Zions Bancorporation, N.A. (NASDAQ:ZION) is a leading financial services company that has been serving communities in the Western and Southwestern United States for over a century. With a focus on commercial banking, Zions has built a reputation for its dedication to its customers, commitment to the local markets it serves, and prudent risk management.
Business Overview Zions Bancorporation was founded in 1873 in Salt Lake City, Utah, initially operating as the commercial banking arm of The Church of Jesus Christ of Latter-day Saints. Over its 150-year history, the company has grown to become one of the largest regional banks in the western United States. In its early years, Zions focused on serving the local community in Utah, providing basic commercial banking services such as deposits, loans, and cash management. As Utah's economy grew, the bank expanded its branch network and lending capabilities to support the development of key industries like mining, agriculture, and manufacturing.
Throughout its history, Zions has demonstrated resilience in the face of economic challenges. The bank weathered several downturns in the late 19th and early 20th centuries, including the Great Depression, by maintaining a conservative lending approach and diversifying its revenue streams. This prudent risk management allowed Zions to emerge from these challenges in a strong financial position.
In the 1980s and 1990s, Zions embarked on a period of strategic acquisitions, expanding its footprint beyond Utah into other western states. This geographic diversification helped mitigate regional economic risks and positioned the bank for continued growth. Key acquisitions during this time included Amegy Bank in Texas, National Bank of Arizona, and Vectra Bank Colorado.
During the 2008 financial crisis, Zions navigated the turbulent environment without requiring government assistance, focusing on maintaining strong asset quality, raising capital, and streamlining operations. This demonstrated the effectiveness of Zions' risk management practices and commitment to long-term stability.
Today, Zions operates through seven separately managed bank divisions, each with its own local branding and management team, including Zions Bank, California Bank & Trust, Amegy Bank, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington. The company's core business activities revolve around commercial banking, providing a wide range of lending products, deposit services, treasury management, and wealth management solutions to its customers, which are primarily small- and medium-sized businesses. Zions has also built a robust capital markets division, offering clients risk management and strategic advisory services.
Throughout its history, Zions has remained dedicated to serving the communities in which it operates, supporting local businesses and nonprofit organizations through lending, philanthropic efforts, and employee volunteerism. This community-focused approach has been a hallmark of the bank's culture and has contributed to its enduring success over the past century and a half.
Financial Performance In its latest financial reporting, Zions Bancorporation demonstrated its resilience and adaptability. For the fiscal year ended December 31, 2023, the company reported net income of $680 million, with diluted earnings per share of $4.35. While this represents a decline compared to the previous year's net income of $907 million and diluted EPS of $5.79, the company's performance must be viewed in the context of the challenging macroeconomic environment, marked by rising interest rates and heightened economic uncertainty.
Zions' net interest income for 2023 stood at $2.44 billion, a testament to the company's ability to navigate the interest rate landscape. The net interest margin, a key metric for banks, remained relatively stable at 3.06%, reflecting Zions' prudent asset-liability management strategies.
The company's balance sheet remained strong, with a Common Equity Tier 1 (CET1) ratio of 10.3% as of December 31, 2023, well above the regulatory minimum, and a tangible common equity ratio of 4.9%. These robust capital levels have enabled Zions to continue supporting its customers and communities while withstanding potential economic headwinds.
For the fiscal year 2023, Zions reported revenue of $3.12 billion, net income of $680 million, operating cash flow (OCF) of $885 million, and free cash flow (FCF) of $772 million. The most recent quarter (Q3 2024) showed improved performance with revenue of $1.279 billion, net income of $214 million, OCF of $1.043 billion, and FCF of $1.091 billion. The increase in revenue, net income, OCF, and FCF compared to the prior year quarter was due to higher net interest income, customer-related noninterest income, and lower provision for credit losses.
Liquidity and Risk Management Zions Bancorporation has a demonstrated track record of prudent risk management, which has been a hallmark of the company's operations. The bank's investment portfolio is primarily composed of high-quality, liquid securities, with a focus on U.S. Treasuries, agency securities, and municipal bonds. This strategy has allowed Zions to maintain a strong liquidity position, with a ratio of available liquidity to uninsured deposits standing at 122% as of December 31, 2023.
