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    ZION
    Earnings call· Mar 2026(Q1 FY26)

    ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ Q1 FY26 earnings call ZION

    Apr 20, 2026 Source

    Executive summary

    Zions Bancorp Q1 FY26 — Strong Capital Position and Strategic Growth Initiatives

    Zions Bancorp reported a reasonably strong Q1 FY26, marked by significant year-over-year earnings growth and strategic advancements in capital markets and new deposit products. While net interest margin saw a slight sequential decline, the company maintains a positive outlook for NII and operating leverage, supported by robust loan pipelines and disciplined expense management. Management is focused on organic deposit growth and opportunistic M&A, alongside a strong capital position.

    Highlights

    5

    • Net earnings were $232 million or $1.56 per diluted share, up 37% year-over-year.

    • Adjusted customer-related noninterest income was $174 million, up 10% year-over-year.

    • Average loans grew 2.4% annualized, primarily within commercial and industrial portfolio.

    • Period-end customer deposits increased by $1.3 billion or 1.8% from year-end.

    • Common Equity Tier 1 ratio remained strong at 11.5%, with tangible book value per share up 19% year-over-year.

    Concerns

    3

    • Net interest margin was 3.27%, down 4 basis points linked quarter.

    • Net earnings declined 11% quarter-over-quarter, primarily reflecting lower revenue and significantly lower securities gains.

    • Adjusted preprovision net revenue declined 9% from the prior quarter.

    Guidance & targets

    4
    CategoryTargetConfidence
    Net Interest Income (NII) growth
    7% to 8%
    high materiality
    High
    Adjusted customer-related fee income
    towards the top end of moderately increasing
    medium materiality
    High
    Adjusted noninterest expense
    moderately increasing
    medium materiality
    Medium
    Positive operating leverage
    100 to 150 basis points
    high materiality
    High

    Operational metrics

    17
    Net earnings
    $232 millionup 37% YoY
    Q1 FY26

    Net earnings were $232 million or $1.56 per diluted share, up 37% from a year ago.

    Diluted EPS
    $1.56down from $1.76 QoQ, up from $1.13 YoY
    Q1 FY26

    Diluted earnings per share were $1.56, down from $1.76 in the prior quarter and up from $1.13 a year ago. As a reminder, the year-ago quarter included an $0.11 per share headwind related to the revaluation of deferred tax assets due to newly enacted state tax legislation.

    Adjusted preprovision net revenue
    $301 milliondeclined 9% QoQ, increased 13% YoY
    Q1 FY26

    Adjusted preprovision net revenue was $301 million, declined 9% from the prior quarter, reflecting some of the items noted earlier, including a slightly lower day count adjusted tax equivalent net interest income. Pre-provision net revenue increased 13% versus the year ago quarter on improved revenue and positive operating leverage.

    Adjusted customer-related noninterest income
    $174 millioncompared with $175 million QoQ, up $16 million or 10% YoY
    Q1 FY26

    Excluding net credit valuation adjustment, adjusted customer-related noninterest income was $174 million compared with $175 million in the prior quarter, and up $16 million or 10% from the year ago quarter.

    Total funding costs
    1.68%declined 8 bps QoQ
    Q1 FY26

    Our total funding costs declined 8 basis points linked quarter to 1.68%, largely as a result of the aforementioned deposit repricing.

    Investment securities cash flows (principal & prepayment)
    $493 million
    Q1 FY26

    During the quarter, principal and prepayment-related cash flows from investment securities of $493 million were partially offset by reinvestment of $299 million.

    Tangible book value per share growth
    19%YoY
    Q1 FY26

    Tangible book value per share increased 19% versus the prior year, reflecting earnings generation and continued balance sheet normalization.

    RWA relief from Basel III Endgame (standardized approach)
    9% to 10%
    future

    our scoping on the standardized approach would suggest some RWA relief... between 9% to 10% of RWA relief, would I contribute all else being equal, about 93 basis points to common equity Tier 1.

