The banking and financial services business in which we engage is highly regulated. Such regulation is intended among other things, to improvepromote the stability of banking and financial companies and to protect the interests of customers, including both loan customers and depositors, and taxpayers. Thesecommunities. Although banks and their customers benefit from many of these regulations, arein some cases, they may not however, generallybe aligned with, or intended to protect, the interests of our shareholders or creditors,creditors. Banking laws and in fact may have the consequence of reducing returns to our shareholders. This regulatory framework has been materially revised and expanded since the 2008-2009 financial crisis and recession. In particular, the Dodd-Frank Act and regulations promulgated pursuant to it have given financial regulators expanded powers over nearly every aspectmany aspects of the Company’s business. These include, among other things, new, higher regulatory capital requirements; regulation of dividends and other forms of capital distributions to shareholders through annual stress testing and capital planning processes; heightened liquidity and liquidity stress testing requirements,financial services industry, which include specific definitions of the types of investment securities that qualify as “high-quality liquid assets” and which effectively limit the portion of the Company’s balance sheet that can be used to meet the credit needs of its customers; specific limitations on mortgage lending products and practices; specific limits on certain consumer payment fees; and subjecting compensation practices to specific regulatory oversight and restrictions. Individually and collectively, these additional regulations have imposed and will continue to impose higher costs on the Company, and have reduced, and may continue to reduce, returns earned by shareholders. Some aspects of the Dodd-Frank Act continue to be subject to rulemaking, the majority of the rules that have been adopted may be subject to interpretationFurthermore, changes in applicable laws or clarification,regulations, and accordingly, the impact of suchin their application by regulatory changesagencies cannot be presently determined. Recent political developments, including the change in the executive administration of the United States,predicted and may have increased uncertainty to the implementation, scope,a material effect on our business and timing of regulatory reforms, including those related to the implementation of the Dodd-Frank Act. The Company is committed to both satisfying heightened regulatory expectations and providing attractive shareholder returns. However, given the still-changing regulatory environment and such uncertainty, the results of these efforts cannot yet be known.
General
The Dodd-FrankNational Bank Act
The National Bank Act provides that under certain circumstances the common stock of at least $50 billion, such as Zions, and further, more stringent requirements for those with total consolidated assets of at least $250 billion. The general qualitative requirements include: (i) prohibiting incentive arrangements that encourage inappropriate risks by providing excessive compensation; (ii) prohibiting incentive arrangements that encourage inappropriate risks that could lead to a material financial loss; (iii) establishing requirements for performance measures to appropriately balance risk and reward; (iv) requiring board of director oversight of incentive arrangements; and (v) mandating appropriate record-keeping. For larger financial institutions, including Zions, the proposed revised regulations would also introduce very prescriptive requirements relating to the types and percentages, the timing of the realization, and the risk of forfeiture of incentive compensation awarded to “senior executive officers” and “significant risk-takers.” The regulators have not yet issued any final rules.
Capital Standards -– Basel Framework
OCC. The Basel III capital rules define the components of capital and address other issuesfactors, such as risk weights, affecting the numerator in banking institutions’ regulatory capital ratios. The Basel III capital rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replaced the risk-weighting approach derived from Basel I capital accords of the Basel Committee, with a more risk-sensitive approach based, in part, on the standardized approach in the Basel Committee’s 2004 Basel II capital accords. The Basel III capital rules also implemented the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies’ rules.
The Basel III capital rules among other things, (i) introduced a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specified that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) applied most deductions/adjustmentsrequire us to regulatory capital measures to CET1 and not to the other components of capital, thus potentially requiring higher levels of CET1 in order to meet minimum ratios, and (iv) expanded the scope of the deductions/adjustments from capital as compared to prior regulations.
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Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) requires each federal banking agency to take prompt corrective action to resolve theidentified problems of insured depository institutions, including, but not limited to, those that fall below one or more prescribed minimum capital ratios. Pursuant to FDICIA, the FDIC promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on the level of its capital ratios: well-capitalized, adequately capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized.
Under the prompt corrective action provisions of FDICIA as modified by the Basel III capital rules, an insured depository institution will generally will be classified as well-capitalized if it has a CET1 ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10%, and a Tier 1 leverage ratio of at least 5%, and an. An insured depository institution will generally will be classified as under-capitalized if itsit has a CET1 ratio is under 3%, its total risk-based capital ratio is less than 8%4.5%, itsa Tier 1 risk-based capital ratio is less than 6%, or itsa total risk-based capital ratio less than 8%, and a Tier 1 leverage ratio is less than 4%.
An institution that based upon its capital levels, is classified as “well-capitalized,” “adequatelywell-capitalized, adequately capitalized,” or “under-capitalized,”under-capitalized, may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, the acceptance of brokered deposits, and restrictions or prohibitions on the payment of dividends and restrictions on the acceptance of brokered deposits.dividends. Furthermore, if a bank is classified in one of the under-capitalized categories, it is required to submit a capital restoration plan to the Federal bank regulator,federal banking regulator.
The following schedule presents minimum capital ratio and capital conservation buffer requirements, our capital ratios at December 31, 2023, and the holding company must guaranteeminimum requirements to be well-capitalized:
Schedule 1
MINIMUM CAPITAL RATIO AND CAPITAL CONSERVATION BUFFER REQUIREMENTS
| December 31, 2023 | Minimum requirement to be “well-capitalized” | |||||||||||||||||||
| Minimum capital requirement | Capital conservation buffer | Minimum capital ratio requirement with capital conservation buffer | Current capital ratio | |||||||||||||||||
| CET1 to risk-weighted assets | 4.5 | % | 2.5 | % | 7.0 | % | 10.3 | % | 6.5 | % | ||||||||||
| Tier 1 capital (i.e., CET1 plus additional Tier 1 capital) to risk-weighted assets | 6.0 | 2.5 | 8.5 | 10.9 | 8.0 | |||||||||||||||
| Total capital (i.e., Tier 1 capital plus Tier 2 capital) to risk-weighted assets | 8.0 | 2.5 | 10.5 | 12.8 | 10.0 | |||||||||||||||
| Tier 1 capital to average consolidated assets (known as the “Tier 1 leverage ratio”) | 4.0 | N/A | 4.0 | 8.3 | 5.0 | |||||||||||||||
Recent Regulatory Developments
Basel III Endgame
On July 27, 2023, bank regulators issued a proposal to implement the performanceBasel Committee on Banking Supervision’s finalization of the post-crisis bank regulatory capital reforms. The proposal, commonly referred to as the “Basel III Endgame,” would significantly revise the capital requirements applicable to large banking organizations, defined as those with total assets of $100 billion or more. The proposal is subject to a three-year phase-in period for certain aspects of the proposal, and would be effective beginning July 1, 2025. At December 31, 2023, we had $87.2 billion in total assets and do not currently qualify as a large banking organization. We are evaluating the potential future impact of the proposal, as we expect it is more likely than not we would become subject to this proposal in the future, were it to be finalized in its current form.
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Under the proposal, if at such time we were to increase our total assets to $100 billion or more, we would, among other things, be required to (1) include certain components of accumulated other comprehensive income (“AOCI”) in regulatory capital and be subject to increased limitations on deferred tax assets (“DTAs”) as a percent of CET1, (2) hold capital for operational risk and market risk, and (3) calculate risk-based capital ratios under both the standardized approach and the expanded risk-based approach.
Long-term Debt
On August 29, 2023, bank regulators issued a proposal that plan.would expand a long-term debt requirement to all banks with total assets of $100 billion or more. The proposed rule would require these banks to have a minimum outstanding amount of eligible long-term debt that is the greatest of (1) 6% of total risk-weighted assets, (2) 2.5% of total leverage exposure, and (3) 3.5% of average total assets. In the event we were to increase our total assets to $100 billion or more, we would have a three-year implementation period to issue debt and meet the other requirements under the proposal. At December 31, 2023, if enacted as proposed, the estimated amount of incremental debt that would be implied by the proposal (based on our asset size at year end) would be approximately $3.5 billion over the three year phase-in period. We expect that the issuance of incremental debt would replace other sources of funding.
Resolution Planning
Additionally, on August 29, 2023, the FDIC issued a proposal that would revise the requirements for resolution planning (“living wills”) for banks in two asset categories. Under the proposal, banks with total assets of $100 billion or more would be required to submit more detailed living wills, while banks with total assets between $50 billion and $100 billion would submit more limited information filings, in each case filed biennially beginning in 2025.
FDIC Special Assessment
In November 2023, the FDIC issued a final rule to implement a special assessment pursuant to a systemic risk determination to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in early 2023. Using an assessment base equal to the estimated amount of uninsured deposits above $5 billion at December 31, 2022, the FDIC is expected to collect the special assessment from banks at an annual rate of approximately 13.4 basis points (“bps”) for an anticipated eight quarterly assessment periods, beginning with the first quarterly assessment period of 2024. At December 31, 2023, our estimated impact of the special assessment was approximately $90 million, which we recorded in deposit insurance and regulatory expense during the fourth quarter of 2023.
Capital Planning and Stress Testing
We utilize stress testing as an important mechanism to inform our decisions on the appropriate level of capital, based upon actual and hypothetically stressed economic conditions, which are comparable in severity to the scenarios published by the Federal Reserve Board (“FRB”). Our recent internal stress test included hypothetical scenarios that reflected (1) high inflation, (2) increased losses on commercial loans due to inflation and supply chain disruptions, (3) declining commercial property values, (4) increased losses on consumer loans due to falling home prices, (5) rising unemployment, and (6) other current economic, financial, and social disruptions. The results of our stress test indicated that we would maintain capital ratios in excess of regulatory minimum and capital conservation buffer requirements throughout the nine-quarter horizon for the hypothetical stress test.
Liquidity
We utilize internal liquidity stress tests as a primary tool for establishing and managing liquidity guidelines including, but not limited to, holdings of investment securities and other liquid assets, levels of readily available contingency funding, concentrations of funding sources, and the maturity profile of liabilities. At December 31, 2023, we had sources of liquidity that exceeded our uninsured deposits without the need to sell any investment securities. We continue to actively manage our deposit base and associated deposit costs in response to the higher interest rate environment. For more information about our liquidity profile, see “Liquidity Risk Management” in MD&A on page 67.
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Financial Privacy and Cybersecurity
The federal legislature and federal banking regulators have implemented laws and rules governing the use of consumer information by banks and other financial institutions, including provisions of the Gramm-Leach-Bliley Act. These laws and rules limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to unaffiliated third parties, require financial institutions to disclose privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to an unaffiliated third party. These laws and regulations also affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. In addition, consumers may prevent disclosure of certain information among affiliated companies that is assembled or used to determine eligibility for a product or service, such as that shown on consumer credit reports and asset and income information from applications. Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.
Federal and state regulators have been increasingly active in implementing privacy and cybersecurity standards and regulations. For example, recently effective SEC rules now require timely disclosure of material cybersecurity incidents and description of cybersecurity risk management, strategy, and governance. Additionally, during the past several years, a growing number of states, including those in which we conduct business, have enacted, or are considering enacting, laws and regulations granting consumers enhanced privacy rights and control over personal information, establishing or modifying data breach notification requirements, and requiring certain financial institutions to implement detailed and prescriptive cybersecurity programs. Data and cybersecurity laws and regulations are evolving rapidly and remain a focus of state and federal regulators.
Other Regulations and Proposals
•Limitations on dividends payable by subsidiaries. A significant portion of the Parent’s cash, which is usedto shareholders. Our ability to pay dividends on both our common and preferred stock and to pay principal and interest on our debt obligations, is derived from dividends paid to the Parent by its subsidiary bank. These dividends are subject to various legal and regulatory restrictions. See Note 1415 of the Notes to Consolidated Financial Statements.Statements for additional information.
•Safety and soundness requirements. Federal law requires that our bank be operated in a safe and sound manner. We are subject to additional safety and soundness standards prescribed in the FDICIA, including standards related to internal controls, information systems, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, as well as other operational and management standards deemed appropriate by the federal banking agencies. The safety and soundness requirements give bank regulatory agencies significant latitude in their supervisory authority over us.
•Requirements for approval of acquisitions and activities and restrictions on other activities. PriorThe National Bank Act requires regulatory and shareholder approval of all mergers between a national bank and another national or state bank and does not allow for the FRB is required under the BHC Act fordirect merger into a financial holding company to acquire or hold more than a 5% voting interestnational bank of an unaffiliated nonbank. See further discussion in any bank, to acquire substantially all the assets of a bank or to merge with another financial or bank holding company. The BHC Act also requires approval for certain non-banking acquisitions, restricts the activities of bank holding companies that are not financial holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto, and restricts the non-banking activities of a financial holding company to those that are permitted for financial holding companies or that have been determined by the FRB to be financial in nature, incidental to financial activities, or complementary to a financial activity. Laws“Risk Factors.” Other laws and regulations governing national banks contain similar provisions concerning acquisitions and activities.
•Limits on interchange fees imposed under the Dodd-Frank Act, including a set of rules requiring that interchange transaction fees for electronic debit transactions be reasonable and proportional to certain costs associated with processing the transactions. In addition, the Federal Reserve has proposed revising Regulation II to lower debit interchange fees by almost 30% and institute a biennial review of the cap without accompanying public comment. If this proposal passes, it could reduce our fee income by approximately $10 million or more per year.
•Limitations on the dollar amount of loans made to a borrower and its affiliates.
•Limitations on transactions with affiliates. The Dodd-Frank Act significantly expanded the coverage and scope of the limitations on affiliate transactions within a banking organization.
•Restrictions on the nature and amount of any investments and ability to underwrite certain securities.types of securities (e.g., common equity).
•Requirements for opening and closing of branchesbranches.
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•A number of federal and the acquisition of other financial entities.
•Community Reinvestment Act (“CRA”) requirements. The CRA requires banks to help serve the credit needs in their communities, including providing credit to lowlow- and moderate incomemoderate-income individuals. If our bank subsidiary failswe fail to adequately serve itsour communities, penalties may be imposed including denials of applications to add branches, relocate, add subsidiaries and affiliates, and merge with or purchase other financial institutions. Banking agencies recently finalized rules that completely overhaul the evaluation framework used by regulators to assess a bank’s performance under and compliance with these requirements, which may make it more difficult for banks to achieve satisfactory ratings. The potential impact of these new rules on the Bank and the industry as a whole is currently under review.
•Requirements regarding the time, manner, and form of compensation given to key executives and other personnel receiving incentive compensation, including requirements related to the SEC’s 2022 rule on pay versus performance disclosures, and recently finalized rules regarding the clawback of executive pay in certain circumstances involving accounting restatements. These restrictions include documentation and governance, deferral, risk-balancing, and the aforementioned clawback requirements. Any deficiencies in compensation practices may be incorporated into supervisory ratings, which can affect our ability to make acquisitions or engage in certain other activities, or could result in regulatory enforcement actions.
•Anti-money laundering regulations. The Bank Secrecy Act, Title III of the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”), and other federal laws require financial institutions to assist U.S. Governmentgovernment agencies in detecting and preventing money laundering and other illegal acts by maintaining policies, procedures and controls designed to detect and report money laundering, terrorist financing, and other suspicious activity.
Sustainability standards and related concerns, including those related to global climate change, continue to evolve and have become more prominent in recent years. We are closely monitoring developments in standards published by sustainability interest groups and organizations, as well as proposed regulatory initiatives and expectations relating to these issues. Although we believe the way we do business has alsobeen and is consistent with many of these standards and expectations, we strive to enhance our business practices by incorporating sustainability recommendations that we believe will benefit our investors, customers, employees, and communities.
In addition to proposed and evolving rulemaking by federal regulators, such as the SEC’s proposed rule on climate-related disclosures and the bank regulatory agencies’ recently issued principles designed to provide a framework for large financial institutions to manage exposure to climate-related financial risks, many states have adopted, corporate governance rules, whichor are intendedconsidering, laws that address climate and social issues. For example, the state of California recently passed sweeping climate-related disclosure laws that will require large entities doing business in the state, including the Bank, to allow shareholdersmeasure and investorsdisclose greenhouse gas emissions and report on their climate-related risks. These laws will increase our compliance costs and may include provisions that conflict with other state and federal regulations, or limit our ability to more easily and efficiently monitor the performanceconduct business in certain jurisdictions. We publish an annual Corporate Responsibility Report that provides a summary of companies and their directors.how we address these issues. The report is available on our website.
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Corporate Governance
Our Board of Directors of the Parent(“Board”) has overseen management’s establishment of a comprehensive system of corporate governance and risk management practices. This system includes frameworks, policies, and guidelines such as the following:
•Corporate Governance Guidelines, aGuidelines;
•A Code of Business Conduct and Ethics for Employees, a DirectorsEmployees;
•A Director’s Code of Conduct, aConduct;
•A Risk Management Framework;
•A Related Party Transaction Policy, Policy;
•Incentive Compensation Recoupment and Clawback Policies;
•Stock Ownership and Retention Guidelines, a Compensation Clawback Policy, an insider trading policy including provisions prohibiting hedgingGuidelines;
•An Insider Trading Policy; and placing restrictions on the pledging of company stock by insiders, and charters
•Charters for theour Executive, Audit, Risk Oversight, Compensation, and Nominating and Corporate Governance Committees.
More information on the Company’sour corporate governance practices is available on the Company’sour website at www.zionsbancorporation.com. (The Company’szionsbancorporation.com. Our website is not part of this Annual Report on Form 10-K).10-K.
HUMAN CAPITAL MANAGEMENT
We are proud of our employees who bring their unique, diverse talents to work each day. We are committed to identifying, recognizing, and creating fulfilling opportunities for our employees, and rewarding them for their contributions to our success.
During 2023, we continued to enhance certain benefits for our employees to adapt to the changing practices of the labor market. Recent changes include more flexibility with paid time off, more health care plan alternatives, and greater access to mental health benefits.
We had 9,679 full-time equivalent employees at December 31, 2023. The following schedule presents certain demographic attributes of our workforce as self-identified by our employees:
Schedule 2
| December 31, 2023 | |||||||||||||||||||||||
| Women | People of Color | Disabled | Veterans | ||||||||||||||||||||
| Employee Roles | |||||||||||||||||||||||
| Management | 52% | 29% | 9% | 2% | |||||||||||||||||||
| Non-management | 60% | 40% | 10% | 2% | |||||||||||||||||||
| All employees | 58% | 38% | 10% | 2% | |||||||||||||||||||
The Company has adopted policies, proceduresfollowing objectives and controlsinitiatives are integral to address compliance withour human capital management efforts:
Cultivating an environment where people are respected and valued, and where individual and cultural differences are embraced
We believe that (1) our performance is stronger when we are able to draw upon the requirementstalents and experience of the banking, securitiesa diverse team of employees, and other laws(2) in-person exchange of ideas and regulations described above or otherwise applicableviewpoints, in both formal and informal settings, improves productivity and supports a strong corporate culture while still offering flexibility to the Company. The Company intends to make appropriate revisions to reflect any changes required.
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We endeavor to provide opportunities for growth, development, and leadership to every employee. We are committed to continue this focus on ensuring that we have a workplace where all are treated fairly in accordance with their qualifications and abilities, and that the Bank is a place where everyone counts.
We use analytics, recruiting outreach efforts, and manager training to reach a diverse, qualified group of potential applicants to secure a high-performing workforce drawn from all segments of society. To identify qualified candidates, our recruiting team partners with assetscommunity organizations, schools, and governmental entities that support marginalized and underserved communities in our footprint. Our annual Corporate Responsibility Report, which is published on our website, highlights several achievements in this area, such as our Banker Development Program, which attracts and advances undergraduates and early career professionals.
Attracting, developing, and retaining talent for long-term success
We are committed to (1) attracting, developing, and retaining the most qualified individuals who reflect the diversity of $50 billionthe available workforce and markets in which we operate, (2) helping our employees grow in their careers, and (3) actively building a pipeline of talent for future leadership opportunities. As we attract and hire talent, we proactively consider the demand for competencies that will be needed within the workforce of the future.
Consistent with our strategic objectives, we invest in training our employees and providing them the tools and resources to build their capabilities. We offer more than 1,500 virtual, in-person, expert-led, and pre-recorded or self-paced learning options for employees to create custom learning plans for personal and professional development. In 2023, we hosted more than 1,000 training experiences to support employees, build new skills, or to assist in career advancement. We offer new manager programs, tuition reimbursement, education sponsorship opportunities, job shadowing, coaching, and formal mentoring programs. Our talent development program and individual development plans focus on education, experience, and exposure to help create well-rounded, highly skilled, and successful employees.
We are also mindful of the DFAST process,continued competition for talent in the labor market. We continue to analyze relevant metrics related to employee recruiting and turnover, which has and will continue to impact wages and flexible work arrangements.
Recognizing, engaging, and rewarding our employees
Our comprehensive rewards and recognition programs are designed to reward high performance, improve retention, and enhance the employee experience through recognition and growth opportunities. We provide meaningful upside opportunities for those who take accountability for business objectives that help us deliver superior results while reducing risk.
We routinely assess pay equity among employees across our organization by analyzing potential disparities in pay based on gender, minority status, and other factors. These actions help us compensate employees fairly. On a biennial basis, we enlist the services of an independent third party to review our pay equity. Results of the most recent review revealed that after adjusting for relevant variables such as described above under “Capital Planningeducation, experience, performance, and Stress Testing.”geography, there were no meaningful differences in pay levels among men, women, and people of color. We remain committed to fair and equitable compensation for all our employees.
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employee input continue to help strengthen working relationships with managers, improve clarity of organizational purpose and goals, and reinforce our Guiding Principles and Code of Business Conduct and Ethics.
We value work-life balance and strive to create a work environment that supports our employees with mental, physical, social, and financial wellness. Some of our key benefits include the following:
•Corporate match for our 401(k) plan of 4.5% of an employee’s salary and incentive compensation;
•Annual profit-sharing contributions;
•Health care plan options including behavioral health, wellness, and autism spectrum disorder services;
•Expanded mental health coverage, including coaching and clinical therapy sessions;
•Preventive prescription drug coverage not subject to the prior non-objection requirement under HCR/CCARdeductibles;
•Paid parental leave program;
•Adoption assistance program; and
•Paid time off for declaring any dividends or share repurchases, but would continue to be subject to the limitations on dividendsvarious community service activities and share repurchases pursuant to the National Bank Act and the OCC’s regulations.other volunteer opportunities.
ITEM 1A. RISK FACTORS
on our business or performance. Although not comprehensive, the following describes several risk factors that are significantmaterial to the Company:us are described below.
Credit quality has adversely affected us in the past and may adversely affect us in the future.
Credit risk is one of our most significant risks. ARising interest rates, increased market volatility, or a decline in the strength of the U.S. economy in general or the local economies in which we conduct operations could result in, among other things, deterioration in credit quality and/orand reduced demand for credit, including a resultant adverse effect on the income from our loan portfolio,and investment portfolios, an increase in charge-offs, and an increase in the allowance for loan and leasecredit losses (“ALLL”ACL”).
We have concentrationsconcentration of risk from counterparties and risk in our loan portfolio, including, but not limited to, loans secured by real estate, oil and gas-related lending, and leveraged and enterprise value lending, and oil and gas-related lending, which may have unique risk characteristics that may adversely affect our results. While oil and gas prices have stabilized over the last year and our lending exposure to this segment has been reduced, the oil and gas industry is still subject to volatility.
We engage in commercial constructionreal estate (“CRE”) term and land acquisition and development lending, as well as commercial termconstruction lending, primarily in our westernWestern states footprint. The Company, as a whole, has relatively larger concentrations of such lending than many other peer institutions. In addition, we have a concentrationCertain CRE collateral types, particularly office CRE, continue to experience increased vacancy rates, declining property values, and pressures from rising interest rates, which could result in increased delinquencies and defaults. We also engage in oil and gas-related lending, primarily in Texas. Both commercial real estate (“CRE”) and oilwe provide leveraged and gas-related lending areenterprise value loans across our entire footprint. Certain of these loans may be subject to specific
risks, including governmental and social responses to environmental issues and climate change, volatility, and potential significant and prolonged declines in
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collateral-values and activity levels. In addition,Any decline in these portfolios could cause increased credit losses and reduced loan demand, which could adversely affect our real estate lending is concentrated in the western states,business and values there may behave differently than in other partsthat of the United States.our customers. We may have other unidentified concentrated or correlated risks in our loan portfolio.
Our business is highly correlated to local economic conditions in a specific geographic region of the United States.U.S.
For example,information about our lending exposure to various industries and how we manage credit risk, could be elevated to the extent that our lending practicessee “Credit Risk Management” in these three states focusMD&A on borrowers or groups of borrowers with similar economic characteristics, which are similarly affected by the same adverse economic events. At December 31, 2017, loan balances associated with our banking operations in Utah, Texas, and California comprised 80% of the Company’s commercial lending portfolio, 74% of the CRE lending portfolio, and 71% of the consumer lending portfolio.page 54.
We have been and could continue to be negatively affected by adverse economic conditions.
Adverse economic conditions negatively affect the Company’s assets,pose significant risks to our business, including itsour loan and securitiesinvestment portfolios, capital levels, results of operations, and financial condition. The most recent financial crisis resultedA slowing economy and uncertainty related to inflationary pressures, including related changes in significant regulatory changes that continue to affect the Company. Although economic conditions have improved since the most recent financial crisis, it is possible that economic conditions may weaken. Economicmonetary and fiscal conditions in the United Statespolicies and other countries may directly or indirectly adversely impact economic and market conditions faced by the Company and its customers. Any sustained weakness or further weakening in economic conditions would adversely affect the Company.
Net interest income is the Company.largest component of our revenue. Factors beyond the Company’sour control can significantly influence the interest rate environment and increase the Company’sour risk. These factors include changes in the prevailing interest rate environment, competitive pricing pressures for our loans and deposits, adverse shifts in the mix of deposits and other funding sources, and volatile market interest rates resulting from general economic conditions and the policies of governmental and regulatory agencies, in particular the FRB. Most components of our balance sheet are sensitive to rising and falling rates, and mismatches in rate sensitivity between assets and liabilities may result in unanticipated changes in both asset and liability values and related income and expense. Additionally, asset and liability values may be significantly impacted by customer behavior, as customers may choose to withdraw certain deposits or prepay certain loans at any time, which may significantly affect our expected cash flows.
LIQUIDITY RISK
Changes in levels and sources of liquidity and capital, including the FRB decided to maintainresulting effects of recent events in the target range for the federal funds rate at 1.25% to 1.5%, and indicated that it will determine the timing and size of future rate adjustments by assessing realized and expected economic conditions relative to the objectives of maximum employment and 2% inflation.
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Although our capitaldeposit levels even inhave increased during the absencelatter half of actual adverse economic conditions or forecasts2023, our cost of funds has also increased, primarily as a result of stress testingdeclining noninterest-bearing deposits, growth in interest-bearing deposits, and capital planning baseda higher interest rate environment. The potential for greater volatility and further increased costs remains, particularly if there is negative news surrounding the banking industry or perceived risks regarding bank safety and soundness. In such an environment, some depositors may be more likely to believe that there is greater safety in maintaining large, uninsured deposits at banks deemed “too big to fail,” which may contribute to further deposit runoff and increased deposit costs of community and regional institutions, including the Bank. If we are unable to continue to fund assets through customer bank deposits or access other funding sources on hypothetical future adversefavorable terms, or if we experience continued increases in borrowing costs or FDIC insurance assessments, or otherwise fail to manage liquidity effectively, our liquidity, operating margins, financial condition, and results of operations may be materially and adversely affected.
The Federal Reserve’s tightened monetary policy has contributed to a decline in the value of our fixed-rate loans and investment securities that are pledged as collateral to support short-term borrowings. Other economic scenarios. Compliance with the capital requirements, including leverage ratios,conditions may limit operations that require the intensive usealso affect (or continue to affect) our liquidity and efforts to manage associated risks. The Federal Home Loan Bank (“FHLB”) system and Federal Reserve have been, and continue to be, a significant source of capitaladditional liquidity and funding. Changes in FHLB or Federal Reserve funding programs could adversely affect our ability to expand or maintain present business levels. For a summaryliquidity and management of the capital rules to which we are subject, see “Capital Standards – Basel Framework” on page 10 of this Annual Report on Form 10-K.
We and/orand the holders of our securities could be adversely affected by unfavorable rating actions from rating agencies.
STRATEGIC AND BUSINESS RISK
Problems encountered by other financial institutions could adversely affect financial markets generally and have indirect adverse effects on us.
The commercial soundness and stability of many financial institutions may be closely interrelated as a result of credit, trading, clearing, or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, and exchanges, with which we interact on a daily basis, and therefore, could adversely affect us. Information securityThis phenomenon has been evident in the recent events affecting the banking industry (such as the prominent bank closures), as financial institutions like us have been impacted by concerns regarding the soundness or creditworthiness of other financial institutions or reports of the risk of systemic deterioration in asset classes, such as commercial real estate. This has caused substantial and vendor management processes arecascading disruptions within the financial markets and deposits environment, increased expenses, reduced bank fees, and adversely impacted the market price and volatility of our common stock.
We may not be able to hire or retain qualified personnel or effectively promote our corporate culture, and recruiting and compensation costs may increase as a result of changes in place to actively identify, managethe workplace, marketplace, economy, and monitor actual and potential impacts.regulatory environment.
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talent, in particular, as we are more frequently competing for personnel with financial technology providers and other entities that may not have the same limitations on compensation as we do. If we were to suffer such adverse effects with respect to our employees, our business, financial condition and results of operations could be adversely or materially affected.
Our ability to retain talent may also be adversely affected perhaps materially.by changes in the economy and workforce trends, priorities, migration, modes of delivery and other considerations, such as the increased ability of employees to work from anywhere in many industries.This growth in remote work and other changing priorities and benefits has led to an increase in compensation and related expenses and workplace challenges, such as fewer opportunities for face-to-face interactions, training and mentoring new employees, promoting a cohesive corporate culture, and increased competition for experienced labor, especially in high-demand and highly skilled categories. Inflationary pressures have also increased our compensation costs and are likely to continue to do so in the future.
We have made, and are continuing to make, significant changes to the Company that include, among other things, organizational restructurings, efficiency initiatives, and replacement or upgrades of certain core technologicaltechnology systems to improve our operating efficiency and control environment, and operating efficiency.environment. The ultimate success and completion of these changes, and their effecteffects on the Company,us, may vary significantly from initial planning,intended results, which could materially adversely affect the Company.us.
These initiatives and other significant changes continue to be implemented; some of the projects are fully completed,implemented and some projects are in their early stages.various stages of completion. By their very nature, projections of duration, cost, expected savings, expected efficiencies, and related items are subject to change and significant variability. There can be no certainty that we will achieve the expected benefits or other intended results associated with these projects.
We could be adversely affected by our ability to develop, adopt, implement, and deliver technology advancements.
Our ability to remain competitive is increasingly dependent upon our ability to maintain critical technological capabilities, and to identify and develop new, value-added products for existing and future customers. These technological competitive pressures arise from both traditional banking and nontraditional sources. Larger banks may have greater resources and economies of scale attendant to maintaining existing capabilities and developing digital and other technologies. Fintechs and other technology platform companies continue to emerge and compete with traditional financial institutions across a wide variety of products and services. Industry experimentation with, and adoption of, artificial intelligence (“AI”), the expansion of blockchain technologies, and digital currencies, including the potential creation and adoption of central bank digital currencies, present similar risks. Our failure to remain technologically competitive could impede our competitive market position and reduce customer satisfaction, product accessibility, and relevance.
OPERATIONAL RISK
Our operations could be disrupted by the effects of new and ongoing projects and initiatives.
We may encounter significant adverse developments in the completionoperational disruptions arising from our numerous projects and implementation of these changes.initiatives. These may include significant time delays, cost overruns, loss of key people, technological problems, and processing failures. We may also experience operational disruptions due to capacity constraints, service level failures and other adverse developments.inadequate performance, and certain replacement costs. Any or all of these issues could result in disruptions to our systems, processes, control environment, procedures, employees, and employees, which may adversely impact our customers and our ability to conduct business.
We could be adversely affected by failure in our internal controls.
Because of their inherent limitations, our internal controls may not prevent or detect the risk of operational failures, misstatements in our financial statements, or capital arising from inadequate or failed internal processes or systems, human errors or misconduct, or other adverse external events. A failure in our internal controls could have a
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significant negative impact not only on our earnings, but also on the perception that customers, regulators, and investors may have of us and adversely affect our business and our stock price.
Climate-related and other catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, floods, and prolonged drought, and pandemics may adversely affect us, our customers, and the general economy, financial and capital markets, and specific industries, and the Company.industries.
The Company hasoccurrence of pandemics, natural disasters, and other climate-related or catastrophic events could materially and adversely affect our operations and financial results. We have significant operations and a significant customer basecustomers in Utah, Texas, California, and other regions where natural and other disasters mayhave occurred, and are likely to continue to occur. These regions are known for being vulnerable to natural disasters and other risks, such as hurricanes, tornadoes, earthquakes, fires, floods, prolonged droughts, and prolonged drought.other weather-related events, some of which may be exacerbated by climate change and become more frequent and intense. These types of natural catastrophic events at times have posed physical risks to our property and have disrupted the local economy, the Company’sour business, and customers, including decreased access to insurance and have posed physical risks to the Company’s property.other services. In addition, catastrophic events occurring in other regions of the world may have an impact on us and our customers.
We use models in the Company’smanagement of the Bank. There is risk that these models are inaccurate in various ways, which may cause us to make suboptimal decisions.
We rely on models in the management of the Bank. For example, we use models to inform our estimate of the allowance for credit losses, to manage interest rate and liquidity risk, to project stress losses in various segments of our loan and investment portfolios, and to project net revenue under stress. Models are inherently imperfect and cannot perfectly predict outcomes. Management decisions that are largely informed by such models, therefore, may be suboptimal. For example, with the recent prominent bank closures during the first half of 2023, customer deposit behavior deviated from modeled behaviors, and as a result, we redeveloped our deposit models, which are currently used by management. For more information about our deposit models, see “Interest Rate and Market Risk Management” in MD&A on page 63.
We outsource various operations to third-party vendors, which could adversely impact our business and operational performance.
We rely on various vendors to perform operational activities to conduct our business. Although there are benefits in entering into these relationships, there are risks associated with such activities.Our operational controls and third-party management programs may not provide adequate oversight and control. Inadequate performance by third parties can adversely affect our ability to deliver products and services to our customers and conduct our business. Replacing or finding alternatives for vendors who do not perform adequately can be difficult and costly, and may also adversely impact our customers and other operations, particularly when circumstances require us to make changes under tight time constraints. Many of our vendors have experienced adverse effects upon their operations, supply chains, personnel, and businesses arising from inflationary pressures, wars and geopolitical conflicts, cyber vulnerabilities, and other events, all of which can impact our operations as well.
For information about how we manage operational risk, see “Operational, Technology, and Cybersecurity Risk Management” in turnMD&A on the Company. Although we have business continuity and disaster recovery programs in place, a significant catastrophic event could materially adversely affect the Company’s operating results.page 70.
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TECHNOLOGY RISK
We could be adversely affectedimpacted by system vulnerabilities, failures, or outages impacting operations and customer services such as online and mobile banking.
We rely on various information technology systems that work together in supporting internal operations and customer services. Vulnerabilities in, or a failure in ouror outage of, one or many of these systems could impact the ability to perform internal controls.
For information regarding risks associated with the replacement or upgrades of our core technology systems, see “Strategic and Business Risk” in Risk Factors on our earnings, but alsopage 16. For information about how we manage technology risk, see “Operational, Technology, and Cybersecurity Risk Management” in MD&A on the perception that customers, regulators and investors may have of the Company. We continue to devote a significant amount of effort, time and resources to improving our controls and ensuring compliance with complex accounting standards and regulations. These efforts also include the management of controls to mitigate operational risks for programs and processes across the Company.page 70.
We are subject to a variety of information system failure and cyber securitycybersecurity risks that could adversely affect our business and financial performance.
