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)
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Registrant’s telephone number, including area code: (
801
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844-8208
Securities registered pursuant to Section 12(b) of the Act:
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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
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No
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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
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No
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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.
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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.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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No
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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 April 30, 2025:
147,570,811
shares
1
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Table of Contents
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| 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 | GAAP | Generally Accepted Accounting Principles | ||||||||
| AFS | Available-for-Sale | GCF |
General Collateral Funding
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| ALLL | Allowance for Loan and Lease Losses | HECL | Home Equity Credit Line | ||||||||
| Amegy | Amegy Bank, a division of Zions Bancorporation, National Association | HTM | Held-to-Maturity | ||||||||
| AOCI | Accumulated Other Comprehensive Income or Loss | IPO | Initial Public Offering | ||||||||
| ASU | Accounting Standards Update | LTV | Loan-to-Value | ||||||||
| Board | Board of Directors | NASDAQ | National Association of Securities Dealers Automated Quotations | ||||||||
| bps | Basis Points | NBAZ | National Bank of Arizona, a division of Zions Bancorporation, National Association | ||||||||
| CB&T | California Bank & Trust, a division of Zions Bancorporation, National Association | NM | Not Meaningful | ||||||||
| CET1 | Common Equity Tier 1 | 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 | ||||||||
| CVA | Credit Valuation Adjustment | PEI | Private Equity Investment | ||||||||
| DTA | Deferred Tax Asset | PPNR | Pre-provision Net Revenue | ||||||||
| DTL | Deferred Tax Liability | ROU | Right-of-Use | ||||||||
| EaR | Earnings at Risk | RULC | Reserve for Unfunded Lending Commitments | ||||||||
| EPS | Earnings per Share | S&P | Standard & Poor's | ||||||||
| EVE | Economic Value of Equity | SBA | U.S. Small Business Administration | ||||||||
| FASB | Financial Accounting Standards Board | SBIC | Small Business Investment Company | ||||||||
| FDIC | Federal Deposit Insurance Corporation | SEC | Securities and Exchange Commission | ||||||||
| FHLB | Federal Home Loan Bank | TCBW | The Commerce Bank of Washington, a division of Zions Bancorporation, National Association | ||||||||
| FICO | Fair Isaac Corporation | U.S. | United States | ||||||||
| FRB | Federal Reserve Board | Vectra | Vectra Bank Colorado, a division of Zions Bancorporation, National Association | ||||||||
| FTP | Funds Transfer Pricing | 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:
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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
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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 and should not 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, key factors that may cause material differences include:
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The quality and composition of our loan and investment securities portfolios and the quality and composition of our deposits;
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Changes in general industry, political, and economic conditions, including elevated inflation, economic slowdown or recession, or other economic challenges; imposition of announced or future tariffs (including retaliatory tariffs) and resulting market volatility and uncertainty, including the effects on supply chains, operations, consumer confidence, and financial performance of us and our customers; changes in interest and reference rates, which could adversely affect our revenues and expenses, the value of assets and liabilities, and the availability and cost of capital and liquidity; and deterioration in economic conditions that may result in increased loan and lease losses;
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Political developments, such as transitions in administration, shifts in congressional control and influence, and policy changes, can significantly impact government operations and effectiveness. These effects may include disruptions in and disbursement of government funding, protracted litigation, increased risk of government shutdowns, and potential downgrades in United States (“U.S.”) credit ratings;
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The effects of newly enacted and proposed regulations affecting us and the banking industry, as well as changes and uncertainties in the interpretation, enforcement, and applicability of laws and fiscal, monetary, regulatory, trade, and tax policies;
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Actions taken by governments, agencies, central banks, and similar organizations, including those that result in decreases in revenue, increases in regulatory fees, insurance assessments, and capital standards; and other regulatory requirements;
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Judicial, regulatory and administrative inquiries, investigations, examinations or proceedings and the outcomes thereof that create uncertainty for, or are adverse to us or, the banking industry;
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Changes in our credit ratings;
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Our ability to innovate and otherwise address competitive pressures and other factors that may affect aspects of our business, such as pricing, relevance of, and demand for, our products and services, and our ability to recruit and retain talent;
4
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The potential for both positive and disruptive impacts of technological advancements, such as digital currencies and commerce, blockchain, artificial intelligence, quantum and cloud computing, and other innovations affecting us and the banking industry;
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Our ability to complete projects and initiatives and execute our strategic plans, manage our risks, control compensation and other expenses, and achieve our business objectives;
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Our ability to develop and maintain technology, information security systems, and controls designed to guard against fraud, cybersecurity, and privacy risks and related incidents;
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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;
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The effects of wars, domestic and international trade policies and disputes, geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
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Natural disasters, pandemics, wildfires, 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;
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Governmental and social responses to environmental, social, and governance issues, including those with respect to climate change and diversity;
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Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital;
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The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and shareholders’ equity;
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The impact of bank closures or adverse developments at other banks on general public, customer, and investor sentiment regarding the stability and liquidity of banks; and
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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.
Factors that could cause our actual results, performance, achievements, industry trends, or regulatory outcomes to differ materially from those expressed or implied in the forward-looking statements are discussed in our 2024 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”). These documents are available on our website (www.zionsbancorporation.com) and from the SEC (www.sec.gov).
We caution against placing undue reliance on forward-looking statements, as they reflect our views only as of the date they are issued. Except as required by law, we specifically disclaim any obligation to update any factors or publicly announce revisions to forward-looking statements to reflect future events or developments.
RESULTS OF OPERATIONS
Comparisons noted below are calculated for the current quarter versus the same prior year period, unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they typically reflect a low starting point.
5
First Quarter 2025 Financial Performance
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Net Earnings Applicable to Common Shareholders
(in millions) |
Diluted EPS |
Adjusted PPNR
(in millions)
1
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Efficiency Ratio
1
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1
For information on non-GAAP financial measures, see page 40
.
Executive Summary
Our financial performance in the first quarter of 2025, relative to the prior year period, reflected growth in net earnings, diluted earnings per share (“EPS”), and adjusted pre-provision net revenue. Diluted EPS was $1.13, compared with $0.96 in the first quarter of 2024, as higher net interest income and noninterest income were partially offset by increased noninterest expense, and a higher provision for credit losses.
EPS was negatively impacted $0.11 per share by an increase of $16 million in income tax expense due to a required revaluation of our deferred tax assets resulting from newly enacted Utah state tax legislation during the quarter. Approximately $14 million of this additional expense is related to investment securities with unrealized losses in accumulated other comprehensive income (“AOCI”) and is expected to accrete back into income over the life of the respective securities. Additionally, this legislation is expected to reduce Utah tax expense related to investment securities and trading income in future periods.
•
Net interest income increased $38 million, or 6%, compared with the prior year period, primarily as a result of lower funding costs and a favorable mix change in average interest-earning assets. The net interest margin improved to 3.10%, compared with 2.94%.
◦
Average interest-earning assets increased $1.4 billion, or 2%, primarily driven by growth in average loans, leases, and money market investments, partially offset by a decline in average securities.
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Average interest-bearing liabilities increased $2.3 billion, or 4%, primarily due to an increase in average interest-bearing deposits, which was partially offset by a decrease in average borrowed funds.
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Total loans and leases increased $1.8 billion, or 3%, primarily driven by growth in the consumer 1-4 family residential mortgage and commercial and industrial loan portfolios.
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Total deposits increased $1.5 billion, or 2%, primarily due to an increase in interest-bearing deposits, partially offset by a decrease in noninterest-bearing deposits. Customer deposits (excluding brokered deposits) totaled $70.9 billion, compared with $69.9 billion.
◦
Total loans and deposits at March 31, 2025 included approximately $420 million of consumer and commercial loan balances and $630 million of deposit balances, respectively, which were acquired from the purchase of four FirstBank Coachella Valley, California branches in late March 2025.
•
The provision for credit losses was $18 million, compared with $13 million in the prior year period.
6
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Customer-related noninterest income increased $6 million, or 4%, primarily due to higher loan-related fees and income, as well as improved capital markets fees and income. Noncustomer-related noninterest income increased $9 million, mainly due to an increase in net securities gains, largely attributable to valuation adjustments in our Small Business Investment Company (“SBIC”) investment portfolio and a valuation loss associated with one of our equity investments in the prior year period.
•
Noninterest expense increased $12 million, or 2%, primarily due to increases in salaries and employee benefits expense; technology, telecom, and information processing expense; and other noninterest expense. These increases were partially offset by a decrease in deposit insurance and regulatory expense, primarily due to a $13 million Federal Deposit Insurance Corporation (“FDIC”) special assessment accrual during the prior year quarter.
•
Net loan and lease charge-offs totaled $16 million, or 0.11% of average loans and leases annualized, compared with $6 million, or 0.04%, in the prior year quarter. The ratio of allowance for credit losses (“ACL”) to total loans and leases was 1.24%, compared with 1.27%.
•
Nonperforming assets totaled $307 million, or 0.51% of total loans and leases and other real estate owned, compared with $254 million, or 0.44%. The increase was primarily in the term commercial real estate (“CRE”), consumer 1-4 family residential, and commercial and industrial portfolios.
•
Classified loans totaled $2.9 billion, or 4.82% of total loans and leases, compared with $966 million, or 1.66%, in the prior year quarter, and remained relatively stable compared with $2.9 billion, or 4.83%, in the prior quarter. The year-over-year increase was primarily in the multifamily and industrial CRE loan portfolios, largely due to an increased emphasis in risk grading on current cash flows, and less emphasis on the adequacy of collateral values and the strength of guarantors and sponsors. Weaker performance in the 2021, 2022, and 2023 construction loan vintages also contributed to the increase, as borrowers missed projections due to longer-than-anticipated lease-up periods, rent concessions, elevated costs, and higher interest rates.
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Total borrowed funds, primarily consisting of secured borrowings, decreased $1.0 billion, or 18%, from the prior year quarter, primarily due to a reduction in security repurchase agreements and Federal Reserve Board (“FRB”) short-term advances, partially offset by an increase in long-term debt.
Net Interest Income and Net Interest Margin
NET INTEREST INCOME AND NET INTEREST MARGIN
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Three Months Ended
March 31, |
Amount change | Percent change | |||||||||||||||||||||
| (Dollar amounts in millions) | 2025 | 2024 | |||||||||||||||||||||
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Interest and fees on loans
1
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$ | 850 | $ | 865 | $ | (15) | (2) | % | |||||||||||||||
| Interest on money market investments | 53 | 47 | 6 | 13 | |||||||||||||||||||
| Interest on securities | 125 | 142 | (17) | (12) | |||||||||||||||||||
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Total interest income
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1,028 | 1,054 | (26) | (2) | |||||||||||||||||||
| Interest on deposits | 326 | 376 | (50) | (13) | |||||||||||||||||||
| Interest on short- and long-term borrowings | 78 | 92 | (14) | (15) | |||||||||||||||||||
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Total interest expense
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404 | 468 | (64) | (14) | |||||||||||||||||||
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Net interest income
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$ | 624 | $ | 586 | $ | 38 | 6 | ||||||||||||||||
| Average interest-earning assets | $ | 83,002 | $ | 81,613 | $ | 1,389 | 2 | % | |||||||||||||||
| Average interest-bearing liabilities | 57,322 | 55,043 | 2,279 | 4 | |||||||||||||||||||
| bps | |||||||||||||||||||||||
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Net interest margin
2
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3.10 | % | 2.94 | % | 16 | ||||||||||||||||||
1
Includes interest income recoveries of $4 million and $2 million
for the three months ended
March 31, 2025, and 2024, respectively.
2
Taxable-equivalent rates used where applicable.
7
Net interest income represented 78% and 79% of our net revenue (net interest income plus noninterest income) during the first quarters of 2025 and 2024, respectively. It increased $38 million, or 6%, relative to the prior year quarter, as the decrease in funding costs outpaced the repricing of interest-earning assets. The net interest margin improved to 3.10%, compared with 2.94%.
