ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
COMMISSION FILE NUMBER
001-12307
(Exact name of registrant as specified in its charter)
|
|
|
||||
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
||||
|
|
|||||
|
|
|
||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (
801
)
844-8208
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered | ||||||
|
|
|
|
||||||
| Depositary Shares each representing a 1/40th ownership interest in a share of: | ||||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
ý
No
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
ý
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Number of common shares outstanding at October 31, 2024:
147,711,218
shares
1
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Table of Contents
| Page | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
2
Table of Contents
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
GLOSSARY OF ACRONYMS AND ABBREVIATIONS
| ACL | Allowance for Credit Losses | HECL | Home Equity Credit Line | ||||||||
| AFS | Available-for-Sale | HTM | Held-to-Maturity | ||||||||
| ALLL | Allowance for Loan and Lease Losses | IPO | Initial Public Offering | ||||||||
| Amegy | Amegy Bank, a division of Zions Bancorporation, National Association | LIHTC | Low-income Housing Tax Credit | ||||||||
| AOCI | Accumulated Other Comprehensive Income or Loss | LTV | Loan-to-Value | ||||||||
| ASU | Accounting Standards Update | NASDAQ | National Association of Securities Dealers Automated Quotations | ||||||||
| BOLI | Bank-Owned Life Insurance | NBAZ | National Bank of Arizona, a division of Zions Bancorporation, National Association | ||||||||
| bps | Basis Points | NIM | Net Interest Margin | ||||||||
| BTFP |
Bank Term Funding Program
|
NM | Not Meaningful | ||||||||
| CB&T | California Bank & Trust, a division of Zions Bancorporation, National Association | NSB | Nevada State Bank, a division of Zions Bancorporation, National Association | ||||||||
| CLTV | Combined Loan-to-Value Ratio | OCC | Office of the Comptroller of the Currency | ||||||||
| CODM | Chief Operating Decision Maker | OCI | Other Comprehensive Income or Loss | ||||||||
| CRE | Commercial Real Estate | OREO | Other Real Estate Owned | ||||||||
| DTA | Deferred Tax Asset | PAM | Proportional Amortization Method | ||||||||
| DTL | Deferred Tax Liability | PEI | Private Equity Investment | ||||||||
| EaR | Earnings at Risk | PPNR | Pre-provision Net Revenue | ||||||||
| EPS | Earnings per Share | ROU | Right-of-Use | ||||||||
| EVE | Economic Value of Equity | RULC | Reserve for Unfunded Lending Commitments | ||||||||
| FASB | Financial Accounting Standards Board | S&P | Standard & Poor's | ||||||||
| FDIC | Federal Deposit Insurance Corporation | SBA | U.S. Small Business Administration | ||||||||
| FHLB | Federal Home Loan Bank | SBIC | Small Business Investment Company | ||||||||
| FICO | Fair Isaac Corporation | SEC | Securities and Exchange Commission | ||||||||
| FRB | Federal Reserve Board | TCBW | The Commerce Bank of Washington, a division of Zions Bancorporation, National Association | ||||||||
| FTP | Funds Transfer Pricing | U.S. | United States | ||||||||
| GAAP | Generally Accepted Accounting Principles | Vectra | Vectra Bank Colorado, a division of Zions Bancorporation, National Association | ||||||||
| GCF |
General Collateral Funding
|
Zions Bank | Zions Bank, a division of Zions Bancorporation, National Association | ||||||||
3
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:
•
Statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations, and performance of Zions Bancorporation, National Association and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
•
Statements preceded or followed by, or that include the words “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecasts,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” “will,” and the negative thereof and similar words and expressions.
Forward-looking statements are not guarantees, nor should they be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those presented. Although the following list is not comprehensive, important factors that may cause material differences include:
•
The quality and composition of our loan and securities portfolios and the quality and composition of our deposits;
•
Changes in general industry, political, and economic conditions, including elevated inflation, economic slowdown or recession, or other economic challenges; changes in interest and reference rates, which could adversely affect our revenue and expenses, the value of assets and liabilities, and the availability and cost of capital and liquidity; deterioration in economic conditions that may result in increased loan and lease losses;
•
The effects of newly enacted and proposed regulations affecting us and the banking industry, as well as changes and uncertainties in applicable laws, and fiscal, monetary, regulatory, trade, and tax policies, and actions taken by governments, agencies, central banks, and similar organizations, including those that result in decreases in revenue; increases in bank fees, insurance assessments, and capital standards; and other regulatory requirements;
•
Competitive pressures and other factors that may affect aspects of our business, such as pricing and demand for our products and services, and our ability to recruit and retain talent;
•
The impact of technological advancements, digital commerce, artificial intelligence, and other innovations affecting the banking industry;
•
Our ability to complete projects and initiatives and execute on our strategic plans, manage our risks, control compensation and other expenses, and achieve our business objectives;
•
Our ability to develop and maintain technology, information security systems, and controls designed to guard against fraud, cybersecurity, and privacy risks;
•
Our ability to provide adequate oversight of our suppliers to help us prevent or mitigate effects upon us and our customers of inadequate performance, systems failures, or cyber and other incidents by, or affecting, third parties upon whom we rely for the delivery of various products and services;
•
Natural disasters, pandemics, catastrophic events, and other emergencies and incidents, and their impact on our and our customers’ operations, business, and communities, including the increasing difficulty in, and the expense of, obtaining property, auto, business, and other insurance products;
4
•
Governmental and social responses to environmental, social, and governance issues, including those with respect to climate change;
•
Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital;
•
The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and shareholders’ equity;
•
The impact of bank closures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
•
Adverse news and other expressions of negative public opinion whether directed at us, other banks, the banking industry, or otherwise that may adversely affect our reputation and that of the banking industry generally;
•
Protracted congressional negotiations and political stalemates regarding government funding and other issues, including those that increase the possibility of government shutdowns, downgrades in United States (“U.S.”) credit ratings, or other economic disruptions; and
•
The effects of wars and geopolitical conflicts, such as the ongoing war between Russia and Ukraine, the war in the Middle East, and other local, national, or international disasters, crises, or conflicts that may occur in the future.
Factors that could cause our actual results, performance or achievements, industry trends, or regulatory outcomes to differ materially from those expressed or implied in the forward-looking statements are discussed in our 2023 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”), and are available on our website (www.zionsbancorporation.com) and from the SEC (www.sec.gov).
We caution against the undue reliance on forward-looking statements, which reflect our views only as of the date they are made. Except to the extent required by law, we specifically disclaim any obligation to update any factors or to publicly announce the revisions to any forward-looking statements to reflect future events or developments.
RESULTS OF OPERATIONS
Comparisons noted below are calculated for the current quarter compared with the same prior year period unless otherwise specified. Reasons for changes in the current year-to-date period compared with the same prior year period are generally consistent with the quarter-to-date comparisons unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they generally reflect a low starting point.
Third Quarter 2024 Financial Performance
|
Net Earnings Applicable to Common Shareholders
(in millions) |
Diluted EPS |
Adjusted PPNR
(in millions)
1
|
Efficiency Ratio
1
|
|||||||||||||||||
1
For information on non-GAAP financial measures, see page 38
.
5
Executive Summary
Our financial results in the third quarter of 2024 reflected continued improvement in our net interest margin (“NIM”), low net charge-offs, growth in customer deposits and loans, a record quarter for capital markets fee income, and deterioration in certain credit quality metrics. Diluted earnings per share (“EPS”) was $1.37, compared with $1.13 in the third quarter of 2023, as higher net interest income and a lower provision for credit losses were partially offset by lower noninterest income.
•
Net interest income increased $35 million, or 6%, relative to the prior year period, as higher earning asset yields were partially offset by higher funding costs. Net interest income was also impacted by growth in average interest-earning assets. The net interest margin was 3.03%, compared with 2.93%.
◦
Average interest-earning assets increased $2.2 billion, or 3%, as growth in average money market investments and average loans and leases, was partially offset by a decline in average securities.
◦
Average interest-bearing liabilities increased $4.3 billion, or 8%, driven by increases in average interest-bearing deposits and average borrowed funds.
◦
Total loans and leases increased $2.0 billion, or 3%, primarily due to growth in the consumer 1-4 family residential mortgage and commercial and industrial loan portfolios.
◦
Total deposits increased $319 million, as an increase in interest-bearing deposits was partially offset by a decrease in noninterest-bearing demand deposits. Customer deposits (excluding brokered deposits) increased $1.7 billion, or 2%, to $70.5 billion, compared with $68.8 billion.
•
The provision for credit losses was $13 million, compared with $41 million in the prior year period.
•
Customer-related noninterest income increased $4 million, or 3%, driven largely by increases in capital markets fees and commercial account fees, partially offset by a decline in loan-related fees and income. Decreases in noncustomer-related noninterest income were primarily due to credit valuation adjustments on client-related interest rate swaps, and a decline in dividends on Federal Home Loan Bank (“FHLB”) stock.
•
Noninterest expense increased $6 million, or 1%. Salaries and employee benefits expense increased primarily due to a decline in capitalized salaries related to reduced software development activities, and technology, telecom, and information processing expense increased primarily due to higher application software, license, and maintenance expenses. These increases were partially offset by decreases in other expenses, including professional and legal services and occupancy and equipment expenses.
•
Net loan and lease charge-offs totaled $3 million, or 0.02%, of average loans and leases, compared with $14 million, or 0.10%, in the prior year quarter. The ratio of allowance for credit losses (“ACL”) to total loans and leases was 1.25%, compared with 1.30%.
•
Nonperforming assets totaled $368 million, or 0.62%, of total loans and leases and other real estate owned, compared with $219 million, or 0.38%. The increase was primarily due to a small number of loans in the commercial and industrial and term commercial real estate (“CRE”) portfolios.
•
Classified loans totaled $2.1 billion, or 3.55%, of total loans and leases, compared with $769 million, or 1.35%. The increase was primarily in the multifamily CRE loan portfolio, largely due to a change in approach to risk grading that places more emphasis on current cash flow, which is the primary source of repayment, and less emphasis on the adequacy of collateral values and the strength of guarantors and sponsors. The increase in classified loans was also attributable to weaker performance, particularly for 2021 and 2022 construction loan vintages, as borrowers missed projections due to lower-than-anticipated leasing, rent concessions, elevated costs, and higher interest rates.
•
Total borrowed funds, consisting primarily of secured borrowings, decreased $1.4 billion, or 29%, from the prior year quarter, primarily due to a decrease in security repurchase agreements.
6
Net Interest Income and Net Interest Margin
NET INTEREST INCOME AND NET INTEREST MARGIN
|
Three Months Ended
September 30, |
Amount change | Percent change |
Nine Months Ended
September 30, |
Amount change | Percent change | ||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
|
Interest and fees on loans
1
|
$ | 899 | $ | 831 | $ | 68 | 8 | % | $ | 2,641 | $ | 2,348 | $ | 293 | 12 | % | |||||||||||||||||||||||||||||||
| Interest on money market investments | 67 | 35 | 32 | 91 | 170 | 140 | 30 | 21 | |||||||||||||||||||||||||||||||||||||||
| Interest on securities | 138 | 144 | (6) | (4) | 420 | 419 | 1 | — | |||||||||||||||||||||||||||||||||||||||
|
Total interest income
|
1,104 | 1,010 | 94 | 9 | 3,231 | 2,907 | 324 | 11 | |||||||||||||||||||||||||||||||||||||||
| Interest on deposits | 403 | 366 | 37 | 10 | 1,169 | 668 | 501 | 75 | |||||||||||||||||||||||||||||||||||||||
| Interest on short- and long-term borrowings | 81 | 59 | 22 | 37 | 259 | 384 | (125) | (33) | |||||||||||||||||||||||||||||||||||||||
|
Total interest expense
|
484 | 425 | 59 | 14 | 1,428 | 1,052 | 376 | 36 | |||||||||||||||||||||||||||||||||||||||
|
Net interest income
|
$ | 620 | $ | 585 | $ | 35 | 6 | $ | 1,803 | $ | 1,855 | $ | (52) | (3) | |||||||||||||||||||||||||||||||||
| Average interest-earning assets | $ | 82,894 | $ | 80,678 | $ | 2,216 | 3 | % | $ | 82,204 | $ | 82,325 | $ | (121) | — | % | |||||||||||||||||||||||||||||||
| Average interest-bearing liabilities | $ | 56,628 | $ | 52,312 | $ | 4,316 | 8 | $ | 55,854 | $ | 51,271 | $ | 4,583 | 9 | |||||||||||||||||||||||||||||||||
| bps | bps | ||||||||||||||||||||||||||||||||||||||||||||||
|
Yield on interest-earning assets
2
|
5.35 | % | 5.02 | % | 33 | 5.30 | % | 4.77 | % | 53 | |||||||||||||||||||||||||||||||||||||
|
Rate paid on total deposits and interest-bearing liabilities
2
|
2.36 | % | 2.10 | % | 26 | 2.34 | % | 1.75 | % | 59 | |||||||||||||||||||||||||||||||||||||
|
Cost of total deposits
2
|
2.14 | % | 1.92 | % | 22 | 2.10 | % | 1.24 | % | 86 | |||||||||||||||||||||||||||||||||||||
|
Net interest margin
2
|
3.03 | % | 2.93 | % | 10 | 2.98 | % | 3.06 | % | (8) | |||||||||||||||||||||||||||||||||||||
1
Includes interest income recoveries of $1 million for both the three months ended, and $5 million for both the nine months ended
September 30, 2024, and 2023, respectively.
2
Taxable-equivalent rates used where applicable.
Net interest income accounted for approximately 78% and 76% of our net revenue (net interest income plus noninterest income) during the third quarter of 2024 and 2023, respectively, and increased $35 million, or 6%, relative to the prior year quarter, as the repricing of interest-earning assets outpaced the increase in funding costs. Net interest income was also impacted by growth in average interest-earning assets. The NIM was 3.03%, compared with 2.93%.
The yield on average interest-earning assets was 5.35% in the third quarter of 2024, an increase of 33 basis points (“bps”), reflecting higher interest rates and a favorable mix change to higher yielding assets, as average securities decreased, and average loans and average money market investments increased. The yield on average loans and leases increased 31 bps to 6.15%, and the yield on average securities increased 13 bps to 2.86% in the third quarter of 2024.
The rate paid on total deposits and interest-bearing liabilities was 2.36%, compared with 2.10% in the prior year quarter, and the cost of total deposits was 2.14%, compared with 1.92%, reflecting the higher interest rate environment and reduced noninterest-bearing deposits.
Average interest-earning assets increased $2.2 billion, or 3% from the prior year quarter, as growth of $2.3 billion in average money market investments and $1.7 billion in average loans and leases, was partially offset by a decline of $1.8 billion in average securities. The decrease in average securities was primarily due to principal reductions.
Average interest-bearing liabilities increased $4.3 billion, or 8%, from the prior year quarter, driven by increases of $2.5 billion in average interest-bearing deposits, primarily due to customer deposit growth, and $1.8 billion
in average borrowed funds, primarily due to increased short-term borrowings.
For the nine months ended September 30, 2024, net interest income decreased $52 million, or 3%, relative to the same prior year period, as higher funding costs more than offset higher earning asset yields.
7
The following charts further illustrate the changes in average interest-earning assets and average interest-bearing liabilities:
Average loans and leases increased $1.7 billion, or 3%, to $58.7 billion, primarily due to growth in average consumer and commercial real estate loans. Average securities decreased $1.8 billion, or 9%, to $19.4 billion, primarily due to principal reductions.
Average deposits decreased $0.7 billion, or 1%, to $75.0 billion at an average cost of 2.14%, from $75.7 billion at an average cost of 1.92% in the third quarter of 2023. Average noninterest-bearing deposits decreased $3.2 billion, or 11%, relative to the prior year quarter, and were relatively flat compared with the ending balance at June 30, 2024, reflecting stabilization during the current quarter. Average noninterest-bearing deposits decreased to 33% of total deposits, compared with 37% during the same prior year period.
8
Average borrowed funds, consisting primarily of secured borrowings, increased $1.8 billion, or 39%, to $6.3 billion, primarily due to increased short-term borrowings, including advances under the Bank Term Funding Program (“BTFP”).
For more information on our investment securities portfolio and borrowed funds and how we manage liquidity risk, refer to the “Investment Securities Portfolio” section on page 17 and the “Liquidity Risk Management” section on page 34. For further discussion of the effects of market rates on net interest income and how we manage interest rate risk, refer to the “Interest Rate and Market Risk Management” section on page 31.
The following schedule summarizes the average balances, the amount of interest earned or paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities:
9
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
| (Unaudited) |
Three Months Ended
September 30, 2024 |
Three Months Ended
September 30, 2023 |
|||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Average
balance |
Interest
|
Yield/
Rate
1
|
Average
balance |
Interest
|
Yield/
Rate
1
|
|||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Money market investments: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 2,457 | $ | 34 | 5.53 | % | $ | 1,539 | $ | 21 | 5.52 | % | |||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | 2,258 | 33 | 5.82 | 874 | 14 | 6.13 | |||||||||||||||||||||||||||||
| Total money market investments | 4,715 | 67 | 5.67 | 2,413 | 35 | 5.74 | |||||||||||||||||||||||||||||
| Trading securities | 32 | 1 | 4.18 | 20 | — | 4.65 | |||||||||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||||||||
| Available-for-sale | 9,442 | 84 | 3.53 | 10,606 | 87 | 3.24 | |||||||||||||||||||||||||||||
| Held-to-maturity | 9,936 | 55 | 2.22 | 10,625 | 59 | 2.21 | |||||||||||||||||||||||||||||
|
Total investment securities
|
19,378 | 139 | 2.86 | 21,231 | 146 | 2.73 | |||||||||||||||||||||||||||||
| Loans held for sale | 104 | 2 | NM | 46 | 1 | NM | |||||||||||||||||||||||||||||
|
Loans and leases:
2
|
|||||||||||||||||||||||||||||||||||
| Commercial | 30,671 | 473 | 6.14 | 30,535 | 438 | 5.69 | |||||||||||||||||||||||||||||
| Commercial real estate | 13,523 | 245 | 7.23 | 13,016 | 234 | 7.14 | |||||||||||||||||||||||||||||
| Consumer | 14,471 | 189 | 5.18 | 13,417 | 167 | 4.92 | |||||||||||||||||||||||||||||
| Total loans and leases | 58,665 | 907 | 6.15 | 56,968 | 839 | 5.84 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 82,894 | 1,116 | 5.35 | 80,678 | 1,021 | 5.02 | |||||||||||||||||||||||||||||
| Cash and due from banks | 703 | 712 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and debt securities | (699) | (651) | |||||||||||||||||||||||||||||||||
| Goodwill and intangibles | 1,054 | 1,061 | |||||||||||||||||||||||||||||||||
| Other assets | 5,218 | 5,523 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 89,170 | $ | 87,323 | |||||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and money market | $ | 39,031 | $ | 266 | 2.72 | % | $ | 35,346 | $ | 215 | 2.42 | % | |||||||||||||||||||||||
| Time | 11,275 | 137 | 4.81 | 12,424 | 151 | 4.81 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 50,306 | 403 | 3.19 | 47,770 | 366 | 3.04 | |||||||||||||||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||||||||||||||
|
Federal funds and security repurchase agreements
|
1,072 | 14 | 5.33 | 1,770 | 24 | 5.31 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 4,704 | 58 | 4.89 | 2,233 | 27 | 4.95 | |||||||||||||||||||||||||||||
| Long-term debt | 546 | 9 | 5.91 | 539 | 8 | 5.37 | |||||||||||||||||||||||||||||
| Total borrowed funds | 6,322 | 81 | 5.06 | 4,542 | 59 | 5.14 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 56,628 | 484 | 3.40 | 52,312 | 425 | 3.22 | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 24,723 | 27,873 | |||||||||||||||||||||||||||||||||
| Other liabilities | 1,641 | 1,760 | |||||||||||||||||||||||||||||||||
| Total liabilities | 82,992 | 81,945 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||||||||||||
| Preferred equity | 440 | 440 | |||||||||||||||||||||||||||||||||
| Common equity | 5,738 | 4,938 | |||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 6,178 | 5,378 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 89,170 | $ | 87,323 | |||||||||||||||||||||||||||||||
| Spread on average interest-bearing funds | 1.95 | % | 1.80 | % | |||||||||||||||||||||||||||||||
| Net impact of noninterest-bearing sources of funds | 1.08 | % | 1.13 | % | |||||||||||||||||||||||||||||||
|
Net interest margin
|
$ | 632 | 3.03 | % | $ | 596 | 2.93 | % | |||||||||||||||||||||||||||
|
Memo: cost of total deposits
|
2.14 | % | 1.92 | % | |||||||||||||||||||||||||||||||
| Memo: total deposits and interest-bearing liabilities | $ | 81,351 | 484 | 2.36 | % | $ | 80,185 | 425 | 2.10 | % | |||||||||||||||||||||||||
1
Taxable-equivalent rates used where applicable.
