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Date

Tuesday, January 20, 2026 at 5:30 p.m. ET

Call participants

  • Chairman and Chief Executive Officer — Harris H. Simmons
  • Chief Financial Officer — Ryan G. Richards
  • President and Chief Operating Officer — Scott J. McClain
  • Chief Credit Officer — Derek A. Stewart
  • Director of Investor Relations — Shannon L. Drage

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Takeaways

  • Net Income -- $262 million, up 19% sequentially and 31% year over year, attributed to higher revenues and lower credit loss provision.
  • Net Interest Margin -- 3.31%, achieving its eighth consecutive quarterly increase and expanding three basis points sequentially and 26 basis points year over year.
  • Diluted Earnings Per Share -- $1.76, compared to $1.48 last quarter and $1.34 one year ago; included an $0.08 per share headwind from a charitable contribution and a $0.11 per share benefit from the FDIC special assessment refund and SBIC portfolio gains.
  • Adjusted PPNR -- $331 million, down 6% quarter over quarter but up 6% year over year; when adjusted for the charitable donation, down 2% sequentially and up 11% year over year.
  • Customer Deposits -- Increased at a 9% annualized rate with average balances up 2.3% sequentially; average noninterest-bearing deposits grew $1.7 billion or 6% quarter over quarter.
  • Average Loans -- Flat versus last quarter and up 2.5% year over year; period-end balances rose $615 million sequentially, led by commercial growth in Texas, California, and the Pacific Northwest.
  • Credit Quality -- Net charge-offs of $7 million or five basis points annualized; nonperforming assets at 52 basis points of loans and OREO, down from 54 basis points prior quarter; allowance for credit losses declined one basis point to 1.19% of loans.
  • Adjusted Non-Interest Expense -- $548 million, up $28 million or 5% sequentially and 8% year over year; excluding the $15 million charitable contribution, up 2% from last quarter and 5% from prior year with increases in marketing, technology, and normalized legal expenses offset by efficiency gains.
  • Capital Position -- Common equity Tier 1 ratio at 11.5%; tangible book value per share up 21% year over year, marking a third year of 20%+ growth.
  • Charitable Foundation Donation -- $15 million pre-tax charge included to front-load deductible charitable giving over three years in response to recent tax law changes.
  • Capital Distribution Outlook -- Management stated they are "nearing the point" of increasing capital returns, with likely acceleration of share buybacks in the second half of 2026.
  • Full-Year 2026 Outlook -- Guidance for moderately increasing net interest income, customer-related fee income, and adjusted noninterest expense relative to 2025, with positive operating leverage targeted at 100-150 basis points.
  • Customer-Related Noninterest Income -- $177 million in the quarter compared to $163 million last quarter and $176 million one year ago; adjusted for net CVA, a record $175 million.
  • CRE Portfolio -- $13.4 billion representing 22% of loans, maintaining low nonaccruals and delinquencies while classified balances declined $35 million sequentially, primarily driven by commercial real estate improvement and partially offset by a $92 million rise in C&I classified loans.
  • Total Funding Costs -- Declined 16 basis points sequentially to 1.76%, supported by $766 million growth in period-end deposits and a $53 million reduction in higher-cost short-term borrowings.
  • Securities Portfolio Duration -- Estimated at 3.8 years, with maturities and paydowns contributing to asset mix improvement and tangible book value growth.

Summary

Zions Bancorporation (ZION 0.89%) highlighted strong sequential and year-over-year improvements in net income, driven by rising revenues, effective funding mix management, and disciplined expense growth that included significant strategic investments. Tangible book value per share grew by 21%, reflecting sustained capital build, while the common equity Tier 1 ratio advanced to 11.5%. Loan growth owed to targeted commercial expansion in key markets and an intensified focus on small business banking, including notable production in SBA 7(a) originations. Deposit initiatives contributed to a robust funding mix and lowered overall funding costs, with new product launches generating granular growth across the consumer and commercial franchise.

  • Commercial loan portfolio growth concentrated in C&I and owner-occupied segments, supported by banker hiring in California and enhanced small business initiatives.
  • Management guided for further organic capital accretion from continued earnings and AOCI accretion, with regulatory capital ratios tracking positively for increased shareholder distributions.
  • Leadership conveyed that increased marketing and technology spend was not reactive to competitive threats but integral to a strategic pivot toward sustainable, higher-quality growth.
  • The company cited $40 million in embedded cost savings initiatives through AI, outsourcing, and process optimization, offsetting rises in growth-oriented expenditures.
  • Asset sensitivity was described as closer to neutral, with management employing hedges and remix strategies to mitigate potential near-term interest rate declines on net interest income.
  • Growth in customer-related fee income was broad-based across products and not reliant solely on capital markets, with management projecting results at the top end of guidance for 2026.
  • Management stated, regarding M&A, "our stance is we we're not we don't have a stance per se. We're we're we're not looking for deals. They come along and they make a whole lot of sense might be interested. I don't see us doing anything really large. I it would surprise me at the moment. And so it's just not it's not a part of our daily day to day kinda thinking. Frankly, in terms of what we're really focused on. So I I've been pretty determined to not say that we're not that we never do a deal or anything of that sort. That said, we're not looking to do yields to to, you know, as I said earlier, to to become a particular size or you know, we do things that we think are really really attractive. Financially. And fifth, culturally, etcetera. I I has to check some boxes before I'd be particularly interested," signaling a disciplined, non-acquisitive posture.
  • Headcount reductions were attributed to successful outsourcing and automation, with full-time equivalent employees declining from about 10,300 in mid-2019 to below 9,300, and further reductions anticipated.