The following chart presents the changes in yields on average interest-earning assets:
The yield on average interest-earning assets decreased 17 basis points (“bps”) in the first quarter of 2025, compared with the prior year period. This decline reflects a lower interest rate environment, partially offset by a favorable asset mix change, as average loans and leases and average money market investments increased, while average investment securities decreased. The yield on average loans and leases decreased 22 bps, the yield on average money market investments decreased 115 bps, and the yield on average securities decreased 9 bps in the first quarter of 2025.
The following chart presents the changes in rates paid on average interest-bearing liabilities:
8
The total cost of deposits decreased 30 bps, and the rate paid on total deposits and interest-bearing liabilities decreased 33 bps during the first quarter of 2025, compared with the prior year period. This decline also reflects a lower interest rate environment, partially offset by an adverse mix change from noninterest-bearing to interest-bearing products. The rate paid on total borrowed funds decreased 41 bps.
Average interest-earning assets increased $1.4 billion, or 2% from the prior year quarter, as growth in average loans and leases and average money market investments was partially offset by a decline in average securities.
Average loans and leases increased $1.7 billion, or 3%, to $59.6 billion, primarily due to growth in average consumer and commercial loans. Average securities decreased $1.7 billion, or 8%, to $18.7 billion, primarily due to principal reductions.
Average interest-bearing liabilities increased $2.3 billion, or 4%, from the prior year quarter. This growth was largely driven by an increase in average interest-bearing deposits, partially offset by decreases in average noninterest-bearing deposits and average borrowed funds.
9
Average deposits increased $1.5 billion, or 2%, to $74.9 billion. Average interest-bearing deposits increased $2.9 billion, or 6%, primarily due to customer deposit growth. Average noninterest-bearing deposits decreased $1.4 billion, or 5%, and represented 32% of total deposits during the first quarter of 2025, compared with 35% during the same prior year period.
Average borrowed funds, primarily consisting of secured borrowings, decreased $570 million, or 8%, to $6.7 billion. This decrease was primarily due to a reduction in security repurchase agreements and FRB short-term advances,
partially offset by an increase in long-term debt. The increase in long-term debt was due to the issuance of $500 million of 6.82% Fixed-to-Floating Subordinated Notes, partially offset by the redemption of $88 million of 6.95% Fixed-to-Floating Subordinated Notes during the fourth quarter of 2024.
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 36. 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 33.
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:
10
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
| (Unaudited) |
Three Months Ended
March 31, 2025 |
Three Months Ended
March 31, 2024 |
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Average
balance |
Interest
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Yield/
Rate
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Average
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Interest
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Yield/
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| ASSETS | |||||||||||||||||||||||||||||||||||
| Money market investments: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 1,632 | $ | 19 | 4.59 | % | $ | 1,447 | $ | 20 | 5.71 | % | |||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | 2,971 | 34 | 4.70 | 1,826 | 27 | 5.89 | |||||||||||||||||||||||||||||
| Total money market investments | 4,603 | 53 | 4.66 | 3,273 | 47 | 5.81 | |||||||||||||||||||||||||||||
| Trading securities | 25 | — | 4.01 | 33 | — | 4.27 | |||||||||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||||||||
| Available-for-sale | 9,101 | 74 | 3.27 | 10,067 | 86 | 3.45 | |||||||||||||||||||||||||||||
| Held-to-maturity | 9,555 | 53 | 2.25 | 10,277 | 57 | 2.25 | |||||||||||||||||||||||||||||
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Total investment securities
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18,656 | 127 | 2.75 | 20,344 | 143 | 2.84 | |||||||||||||||||||||||||||||
| Loans held for sale | 83 | 1 | NM | 56 | 1 | NM | |||||||||||||||||||||||||||||
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Loans and leases:
2
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| Commercial | 31,033 | 448 | 5.86 | 30,482 | 451 | 5.95 | |||||||||||||||||||||||||||||
| Commercial real estate | 13,557 | 220 | 6.59 | 13,504 | 245 | 7.29 | |||||||||||||||||||||||||||||
| Consumer | 15,045 | 190 | 5.12 | 13,921 | 177 | 5.10 | |||||||||||||||||||||||||||||
| Total loans and leases | 59,635 | 858 | 5.84 | 57,907 | 873 | 6.06 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 83,002 | 1,039 | 5.08 | 81,613 | 1,064 | 5.25 | |||||||||||||||||||||||||||||
| Cash and due from banks | 705 | 710 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses on loans and debt securities | (692) | (685) | |||||||||||||||||||||||||||||||||
| Goodwill and intangibles | 1,052 | 1,058 | |||||||||||||||||||||||||||||||||
| Other assets | 5,376 | 5,274 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 89,443 | $ | 87,970 | |||||||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Savings and money market | $ | 39,646 | $ | 213 | 2.18 | % | $ | 38,044 | $ | 259 | 2.73 | % | |||||||||||||||||||||||
| Time | 11,024 | 113 | 4.15 | 9,777 | 117 | 4.81 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 50,670 | 326 | 2.61 | 47,821 | 376 | 3.16 | |||||||||||||||||||||||||||||
| Borrowed funds: | |||||||||||||||||||||||||||||||||||
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Federal funds and security repurchase agreements
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1,721 | 19 | 4.36 | 1,748 | 23 | 5.38 | |||||||||||||||||||||||||||||
| Other short-term borrowings | 3,976 | 44 | 4.52 | 4,931 | 61 | 4.98 | |||||||||||||||||||||||||||||
| Long-term debt | 955 | 15 | 6.38 | 543 | 8 | 5.99 | |||||||||||||||||||||||||||||
| Total borrowed funds | 6,652 | 78 | 4.74 | 7,222 | 92 | 5.15 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 57,322 | 404 | 2.85 | 55,043 | 468 | 3.42 | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 24,249 | 25,537 | |||||||||||||||||||||||||||||||||
| Other liabilities | 1,624 | 1,661 | |||||||||||||||||||||||||||||||||
| Total liabilities | 83,195 | 82,241 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||||||||||||
| Preferred equity | 66 | 440 | |||||||||||||||||||||||||||||||||
| Common equity | 6,182 | 5,289 | |||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 6,248 | 5,729 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 89,443 | $ | 87,970 | |||||||||||||||||||||||||||||||
| Spread on average interest-bearing funds | 2.23 | % | 1.83 | % | |||||||||||||||||||||||||||||||
| Net impact of noninterest-bearing sources of funds | 0.87 | % | 1.11 | % | |||||||||||||||||||||||||||||||
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Net interest margin
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$ | 635 | 3.10 | % | $ | 596 | 2.94 | % | |||||||||||||||||||||||||||
|
Memo: total cost of deposits
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1.76 | % | 2.06 | % | |||||||||||||||||||||||||||||||
| Memo: total deposits and interest-bearing liabilities | $ | 81,571 | 404 | 2.01 | % | $ | 80,580 | 468 | 2.34 | % | |||||||||||||||||||||||||
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”) comprises 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 $743 million at March 31, 2025, compared with $736 million at March 31, 2024. The increase in the ACL primarily reflects credit quality deterioration and loan growth, partially offset by lower reserves associated with portfolio-specific risks, including commercial real estate, improvements in economic forecasts, and changes in loan portfolio composition. The ratio of ACL to total loans and leases was 1.24% at March 31, 2025, compared with 1.27% at March 31, 2024.
The provision for credit losses, which includes both the provision for loan and lease losses and the provision for unfunded lending commitments, was $18 million in the first quarter of 2025, compared with $13 million in the first quarter of 2024. The provision for securities losses was less than $1 million during both the first quarters of 2025 and 2024.
12
The bar chart above illustrates the broad categories of changes in the ACL from the prior year period. To estimate current expected losses, we use econometric loss models that incorporate multiple economic scenarios, reflecting optimistic, baseline, and stressed economic conditions. The results derived from these 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 on the weighting of the economic forecasts during the current quarter. These changes contributed to a $25 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. Combined, these factors contributed to a $2 million decrease in the ACL, driven largely by a reduced emphasis on certain portfolio-specific risks, including CRE, partially offset by credit quality deterioration.
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. The effects of $1.8 billion in period-ending loan growth, partially offset by changes in mix of the loan portfolio, resulted in a net $34 million increase in the ACL.
See “Credit Risk Management” on page 21 and Note 6 in our 2024 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 represented 22% and 21% of our net revenue (net interest income plus noninterest income) during the first quarter of 2025 and 2024, respectively, and increased $15 million, or 10%, relative to the prior year quarter. The following schedule presents a comparison of the major components of noninterest income:
NONINTEREST INCOME
|
Three Months Ended
March 31, |
Amount
change |
Percent
change |
|||||||||||||||||||||
| (Dollar amounts in millions) | 2025 | 2024 | |||||||||||||||||||||
|
Commercial account fees
|
$ | 45 | $ | 44 | $ | 1 | 2 | % | |||||||||||||||
|
Card fees
|
23 | 23 | — | — | |||||||||||||||||||
| Retail and business banking fees | 17 | 16 | 1 | 6 | |||||||||||||||||||
| Loan-related fees and income | 17 | 15 | 2 | 13 | |||||||||||||||||||
|
Capital markets fees and income
1
|
27 | 25 | 2 | 8 | |||||||||||||||||||
| Wealth management fees | 15 | 15 | — | — | |||||||||||||||||||
| Other customer-related fees | 14 | 14 | — | — | |||||||||||||||||||
|
Customer-related noninterest income
|
158 | 152 | 6 | 4 | |||||||||||||||||||
| Dividends and other income | 7 | 6 | 1 | 17 | |||||||||||||||||||
| Securities gains (losses), net | 6 | (2) | 8 | NM | |||||||||||||||||||
| Noncustomer-related noninterest income | 13 | 4 | 9 | NM | |||||||||||||||||||
|
Total noninterest income
|
$ | 171 | $ | 156 | $ | 15 | 10 | ||||||||||||||||
1
Effective for the first quarter of 2025, capital markets fees and income includes fair value and nonhedge derivative income (loss) of less than $1 million and $1 million for the three months ended March 31, 2025 and 2024, respectively. These amounts were previously disclosed under noncustomer-related noninterest income. No other income statement line items or ratios were affected by these changes and reclassifications. Prior period amounts have been reclassified for comparative purposes.
Customer-related Noninterest Income
Customer-related noninterest income increased $6 million, or 4%, compared with the prior year period. This growth was largely driven by higher loan-related fees and income, as well as improved capital markets fees and income, primarily due to increased investment banking advisory fees.
Noncustomer-related Noninterest Income
Noncustomer-related noninterest income increased $9 million, compared with the prior year period, primarily due to an $8 million increase in net securities gains. This increase was largely attributable to valuation adjustments in our SBIC investment portfolio, and a $4 million valuation loss associated with one of our equity investments in the prior year period.