2
Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
10
|
Nine Months Ended
September 30, 2024 |
Nine Months Ended
September 30, 2023 |
||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Average
balance |
Interest
|
Yield/
Rate
1
|
Average
balance |
Interest
|
Yield/
Rate
1
|
|||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Money market investments: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 1,940 | $ | 81 | 5.59 | % | $ | 2,356 | $ | 90 | 5.10 | % | |||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | 2,037 | 89 | 5.86 | 1,242 | 50 | 5.41 | |||||||||||||||||||||||||||||
| Total money market investments | 3,977 | 170 | 5.72 | 3,598 | 140 | 5.21 | |||||||||||||||||||||||||||||
| Trading securities | 35 | 1 | 4.42 | 58 | 1 | 2.43 | |||||||||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||||||||
| Available-for-sale | 9,725 | 256 | 3.52 | 11,199 | 243 | 2.89 | |||||||||||||||||||||||||||||
| Held-to-maturity | 10,110 | 169 | 2.24 | 10,826 | 181 | 2.24 | |||||||||||||||||||||||||||||
|
Total investment securities
|
19,835 | 425 | 2.87 | 22,025 | 424 | 2.57 | |||||||||||||||||||||||||||||
| Loans held for sale | 68 | 3 | NM | 41 | 2 | NM | |||||||||||||||||||||||||||||
|
Loans and leases
|
|||||||||||||||||||||||||||||||||||
| Commercial | 30,553 | 1,383 | 6.05 | 30,620 | 1,236 | 5.40 | |||||||||||||||||||||||||||||
| Commercial real estate | 13,538 | 734 | 7.24 | 12,942 | 668 | 6.90 | |||||||||||||||||||||||||||||
| Consumer | 14,198 | 548 | 5.15 | 13,041 | 467 | 4.78 | |||||||||||||||||||||||||||||
| Total loans and leases | 58,289 | 2,665 | 6.11 | 56,603 | 2,371 | 5.60 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 82,204 | 3,264 | 5.30 | 82,325 | 2,938 | 4.77 | |||||||||||||||||||||||||||||
| Cash and due from banks | 701 | 636 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and debt securities | (693) | (615) | |||||||||||||||||||||||||||||||||
| Goodwill and intangibles | 1,056 | 1,063 | |||||||||||||||||||||||||||||||||
| Other assets | 5,305 | 5,556 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 88,573 | $ | 88,965 | |||||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and money market | $ | 38,471 | $ | 785 | 2.73 | % | $ | 32,852 | $ | 390 | 1.59 | % | |||||||||||||||||||||||
| Time | 10,601 | 384 | 4.83 | 8,319 | 278 | 4.46 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 49,072 | 1,169 | 3.18 | 41,171 | 668 | 2.17 | |||||||||||||||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||||||||||||||
|
Federal funds and security repurchase agreements
|
1,328 | 53 | 5.37 | 3,921 | 145 | 4.92 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 4,910 | 181 | 4.94 | 5,570 | 211 | 5.07 | |||||||||||||||||||||||||||||
| Long-term debt | 544 | 25 | 5.96 | 609 | 28 | 6.10 | |||||||||||||||||||||||||||||
| Total borrowed funds | 6,782 | 259 | 5.11 | 10,100 | 384 | 5.08 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 55,854 | 1,428 | 3.41 | 51,271 | 1,052 | 2.74 | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 25,136 | 30,665 | |||||||||||||||||||||||||||||||||
| Other liabilities | 1,650 | 1,798 | |||||||||||||||||||||||||||||||||
| Total liabilities | 82,640 | 83,734 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||||||||||||
| Preferred equity | 440 | 440 | |||||||||||||||||||||||||||||||||
| Common equity | 5,493 | 4,791 | |||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 5,933 | 5,231 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 88,573 | $ | 88,965 | |||||||||||||||||||||||||||||||
| Spread on average interest-bearing funds | 1.89 | % | 2.03 | % | |||||||||||||||||||||||||||||||
| Net impact of noninterest-bearing sources of funds | 1.09 | % | 1.03 | % | |||||||||||||||||||||||||||||||
|
Net interest margin
|
$ | 1,836 | 2.98 | % | $ | 1,886 | 3.06 | % | |||||||||||||||||||||||||||
|
Memo: cost of total deposits
|
2.10 | % | 1.24 | % | |||||||||||||||||||||||||||||||
| Memo: total deposits and interest-bearing liabilities | $ | 80,990 | 1,428 | 2.34 | % | $ | 81,936 | 1,052 | 1.75 | % | |||||||||||||||||||||||||
1
Taxable-equivalent rates used where applicable.
2
Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
11
The Allowance and 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 ACL was $736 million at September 30, 2024, and was relatively flat compared with $738 million at September 30, 2023. The slight decrease in the ACL primarily reflects improvements in economic forecasts and declines in unfunded lending commitments related to construction lending, partially offset by increases associated with declines in credit quality, incremental reserves associated with portfolio-specific risks including CRE, average loan growth of $1.7 billion, and changes in our loan portfolio composition. The ratio of ACL to total loans and leases was 1.25% at September 30, 2024, compared with 1.30% at September 30, 2023.
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, was $13 million, compared with $41 million in the third quarter of 2023. The provision for securities losses was less than $1 million during both the third quarter of 2024 and 2023.
12
The bar chart above illustrates the broad categories of change in the ACL from the prior year period. To estimate current expected losses, we use econometric loss models that include multiple economic scenarios that reflect optimistic, baseline, and stressed economic conditions. The results derived using these economic scenarios are weighted to produce the credit loss estimate. Management may adjust the weights to reflect their assessment of current conditions and reasonable and supportable forecasts. The second bar represents changes in these economic forecasts and current economic conditions, including management's judgment of the weighting of the economic forecasts during the current quarter. These changes contributed to a $199 million decrease in the ACL from the prior year quarter.
The third bar represents changes in credit quality factors and includes risk grade migration, portfolio-specific risks, and specific reserves against loans, which, when combined, contributed to a $163 million increase in the ACL, driven largely by declines in credit quality and an increased focus on certain portfolio-specific risks, including commercial real estate.
The fourth bar represents changes in our loan portfolio composition, including changes in loan balances and mix, the aging of the portfolio, and other qualitative risk factors; all of which contributed to a $34 million increase in the ACL.
See “Credit Risk Management” on page 21 and Note 6 in our 2023 Form 10-K for more information on how we determine the appropriate level of the ALLL and the RULC.
13
Noninterest Income
Noninterest income represents revenue earned from products and services that generally have no associated interest rate or yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives.
Noninterest income accounted for approximately 22% and 24% of our net revenue (net interest income plus noninterest income) during the third quarter of 2024 and 2023, respectively, and decreased $8 million, or 4%, relative to the prior year quarter. The following schedule presents a comparison of the major components of noninterest income:
NONINTEREST INCOME
|
Three Months Ended
September 30, |
Amount
change |
Percent
change |
Nine Months Ended
September 30, |
Amount
change |
Percent
change |
||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
|
Commercial account fees
|
$ | 46 | $ | 43 | $ | 3 | 7 | % | $ | 135 | $ | 131 | $ | 4 | 3 | % | |||||||||||||||||||||||||||||||
|
Card fees
|
24 | 26 | (2) | (8) | 72 | 75 | (3) | (4) | |||||||||||||||||||||||||||||||||||||||
| Retail and business banking fees | 18 | 17 | 1 | 6 | 50 | 49 | 1 | 2 | |||||||||||||||||||||||||||||||||||||||
| Loan-related fees and income | 17 | 23 | (6) | (26) | 50 | 63 | (13) | (21) | |||||||||||||||||||||||||||||||||||||||
| Capital markets fees | 28 | 18 | 10 | 56 | 73 | 62 | 11 | 18 | |||||||||||||||||||||||||||||||||||||||
| Wealth management fees | 14 | 15 | (1) | (7) | 44 | 44 | — | — | |||||||||||||||||||||||||||||||||||||||
| Other customer-related fees | 14 | 15 | (1) | (7) | 42 | 46 | (4) | (9) | |||||||||||||||||||||||||||||||||||||||
|
Customer-related noninterest income
|
161 | 157 | 4 | 3 | 466 | 470 | (4) | (1) | |||||||||||||||||||||||||||||||||||||||
| Fair value and nonhedge derivative income | (3) | 7 | (10) | NM | (3) | 5 | (8) | NM | |||||||||||||||||||||||||||||||||||||||
| Dividends and other income (loss) | 5 | 12 | (7) | (58) | 33 | 49 | (16) | (33) | |||||||||||||||||||||||||||||||||||||||
| Securities gains (losses), net | 9 | 4 | 5 | NM | 11 | 5 | 6 | NM | |||||||||||||||||||||||||||||||||||||||
| Noncustomer-related noninterest income | 11 | 23 | (12) | (52) | 41 | 59 | (18) | (31) | |||||||||||||||||||||||||||||||||||||||
|
Total noninterest income
|
$ | 172 | $ | 180 | $ | (8) | (4) | $ | 507 | $ | 529 | $ | (22) | (4) | |||||||||||||||||||||||||||||||||
Customer-related Noninterest Income
Customer-related noninterest income increased $4 million, or 3%, compared with the prior year period. Capital markets fees increased $10 million, largely due to increased swap fees, loan syndication fees, and expanded real estate capital markets activity, and commercial account fees increased $3 million. These increases were partially offset by a $6 million decrease in loan-related fees and income, primarily due to higher gains on loan sales in the prior year period and a decline in loan servicing income resulting from the sale of associated mortgage servicing rights in the third quarter of 2023.
Noncustomer-related Noninterest Income
Noncustomer-related noninterest income decreased $12 million from the prior year quarter. Fair value and nonhedge derivative income decreased $10 million, primarily due to credit valuation adjustments on client-related interest rate swaps, and dividends and other income decreased $7 million, primarily due to a decline in dividends on FHLB stock. These decreases were partially offset by an increase of $5 million in net securities gains, largely due to valuation adjustments in our Small Business Investment Company (“SBIC”) investment portfolio.
14
Noninterest Expense
The following schedule presents a comparison of the major components of noninterest expense:
NONINTEREST EXPENSE
|
Three Months Ended
September 30, |
Amount
change |
Percent
change |
Nine Months Ended
September 30, |
Amount
change |
Percent
change |
||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 317 | $ | 311 | $ | 6 | 2 | % | $ | 966 | $ | 974 | $ | (8) | (1) | % | |||||||||||||||||||||||||||||||
| Technology, telecom, and information processing | 66 | 62 | 4 | 6 | 194 | 175 | 19 | 11 | |||||||||||||||||||||||||||||||||||||||
| Occupancy and equipment, net | 40 | 42 | (2) | (5) | 119 | 122 | (3) | (2) | |||||||||||||||||||||||||||||||||||||||
| Professional and legal services | 14 | 16 | (2) | (13) | 47 | 45 | 2 | 4 | |||||||||||||||||||||||||||||||||||||||
| Marketing and business development | 12 | 10 | 2 | 20 | 35 | 35 | — | — | |||||||||||||||||||||||||||||||||||||||
| Deposit insurance and regulatory expense | 19 | 20 | (1) | (5) | 74 | 60 | 14 | 23 | |||||||||||||||||||||||||||||||||||||||
| Credit-related expense | 6 | 6 | — | — | 19 | 19 | — | — | |||||||||||||||||||||||||||||||||||||||
| Other real estate expense, net | — | — | — | NM | (1) | — | (1) | NM | |||||||||||||||||||||||||||||||||||||||
| Other | 28 | 29 | (1) | (3) | 84 | 86 | (2) | (2) | |||||||||||||||||||||||||||||||||||||||
|
Total noninterest expense
|
$ | 502 | $ | 496 | $ | 6 | 1 | $ | 1,537 | $ | 1,516 | $ | 21 | 1 | |||||||||||||||||||||||||||||||||
|
Adjusted noninterest expense (non-GAAP)
|
$ | 499 | $ | 493 | $ | 6 | 1 | % | $ | 1,516 | $ | 1,496 | $ | 20 | 1 | % | |||||||||||||||||||||||||||||||
Total noninterest expense increased $6 million, or 1%, relative to the prior year quarter. Salaries and employee benefits expense increased $6 million, or 2%, primarily due to a decline in capitalized salaries related to reduced software development activities, as well as higher benefits accruals, and an additional business day during the current quarter. Technology, telecom, and information processing expense increased $4 million, or 6%, primarily due to increases in application software, license, and maintenance expenses. These increases were partially offset by decreases in other expenses including professional and legal services associated with reduced technology-related consulting services and occupancy and equipment expenses.
Adjusted noninterest expense increased $6 million, or 1%. The efficiency ratio was 62.5%, compared with 64.4%, due to an increase in adjusted taxable-equivalent revenue. For information on non-GAAP financial measures, see page 38.
For the nine months ended September 30, 2024, noninterest expense increased $21 million, or 1%, relative to the same prior year period. Technology, telecom, and information processing expense increased $19 million, or 11%, primarily due to increases in software amortization expenses associated with the replacement of substantially all of our in-scope core loan and deposit banking systems. Deposit insurance and regulatory expense increased $14 million, or 23%, driven largely by a $13 million accrual associated with an updated special assessment estimate by the Federal Deposit Insurance Corporation (“FDIC”) during the first quarter of 2024. These increases were partially offset by a decrease of $8 million, or 1%, in salaries and employee benefits expense, primarily due to higher severance expense and incentive compensation accruals in the prior year period.
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 the following:
•
Technology, telecom, and information processing expense
— includes expenses related to application software, licensing, and maintenance; related amortization; telecommunications; and data processing;
15
•
Other technology-related expense
— includes related noncapitalized salaries and employee benefits, occupancy and equipment, and professional and legal services; and
•
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:
TECHNOLOGY SPEND
|
Three Months Ended
September 30, |
Amount
change |
Percent
change |
Nine Months Ended
September 30, |
Amount
change |
Percent
change |
||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Technology, telecom, and information processing expense | $ | 66 | $ | 62 | $ | 4 | 6 | % | $ | 194 | $ | 175 | $ | 19 | 11 | % | |||||||||||||||||||||||||||||||
| Other technology-related expense | 62 | 59 | 3 | 5 | 188 | 169 | 19 | 11 | |||||||||||||||||||||||||||||||||||||||
| Technology investments | 7 | 22 | (15) | (68) | 26 | 71 | (45) | (63) | |||||||||||||||||||||||||||||||||||||||
| Less: related amortization and depreciation | (19) | (21) | 2 | (10) | (59) | (51) | (8) | 16 | |||||||||||||||||||||||||||||||||||||||
|
Total technology spend
|
$ | 116 | $ | 122 | $ | (6) | (5) | $ | 349 | $ | 364 | $ | (15) | (4) | |||||||||||||||||||||||||||||||||
Total technology spend decreased $6 million, or 5%, relative to the prior year quarter, as the aforementioned increase in technology, telecom, and information processing expense and an increase in other technology-related expense was more than offset by a decrease in certain technology investments, as the final phase of our multi-year project to replace substantially all of our in-scope core loan and deposit banking systems was completed in July 2024.
Income Taxes
The following schedule summarizes the income tax expense and effective tax rates for the periods presented:
INCOME TAXES
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (Dollar amounts in millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Income before income taxes | $ | 277 | $ | 228 | $ | 742 | $ | 736 | |||||||||||||||
| Income tax expense | 63 | 53 | 174 | 182 | |||||||||||||||||||
| Effective tax rate | 22.7 | % | 23.2 | % | 23.5 | % | 24.7 | % | |||||||||||||||
The effective tax rate was 22.7% and 23.2% for the three months ended September 30, 2024 and 2023, respectively. See Note 12 of the Notes to Consolidated Financial Statements for more information about the factors that impacted the income tax rates, as well as information about deferred income tax assets and liabilities.
Preferred Stock Dividends
Preferred stock dividends totaled $10 million and $7 million for the third quarter of 2024 and 2023, respectively. The increase was primarily due to changes in the timing and rates of dividend payments for certain series of preferred stock.
BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets have associated interest rates or yields, and generally consist of loans and leases, securities, and money market investments. We strive to maintain a high level of interest-earning assets relative to total assets. For more information regarding the average balances, associated revenue generated, and the respective yields of our interest-earning assets, see the Consolidated Average Balance Sheet on page 10.
16
Investment Securities Portfolio
We invest in securities to actively manage liquidity and interest rate risk and 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. Our fixed-rate securities portfolio helps balance the inherent interest rate mismatch between loans and deposits and protects the economic value of shareholders’ equity. At both September 30, 2024 and December 31, 2023, the estimated duration of our investment securities portfolio, which measures price sensitivity to interest rate changes, was 3.6 percent.
For information about our borrowing capacity associated with our investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 34. See also Note 3 and Note 5 of the Notes to Consolidated Financial Statements for more information on fair value measurements and the accounting for our investment securities portfolio.
The following schedule presents the major components of our investment securities portfolio:
INVESTMENT SECURITIES PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) | Par Value |
Amortized
cost |
Fair
value |
Par Value |
Amortized
cost |
Fair
value |
|||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 580 | $ | 580 | $ | 490 | $ | 585 | $ | 585 | $ | 492 | |||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | 483 | 478 | 458 | 669 | 663 | 630 | |||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 7,854 | 7,914 | 6,869 | 8,460 | 8,530 | 7,291 | |||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities | 453 | 483 | 465 | 535 | 571 | 546 | |||||||||||||||||||||||||||||
| Municipal securities | 1,155 | 1,251 | 1,189 | 1,269 | 1,385 | 1,318 | |||||||||||||||||||||||||||||
| Other debt securities | 25 | 25 | 24 | 25 | 25 | 23 | |||||||||||||||||||||||||||||
| Total available-for-sale | 10,550 | 10,731 | 9,495 | 11,543 | 11,759 | 10,300 | |||||||||||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | 149 | 149 | 144 | 93 | 93 | 87 | |||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 11,226 | 9,384 | 9,570 | 11,966 | 9,935 | 10,041 | |||||||||||||||||||||||||||||
| Municipal securities | 324 | 324 | 310 | 354 | 354 | 338 | |||||||||||||||||||||||||||||
| Total held-to-maturity | 11,699 | 9,857 | 10,024 | 12,413 | 10,382 | 10,466 | |||||||||||||||||||||||||||||
| Total investment securities | $ | 22,249 | $ | 20,588 | $ | 19,519 | $ | 23,956 | $ | 22,141 | $ | 20,766 | |||||||||||||||||||||||
The amortized cost of total investment securities decreased $1.6 billion, or 7%, from December 31, 2023, largely due to principal reductions. Approximately 7% of the total investment securities were floating-rate instruments at both September 30, 2024 and December 31, 2023. Additionally, at September 30, 2024, we had $3.6 billion of pay-fixed swaps designated as fair value hedges against fixed-rate available-for-sale (“AFS”) securities that effectively convert the fixed interest income to a floating rate on the hedged portion of the securities.
At September 30, 2024, our AFS investment securities portfolio included $181 million of net premium that was distributed across the various security categories. Total taxable-equivalent premium amortization for our total investment securities portfolio was $17 million for the third quarter of 2024, compared with $20 million for the same prior year period.
Refer to the “Interest Rate Risk Management” section on page 31, the “Capital Management” section on page 35, and Note 5 of the Notes to Consolidated Financial Statements for more discussion regarding our investment securities portfolio, swaps, and related unrealized gains and losses.
17
Municipal Investments and Extensions of Credit
We support our communities by providing products and services to state and local governments (“municipalities”), including deposit services, loans, and investment banking services. We also invest in securities issued by municipalities. Our municipal lending products generally include loans in which the 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:
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
| (In millions) |
September 30,
2024 |
December 31,
2023 |
|||||||||
| Loans and leases | $ | 4,270 | $ | 4,302 | |||||||
| Unfunded lending commitments | 438 | 231 | |||||||||
| Trading securities | 68 | 48 | |||||||||
| Available-for-sale securities | 1,189 | 1,318 | |||||||||
| Held-to-maturity securities | 324 | 354 | |||||||||
|
Total
|
$ | 6,289 | $ | 6,253 | |||||||
Our municipal loans and securities are primarily associated with municipalities located within our geographic footprint.
The municipal loan and lease portfolio is primarily secured by general obligations of municipal entities,
real estate, revenue pledges, or equipment. At September 30, 2024, we had a small number of municipal loans on nonaccrual totaling $11 million; we had no municipal loans on nonaccrual at December 31, 2023. These loans were to private commercial entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
Municipal securities are internally graded, similar to loans, using risk-grading systems which vary based on the size and type of credit risk exposure. The internal risk grades assigned to our municipal securities follow our definitions of Pass, Special Mention, and Substandard, which are consistent with published definitions of regulatory risk classifications. At September 30, 2024, all municipal securities were graded as Pass. See Notes 5 and 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans and securities.
Loan and Lease Portfolio
We provide a wide range of lending products to commercial customers, generally small- and medium-sized businesses, as well as other products secured by commercial real estate. We also provide various retail banking products and services to consumers and small businesses. The following schedule presents the composition of our loan and lease portfolio:
18
LOAN AND LEASE PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total loans |
Amount |
% of
total loans |
|||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ | 16,757 | 28.5 | % | $ | 16,684 | 28.9 | % | |||||||||||||||
| Leasing | 377 | 0.6 | 383 | 0.7 | |||||||||||||||||||
| Owner-occupied | 9,381 | 15.9 | 9,219 | 16.0 | |||||||||||||||||||
| Municipal | 4,270 | 7.3 | 4,302 | 7.4 | |||||||||||||||||||
| Total commercial | 30,785 | 52.3 | 30,588 | 53.0 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Construction and land development | 2,833 | 4.8 | 2,669 | 4.6 | |||||||||||||||||||
| Term | 10,650 | 18.1 | 10,702 | 18.5 | |||||||||||||||||||
| Total commercial real estate | 13,483 | 22.9 | 13,371 | 23.1 | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Home equity credit line | 3,543 | 6.0 | 3,356 | 5.8 | |||||||||||||||||||
| 1-4 family residential | 9,489 | 16.1 | 8,415 | 14.6 | |||||||||||||||||||
| Construction and other consumer real estate | 997 | 1.7 | 1,442 | 2.5 | |||||||||||||||||||
| Bankcard and other revolving plans | 461 | 0.8 | 474 | 0.8 | |||||||||||||||||||
| Other | 126 | 0.2 | 133 | 0.2 | |||||||||||||||||||
| Total consumer | 14,616 | 24.8 | 13,820 | 23.9 | |||||||||||||||||||
| Total loans and leases | $ | 58,884 | 100.0 | % | $ | 57,779 | 100.0 | % | |||||||||||||||
During the first nine months of 2024, the loan and lease portfolio increased $1.1 billion, or 2%, to $58.9 billion at September 30, 2024. Loan growth was primarily in the consumer 1-4 family residential mortgage portfolio. At September 30, 2024 and December 31, 2023, the ratio of loans and leases to total assets was 68% and 66%, respectively. The largest loan category was commercial and industrial loans, which constituted 29% of our total loan portfolio for both time periods.
Other Noninterest-Bearing Investments
Other noninterest-bearing investments are equity investments that are held primarily for capital appreciation, dividends, or for certain regulatory requirements. The following schedule summarizes our related investments:
OTHER NONINTEREST-BEARING INVESTMENTS
| (Dollar amounts in millions) |
September 30,
2024 |
December 31,
2023 |
Amount change | Percent change | |||||||||||||||||||
| Bank-owned life insurance | $ | 560 | $ | 553 | $ | 7 | 1 | % | |||||||||||||||
| Federal Home Loan Bank stock | 56 | 79 | (23) | (29) | |||||||||||||||||||
| Federal Reserve stock | 65 | 65 | — | — | |||||||||||||||||||
| Farmer Mac stock | 27 | 24 | 3 | 13 | |||||||||||||||||||
| SBIC investments | 202 | 190 | 12 | 6 | |||||||||||||||||||
| Other | 36 | 39 | (3) | (8) | |||||||||||||||||||
| Total other noninterest-bearing investments | $ | 946 | $ | 950 | $ | (4) | — | ||||||||||||||||
Other noninterest-bearing investments decreased $4 million during the first nine months of 2024, primarily due to a decrease in FHLB stock, partially offset by higher valuation adjustments in our SBIC investment portfolio. We are required to invest approximately 4% of our FHLB borrowings in FHLB stock to maintain our borrowing capacity. The decrease in period-end FHLB activity stock was due to a decline in short-term FHLB borrowings.
19
Premises, Equipment, and Software
We continue to invest in technology to modernize our financial systems. In July 2024, we successfully completed the final phase of our multi-year project to replace our core loan and deposit banking systems. We have now transitioned substantially all of our commercial, commercial real estate, and consumer loans, as well as our deposit accounts to a modern, integrated core system, which allows us to deliver improved experiences to our customers and gain incremental operational efficiencies.