We rely heavily on communications and information systems to conduct our business. We process and maintain on our systems certain information that is confidential, proprietary, personal, or otherwise sensitive, including financial and other confidential business information. We, our customers, and other financial institutions with which we interact, are subject to ongoing, continuous attempts by threat actors, such as organized cybercrime, hackers, and state-sponsored organizations to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations.systems. Information security risks for us and other large financial institutions such as Zions have increased significantly in recent years, in part because of the proliferation of new technologies, such as Internet and mobile banking to conduct financial transactions,the ubiquity of internet connections, and the increased sophistication and activities of cyber criminals. Any failure, interruptionthreat actors. The types of attacks these threat actors may use include, but are not limited to: exploiting customer or breach in securitysystem vulnerabilities or misconfigurations, deceiving employees through email phishing or social engineering, and compromising any of our suppliers.
Third parties, including our suppliers and their subcontractors, also present operational and information security risks to us, including security incidents or failures of their own systems could resultand downstream systems. In incidents involving third parties, we may not be informed promptly of any effect on our services or our data, or be able to participate in failuresany related investigation, notification, or disruptionsremediation that occurs. The possibility of third-party or employee error, failure to follow security procedures, or malfeasance also presents these risks.
As cybersecurity threats continue to evolve, we will be required to expend additional resources to continue to modify or enhance our defenses or to investigate or remediate any information security vulnerabilities. We, and our third-party suppliers, have experienced cybersecurity incidents in the past that have not had material impact to our customer relationship management, general ledger, deposit, loan and other systems, misappropriation of funds, and theft, disclosuredata, customers, or misuse of proprietary Company or customer data. While we have significant internal resources, policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems,operations, but there can be no assurance that any such failure, interruption, or significant security breach will not occur in the future, or, if they do occur, that theyany future occurrences will be adequately addressed. As cyber threatsIt is impossible to determine the severity or potential effects of these incidents with any certainty.
System enhancements and updates may also create risks associated with implementing new systems and integrating them with existing ones. Due to the complexity and interconnectedness of information technology systems, the process of enhancing our defenses itself can create a risk of systems disruptions and security issues. We may face additional risks to the extent our hardware and software providers are unable to deliver patches and updates to mitigate vulnerabilities or we are unable to implement patches in a timely manner, particularly when a vulnerability is being actively exploited by threat actors. We have devoted and will continue to evolve, we may be required to expenddevote significant additional resources to continuethe security of our computer systems, but they may still be vulnerable to modifythese threats and our efforts may subsequently be deemed to have been inadequate by regulators or enhance our layers of defense or to investigate or remediate any information security vulnerabilities.courts. The occurrence of any failure, interruption or security breach ofincident to our information systems or those of our third-party suppliers could interfere with or disrupt our
19
operations and services, damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability.liability, or otherwise result in material adverse consequences on us.
Internal stress testing and capital plan. There is risk that these models are incorrect or inaccurate in various ways, which can cause us
Under stress testingthe National Bank Act and OCC regulations, certain capital management standards implemented by bank regulatory agencies under the Dodd-Frank Act, we may declare dividends, repurchase common stock, redeem preferred stock and debt, access capital markets for certain types of capital, make acquisitions, and enter into similar transactions, only if included in a capital plan to which the FRB has not objected. Any similar transactions not contemplated in our annual capital plan, other than those with an inconsequential impact on actual or projected capital, may require a new stress test and capital plan, which isincluding share repurchases, are subject to FRB non-objection.the approval of the OCC. These requirements may significantly limit our ability to respond to and take advantage of market developments.
We could be adversely affected by accounting, financial reporting, and regulatory and compliance risk.
The value of our goodwill may decline in the future.
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Changes in applicable tax laws, regulations, macroeconomic conditions, or market conditions may adversely affect our financial results, and there can be no assurance that we will be able to fully realize our deferred tax assets.
Laws and regulations applicable to us and the financial services industry impose significant limitations on our business activities and subjectssubject us to increased regulation and additional costs.
Regulators, the Company’s abilityU.S. Congress, state legislatures, and other governing or consultative bodies continue to compete effectively with less regulatedenact rules, laws, and policies to regulate the financial services providers),industry and results of operations.
There can be no assurance that any or all of these regulatory changes or actions will ultimately be adopted.enacted. However, if adopted,enacted, some of these proposals could adversely affect the Companyus by, among other things: impacting after-tax returns earned by financial services firms in general; limiting the Company’sour ability to grow; increasing FDIC insurance assessments, taxes or fees on some of the Company’sour funding or activities; limiting the range of products and services that the Companywe could offer; and requiring the Companyus to raise capital at inopportune times.
Regulations and laws may be modified or repealed, and new legislation may be enacted that will affect us and our subsidiaries.
The ultimate impact of these proposals cannot be predicted as it is unclear which, if any, may be adopted.enacted.
Tax laws, regulations, and case law may change due to legislative, administrative, and judicial changes that could adversely impact our business and financial performance.
We are subject to the income tax laws of the U.S., its states, and other jurisdictions where we conduct business. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management makes judgments and estimates about the application of these inherently complex laws, related regulations, and case law. In the process of preparing our tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law. Changes in tax laws, regulations, or case law may result in an adverse impact to our effective tax rate, tax obligations, and financial results. Additionally, challenges made by tax authorities during an audit may result in adjustments to our tax return filings, resulting in similar adverse impacts to our financial position.
We could be adversely affected by legal and governmental proceedings.
We are subject to risks associated with legal claims, litigation, and regulatory and other government proceedings. The Company’sOur exposure to these proceedings has increased and may further increase as a result of stresses on customers, counterparties, and others arising from the past or current economic environments, more frequent claims and actions resulting from fraud schemes perpetrated by or involving our customers, new regulations promulgated under recently adoptedenacted statutes, the creation of new examination and enforcement bodies, and increasingly aggressive enforcement and legal actions against banking organizations. Anysuchmatters may result in material adverse consequences to our results of operations, financial
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condition or ability to conduct our business, including adverse judgments, settlements, fines, penalties (including(e.g., civil money penalties under applicable banking laws), injunctions, restrictions on our business activities, or other relief. We maintain insurance coverage to mitigate the financial risk of defense costs, settlements, and awards, but the coverage is subject to deductibles and limits of coverage. Our involvement in any such matters, even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. In general, the amounts paid by financial institutions in settlement of proceedings or investigations, including those relating to anti-money laundering matters, have been increasing dramatically. This has affected and will continue to adversely affect (1) our ability to obtain insurance coverage for certain claims, (2) our deductible levels, and (3) the cost of premiums associated with our coverage. Consequently, our financial results are subject to greater risk of adverse outcomes from legal claims.
Due to the difficulty in predicting the timing of, and damages or penalties associated with, the resolution of legal claims, it is possible that adverse financial impacts from litigation could occur sporadically and could be significant. In addition, any enforcement matters could impact our supervisory and CRA ratings, which may restrict or limit our activities.
The corporate and securities laws applicable to us are not as well-developed as those applicable to a state-chartered corporation, which may impact our ability to effect corporate transactions in an efficient and optimal manner.
Our corporate affairs are governed by the National Bank Act, and related regulations are administered by the OCC. As to securities laws, the OCC maintains its own securities offering framework applicable to national banks and their securities offerings, and our compliance with the Exchange Act is governed and enforced by the OCC.
State corporate codes, including that of Utah, are widely recognized, updated by legislative action from time-to-time, and may be based on and influenced by model statutes. The federal securities law regime established by the Securities Act and the Exchange Act and the SEC’s extensive and well-developed framework thereunder are widely used by public companies. The OCC’s statutory and regulatory frameworks have been used by publicly traded banking organizations relatively rarely and are not as well-developed as the corporate and securities law frameworks applicable to other public corporations. While certain specific risks associated with operating under these frameworks are described below, unless and until these frameworks are further developed and established over time, the uncertainty of how these frameworks might apply to any given corporate or securities matters may prevent us from effecting transactions in an efficient and optimal manner or perhaps at all.
Differences between the National Bank Act and state law requirements regarding mergers could hinder our ability to execute acquisitions as efficiently and advantageously as bank holding companies or other financial institutions.
Unlike state corporate law, the National Bank Act requires shareholder approval of all mergers between a national bank and another national or state bank and does not allow for exceptions in the case of various “minor” mergers, such as a parent company’s merger with a subsidiary or an acquirer’s merger with an unaffiliated entity in which the shares issued by the acquirer do not exceed a designated percentage. The National Bank Act and related regulations may also complicate the structuring of certain nonbank acquisitions.
These differences could adversely affect the ability of the Bank and other banks registered under the National Bank Act to efficiently consummate acquisition transactions. In addition, such differences could make us less competitive as a potential acquirer in certain circumstances given that our acquisition proposal may be conditioned on shareholder approval while our competitors’ proposals will not have such a condition.
We are subject to restrictions on permissible activities that would limit the types of business we may conduct and that may make acquisitions of other financial companies more challenging.
Under applicable laws and regulations, bank holding companies and banks are generally limited to business activities and investments that are related to banking or are financial in nature. The range of permissible financial activities is set forth in the Gramm-Leach-Bliley Act and is more limited for banks than for bank holding company isorganizations. The differences relate mainly to insurance underwriting (but not insurance agency activities) and
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merchant banking (but not broker-dealer and investment advisory activities). The fact that we do not have a bank holding company could make future acquisitions of financial institutions with such operations more challenging.
REPUTATIONAL RISK
We are presented with various reputational risk issues that could stem from operational, regulatory, compliance, and legal risks.
OTHER RISKS
The Russian invasion of Ukraine, the conflicts in the Middle East, other geopolitical conflicts, and retaliatory measures imposed by the U.S. and other countries, including the responses to such measures, may cause significant disruptions to domestic and foreign economies and markets.
The Russia-Ukraine war and the conflicts in the Middle East, along with other geopolitical conflicts, have created new risks for global markets, trade, economic conditions, cybersecurity, and similar concerns. For example, these conflicts could affect the availability and price of commodities and products, adversely affecting supply chains and increasing inflationary pressures; the value of currencies, interest rates, and other components of financial markets; and lead to increased risks of events such as cyberattacks that could result in severe costs and disruptions to governmental entities and companies and their operations. The impact of these conflicts and retaliatory measures is continually evolving and cannot be predicted with certainty. It is likely that these conflicts will continue to affect the global political order and global and domestic markets for a substantial period of time, regardless of when these conflicts end.
While these events have not materially interrupted our operations, these or future developments resulting from these conflicts, such as cyberattacks on the U.S., the Bank, our customers, or our suppliers, could make it difficult to conduct business.
Sustainability-related risk developments could lead or require us to restrict or modify some of our business activities.
Expectations of investors and regulators could, over time, lead us to restrict or modify some of our business practices. In addition, our business practices could be adversely affected by laws and regulations enacted or promulgated by federal, state, and local governments that relate to environmental and social issues. For example, in 2022 and 2023, certain states passed, or considered passing, laws prohibiting financial institutions from restricting the services that they provide to certain types of businesses if the institutions also conduct business with governmental entities in such states. Depending on how these laws are worded and implemented, they could adversely affect our ability to manage risk. These laws and develop strategiesrules related to effectively manageenvironmental and social issues may include provisions that conflict with other state and federal regulations and may increase our costs or limit our ability to conduct business in certain jurisdictions.
Heightened regulatory and social focus on climate change may place additional requirements on public companies, including financial institutions, regarding the measurement, management, and disclosure of climate-related risks and associated lending and investment activities. For example, the state of California recently passed sweeping climate-related disclosure laws that will require large entities doing business in the state, including the Bank, to measure and disclose greenhouse gas emissions and report on their climate-related risks. These new laws, which will require initial disclosures as early as 2026, impose disclosure obligations on companies that in certain respects exceed those previously proposed by the SEC. These new laws may result in higher regulatory, compliance, credit, and reputational risks and costs. In addition, the transition to a lower-carbon economy could subject us to other risks, such as through our customers’ exposure to volatility in commodity prices, increased insurance costs or inability to access insurance, and changes in the market for carbon-related products and services.
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Protracted congressional negotiations and political stalemates in Washington, D.C. regarding government funding and other issues may introduce additional volatility in the U.S. economy including capital and credit markets and the banking industry in particular.
The U.S. government is currently funded through early March 2024 as a result of a series of continuing resolutions that provide short-term appropriations. Democrat and Republican lawmakers are at a stalemate, and efforts to pass spending bills for long-term government funding have been complicated, increasing the risk which includes, but is not limited to, addressing communication logistics, legalof an eventual government shutdown. Any such shutdown may result in further U.S. credit rating downgrades or defaults, and regulatory issues.may introduce additional volatility in the U.S. economy, including capital and credit markets and the banking industry in particular; cause disruptions in the financial markets; impact interest rates; and result in other potential unforeseen consequences. In any such event, the Bank’s liquidity, operating margins, financial condition, and results of operations may be materially and adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved written comments that were received from the SEC’sSEC or OCC staff 180 days or more before the end of the Company’sour fiscal year relating to itsour periodic or current reports filed under the Securities Exchange ActAct.
ITEM 1C. CYBERSECURITY
Cybersecurity risk is the risk of 1934.adverse impacts to the confidentiality, integrity, and availability of data owned, stored, or processed by the Bank or the accompanying information systems. The number and sophistication of attempts to disrupt or penetrate our systems, and those of our suppliers — sometimes referred to as hacking, cybersecurity fraud, cyberattacks, or other similar names — continues to grow.
Cybersecurity risk is overseen by the Board and the Bank’s multiple lines of defense, including front-line bankers and operations teams, Enterprise Risk Management (“ERM”), and internal audit. Information security risk is managed in accordance with an established ERM framework, which includes elements such as key risk indicators, enterprise standards, controls, and self-assessments that comply with established ERM policies. These elements are regularly assessed, measured, and reported to Board-level and Bank senior management-level risk committees, and those committees review such reports.
As set forth in its charter, the ROC has the responsibility to review reports from management relating to enterprise-wide risk management efforts, including cybersecurity risks. As part of that oversight, the ROC performs an annual review and approval of information security policies and programs, and receives regular updates on key risk indicators, threat trends, risk remediation activities, and operational events. The ROC periodically provides reports regarding this oversight to the Board. Management uses multiple real-time and interval-based monitoring and reporting mechanisms to detect and respond to cybersecurity incidents. Documented escalation procedures are tested regularly as part of tabletop exercises and other activities and include notification to executive management during qualifying cybersecurity incidents.
Management positions directly responsible for assessing, measuring, and managing cybersecurity risks include the Chief Information Security Officer (“CISO”) and the Chief Technology and Operations Officer (“CTOO”). The current CISO has more than 20 years of technology leadership experience, including a significant period directly leading cybersecurity efforts, and holds multiple industry certifications. The CTOO has more than 25 years of audit, risk, operations, and technology leadership experience, including prior assignments as the Bank’s Chief Audit Executive and Director of Bank Operations. The CISO and CTOO regularly report information about cybersecurity risks to the Board or a committee of the Board.
We engage multiple independent third parties or cyber experts to assess information security programs and practices, including, but not limited to, framework maturity assessments, blind penetration testing, technology health checks, cyber skill and staffing assessments, externally facilitated tabletop exercises, external cyber legal counsel briefings, and strategic assessments. Findings from these assessments are regularly reviewed with management and the ROC. Additionally, we participate in various cybersecurity industry forums and have access to law enforcement analysis regarding current threats.
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Our supply chain risk management practices include risk assessments of suppliers, including with respect to cybersecurity. We monitor our suppliers using commercially available services that provide real-time security scoring of supplier technology services, threat intelligence, financial intelligence, geopolitical risk intelligence, and other considerations related to cybersecurity. Reviews are also regularly performed to monitor changes in suppliers’ cybersecurity risk posture. Continuous threat intelligence monitoring is also performed to identify potential cybersecurity incidents involving third parties. We strive to negotiate appropriate provisions with respect to cybersecurity in our contracts with suppliers.
When a cybersecurity incident occurs, whether detected internally or from third-party cybersecurity incidents, we evaluate the incident for criticality and potential materiality and disclosure across a range of contributing indicators, including service availability, impact to operations, reputational impact, regulatory and legal considerations, data sensitivity, and direct financial impact. The potential impact of the incident, individually or in aggregate, is evaluated by the CISO continuously across these criteria. We have escalation procedures to notify members of senior and executive management, the Board (or an applicable subset), and regulators in a timely manner based on the criticality and materiality of the cybersecurity incident.
To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us, including our business strategy, results of operations, or financial condition. At December 31, 2023, management has assessed known cybersecurity incidents for potential materiality and disclosure using formal documented processes and has determined that there have been no material cybersecurity incidents, individually or in aggregate. We may nevertheless be unsuccessful in the future in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
For additional discussion regarding cybersecurity risks, see “Cybersecurity Risk” in Risk Factors on page 19.
ITEM 2. PROPERTIES
At December 31, 2017, the Company2023, we operated 433407 branches, of which 275278 are owned and 158129 are leased. The CompanyWe also leases itslease our headquarters in Salt Lake City, Utah. Other operations facilities are either owned or leased. The annual rentals under long-term leases for leased premises are determined under various formulas and factors, including operating costs, maintenance, and taxes. For additional information regarding leases and rental payments, see Note 158 of the Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The information contained in Note 1516 of the Notes to Consolidated Financial Statements is incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
| 2017 | 2016 | ||||||||||||||
| High | Low | High | Low | ||||||||||||
| 1st Quarter | $ | 48.33 | $ | 39.09 | $ | 26.91 | $ | 19.65 | |||||||
| 2nd Quarter | 44.85 | 38.43 | 29.46 | 23.14 | |||||||||||
| 3rd Quarter | 47.70 | 41.23 | 31.35 | 23.02 | |||||||||||
| 4th Quarter | 52.20 | 43.50 | 44.15 | 30.07 | |||||||||||
PREFERRED STOCK REDEMPTIONS
We have 4,400,0004.4 million authorized shares of preferred stock without par value and with a liquidation preference of $1,000 per share. As of December 31, 2017,2023, 66,139, 138,390, 126,221, 98,555, and 136,368 of preferred shares series A, G, H, I, and J respectively, are outstanding. In general, preferred shareholders may receive asset distributions before common shareholders; however, preferred shareholders have only limited voting rights generally with respect to certain provisions of the preferred stock, the issuance of senior preferred stock, and the election of directors. Preferred stock dividends reduce earnings available to common shareholders and are paid quarterly or semiannually in arrears. The preferred stock redemption amount is computed at the per share liquidation preference plus any declared but unpaid dividends. All of the outstanding series of preferred stock are registered with the SEC. In addition, Series A, G, and H preferred stock are listed and traded on the New York Stock Exchange. See Note 1314 of the Notes to Consolidated Financial Statements for further information regarding the Company’sour preferred stock.
COMMON STOCK
Market Information
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market under the symbol “ZION.” The closing price of our common stock on NASDAQ was $38.87 per share on February 5, 2024.
Equity Capital and Dividends
As of February 9, 2018,5, 2024, there were 4,353 holders3,530 shareholders of record of the Company’sour common stock. The frequency and amount of common stock dividends paid duringIn February 2024, the last two years are as follows:
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||
| 2017 | $ | 0.08 | $ | 0.08 | $ | 0.12 | $ | 0.16 | |||||||
| 2016 | 0.06 | 0.06 | 0.08 | 0.08 | |||||||||||
During 2017the first quarter of 2023, we continued ourrepurchased 0.9 million common stock repurchase program and repurchased 7 million shares of common stock outstanding with a fair value $320for $50 million at an average price of $45.66$52.82 per share. DuringWe did not repurchase common shares during the first quartersecond, third, or fourth quarters of 2018,2023.
In February 2024, the Company repurchased an additional 2Board approved a plan to repurchase up to $35 million shares of common stockshares outstanding with a fair value of $115during the fiscal year 2024. In February 2024, we repurchased 0.9 million common shares outstanding for $35 million at an average price of $53.46 per share, leaving $120 million of repurchase capacity remaining in the 2017 capital plan (which spans the timeframe of July 2017 to June 2018).
The following schedule summarizes the Company’sour share repurchases for the fourth quarteryear ended December 31, 2023:
Schedule 3
2023 SHARE REPURCHASES
| Period | Total number of shares purchased 1 | Average price paid per share | Shares purchased as part of publicly announced plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| First quarter | 953,080 | $ | 52.82 | 946,644 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Second quarter | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Third quarter | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| October | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
November | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December | 18,851 | 45.59 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fourth quarter total | 18,851 | 45.59 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total 2023 | 971,931 | $ | 52.68 | 946,644 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Includes common shares acquired in connection with our stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the exercise of 2017:stock options.
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| Period | Total number of shares repurchased 1 | Average price paid per share | Shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plan | ||||||||||||||
| October | 935 | $ | 47.19 | — | $ | 350,000,045 | ||||||||||||
| November | 1,019,801 | 48.07 | 1,019,240 | 301,000,280 | ||||||||||||||
| December | 1,302,618 | 50.74 | 1,300,777 | 235,000,750 | ||||||||||||||
| Fourth quarter | 2,323,354 | 49.57 | 2,320,017 | |||||||||||||||
The following stock performance graph compares the five-year cumulative total return of Zions Bancorporation’sour common stock with the Standard &and Poor’s (“S&P”) 500 Index and the Keefe, Bruyette & Woods, Inc. (“KBW”) Regional Bank Index both of which include Zions Bancorporation.(“KRX”). The KBW Bank IndexKRX is a modified market capitalization-weighted regional bank and thrift stock index developed and published by KBW, a nationally recognized brokerage and investment banking firm specializing in bank stocks. The index is composed of 2450 geographically diverse stocks representing national money centerregional banks and leading regional financial institutions.or thrifts. The stock performance graph is based upon an initial investment of $100 on December 31, 20122018 and assumes reinvestment of dividends.
PERFORMANCE GRAPH FOR ZIONS BANCORPORATION, N.A.
INDEXED COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||
| Zions Bancorporation | 100.0 | 140.6 | 134.6 | 129.8 | 206.7 | 246.6 | |||||||||||
| KBW Bank Index | 100.0 | 137.8 | 150.7 | 151.4 | 194.6 | 230.7 | |||||||||||
| S&P 500 | 100.0 | 132.4 | 150.5 | 152.5 | 170.8 | 208.1 | |||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||||||||||||||||
| Zions Bancorporation, N.A. | 100.0 | 131.1 | 113.8 | 169.7 | 127.2 | 119.0 | |||||||||||||||||||||||||||||
| KRX Regional Bank Index | 100.0 | 123.9 | 113.1 | 154.6 | 143.9 | 143.3 | |||||||||||||||||||||||||||||
| S&P 500 | 100.0 | 131.5 | 155.7 | 200.3 | 164.0 | 207.0 | |||||||||||||||||||||||||||||
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The information contained in Item 12 of this Form 10-K is incorporated by reference herein.
ITEM 6. RESERVED
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| FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||
| (Dollar amounts in millions, except per share amounts) | 2017/2016 Change | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| For the Year | ||||||||||||||||||||||
| Net interest income | +11 | % | $ | 2,065 | $ | 1,867 | $ | 1,715 | $ | 1,680 | $ | 1,696 | ||||||||||
| Noninterest income | +5 | % | 544 | 516 | 357 | 493 | 327 | |||||||||||||||
| Total revenue | +9 | % | 2,609 | 2,383 | 2,072 | 2,173 | 2,023 | |||||||||||||||
| Provision for loan losses | -74 | % | 24 | 93 | 40 | (98 | ) | (87 | ) | |||||||||||||
| Noninterest expense | +4 | % | 1,649 | 1,585 | 1,581 | 1,649 | 1,704 | |||||||||||||||
| Income before income taxes | +33 | % | 936 | 705 | 451 | 621 | 407 | |||||||||||||||
| Income taxes | +46 | % | 344 | 236 | 142 | 223 | 143 | |||||||||||||||
| Net income | +26 | % | 592 | 469 | 309 | 398 | 264 | |||||||||||||||
| Net earnings applicable to common shareholders | +34 | % | 550 | 411 | 247 | 327 | 294 | |||||||||||||||
| Per Common Share | ||||||||||||||||||||||
| Net earnings – diluted | +31 | % | 2.60 | 1.99 | 1.20 | 1.68 | 1.58 | |||||||||||||||
| Net earnings – basic | +36 | % | 2.71 | 2.00 | 1.20 | 1.68 | 1.58 | |||||||||||||||
| Dividends declared | +57 | % | 0.44 | 0.28 | 0.22 | 0.16 | 0.13 | |||||||||||||||
Book value 1 | +6 | % | 36.01 | 34.10 | 32.67 | 31.35 | 29.57 | |||||||||||||||
| Market price – end | 50.83 | 43.04 | 27.30 | 28.51 | 29.96 | |||||||||||||||||
| Market price – high | 52.20 | 44.15 | 33.42 | 33.33 | 31.40 | |||||||||||||||||
| Market price – low | 38.43 | 19.65 | 23.72 | 25.02 | 21.56 | |||||||||||||||||
| At Year-End | ||||||||||||||||||||||
| Assets | +5 | % | 66,288 | 63,239 | 59,665 | 57,203 | 56,021 | |||||||||||||||
| Net loans and leases | +5 | % | 44,780 | 42,649 | 40,650 | 40,064 | 39,043 | |||||||||||||||
| Deposits | -1 | % | 52,621 | 53,236 | 50,374 | 47,848 | 46,363 | |||||||||||||||
| Long-term debt | -28 | % | 383 | 535 | 812 | 1,086 | 2,263 | |||||||||||||||
| Federal funds and other short-term borrowings | +502 | % | 4,976 | 827 | 347 | 244 | 340 | |||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||||||
| Preferred equity | -20 | % | 566 | 710 | 829 | 1,004 | 1,004 | |||||||||||||||
| Common equity | +3 | % | 7,113 | 6,924 | 6,679 | 6,366 | 5,461 | |||||||||||||||
| Performance Ratios | ||||||||||||||||||||||
| Return on average assets | 0.91 | % | 0.78 | % | 0.53 | % | 0.71 | % | 0.48 | % | ||||||||||||
| Return on average common equity | 7.7 | % | 6.0 | % | 3.8 | % | 5.4 | % | 5.7 | % | ||||||||||||
| Return on average tangible common equity | 9.0 | % | 7.1 | % | 4.6 | % | 6.7 | % | 7.4 | % | ||||||||||||
| Net interest margin | 3.45 | % | 3.37 | % | 3.19 | % | 3.26 | % | 3.36 | % | ||||||||||||
Capital Ratios 1 | ||||||||||||||||||||||
| Equity to assets | 11.6 | % | 12.1 | % | 12.6 | % | 12.9 | % | 11.5 | % | ||||||||||||
Common equity tier 1 (Basel III), tier 1 common (Basel I) 2 | 12.1 | % | 12.1 | % | 12.2 | % | 11.9 | % | 10.2 | % | ||||||||||||
Tier 1 leverage 2 | 10.5 | % | 11.1 | % | 11.3 | % | 11.8 | % | 10.5 | % | ||||||||||||
Tier 1 risk-based capital 2 | 13.2 | % | 13.5 | % | 14.1 | % | 14.5 | % | 12.8 | % | ||||||||||||
Total risk-based capital 2 | 14.8 | % | 15.2 | % | 16.1 | % | 16.3 | % | 14.7 | % | ||||||||||||
| Tangible common equity | 9.3 | % | 9.5 | % | 9.6 | % | 9.5 | % | 8.0 | % | ||||||||||||
| Tangible equity | 10.2 | % | 10.6 | % | 11.1 | % | 11.3 | % | 9.9 | % | ||||||||||||
| Selected Information | ||||||||||||||||||||||
Weighted average diluted common shares outstanding (in thousands) | 209,653 | 204,269 | 203,698 | 192,789 | 184,297 | |||||||||||||||||
Company common shares repurchased - from publicly announced plans (in thousands) | 7,009 | 2,889 | — | — | — | |||||||||||||||||
| Common dividend payout ratio | 16.05 | % | 14.04 | % | 18.30 | % | 9.56 | % | 8.20 | % | ||||||||||||
| Full-time equivalent employees | 10,083 | 10,057 | 10,200 | 10,462 | 10,452 | |||||||||||||||||
| Commercial banking offices | 431 | 436 | 450 | 460 | 469 | |||||||||||||||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We conduct our operations primarily through seven separately managed and geographically defined affiliates, each with its own local branding and management team. Our affiliate banks are supported by an enterprise operating segment (referred to NON-GAAP RECONCILIATIONSas the “Other” segment) that provides governance and risk management, allocates capital, establishes strategic objectives, and includes centralized technology, back-office functions, and certain lines of business not operated through our affiliate banks.
We focus our efforts and resources to achieve our strategic growth and profitability objectives. This Form 10-K presents non-GAAP financial measures, in additionincludes providing high-quality products and services and deepening relationships with our small business, commercial, and consumer customers. Serving as a trusted advisor for our business customers and supporting their operational needs generally affords us a major source of relatively stable deposits.
We strive to GAAP financial measures, to provide investors with additional information. The adjustments to reconcile fromachieve balanced growth of customers, pre-provision net revenue (“PPNR”), profitability, and shareholder returns. We focus on five strategic growth areas: small business, commercial, affluent, capital markets, and consumer.
To facilitate the applicable GAAP financial measures to the non-GAAP financial measures are presentedachievement of our growth and profitability objectives, we invest in the following schedules. The Company considers these adjustmentsfive key areas, referred to beas “strategic enablers”:
•People and Empowerment — we invest in training our employees and providing them the tools and resources to build their capabilities;
•Technology — we invest in innovative technologies that will make us more efficient and enable us to remain competitive;
•Operational Excellence — we invest in and support ongoing improvements in how we safely and securely deliver value to our customers;
•Risk Management — we engage in risk management practices to ensure prudent risk-taking and appropriate oversight; and
•Data and Analytics — we invest in relevant enterprise data and analytic tools to ongoing operating resultssupport local execution and provide a meaningful base for period-to-period and company-to-company comparisons. These non-GAAP financial measures are used by management to assess the performance and financial position of the Company and for presentations of Company performance to investors. The Company further believes that presenting these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management.prudent decision making.
| Year Ended December 31, | ||||||||||||
| (Dollar amounts in millions) | 2017 | 2016 | 2015 | |||||||||
| Net earnings applicable to common shareholders (GAAP) | $ | 550 | $ | 411 | $ | 247 | ||||||
| Adjustments, net of tax: | ||||||||||||
| Amortization of core deposit and other intangibles | 4 | 5 | 6 | |||||||||
| Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) | (a) | $ | 554 | $ | 416 | $ | 253 | |||||
| Average common equity (GAAP) | $ | 7,148 | $ | 6,915 | $ | 6,581 | ||||||
| Average goodwill | (1,014 | ) | (1,014 | ) | (1,014 | ) | ||||||
| Average core deposit and other intangibles | (5 | ) | (13 | ) | (21 | ) | ||||||
| Average tangible common equity (non-GAAP) | (b) | $ | 6,129 | $ | 5,888 | $ | 5,546 | |||||
| Return on average tangible common equity (non-GAAP) | (a/b) | 9.0 | % | 7.1 | % | 4.6 | % | |||||
| (Dollar amounts in millions, except per share amounts) | December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Total shareholders’ equity (GAAP) | $ | 7,679 | $ | 7,634 | $ | 7,507 | ||||||
| Goodwill | (1,014 | ) | (1,014 | ) | (1,014 | ) | ||||||
| Core deposit and other intangibles | (2 | ) | (8 | ) | (16 | ) | ||||||
| Tangible equity (non-GAAP) | (a) | 6,663 | 6,612 | 6,477 | ||||||||
| Preferred stock | (566 | ) | (710 | ) | (829 | ) | ||||||
| Tangible common equity (non-GAAP) | (b) | $ | 6,097 | $ | 5,902 | $ | 5,648 | |||||
| Total assets (GAAP) | $ | 66,288 | $ | 63,239 | $ | 59,665 | ||||||
| Goodwill | (1,014 | ) | (1,014 | ) | (1,014 | ) | ||||||
| Core deposit and other intangibles | (2 | ) | (8 | ) | (16 | ) | ||||||
| Tangible assets (non-GAAP) | (c) | $ | 65,272 | $ | 62,217 | $ | 58,635 | |||||
| Common shares outstanding (thousands) | (d) | 197,532 | 203,085 | 204,417 | ||||||||
| Tangible equity ratio (non-GAAP) | (a/c) | 10.2 | % | 10.6 | % | 11.0 | % | |||||
| Tangible common equity ratio (non-GAAP) | (b/c) | 9.3 | % | 9.5 | % | 9.6 | % | |||||
| Tangible book value per common share (non-GAAP) | (b/d) | $30.87 | $29.06 | $27.63 | ||||||||
| (Dollar amounts in millions) | 2017 | 2016 | 2015 | |||||||||
| Noninterest expense (GAAP) | (a) | $ | 1,649 | $ | 1,585 | $ | 1,581 | |||||
| Adjustments: | ||||||||||||
| Severance costs | 7 | 5 | 11 | |||||||||
| Other real estate expense, net | (1 | ) | (2 | ) | (1 | ) | ||||||
| Provision for unfunded lending commitments | (7 | ) | (10 | ) | (6 | ) | ||||||
| Debt extinguishment cost | — | — | 3 | |||||||||
| Amortization of core deposit and other intangibles | 6 | 8 | 9 | |||||||||
| Restructuring costs | 4 | 5 | 4 | |||||||||
| Total adjustments | (b) | 9 | 6 | 20 | ||||||||
| Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 1,640 | $ | 1,579 | $ | 1,561 | |||||
| Net interest income (GAAP) | (d) | $ | 2,065 | $ | 1,867 | $ | 1,715 | |||||
| Fully taxable-equivalent adjustments | (e) | 35 | 25 | 18 | ||||||||
Taxable-equivalent net interest income (non-GAAP)1 | (d+e)=(f) | 2,100 | 1,892 | 1,733 | ||||||||
| Noninterest income (GAAP) | (g) | 544 | 516 | 357 | ||||||||
| Combined income (non-GAAP) | (f+g)=(h) | 2,644 | 2,408 | 2,090 | ||||||||
| Adjustments: | ||||||||||||
| Fair value and nonhedge derivative income (loss) | (2 | ) | 2 | — | ||||||||
| Securities gains (losses), net | 14 | 7 | (127 | ) | ||||||||
| Total adjustments | (i) | 12 | 9 | (127 | ) | |||||||
| Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 2,632 | $ | 2,399 | $ | 2,217 | |||||
| Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 995 | $ | 823 | $ | 509 | |||||
| Adjusted pre-provision net revenue (non-GAAP) | (j-c) | 992 | 820 | 656 | ||||||||
| Efficiency ratio (non-GAAP) | (c/j) | 62.3 | % | 65.8 | % | 70.4 | % | |||||
RESULTS OF OPERATIONS
•Actively managed the balance sheet through an earning-asset mix change toward higher-yielding loans, while reducing the size of our lower-yielding securities and money market positions;
•Increased total available liquidity sources, which far exceeded our level of uninsured deposits, and included the expanded use of existing collateralized funding lines;
•Actively managed our interest rate and market risk exposures through a rebalancing of our hedges for both available-for-sale (“AFS”) securities and commercial loans;
•Remained committed to controlling expenses, including active personnel management, while continuing to invest in technology;
28
•Maintained strong credit performance, including low net charge-offs; and
•Further strengthened our regulatory capital position through increased retained earnings applicable to common shareholdersand suspended share repurchase programs (beginning the second quarter of 2023 through the end of the year).
Our Financial Performance
This section and other sections provide information about our recent financial performance. For more information about our results of operations for 2017 of $550 million or $2.60 per diluted common share2022 compared with $411 million or $1.99 per diluted common share for 2016. The improved2021, see the respective sections in MD&A included in our 2022 Form 10-K.
Net Earnings Applicable to Common Shareholders (in millions) | Diluted EPS | Adjusted PPNR (in millions) | Efficiency ratio | |||||||||||||||||
Our financial performance reflects revenue growth, continued expense control and improved credit quality, particularlyfor 2023 relative to the prior year reflected an increase in the oil and gas-related loan portfolio. Net income increased in 2017 primarily due to a $198 million increase indeposits, lower net interest income, fromstabilization of the net interest margin (“NIM”), loan growth, in our lending and securities portfolios during the year,strong credit quality, as well as higher noninterest expense and short-term rate increases that positively impacted loan yields. Revenue also experienced a benefit from a $28 million increase related to noninterest income and credit costs, specifically the provision for loan losses, declined $69 million. These increasescredit losses.
