Zions Bancorp, a national association, reported a net income of $102.7 million for Q1 2024, up 12% from Q1 2023. The bank’s total assets increased to $22.2 billion, while its total deposits reached $18.3 billion. The bank’s efficiency ratio was 47.7%, reflecting cost management efforts. The bank’s loan portfolio grew by 10% year-over-year, driven by commercial and industrial loans and commercial real estate loans. The bank’s allowance for credit losses increased to $371.7 million, reflecting a cautious approach to credit risk.
Zions Bancorporation is a regional bank holding company headquartered in Salt Lake City, Utah. In the first quarter of 2024, Zions reported net income applicable to common shareholders of $143 million, or $0.96 per diluted share. This compares to net income of $198 million, or $1.33 per diluted share, in the first quarter of 2023.
The decline in earnings was driven by lower net interest income, higher provision for credit losses, and higher noninterest expense. These negative factors were partially offset by higher noninterest income.
Net interest income decreased 14% to $586 million. This was driven by higher funding costs, which more than offset higher earning asset yields.
Specifically:
The net interest margin declined to 2.94% from 3.33% last year.
In summary, Zions’ first quarter earnings reflected pressure from the higher interest rate environment, but underlying business performance remains solid. Credit quality is excellent, capital levels are strong, and liquidity is robust. The company is well-positioned to navigate challenges and take advantage of opportunities in 2024.
As shown in the table below, net interest income has trended lower over the past five quarters, decreasing 14% year-over-year in the first quarter of 2024. This decline has been driven by a sharp rise in funding costs, stemming from higher interest rates and a shift in the deposit mix from noninterest-bearing to interest-bearing.
The net interest margin has compressed from a peak of 3.45% in the first quarter of 2023 to 2.94% in the most recent quarter. While earning asset yields have increased in tandem with higher rates, the overall impact has been a decline in net interest income and margin.
Quarter | Net Interest Income ($M) | Net Interest Margin |
---|---|---|
Q1 2023 | $679 | 3.33% |
Q2 2023 | $640 | 3.25% |
Q3 2023 | $612 | 3.11% |
Q4 2023 | $603 | 2.91% |
Q1 2024 | $586 | 2.94% |
Noninterest income has held relatively steady over the past year in the $155-160 million range. An increase in capital markets fees has helped offset declines in other fee categories.
Noninterest income was equal to 21% of net revenue in the first quarter of 2024, playing an important supplementary role to net interest income.
Quarter | Noninterest Income ($M) | % of Net Revenue |
---|---|---|
Q1 2023 | $160 | 19% |
Q2 2023 | $158 | 20% |
Q3 2023 | $156 | 20% |
Q4 2023 | $155 | 20% |
Q1 2024 | $156 | 21% |
Noninterest expense increased 3% year-over-year in the first quarter of 2024. Most expense categories were well controlled, with the exception of higher regulatory assessments.
The efficiency ratio deteriorated to 67.9% from 59.9% last year, primarily reflecting the 14% decrease in net interest income.
Quarter | Noninterest Expense ($M) | Efficiency Ratio |
---|---|---|
Q1 2023 | $512 | 59.9% |
Q2 2023 | $525 | 63.5% |
Q3 2023 | $521 | 64.0% |
Q4 2023 | $514 | 63.4% |
Q1 2024 | $526 | 67.9% |
Excellent Credit Quality - Net charge-offs remained low at 0.04% of average loans in the first quarter of 2024. Criticized and classified loans increased modestly but remain at very manageable levels. The allowance for credit losses stands at a healthy 1.27% of total loans.
Strong Capital Levels - All regulatory capital ratios were comfortably above the thresholds for “well-capitalized” status. The tangible common equity ratio was 5.0% as of March 31, 2024.
Robust Liquidity - Diverse sources of liquidity exceeded 130% of uninsured deposits at the end of the first quarter. The investment portfolio can readily be used as a source of contingent funding.
Net Interest Income Pressure - The higher interest rate environment and intense deposit competition have put significant pressure on net interest income. Balance sheet positioning provides only partial mitigation of this headwind.
Economic Conditions - A potential recession or sustained period of low growth would negatively impact customers’ ability to repay loans. Real estate values could also be vulnerable in these scenarios.
Cybersecurity - Like all financial institutions, Zions faces elevated cybersecurity risks requiring substantial investment in talent, tools, and controls. A successful large-scale attack could be highly disruptive and costly.
Zions expects full year 2024 net interest income to be flat to down modestly compared to 2023, reflecting asset sensitivity to declining interest rates in the forward curve.
Noninterest income is projected to grow in the low single digits, driven by capital markets and wealth management fees.
Operating expenses are likely to increase approximately 3% for technology investments and inflationary pressure on salaries.
Credit costs are forecast to normalize closer to long-run historical loss rates after remaining unusually low during the pandemic period.
If the economy enters recession, financial performance would come under greater pressure. However, Zions’ strong capital and liquidity positions should provide resilience in navigating through challenges.
With its solid regional banking franchise across the Western U.S., Zions is well-positioned to deliver steady performance over the long term. The company remains focused on driving sustainable, profitable growth while maintaining its commitment to strong risk management.