The following schedule summarizes the capitalized costs associated with our core system replacement project, which are amortized using a useful life of ten years:
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| September 30, 2024 | |||||||||||||||||||||||
| (In millions) | Phase 1 | Phase 2 | Phase 3 | Total | |||||||||||||||||||
| Total amount of capitalized costs, less accumulated amortization | $ | 16 | $ | 39 | $ | 216 | $ | 271 | |||||||||||||||
| End of scheduled amortization period | Q2 2027 | Q1 2029 | Q2 2033 | ||||||||||||||||||||
Deposits
Deposits are our primary funding source. The following schedule presents the composition of our deposit portfolio:
DEPOSIT PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total deposits |
Amount |
% of
total deposits |
|||||||||||||||||||
| Deposits by type | |||||||||||||||||||||||
| Noninterest-bearing demand | $ | 24,973 | 33.0 | % | $ | 26,244 | 35.0 | % | |||||||||||||||
| Interest-bearing: | |||||||||||||||||||||||
| Savings and money market | 39,215 | 51.8 | 38,663 | 51.6 | |||||||||||||||||||
| Time | 6,333 | 8.3 | 5,619 | 7.5 | |||||||||||||||||||
| Brokered | 5,197 | 6.9 | 4,435 | 5.9 | |||||||||||||||||||
| Total deposits | $ | 75,718 | 100.0 | % | $ | 74,961 | 100.0 | % | |||||||||||||||
| Deposit-related metrics | |||||||||||||||||||||||
| Estimated amount of insured deposits | $ | 42,656 | 56 | % | $ | 41,777 | 56 | % | |||||||||||||||
| Estimated amount of uninsured deposits | 33,062 | 44 | 33,184 | 44 | |||||||||||||||||||
|
Estimated amount of collateralized deposits
1
|
2,762 | 4 | 3,979 | 5 | |||||||||||||||||||
| Loan-to-deposit ratio | 78% | 77% | |||||||||||||||||||||
1
Includes both insured and uninsured deposits.
Total deposits increased $757 million, or 1%, from December 31, 2023, as a $2.0 billion
increase in interest-bearing deposits was partially offset by a $1.3 billion
decrease in noninterest-bearing demand deposits. At both September 30, 2024 and December 31, 2023, customer deposits (excluding brokered deposits) totaled $70.5 billion, and included approximately $7.3 billion and $6.8 billion, respectively, of reciprocal deposits.
At September 30, 2024, the estimated total amount of uninsured deposits was $33.1 billion, or 44%, of total deposits, compared with $33.2 billion, or 44%, at December 31, 2023. Our loan-to-deposit ratio was 78%, compared with 77% for the same respective time periods. See “Liquidity Risk Management” on page 34 for additional information on liquidity, including the ratio of available liquidity to uninsured deposits.
RISK MANAGEMENT
Risk management is an integral part of our operations and is a key determinant of our overall performance. We employ various strategies to prudently manage the risks to which our operations are exposed, including credit risk, market and interest rate risk, liquidity risk, strategic and business risk, operational risk, technology risk,
20
cybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by various management committees, including the Enterprise Risk Management Committee. For a more comprehensive discussion of these risks, see “Risk Factors” in our 2023 Form 10-K.
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. Credit policies, credit risk management, and credit examination functions inform and support the oversight of credit risk. Our credit policies emphasize strong underwriting standards and early detection of potential problem credits in order to develop and implement action plans on a timely basis to mitigate potential losses. These formal credit policies and procedures provide us with a framework for consistent underwriting and a basis for sound credit decisions at the local banking affiliate level.
Our business activity is conducted primarily within the geographic footprint of our banking affiliates. We strive to avoid the risk of undue concentrations of credit in any particular industry, collateral type, location, or with any individual customer or counterparty. For a more comprehensive discussion of our credit risk management, see “Credit Risk Management” in our 2023 Form 10-K.
U.S. Government Agency Guaranteed Loans
We participate in various guaranteed lending programs sponsored by U.S. government agencies, such as the Small Business Administration (“SBA”), Federal Housing Authority, U.S. Department of Veterans Affairs, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. At September 30, 2024, $548 million of related loans were guaranteed, primarily by the SBA. The following schedule presents the composition of U.S. government agency guaranteed loans:
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
| (Dollar amounts in millions) |
September 30,
2024 |
Percent
guaranteed |
December 31,
2023 |
Percent
guaranteed |
|||||||||||||||||||
| Commercial | $ | 670 | 78 | % | $ | 664 | 80 | % | |||||||||||||||
| Commercial real estate | 24 | 79 | 24 | 79 | |||||||||||||||||||
| Consumer | 4 | 100 | 4 | 100 | |||||||||||||||||||
| Total loans | $ | 698 | 79 | $ | 692 | 80 | |||||||||||||||||
Commercial Lending
The following schedule presents the composition of our commercial lending portfolio:
COMMERCIAL LENDING PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
commercial loans |
Amount |
% of total
commercial loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
54.4 | % | $ |
|
54.5 | % | $ | 73 | 0.4 | % | |||||||||||||||||||||||
| Leasing |
|
1.2 |
|
1.3 | (6) | (1.6) | |||||||||||||||||||||||||||||
| Owner-occupied |
|
30.5 |
|
30.1 | 162 | 1.8 | |||||||||||||||||||||||||||||
| Municipal |
|
13.9 |
|
14.1 | (32) | (0.7) | |||||||||||||||||||||||||||||
| Total commercial | $ | 30,785 | 100.0 | % | $ | 30,588 | 100.0 | % | $ | 197 | 0.6 | ||||||||||||||||||||||||
Our commercial loans span various industries and generally mature within a one-to-five-year period with applicable amortization based on the underlying collateral and guarantees. Commercial loans are typically structured as seasonal, term, working capital, or bridge loans in the form of revolving and non-revolving lines of credit, amortizing term loans, guidance facilities, and single-payment loans. These loans include covenants requiring borrowers to provide regular financial reporting to measure leverage, debt service coverage, and liquidity. At
21
September 30, 2024, approximately 70% of our commercial lending portfolio was variable rate, and approximately 10% of these variable-rate loans were swapped with our customers to a fixed rate.
Underwriting of commercial loans is primarily based on analyses of management, financial performance, industry, sponsorship (if applicable), and transaction structure, with credit enhancements typically provided by collateral and guarantees from the owners or sponsors. Prospective cash flows are subjected to various downside scenario analyses, including revenue decline, margin compression, and interest rate movements.
The following schedule presents the geography distribution of our commercial lending portfolio. For commercial loans, geographies are based on the location of the primary borrower.
COMMERCIAL LENDING BY GEOGRAPHY
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 2,277 | 7.4 | % | $ | 5 | $ | 2,237 | 7.3 | % | $ | 7 | |||||||||||||||||||||||
| California | 6,091 | 19.8 | 57 | 6,106 | 20.0 | 50 | |||||||||||||||||||||||||||||
| Colorado | 1,935 | 6.3 | 23 | 1,970 | 6.4 | 3 | |||||||||||||||||||||||||||||
| Nevada | 1,339 | 4.4 | 12 | 1,230 | 4.0 | 11 | |||||||||||||||||||||||||||||
| Texas | 7,233 | 23.5 | 75 | 7,070 | 23.1 | 13 | |||||||||||||||||||||||||||||
| Utah/Idaho | 6,294 | 20.4 | 6 | 6,353 | 20.8 | 12 | |||||||||||||||||||||||||||||
| Washington/Oregon | 1,428 | 4.6 | 32 | 1,339 | 4.4 | 8 | |||||||||||||||||||||||||||||
|
Other
1
|
4,188 | 13.6 | 5 | 4,283 | 14.0 | — | |||||||||||||||||||||||||||||
| Total commercial | $ | 30,785 | 100.0 | % | $ | 215 | $ | 30,588 | 100.0 | % | $ | 104 | |||||||||||||||||||||||
1
No other geography exceeds 2.7% for September 30, 2024 and December 31, 2023, respectively.
The following schedule presents an industry distribution of our commercial lending portfolio. Industry classification is based on the North American Industry Classification System.
COMMERCIAL LENDING BY INDUSTRY
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Real estate, rental and leasing | $ | 3,003 | 9.7 | % | $ | 7 | $ | 2,946 | 9.6 | % | $ | 1 | |||||||||||||||||||||||
| Retail trade | 2,913 | 9.5 | 39 | 2,995 | 9.8 | 2 | |||||||||||||||||||||||||||||
| Finance and insurance | 2,863 | 9.3 | 1 | 2,918 | 9.5 | — | |||||||||||||||||||||||||||||
| Healthcare and social assistance | 2,453 | 8.0 | 35 | 2,527 | 8.3 | 8 | |||||||||||||||||||||||||||||
| Manufacturing | 2,304 | 7.5 | 8 | 2,190 | 7.2 | 15 | |||||||||||||||||||||||||||||
| Public Administration | 2,115 | 6.9 | — | 2,279 | 7.5 | — | |||||||||||||||||||||||||||||
| Wholesale trade | 1,992 | 6.5 | 2 | 1,850 | 6.0 | 3 | |||||||||||||||||||||||||||||
| Transportation and warehousing | 1,515 | 4.9 | 7 | 1,499 | 4.9 | 3 | |||||||||||||||||||||||||||||
|
Utilities
1
|
1,406 | 4.6 | 6 | 1,409 | 4.6 | 10 | |||||||||||||||||||||||||||||
| Educational services | 1,301 | 4.2 | — | 1,298 | 4.2 | — | |||||||||||||||||||||||||||||
| Construction | 1,280 | 4.2 | 27 | 1,355 | 4.4 | 7 | |||||||||||||||||||||||||||||
| Hospitality and food services | 1,267 | 4.1 | 1 | 1,180 | 3.9 | 1 | |||||||||||||||||||||||||||||
| Other services (except Public Administration) | 1,103 | 3.6 | 3 | 1,047 | 3.4 | 2 | |||||||||||||||||||||||||||||
| Mining, quarrying, and oil and gas extraction | 1,094 | 3.5 | 15 | 1,133 | 3.7 | — | |||||||||||||||||||||||||||||
| Professional, scientific, and technical services | 1,084 | 3.5 | 30 | 1,010 | 3.3 | 10 | |||||||||||||||||||||||||||||
|
Other
2
|
3,092 | 10.0 | 34 | 2,952 | 9.7 | 42 | |||||||||||||||||||||||||||||
| Total | $ | 30,785 | 100.0 | % | $ | 215 | $ | 30,588 | 100.0 | % | $ | 104 | |||||||||||||||||||||||
1
Includes primarily utilities, power, and renewable energy.
2
No other industry group exceeds 3.5% and 3.3% for September 30, 2024 and December 31, 2023, respectively.
22
Commercial Real Estate Lending
The following schedule presents the composition of our commercial real estate lending portfolio:
COMMERCIAL REAL ESTATE LENDING PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
CRE loans |
Amount |
% of total
CRE loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Construction and land development | $ | 2,833 | 21.0 | % | $ | 2,669 | 20.0 | % | $ | 164 | 6.1 | % | |||||||||||||||||||||||
| Term | 10,650 | 79.0 | 10,702 | 80.0 | (52) | (0.5) | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | 13,483 | 100.0 | % | $ | 13,371 | 100.0 | % | $ | 112 | 0.8 | ||||||||||||||||||||||||
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 (“LTV”) 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 September 30, 2024, approximately 86% of our CRE loan portfolio was variable-rate, and approximately 21% of these variable-rate loans were swapped with our customers to a fixed rate.
Underwriting on commercial properties is primarily based on the economic viability of the project with significant consideration given to the creditworthiness and experience of the sponsor. We generally require that the owner’s equity be included prior to any advances. Remargining 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.
Real estate appraisals are performed in accordance with regulatory guidelines. In some cases, reports from automated valuation services are used or internal evaluations are performed. An appraisal is ordered and reviewed prior to loan closing, and a new appraisal or evaluation is generally ordered when market conditions indicate a potential decline in the value of the collateral, or when the loan is either modified, renewed, or deteriorates to a certain level of credit weakness. CRE LTVs are calculated by dividing the outstanding loan balance by the estimated collateral value from the most current appraisal. At September 30, 2024, the weighted average LTV ratio for our term CRE portfolio was less than 60%.
For a more comprehensive discussion of CRE loans and our underwriting, see “Commercial Real Estate Loans” in our 2023 Form 10-K. The following schedule presents the geography distribution of our commercial real estate lending portfolio. Geographies are based on the location of the primary collateral.
COMMERCIAL REAL ESTATE LENDING BY GEOGRAPHY
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 1,808 | 13.4 | % | $ | — | $ | 1,726 | 12.9 | % | $ | 1 | |||||||||||||||||||||||
| California | 3,609 | 26.7 | 59 | 3,865 | 28.9 | 50 | |||||||||||||||||||||||||||||
| Colorado | 724 | 5.4 | — | 709 | 5.3 | — | |||||||||||||||||||||||||||||
| Nevada | 1,155 | 8.6 | — | 1,072 | 8.0 | — | |||||||||||||||||||||||||||||
| Texas | 2,539 | 18.8 | 10 | 2,385 | 17.8 | 10 | |||||||||||||||||||||||||||||
| Utah/Idaho | 2,129 | 15.8 | — | 2,214 | 16.6 | — | |||||||||||||||||||||||||||||
| Washington/Oregon | 1,088 | 8.1 | — | 1,004 | 7.5 | — | |||||||||||||||||||||||||||||
| Other | 431 | 3.2 | — | 396 | 3.0 | — | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | 13,483 | 100.0 | % | $ | 69 | $ | 13,371 | 100.0 | % | $ | 61 | |||||||||||||||||||||||
The following schedule presents our commercial real estate lending portfolio by the type of collateral:
23
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial property | |||||||||||||||||||||||||||||||||||
| Multifamily | $ | 3,904 | 29.0 | % | $ | 1 | $ | 3,709 | 27.7 | % | $ | 1 | |||||||||||||||||||||||
| Industrial | 3,027 | 22.4 | — | 3,062 | 22.9 | 1 | |||||||||||||||||||||||||||||
| Office | 1,867 | 13.9 | 58 | 1,984 | 14.8 | 48 | |||||||||||||||||||||||||||||
| Retail | 1,524 | 11.3 | — | 1,503 | 11.2 | 1 | |||||||||||||||||||||||||||||
| Hospitality | 642 | 4.8 | 8 | 688 | 5.2 | 9 | |||||||||||||||||||||||||||||
| Land | 236 | 1.7 | — | 211 | 1.6 | — | |||||||||||||||||||||||||||||
|
Other
1
|
1,613 | 11.9 | — | 1,682 | 12.6 | — | |||||||||||||||||||||||||||||
|
Residential property
2
|
|||||||||||||||||||||||||||||||||||
| Single family | 327 | 2.4 | 2 | 287 | 2.1 | 1 | |||||||||||||||||||||||||||||
| Land | 100 | 0.8 | — | 90 | 0.7 | — | |||||||||||||||||||||||||||||
| Condo/Townhome | 26 | 0.2 | — | 37 | 0.3 | — | |||||||||||||||||||||||||||||
|
Other
1
|
217 | 1.6 | — | 118 | 0.9 | — | |||||||||||||||||||||||||||||
| Total | $ | 13,483 | 100.0 | % | $ | 69 | $ | 13,371 | 100.0 | % | $ | 61 | |||||||||||||||||||||||
1
Included in the total amount of the “Other” commercial and residential categories was approximately $356 million and $202 million of unsecured loans at September 30, 2024 and December 31, 2023, respectively.
2
Residential property consists primarily of loans provided to commercial homebuilders for land, lot, and single-family housing developments.
As previously discussed, our commercial real estate lending portfolio is diversified across geography and collateral type, with the largest concentration in multifamily. We provide additional analysis of our multifamily and office CRE portfolios below in view of increased investor interest in those collateral types in recent periods.
Multifamily CRE
At September 30, 2024 and December 31, 2023, our multifamily CRE loan portfolio totaled $3.9 billion and $3.7 billion, representing 29% and 28% of the total CRE loan portfolio, respectively. Approximately 33% of the multifamily CRE loan portfolio is scheduled to mature in the next 12 months. We believe that most of these borrowers will be able to refinance at maturity through the Bank, or other lenders, as a result of the cash flows from the properties, acceptable LTVs, equity levels, and guarantor support. The following schedule presents the composition of our multifamily CRE loan portfolio and other related credit quality metrics:
MULTIFAMILY CRE LOAN PORTFOLIO
| (Dollar amounts in millions) |
September 30,
2024 |
December 31, 2023 | |||||||||
| Multifamily CRE | |||||||||||
| Construction and land development | $ | 1,128 | $ | 902 | |||||||
| Term | 2,776 | 2,807 | |||||||||
| Total multifamily CRE | $ | 3,904 | $ | 3,709 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 17.2 | % | 6.1 | % | |||||||
|
Classified loan ratio
1
|
12.8 | % | 0.5 | % | |||||||
| Nonaccrual loan ratio | — | % | — | % | |||||||
| Delinquency ratio | 0.1 | % | — | % | |||||||
| Annualized ratio of multifamily CRE net charge-offs (recoveries) to average loans | — | % | — | % | |||||||
| Ratio of allowance for credit losses to multifamily CRE loans, at period end | 2.38 | % | 1.70 | % | |||||||
| Weighted average LTV for multifamily term CRE loans | 57 | % | 61 | % | |||||||
1
For the first nine months of 2024, multifamily CRE classified loan balances significantly increased. See the “Classified Loans” section below on page 29 for more information about changes in these related balances.
24
The following schedules present our multifamily CRE loan portfolio by collateral location for the periods presented:
MULTIFAMILY CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| September 30, 2024 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Construction and land development | Term | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Multifamily CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 196 | $ | 284 | $ | 480 | 12.3 | % | $ | — | ||||||||||||||||||||||
| California | 145 | 931 | 1,076 | 27.6 | 1 | |||||||||||||||||||||||||||
| Colorado | 112 | 59 | 171 | 4.4 | — | |||||||||||||||||||||||||||
| Nevada | 112 | 173 | 285 | 7.3 | — | |||||||||||||||||||||||||||
| Texas | 357 | 720 | 1,077 | 27.6 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 92 | 312 | 404 | 10.3 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 114 | 234 | 348 | 8.9 | — | |||||||||||||||||||||||||||
|
Other
1
|
— | 63 | 63 | 1.6 | — | |||||||||||||||||||||||||||
| Total multifamily CRE | $ | 1,128 | $ | 2,776 | $ | 3,904 | 100.0 | % | $ | 1 | ||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Construction and land development | Term | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Multifamily CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 118 | $ | 322 | $ | 440 | 11.9 | % | $ | — | ||||||||||||||||||||||
| California | 183 | 994 | 1,177 | 31.7 | 1 | |||||||||||||||||||||||||||
| Colorado | 46 | 90 | 136 | 3.7 | — | |||||||||||||||||||||||||||
| Nevada | 40 | 188 | 228 | 6.1 | — | |||||||||||||||||||||||||||
| Texas | 359 | 578 | 937 | 25.3 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 44 | 345 | 389 | 10.4 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 112 | 228 | 340 | 9.2 | — | |||||||||||||||||||||||||||
|
Other
1
|
— | 62 | 62 | 1.7 | — | |||||||||||||||||||||||||||
| Total multifamily CRE | $ | 902 | $ | 2,807 | $ | 3,709 | 100.0 | % | $ | 1 | ||||||||||||||||||||||
1
Other included $55 million of multifamily loans with collateral located in New Mexico at both September 30, 2024 and December 31, 2023.
Office CRE
At September 30, 2024 and December 31, 2023, our office CRE loan portfolio totaled $1.9 billion and $2.0 billion, representing 14% and 15% of the total CRE loan portfolio, respectively. Approximately 39% of the office CRE loan portfolio is scheduled to mature in the next 12 months. We believe that most of these borrowers will be able to refinance at maturity through the Bank, or other lenders, as a result of the cash flows from the properties, acceptable LTVs, equity levels, and guarantor support. The following schedule presents the composition of our office CRE loan portfolio and other related credit quality metrics:
25
OFFICE CRE LOAN PORTFOLIO
| (Dollar amounts in millions) |
September 30,
2024 |
December 31, 2023 | |||||||||
| Office CRE | |||||||||||
| Construction and land development | $ | 112 | $ | 191 | |||||||
| Term | 1,755 | 1,793 | |||||||||
| Total office CRE | $ | 1,867 | $ | 1,984 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 9.7 | % | 11.9 | % | |||||||
| Classified loan ratio | 7.7 | % | 8.9 | % | |||||||
| Nonaccrual loan ratio | 3.1 | % | 2.4 | % | |||||||
| Delinquency ratio | 1.2 | % | 2.3 | % | |||||||
| Annualized ratio of office CRE net charge-offs (recoveries) to average loans | — | % | 0.2 | % | |||||||
| Ratio of allowance for credit losses to office CRE loans, at period end | 3.91 | % | 3.80 | % | |||||||
| Weighted average LTV for office term CRE loans | 56 | % | 53 | % | |||||||
The following schedules present our office CRE loan portfolio by collateral location for the periods presented:
OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| September 30, 2024 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Construction and land development | Term | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | — | $ | 274 | $ | 274 | 14.7 | % | $ | — | ||||||||||||||||||||||
| California | 38 | 343 | 381 | 20.4 | 57 | |||||||||||||||||||||||||||
| Colorado | — | 58 | 58 | 3.1 | — | |||||||||||||||||||||||||||
| Nevada | 11 | 78 | 89 | 4.8 | — | |||||||||||||||||||||||||||
| Texas | 6 | 205 | 211 | 11.3 | 1 | |||||||||||||||||||||||||||
| Utah/Idaho | 34 | 481 | 515 | 27.6 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 23 | 287 | 310 | 16.6 | — | |||||||||||||||||||||||||||
|
Other
1
|
— | 29 | 29 | 1.5 | — | |||||||||||||||||||||||||||
| Total office CRE | $ | 112 | $ | 1,755 | $ | 1,867 | 100.0 | % | $ | 58 | ||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Construction and land development | Term | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | — | $ | 281 | $ | 281 | 14.2 | % | $ | — | ||||||||||||||||||||||
| California | 64 | 412 | 476 | 24.0 | 48 | |||||||||||||||||||||||||||
| Colorado | — | 92 | 92 | 4.6 | — | |||||||||||||||||||||||||||
| Nevada | 2 | 86 | 88 | 4.4 | — | |||||||||||||||||||||||||||
| Texas | 22 | 179 | 201 | 10.1 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 29 | 488 | 517 | 26.1 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 74 | 226 | 300 | 15.1 | — | |||||||||||||||||||||||||||
|
Other
1
|
— | 29 | 29 | 1.5 | — | |||||||||||||||||||||||||||
| Total office CRE | $ | 191 | $ | 1,793 | $ | 1,984 | 100.0 | % | $ | 48 | ||||||||||||||||||||||
1
Other included
$17 million
of office CRE loans with collateral located in Georgia at both September 30, 2024 and December 31, 2023.
