Zions Bancorporation, N.A. (NASDAQ:ZION) is one of the nation's premier financial services companies, with a rich history spanning over a century. Headquartered in Salt Lake City, Utah, the bank operates through seven separately managed and geographically defined affiliate banks, each with its own local branding and management team. This unique approach has allowed Zions to maintain a strong community-focused presence while delivering a comprehensive suite of banking products and services to its customers across 11 Western and Southwestern states.
Business Overview: Navigating Growth and Resilience
Zions Bancorporation's origins date back to 1873, when it was founded as Zions Savings Bank and Trust Company in Salt Lake City. Over the decades, the bank has grown through a series of strategic mergers and acquisitions, expanding its operations throughout Utah in the early 1900s and establishing additional branch locations. This growth continued through the mid-20th century as Zions acquired several other banks and trust companies, becoming a major regional banking force by the 1980s with operations in Utah, Idaho, and Wyoming.
The 1990s and 2000s marked a period of significant expansion for Zions, as the company made strategic acquisitions to broaden its geographic footprint. Notable acquisitions included Amegy Bank in Texas in 2005 and California Bank & Trust in 2008, which significantly increased Zions' presence in the southwestern United States. These moves solidified Zions' position as a key player in the Western banking landscape.
Like many financial institutions, Zions faced challenges during the 2008-2009 financial crisis, grappling with rising loan defaults and market turmoil. In response, the company focused on strengthening its balance sheet, diversifying its loan portfolio, and improving its capital position. These efforts have contributed to Zions' resilience and ability to navigate subsequent economic challenges.
Today, Zions Bancorporation operates 404 branches across 11 western states, serving over 1 million customers. The bank's diversified business model encompasses a range of offerings, including commercial and small business banking, capital markets and investment banking, commercial real estate lending, retail banking, and wealth management. This breadth of services has enabled Zions to establish a strong foothold in its target markets, catering to the needs of businesses and individuals alike.
Financial Performance: Weathering Challenges, Driving Growth
Zions Bancorporation has demonstrated resilience in the face of economic headwinds, delivering solid financial results in recent years. For the full year 2024, the bank reported net earnings of $784 million, or $4.95 per diluted common share, compared to $680 million, or $4.35 per diluted common share, in the prior year. This strong performance was driven by a combination of higher net interest income, increased non-interest income, and disciplined expense management.
The bank's net interest margin (NIM) expanded for the fourth consecutive quarter, reaching 3.05% in the fourth quarter of 2024, compared to 3.03% in the prior quarter and 2.91% in the year-ago quarter. This improvement was primarily attributed to the downward repricing of interest-bearing liabilities, which outpaced the pressure on asset yields.
Zions also reported robust customer-related non-interest income, which grew 7.5% on a linked-quarter basis and 15% year-over-year, driven by strong performance in its capital markets business. The bank's focus on diversifying its revenue streams has proven effective, as it continues to capitalize on expanding product capabilities and strategic investments in this area.
Navigating a Challenging Credit Environment
While Zions has maintained a generally strong credit profile, the bank has not been immune to the challenges faced by the broader banking industry. In the fourth quarter of 2024, the bank reported a provision for credit losses of $41 million, which had a negative impact of $0.21 per share on earnings. This increase was primarily attributable to a single commercial and industrial credit, as well as broader concerns in the commercial real estate (CRE) portfolio.
The bank's CRE exposure, which represented 23% of its total loan portfolio as of December 31, 2024, has been a focal point. Zions reported a $777 million increase in classified loans during the quarter, with the majority of the increase stemming from the multifamily, industrial, and office CRE sub-portfolios. This trend reflects the impact of construction delays, slower lease-up performance, and elevated costs, exacerbated by rising interest rates.
However, Zions' management remains cautiously optimistic about the CRE portfolio's performance, citing relatively low loan-to-value ratios, continued sponsor support, and the bank's disciplined underwriting practices. The bank's loss-absorbing capital levels, as evidenced by a Common Equity Tier 1 ratio of 10.9% as of the end of 2024, provide a solid buffer against potential credit challenges.
Navigating the Regulatory Landscape and Technological Advancements
Zions Bancorporation has demonstrated its ability to adapt to the evolving regulatory environment. The bank has made significant investments in building out its risk management infrastructure and internal controls, positioning it to navigate the potential implications of regulatory changes, such as the proposed Basel III "Endgame" rules.
