Zions Bancorp Reports Q3 2026 Earnings Per Share of $1.78

Zions Bancorp (NASDAQ: ZION ) reported third-quarter financial results on Monday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Zions Bancorp reported a 20% year-over-year increase in net earnings to $262 million, with a corresponding rise in earnings per share to $1.78. The company's net interest margin slightly declined to 3.23%, attributed to higher deposit costs despite a growth in net interest income and customer deposits. Strategically, Zions Bancorp acquired Basis Investment Group's multifamily agency lending business, aiming to expand its multifamily financing solutions and enhance its one-stop platform capabilities. The capital markets division has shown significant growth, with expectations for increased fee income contributions in the upcoming quarters.

The company anticipates an 8% to 12% increase in net interest income for the third quarter of 2027, influenced by expected interest rate hikes and deposit cost adjustments. Zions Bancorp's credit quality remained strong, with modest credit losses and a stable Common Equity Tier 1 ratio at 11.8%. Management highlighted ongoing strategic initiatives, including expanding wealth management offerings and focusing on core deposit and small business growth through its Strategic Six products. Operational expenses are expected to rise by 4% to 6% in 2027, with continued investments in technology and talent to support growth.

Full Transcript OPERATOR Greetings. Welcome to Zions Bancorp third quarter earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jason Arbuckle. Thank you.

You may begin. Jason Arbuckle (Senior Director of Investor Relations) Thank you, Cleo, and good evening, everyone. Welcome to our conference call to discuss Zions Bancorp's third quarter 2026 results. My name is Jason Arbuckle, Senior Director of Investor Relations, and before we begin I would like to remind you that during the call we will make forward-looking statements.

Actual results may differ materially. We encourage you to review the forward-looking statements and non-GAAP disclosures in our press release and on slide 2 of today's presentation, which apply equally to statements made during this call. A copy of the earnings release and the presentation are available at our website, zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer Harris Simmons will provide opening remarks.

Following Harris's comments, Chief Financial Officer Ryan Richards will review our financial results and outlook, and also with us today are Scott McLean, President and Chief Operating Officer, and Derek Stewart, Chief Credit Officer. After our prepared remarks, we will hold a question-and-answer session. This call is scheduled for one hour, and I will now turn the time over to Harris Simmons. Harris Simmons (Chief Executive Officer) Thanks very much, Jason, and good evening, everyone.

We're reasonably pleased with our financial results for the third quarter, which reflect meaningful year-over-year earnings improvement and continued progress on our strategic priorities. Going to the slides. Slide 3 summarizes second quarter results versus the prior quarter and last year's third quarter. Net earnings available to common was $262 million, or $1.78 per share, an increase of 20% compared to $1.48 in last year's third quarter and an increase of 2% compared with $1.74 last quarter after adjusting for that quarter's large equity securities gains.

The increase from a year ago was due to growth in net interest income and customer-related noninterest income, modest loan growth, and exceptional credit performance. The net interest margin was 3.23%, down 4 basis points from the prior quarter and down 5 basis points from a year ago. When compared to the prior quarter, average loans grew 3.7% on an annualized basis, led by commercial lending. Average customer deposits grew 8.8% on an annualized basis.

Credit losses were modest at 2 basis points annualized of average loans. Slide 4 presents the recent history of our earnings performance together with the impact of the provision for loan losses on quarterly results. Notable items in each of the recent quarters are also included on this slide. As shown on slide 5, adjusted pre-provision net revenue was $338 million.

It increased 2% from the prior quarter, reflecting improvement in adjusted taxable-equivalent revenue, which more than offset a modest increase in adjusted noninterest expense. Adjusted pre-provision revenue declined $14 million, or 4% from the prior-year period, which represented a particularly strong comparison quarter. In addition, results for the current quarter included $4 million of expense associated with a recently acquired multifamily agency platform that was not included in our original forecast. Turning to Slide 6, our capital markets division continues to be an important driver of fee income growth.

Since launching the business in 2020, we have nearly doubled the annual fee income contribution by investing steadily in talent, technology, and product capabilities, including investment banking, commodities, hedging, real estate, capital markets, and multifamily agency capabilities, which I'll discuss in more detail on the next slide. Before moving on, I'll note that the $136 million fee income number shown for 2026 is annualized based on our performance through September 30th. Given the momentum we are seeing across the business and our expectations for the fourth quarter, we anticipate the full-year results to come in somewhat above that level.