26
Consumer Lending
The following schedule presents the composition of our consumer lending portfolio:
CONSUMER LENDING PORTFOLIO
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
consumer loans |
Amount |
% of total
consumer loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||
| Home equity credit line | $ | 3,543 | 24.2 | % | $ | 3,356 | 24.3 | % | $ | 187 | 5.6 | % | |||||||||||||||||||||||
| 1-4 family residential | 9,489 | 64.9 | 8,415 | 60.9 | 1,074 | 12.8 | |||||||||||||||||||||||||||||
| Construction and other consumer real estate | 997 | 6.8 | 1,442 | 10.4 | (445) | (30.9) | |||||||||||||||||||||||||||||
| Bankcard and other revolving plans | 461 | 3.2 | 474 | 3.4 | (13) | (2.7) | |||||||||||||||||||||||||||||
| Other | 126 | 0.9 | 133 | 1.0 | (7) | (5.3) | |||||||||||||||||||||||||||||
| Total consumer | $ | 14,616 | 100.0 | % | $ | 13,820 | 100.0 | % | $ | 796 | 5.8 | ||||||||||||||||||||||||
1-4 Family Residential Mortgages
We originate first-lien residential home mortgage loans considered to be of prime quality. At September 30, 2024, our 1-4 family residential mortgage loan portfolio totaled $9.5 billion, or 65%, of our total consumer loan portfolio, compared with $8.4 billion, or 61%, at December 31, 2023. Approximately 91% and 93% of our 1-4 family residential mortgage loan portfolio was variable-rate for the same respective time periods. 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.
Home Equity Credit Lines
We also originate home equity credit lines (“HECLs”). At September 30, 2024 and December 31, 2023, our HECL portfolio totaled $3.5 billion and $3.4 billion, respectively. Approximately 37% and 39% of our HECLs were secured by first liens for the same respective time periods.
At September 30, 2024, loans representing less than 1% of the outstanding balance in the HECL portfolio were estimated to have combined loan-to-value (“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. At origination, underwriting standards for the HECL portfolio generally include a maximum 80% CLTV with a Fair Isaac Corporation (“FICO”) credit score greater than 700.
Approximately 92% of our HECL portfolio is still in the draw period, and about 21% of those loans are scheduled to begin amortizing within the next five years. We believe the risk of loss and borrower default in the event of a loan becoming fully amortizing and the effect of significant interest rate changes is low, given the rate shock analysis performed at origination. The ratio of HECL net charge-offs (recoveries) for the trailing twelve months to average balances at September 30, 2024 and December 31, 2023, was (0.01)% and 0.05%, respectively. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of the HECL portfolio.
27
The following schedule presents the geography distribution of our consumer lending portfolio. Geographies are based on the location of the primary borrower.
CONSUMER LENDING BY GEOGRAPHY
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 1,323 | 9.1 | % | $ | 5 | $ | 1,208 | 8.7 | % | $ | 4 | |||||||||||||||||||||||
| California | 2,980 | 20.4 | 15 | 2,683 | 19.4 | 13 | |||||||||||||||||||||||||||||
| Colorado | 1,356 | 9.3 | 9 | 1,292 | 9.3 | 7 | |||||||||||||||||||||||||||||
| Nevada | 1,277 | 8.7 | 8 | 1,204 | 8.7 | 5 | |||||||||||||||||||||||||||||
| Texas | 3,701 | 25.3 | 23 | 3,698 | 26.9 | 17 | |||||||||||||||||||||||||||||
| Utah/Idaho | 3,413 | 23.4 | 14 | 3,188 | 23.1 | 10 | |||||||||||||||||||||||||||||
| Washington/Oregon | 210 | 1.4 | — | 211 | 1.5 | — | |||||||||||||||||||||||||||||
| Other | 356 | 2.4 | 5 | 336 | 2.4 | 1 | |||||||||||||||||||||||||||||
| Total consumer | $ | 14,616 | 100.0 | % | $ | 79 | $ | 13,820 | 100.0 | % | $ | 57 | |||||||||||||||||||||||
Credit Quality
We monitor credit quality by analyzing various factors, including (among others) nonperforming status, internal risk grades, and net charge-offs, all of which are used in our overall evaluation of the adequacy of our ACL. See Note 6 of the Notes to Consolidated Financial Statements for more information on these factors and the ACL.
Nonperforming Assets
Nonperforming assets include nonaccrual loans and other real estate owned (“OREO”), or foreclosed properties. The following schedule presents our nonperforming assets:
NONPERFORMING ASSETS
| (Dollar amounts in millions) |
September 30,
2024 |
December 31,
2023 |
|||||||||
|
Nonaccrual loans
1
|
$ | 363 | $ | 222 | |||||||
|
Other real estate owned
2
|
5 | 6 | |||||||||
| Total nonperforming assets | $ | 368 | $ | 228 | |||||||
|
Ratio of nonperforming assets to net loans and leases
1
and other real estate owned
2
|
0.62 | % | 0.39 | % | |||||||
| Accruing loans past due 90 days or more | $ | 7 | $ | 3 | |||||||
|
Ratio of accruing loans past due 90 days or more to loans and leases
1
|
0.01 | % | 0.01 | % | |||||||
|
Nonaccrual loans
1
and accruing loans past due 90 days or more
|
$ | 370 | $ | 225 | |||||||
|
Ratio of nonperforming assets
1
and accruing loans past due 90 days or more to loans and leases
1
and other real estate owned
2
|
0.64 | % | 0.40 | % | |||||||
| Accruing loans past due 30-89 days | $ | 89 | $ | 86 | |||||||
1
Includes loans held for sale.
2
Does not include banking premises held for sale.
Nonperforming assets totaled $368 million, or 0.62%, of total loans and leases and other real estate owned at September 30, 2024, compared with $228 million, or 0.39%, at December 31, 2023. The increase was primarily due to a small number of loans in the commercial and industrial and term CRE portfolios.
28
Classified Loans
Classified loans are considered loans with well-defined weaknesses and are assigned using our internal risk grade definitions of substandard and doubtful, which are consistent with regulatory risk classifications. The following schedule presents our classified loans by loan segment:
CLASSIFIED LOANS
| (Dollar amounts in millions) |
September 30,
2024 |
December 31,
2023 |
|||||||||
|
Commercial
|
$ | 964 | $ | 482 | |||||||
| Commercial real estate | 1,042 | 280 | |||||||||
| Consumer | 87 | 63 | |||||||||
| Total classified loans | $ | 2,093 | $ | 825 | |||||||
| Ratio of classified loans to total loans and leases | 3.55 | % | 1.43 | % | |||||||
Classified loans totaled $2.1 billion, or 3.55%, of total loans and leases, at September 30, 2024, compared with $825 million, or 1.43%, at December 31, 2023. The increase was primarily in the multifamily CRE loan portfolio, largely due to a change in approach to risk grading that places more emphasis on current cash flow, which is the primary source of repayment, and less emphasis on the adequacy of collateral values and the strength of guarantors and sponsors. The increase in classified loans was also attributable to weaker performance, particularly for 2021 and 2022 construction loan vintages, as borrowers missed projections due to lower-than-anticipated leasing, rent concessions, elevated costs, and higher interest rates. Our CRE loan portfolio continues to benefit from strong underwriting, supported by high borrower equity and guarantor support.
Allowance for Credit Losses
The ACL, which consists of the ALLL and the RULC, 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.
We estimate current expected credit losses, which include considerations of historical credit loss experience, current conditions, and standard economic forecasts, all of which inform the quantitative portion of our ACL. We also consider qualitative and environmental factors that may indicate losses may differ from levels estimated by our quantitative models. The impact of these factors on our ACL may change from quarter to quarter.
During recent quarters, the qualitative portion of the ACL has increased primarily due to (1) economic uncertainty, which caused us to increase the weights on recessionary economic forecasts, and (2) portfolio-specific risks, which caused us to use stressed economic forecasts for certain portfolios, particularly CRE.
29
The following schedule presents the changes in the ACL and certain credit-related metrics:
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
| (Dollar amounts in millions) |
Nine Months Ended
September 30, 2024 |
Twelve Months Ended
December 31, 2023 |
Nine Months Ended
September 30, 2023 |
||||||||||||||
| Loans and leases outstanding | $ | 58,884 | $ | 57,779 | $ | 56,893 | |||||||||||
| Average loans and leases outstanding: | |||||||||||||||||
| Commercial | 30,553 | 30,519 | 30,620 | ||||||||||||||
| Commercial real estate | 13,538 | 13,023 | 12,942 | ||||||||||||||
| Consumer | 14,198 | 13,198 | 13,041 | ||||||||||||||
| Total average loans and leases outstanding | $ | 58,289 | $ | 56,740 | $ | 56,603 | |||||||||||
| Allowance for loan and lease losses: | |||||||||||||||||
| Balance at beginning of period | $ | 684 | $ | 572 | $ | 572 | |||||||||||
| Provision for loan losses | 34 | 148 | 136 | ||||||||||||||
| Charge-offs: | |||||||||||||||||
| Commercial | 30 | 45 | 35 | ||||||||||||||
| Commercial real estate | 11 | 3 | 3 | ||||||||||||||
| Consumer | 9 | 14 | 11 | ||||||||||||||
| Total | 50 | 62 | 49 | ||||||||||||||
| Recoveries: | |||||||||||||||||
| Commercial | 19 | 20 | 17 | ||||||||||||||
| Commercial real estate | 3 | — | — | ||||||||||||||
| Consumer | 4 | 6 | 5 | ||||||||||||||
| Total | 26 | 26 | 22 | ||||||||||||||
| Net loan and lease charge-offs | 24 | 36 | 27 | ||||||||||||||
| Balance at end of period | $ | 694 | $ | 684 | $ | 681 | |||||||||||
| Reserve for unfunded lending commitments: | |||||||||||||||||
| Balance at beginning of period | $ | 45 | $ | 61 | $ | 61 | |||||||||||
| Provision for unfunded lending commitments | (3) | (16) | (4) | ||||||||||||||
| Balance at end of period | $ | 42 | $ | 45 | $ | 57 | |||||||||||
| Total allowance for credit losses: | |||||||||||||||||
| Allowance for loan and lease losses | $ | 694 | $ | 684 | $ | 681 | |||||||||||
| Reserve for unfunded lending commitments | 42 | 45 | 57 | ||||||||||||||
| Total allowance for credit losses | $ | 736 | $ | 729 | $ | 738 | |||||||||||
| Ratio of allowance for credit losses to net loans and leases, at period end | 1.25 | % | 1.26 | % | 1.30 | % | |||||||||||
| Ratio of allowance for credit losses to nonaccrual loans, at period end | 203 | % | 328 | % | 371 | % | |||||||||||
| Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 199 | % | 324 | % | 343 | % | |||||||||||
|
Ratio of total net charge-offs to average loans and leases
1
|
0.05 | % | 0.06 | % | 0.06 | % | |||||||||||
|
Ratio of commercial net charge-offs to average commercial loans
1
|
0.05 | % | 0.08 | % | 0.08 | % | |||||||||||
|
Ratio of commercial real estate net charge-offs to average commercial real estate loans
1
|
0.08 | % | 0.02 | % | 0.03 | % | |||||||||||
|
Ratio of consumer net charge-offs to average consumer loans
1
|
0.05 | % | 0.06 | % | 0.06 | % | |||||||||||
1
Ratios are annualized for the periods presented except for the period representing the full twelve months.
See “The Allowance and Provision for Credit Losses” section on page 12 for more discussion on changes in the ACL, and 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.
30
Interest Rate and Market Risk Management
Interest rate and market risk is the risk of losses to current or future earnings and capital from changes in interest rates and other market conditions. Because we engage in transactions involving various financial products, we are exposed to interest rate and market risk. For a more comprehensive discussion of our interest rate and market risk management, see “Interest Rate and Market Risk Management” in our 2023 Form 10-K.
We strive to position the Bank for interest rate changes and manage the balance sheet sensitivity to reduce the volatility of both net interest income and economic value of equity (“EVE”). With the recent higher interest rate environment, customer deposit behavior has deviated from the trends observed during the relatively low interest rate period over the prior 15 years. As a result, customers have been more inclined to (1) move deposits to nonbanking products, such as money market mutual funds, that offer higher interest rates, and (2) reduce their balances in noninterest-bearing accounts. Observed changes in deposit behavior have been incorporated into our deposit models used in managing interest rate risk, giving more weight to the recently observed behavior, and increased both the deposit beta for interest-bearing products and the percentage of noninterest-bearing deposits assumed to migrate to interest-bearing products. Changes to models are independently reviewed by our Model Risk Management function.
We generally have granular deposit funding, and much of this funding is in the form of demand deposits with no maturity, which contractually can be withdrawn at any time. Rather than using contractual maturities, our interest rate risk model uses dynamically modeled behavioral assumptions based on historical behavior and future projections. Because many deposits from household and business accounts have proven to be stable over time and less sensitive to rate changes, their duration is generally longer than the duration of our loan portfolio. As such, we have historically been “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 our interest rate risk. These strategies collectively have muted the expected sensitivity of net interest income to changes in interest rates. Asset sensitivity measures depend upon the assumptions we use for deposit runoff and repricing behavior. Our models are particularly sensitive to these assumptions about the rate of such behavior.
We also assume a correlation, referred to as a “deposit beta,” with respect to interest-bearing deposits, wherein the rates paid to customers change at a different pace when compared with changes in average benchmark interest rates. Generally, certificates of deposit are assumed to have a high correlation, while interest-bearing checking accounts are assumed to have a lower correlation.
The following schedule presents deposit duration assumptions discussed previously:
DEPOSIT ASSUMPTIONS
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Product |
Effective duration
(-200 bps) |
Effective duration (unchanged) |
Effective duration
(+200 bps) |
Effective duration
(-200 bps) |
Effective duration (unchanged) |
Effective duration
(+200 bps) |
||||||||||||||||||||||||||||||||
| Demand deposits | 4.4% | 3.1% | 2.8% | 4.0% | 3.5% | 3.2% | ||||||||||||||||||||||||||||||||
| Money market | 3.2% | 1.5% | 1.4% | 3.0% | 1.5% | 1.4% | ||||||||||||||||||||||||||||||||
| Savings and interest-bearing checking | 2.5% | 2.1% | 1.8% | 2.7% | 2.2% | 1.9% | ||||||||||||||||||||||||||||||||
The effective duration of the deposits increases as market rates decline due to the inability to reprice as deposits approach their floor.
As noted previously, we utilize derivatives to manage interest rate risk. The following schedule presents derivatives that are designated in qualifying hedging relationships at September 30, 2024. 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. 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.
31
DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS
| 2024 | 2025 | 2026 | 4Q26 - 1Q27 | 4Q27 - 3Q28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Fourth Quarter | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | First Quarter | Second Quarter | Third Quarter | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Cash flow hedges of assets
1
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 350 | $ | 350 | $ | 350 | $ | 350 | $ | 300 | $ | 133 | $ | 100 | $ | 100 | $ | 100 | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate received | 2.34 | % | 2.34 | % | 2.34 | % | 2.34 | % | 2.13 | % | 1.67 | % | 1.65 | % | 1.65 | % | 1.65 | % | — | % | |||||||||||||||||||||||||||||||||||||||
|
Cash flow hedges of liabilities
2
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 500 | $ | 500 | $ | 500 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 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 | $ | 4,468 | $ | 4,558 | $ | 4,562 | $ | 4,558 | $ | 2,428 | $ | 1,049 | $ | 1,044 | $ | 1,037 | $ | 1,001 | $ | 973 | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 3.23 | % | 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 consist of a pay-fixed swap hedging rolling FHLB advances. This swap matures in May 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 in 2025 are due to forward starting swaps.
At September 30, 2024, we had $117 million of net losses deferred in accumulated other comprehensive income (loss) (“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 of the hedges as long as the hedged forecasted transactions continue to be expected to occur. For more information on amounts deferred in AOCI related to terminated cash flow hedges, see “Interest Rate and Market Risk Management” in our 2023 Form 10-K.
Earnings at Risk (EaR) and Economic Value of Equity (EVE)
Incorporating our deposit assumptions and the impact of derivatives in qualifying hedging relationships previously discussed, the following schedule 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 under instantaneous parallel interest rate changes ranging from -200 bps to +200 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.
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Parallel shift in rates (in bps)
1
|
Parallel shift in rates (in bps)
1
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repricing scenario | -200 | -100 | 0 | +100 | +200 | -200 | -100 | 0 | +100 | +200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Earnings at Risk
(EaR)
|
(5.7) | % | (2.7) | % | — | % | 2.5 | % | 5.1 | % | (5.6) | % | (2.5) | % | — | % | 2.4 | % | 4.9 | % | ||||||||||||||||||||||||||||||||||||||||||
|
Economic Value of Equity
(EVE)
|
8.7 | % | 2.9 | % | — | % | (1.9) | % | (4.4) | % | 6.6 | % | 2.8 | % | — | % | (1.4) | % | (3.3) | % | ||||||||||||||||||||||||||||||||||||||||||
1
Assumes rates cannot go below zero in the negative rate shifts.
32
The asset sensitivity, as measured by EaR, increased during the first nine months of 2024, due to securities redemptions, swap maturities, and assumption changes that reduced the projected runoff of noninterest-bearing deposits. Under our current deposit assumptions, interest rate risk remains within policy limits. For interest-bearing deposits with indeterminable maturities, the weighted average modeled beta is 55%.
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 borrower, which may significantly affect our expected cash flows. At September 30, 2024, lifetime prepayment speeds were estimated to be 15.8% for loans, which reflects an acceleration of prepayments upon rate reset for adjustable rate loans, and 7.1% for mortgage-backed securities.
The EaR analysis focuses on parallel rate shocks across the term structure of benchmark interest rates. In a non-parallel rate scenario, where short-term rates decline 200 bps, but long-term rates are unchanged, the EaR is comparable to the parallel rate scenario of similar rate shock.
If interest rates were to follow the rate path implied by the forward curve at September 30, 2024, modeled net interest income would increase in the third quarter of 2025 by an additional 1.4%, when compared to the third quarter of 2024. For a -100 bps and +100 bps parallel interest rate shock to the implied forward rate path, the cumulative net interest income sensitivity would be between (0.8)% and 3.1%, respectively.
Our focus on business banking also plays a significant role in determining the nature of our asset-liability management posture. At September 30, 2024, $27.4 billion of our commercial and CRE loans were scheduled to reprice in the next six months. For these variable-rate loans, we have executed $350 million of cash flow hedges by receiving fixed rates on interest rate swaps. At September 30, 2024, we also had $4.0 billion of variable-rate consumer loans scheduled to reprice in the next six months. The impact on asset sensitivity from commercial or consumer loans with floors has become insignificant as rates have risen. See Notes 3 and 7 of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.
Fixed Income
We are exposed to market risk through changes in fair 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 activity exposes us to a risk of loss arising from adverse changes in the prices of these fixed-income securities.
Changes in the fair value of AFS securities and in interest rate swaps that qualify as cash flow hedges are included in AOCI for each financial reporting period. For more discussion regarding investment securities and AOCI, see the “Capital Management” section on page 35. See also Note 5 of the Notes to Consolidated Financial Statements for further information regarding the accounting for investment securities.
Equity Investments
Through our equity investment activities, we own equity securities that are publicly traded. In addition, we own equity securities in governmental entities and companies, e.g., Federal Reserve (“FRB”) and the FHLB, that are not publicly traded. For more information regarding our equity investments, see “Interest Rate and Market Risk Management” in our 2023 Form 10-K.
We hold both direct and indirect investments in predominantly pre-public companies, primarily through various SBIC venture capital 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 $202 million and $190 million at September 30, 2024 and December 31, 2023, respectively. On occasion, some of the companies within our SBIC investment may issue an initial public offering (“IPO”). In this case, the fund is generally subject to a lockout period before we can liquidate the investment, which can introduce additional market risk. See Note 3 of the Notes to Consolidated Financial Statements for additional information regarding the valuation of our SBIC investments.
33
Liquidity Risk Management
Liquidity refers to our ability to meet our cash, contractual, and collateral obligations, and to manage both expected and unexpected cash flows without adversely impacting our operations or financial strength. We manage our liquidity to provide funds for our customers’ credit needs, our anticipated financial and contractual obligations, and other corporate activities. Sources of liquidity primarily include deposits, borrowings, equity, and paydowns of assets, such as loans and investment securities. For more information on our liquidity risk management practices, see “Liquidity Risk Management” in our 2023 Form 10-K.
We have pledged collateral to the FRB’s primary credit facility (or discount window) and to the BTFP, which provide additional contingent funding sources outside the normal operating hours of the FHLB and the General Collateral Funding (“GCF”) program. The BTFP offered loans of up to one year in length to eligible depository institutions pledging U.S. Treasuries, agency debt and government mortgage-backed securities, and other qualifying assets as collateral. The availability of advances under the program ended in mid-March 2024.
For the first nine months of 2024, the primary sources of cash came from a decrease in investment securities, an increase in deposits, and net cash provided by operating activities. Uses of cash during the same period primarily included a decrease in short-term borrowings, an increase in loans and leases, and dividends paid on common and preferred stock. Cash payments for interest reflected in operating expenses were $1.4 billion and $913 million for the first nine months of 2024 and 2023, respectively.
The FHLB and FRB have been, and continue to be, a significant source of back-up liquidity and funding. We are a member of the FHLB of Des Moines, which allows member banks to borrow against eligible loans and securities to satisfy liquidity and funding requirements. We are required to invest in FHLB and FRB stock to maintain our borrowing capacity. At September 30, 2024, our total investment in FHLB and FRB stock was $56 million and $65 million, respectively, compared with $79 million and $65 million at December 31, 2023.
At September 30, 2024, loans with a carrying value of $23.3 billion and $17.3 billion, compared with $24.8 billion and $11.5 billion at December 31, 2023, were pledged at the FHLB and FRB, respectively, as collateral for current and potential borrowings.
