Zions Bancorporation (ZION) Q3 2024 Earnings Report

Revenue and profitability:
- Revenue: $1.276 billion for Q3 2024, up 7.23% YoY and 2.65% QoQ.
- Gross profit: $779 million with gross margin of 61.05%.
- Operating income: $277 million; operating income margin ~21.71%.
- Net income: $214 million; net income margin ~16.77%.
- Earnings per share (diluted): $1.37, up 7% QoQ and 21% YoY; weighted average shares ~147.14 million.
- EBITDA: $309 million; EBITDA margin ~24.22%.
- NIM: Net interest margin expansion of 5 bps QoQ; up 10 bps YoY.
- Net interest income (NII): Incremental strength driven by higher asset yields and favorable mix; NII trend described as continuing to improve as asset repricing outpaces funding cost rises.

Asset quality and credit metrics:
- Allowance for credit losses: 1.25% of total loans and leases.
- Non-performing assets (NPA): $306 million, or 0.62% of loans and ORE (other real estate owned).
- Classified loans: +$829 million quarter over quarter, driven largely by multifamily credits; criticized loans also increased.
- Net charge-offs (NCO): 2 bps annualized of average loans for the quarter; CRE concentration remains a key risk area.
- CRE portfolio: ~$13.5 billion (23% of total loan balances); multifamily portion drove a substantial share of the increase in classified assets. LTV distribution largely ≤70% on many CRE loans; sponsor equity and underwriting quality cited as mitigants.

Balance sheet and liquidity:
- Total assets: ~$87.0 billion; total liabilities: ~$80.6 billion; total stockholders’ equity: ~$6.39 billion.
- CET1 ratio: 10.7% (up from 10.6% in Q2 2024; 10.2% YoY).
- Tangible common equity (TCE) ratio: 5.7% (up 50 bps QoQ).
- Cash and cash equivalents: ~$2.37 billion; total cash and short-term investments: ~$11.90 billion.
- Deposits: Customer deposits up 1.5 percentage points QoQ; non-interest-bearing deposits +1 percentage point QoQ; NIB deposits about one-third of total deposits.
- Funding costs: Total funding costs largely flat QoQ; blended deposit cost ~2.14% with a 2.94% end-of-period for interest-bearing deposits.
- Leverage and liquidity position remain solid, aided by the portfolio extension into high-quality, short-duration assets and a disciplined cost of funds strategy.

Cash flow and capital allocation:
- Operating cash flow: $119 million; capital expenditures: $22 million; free cash flow: $97 million.
- Investing cash flow was negative due to securities activity; financing cash flow was negative driven by debt paydowns and modest dividend activity.
- Dividend payout and share repurchases: Dividend payout ratio ~33.6% of earnings; no material share repurchase activity disclosed in the quarter; management cited capital rules as a constraint prior to initiating aggressive buybacks.

Subsequent developments and guidance:
- Strategic acquisition: Agreement with FirstBank to acquire four California branches in Coachella Valley with approximately $730 million deposits and $420 million in loans; regulatory approval pending. Management framed this as a growth opportunity to deepen market presence and expand the branch footprint.
- Forward guidance: Management signaled continued NII improvement with NIM expected to remain elevated, guided by the NII path and a rate environment anticipated to be favorable for repricing opportunities. The company expects loans to be stable to slightly increasing in 2025, led by the commercial portfolio, with CRE and residential mortgage refinancings offsetting some growth. The cost of deposits remains a key variable, with deposit beta ~36% across total deposits and higher for interest-bearing deposits (~60%).