The company's credit quality metrics have also remained relatively stable, with a ratio of nonperforming assets to total loans and leases of 0.39% as of the end of 2023. Zions' allowance for credit losses, which stood at 1.26% of total loans and leases, provides a solid buffer against potential asset quality deterioration.
As of September 30, 2024, Zions reported a debt-to-equity ratio of 0.36, cash holdings of $1.11 billion, and a total borrowing capacity of $43.3 billion, with $40.7 billion in remaining capacity across various funding programs. The current ratio and quick ratio both stood at 0.73, indicating the bank's ability to meet short-term obligations.
Technological Innovation and Customer Focus Zions Bancorporation has been at the forefront of technological innovation in the banking industry, investing in modern core banking systems, digital banking platforms, and advanced data analytics capabilities. These initiatives have enabled the company to enhance the customer experience, streamline operations, and improve efficiency.
The company's commitment to its customers is evident in its focus on tailored solutions and personalized service. Zions has established strong relationships with the small and medium-sized businesses in its local markets, leveraging its deep understanding of their unique needs to provide comprehensive financial services.
Product Segments and Market Position Zions Bancorporation operates through several key product segments:
Commercial Lending: As of September 30, 2024, the commercial loan portfolio totaled $30.79 billion, representing 52.3% of the total loan and lease portfolio. This segment includes commercial and industrial loans, leasing, owner-occupied commercial real estate, and municipal loans.
Commercial Real Estate (CRE) Lending: The CRE loan portfolio stood at $13.48 billion, or 22.9% of the total loan and lease portfolio. This includes construction and land development loans as well as term CRE loans.
Consumer Lending: The consumer loan portfolio totaled $14.62 billion, accounting for 24.8% of the total loan and lease portfolio. This segment offers products such as home equity credit lines, residential mortgages, and other consumer loans.
Deposits: As of September 30, 2024, total deposits were $75.72 billion, consisting of $24.97 billion in noninterest-bearing demand deposits, $39.24 billion in interest-bearing savings and money market deposits, and $11.50 billion in time deposits.
Zions Bancorporation primarily operates within the Western and Southwestern United States, with banking divisions in Utah, Idaho, Wyoming, California, Texas, Arizona, Nevada, Colorado, and Washington/Oregon.
Outlook and Risks Looking ahead, Zions Bancorporation faces a range of both opportunities and challenges. The company's diversified geographic footprint, coupled with its emphasis on commercial banking, positions it well to capitalize on the expected growth in its Western and Southwestern markets. However, the company must also navigate the evolving regulatory landscape, ongoing competition from both traditional and fintech players, and the potential for continued economic volatility.
Zions' management has demonstrated a prudent approach to risk management, and the company's strong capital and liquidity positions provide a solid foundation to weather any potential storms. The successful execution of its technology initiatives and its continued focus on customer service will be critical factors in Zions' ability to maintain its competitive edge and drive sustainable growth in the years to come.
Based on recent guidance, Zions expects positive operating leverage and improved efficiency as revenue growth outpaces funding and expense pressures. For the third quarter of 2025 compared to the third quarter of 2024, the bank anticipates slightly to moderately increasing net interest income, slightly increasing adjusted non-interest expense, stable to slightly increasing loans, and moderately increasing customer-related non-interest income. The bank's interest rate sensitivity analysis suggests that modeled net interest income in Q3 2025 is expected to be 1.4% higher compared to Q3 2024 based on the forward rate curve as of September 30th.
Conclusion Zions Bancorporation, N.A. has established itself as a respected and reliable financial institution in the Western and Southwestern United States. The company's long history, prudent risk management practices, and commitment to technological innovation and customer service have enabled it to navigate challenging economic environments and position itself for long-term success. As Zions continues to evolve and adapt to the changing financial landscape, investors and customers can take comfort in the company's proven track record and its unwavering dedication to the communities it serves.