    Residential mortgage loans sold (held-for-sale)
    in excess of $500 million
    Q1 FY26

    We had a pool in excess of $500 million that we sold out of the book that would have otherwise been part of our story for loan growth.

    Loan balance impact from derivative accounting change
    $100 million
    Q1 FY26

    we did roll out an accounting change this quarter moving forward on the netting of derivative assets and derivative liabilities and cash collateral things associated with that. And that would also have sort of a knock-on effect on some netting down of some loan balances to the tune of about $100 million difference.

    Capital Markets fees
    $28 millionslightly higher YoY, down $9 million QoQ
    Q1 FY26

    capital markets fees, the $28 million, slightly higher year-over-year, but down $9 million versus a strong 4Q.

    Gold Account new accounts opened
    4,000
    Q1 FY26

    we opened about 4,000 new accounts in the first quarter.

    Gold Account total relationship balances
    $100,000
    over time

    What we're seeing is over time, the total relationship balances are somewhere around $100,000.

    SBA 7(a) loan approvals ranking
    11th
    1H SBA FY

    we now rank 11th nationally in SBA 7(a) loan approvals during the first half of the SBA's fiscal year.

    Energy lending portfolio outstanding
    $2 billionflat for a long time
    current

    we've been sitting at $2 billion in outstanding for a long time.

    Oilfield service companies exposure (energy book)
    12%down from 35-40% historically
    current

    It's about 12% of the book now. It was as high as 35%, 40% at one time.

    Headcount reduction
    20%
    since 2008

    our headcount is down 20% and our -- back then, we were about $54 billion company, you have to inflation adjust that. But even with that, I mean, it's about a 25% improvement in productivity per dollar of real assets.

    Industry KPIs

    11
    MetricValueDetails
    Loans—
    Deposits—
    Cet1 ratio11.5%%
    Capital returns$77 millionUSD
    Fee income lines$172 millionUSD
    Allowance reserves1.16%%
    Net interest income$662 millionUSD
    Net interest margin3.27%%
    Net charge offs npls3 bpsbps
    Total operating expenses$558 millionUSD
    Efficiency ratio operating leverage—

    Product announcements

    2
    ProductTypeDetails
    business beyondlaunch
    gold accountupdate

    Deals & partnerships

    1
    Basis Investment GroupAgreement to acquire their Fannie and Freddie lending programs, related mortgage servicing rights, and an experienced team.

    This acquisition will expand Zions' capabilities in serving commercial real estate clients, particularly in multifamily lending, which is a key growth area for the region. The deal is subject to regulatory and customary closing approvals. The acquired business is P&L-based, not balance sheet intensive for long-term takeouts, but uses balance sheet for origination, construction, and stabilization of deals. MSR generation from this business could be impacted by future Basel III Endgame rules on risk weighting for MSRs. The region where the acquisition is focused (Mountain West, Southwest) accounts for about 80% of the nation's population growth, driving demand for multifamily housing. The acquisition aligns with the capital market strategy and real estate talent in-house to originate such products. It is an opportunistic acquisition, not driven by a growth objective, but by strategic fit and price. The company has been looking to do this type of business for some time. The licenses are rare and valuable. The acquisition will allow Zions to be in the stream for long-term takeouts for customers developing multifamily products. It is not a use of balance sheet for the long-term portion of the business, but for origination and construction.

    Risks & headwinds

    5
    Uncertain path of benchmark ratesNext 12 months

    Forward curve as of March 31 assumed no rate changes over the next 12 months.

    Mitigation: Company is asset-sensitive, NII outlook of 7-8% growth if rates remain static.

    Pricing pressure in CRE marketCurrent

    as much pricing pressure in CRE as they've seen for some time.

    Mitigation: Cautious approach to increased CRE activity.

    Price competition in C&I spaceCurrent

    not significant, but it's something that we're definitely very aware of.

    Mitigation: Healthy activity levels and strong call programs.

    Increases to expenses in certain consumer-focused businessesCurrent

    null

    Mitigation: Focused attention on commercial and industrial space, watching consumer-focused businesses.

