zions-20220930

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 September 30, 2022 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 October 31, 2022 149,617,754 shares

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	36

	Consolidated Balance Sheets	36
	Consolidated Statements of Income	37
	Consolidated Statements of Comprehensive Income (Loss)	38
	Consolidated Statements of Changes in Shareholders’ Equity	38
	Consolidated Statements of Cash Flows	40
	Notes to Consolidated Financial Statements	41

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	79

Item 4.	Controls and Procedures	80

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	80

Item 1A.	Risk Factors	80

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81

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

These 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 this list is not comprehensive, important factors that may cause material differences include changes in general industry and economic conditions, including inflation, economic slowdown or other economic disruption; securities and capital markets behavior, including volatility and changes in market liquidity; changes and uncertainties in legislation and fiscal, monetary, regulatory, trade, and tax policies; changes in interest and reference rates; the quality and composition of our loan and securities portfolios; 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 execute our strategic plans, manage our risks, and achieve our business objectives; our ability to develop and maintain information security systems and controls designed to guard against fraud, cyber, and privacy risks; the effects of the COVID-19 pandemic (including variants) and associated actions that may affect our business, employees, and communities; the effects of the ongoing conflict in Eastern Europe and other local, national, or international disasters, crises, or conflicts that may occur in the future; and governmental and social responses to environmental issues and climate change. These factors, risks, and uncertainties, among others, are discussed in our 2021 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”).

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 of the forward-looking statements included herein to reflect future events or developments.

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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 third quarter of 2022 reflected strong revenue growth, which was offset by increases in the provision for credit losses and noninterest expense. Diluted earnings per share (“EPS”) decreased to $1.40, compared with $1.45 in the third quarter of 2021.

Notwithstanding a $57 million decrease in interest income from Paycheck Protection Program (“PPP”) loans, net interest income increased $108 million, or 19%, to $663 million, primarily due to a higher interest rate environment and a favorable change in the composition of interest-earning assets. The net interest margin (“NIM”) was 3.24%, compared with 2.68%.

Nonperforming assets decreased $173 million, and classified loans decreased $432 million. Net loan and lease charge-offs were $27 million, or 0.21% of average loans (ex-PPP), compared with net recoveries of $1 million, or 0.01% of average loans (ex-PPP), in the prior year quarter. Despite improvements in most of our credit quality metrics, the provision for credit losses was $71 million, compared with a $(46) million provision in the prior year period, reflecting loan growth and changes in economic scenarios.

Total customer-related noninterest income increased $5 million, or 3%, driven by increases in capital markets and foreign exchange fees, commercial account fees, card fees, and wealth management fees, partially offset by decreases in loan-related fees and retail and business banking fees. Total noninterest income increased $26 million, or 19%, primarily due to unrealized losses recorded during the prior year period related to our Small Business Investment Company (“SBIC”) investment in Recursion Pharmaceuticals, Inc.

Total noninterest expense increased $50 million, or 12%. The increase was driven largely by a $27 million increase in salaries and benefits expense, which was impacted by inflationary and competitive labor market pressures on wages and benefits, increased headcount, and increased incentive compensation accruals arising from improvements in anticipated full-year profitability. Our efficiency ratio was 57.6%, compared with 59.8%, as growth in net revenue outpaced growth in noninterest expense.

Average interest-earning assets decreased $0.7 billion, or 1%, from the prior year quarter, driven by declines in average money market investments and PPP loans, the effects of which were largely offset by growth in average available-for-sale (“AFS”) investment securities and average loans and leases (ex-PPP).

Excluding PPP loans, total loans and leases increased $6.0 billion, or 13%. The increases were primarily in the commercial and industrial, owner-occupied, municipal, consumer 1-4 family residential mortgage, and home equity credit line (“HECL”) portfolios.

Total deposits decreased $1.9 billion, or 2%, primarily due to a $1.7 billion, or 4%, decrease mainly related to more rate-sensitive larger-balance deposits. Total deposits at September 30, 2022 included approximately $400 million of deposit balances acquired from the purchase of three Northern Nevada branches during the third quarter of 2022. Our loan-to-deposit ratio was 71%, compared with 65% in the prior year quarter, which continues to afford us flexibility in managing our funding costs.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Third Quarter 2022 Financial Performance

Net Earnings Applicable to Common Shareholders
(in millions)

Diluted EPS

Adjusted PPNR
(in millions)

Efficiency Ratio

Net earnings applicable to common shareholders decreased from the third quarter of 2021, primarily due to a $117 million unfavorable change in the provision for credit losses.

Diluted earnings per share declined from the third quarter of 2021 as a result of decreased net earnings, the effect of which was partially offset by a 10.7 million decrease in weighted average diluted shares, primarily due to share repurchases.

