Zions Bancorporation, National Association Q2 FY2025 earnings call

• Net earnings of $243 million reflect 28% improvement over prior year, with momentum in core earnings including net interest margin expansion, customer fee growth, and well-managed expenses.
• Focus on growing customers and relationships, especially small business banking, with SBA 7(a) program deals up 91% in first 9 months of 2025 fiscal year relative to same period last year.
• Rollout of consumer gold account offering in Nevada market, with 78% increase in sales versus predecessor product and average balances around $30,000.
• Efficiency ratio improved to 62.2%, net loan losses were $10 million or 7 basis points annualized, nonperforming assets remained low at 0.51% of loans and other real estate owned.
• Adjusted noninterest expense decreased by $12 million versus prior year to $521 million, with expectations of positive operating leverage.

Zions Bancorp reported second quarter net earnings of $243 million, a 28% improvement over the prior year. The net interest margin continued to increase for the sixth consecutive quarter to 3.17% due to lower funding costs and improved earning asset mix. Customer related noninterest income was $164 million for the quarter, an increase of 7% versus the year ago quarter. Average loans experienced modest growth of 5.6% annualized linked quarter basis and 3.7% year-over-year. Average customer deposits in the second quarter were up 0.5% relative to last year's number and down 1.4% annualized on a linked quarter basis. Noninterest-bearing deposits reflect continued stability at 34% of total deposits.

• Net interest income for second quarter of 2026 is moderately increasing relative to second quarter of 2025, supported by continued earning asset remix, growth in loans and deposits, and fixed rate asset repricing, with guidance incorporating two 25 basis point Fed fund cuts in second half of 2025 and an additional 25 basis point cut in April 2026.
• Customer-related fee income for second quarter of 2026 is moderately increasing relative to second quarter of 2025, broad-based and driven by increased customer activity and new client acquisitions.
• Adjusted noninterest expense for second quarter of 2026 is moderately increasing relative to second quarter of 2025, reflecting expectations of positive operating leverage, including increased marketing-related costs and investments in revenue-generating businesses.
• Period-end loan balances for second quarter of 2026 are slightly increasing relative to second quarter of 2025, led by commercial loans, with potential upside depending on trade policy negotiations.

• Economic slowing is still a factor, although tariff-related risks noted in first quarter call have abated somewhat.
• Competitive deposit market, with challenge of balancing margin protection and maintaining deposit base.
• Impact of regulatory changes, including uncertainty around Basel III Endgame and potential effects on capital requirements and M&A opportunities.

Q: What are you hearing from clients in the small business and middle market side?

A: Harris Simmons noted that while some businesses are hurt by tariffs, others see opportunity, and the economy is weathering better than anticipated.

Q: Are you seeing elevated competition on the deposit side?

A: Harris Simmons said it's a competitive deposit market, focusing on total funding cost and working hard on deposits, including a consumer deposit effort.

Q: Any color on loan growth increase and where to continue?

A: Derek Steward and Ryan Richards mentioned loan growth from commercial and industrial, CRE, and consumer, with growth seen in Zions market, California Bank and Trust, Amegy.

Q: Thoughts on deregulation and M&A?

A: Harris Simmons noted tiering as encouraging, and referenced shareholder letter on M&A, focusing on strategic organic growth.

Q: Degree of positive operating leverage?

A: Ryan Richards and Scott McLean discussed positive operating leverage from revenue momentum, expense control through continuous improvement like AI use, and investment in revenue producers.

Q: M&A and core system integration?

A: Scott McLean discussed benefits of new core system in integrating the Coachella Valley deal and using AI-enabled system.

Q: Interplay of repricing tailwinds and funding dynamics on NIM?

A: R. Ryan Richards discussed factors like fixed asset repricing lag, cash flow hedges, and remix of earning assets.

Q: Details on gold account and expansion?

A: Harris Simmons and Scott McLean discussed features like unlimited ATM, safe deposit box access, discounts, and plan to roll out across enterprise.

Q: Brokerage deposits and loan side yields?

A: R. Ryan Richards and Matt Tyler discussed working down broker deposits and loan side yields influenced by repricing and funding sources.

Q: Balance sheet sensitivity and Fed stance?

A: R. Ryan Richards and Matt Tyler discussed managing balance sheet sensitivity and potential impact of dovish Fed stance.

Q: Outlook for capital markets business and buybacks?

A: Scott McLean discussed growth in capital markets business and Harris Simmons and R. Ryan Richards on conservatism regarding buybacks.

Q: Deposit growth outlook?

A: Harris Simmons said it's too soon to tell, but working hard on deposits.

Q: Stablecoins and digital assets impact?

A: Harris Simmons discussed stablecoins and tokenized deposits, seeing potential in programmable payments but uncertainty on immediate impact.

Q: Loan growth capacity and capital?

A: R. Ryan Richards and Scott McLean said not capital constrained, with growth orientation and intensified calling programs.