•Net interest income decreased $82 million, or 3%, as higher earning asset yields were partially offset by rising funding costs. The NIM decreased slightly to 3.02%, compared with 3.06%. Net interest income was also impacted by a $64 millionreduction in interest-earning assets and an increase in noninterest expenseinterest-bearing liabilities.
◦Total loans and leases increased $2.1 billion, or 4%, primarily due to growth in the significant improvement. See “GAAPconsumer 1-4 family residential mortgage, commercial real estate term, and commercial and industrial loan portfolios.
◦Average interest-bearing liabilities increased $9.7 billion, or 23%, primarily due to Non-GAAP Reconciliations” on page 29 for more information regardingincreases in average interest-bearing deposits and average borrowed funds. These increases were offset by a decrease of $10.2 billion, or 26%, in average noninterest-bearing deposits, as customers migrated to interest-bearing products in response to the calculation of the adjusted efficiency ratio and why management uses this non-GAAP measure.
higher interest rate environment.•The provision for credit losses was $132 million in 2023, compared with $122 million in 2022.
29
•Customer-related noninterest income increased $6 million, or 1%, primarily due to increases in commercial account fees and wealth management fees, partially offset by a decrease in retail and business banking fees resulting from a change in our overdraft and non-sufficient funds practices effected during the third quarter of 2022. Increases in noncustomer-related noninterest income were due largely to an increase in dividends on FHLB stock, as well as the gain on sale of a bank-owned property in the second quarter of 2023.
•Noninterest expense increased $219 million, or 12%, primarily due to an increase in deposit insurance and regulatory expense, driven largely by a $90 million accrual associated with the FDIC special assessment in the fourth quarter of 2017, which2023. Noninterest expense was related in part to the Tax Cutsalso impacted by higher salaries and Jobs Act. Excluding the impact of this one-time accelerated contribution, adjusted noninterest expense increased $49benefits (including severance) and technology, telecom, and information processing expenses.
•Credit quality remained strong, as net loan and lease charge-offs were $36 million, or 3%0.06% of average loans in 2023, compared with net charge-offs of $39 million, or 0.07% of average loans, in 2022. Classified loans decreased $104 million, or 11%. Nonperforming assets increased $79 million, or 53%, which was in line with our expectations. Adjusted noninterest expense excludes those same expense items excluded in arriving at the efficiency ratio (see “GAAPprimarily due to Non-GAAP Reconciliations” on page 29 for more information regarding the calculation of the efficiency ratio).one commercial and industrial loan totaling $31 million, and two suburban office commercial real estate loans totaling $46 million.
The following schedule presents additional selected financial highlights:
30
Schedule 4
| (Dollar amounts in millions, except per share amounts) | 2023/2022 Change | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||
| For the Year | |||||||||||||||||||||||||||||||||||
| Net interest income | (3) | % | $ | 2,438 | $ | 2,520 | $ | 2,208 | |||||||||||||||||||||||||||
| Noninterest income | 7 | % | 677 | 632 | 703 | ||||||||||||||||||||||||||||||
| Total net revenue | (1) | % | 3,115 | 3,152 | 2,911 | ||||||||||||||||||||||||||||||
| Provision for credit losses | 8 | % | 132 | 122 | (276) | ||||||||||||||||||||||||||||||
| Noninterest expense | 12 | % | 2,097 | 1,878 | 1,741 | ||||||||||||||||||||||||||||||
Pre-provision net revenue 1 | (19) | % | 1,059 | 1,311 | 1,202 | ||||||||||||||||||||||||||||||
| Net income | (25) | % | 680 | 907 | 1,129 | ||||||||||||||||||||||||||||||
| Net earnings applicable to common shareholders | (26) | % | 648 | 878 | 1,100 | ||||||||||||||||||||||||||||||
| Per Common Share | |||||||||||||||||||||||||||||||||||
| Net earnings – diluted | (25) | % | 4.35 | 5.79 | 6.79 | ||||||||||||||||||||||||||||||
Tangible book value at year-end 1 | 24 | % | 28.30 | 22.79 | 39.62 | ||||||||||||||||||||||||||||||
| Market price – end | (11) | % | 43.87 | 49.16 | 63.16 | ||||||||||||||||||||||||||||||
| Market price – high | (27) | % | 55.20 | 75.44 | 68.25 | ||||||||||||||||||||||||||||||
| Market price – low | (60) | % | 18.26 | 45.21 | 42.12 | ||||||||||||||||||||||||||||||
| At Year-End | |||||||||||||||||||||||||||||||||||
| Assets | (3) | % | 87,203 | 89,545 | 93,200 | ||||||||||||||||||||||||||||||
| Loans and leases, net of unearned income and fees | 4 | % | 57,779 | 55,653 | 50,851 | ||||||||||||||||||||||||||||||
| Deposits | 5 | % | 74,961 | 71,652 | 82,789 | ||||||||||||||||||||||||||||||
| Common equity | 18 | % | 5,251 | 4,453 | 7,023 | ||||||||||||||||||||||||||||||
| Performance Ratios | |||||||||||||||||||||||||||||||||||
| Return on average assets | 0.77% | 1.01% | 1.29% | ||||||||||||||||||||||||||||||||
| Return on average common equity | 13.4% | 16.0% | 14.9% | ||||||||||||||||||||||||||||||||
Return on average tangible common equity 1 | 17.3% | 19.8% | 17.3% | ||||||||||||||||||||||||||||||||
| Net interest margin | 3.02% | 3.06% | 2.72% | ||||||||||||||||||||||||||||||||
| Net charge-offs to average loans and leases | 0.06% | 0.07% | 0.01% | ||||||||||||||||||||||||||||||||
| Total allowance for credit losses to loans and leases outstanding | 1.26% | 1.14% | 1.09% | ||||||||||||||||||||||||||||||||
| Capital Ratios at Year-End | |||||||||||||||||||||||||||||||||||
| Common equity Tier 1 capital | 10.3% | 9.8% | 10.2% | ||||||||||||||||||||||||||||||||
| Tier 1 leverage | 8.3% | 7.7% | 7.2% | ||||||||||||||||||||||||||||||||
Tangible common equity 1 | 4.9% | 3.8% | 6.5% | ||||||||||||||||||||||||||||||||
| Other Selected Information | |||||||||||||||||||||||||||||||||||
Weighted average diluted common shares outstanding (in thousands) | (2) | % | 147,756 | 150,271 | 160,234 | ||||||||||||||||||||||||||||||
Bank common shares repurchased (in thousands) | (73) | % | 947 | 3,563 | 13,497 | ||||||||||||||||||||||||||||||
| Dividends declared | 4 | % | $ | 1.64 | $ | 1.58 | $ | 1.44 | |||||||||||||||||||||||||||
Common dividend payout ratio 2 | 37.8% | 27.3% | 21.1% | ||||||||||||||||||||||||||||||||
Capital distributed as a percentage of net earnings applicable to common shareholders 3 | 46% | 50% | 94% | ||||||||||||||||||||||||||||||||
Efficiency ratio 1 | 62.9% | 58.8% | 60.8% | ||||||||||||||||||||||||||||||||
3 This ratio is the third phase ofcommon dividends paid plus share repurchases for the project. As of December 31, 2017, the Company had $148 million of capitalized expenses associated with the Core Transformation Project. BαNCS® is a real time, parameter-driven servicing system that will provide long-term benefitsyear, divided by net earnings applicable to the Company by improving accessibility and functionality, allowing our bankers to better serve customers.common shareholders.
31
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| Driver | 2017 | 2016 | Change better/(worse) | ||||||||
| (In billions) | |||||||||||
| Average net loans and leases | $ | 43.5 | $ | 42.1 | 3 | % | |||||
| Average money market investments | 1.5 | 3.7 | (59 | ) | |||||||
| Average total securities | 15.7 | 10.3 | 52 | ||||||||
| Average noninterest-bearing deposits | 23.8 | 22.5 | 6 | ||||||||
| Average total deposits | 52.2 | 50.6 | 3 | ||||||||
| (In millions) | |||||||||||
| Net interest income | $ | 2,065 | $ | 1,867 | 11 | % | |||||
| Provision for loan losses | 24 | 93 | 74 | ||||||||
| Noninterest income | 544 | 516 | 5 | ||||||||
Customer-related fee income 1 | 485 | 473 | 3 | ||||||||
| Noninterest expense | 1,649 | 1,585 | (4 | ) | |||||||
| Net interest margin | 3.45 | % | 3.37 | % | 8 bps | ||||||
Nonaccrual loans 2 | 414 | 569 | 27 | % | |||||||
| Ratio of net charge-offs to average loans and leases | 0.17 | % | 0.31 | % | 14 bps | ||||||
Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 2 | 0.93 | % | 1.34 | % | 41 bps | ||||||
| Ratio of total allowance for credit losses to net loans and leases outstanding | 1.29 | % | 1.48 | % | 19 bps | ||||||
Net Interest Income and Net Interest Margin
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Taxable-equivalentliabilities, and represented 78% and 80% of our net revenue (net interest income plus noninterest income) during 2023 and 2022, respectively. The NIM is calculated as net interest income isas a percent of average interest-earning assets.
Schedule 5
NET INTEREST INCOME AND NET INTEREST MARGIN
| Amount change | Percent change | Amount change | Percent change | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 3,196 | $ | 1,084 | 51 | % | $ | 2,112 | $ | 177 | 9 | % | $ | 1,935 | |||||||||||||||||||||||||||
| Interest on money market investments | 188 | 107 | NM | 81 | 60 | NM | 21 | ||||||||||||||||||||||||||||||||||
| Interest on securities | 563 | 51 | 10 | 512 | 201 | 65 | 311 | ||||||||||||||||||||||||||||||||||
| Total interest income | 3,947 | 1,242 | 46 | 2,705 | 438 | 19 | 2,267 | ||||||||||||||||||||||||||||||||||
| Interest on deposits | 1,063 | 993 | NM | 70 | 40 | NM | 30 | ||||||||||||||||||||||||||||||||||
| Interest on short- and long-term borrowings | 446 | 331 | NM | 115 | 86 | NM | 29 | ||||||||||||||||||||||||||||||||||
| Total interest expense | 1,509 | 1,324 | NM | 185 | 126 | NM | 59 | ||||||||||||||||||||||||||||||||||
| Net interest income | $ | 2,438 | $ | (82) | (3) | $ | 2,520 | $ | 312 | 14 | $ | 2,208 | |||||||||||||||||||||||||||||
| Average interest-earning assets | $ | 81,984 | $ | (1,654) | (2) | % | $ | 83,638 | $ | 1,371 | 2 | % | $ | 82,267 | |||||||||||||||||||||||||||
| Average interest-bearing liabilities | 51,876 | 9,738 | 23 | % | 42,138 | 1,388 | 3 | % | 40,750 | ||||||||||||||||||||||||||||||||
| bps | bps | ||||||||||||||||||||||||||||||||||||||||
Yield on interest-earning assets 1 | 4.86 | % | 158 | 3.28 | % | 49 | 2.79 | % | |||||||||||||||||||||||||||||||||
Rate paid on total deposits and interest-bearing liabilities 1 | 1.87 | % | 164 | 0.23 | % | 16 | 0.07 | % | |||||||||||||||||||||||||||||||||
Cost of total deposits 1 | 1.46 | % | 137 | 0.09 | % | 5 | 0.04 | % | |||||||||||||||||||||||||||||||||
Net interest margin 1 | 3.02 | % | (4) | 3.06 | % | 34 | 2.72 | % | |||||||||||||||||||||||||||||||||
1 Taxable-equivalent rates used where applicable.
Net interest income decreased $82 million, or 3%, in 2023, relative to the largest portionprior year, as higher earning asset yields were offset by higher funding costs. The NIM was 3.02%, compared with 3.06%.
The yield on average interest-earning assets was 4.86% in 2023, an increase of our revenue. For 2017, taxable-equivalent net158 basis points, reflecting higher interest rates and a favorable mix change to higher yielding assets. The yield on average loans and leases increased 163 basis points to 5.69% in 2023, compared with 4.06% in 2022, reflecting the higher interest rate environment. The yield on average securities increased 58 basis points to 2.64% in 2023.
The rate paid on average interest-bearing liabilities was 2.91% in 2023, compared with 0.44% in the prior year, and the cost of total deposits was 1.46%, compared with 0.09% in the prior year, also reflecting the higher interest rate environment, and the impact of the change in deposit composition away from noninterest-bearing deposits. The rate paid on total borrowed funds was 5.11%, compared with 3.27%, for the same time periods.
Net interest income was $2.1 billion, compared with $1.9 billion and $1.7 billion, in 2016 and 2015, respectively. The tax rate used for calculating all taxable-equivalent adjustments was 35% for all years presented. The increase over 2016, and the previous increase over 2015, were driven by several factors, including a larger average securities portfolio balance, loan growth, and increases in benchmark interest rates that impacted loan yields. We expect the size of the securities portfolio to be relatively stable during the next several quarters, and we are not assuming any further increases in benchmark rates in our forecasts. Therefore, we expect net interest income to increase at a moderate pace in 2018 when compared with 2017.
Average interest-bearing liabilities increased $3.6$9.7 billion, or 23%, primarily due to increases in average interest-bearing deposits and average rates increased 8 bps over the same period.
32
The following charts further illustrate the changes in average interest-earning assets and average interest-bearing liabilities:
Average loans and leases increased $4.1 billion, or 8%, to $56.7 billion, primarily due to growth in average consumer balances were relatively flat during 2017. Much of the consumer growth was in consumer 1-4 family residential, where our yields are generally lower than onand commercial loans. Benchmark interest rates increased several times beginning inAverage securities decreased $3.8 billion, or 15%, to $21.7 billion, primarily due to principal reductions. During the fourth quarter of 2015, which has had a positive impact on NIM and spreads, as our earning assets generally reprice more quickly than our funding sources. A portion2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of our variable-rate loans were not affected by these changes primarily due to longer reset frequency, or because a substantial portion of our earning assets are tied to longer-term rates indices, which rates were impacted by a relatively flat yield curve for much of 2017. Additionally, NIM benefited from FDIC-supported loans by approximately 3 bps and 4 bps in 2017 and 2016, respectively. We expect continued strong growth in residential mortgages, with moderate growth in both CRE and commercial and industrial loans.
Average deposits decreased $5.6 billion, or 7%, to $72.9 billion, driven largely by the reduction in the amount of prepayments on agency-guaranteed, mortgage-backed securities, and investment in products providing a higher yield than the average portfolio. The purchases were funded by using lower-yielding average money market investments, which were reduced by $2.1 billion, and wholesale borrowing from the FHLB. The investment portfolio has now reached a generally appropriate size relative to the balance sheet.
noninterest-bearing deposits. Average noninterest-bearing demandnoninterest-bearing deposits provided us with low-cost funding and comprised 45.6% of average total deposits, which totaled $52.2 billion in 2017, compared with 44.4% of average total deposits, which totaled $50.6 billion, for 2016. Average interest-bearing deposits increased only 1% in 2017, compared with 2016. Over the past 12 months the Federal Reserve has increased the overnight benchmark Federal Funds rate by 75 bps, while the rate paid on the Company’s interest-bearing deposits increased 3 bps. We have been selectively increasing deposit pricing in certain markets and with certain clients, but we have not generally experienced signific
33
Average borrowed funds, consisting primarily of secured borrowings, increased $5.2 billion, or 149%, to $8.7 billion, due largely to a higher average rate thanshift in wholesale funding needs as a result of fluctuations in deposit levels during 2023.
For more information on our investment securities portfolio and borrowed funds and how we manage liquidity risk, refer to the rate“Investment Securities Portfolio” section on debt that matured and was available to be called; overall interest expense thereon decreased $13 million. As mentioned previously, the Company has used short-term FHLB borrowings to fund some of its balance sheet growth. Average short-term debt grew $3.6 billionpage 46 and the rate paid increased 78 bps. Further changes in short-term borrowings will be driven by balancing changes in deposits and loans as we do not foresee significant increases in investment security balances.
The following schedule summarizes the average balances, the amount of interest earned or incurred,paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities that generate taxable-equivalent net interest income.liabilities:
34
Schedule 5
AVERAGE BALANCE SHEETS, YIELDS, AND RATES
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||
| (In millions) | Average balance | Interest | Yield/ Rate 1 | Average balance | Interest | Yield/ Rate 1 | Average balance | Interest | Yield/ Rate 1 | ||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Money market investments: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 2,163 | $ | 112 | 5.18 | % | $ | 3,066 | $ | 27 | 0.87 | % | $ | 8,917 | $ | 12 | 0.14 | % | |||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | 1,358 | 76 | 5.57 | 2,482 | 54 | 2.16 | 2,129 | 9 | 0.40 | ||||||||||||||||||||||||||
| Total money market investments | 3,521 | 188 | 5.33 | 5,548 | 81 | 1.45 | 11,046 | 21 | 0.19 | ||||||||||||||||||||||||||
| Securities: | |||||||||||||||||||||||||||||||||||
| Held-to-maturity | 10,731 | 240 | 2.24 | 1,999 | 47 | 2.36 | 562 | 17 | 2.97 | ||||||||||||||||||||||||||
| Available-for-sale | 10,900 | 331 | 3.03 | 23,132 | 461 | 1.99 | 18,365 | 292 | 1.59 | ||||||||||||||||||||||||||
| Trading account | 53 | 1 | 2.86 | 322 | 16 | 4.79 | 246 | 11 | 4.43 | ||||||||||||||||||||||||||
| Total securities | 21,684 | 572 | 2.64 | 25,453 | 524 | 2.06 | 19,173 | 320 | 1.67 | ||||||||||||||||||||||||||
| Loans held for sale | 39 | 2 | 5.95 | 39 | 1 | 2.57 | 65 | 1 | 2.35 | ||||||||||||||||||||||||||
Loans and leases: 2 | |||||||||||||||||||||||||||||||||||
| Commercial | 30,519 | 1,679 | 5.50 | 29,225 | 1,194 | 4.09 | 29,580 | 1,185 | 4.01 | ||||||||||||||||||||||||||
| Commercial real estate | 13,023 | 908 | 6.98 | 12,251 | 544 | 4.44 | 12,136 | 418 | 3.44 | ||||||||||||||||||||||||||
| Consumer | 13,198 | 639 | 4.84 | 11,122 | 398 | 3.58 | 10,267 | 354 | 3.44 | ||||||||||||||||||||||||||
| Total loans and leases | 56,740 | 3,226 | 5.69 | 52,598 | 2,136 | 4.06 | 51,983 | 1,957 | 3.76 | ||||||||||||||||||||||||||
| Total interest-earning assets | 81,984 | 3,988 | 4.86 | 83,638 | 2,742 | 3.28 | 82,267 | 2,299 | 2.79 | ||||||||||||||||||||||||||
| Cash and due from banks | 662 | 621 | 605 | ||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and debt securities | (632) | (514) | (612) | ||||||||||||||||||||||||||||||||
| Goodwill and intangibles | 1,062 | 1,022 | 1,015 | ||||||||||||||||||||||||||||||||
| Other assets | 5,579 | 4,908 | 4,122 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 88,655 | $ | 89,675 | $ | 87,397 | |||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and money market | $ | 34,135 | $ | 650 | 1.90 | $ | 37,045 | $ | 61 | 0.16 | $ | 36,717 | $ | 21 | 0.06 | ||||||||||||||||||||
| Time | 9,028 | 413 | 4.58 | 1,594 | 9 | 0.58 | 2,020 | 9 | 0.41 | ||||||||||||||||||||||||||
| Total interest-bearing deposits | 43,163 | 1,063 | 2.46 | 38,639 | 70 | 0.18 | 38,737 | 30 | 0.08 | ||||||||||||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||||||||||||||
| Federal funds purchased and security repurchase agreements | 3,380 | 169 | 4.98 | 1,531 | 38 | 2.49 | 797 | 1 | 0.07 | ||||||||||||||||||||||||||
| Other short-term borrowings | 4,741 | 241 | 5.08 | 1,263 | 46 | 3.65 | 5 | — | 0.04 | ||||||||||||||||||||||||||
| Long-term debt | 592 | 36 | 6.09 | 705 | 31 | 4.28 | 1,211 | 28 | 2.36 | ||||||||||||||||||||||||||
| Total borrowed funds | 8,713 | 446 | 5.11 | 3,499 | 115 | 3.27 | 2,013 | 29 | 1.45 | ||||||||||||||||||||||||||
| Total interest-bearing funds | 51,876 | 1,509 | 2.91 | 42,138 | 185 | 0.44 | 40,750 | 59 | 0.14 | ||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 29,703 | 39,890 | 37,520 | ||||||||||||||||||||||||||||||||
| Other liabilities | 1,797 | 1,735 | 1,259 | ||||||||||||||||||||||||||||||||
| Total liabilities | 83,376 | 83,763 | 79,529 | ||||||||||||||||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||||||||||||
| Preferred equity | 440 | 440 | 497 | ||||||||||||||||||||||||||||||||
| Common equity | 4,839 | 5,472 | 7,371 | ||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 5,279 | 5,912 | 7,868 | ||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 88,655 | $ | 89,675 | $ | 87,397 | |||||||||||||||||||||||||||||
| Spread on average interest-bearing funds | 1.95 | % | 2.84 | % | 2.65 | % | |||||||||||||||||||||||||||||
| Impact of net noninterest-bearing sources of funds | 1.07 | % | 0.22 | % | 0.07 | % | |||||||||||||||||||||||||||||
| Net interest margin | $ | 2,479 | 3.02 | % | $ | 2,557 | 3.06 | % | $ | 2,240 | 2.72 | % | |||||||||||||||||||||||
| Memo: total cost of deposits | 1.46 | % | 0.09 | % | 0.04 | % | |||||||||||||||||||||||||||||
| Memo: total deposits and interest-bearing liabilities | 81,579 | 1,509 | 1.87 | % | 82,028 | 185 | 0.23 | % | 78,270 | 59 | 0.07 | % | |||||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||
| (Dollar amounts in millions) | Average balance | Amount of interest 1 | Average rate | Average balance | Amount of interest 1 | Average rate | |||||||||||||||
| ASSETS | |||||||||||||||||||||
| Money market investments | $ | 1,539 | $ | 19 | 1.23 | % | $ | 3,664 | $ | 21 | 0.59 | % | |||||||||
| Securities: | |||||||||||||||||||||
| Held-to-maturity | 776 | 31 | 3.95 | 675 | 30 | 4.40 | |||||||||||||||
| Available-for-sale | 14,907 | 313 | 2.10 | 9,546 | 184 | 1.93 | |||||||||||||||
| Trading account | 64 | 2 | 3.75 | 83 | 3 | 3.76 | |||||||||||||||
| Total securities | 15,747 | 346 | 2.20 | 10,304 | 217 | 2.11 | |||||||||||||||
| Loans held for sale | 87 | 3 | 3.56 | 140 | 5 | 3.36 | |||||||||||||||
Loans and leases 2 | |||||||||||||||||||||
| Commercial | 22,116 | 964 | 4.36 | 21,748 | 913 | 4.20 | |||||||||||||||
| Commercial Real Estate | 11,184 | 504 | 4.50 | 11,131 | 472 | 4.24 | |||||||||||||||
| Consumer | 10,201 | 391 | 3.84 | 9,183 | 351 | 3.83 | |||||||||||||||
| Total Loans and leases | 43,501 | 1,859 | 4.27 | 42,062 | 1,736 | 4.13 | |||||||||||||||
| Total interest-earning assets | 60,874 | 2,227 | 3.66 | 56,170 | 1,979 | 3.52 | |||||||||||||||
| Cash and due from banks | 786 | 675 | |||||||||||||||||||
| Allowance for loan losses | (548 | ) | (601 | ) | |||||||||||||||||
| Goodwill | 1,014 | 1,014 | |||||||||||||||||||
| Core deposit and other intangibles | 5 | 13 | |||||||||||||||||||
| Other assets | 2,985 | 2,779 | |||||||||||||||||||
| Total assets | $ | 65,116 | $ | 60,050 | |||||||||||||||||
| LIABILITIES | |||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||
| Saving and money market | $ | 25,453 | 39 | 0.15 | $ | 25,672 | 37 | 0.15 | |||||||||||||
| Time | 2,966 | 20 | 0.69 | 2,333 | 12 | 0.49 | |||||||||||||||
| Foreign | — | — | — | 128 | — | 0.28 | |||||||||||||||
| Total interest-bearing deposits | 28,419 | 59 | 0.21 | 28,133 | 49 | 0.18 | |||||||||||||||
| Borrowed funds: | |||||||||||||||||||||
| Federal funds purchased and other short-term borrowings | 4,096 | 44 | 1.05 | 456 | 1 | 0.27 | |||||||||||||||
| Long-term debt | 417 | 24 | 5.79 | 703 | 37 | 5.18 | |||||||||||||||
| Total borrowed funds | 4,513 | 68 | 1.49 | 1,159 | 38 | 3.25 | |||||||||||||||
| Total interest-bearing liabilities | 32,932 | 127 | 0.38 | 29,292 | 87 | 0.30 | |||||||||||||||
| Noninterest-bearing deposits | 23,781 | 22,462 | |||||||||||||||||||
| Other liabilities | 624 | 625 | |||||||||||||||||||
| Total liabilities | 57,337 | 52,379 | |||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||
| Preferred equity | 631 | 756 | |||||||||||||||||||
| Common equity | 7,148 | 6,915 | |||||||||||||||||||
| Controlling interest shareholders’ equity | 7,779 | 7,671 | |||||||||||||||||||
| Noncontrolling interests | — | — | |||||||||||||||||||
| Total shareholders’ equity | 7,779 | 7,671 | |||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 65,116 | $ | 60,050 | |||||||||||||||||
| Spread on average interest-bearing funds | 3.27 | 3.23 | |||||||||||||||||||
| Taxable-equivalent net interest income and net yield on interest-earning assets | $ | 2,100 | 3.45 | $ | 1,892 | 3.37 | |||||||||||||||
1 Taxable-equivalent rates used where applicable. See “GAAP to Non-GAAP Reconciliations” on page 29 for more information regarding taxable-equivalent net interest income.
2 Net of unearned incomeunamortized purchase premiums, discounts, and deferred loan fees net of relatedand costs. Loans include nonaccrual and restructured loans.
35
| 2015 | 2014 | 2013 | |||||||||||||||||||||||||||||
Average balance | Amount of interest 1 | Average rate | Average balance | Amount of interest 1 | Average rate | Average balance | Amount of interest 1 | Average rate | |||||||||||||||||||||||
| $ | 8,252 | $ | 23 | 0.28 | % | $ | 8,218 | $ | 21 | 0.26 | % | $ | 8,850 | $ | 23 | 0.26 | % | ||||||||||||||
| 581 | 30 | 5.08 | 609 | 32 | 5.27 | 762 | 38 | 4.91 | |||||||||||||||||||||||
| 5,181 | 100 | 1.93 | 3,472 | 75 | 2.17 | 3,107 | 72 | 2.32 | |||||||||||||||||||||||
| 64 | 2 | 3.46 | 61 | 2 | 3.22 | 32 | 1 | 3.29 | |||||||||||||||||||||||
| 5,826 | 132 | 2.26 | 4,142 | 109 | 2.64 | 3,901 | 111 | 2.84 | |||||||||||||||||||||||
| 125 | 5 | 3.61 | 128 | 5 | 3.63 | 147 | 5 | 3.64 | |||||||||||||||||||||||
| 21,419 | 903 | 4.22 | 21,125 | 922 | 4.36 | 20,186 | 940 | 4.65 | |||||||||||||||||||||||
| 10,178 | 454 | 4.46 | 10,337 | 484 | 4.68 | 10,386 | 557 | 5.36 | |||||||||||||||||||||||
| 8,574 | 334 | 3.91 | 8,060 | 328 | 4.06 | 7,537 | 321 | 4.25 | |||||||||||||||||||||||
| 40,171 | 1,691 | 4.21 | 39,522 | 1,734 | 4.39 | 38,109 | 1,818 | 4.77 | |||||||||||||||||||||||
| 54,374 | 1,851 | 3.40 | 52,010 | 1,869 | 3.59 | 51,007 | 1,957 | 3.84 | |||||||||||||||||||||||
| 642 | 894 | 1,014 | |||||||||||||||||||||||||||||
| (607 | ) | (690 | ) | (830 | ) | ||||||||||||||||||||||||||
| 1,014 | 1,014 | 1,014 | |||||||||||||||||||||||||||||
| 21 | 31 | 44 | |||||||||||||||||||||||||||||
| 2,601 | 2,623 | 2,683 | |||||||||||||||||||||||||||||
| $ | 58,045 | $ | 55,882 | $ | 54,932 | ||||||||||||||||||||||||||
| $ | 24,619 | 38 | 0.16 | $ | 23,532 | 37 | 0.16 | $ | 22,891 | 40 | 0.17 | ||||||||||||||||||||
| 2,274 | 10 | 0.43 | 2,490 | 12 | 0.46 | 2,792 | 16 | 0.57 | |||||||||||||||||||||||
| 379 | 1 | 0.18 | 642 | 1 | 0.18 | 1,662 | 3 | 0.20 | |||||||||||||||||||||||
| 27,272 | 49 | 0.18 | 26,664 | 50 | 0.19 | 27,345 | 59 | 0.22 | |||||||||||||||||||||||
| 235 | — | 0.14 | 223 | — | 0.11 | 278 | — | 0.11 | |||||||||||||||||||||||
| 1,016 | 69 | 6.75 | 1,803 | 123 | 6.82 | 2,265 | 186 | 8.21 | |||||||||||||||||||||||
| 1,251 | 69 | 5.51 | 2,026 | 123 | 6.09 | 2,543 | 186 | 7.32 | |||||||||||||||||||||||
| 28,523 | 118 | 0.41 | 28,690 | 173 | 0.60 | 29,888 | 245 | 0.82 | |||||||||||||||||||||||
| 21,366 | 19,610 | 17,972 | |||||||||||||||||||||||||||||
| 592 | 554 | 584 | |||||||||||||||||||||||||||||
| 50,481 | 48,854 | 48,444 | |||||||||||||||||||||||||||||
| 983 | 1,004 | 1,360 | |||||||||||||||||||||||||||||
| 6,581 | 6,024 | 5,130 | |||||||||||||||||||||||||||||
| 7,564 | 7,028 | 6,490 | |||||||||||||||||||||||||||||
| — | — | (2 | ) | ||||||||||||||||||||||||||||
| 7,564 | 7,028 | 6,488 | |||||||||||||||||||||||||||||
| $ | 58,045 | $ | 55,882 | $ | 54,932 | ||||||||||||||||||||||||||
| 2.99 | 2.99 | 3.02 | |||||||||||||||||||||||||||||
| $ | 1,733 | 3.19 | $ | 1,696 | 3.26 | $ | 1,712 | 3.36 | |||||||||||||||||||||||
| 2017 over 2016 | 2016 over 2015 | ||||||||||||||||||||||
| Changes due to | Total changes | Changes due to | Total changes | ||||||||||||||||||||
| (In millions) | Volume | Rate1 | Volume | Rate1 | |||||||||||||||||||
| INTEREST-EARNING ASSETS | |||||||||||||||||||||||
| Money market investments | $ | (12 | ) | $ | 10 | $ | (2 | ) | $ | (13 | ) | $ | 11 | $ | (2 | ) | |||||||
| Securities: | |||||||||||||||||||||||
| Held-to-maturity | 4 | (3 | ) | 1 | 4 | (4 | ) | — | |||||||||||||||
| Available-for-sale | 111 | 18 | 129 | 84 | — | 84 | |||||||||||||||||
| Trading account | (1 | ) | — | (1 | ) | 1 | — | 1 | |||||||||||||||
| Total securities | 114 | 15 | 129 | 89 | (4 | ) | 85 | ||||||||||||||||
| Loans held for sale | (2 | ) | — | (2 | ) | 1 | — | 1 | |||||||||||||||
Loans and leases2 | |||||||||||||||||||||||
| Commercial | 16 | 35 | 51 | 13 | (3 | ) | 10 | ||||||||||||||||
| Commercial Real Estate | 2 | 30 | 32 | 40 | (22 | ) | 18 | ||||||||||||||||
| Consumer | 38 | 2 | 40 | 23 | (6 | ) | 17 | ||||||||||||||||
| Total loans and leases | 56 | 67 | 123 | 76 | (31 | ) | 45 | ||||||||||||||||
| Total interest-earning assets | 156 | 92 | 248 | 153 | (24 | ) | 129 | ||||||||||||||||
| INTEREST-BEARING LIABILITIES | |||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||
| Saving and money market | — | 2 | 2 | — | (1 | ) | (1 | ) | |||||||||||||||
| Time | 3 | 5 | 8 | — | 2 | 2 | |||||||||||||||||
| Foreign | — | — | — | (1 | ) | — | (1 | ) | |||||||||||||||
| Total interest-bearing deposits | 3 | 7 | 10 | (1 | ) | 1 | — | ||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||
| Federal funds purchased and other short-term borrowings | 31 | 12 | 43 | 1 | — | 1 | |||||||||||||||||
| Long-term debt | (15 | ) | 2 | (13 | ) | (16 | ) | (16 | ) | (32 | ) | ||||||||||||
| Total borrowed funds | 16 | 14 | 30 | (15 | ) | (16 | ) | (31 | ) | ||||||||||||||
| Total interest-bearing liabilities | 19 | 21 | 40 | (16 | ) | (15 | ) | (31 | ) | ||||||||||||||
| Change in taxable-equivalent net interest income | $ | 137 | $ | 71 | $ | 208 | $ | 169 | $ | (9 | ) | $ | 160 | ||||||||||
In the analysis of changes in taxable-equivalent net interest changes dueincome attributed to volume and rate, changes due to the volume/rate variance are allocated to volume with the following exceptions: when volume and rate both increase, the variance is allocated proportionately to both volume and rate; when the rate increases and volume decreases, the variance is allocated to rate.
Schedule 7
ANALYSIS OF CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME
| 2023 over 2022 | 2022 over 2021 | ||||||||||||||||||||||||||||||||||
| Changes due to | Total changes | Changes due to | Total changes | ||||||||||||||||||||||||||||||||
| (In millions) | Volume | Rate1 | Volume | Rate1 | |||||||||||||||||||||||||||||||
| INTEREST-EARNING ASSETS | |||||||||||||||||||||||||||||||||||
| Money market investments: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | (8) | $ | 93 | $ | 85 | $ | (8) | $ | 23 | $ | 15 | |||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | (25) | 47 | 22 | 1 | 44 | 45 | |||||||||||||||||||||||||||||
| Total money market investments | (33) | 140 | 107 | (7) | 67 | 60 | |||||||||||||||||||||||||||||
| Securities: | |||||||||||||||||||||||||||||||||||
| Held-to-maturity | 195 | (2) | 193 | 34 | (4) | 30 | |||||||||||||||||||||||||||||
| Available-for-sale | (244) | 114 | (130) | 86 | 83 | 169 | |||||||||||||||||||||||||||||
| Trading account | (8) | (7) | (15) | 4 | 1 | 5 | |||||||||||||||||||||||||||||
| Total securities | (57) | 105 | 48 | 124 | 80 | 204 | |||||||||||||||||||||||||||||
| Loans held for sale | — | 1 | 1 | — | — | — | |||||||||||||||||||||||||||||
Loans and leases2 | |||||||||||||||||||||||||||||||||||
| Commercial | 56 | 429 | 485 | (59) | 68 | 9 | |||||||||||||||||||||||||||||
| Commercial real estate | 36 | 328 | 364 | 3 | 123 | 126 | |||||||||||||||||||||||||||||
| Consumer | 84 | 157 | 241 | 30 | 14 | 44 | |||||||||||||||||||||||||||||
| Total loans and leases | 176 | 914 | 1,090 | (26) | 205 | 179 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 86 | 1,160 | 1,246 | 91 | 352 | 443 | |||||||||||||||||||||||||||||
| INTEREST-BEARING LIABILITIES | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Saving and money market | (6) | 595 | 589 | 1 | 39 | 40 | |||||||||||||||||||||||||||||
| Time | 163 | 241 | 404 | (2) | 2 | — | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 157 | 836 | 993 | (1) | 41 | 40 | |||||||||||||||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||||||||||||||
| Federal funds purchased and security repurchase agreements | 72 | 59 | 131 | — | 37 | 37 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 171 | 24 | 195 | 34 | 12 | 46 | |||||||||||||||||||||||||||||
| Long-term debt | (6) | 11 | 5 | (11) | 14 | 3 | |||||||||||||||||||||||||||||
| Total borrowed funds | 237 | 94 | 331 | 23 | 63 | 86 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 394 | 930 | 1,324 | 22 | 104 | 126 | |||||||||||||||||||||||||||||
| Change in taxable-equivalent net interest income | $ | (308) | $ | 230 | $ | (78) | $ | 69 | $ | 248 | $ | 317 | |||||||||||||||||||||||
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and modified loans.