14
Noninterest Expense
The following schedule presents a comparison of the major components of noninterest expense:
NONINTEREST EXPENSE
|
Three Months Ended
March 31, |
Amount
change |
Percent
change |
|||||||||||||||||||||
| (Dollar amounts in millions) | 2025 | 2024 | |||||||||||||||||||||
| Salaries and employee benefits | $ | 342 | $ | 331 | $ | 11 | 3 | % | |||||||||||||||
| Technology, telecom, and information processing | 70 | 62 | 8 | 13 | |||||||||||||||||||
| Occupancy and equipment, net | 41 | 39 | 2 | 5 | |||||||||||||||||||
| Professional and legal services | 13 | 16 | (3) | (19) | |||||||||||||||||||
| Marketing and business development | 11 | 10 | 1 | 10 | |||||||||||||||||||
| Deposit insurance and regulatory expense | 22 | 34 | (12) | (35) | |||||||||||||||||||
| Credit-related expense | 6 | 7 | (1) | (14) | |||||||||||||||||||
| Other real estate expense, net | — | — | — | NM | |||||||||||||||||||
| Other | 33 | 27 | 6 | 22 | |||||||||||||||||||
|
Total noninterest expense
|
$ | 538 | $ | 526 | $ | 12 | 2 | ||||||||||||||||
|
Adjusted noninterest expense (non-GAAP)
|
$ | 533 | $ | 511 | $ | 22 | 4 | % | |||||||||||||||
Noninterest expense increased $12 million, or 2%, compared with the prior year quarter. Salaries and employee benefits expense increased $11 million, primarily due to higher incentive compensation, benefits, and severance expenses. Technology, telecom, and information processing expense increased $8 million, mainly due to higher application software, license, and maintenance expenses. Other noninterest expense increased $6 million, partly due to a $3 million impairment of certain long-lived assets. These increases were partially offset by a $12 million decrease in deposit insurance and regulatory expense, primarily due to a $13 million accrual associated with an updated FDIC special assessment estimate during the prior year quarter.
Adjusted noninterest expense increased $22 million, or 4%. The efficiency ratio was 66.6%, compared with 67.9%, as the increase in adjusted taxable-equivalent revenue outpaced the increase in adjusted noninterest expense. For more information on non-GAAP financial measures, see page 40.
Technology Spend
We invest in technology initiatives designed to improve our products and services, increase our operational efficiency, and enable us to remain competitive. We report these investments as technology spend, which includes the following:
•
Technology, telecom, and information processing expense
— includes current period expenses presented on the consolidated statement of income related to application software licensing and maintenance, telecommunications, and data processing, less related amortization and depreciation of capitalized technology investments;
•
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 software (both purchased and internally developed).
15
The following schedule presents the composition of our technology spend:
TECHNOLOGY SPEND
|
Three Months Ended
March 31, |
Amount
change |
Percent
change |
|||||||||||||||||||||
| (Dollar amounts in millions) | 2025 | 2024 | |||||||||||||||||||||
| Technology, telecom, and information processing expense | $ | 70 | $ | 62 | $ | 8 | 13 | % | |||||||||||||||
| Less: related amortization and depreciation | (19) | (20) | 1 | (5) | |||||||||||||||||||
| Other technology-related expense | 60 | 60 | — | — | |||||||||||||||||||
| Capitalized technology investments | 12 | 15 | (3) | (20) | |||||||||||||||||||
|
Total technology spend
|
$ | 123 | $ | 117 | $ | 6 | 5 | ||||||||||||||||
Total technology spend increased $6 million, or 5%, relative to the prior year quarter, primarily due to the aforementioned increase in technology, telecom, and information processing expense driven by higher application software, license, and maintenance costs, partially offset by a decrease in certain capitalized technology investments.
Income Taxes
The following schedule summarizes the income tax expense and effective tax rates for the periods presented:
INCOME TAXES
|
Three Months Ended
March 31, |
|||||||||||
| (Dollar amounts in millions) | 2025 | 2024 | |||||||||
| Income before income taxes | $ | 239 | $ | 203 | |||||||
| Income tax expense | 69 | 50 | |||||||||
| Effective tax rate | 28.9 | % | 24.6 | % | |||||||
The effective tax rate was 28.9% and 24.6% for the three months ended March 31, 2025 and 2024, respectively. This year-over-year increase was primarily attributable to new Utah state tax legislation enacted in the first quarter of 2025 related to our investment securities and trading assets. This legislation required a revaluation of our net deferred tax asset, which primarily arises from unrealized losses in AOCI on certain securities. Consequently, this resulted in $16 million of additional tax expense for the quarter, or a $0.11 per share negative impact. Approximately $14 million of this additional expense is related to investment securities with unrealized losses in AOCI and is expected to accrete back into income over the life of the respective securities. Additionally, this legislation is expected to reduce Utah tax expense related to investment securities and trading income in future periods.
For more information about the factors that impacted the income tax rates, as well as details on deferred income tax assets and liabilities, see Note 12 of the Notes to Consolidated Financial Statements.
Preferred Stock Dividends
Preferred stock dividends totaled $1 million and $10 million for the first quarters of 2025 and 2024, respectively. The decrease was due to the redemption of the outstanding shares of our Series G, I, and J preferred stock in the fourth quarter of 2024.
BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets, which include loans and leases, investment securities, and money market investments, have associated interest rates or yields. 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 Average Balance Sheet on page 11.
16
Investment Securities Portfolio
We invest in securities to manage liquidity and interest rate risk, and to generate interest income. Our portfolio primarily consists of securities that can readily provide 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 March 31, 2025, the estimated duration of our investment securities portfolio, which measures price sensitivity to interest rate changes, was 4.0 years, compared with 3.4 years at December 31, 2024, primarily due to updated prepayment assumptions related to certain securities.
For information about our borrowing capacity associated with the investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 36. Additionally, refer to 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
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (In millions) | Par Value |
Amortized
cost |
Fair
value |
Par Value |
Amortized
cost |
Fair
value |
|||||||||||||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 1,080 | $ | 1,081 | $ | 982 | $ | 780 | $ | 781 | $ | 662 | |||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | 404 | 399 | 379 | 446 | 441 | 415 | |||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 7,453 | 7,507 | 6,375 | 7,656 | 7,713 | 6,451 | |||||||||||||||||||||||||||||
| Small Business Administration loan-backed securities | 400 | 426 | 407 | 427 | 455 | 434 | |||||||||||||||||||||||||||||
| Municipal securities | 1,050 | 1,135 | 1,055 | 1,096 | 1,186 | 1,108 | |||||||||||||||||||||||||||||
| Other debt securities | 25 | 25 | 25 | 25 | 25 | 25 | |||||||||||||||||||||||||||||
| Total available-for-sale | 10,412 | 10,573 | 9,223 | 10,430 | 10,601 | 9,095 | |||||||||||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||||||||||
| Agency securities | 145 | 145 | 139 | 148 | 148 | 140 | |||||||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 10,761 | 9,035 | 8,976 | 10,983 | 9,202 | 8,941 | |||||||||||||||||||||||||||||
| Municipal securities | 300 | 301 | 285 | 319 | 319 | 301 | |||||||||||||||||||||||||||||
| Total held-to-maturity | 11,206 | 9,481 | 9,400 | 11,450 | 9,669 | 9,382 | |||||||||||||||||||||||||||||
| Total investment securities | $ | 21,618 | $ | 20,054 | $ | 18,623 | $ | 21,880 | $ | 20,270 | $ | 18,477 | |||||||||||||||||||||||
The amortized cost of total investment securities decreased $216 million, or 1%, from December 31, 2024, primarily due to principal reductions. Approximately 7% of the total investment securities were floating-rate instruments at both March 31, 2025 and December 31, 2024. Additionally, at March 31, 2025, we had $4.0 billion pay-fixed swaps as fair value hedges against fixed-rate available-for-sale (“AFS”) securities, effectively converting the fixed interest income to a floating rate on the hedged portion of the securities.
At March 31, 2025, our AFS investment securities portfolio included approximately $161 million of net premium, distributed across various security categories. Total taxable-equivalent premium amortization for these investment securities was $12 million for the first quarter of 2025, compared with $15 million for the same prior year period.
For more information regarding our investment securities portfolio, swaps, and related unrealized gains and losses, refer to the “Interest Rate Risk Management” section on page 33, the “Capital Management” section on page 37, and Note 5 of the Notes to Consolidated Financial Statements.
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. Additionally, we invest in securities issued by municipalities. Our municipal lending products generally include loans where 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 presents our total investments and extensions of credit to municipalities:
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
| (In millions) |
March 31,
2025 |
December 31,
2024 |
|||||||||
| Loans and leases | $ | 4,412 | $ | 4,364 | |||||||
| Unfunded lending commitments | 447 | 524 | |||||||||
| Available-for-sale securities | 1,055 | 1,108 | |||||||||
| Held-to-maturity securities | 301 | 319 | |||||||||
| Trading securities | 64 | 35 | |||||||||
|
Total
|
$ | 6,279 | $ | 6,350 | |||||||
Our municipal loans and securities are primarily associated with municipalities located within our geographic footprint.
The municipal loan and lease portfolio is largely secured by general obligations of municipal entities,
real estate, revenue pledges, or equipment. At March 31, 2025, approximately $10 million of our municipal loans and leases were on nonaccrual, compared with $11 million at December 31, 2024. 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 March 31, 2025, all municipal securities were graded as Pass. For additional information about the credit quality of these municipal loans and securities, see Notes 5 and 6 of the Notes to Consolidated Financial Statements.
Loan and Lease Portfolio
We provide a wide range of lending products to commercial customers, primarily small- and medium-sized businesses, as well as other products secured by commercial real estate. Additionally, we 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
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total loans |
Amount |
% of
total loans |
|||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ | 16,900 | 28.2 | % | $ | 16,891 | 28.4 | % | |||||||||||||||
| Owner-occupied | 9,321 | 15.5 | 9,333 | 15.7 | |||||||||||||||||||
| Municipal | 4,412 | 7.4 | 4,364 | 7.4 | |||||||||||||||||||
| Leasing | 377 | 0.6 | 377 | 0.6 | |||||||||||||||||||
| Total commercial | 31,010 | 51.7 | 30,965 | 52.1 | |||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Term | 10,878 | 18.2 | 10,703 | 18.0 | |||||||||||||||||||
| Construction and land development | 2,715 | 4.5 | 2,774 | 4.7 | |||||||||||||||||||
| Total commercial real estate | 13,593 | 22.7 | 13,477 | 22.7 | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| 1-4 family residential | 10,312 | 17.2 | 9,939 | 16.7 | |||||||||||||||||||
| Home equity credit line | 3,670 | 6.1 | 3,641 | 6.1 | |||||||||||||||||||
| Construction and other consumer real estate | 762 | 1.3 | 810 | 1.4 | |||||||||||||||||||
| Bankcard and other revolving plans | 472 | 0.8 | 457 | 0.8 | |||||||||||||||||||
| Other | 122 | 0.2 | 121 | 0.2 | |||||||||||||||||||
| Total consumer | 15,338 | 25.6 | 14,968 | 25.2 | |||||||||||||||||||
| Total loans and leases | $ | 59,941 | 100.0 | % | $ | 59,410 | 100.0 | % | |||||||||||||||
During the first three months of 2025, the loan and lease portfolio increased $531 million, or 1%, to $59.9 billion at March 31, 2025. Loan growth was primarily driven by increases in the consumer 1-4 family residential mortgage and term commercial real estate loan portfolios. At March 31, 2025 and December 31, 2024, the ratio of loans and leases to total assets was 68% and 67%, respectively. The largest loan segment was commercial and industrial loans, which represented 28% of our total loan portfolio for both periods.
At March 31, 2025, total loans and leases included approximately $420 million of consumer and commercial loan balances acquired from the purchase of four FirstBank Coachella Valley, California branches during the first quarter of 2025.
Other Noninterest-Bearing Investments
Other noninterest-bearing investments consist of equity investments held primarily for capital appreciation, dividends, or to meet certain regulatory requirements. The following schedule presents our related investments.
