Name of Each Exchange on Which Registered
Common Stock, par value $0.001	ZION	The NASDAQ Stock Market LLC
Depositary Shares each representing a 1/40th ownership interest in a share of:
Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock	ZIONP	The NASDAQ Stock Market LLC
Series G Fixed/Floating-Rate Non-Cumulative Perpetual Preferred Stock	ZIONO	The NASDAQ Stock Market LLC
6.95% Fixed-to-Floating Rate Subordinated Notes due September 15, 2028	ZIONL	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Number of common shares outstanding at April 28, 2023 148,100,701 shares

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	39

	Consolidated Balance Sheets	39
	Consolidated Statements of Income	40
	Consolidated Statements of Comprehensive Income (Loss)	41
	Consolidated Statements of Changes in Shareholders’ Equity	41
	Consolidated Statements of Cash Flows	42
	Notes to Consolidated Financial Statements	43

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78

Item 4.	Controls and Procedures	79

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	79

Item 1A.	Risk Factors	79

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80

Item 6.	Exhibits	81

Signatures		82

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

GLOSSARY OF ACRONYMS AND ABBREVIATIONS


ACL	Allowance for Credit Losses	HECL	Home Equity Credit Line
AFS	Available-for-Sale	HTM	Held-to-Maturity
ALLL	Allowance for Loan and Lease Losses	IPO	Initial Public Offering
Amegy	Amegy Bank, a division of Zions Bancorporation, National Association	LIHTC	Low-income Housing Tax Credit
AMERIBOR	American Interbank Offered Rate	LIBOR	London Interbank Offered Rate
AOCI	Accumulated Other Comprehensive Income or Loss	Municipalities	State and Local Governments
ASC	Accounting Standards Codification	NAICS	North American Industry Classification System
ASU	Accounting Standards Update	NASDAQ	National Association of Securities Dealers Automated Quotations
BOLI	Bank-Owned Life Insurance	NBAZ	National Bank of Arizona, a division of Zions Bancorporation, National Association
bps	Basis Points	NIM	Net Interest Margin
BSBY	Bloomberg Short-Term Bank Yield	NM	Not Meaningful
BTFP	Bank Term Funding Program	NSB	Nevada State Bank, a division of Zions Bancorporation, National Association
CB&T	California Bank & Trust, a division of Zions Bancorporation, National Association	OCC	Office of the Comptroller of the Currency
CECL	Current Expected Credit Loss	OCI	Other Comprehensive Income or Loss
CLTV	Combined Loan-to-Value Ratio	OREO	Other Real Estate Owned
CMT	Constant Maturity Treasury	PAM	Proportional Amortization Method
CRE	Commercial Real Estate	PEI	Private Equity Investment
CVA	Credit Valuation Adjustment	PPNR	Pre-provision Net Revenue
DTA	Deferred Tax Asset	PPP	Paycheck Protection Program
DTL	Deferred Tax Liability	ROU	Right-of-Use
EaR	Earnings at Risk	RULC	Reserve for Unfunded Lending Commitments
EPS	Earnings per Share	S&P	Standard & Poor's
EVE	Economic Value of Equity	SBA	U.S. Small Business Administration
FASB	Financial Accounting Standards Board	SBIC	Small Business Investment Company
FDIC	Federal Deposit Insurance Corporation	SEC	Securities and Exchange Commission
FHLB	Federal Home Loan Bank	SOFR	Secured Overnight Financing Rate
FICO	Fair Isaac Corporation	TCBW	The Commerce Bank of Washington, a division of Zions Bancorporation, National Association
FRB	Federal Reserve Board	TDR	Troubled Debt Restructuring
FTP	Funds Transfer Pricing	U.S.	United States
GAAP	Generally Accepted Accounting Principles	Vectra	Vectra Bank Colorado, a division of Zions Bancorporation, National Association
GCF	General Collateral Funding	Zions Bank	Zions Bank, a division of Zions Bancorporation, National Association

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:

•Statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation, National Association and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and

•Statements preceded or followed by, or that include the words “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecasts,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” “will,” and the negative thereof and similar words and expressions.