Moreover, Zions has been proactive in embracing technological advancements to enhance its operational efficiency and customer experience. In 2024, the bank successfully completed the final phase of a multi-year project to replace its core loan and deposit banking systems, enabling it to deliver improved experiences to its customers and achieve incremental operational efficiencies.
Financials
Zions Bancorporation's financial performance has been solid, with the bank reporting net earnings of $784 million for the full year 2024. The bank's net interest margin expanded to 3.05% in the fourth quarter of 2024, demonstrating its ability to manage interest rate pressures effectively. Customer-related non-interest income grew by 15% year-over-year, reflecting the bank's success in diversifying its revenue streams.
For the full year 2024, Zions reported net revenue of $3.13 billion, a modest increase from $3.12 billion in 2023. Net interest income, which represented 78% of net revenue in both 2024 and 2023, remained relatively flat year-over-year, as higher yields on interest-earning assets were offset by increased funding costs. Noninterest income increased 3% to $700 million in 2024, driven by growth in capital markets fees, commercial account fees, and net securities gains, partially offset by declines in loan-related fees and card fees.
In the fourth quarter of 2024, Zions reported revenue of $1.062 billion and net income of $216 million. The bank's provision for credit losses decreased from $132 million in 2023 to $72 million in 2024, as the allowance for credit losses (ACL) was adjusted to reflect changes in economic forecasts and portfolio-specific risks. Net charge-offs increased from $36 million in 2023 to $60 million in 2024, primarily due to a single commercial and industrial loan. The ACL to total loans and leases ratio was 1.25% at the end of 2024, compared to 1.26% at the end of 2023.
Zions continued to maintain a strong capital position, with a common equity tier 1 capital ratio of 10.90% and a total risk-based capital ratio of 13.30% at the end of 2024, both exceeding regulatory well-capitalized minimums. The company also returned capital to shareholders through $248 million in common dividends and $36 million in common stock repurchases during the year.
Liquidity
Zions Bancorporation maintains a strong liquidity position, supported by its diverse funding sources and robust capital levels. The bank's Common Equity Tier 1 ratio of 10.9% as of the end of 2024 provides a solid buffer against potential credit challenges and regulatory requirements. This strong capital position also enables Zions to pursue growth opportunities and navigate economic uncertainties.
As of December 31, 2024, Zions had $3.5 billion in cash and cash equivalents. The bank also reported $12 billion in remaining FHLB and FRB collateralized borrowing capacity, further strengthening its liquidity position.
Looking Ahead: Resilience, Growth, and Shareholder Value
As Zions Bancorporation looks to the future, the bank remains focused on driving sustainable growth, improving profitability, and enhancing shareholder value. The bank's 2025 financial outlook, as presented in its fourth-quarter 2024 earnings release, reflects its confidence in its ability to navigate the dynamic banking landscape.
Zions expects to see continued positive operating leverage, with revenue growth outpacing funding and expense pressures. The bank's guidance for 2025 includes a moderately increasing outlook for net interest income and customer-related fee income, as well as a slightly to moderately increasing outlook for adjusted non-interest expense. Loans are expected to be slightly increasing relative to full year 2024, with growth led by commercial loans.
Furthermore, Zions' solid capital position and disciplined approach to risk management position the bank well to capitalize on potential growth opportunities, both organically and through strategic acquisitions, should they arise and align with the bank's long-term objectives.
The bank's past performance has been strong, with adjusted pre-provision net revenue increasing 19% in Q4 2024 compared to the prior year quarter. The efficiency ratio improved to 62% in Q4 2024, demonstrating the bank's commitment to operational efficiency. Looking ahead, Zions expects modeled net interest income in Q4 2025 to be 6.8% higher when compared to Q4 2024, assuming the Fed funds target reaches 4.25%.
Conclusion
Zions Bancorporation has demonstrated its ability to navigate the complexities of the banking industry, weathering economic challenges and regulatory changes while consistently delivering value to its shareholders. With its diversified business model, focus on technological innovation, and commitment to prudent risk management, Zions is well-positioned to continue its trajectory of growth and resilience in the years to come.
The bank's strong performance across its various business segments, including Commercial and Small Business Banking, Capital Markets and Investment Banking, Commercial Real Estate Lending, Retail Banking, and Wealth Management, underscores its ability to meet the diverse needs of its customers. As Zions continues to leverage its strengths and adapt to evolving market conditions, it remains a compelling investment opportunity for those seeking exposure to the dynamic Western U.S. banking sector.