Adjusted pre-provision net revenue (“PPNR”) increased $61 million from the third quarter of 2021, primarily due to growth in adjusted net revenue, driven largely by an increase 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 revenue 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 September 30,						Amount change		Percent change
(Dollar amounts in millions)	2022			2021

Interest and fees on loans 1	$	551		$	484		$	67	14	%
Interest on money market investments	24			7			17		NM
Interest on securities	132			78			54		69
Total interest income	707			569			138		24
Interest on deposits	19			7			12		NM
Interest on short- and long-term borrowings	25			7			18		NM
Total interest expense	44			14			30		NM
Net interest income	$	663		$	555		$	108	19	%

Average interest-earning assets	$	82,474		$	83,189		$	(715)	(1)	%
Average interest-bearing liabilities	$	41,398		$	40,925		$	473	1	%
							bps
Yield on interest-earning assets 2	3.45		%	2.75		%	70
Rate paid on total deposits and interest-bearing liabilities 2	0.22		%	0.07		%	15
Cost of total deposits 2	0.10		%	0.03		%	7
Net interest margin 2	3.24		%	2.68		%	56

1 Includes interest income recoveries of $2 million and $1 million for the three months ended September 30, 2022, and 2021, respectively.

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 80% of our net revenue (net interest income plus noninterest income) for the quarter. Notwithstanding a $57 million decrease in interest income from PPP loans, net interest income increased $108 million, or 19%, primarily due to a higher interest rate environment and a favorable change in the composition of interest-earning assets.

Average interest-earning assets decreased $0.7 billion, or 1%, from the prior year quarter, driven by declines of $9.0 billion and $3.4 billion in average money market investments and average PPP loans, respectively. These decreases were largely offset by increases of $6.2 billion and $5.5 billion in average securities and average loans and leases (ex-PPP), respectively.

The NIM was 3.24%, compared with 2.68%. The yield on average interest-earning assets was 3.45% in the third quarter of 2022, an increase of 70 basis points (“bps”), reflecting a change in the mix of interest-earning assets from money market investments to securities and loans. The yield also benefited from a decrease in the market value of AFS securities due to rising interest rates. The average rate paid on interest-bearing liabilities increased to 0.43%, compared with 0.13%, reflecting the higher interest rate environment and increased short-term borrowings.

Total average loans and leases increased $2.1 billion, or 4%, to $53.0 billion, and were partially offset by decreases in PPP loans, primarily due to forgiveness of these loans by the Small Business Administration (“SBA”). The yield on total loans increased 35 basis points to 4.17%, reflecting the higher interest rate environment. Excluding PPP loans, average loans and leases increased $5.5 billion, or 12%, primarily in the commercial and industrial, owner-occupied, municipal, 1-4 family residential mortgage, and home equity credit line portfolios. The yield on non-PPP loans increased 57 basis points to 4.16%.

During the third quarter of 2022 and 2021, PPP loans totaling $0.2 billion and $1.5 billion, respectively, were forgiven by the SBA. PPP loans contributed $6 million and $63 million in interest income during the same time periods. The yield on PPP loans was 6.28% and 6.66% for the respective periods, and was positively impacted by accelerated amortization of deferred fees on paid off or forgiven PPP loans. At September 30, 2022 and 2021, the remaining unamortized net deferred fees on PPP loans totaled $5 million and $83 million, respectively.

Average total deposits increased $0.1 billion to $77.5 billion at an average cost of 0.10%, from $77.4 billion at an average cost of 0.03% in the third quarter of 2021. The rate paid on total deposits and interest-bearing liabilities was 0.22%, compared with 0.07%. Average noninterest-bearing deposits as a percentage of total deposits were 51%, up

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

slightly from the same prior year period. Our funding costs were well controlled, reflecting the granularity of our deposit base and the extent of our noninterest-bearing deposits.

Average AFS securities balances increased $6.1 billion, or 32%, to $24.9 billion, primarily due to an increase in our agency guaranteed mortgage-backed securities portfolio.

Average borrowed funds increased $1.8 billion, driven by increases in short-term borrowings as a result of loan growth and declines in interest-bearing deposits. These increases were partially offset by a decrease in long-term debt, primarily due to the redemption and maturity of senior notes during the past year.

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. For more information on how we manage liquidity risk, refer to the “Liquidity Risk Management” section on page 32.

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 September 30, 2022						Three Months Ended September 30, 2021
(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	$	1,233	$	7	2.19	%	$	10,977	$	5	0.15	%
Federal funds sold and security resell agreements	2,511		17		2.66		1,739		2		0.50
Total money market investments	3,744		24		2.51		12,716		7		0.20
Securities:
Held-to-maturity	560		4		2.88		557		4		2.87
Available-for-sale 2	24,892		129		2.05		18,814		74		1.56
Trading account	288		3		4.57		199		2		4.41
Total securities 3	25,740		136		2.10		19,570		80		1.63
Loans held for sale	37		1		5.33		52		—		3.03
Loans and leases 4
Commercial – excluding PPP loans	28,972		302		4.13		24,854		235		3.76
Commercial – PPP loans	408		6		6.28		3,795		63		6.66
Commercial real estate	12,182		145		4.73		12,144