Industry glossary

  • PPNR: Pre-provision net revenue; calculated as net interest income plus noninterest income minus noninterest expense, before loan loss provisions and taxes.
  • AOCI: Accumulated other comprehensive income; represents unrealized gains/losses on certain balance sheet items, particularly securities, impacting regulatory capital but not current period earnings.
  • CVA: Credit valuation adjustment; an adjustment to the fair value of derivative instruments for counterparty credit risk.
  • SBIC portfolio: Investments managed under the Small Business Investment Company program, typically including securities and loans to small businesses.
  • CRE: Commercial real estate; loans secured by income-producing property.
  • C&I: Commercial and industrial; loans extended to businesses rather than individuals or real estate developers.
  • OREO: Other real estate owned; property acquired by the bank, usually through foreclosure, that is held for sale.

Full Conference Call Transcript

Harris Simmons: Thanks very much, Shannon, and good evening to all of you. You've seen on Slide three, our fourth quarter results reflected continued progress and steady improvement across a variety of key financial metrics. Earnings of $262 million were up meaningfully 19% from the prior quarter and 31% from a year ago, driven by stronger revenues and notably lower provision for credit losses. Our net interest margin expanded for the eighth consecutive quarter to 3.31%, benefiting from an improved funding mix as customer deposits initiatives reduced our reliance on short-term borrowings. Customer deposits grew at a healthy pace, up 9% annualized. Average loans were essentially flat compared with last quarter, reflecting payoffs we saw at the end of last quarter.

So period-end balances increased by $615 million on solid production. Credit quality was strong with net charge-offs just five basis points annualized of total loans. This quarter's results also included a $15 million donation to our charitable foundation, to be spent down over the next three years to make charitable donations that we expect would otherwise have been nondeductible for tax purposes as a result of the recent tax law changes. Turning to slide four, full-year results were similarly improved relative to the prior year. Earnings grew 21%, net interest margin expanded by 21 basis points. Adjusted PPNR increased 12% and when excluding material contribution, we achieved over 300 basis points of positive operating leverage.

After several years of industry-wide disruptions, from the 2020 pandemic to the 2023 regional bank crisis, and stress in the commercial real estate sector, we're pleased with the resilience of our performance, particularly the stability and credit outcomes throughout that period. Tangible book value per share increased 21% this year, the third straight year of growth greater than 20%, and we believe that we're nearing the point where we'll be able to increase capital distributions while continuing to further strengthen capital. On Slide five, diluted earnings per share was $1.76, up from $1.48 last quarter and $1.34 a year ago.

This quarter's figure includes an $0.08 per share headwind from the charitable contribution offset by a positive $0.11 per share combined impact from the reward flow of the FDIC special assessment and net gains on our SBIC portfolio. As shown on Slide six, adjusted PPNR of $331 million was down 6% sequentially and up 6% year over year. When further adjusted for the aforementioned charitable contribution, it was down 2% versus last quarter, up 11% versus the year-ago quarter. With that high-level overview, I'm going to turn the time over to our Financial Officer, Ryan Richards, for additional details related to our performance. Ryan?

Ryan Richards: Thank you, Harris, and good evening all. Beginning on Slide seven, you will see the five-quarter trend for net interest income and net interest margin. Net interest income increased by $56 million or 9% relative to 2024 and increased by $11 million relative to the prior quarter. For the second consecutive quarter, growth in average customer deposits in excess of loan growth aided our ability to improve funding mix and reduce overall funding costs. As a result, our net interest margin expanded for the eighth consecutive quarter to 3.31%.

Our outlook for net interest income for the full year of 2026 is moderately increasing relative to the full year of 2025, supported by a favorable earning asset and interest-bearing liability remix in addition to growth of loans and deposits. Our guidance assumes two twenty-five basis point cuts to the Fed funds rate occurring in June and September of this year. Slide eight presents additional details on changes in the net interest margin. The linked quarter waterfall chart on the left outlines changes in both rate and volume for key components of the note. The net interest margin expanded by three basis points sequentially, as improved funding mix and lower borrowing costs offset reductions in asset yields.

Against the year-ago quarter, the right-hand chart on this slide presents the 26 basis point improvement in the net interest margin, which benefited from the improved cost of deposits. Moving to non-interest income and revenue on Slide nine. Presented on the left in the darker blue bars, customer-related noninterest income was $177 million for the quarter, versus $163 million in the prior period and $176 million one year ago. You will recall that last quarter's customer-related noninterest income results included an $11 million impact the net CVA loss, primarily driven by an update in our valuation methodology. Adjusted customer-related noninterest income, which excludes net CDA, was $175 million for the quarter, representing a new record quarter for the company.

This increased $1 million versus the prior quarter and $2 million versus the year-ago quarter. The chart on the right side of this page presents both total revenue and adjusted revenue for the most recent five quarters, which were impacted by the factors previously noted for net interest income and customer-related fee income. While not presented on this page, it is notable that on a full-year basis, capital markets fees excluding net CDA increased 25% compared to the full year 2024, driven by higher customer swaps investment banking, and loan syndication fee revenues.

As was mentioned in prior earnings call, we set an aspirational goal to settle capital markets fees when Zions Capital Markets was formally launched in 2020, consolidating existing product offerings and our new executive leadership with a mandate to invest in additional capabilities. We have accomplished that goal and see continued opportunity for outside growth in this business. Our outlook for customer-related fee income for the full year 2026 is moderately increasing relative to the full year 2025. We currently expect that we will be at the top end of that guide. Growth continues to be led by capital markets, followed by loan-related fees with broad-based growth in the remaining categories from increased activity.

Slide 10 presents adjusted non-interest expense in the lighter blue bars. Adjusted expenses of $548 million increased by $28 million or 5% versus the prior quarter and increased 8% versus the year-ago quarter. As presented here, adjusted non-interest expense includes the aforementioned $15 million charitable donation. When further adjusting for the donation, expenses were up 2% versus the prior quarter and up 5% versus the year-ago quarter. Expense increases for the quarter include increased marketing and business development expenses, higher costs associated with application software licensing and maintenance costs, and normalization of legal fees after an approximate $2 million reimbursement of attorney fees last quarter.