Forward-looking statements are not guarantees, nor should they be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those presented. Although the following list is not comprehensive, important factors that may cause material differences include:

•The quality and composition of our loan and securities portfolios and the quality and composition of our deposits;

•Changes in general industry, political and economic conditions, including continued high inflation, economic slowdown or recession, or other economic disruptions; changes in interest and reference rates which could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; deterioration in economic conditions that may result in increased loan and leases losses;

•Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital;

•The impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;

•The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings;

•Our ability to recruit and retain talent, including increased competition for qualified candidates as a result of expanded remote-work opportunities and increased compensation expenses;

•Competitive pressures and other factors that may affect aspects of our business, such as pricing and demand for our products and services;

•Our ability to complete projects and initiatives and execute on our strategic plans, manage our risks, and achieve our business objectives;

•Our ability to provide adequate oversight of our suppliers or prevent inadequate performance by third parties upon whom we rely for the delivery of various products and services;

•Our ability to develop and maintain technology, information security systems and controls designed to guard against fraud, cybersecurity, and privacy risks;

•Changes and uncertainties in applicable laws, and fiscal, monetary, regulatory, trade, and tax policies, and actions taken by governments, agencies, central banks and similar organizations; adverse media and other expressions of negative public opinion whether directed at us, other banks, the banking industry generally or otherwise that may adversely affect our reputation and that of the banking industry generally;

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

•The effects of pandemics and other health emergencies, including the lingering effects of the COVID-19 pandemic that may affect our business, employees, customers, and communities, such as ongoing effects on availability and cost of labor;

•The effects of wars and geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;

•Natural disasters that may impact our and our customer's operations and business; and

•Governmental and social responses to environmental, social, and governance issues, including those with respect to climate change.

We caution against the undue reliance on forward-looking statements, which reflect our views only as of the date they are made. Except to the extent required by law, we specifically disclaim any obligation to update any factors or to publicly announce the revisions to any forward-looking statements to reflect future events or developments.

RECENT DEVELOPMENTS

As this quarterly report is filed, the Nasdaq Regional Banking Index is down about 30% year-to-date in 2023, reflecting broad weakness in bank valuations due in large part to several regional banks being closed and placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”). The root causes of these closures appear to be centered on weaknesses in liquidity risk, interest rate risk, and capital management. Investor sentiment has also been adversely impacted by concerns about future losses in commercial real estate.

In light of the current banking environment, below we have summarized key strategic actions that we employ (and have employed since the 2008 global financial crisis) to prudently manage the associated risks.

Liquidity Risk

We manage liquidity to provide necessary funds in varying circumstances. As a result, we have readily available sources of liquidity, including cash, interest-bearing funds held at the Federal Reserve, and advances and other borrowings against loans and highly-liquid investment securities, which all together exceed our level of uninsured deposits. An important source of our liquidity is an approximately $22 billion investment securities portfolio, comprised primarily of United States (“U.S.”) government mortgage-backed securities that can be readily pledged for future borrowings without effecting a sale.

Interest Rate Risk

We actively manage the volatility of net interest income and economic value of equity associated with changes in interest rates. Our investment securities portfolio, which has an estimated duration of 4.1 years, facilitates the balancing of the mismatch between our loan and deposit durations.

Capital Management

We maintain strong regulatory capital ratios, exceeding all capital adequacy and regulatory requirements for well-capitalized banks, and have current and projected earnings capacity to augment capital going forward. We regularly utilize stress testing as an important mechanism to inform our decisions on the appropriate level of capital and funding.

Credit Risk

We believe we have strong credit discipline, solid underwriting standards, and a well-diversified loan portfolio, all of which has resulted in very good credit quality for more than a decade. Specifically, we have actively managed the credit risk in our commercial real estate loan portfolio, reducing these loans to 23% of total loans, compared with 33% in late 2008.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Comparisons noted below are calculated for the current quarter compared with the same prior-year period unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they generally reflect a low starting point.

RESULTS OF OPERATIONS

Executive Summary

Our financial results in the first quarter of 2023 reflected strong credit quality and revenue growth, which was partially offset by increases in the provision for credit losses and noninterest expense. Diluted earnings per share (“EPS”) was $1.33, compared with $1.27 in the first quarter of 2022.

