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 total deposits reached $18.1 billion. The bank’s efficiency ratio was 47.7%, reflecting cost management efforts. The bank declared a quarterly cash dividend of $0.15 per common share.
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
Net interest income decreased 14% to $586 million. This was driven by higher funding costs that outpaced the benefit of higher earning asset yields.
Specifically:
Noninterest Income
Noninterest income was flat at $151 million as higher capital markets revenue offset declines in other fee income sources.
Noninterest Expense
Noninterest expense increased 3% to $526 million, driven by:
These increases were partially offset by lower salary and benefit costs.
Provision for Credit Losses
The provision for credit losses was $13 million compared to $45 million a year ago. This reflected improvement in economic forecasts but higher reserves for commercial real estate loans.
Net Charge-Offs
Net charge-offs remained low at 0.04% of average loans. However, nonperforming assets increased modestly from the prior quarter.
Loans
Total loans increased 1% from the prior quarter to $58.1 billion, driven by growth in residential mortgages and commercial real estate.
Investment Securities
The securities portfolio declined modestly as paydowns outpaced new investments. The duration of the portfolio was steady at 3.6 years.
Deposits and Borrowings
Total deposits decreased 1% while interest-bearing deposits increased. Short-term borrowings also declined as deposit funding increased.
Capital levels remained strong with a Common Equity Tier 1 ratio of 10.4%. The company has ample sources of liquidity including $39 billion of remaining borrowing capacity.
Zions operates seven affiliate banks in select Western U.S. markets. The banks provide a diversified mix of commercial and retail banking services.
Commercial and industrial loans represent Zions’ largest portfolio at 28% of total loans. Compared to a year ago:
Top industry exposures included retail trade, real estate, finance, healthcare, and public administration.
Commercial real estate loans accounted for 23% of total loans. The portfolio is diversified across major property types, led by multifamily at 28%. Compared to a year ago:
Consumer loans accounted for 24% of total loans. The portfolio is concentrated in residential mortgages and home equity lines. Compared to a year ago:
Net Interest Income
The net interest margin increased modestly from the prior quarter due to higher rates. Margin pressure may continue in coming quarters with deposit competition and asset repricing lags.
Provision for Credit Losses
The provision will depend on changes in loan volumes, portfolio credit quality trends, and the economic outlook. Some further reserve build is possible but should moderate over time.
Noninterest Income
Customer-related fee revenue faces headwinds from lower service charges and card fees due to habit changes. Mortgage and capital markets revenue will vary based on market conditions.
Noninterest Expense
Expense discipline is a key focus with technology investments continuing. Efficiency initiatives aim to keep noninterest expense growth below revenue growth over the medium term.
Credit Quality
Credit quality metrics remain strong but are showing some normalization from unsustainably low recession-era levels. Risks remain tilted to the upside due to economic uncertainty.
In summary, Zions reported lower earnings this quarter due to margin pressure and increased credit costs. Revenue growth was muted by the operating environment. The company maintains a solid franchise, healthy balance sheet, and diverse business mix. Financial performance should improve over time as higher interest rates and lending translate to revenue growth. The economic outlook has deteriorated modestly but remains supportive.