Zions Bancorporation, National Association Q2 FY2025 earnings call

• Harris highlighted net earnings improvement, with core earnings driven by 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 the first 9 months of 2025 fiscal year. Launched consumer gold account in Nevada with 78% sales increase vs predecessor and average balances around $30,000.
• Ryan discussed net interest income increase of $51 million YoY and $24 million QoQ, net interest margin expansion to 3.17%, noninterest income growth, adjusted expense trends, average loans and deposits trends, credit quality with low net charge-offs and classified loan balances declining, and investment portfolio details.

Net earnings for the second quarter were $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 an improved earning asset mix. Customer related noninterest income was $164 million for the quarter, an increase of 4% on a linked quarter basis and 7% versus the year ago quarter. Adjusted noninterest expense decreased by $12 million versus the prior year to $521 million, with expectations of moderately increasing adjusted noninterest expense for the future.

• Net interest income outlook for Q2 2026 is moderately increasing relative to Q2 2025, supported by earnings asset remix, loan and deposit growth, and fixed rate asset repricing. Incorporates two 25 basis point Fed fund cuts in H2 2025 and an additional 25 basis point cut in April 2026.
• Customer-related fee income outlook for Q2 2026 is moderately increasing, broad-based, driven by increased customer activity, new client acquisitions, and capital markets contribution.
• Adjusted noninterest expense outlook for Q2 2026 is moderately increasing, reflecting positive operating leverage, increased marketing costs, investments in revenue-generating businesses, and technology cost pressure.
• Period-end loan balances outlook for Q2 2026 is slightly increasing, led by commercial loans, with upside potential depending on trade policy negotiations.

• Economic slowing remains a factor. Tariff-related risks noted in prior call have abated somewhat but uncertainty remains. Intense deposit competition. Impact of regulatory changes, including potential easing of framework and its effect on the bank, such as Basel III Endgame and long-term debt requirements.

Q: Outlook for deposits and balance sheet sensitivity?

A: Harris said too soon to know if Q3 will be growth quarter, working hard on deposit front. R. Ryan discussed balance sheet sensitivity, managing asset sensitivity with hedges and considering Fed's dovish stance impact.

Q: Capital markets business outlook and buybacks?

A: Scott said capital markets business growing nicely, aiming to double in size, with contributors like loan syndications, real estate capital markets, M&A advisory, commodity risk management. Harris said not yet comfortable with resuming buybacks due to AOCI and nominal CET1 ratio considerations.

Q: Deposit growth and stablecoins impact?

A: Harris said deposit growth not yet big driver, working on deposit side. On stablecoins, sees potential in tokenized deposits for programmable payments, but stablecoin's advantage unclear relative to tokenized deposits.

Q: Loan growth capacity and organic growth?

A: R. Ryan said not capital constrained for organic growth, having growth orientation with marketing dollars and revenue producers. Scott mentioned intensified calling programs with branch and commercial bankers.

Q: CRE construction and term loan activity, and repricing momentum?

A: Derek said C&D construction loans moving into term loan bucket as they reach certificate of occupancy. R. Ryan explained repricing momentum allowing for continued NIM growth even with Fed rate cuts, showing latent growth potential in sensitivity analysis