Turning now to Slide 7, I'd like to highlight the acquisition of Basis Investment Group's multifamily agency lending business, which closed during the third quarter. This acquisition represents an important step in building what we believe can be a highly differentiated multifamily franchise. Our goal is straightforward: to provide clients with a single source of financing solutions across market rate, affordable, construction, bridge, agency, and CMBS products.

With this acquisition, we are now one of only four banks in the country that combines direct access to both Fannie Mae Designated Underwriter Servicer and Freddie Mac's Optigo programs, together with originations to third-party CMBS conduit platforms. When combined with the broader capabilities of the bank, this creates a differentiated one-stop multifamily platform capable of serving clients throughout the life cycle of an asset. In addition to the talented team that joined us from Basis, we have added seasoned lenders with deep experience in multifamily agency lending and servicing to help scale the platform.

We're excited about the opportunities this creates and the talent that we have assembled. This acquisition enhances our ability to serve commercial real estate clients and, in particular, those in the Western United States where we see a real market opportunity with population growth and housing affordability issues that drive demand for multifamily products. Included in the quarter were approximately $4 million of expenses associated with our newly acquired multifamily agency platform, including personnel and other integration-related costs, and approximately $300,000 of revenue.

We expect the financial benefits to build gradually over time as the platform is integrated and production ramps up. For 2027, we anticipate approximately $17 to $20 million of revenue and $12 to $13 million of expense, recognizing that we are in the early process of scaling the business. Over the medium term, we expect the business to generate approximately $30 to $40 million of annual revenue. The pace of growth and ultimate revenue potential will be influenced by market conditions, including the interest rate environment.

Moving to slide 8, we see wealth management as a compelling growth opportunity given our broad customer base and the size of wealth assets under management relative to the size of our banking franchise. We have seasoned affiliate and wealth leadership teams focused on continuing to enhance coordination between our banking and advisory businesses, which we believe positions us to deepen client relationships and capture additional growth opportunities.

A key component of our strategy is a product we call Wealth Select, which is a new offering that expands our addressable market by allowing us to serve clients with approximately $100,000 to $1 million of investable assets through a scalable advisory model. Wealth Select helps us engage clients earlier, deepen relationships over time, and create a pathway for those relationships to grow alongside their financial needs. Slide 9 provides more information about what we refer to as our Strategic Six products.

While each serves a different client segment and business need, they all share a common objective, which is strengthening sustainable growth through our branch footprint and core deposits, small business relationships, and fee income. We continue to be encouraged by the early results. For example, year to date at September 30th we've opened over 14,000 Gold accounts for consumers totaling approximately $275 million in new-to-bank deposits and 1,300 Business Beyond accounts bringing in about $120 million in new deposits. In addition, we currently rank number 10 nationally in SBA 7 lending based on approval volume, number 9 in SBA 504 loans.

While the near-term financial contribution is modest relative to the size of the bank, these products are helping us grow long-term relationships and creating opportunities to deliver additional banking, payments, lending, and wealth management solutions over time. With that overview, I'll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and walk through our outlook. Ryan Richards (Chief Financial Officer) Ryan, thank you. Harris, and good evening, everyone.

Beginning on slide 10, you can see the five-quarter trends for net interest income and net interest margin. Taxable-equivalent net interest income was 684 million, up 7 million, or 1%, from the prior quarter, and up 12 million, or 2%, from the year-ago quarter. Earning-asset yields were relatively stable sequentially while our cost of funding increased, resulting in a decline in the net interest margin compared to the prior quarter. Slide 11 provides additional detail on the drivers of net interest margin, which decreased 4 basis points from the prior quarter and 5 basis points from a year ago.

The linked-quarter decline was primarily driven by higher deposit costs and growth in lower-yielding assets. As Harris noted in his opening remarks, deposit growth significantly outpaced loan growth during the quarter, with average customer deposits growing by 8.8% on an annualized basis. This compares with annualized loan growth of 3.7% during the quarter and a slight decrease in ending loan balances. We used this excess funding to pay down short-term FHLB borrowings, with the residual deployed into money market investments, which increased meaningfully during the quarter.

Moving forward, these lower-yielding money market balances, which are dilutive to our net interest margin, will be utilized to fund loan growth and/or reduce brokered deposits as those balances mature. The total cost of deposits increased 11 basis points to 1.59% during the quarter. This increase was driven, in part, by a recent change in how we present interest paid on cash collateral associated with our derivatives portfolio. Earlier this year we began presenting derivatives and related cash collateral on a net basis.