    Potential impact of tariffs or Middle East eventsCurrent

    not seeing a lot of impact... at this point

    Mitigation: Watching closely.

    What to watch in Q2 FY26

    5

    Net Interest Income (NII) growth

    1Q FY27
    Currentmoderately increasing outlook for 1Q FY27 over 1Q FY26
    Target7% to 8% growth if benchmark rates remain static

    Why it matters

    NII is a primary driver of bank profitability, and achieving the higher end of the outlook would signal strong performance.

    For the first quarter of 2027, our outlook for net interest income is moderately increasing given the uncertain path of benchmark rates. The forward curve as of March 31 assumed no rate changes over the next 12 months. As that plays out, we estimate net interest income growth of about 7% to 8%, which would exceed our guide.

    Q&A highlights

    5

    Inquired about the drivers of the 14 bps loan yield compression and new money loan yields, and how the 100-150 bps positive operating leverage expectation aligns with the NII outlook given no rate cuts.

    Loan yield compression was primarily due to benchmark repricing from December rate cuts. New money loan yields show a 72 bps spread over the back book. The NII outlook of 7-8% growth (if rates stay static) implies a more powerful positive operating leverage than the 100-150 bps full-year guide, driven by repricing of investment securities and reduced swap headwinds.

    “for those fixed rate loan portfolios, or things that have yet to reprice through. And there, we're seeing a 72 basis point spread on the front book vis-a-vis the back book.”

    asked by John Pancari · answered by R. Richards

    2 min read7 chapters

    Detailed Narrative

    01

    Capital Markets Expansion

    Zions continues to invest heavily in its Capital Markets division, expanding across investment banking, sales and trading, and real estate capital markets. The recent agreement to acquire Fannie and Freddie lending programs from Basis Investment Group is expected to enhance service to commercial real estate clients across the Western United States and beyond, further strengthening the capital markets franchise.

    02

    New Deposit Products and SBA Lending Momentum

    The company launched "business beyond," a companion offering for small business customers, following the "gold account" consumer product. Piloted in Colorado and Arizona, it aims for a broader rollout and is designed to support clients from basic banking to complex cash flow needs, contributing to deposit growth. Zions also ranks 11th nationally in SBA 7(a) loan approvals for the first half of the SBA's fiscal year, reflecting continued focus and momentum in small business lending.

    03

    Balance Sheet Optimization and Funding Costs

    Zions is actively managing its balance sheet, with short-term borrowings declining significantly as higher-cost wholesale funding is replaced by customer deposit growth and securities cash flows, alongside remixing into senior debt. This strategy contributed to a sequential decline of 8 basis points in total funding costs to 1.68% in Q1 FY26, and is expected to continue improving net interest margin.

    04

    Strong Credit Quality

    Credit quality remains strong with net charge-offs at 3 basis points annualized of average loans and the nonperforming assets ratio declining to 48 basis points. Classified and criticized balances also decreased during the quarter. The allowance for credit losses stands at 1.16%, providing 239% coverage of nonaccrual loans, indicating a well-positioned risk profile.

    05

    Basel III Endgame Regulatory Impact

    Management is studying the Basel III Endgame proposal, which could provide RWA relief of 9-10% under the standardized approach, translating to approximately 93 basis points to the CET1 ratio. While the ERBA impact is still being assessed, the company views the proposal as potentially beneficial and is prepared for its implications, including the formalization of AOCI into capital standards.

    06

    Core System Modernization Benefits and Innovation

    The decade-long core replacement project (FutureCore) has improved data quality and organization, enabling faster execution and innovation. This platform facilitates new initiatives like a potential tokenized deposit/stablecoin application, offering competitive advantages and allowing the company to explore new technologies more efficiently than peers.

    07

    Opportunistic M&A Strategy

    Zions pursues M&A opportunistically, not as a primary growth objective, focusing on strategic fit and price. The acquisition of Basis Investment Group's agency lending business aligns with strengthening the capital markets strategy in the Western United States, particularly in multifamily lending, which is a key growth area for the region.

    AI-generated summary of the company’s earnings call. Not investment advice.