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Provision for Credit Losses
The allowance for credit losses (“ACL”) is the combination of both the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents the estimated current expected credit losses related to the loan and lease portfolio as of the balance sheet date. The RULC represents the estimated reserve for current expected credit losses associated with off-balance sheet commitments. Changes in the ALLL and RULC, net of charge-offs and recoveries, are recorded as the provision for loan and lease losses and the provision for unfunded lending commitments, respectively, on the consolidated statement of income. The ACL for debt securities is estimated separately from loans and is included in “Investment securities” on the consolidated balance sheet.
The provision for credit losses, which is the combination of both the provision for loan and lease losses and the provision for unfunded lending commitments.commitments, was $132 million in 2023, compared with $122 million in 2022.
The ACL was $729 million at December 31, 2023, compared with $636 million at December 31, 2022. The increase in the ACL reflects incremental reserves associated with portfolio-specific risks including commercial real estate, as well as deterioration in economic forecasts. The ratio of ACL to total loans and leases was 1.26% at December 31, 2023, compared with 1.14% at December 31, 2022. The provision for loansecurities losses is the amount of expense that, in our judgment, is required to maintain the ALLL at an adequate level based on the inherent risks in the loan portfolio. The provision for unfunded lending commitments is used to maintain the reserve for unfunded lending commitments (“RULC”) at an adequate level based on the inherent risks associated with such commitments. In determining adequate levels of the ALLLwas less than $1 million during 2023 and RULC, we perform periodic evaluations of our various loan portfolios, the levels of actual charge-2022.
37
The third bar represents changes in credit trends,quality factors and external factors. includes risk-grade migration, portfolio-specific risks, and specific reserves against loans, which, when combined, increased the ACL by $84 million, driven largely by an increased focus on certain portfolio-specific risks, including commercial real estate.
The fourth bar represents loan portfolio changes, driven primarily by changes in loan balances and composition, the aging of the portfolio, and other qualitative risk factors; all of which resulted in a $24 million decrease in the ACL.
See “Credit Risk Management” on page 54 and Note 6of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 56 for more information on how we determine the appropriate level forof the ALLL and the RULC.
Noninterest Income
Noninterest income represents revenuesrevenue we earn forfrom products and services that generally have no associated interest rate or yield. For 2017,yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income was $544 million compared with $516 million in 2016 and $357 million in 2015. We believe a subtotal of customer-related fees provides a better view of income over which we have more direct control. It excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives,derivatives.
Total noninterest income increased $45 million, or 7%, in 2023, relative to the prior year. Noninterest income accounted for 22% and securities gains20% of net revenue during 2023 and losses.
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Schedule 78
NONINTEREST INCOME
| (Dollar amounts in millions) | 2023 | Amount change | Percent change | 2022 | Amount change | Percent change | 2021 | ||||||||||||||||||||||||||||||||||
| Commercial account fees | $ | 174 | $ | 15 | 9 | % | $ | 159 | $ | 22 | 16 | % | $ | 137 | |||||||||||||||||||||||||||
| Card fees | 101 | (3) | (3) | 104 | 9 | 9 | 95 | ||||||||||||||||||||||||||||||||||
| Retail and business banking fees | 66 | (7) | (10) | 73 | (1) | (1) | 74 | ||||||||||||||||||||||||||||||||||
| Loan-related fees and income | 79 | (1) | (1) | 80 | (15) | (16) | 95 | ||||||||||||||||||||||||||||||||||
| Capital markets fees | 81 | (2) | (2) | 83 | 13 | 19 | 70 | ||||||||||||||||||||||||||||||||||
| Wealth management fees | 58 | 3 | 5 | 55 | 5 | 10 | 50 | ||||||||||||||||||||||||||||||||||
| Other customer-related fees | 61 | 1 | 2 | 60 | 6 | 11 | 54 | ||||||||||||||||||||||||||||||||||
| Customer-related noninterest income | 620 | 6 | 1 | % | 614 | 39 | 7 | % | 575 | ||||||||||||||||||||||||||||||||
| Fair value and nonhedge derivative income (loss) | (4) | (20) | NM | 16 | 2 | 14 | 14 | ||||||||||||||||||||||||||||||||||
| Dividends and other income | 57 | 40 | NM | 17 | (26) | (60) | 43 | ||||||||||||||||||||||||||||||||||
| Securities gains (losses), net | 4 | 19 | NM | (15) | (86) | NM | 71 | ||||||||||||||||||||||||||||||||||
| Noncustomer-related noninterest income | 57 | 39 | NM | 18 | (110) | (86) | 128 | ||||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 677 | $ | 45 | 7 | % | $ | 632 | $ | (71) | (10) | % | $ | 703 | |||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2017 | Percent change | 2016 | Percent change | 2015 | ||||||||||||
| Service charges and fees on deposit accounts | $ | 171 | — | % | $ | 171 | 2 | % | $ | 168 | |||||||
| Other service charges, commissions and fees | 217 | 4 | 208 | 11 | 187 | ||||||||||||
| Wealth management and trust income | 42 | 14 | 37 | 19 | 31 | ||||||||||||
| Loan sales and servicing income | 25 | (29 | ) | 35 | 13 | 31 | |||||||||||
| Capital markets and foreign exchange | 30 | 36 | 22 | (15 | ) | 26 | |||||||||||
| Customer-related fees | 485 | 3 | 473 | 7 | 443 | ||||||||||||
| Dividends and other investment income | 40 | 67 | 24 | (20 | ) | 30 | |||||||||||
| Securities gains (losses), net | 14 | 100 | 7 | 106 | (127 | ) | |||||||||||
| Other | 5 | (58 | ) | 12 | 9 | 11 | |||||||||||
| Total noninterest income | $ | 544 | 5 | $ | 516 | 45 | $ | 357 | |||||||||
Consistent with our key corporate objectives, we continue to deepen existing relationships with our commercial, small business, capital markets, affluent, and retail customers by providing high-quality treasury management products, capital market solutions, wealth management advisory services, and depository account services.
•Commercial account fees increased $15 million or 9%, driven by increases in treasury management sweep income, account analysis fees, and 2015 forbankcard merchant fees.
•Wealth management fee income increased $3 million, or 5%, reflecting growth in assets and increased wealth and advisory services. Our assets under management were $13.3 billion at December 31, 2023.
•Retail and business banking fees decreased $7 million, or 10%, primarily due to changes in our overdraft and non-sufficient funds practices, which were effected in the same reasons.third quarter of 2022.
•Card fees decreased $3 million, or 3%, due to declines in commercial and business bankcard interchange fees.
•Capital markets fees decreased $2 million, or 2%, primarily due to reduced customer swap and loan syndication fees.
Noncustomer-related Noninterest Income
Total noncustomer-related noninterest income increased $39 million in 2023. Dividends and other investment income increased $16$40 million, primarily due to $14 million of gains across many of our cost and equity method investments. After consolidating seven banking charters into one in December 2015, ourhigher dividends on FHLB stock ownership with the FHLB system has decreased significantly and dividends thereon have also fallen. Due toresulting from increased use of FHLB borrowing during 2017, the Company has purchasedaverage FHLB activity stock as needed; however, the dividends received have not equaled the level seen prior to 2016. The consolidation also causedand an increase in the Company’s ownershipassociated dividend rate, when compared with the prior year, as well as a gain on sale of Federal Reserve stock. Dividends on FRB stock were relatively flat between 2017a bank-owned property in the second quarter of 2023. Net securities gains increased $19 million, due largely to higher losses recorded during the prior year in our Small Business Investment Company (“SBIC”) investment portfolio. Fair value and 2016.
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Noninterest Expense
Schedule 89
NONINTEREST EXPENSE
| (Dollar amounts in millions) | 2023 | Amount change | Percent change | 2022 | Amount change | Percent change | 2021 | ||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 1,275 | $ | 40 | 3 | % | $ | 1,235 | $ | 108 | 10 | % | $ | 1,127 | |||||||||||||||||||||||||||
| Technology, telecom, and information processing | 240 | 31 | 15 | 209 | 10 | 5 | 199 | ||||||||||||||||||||||||||||||||||
| Occupancy and equipment, net | 160 | 8 | 5 | 152 | (1) | (1) | 153 | ||||||||||||||||||||||||||||||||||
| Professional and legal services | 62 | 5 | 9 | 57 | (15) | (21) | 72 | ||||||||||||||||||||||||||||||||||
| Marketing and business development | 46 | 7 | 18 | 39 | (4) | (9) | 43 | ||||||||||||||||||||||||||||||||||
| Deposit insurance and regulatory expense | 169 | 119 | NM | 50 | 16 | 47 | 34 | ||||||||||||||||||||||||||||||||||
| Credit-related expense | 26 | (4) | (13) | 30 | 4 | 15 | 26 | ||||||||||||||||||||||||||||||||||
| Other real estate expense, net | — | (1) | NM | 1 | 1 | NM | — | ||||||||||||||||||||||||||||||||||
| Other | 119 | 14 | 13 | 105 | 18 | 21 | 87 | ||||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 2,097 | $ | 219 | 12 | % | $ | 1,878 | $ | 137 | 8 | % | $ | 1,741 | |||||||||||||||||||||||||||
| Adjusted noninterest expense (non-GAAP) | $ | 1,986 | $ | 110 | 6 | % | $ | 1,876 | $ | 139 | 8 | % | $ | 1,737 | |||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2017 | Percent change | 2016 | Percent change | 2015 | ||||||||||||
| Salaries and employee benefits | $ | 1,011 | 3 | % | $ | 983 | 1 | % | $ | 973 | |||||||
| Occupancy, net | 129 | 3 | 125 | 4 | 120 | ||||||||||||
| Furniture, equipment and software | 130 | 4 | 125 | 2 | 123 | ||||||||||||
| Other real estate expense | (1 | ) | (50 | ) | (2 | ) | 100 | (1 | ) | ||||||||
| Credit-related expense | 29 | 12 | 26 | (10 | ) | 29 | |||||||||||
| Provision for unfunded lending commitments | (7 | ) | (30 | ) | (10 | ) | 67 | (6 | ) | ||||||||
| Professional and legal services | 54 | (2 | ) | 55 | 10 | 50 | |||||||||||
| Advertising | 22 | — | 22 | (12 | ) | 25 | |||||||||||
| FDIC premiums | 53 | 33 | 40 | 18 | 34 | ||||||||||||
| Amortization of core deposit and other intangibles | 6 | (25 | ) | 8 | (11 | ) | 9 | ||||||||||
| Other | 223 | 5 | 213 | (5 | ) | 225 | |||||||||||
| Total noninterest expense | $ | 1,649 | 4 | $ | 1,585 | — | $ | 1,581 | |||||||||
In November 2023, the FDIC issued a final rule to implement a special assessment pursuant to a systemic risk determination to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in early 2023. Using an assessment base equal to the estimated amount of uninsured deposits above $5 billion at December 31, 2022, the FDIC is expected to collect a tax-deductible special assessment from banks at an annual rate of approximately 13.4 bps for an anticipated eight quarterly assessment periods, beginning with the first quarter of 2024.
Salaries and employee benefits increased by $28 million, or 3%, in 2017, compared with 2016, as illustrated in Schedule 9. Baseexpense represented approximately 61% and 66% of total noninterest expense during 2023 and 2022, respectively. The following schedule presents the major components of salaries were up in 2017, as employee salary expense rose roughly in line with inflation. Employee bonuses were up, partially due to lower incentive compensation for management in 2016 and larger commission expense in the current year. Benefits expense increased $9 million, or 6%, in 2017, primarily due to higher costs in the Company’s self-funded medical plans and an increase in profit sharing expense. Salaries and employee benefits increased by $10 million, or 1%, in 2016, compared with 2015 due to several reasons. Our investment in major systems projects led to headcount increases in more highly compensated roles, we had higher costs in our medical plans and also higher-than-expected retirement expense due to several large lump-sum payouts during the year.expense:
Schedule 910
SALARIES AND EMPLOYEE BENEFITS
| (Dollar amounts in millions) | 2023 | Amount/quantity change | Percent change | 2022 | Amount/quantity change | Percent change | 2021 | ||||||||||||||||||||||||||||||||||
| Salaries and bonuses | $ | 1,057 | $ | 29 | 3 | % | $ | 1,028 | $ | 93 | 10 | % | $ | 935 | |||||||||||||||||||||||||||
| Employee benefits: | |||||||||||||||||||||||||||||||||||||||||
| Employee health and insurance | 100 | 7 | 8 | 93 | 10 | 12 | 83 | ||||||||||||||||||||||||||||||||||
| Retirement and profit sharing | 51 | (1) | (2) | 52 | (5) | (9) | 57 | ||||||||||||||||||||||||||||||||||
| Payroll taxes and other fringe benefits | 67 | 5 | 8 | 62 | 10 | 19 | 52 | ||||||||||||||||||||||||||||||||||
| Total employee benefits | 218 | 11 | 5 | 207 | 15 | 8 | 192 | ||||||||||||||||||||||||||||||||||
| Total salaries and employee benefits | $ | 1,275 | $ | 40 | 3 | % | $ | 1,235 | $ | 108 | 10 | % | $ | 1,127 | |||||||||||||||||||||||||||
| Full-time equivalent employees at December 31, | 9,679 | (310) | (3) | % | 9,989 | 304 | 3 | % | 9,685 | ||||||||||||||||||||||||||||||||
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| (Dollar amounts in millions) | 2017 | Percent change | 2016 | Percent change | 2015 | ||||||||||||
| Salaries and bonuses | $ | 851 | 2 | % | $ | 832 | — | % | $ | 829 | |||||||
| Employee benefits: | |||||||||||||||||
| Employee health and insurance | 69 | 11 | 62 | 7 | 58 | ||||||||||||
| Retirement | 41 | 14 | 36 | 9 | 33 | ||||||||||||
| Payroll taxes and other | 50 | (6 | ) | 53 | — | 53 | |||||||||||
| Total benefits | 160 | 6 | 151 | 5 | 144 | ||||||||||||
| Total salaries and employee benefits | $ | 1,011 | 3 | $ | 983 | 1 | $ | 973 | |||||||||
| Full-time equivalent employees at December 31 | 10,083 | — | 10,057 | (1 | ) | 10,200 | |||||||||||
Technology, telecom, and information processing expense increased $31 million, or 15%, primarily due to increases in software amortization expenses associated with the replacement of our core loan and deposit banking system, as well as other related application software, license, and maintenance expenses, reflecting our ongoing investments in strategic technology initiatives designed to improve our products and services and to simplify how we do business. For further discussion on the replacement of our core loan and deposit banking system, see “Premises, Equipment, and Software” on page 52.
The efficiency ratio was 62.9%, compared with 2015. The increase was58.8%, primarily due to a decline in adjusted taxable-equivalent revenue. For information on non-GAAP financial measures, see page 77.
Technology Spend
Consistent with our strategic objectives, we invest in technologies that will make us more efficient and enable us to remain competitive. We generally consider these investments as technology spend, which represents expenditures associated with technology-related investments, operations, systems, and infrastructure, and includes current period expenses presented on the consolidated statement of income, as well as capitalized investments, net of related amortization and depreciation, presented on the consolidated balance sheet. Technology spend is reported as a combination of small items including higher rentthe following:
•Technology, telecom, and information processing expense lease depreciation, — includes expenses related to application software licensing and building security.maintenance, related amortization, telecommunications, and data processing;
•Technology investments — includes capitalized technology infrastructure equipment, hardware, and purchased or internally developed software, less related amortization or depreciation.
The following schedule presents the composition of our technology spend:
Schedule 11
TECHNOLOGY SPEND
| December 31 | Amount change | Percent change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Technology, telecom, and information processing expense | $ | 240 | $ | 209 | $ | 31 | 15 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other technology-related expense | 232 | 206 | 26 | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Technology investments | 82 | 90 | (8) | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: related amortization and depreciation | (71) | (54) | (17) | 31 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total technology spend | $ | 483 | $ | 451 | $ | 32 | 7 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total technology spend increased $32 million, or 7%, relative to the prior year, driven largely by the aforementioned increases in technology, telecom, and information processing expense, increased $5 millionas well as higher technology-related compensation and investments in 2017 mainly due to amortization of capitalized software. Expense was relatively flat between 2016 and 2015.resiliency.
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Income Taxes
Schedule 12
INCOME TAXES
| (Dollar amounts in millions) | 2023 | 2022 | 2021 | |||||||||||||||||
| Income before income taxes | $ | 886 | $ | 1,152 | $ | 1,446 | ||||||||||||||
| Income tax expense | 206 | 245 | 317 | |||||||||||||||||
| Effective tax rate | 23.3 | % | 21.3 | % | 21.9 | % | ||||||||||||||
The effective tax expense rates for all tax yearsthe periods presented above were reduceddecreased by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance.insurance (“BOLI”), and were increased by the nondeductibility of certain FDIC premiums, certain executive compensation, and other fringe benefits. The increase in the effective tax rate in 2017for 2023 was further impacted by the following items:
We had a net DTA balance of $93 million$1.0 billion and $1.1 billion at December 31, 2017, compared with $250 million at December 31, 2016.2023 and 2022, respectively. The decrease in the net DTA resulted primarily from the reduction in the federal income tax rate from the Act, accelerated tax deductions on certain technology initiatives and depreciable property, the payment of deferred compensation, andwas driven largely by a decrease in unrealized losses in AOCI associated with investment securities and derivative instruments and a reduction of certain capitalized expenses for tax purposes. These decreases were partially offset by an increase in the allowanceprovision for loan losses. A decrease in deferred tax liabilitiescredit losses during 2017, which related primarily to the deferred gain on a prior period debt exchange, offset some of the overall net decrease.2023.
We did not record any additionalhad no valuation allowance for GAAP purposes as ofat December 31, 2017.2023 and December 31, 2022. See Note 1820 of the Notes to Consolidated Financial Statements for more information about the factors that impacted our effective tax rate, significant components of our DTAs and “Critical Accounting PoliciesDTLs, and Significant Estimates” on page 80unrecognized tax benefits for additional information.
uncertain tax positions.
Preferred Stock Dividends and Redemption
The following schedule summarizes selected financial information about the Parent’s activities. We have announcedof our intention to merge the parent company into ZB, N.A. The merger is not expected to have an impact to the results of the Other operating segment.
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Schedule 1013
SELECTED SEGMENT INFORMATION
| (Dollar amounts in millions) | Zions Bank | CB&T | Amegy | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| KEY FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||
| Total average loans | $ | 14,298 | $ | 13,277 | $ | 13,198 | $ | 14,128 | $ | 13,129 | $ | 12,892 | $ | 12,851 | $ | 12,110 | $ | 12,189 | |||||||||||||||||
| Total average deposits | 20,233 | 24,317 | 23,588 | 14,253 | 16,160 | 15,796 | 13,569 | 15,735 | 15,496 | ||||||||||||||||||||||||||
| Income before income taxes | 311 | 387 | 380 | 282 | 314 | 405 | 218 | 311 | 362 | ||||||||||||||||||||||||||
| CREDIT QUALITY | |||||||||||||||||||||||||||||||||||
| Provision for credit losses | $ | 20 | $ | 43 | $ | (26) | $ | 44 | $ | 49 | $ | (78) | $ | 15 | $ | 5 | $ | (96) | |||||||||||||||||
| Net loan and lease charge-offs (recoveries) | 19 | 29 | — | 10 | 3 | — | 5 | 3 | 2 | ||||||||||||||||||||||||||
| Ratio of net charge-offs to average loans and leases | 0.13 | % | 0.22 | % | — | % | 0.07 | % | 0.02 | % | — | % | 0.04 | % | 0.02 | % | 0.02 | % | |||||||||||||||||
| Allowance for credit losses | $ | 157 | $ | 155 | $ | 142 | $ | 162 | $ | 122 | $ | 90 | $ | 139 | $ | 122 | $ | 128 | |||||||||||||||||
| Ratio of allowance for credit losses to net loans and leases, at year-end | 1.10 | % | 1.17 | % | 1.08 | % | 1.15 | % | 0.93 | % | 0.70 | % | 1.08 | % | 1.01 | % | 1.05 | % | |||||||||||||||||
| Nonperforming assets | $ | 26 | $ | 36 | $ | 84 | $ | 82 | $ | 25 | $ | 41 | $ | 35 | $ | 59 | $ | 90 | |||||||||||||||||
| Ratio of nonperforming assets to net loans and leases and other real estate owned | 0.18 | % | 0.26 | % | 0.65 | % | 0.58 | % | 0.18 | % | 0.32 | % | 0.27 | % | 0.46 | % | 0.77 | % | |||||||||||||||||
| (Dollar amounts in millions) | Zions Bank | Amegy | CB&T | ||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||
| KEY FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
| Total average loans | $ | 12,481 | $ | 12,538 | $ | 12,118 | $ | 11,021 | $ | 10,595 | $ | 10,148 | $ | 9,539 | $ | 9,211 | $ | 8,556 | |||||||||||
| Total average deposits | 15,986 | 15,991 | 15,688 | 11,096 | 11,130 | 11,495 | 11,030 | 10,827 | 10,063 | ||||||||||||||||||||
| Income before income taxes | 346 | 371 | 275 | 240 | 94 | 44 | 257 | 220 | 150 | ||||||||||||||||||||
| CREDIT QUALITY | |||||||||||||||||||||||||||||
| Provision for loan losses | $ | 19 | $ | (22 | ) | $ | (28 | ) | $ | 25 | $ | 163 | $ | 91 | $ | (5 | ) | $ | (9 | ) | $ | (4 | ) | ||||||
| Net loan and lease charge-offs | 34 | 13 | 10 | 41 | 123 | 22 | 1 | (1 | ) | 10 | |||||||||||||||||||
| Ratio of net charge-offs to average loans and leases | 0.27 | % | 0.11 | % | 0.09 | % | 0.37 | % | 1.16 | % | 0.22 | % | 0.01 | % | (0.01 | )% | 0.12 | % | |||||||||||
| Allowance for loan losses | $ | 130 | $ | 145 | $ | 180 | $ | 247 | $ | 263 | $ | 223 | $ | 69 | $ | 74 | $ | 81 | |||||||||||
| Ratio of allowance for loan losses to net loans and leases, at year-end | 1.04 | % | 1.15 | % | 1.47 | % | 2.17 | % | 2.49 | % | 2.20 | % | 0.69 | % | 0.79 | % | 0.92 | % | |||||||||||
| Nonperforming lending-related assets | $ | 85 | $ | 105 | $ | 109 | $ | 236 | $ | 360 | $ | 116 | $ | 47 | $ | 42 | $ | 42 | |||||||||||
| Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned | 0.68 | % | 0.83 | % | 0.89 | % | 2.07 | % | 3.39 | % | 1.14 | % | 0.47 | % | 0.45 | % | 0.48 | % | |||||||||||
| Accruing loans past due 90 days or more | $ | 11 | $ | 10 | $ | 4 | $ | 1 | $ | 7 | $ | 3 | $ | 9 | $ | 19 | $ | 24 | |||||||||||
| Ratio of accruing loans past due 90 days or more to net loans and leases | 0.09 | % | 0.08 | % | 0.04 | % | 0.01 | % | 0.06 | % | 0.02 | % | 0.09 | % | 0.20 | % | 0.27 | % | |||||||||||
| (Dollar amounts in millions) | NBAZ | NSB | Vectra | TCBW | |||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| KEY FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||||||||||||||
| Total average loans | $ | 5,318 | $ | 4,911 | $ | 4,849 | $ | 3,392 | $ | 2,987 | $ | 3,015 | $ | 4,004 | $ | 3,632 | $ | 3,414 | $ | 1,705 | $ | 1,630 | $ | 1,569 | |||||||||||||||||||||||
| Total average deposits | 7,008 | 8,035 | 7,288 | 6,964 | 7,436 | 6,691 | 3,482 | 4,109 | 4,386 | 1,196 | 1,571 | 1,537 | |||||||||||||||||||||||||||||||||||
| Income before income taxes | 107 | 111 | 126 | 23 | 76 | 89 | 34 | 55 | 67 | 38 | 45 | 41 | |||||||||||||||||||||||||||||||||||
| CREDIT QUALITY | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | $ | 4 | $ | 11 | $ | (27) | $ | 42 | $ | 4 | $ | (35) | $ | 7 | $ | 9 | $ | (12) | $ | 2 | $ | 1 | $ | (3) | |||||||||||||||||||||||
| Net loan and lease charge-offs (recoveries) | 1 | (1) | (1) | 3 | (2) | 1 | 2 | 9 | — | — | — | 1 | |||||||||||||||||||||||||||||||||||
| Ratio of net charge-offs to average loans and leases | 0.02 | % | (0.02) | % | (0.02) | % | 0.09 | % | (0.07) | % | 0.03 | % | 0.05 | % | 0.25 | % | — | % | — | % | — | % | 0.06 | % | |||||||||||||||||||||||
| Allowance for credit losses | $ | 54 | $ | 40 | $ | 38 | $ | 66 | $ | 27 | $ | 26 | $ | 45 | $ | 36 | $ | 37 | $ | 11 | $ | 9 | $ | 8 | |||||||||||||||||||||||
| Ratio of allowance for credit losses to net loans and leases, at year-end | 1.02% | 0.81% | 0.79% | 1.95% | 0.90% | 0.86% | 1.12% | 0.99% | 1.08% | 0.65% | 0.55% | 0.51% | |||||||||||||||||||||||||||||||||||
| Nonperforming assets | $ | 12 | $ | 6 | $ | 11 | $ | 46 | $ | 9 | $ | 24 | $ | 16 | $ | 14 | $ | 18 | $ | 8 | $ | — | $ | 1 | |||||||||||||||||||||||
| Ratio of nonperforming assets to net loans and leases and other real estate owned | 0.21% | 0.12% | 0.24% | 1.34% | 0.27% | 0.85% | 0.40% | 0.36% | 0.53% | 0.46% | —% | 0.06% | |||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | NBAZ | NSB | Vectra | TCBW | |||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||
| KEY FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||||||
| Total average loans | $ | 4,267 | $ | 4,086 | $ | 3,811 | $ | 2,357 | $ | 2,284 | $ | 2,344 | $ | 2,644 | $ | 2,469 | $ | 2,400 | $ | 926 | $ | 791 | $ | 707 | |||||||||||||||
| Total average deposits | 4,762 | 4,576 | 4,311 | 4,254 | 4,137 | 3,891 | 2,756 | 2,720 | 2,792 | 1,107 | 1,007 | 879 | |||||||||||||||||||||||||||
| Income before income taxes | 106 | 89 | 47 | 46 | 52 | 27 | 49 | 54 | 19 | 29 | 24 | 18 | |||||||||||||||||||||||||||
| CREDIT QUALITY | |||||||||||||||||||||||||||||||||||||||
| Provision for loan losses | $ | (8 | ) | $ | (3 | ) | $ | 8 | $ | (11 | ) | $ | (28 | ) | $ | (28 | ) | $ | 1 | $ | (8 | ) | $ | 5 | $ | 2 | $ | — | $ | (3 | ) | ||||||||
| Net loan and lease charge-offs | (2 | ) | — | 10 | (3 | ) | (5 | ) | (17 | ) | 2 | — | 4 | — | — | — | |||||||||||||||||||||||
| Ratio of net charge-offs to average loans and leases | (0.04 | )% | — | % | 0.26 | % | (0.13 | )% | (0.21 | )% | (0.74 | )% | 0.09 | % | 0.01 | % | 0.16 | % | 0.02 | % | 0.02 | % | (0.05 | )% | |||||||||||||||
| Allowance for loan losses | $ | 28 | $ | 35 | $ | 38 | $ | 11 | $ | 19 | $ | 43 | $ | 24 | $ | 25 | $ | 33 | $ | 9 | $ | 7 | $ | 8 | |||||||||||||||
| Ratio of allowance for loan losses to net loans and leases, at year-end | 0.63 | % | 0.81 | % | 0.97 | % | 0.48 | % | 0.81 | % | 1.87 | % | 0.87 | % | 0.99 | % | 1.34 | % | 0.83 | % | 0.83 | % | 1.08 | % | |||||||||||||||
| Nonperforming lending-related assets | $ | 17 | $ | 31 | $ | 47 | $ | 17 | $ | 20 | $ | 19 | $ | 10 | $ | 15 | $ | 23 | $ | 6 | $ | — | $ | 1 | |||||||||||||||
| Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned | 0.39 | % | 0.73 | % | 1.20 | % | 0.73 | % | 0.84 | % | 0.84 | % | 0.35 | % | 0.59 | % | 0.92 | % | 0.56 | % | 0.02 | % | 0.18 | % | |||||||||||||||
| Accruing loans past due 90 days or more | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | — | |||||||||||||||
| Ratio of accruing loans past due 90 days or more to net loans and leases | 0.02 | % | — | % | — | % | — | % | — | % | — | % | — | % | 0.01 | % | 0.04 | % | — | % | — | % | — | % | |||||||||||||||
All references below to domestic deposits by state are based on FDIC deposit market share data for full-service institutions with at least three branches at June 30, 2023.
Zions Bank
Zions Bank is headquartered in Salt Lake City, Utah, and is primarily responsible for conductingconducts operations in Utah, Idaho, and Wyoming. If it were a separately chartered bank, it would beAs measured by domestic deposits in these states, Zions Bank was the 2nd largest full-service commercial bank in Utah and the 4thfifth largest in Idaho, as measured by domestic deposits in these states.Idaho.
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Zions Bank’s income before income taxes decreased by $25$76 million, or 7%20%, during 2017 primarily as2023. The decrease was due to a result of an$45 million decrease in net interest income and a $62 million increase in noninterest expense, partially offset by a $23 million decrease in the provision for loan losses.credit losses and an $8 million increase in noninterest income. The loan portfolio decreased by $92increased $852 million during 2017, which consisted2023, including increases of $557 million and $424 million in consumer and commercial loans, respectively, and a decrease of $284 million in commercial loans and increases of $111 million and $81$129 million in CRE and consumer loans, respectively. Within commercial lending, commercial owner-occupied loans decreased by $128 million, which was mainly the result of a reduction in the NRE loan portfolio.loans. The ratio of allowance for loan lossesACL to net loans and leases decreased to 1.04%1.10% at December 31, 20172023, compared with 1.17%. Nonperforming assets decreased $10 million, or 28%, from the prior year. Total deposits decreased 3% in 2023.
California Bank & Trust
California Bank & Trust is headquartered in San Diego, California. As measured by domestic deposits in the state, CB&T was the 17th largest full-service commercial bank in California.
CB&T’s income before income taxes decreased $32 million, or 10%, during 2023. The decrease was due to a $48 million increase in noninterest expense, partially offset by an $8 million increase in noninterest income, a $5 million decrease in the provision for credit losses, and a $3 million increase in net interest income. The loan portfolio increased $291 million during 2023, including increases of $243 million and $164 million in consumer and CRE loans, respectively, and a decrease of $116 million in commercial loans. The ratio of ACL to net loans and leases increased to 1.15% at December 31, 2016.2023, compared with 0.93%. Nonperforming lending-related assets declined 19%increased $57 million from the prior year, due primarily to decreasesdriven largely by two suburban office commercial real estate loans totaling $46 million. Total deposits increased 2% in nonaccrual loans in the commercial and industrial portfolio. Deposits decreased 4% from 2016 to 2017.2023.
Amegy Bank
Amegy Bank is headquartered in Houston, Texas. If it were a separately chartered bank, it would be the 8th largest full-service commercial bank in Texas asAs measured by domestic deposits in the state.state, Amegy was the 9th largest full-service commercial bank in Texas.
Amegy’s income before income taxes increased by $146decreased $93 million, or 155%30%, during 2017.2023. The increase in income before income taxes is mainlydecrease was due to a $138$60 million decrease in net interest income, a $49 million increase in noninterest expense, and a $10 million increase in the provision for loan losses. Amegy has been able to achievecredit losses, partially offset by a $26 million increase in noninterest income. The loan portfolio growth, resulting in an $835increased $237 million increase from the prior year. During 2017, CRE loans decreased by $64during 2023, including increases of $171 million and commercial$156 million in CRE and consumer loans, increased by $395respectively, and a decrease of $90 million and $504 million, respectively.in commercial loans. The credit quality of Amegy’s loan portfolio improved during 2017, mainly due to improvements in the oil and gas-related portfolio; the ratio of the ALLLACL to net loans and leases decreasedincreased to 2.17%1.08% at December 31, 2017 from 2.49% a year earlier. During 2017, nonperforming lending-related2023, compared with 1.01%. Nonperforming assets decreased $124$24 million, or 34%. Deposits decreased by 8% from 2016 to 2017.
National Bank of Arizona
National Bank of Arizona is headquartered in Phoenix, Arizona. If it were a separately chartered bank, it would be the 5th largest full-service commercial bank in Arizona asAs measured by domestic deposits in the state.state, NBAZ was the fifth largest full-service commercial bank in Arizona.
NBAZ’s income before income taxes increased by $17decreased $4 million, or 19%4%, during 20172023. The decrease was due to a $5$22 million improvementincrease in noninterest expense and an $8 million decrease in noninterest income, partially offset by a $19 million increase in net interest income and a $7 million decrease in the provision for loan losses, in addition to increased net interest income from loan growth and improved fee revenue.credit losses. The loan portfolio increased $509 million during 2017 by $1442023, including increases of $259 million, driven by a $206$177 million, increase in commercial loans and a $51 million increase in consumer loans, partially offset by a decrease of $113$73 million in CRE, loans.consumer, and commercial loans, respectively. The credit quality of NBAZ’s loan portfolio continues to improve, and the ratio of ALLLACL to net loans
and leases declinedincreased to 0.63%1.02% at December 31, 20172023, compared with 0.81%. Nonperforming assets increased $6 million from 0.81% a year earlier. Deposits increased by 2% from 2016 to 2017.the prior year. Total deposits decreased 6% in 2023.
Nevada State Bank
Nevada State Bank is headquartered in Las Vegas, Nevada. If it were a separately chartered bank, it would be the 4th largest full-service commercial bank in Nevada asAs measured by domestic deposits in the state.state, NSB focuses on serving small and mid-sized businesses as well as retail consumers, with an emphasis on relationship banking.was the fifth largest full-service commercial bank in Nevada.
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portfolio increased by $12$158 million during 2017,2023, including an increaseincreases of $70$104 million and $56 million in consumer and CRE loans, respectively, and a decrease of $2 million in commercial loans, and $23 million in consumer loans, partially offset by a decrease of $81 million in CRE.loans. The credit quality of NSB’s loan portfolio remained strong, and the ratio of the ALLLACL to net loans and leases was 0.48% and 0.81%increased to 1.95% at December 31, 2017 and 2016, respectively.2023, compared with 0.90%. Nonperforming lending-related assets decreased 15%increased $37 million from the prior year. Deposits decreased byTotal deposits increased 1% from 2016in 2023.
In July 2022, NSB purchased three Northern Nevada City National Bank branches and their associated deposit, credit card, and loan accounts. In addition to 2017.the three branches, the purchase included approximately $430 million in deposits and $95 million in commercial and consumer loans.
Vectra Bank Colorado
Vectra Bank Colorado is headquartered in Denver, Colorado. If it were a separately a chartered bank, it would be the 10th largest full-service commercial bank in Colorado asAs measured by domestic deposits in the state.state, Vectra was the 14th largest full-service commercial bank in Colorado.