Net interest income increased $135 million, or 25%, to $679 million, primarily due to a higher interest rate environment and a favorable change in the mix of interest-earning assets. The net interest margin (“NIM”) was 3.33%, compared with 2.60%.

Nonperforming assets decreased $79 million, or 31%, and classified loans decreased $236 million, or 21%. We had zero net loan and lease charge-offs, compared with net charge-offs of $6 million, in the prior year quarter. Despite improvements in most of our credit quality metrics, the provision for credit losses was $45 million, compared with a $(33) million provision in the prior year period, reflecting deterioration in economic forecasts and growth in the loan portfolio.

Total customer-related noninterest income remained stable at $151 million, compared with the prior year period, driven by increases in commercial treasury management, foreign exchange, and capital markets syndication fees, offset by a decrease in retail and business banking fees. Total noninterest income increased $18 million, or 13%, primarily due to negative mark-to-market adjustments recorded during the prior year period related to our Small Business Investment Company (“SBIC”) investment portfolio.

Total noninterest expense increased $48 million, or 10%. The increase was driven largely by a $27 million increase in salaries and benefits expense, which was impacted by ongoing inflationary and competitive labor market pressures on wages and benefits, increased headcount, and an additional business day during the current quarter. Our efficiency ratio was 59.9%, compared with 65.8%, as growth in adjusted taxable-equivalent revenue significantly outpaced growth in adjusted noninterest expense.

Average interest-earning assets decreased $2.3 billion, or 3%, from the prior year quarter, driven by declines of $4.2 billion and $3.2 billion in average money market investments and average securities, respectively, and partially offset by an increase of $5.2 billion in average loans and leases.

Total loans and leases increased $5.1 billion, or 10%, to $56.3 billion. The increases were primarily in the consumer 1-4 family residential mortgage, commercial real estate term, commercial and industrial, and consumer construction loan portfolios.

Total deposits decreased $13.1 billion, or 16%, to $69.2 billion, from the prior year quarter, mainly due to declines in larger-balance and more rate-sensitive, nonoperating deposits during the prior year, which continued into the first quarter of 2023 due to market uncertainty and heightened sensitivity of large depositors in the wake of prominent bank failures. Our loan-to-deposit ratio was 81%, compared with 62% in the prior year quarter. Borrowed funds, consisting primarily of secured borrowings, increased $11.5 billion from the prior year quarter in response to declines in total deposits and loan growth.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

First Quarter 2023 Financial Performance

Net Earnings Applicable to Common Shareholders
(in millions)

Diluted EPS

Adjusted PPNR
(in millions)

Efficiency Ratio

Net earnings applicable to common shareholders increased from the first quarter of 2022, primarily due to an increase in net revenue, driven largely by the higher interest rate environment and change in the mix of interest-earning assets, partially offset by increases in the provision for credit losses and noninterest expense, as well as a higher effective tax rate.

Diluted earnings per share improved from the first quarter of 2022 as a result of increased net earnings and a 3.6 million decrease in weighted average diluted shares, primarily due to share repurchases.

Adjusted pre-provision net revenue (“PPNR”) increased $100 million from the first quarter of 2022, primarily due to growth in net interest income. This increase was partially offset by higher adjusted noninterest expense.

The efficiency ratio improved from the prior year quarter, as growth in adjusted taxable-equivalent revenue significantly outpaced growth in adjusted noninterest expense, resulting in positive operating leverage.

Net Interest Income and Net Interest Margin

NET INTEREST INCOME AND NET INTEREST MARGIN


	Three Months Ended March 31,						Amount change		Percent change
(Dollar amounts in millions)	2023			2022

Interest and fees on loans 1	$	726		$	437		$	289	66	%
Interest on money market investments	57			6			51		NM
Interest on securities	137			112			25		22
Total interest income	920			555			365		66
Interest on deposits	82			6			76		NM
Interest on short- and long-term borrowings	159			5			154		NM
Total interest expense	241			11			230		NM
Net interest income	$	679		$	544		$	135	25	%