OTHER NONINTEREST-BEARING INVESTMENTS
| (Dollar amounts in millions) |
March 31,
2025 |
December 31,
2024 |
Amount change | Percent change | |||||||||||||||||||
| Bank-owned life insurance | $ | 564 | $ | 562 | $ | 2 | — | % | |||||||||||||||
| Federal Home Loan Bank stock | 146 | 124 | 22 | 18 | |||||||||||||||||||
| Federal Reserve stock | 54 | 65 | (11) | (17) | |||||||||||||||||||
| Farmer Mac stock | 29 | 28 | 1 | 4 | |||||||||||||||||||
| SBIC investments | 211 | 204 | 7 | 3 | |||||||||||||||||||
| Other | 41 | 37 | 4 | 11 | |||||||||||||||||||
| Total other noninterest-bearing investments | $ | 1,045 | $ | 1,020 | $ | 25 | 2 | ||||||||||||||||
Other noninterest-bearing investments increased $25 million, or 2%, during the first three months of 2025. This increase was primarily due to higher Federal Home Loan Bank (“FHLB”) borrowings, which drove an increase in FHLB stock, as we are required to hold FHLB stock equivalent to approximately 4% of our FHLB borrowings to maintain our borrowing capacity. Additionally, our SBIC investment portfolio increased $7 million, mainly due to
19
valuation adjustments associated with related investments. These increases were partially offset by a decrease in Federal Reserve stock, driven by a reduction in Federal Reserve short-term advances.
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. This transition enables us to deliver improved experiences to our customers and achieve incremental operational efficiencies.
The following schedule summarizes the capitalized costs associated with this project, which are amortized using a useful life of ten years:
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| March 31, 2025 | |||||||||||||||||||||||
| (In millions) | Phase 1 | Phase 2 | Phase 3 | Total | |||||||||||||||||||
| Total amount of capitalized costs, less accumulated amortization | $ | 13 | $ | 34 | $ | 204 | $ | 251 | |||||||||||||||
| 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
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total deposits |
Amount |
% of
total deposits |
|||||||||||||||||||
| Deposits by type | |||||||||||||||||||||||
| Noninterest-bearing demand | $ | 24,792 | 32.8 | % | $ | 24,704 | 32.4 | % | |||||||||||||||
| Interest-bearing: | |||||||||||||||||||||||
| Savings and money market | 39,860 | 52.7 | 40,037 | 52.5 | |||||||||||||||||||
| Time | 6,269 | 8.2 | 6,448 | 8.5 | |||||||||||||||||||
| Brokered | 4,771 | 6.3 | 5,034 | 6.6 | |||||||||||||||||||
| Total interest-bearing | 50,900 | 67.2 | 51,519 | 67.6 | |||||||||||||||||||
| Total deposits | $ | 75,692 | 100.0 | % | $ | 76,223 | 100.0 | % | |||||||||||||||
| Deposit-related metrics | |||||||||||||||||||||||
| Estimated amount of insured deposits | $ | 42,792 | 57 | % | $ | 41,836 | 55 | % | |||||||||||||||
| Estimated amount of uninsured deposits | 32,900 | 43 | 34,387 | 45 | |||||||||||||||||||
|
Estimated amount of collateralized deposits
1
|
2,772 | 4 | 3,199 | 4 | |||||||||||||||||||
| Loan-to-deposit ratio | 79% | 78% | |||||||||||||||||||||
1
Includes both insured and uninsured deposits.
Total deposits decreased $531 million, or 1%, from December 31, 2024, due to a $619 million decrease in interest-bearing deposits, partially offset by an $88 million increase in noninterest-bearing demand deposits. At March 31, 2025 and December 31, 2024, customer deposits (excluding brokered deposits) totaled $70.9 billion and $71.2 billion, respectively, and included approximately $6.7 billion and $7.0 billion of reciprocal deposits.
At March 31, 2025, total deposits included approximately $630 million of deposit balances acquired from the purchase of four FirstBank Coachella Valley, California branches during the first quarter of 2025.
20
At March 31, 2025, the estimated total amount of uninsured deposits was $32.9 billion, or 43% of total deposits, compared with $34.4 billion, or 45%, at December 31, 2024. Our loan-to-deposit ratio was 79%, compared with 78% for the same periods. For additional information on liquidity, including the ratio of available liquidity to uninsured deposits, see “Liquidity Risk Management” on page 36.
RISK MANAGEMENT
Risk management is integral to our operations and a key determinant of our overall performance, aligning with our strategic objectives. 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, cybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by various management committees, with the Enterprise Risk Management Committee serving as the focal point. For a more comprehensive discussion of these risks, see “Risk Factors” in our 2024 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 and off-balance sheet credit instruments.
Our credit policies, credit risk management, and credit examination functions collectively support the oversight of credit risk. We emphasize strong underwriting standards and the early detection of potential problem credits to develop and implement timely action plans, thereby minimizing potential losses. These formal credit policies and procedures provide a framework for consistent underwriting and sound credit decisions at the local banking affiliate level. Our policies include standards for sensitivity and scenario analysis to assess the resilience of borrowers, especially during periods of uncertain or adverse economic conditions. Additionally, we require borrowers to provide evidence of insurance for properties used as collateral, with coverage and levels appropriate to the specific credit.
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 2024 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 U.S. 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 March 31, 2025, $574 million of related loans were guaranteed, primarily by the SBA.
The following schedule presents the composition of our U.S. government agency guaranteed loans:
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
Percent
guaranteed |
Amount |
Percent
guaranteed |
|||||||||||||||||||
| Commercial | $ | 701 | 78 | % | $ | 687 | 78 | % | |||||||||||||||
| Commercial real estate | 31 | 77 | 25 | 76 | |||||||||||||||||||
| Consumer | 4 | 100 | 4 | 100 | |||||||||||||||||||
| Total loans | $ | 736 | 78 | $ | 716 | 78 | |||||||||||||||||
21
Commercial Lending
The following schedule presents the composition of our commercial lending portfolio:
COMMERCIAL LENDING PORTFOLIO
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
commercial loans |
Amount |
% of total
commercial loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 16,900 | 54.5 | % | $ | 16,891 | 54.6 | % | $ | 9 | 0.1 | % | |||||||||||||||||||||||
| Owner-occupied | 9,321 | 30.1 | 9,333 | 30.1 | (12) | (0.1) | |||||||||||||||||||||||||||||
| Municipal | 4,412 | 14.2 | 4,364 | 14.1 | 48 | 1.1 | |||||||||||||||||||||||||||||
| Leasing | 377 | 1.2 | 377 | 1.2 | — | — | |||||||||||||||||||||||||||||
| Total commercial | $ | 31,010 | 100.0 | % | $ | 30,965 | 100.0 | % | $ | 45 | 0.1 | ||||||||||||||||||||||||
Our commercial loans encompass a diverse range of industries and generally mature within one to five years, with amortization schedules determined by the underlying collateral and guarantees. These loans are typically structured as seasonal, term, working capital, or bridge loans, and are offered as revolving and non-revolving lines of credit, amortizing term loans, guidance facilities, and single-payment loans. They include covenants that require borrowers to provide regular financial reporting to monitor business performance and assess leverage, debt service coverage, and liquidity.
The underwriting process for commercial loans primarily involves analyzing management, financial performance, industry, sponsorship (if applicable), and transaction structure. Credit enhancements are generally 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 fluctuations.
The following schedule presents the geographic distribution of our commercial lending portfolio, with geographies based on the location of the primary borrower:
COMMERCIAL LENDING BY GEOGRAPHY
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 2,166 | 7.0 | % | $ | 5 | $ | 2,202 | 7.1 | % | $ | 5 | |||||||||||||||||||||||
| California | 6,291 | 20.3 | 82 | 6,190 | 20.0 | 58 | |||||||||||||||||||||||||||||
| Colorado | 1,746 | 5.6 | 3 | 1,892 | 6.1 | 17 | |||||||||||||||||||||||||||||
| Nevada | 1,361 | 4.4 | 6 | 1,336 | 4.3 | 11 | |||||||||||||||||||||||||||||
| Texas | 7,568 | 24.4 | 46 | 7,367 | 23.8 | 47 | |||||||||||||||||||||||||||||
| Utah/Idaho | 6,323 | 20.4 | 6 | 6,309 | 20.4 | 6 | |||||||||||||||||||||||||||||
| Washington/Oregon | 1,468 | 4.7 | 10 | 1,338 | 4.3 | 10 | |||||||||||||||||||||||||||||
|
Other
1
|
4,087 | 13.2 | — | 4,331 | 14.0 | 4 | |||||||||||||||||||||||||||||
| Total commercial | $ | 31,010 | 100.0 | % | $ | 158 | $ | 30,965 | 100.0 | % | $ | 158 | |||||||||||||||||||||||
1
No other geography exceeds 2.1% and 2.6% for March 31, 2025 and December 31, 2024, respectively.
22
The following schedule presents the industry distribution of our commercial lending portfolio, classified based on the North American Industry Classification System:
COMMERCIAL LENDING BY INDUSTRY
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Real estate, rental and leasing | $ | 3,092 | 10.0 | % | $ | 33 | $ | 3,083 | 10.0 | % | $ | 7 | |||||||||||||||||||||||
| Retail trade | 2,821 | 9.1 | 3 | 2,873 | 9.3 | 7 | |||||||||||||||||||||||||||||
| Finance and insurance | 2,728 | 8.8 | 1 | 2,762 | 8.9 | 1 | |||||||||||||||||||||||||||||
| Healthcare and social assistance | 2,481 | 8.0 | 16 | 2,541 | 8.2 | 34 | |||||||||||||||||||||||||||||
| Manufacturing | 2,358 | 7.6 | 6 | 2,322 | 7.5 | 7 | |||||||||||||||||||||||||||||
| Public administration | 2,071 | 6.7 | — | 2,106 | 6.8 | — | |||||||||||||||||||||||||||||
| Wholesale trade | 2,039 | 6.6 | 2 | 1,909 | 6.2 | 2 | |||||||||||||||||||||||||||||
| Transportation and warehousing | 1,574 | 5.1 | 6 | 1,589 | 5.1 | 7 | |||||||||||||||||||||||||||||
| Hospitality and food service | 1,466 | 4.7 | 3 | 1,352 | 4.4 | 2 | |||||||||||||||||||||||||||||
|
Utilities
1
|
1,450 | 4.7 | 20 | 1,389 | 4.5 | 2 | |||||||||||||||||||||||||||||
| Construction | 1,401 | 4.5 | 25 | 1,335 | 4.3 | 26 | |||||||||||||||||||||||||||||
| Educational services | 1,258 | 4.1 | 2 | 1,292 | 4.2 | — | |||||||||||||||||||||||||||||
| Other Services (except Public administration) | 1,106 | 3.5 | 3 | 1,069 | 3.4 | 3 | |||||||||||||||||||||||||||||
| Professional, scientific, and technical services | 1,043 | 3.4 | 7 | 1,057 | 3.4 | 25 | |||||||||||||||||||||||||||||
| Mining, quarrying, and oil and gas extraction | 998 | 3.2 | — | 1,178 | 3.8 | — | |||||||||||||||||||||||||||||
|
Other
2
|
3,124 | 10.0 | 31 | 3,108 | 10.0 | 35 | |||||||||||||||||||||||||||||
| Total | $ | 31,010 | 100.0 | % | $ | 158 | $ | 30,965 | 100.0 | % | $ | 158 | |||||||||||||||||||||||
1
Includes primarily utilities, power, and renewable energy.
2
No other industry group exceeds 3.4% at both March 31, 2025 and December 31, 2024.
Commercial Real Estate Lending
The following schedule presents the composition of our commercial real estate lending portfolio:
COMMERCIAL REAL ESTATE LENDING PORTFOLIO
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
CRE loans |
Amount |
% of total
CRE loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Term | $ | 10,878 | 80.0 | % | $ | 10,703 | 79.4 | % | $ | 175 | 1.6 | % | |||||||||||||||||||||||
| Construction and land development | 2,715 | 20.0 | 2,774 | 20.6 | (59) | (2.1) | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | 13,593 | 100.0 | % | $ | 13,477 | 100.0 | % | $ | 116 | 0.9 | ||||||||||||||||||||||||
Term CRE loans typically mature within three to seven years and may include full, partial, and non-recourse guarantee structures.