The Commerce Bank of Washington
The Commerce Bank of Washington is headquartered in Seattle, Washington. ItWashington, and operates in Washington under The Commerce Bank of Washington name and in Portland, Oregon, under The Commerce Bank of Oregon name. Its business strategy focuses on serving the financial needs of commercial businesses, including professional services firms.The FDIC deposit market share data at June 30, 2023 for TCBW has been successful in serving the greater Seattle/Puget SoundWashington and Portland regions without requiring extensive investments in a traditional branch network. It has been innovative in effectively utilizing couriers, bank by mail, remote deposit image capture, and other technologies.Oregon was not meaningful.
TCBW’s income before income taxes increased $5decreased $7 million, or 21%16%, during 2017.2023. The decrease was due to a $3 million increase in noninterest expense, a $3 million decrease in net interest income, and a $1 million increase in the provision for credit losses. The loan portfolio increased by $164decreased $14 million during 2023, including increasesa decrease of $42$83 million in commercial loans, $94partially offset by increases of $68 million and $1 million in CRE and consumer loans, and $28 million in consumer loans. Nonperforming lending-related assets increased $6 million, and therespectively. The ratio of ALLLACL to net loans and leases wasincreased to 0.65% at 0.83%December 31, 2023, compared with 0.55%. Nonperforming assets increased $8 million from the prior year. Total deposits decreased 23% in 2017 and 2016. Deposits decreased by 5% from 2016 to 2017.2023.
BALANCE SHEET ANALYSIS
Interest-earning assets are those assets that have associated interest rates or yields, associated with them. Oneand generally consist of our goals isloans and leases, securities, and money market investments. We strive to maintain a high level of interest-earning assets relative to total assets while keeping nonearning assets at a minimum. Interest-earning assets consist of money market investments, securities, loans, and leases.
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
AVERAGE OUTSTANDINGNET LOANS, SECURITIES, AND DEPOSITSMONEY MARKET INVESTMENTS
(at December 31)
Investment Securities Portfolio
We invest in securities to actively manage liquidity and interest rate risk inand to generate interest income. We primarily own securities that can readily provide us cash and liquidity through secured borrowing agreements without the need to sell the securities. We also manage the duration of our investment securities portfolio to help balance the inherent interest rate mismatch between loans and deposits, and to protect the economic value of shareholders’ equity. At December 31, 2023, the estimated duration of our securities portfolio decreased to 3.6 percent, compared with 4.1 percent at December 31, 2022, primarily due to the addition to generating revenue forof fair value hedges of fixed-rate securities during the Company. Refersecond quarter of 2023.
For information about our borrowing capacity associated with the investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 72 for additional information on management of liquidity67. See also Note 3 and funding and compliance with Basel III and LCR requirements. The following schedule presents a profile of our investment securities portfolio. The amortized cost amounts represent the original cost of the investments, adjusted for related accumulated amortization or accretion of any yield adjustments, and for impairment losses, including credit-related impairment. The estimated fair value measurement levels and methodology are discussed in Note 35 of the Notes to Consolidated Financial Statements.Statements for more information on fair value measurements and the accounting for our investment securities portfolio.
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Schedule 1114
INVESTMENT SECURITIES PORTFOLIO
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| (In millions) | Par Value | Amortized cost | Fair value | Par Value | Amortized cost | Fair value | |||||||||||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | $ | 93 | $ | 93 | $ | 87 | $ | 100 | $ | 100 | $ | 93 | |||||||||||||||||||||||
Agency guaranteed mortgage-backed securities 1 | 11,966 | 9,935 | 10,041 | 12,921 | 10,621 | 10,772 | |||||||||||||||||||||||||||||
| Municipal securities | 354 | 354 | 338 | 404 | 405 | 374 | |||||||||||||||||||||||||||||
| Total held-to-maturity | 12,413 | 10,382 | 10,466 | 13,425 | 11,126 | 11,239 | |||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | 585 | 585 | 492 | 555 | 557 | 393 | |||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | 669 | 663 | 630 | 790 | 782 | 736 | |||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 8,460 | 8,530 | 7,291 | 9,566 | 9,652 | 8,367 | |||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities | 535 | 571 | 546 | 691 | 740 | 712 | |||||||||||||||||||||||||||||
| Municipal securities | 1,269 | 1,385 | 1,318 | 1,571 | 1,732 | 1,634 | |||||||||||||||||||||||||||||
| Other debt securities | 25 | 25 | 23 | 75 | 75 | 73 | |||||||||||||||||||||||||||||
| Total available-for-sale | 11,543 | 11,759 | 10,300 | 13,248 | 13,538 | 11,915 | |||||||||||||||||||||||||||||
| Total HTM and AFS investment securities | $ | 23,956 | $ | 22,141 | $ | 20,766 | $ | 26,673 | $ | 24,664 | $ | 23,154 | |||||||||||||||||||||||
| December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
| (In millions) | Par Value | Amortized cost | Estimated fair value | Par Value | Amortized cost | Estimated fair value | |||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||
| Municipal securities | $ | 771 | $ | 770 | $ | 762 | $ | 868 | $ | 868 | $ | 850 | |||||||||||
| Available-for-sale | |||||||||||||||||||||||
| U.S. Treasury securities | 25 | 25 | 25 | — | — | — | |||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||
| Agency securities | 1,830 | 1,830 | 1,818 | 1,847 | 1,846 | 1,839 | |||||||||||||||||
| Agency guaranteed mortgage-backed securities | 9,605 | 9,798 | 9,666 | 7,745 | 7,986 | 7,883 | |||||||||||||||||
| Small Business Administration loan-backed securities | 2,007 | 2,227 | 2,222 | 2,066 | 2,298 | 2,288 | |||||||||||||||||
| Municipal securities | 1,193 | 1,336 | 1,334 | 1,048 | 1,182 | 1,154 | |||||||||||||||||
| Other | 25 | 25 | 24 | 25 | 25 | 24 | |||||||||||||||||
| Total available-for-sale debt securities | 14,685 | 15,241 | 15,089 | 12,731 | 13,337 | 13,188 | |||||||||||||||||
| Money market mutual funds and other | 72 | 72 | 72 | 184 | 184 | 184 | |||||||||||||||||
| Total available-for-sale | 14,757 | 15,313 | 15,161 | 12,915 | 13,521 | 13,372 | |||||||||||||||||
| Total investment securities | $ | 15,528 | $ | 16,083 | $ | 15,923 | $ | 13,783 | $ | 14,389 | $ | 14,222 | |||||||||||
The amortized cost of total HTM and AFS investment securities decreased $2.5 billion, or 10%, during 2023, primarily due to principal reductions. Approximately 7.0% and 8.0% of the total HTM and AFS investment securities were floating-rate instruments at December 31, 2017 increased by 12% from the balance2023 and 2022, respectively. Additionally, at December 31, 2016, primarily due2023, we had a total of $3.6 billion of pay-fixed swaps held as fair value hedges against fixed-rate AFS securities that effectively convert the fixed interest income to purchasesa floating rate on the hedged portion of agency guaranteed mortgage-backedthe securities.
In addition to HTM and AFS securities, are amortizedwe also have a trading securities portfolio, comprised of municipal securities, which totaled $48 million at December 31, 2023. The trading securities portfolio at December 31, 2022 was $465 million and accreted at a constant effective yieldincluded $71 million of municipal securities and $394 million of money market mutual funds available for customer sweeps. Beginning in the first quarter of 2023, sweep-related balances were included in “Money market investments” on the consolidated balance sheet.
Refer to the contractual maturity date“Interest Rate Risk Management” section on page 63, the “Capital Management” section on page 72, and no assumption is made concerning prepayments. As principal prepayments occur, the portion of the unamortized premium or discount associated with the principal reduction is recognized as interest income in the period the principal is reduced. Premium amortization for 2017 was approximately $125 million, compared with approximately $99 million in 2016, reducing the yield on securities in those years by 92 and 109 bps, respectively. The increased premium amortization is due to both an increased amount of agency guaranteed mortgage-backed securities and SBA loan-backed securities and changes in actual prepayment rates of underlying loans.
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| Total securities | Within one year | After one but within five years | After five but within ten years | After ten years | ||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | Yield1 | Amount | Yield1 | Amount | Yield1 | Amount | Yield1 | Amount | Yield1 | ||||||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||||||||||||||||
| Municipal securities | $ | 770 | 4.0 | % | $ | 180 | 3.4 | % | $ | 372 | 3.9 | % | $ | 159 | �� | 4.8 | % | $ | 59 | 4.7 | % | |||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | 25 | 1.3 | 25 | 1.3 | — | — | — | |||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | ||||||||||||||||||||||||||||||||||
| Agency securities | 1,830 | 2.1 | 550 | 1.3 | 287 | 2.5 | 777 | 2.3 | 216 | 2.5 | ||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 9,798 | 2.0 | 1,509 | 2.0 | 3,997 | 2.0 | 2,566 | 2.0 | 1,726 | 2.1 | ||||||||||||||||||||||||
| Small Business Administration loan-backed securities | 2,227 | 3.0 | 230 | 2.9 | 699 | 3.0 | 588 | 2.9 | 710 | 3.1 | ||||||||||||||||||||||||
| Municipal securities | 1,336 | 3.0 | 185 | 3.0 | 744 | 2.9 | 400 | 3.3 | 7 | 3.4 | ||||||||||||||||||||||||
| Other | 25 | 6.2 | — | — | — | 25 | 6.2 | |||||||||||||||||||||||||||
| Total available-for-sale debt securities | 15,241 | 2.3 | 2,499 | 2.0 | 5,727 | 2.3 | 4,331 | 2.3 | 2,684 | 2.4 | ||||||||||||||||||||||||
| Money market mutual funds and other | 72 | 1.2 | 72 | 1.2 | — | — | — | |||||||||||||||||||||||||||
| Total available-for-sale | 15,313 | 2.3 | 2,571 | 2.0 | 5,727 | 2.3 | 4,331 | 2.3 | 2,684 | 2.4 | ||||||||||||||||||||||||
| Total investment securities | $ | 16,083 | 2.3 | $ | 2,751 | 2.1 | $ | 6,099 | 2.4 | $ | 4,490 | 2.4 | $ | 2,743 | 2.5 | |||||||||||||||||||
We provide multiplesupport our communities by providing products and services to state and local governments (referred to collectively as “municipalities”(“municipalities”), including deposit services, loans, and investment banking services, and weservices. We also invest in securities issued by municipalities. Our municipal lending products generally include loans in which the municipalities.debt service is repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
The following schedule summarizes our total investments and extensions of credit to municipalities:
Schedule 13 summarizes15
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
| December 31, | |||||||||||
| (In millions) | 2023 | 2022 | |||||||||
| Loans and leases | $ | 4,302 | $ | 4,361 | |||||||
| Held-to-maturity – municipal securities | 354 | 405 | |||||||||
| Available-for-sale – municipal securities | 1,318 | 1,634 | |||||||||
| Trading account – municipal securities | 48 | 71 | |||||||||
| Unfunded lending commitments | 231 | 406 | |||||||||
| Total | $ | 6,253 | $ | 6,877 | |||||||
Our municipal loans and securities are primarily associated with municipalities located within our exposure to state and local municipalities:
| December 31, | |||||||
| (In millions) | 2017 | 2016 | |||||
| Loans and leases | $ | 1,271 | $ | 778 | |||
| Held-to-maturity – municipal securities | 770 | 868 | |||||
| Available-for-sale – municipal securities | 1,334 | 1,154 | |||||
| Trading account – municipal securities | 146 | 112 | |||||
| Unfunded lending commitments | 152 | 182 | |||||
| Total direct exposure to municipalities | $ | 3,673 | $ | 3,094 | |||
Municipal securities are internally graded, similar to loans, using risk-grading systems which vary based on the size and equipment,type of credit risk exposure. The internal risk grades assigned to our municipal securities follow our definitions of Pass, Special Mention, and 79%Substandard, which are consistent with published definitions of the outstanding creditsregulatory risk classifications. At December 31, 2023, all municipal securities were originated by CB&T, Zions Bank,graded as Pass. See Notes 5 and Vectra. See Note 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans.loans and securities.
Loan and Lease Portfolio
We provide a wide range of lending products to commercial customers, generally small- and medium-sized businesses. We also provide various retail lending products and services to consumers and small businesses. The following schedule presents the composition of our loan and lease portfolio:
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Schedule 16
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | % of total loans | Amount | % of total loans | |||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
Commercial and industrial 1 | $ | 16,684 | 28.9 | % | $ | 16,377 | 29.5 | % | |||||||||||||||
| Leasing | 383 | 0.7 | 386 | 0.7 | |||||||||||||||||||
| Owner-occupied | 9,219 | 16.0 | 9,371 | 16.8 | |||||||||||||||||||
| Municipal | 4,302 | 7.4 | 4,361 | 7.8 | |||||||||||||||||||
| Total commercial | 30,588 | 53.0 | 30,495 | 54.8 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Construction and land development | 2,669 | 4.6 | 2,513 | 4.5 | |||||||||||||||||||
| Term | 10,702 | 18.5 | 10,226 | 18.4 | |||||||||||||||||||
| Total commercial real estate | 13,371 | 23.1 | 12,739 | 22.9 | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Home equity credit line | 3,356 | 5.8 | 3,377 | 6.1 | |||||||||||||||||||
| 1-4 family residential | 8,415 | 14.6 | 7,286 | 13.1 | |||||||||||||||||||
| Construction and other consumer real estate | 1,442 | 2.5 | 1,161 | 2.1 | |||||||||||||||||||
| Bankcard and other revolving plans | 474 | 0.8 | 471 | 0.8 | |||||||||||||||||||
| Other | 133 | 0.2 | 124 | 0.2 | |||||||||||||||||||
| Total consumer | 13,820 | 23.9 | 12,419 | 22.3 | |||||||||||||||||||
| Total loans and leases | $ | 57,779 | 100.0 | % | $ | 55,653 | 100.0 | % | |||||||||||||||
1Commercial and industrial loan balances include Paycheck Protection Program (“PPP”) loans of $77 million and $197 million for the respective periods presented.
At December 31, 2023 and December 31, 2022, the ratio of loans and leases to total assets was 66% and 62%, respectively. The largest loan category was commercial and industrial loans, which constituted 29% and 30% of our total loan portfolio for the municipal AFS securities portfolio. AFS securities generally consist of securities with investment-grade ratings from onesame respective periods.
During 2023, the loan and lease portfolio increased $2.1 billion, or more major credit rating agencies.
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Schedule 17
LOAN AND LEASE PORTFOLIO BY CONTRACTUAL MATURITY
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | One year or less | One year through five years | Five years through fifteen years | Over fifteen years | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 3,332 | $ | 11,113 | $ | 2,188 | $ | 51 | $ | 16,684 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Leasing | 27 | 264 | 92 | — | 383 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied | 419 | 1,795 | 5,461 | 1,544 | 9,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal | 306 | 640 | 2,436 | 920 | 4,302 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial | 4,084 | 13,812 | 10,177 | 2,515 | 30,588 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | 1,089 | 1,442 | 88 | 50 | 2,669 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term | 2,407 | 5,762 | 2,390 | 143 | 10,702 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial real estate | 3,496 | 7,204 | 2,478 | 193 | 13,371 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity credit line | 1 | 5 | 70 | 3,280 | 3,356 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential | 8 | 32 | 171 | 8,204 | 8,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and other consumer real estate | — | 1 | 20 | 1,421 | 1,442 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bankcard and other revolving plans | 320 | 154 | — | — | 474 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 17 | 82 | 34 | — | 133 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer | 346 | 274 | 295 | 12,905 | 13,820 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 7,926 | $ | 21,290 | $ | 12,950 | $ | 15,613 | $ | 57,779 | |||||||||||||||||||||||||||||||||||||||||||||||||
Our loans and leases accounted for 68%have predetermined (fixed) or variable interest rates. The following schedule presents the interest rate composition of total assets comparedour loan and lease portfolio with 67% at the end of 2016. Schedule 14 presents our loans outstanding by type of loan as of the five most recent year-ends. The schedule also includes a maturity profile for the loans that were outstanding as of December 31, 2017. However, while this schedule reflects the contractual maturity date over one year, and repricing characteristicsdoes not include the effect of these loans, in a small number of cases, we have hedgedany interest rate swaps associated with the repricing characteristics ofloan portfolio. For more information on our variable-rate loans as more fully described ininterest rate risk management, see “Interest Rate Risk” on page 68.63.
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Schedule 1418
LOAN AND LEASE PORTFOLIO WITH CONTRACTUAL MATURITIES OVER ONE YEAR BY INTEREST RATE TYPE AND MATURITY
| December 31, 2017 | December 31, | ||||||||||||||||||||||||||||||
| (In millions) | One year or less | One year through five years | Over five years | Total | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 8,064 | $ | 4,375 | $ | 1,564 | $ | 14,003 | $ | 13,452 | $ | 13,211 | $ | 13,163 | $ | 12,459 | |||||||||||||||
| Leasing | 26 | 262 | 76 | 364 | 423 | 442 | 409 | 388 | |||||||||||||||||||||||
| Owner-occupied | 463 | 1,138 | 5,687 | 7,288 | 6,962 | 7,150 | 7,351 | 7,568 | |||||||||||||||||||||||
| Municipal | 100 | 191 | 980 | 1,271 | 778 | 676 | 521 | 449 | |||||||||||||||||||||||
| Total commercial | 8,653 | 5,966 | 8,307 | 22,926 | 21,615 | 21,479 | 21,444 | 20,864 | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||
| Construction and land development | 931 | 1,016 | 74 | 2,021 | 2,019 | 1,842 | 1,986 | 2,193 | |||||||||||||||||||||||
| Term | 1,779 | 3,775 | 3,549 | 9,103 | 9,322 | 8,514 | 8,127 | 8,203 | |||||||||||||||||||||||
| Total commercial real estate | 2,710 | 4,791 | 3,623 | 11,124 | 11,341 | 10,356 | 10,113 | 10,396 | |||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||
| Home equity credit line | 29 | 91 | 2,657 | 2,777 | 2,645 | 2,417 | 2,321 | 2,147 | |||||||||||||||||||||||
| 1-4 family residential | 12 | 97 | 6,553 | 6,662 | 5,891 | 5,382 | 5,201 | 4,742 | |||||||||||||||||||||||
| Construction and other consumer real estate | 287 | 36 | 274 | 597 | 486 | 385 | 371 | 325 | |||||||||||||||||||||||
| Bankcard and other revolving plans | 293 | 58 | 158 | 509 | 481 | 444 | 401 | 361 | |||||||||||||||||||||||
| Other | 12 | 138 | 35 | 185 | 190 | 187 | 213 | 208 | |||||||||||||||||||||||
| Total consumer | 633 | 420 | 9,677 | 10,730 | 9,693 | 8,815 | 8,507 | 7,783 | |||||||||||||||||||||||
| Total net loans | $ | 11,996 | $ | 11,177 | $ | 21,607 | $ | 44,780 | $ | 42,649 | $ | 40,650 | $ | 40,064 | $ | 39,043 | |||||||||||||||
| Loans maturing: | |||||||||||||||||||||||||||||||
| With fixed interest rates | $ | 1,341 | $ | 3,704 | $ | 4,680 | $ | 9,725 | |||||||||||||||||||||||
| With variable interest rates | 10,655 | 7,473 | 16,927 | 35,055 | |||||||||||||||||||||||||||
| Total | $ | 11,996 | $ | 11,177 | $ | 21,607 | $ | 44,780 | |||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Loans with contractual maturities over one year | |||||||||||||||||||||||||||||||||||
| (In millions) | Predetermined (fixed) interest rates | Variable interest rates | Total | ||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 2,550 | $ | 10,802 | $ | 13,352 | |||||||||||||||||||||||||||||
| Leasing | 356 | — | 356 | ||||||||||||||||||||||||||||||||
| Owner-occupied | 3,178 | 5,622 | 8,800 | ||||||||||||||||||||||||||||||||
| Municipal | 3,282 | 714 | 3,996 | ||||||||||||||||||||||||||||||||
| Total commercial | 9,366 | 17,138 | 26,504 | ||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Construction and land development | 50 | 1,530 | 1,580 | ||||||||||||||||||||||||||||||||
| Term | 1,774 | 6,521 | 8,295 | ||||||||||||||||||||||||||||||||
| Total commercial real estate | 1,824 | 8,051 | 9,875 | ||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||
| Home equity credit line | 196 | 3,159 | 3,355 | ||||||||||||||||||||||||||||||||
| 1-4 family residential | 609 | 7,798 | 8,407 | ||||||||||||||||||||||||||||||||
| Construction and other consumer real estate | — | 1,442 | 1,442 | ||||||||||||||||||||||||||||||||
| Bankcard and other revolving plans | 2 | 152 | 154 | ||||||||||||||||||||||||||||||||
| Other | 115 | 1 | 116 | ||||||||||||||||||||||||||||||||
| Total consumer | 922 | 12,552 | 13,474 | ||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 12,112 | $ | 37,741 | $ | 49,853 | |||||||||||||||||||||||||||||
Other Noninterest-BearingNoninterest-bearing Investments
Schedule 1519
OTHER NONINTEREST-BEARING INVESTMENTS
| December 31, | Amount change | Percent change | |||||||||||||||||||||
| (Dollar amounts in millions) | 2023 | 2022 | |||||||||||||||||||||
| Bank-owned life insurance | $ | 553 | $ | 546 | $ | 7 | 1 | % | |||||||||||||||
| Federal Home Loan Bank stock | 79 | 294 | (215) | NM | |||||||||||||||||||
| Federal Reserve stock | 65 | 68 | (3) | (4) | |||||||||||||||||||
| Farmer Mac stock | 24 | 19 | 5 | 26 | |||||||||||||||||||
| SBIC investments | 190 | 172 | 18 | 10 | |||||||||||||||||||
| Other | 39 | 31 | 8 | 26 | |||||||||||||||||||
| Total other noninterest-bearing investments | $ | 950 | $ | 1,130 | $ | (180) | (16) | % | |||||||||||||||
Total other noninterest-bearing investments decreased $180 million, or 16%, during 2023, primarily due to a $215 million decrease in FHLB stock. We are required to invest approximately 4% of our FHLB borrowings in FHLB activity stock to maintain our borrowing capacity. The decrease in period-end FHLB activity stock was primarily due to a shift in wholesale funding needs as a result of the increase in interest-bearing deposits and the decrease in interest-earning assets.
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| December 31, | |||||||
| (In millions) | 2017 | 2016 | |||||
| Bank-owned life insurance | $ | 506 | $ | 497 | |||
| Federal Home Loan Bank stock | 154 | 30 | |||||
| Federal Reserve stock | 184 | 181 | |||||
| Farmer Mac stock | 43 | 34 | |||||
| SBIC investments | 127 | 124 | |||||
| Non-SBIC investment funds | 12 | 15 | |||||
| Other | 3 | 3 | |||||
| Total other noninterest-bearing investments | $ | 1,029 | $ | 884 | |||
In 2007, we received 460,153 non-transferable Class B shares of Visa, Inc. in connection with a restructuring and public offering by Visa U.S.A. As a member of Visa U.S.A., we received the Class B shares based on our interest in Visa U.S.A. and did not pay anything to acquire the shares. On September 13, 2023, Visa, Inc. announced its intent to engage with common stockholders on a potential proposal that would result in the release of certain transfer restrictions on a portion of Visa Class B common stock. On January 23, 2024, the proposal was approved by a majority of Class A, B, and C common stockholders, which would provide us the option to convert up to 50% of our Class B shares to freely transferable Visa Class A common shares upon terms and conditions more fully described in the public filings of Visa, Inc. The closing price of a Visa Class A common share was $260.35 at December 31, 2023. In light of uncertainties associated with certain ongoing litigation matters involving Visa and the details of the aforementioned proposal, the ultimate timing and impact of us exercising this option, including any gain contingency, is unknown.
Premises, Equipment, and Software Net
The following schedule summarizes the capitalized costs associated with the developmentour core system replacement project, which are depreciated using a useful life of a new corporate facility for Amegy Bank in Texas, major software purchases, and the capitalization of eligible costs related to the development of new lending, deposit and reporting systems.ten years:
Schedule 20
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| December 31, 2023 | |||||||||||||||||||||||
| (In millions) | Phase 1 | Phase 2 | Phase 3 | Total | |||||||||||||||||||
| Total amount of capitalized costs, less accumulated amortization | $ | 21 | $ | 45 | $ | 227 | $ | 293 | |||||||||||||||
Deposits
Deposits both interest-bearingare our primary funding source. In recent years, we experienced a significant influx of deposits, which was impacted by considerable fiscal and noninterest-bearing, are a primary sourcemonetary policy decisions. During 2022, with the withdrawal of funding forstimulus by the Company. Averagefederal government, our deposits began to decline. This trend accelerated with prominent bank closures during the first quarter of 2023 and abated during the second quarter of 2023. As shown below, total deposits increased 5% during 2023. The following schedule presents the composition of our deposit portfolio:
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Schedule 21
DEPOSIT PORTFOLIO
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | % of total deposits | Amount | % of total deposits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deposits by type | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 26,244 | 35.0 | % | $ | 35,777 | 49.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings and money market | 38,663 | 51.6 | 33,474 | 46.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time | 5,619 | 7.5 | 1,484 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Brokered | 4,435 | 5.9 | 917 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total deposits | $ | 74,961 | 100.0 | % | $ | 71,652 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deposit-related metrics | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Estimated amount of insured deposits | $ | 41,777 | 56 | % | $ | 33,589 | 47 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Estimated amount of uninsured deposits | 33,184 | 44 | % | 38,063 | 53 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated amount of collateralized deposits 1 | $ | 3,979 | 5 | % | $ | 2,861 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan-to-deposit ratio | 77% | 78% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Includes both insured and uninsured deposits.
Total deposits increased $3.3 billion, or 5%, in 2023. Interest-bearing deposits increased $12.8 billion, or 36%, and were partially offset by 3% during 2017,a decrease of $9.5 billion, or 27%, in noninterest-bearing demand deposits, as customers migrated to interest-bearing products in response to the higher interest rate environment. Our noninterest-bearing deposits are generally more valuable in a rising interest rate environment, creating meaningful economic value that is not fully reflected on our balance sheet since core deposits and related intangible assets are not recorded at fair value for accounting purposes.
At December 31, 2023, customer deposits (excluding brokered deposits) totaled $70.5 billion and included approximately $6.8 billion of reciprocal deposit products, where we distributed our customers’ deposits in a placement network to increase their FDIC insurance, and in return, we received a matching amount of deposits from other network banks.
At December 31, 2023, the total estimated amount of uninsured deposits was $33.2 billion, or 44%, of total deposits, compared with 2016, with average interest-bearing deposits increasing by 1% and average noninterest-bearing deposits increasing by 6%. The average interest rate paid for interest-bearing deposits was 3 bps higher in 2017 compared with 2016.
See Notes 11 and 12of the Notes to Consolidated Financial Statements and “Liquidity Risk Management” on page 7267 for additional information on funding and borrowed funds.
liquidity, including the ratio of available liquidity to uninsured deposits.
RISK ELEMENTSMANAGEMENT
We utilize the three lines of defense approach to risk management with responsibilities for each line of defense defined in our Risk Management Framework. The first line of defense represents units and functions throughout the Bank engaged in activities related to revenue generation, expense reduction, operational support, and technology services. These units and functions are accountable for owning and managing the risks associated with these activities. The second line of defense represents functions responsible for independently assessing and overseeing risk management activities. The third line of defense is our internal audit function that provides independent assessment of the effectiveness of the first and second lines of defense.
53
In support of management’s efforts, the Board of Directors has appointed a Risk Oversightestablished certain committees to oversee our risk management processes. The Audit Committee (“ROC”) that consists of appointed Board members who overseeoversees financial reporting risk, and the Company’sROC oversees the other risk management processes. The ROC meets on a regular basis to monitor and review Enterprise Risk Management (“ERM”)ERM activities. As required by its charter, the ROC performsprovides oversight for various ERM activities and approves ERM policies and activities as detailed in the ROC charter.
Credit Risk Management
Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risk arises primarily from our lending activities, as well as from off-balance sheet credit instruments.
The Board, of Directors, through the ROC, is responsible for approving the overallkey credit policies relating to the management of the credit risk of the Company. In addition, thepolicies. The ROC also oversees and monitors adherence to key creditthese policies and the credit risk appetite as defined in the Risk AppetiteManagement Framework. Additionally, theThe Board has established the Credit Administration Committee, chaired by the Chief Credit Officer and consisting of members of management, to which it has delegated the responsibility for managing credit risk for the Company and approving changes to credit policies to the Company’s credit policies.Chief Credit Officer, who chairs the Credit Risk Committee.
Our credit policies and practices are also designed to help manage potential risks, including those arising from environmental issues. Environmental risk related to our lending practices is primarily covered in our environmental credit policy and by our environmental subject matter experts and management. The extent of environmental due diligence performed by our environmental risk team is based on the risks identified at each property and the loan amount. The extension of credit to certain borrowers, or those connected with certain activities, may be restricted or require escalated approval, by policy, because of various environmental risks.
Our credit risk management function is separate from the lending function and strengthens control over, and the independent evaluation of, credit activities. In addition, we have a well-defined set of standards for evaluating our loan portfolio, and we utilize a comprehensive loan risk-grading system to determine the risk potential in the portfolio. Furthermore, the
The internal credit examination department, which is independent of the lending function, periodically conducts examinations of the Company’sour lending departments and credit activities. These examinations are designed to review credit quality, adequacy of documentation, appropriate loan risk-grading administration, and compliance with credit policies. New, expanded, or modified productsCredit examinations related to the ACL are reported to both the Audit Committee and services, as well as new lines of business, are approved by the New Initiative Review Committee.ROC.
Our credit risk management strategy includes diversificationbusiness activity is conducted primarily within the geographic footprint of our loan portfolio.banking affiliates. We attemptstrive to avoid the risk of an undue concentrationconcentrations of creditscredit in aany particular industry, collateral type, location, or with anany individual customer or counterparty. Generally, our loan portfolio is well diversified; however, due to the nature of our geographical footprint, there are certain significant concentrations primarily in CRE and oil and gas-related lending. We have adopted and adhere to concentration limits on certain commercial industries, including leveraged lending, municipal lending, oil and gas-related lending, and various types of CRE lending, particularly construction and land development and office lending. All of theseConcentration limits are continuallyregularly monitored and revised as necessary. The recent growth in construction and land development loan commitments is within the established concentration limits. Our business activity is primarily with customers located within the geographical footprint of our banking affiliates.
54
| December 31, 2017 | December 31, 2016 | ||||||||||||
| (Dollar amounts in millions) | Amount | % of total loans | Amount | % of total loans | |||||||||
| Commercial: | |||||||||||||
| Commercial and industrial | $ | 14,003 | 31.3 | % | $ | 13,452 | 31.5 | % | |||||
| Leasing | 364 | 0.8 | 423 | 1.0 | |||||||||
| Owner-occupied | 7,288 | 16.3 | 6,962 | 16.3 | |||||||||
| Municipal | 1,271 | 2.8 | 778 | 1.8 | |||||||||
| Total commercial | 22,926 | 51.2 | 21,615 | 50.6 | |||||||||
| Commercial real estate: | |||||||||||||
| Construction and land development | 2,021 | 4.5 | 2,019 | 4.7 | |||||||||
| Term | 9,103 | 20.3 | 9,322 | 21.9 | |||||||||
| Total commercial real estate | 11,124 | 24.8 | 11,341 | 26.6 | |||||||||
| Consumer: | |||||||||||||
| Home equity credit line | 2,777 | 6.2 | 2,645 | 6.2 | |||||||||
| 1-4 family residential | 6,662 | 15.0 | 5,891 | 13.8 | |||||||||
| Construction and other consumer real estate | 597 | 1.3 | 486 | 1.2 | |||||||||
| Bankcard and other revolving plans | 509 | 1.1 | 481 | 1.1 | |||||||||
| Other | 185 | 0.4 | 190 | 0.5 | |||||||||
| Total consumer | 10,730 | 24.0 | 9,693 | 22.8 | |||||||||
| Total net loans | $ | 44,780 | 100.0 | % | $ | 42,649 | 100.0 | % | |||||
U.S. Government Agency Guaranteed Loans
We participate in various guaranteed lending programs sponsored by U.S. government agencies, such as the SBA,U.S. Small Business Administration (“SBA”), Federal Housing Authority, Veterans’ Administration,U.S. Department of Veterans Affairs, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. As ofAt December 31, 2017, the principal balance2023, $554 million of these loans was $537 million, and the guaranteed portion of these loans was $406 million. Most of theserelated loans were guaranteed, primarily by the SBA.