Average interest-earning assets	$	83,832		$	86,093		$	(2,261)	(3)	%
Average interest-bearing liabilities	$	49,012		$	42,136		$	6,876	16	%
							bps
Yield on interest-earning assets 2	4.49		%	2.65		%	184
Rate paid on total deposits and interest-bearing liabilities 2	1.17		%	0.06		%	111
Cost of total deposits 2	0.47		%	0.03		%	44
Net interest margin 2	3.33		%	2.60		%	73

1 Includes interest income recoveries of $2 million for both the three months ended March 31, 2023, and 2022.

2 Rates are calculated using amounts in thousands; taxable-equivalent rates are used where applicable.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Net interest income accounted for approximately 81% of our net revenue (net interest income plus noninterest income) for the quarter and increased $135 million, or 25%, relative to the prior year quarter. The increase was primarily due to the higher interest rate environment and a favorable change in the mix of interest-earning assets.

Average interest-earning assets decreased $2.3 billion, or 3%, from the prior year quarter, driven by declines of $4.2 billion and $3.2 billion in average money market investments and average securities, respectively. A majority of the decrease in average securities was due to payments and maturities. These decreases were partially offset by an increase of $5.2 billion in average loans and leases.

The NIM was 3.33%, compared with 2.60%. The yield on average interest-earning assets was 4.49% in the first quarter of 2023, an increase of 184 basis points (“bps”), reflecting higher interest rates and a favorable mix change from money market investments to loans. The yield also benefited from a decrease in the market value of available-for-sale (“AFS”) securities due to rising interest rates. The rate paid on average interest-bearing liabilities increased to 1.99%, compared with 0.11%, reflecting the higher interest rate environment and increased borrowings. We expect that the funding mix change toward the end of the first quarter of 2023, combined with the continued improvement in earning asset yields, will result in an estimated NIM of approximately 3.0% in the near term.

Average loans and leases increased $5.2 billion, or 10%, to $56.1 billion, mainly due to growth in average consumer and commercial loans. The yield on total loans increased 178 basis points to 5.30%, reflecting the higher interest rate environment.

Average deposits decreased $11.4 billion, or 14%, to $70.2 billion at an average cost of 0.47%, from $81.6 billion at an average cost of 0.03% in the first quarter of 2022. The rate paid on total deposits and interest-bearing liabilities was 1.17%, compared with 0.06%, reflecting the higher interest rate environment and increased short-term borrowings. Average noninterest-bearing deposits as a percentage of total deposits were 49%, compared with 50% during the same prior year period.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Average AFS securities balances decreased $13.3 billion, or 53%, to $11.9 billion. During the fourth quarter of 2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of mortgage-backed AFS securities to the held-to-maturity (“HTM”) category to reflect our intent for these securities.

Average borrowed funds, consisting primarily of secured borrowings, increased $11.8 billion from the prior year quarter in response to declines in total deposits and loan growth.

For more information on our investments securities portfolio and borrowed funds and how we manage liquidity risk, refer to the “Investment Securities Portfolio” section on page 15 and the “Liquidity Risk Management” section on page 31. For further discussion of the effects of market rates on net interest income and how we manage interest rate risk, refer to the “Interest Rate and Market Risk Management” section on page 28.

The following schedule summarizes the average balances, the amount of interest earned or paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES


(Unaudited)	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
(Dollar amounts in millions)	Average balance		Amount of interest		Average yield/rate 1		Average balance		Amount of interest 1		Average yield/rate 1
ASSETS
Money market investments:
Interest-bearing deposits	$	2,724	$	31	4.72	%	$	6,735	$	3	0.19	%
Federal funds sold and securities purchased under agreements to resell	2,081		26		5.02		2,300		3		0.52
Total money market investments	4,805		57		4.85		9,035		6		0.27
Securities:
Held-to-maturity	11,024		62		2.28		438		3		3.12
Available-for-sale 2	11,824		76		2.62		25,246		106		1.71
Trading	21		—		4.01		384		5		4.76
Total securities 3	22,869		138		2.46		26,068		114		1.78
Loans held for sale	5		—		0.26		57		—		1.92
Loans and leases 4
Commercial	30,678		381		5.03		28,496		260		3.70
Commercial real estate	12,876		209		6.59		12,171		101		3.37
Consumer	12,599		144		4.62		10,266		82		3.23
Total loans and leases	56,153		734		5.30		50,933		443		3.52
Total interest-earning assets	83,832		929		4.49		86,093		563		2.65
Cash and due from banks	543						625
Allowance for credit losses on loans and debt securities	(576)						(515)
Goodwill and intangibles	1,064						1,015
Other assets	5,624						4,211
Total assets	$	90,487					$	91,429
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market	$	32,859	$	62	0.77	%	$	39,132	$	5	0.05	%
Time	2,934		20		2.68		1,587		1		0.26