We expect to continue to manage expenses prudently while investing in revenue generation to support growth. Our outlook for adjusted noninterest expense for the full year 2026 is moderately increasing relative to the full year of 2025. The expense outlook considers increased marketing-related costs, continued investments in revenue-generating people and business lines, and increases in contractual technology costs. We continue to expect positive operating leverage in 2026 that we currently estimate around 100 to 150 basis points. Slide 11 presents the five-quarter trend in average loans and deposits. Average loans were flat over the previous quarter, and 2.5% over the year-ago period.

Ending loans increased by $615 million sequentially with strong commercial growth in our Texas, California, and Pacific Northwest markets. Total O'Neal's decreased 15 basis points sequentially. Our outlook for period-end loan balances for the full year of 2026 is moderately increasing relative to the full year of 2025 and assumes growth will be led by commercial loans, primarily in the C and I and owner-occupied subcategories with additional growth from commercial real estate. Average deposit balances are presented on the right side of the slide. Relative to the prior quarter, total average deposits increased 2.3%. Average noninterest-bearing deposits grew $1.7 billion or 6% compared to the prior quarter.

This was partially as a result of the approximate $1 billion migration into a new customer interest-bearing product. Excuse me, migration of a consumer interest-bearing product into a new non-interest-bearing product at the end of the last quarter, which is now being fully reflected in average balances, but also represents success our bankers have had this quarter in executing on deposit gathering initiatives. The cost of total deposits declined by 11 basis points sequentially to 1.56%, aided somewhat by the lag effect from time deposit repricing from benchmark rate cuts in the latter part of 2025.

Further opportunities to reduce deposit costs will depend upon the timing and speed of short-term benchmark rate changes, growth in customer deposits, and market competition of market and depositor behavior. Slide 12 provides additional details on funding and total funding costs. Presented on the left are period-end deposit balances, which grew by $766 million versus the prior quarter, enabling us to reduce higher costs, short-term borrowings was declined by $53 million or 17% during the quarter. As seen on the chart on the right, our total funding costs declined by 16 basis points during the quarter to 1.76%. The trending in our securities and money market investment portfolios over the last five quarters is presented on Slide 13.

Maturities, principal amortization, and prepayment-related cash flows from our securities portfolio $554 million during the quarter. $288 million when considered net of reinvestment. The paydown and reinvestment of lower-yielding securities continue to contribute to the favorable remix of our earning assets. The duration of our investment securities portfolio, which is a measure of price and sensitivity to changes in interest rates, is estimated at 3.8 years. Credit quality is presented on slide 14. Realized net charge-offs in the portfolio were $11 million were $7 million this quarter or five basis points annualized. Nonperforming assets remained relatively low at 52 basis points of loans and other real estate owned compared to 54 basis points in the prior quarter.

Classified loan balances declined sequentially by $35 million driven by a $132 million reduction in CRE offset in part a $92 million increase in C and I classified levels. We expect the CRE classified balances will continue to decline going forward through payoffs and upgrades. During the fourth quarter, we reported a $6 million provision for credit losses, which when combined with our net charge-offs reduced the allowance for credit losses by $1 million relative to the prior quarter. The allowance for credit losses as a percentage of loans declined one basis point to 1.19% and the loan loss allowance coverage with respect to nonaccrual loans decreased to 215%.

Slide 15 provides an overview of the $13.4 billion CRE portfolio, which represents 22% of loan balance. Notably, this portfolio continues to maintain low levels of non-accruals and delinquencies. The portfolio is granular and well diversified by property type and location, with its growth carefully managed for over a decade through disciplined concentration limits. As it continues to be of interest, we have included additional details on certain CRE portfolios in the appendix of this presentation. Our loss-absorbing capital position is shown on Slide 16. The common equity Tier one ratio for the quarter was 11.5%. This one combined with the allowance for credit losses compares well to our risk profile as reflected in performance for loan losses.

We expect our common equity both from a regulatory and GAAP perspective continue increasing organically through earnings. And the AOCI improvement will continue through unrealized loss accretion in the securities portfolio as individual securities pay down and mature. Importantly, our organic earnings growth coupled with AOCI unrealized loss accretion has enabled us to grow tangible book value per share by 21% versus prior year. And as Harris noted earlier, it is our third year of tangible book value growth in excess of 20%. We believe that we are nearing a position to increase capital distributions while continuing to invest in our franchise to support profitable growth.

Slide 17 summarizes the financial outlook provided the course of our prepared remarks for the full year of 2026. As compared to the full year of 2025. Our outlook represents our best estimate of financial performance based upon current information. This concludes our prepared remarks. As we move to the question and answer section of the call, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask questions. Dawn, can you please open the line for questions?

Operator: Thank you. We will now be conducting a question and answer session. As stated, the format will be for one question and one follow-up. Our first question comes from Manon Gosalia with Morgan Stanley. You may proceed with your question.

Manon Gosalia: Just wanted to start with a quick clarification question. Just on the guide for expenses, what is the base for the moderately increasing guide? I know you have at the back of the earnings release an adjusted non-interest expense number of $2.1 billion. Does that is that the right base, or should we also be stripping out the charitable contribution for this quarter?

Ryan Richards: Yeah. I would I would ask you to think about the base stripping out the charitable contribution for this quarter and then rolling forward into next year. Thinking about really that activity relates to, as Harris mentioned, the three years forward look about things that might otherwise be tax deductible. With the spend outlay at that time. So that's that's probably where I would anchor you.

Manon Gosalia: Got it. So, basically, take that two one two number and then strip out the charitable contribution from that and then do moderately increasing off of that. Okay.