SBA, and included $77 million of Paycheck Protection Program (“PPP”) loans. The following schedule presents the composition of U.S. government agency guaranteed loans.loans:
Schedule 1722
U.S. GOVERNMENT GUARANTEESAGENCY GUARANTEED LOANS
| (Dollar amounts in millions) | December 31, 2017 | Percent guaranteed | December 31, 2016 | Percent guaranteed | |||||||||
| Commercial | $ | 507 | 75 | % | $ | 519 | 75 | % | |||||
| Commercial real estate | 14 | 75 | 18 | 75 | |||||||||
| Consumer | 16 | 92 | 17 | 92 | |||||||||
| Total loans | $ | 537 | 76 | $ | 554 | 76 | |||||||
| (Dollar amounts in millions) | December 31, 2023 | Percent guaranteed | December 31, 2022 | Percent guaranteed | |||||||||||||||||||
| Commercial | $ | 664 | 80 | % | $ | 753 | 83 | % | |||||||||||||||
| Commercial real estate | 24 | 79 | 21 | 76 | |||||||||||||||||||
| Consumer | 4 | 100 | 5 | 100 | |||||||||||||||||||
| Total loans | $ | 692 | 80 | % | $ | 779 | 83 | % | |||||||||||||||
Commercial Lending
The following schedule provides selected information regarding lending concentrationsexposures to certain industries in our commercial lending portfolio.portfolio:
Schedule 1823
COMMERCIAL LENDING BY INDUSTRY GROUP1
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Retail trade | $ | 2,995 | 9.8 | % | $ | 2,751 | 9.0 | % | |||||||||||||||
| Real estate, rental and leasing | 2,946 | 9.6 | 2,802 | 9.2 | |||||||||||||||||||
| Finance and insurance | 2,918 | 9.5 | 2,992 | 9.8 | |||||||||||||||||||
| Healthcare and social assistance | 2,527 | 8.3 | 2,373 | 7.8 | |||||||||||||||||||
| Public Administration | 2,279 | 7.5 | 2,366 | 7.8 | |||||||||||||||||||
| Manufacturing | 2,190 | 7.2 | 2,387 | 7.8 | |||||||||||||||||||
| Wholesale trade | 1,850 | 6.0 | 1,880 | 6.2 | |||||||||||||||||||
| Transportation and warehousing | 1,499 | 4.9 | 1,464 | 4.8 | |||||||||||||||||||
Utilities 2 | 1,409 | 4.6 | 1,418 | 4.6 | |||||||||||||||||||
| Construction | 1,355 | 4.4 | 1,355 | 4.4 | |||||||||||||||||||
| Educational services | 1,298 | 4.2 | 1,302 | 4.3 | |||||||||||||||||||
| Hospitality and food services | 1,180 | 3.9 | 1,238 | 4.1 | |||||||||||||||||||
| Mining, quarrying, and oil and gas extraction | 1,133 | 3.7 | 1,349 | 4.4 | |||||||||||||||||||
| Other Services (except Public Administration) | 1,047 | 3.4 | 1,041 | 3.4 | |||||||||||||||||||
| Professional, scientific, and technical services | 1,010 | 3.3 | 995 | 3.3 | |||||||||||||||||||
Other 3 | 2,952 | 9.7 | 2,782 | 9.1 | |||||||||||||||||||
| Total | $ | 30,588 | 100.0 | % | $ | 30,495 | 100.0 | % | |||||||||||||||
| December 31, 2017 | December 31, 2016 | ||||||||||||
| (Dollar amounts in millions) | Amount | Percent | Amount | Percent | |||||||||
| Real estate, rental and leasing | $ | 2,807 | 12.3 | % | $ | 2,624 | 12.1 | % | |||||
Retail trade 1 | 2,257 | 9.8 | 2,145 | 9.9 | |||||||||
| Manufacturing | 2,116 | 9.2 | 2,161 | 10.0 | |||||||||
| Finance and insurance | 2,026 | 8.8 | 1,462 | 6.8 | |||||||||
| Healthcare and social assistance | 1,556 | 6.8 | 1,538 | 7.1 | |||||||||
| Wholesale trade | 1,543 | 6.7 | 1,444 | 6.7 | |||||||||
| Transportation and warehousing | 1,343 | 5.9 | 1,300 | 6.0 | |||||||||
| Construction | 1,094 | 4.8 | 1,076 | 5.0 | |||||||||
| Mining, quarrying, and oil and gas extraction | 1,010 | 4.4 | 1,403 | 6.5 | |||||||||
| Accommodation and food services | 932 | 4.1 | 925 | 4.3 | |||||||||
Utilities 2 | 905 | 4.0 | 783 | 3.6 | |||||||||
| Other Services (except Public Administration) | 896 | 3.9 | 881 | 4.1 | |||||||||
| Professional, scientific, and technical services | 879 | 3.8 | 875 | 4.0 | |||||||||
Other 3 | 3,562 | 15.5 | 2,998 | 13.9 | |||||||||
| Total | $ | 22,926 | 100.0 | % | $ | 21,615 | 100.0 | % | |||||
3 At December 31, 2017, 84% of retail trade consists of motor vehicle and parts dealers, gas stations, grocery stores, building material suppliers, and direct-to-consumer retailers. For additional detail on our CRE retail exposure, see the Commercial Real Estate Loans section on page 61.
| (Dollar amounts in millions) | December 31, 2017 | % of total oil and gas- related | December 31, 2016 | % of total oil and gas- related | |||||||||
| Loans and leases | |||||||||||||
| Upstream – exploration and production | $ | 730 | 37 | % | $ | 733 | 34 | % | |||||
| Midstream – marketing and transportation | 617 | 31 | 598 | 28 | |||||||||
| Downstream – refining | 123 | 6 | 137 | 6 | |||||||||
| Other non-services | 34 | 2 | 38 | 2 | |||||||||
| Oilfield services | 367 | 19 | 500 | 23 | |||||||||
| Oil and gas service manufacturing | 102 | 5 | 152 | 7 | |||||||||
Total loan and lease balances 2 | 1,973 | 100 | % | 2,158 | 100 | % | |||||||
| Unfunded lending commitments | 1,908 | 1,722 | |||||||||||
| Total oil and gas credit exposure | $ | 3,881 | $ | 3,880 | |||||||||
| Private equity investments | $ | 3 | $ | 7 | |||||||||
| Credit quality measures | |||||||||||||
| Criticized loan ratio | 25.1 | % | 37.8 | % | |||||||||
| Classified loan ratio | 17.9 | % | 31.6 | % | |||||||||
| Nonaccrual loan ratio | 7.7 | % | 13.6 | % | |||||||||
| Ratio of nonaccrual loans that are current | 88.1 | % | 86.1 | % | |||||||||
Net charge-off ratio, annualized 3 | — | % | 3.0 | % | |||||||||
Commercial Real Estate Loans
55
The following schedule.schedule presents the geographic distribution of our CRE loan portfolio based on the location of the primary collateral:
Schedule 2024
COMMERCIAL REAL ESTATE PORTFOLIOLENDING BY LOAN TYPE AND COLLATERAL LOCATION
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Arizona | $ | 1,726 | 12.9 | % | $ | 1,521 | 11.9 | % | |||||||||||||||
| California | 3,865 | 28.9 | 3,805 | 29.9 | |||||||||||||||||||
| Colorado | 709 | 5.3 | 637 | 5.0 | |||||||||||||||||||
| Nevada | 1,072 | 8.0 | 910 | 7.1 | |||||||||||||||||||
| Texas | 2,385 | 17.8 | 2,139 | 16.8 | |||||||||||||||||||
| Utah/Idaho | 2,214 | 16.6 | 2,397 | 18.8 | |||||||||||||||||||
| Washington/Oregon | 1,004 | 7.5 | 899 | 7.1 | |||||||||||||||||||
| Other | 396 | 3.0 | 431 | 3.4 | |||||||||||||||||||
| Total CRE | $ | 13,371 | 100.0 | % | $ | 12,739 | 100.0 | % | |||||||||||||||
Term CRE loans generally mature within a three- to seven-year period and consist of full, partial, and non-recourse guarantee structures. Typical term CRE loan structures include annually tested operating covenants that require loan rebalancing based on minimum debt service coverage, debt yield, or loan-to-value tests. Construction and land development loans generally mature in 18 to 36 months and contain full or partial recourse guarantee structures with one- to five-year extension options or roll-to-perm options that often result in term loans. At December 31, 2023, approximately 83% of our CRE loan portfolio was variable-rate, and approximately 22% of these variable-rate loans were swapped to a fixed rate.
The following schedule provides information regarding lending exposures to certain collateral types in our commercial real estate lending portfolio:
Schedule 25
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount | Percent | Amount | Percent | |||||||||||||||||||
| Commercial property | |||||||||||||||||||||||
| Multi-family | $ | 3,709 | 27.7 | % | $ | 3,068 | 24.1 | % | |||||||||||||||
| Industrial | 3,062 | 22.9 | 2,509 | 19.7 | |||||||||||||||||||
| Office | 1,984 | 14.8 | 2,281 | 17.9 | |||||||||||||||||||
| Retail | 1,503 | 11.2 | 1,529 | 12.0 | |||||||||||||||||||
| Hospitality | 688 | 5.2 | 695 | 5.4 | |||||||||||||||||||
| Land | 211 | 1.6 | 276 | 2.2 | |||||||||||||||||||
Other 1 | 1,682 | 12.6 | 1,728 | 13.5 | |||||||||||||||||||
Residential property 2 | |||||||||||||||||||||||
| Single family | 287 | 2.1 | 340 | 2.7 | |||||||||||||||||||
| Land | 90 | 0.7 | 75 | 0.6 | |||||||||||||||||||
| Condo/Townhome | 37 | 0.3 | 13 | 0.1 | |||||||||||||||||||
Other 1 | 118 | 0.9 | 225 | 1.8 | |||||||||||||||||||
| Total | $ | 13,371 | 100.0 | % | $ | 12,739 | 100.0 | % | |||||||||||||||
1 Included in the total amount of the “Other” category was approximately $202 million and $301 million of unsecured loans at December 31, 2023 and 2022, respectively.
2 Residential property collateral type consists primarily of loans provided to commercial homebuilders for single-family housing developments, land and lots, and condo/townhome developments.
56
| (Dollar amounts in millions) | Collateral Location | ||||||||||||||||||||||||||||||||||||||||
| Loan type | As of date | Arizona | California | Colorado | Nevada | Texas | Utah/ Idaho | Wash-ington/Oregon | Other 1 | Total | % of total CRE | ||||||||||||||||||||||||||||||
| Commercial term | |||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2017 | $ | 1,018 | $ | 3,026 | $ | 493 | $ | 536 | $ | 1,735 | $ | 1,365 | $ | 448 | $ | 482 | $ | 9,103 | 81.8 | % | ||||||||||||||||||||
| % of loan type | 11.2 | % | 33.2 | % | 5.4 | % | 5.9 | % | 19.1 | % | 15.0 | % | 4.9 | % | 5.3 | % | 100.0 | % | |||||||||||||||||||||||
Delinquency rates: 2 | |||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2017 | 0.2 | % | 0.1 | % | 0.1 | % | 0.2 | % | — | % | 0.2 | % | — | % | 0.8 | % | 0.1 | % | ||||||||||||||||||||||
| 12/31/2016 | 0.1 | % | — | % | — | % | 0.8 | % | — | % | 0.1 | % | 0.2 | % | — | % | 0.1 | % | |||||||||||||||||||||||
| ≥ 90 days | 12/31/2017 | 0.2 | % | 0.1 | % | 0.1 | % | — | % | — | % | 0.1 | % | — | % | 0.7 | % | 0.1 | % | ||||||||||||||||||||||
| 12/31/2016 | 0.3 | % | 0.4 | % | — | % | — | % | — | % | 0.2 | % | — | % | 1.1 | % | 0.2 | % | |||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2017 | $ | 1 | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | ||||||||||||||||||||||
| 12/31/2016 | — | 10 | — | — | — | 2 | — | — | 12 | ||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2017 | 4 | 7 | 1 | 2 | 17 | 1 | 4 | — | 36 | |||||||||||||||||||||||||||||||
| 12/31/2016 | 8 | 11 | — | 2 | 1 | — | 7 | — | 29 | ||||||||||||||||||||||||||||||||
| Residential construction and land development | |||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2017 | $ | 40 | $ | 261 | $ | 43 | $ | 4 | $ | 201 | $ | 42 | $ | 3 | $ | 6 | $ | 600 | 5.4 | % | ||||||||||||||||||||
| % of loan type | 6.6 | % | 43.5 | % | 7.2 | % | 0.7 | % | 33.5 | % | 7.0 | % | 0.5 | % | 1.0 | % | 100.0 | % | |||||||||||||||||||||||
Delinquency rates: 2 | |||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2017 | — | % | — | % | 0.2 | % | — | % | 0.7 | % | — | % | — | % | — | % | 0.2 | % | ||||||||||||||||||||||
| 12/31/2016 | — | % | — | % | — | % | — | % | 0.4 | % | — | % | — | % | — | % | 0.1 | % | |||||||||||||||||||||||
| ≥ 90 days | 12/31/2017 | — | % | — | % | — | % | — | % | 0.1 | % | — | % | — | % | — | % | — | % | ||||||||||||||||||||||
| 12/31/2016 | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | |||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2017 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| 12/31/2016 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2017 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| 12/31/2016 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Commercial construction and land development | |||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2017 | $ | 131 | $ | 356 | $ | 34 | $ | 72 | $ | 415 | $ | 265 | $ | 90 | $ | 58 | $ | 1,421 | 12.8 | % | ||||||||||||||||||||
| % of loan type | 9.2 | % | 25.0 | % | 2.4 | % | 5.1 | % | 29.2 | % | 18.7 | % | 6.3 | % | 4.1 | % | 100.0 | % | |||||||||||||||||||||||
Delinquency rates: 2 | |||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2017 | 0.1 | % | 0.2 | % | — | % | — | % | 0.2 | % | 0.1 | % | — | % | — | % | 0.1 | % | ||||||||||||||||||||||
| 12/31/2016 | — | % | — | % | — | % | 1.2 | % | — | % | 2.4 | % | — | % | — | % | 0.5 | % | |||||||||||||||||||||||
| ≥ 90 days | 12/31/2017 | — | % | — | % | — | % | — | % | — | % | 1.3 | % | — | % | — | % | 0.3 | % | ||||||||||||||||||||||
| 12/31/2016 | — | % | — | % | — | % | — | % | 0.4 | % | — | % | — | % | — | % | 0.2 | % | |||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2017 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| 12/31/2016 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2017 | — | — | — | — | — | 4 | — | — | 4 | |||||||||||||||||||||||||||||||
| 12/31/2016 | — | — | — | — | 2 | 5 | — | — | 7 | ||||||||||||||||||||||||||||||||
| Total construction and land development | 12/31/2017 | $ | 171 | $ | 617 | $ | 77 | $ | 76 | $ | 616 | $ | 307 | $ | 93 | $ | 64 | $ | 2,021 | ||||||||||||||||||||||
| Total commercial real estate | 12/31/2017 | $ | 1,189 | $ | 3,643 | $ | 570 | $ | 612 | $ | 2,351 | $ | 1,672 | $ | 541 | $ | 546 | $ | 11,124 | 100.0 | % | ||||||||||||||||||||
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Underwriting on commercial properties is primarily based on the economic viability of the project with heavysignificant consideration given to the creditworthiness and experience of the sponsor. We generally require that the owner’s equity be injected prior to bankany advances. RemarginingRe-margining requirements (required equity infusions upon a decline in value or cash flow of the collateral) are often included in the loan agreement along with guarantees of the sponsor. Recognizing that debt is paid via cash flow, the projected cash flows of the project are critical in the underwriting because these determine the ultimate value of the property and its ability to service debt. Therefore, in most projects (with the exception of multifamily and hospitality construction projects), we require substantial pre-leasing/leasing in our underwriting and we generally require a minimum projected stabilized debt service coverage ratio of 1.20 or higher, depending on the project asset class.
Within the residential construction and development sector, many of the requirements previously mentioned, such as creditworthiness and experience of the developer, up-front injection of the developer’s equity, principal curtailment requirements, and the viability of the project are also important in underwriting a residential development loan. Significant considerationConsideration is given to the forecastedexpected market acceptance of the product, location, strength of the developer, and the ability of the developer to stay within budget. Progress inspections by qualified independent inspectors are routinely performed before disbursements are made.disbursing loan funds. Advance rates will vary based on the collateral, viability of the project, and the creditworthiness of the sponsor, with exceptions granted on a case-by-case basis.
Real estate appraisals are orderedperformed in accordance with regulatory guidelines and are validated independently of the loan officer and the borrower, generally by our internal appraisal review function, which is staffed by licensed appraisers.team. In some cases, reports from automated valuation services are used or internal evaluations are performed. A new appraisal or evaluation is required when a loan deteriorates to a certain level of credit weakness.
Loan agreements require regular reporting of financial information on the project and the sponsor in addition to lease schedules, rent rolls and, on construction projects, independent progress inspection reports. The receipt ofWe monitor this financial information is monitored and calculations are made to determineensure adherence to the covenants set forth in the loan agreement.
The existence of a guarantee that improves the likelihood of repayment is taken into consideration when analyzingevaluating CRE loans for impairment.expected losses. If theguarantor support of the guarantor is quantifiable and documented, it is includedconsidered in the
potential cash flows and liquidity available for debt repayment, and our impairmentrepayment. Our expected loss methodology takes this repayment source into consideration.
repayment. In general, we obtain and considerevaluate updated financial information for the guarantor as part of our determination to extend a loan.credit. The quality and frequency of financial reporting collected and analyzed varies depending on the contractual requirements for reporting, the size of the transaction, and the strength of the guarantor.
In the event of default, we evaluate the pursuit ofpursue any and all appropriate potentialavailable sources of repayment, which may comeincluding from multiple sources, including the guarantee.collateral and guarantors. A number of factors are considered when deciding whether or not to pursue a guarantor, including, but not limited to, the value and liquidity of other sources of repayment (collateral), the financial strength and liquidity of the guarantor, possible statutory limitations, (e.g., single action rule on real estate) and the overall cost of pursuing a guarantee comparedversus the amount we are likely to recover.
Our CRE portfolio is diversified across geography and collateral type, with the ultimate amount we may be able to recover. In other instances, the guarantor may voluntarily support alargest concentration in multi-family. We provide additional analysis of our office CRE portfolio below in view of increased investor interest in that collateral type in recent periods.
Office CRE loan without any formal pursuit of remedies.portfolio
57
Schedule 26
OFFICE CRE LOAN PORTFOLIO
| (Dollar amounts in millions) | December 31, 2023 | December 31, 2022 | |||||||||
| Office CRE | |||||||||||
| Construction and land development | $ | 191 | $ | 208 | |||||||
| Term | 1,793 | 2,073 | |||||||||
| Total office CRE | $ | 1,984 | $ | 2,281 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 11.9 | % | 7.2 | % | |||||||
| Classified loan ratio | 8.9 | % | 5.8 | % | |||||||
| Nonaccrual loan ratio | 2.4 | % | — | % | |||||||
| Delinquency ratio | 2.3 | % | 1.5 | % | |||||||
| Ratio of net loan and lease charge-offs | 0.2 | % | — | % | |||||||
| Ratio of allowance for credit losses to office CRE loans, at period end | 3.80 | % | 1.36 | % | |||||||
The following schedules present our office CRE loan portfolio by collateral location for the periods presented:
Schedule 27
OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| (Dollar amounts in millions) | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateral Location | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan type | Arizona | California | Colorado | Nevada | Texas | Utah/ Idaho | Wash-ington | Other 1 | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | $ | — | $ | 64 | $ | — | $ | 2 | $ | 22 | $ | 29 | $ | 74 | $ | — | $ | 191 | ||||||||||||||||||||||||||||||||||||||
| Term | 281 | 412 | 92 | 86 | 179 | 488 | 226 | 29 | 1,793 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Office CRE | $ | 281 | $ | 476 | $ | 92 | $ | 88 | $ | 201 | $ | 517 | $ | 300 | $ | 29 | $ | 1,984 | ||||||||||||||||||||||||||||||||||||||
| % of total | 14.2 | % | 24.0 | % | 4.6 | % | 4.4 | % | 10.1 | % | 26.1 | % | 15.1 | % | 1.5 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateral Location | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan type | Arizona | California | Colorado | Nevada | Texas | Utah/ Idaho | Wash-ington | Other 1 | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction and land development | $ | 8 | $ | 79 | $ | — | $ | 2 | $ | — | $ | 18 | $ | 101 | $ | — | $ | 208 | ||||||||||||||||||||||||||||||||||||||
| Term | 295 | 525 | 97 | 99 | 217 | 613 | 195 | 32 | 2,073 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Office CRE | $ | 303 | $ | 604 | $ | 97 | $ | 101 | $ | 217 | $ | 631 | $ | 296 | $ | 32 | $ | 2,281 | ||||||||||||||||||||||||||||||||||||||
| % of total | 13.1 | % | 27.0 | % | 4.3 | % | 4.3 | % | 9.6 | % | 26.8 | % | 13.5 | % | 1.4 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||
1 No other geography exceeds $17 million and $18 million at December 31, 2023 and December 31, 2022, respectively.
Consumer Loans
We have mainly been an originator of first and secondoriginate first-lien residential home mortgages generally considered to be of prime quality. We generally hold variable-rate loans in our portfolio and sell “conforming” fixed-rate loans to third parties, including Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, for which we make representations and warranties that the loans meet certain underwriting and collateral documentation standards.
During 2023, consumer loans increased $1.4 billion, primarily in the 1-4 family residential and consumer construction loan portfolios. Increased funding of construction lending commitments contributed to growth in these portfolios, although the rate of growth slowed in the latter half of the year.
58
We are engaged in Home Equity Credit Linealso originate home equity credit lines (“HECL”HECLs”) lending.. At December 31, 2017,2023 and December 31, 2022, our HECL portfolio totaled $2.8$3.4 billion compared with $2.6 billion at December 31, 2016. The following schedule describes the compositionfor both periods. Approximately 39% and 44% of our HECL portfolioHECLs are secured by lien status.
| December 31, | |||||||
| (In millions) | 2017 | 2016 | |||||
| Secured by first deeds of trust | $ | 1,406 | $ | 1,383 | |||
| Secured by second (or junior) liens | 1,371 | 1,262 | |||||
| Total | $ | 2,777 | $ | 2,645 | |||
At December 31, 2017,2023, loans representing less than 1% of the outstanding balance in the HECL portfolio were estimated to have combined loan-to-value ratios (“CLTV”) ratios above 100%. An estimated CLTV ratio is the ratio of our loan plus any prior lien amounts divided by the estimated current collateral-value.collateral value. At origination, underwriting standards for the HECL portfolio generally include a maximum 80% CLTV with higha Fair Isaac Corporation (“FICO”) credit scores at origination.score greater than 700.
Approximately 93%90% of our HECL portfolio is still in the draw period, and approximately 26%about 18% of those loans are scheduled to begin amortizing within the next five years. We regularly analyzebelieve the risk of loss and borrower default in the event of a loan becoming fully amortizing and the riskeffect of highersignificant interest rates. Therate changes is low, given the rate shock analysis indicates that the risk of loss from this factor is minimal in the current economic environment.performed at origination. The ratio of HECL net charge-offs (recoveries) for the trailing twelve months to average balances at year-end 2017December 31, 2023 and 2016 for the HECL portfolioDecember 31, 2022, was 0.02%0.05% and 0.01%(0.03)%, respectively. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of thisthe HECL portfolio.
Nonperforming Assets
Nonperforming assets include nonaccrual loans and other real estate owned (“OREO”) or foreclosed properties. The following schedule presents our nonperforming assets:
59
Schedule 28
NONPERFORMING ASSETS
| (Dollar amounts in millions) | December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||||||||||||||
| Nonaccrual loans: | |||||||||||||||||||||||||||||||||||
| Loans held for sale | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | 82 | 63 | |||||||||||||||||||||||||||||||||
| Leasing | 2 | — | |||||||||||||||||||||||||||||||||
| Owner-occupied | 20 | 24 | |||||||||||||||||||||||||||||||||
| Municipal | — | — | |||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Construction and land development | 22 | — | |||||||||||||||||||||||||||||||||
| Term | 39 | 14 | |||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||
| Real estate | 57 | 48 | |||||||||||||||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||||||||||||||
| Nonaccrual loans | 222 | 149 | |||||||||||||||||||||||||||||||||
Other real estate owned 1: | |||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Commercial properties | 4 | — | |||||||||||||||||||||||||||||||||
| Developed land | — | — | |||||||||||||||||||||||||||||||||
| Land | 2 | — | |||||||||||||||||||||||||||||||||
| Residential: | |||||||||||||||||||||||||||||||||||
| 1-4 family | — | — | |||||||||||||||||||||||||||||||||
| Other real estate owned | 6 | — | |||||||||||||||||||||||||||||||||
| Total nonperforming assets | $ | 228 | $ | 149 | |||||||||||||||||||||||||||||||
| Accruing loans past due 90 days or more: | |||||||||||||||||||||||||||||||||||
| Commercial: | $ | 2 | $ | 5 | |||||||||||||||||||||||||||||||
| Commercial real estate | — | — | |||||||||||||||||||||||||||||||||
| Consumer | 1 | 1 | |||||||||||||||||||||||||||||||||
| Total | $ | 3 | $ | 6 | |||||||||||||||||||||||||||||||
Ratio of nonaccrual loans to net loans and leases 2 | 0.38 | % | 0.27 | % | |||||||||||||||||||||||||||||||
Ratio of nonperforming assets to net loans and leases2 and other real estate owned | 0.39 | % | 0.27 | % | |||||||||||||||||||||||||||||||
Ratio of accruing loans past due 90 days or more to net loans and leases 2 | 0.01 | % | 0.01 | % | |||||||||||||||||||||||||||||||
1 Does not include banking premises held for sale.
2Includes loans held for sale.
Nonperforming assets as a percentage of loans and leases and other real estate owned (“OREO”) decreasedOREO increased to 0.93%0.39% at December 31, 2017,2023, compared with 1.34%0.27% at December 31, 2016.
2022. Total nonaccrual loans at December 31, 2017 decreased $155increased $73 million, from December 31, 2016,or 49%, during 2023, primarily in the oil and gas-related loan portfolio. However, nonaccrual loans slightly increased in the commercial owner-occupied and 1-4 family residential loan portfolios. The largest total decrease in nonaccrual loans occurred at Amegy.
60
Loan Modifications
| (Dollar amounts in millions) | December 31, | ||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Nonaccrual loans: | |||||||||||||||||||
| Loans held for sale | $ | 12 | $ | 40 | $ | — | $ | — | $ | — | |||||||||
| Commercial: | |||||||||||||||||||
| Commercial and industrial | 195 | 354 | 164 | 106 | 101 | ||||||||||||||
| Leasing | 8 | 14 | 4 | — | 1 | ||||||||||||||
| Owner-occupied | 90 | 74 | 74 | 87 | 137 | ||||||||||||||
| Municipal | 1 | 1 | 1 | 1 | 10 | ||||||||||||||
| Commercial real estate: | |||||||||||||||||||
| Construction and land development | 4 | 7 | 7 | 24 | 29 | ||||||||||||||
| Term | 36 | 29 | 40 | 25 | 60 | ||||||||||||||
| Consumer: | |||||||||||||||||||
| Real estate | 68 | 49 | 59 | 64 | 66 | ||||||||||||||
| Other | — | 1 | 1 | — | 2 | ||||||||||||||
| Nonaccrual loans | 414 | 569 | 350 | 307 | 406 | ||||||||||||||
| Other real estate owned: | |||||||||||||||||||
| Commercial: | |||||||||||||||||||
| Commercial properties | 3 | 2 | 5 | 11 | 16 | ||||||||||||||
| Developed land | — | — | — | — | 6 | ||||||||||||||
| Land | — | — | 1 | 2 | 6 | ||||||||||||||
| Residential: | |||||||||||||||||||
| 1-4 family | 1 | 2 | 1 | 4 | 8 | ||||||||||||||
| Developed land | — | — | — | 2 | 9 | ||||||||||||||
| Land | — | — | — | — | 1 | ||||||||||||||
| Other real estate owned | 4 | 4 | 7 | 19 | 46 | ||||||||||||||
| Total nonperforming assets | $ | 418 | $ | 573 | $ | 357 | $ | 326 | $ | 452 | |||||||||
Ratio of nonperforming assets to net loans and leases1 and other real estate owned | 0.93 | % | 1.34 | % | 0.87 | % | 0.81 | % | 1.15 | % | |||||||||
| Accruing loans past due 90 days or more: | |||||||||||||||||||
| Commercial | $ | 17 | $ | 18 | $ | 7 | $ | 8 | $ | 8 | |||||||||
| Commercial real estate | 2 | 13 | 22 | 20 | 29 | ||||||||||||||
| Consumer | 3 | 5 | 3 | 1 | 3 | ||||||||||||||
| Total | $ | 22 | $ | 36 | $ | 32 | $ | 29 | $ | 40 | |||||||||
Ratio of accruing loans past due 90 days or more to net loans and leases1 | 0.05 | % | 0.08 | % | 0.08 | % | 0.07 | % | 0.10 | % | |||||||||
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) areand their related disclosures. ASU 2022-02 requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. During 2023, loans that have been modified to accommodate a borrower who is experiencing financial difficulties and for whom we have granted a concession that we would not otherwise consider. TDRs decreased $25 million, or 10%, during 2017, primarily due to payments and payoffs. Commercial loans may be modified to provide the borrower more time to complete the project, to achieve a higher lease-up percentage, to sell the property, or for other reasons. Consumer loan TDRs represent loan modifications in which a concession has been granted to the borrower who is unable to refinance the loan with another lender, or who is experiencing economic hardship.
totaled $264 million.
If the restructureda modified loan is on nonaccrual and performs for at least six months according to the modified terms, and an analysis of the customer’s financial condition indicates that we are reasonably assured of repayment of the modified principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the restructuringmodification is taken into account to determine whether a loan should be returned to accrual status.
Schedule 2329
ACCRUING AND NONACCRUING TROUBLED DEBT RESTRUCTUREDMODIFIED LOANS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
| (In millions) | December 31, 2023 | ||||||||||
| Modified loans – accruing | $ | 247 | |||||||||
| Modified loans – nonaccruing | 17 | ||||||||||
| Total | $ | 264 | |||||||||
| December 31, | |||||||
| (In millions) | 2017 | 2016 | |||||
| Restructured loans – accruing | $ | 139 | $ | 151 | |||
| Restructured loans – nonaccruing | 87 | 100 | |||||
| Total | $ | 226 | $ | 251 | |||
| (In millions) | 2017 | 2016 | |||||
| Balance at beginning of year | $ | 251 | $ | 297 | |||
| New identified troubled debt restructuring and principal increases | 190 | 154 | |||||
| Payments and payoffs | (157 | ) | (145 | ) | |||
| Charge-offs | (25 | ) | (32 | ) | |||
| No longer reported as troubled debt restructuring | (4 | ) | (10 | ) | |||
| Sales and other | (29 | ) | (13 | ) | |||
| Balance at end of year | $ | 226 | $ | 251 | |||
Allowance for Credit Losses
| (Dollar amounts in millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||
| Loans and leases outstanding (net of unearned income) | $ | 44,780 | $ | 42,649 | $ | 40,650 | $ | 40,064 | $ | 39,043 | |||||||||
| Average loans and leases outstanding, (net of unearned income) | $ | 43,501 | $ | 42,062 | $ | 40,171 | $ | 39,522 | $ | 38,109 | |||||||||
| Allowance for loan losses: | |||||||||||||||||||
| Balance at beginning of year | $ | 567 | $ | 606 | $ | 605 | $ | 746 | $ | 896 | |||||||||
| Provision charged to earnings | 24 | 93 | 40 | (98 | ) | (87 | ) | ||||||||||||
| Adjustment for FDIC-supported/PCI loans | — | — | — | (1 | ) | (11 | ) | ||||||||||||
| Charge-offs: | |||||||||||||||||||
| Commercial | (118 | ) | (170 | ) | (111 | ) | (77 | ) | (76 | ) | |||||||||
| Commercial real estate | (9 | ) | (12 | ) | (14 | ) | (15 | ) | (26 | ) | |||||||||
| Consumer | (17 | ) | (16 | ) | (14 | ) | (14 | ) | (29 | ) | |||||||||
| Total | (144 | ) | (198 | ) | (139 | ) | (106 | ) | (131 | ) | |||||||||
| Recoveries: | |||||||||||||||||||
| Commercial | 46 | 43 | 55 | 41 | 41 | ||||||||||||||
| Commercial real estate | 14 | 14 | 35 | 12 | 25 | ||||||||||||||
| Consumer | 11 | 9 | 10 | 11 | 13 | ||||||||||||||
| Total | 71 | 66 | 100 | 64 | 79 | ||||||||||||||
| Net loan and lease charge-offs | (73 | ) | (132 | ) | (39 | ) | (42 | ) | (52 | ) | |||||||||
| Balance at end of year | $ | 518 | $ | 567 | $ | 606 | $ | 605 | $ | 746 | |||||||||
| Ratio of net charge-offs to average loans and leases | 0.17 | % | 0.31 | % | 0.10 | % | 0.11 | % | 0.14 | % | |||||||||
| Ratio of allowance for loan losses to net loans and leases, on December 31, | 1.16 | % | 1.33 | % | 1.49 | % | 1.51 | % | 1.91 | % | |||||||||
| Ratio of allowance for loan losses to nonaccrual loans, on December 31, | 129 | % | 107 | % | 173 | % | 197 | % | 184 | % | |||||||||
| Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more, on December 31, | 122 | % | 101 | % | 159 | % | 180 | % | 167 | % | |||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | % of total loans | Allocation of allowance | % of total loans | Allocation of allowance | % of total loans | Allocation of allowance | % of total loans | Allocation of allowance | % of total loans | Allocation of allowance | ||||||||||||||||||||||||
| Loan segment | ||||||||||||||||||||||||||||||||||
| Commercial | 51.2 | % | $ | 371 | 50.6 | % | $ | 420 | 52.9 | % | $ | 454 | 53.5 | % | $ | 413 | 53.5 | % | $ | 469 | ||||||||||||||
| Commercial real estate | 24.8 | 103 | 26.6 | 116 | 25.5 | 114 | 25.3 | 145 | 26.6 | 216 | ||||||||||||||||||||||||
| Consumer | 24.0 | 44 | 22.8 | 31 | 21.6 | 38 | 21.2 | 47 | 19.9 | 61 | ||||||||||||||||||||||||
| Total | 100.0 | % | $ | 518 | 100.0 | % | $ | 567 | 100.0 | % | $ | 606 | 100.0 | % | $ | 605 | 100.0 | % | $ | 746 | ||||||||||||||
The RULC representsis a reserve for potential losses associated with off-balance-sheetoff-balance sheet commitments and standby letters of credit. The reserve is separately shownincluded in “Other liabilities” on the consolidated balance sheet and anysheet. Any related increases or decreases in the reserve are shown separatelyincluded in “Provision for unfunded lending commitments” on the consolidated statement of income. At December 31, 2017,
The following schedules present the reserve decreased by $7 million compared with December 31, 2016, also as a resultchanges in, and allocation of, credit quality improvements in the total loan portfolio.ACL:
61
Schedule 30
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Loans and leases outstanding, | $ | 57,779 | $ | 55,653 | $ | 50,851 | |||||||||||||||||||||||||||||
| Average loans and leases outstanding: | |||||||||||||||||||||||||||||||||||
| Commercial | 30,519 | 29,225 | 29,580 | ||||||||||||||||||||||||||||||||
| Commercial real estate | 13,023 | 12,251 | 12,136 | ||||||||||||||||||||||||||||||||
| Consumer | 13,198 | 11,122 | 10,267 | ||||||||||||||||||||||||||||||||
| Total average loans and leases outstanding | $ | 56,740 | $ | 52,598 | $ | 51,983 | |||||||||||||||||||||||||||||
| Allowance for loan and lease losses: | |||||||||||||||||||||||||||||||||||
Balance at beginning of year 1, 2 | $ | 572 | $ | 513 | $ | 777 | |||||||||||||||||||||||||||||
| Provision for loan losses | 148 | 101 | (258) | ||||||||||||||||||||||||||||||||
| Charge-offs: | |||||||||||||||||||||||||||||||||||
| Commercial | 45 | 72 | 35 | ||||||||||||||||||||||||||||||||
| Commercial real estate | 3 | — | — | ||||||||||||||||||||||||||||||||
| Consumer | 14 | 10 | 13 | ||||||||||||||||||||||||||||||||
| Total | 62 | 82 | 48 | ||||||||||||||||||||||||||||||||
| Recoveries: | |||||||||||||||||||||||||||||||||||
| Commercial | 20 | 32 | 29 | ||||||||||||||||||||||||||||||||
| Commercial real estate | — | — | 3 | ||||||||||||||||||||||||||||||||
| Consumer | 6 | 11 | 10 | ||||||||||||||||||||||||||||||||
| Total | 26 | 43 | 42 | ||||||||||||||||||||||||||||||||
| Net loan and lease charge-offs | 36 | 39 | 6 | ||||||||||||||||||||||||||||||||
| Balance at end of year | $ | 684 | $ | 575 | $ | 513 | |||||||||||||||||||||||||||||
| Reserve for unfunded lending commitments: | |||||||||||||||||||||||||||||||||||
Balance at beginning of year 1, 2 | $ | 61 | $ | 40 | $ | 58 | |||||||||||||||||||||||||||||
| Provision for unfunded lending commitments | (16) | 21 | (18) | ||||||||||||||||||||||||||||||||
| Balance at end of year | $ | 45 | $ | 61 | $ | 40 | |||||||||||||||||||||||||||||
| Total allowance for credit losses: | |||||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | $ | 684 | $ | 575 | $ | 513 | |||||||||||||||||||||||||||||
| Reserve for unfunded lending commitments | 45 | 61 | 40 | ||||||||||||||||||||||||||||||||
| Total allowance for credit losses | $ | 729 | $ | 636 | $ | 553 | |||||||||||||||||||||||||||||
| Ratio of allowance for credit losses to net loans and leases | 1.26 | % | 1.14 | % | 1.09 | % | |||||||||||||||||||||||||||||
| Ratio of allowance for credit losses to nonaccrual loans | 328 | % | 427 | % | 204 | % | |||||||||||||||||||||||||||||
| Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more | 324 | % | 410 | % | 198 | % | |||||||||||||||||||||||||||||
| Ratio of total net charge-offs to average total loans and leases | 0.06 | % | 0.07 | % | 0.01 | % | |||||||||||||||||||||||||||||
| Ratio of commercial net charge-offs to average commercial loans | 0.08 | % | 0.14 | % | 0.02 | % | |||||||||||||||||||||||||||||
| Ratio of commercial real estate net charge-offs to average commercial real estate loans | 0.02 | % | — | % | (0.02) | % | |||||||||||||||||||||||||||||
| Ratio of consumer net charge-offs to average consumer loans | 0.06 | % | (0.01) | % | 0.03 | % | |||||||||||||||||||||||||||||
1 Beginning balances at January 1, 2020 for the allowance for loan and lease losses and reserve for unfunded lending commitments do not agree to their respective ending balances at December 31, 2019 because of the adoption of the CECL accounting standard.
2 The beginning balance at January 1, 2023 for the allowance for loan and lease losses and reserve for unfunded lending commitments do not agree to the ending balance at December 31, 2022 because of the adoption of the new accounting standard related to loan modifications to borrowers experiencing financial difficulties.