At September 30, 2024 and December 31, 2023, investment securities with a carrying value of $18.6 billion and $20.5 billion, respectively, were pledged as collateral for potential borrowings. For the same time periods, these pledged securities included $8.9 billion and $9.5 billion for available use through the GCF and other repo programs, $5.2 billion and $5.5 billion to the FRB and FHLB, and $4.5 billion and $5.5 billion to secure collateralized public and trust deposits, advances, and for other 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:
34
AVAILABLE LIQUIDITY
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in billions) | FHLB |
FRB
1
|
GCF
2
|
BTFP | Total | FHLB |
FRB
1
|
GCF | BTFP | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total borrowing capacity | $ | 15.5 | $ | 17.2 | $ | 9.1 | $ | 1.5 | $ | 43.3 | $ | 16.6 | $ | 9.8 | $ | 9.6 | $ | 5.8 | $ | 41.8 | |||||||||||||||||||||||||||||||||||||||
| Borrowings outstanding | 1.1 | — | — | 1.5 | 2.6 | 1.6 | — | 1.8 | — | 3.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Remaining capacity, at period end | 14.4 | 17.2 | 9.1 | — | 40.7 | 15.0 | 9.8 | 7.8 | 5.8 | 38.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 1.1 | 0.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Interest-bearing deposits
3
|
1.3 | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total available liquidity | $ | 43.1 | $ | 40.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratio of available liquidity to uninsured deposits | 130 | % | 122 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1
Represents borrowing capacity and borrowings outstanding at the Federal Reserve Bank discount window.
2
Includes $42 million pledged for available use through other repo programs.
3
Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
At September 30, 2024 and December 31, 2023, our total available liquidity was $43.1 billion, compared with $40.6 billion, respectively. At September 30, 2024, 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 is also directly affected by the credit ratings we receive from various rating agencies. The ratings not only influence the costs associated with borrowings, but can also influence the sources of the borrowings. All of the credit rating agencies rate our debt at an investment-grade level.
The following schedule presents our credit ratings:
| CREDIT RATINGS | ||||||||||||||||||||||||||
| as of October 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 | NR | ||||||||||||||||||||||
| Fitch | Stable | BBB+ | BBB | F2 | ||||||||||||||||||||||
| Moody's | Stable | Baa2 | NR | P2 | ||||||||||||||||||||||
Capital Management
A strong capital position is vital to the achievement of our key corporate objectives, our continued profitability, and to promoting depositor and investor confidence. We seek to (1) maintain sufficient capital to support the current needs and growth of our businesses, consistent with our assessment of their potential to create value for shareholders, and (2) fulfill responsibilities to depositors and bondholders while managing capital distributions to shareholders through dividends and repurchases of common stock.
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, including the FRB’s supervisory severely adverse scenario. The timing and amount of capital actions are subject to various factors, including our financial performance, business needs, prevailing and anticipated economic conditions, and the results of our internal stress testing, as well as Board and Office of the Comptroller of the Currency (“OCC”) approval. Shares may be repurchased occasionally in the open market or through privately negotiated transactions. For a more comprehensive discussion of our capital risk management, see “Capital Management” in our 2023 Form 10-K.
35
SHAREHOLDERS' EQUITY
| (Dollar amounts in millions) |
September 30,
2024 |
December 31,
2023 |
Amount change | Percent change | |||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||
|
Preferred stock
|
$ | 440 | $ | 440 | $ | — | — | % | |||||||||||||||
|
Common stock and additional paid-in capital
|
1,717 | 1,731 | (14) | (1) | |||||||||||||||||||
|
Retained earnings
|
6,564 | 6,212 | 352 | 6 | |||||||||||||||||||
| Accumulated other comprehensive loss | (2,336) | (2,692) | 356 | 13 | |||||||||||||||||||
| Total shareholders' equity | $ | 6,385 | $ | 5,691 | $ | 694 | 12 | ||||||||||||||||
Total shareholders’ equity increased $694 million, or 12%, to $6.4 billion at September 30, 2024, compared with $5.7 billion at December 31, 2023. The AOCI balance was a loss of $2.3 billion at September 30, 2024, and largely reflects a decline in the fair value of fixed-rate AFS securities as a result of changes in interest rates, and includes $1.9 billion ($1.4 billion after tax) of unrealized losses on the securities previously transferred from AFS to held-to-maturity (“HTM”). When compared to December 31, 2023, AOCI improved $356 million, primarily due to $147 million in unrealized loss amortization associated with the securities transferred from AFS to HTM, and $137 million primarily related to paydowns on AFS securities. AOCI was also impacted by a $72 million decrease in unrealized losses and other adjustments associated with derivative instruments used for risk management purposes.
Absent any sales or credit impairment of the AFS securities, the unrealized losses will not be recognized in earnings. We do not intend to sell any securities with unrealized losses. Although changes in AOCI are reflected in shareholders’ equity, they are currently excluded from regulatory capital, and therefore do not impact our regulatory ratios. For more discussion on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.
CAPITAL DISTRIBUTIONS
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In millions, except share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Capital distributions: | |||||||||||||||||||||||
| Preferred dividends paid | $ | 10 | $ | 7 | $ | 31 | $ | 22 | |||||||||||||||
| Total capital distributed to preferred shareholders | 10 | 7 | 31 | 22 | |||||||||||||||||||
| Common dividends paid | 61 | 61 | 184 | 184 | |||||||||||||||||||
|
Bank common stock repurchased
1
|
— | — | 35 | 50 | |||||||||||||||||||
| Total capital distributed to common shareholders | 61 | 61 | 219 | 234 | |||||||||||||||||||
| Total capital distributed to preferred and common shareholders | $ | 71 | $ | 68 | $ | 250 | $ | 256 | |||||||||||||||
|
Weighted average diluted common shares outstanding (in thousands)
|
147,150 | 147,653 | 147,202 | 147,794 | |||||||||||||||||||
| Common shares outstanding, at period end (in thousands) | 147,699 | 148,146 | 147,699 | 148,146 | |||||||||||||||||||
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 October 1, 2024, we had $1.4 billion of retained net profits available for distribution.
During the third quarter of 2024, we paid dividends on preferred stock of $10 million and dividends on common stock of $61 million, or $0.41 per share. In November 2024, the Board declared a regular quarterly dividend of $0.43 per common share, payable on November 21, 2024 to shareholders of record on November 14, 2024. See Note 9 of the Notes to Consolidated Financial Statements for additional information about our capital management actions.
36
Basel III
We are subject to Basel III capital requirements that include certain minimum regulatory capital ratios. At September 30, 2024, we exceeded all capital adequacy requirements under the Basel III capital rules. Based on our internal stress testing and other assessments of capital adequacy, we believe we hold capital sufficiently in excess of internal and regulatory requirements for well-capitalized banks. See “Supervision and Regulation” and Note 15 of our 2023 Form 10-K for more information about our compliance with the Basel III capital requirements. The following schedule presents our capital amounts, capital ratios, and other selected performance ratios:
CAPITAL AMOUNTS AND RATIOS
| (Dollar amounts in millions) |
September 30,
2024 |
December 31,
2023 |
September 30,
2023 |
||||||||||||||
|
Basel III risk-based capital amounts:
|
|||||||||||||||||
| Common equity tier 1 capital | $ | 7,206 | $ | 6,863 | $ | 6,803 | |||||||||||
| Tier 1 risk-based | 7,646 | 7,303 | 7,242 | ||||||||||||||
| Total risk-based | 8,890 | 8,553 | 8,500 | ||||||||||||||
| Risk-weighted assets | 67,305 | 66,934 | 66,615 | ||||||||||||||
| Basel III risk-based capital ratios: | |||||||||||||||||
| Common equity tier 1 capital ratio | 10.7 | % | 10.3 | % | 10.2 | % | |||||||||||
| Tier 1 risk-based ratio | 11.4 | 10.9 | 10.9 | ||||||||||||||
| Total risk-based ratio | 13.2 | 12.8 | 12.8 | ||||||||||||||
| Tier 1 leverage ratio | 8.6 | 8.3 | 8.3 | ||||||||||||||
| Other ratios: | |||||||||||||||||
| Average equity to average assets (three months ended) | 6.9 | % | 6.2 | % | 6.2 | % | |||||||||||
| Return on average common equity (three months ended) | 14.1 | 9.2 | 13.5 | ||||||||||||||
|
Return on average tangible common equity (three months ended)
1
|
17.4 | 11.8 | 17.3 | ||||||||||||||
|
Tangible equity ratio
1
|
6.2 | 5.4 | 4.9 | ||||||||||||||
|
Tangible common equity ratio
1
|
5.7 | 4.9 | 4.4 | ||||||||||||||
1
See “Non-GAAP Financial Measures” on page 38 for more information regarding these ratios.
Estimated common equity tier 1 (“CET1”) capital was $7.2 billion, an increase of 6%, compared with $6.8 billion in the prior year period. The estimated CET1 capital ratio was 10.7%, compared with 10.2%. Our tangible common equity ratio increased to 5.7%, compared with 4.4%, primarily due to an increase in retained earnings and reduced unrealized losses in AOCI. For more information on non-GAAP financial measures, see page 38.
Recent Regulatory Developments
During the third quarter of 2023, federal bank regulators issued a proposal to implement the Basel 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, and would potentially impact our current and future capital planning, including share repurchase activity. At September 30, 2024, we had $87.0 billion in total assets and do not currently qualify as a large banking organization. We continue to evaluate the potential 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.
Federal bank regulators also issued proposals that would (1) expand a long-term debt requirement to all banks with total assets of $100 billion or more, and (2) revise requirements for resolution planning. For more information about these regulatory proposals and their potential impact, see “Recent Regulatory Developments” in the Supervision and Regulation section of our 2023 Form 10-K.
37
NON-GAAP FINANCIAL MEASURES
This Form 10-Q presents non-GAAP financial measures, in addition to generally accepted accounting principles (“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 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.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
| Three Months Ended | ||||||||||||||||||||
| (Dollar amounts in millions) |
September 30,
2024 |
June 30,
2024 |
September 30,
2023 |
|||||||||||||||||
|
Net earnings applicable to common shareholders (GAAP)
|
$ | 204 | $ | 190 | $ | 168 | ||||||||||||||
| Adjustment, net of tax: | ||||||||||||||||||||
| Amortization of core deposit and other intangibles | 1 | 1 | 1 | |||||||||||||||||
|
Net earnings applicable to common shareholders, net of tax
|
(a) | $ | 205 | $ | 191 | $ | 169 | |||||||||||||
| Average common equity (GAAP) | $ | 5,738 | $ | 5,450 | $ | 4,938 | ||||||||||||||
| Average goodwill and intangibles | (1,054) | (1,056) | (1,061) | |||||||||||||||||
| Average tangible common equity (non-GAAP) | (b) | $ | 4,684 | $ | 4,394 | $ | 3,877 | |||||||||||||
| Number of days in quarter | (c) | 92 | 91 | 92 | ||||||||||||||||
| Number of days in year | (d) | 366 | 366 | 365 | ||||||||||||||||
|
Return on average tangible common equity (non-GAAP)
1
|
(a/b/c)*d | 17.4 | % | 17.5 | % | 17.3 | % | |||||||||||||
1
Excluding the effect of AOCI from average tangible common equity would result in associated returns of 11.4%, 10.9%, and 9.9% for the periods presented, respectively.
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)
| (Dollar amounts in millions, except shares and per share amounts) |
September 30,
2024 |
June 30,
2024 |
September 30,
2023 |
|||||||||||||||||
| Total shareholders’ equity (GAAP) | $ | 6,385 | $ | 6,025 | $ | 5,315 | ||||||||||||||
| Goodwill and intangibles | (1,053) | (1,055) | (1,060) | |||||||||||||||||
| Tangible equity (non-GAAP) | (a) | 5,332 | 4,970 | 4,255 | ||||||||||||||||
| Preferred stock | (440) | (440) | (440) | |||||||||||||||||
| Tangible common equity (non-GAAP) | (b) | $ | 4,892 | $ | 4,530 | $ | 3,815 | |||||||||||||
| Total assets (GAAP) | $ | 87,032 | $ | 87,606 | $ | 87,269 | ||||||||||||||
| Goodwill and intangibles | (1,053) | (1,055) | (1,060) | |||||||||||||||||
| Tangible assets (non-GAAP) | (c) | $ | 85,979 | $ | 86,551 | $ | 86,209 | |||||||||||||
| Common shares outstanding (in thousands) | (d) | 147,699 | 147,684 | 148,146 | ||||||||||||||||
| Tangible equity ratio (non-GAAP) | (a/c) | 6.2 | % | 5.7 | % | 4.9 | % | |||||||||||||
| Tangible common equity ratio (non-GAAP) | (b/c) | 5.7 | % | 5.2 | % | 4.4 | % | |||||||||||||
| Tangible book value per common share (non-GAAP) | (b/d) | $ | 33.12 | $ | 30.67 | $ | 25.75 | |||||||||||||
38
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 allows 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 (“PPNR”) 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.
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
| Three Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
September 30,
2024 |
June 30,
2024 |
September 30,
2023 |
September 30,
2024 |
September 30,
2023 |
December 31,
2023 |
||||||||||||||||||||||||||||||||
| Noninterest expense (GAAP) | (a) | $ | 502 | $ | 509 | $ | 496 | $ | 1,537 | $ | 1,516 | $ | 2,097 | |||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
|
Severance costs
|
1 | 1 | — | 2 | 14 | 14 | ||||||||||||||||||||||||||||||||
|
Other real estate expense, net
|
— | (1) | — | (1) | — | — | ||||||||||||||||||||||||||||||||
|
Amortization of core deposit and other intangibles
|
2 | 1 | 2 | 5 | 5 | 6 | ||||||||||||||||||||||||||||||||
|
Restructuring costs
|
— | — | 1 | — | 1 | 1 | ||||||||||||||||||||||||||||||||
| SBIC investment success fee accrual | — | 1 | — | 1 | — | — | ||||||||||||||||||||||||||||||||
| FDIC special assessment | — | 1 | — | 14 | — | 90 | ||||||||||||||||||||||||||||||||
|
Total adjustments
|
(b) | 3 | 3 | 3 | 21 | 20 | 111 | |||||||||||||||||||||||||||||||
|
Adjusted noninterest expense (non-GAAP)
|
(c)=(a-b) | $ | 499 | $ | 506 | $ | 493 | $ | 1,516 | $ | 1,496 | $ | 1,986 | |||||||||||||||||||||||||
| Net interest income (GAAP) | (d) | $ | 620 | $ | 597 | $ | 585 | $ | 1,803 | $ | 1,855 | $ | 2,438 | |||||||||||||||||||||||||
|
Fully taxable-equivalent adjustments
|
(e) | 12 | 11 | 11 | 33 | 31 | 41 | |||||||||||||||||||||||||||||||
|
Taxable-equivalent net interest income (non-GAAP)
|
(f)=(d+e) | 632 | 608 | 596 | 1,836 | 1,886 | 2,479 | |||||||||||||||||||||||||||||||
| Noninterest income (GAAP) | g | 172 | 179 | 180 | 507 | 529 | 677 | |||||||||||||||||||||||||||||||
|
Combined income (non-GAAP)
|
(h)=(f+g) | 804 | 787 | 776 | 2,343 | 2,415 | 3,156 | |||||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
|
Fair value and nonhedge derivative gains (losses)
|
(3) | (1) | 7 | (3) | 5 | (4) | ||||||||||||||||||||||||||||||||
|
Securities gains (losses), net
|
9 | 4 | 4 | 11 | 5 | 4 | ||||||||||||||||||||||||||||||||
|
Total adjustments
|
(i) | 6 | 3 | 11 | 8 | 10 | — | |||||||||||||||||||||||||||||||
|
Adjusted taxable-equivalent revenue (non-GAAP)
|
(j)=(h-i) | $ | 798 | $ | 784 | $ | 765 | $ | 2,335 | $ | 2,405 | $ | 3,156 | |||||||||||||||||||||||||
|
Pre-provision net revenue (non-GAAP)
|
(h)-(a) | $ | 302 | $ | 278 | $ | 280 | $ | 806 | $ | 899 | $ | 1,059 | |||||||||||||||||||||||||
| Adjusted PPNR (non-GAAP) | (j)-(c) | 299 | 278 | 272 | 819 | 909 | 1,170 | |||||||||||||||||||||||||||||||
|
Efficiency ratio (non-GAAP)
1
|
(c/j) | 62.5 | % | 64.5 | % | 64.4 | % | 64.9 | % | 62.2 | % | 62.9 | % | |||||||||||||||||||||||||
1
Excluding both the $9 million gain on sale of our Enterprise Retirement Solutions business and the $4 million gain on sale of a bank-owned property (recorded in dividends and other income), the efficiency ratio for the three months ended June 30, 2024 would have been 65.6%.
39
ITEM 1. FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED BALANCE SHEETS
| (In millions, shares in thousands) |
September 30,
2024 |
December 31,
2023 |
|||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ |
|
$ |
|
|||||||
| Money market investments: | |||||||||||
| Interest-bearing deposits |
|
|
|||||||||
| Federal funds sold and securities purchased under agreements to resell |
|
|
|||||||||
| Trading securities, at fair value |
|
|
|||||||||
| Investment securities: | |||||||||||
| Available-for-sale, at fair value |
|
|
|||||||||
|
Held-to-maturity, at amortized cost (fair value: $
|
|
|
|||||||||
| Total investment securities |
|
|
|||||||||
|
Loans held for sale (includes $
|
|
|
|||||||||
| Loans and leases, net of unearned income and fees |
|
|
|||||||||
| Less allowance for loan and lease losses |
|
|
|||||||||
| Loans held for investment, net of allowance |
|
|
|||||||||
| Other noninterest-bearing investments |
|
|
|||||||||
| Premises, equipment and software, net |
|
|
|||||||||
| Goodwill and intangibles |
|
|
|||||||||
| Other real estate owned |
|
|
|||||||||
| Other assets |
|
|
|||||||||
| Total assets | $ |
|
$ |
|
|||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Deposits: | |||||||||||
| Noninterest-bearing demand | $ |
|
$ |
|
|||||||
| Interest-bearing: | |||||||||||
| Savings and money market |
|
|
|||||||||
| Time |
|
|
|||||||||
| Total deposits |
|
|
|||||||||
| Federal funds and other short-term borrowings |
|
|
|||||||||
| Long-term debt |
|
|
|||||||||
| Reserve for unfunded lending commitments |
|
|
|||||||||
| Other liabilities |
|
|
|||||||||
| Total liabilities |
|
|
|||||||||
| Shareholders’ equity: | |||||||||||
|
Preferred stock, without par value; authorized
|
|
|
|||||||||
|
Common stock ($
|
|
|
|||||||||
| Retained earnings |
|
|
|||||||||
| Accumulated other comprehensive income (loss) |
(
|
(
|
|||||||||
| Total shareholders’ equity |
|
|
|||||||||
| Total liabilities and shareholders’ equity | $ |
|
$ |
|
|||||||
See accompanying notes to consolidated financial statements.
40
CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||||||||
| (In millions, except shares and per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Interest and fees on loans | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Interest on money market investments |
|
|
|
|
|||||||||||||||||||
| Interest on securities |
|
|
|
|
|||||||||||||||||||
| Total interest income |
|
|
|
|
|||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Interest on deposits |
|
|
|
|
|||||||||||||||||||
| Interest on short- and long-term borrowings |
|
|
|
|
|||||||||||||||||||
| Total interest expense |
|
|
|
|
|||||||||||||||||||
| Net interest income |
|
|
|
|
|||||||||||||||||||
| Provision for credit losses: | |||||||||||||||||||||||
| Provision for loan and lease losses |
|
|
|
|
|||||||||||||||||||
| Provision for unfunded lending commitments |
|
(
|
(
|
(
|
|||||||||||||||||||
| Total provision for credit losses |
|
|
|
|
|||||||||||||||||||
| Net interest income after provision for credit losses |
|
|
|
|
|||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| 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 |
|
|
|
|
|||||||||||||||||||
| Customer-related noninterest income |
|
|
|
|
|||||||||||||||||||
| Fair value and nonhedge derivative income |
(
|
|
(
|
|
|||||||||||||||||||
| Dividends and other income (loss) |
|
|
|
|
|||||||||||||||||||
| Securities gains (losses), net |
|
|
|
|
|||||||||||||||||||
| Total noninterest income |
|
|
|
|
|||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| 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 |
|
|
(
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total noninterest expense |
|
|
|
|
|||||||||||||||||||
| Income before income taxes |
|
|
|
|
|||||||||||||||||||
| Income taxes |
|
|
|
|
|||||||||||||||||||
| Net income |
|
|
|
|
|||||||||||||||||||
| Preferred stock dividends |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Net earnings applicable to common shareholders | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Weighted average common shares outstanding during the period: | |||||||||||||||||||||||
| Basic shares (in thousands) |
|
|
|
|
|||||||||||||||||||
| Diluted shares (in thousands) |
|
|
|
|
|||||||||||||||||||
| Net earnings per common share: | |||||||||||||||||||||||
| Basic | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Diluted |
|
|
|
|
|||||||||||||||||||
See accompanying notes to consolidated financial statements.