Ryan Richards: Yeah. That's certainly how I think about our core result.

Manon Gosalia: Got it. All right. Perfect. And then just a broader question on expenses. You guys operate in a pretty attractive footprint. We've seen a lot of larger banks come out and highlight growth in, branches and new markets and including some of yours. Are you seeing any increased competition in your markets? And if you are, is that the driver behind some of the increased marketing and tech spend that you called out in the deck?

Harris Simmons: I think I you know, we have for as long as I can remember, we faced no new competition particularly during good times, You know, these times are reasonably good. Sometimes it they go away when pipes turn tough. But it's that is not per se what a driving our focus on increased marketing spend. It's a revamp of some of our products and it's a belief that after spending a better part of its decade doing a lot of internal kind of reengineering and fixing a lot of plumbing, that we're really in a position to be able to grow at a at a at better clip than we had been over the last decade.

So we, you know, we wanna do it prudently and carefully. We care a lot about the credit culture in the company, etcetera. But we're determined to actually spend more on growth initiatives. And so that's what you've seen this past year. You'll continue to see that in the coming year. It's it's not because of any particular new entrant or anything like that. Although they're certainly there. We're in markets that are pretty attractive and so the that's wonderful, but dark underside of that is it's attractive to folks who aren't here yet. So that's always part of the story.

Manon Gosalia: That's very helpful. Thank you.

Operator: Yep. Our next question comes from Dave Rochester with Cantor Fitzgerald. You may proceed with your question.

Dave Rochester: Hey, good afternoon, guys. Just want to start on the NII outlook. For 'twenty six. Appreciate all the color on the rate cuts. I was just wondering what you're assuming for the funding of loan growth if you're assuming that securities runoff continues and you fill in the rest with the deposit growth, and then the magnitude of any kind of funding remix out of broker deposits or out of wholesale funding that you're assuming within that guide. Any color on any of that would be great. Thanks.

Ryan Richards: Yes. Thanks, Dave. And I can give you some broad strokes. We don't typically deconstruct the law, they growth or have any specific guidance about that moving forward to a year. But to your earlier point, certainly, we see the potential for remix on both sides. Of the balance sheet contributing to the NII outcome. We believe we still have some room to run with investment securities portfolio before we really feel pinched on the sort of how we think about liquidity stress testing and liquidity ratios. That said, I don't know that we'll continue to see it maybe as forceful as it has been in the We're probably getting closer to a taper point.

But there is room for additional remix out of securities into loans. And or paying down broker deposits or wholesale funding. We're we're spending a lot of time, you know, building back from Harris' comments thinking about growth and what growth looks like for 2026. And we certainly have some aspirations and some plans more than aspirations to build out our deposit base focusing on granular deposit growth and putting marketing dollars behind initiatives that would help us drive that with the intent of course of continuing to pay down those broker deposits where we've had good success year over year. But also other short-term borrowings and the like.

So what with the stopping short of giving you a specific number because I'd be hazarding a number of assumptions, that is certainly where we're headed, intended to headed as an organization.

Dave Rochester: Great. Sounds good. And then I know you guys have talked about this in the last call, talked about a three fifty margin. We're only 19 bps away from that now. We're in 26. Is this something you think that we can hit by the end of '27?

Harris Simmons: I, you know, if I'm not gonna hazard a you know, put a timeframe on it. I think it has so much to do with what happens with rates. And we're going to have a new fit share, we're going to have more going on there that I you know, that I wanna hazard a guess about. But I you know, my as I've said previously, you know, my comment about it's really intended to suggest that I think over time that's probably get getting pretty close to what a stable state could look like for us. We made a lot of progress. We got a ways to go.

I continue to believe that, you know, over a longer period of time that the risk is to higher rates and so we've we've reduced our asset sensitivities somewhat. We're closer to neutral right now, but think very mindful of the possibility of higher rates and wanna be careful that we that we can deal with that. And, but in a know, a little, you know, in a in a prolonged period where you have a kind of moderate short-term rates, some slope to the curve, I think that's where we can get to. Before that happens in the next seven or eight quarters, harder to say.

Dave Rochester: Alright. Great. Thanks guys. Appreciate it.

Operator: Thanks. Our next question comes from John Pancari with Evercore ISI. You may proceed with your question.

John Pancari: Good afternoon. On the loan growth front, I appreciate the moderately increasing guide. Underneath that, could you help unpack it a little bit in terms of what type of dynamics you're seeing on the loan growth front? Are you seeing demand strengthen? Are you seeing some pull through in terms of line utilization? And are any of these growth initiatives that you just discussed, Harris, in response to the question, is that banker hiring that in certain areas that can drive some of this growth? Thanks.

Harris Simmons: Yeah. I mean, we've we've hired some really good bankers. Particularly in the California market. But elsewhere as well. We are very focused on small business lending. That's a That's really central to our thinking about growth. Is banking smaller businesses, bring great deposits. We think that our history and our organizational structure and our people are really geared toward that kind of business in a big way. We've seen this past year near doubling of the number of SBA seven a loans that we made. About a 53% increase in dollars produced. I expect that we'll continue to see very strong growth in that category.

I mean, we're putting training dollars and marketing dollars and a lot of focus into that. It's not just the SBA program, just banking smaller businesses generally. And so if there's a particular sweet spot for me, it's kinda watching what happens there. A dollar of growth there is better than typically than a couple of dollars of growth in a lot of other places. So it's not always just the percentages. It's kind of the quality. I mean, we're really trying to build a sheet that is more productive and it's growing and serving more customers. At the same time. So that's anyway, that's in a nutshell how I think about it.