Standard term CRE loan structures feature annually tested operating covenants that require loan rebalancing based on minimum debt service coverage, debt yield, or loan-to-value (“LTV”) ratios. 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-permanent options that often convert into term loans.
Underwriting for commercial properties primarily focuses 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 invested prior to any advances. Loan agreements often include remargining requirements (equity infusions required upon a decline in the value or cash flow of the collateral) and sponsor guarantees.
23
Real estate appraisals are conducted in accordance with applicable regulatory guidelines. In some instances, reports from automated valuation services are utilized, 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 modified, renewed, or exhibits 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 March 31, 2025, 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 2024 Form 10-K.
The following schedule presents the geographic distribution of our commercial real estate lending portfolio, based on the location of the primary collateral.
COMMERCIAL REAL ESTATE LENDING BY GEOGRAPHY
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 1,878 | 13.8 | % | $ | — | $ | 1,801 | 13.4 | % | $ | — | |||||||||||||||||||||||
| California | 3,614 | 26.6 | 49 | 3,569 | 26.5 | 50 | |||||||||||||||||||||||||||||
| Colorado | 699 | 5.1 | — | 666 | 4.9 | — | |||||||||||||||||||||||||||||
| Nevada | 1,039 | 7.6 | — | 1,104 | 8.2 | — | |||||||||||||||||||||||||||||
| Texas | 2,569 | 18.9 | 8 | 2,596 | 19.2 | 8 | |||||||||||||||||||||||||||||
| Utah/Idaho | 2,248 | 16.5 | — | 2,170 | 16.1 | — | |||||||||||||||||||||||||||||
| Washington/Oregon | 1,083 | 8.0 | — | 1,090 | 8.1 | — | |||||||||||||||||||||||||||||
| Other | 463 | 3.5 | 1 | 481 | 3.6 | 1 | |||||||||||||||||||||||||||||
| Total commercial real estate | $ | 13,593 | 100.0 | % | $ | 58 | $ | 13,477 | 100.0 | % | $ | 59 | |||||||||||||||||||||||
The following schedule presents our commercial real estate lending portfolio by the type of collateral:
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Commercial property | |||||||||||||||||||||||||||||||||||
| Multifamily | $ | 4,012 | 29.5 | % | $ | — | $ | 4,007 | 29.7 | % | $ | 1 | |||||||||||||||||||||||
| Industrial | 2,923 | 21.5 | — | 2,954 | 21.9 | — | |||||||||||||||||||||||||||||
| Office | 1,792 | 13.2 | 49 | 1,812 | 13.5 | 50 | |||||||||||||||||||||||||||||
| Retail | 1,513 | 11.1 | — | 1,533 | 11.4 | — | |||||||||||||||||||||||||||||
| Hospitality | 711 | 5.2 | 8 | 625 | 4.6 | 8 | |||||||||||||||||||||||||||||
| Land | 281 | 2.1 | — | 261 | 1.9 | — | |||||||||||||||||||||||||||||
|
Other
1
|
1,624 | 12.0 | 1 | 1,644 | 12.2 | — | |||||||||||||||||||||||||||||
|
Residential property
2
|
|||||||||||||||||||||||||||||||||||
| Single family | 368 | 2.7 | — | 330 | 2.5 | — | |||||||||||||||||||||||||||||
| Land | 107 | 0.8 | — | 110 | 0.8 | — | |||||||||||||||||||||||||||||
| Condo/Townhome | 13 | 0.1 | — | 17 | 0.1 | — | |||||||||||||||||||||||||||||
|
Other
1
|
249 | 1.8 | — | 184 | 1.4 | — | |||||||||||||||||||||||||||||
| Total | $ | 13,593 | 100.0 | % | $ | 58 | $ | 13,477 | 100.0 | % | $ | 59 | |||||||||||||||||||||||
1
Included in the total amount of the “Other” commercial and residential categories was approximately $420 million and $342 million of unsecured loans at March 31, 2025 and December 31, 2024, respectively.
2
Residential property consists primarily of loans provided to commercial homebuilders for land, lot, and single-family housing developments.
24
As previously discussed, our commercial real estate lending portfolio is diversified across geography and collateral type, with the largest concentration in multifamily properties. Given the recent increase in investor interest in multifamily, industrial, and office collateral types, we provide additional analysis of these segments of our CRE portfolio below.
Multifamily CRE
At March 31, 2025 and December 31, 2024, our multifamily CRE loan portfolio totaled $4.0 billion, representing 30% of the total CRE loan portfolio for both periods. Approximately 34% of our multifamily CRE loan portfolio is scheduled to mature within the next 12 months. We believe that substantially all of these borrowers will be able to refinance at maturity through the Bank or other lenders, due to 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) |
March 31,
2025 |
December 31, 2024 | |||||||||
| Multifamily CRE | |||||||||||
| Term | $ | 3,052 | $ | 2,918 | |||||||
| Construction and land development | 960 | 1,089 | |||||||||
| Total multifamily CRE | $ | 4,012 | $ | 4,007 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 20.5 | % | 21.5 | % | |||||||
| Classified loan ratio | 17.7 | % | 18.8 | % | |||||||
| Nonaccrual loan ratio | — | % | — | % | |||||||
| Delinquency ratio | 0.3 | % | — | % | |||||||
| Ratio of multifamily CRE net charge-offs (recoveries) to average loans | — | % | — | % | |||||||
| Ratio of allowance for credit losses to multifamily CRE loans, at period end | 2.32 | % | 2.55 | % | |||||||
| Weighted average LTV for multifamily term CRE loans | 55 | % | 57 | % | |||||||
The following schedules present our multifamily CRE loan portfolio, categorized by collateral location for the periods presented:
MULTIFAMILY CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Multifamily CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 398 | $ | 109 | $ | 507 | 12.6 | % | $ | — | ||||||||||||||||||||||
| California | 859 | 166 | 1,025 | 25.5 | — | |||||||||||||||||||||||||||
| Colorado | 118 | 89 | 207 | 5.2 | — | |||||||||||||||||||||||||||
| Nevada | 189 | 67 | 256 | 6.4 | — | |||||||||||||||||||||||||||
| Texas | 785 | 313 | 1,098 | 27.4 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 364 | 134 | 498 | 12.4 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 276 | 82 | 358 | 8.9 | — | |||||||||||||||||||||||||||
|
Other
1
|
63 | — | 63 | 1.6 | — | |||||||||||||||||||||||||||
| Total multifamily CRE | $ | 3,052 | $ | 960 | $ | 4,012 | 100.0 | % | $ | — | ||||||||||||||||||||||
25
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Multifamily CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 364 | $ | 142 | $ | 506 | 12.6 | % | $ | — | ||||||||||||||||||||||
| California | 850 | 172 | 1,022 | 25.5 | 1 | |||||||||||||||||||||||||||
| Colorado | 91 | 101 | 192 | 4.8 | — | |||||||||||||||||||||||||||
| Nevada | 188 | 99 | 287 | 7.2 | — | |||||||||||||||||||||||||||
| Texas | 808 | 310 | 1,118 | 27.9 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 320 | 134 | 454 | 11.3 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 234 | 130 | 364 | 9.1 | — | |||||||||||||||||||||||||||
|
Other
1
|
63 | 1 | 64 | 1.6 | — | |||||||||||||||||||||||||||
| Total multifamily CRE | $ | 2,918 | $ | 1,089 | $ | 4,007 | 100.0 | % | $ | 1 | ||||||||||||||||||||||
1
Other included $56 million and $55 million of multifamily loans with collateral located in New Mexico at March 31, 2025 and December 31, 2024, respectively.
Industrial CRE
At March 31, 2025 and December 31, 2024, our industrial CRE loan portfolio totaled $2.9 billion
and $3.0 billion, respectively, representing 22% of the total CRE loan portfolio for both periods. Approximately 34% of the industrial CRE loan portfolio is scheduled to mature within the next 12 months. We believe that substantially all of these borrowers will be able to refinance at maturity through the Bank or other lenders, due to the cash flows from the properties, acceptable LTVs, equity levels, and guarantor support.
The following schedule presents the composition of our industrial CRE loan portfolio and other related credit quality metrics:
INDUSTRIAL CRE LOAN PORTFOLIO
| (Dollar amounts in millions) |
March 31,
2025 |
December 31, 2024 | |||||||||
| Industrial CRE | |||||||||||
| Term | $ | 2,432 | $ | 2,462 | |||||||
| Construction and land development | 491 | 492 | |||||||||
| Total industrial CRE | $ | 2,923 | $ | 2,954 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 16.4 | % | 14.6 | % | |||||||
| Classified loan ratio | 15.1 | % | 12.8 | % | |||||||
| Nonaccrual loan ratio | — | % | — | % | |||||||
| Delinquency ratio | 0.1 | % | — | % | |||||||
| Ratio of industrial CRE net charge-offs (recoveries) to average loans | — | % | — | % | |||||||
| Ratio of allowance for credit losses to industrial CRE loans, at period end | 2.16 | % | 2.30 | % | |||||||
| Weighted average LTV for industrial term CRE loans | 51 | % | 53 | % | |||||||
26
The following schedules present our industrial CRE loan portfolio, categorized by collateral location for the periods presented:
INDUSTRIAL CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
|
Industrial CRE
|
||||||||||||||||||||||||||||||||
| Arizona | $ | 378 | $ | 35 | $ | 413 | 14.1 | % | $ | — | ||||||||||||||||||||||
| California | 761 | 164 | 925 | 31.7 | — | |||||||||||||||||||||||||||
| Colorado | 58 | 2 | 60 | 2.0 | — | |||||||||||||||||||||||||||
| Nevada | 168 | 118 | 286 | 9.8 | — | |||||||||||||||||||||||||||
| Texas | 454 | 52 | 506 | 17.3 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 359 | 82 | 441 | 15.1 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 200 | 38 | 238 | 8.1 | — | |||||||||||||||||||||||||||
|
Other
1
|
54 | — | 54 | 1.9 | — | |||||||||||||||||||||||||||
| Total industrial CRE | $ | 2,432 | $ | 491 | $ | 2,923 | 100.0 | % | $ | — | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
|
Industrial CRE
|
||||||||||||||||||||||||||||||||
| Arizona | $ | 374 | $ | 33 | $ | 407 | 13.8 | % | $ | — | ||||||||||||||||||||||
| California | 730 | 189 | 919 | 31.1 | — | |||||||||||||||||||||||||||
| Colorado | 58 | 1 | 59 | 2.0 | — | |||||||||||||||||||||||||||
| Nevada | 241 | 108 | 349 | 11.8 | — | |||||||||||||||||||||||||||
| Texas | 453 | 42 | 495 | 16.8 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 350 | 83 | 433 | 14.7 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 201 | 36 | 237 | 8.0 | — | |||||||||||||||||||||||||||
|
Other
1
|
55 | — | 55 | 1.8 | — | |||||||||||||||||||||||||||
| Total industrial CRE | $ | 2,462 | $ | 492 | $ | 2,954 | 100.0 | % | $ | — | ||||||||||||||||||||||
1
Other included $31 million of industrial loans with collateral located in Virginia at both March 31, 2025 and December 31, 2024.