Total interest-bearing deposits	35,793		82		0.92		40,719		6		0.06
Borrowed funds:
Federal funds and security repurchase agreements	5,614		64		4.65		585		—		0.08
Other short-term borrowings	6,952		84		4.89		9		—		—
Long-term debt	653		11		6.85		823		5		2.66
Total borrowed funds	13,219		159		4.88		1,417		5		1.58
Total interest-bearing liabilities	49,012		241		1.99		42,136		11		0.11
Noninterest-bearing demand deposits	34,363						40,886
Other liabilities	2,058						1,267
Total liabilities	85,433						84,289
Shareholders’ equity:
Preferred equity	440						440
Common equity	4,614						6,700
Total shareholders’ equity	5,054						7,140
Total liabilities and shareholders’ equity	$	90,487					$	91,429
Spread on average interest-bearing funds					2.50	%					2.54	%
Net impact of noninterest-bearing sources of funds					0.83	%					0.06	%
Net interest margin			$	688	3.33	%			$	552	2.60	%
Memo: total cost of deposits					0.47	%					0.03	%
Memo: total deposits and interest-bearing liabilities	83,375		241		1.17	%	83,022		11		0.06	%

1 Rates are calculated using amounts in thousands and a tax rate of 21% for the periods presented.

2 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Provision for Credit Losses

The allowance for credit losses (“ACL”) is the combination of both the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents the estimated current expected credit losses related to the loan and lease portfolio as of the balance sheet date. The RULC represents the estimated reserve for current expected credit losses associated with off-balance sheet commitments. Changes in the ALLL and RULC, net of charge-offs and recoveries, are recorded as the provision for loan and lease losses and the provision for unfunded lending commitments, respectively, in the income statement. The ACL for debt securities is estimated separately from loans and is recorded in investment securities on the consolidated balance sheet.

The provision for credit losses, which is the combination of both the provision for loan and lease losses and the provision for unfunded lending commitments, was $45 million, compared with $(33) million in the first quarter of 2022. The ACL was $678 million at March 31, 2023, compared with $514 million at March 31, 2022. The increase in the ACL was primarily due to deterioration in economic forecasts and growth in the loan portfolio. The ratio of ACL to net loans and leases was 1.20% and 1.00% at March 31, 2023 and 2022, respectively. The provision for securities losses was less than $1 million during the first quarter of 2023 and 2022.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

The bar chart above illustrates the broad categories of change in the ACL from the prior year period. The second bar represents changes in economic forecasts and current economic conditions, which increased the ACL by $114 million from the prior year quarter.

The third bar represents changes in credit quality factors and includes risk-grade migration and specific reserves against loans, which, when combined, increased the ACL by $6 million, reflecting relatively stable credit quality. Nonperforming assets decreased $79 million, or 31%, and classified loans decreased $236 million, or 21%. We had zero net loan and lease charge-offs, or 0.00% annualized of average loans, compared with net charge-offs of $6 million, or 0.05% annualized of average loans in the prior year quarter.

The fourth bar represents loan portfolio changes, driven primarily by loan growth, as well as changes in portfolio mix, the aging of the portfolio, and other risk factors; all of which resulted in a $44 million increase in the ACL.

See “Credit Risk Management” on page 20 and Note 6 in our 2022 Form 10-K for more information on how we determine the appropriate level of the ALLL and the RULC.

Noninterest Income

Noninterest income represents revenue we earn from products and services that generally have no associated interest rate or yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives.