Scott McClain: Hey, John. This is Scott. I would just add to that similar to what I said last quarter, the growth is really going to come in C and I and owner occupied. We do think we're going to see some growth in CRE. Our goal for as long as you've been covering us has been that we wanna grow CRE a little less than we're growing the overall portfolio. And we fall a little short on that recently, but I think I think you'll see some CRE growth where we haven't seen much in the past. I think our municipal business and our energy business are two businesses that have some nice upside potential and they've been a little flat.

And so clearly, the real estate the sentiment about CRE and tariffs and economy has caused the whole industry to see sort of sobering loan growth numbers. But I think we're well positioned as business sentiment improves for the reasons Harris said, but also our this is gonna sound kinda squishy, but it's true. Our call programs are more energized than ever before. And this advertising spend and marketing spend that Harris referenced, it's not just incrementally, it's not just sort of a sequential thing. I mean, it's it's a significant change and it's very targeted to small and medium-sized businesses, granular deposits, just SBA and initiative that Harris mentioned.

I'd add one other thing that is if you look across the industry, a lot of commercial loan growth has come out of increased exposure to NDFI sector. And notwithstanding having stepped on a landline in the in the fourth quarter we have not been growing our portfolio and don't really intend to in any kind of meaningful way. Any deliberate way. And so, you know, in a relative sense, that's actually kind of a headwind comparatively to peers. My hope is that we can actually make up for that again in some of these areas we've been talking about small business, We will have some CRE growth. And we'll probably see a little bit of municipal growth.

But a lot of it will be commercial.

Ryan Richards: And just underscoring what both Harrison and Scott have said and Virgie back to Dave's earlier question, it's not just the trade-off between securities loans or broker deposits or wholesale borrowing. It's the mix within the loan portfolio that both Harris and Scott described that will be beneficial for NII as we're seeing it. The other part that I didn't pick up in my earlier response was and we talk about it. The terminated swap effect, speaking of headwinds, that's been a headwind for us that's been diminishing thankfully over time.

That we as we charge the year of 2026, we see about $29 million worth of headwind associated with that about half of what it was in 2025 as being another contributor towards a better NII outcome for 2026.

John Pancari: Got it. Alright. Well, thanks for all that color. And then separately on capital, just want to get your updated thoughts on potential timing of a return of share buybacks. I believe you had indicated you're kind of nearing the point where you could consider capital return, an increase in it. I think you're CET1 ratio, which you've been watching a little more closely, increased about 40 basis points this quarter and then your CET1 up 60 bps. And so both TCE and CET1 heading in the right direction. So curious what your updated thoughts are there?

Harris Simmons: I think it's probably this year that probably not this next quarter, right. In the second half, I think you'll see I would expect we're going to be in a position to start to accelerate capital returns.

John Pancari: Okay. Thanks. But I'm not I'm not gonna give you a target amount, etcetera. At some point, we'll in order to position to do so, we'll announce something and but I don't think it's a long ways. Off.

Operator: Our next question comes from Chris McGratty with KBW. You may proceed with your question.

Chris McGratty: Great. Thanks. Just following up on that question on the buyback. I know during the 2023 banking drama, the regular the rating agencies got pretty loud about capital levels. I guess, when you do announce or when you are preparing to announce the buyback, how important is that And again, what that a tangible common equity consideration versus CET1? How are you thinking about all the constituents?

Ryan Richards: Listen, that's an important stakeholder for us. And we really appreciate the engagement that we get. And certainly, I think they've appreciated the fact that we've been on build back mode here for a good long time. So we're not suggesting there's a wholesale change here. I think the more of a recognition that we're still building back on an AOCI inclusive base to where we think peers are. It's just that the timing whether there's an opportunity to kinda change the pacing of how long it takes to converge. So as Harris pointed out, you know, that you have to be determined. All those things are subject to OCC approval and board approval.

But we continue to thank you, for John's acknowledgment earlier that there's been some really good trending on this basis. We've seen that as well and it's showing up in our statistics and how we're growing our tangible book value, all really, really positive. And when you look at that headline number, there's a lot to like on it. Still tend to screen lower among our peer set when you include AOCI. We're not giving up on this of tangible book value accretion path that we're pursuing. It's just a question whether or there's an opportunity to do something along the way. You're driving convergence.

Harris Simmons: I think it's helpful that, you know, I could portion of this tangible common equity build has been facilitated by you know, it's it's it's locked in place. I mean, it's it's it's predictive it's highly predictable. And that ought to be important to rating agencies, it is to us. That it's something that time takes care of. As much as anything. So I, you know, I will we'll feather things in. It's not gonna be a cliff event, but we're you know, we wanna continue to build capital, and we're looking at it CET1, I always think about it. In a world where AOCI is included in the number.

But I also from a regulatory perspective, looks like there's nothing really imminently on the horizon that would change the current treatment of AOCI in capital. So I think we'll have some room.

Chris McGratty: Great. Thank you. Thanks for all the color. And then the follow-up would be on the source of deposit growth. You may have touched on it, so I apologize. Ryan, about 5% noninterest bearing growth in 2025. I hear you're the initiatives. Within your guide for '26, did I miss what are you assuming for NIV growth? NIV mix?

Ryan Richards: Yeah. We don't we typically guide on deposit side of that. Chris. Certainly, we just try to roll it into our NII and now we see that holistically. But suffice to say, based upon the things that we're prioritizing for strategic initiatives that we certainly would expect to see growth across the noninterest bearing dimension as well as interest-bearing deposits. Trying to pull those whole, relationships, net new relationships into the bank, that's where that whole growth orientation you're hearing from us, not just this year, but going into last year, putting some market dollars and some real focus behind those campaigns.

In terms of the refreshing as Harris alluded to before of our offerings, potential of the bundled products that we think are really relevant for our clients, and the like.

Chris McGratty: Great. Thank you very much.