41
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Net income for the period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net unrealized holding gains (losses) on investment securities |
|
(
|
|
(
|
|||||||||||||||||||
| Unrealized loss amortization associated with the securities transferred from AFS to HTM |
|
|
|
|
|||||||||||||||||||
|
Net unrealized gains on other noninterest-bearing investments
|
|
|
|
|
|||||||||||||||||||
| Net unrealized holding gains (losses) on derivative instruments |
|
(
|
|
|
|||||||||||||||||||
|
Reclassification adjustment for decrease in interest income recognized in earnings on derivative instruments
|
|
|
|
|
|||||||||||||||||||
| Other comprehensive income (loss), net of tax |
|
(
|
|
|
|||||||||||||||||||
| Comprehensive income | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
|
(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 June 30, 2024 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Net income for the period |
|
|
|||||||||||||||||||||||||||||||||
|
Other comprehensive income, net of tax
|
|
|
|||||||||||||||||||||||||||||||||
|
Bank common stock repurchased
|
(
|
|
|||||||||||||||||||||||||||||||||
|
Net activity under employee plans and related tax benefits
|
|
|
|
||||||||||||||||||||||||||||||||
| Dividends on preferred stock |
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Dividends on common stock, $
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Balance at June 30, 2023 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Net income for the period |
|
|
|||||||||||||||||||||||||||||||||
|
Other comprehensive loss, net of tax
|
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Net activity under employee plans and related tax benefits
|
|
|
|
||||||||||||||||||||||||||||||||
| Dividends on preferred stock |
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Dividends on common stock, $
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Change in deferred compensation |
(
|
(
|
|||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
42
|
(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, 2023 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Net income for the period |
|
|
|||||||||||||||||||||||||||||||||
|
Other comprehensive income, net of tax
|
|
|
|||||||||||||||||||||||||||||||||
|
Bank common stock repurchased
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||
|
Net activity under employee plans and related tax benefits
|
|
|
|
||||||||||||||||||||||||||||||||
| Dividends on preferred stock |
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Dividends on common stock, $
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Change in deferred compensation |
(
|
(
|
|||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Balance at December 31, 2022 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| Net income for the period |
|
|
|||||||||||||||||||||||||||||||||
|
Other comprehensive income, net of tax
|
|
|
|||||||||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||||||||||
|
Bank common stock repurchased
|
(
|
(
|
(
|
||||||||||||||||||||||||||||||||
|
Net activity under employee plans and related tax benefits
|
|
|
|
||||||||||||||||||||||||||||||||
| Dividends on preferred stock |
(
|
(
|
|||||||||||||||||||||||||||||||||
|
Dividends on common stock, $
|
(
|
(
|
|||||||||||||||||||||||||||||||||
| Change in deferred compensation |
(
|
(
|
|||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
43
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| (In millions) |
Nine Months Ended
September 30, |
||||||||||
| 2024 | 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income for the period | $ |
|
$ |
|
|||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
|
Provision for credit losses
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|||||||||
|
Deferred income tax expense
|
|
|
|||||||||
|
Net (increase) decrease in trading securities
|
(
|
|
|||||||||
|
Net decrease (increase) in loans held for sale
|
|
(
|
|||||||||
|
Change in other liabilities
|
(
|
(
|
|||||||||
|
Change in other assets
|
|
|
|||||||||
|
Other, net
|
(
|
|
|||||||||
| Net cash provided by operating activities |
|
|
|||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Net decrease in money market investments |
|
|
|||||||||
| Proceeds from maturities and paydowns of investment securities held-to-maturity |
|
|
|||||||||
| Purchases of investment securities held-to-maturity |
(
|
(
|
|||||||||
| Proceeds from sales, maturities, and paydowns of investment securities available-for-sale |
|
|
|||||||||
| Purchases of investment securities available-for-sale |
(
|
(
|
|||||||||
| Net change in loans and leases |
(
|
(
|
|||||||||
| Purchases and sales of other noninterest-bearing investments |
|
|
|||||||||
| Purchases of premises and equipment |
(
|
(
|
|||||||||
|
Other, net
|
|
(
|
|||||||||
| Net cash provided by investing activities |
|
|
|||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Net increase in deposits |
|
|
|||||||||
| Net change in short-term borrowed funds |
(
|
(
|
|||||||||
| Redemption of long-term debt |
|
(
|
|||||||||
| Proceeds from the issuance of common stock |
|
|
|||||||||
| Dividends paid on common and preferred stock |
(
|
(
|
|||||||||
| Bank common stock repurchased |
(
|
(
|
|||||||||
| Other, net |
(
|
(
|
|||||||||
| Net cash used in financing activities |
(
|
(
|
|||||||||
| Net increase in cash and due from banks |
|
|
|||||||||
| Cash and due from banks at beginning of period |
|
|
|||||||||
| Cash and due from banks at end of period | $ |
|
$ |
|
|||||||
| Cash paid for interest | $ |
|
$ |
|
|||||||
| Net cash paid for income taxes |
|
|
|||||||||
|
Noncash activities:
|
|||||||||||
| Loans held for investment reclassified to loans held for sale, net |
|
|
|||||||||
See accompanying notes to consolidated financial statements.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2024
1.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Zions Bancorporation, National Association and its majority-owned subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included. References to GAAP, including standards promulgated by the Financial Accounting Standards Board (“FASB”), are made according to sections of the Accounting Standards Codification.
The results of operations for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of the results that may be expected in future periods. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying Notes. Actual results could differ from those estimates. For further information, refer to the consolidated financial statements and accompanying footnotes included in our 2023 Form 10-K.
We evaluated events that occurred between September 30, 2024 and the date the accompanying financial statements were issued, and determined that there were no material events that would require adjustments to our consolidated financial statements or significant disclosure in the accompanying Notes.
Zions Bancorporation, N.A. is a commercial bank headquartered in Salt Lake City, Utah. We provide a wide range of banking products and related services in
11
Western and Southwestern states through
seven
separately managed bank divisions, which we refer to as “affiliates,” or “affiliate banks,” each with its own local branding and management team. These include Zions Bank, in Utah, Idaho, and Wyoming; California Bank & Trust (“CB&T”); Amegy Bank (“Amegy”), in Texas; National Bank of Arizona (“NBAZ”); Nevada State Bank (“NSB”); Vectra Bank Colorado (“Vectra”), in Colorado and New Mexico; and The Commerce Bank of Washington (“TCBW”) which operates under that name in Washington and under the name The Commerce Bank of Oregon in Oregon.
45
2.
RECENT ACCOUNTING PRONOUNCEMENTS
|
Standard
|
Description
|
Effective date |
Effect on the financial statements or other significant matters
|
|||||||||||||||||
| Standards not yet adopted by the Bank as of September 30, 2024 | ||||||||||||||||||||
|
ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
|
This Accounting Standards Update (“ASU”) expands operating segment disclosures and requires all segment disclosures to be reported in both annual and interim periods. The new standard requires disclosure of the following:
•
Significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) for reportable segments;
•
The title and position of the CODM as well as how the CODM uses the reported measure(s) of profit and loss to assess segment performance; and
•
“Other segment items” by reportable segment and a description of its composition.
|
Annual periods beginning January 1, 2024; Interim periods beginning January 1, 2025
|
The overall effect of this standard is not expected to have a material impact on our financial statements.
|
|||||||||||||||||
|
ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
|
This ASU expands tax disclosures to provide more information to better assess how an entity’s operations, related tax risks, and tax planning affect its tax rate and prospects for future cash flows. The enhancements in this ASU require that an entity disaggregate income taxes paid and income (or loss) from continuing operations before tax expense (or benefit), and income tax expense (or benefit) from continuing operations.
The new standard requires disclosure of specific categories in the rate reconciliation and provides additional information for reconciling items that meet a quantitative threshold.
|
January 1, 2025
|
The overall effect of this standard is not expected to have a material impact on our financial statements.
|
|||||||||||||||||
|
Standards adopted by the Bank during 2024
|
||||||||||||||||||||
|
ASU 2022-03,
Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
|
This ASU clarifies that contractual restrictions prohibiting the sale of an equity security are not considered part of the unit of account of the equity security, and therefore, are not considered in measuring fair value. The amendments clarify that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account. The amendments in this ASU also require additional qualitative and quantitative disclosures for equity securities subject to contractual sale restrictions.
|
January 1, 2024
|
We adopted the new standard on January 1, 2024. The adoption of this standard did not have a material effect on our financial statements.
|
|||||||||||||||||
|
ASU 2023-02,
Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
|
This ASU expands the optional use of the proportional amortization method (“PAM”), previously limited to investments in low-income housing tax credit (“LIHTC”) structures, to any eligible equity investments made primarily for the purpose of receiving income tax credit and other tax benefits when certain criteria are met. PAM results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit).
This ASU allows for an accounting policy election to apply PAM on a tax-credit-program-by-tax-credit-program basis. The ASU also includes additional disclosure requirements about equity investments accounted for using PAM.
|
January 1, 2024
|
We adopted the new standard on January 1, 2024. The adoption of this standard did not have a material effect on our financial statements.
|
|||||||||||||||||
46
3.
FAIR VALUE
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For more information about our valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 3 of our 2023 Form 10-K.
Fair Value Hierarchy
The following schedule presents assets and liabilities measured at fair value on a recurring basis:
| (In millions) | September 30, 2024 | ||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Trading securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Available-for-sale securities:
|
|||||||||||||||||||||||
| U.S. Treasury, agencies, and corporations |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Other debt securities |
|
|
|
|
|||||||||||||||||||
| Total available-for-sale |
|
|
|
|
|||||||||||||||||||
| Loans held for sale |
|
|
|
|
|||||||||||||||||||
| Other noninterest-bearing investments: | |||||||||||||||||||||||
| Bank-owned life insurance |
|
|
|
|
|||||||||||||||||||
|
Private equity investments
1
|
|
|
|
|
|||||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| Agriculture loan servicing |
|
|
|
|
|||||||||||||||||||
| Deferred compensation plan assets |
|
|
|
|
|||||||||||||||||||
| Derivatives |
|
|
|
|
|||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| LIABILITIES | |||||||||||||||||||||||
| Securities sold, not yet purchased | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Other liabilities: | |||||||||||||||||||||||
| Derivatives |
|
|
|
|
|||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
1
The Level 1 private equity investments (“PEIs”) generally relate to the portion of our Small Business Investment Company (“SBIC”) investments and other similar investments that are publicly traded.
47
| (In millions) | December 31, 2023 | ||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Trading securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Available-for-sale securities:
|
|||||||||||||||||||||||
| U.S. Treasury, agencies, and corporations |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Other debt securities |
|
|
|
|
|||||||||||||||||||
| Total available-for-sale |
|
|
|
|
|||||||||||||||||||
| Loans held for sale |
|
|
|
|
|||||||||||||||||||
| Other noninterest-bearing investments: | |||||||||||||||||||||||
| Bank-owned life insurance |
|
|
|
|
|||||||||||||||||||
|
Private equity investments
1
|
|
|
|
|
|||||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| Agriculture loan servicing |
|
|
|
|
|||||||||||||||||||
| Deferred compensation plan assets |
|
|
|
|
|||||||||||||||||||
| Derivatives |
|
|
|
|
|||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| LIABILITIES | |||||||||||||||||||||||
| Securities sold, not yet purchased | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Other liabilities: | |||||||||||||||||||||||
| Derivatives |
|
|
|
|
|||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
1
The Level 1 PEIs generally relate to the portion of our SBIC investments and other similar investments that are publicly traded.
Fair Value Option for Certain Loans Held for Sale
We have elected the fair value option for certain commercial real estate (“CRE”) loans that are intended for sale to a third-party conduit for securitization and are hedged with derivative instruments. Electing the fair value option reduces the accounting volatility that would otherwise result from the asymmetry created by accounting for the loans held for sale at the lower of cost or fair value and the derivatives at fair value, without the complexity of applying hedge accounting. These loans are included in “Loans held for sale” on the consolidated balance sheet, and associated fair value gains and losses are included in “Capital markets fees” on the consolidated statement of income, while accrued interest is included in “Interest and fees on loans.”
At September 30, 2024 and December 31, 2023, we had $
58
million and $
43
million of loans measured at fair value ($
58
million and $
43
million par value), respectively. During the first nine months of 2024 and 2023, we recognized approximately $
10
million and $
3
million of net gains from loan sales and valuation adjustments of loans carried at fair value and the associated derivatives, respectively.
Level 3 Valuations
Our Level 3 financial instruments include PEIs and agriculture loan servicing. For additional information regarding our Level 3 financial instruments, including the methods and significant assumptions used to estimate their fair value, see Note 3 of our 2023 Form 10-K.
48
Roll-forward of Level 3 Fair Value Measurements
The following schedule presents a roll-forward of assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs:
| Level 3 Instruments | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Private equity investments | Ag loan servicing | Private equity investments | Ag loan servicing | Private equity investments | Ag loan servicing | Private equity investments | Ag loan servicing | |||||||||||||||||||||||||||||||||||||||
|
Balance at beginning of period
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||
| Unrealized securities gains (losses), net |
|
|
|
|
|
|
(
|
|
|||||||||||||||||||||||||||||||||||||||
| Other noninterest income (expense) |
|
(
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Purchases |
|
|
|
|
|
|
|
(
|
|||||||||||||||||||||||||||||||||||||||
| Cost of investments sold |
(
|
|
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Transfers out |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
Balance at end of period
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||
The roll-forward of Level 3 instruments includes the following realized gains and losses recognized in “Securities gains (losses), net” on the consolidated statement of income for the periods presented:
| (In millions) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| Securities gains (losses), net | $ |
(
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||
Nonrecurring Fair Value Measurements
Certain assets and liabilities may be measured at fair value on a nonrecurring basis, including impaired loans that have been measured based on the fair value of the underlying collateral, other real estate owned (“OREO”), and equity investments without readily determinable fair values. Nonrecurring fair value adjustments generally include changes in value resulting from observable price changes for equity investments without readily determinable fair values, write-downs of individual assets, or the application of lower of cost or fair value accounting. At September 30, 2024, we had approximately $
1
million of collateral-dependent loans marked to fair value and classified in Level 2. During the third quarter of 2024, we recognized $
1
million of losses from fair value changes related to these loans. For additional information regarding assets and liabilities measured at fair value on a nonrecurring basis, see Note 3 of our 2023 Form 10-K.
Fair Value of Certain Financial Instruments
The following schedule presents the carrying values and estimated fair values of certain financial instruments:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) |
Carrying
value |
Fair value |
Level |
Carrying
value |
Fair value | Level | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||
| Held-to-maturity investment securities | $ |
|
$ |
|
2 | $ |
|
$ |
|
2 | |||||||||||||||||||||||||
|
Loans and leases (including loans held for sale), net of allowance
|
|
|
3 |
|
|
3 | |||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Time deposits |
|
|
2 |
|
|
2 | |||||||||||||||||||||||||||||
| Long-term debt |
|
|
2 |
|
|
2 | |||||||||||||||||||||||||||||
The preceding schedule does not include certain financial instruments that are recorded at fair value on a recurring basis, as well as certain financial assets and liabilities for which the carrying value approximates fair value. For
49
additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3 of our 2023 Form 10-K.
4.
OFFSETTING ASSETS AND LIABILITIES
The following schedules present gross and net information for selected financial instruments on the balance sheet:
| September 30, 2024 | ||||||||||||||||||||||||||||||||||||||
| Gross amounts not offset on the balance sheet | ||||||||||||||||||||||||||||||||||||||
| (In millions) | Gross amounts recognized | Gross amounts offset on the balance sheet | Net amounts presented on the balance sheet | Financial instruments | Cash collateral received/pledged | Net amount | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
|
Federal funds sold and securities purchased under agreements to resell
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Derivatives (included in other assets) |
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
|
Federal funds and other short-term borrowings
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
Derivatives (included in other liabilities)
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Gross amounts not offset on the balance sheet | ||||||||||||||||||||||||||||||||||||||
| (In millions) | Gross amounts recognized | Gross amounts offset on the balance sheet | Net amounts presented on the balance sheet | Financial instruments | Cash collateral received/pledged | Net amount | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
|
Federal funds sold and securities purchased under agreements to resell
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
| Derivatives (included in other assets) |
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||
| Total assets | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
|
Federal funds and other short-term borrowings
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||
|
Derivatives (included in other liabilities)
|
|
|
|
(
|
(
|
|
||||||||||||||||||||||||||||||||
| Total liabilities | $ |
|
$ |
(
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
Security repurchase and reverse repurchase agreements are offset, when applicable, on the balance sheet according to master netting agreements. Security repurchase agreements are included in “Federal funds and other short-term borrowings” on the consolidated balance sheet. Derivative instruments may be offset under their master netting agreements; however, for accounting purposes, we present these items on a gross basis on our balance sheet. See Note 7 for further information regarding derivative instruments.
5.
INVESTMENT SECURITIES
Investment securities are classified as available-for-sale (“AFS”) or held-to-maturity (“HTM”). AFS securities are carried at fair value, and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to accumulated other comprehensive income (“AOCI”), net of related taxes. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. The amortized cost represents the original cost of the investment, adjusted for related amortization or accretion of any purchase premiums or discounts, and for any impairment losses, including credit-related impairment.
50
The carrying values of our investment securities do not include accrued interest receivables of
$
54
million
and $
65
million at September 30, 2024 and December 31, 2023, respectively. These receivables are included in “Other assets” on the consolidated balance sheet.
When a security is transferred from AFS to HTM, the difference between its amortized cost basis and fair value at the date of transfer is amortized as a yield adjustment through interest income, and the fair value at the date of transfer results in either a premium or discount to the amortized cost basis of the HTM securities. The amortization of unrealized gains or losses reported in AOCI will offset the effect of the amortization of the premium or discount in interest income that is created by the transfer. The discount associated with securities previously transferred from AFS to HTM was $
1.9
billion ($
1.4
billion after tax) at September 30, 2024, compared with $
2.1
billion ($
1.5
billion after tax) at December 31, 2023.
See Notes 3 and 5 of our 2023 Form 10-K for more information regarding our process to estimate the fair value and accounting for our investment securities, respectively.
The following schedule presents the amortized cost and estimated fair values of our AFS and HTM securities:
| September 30, 2024 | |||||||||||||||||||||||
| (In millions) |
Amortized
cost |
Gross unrealized gains
1
|
Gross unrealized losses |
Estimated
fair value |
|||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||
| Agency securities |
|
|
|
|
|||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
| Small Business Administration loan-backed securities |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Other debt securities |
|
|
|
|
|||||||||||||||||||
| Total available-for-sale |
|
|
|
|
|||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||
| Agency securities |
|
|
|
|
|||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Total held-to-maturity |
|
|
|
|
|||||||||||||||||||
| Total investment securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| (In millions) |
Amortized
cost |
Gross unrealized gains
1
|
Gross unrealized losses |
Estimated
fair value |
|||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||
| Agency securities |
|
|
|
|
|||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
| Small Business Administration loan-backed securities |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Other debt securities |
|
|
|
|
|||||||||||||||||||
| Total available-for-sale |
|
|
|
|
|||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||
| Agency securities |
|
|
|
|
|||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|||||||||||||||||||
| Municipal securities |
|
|
|
|
|||||||||||||||||||
| Total held-to-maturity |
|
|
|
|
|||||||||||||||||||
| Total investment securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
1
Gross unrealized gains for the respective AFS security categories without values were individually less than $
1
million.
51
Maturities
The following schedule presents the amortized cost and weighted average yields of debt securities by remaining contractual maturity of principal payments at September 30, 2024, and does not incorporate interest rate resets and fair value hedges. The remaining contractual principal maturities do not reflect the duration of the portfolio, which would incorporate amortization and expected prepayments; the effects of which result in measured durations shorter than contractual maturities.
| September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
debt securities |
Due in one year or less | Due after one year through five years | Due after five years through ten years | Due after ten years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amortized cost | Average yield | Amortized cost | Average yield | Amortized cost | Average yield | Amortized cost | Average yield | Amortized cost | Average yield | |||||||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | |||||||||||||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Municipal securities
1
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Other debt securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Total available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Agency guaranteed mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Municipal securities
1
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Total held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities | $ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||||||||
1
The yields on tax-exempt securities are calculated on a tax-equivalent basis.
52
The following schedule presents gross unrealized losses for AFS securities and the estimated fair value by length of time the securities have been in an unrealized loss position:
| September 30, 2024 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| (In millions) |
Gross
unrealized losses |
Estimated
fair value |
Gross
unrealized losses |
Estimated
fair value |
Gross
unrealized losses |
Estimated
fair value |
|||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Municipal securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total available-for-sale investment securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| (In millions) |
Gross
unrealized losses |
Estimated
fair value |
Gross
unrealized losses |
Estimated
fair value |
Gross
unrealized losses |
Estimated
fair value |
|||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Municipal securities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total available-for-sale investment securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
At September 30, 2024 and December 31, 2023, approximately
2,589
and
2,998
AFS investment securities were in an unrealized loss position, respectively.
Impairment
On a quarterly basis, we review our investment securities portfolio for the presence of impairment on an individual security basis. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our 2023 Form 10-K.
AFS Impairment
We did not recognize any impairment
on our AFS investment securities portfolio during the first nine months of both 2024 and 2023. Unrealized losses primarily relate to higher interest rates subsequent to the purchase of securities and are not attributable to credit; as such, absent any future sales, we would expect to receive the full principal value at maturity. At September 30, 2024, we had not initiated any sales of AFS securities, nor did we have an intent to sell any identified securities with unrealized losses. We do not believe it is more likely than not that we would be required to sell such securities before recovery of their amortized cost basis.
HTM Impairment
For HTM securities, the allowance for credit losses (“ACL”) is assessed consistent with the approach described in Note 6 for loans and leases measured at amortized cost. At September 30, 2024, the ACL on HTM securities was
less than $
1
million, all HTM securities were risk-graded as
“
Pass
” in terms of credit quality, and none were considered past due.
53
Investment Securities Gains and Losses Recognized in Income
The following schedule presents investment securities gains and losses recognized in income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Gross gains | Gross losses | Gross gains | Gross losses | Gross gains | Gross losses | Gross gains | Gross losses | |||||||||||||||||||||||||||||||||||||||
| Available-for-sale | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||
The following schedule presents interest income by investment security type:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) | Taxable | Nontaxable | Total | Taxable | Nontaxable | Total | |||||||||||||||||||||||||||||
| Available-for-sale | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Held-to-maturity |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total investment securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) | Taxable | Nontaxable | Total | Taxable | Nontaxable | Total | |||||||||||||||||||||||||||||
| Available-for-sale | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Held-to-maturity |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total investment securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
6.
LOANS, LEASES, AND ALLOWANCE FOR CREDIT LOSSES
Loans, Leases, and Loans Held for Sale
Loans and leases are summarized as follows according to major portfolio segment and specific loan class:
| (In millions) |
September 30,
2024 |
December 31,
2023 |
|||||||||
| Loans held for sale | $ |
|
$ |
|
|||||||
| Commercial: | |||||||||||
| Commercial and industrial | $ |
|
$ |
|
|||||||
| Leasing |
|
|
|||||||||
| Owner-occupied |
|
|
|||||||||
| Municipal |
|
|
|||||||||
| Total commercial |
|
|
|||||||||
| Commercial real estate: | |||||||||||
| Construction and land development |
|
|
|||||||||
| Term |
|
|
|||||||||
| Total commercial real estate |
|
|
|||||||||
| Consumer: | |||||||||||
| Home equity credit line |
|
|
|||||||||
| 1-4 family residential |
|
|
|||||||||
| Construction and other consumer real estate |
|
|
|||||||||
| Bankcard and other revolving plans |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total consumer |
|
|
|||||||||
|
Total loans and leases
|
$ |
|
$ |
|
|||||||
54
Loans and leases are measured and presented at their amortized cost basis, which includes net unamortized purchase premiums, discounts, and deferred loan fees and costs totaling $
35
million and $
37
million at September 30, 2024 and December 31, 2023, respectively. Amortized cost basis does not include accrued interest receivables of $
289
million and $
299
million at September 30, 2024 and December 31, 2023, respectively. These receivables are included in “
” on the consolidated balance sheet.
Municipal loans generally include loans to state and local governments (“municipalities”) with the debt service being 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.
Land acquisition and development loans included in the construction and land development loan portfolio were $
233
million at September 30, 2024 and $
219
million at December 31, 2023.
Loans with a carrying value of $
40.6
billion at September 30, 2024 and $
36.3
billion at December 31, 2023 have been pledged at the Federal Reserve (“FRB”) and the Federal Home Loan Bank (“FHLB”) of Des Moines as collateral for current and potential borrowings.
At the time of origination, we determine the classification of loans as either held for investment or held for sale. Loans held for sale are measured at fair value or the lower of cost or fair value and primarily consist of (1) commercial real estate loans that are sold into securitization entities, and (2) conforming residential mortgages that are generally sold to U.S. government agencies.