Beginning this quarter, we reflected the interest costs associated with the cash collateral held in the cost of deposits as opposed to short-term borrowings. This increased our reported cost of deposits by approximately three basis points but had no impact on our overall cost of funds. As Harris noted in our earnings release, we expect our asset-sensitive balance sheet to produce stronger net interest income in a higher-rate environment. For the third quarter of 2027, we anticipate net interest income to increase by approximately 8% to 12%.

Our outlook is based on the forward curve as of September 30, which assumes three rate increases occurring in December, March, and June, respectively. The forecast assumes our cost of deposits rises to around 2% from current levels of 1.59%, which includes migration of some noninterest-bearing deposits into interest-bearing products. If deposit pricing and mix trends develop more favorably than we have assumed, there is potential for net interest income to exceed our guidance. Moving to noninterest income on slide 12, customer-related noninterest income was 192 million compared with 182 million in the prior quarter and 163 million a year ago.

Excluding the net credit valuation adjustment, adjusted customer-related noninterest income was 182 million compared with 181 million in the prior quarter and up 8 million, or 5%, from the year-ago quarter. As Harris mentioned earlier, capital markets continues to deliver strong performance and remains on pace for a strong fourth quarter. In Wealth, we are seeing encouraging momentum and remain focused on executing our strategy to drive growth and deepen client relationships. Looking ahead to the third quarter of 2027, we expect adjusted customer-related fee income to grow 6% to 9% relative to the third quarter 2026 results of 182 million.

We anticipate broad-based growth across our fee businesses led by continued momentum in capital markets. Turning to slide 13, adjusted noninterest expense was 549 million, representing an increase of 3 million, or 1%, from the prior quarter, and as Harris mentioned earlier included 4 million of expense related to the newly acquired multifamily agency platform. Technology, telecom, and information processing expense increased 4 million, driven by higher application software licensing and maintenance costs. Additionally, deposit regulatory expense increased 5 million related to the decrease to our FDIC special assessment in the prior quarter.

Expenses were higher year over year, reflecting higher incentive compensation, increased professional outsourced services, and higher technology costs. We will continue to manage expenses prudently while investing to support growth. For the third quarter of 2027, we expect adjusted noninterest expense to increase by approximately 4% to 6% relative to the third quarter 2026. We also continue to expect positive operating leverage for the full year 2026.

Our initial outlook of 100 to 150 basis points of operating leverage did not contemplate the acquisition of the multifamily agency platform. For basis, including the impact of that acquisition, we now expect operating leverage of approximately 40 to 50 basis points. Excluding the acquisition, operating leverage would approach the low end of our prior expectations of 100 to 150 basis points. Slide 14 presents trends in average loans and deposits.

Average loans grew 3.7% annualized during the quarter, primarily within the commercial and industrial portfolio, and increased 2.7% year over year. Loan yields remained relatively stable sequentially and were down 28 basis points year over year, primarily reflecting lower interest rates. Looking ahead, we expect loan growth to be between 2% to 4% for the third quarter of 2027 compared with the third quarter of 2026. Our outlook reflects current pipeline activity, customer utilization trends, and the broader economic environment.

Given the expected path of interest rates, we are tempering our outlook for loan growth, particularly within commercial real estate. Average deposits increased 17 billion from the prior quarter driven—excuse me, thank you—average deposits increased 1.7 billion from the prior quarter, driven largely by an increase in interest-bearing deposits. The cost of total deposits was 1.59%, an increase of 11 basis points sequentially, primarily reflecting deposit repricing and, to a lesser extent, the presentation change related to interest paid on cash collateral associated with our derivatives portfolio.

Our deposit growth allowed us to reduce wholesale funding sources during the quarter, tempering the increase in total cost of funding. Year over year, the cost of deposits declined 8 basis points, primarily due to lower interest rates. Slide 15 presents the five-quarter trend of our average and ending funding sources. Our total funding costs increased to 1.75% compared with 1.69% in the prior quarter period, and deposit balances increased by 1.3 billion compared with the prior quarter, driven by a 1.8 billion increase in customer deposits partially offset by a decrease of 448 million in brokered deposits.

Short-term borrowings decreased 376 million linked quarter and declined by 2.7 billion versus the prior-year quarter. Turning to slide 16, the investment securities portfolio continues to serve as an important source of on-balance-sheet liquidity and a tool to balance interest-rate risk. During the quarter, principal prepayment-related cash flows from investment securities of 631 million were partially offset by reinvestment of 296 million. The continued paydown of lower-yielding mortgage-backed securities supports earning-asset remix and/or a reduction in wholesale funds.

The estimated price sensitivity of the portfolio, inclusive of hedging activity, was 3.4 years. Credit quality remains strong as shown in slide 17.