Operator: Much. Our next question comes from Bernard Von Gizycki with Deutsche Bank. Hi, good afternoon. Maybe just following up on non-interest bearing deposits. I'm just curious that most of the growth there, the $1.1 billion year over year, and then the decline $310 million sequentially, Was there growth from new customer acquisitions within the consumer gold account? And can you just share now that legacy account migration has now ended how do you expect this to trend from what you've been hearing from the branches?

Ryan Richards: Yeah. There was yeah. There has been, growth, although it's you know, these accounts we've opened new these aren't just conversions of existing accounts, but new accounts, we've opened close about 4,000 of them. Since we kind of relaunched this a few months ago. I expect that number to pick up in twenty six. We're seeing average balances of about $10,000 per account. For established accounts, we're seeing, it's it's about triple that. And, you know, so in other words, it's attracting a kind of clientele that we think actually can lead to really substantial balances. The total the total size of deposit relationship in this whole portfolio. Of almost 50,000 accounts is average is about $125,000 per customer.

And so we think it's a really attractive kind of focus. There would be a group to be focused on. And that it yeah. It should help. But it but it also yeah. I mean, non-interest bearing accounts are also they're subject to what happens to interest rates, big portion of the commercial ones are supporting the provision of services through account analysis, for example. There are a lot of other things going on that can move these numbers around, we're trying to make sure that as we think about the long term, we're continuing to build a really solid base. Of granular accounts that are, you know, that are no. They're smaller. They're insured, but they're not tiny.

They're actually they're actually really good business. So that's what we're trying to do.

Scott McClain: And I would just add that the number Harris referenced on sort of net new kind of accounts is we're really just kicking this campaign off. We were piloting it in the second half of the of '25 and But it's now rolling out with greatly enhanced marketing across the entire company. So

Ryan Richards: Yeah.

Bernard Von Gizycki: Got it. I appreciate that. Just my follow-up, I think you've indicated in the past that you expect two to three basis points a quarter of fixed rate asset repricing. You mentioned the two rate cuts assumed in '26. Just update us here same assumption and if the rate if the Fed is at a rate cut pause, how does that assume to change if at all?

Ryan Richards: Yes. Thanks, Bernard. I mean, we're currently seeing now, obviously, with the changes we had later in the last year, we're not seeing quite that level in terms of fixed loan repricing impacts on our earning asset yields. Right now, we would say that around one basis point. As opposed to what we were previously. And then with additional cuts in the future, you could imagine that it would erode that value opportunity for us.

Bernard Von Gizycki: Okay, great. Thanks for taking my questions.

Operator: Our next question comes from Ken Usdin with Autonomous Research. May proceed with your question.

Ken Usdin: Hi, good afternoon. Just wondering know the question of tailoring has come up on prior calls, but now that there's been even more discussion from the regulatory front about the potential to either index levels or maybe even raise the bar fully. Are you thinking about anything differently with the asset base still hanging around $90 billion in terms of either future growth investments you have to make your outlook on, you know, acquisitions, etcetera. As we wait maybe a more formal change than we've, you know, than we've we've seen in a couple of years?

Harris Simmons: Yeah. Ken, as we've, you know, I think as we've seen or as we've said periodically over the last couple of years, the even without announcements from the OCC, but with respect to their heightened expectations. Rule and others. I have similar kinds of changes that they've been posed or made. We didn't see the $100 billion threshold as posing any real kind of a threat to We noted we were because we were the we're actually the smallest systemically important financial institution in the wake of the passage of Dodd Frank back in 2011. I mean, we were subject to all the industrial strength stuff that JPMorgan Chase and Bank where everybody else wants.

And so we built the capabilities, the models, not only for credit stress testing and stressing the balance sheet, but liquidity etcetera. All of the works that went in building sort of a COSO compliant three lines of defense risk management infrastructure, etcetera. Our intent is to never dismantle that. We found a lot of value in it. I mean, some of it was taken to extreme, some of it was I know some of the documentation, etcetera, was painful and overly expensive etcetera. But we've maintained the capabilities and it I think makes us a stronger company. And so we just don't think there's even much of a any kind of speed bump going across a 100 billion.

We don't feel compelled to try and, you know, boys are gonna cross a 100. You gotta get to 200 or anything like that sort. It's it's going to know, it's gonna be about the same as crossing 80 plus. Which was kind of a non-event. So that's how we're thinking about it. It's not It's a inhibitor in terms of thinking about deals, it's not a reason that we would think about deals. We'd only think about deals in the event they were really attractive and right now, it's it's it's you know, I don't know that we're likely to see anything that we need to improve our valuation. Something comes along that is absolutely compelling.

We'll certainly consider it. We're not gonna be taking pledges or painted into a corner of thinking about things in a particular way. I hope we'll think about it as good long-term ownership for the business would. But a $100 billion threshold isn't a factor one way or the other in that thinking.

Ken Usdin: Understood. Thanks. And Ryan, one just follow-up on the operating leverage point earlier. So is it the right way to think about it? You mentioned that the core base and then add back the charitable or take out the charitable contribution. That's the base in which you're talking about, the 100 to a 150 basis points of operating leverage?

Ryan Richards: Yeah. That's correct. Uh-huh.

Ken Usdin: And just the range it's great to hear you guys focusing to the 100,000,000 150,000,000 But what would be the difference on your expense growth? I would have just be like how revenues come out and you have some flex triangulate up and down?

Ryan Richards: Sorry for that extra one. Yeah. I think I think you always have to recognize that if the revenue requirement changes, you get to rethink way that you approach your expense side of it. But I just I included that as part of my written remarks and spoken because it wasn't obvious, of course, with our forward guidance, the words we choose. Whether or there was a positive operating leverage in there, and we absolutely believe that's the case as we as we see it today.