Office CRE
At March 31, 2025 and December 31, 2024, our office CRE loan portfolio totaled $1.8 billion, representing 13% of the total CRE loan portfolio for both periods. Approximately 32% of the office CRE loan portfolio is scheduled to mature in the next 12 months. We believe that substantially all of these borrowers will be able to refinance at maturity through the Bank or other lenders, due to 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:
27
OFFICE CRE LOAN PORTFOLIO
| (Dollar amounts in millions) |
March 31,
2025 |
December 31, 2024 | |||||||||
| Office CRE | |||||||||||
| Term | $ | 1,707 | $ | 1,697 | |||||||
| Construction and land development | 85 | 115 | |||||||||
| Total office CRE | $ | 1,792 | $ | 1,812 | |||||||
| Credit quality metrics | |||||||||||
| Criticized loan ratio | 16.9 | % | 14.5 | % | |||||||
| Classified loan ratio | 15.1 | % | 12.8 | % | |||||||
| Nonaccrual loan ratio | 2.7 | % | 2.8 | % | |||||||
| Delinquency ratio | 1.3 | % | 1.4 | % | |||||||
| Ratio of office CRE net charge-offs (recoveries) to average loans | — | % | 0.3 | % | |||||||
| Ratio of allowance for credit losses to office CRE loans, at period end | 3.68 | % | 3.92 | % | |||||||
| Weighted average LTV for office term CRE loans | 55 | % | 56 | % | |||||||
The following schedules present our office CRE loan portfolio, categorized by collateral location for the periods presented:
OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 252 | $ | — | $ | 252 | 14.1 | % | $ | — | ||||||||||||||||||||||
| California | 309 | 38 | 347 | 19.3 | 49 | |||||||||||||||||||||||||||
| Colorado | 61 | — | 61 | 3.4 | — | |||||||||||||||||||||||||||
| Nevada | 79 | 13 | 92 | 5.1 | — | |||||||||||||||||||||||||||
| Texas | 196 | — | 196 | 10.9 | — | |||||||||||||||||||||||||||
| Utah/Idaho | 473 | 34 | 507 | 28.3 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 309 | — | 309 | 17.4 | — | |||||||||||||||||||||||||||
|
Other
1
|
28 | — | 28 | 1.5 | — | |||||||||||||||||||||||||||
| Total office CRE | $ | 1,707 | $ | 85 | $ | 1,792 | 100.0 | % | $ | 49 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Loan Type | ||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Term | Construction and land development | Total |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||
| Office CRE | ||||||||||||||||||||||||||||||||
| Arizona | $ | 255 | $ | — | $ | 255 | 14.1 | % | $ | — | ||||||||||||||||||||||
| California | 328 | 38 | 366 | 20.2 | 49 | |||||||||||||||||||||||||||
| Colorado | 58 | — | 58 | 3.2 | — | |||||||||||||||||||||||||||
| Nevada | 77 | 11 | 88 | 4.9 | — | |||||||||||||||||||||||||||
| Texas | 186 | 7 | 193 | 10.6 | 1 | |||||||||||||||||||||||||||
| Utah/Idaho | 482 | 34 | 516 | 28.5 | — | |||||||||||||||||||||||||||
| Washington/Oregon | 283 | 25 | 308 | 17.0 | — | |||||||||||||||||||||||||||
|
Other
1
|
28 | — | 28 | 1.5 | — | |||||||||||||||||||||||||||
| Total office CRE | $ | 1,697 | $ | 115 | $ | 1,812 | 100.0 | % | $ | 50 | ||||||||||||||||||||||
1
Other included approximately $16 million and $17 million of office CRE loans with collateral located in Georgia at March 31, 2025 and December 31, 2024, respectively.
28
Consumer Lending
The following schedule presents the composition of our consumer lending portfolio:
CONSUMER LENDING PORTFOLIO
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of total
consumer loans |
Amount |
% of total
consumer loans |
Amount change | Percent change | |||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||
| 1-4 family residential | $ | 10,312 | 67.2 | % | $ | 9,939 | 66.4 | % | $ | 373 | 3.8 | % | |||||||||||||||||||||||
| Home equity credit line | 3,670 | 23.9 | 3,641 | 24.3 | 29 | 0.8 | |||||||||||||||||||||||||||||
| Construction and other consumer real estate | 762 | 5.0 | 810 | 5.4 | (48) | (5.9) | |||||||||||||||||||||||||||||
| Bankcard and other revolving plans | 472 | 3.1 | 457 | 3.1 | 15 | 3.3 | |||||||||||||||||||||||||||||
| Other | 122 | 0.8 | 121 | 0.8 | 1 | 0.8 | |||||||||||||||||||||||||||||
| Total consumer | $ | 15,338 | 100.0 | % | $ | 14,968 | 100.0 | % | $ | 370 | 2.5 | ||||||||||||||||||||||||
1-4 Family Residential Mortgages
We originate first-lien residential home mortgage loans considered to be of prime quality. At March 31, 2025, our 1-4 family residential mortgage loan portfolio totaled $10.3 billion, or 67% of our total consumer loan portfolio, compared with $9.9 billion, or 66%, at December 31, 2024. Approximately 89% and 90% of our 1-4 family residential mortgage loan portfolio was variable-rate for the same respective time periods. While we have historically retained variable-rate and other consumer construction loans in our portfolio, we are currently selling more of these loans to third parties. We continue to 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 March 31, 2025 and December 31, 2024, our HECL portfolio totaled $3.7 billion and $3.6 billion, respectively. Approximately 34% and 37% of our HECLs were secured by first liens for the same respective time periods.
At March 31, 2025, 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.
At March 31, 2025, approximately 92% of our HECL portfolio was still in the draw period, and about 23% of those loans were 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 March 31, 2025 and December 31, 2024, was 0.02% and 0.00%, respectively. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of our HECL portfolio.
29
The following schedule presents the geographic distribution of our consumer lending portfolio, based on the location of the primary borrower.
CONSUMER LENDING BY GEOGRAPHY
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Amount |
% of
total |
Nonaccrual loans | Amount |
% of
total |
Nonaccrual loans | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| Arizona | $ | 1,401 | 9.1 | % | $ | 5 | $ | 1,365 | 9.1 | % | $ | 5 | |||||||||||||||||||||||
| California | 3,434 | 22.4 | 16 | 3,159 | 21.1 | 14 | |||||||||||||||||||||||||||||
| Colorado | 1,376 | 9.0 | 9 | 1,353 | 9.1 | 7 | |||||||||||||||||||||||||||||
| Nevada | 1,319 | 8.6 | 10 | 1,328 | 8.9 | 10 | |||||||||||||||||||||||||||||
| Texas | 3,693 | 24.1 | 27 | 3,657 | 24.4 | 25 | |||||||||||||||||||||||||||||
| Utah/Idaho | 3,459 | 22.6 | 16 | 3,430 | 22.9 | 14 | |||||||||||||||||||||||||||||
| Washington/Oregon | 262 | 1.7 | 3 | 237 | 1.6 | — | |||||||||||||||||||||||||||||
| Other | 394 | 2.5 | 3 | 439 | 2.9 | 5 | |||||||||||||||||||||||||||||
| Total consumer | $ | 15,338 | 100.0 | % | $ | 89 | $ | 14,968 | 100.0 | % | $ | 80 | |||||||||||||||||||||||
Credit Quality
We monitor credit quality by analyzing various factors, including 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 the composition of our nonperforming assets:
NONPERFORMING ASSETS
| (Dollar amounts in millions) |
March 31,
2025 |
December 31,
2024 |
|||||||||
|
Nonaccrual loans
1
|
$ | 305 | $ | 297 | |||||||
|
Other real estate owned
2
|
2 | 1 | |||||||||
| Total nonperforming assets | $ | 307 | $ | 298 | |||||||
|
Ratio of nonperforming assets to net loans and leases
1
and other real estate owned
2
|
0.51 | % | 0.50 | % | |||||||
| Accruing loans past due 90 days or more | $ | 13 | $ | 18 | |||||||
|
Ratio of accruing loans past due 90 days or more to loans and leases
1
|
0.02 | % | 0.03 | % | |||||||
|
Nonaccrual loans
1
and accruing loans past due 90 days or more
|
$ | 318 | $ | 315 | |||||||
|
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
|
0.53 | % | 0.53 | % | |||||||
| Accruing loans past due 30-89 days | $ | 105 | $ | 57 | |||||||
1
Includes loans held for sale.
2
Does not include banking premises held for sale.
Nonperforming assets totaled $307 million, or 0.51% of total loans and leases and other real estate owned at March 31, 2025, and remained relatively stable compared with $298 million, or 0.50%, at December 31, 2024. See Note 6 of the Notes to Consolidated Financial Statements for more information on nonaccrual loans.
30
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) |
March 31,
2025 |
December 31,
2024 |
|||||||||
|
Commercial
|
$ | 1,115 | $ | 1,130 | |||||||
| Commercial real estate | 1,677 | 1,651 | |||||||||
| Consumer | 99 | 89 | |||||||||
| Total classified loans | $ | 2,891 | $ | 2,870 | |||||||
| Ratio of classified loans to total loans and leases | 4.82 | % | 4.83 | % | |||||||
Classified loans totaled $2.9 billion and remained relatively stable when compared with December 31, 2024. Approximately 58% of our classified loans are in the CRE loan portfolio. The loss content of our CRE loan portfolio continues to be mitigated by strong underwriting, supported by significant borrower equity and guarantor support, resulting in relatively stable CRE nonperforming assets and low net loan charge-offs.
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 by considering historical credit loss experience, current conditions, and economic forecasts, all of which inform the quantitative portion of our ACL. Additionally, we consider qualitative and environmental factors that may indicate losses could differ from levels estimated by our quantitative models. The impact of these factors on our ACL may change from quarter to quarter. Economic forecasts may not align with credit quality trends; therefore, changes in the ACL may not be directionally consistent with changes in credit quality.
During the first three months of 2025, the qualitative portion of the ACL decreased primarily due to portfolio-specific risks. This led us to assign lesser weight to stressed economic assumptions for certain portfolios, particularly CRE.
For additional information on the ACL and credit trends experienced in each portfolio segment, see “The Allowance and Provision for Credit Losses” section on page 12 and Note 6 of the Notes to Consolidated Financial Statements.
31
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) |
Three Months Ended
March 31, 2025 |
Twelve Months Ended
December 31, 2024 |
Three Months Ended
March 31, 2024 |
||||||||||||||
| Loans and leases outstanding | $ | 59,941 | $ | 59,410 | $ | 58,109 | |||||||||||
| Average loans and leases outstanding: | |||||||||||||||||
| Commercial | 31,033 | 30,671 | 30,482 | ||||||||||||||
| Commercial real estate | 13,557 | 13,532 | 13,504 | ||||||||||||||
| Consumer | 15,045 | 14,344 | 13,921 | ||||||||||||||
| Total average loans and leases outstanding | $ | 59,635 | $ | 58,547 | $ | 57,907 | |||||||||||
| Allowance for loan and lease losses: | |||||||||||||||||
| Balance at beginning of period | $ | 696 | $ | 684 | $ | 684 | |||||||||||
| Provision for loan losses | 17 | 72 | 21 | ||||||||||||||
| Charge-offs: | |||||||||||||||||
| Commercial | 19 | 68 | 10 | ||||||||||||||
| Commercial real estate | — | 11 | — | ||||||||||||||
| Consumer | 5 | 12 | 4 | ||||||||||||||
| Total | 24 | 91 | 14 | ||||||||||||||
| Recoveries: | |||||||||||||||||
| Commercial | 7 | 23 | 6 | ||||||||||||||
| Commercial real estate | — | 3 | 1 | ||||||||||||||
| Consumer | 1 | 5 | 1 | ||||||||||||||
| Total | 8 | 31 | 8 | ||||||||||||||
| Net loan and lease charge-offs | 16 | 60 | 6 | ||||||||||||||
| Balance at end of period | $ | 697 | $ | 696 | $ | 699 | |||||||||||
| Reserve for unfunded lending commitments: | |||||||||||||||||
| Balance at beginning of period | $ | 45 | $ | 45 | $ | 45 | |||||||||||
| Provision for unfunded lending commitments | 1 | — | (8) | ||||||||||||||
| Balance at end of period | $ | 46 | $ | 45 | $ | 37 | |||||||||||
| Total allowance for credit losses: | |||||||||||||||||
| Allowance for loan and lease losses | $ | 697 | $ | 696 | $ | 699 | |||||||||||
| Reserve for unfunded lending commitments | 46 | 45 | 37 | ||||||||||||||
| Total allowance for credit losses | $ | 743 | $ | 741 | $ | 736 | |||||||||||
| Ratio of allowance for credit losses to net loans and leases, at period end | 1.24 | % | 1.25 | % | 1.27 | % | |||||||||||
| Ratio of allowance for credit losses to nonaccrual loans, at period end | 244 | % | 249 | % | 297 | % | |||||||||||
| Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 234 | % | 235 | % | 293 | % | |||||||||||
|
Ratio of total net charge-offs to average loans and leases
1
|
0.11 | % | 0.10 | % | 0.04 | % | |||||||||||
|
Ratio of commercial net charge-offs to average commercial loans
1
|
0.15 | % | 0.15 | % | 0.05 | % | |||||||||||
|
Ratio of commercial real estate net charge-offs to average commercial real estate loans
1
|
— | % | 0.06 | % | (0.03) | % | |||||||||||
|
Ratio of consumer net charge-offs to average consumer loans
1
|
0.11 | % | 0.05 | % | 0.09 | % | |||||||||||
1
Ratios are annualized for the periods presented except for the period representing the full twelve months.