Total noninterest income increased $18 million, or 13%, relative to the prior year. Noninterest income accounted for approximately 19% and 21% of our net revenue during the first quarter of 2023 and 2022, respectively. The following schedule presents a comparison of the major components of noninterest income.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

NONINTEREST INCOME


	Three Months Ended March 31,				Amount change		Percent change
(Dollar amounts in millions)	2023		2022

Commercial account fees	$	43	$	41	$	2	5	%
Card fees	24		25		(1)		(4)
Retail and business banking fees	16		20		(4)		(20)
Loan-related fees and income	21		22		(1)		(5)
Capital markets fees	17		15		2		13
Wealth management fees	15		14		1		7
Other customer-related fees	15		14		1		7
Customer-related noninterest income	151		151		—		—

Fair value and nonhedge derivative income	(3)		6		(9)		NM
Dividends and other income (loss)	11		2		9		NM
Securities gains (losses), net	1		(17)		18		NM
Noncustomer-related noninterest income	9		(9)		18		NM
Total noninterest income	$	160	$	142	$	18	13	%

Customer-related Noninterest Income

Total customer-related noninterest income remained stable at $151 million, compared with the prior year period. Increases in commercial treasury management, foreign exchange, and capital markets syndication fees were offset by a decrease in retail and business banking fees largely as a result of a change in our overdraft and non-sufficient funds practices effected during the third quarter of 2022.

Noncustomer-related Noninterest Income

Total noncustomer-related noninterest income increased $18 million from the prior year quarter. Net securities gains and losses increased $18 million, due largely to negative mark-to-market adjustments recorded during the prior year period related to our SBIC investment portfolio. Dividends and other income increased $9 million, primarily due to an increase in dividends on Federal Home Loan Bank (“FHLB”) stock. These increases were offset by a $9 million decrease in fair value and nonhedge derivative income, primarily due to a $3 million loss during the quarter related to a credit valuation adjustment (“CVA”) on client-related interest rate swaps, compared with a $6 million CVA gain in the prior year period.

Noninterest Expense

The following schedule presents a comparison of the major components of noninterest expense.

NONINTEREST EXPENSE


	Three Months Ended March 31,				Amount change		Percent change
(Dollar amounts in millions)	2023		2022

Salaries and employee benefits	$	339	$	312	$	27	9	%
Technology, telecom, and information processing	55		52		3		6
Occupancy and equipment, net	40		38		2		5
Professional and legal services	13		14		(1)		(7)
Marketing and business development	12		8		4		50
Deposit insurance and regulatory expense	18		10		8		80
Credit-related expense	6		7		(1)		(14)
Other real estate expense, net	—		1		(1)		NM
Other	29		22		7		32
Total noninterest expense	$	512	$	464	$	48	10	%
Adjusted noninterest expense 1	$	509	$	464	$	45	10	%

1 For information on non-GAAP financial measures, see “Non-GAAP Financial Measures” on page 36.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Total noninterest expense increased $48 million, or 10%, relative to the prior year quarter. Salaries and benefits expense increased $27 million, or 9%, due to the ongoing impact of inflationary and competitive labor market pressures on wages and benefits, increased headcount, a decline in deferred salaries, and an additional business day during the current quarter.

Deposit insurance and regulatory expense increased $8 million, driven largely by an increased base rate beginning in 2023 and a higher FDIC insurance assessment resulting from changes in balance sheet composition. Other noninterest expense increased $7 million, primarily due to increased travel, intangible amortization, and other expenses incurred during the current quarter.

The efficiency ratio was 59.9%, compared with 65.8%, as growth in adjusted taxable-equivalent revenue significantly outpaced growth in adjusted noninterest expense. For information on non-GAAP financial measures, including differences between noninterest expense and adjusted noninterest expense, see page 36.

Technology Spend

Technology spend represents expenditures associated with technology-related investments, operations, systems, and infrastructure, and includes current period expenses reported on our consolidated statement of income, and capitalized investments, net of related amortization and depreciation, reported on our consolidated balance sheet. Technology spend is reported as a combination of the following:

•Technology, telecom, and information processing expense — includes expenses related to application software licensing and maintenance, related amortization, telecommunications, and data processing;

•Other technology-related expense — includes related noncapitalized salaries and employee benefits, occupancy and equipment, and professional and legal services; and

•Technology investments — includes capitalized technology infrastructure equipment, hardware, and purchased or internally developed software, less related amortization or depreciation.