The following schedule presents loans added to, or sold from, the held for sale category during the periods presented:
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Loans added to held for sale | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Loans sold from held for sale |
|
|
|
|
|||||||||||||||||||
Occasionally, we have continuing involvement in the sold loans in the form of servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was $
582
million and $
431
million at September 30, 2024 and December 31, 2023, respectively. Income from sold loans, excluding servicing, was $
2
million and $
5
million for the three and nine months ended September 30, 2024, and $
8
million and $
15
million for the three and nine months ended September 30, 2023, respectively. Other income from loans sold includes fair value adjustments on loans that are included in “Capital markets fees” on the consolidated statement of income.
Allowance for Credit Losses
The allowance for credit losses (“ACL”), which consists of the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”), 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. For additional information regarding our policies and methodologies used to estimate the ACL, see Note 6 of our 2023 Form 10-K.
The ACL for AFS and HTM debt securities is estimated separately from loans. For HTM securities, the ACL is estimated consistent with the approach for loans measured at amortized cost. See Note 5 of our 2023 Form 10-K for further discussion of our methodology used to estimate the ACL on AFS and HTM debt securities.
55
Changes in the ACL are summarized as follows:
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| (In millions) | Commercial |
Commercial
real estate |
Consumer | Total | |||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for loan losses |
|
(
|
|
|
|||||||||||||||||||
| Gross loan and lease charge-offs |
|
|
|
|
|||||||||||||||||||
| Recoveries |
|
|
|
|
|||||||||||||||||||
| Net loan and lease charge-offs (recoveries) |
|
(
|
|
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for unfunded lending commitments |
|
|
|
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total allowance for credit losses at end of period | |||||||||||||||||||||||
| Allowance for loan losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments |
|
|
|
|
|||||||||||||||||||
| Total allowance for credit losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| (In millions) | Commercial |
Commercial
real estate |
Consumer | Total | |||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for loan losses |
|
|
(
|
|
|||||||||||||||||||
| Gross loan and lease charge-offs |
|
|
|
|
|||||||||||||||||||
| Recoveries |
|
|
|
|
|||||||||||||||||||
| Net loan and lease charge-offs (recoveries) |
|
|
|
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for unfunded lending commitments |
|
(
|
|
(
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total allowance for credit losses at end of period | |||||||||||||||||||||||
| Allowance for loan losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments |
|
|
|
|
|||||||||||||||||||
| Total allowance for credit losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
56
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||
| (In millions) | Commercial | Commercial real estate | Consumer | Total | |||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for loan losses |
|
|
(
|
|
|||||||||||||||||||
| Gross loan and lease charge-offs |
|
|
|
|
|||||||||||||||||||
| Recoveries |
|
|
|
|
|||||||||||||||||||
| Net loan and lease charge-offs (recoveries) |
|
|
|
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for unfunded lending commitments |
|
(
|
(
|
(
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total allowance for credit losses at end of period | |||||||||||||||||||||||
| Allowance for loan losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments |
|
|
|
|
|||||||||||||||||||
| Total allowance for credit losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| (In millions) | Commercial |
Commercial
real estate |
Consumer | Total | |||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Adjustment for change in accounting standard |
|
(
|
|
(
|
|||||||||||||||||||
| Balance at beginning of period |
|
|
|
|
|||||||||||||||||||
| Provision for loan losses |
|
|
|
|
|||||||||||||||||||
| Gross loan and lease charge-offs |
|
|
|
|
|||||||||||||||||||
| Recoveries |
|
|
|
|
|||||||||||||||||||
| Net loan and lease charge-offs (recoveries) |
|
|
|
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments | |||||||||||||||||||||||
| Balance at beginning of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Provision for unfunded lending commitments |
|
(
|
(
|
(
|
|||||||||||||||||||
| Balance at end of period | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total allowance for credit losses at end of period | |||||||||||||||||||||||
| Allowance for loan losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Reserve for unfunded lending commitments |
|
|
|
|
|||||||||||||||||||
| Total allowance for credit losses | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Nonaccrual Loans
Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well-secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain.
A nonaccrual loan may be returned to accrual status when (1) all delinquent interest and principal become current in accordance with the terms of the loan agreement, (2) the loan, if secured, is well-secured, (3) the borrower has paid according to the contractual terms for a minimum of six months, and (4) an analysis of the borrower indicates a reasonable assurance of the borrower's ability and willingness to maintain payments.
57
The amortized cost basis of nonaccrual loans is summarized as follows:
| September 30, 2024 | |||||||||||||||||||||||
| Amortized cost basis | Total amortized cost basis | ||||||||||||||||||||||
| (In millions) | with no allowance | with allowance | Related allowance | ||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Leasing |
|
|
|
|
|||||||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Municipal |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Amortized cost basis | Total amortized cost basis | ||||||||||||||||||||||
| (In millions) | with no allowance | with allowance | Related allowance | ||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Leasing |
|
|
|
|
|||||||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
For accruing loans, interest is accrued and interest payments are recognized into interest income according to the contractual loan agreement. For nonaccruing loans, the accrual of interest is discontinued, any uncollected or accrued interest is reversed from interest income in a timely manner (generally within one month), and any payments received on these loans are not recognized into interest income, but are applied as a reduction to the principal outstanding. When the collectability of the amortized cost basis for a nonaccrual loan is no longer in doubt, then interest payments may be recognized in interest income on a cash basis. For the three and nine months ended September 30, 2024 and 2023, there was
no
interest income recognized on a cash basis during the period the loans were on nonaccrual.
58
The amount of accrued interest receivables reversed from interest income during the periods presented is summarized by loan portfolio segment as follows:
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Commercial | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Past Due Loans
Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credits, such as bankcard and other revolving credit plans, are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semi-annual, etc.), single payment, and demand notes, are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more.
Past due loans (accruing and nonaccruing) are summarized as follows:
| September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| (In millions) | Current |
30-89 days
past due |
90+ days
past due |
Total
past due |
Total
loans |
Accruing
loans 90+ days past due |
Nonaccrual
loans
that are
current
1
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Leasing |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Construction and other consumer real estate
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
59
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| (In millions) | Current |
30-89 days
past due |
90+ days
past due |
Total
past due |
Total
loans |
Accruing
loans 90+ days past due |
Nonaccrual
loans
that are
current
1
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Leasing |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Construction and other consumer real estate
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
1
Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is not expected.
Credit Quality Indicators
In addition to the nonaccrual and past due criteria, we also analyze loans using loan risk-grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definition of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.
•
Pass —
A Pass asset is higher-quality and does not fit any of the other categories described below. The likelihood of loss is considered low.
•
Special Mention —
A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in our credit position at some future date.
•
Substandard —
A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well-defined weaknesses and are characterized by the distinct possibility that we may sustain some loss if deficiencies are not corrected.
•
Doubtful —
A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable.
The amount of loans classified as Doubtful totaled $
20
million at September 30, 2024; we had
no
loans classified as Doubtful at December 31, 2023.
For consumer loans and for CRE loans with commitments greater than $
1
million, we generally assign internal risk grades similar to those described previously based on automated rules that depend on refreshed credit scores, payment performance, and other risk indicators. These are generally assigned either a Pass, Special Mention, or Substandard grade, and are reviewed as we identify information that might warrant a grade change.
60
The following schedule presents the amortized cost basis of loans and leases categorized by year of origination and by credit quality classification as monitored by management.
| September 30, 2024 | |||||||||||||||||||||||||||||
| Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |||||||||||||||||||||||||||
| Amortized cost basis by year of origination | |||||||||||||||||||||||||||||
| (In millions) |
2024
|
2023
|
2022
|
2021
|
2020
|
Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||
| Pass | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Leasing | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total leasing |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Owner-occupied | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Municipal | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total municipal |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Term | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
61
| September 30, 2024 | |||||||||||||||||||||||||||||
| Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |||||||||||||||||||||||||||
| Amortized cost basis by year of origination | |||||||||||||||||||||||||||||
| (In millions) |
2024
|
2023
|
2022
|
2021
|
2020
|
Prior | Total | ||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 1-4 family residential | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Construction and other consumer real estate | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and other consumer real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total other consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
62
| December 31, 2023 | |||||||||||||||||||||||||||||
| Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |||||||||||||||||||||||||||
| Amortized cost basis by year of origination | |||||||||||||||||||||||||||||
| (In millions) |
2023
|
2022
|
2021
|
2020
|
2019 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||
| Pass | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Leasing | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total leasing |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Owner-occupied | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Municipal | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total municipal |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Term | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
63
| December 31, 2023 | |||||||||||||||||||||||||||||
| Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |||||||||||||||||||||||||||
| Amortized cost basis by year of origination | |||||||||||||||||||||||||||||
| (In millions) |
2023
|
2022
|
2021
|
2020
|
2019 | Prior | Total | ||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 1-4 family residential | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Construction and other consumer real estate | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and other consumer real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total other consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
64
The following schedules present gross charge-offs by year of loan origination for the periods presented.
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||
| Term loans |
Revolving loans
gross charge-offs |
Revolving loans converted to term loans gross charge-offs | |||||||||||||||||||||||||||
| Gross charge-offs by year of loan origination | |||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||
| Term loans |
Revolving loans
gross charge-offs |
Revolving loans converted to term loans gross charge-offs | |||||||||||||||||||||||||||
| Gross charge-offs by year of loan origination | |||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
65
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||
| Term loans |
Revolving loans
gross charge-offs |
Revolving loans converted to term loans gross charge-offs | |||||||||||||||||||||||||||
| Gross charge-offs by year of loan origination | |||||||||||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||
| Term loans |
Revolving loans
gross charge-offs |
Revolving loans converted to term loans gross charge-offs | |||||||||||||||||||||||||||
| Gross charge-offs by year of loan origination | |||||||||||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
66
Loan Modifications
Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. For loans that have been modified with a borrower experiencing financial difficulty, we use the same credit loss estimation methods that we use for the rest of the loan portfolio. These methods incorporate the post-modification loan terms, as well as defaults and charge-offs associated with historical modified loans. All nonaccruing loans more than $
1
million are evaluated individually, regardless of modification.
We consider many factors in determining whether to agree to a loan modification and we seek a solution that will both minimize potential loss to us and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.
A modified loan on nonaccrual will generally remain on nonaccrual until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual.
On an ongoing basis, we monitor the performance of all modified loans according to their modified terms. The amortized cost of modified loans that had a payment default during the three and nine months ended September 30, 2024, which were still in default at period end, and were within 12 months or less of being modified was approximately $
5
million for both periods, primarily commercial real estate loans, and less than $
1
million for both the three and nine months ended September 30, 2023, respectively.
The amortized cost of loans to borrowers experiencing financial difficulty that were modified during the period, by loan class and modification type, is summarized in the following schedule:
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Amortized cost associated with
the following modification types: |
|||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Interest
rate reduction |
Maturity
or term extension |
Principal
forgiveness |
Payment
deferral |
Multiple modification types
1
|
Total
2
|
Percentage of total loans
3
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
% | |||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||
67
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
|
Amortized cost associated with
the following modification types: |
|||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Interest
rate reduction |
Maturity
or term extension |
Principal
forgiveness |
Payment
deferral |
Multiple modification types
1
|
Total
2
|
Percentage of total loans
3
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
% | |||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
|
Amortized cost associated with
the following modification types: |
|||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Interest
rate reduction |
Maturity
or term extension |
Principal
forgiveness |
Payment
deferral |
Multiple modification types
1
|
Total
2
|
Percentage of total loans
3
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
% | |||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||
68
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
|
Amortized cost associated with
the following modification types: |
|||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Interest
rate reduction |
Maturity
or term extension |
Principal
forgiveness |
Payment
deferral |
Multiple modification types
1
|
Total
2
|
Percentage of total loans
3
|
||||||||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
% | |||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||
1
Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.
2
Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled
$
8
million and
$
10
million
at September 30, 2024 and September 30, 2023, respectively.
3
Amounts less than 0.05% are rounded to zero.
The financial impact of loan modifications to borrowers experiencing financial difficulty is summarized in the following schedules:
|
Three Months Ended
September 30, 2024 |
Nine Months Ended
September 30, 2024 |
||||||||||||||||||||||
| Weighted-average interest rate reduction (in percentage points) |
Weighted-average term extension
(in months) |
Weighted-average interest rate reduction (in percentage points) |
Weighted-average term extension
(in months) |
||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial |
|
% |
|
|
% |
|
|||||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Municipal |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total weighted average financial impact |
|
|
|
|
|||||||||||||||||||
69
|
Three Months Ended
September 30, 2023 |
Nine Months Ended
September 30, 2023 |
||||||||||||||||||||||
| Weighted-average interest rate reduction (in percentage points) |
Weighted-average term extension
(in months) |
Weighted-average interest rate reduction (in percentage points) |
Weighted-average term extension
(in months) |
||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial |
|
% |
|
|
% |
|
|||||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
|
Consumer:
1
|
|||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total weighted average financial impact |
|
|
|
|
|||||||||||||||||||
1
Primarily relates to a small number of loans within each consumer loan class.
Loan modifications to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 and 2023 resulted in less than $
1
million of principal forgiveness for each respective period.
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after October 1, 2023 through September 30, 2024, presented by portfolio segment and loan class:
| September 30, 2024 | |||||||||||||||||||||||||||||
| (In millions) | Current |
30-89 days
past due |
90+ days
past due |
Total
past due |
Total
amortized cost of loans |
||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
||||||||||||||||||||||||
| Term |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
||||||||||||||||||||||||
| Other |
|
|
|
|
|
||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
70
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date we adopted ASU 2022-02, through September 30, 2023, presented by portfolio segment and loan class:
| September 30, 2023 | |||||||||||||||||||||||||||||
| (In millions) | Current |
30-89 days
past due |
90+ days
past due |
Total
past due |
Total
amortized cost of loans |
||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
||||||||||||||||||||||||
| Term |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
Collateral-Dependent Loans
When a loan is individually evaluated for expected credit losses, we estimate a specific reserve for the loan based on (1) the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, (2) the observable market price of the loan, or (3) the fair value of the loan’s underlying collateral.
Select information on loans for which the borrower is experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of the underlying collateral, including the type of collateral and the extent to which the collateral secures the loans, is summarized as follows:
| September 30, 2024 | |||||||||||||||||
| (Dollar amounts in millions) | Amortized cost | Major types of collateral |
Weighted average LTV
1
|
||||||||||||||
| Commercial: | |||||||||||||||||
| Commercial and industrial | $ |
|
Accounts Receivable |
|
% | ||||||||||||
| Owner-occupied |
|
Retail Facility |
|
||||||||||||||
| Municipal |
|
Multifamily Apartments |
|
||||||||||||||
| Total commercial |
|
||||||||||||||||
| Commercial real estate: | |||||||||||||||||
| Construction and land development |
|
Lots / Homes |
|
||||||||||||||
| Term |
|
Office Building |
|
||||||||||||||
| Total commercial real estate |
|
||||||||||||||||
| Consumer: | |||||||||||||||||
| Home equity credit line |
|
Single Family Residential |
|
||||||||||||||
| Total | $ |
|
|||||||||||||||
71
| December 31, 2023 | |||||||||||||||||
| (Dollar amounts in millions) | Amortized cost | Major types of collateral |
Weighted average LTV
1
|
||||||||||||||
| Commercial: | |||||||||||||||||
| Owner-occupied | $ |
|
Hospital |
|
% | ||||||||||||
| Commercial real estate: | |||||||||||||||||
| Construction and land development |
|
Office Building |
|
||||||||||||||
| Term |
|
Office Building |
|
||||||||||||||
| Total commercial real estate |
|
||||||||||||||||
| Total | $ |
|
|||||||||||||||
1
The fair value is based on the most recent appraisal or other collateral evaluation.
Foreclosed Residential Real Estate
At September 30, 2024, the amount of foreclosed residential real estate property totaled $
2
million; we had
no
foreclosed residential real estate property at December 31, 2023. The amortized cost basis of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure was $
8
million and $
11
million for the same periods, respectively.
7.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Accounting
Our primary objective for using derivatives is to manage interest rate risk. We use derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or liabilities. We also assist clients with their risk management needs through the use of derivatives. Cash receipts and payments from derivatives designated in qualifying hedging relationships are classified in the same category as the cash flows from the items being hedged in the statement of cash flows, and cash flows from undesignated derivatives are classified as operating activities. For a more detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our 2023 Form 10-K.
Fair Value Hedges of Liabilities
—
During the second quarter of 2023, we terminated our remaining receive-fixed interest rate swap with a notional amount of $
500
million that had been designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively converted the interest on our fixed-rate debt to floating until it was terminated. Prior to termination, changes in the fair value of derivatives designated as fair value hedges of debt were offset by changes in the fair value of the hedged debt instruments. The unamortized hedge basis adjustments resulting from the terminated hedging relationship are being amortized over the remaining life of the fixed-rate debt.
Fair Value Hedges of Assets —
Fair value hedges of fixed-rate assets effectively convert the fixed interest income to a floating rate on the hedged portion of the assets. Changes in fair value of derivatives designated as fair value hedges of fixed-rate financial assets were largely offset by changes in the value of the hedged assets, as shown in the schedules on the following pages. At September 30, 2024, we had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $
3.6
billion designated as fair value hedges of fixed-rate AFS securities. We had pay-fixed swaps with an additional $
1.0
billion of aggregate notional designated as hedges of fixed-rate commercial loans.
Cash Flow Hedges
—
Cash flow hedges of variable-rate assets and liabilities effectively convert the variable interest receipts and payments to fixed. At September 30, 2024, we had receive-fixed, pay-floating interest rate swaps with an aggregate notional amount of $
350
million designated as cash flow hedges of pools of floating-rate commercial loans. Additionally, at September 30, 2024, we had one pay-fixed, receive-floating interest rate swap with a notional amount of $
500
million designated as a cash flow hedge of the variability in the interest payments on certain FHLB advances. Changes in the fair value of qualifying cash flow hedges during the quarter were recorded in AOCI as shown in the schedule below. The amounts deferred in AOCI are reclassified into earnings in the periods in which
72
the hedged interest receipts or payments occur (i.e., when the hedged forecasted transactions affect earnings). At September 30, 2024, there was $
117
million of losses deferred in AOCI related to terminated cash flow hedges that are expected to be fully reclassified into earnings by October 2027.
Collateral and Credit Risk
Exposure to credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For more information on how we incorporate counterparty credit risk in derivative valuations, see Note 3 of our 2023 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our 2023 Form 10-K.
Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit risk-related feature were triggered, such as a downgrade of our credit rating. In past situations, counterparties have not generally required that additional collateral be pledged when provided for by the contractual terms. At September 30, 2024, the fair value of our derivative liabilities was $
295
million, for which we were required to pledge cash collateral of $
4
million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at September 30, 2024, there would likely be
no
additional collateral required to be pledged.
Derivative Amounts
The following schedule presents information regarding notional amounts and recorded gross fair values at September 30, 2024 and December 31, 2023, and the related gain (loss) of derivative instruments:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
|
Notional
amount |
Fair value |
Notional
amount |
Fair value | ||||||||||||||||||||||||||||||||
| (In millions) |
Other
assets |
Other
liabilities |
Other
assets |
Other
liabilities |
|||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
| Cash flow hedges of floating-rate assets: | |||||||||||||||||||||||||||||||||||
|
Receive-fixed interest rate swaps
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Cash flow hedges of floating-rate liabilities: | |||||||||||||||||||||||||||||||||||
| Pay-fixed interest rate swaps |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||||||||
| Asset hedges: Pay-fixed interest rate swaps |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | |||||||||||||||||||||||||||||||||||
|
Customer interest rate derivatives
1
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other interest rate derivatives |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Foreign exchange derivatives |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Purchased credit derivatives |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total derivatives | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
1
Customer interest rate derivatives include both customer-facing derivatives as well as offsetting derivatives facing other dealer banks. The fair value of these derivatives include a net credit valuation adjustment of $
5
million and $
9
million, reducing the fair value of the liability at September 30, 2024, and December 31, 2023, respectively.
73
The amount of derivative gains/(losses) from cash flow and fair value hedges that were deferred in other comprehensive income (“OCI”) or recognized in earnings for the three and nine months ended September 30, 2024 and 2023 is presented in the schedules below.
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| (In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | Amount of gain/(loss) reclassified from AOCI into income | Interest on fair value hedges | Hedge ineffectiveness/AOCI reclass due to missed forecast | |||||||||||||||||||
|
Cash flow hedges of floating-rate assets:
1
|
|||||||||||||||||||||||
| Receive-fixed interest rate swaps | $ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Cash flow hedges of floating-rate liabilities: | |||||||||||||||||||||||
| Pay-fixed interest rate swaps |
(
|
|
|
|
|||||||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||||||||
| Debt hedges: Receive-fixed interest rate swaps |
|
|
(
|
|
|||||||||||||||||||
| Asset hedges: Pay-fixed interest rate swaps |
|
|
|
|
|||||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| (In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | Amount of gain/(loss) reclassified from AOCI into income | Interest on fair value hedges | Hedge ineffectiveness/AOCI reclass due to missed forecast | |||||||||||||||||||
|
Cash flow hedges of floating-rate assets:
1
|
|||||||||||||||||||||||
| Receive-fixed interest rate swaps | $ |
(
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Cash flow hedges of floating-rate liabilities: | |||||||||||||||||||||||
| Pay-fixed interest rate swaps |
|
|
|
|
|||||||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||||||||
| Debt hedges: Receive-fixed interest rate swaps |
|
|
(
|
|
|||||||||||||||||||
| Asset hedges: Pay-fixed interest rate swaps |
|
|
|
|
|||||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||
| (In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | Amount of gain/(loss) reclassified from AOCI into income | Interest on fair value hedges | Hedge ineffectiveness/AOCI reclass due to missed forecast | |||||||||||||||||||
|
Cash flow hedges of floating-rate assets:
1
|
|||||||||||||||||||||||
| Receive-fixed interest rate swaps | $ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Cash flow hedges of floating-rate liabilities: | |||||||||||||||||||||||
| Pay-fixed interest rate swaps |
(
|
|
|
|
|||||||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||||||||
| Debt hedges: Receive-fixed interest rate swaps |
|
|
(
|
|
|||||||||||||||||||
| Asset hedges: Pay-fixed interest rate swaps |
|
|
|
(
|
|||||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
|||||||||||||||
74
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| (In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | Amount of gain/(loss) reclassified from AOCI into income | Interest on fair value hedges | Hedge ineffectiveness/AOCI reclass due to missed forecast | |||||||||||||||||||
|
Cash flow hedges of floating-rate assets:
1
|
|||||||||||||||||||||||
| Receive-fixed interest rate swaps | $ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||
| Cash flow hedges of floating-rate liabilities: | |||||||||||||||||||||||
| Pay-fixed interest rate swaps |
|
|
|
|
|||||||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||||||||
| Debt hedges: Receive-fixed interest rate swaps |
|
|
(
|
|
|||||||||||||||||||
| Asset hedges: Pay-fixed interest rate swaps |
|
|
|
(
|
|||||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
|
$ |
(
|
$ |
|
$ |
(
|
|||||||||||||||
1
For the 12 months following September 30, 2024, we estimate that $
73
million of losses will be reclassified from AOCI into interest income, compared with an estimate of $
133
million of losses at September 30, 2023.