32
Interest Rate and Market Risk Management
Interest rate and market risk refer to the potential for losses to current or future earnings and capital due to changes in interest rates and other market conditions. Given our involvement in transactions with various financial products, we are exposed to these risks. For a more comprehensive discussion of our interest rate and market risk management, see “Interest Rate and Market Risk Management” in our
2024
Form 10-K.
We strive to position the Bank for interest rate changes and manage balance sheet sensitivity to reduce the volatility of both net interest income and economic value of equity (“EVE”). With the generally higher interest rate environment over the past couple of years, customer deposit behavior has deviated from the trends observed during the relatively low interest rate period of the previous 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 for managing interest rate risk. These changes give more weight to the recently observed behavior and have 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, with much of this funding in the form of demand deposits with no maturity, which can be withdrawn at any time. Instead of using contractual maturities, our interest rate risk model employs dynamically modeled behavioral assumptions based on historical behavior and future projections. Since 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 that of our loan portfolio. Consequently, we have historically been “asset-sensitive,” meaning our assets are expected to reprice faster or more significantly than our liabilities.
We regularly use interest rate swaps, investments 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 on the assumptions we use for deposit runoff and repricing behavior, and our models are particularly sensitive to these assumptions.
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 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
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| 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 | 4.3% | 3.5% | 2.8% | 4.2% | 3.5% | 2.9% | ||||||||||||||||||||||||||||||||
| Money market | 2.0% | 1.6% | 1.4% | 1.9% | 1.6% | 1.4% | ||||||||||||||||||||||||||||||||
| Savings and interest-bearing checking | 2.2% | 1.8% | 1.7% | 2.1% | 1.8% | 1.6% | ||||||||||||||||||||||||||||||||
As noted previously, we utilize derivatives to manage interest rate risk. The following schedule presents derivatives that are designated in qualifying hedging relationships at March 31, 2025. 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.
33
DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS
| 2025 | 2026 | 2027 | 2Q27 - 1Q28 | 2Q28 - 1Q29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) | Second Quarter | Third Quarter | Fourth Quarter | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | First Quarter | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Cash flow hedges of assets
1
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 750 | $ | 750 | $ | 700 | $ | 533 | $ | 500 | $ | 500 | $ | 500 | $ | 433 | $ | 383 | $ | 242 | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate received | 3.17 | % | 3.17 | % | 3.17 | % | 3.35 | % | 3.45 | % | 3.45 | % | 3.45 | % | 3.75 | % | 3.88 | % | 3.82 | % | |||||||||||||||||||||||||||||||||||||||
|
Cash flow hedges of liabilities
2
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 500 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 3.67 | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | |||||||||||||||||||||||||||||||||||||||
| 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value hedges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Fair value hedges of debt
3
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | $ | 500 | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate received | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | 3.93 | % | |||||||||||||||||||||||||||||||||||||||
|
Fair value hedges of assets
4
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average outstanding notional | $ | 4,965 | $ | 4,962 | $ | 4,958 | $ | 2,828 | $ | 1,449 | $ | 1,444 | $ | 1,437 | $ | 1,401 | $ | 1,373 | $ | 1,192 | |||||||||||||||||||||||||||||||||||||||
| Weighted-average fixed-rate paid | 3.27 | % | 3.27 | % | 3.27 | % | 2.82 | % | 2.44 | % | 2.44 | % | 2.44 | % | 2.45 | % | 2.46 | % | 2.58 | % | |||||||||||||||||||||||||||||||||||||||
1
Cash flow hedges of assets consist of receive-fixed swaps hedging pools of floating-rate loans.
2
Cash flow hedges of liabilities consist of a pay-fixed swap hedging rolling FHLB advances. This swap matures in May 2025.
Amounts for the second quarter of 2025 are not prorated to reflect this hedge maturing during the period.
3
Fair value debt hedges consist of receive-fixed swaps that hedge fixed-rate subordinated debt, as detailed in Note
7
of the Notes to Consolidated Financial Statements.
4
Fair value asset hedges consist of pay-fixed swaps that hedge fixed-rate AFS securities and fixed-rate commercial loans, as detailed in Note
7
of the Notes to Consolidated Financial Statements.
At March 31, 2025, we had $76 million of net losses deferred in AOCI related to terminated cash flow hedges. Amounts deferred in AOCI from terminated cash flow hedges are amortized into interest income on a straight-line basis through the original maturity dates of the hedges, provided 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 2024 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.
34
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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)
|
(8.2) | % | (4.1) | % | — | % | 3.9 | % | 7.6 | % | (8.9) | % | (4.5) | % | — | % | 4.4 | % | 8.7 | % | ||||||||||||||||||||||||||||||||||||||||||
|
Economic Value of Equity
(EVE)
|
2.8 | % | 1.8 | % | — | % | (2.7) | % | (5.9) | % | 0.1 | % | 0.6 | % | — | % | (1.7) | % | (3.6) | % | ||||||||||||||||||||||||||||||||||||||||||
1
Assumes rates cannot go below zero in the negative rate shifts.
Asset sensitivity, as measured by EaR, decreased during the first three months of 2025, primarily due to declines in money market investments and interest-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 49%.
Prepayment assumptions are an important factor in managing 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 March 31, 2025 and 2024, lifetime prepayment speeds were estimated to be 14.9% and 8.7% for loans, respectively, reflecting an acceleration of prepayments upon rate reset for adjustable rate loans. Prepayment speeds for mortgage-backed securities were estimated to be 7.0% and 6.1% for the same time periods.
Our EaR analysis primarily focuses on parallel rate shocks across the term structure of benchmark interest rates. Additionally, we conduct non-parallel rate shocks to identify other risks that may not be apparent in a parallel rate scenario. In non-parallel rate scenarios, the primary impacts on EaR generally arise from changes in short-term interest rates.
EaR has inherent limitations in describing expected changes in net interest income in changing interest rate environments due to a lag in asset and liability repricing behavior. Consequently, we expect net interest income to change due to “latent” and “emergent” interest rate sensitivity. Unlike EaR, which measures net interest income over 12 months, latent and emergent interest rate sensitivity explains changes in current quarter net interest income compared with expected net interest income in the same quarter one year forward.
Latent interest rate sensitivity refers to future changes in net interest income based upon past rate movements that have yet to be fully recognized in revenue but will be recognized over the near term. Latent sensitivity is modeled to increase net interest income by approximately 8.9% in the first quarter of 2026, compared with the first quarter of 2025.
Emergent interest rate sensitivity refers to future and incremental changes in net interest income based on future interest rate movements and is measured from the latent level of net interest income. If interest rates move in accordance with the forward curve at March 31, 2025, emergent sensitivity is modeled to reduce net interest income by approximately 4.3% from the latent sensitivity level, resulting in a cumulative 4.6% increase in net interest income. For a -100 bps and +100 bps parallel interest rate shock to the implied forward rate path, the cumulative net interest income sensitivity would range between 2.1% and 6.6%, respectively.
Our focus on business banking significantly influences our asset-liability management strategy. At March 31, 2025, $27.9 billion of commercial and CRE loans were scheduled to reprice within the next six months. To manage these variable-rate loans, we have executed $750 million of cash flow hedges by receiving fixed rates on interest rate swaps. Additionally, at March 31, 2025, we had $4.3 billion in variable-rate consumer loans scheduled to reprice within the next six months. The impact on asset sensitivity of commercial or consumer loans with floors has become insignificant due to higher interest rates. For additional information regarding derivative instruments, see Notes 3 and 7 of the Notes to Consolidated Financial Statements.
35
Fixed Income
We are exposed to market risk due to fluctuations in fair value, which encompasses market risk for trading securities and interest rate swaps used to hedge interest rate risk. Our underwriting activities include municipal and corporate securities, and we also trade municipal, agency, and treasury securities. This exposes us to potential losses from adverse price changes in these fixed-income securities.
Changes in the fair value of AFS securities and interest rate swaps that qualify as cash flow hedges are recorded in AOCI for each financial reporting period. For more information on investment securities and AOCI, refer to the “Capital Management” section on page 37. See also Note 5 of the Notes to Consolidated Financial Statements for further information on the accounting for investment securities.
Equity Investments
Through our equity investment activities, we hold publicly traded equity securities as well as equity securities in governmental entities and companies, such as the FRB and the FHLB, which are not publicly traded. For more information regarding our equity investments, see “Interest Rate and Market Risk Management” in our 2024 Form 10-K.
Additionally, we hold direct and indirect investments in predominantly pre-public companies, primarily through various SBIC venture capital funds. This strategy aims to provide beneficial financing, growth, and expansion opportunities to diverse businesses generally within our geographic footprint. At March 31, 2025 and December 31, 2024, our equity exposure to these investments was approximately $211 million and $204 million, respectively. Occasionally, companies within our SBIC investment portfolio may issue an initial public offering (“IPO”). In such cases, the fund is generally subject to a lockout period before we can liquidate the investment, introducing additional market risk. For additional information regarding the valuation of our SBIC investments, see Note 3 of the Notes to Consolidated Financial Statements.
Liquidity Risk Management
Liquidity refers to our ability to meet cash, contractual, and collateral obligations, and manage both expected and unexpected cash flows without negatively impacting our operations or financial strength. We manage liquidity to provide funds for our customers’ credit needs, anticipated financial and contractual obligations, and other corporate activities. Primary sources of liquidity include deposits, borrowings, equity, and paydowns of assets such as loans and investment securities. Our investment securities are primarily held as a source of contingent liquidity, and we generally own securities that can readily provide cash and liquidity through secured borrowing agreements with securities pledged as collateral. For more information on our liquidity risk management practices, see “Liquidity Risk Management” in our 2024 Form 10-K.
For the first three months of 2025, our primary sources of cash included a decrease in money market investments, a decrease in investment securities, and net cash provided by the acquisition of the California branches. The primary uses of cash during the same period included a decrease in deposits, a decrease in short-term borrowings, and an increase in loans and leases. Cash payments for interest, reflected in operating expenses, totaled $423 million and $491 million for the first three months of 2025 and 2024, respectively.
The FHLB and FRB have been, and continue to be, significant sources of back-up liquidity and funding. As a member of the FHLB of Des Moines, we can borrow against eligible loans and securities to meet liquidity and funding requirements. To maintain our borrowing capacity, we are required to invest in FHLB and FRB stock. At March 31, 2025, our total investment in FHLB and FRB stock was $146 million and $54 million, respectively, compared with $124 million and $65 million at December 31, 2024.
At March 31, 2025, loans with a carrying value of $24.6 billion and $16.8 billion were pledged at the FHLB and FRB, respectively, as collateral for current and potential borrowings, compared with $23.4 billion
and $17.0 billion at December 31, 2024.