The following schedule provides information related to our technology spend:

TECHNOLOGY SPEND


	Three Months Ended March 31,
(In millions)	2023		2022

Technology, telecom, and information processing expense	$	55	$	52
Other technology-related expense	54		49
Technology investments	26		22
Less: related amortization and depreciation	(14)		(14)
Total technology spend	$	121	$	109

Total technology spend increased $12 million relative to the prior year quarter, largely due to technology-related compensation and investments in application resiliency.

Income Taxes

The following schedule summarizes the income tax expense and effective tax rates for the periods presented:

INCOME TAXES


	Three Months Ended March 31,
(Dollar amounts in millions)	2023			2022

Income before income taxes	$	282		$	255
Income tax expense	78			52
Effective tax rate	27.7		%	20.4		%

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

The effective tax rate was 27.7% at March 31, 2023, compared with 20.4% at March 31, 2022, primarily as a result of a discrete item that affected the reserve for uncertain tax positions during the current quarter. See Note 12 of the Notes to Consolidated Financial Statements for more information about the factors that influenced the income tax rates as well as information about deferred income tax assets and liabilities, and valuation allowances.

Preferred Stock Dividends

Preferred stock dividends totaled $6 million and $8 million for the first quarter of 2023 and 2022, respectively.

BALANCE SHEET ANALYSIS

Interest-Earning Assets

Interest-earning assets are assets that have associated interest rates or yields, and generally consist of money market investments, securities, loans, and leases. We strive to maintain a high level of interest-earning assets relative to total assets. For more information regarding the average balances, associated revenue generated, and the respective yields of our interest-earning assets, see the Consolidated Average Balance Sheet on page 10.

Investment Securities Portfolio

We invest in securities to actively manage liquidity and interest rate risk and to generate interest income. We primarily own securities that can readily provide us cash and liquidity through secured borrowing agreements without the need to sell the securities. We also manage the duration extension risk of our investment securities portfolio. At March 31, 2023, the estimated duration of our securities portfolio remained unchanged at 4.1 years, compared with December 31, 2022. This duration helps to manage the inherent interest rate mismatch between loans and deposits, as fixed-rate term investments facilitate the balancing of asset and liability durations, as well as protect the expected economic value of shareholders' equity.

For information about our borrowing capacity associated with the investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 31. See also Note 3 and Note 5 of the Notes to Consolidated Financial Statements for more information on fair value measurements and the accounting for our investment securities portfolio.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

The following schedule presents the components of our investment securities portfolio.

INVESTMENT SECURITIES PORTFOLIO


	March 31, 2023						December 31, 2022
(In millions)	Par Value		Amortized cost		Fair value		Par Value		Amortized cost		Fair value
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	98	$	98	$	92	$	100	$	100	$	93
Agency guaranteed mortgage-backed securities 1	12,707		10,471		10,750		12,921		10,621		10,772
Municipal securities	392		392		368		404		405		374
Total held-to-maturity	13,197		10,961		11,210		13,425		11,126		11,239
Available-for-sale
U.S. Treasury securities	655

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONP] Filings
ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZION] Filings
ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONL] Filings
ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONO] Filings
10-Q	[2023-05-05]
10-K	[2023-02-23]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-25]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-06]
10-K	[2020-02-26]
10-Q	[2019-11-05]
10-Q	[2019-08-06]
10-Q	[2019-05-08]
10-K	[2019-02-26]
10-Q	[2018-11-07]
10-Q	[2018-08-08]
10-Q	[2018-05-09]
10-K	[2018-03-01]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-08]
10-K	[2017-02-28]
10-Q	[2016-11-07]
10-Q	[2016-08-05]
10-Q	[2016-05-09]
10-K	[2016-02-29]
10-Q	[2015-11-06]
10-Q	[2015-08-06]
10-Q	[2015-05-07]
10-K	[2015-02-27]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-03-03]
10-Q	[2013-11-07]
10-Q	[2013-08-06]
10-Q	[2013-05-09]
10-K	[2013-02-28]
10-Q	[2012-11-08]
10-Q	[2012-08-08]
10-Q	[2012-05-10]
10-K	[2012-02-29]

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONP] Filings

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZION] Filings

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONL] Filings

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ [ZIONO] Filings