And that's where we you know, if you look at what our results have been for quite a long time, you know, we've we've been pretty consistent in driving customer fee growth on a compound annual growth rate of about 4%. That's really what we showed up with this past year as well. And we think we see an opportunity to do little better on that dimension moving forward, building on some of momentum we've been having in our businesses. And that's gonna be, we think, really helpful in driving some of that leverage. But we'll we'll pay attention to expenses as we move through the year. Harris has always said we're gonna run this place for the long term.

We're going to invest in growth and do things that maybe in the moment don't pay for themselves. But we've had some pretty nice returns on the investments we've been making in recent years. So that's how we're thinking about it.

Ken Usdin: Okay. Got it. Thanks. I appreciate you pointing that.

Operator: Our next question comes from David Smith with Truist. May proceed with your question.

David Smith: Hi, good afternoon. On credit hey. On credit, you highlighted an expectation for a CRE classified to continue to decline. You know, there had been an uptick in C and I classified offsetting some of the CRE decline we had this past quarter. Anything chunky in that $92 million C and I increase this quarter in terms of like a few big particular names? And just as a follow-up, would you also expect general stability in the C and I classified size of the portfolio? Or would there be a bias towards an increase or a decrease as you see things today? Thank you.

Derek Stewart: Sure, David. This is Derek. Let me answer the second question first. It's it's hard to say exactly where the C and I downgrades may come from or improvements. It's just generally depends on the economy. We do see CRE improving throughout the year. We have a good line of sight on that. We can just continue to see taking a little longer for some companies to perform. One thing I will say because we're not concerned with losses, think we're going to try to retain a lot of the loans. We may be willing to carry some of the criticized and classified real estate loans a little bit longer.

Just because they're they're they're on their way to performance and an upgrade. As far as the C and I downgrades I wouldn't say there's anything chunky in there. It's pretty broadly distributed across industries. And it's something we're watching again it depends on where the economy goes. Would point out that while we've seen the uptick this quarter in the C and I classifieds we're actually down since year-end 2024 for C and I classified. So I it's it's not jumping out as concern at this point, but something that we're paying attention to.

David Smith: Alright. Thank you.

Operator: Our next question comes from Anthony Elian with JP Morgan. May proceed with your question.

Anthony Elian: Hi, everyone. A follow-up on operating leverage. You gave us the base for our expenses backing out the foundation contribution. But just to clarify the base for revenue, Ryan, does the base for fee income exclude the adjusted non-customer fees? I think that was $44 million you have in the back of the press release.

Ryan Richards: Yeah. Can you Say one more time.

Anthony Elian: Yes. I'm just curious if you can give us the base for fee income right? You have some items you back out on Slide five and the back of the press release. So if you can give us the base to use for operating leverage, that would be great.

Ryan Richards: I think it's it's being the customer. The customer fee income that we Yeah. Hard to predict year to year what we're going get on the security gains and losses. So that's kind of how we think about core expenses. What's the level of adjusted related non-interest income?

Anthony Elian: Yeah. Okay. And then my follow-up so from this call, sounds like there's a lot more emphasis on growth initiatives this year, including hiring, which I fully appreciate. You left the expense outlook unchanged. So I'm wondering if there's directionally a range you point us to for expenses within your guidance of moderately increasing?

Ryan Richards: Yes. I mean, listen, if we first the tape about a year ago, we were coming at a time when we were keeping things, I think, pretty tight, slightly increasing would have been more and maybe at times slightly to moderately. We allowed that to start migrating up because of this growth agenda. So I don't know that would point you to a specific point. We usually talk about you know, moderately being, like, a mid single digits type number. You know, I probably just orange you somewhere to the middle of that. You know, we'll see what we get.

But I really did the intent here is to do things that feel strategic to us and to and it should feel different and look different. We're successful in exceeding our growth goals. But the types of numbers that we're talking about that Scott alluded to before may not be fully evident, but we have some real aspirations in driving commercial loan growth and aligned for some increased CRE could be some offsets there in the sense that we've talked a little bit in the past about what we're doing on our one to four family resi strategy and having more of an orientation to help her sell.

So we think that there's potential for more of that to show up this year, but without that, we could really put, I think, some decent loan numbers up.

Scott McClain: I on the expense guide, also, I would just say that there's and we've said this in previous years, but there's probably about $40 million of savings initiatives in there that keep us at the expense growth rate number that we are that we're at. So this isn't just it's just the same as last year plus a little bit more. There's quite a bit of work on continued efficiency gains and optimization and particularly with AI and some of the things we're doing with process change and new technologies that can help us lower cost as well as outsourcing. We have a lot of levers to pull on.

And that helps keep the expense number down and has four years. There's nothing new about it.

Operator: Thank you. Our next question comes from Janet Lee with TD Cowen. May proceed with your question.

Janet Lee: For clarification on NIM, so if I look at your earning asset yields the fourth quarter, it looks like lower rates had an impact on your earning yields declining about 15 basis points. And you talked about one basis point of fixed rate asset repricing lift. So if I assume two to three rate cuts, in 2026, is it fair to say earning asset yields are declining through 2026 and the NIM trajectory is really dependent on the shape of the yield curve and what you can do on the deposit front.

Ryan Richards: Yeah. Listen. I think that those are all fair observations. In deposit production and our success there while we have an outsized impact on how we show up on them. Our success year over year has been I've been able to manage down our funding costs. You more aggressively than what we're seeing in terms of on the asset side because we've had some really nice remix that's an offset to some of the things that would otherwise play through on the resetting of benchmark rates. You know, we haven't gotten it yet, and then it's almost like I can't imagine we go through a call without saying something about latent emergent type things.

But we do include some of those materials in the back. I think Harris alluded to before we took a little bit of the edge off of some of our asset sensitivity metrics that you would have otherwise seen us maybe earlier. Through some hedging activities that we put on just trying to guard against maybe some near-term rate cuts. What the asset sensitivity would tell you is that we still think that there's opportunities for things to play through. On a latent basis, things that haven't already found price discovery on fixed assets playing through. We have about 60% of our term deposits that are set to reprice.