62
Schedule 31
ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
| December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | % of total loans | Allocation of ACL | % of total loans | Allocation of ACL | % of total loans | Allocation of ACL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan segment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | 53.0 | % | $ | 321 | 54.8 | % | $ | 316 | 55.9 | % | $ | 330 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | 23.1 | 258 | 22.9 | 189 | 24.0 | 118 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 23.9 | 150 | 22.3 | 131 | 20.1 | 105 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 100.0 | % | $ | 729 | 100.0 | % | $ | 636 | 100.0 | % | $ | 553 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The total ACL increased to $729 million in 2023, from $636 million in 2022. The increase in the ACL reflects incremental reserves associated with portfolio-specific risks including commercial real estate, as well as deterioration in economic forecasts. Due to the adoption of the current expected credit loss (“CECL”) standard in 2020, the ACL is not comparable to periods presented prior to that period.
See Note 6 of the Notes to Consolidated Financial Statements for additional information related to the ACL and credit trends experienced in each portfolio segment.
Interest Rate and Market Risk Management
Interest Rate Risk
63
We generally have granular deposit funding, and much of this funding has an indeterminable life with no maturity, and can be withdrawn at any time. Because most deposits come from household and business accounts, their duration is generally longer than the duration of our loan portfolio. As such, we are naturally “asset-sensitive” — meaning that our assets are expected to reprice faster or more significantly than our liabilities. We regularly use interest rate swaps, investment in fixed-rate securities, and funding strategies to manage balance sheetour interest rate risk. These strategies collectively have muted the expected sensitivity to reduceof net interest income volatility due to changes in interest rates.
DEPOSIT ASSUMPTIONS
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
| Product | Effective duration (unchanged) | Effective duration (+200 bps) | Effective duration (unchanged) | Effective duration (+200 bps) | ||||||||||||||||||||||||||||||||||
| Demand deposits | 3.5% | 3.2% | 3.6% | 3.5% | ||||||||||||||||||||||||||||||||||
| Money market | 1.5% | 1.4% | 2.3% | 2.0% | ||||||||||||||||||||||||||||||||||
| Savings and interest-bearing checking | 2.2% | 1.9% | 3.1% | 2.8% | ||||||||||||||||||||||||||||||||||
| December 31, 2017 | ||||||
| New Deposit Method | ||||||
| Product | Effective duration (unchanged) | Effective duration (+200 bps) | ||||
| Demand deposits | 3.4 | % | 3.3 | % | ||
| Money market | 1.5 | % | 1.3 | % | ||
| Savings and interest-on-checking | 2.6 | % | 2.4 | % | ||
As noted previously, we utilize derivatives to manage interest rate risk. The following schedule presents derivatives that are designated in qualifying hedging relationships at December 31, 2023. Included are the average outstanding derivative notional amounts for each period presented and the weighted average fixed-rate paid or received for each category of cash flow and fair value hedge. Fair value hedges of assets include $2.5 billion in notional of hedges of AFS securities designated under the portfolio layer method that were added during the second quarter of 2023. See Note 7 of the Notes to Consolidated Financial Statements for additional information regarding the impact of these hedging relationships on interest income and expense.
64
Schedule 33
| 2024 | 2025 | 2026 | 2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash flow hedges of assets 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 1,017 | $ | 683 | $ | 350 | $ | 350 | $ | 350 | $ | 350 | $ | 350 | $ | 300 | $ | 108 | $ | 100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate received | 2.50 | % | 2.55 | % | 2.34 | % | 2.34 | % | 2.34 | % | 2.34 | % | 2.34 | % | 2.13 | % | 1.65 | % | 1.65 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash flow hedges of liabilities 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 3.67 | % | 3.67 | % | 3.67 | % | 3.67 | % | 3.67 | % | 3.67 | % | — | % | — | % | — | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value hedges of assets 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 4,444 | $ | 4,558 | $ | 4,562 | $ | 4,558 | $ | 2,428 | $ | 1,049 | $ | 1,044 | $ | 1,037 | $ | 1,001 | $ | 973 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 3.24 | % | 3.21 | % | 3.21 | % | 3.21 | % | 2.47 | % | 1.84 | % | 1.83 | % | 1.83 | % | 1.83 | % | 1.82 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Cash flow hedges of assets consist of receive-fixed swaps hedging pools of floating-rate loans. The longest dated cash flow hedge matures in February 2027. Amounts for 2027 have not been prorated to reflect this hedge maturing during the period.
2 Cash flow hedges of liabilities consists of a pay-fixed swaps hedging rolling FHLB advances. This swap matures in May of 2025.
3 Fair value asset hedges consist of pay-fixed swaps hedging fixed-rate AFS securities and fixed-rate commercial loans, as further discussed in Note 7 of the Notes to Consolidated Financial Statements. Increasing notional amounts are due to forward starting swaps.
At December 31, 2023, we had receive-fixed interest rate swaps with an aggregate notional amount of $1.5 billion designated as cash flow hedges of the variability of interest receipts on floating-rate commercial loans. During 2023, we terminated receive-fixed swaps with an aggregate notional amount of $5.0 billion. At December 31, 2023, we had $201 million of net losses deferred in AOCI related to terminated cash flow hedges. Amounts deferred in AOCI from terminated cash flow hedges will be amortized into interest income on a straight-line basis through the original maturity dates indicatedof the hedges as long as the hedged forecasted transactions continue to be expected to occur.
The following schedule summarizes amounts deferred in AOCI related to terminated cash flow hedges that will be fully reclassified into interest income by the fourth quarter of 2027:
Schedule 34
SCHEDULED OCI AMORTIZATION FOR TERMINATED CASH FLOW HEDGES
| 2024 | 2025 | 2026 | 2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges of assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Periodic amortization of deferred gains (losses) | $ | (28) | $ | (28) | $ | (28) | $ | (23) | $ | (18) | $ | (16) | $ | (13) | $ | (11) | $ | (29) | $ | (8) | |||||||||||||||||||||||||||||||||||||||
Earnings at Risk (EaR) and incorporatingEconomic Value of Equity (EVE)
Incorporating our deposit assumptions and the assumptionsimpact of derivatives in qualifying hedging relationships previously described,discussed, the following schedule shows EaR,presents earnings at risk (“EaR”), or the percentage change in 12-month forward-looking net interest income, and our estimated percentage change in EVE. Both EaR and EVE are based on a static balance sheet size in the first year after theunder parallel interest rate change if interest rates were to sustain immediate parallel changes ranging from -100 bps to +300 bps. These measures highlight the sensitivity to changes in interest rates across various scenarios; the outcomes are not intended to be forecasts of expected net interest income.
65
Schedule 2835
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Parallel shift in rates (in bps) | Parallel shift in rates (in bps) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repricing scenario | -100 | 0 | +100 | +200 | +300 | -100 | 0 | +100 | +200 | +300 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings at Risk (EaR) | (2.5) | % | — | % | 2.4 | % | 4.9 | % | 7.4 | % | (2.4) | % | — | % | 2.4 | % | 4.8 | % | 7.1 | % | ||||||||||||||||||||||||||||||||||||||||||
Economic Value of Equity (EVE) | 2.8 | % | — | % | (1.4) | % | (3.3) | % | (5.2) | % | 2.0 | % | — | % | (1.1) | % | (2.3) | % | (3.7) | % | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2017 | |||||||||||||||
Parallel shift in rates (in bps)1 | |||||||||||||||
| Repricing scenario | -100 | 0 | +100 | +200 | +300 | ||||||||||
| Earnings at Risk | (2.7 | )% | — | % | 2.8 | % | 5.4 | % | 7.8 | % | |||||
The asset sensitivity, as measured by EaR, increased slightly during 2023, primarily due to an increase in pay-fixed interest rate swap notional, partially offset by deposit migration from low beta products (e.g., checking accounts) to high beta products (e.g., money market accounts). Under our current deposit assumptions, interest rate risk remains within policy limits. For non-maturity interest-bearing deposits with indeterminable maturities, the weighted average modeled beta is 36.2%53%. If
Prepayment assumptions are an important factor in how we manage interest rate risk. Certain assets in our portfolio, such as 1-4 family residential mortgages and mortgage-backed securities, can be prepaid at any time by the weighted average deposit beta increasedborrower, which may significantly affect our expected cash flows. At December 31, 2023, lifetime prepayment speeds on loans and mortgage-backed securities were estimated to 46.2% it would decrease the EaR in the +200bp shock from 5.4% to 2.9%.be 8.7% and 6.1%, respectively.
The EaR analysis focuses on parallel rate shocks across the term structure of benchmark interest rates. The yield curve typically does not move inIn a parallel manner. During the past year, annon-parallel rate scenario where shorter-term rates increase in short-term rates has led to a flatter yield curve as longer-term rates have not increased at the same pace as short-term rates. If we consider a flattening rate shock where the short-term rate moves +200bpslightly, but the ten-year rate only moves +30bp,increases by 200 bps, the increase in earnings is 33% lowerEaR would be approximately 50 percent larger than the change associated with the parallel +200 bps rate change.
EaR has inherent limitations in describing expected changes in net interest income in rapidly changing interest rate environments due to a lag in asset and liability repricing behavior. As such, we expect net interest income to change due to “latent” and “emergent” interest rate sensitivity. Unlike EaR, which measures net interest income over 12 months, latent and emergent interest rate sensitivity explains changes in current quarter net interest income, compared with expected net interest income in the parallel +200bpsame quarter one year forward.
Latent interest rate shock.
| December 31, 2016 | |||||||||||||||
Parallel shift in rates (in bps)1 | |||||||||||||||
| Repricing scenario | -100 | 0 | +100 | +200 | +300 | ||||||||||
| Earnings at Risk | (4.9 | )% | — | % | 3.6 | % | 7.6 | % | 11.5 | % | |||||
| December 31, 2017 | |||||||||||||||
Parallel shift in rates (in bps)1 | |||||||||||||||
| Repricing scenario | -100 bps | 0 bps | +100 bps | +200 bps | +300 bps | ||||||||||
| Economic Value of Equity | 0.2 | % | — | % | 0.5 | % | 0.3 | % | 0.2 | % | |||||
| December 31, 2016 | |||||||||||||||
Parallel shift in rates (in bps)1 | |||||||||||||||
| Repricing scenario | -100 bps | 0 bps | +100 bps | +200 bps | +300 bps | ||||||||||
| Economic Value of Equity | 0.3 | % | — | % | 1.2 | % | 2.9 | % | 4.9 | % | |||||
Our focus on business banking also plays a significant role in determining the nature of the Company’sour asset-liability management posture. At December 31, 2017, $19.82023, $26.3 billion of the Company’sour commercial lending and CRE loan balances were scheduled to reprice in the next six months. Of these variable-rate loans approximately 94% are tied to either the prime rate or LIBOR. For these variable-rate loans, we have executed $1.1$1.5 billion of cash flow hedges by receiving fixed rates on interest rate swaps. Additionally, asset sensitivity is reduced due to $0.2 billion of variable-rate loans being priced at floored rates at December 31, 2017, which were above the “index plus spread” rate by an average of 60 bps. At December 31, 2017,2023, we also had $3.3$3.7 billion of variable-rate consumer loans scheduled to reprice in the next six months. Of these variable-rateThe impact on asset sensitivity from commercial or consumer loans approximately $0.1 billion were priced at flooredwith floors has become insignificant as rates which were above the “index plus spread” rate by an average of 42 bps.
have risen. See Notes 3 and 7 of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.
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LIBOR Transition
The London Interbank Offered Rate (“LIBOR”) was phased out globally, and banks migrated to alternative reference rates by June 30, 2023. We implemented processes, procedures, and systems to mitigate contract risk. We believe we have remediated our LIBOR exposure through fallback language, replacement indices, and reliance upon the provisions under the LIBOR Act.
Market Risk –— Fixed Income
We engageare exposed to market risk through changes in thefair value. This includes market risk for trading securities and for interest rate swaps used to hedge interest rate risk. We underwrite municipal and corporate securities. We also trade municipal, agency, and treasury securities. This underwriting and trading of municipal securities. This trading activity exposes us to a risk of loss arising from adverse changes in the prices of these fixed incomefixed-income securities.
Market Risk –— Equity Investments
Through our equity investment activities, we own equity securities that are publicly-traded.publicly traded. In addition, we own equity securities in companies and governmental entities and companies, e.g., Federal Reserve BankFRB and anthe FHLB, that are not publicly-traded. The accounting for equitypublicly traded. Equity investments may use thebe accounted for at cost less impairment and adjusted for observable price changes, fair value, the equity method, or proportional or full consolidation methods of accounting, depending on our ownership position and degree of involvement in influencinginfluence over the investees’ affairs.business. Regardless of the accounting method, the valuevalues of our investment isinvestments are subject to fluctuation. Because the fair value of these securities may fall below our investment costs,the cost at which we acquired them, we are exposed to the possibility of loss. Equity investments in private and public companies are approved,evaluated, monitored, and evaluatedapproved by the Company’smembers of management in our Equity Investments Committee consisting of members of management.and Securities Valuation Committee.
We hold both direct and indirect investments in predominantly pre-public companies, primarily through various Small Business Investment Company (“SBIC”)SBIC venture capital funds.funds as a strategy to provide beneficial financing, growth, and expansion opportunities to diverse businesses generally in communities within our geographic footprint. Our equity exposure to these investments was approximately $127$190 million and $124$172 million at December 31, 20172023 and December 31, 2016,2022, respectively. On occasion, some of the companies within our SBIC investmentsportfolio may issue an initial public offering.offering (“IPO”). In this case, the fund is generally subject to a lockout period before liquidatingwe can liquidate the investment, which can introduce additional market risk. During the fourth quarter of 2017 we sold the remaining amount of our publicly-traded direct investment and as of December 31, 2017, we had no publicly-traded stocks as part of our direct SBIC investments.
Liquidity Risk Management
Liquidity risk is the possibility thatrefers to our ability to meet our cash, contractual, and collateral obligations, and to manage both expected and unexpected cash flows may not be adequate to fundwithout adversely impacting our ongoing operations and meet our commitments in a timely and cost-effective manner. Since liquidity risk is closely linked to both credit risk and market risk, many of the previously discussed risk control mechanisms also apply to the monitoring and management of liquidity risk.or financial strength. We manage our liquidity to provide adequate funds for our customers’ credit needs, or capital plan actions and our anticipated financial and contractual obligations, which include withdrawals by depositors, debt and capital service requirements, and lease obligations.
Our Treasury group manages our liquidity and funding, is performed centrally for the Parent and jointly by the Parent and bank management for its subsidiary bank. The Treasury Department performs this management centrally, under the direction of the Corporate Treasurer, with oversight by ALCO. The Treasurer is responsible for recommending changes to existing funding plans as well asand our policies related to the Company’s Liquidity Policy.liquidity and funding. These recommendations must beare submitted for approval to ALCO, and changes to the Policypolicies are also must be approved by the Company’s ERMC and the Board of Directors. The Company has adopted policy limits that govern liquidity risk. The policy requires the Company toBoard. We maintain a buffer of highly liquid assets sufficient to cover cash outflows in the event of a severe liquidity crisis. The Company targets a buffer of highly liquid assets at the Parent to cover 18-24 months of cash outflows under a scenario with limited cash inflows, and maintains a minimum policy limit of not less than 12 months. The consolidated Company exceeds the regulatory requirements of the Modified LCR that mandates a buffer of HQLA to cover 70% of 30-day cash outflows under the assumptions mandated in the Final Liquidity Rule. Additionally, the Company performs monthly liquidity stress testing using a set of internally generated scenarios representing severe liquidity constraints over a 12-month horizon. ZB, N.A. maintains a buffer of highly liquid assets consisting of cash, U.S. Agency, and U.S. Government Sponsored Entity securities to cover 30-day cash outflows under liquidity stress tests and maintainsregularly test a contingency funding plan to identify sources and uses of liquidity. Our Board-approved liquidity policy requires us to monitor and maintain adequate liquidity, diversify funding sources that would be utilized over the extended 12-month horizon. Throughout 2017positions, and as of December 31, 2017, the Company compliedanticipate future funding needs. In accordance with this policy.policy, we monitor our liquidity positions by
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conducting various stress tests and evaluating certain liquid asset measurements, such as a 30-day liquidity coverage ratio.
We have a dedicated funding desk that monitors real-time inflows and outflows of our FRB account, and we have tools, including ready access to repo markets and FHLB advances, to manage intraday liquidity. FHLB borrowings are “open-term,” allowing us the ability to retain or return funds based on our liquidity needs. We pledge a large portion of our highly liquid investment securities portfolio through the General Collateral Funding (“GCF”) repo program. Through this program, as contained in its policy complies with these requirementshigh-quality collateral is pledged, and includes monthly liquidity stress testing using a set of internally generated scenarios representing severe liquidity constraints over a 12-month horizon.program participants exchange funds anonymously, which allows for near instant access to funding during market hours.
| (In millions) | One year or less | Over one year through three years | Over three years through five years | Over five years | Indeterminable maturity 1 | Total | |||||||||||||||||
| Deposits | $ | 2,584 | $ | 388 | $ | 142 | $ | 1 | $ | 49,506 | $ | 52,621 | |||||||||||
| Net unfunded commitments to extend credit | 6,227 | 5,202 | 3,361 | 4,793 | — | 19,583 | |||||||||||||||||
| Standby letters of credit: | |||||||||||||||||||||||
| Financial | 461 | 25 | 54 | 181 | — | 721 | |||||||||||||||||
| Performance | 149 | 46 | 1 | — | — | 196 | |||||||||||||||||
| Commercial letters of credit | 31 | — | — | — | — | 31 | |||||||||||||||||
Commitments to make venture and other noninterest-bearing investments 2 | 31 | — | — | — | — | 31 | |||||||||||||||||
| Federal funds and other short-term borrowings | 4,976 | — | — | — | — | 4,976 | |||||||||||||||||
| Long-term debt | — | 1 | — | 382 | — | 383 | |||||||||||||||||
| Operating leases, net of subleases | 40 | 75 | 54 | 76 | — | 245 | |||||||||||||||||
| Unrecognized tax benefits | — | 6 | — | — | — | 6 | |||||||||||||||||
| Total contractual obligations | $ | 14,499 | $ | 5,743 | $ | 3,612 | $ | 5,433 | $ | 49,506 | $ | 78,793 | |||||||||||
During 2023, the primary sources of the expected future cash receipts and payments based on market rates of interest. The fair value of the contracts changes daily as interest rates change. See Note 7 of the Notes to Consolidated Financial Statements for further information on derivative contracts.
The FHLB borrowings and net cash provided by operating activities.
At December 31, 2023 and risk-basedDecember 31, 2022, investment securities with a carrying value of $20.5 billion and $13.5 billion, respectively, were pledged as collateral for potential borrowings. For the same time periods, these pledges included $9.5 billion and $8.3 billion for available use through the GCF repo program, $5.5 billion and $1.0 billion to the FRB, and $5.5 billion and $4.2 billion to secure collateralized public and trust deposits, advances, and for other regulatory capital requirements and limitations.purposes.
A large portion of these pledged assets are unencumbered, but are pledged to provide immediate access to contingency sources of funds. The following schedule presents our total available liquidity including unused collateralized borrowing capacity:
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Schedule 36
AVAILABLE LIQUIDITY
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in billions) | FHLB | FRB | GCF | BTFP | Total | FHLB | FRB | GCF | BTFP | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total borrowing capacity | $ | 16.6 | $ | 9.8 | $ | 9.6 | $ | 5.8 | $ | 41.8 | $ | 16.6 | $ | 4.0 | $ | 8.4 | $ | — | $ | 29.0 | |||||||||||||||||||||||||||||||||||||||
| Borrowings outstanding | 1.6 | — | 1.8 | — | 3.4 | 7.2 | — | 2.7 | — | 9.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Remaining capacity, at period end | $ | 15.0 | $ | 9.8 | $ | 7.8 | $ | 5.8 | $ | 38.4 | $ | 9.4 | $ | 4.0 | $ | 5.7 | $ | — | $ | 19.1 | |||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 0.7 | 0.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits 1 | 1.5 | 1.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total available liquidity | $ | 40.6 | $ | 21.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratio of available liquidity to uninsured deposits | 122 | % | 56 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
At December 31, 2023 and December 31, 2022, our total available liquidity was $40.6 billion, compared with $21.1 billion, respectively. At December 31, 2023, we had sources of liquidity that exceeded our uninsured deposits without the need to sell any investment securities.
Credit Ratings
General financial market and economic conditions impact our access to, and cost of, external financing. Access to funding markets for the Parent and its subsidiary bank is also directly affected by the credit ratings receivedwe receive from various rating agencies. The ratings not only influence the costs associated with the borrowings, but can also influence the sources of the borrowings. The debt ratings and outlooks issued byAll of the variouscredit rating agencies for the Company and ZB, N.A. improved during 2017 and are shown in therate our debt at an investment-grade level.
The following schedules.schedule presents our credit ratings:
Schedule 31 presents the Company’s and ZB, N.A.’s ratings as of December 31, 2017.37
CREDIT RATINGS
| as of January 31, 2024: | |||||||||||||||||||||||||||||||
| Rating agency | Outlook | Long-term issuer/senior debt rating | Subordinated debt rating | Short-term debt rating | |||||||||||||||||||||||||||
| Kroll | Stable | A- | BBB+ | K2 | |||||||||||||||||||||||||||
| S&P | Negative | BBB+ | BBB | ||||||||||||||||||||||||||||
| Stable | BBB+ | BBB | |||||||||||||||||||||||||||||
| Stable | Baa2 | NR | |||||||||||||||||||||||||||||
•In April 2023, Moody’s downgraded our long-term issuer rating to Baa2 from Baa1, our short-term debt at an investment-grade level. rating to P2 from P1, and changed their outlook on our long-term deposit and issuer ratings to “Stable” from “Ratings under review.”
•In addition, Kroll rates the Company’s subordinated debt at an investment-grade level, whileMay 2023, S&P rates the Company’schanged their outlook on our long-term deposit and issuer ratings to “Negative” from “Stable.”
•In October 2023, Fitch downgraded our short-term debt rating to F2 from F1.
•In November 2023, Kroll changed their outlook on our long-term deposit and issuer ratings to “Stable” from “Positive.”
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We may, from time to time, issue additional preferred stock, senior or subordinated notes, or other forms of capital or debt instruments, depending on our capital, funding, asset-liability management, or other needs as noninvestment-grade.market conditions warrant. These additional issuances may be subject to required regulatory approvals. We believe that our sources of available liquidity are adequate to meet all reasonably foreseeable short- and intermediate-term demands.
For more information about a recent regulatory proposal that would expand long-term debt requirements and impact our sources of available liquidity, see “Recent Regulatory Developments” on page 8 in Supervision and Regulation.
Contractual Obligations
The Parent’s cash payments for interest, reflected in operating expenses, decreased to $26 million in 2017 from $35 million in 2016 due to the maturity and repayment of long-term debt during 2017 and 2016, partially offset by the increase in interest from short-term FHLB advances. Additionally, the Parent paid approximately $129 million of total dividends on preferred stock and common stock for 2017 compared to $108 million for 2016.
Schedule 38
CONTRACTUAL OBLIGATIONS
| (In millions) | One year or less | Over one year through three years | Over three years through five years | Over five years | Indeterminable maturity 1 | Total | |||||||||||||||||||||||||||||
| Deposits | $ | 9,798 | $ | 155 | $ | 42 | $ | 1 | $ | 64,965 | $ | 74,961 | |||||||||||||||||||||||
| Unfunded lending commitments | 7,995 | 8,372 | 3,512 | 9,061 | — | 28,940 | |||||||||||||||||||||||||||||
| Standby letters of credit: | |||||||||||||||||||||||||||||||||||
| Financial | 548 | — | — | — | — | 548 | |||||||||||||||||||||||||||||
| Performance | 206 | — | — | — | — | 206 | |||||||||||||||||||||||||||||
| Commercial letters of credit | 22 | — | — | — | — | 22 | |||||||||||||||||||||||||||||
Mortgage-backed security purchase agreements 2 | — | — | — | 66 | — | 66 | |||||||||||||||||||||||||||||
Commitments to make venture and other noninterest-bearing investments 3 | — | — | — | — | 62 | 62 | |||||||||||||||||||||||||||||
| Federal funds and other short-term borrowings | 4,379 | — | — | — | — | 4,379 | |||||||||||||||||||||||||||||
Long-term debt 4 | — | — | 88 | 500 | — | 588 | |||||||||||||||||||||||||||||
| Operating leases | 42 | 67 | 40 | 83 | — | 232 | |||||||||||||||||||||||||||||
| Total contractual obligations | $ | 22,990 | $ | 8,594 | $ | 3,682 | $ | 9,711 | $ | 65,027 | $ | 110,004 | |||||||||||||||||||||||
1 Indeterminable maturity deposits include noninterest-bearing demand, savings, and 2016.money market deposits.
3 Commitments to make venture and other noninterest-bearing investments do not have defined maturity dates. They are due upon demand and may be drawn immediately. Therefore, these commitments are shown as having indeterminable maturities.
4 The values presented do not reflect the impact of associated fair value hedges.
In addition to the commitments specifically noted in the schedule above, we enter into a number of contractual commitments in the ordinary course of business. These include software licensing and maintenance, telecommunications services, facilities maintenance and equipment servicing, supplies purchasing, and other goods and services used in the operation of our long-term seniorbusiness. Some of these contracts are renewable or cancellable annually or in shorter time intervals. To secure favorable pricing concessions, we may also commit to contracts that may extend several years.
We enter into derivative contracts that may require us to pay cash, depending on changes in interest rates. These contracts are measured at fair value on the balance sheet, reflecting the net present value of the expected future cash receipts and subordinated debt ranged from June 2023 to September 2028, with effectivepayments based on market interest rates from 4.50% to 6.95%.
rates. See Note 127 of the Notes to Consolidated Financial Statements for a complete summary of our long-term debt.further information on derivative contracts.
Operational, Technology, and money market deposits, and time deposits under $250,000. On a consolidated basis, the Company’s loan to total deposit ratio was 85.1% as of December 31, 2017, compared to 80.1% as of December 31, 2016, reflecting loan growth and a decrease in deposits during 2017.
Operational Risk Management
Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or systems, human errors or misconduct, or adverse external events. In our ongoing efforts to identify and manage operational risk, we have an ERM department whose responsibility is to helpassists employees, management, and the Board of Directors to assess, understand, measure, manage,with assessing, measuring, managing, and monitormonitoring this risk in accordance with our
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Risk AppetiteManagement Framework. WeFor example, we have documented both controls and the Control Self-Assessmentcontrol self-assessments related to financial reporting under the 2013 framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and the FDICIA.
We are continually improvingstrive to improve our oversight of operational risk management, including enhancement of risk identification, risk and control self-assessments, business process mappings, regular tests of controls, and antifraudanti-fraud measures, which are reported on a regular basis to enterprise management committees. The Operational Risk Committee reports to the ERMC, which reports to the ROC. Key measures have been established in line with our Risk Management Framework to increase oversight by ERM and Operational Risk Management through the strengthening of new initiative reviews and enhancements to theenterprise supply chain and vendor risk management. We also continue to review and enhance our Enterprise Procurement and Third Party Risk Management framework, enhancements to the Business Continuity and Disaster Recovery programs and Enterprise Security programs, and the establishment of Fraud Risk Oversight, Incident Response Oversight and Technology Project Oversight programs.
Significant enhancements have also been made to governance, technology, and reporting, including the establishment of Policy and Committee Governance programs,programs; the implementation of a governance, risk, and control solution,system to manage and integrate business processes, risks, controls, assessments, and control testing; and the creation of an Enterprise Risk Profile and an Operational Risk Profile along with business line risk profiles.Profile. In addition, the establishment of anour Enterprise Exam Management department has standardized our response and reporting, and increased our effectiveness and efficiencies with regulatory examinations,examination, communications, and issues management.
Technology Risk Management
Technology risk is the risk of adverse impact to business operations and customers due to reduced or denied availability or inadequate value delivery related to technology-related applications, infrastructure, strategy, or processes. We make significant investments to enhance our technology capabilities and to mitigate the risk from outdated and unsupported technologies (technical debt). This includes updating core banking systems, as well as introducing new digital customer-facing capabilities. Technology projects, initiatives, and operations are governed by a change management framework that assesses the activities and risk within our business processes to limit disruption and resource constraints. New, expanded, or modified products and services, as well as new lines of business, change initiatives, and other risks are regularly reviewed and approved by the Change, Initiatives, and Technology Committee. This Committee includes, among other senior executives, the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, CTOO, and Chief Risk Officer. Initiative risk and change impact from the framework are reported to the ROC.
Technology governance exists at the operational level within our Enterprise and Technology Operations (“ETO”) division to help ensure safety, soundness, operational resiliency, and compliance with our technology policies. ETO management regularly participates in enterprise architecture review boards and technology risk committees to assess ongoing objectives related to enterprise standards compliance and strategic alignment, end-of-life, audit, risk and compliance issue management, and asset management. Thresholds are defined to escalate associated risks to the attention of the ERMC and ROC committees as appropriate.
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Cybersecurity Risk Management
The Board of Directors is responsible for approving thekey policies associated with capital management. The Board has establisheddelegated responsibility of managing our capital risk to the Capital Management Committee (“CMC”), which is chaired by the Chief Financial Officer, and consistingconsists of members of management, and whose primary responsibility is to recommend and administer the approved capital policies that govern theour capital management of the Company and its subsidiary bank.management. Other major CMC responsibilities include:
•Setting overall capital targets within the Board-approved capital policy,Capital Policy, monitoring performance compared to the Company’swith our Capital Policy limits, and recommending changes to capital including dividends, common stock issuances and repurchases, subordinated debt, and changes in major strategies to maintain the Company and its subsidiary bankourselves at well-capitalized levels;
•Maintaining an adequate capital cushion to withstand adverse stress events while continuing to meet the borrowing needs of itsour customers, and to provide reasonable assurance of continued access to wholesale funding, consistent with fiduciary responsibilities to depositors and bondholders; and
•Reviewing our credit agency ratings of the Company and ZB, N.A.ratings.
Schedule 39
SHAREHOLDERS’ EQUITY
| (Dollar amounts in millions) | December 31, 2023 | December 31, 2022 | Amount change | Percent change | |||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||
| Preferred stock | $ | 440 | $ | 440 | $ | — | — | % | |||||||||||||||
| Common stock and additional paid-in capital | 1,731 | 1,754 | (23) | (1) | |||||||||||||||||||
| Retained earnings | 6,212 | 5,811 | 401 | 7 | |||||||||||||||||||
| Accumulated other comprehensive income | (2,692) | (3,112) | 420 | 13 | |||||||||||||||||||
Total shareholders’ equity | $ | 5,691 | $ | 4,893 | $ | 798 | 16 | % | |||||||||||||||
Total shareholders’ equity increased $798 million, or 16% to $5.7 billion at December 31, 2023, compared with $4.9 billion at December 31, 2022. Common stock and additional paid-in capital decreased $23 million. During the first quarter of Zions’ published stress tests demonstrate that2023, we repurchased 0.9 million common shares outstanding for $50 million. As the Company believes it has sufficient capital to withstand a severe hypothetical economic downturn. Detailed disclosure of the stress test results can be found onmacroeconomic environment remained uncertain, we suspended our website.
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In February 2024, the Board approved a plan to our 2016 capital plan (which spansrepurchase up to $35 million of common shares outstanding during the timeframefiscal year 2024. In February 2024, we repurchased 0.9 million common shares outstanding for $35 million at an average price of July$39.32.
The AOCI loss was $2.7 billion at December 31, 2016 to June 30, 2017). The plan included (1) the increase of the quarterly common dividend to $0.08 per share beginning2023, and primarily reflects declines in the third quarterfair value of 2016, (2) upfixed-rate available-for-sale securities as a result of changes in interest rates. When compared to $180the prior year end, AOCI improved $420 million during 2023, driven largely by $208 million in total repurchases of common equity and (3) upunrealized loss amortization associated with the securities transferred from AFS to $144 million in total repurchases of preferred equity.
Bank regulators recently issued a proposal to implement Basel III Endgame, which would significantly revise certain capital requirements, such as the inclusion of unrealized gains and losses on AFS debt securities in regulatory capital, and would potentially impact our current and future capital planning, including share repurchase activity. For more information about the regulatory proposals, see “Recent Regulatory Developments” in Supervision and Regulation on page 8. For more discussion on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.
Schedule 40
CAPITAL DISTRIBUTIONS
| (In millions, except share data) | 2023 | 2022 | |||||||||
| Capital distributions: | |||||||||||
| Preferred dividends paid | $ | 32 | $ | 29 | |||||||
| Total capital distributed to preferred shareholders | 32 | 29 | |||||||||
| Common dividends paid | 245 | 240 | |||||||||
Bank common stock repurchased 1 | 51 | 202 | |||||||||
| Total capital distributed to common shareholders | 296 | 442 | |||||||||
| Total capital distributed to preferred and common shareholders | $ | 328 | $ | 471 | |||||||
| Weighted average diluted common shares outstanding (in thousands) | 147,756 | 150,271 | |||||||||
| Common shares outstanding, at year-end (in thousands) | 148,153 | 148,664 | |||||||||
1 Includes amounts related to the common shares acquired from our publicly announced plans and those acquired in connection with our stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the exercise of stock options.
Pursuant to the OCC’s “Earnings Limitation Rule,” our dividend payments are restricted to an amount equal to the sum of the total of (1) our net income for that year, and (2) retained earnings for the preceding two years, unless the OCC approves the declaration and payment of dividends in excess of such amount. As of December 31, 2017, the Company has repurchased $230January 1, 2024, we had $1.0 billion of retained net profits available for distribution.
We paid dividends on preferred stock of $32 million of itsin 2023, compared with $29 million in 2022. We paid dividends on common stock at an average price of $47.42$245 million, or $1.64 per share, under the 2017 capital plan and $180in 2023, compared with $240 million, of its common stock at an average price of $35.66or $1.58 per share, underin 2022. In February 2024, the 2016 capital plan.
Basel III
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page 7 and 5.8 million common stock warrants at an exercise price of $36.27 per share which expire on November 14, 2018. See Note 1315 of the Notes to Consolidated Financial Statements for more information onabout Basel III capital requirements. The following schedule presents our common stock warrants. The increase in the market price of our common stock increased our diluted shares throughout 2017capital amounts, capital ratios, and for the fourth quarter of 2016, but did not effect on our diluted shares for the full 2016 year.