2
We had total cumulative unamortized basis adjustments from terminated fair value hedges of debt of $
41
million and $
48
million at September 30, 2024 and 2023, respectively. We had $
3
million of cumulative unamortized basis adjustments from terminated fair value hedges of assets at both September 30, 2024 and 2023. Interest on fair value hedges presented above includes the amortization of the remaining unamortized basis adjustments.
The amount of gains/(losses) recognized from derivatives not designated as accounting hedges is summarized as follows:
| Other Noninterest Income/(Expense) | |||||||||||||||||||||||
| (In millions) | Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||
|
Derivatives not designated as hedging instruments:
|
|||||||||||||||||||||||
|
Customer-facing interest rate derivatives
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Other interest rate derivatives |
(
|
(
|
|
|
|||||||||||||||||||
| Foreign exchange derivatives |
|
|
|
|
|||||||||||||||||||
| Purchased credit derivatives |
|
|
|
(
|
|||||||||||||||||||
|
Total derivatives not designated as hedging instruments
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
The following schedule presents derivatives used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the periods presented:
| Gains/(losses) recorded in income | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) |
Derivatives
|
Hedged items | Total income statement impact |
Derivatives
|
Hedged items | Total income statement impact | |||||||||||||||||||||||||||||
|
Debt: Receive-fixed interest rate swaps
1, 2
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Assets: Pay-fixed interest rate swaps
1, 2
|
(
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||
| Gains/(losses) recorded in income | |||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) |
Derivatives
|
Hedged items | Total income statement impact |
Derivatives
|
Hedged items | Total income statement impact | |||||||||||||||||||||||||||||
|
Debt: Receive-fixed interest rate swaps
1, 2
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Assets: Pay-fixed interest rate swaps
1, 2
|
(
|
|
|
|
(
|
(
|
|||||||||||||||||||||||||||||
1
Consists of hedges of benchmark interest rate risk of fixed-rate long-term debt, fixed-rate AFS securities, and fixed-rate commercial loans. Gains and losses were recorded in interest expense or income consistent with the hedged items.
2
The income/expense for derivatives does not reflect interest income/expense from periodic accruals and payments to be consistent with the presentation of the gains/(losses) on the hedged items.
75
The following schedule provides information regarding basis adjustments for hedged items:
| Par value of hedged assets |
Carrying amount of the hedged assets
1
|
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item | |||||||||||||||||||||||||||||||||
| (In millions) | September 30, 2024 | December 31, 2023 | September 30, 2024 | December 31, 2023 | September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||
|
Fixed-rate assets
2
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
|||||||||||||||||||||||
1
Carrying amounts exclude (1) issuance and purchase discounts or premiums, (2) unamortized issuance and acquisition costs, and (3) amounts related to terminated fair value hedges.
2
These amounts include the amortized cost basis of defined portfolios of AFS securities and commercial loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the defined portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2024, the amortized cost basis of the defined portfolios used in these hedging relationships was $
10.4
billion; the cumulative basis adjustment associated with these hedging relationships was $
48
million; and the notional amounts of the designated hedging instruments were $
3.5
billion.
8.
LEASES
We have operating and finance leases for branches, corporate offices, and data centers. At September 30, 2024, we had
409
branches, of which
279
are owned and
130
are leased. We lease our headquarters in Salt Lake City, Utah. The remaining maturities of our lease commitments range from the year 2024 to 2062, and some lease arrangements include options to extend or terminate the leases.
All leases with lease terms greater than twelve months are reported as a lease liability with a corresponding right-of-use (“ROU”) asset. We include ROU assets for operating leases and finance leases in “
” and “
” on the consolidated balance sheet, respectively. The corresponding liabilities for those leases are included in “
” and “
.” For more information about our lease policies, see Note 8 of our 2023 Form 10-K.
The following schedule presents ROU assets and lease liabilities with the associated weighted average remaining life and discount rate:
| (Dollar amounts in millions) |
September 30,
2024 |
December 31, 2023 | |||||||||
| Operating leases | |||||||||||
| ROU assets, net of amortization | $ |
|
$ |
|
|||||||
| Lease liabilities |
|
|
|||||||||
| Finance leases | |||||||||||
| ROU assets, net of amortization |
|
|
|||||||||
| Lease liabilities |
|
|
|||||||||
| Weighted average remaining lease term (years) | |||||||||||
| Operating leases |
|
|
|||||||||
| Finance leases |
|
|
|||||||||
| Weighted average discount rate | |||||||||||
| Operating leases |
|
% |
|
% | |||||||
| Finance leases |
|
|
|||||||||
76
The following schedule presents additional information related to lease expense:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Lease expense: | |||||||||||||||||||||||
| Operating lease expense | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Other expenses associated with operating leases
1
|
|
|
|
|
|||||||||||||||||||
| Total lease expense | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Related cash disbursements from operating leases | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
1
Other expenses primarily include property taxes and building and property maintenance.
The following schedule presents the total contractual undiscounted lease payments for operating lease liabilities by expected due date for each of the next five years:
| (In millions) | Total undiscounted lease payments | ||||
|
2024
1
|
$ |
|
|||
| 2025 |
|
||||
| 2026 |
|
||||
| 2027 |
|
||||
| 2028 |
|
||||
| Thereafter |
|
||||
| Total | $ |
|
|||
1
Contractual maturities for the three months remaining in 2024.
We enter into certain lease agreements where we are the lessor of real estate. Real estate leases are made from bank-owned and subleased property to generate cash flow from the property, including from leasing vacant suites in which we occupy portions of the building. Operating lease income was $
3
million for both the third quarter of 2024 and 2023, and $
10
million and $
11
million for the first nine months of 2024 and 2023, respectively.
We originated equipment leases, considered to be sales-type leases or direct financing leases, totaling $
377
million and $
383
million at September 30, 2024 and December 31, 2023, respectively. We recorded income of $
5
million and $
4
million
on these leases for the third quarter of 2024 and 2023, respectively, and $
14
million and $
12
million for the first nine months of 2024 and 2023, respectively.
9.
LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY
Long-Term Debt
The long-term debt carrying values presented on the consolidated balance sheet represent the par value of the debt, adjusted for any unamortized premium or discount, unamortized debt issuance costs, and basis adjustments for interest rate swaps designated as fair value hedges.
The following schedule presents the components of our long-term debt:
LONG-TERM DEBT
| (In millions) |
September 30,
2024 |
December 31, 2023 | |||||||||
|
Subordinated notes
1
|
$ |
|
$ |
|
|||||||
| Finance lease obligations |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
1
The change in the subordinated notes balance is primarily due to a fair value hedge accounting adjustment. See also Note 7.
77
Shareholders' Equity
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At September 30, 2024, there were
147.7
million
shares of
$
0.001
par value common stock outstanding. Common stock and additional paid-in capital was $
1.7
billion at both September 30, 2024 and December 31, 2023.
The AOCI balance was a loss of $
2.3
billion at September 30, 2024, and largely reflects a decline in the fair value of fixed-rate AFS securities as a result of changes in interest rates, and includes $
1.9
billion ($
1.4
billion after tax) of unrealized losses on the securities previously transferred from AFS to HTM.
The following schedule presents the changes in AOCI by major component:
| (In millions) | Net unrealized gains/(losses) on investment securities | Net unrealized gains/(losses) on derivatives and other | Pension and post-retirement | Total | |||||||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Other comprehensive income before reclassifications, net of tax
|
|
|
|
|
|||||||||||||||||||
| Amounts reclassified from AOCI, net of tax |
|
|
|
|
|||||||||||||||||||
| Other comprehensive income |
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Income tax expense included in OCI
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(
|
|
|
(
|
|||||||||||||||||||
| Amounts reclassified from AOCI, net of tax |
|
|
|
|
|||||||||||||||||||
| Other comprehensive income (loss) |
(
|
|
|
|
|||||||||||||||||||
| Balance at September 30, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Income tax expense (benefit) included in OCI (loss)
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Amounts reclassified from AOCI
|
||||||||||||||||||||||||||||||||
| (In millions) |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||||||||||
| AOCI components | 2024 | 2023 | 2024 | 2023 | Affected line item on statement of income | |||||||||||||||||||||||||||
|
Net unrealized gains (losses) on investment securities
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
Securities gains (losses), net | |||||||||||||||||||||||
| Less: Income tax expense (benefit) |
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||
| Total | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||||
|
Net unrealized gains (losses) on derivative instruments
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
Interest and fees on loans; Interest on short- and long-term borrowings | |||||||||||||||||||||||
| Less: Income tax expense (benefit) |
(
|
(
|
(
|
(
|
||||||||||||||||||||||||||||
| Total | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||||||||
78
10.
COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES
Commitments and Guarantees
The following schedule presents the contractual amounts related to off-balance sheet financial instruments used to meet the financing needs of our customers:
| (In millions) |
September 30,
2024 |
December 31,
2023 |
|||||||||
|
Unfunded lending commitments
1
|
$ |
|
$ |
|
|||||||
| Standby letters of credit: | |||||||||||
| Financial |
|
|
|||||||||
| Performance |
|
|
|||||||||
| Commercial letters of credit |
|
|
|||||||||
|
Mortgage-backed security purchase agreements
2
|
|
|
|||||||||
| Total unfunded commitments | $ |
|
$ |
|
|||||||
1
Net of participations.
2
Represents agreements with Farmer Mac to purchase securities backed by certain agricultural mortgage loans.
For more information about these commitments and guarantees including their terms and collateral requirements, see Note 16 of our 2023 Form 10-K.
Legal Matters
We are involved in various legal proceedings or governmental inquiries, which may include litigation in court and arbitral proceedings, as well as investigations, examinations, and other actions brought or considered by governmental and self-regulatory agencies. Litigation may relate to lending, deposit and other customer relationships, vendor and contractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. While most matters relate to individual claims, we are also subject to putative class action claims and similar broader claims. Proceedings, investigations, examinations, and other actions brought or considered by governmental and self-regulatory agencies may relate to our banking, investment advisory, trust, securities, and other products and services; our customers’ involvement in money laundering, fraud, securities violations and other illicit activities or our policies and practices relating to such customer activities; and our compliance with the broad range of banking, securities and other laws and regulations applicable to us. At any given time, we may be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters.
At September 30, 2024, we were subject to the following material litigation:
•
Two
civil cases,
Lifescan, Inc.
and
Johnson & Johnson Health Care Services v. Jeffrey Smith, et. al.
, brought against us in the United States District Court for the District of New Jersey in December 2017, and
Roche Diagnostics and Roche Diabetes Care Inc. v. Jeffrey C. Smith, et. al.
, brought against us in the United States District Court for the District of New Jersey in March 2019. In these cases, certain manufacturers and distributors of medical products seek to hold us liable for allegedly fraudulent practices of a borrower of the Bank who filed for bankruptcy protection in 2017. No trial has been set.
•
In the matter of
Streck and Ariza v. Zions Bancorporation, N.A.
, an arbitration matter pending before the American Arbitration Association, related to an employment dispute brought by
two
former employees alleging damages arising from claims of alleged gender discrimination, retaliation, and constructive discharge. The case is in the dispositive motion phase.
At least quarterly, we review outstanding and new legal matters, utilizing then-available information. In accordance with applicable accounting guidance, if we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. In the absence of such a determination, no accrual is made. Once established, accruals are adjusted to reflect developments relating to the matters.
79
In our review, we also assess whether we can determine the range of reasonably possible losses for significant matters in which we are unable to determine that the likelihood of a loss is remote. Because of the difficulty of predicting the outcome of legal matters, discussed subsequently, we are able to meaningfully estimate such a range only for a limited number of matters. Based on information available at September 30, 2024, we estimated that the aggregate range of reasonably possible losses for those matters to be from
zero
to approximately $
10
million in excess of amounts accrued. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which a meaningful estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.
Based on our current knowledge, we believe that our estimated liability for litigation and other legal actions and claims, reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate and that liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions and claims for which an estimate as previously described is possible, will not have a material impact on our financial condition, results of operations, or cash flows. However, in light of the significant uncertainties involved in these matters, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our financial condition, results of operations, or cash flows for any given reporting period.
Any estimate or determination relating to the future resolution of litigation, arbitration, governmental or self-regulatory examinations, investigations or actions or similar matters is inherently uncertain and involves significant judgment. This is particularly true in the early stages of a legal matter, when legal issues and facts have not been well articulated, reviewed, analyzed, and vetted through discovery, preparation for trial or hearings, substantive and productive mediation or settlement discussions, or other actions. It is also particularly true with respect to class action and similar claims involving multiple defendants, matters with complex procedural requirements or substantive issues or novel legal theories, and examinations, investigations and other actions conducted or brought by governmental and self-regulatory agencies, in which the normal adjudicative process is not applicable. Accordingly, we usually are unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely, or probable, or to estimate the amount or range of a probable or reasonably likely loss, until relatively late in the course of a legal matter, sometimes not until a number of years have elapsed. Accordingly, our judgments and estimates relating to claims will change from time to time in light of developments and actual outcomes will differ from our estimates. These differences may be material.
80
11.
REVENUE FROM CONTRACTS WITH CUSTOMERS
We recognize noninterest income from certain contracts with customers when the contractual performance obligations are satisfied. See Note 17 of our 2023 Form 10-K for more information about our revenue from contracts with customers.
Disaggregation of Revenue
The following schedule presents revenue from contracts with customers and a reconciliation to total noninterest income by operating business segment for the three months ended September 30, 2024 and 2023:
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
81
The following schedule presents revenue from contracts with customers and a reconciliation to total noninterest income by operating business segment for the nine months ended September 30, 2024 and 2023:
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Wealth management fees |
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
| Other customer-related fees |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income from contracts with customers
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Customer-related noninterest income from other sources
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total customer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Noncustomer-related noninterest income
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
Revenue from contracts with customers did not generate significant contract assets and liabilities. Contract receivables are included in “Other assets” on the consolidated balance sheet. Payment terms vary by services offered, and the timing between completion of performance obligations and payment is generally not significant.
12.
INCOME TAXES
The effective income tax rate was
22.7
% for the third quarter of 2024, compared with
23.2
% for the third quarter of 2023. The effective tax rates for the first nine months of 2024 and 2023 were
23.5
% and
24.7
%, respectively. The tax rates during both periods were reduced by nontaxable municipal interest income and nontaxable income from
82
certain bank-owned life insurance (“BOLI”), and were increased by the nondeductibility of Federal Deposit Insurance Corporation (“FDIC”) premiums, certain executive compensation plans, and other fringe benefits. The FDIC insurance premiums are nondeductible, whereas the FDIC special assessments are tax deductible.
At September 30, 2024 and December 31, 2023, we had a net deferred tax asset (“DTA”) totaling $
879
million and $
1.0
billion, respectively. The net DTA or deferred tax liability (“DTL”) is included in either “Other assets” or “Other liabilities,” respectively, on the consolidated balance sheet.
We evaluate DTAs on a regular basis to determine whether a valuation allowance is required. In conducting this evaluation, we consider all available evidence, both positive and negative, based on the more-likely-than-not criteria that such assets will be realized. This evaluation includes, but is not limited to, the following:
•
Future reversals of existing DTLs — These DTLs have a reversal pattern generally consistent with DTAs and are used to realize the DTAs.
•
Tax planning strategies — We have considered prudent and feasible tax planning strategies that we would implement to preserve the value of the DTAs, if necessary.
•
Future projected taxable income — We expect future taxable income will offset the reversal of remaining net DTAs.
Based on this evaluation, we concluded that a valuation allowance was not required at both September 30, 2024 and
December 31, 2023.
13.
NET EARNINGS PER COMMON SHARE
The following schedule presents basic and diluted net earnings per common share based on the weighted average outstanding shares:
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In millions, except shares and per share amounts) | 2024 | 2023 |
2024
|
2023
|
|||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Net income | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Less common and preferred dividends |
|
|
|
|
|||||||||||||||||||
| Undistributed earnings |
|
|
|
|
|||||||||||||||||||
| Less undistributed earnings applicable to nonvested shares |
|
|
|
|
|||||||||||||||||||
| Undistributed earnings applicable to common shares |
|
|
|
|
|||||||||||||||||||
| Distributed earnings applicable to common shares |
|
|
|
|
|||||||||||||||||||
| Total earnings applicable to common shares | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Weighted average common shares outstanding (in thousands) |
|
|
|
|
|||||||||||||||||||
| Net earnings per common share | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Diluted: | |||||||||||||||||||||||
| Total earnings applicable to common shares | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Weighted average common shares outstanding (in thousands) |
|
|
|
|
|||||||||||||||||||
| Dilutive effect of stock options (in thousands) |
|
|
|
|
|||||||||||||||||||
|
Weighted average diluted common shares outstanding (in thousands)
|
|
|
|
|
|||||||||||||||||||
| Net earnings per common share | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
The following schedule presents the weighted average stock awards that were anti-dilutive and not included in the calculation of diluted earnings per share:
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||||||||||
| (In thousands) | 2024 | 2023 |
2024
|
2023
|
|||||||||||||||||||
| Restricted stock and restricted stock units |
|
|
|
|
|||||||||||||||||||
| Stock options |
|
|
|
|
|||||||||||||||||||
83
14.
OPERATING SEGMENT INFORMATION
We manage our operations with a primary focus on geographic area. We conduct our operations primarily through
seven
separately managed affiliate banks, each with its own local branding and management team, including Zions Bank, California Bank & Trust, Amegy Bank, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington. These affiliate banks comprise our primary business segments. Performance assessment and resource allocation are based upon this geographic structure. Our affiliate banks are supported by an enterprise operating segment (referred to as 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 allocate the cost of centrally provided services to the business segments based upon estimated or actual usage of those services. We also allocate capital based on the risk-weighted assets held at each business segment. We use an internal funds transfer pricing (“FTP”) allocation process to report results of operations for business segments. This process is subject to change and refinement over time. Total average loans and deposits presented for the business segments include insignificant intercompany amounts between business segments and may also include deposits with the “Other” segment.
At September 30, 2024, Zions Bank operated
95
branches in Utah,
25
branches in Idaho, and
one
branch in Wyoming. CB&T operated
75
branches in California. Amegy operated
76
branches in Texas. NBAZ operated
56
branches in Arizona. NSB operated
43
branches in Nevada. Vectra operated
34
branches in Colorado and
one
branch in New Mexico. TCBW operated
two
branches in Washington and
one
branch in Oregon.
On September 23, 2024, we announced that we have entered into an agreement to purchase
four
FirstBank Coachella Valley, California branches and their associated deposit and loan accounts. These branches will be operated by our CB&T affiliate bank. In addition to the
four
branches, the purchase includes approximately $
700
million in deposits and $
400
million in commercial and consumer loans. These amounts are subject to change. The transaction is expected to be completed in the first quarter of 2025, subject to customary closing conditions and regulatory approval.
Transactions between business segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. The following schedule presents average loans, average deposits, and income before income taxes because we use these metrics when evaluating performance and making decisions pertaining to the business segments. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the “Other” segment.
84
The following schedule presents selected operating segment information for the three months ended September 30, 2024 and 2023:
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
|
(
|
|
|
(
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
85
The following schedule presents selected operating segment information for the nine months ended September 30, 2024 and 2023:
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
(
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
|
(
|
|
(
|
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
|
(
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Net interest income after provision for credit losses
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Income (loss) before income taxes
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our most significant risks include interest rate and market risk, which are closely monitored by management as previously discussed. For more information regarding interest rate and market risk, see the “Interest Rate and Market Risk Management” section in this Form 10-Q.
86
ITEM 4. CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures at September 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at September 30, 2024. There were no changes in our internal control over financial reporting during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 10 of the Notes to Consolidated Financial Statements is incorporated by reference herein.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A. Risk Factors in our 2023
Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| Period |
Total number
of shares
purchased
1
|
Average
price paid per share |
Total number of shares purchased as part of publicly announced plans or programs |
Approximate dollar value of shares that may yet be
purchased under the plan (in millions) |
||||||||||||||||||||||||||||||||||||||||
| July | 2,706 | $ | 49.60 | — | $ | — | ||||||||||||||||||||||||||||||||||||||
| August | 93 | 50.24 | — | — | ||||||||||||||||||||||||||||||||||||||||
| September | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
|
Third quarter 2024
|
2,799 | 49.62 | — | — | ||||||||||||||||||||||||||||||||||||||||
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 stock options under provisions of an employee share-based compensation plan.
ITEM 5. OTHER INFORMATION
None of our directors or officers have
adopted
, modified, or
terminated
a Rule 10b5-1(c) trading arrangement during the three months ended September 30, 2024. Our directors and officers participate in certain of our benefits plans such as our Omnibus Incentive Plan and Payshelter 401(k) and Employee Stock Ownership Plan, and may from time to time make elections to have shares withheld to cover withholding taxes or pay the exercise price of options granted thereunder, which elections may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements as defined in Item 408(c) of Regulation S-K.
87
ITEM 6. EXHIBITS
a.
Exhibits
|
Exhibit
Number |
Description | ||||||||||
| Second Amended and Restated Articles of Association of Zions Bancorporation, National Association, incorporated by reference to Exhibit 3.1 of Form 8-K filed on October 2, 2018. | * | ||||||||||
| Second Amended and Restated Bylaws of Zions Bancorporation, National Association, incorporated by reference to Exhibit 3.2 of Form 8-K filed on April 4, 2019. | * | ||||||||||
| Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, Restated and Amended effective August 23, 2024 (filed herewith). | |||||||||||
| Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |||||||||||
| Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |||||||||||
| Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith). | |||||||||||
| 101 |
Pursuant to Rules 405 and 406 of Regulation S-T, the following information is formatted in Inline XBRL (i) the Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, (ii) the Consolidated Statements of Income for the three and nine months ended September 30, 2024 and September 30, 2023, (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and September 30, 2023, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2024 and September 30, 2023, (v) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and September 30, 2023, and (vi) the Notes to Consolidated Financial Statements (filed herewith).
|
||||||||||
| 104 | The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL. | ||||||||||
* Incorporated by reference
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt are not filed. We agree to furnish a copy thereof to the Securities and Exchange Commission and the Office of the Comptroller of the Currency upon request.
88
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ZIONS BANCORPORATION, NATIONAL ASSOCIATION | ||
| /s/ Harris H. Simmons | ||
|
Harris H. Simmons, Chairman and
Chief Executive Officer |
||
| /s/ R. Ryan Richards | ||
| R. Ryan Richards, Executive Vice President and Chief Financial Officer | ||
Date: November 7, 2024
89
TABLE OF CONTENTS
Part I. Financial InformationprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 1. Financial Statements (unaudited)printItem 1. Financial StatementsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II. Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 5. Other InformationprintItem 6. Exhibitsprint