And the 2026, So but as somebody who as a group that's still asset sensitive on a whole, we say we show it the overlay of the forward curve that, again, just using a sensitivity view, that we could stand to have a better you know one year quarter forward outcome even against the backdrop of a forward curve that would apply to more rate cuts. And that, of course, doesn't take into account our prospects for loan growth and a dynamic balance sheet, the mix of our loans, how we would be taking cash flows from our securities portfolio, and reinvesting them in other places. Including loans and other gainful uses.

So there's a lot of contributing factors in there. Hopefully, that gives you a little bit of direction about how you know, we feel and how we're guiding for NII one year hence.

Janet Lee: Thank you. That was very helpful. And clearly, you've made some good strides in improving your capital levels, including AOCI. Accretion? Has happened over the past years. Could you and clearly, you're more open to doing buybacks over the near to intermediate term. Could you give us a refresh on your M and A stance?

Harris Simmons: Well, think I did a few minutes ago. I our stance is we're not we don't have a stance per se. We're we're we're not looking for deals. They come along and they make a whole lot of sense might be interested. I don't see us doing anything really large. I it would surprise me at the moment. And so it's just not it's not a part of our daily day to day kinda thinking. Frankly, in terms of what we're really focused on. So I've been pretty determined to not say that we're not that we never do a deal or anything of that sort.

That said, we're not looking to do yields to, you know, as I said earlier, to become a particular size or you know, we do things that we think are really attractive. Financially. And fifth, culturally, etcetera. I has to check some boxes before I'd be particularly interested.

Janet Lee: Okay. Thank you.

Harris Simmons: Yep.

Operator: We have another from Manon Gosalia with Morgan Stanley. You may proceed with your question.

Manon Gosalia: Hey, thanks for taking the follow-up. I think you mentioned in the prepared remarks that you could come in at the top end of the guide on customer-related fees. Can you just talk about what the drivers are there?

Scott McClain: Yeah. Matt, this is Scott. I think we're inclined to make that comment principally because we're seeing really good momentum, across a wide range of our customer feed product areas. And we see that carrying into the new year. So that combined with this additional advertising and these products Just give us a really nice outlook, we think, on customer fee income. But it's instead of capital markets dominating the growth in our fee income, we're very encouraged by what we're seeing across almost all of our fee income businesses. And that's a little bit different story. And a little bit different guy. Relative to what you've said before.

Manon Gosalia: Got it. Yes. Thank you.

Ryan Richards: Yes. Anand, we appreciate you've got your way back into the queue.

Operator: Our next question comes from Jon Arfstrom with RBC Capital. You may proceed with your question.

Jon Arfstrom: Thanks. Couple of follow-ups. Scott, one for you. When you look in the earnings release, the FTEs are down last couple of quarters. And you might have just touched on it a few minutes ago, but can you talk a little bit more about what you're doing in terms of AI and tech and just the general FTE outlook? Are you seeing real impacts and that's what's showing up in the FTE count or is it?

Scott McClain: Yes. No, thank you for that question. And you know, you'll remember the high point for us was August, really the third quarter, 2019 when we were at about 10,300 colleagues we're now down below 9,300 and we think that number will continue to go down over the next couple of years. And it's it's over the short term here, outsourcing our outsourcing strategy. We've been reengaging with that and with three out outstanding partners that work with us in other ways as well. And so that will continue to have momentum. We probably, you know, a year ago, we were well below where peers are.

Most peers would report that they outsource somewhere between 10 to 15% of their stated FTE base, and we were probably around 3%. So we're really just leaning into a lever that has always been available to us, but we're we're more encouraged and confident about it. So that's that's where you're going to see some of it. But the use of AI again, we've been using AI for a long time. For things like fraud detection, client authentication, product recommendations, financial statement spreading, some unstructured document processing, etcetera. And so, but the proliferation of new ideas that can remove touches, human touches from a process. Can remove multiple data entry can streamline what we do. It's it's it's significant.

And we're moving kind of from an exploratory phase, which I'd say we've been in for the last year and a half to really highly focused on a small couple of handfuls of projects where we can we can see the most leverage in simplifying what we're doing in end to end processes. So those would be the kinda automation, AI, outsourcing would be pretty meaningful contributors. Yep.

Jon Arfstrom: Okay. Thank you for that. And then just one more on loan growth. Just the improved expectations, are the borrowers more optimized optimistic or is it you becoming more comfortable or combination of both? And then I'm just also curious kind of what's going on at Commerce Bank. The growth numbers were pretty strong there. If you could touch on that? Thanks.

Scott McClain: I'm happy to take the first one. I mean, think borrowers are business owners, CEOs, they're kind of in the same place they've been for the last couple of years, again, between commercial real estate, industry concerns, tariffs, the economy in general, whatever happens to be in the newspaper this morning. It just has people a little uncertain. And so I think I think that's one piece. And the other piece is just we are we feel very encouraged about all the steps we're taking to grow. Which we've talked about in this call.

I'd say Commerce Bank, their relative size, they can produce more volatility probably in terms of growth numbers and you'd see in other parts of the company. So I don't think there's anything that's probably necessarily a trend there.

Jon Arfstrom: Okay. Yeah. Okay. Thank you. Appreciate it.

Operator: This now concludes our question and answer session. I would like to turn the call back over to Shannon Drage for closing comments.

Shannon Drage: Thank you, Vaughn, and thanks, everyone, for joining us tonight. Appreciate your interest in Zions Bank Corporation. If you have additional questions, please contact us at the email or phone number listed on our website and we look forward to connecting with you throughout the coming months. This concludes our call.

Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.