Schedule 32 presents41
CAPITAL AMOUNTS AND RATIOS
| (Dollar amounts in millions) | December 31, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||||||
| Basel III risk-based capital amounts: | |||||||||||||||||
| Common equity Tier 1 capital | $ | 6,863 | $ | 6,481 | $ | 6,068 | |||||||||||
| Tier 1 risk-based | 7,303 | 6,921 | 6,508 | ||||||||||||||
| Total risk-based | 8,553 | 8,077 | 7,652 | ||||||||||||||
| Risk-weighted assets | 66,934 | 66,111 | 59,604 | ||||||||||||||
| Basel III risk-based capital ratios: | |||||||||||||||||
| Common equity Tier 1 capital | 10.3 | % | 9.8 | % | 10.2 | % | |||||||||||
| Tier 1 risk-based | 10.9 | % | 10.5 | % | 10.9 | % | |||||||||||
| Total risk-based | 12.8 | % | 12.2 | % | 12.8 | % | |||||||||||
| Tier 1 leverage | 8.3 | % | 7.7 | % | 7.2 | % | |||||||||||
| Other ratios: | |||||||||||||||||
| Average equity to average assets | 6.0 | % | 6.6 | % | 9.0 | % | |||||||||||
| Return on average common equity | 13.4 | % | 16.0 | % | 14.9 | % | |||||||||||
Return on average tangible common equity 1 | 17.3 | % | 19.8 | % | 17.3 | % | |||||||||||
Tangible equity ratio 1 | 5.4 | % | 4.3 | % | 7.0 | % | |||||||||||
Tangible common equity ratio 1 | 4.9 | % | 3.8 | % | 6.5 | % | |||||||||||
1 See “Non-GAAP Financial Measures” on page 77 for more information regarding these ratios.
During the diluted shares from the remaining common stock warrants at various Zions Bancorporation common stock market prices aslatter half of February 20, 2018, excluding the effect of changes in exercise cost and warrant share multiplier from the future payment of common stock dividends.
| Assumed Zions Bancorporation Common Stock Market Price | Diluted Shares (000s) | ||||
| $ | 35.00 | 0 | |||
| 40.00 | 4,684 | ||||
| 45.00 | 7,825 | ||||
| 50.00 | 10,338 | ||||
| 55.00 | 12,394 | ||||
| 60.00 | 14,107 | ||||
| 65.00 | 15,557 | ||||
| 2017 | 2016 | 2015 | ||||||
Tangible common equity ratio1 | 9.3 | % | 9.5 | % | 9.6 | % | ||
Tangible equity ratio1 | 10.2 | 10.6 | 11.1 | |||||
| Average equity to average assets | 12.0 | 12.8 | 13.0 | |||||
Basel III risk-based capital ratios2: | ||||||||
| Common equity tier 1 capital | 12.1 | 12.1 | 12.2 | |||||
| Tier 1 leverage | 10.5 | 11.1 | 11.3 | |||||
| Tier 1 risk-based | 13.2 | 13.5 | 14.1 | |||||
| Total risk-based | 14.8 | 15.2 | 16.1 | |||||
| Return on average common equity | 7.7 | 6.0 | 3.8 | |||||
Return on average tangible common equity1 | 9.0 | 7.1 | 4.6 | |||||
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Note 1 of the Notes to Consolidated Financial Statements contains a summary of the Company’sour significant accounting policies. Discussed below are certain significantCertain accounting policies that we consider critical to the Company’s financial statements. These critical accounting policies were selectedare described below because the amounts affected by themtheir related balances and estimates are significant to the financial statements. Any changes to these amounts, including changes in estimates, may also be significant to the financial statements. We believe that an understanding of these policies, along with the related estimates we are required to make in recording theour financial transactions, of the Company, is important to have a complete picture of the Company’sour financial condition. In addition,Additionally, in arriving atmaking these estimates, we are required to make complex and subjective judgments, many of which include a high degree of uncertainty. The following discussion ofWe discuss these critical accounting policies includes the significant estimates related to these policies. We have discussed each of these accounting policies and the related estimates with the Audit Committee of the Board of Directors.below.
We have included, where applicable in this document, sensitivity schedules and other examples to demonstrate the impact of the changes in estimates made for various financial transactions. The sensitivities in these schedules and examples are hypothetical and should be viewed with caution. Changes in estimates are based on variations in assumptions and are not subject to simple extrapolation, as the relationship of the change in the assumption to the change in the amount of the estimate may not be linear. In addition, the effect of a variation in one assumption is in reality likely to cause changes in other assumptions, which could potentially magnify or counteract the sensitivities.
Allowance for Credit Losses
The ACL includes the ALLL and the RULC and represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. The ACL for our AFS and HTM debt securities portfolio is estimated separately from loans and is not presented separately on the
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consolidated balance sheet due to immateriality. The ACL for debt securities was less than $1 million at both December 31, 2023 and 2022.
The ACL may change significantly each period because the ACL is subject to economic forecasts that may change materially from period to period. We believe that our methodology for determining an appropriate level for the ACL adequately addresses the various components that could potentially result in credit losses. Any unfavorable differences between the actual outcome of credit-related events and our estimates could require an additional provision for credit losses.
The ACL is calculated based on quantitative models and management’s qualitative judgment based on many factors over the life of loan. The primary assumptions of the quantitative model are the economic forecast, the length of the reasonable and supportable forecast period, the length of the reversion period, prepayment rates, and the credit quality of the portfolio. The quantitative ACL estimate is based on losses under multiple economic scenarios that reflect optimistic, baseline, and stressed economic conditions. Management uses qualitative judgment to adjust scenario weights to more closely reflect management’s assessments of current conditions and reasonable and supportable forecasts.
If the ACL was evaluated on the baseline economic scenario rather than weighting multiple scenarios, the quantitatively determined amount of the ACL at December 31, 2023 would decrease by approximately $138 million. Additionally, if the probability of default risk-grade for all pass-graded loans was immediately downgraded one grade on our internal risk-grading scale, the quantitatively determined amount of the ACL at December 31, 2023 would increase by approximately $51 million. These sensitivity analyses are hypothetical and have been provided only to indicate the potential impact that changes in economic forecasts and changes in risk-grades may have on the ACL estimate. See Note 6 of the Notes to Consolidated Financial Statements for more information on the processes and methodologies used to estimate the ACL.
Fair Value Estimates
We measure or monitor many of ourcertain assets and liabilities on aat fair value basis.value. Fair value is the price that couldwould be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. To increase consistency and comparability in fair value measurements, GAAP has establishedwe prioritize valuation inputs in accordance with a three-level hierarchy to prioritize the valuation inputs amonghierarchy: (1) observable inputs that reflect quoted prices in active markets, (2) inputs
other than quoted prices with observable market data, and (3) unobservable data such as the Company’sour own data or single dealer nonbinding pricing quotes.data.
When observable market prices are not available, fair value is estimated using modeling techniques such as discounted cash flow analysis. These modeling techniques use assumptions that market participants would consider in pricing the asset or the liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, the life of the asset and applicable growth rate, the risk of nonperformance, and other related assumptions.liability.
The selection and weighting of the various fair value techniques may result in a fair value higher or lower than the carrying value.value of the item being valued. Considerable judgment may be involved in determining the amount that is most representative of fair value.
For assets and liabilities recordedmeasured at fair value, the Company’sour policy is to maximize the use of observable inputs, when available, and minimize the use of unobservable inputs when developingestimating fair value measurements for those items where there is an active market.value. In certain cases, when market observable inputs for model-based valuation techniques may not be readily available, the Company iswe are required to make judgments about the assumptions that we believe market participants would useconsider in estimating the fair value of the financial instrument.instruments. The models used to determineestimate fair value adjustments are regularly evaluated by management for relevance under current facts and circumstances.
Changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. When market data is not available, the Company uses valuation techniques requiring more management judgment to estimate the appropriate fair value.
Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary measure of accounting. Fair value is used on a nonrecurring basis to measurefor certain assets or liabilities (including HTM securities, loans held for sale, and OREO) forto determine any impairment or for disclosure purposes in accordance with current accounting guidance.purposes.
75
AFS securities are valued using several methodologies, which depend on the nature of the security, availability of current market information, and other factors. InvestmentAFS securities in an unrealized loss position are formally reviewed on a quarterly basis for the presence of other-than-temporary impairment (“OTTI”). OTTI is considered tocredit impairment. If we have occurred if the instrument’s fair value is below its amortized cost and (1) we intendintent to sell thean identified security, or (2) it is “moremore likely than not”not we will be required to sell the security before recovery of its amortized cost basis, or (3)we first recognize an identified impairment. If we do not have the present valueintent to sell a security, and it is more likely than not that we will not be required to sell a security prior to recovery of expected cash flows is not sufficient to recover the entireits amortized cost basis. The “more likely than not” criterionbasis, then we determine whether there is a lower threshold thanany impairment attributable to credit-related factors. Credit-related impairment is recognized as an allowance. Full or partial write-offs of an AFS security are recorded in the “probable” criterion.period in which the security is deemed to be uncollectible.
While certain assets and liabilities are measured at fair value, such as our AFS securities, the majority of our assets and liabilities are not adjusted for changes in fair value. This asymmetrical accounting creates volatility in AOCI and equity.
Notes 1, 3, 5, 7, 9, and 310 of the Notes to Consolidated Financial Statements and the “Investment Securities Portfolio” on page 5046 contain further information regarding the use of fair value estimates.
Goodwill is initially recorded at fair value in the financial statements of a reporting unit at the time of its acquisition and is subsequently evaluated at least annually for impairment in accordance with current accounting guidance. impairment.
We perform this annual test as of September 30an evaluation during the fourth quarter of each year, or more oftenfrequently if events or circumstances indicate that the carrying value exceeds fair value. We may elect to perform a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value may not be recoverable. The goodwill impairment test for a given reporting unit (generally one of our banking segments) compares its fair value with its carrying value.amount. If the carrying amount exceedsis more likely than not to exceed its fair value, an additional quantitative analysis must beis performed to determine the amount if any, by whichof goodwill impairment. If the fair value is impaired.less than the carrying value, an impairment is recorded for the difference. Goodwill impairment does not impact our regulatory capital ratios or tangible common equity ratio.
To determine the fair value of a reporting unit, we use (1) a combination of up to three separate methods:market value approach that incorporates comparable publicly-traded financial service companies (primarilypublicly traded commercial banks, and bank holding companies) in the western and southwestern states (“Market Value”); where applicable, comparable acquisitions(2) an income method that consists of financial services companies in the western and southwestern states (“Transaction Value”); and thea discounted present value of management’s estimates of future cash flows.
Critical assumptions that are used as part of these calculationsmethods include:
Since estimates are an integral part of the impairment test computations, changes in these estimates could have a significant impact on any calculatedour reporting units’ fair value and the goodwill impairment amount.amount, if any. Estimates include economic conditions, which impact the assumptions related to interest and growth rates, loss rates, and imputed cost of equity capital. The fair value estimates for each reporting unit incorporate current economic and market conditions, including Federal Reserve
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impact of an adverse change to this assumption. If the discount rate applied to future earnings werewas increased by 100bps,100 bps, the fair values of Amegy, CB&T, and Zions Bank, and NSB would exceed their carrying values by 33%32%, 52%60%, 63%, and 72%124%, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
Note 2 of the Notes to Consolidated Financial Statements discusses recently issued accounting pronouncements that we are, or will be, required to adopt. Also discusseddescribed is our expectation of the impact these new accounting pronouncements will have, to the extent they are material, on our financial condition or results of operations,operations.
NON-GAAP FINANCIAL MEASURES
This Form 10-K presents non-GAAP financial measures in addition to GAAP financial measures. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. We consider these adjustments to be relevant to ongoing operating results and provide a meaningful basis for period-to-period comparisons. We use these non-GAAP financial measures to assess our performance and financial position. We believe that presenting these non-GAAP financial measures allows investors to assess our performance on the same basis as that applied by our management and the financial services industry.
Non-GAAP financial measures have inherent limitations and are not necessarily comparable to similar financial measures that may be presented by other financial services companies. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or liquidity.as a substitute for analysis of results reported under GAAP.
Tangible Common Equity and Related Measures
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization. We believe these non-GAAP measures provide useful information about our use of shareholders’ equity and provide a basis for evaluating the performance of a business more consistently, whether acquired or developed internally.
Schedule 42
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
| Year Ended December 31, | ||||||||||||||||||||
| (Dollar amounts in millions) | 2023 | 2022 | 2021 | |||||||||||||||||
| Net earnings applicable to common shareholders (GAAP) | $ | 648 | $ | 878 | $ | 1,100 | ||||||||||||||
| Adjustment, net of tax: | ||||||||||||||||||||
| Amortization of core deposit and other intangibles | 5 | 1 | 1 | |||||||||||||||||
| Net earnings applicable to common shareholders, net of tax | (a) | $ | 653 | $ | 879 | $ | 1,101 | |||||||||||||
| Average common equity (GAAP) | $ | 4,839 | $ | 5,472 | $ | 7,371 | ||||||||||||||
| Average goodwill and intangibles | (1,062) | (1,022) | (1,015) | |||||||||||||||||
| Average tangible common equity (non-GAAP) | (b) | $ | 3,777 | $ | 4,450 | $ | 6,356 | |||||||||||||
Return on average tangible common equity (non-GAAP) 1 | (a/b) | 17.3 | % | 19.8 | % | 17.3 | % | |||||||||||||
1 Excluding the effect of AOCI from average tangible common equity would result in associated returns of 9.7%, 13.9%, and 17.8% for the periods presented, respectively.
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Schedule 43
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)
| (Dollar amounts in millions, except per share amounts) | December 31, | |||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Total shareholders’ equity (GAAP) | $ | 5,691 | $ | 4,893 | $ | 7,463 | ||||||||||||||
| Goodwill and intangibles | (1,059) | (1,065) | (1,015) | |||||||||||||||||
| Tangible equity (non-GAAP) | (a) | 4,632 | 3,828 | 6,448 | ||||||||||||||||
| Preferred stock | (440) | (440) | (440) | |||||||||||||||||
| Tangible common equity (non-GAAP) | (b) | $ | 4,192 | $ | 3,388 | $ | 6,008 | |||||||||||||
| Total assets (GAAP) | $ | 87,203 | $ | 89,545 | $ | 93,200 | ||||||||||||||
| Goodwill and intangibles | (1,059) | (1,065) | (1,015) | |||||||||||||||||
| Tangible assets (non-GAAP) | (c) | $ | 86,144 | $ | 88,480 | $ | 92,185 | |||||||||||||
| Common shares outstanding (in thousands) | (d) | 148,153 | 148,664 | 151,625 | ||||||||||||||||
| Tangible equity ratio (non-GAAP) | (a/c) | 5.4 | % | 4.3 | % | 7.0 | % | |||||||||||||
| Tangible common equity ratio (non-GAAP) | (b/c) | 4.9 | % | 3.8 | % | 6.5 | % | |||||||||||||
| Tangible book value per common share (non-GAAP) | (b/d) | $28.30 | $22.79 | $39.62 | ||||||||||||||||
Efficiency Ratio and Adjusted Pre-Provision Net Revenue
The efficiency ratio is a measure of operating expense relative to revenue. We believe the efficiency ratio provides useful information regarding the cost of generating revenue. We make adjustments to exclude certain items that are not generally expected to recur frequently, as identified in the subsequent schedule, which we believe allow for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how we are managing our expenses. Adjusted pre-provision net revenue enables management and others to assess our ability to generate capital. Taxable-equivalent net interest income allows us to assess the comparability of revenue arising from both taxable and tax-exempt sources.
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Schedule 44
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
| (Dollar amounts in millions) | 2023 | 2022 | 2021 | |||||||||||||||||
| Noninterest expense (GAAP) | (a) | $ | 2,097 | $ | 1,878 | $ | 1,741 | |||||||||||||
| Adjustments: | ||||||||||||||||||||
| Severance costs | 14 | 1 | 1 | |||||||||||||||||
| Other real estate expense, net | — | 1 | — | |||||||||||||||||
| Amortization of core deposit and other intangibles | 6 | 1 | 1 | |||||||||||||||||
| Restructuring costs | 1 | — | — | |||||||||||||||||
Pension termination-related expense (income) 1 | — | — | (5) | |||||||||||||||||
SBIC investment success fee accrual 2 | — | (1) | 7 | |||||||||||||||||
| FDIC special assessment | 90 | — | — | |||||||||||||||||
| Total adjustments | (b) | 111 | 2 | 4 | ||||||||||||||||
| Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 1,986 | $ | 1,876 | $ | 1,737 | |||||||||||||
| Net interest income (GAAP) | (d) | $ | 2,438 | $ | 2,520 | $ | 2,208 | |||||||||||||
| Fully taxable-equivalent adjustments | (e) | 41 | 37 | 32 | ||||||||||||||||
| Taxable-equivalent net interest income (non-GAAP) | (d+e)=(f) | 2,479 | 2,557 | 2,240 | ||||||||||||||||
| Noninterest income (GAAP) | (g) | 677 | 632 | 703 | ||||||||||||||||
| Combined income (non-GAAP) | (f+g)=(h) | 3,156 | 3,189 | 2,943 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Fair value and nonhedge derivative gain (loss) | (4) | 16 | 14 | |||||||||||||||||
| Securities gains (losses), net | 4 | (15) | 71 | |||||||||||||||||
| Total adjustments | (i) | — | 1 | 85 | ||||||||||||||||
| Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 3,156 | $ | 3,188 | $ | 2,858 | |||||||||||||
| Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 1,059 | $ | 1,311 | $ | 1,202 | |||||||||||||
| Adjusted pre-provision net revenue (non-GAAP) | (j-c) | 1,170 | 1,312 | 1,121 | ||||||||||||||||
Efficiency ratio (non-GAAP) 3 | (c/j) | 62.9 | % | 58.8 | % | 60.8 | % | |||||||||||||
1 Represents a subsequent valuation adjustment related to the termination of our defined benefit pension plan in 2020.
2 The success fee accrual is associated with the gains and losses from our SBIC investments, which are excluded from the efficiency ratio through securities gains (losses), net.
3 Including the one-time $90 million accrual associated with the FDIC special assessment recorded in deposit insurance and regulatory expense during the fourth quarter of 2023, the efficiency ratio for 2023 would have been 65.8%.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is included in “Interest Rate and Market Risk Management” in MD&A beginning on page 6863, and is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Zions Bancorporation, and subsidiaries (“the Company”)N.A is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined by Exchange Act Rules 13a-15 and 15d-15.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Although any system of internal control can be compromised by human error or intentional circumvention of required procedures, we believe our system provides reasonable assurance that financial transactions are recorded and reported properly, providing an adequate basis for reliable financial statements.
Ernst & Young LLP, an independent registered public accounting firm, has audited theour consolidated financial statements of the Company for the year ended December 31, 20172023, and has also issued an attestation report, which is included herein, on internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”).
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
REPORTS OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 42)
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Shareholders and the Board of Directors of Zions Bancorporation, and SubsidiariesNational Association
Opinion on Internal Control overOver Financial Reporting
We have audited Zions Bancorporation, and subsidiaries’ National Association’s (“the Bank”) internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-IntegratedControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the(“the COSO criteria)criteria”). In our opinion, Zions Bancorporation and subsidiaries (the Company)the Bank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the 20172023 consolidated financial statements of the CompanyBank and our report dated February 28, 201823, 2024, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’sBank’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’sBank’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the CompanyBank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Salt Lake City, Utah
February 28, 201823, 2024
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
To the Shareholders and the Board of Directors of Zions Bancorporation, and Subsidiaries National Association
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Zions Bancorporation, and subsidiaries (the Company)National Association (“the Bank”) as of December 31, 20172023 and 2016, and2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders'shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes (collectively referred to as the “consolidated“consolidated financial statements”statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the CompanyBank at December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the Company’sBank’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 201823, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’sBank’s management. Our responsibility is to express an opinion on the Company’sBank’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the CompanyBank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account and the disclosures to which it relates.
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Allowance for loan and lease losses
| Description of the Matter | The Bank’s loan and lease portfolio and the associated allowance for loan and lease losses (ALLL), were $57.8 billion and $684 million as of December 31, 2023, respectively. The provision for loan and lease losses was $148 million for the year ended December 31, 2023. As discussed in Note 1 and 6 to the consolidated financial statements, the ALLL represented the Bank’s estimate of current expected credit losses over the contractual remaining life of the loan and lease portfolio as of the consolidated balance sheet date. Management’s ALLL estimate includes quantitative calculations based on the statistical analysis of historical loss experience dependent on weighted economic scenarios and other loan-level characteristics forecasted over a reasonable period, losses estimated using historical loss experience for periods outside the reasonable economic forecast period (collectively the quantitative portion), supplemented with qualitative adjustments that bring the ALLL to the level management deemed appropriate based on factors that are not fully considered in the quantitative analysis. The statistical analysis of historical loss experience was derived from credit loss models used to determine the quantitative portion of the ALLL. Judgment was required by management to determine the weightings of the economic scenarios and the magnitude of the impact of the qualitative adjustments to the ALLL. Auditing management’s ALLL estimate is complex due to the judgment used to weigh the economic scenarios and the judgment involved in determining the magnitude of the impact of the various risk factors used to derive the qualitative adjustments to the ALLL. | ||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risk of material misstatement in determining the weightings of the economic scenarios and in determining the impact of the qualitative adjustments to the ALLL. We tested controls over the Bank’s ALLL governance process, model development and model risk management as it relates to the credit loss models used in the ALLL process. Such testing included testing controls over model governance, controls over data input into the models, and controls over model calculation accuracy and observing key management meetings where weightings of the economic scenarios and the magnitude of qualitative adjustments are reviewed and approved. | ||||
| To test the reasonableness of the weightings of the economic scenarios, our procedures consisted of obtaining an understanding of the forecasted economic scenarios used, including agreeing the economic scenarios to third party published data and economic scenarios developed from market information as well as evaluating management’s methodology. We also performed analytical procedures and sensitivity analyses on the weightings of the economic scenarios and searched for and evaluated information that corroborated or contradicted these weightings. | |||||
| Regarding the completeness of qualitative adjustments identified and incorporated into measuring the ALLL, we evaluated the potential impact of imprecision in the credit loss models and emerging risks related to changes in the economic environment impacting the Bank’s loan and lease portfolio. We also evaluated and tested internal and external data used in the qualitative adjustments by agreeing significant inputs and underlying data to internal and external sources. | |||||
| Further, we assessed whether the total amount of the ALLL estimate was consistent with the Bank’s historical loss information, peer bank information, credit quality statistics, subsequent events and transactions, and publicly observable indicators of macroeconomic financial conditions and whether the total ALLL amount was reflective of current expected losses in the loan and lease portfolio as of the consolidated balance sheet date. | |||||
/s/ Ernst & Young LLP
We have served as the Company’sBank’s auditor since 2000.
Salt Lake City, Utah
February 28, 201823, 2024
83
CONSOLIDATED BALANCE SHEETS
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||
| (In millions, shares in thousands) | December 31, | (In millions, shares in thousands) | December 31, | |||||||||||||||
| 2017 | 2016 | 2023 | 2022 | |||||||||||||||
| ASSETS | ||||||||||||||||||
| Cash and due from banks | $ | 548 | $ | 737 | ||||||||||||||
| Cash and due from banks | ||||||||||||||||||
| Cash and due from banks | ||||||||||||||||||
| Money market investments: | ||||||||||||||||||
| Interest-bearing deposits | 782 | 1,411 | ||||||||||||||||
| Federal funds sold and security resell agreements | 514 | 568 | ||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | ||||||||||||||||||
| Investment securities: | ||||||||||||||||||
| Held-to-maturity, at amortized cost (approximate fair value $762 and $850) | 770 | 868 | ||||||||||||||||
| Held-to-maturity, at amortized cost (fair value $10,466 and $11,239) | ||||||||||||||||||
| Held-to-maturity, at amortized cost (fair value $10,466 and $11,239) | ||||||||||||||||||
| Held-to-maturity, at amortized cost (fair value $10,466 and $11,239) | ||||||||||||||||||
| Available-for-sale, at fair value | 15,161 | 13,372 | ||||||||||||||||
| Trading account, at fair value | 148 | 115 | ||||||||||||||||
| Total investment securities | 16,079 | 14,355 | ||||||||||||||||
| Loans held for sale | 44 | 172 | ||||||||||||||||
| Loans and leases, net of unearned income and fees | 44,780 | 42,649 | ||||||||||||||||
| Less allowance for loan losses | 518 | 567 | ||||||||||||||||
| Less allowance for loan and lease losses | ||||||||||||||||||
| Loans, net of allowance | 44,262 | 42,082 | ||||||||||||||||
| Other noninterest-bearing investments | 1,029 | 884 | ||||||||||||||||
| Premises, equipment and software, net | 1,094 | 1,020 | ||||||||||||||||
| Goodwill | 1,014 | 1,014 | ||||||||||||||||
| Core deposit and other intangibles | 2 | 8 | ||||||||||||||||
| Goodwill and intangibles | ||||||||||||||||||
| Other real estate owned | 4 | 4 | ||||||||||||||||
| Other assets | 916 | 984 | ||||||||||||||||
| Total assets | $ | 66,288 | $ | 63,239 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Noninterest-bearing demand | ||||||||||||||||||
| Noninterest-bearing demand | ||||||||||||||||||
| Noninterest-bearing demand | $ | 23,886 | $ | 24,115 | ||||||||||||||
| Interest-bearing: | ||||||||||||||||||
| Savings and money market | 25,620 | 26,364 | ||||||||||||||||
| Savings and money market | ||||||||||||||||||
| Savings and money market | ||||||||||||||||||
| Time | 3,115 | 2,757 | ||||||||||||||||
| Total deposits | ||||||||||||||||||
| Total deposits | ||||||||||||||||||
| Total deposits | 52,621 | 53,236 | ||||||||||||||||
| Federal funds and other short-term borrowings | 4,976 | 827 | ||||||||||||||||
| Long-term debt | 383 | 535 | ||||||||||||||||
| Reserve for unfunded lending commitments | 58 | 65 | ||||||||||||||||
| Other liabilities | 571 | 942 | ||||||||||||||||
| Total liabilities | 58,609 | 55,605 | ||||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||
| Preferred stock, without par value, authorized 4,400 shares | 566 | 710 | ||||||||||||||||
| Common stock, without par value; authorized 350,000 shares; issued and outstanding 197,532 and 203,085 shares | 4,445 | 4,725 | ||||||||||||||||
| Preferred stock, without par value; authorized 4,400 shares | ||||||||||||||||||
| Preferred stock, without par value; authorized 4,400 shares | ||||||||||||||||||
| Preferred stock, without par value; authorized 4,400 shares | ||||||||||||||||||
| Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 148,153 and 148,664 shares and additional paid-in capital) | ||||||||||||||||||
| Retained earnings | 2,807 | 2,321 | ||||||||||||||||
| Accumulated other comprehensive income (loss) | (139 | ) | (122 | ) | ||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||||||
| Total shareholders’ equity | ||||||||||||||||||
| Total shareholders’ equity | ||||||||||||||||||
| Total shareholders’ equity | 7,679 | 7,634 | ||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 66,288 | $ | 63,239 | ||||||||||||||
See accompanying notes to consolidated financial statements.
84
CONSOLIDATED STATEMENTS OF INCOME
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||||||||
| (In millions, except shares and per share amounts) | Year Ended December 31, | (In millions, except shares and per share amounts) | Year Ended December 31, | ||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||
| Interest and fees on loans | |||||||||||||||||||||||||||||||
| Interest and fees on loans | |||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 1,847 | $ | 1,729 | $ | 1,686 | |||||||||||||||||||||||||
| Interest on money market investments | 19 | 21 | 23 | ||||||||||||||||||||||||||||
| Interest on securities | 326 | 204 | 124 | ||||||||||||||||||||||||||||
| Total interest income | 2,192 | 1,954 | 1,833 | ||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||
| Interest on deposits | 59 | 49 | 49 | ||||||||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||||||||||
| Interest on short- and long-term borrowings | 68 | 38 | 69 | ||||||||||||||||||||||||||||
| Total interest expense | 127 | 87 | 118 | ||||||||||||||||||||||||||||
| Net interest income | 2,065 | 1,867 | 1,715 | ||||||||||||||||||||||||||||
| Provision for credit losses: | |||||||||||||||||||||||||||||||
| Provision for loan losses | 24 | 93 | 40 | ||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 2,041 | 1,774 | 1,675 | ||||||||||||||||||||||||||||
| Provision for loan losses | |||||||||||||||||||||||||||||||
| Provision for loan losses | |||||||||||||||||||||||||||||||
| Provision for unfunded lending commitments | |||||||||||||||||||||||||||||||
| Total provision for credit losses | |||||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||
| Service charges and fees on deposit accounts | 171 | 171 | 168 | ||||||||||||||||||||||||||||
| Other service charges, commissions and fees | 217 | 208 | 187 | ||||||||||||||||||||||||||||
| Wealth management and trust income | 42 | 37 | 31 | ||||||||||||||||||||||||||||
| Loan sales and servicing income | 25 | 35 | 31 | ||||||||||||||||||||||||||||
| Capital markets and foreign exchange | 30 | 22 | 26 | ||||||||||||||||||||||||||||
| Customer-related fees | 485 | 473 | 443 | ||||||||||||||||||||||||||||
| Dividends and other investment income | 40 | 24 | 30 | ||||||||||||||||||||||||||||
| Commercial account fees | |||||||||||||||||||||||||||||||
| Commercial account fees | |||||||||||||||||||||||||||||||
| Commercial account fees | |||||||||||||||||||||||||||||||
| Card fees | |||||||||||||||||||||||||||||||
| Retail and business banking fees | |||||||||||||||||||||||||||||||
| Loan-related fees and income | |||||||||||||||||||||||||||||||
| Capital markets fees | |||||||||||||||||||||||||||||||
| Wealth management fees | |||||||||||||||||||||||||||||||
| Other customer-related fees | |||||||||||||||||||||||||||||||
| Other customer-related fees | |||||||||||||||||||||||||||||||
| Other customer-related fees | |||||||||||||||||||||||||||||||
| Customer-related noninterest income | |||||||||||||||||||||||||||||||
| Fair value and nonhedge derivative income (loss) | |||||||||||||||||||||||||||||||
| Dividends and other income | |||||||||||||||||||||||||||||||
| Securities gains (losses), net | 14 | 7 | (127 | ) | |||||||||||||||||||||||||||
| Other | 5 | 12 | 11 | ||||||||||||||||||||||||||||
| Total noninterest income | 544 | 516 | 357 | ||||||||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||||||||||
| Salaries and employee benefits | 1,011 | 983 | 973 | ||||||||||||||||||||||||||||
| Occupancy, net | 129 | 125 | 120 | ||||||||||||||||||||||||||||
| Furniture, equipment and software, net | 130 | 125 | 123 | ||||||||||||||||||||||||||||
| Salaries and employee benefits | |||||||||||||||||||||||||||||||
| Salaries and employee benefits | |||||||||||||||||||||||||||||||
| Technology, telecom, and information processing | |||||||||||||||||||||||||||||||
| Occupancy and equipment, net | |||||||||||||||||||||||||||||||
| Professional and legal services | |||||||||||||||||||||||||||||||
| Marketing and business development | |||||||||||||||||||||||||||||||
| Deposit insurance and regulatory expense | |||||||||||||||||||||||||||||||
| Credit-related expense | |||||||||||||||||||||||||||||||
| Other real estate expense, net | (1 | ) | (2 | ) | (1 | ) | |||||||||||||||||||||||||
| Credit-related expense | 29 | 26 | 29 | ||||||||||||||||||||||||||||
| Provision for unfunded lending commitments | (7 | ) | (10 | ) | (6 | ) | |||||||||||||||||||||||||
| Professional and legal services | 54 | 55 | 50 | ||||||||||||||||||||||||||||
| Advertising | 22 | 22 | 25 | ||||||||||||||||||||||||||||
| FDIC premiums | 53 | 40 | 34 | ||||||||||||||||||||||||||||
| Amortization of core deposit and other intangibles | 6 | 8 | 9 | ||||||||||||||||||||||||||||
| Other | 223 | 213 | 225 | ||||||||||||||||||||||||||||
| Total noninterest expense | 1,649 | 1,585 | 1,581 | ||||||||||||||||||||||||||||
| Income before income taxes | 936 | 705 | 451 | ||||||||||||||||||||||||||||
| Income taxes | 344 | 236 | 142 | ||||||||||||||||||||||||||||
| Net income | 592 | 469 | 309 | ||||||||||||||||||||||||||||
| Preferred stock dividends | (40 | ) | (48 | ) | (62 | ) | |||||||||||||||||||||||||
| Preferred stock redemption | (2 | ) | (10 | ) | — | ||||||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||||||||||
| Preferred stock dividends | |||||||||||||||||||||||||||||||
| Net earnings applicable to common shareholders | |||||||||||||||||||||||||||||||
| Net earnings applicable to common shareholders | |||||||||||||||||||||||||||||||
| Net earnings applicable to common shareholders | $ | 550 | $ | 411 | $ | 247 | |||||||||||||||||||||||||
| Weighted average common shares outstanding during the year: | |||||||||||||||||||||||||||||||
| Basic shares (in thousands) | |||||||||||||||||||||||||||||||
| Basic shares (in thousands) | |||||||||||||||||||||||||||||||
| Basic shares (in thousands) | 200,776 | 203,855 | 203,265 | ||||||||||||||||||||||||||||
| Diluted shares (in thousands) | 209,653 | 204,269 | 203,698 | ||||||||||||||||||||||||||||
| Net earnings per common share: | |||||||||||||||||||||||||||||||
| Basic | $ | 2.71 | $ | 2.00 | $ | 1.20 | |||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||
| Diluted | 2.60 | 1.99 | 1.20 | ||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
85
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||
| (In millions) | Year Ended December 31, | ||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net income | $ | 592 | $ | 469 | $ | 309 | |||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Net unrealized holding losses on investment securities | (2 | ) | (74 | ) | (23 | ) | |||||
| Reclassification of HTM securities to AFS securities | — | — | 11 | ||||||||
| Reclassification to earnings for realized net securities losses | — | — | 86 | ||||||||
| Net unrealized gains (losses) on other noninterest-bearing investments | 3 | 2 | (3 | ) | |||||||
| Net unrealized holding gains (losses) on derivative instruments | (3 | ) | 5 | 7 | |||||||
| Reclassification adjustment for increase in interest income recognized in earnings on derivative instruments | (2 | ) | (7 | ) | (6 | ) | |||||
| Pension and postretirement | 12 | 7 | 1 | ||||||||
| Effect of new tax rates from Tax Cuts and Jobs Act of 2017 | (25 | ) | — | — | |||||||
| Other comprehensive income (loss) | (17 | ) | (67 | ) | 73 | ||||||
| Comprehensive income | $ | 575 | $ | 402 | $ | 382 | |||||
| (In millions) | Year Ended December 31, | ||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income | $ | 680 | $ | 907 | $ | 1,129 | |||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Net unrealized holding gains (losses) on investment securities | 66 | (2,762) | (336) | ||||||||||||||
| Unrealized loss amortization associated with the securities transferred from AFS to HTM | 208 | 40 | — | ||||||||||||||
| Net unrealized gains (losses) on other noninterest-bearing investments | 1 | (2) | 3 | ||||||||||||||
| Net unrealized holding gains (losses) on derivative instruments | 21 | (330) | (26) | ||||||||||||||
| Reclassification adjustment for decrease (increase) in interest income recognized in earnings on derivative instruments | 124 | 21 | (46) | ||||||||||||||
| Pension and post-retirement | — | 1 | — | ||||||||||||||
| Other comprehensive income (loss), net of tax | 420 | (3,032) | (405) | ||||||||||||||
| Comprehensive income (loss) | $ | 1,100 | $ | (2,125) | $ | 724 | |||||||||||
See accompanying notes to consolidated financial statements.
86
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In millions, except shares and per share amounts) | Preferred stock | Common stock | Retained earnings | Accumulated other comprehensive income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares (in thousands) | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except shares and per share amounts) | (In millions, except shares and per share amounts) | Preferred stock | Common stock shares (in thousands) | Accumulated paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2014 | $ | 1,004 | 203,015 | $ | 4,724 | $ | 1,769 | $ | (128 | ) | $ | 7,369 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 309 | 309 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 73 | 73 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank common stock repurchased | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank common stock repurchased | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank common stock repurchased | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redemption | (176 | ) | 3 | (3 | ) | (176 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 1,402 | 40 | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | (62 | ) | (62 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $0.22 per share | (45 | ) | (45 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $1.44 per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in deferred compensation | (1 | ) | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2015 | 828 | 204,417 | 4,767 | 1,967 | (55 | ) | 7,507 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 469 | 469 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (67 | ) | (67 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redemption | (118 | ) | 2 | (10 | ) | (126 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company common stock repurchased under repurchase programs | (2,889 | ) | (90 | ) | (90 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank common stock repurchased | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 1,557 | 46 | 46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | (48 | ) | (48 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $0.28 per share | (58 | ) | (58 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $1.58 per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in deferred compensation | 1 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2016 | 710 | 203,085 | 4,725 | 2,321 | (122 | ) | 7,634 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 592 | 592 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect adjustment, adoption of ASU 2022-02, Financial Instruments - Credit Losses: Troubled Debt Restructurings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 8 | 8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock redemption | (144 | ) | 2 | (2 | ) | (144 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company common stock repurchased under repurchase programs | (7,009 | ) | (320 | ) | (320 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank common stock repurchased | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 1,456 | 38 | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock | (40 | ) | (40 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $0.44 per share | (89 | ) | (89 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of new tax rates from Tax Cuts and Jobs Act of 2017 | 25 | (25 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | $ | 566 | 197,532 | $ | 4,445 | $ | 2,807 | $ | (139 | ) | $ | 7,679 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on common stock, $1.64 per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in deferred compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||