36
Additionally, investment securities with a carrying value of $17.8 billion and $17.9 billion were pledged as collateral for potential borrowings at March 31, 2025 and December 31, 2024, respectively. These pledged securities included $8.5 billion and $8.7 billion for available use through the General Collateral Funding (“GCF”) program and other repo programs, $4.7 billion to the FRB and FHLB for both periods, and $4.6 billion and $4.5 billion to secure collateralized public and trust deposits, advances, and for other purposes.
A significant 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:
AVAILABLE LIQUIDITY
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in billions) | FHLB |
FRB
1
|
GCF
2
|
Total | FHLB |
FRB
1
|
GCF
2
|
Total | |||||||||||||||||||||||||||||||||||||||
| Total borrowing capacity | $ | 15.3 | $ | 17.7 | $ | 8.5 | $ | 41.5 | $ | 14.6 | $ | 17.7 | $ | 8.6 | $ | 40.9 | |||||||||||||||||||||||||||||||
| Borrowings outstanding | 3.1 | — | — | 3.1 | 2.6 | — | 0.3 | 2.9 | |||||||||||||||||||||||||||||||||||||||
| Remaining capacity, at period end | $ | 12.2 | $ | 17.7 | $ | 8.5 | $ | 38.4 | $ | 12.0 | $ | 17.7 | $ | 8.3 | $ | 38.0 | |||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 0.8 | $ | 0.7 | |||||||||||||||||||||||||||||||||||||||||||
|
Interest-bearing deposits
3
|
2.0 | 2.9 | |||||||||||||||||||||||||||||||||||||||||||||
| Total available liquidity | $ | 41.2 | $ | 41.6 | |||||||||||||||||||||||||||||||||||||||||||
| Ratio of available liquidity to uninsured deposits | 125% | 121% | |||||||||||||||||||||||||||||||||||||||||||||
1
Represents borrowing capacity and borrowings outstanding at the Federal Reserve Bank discount window.
2
Includes $893 million and $915 million pledged for available use through other repo programs for the periods presented.
3
Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
At March 31, 2025, our total available liquidity was $41.2 billion, compared with $41.6 billion at December 31, 2024. At March 31, 2025, our sources of liquidity exceeded the estimated amount of uninsured deposits of $32.9 billion
without the need to sell any investment securities.
Credit Ratings
General financial market and economic conditions affect our access to, and the cost of, external financing. Our ability to access funding markets is also directly influenced by the credit ratings assigned to us by various rating agencies. These ratings not only impact the costs associated with borrowings, but also influence the sources from which we can borrow. All credit rating agencies currently rate our debt at an investment-grade level.
The following schedule presents our credit ratings:
| CREDIT RATINGS | ||||||||||||||||||||||||||
| as of April 30, 2025: | ||||||||||||||||||||||||||
| 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 essential to achieve our key corporate objectives, ensure continued profitability, and foster depositor and investor confidence. We strive 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 our responsibilities to depositors and bondholders while managing capital distributions to shareholders through dividends and common stock repurchases.
37
We utilize stress testing as an important tool to inform our decisions on the appropriate level of capital to maintain, based on hypothetically stressed economic conditions, including the FRB’s supervisory severely adverse scenario. The timing and amount of capital actions depend on various factors, including our financial performance, business needs, prevailing and anticipated economic conditions, and the results of our internal stress testing, as well as approval from the Board of Directors (“Board”) and the Office of the Comptroller of the Currency (“OCC”). 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 2024 Form 10-K.
SHAREHOLDERS' EQUITY
| (Dollar amounts in millions) |
March 31,
2025 |
December 31,
2024 |
Amount change | Percent change | |||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||
|
Preferred stock
|
$ | 66 | $ | 66 | $ | — | — | % | |||||||||||||||
|
Common stock and additional paid-in capital
|
1,706 | 1,737 | (31) | (2) | |||||||||||||||||||
|
Retained earnings
|
6,805 | 6,701 | 104 | 2 | |||||||||||||||||||
| Accumulated other comprehensive loss | (2,250) | (2,380) | 130 | 5 | |||||||||||||||||||
| Total shareholders' equity | $ | 6,327 | $ | 6,124 | $ | 203 | 3 | ||||||||||||||||
Total shareholders’ equity increased $203 million, or 3%, to $6.3 billion at March 31, 2025, compared with $6.1 billion at December 31, 2024. Common stock and additional paid-in capital decreased $31 million, primarily due to common stock repurchases. During the first quarter of 2025, we repurchased 0.8 million common shares outstanding for $41 million, which includes common shares acquired through our publicly announced plans and those acquired in connection with our stock compensation plan.
The AOCI balance was a loss of $2.3 billion at March 31, 2025, and largely reflects a decline in the fair value of fixed-rate AFS securities as a result of changes in interest rates. This includes $1.8 billion
($1.3 billion after tax) of unrealized losses on the securities previously transferred from AFS to held-to-maturity (“HTM”). Compared with December 31, 2024, AOCI improved $130 million, primarily due to $68 million related to paydowns on AFS securities, and $43 million in unrealized loss amortization associated with the securities transferred from AFS to HTM. Additionally, AOCI was impacted by a $19 million decrease in unrealized losses and other adjustments associated with derivative instruments used for risk management purposes. We use pay-fixed, receive-floating interest rate swaps designated as hedges of our AFS securities to reduce the volatility of our AOCI balance. For more information about these swaps, see Note 7 of the Notes to Consolidated Financial Statements.
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 information on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.
38
CAPITAL DISTRIBUTIONS
|
Three Months Ended
March 31, |
|||||||||||
| (In millions, except share amounts) | 2025 | 2024 | |||||||||
| Capital distributions: | |||||||||||
| Preferred dividends paid | $ | 1 | $ | 10 | |||||||
| Total capital distributed to preferred shareholders | 1 | 10 | |||||||||
| Common dividends paid | 65 | 61 | |||||||||
|
Bank common stock repurchased
1
|
41 | 35 | |||||||||
| Total capital distributed to common shareholders | 106 | 96 | |||||||||
| Total capital distributed to preferred and common shareholders | $ | 107 | $ | 106 | |||||||
|
Weighted average diluted common shares outstanding (in thousands)
|
147,387 | 147,343 | |||||||||
| Common shares outstanding, at period end (in thousands) | 147,567 | 147,653 | |||||||||
1
Includes amounts related to common shares acquired through our publicly announced plans and those acquired in connection with our stock compensation plan. These shares were acquired from employees to cover their payroll taxes and stock option exercise costs upon the exercise of stock options.
Under the OCC’s “Earnings Limitation Rule,” our dividend payments are restricted to the sum of our net income for the current year and retained earnings for the preceding two years, unless the OCC approves the declaration and payment of dividends in excess of such amount. As of April 1, 2025, we had $1.0 billion in retained net profits available for distribution.
During the first quarter of 2025, we paid $1 million in dividends on preferred stock, compared with $10 million during the same prior year period. The decrease was due to the full redemption of the outstanding shares of our Series G, I, and J preferred stock in the fourth quarter of 2024.
We paid $65 million in dividends on common stock, or $0.43 per share, during the first quarter of 2025, compared with $61 million, or $0.41 per share, during the first quarter of 2024. In May 2025, the Board declared a quarterly dividend of $0.43 per common share, payable on May 22, 2025 to shareholders of record at the close of business on May 15, 2025. For additional information about our capital management actions, see Note 9 of the Notes to Consolidated Financial Statements.
Basel III
We are subject to Basel III capital requirements, which include certain minimum regulatory capital ratios. At March 31, 2025, 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 our capital levels sufficiently exceed both internal and regulatory requirements for well-capitalized banks. For more information about our compliance with the Basel III capital requirements, see “Supervision and Regulation” and Note 15 of our 2024 Form 10-K .
The following schedule presents our capital amounts, capital ratios, and other selected performance ratios:
39
CAPITAL AMOUNTS AND RATIOS
| (Dollar amounts in millions) |
March 31,
2025 |
December 31,
2024 |
March 31,
2024 |
||||||||||||||
|
Basel III risk-based capital amounts:
|
|||||||||||||||||
| Common equity tier 1 capital | $ | 7,379 | $ | 7,363 | $ | 6,920 | |||||||||||
| Tier 1 risk-based | 7,445 | 7,430 | 7,360 | ||||||||||||||
| Total risk-based | 9,057 | 9,026 | 8,619 | ||||||||||||||
| Risk-weighted assets | 68,132 | 67,685 | 66,824 | ||||||||||||||
| Basel III risk-based capital ratios: | |||||||||||||||||
| Common equity tier 1 capital ratio | 10.8 | % | 10.9 | % | 10.4 | % | |||||||||||
| Tier 1 risk-based ratio | 10.9 | 11.0 | 11.0 | ||||||||||||||
| Total risk-based ratio | 13.3 | 13.3 | 12.9 | ||||||||||||||
| Tier 1 leverage ratio | 8.4 | 8.3 | 8.4 | ||||||||||||||
| Other ratios: | |||||||||||||||||
| Average equity to average assets (three months ended) | 7.0 | % | 7.2 | % | 6.5 | % | |||||||||||
| Return on average common equity (three months ended) | 11.1 | 13.2 | 10.9 | ||||||||||||||
|
Return on average tangible common equity (three months ended)
1
|
13.4 | 16.0 | 13.7 | ||||||||||||||
|
Tangible equity ratio
1
|
6.0 | 5.8 | 5.5 | ||||||||||||||
|
Tangible common equity ratio
1
|
5.9 | 5.7 | 5.0 | ||||||||||||||
1
See “Non-GAAP Financial Measures” on page 40 for more information regarding these ratios.
At March 31, 2025, our common equity tier 1 (“CET1”) capital was $7.4 billion, an increase of 7%, compared with $6.9 billion in the prior year period. The CET1 capital ratio improved to 10.8%, compared with 10.4%. Tangible book value per common share was $34.95, compared with $29.34, primarily due to an increase in retained earnings and reduced unrealized losses in AOCI. For more information on non-GAAP financial measures, see page 40.
Regulatory Developments
During 2023 and 2024, federal bank regulators issued proposals to (1) implement Basel III Endgame and revise capital requirements for large banking organizations, (2) revise requirements for resolution and recovery planning, and (3) expand a long-term debt requirement to all banks with $100 billion or more in total assets. For more information about these regulatory proposals and their potential impact on the Bank, see “Regulatory Developments” in the Supervision and Regulation section of our 2024 Form 10-K.
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.
40
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) |
March 31,
2025 |
December 31,
2024 |
March 31,
2024 |
|||||||||||||||||
|
Net earnings applicable to common shareholders (GAAP)
|
$ | 169 | $ | 200 | $ | 143 | ||||||||||||||
| Adjustment, net of tax: | ||||||||||||||||||||
| Amortization of core deposit and other intangibles | 1 | 1 | 1 | |||||||||||||||||
|
Net earnings applicable to common shareholders, net of tax
|
(a) | $ | 170 | $ | 201 | $ | 144 | |||||||||||||
| Average common equity (GAAP) | $ | 6,182 | $ | 6,036 | $ | 5,289 | ||||||||||||||
| Average goodwill and intangibles | (1,052) | (1,053) | (1,058) | |||||||||||||||||
| Average tangible common equity (non-GAAP) | (b) | $ | 5,130 | $ | 4,983 | $ | 4,231 | |||||||||||||
| Number of days in quarter | (c) | 90 | 92 | 91 | ||||||||||||||||
| Number of days in year | (d) | 365 | 366 | 366 | ||||||||||||||||
|
Return on average tangible common equity (non-GAAP)
1
|
(a/b/c)*d | 13.4 | % | 16.0 | % | 13.7 | % | |||||||||||||
1
Excluding the effect of AOCI from average tangible common equity would result in associated returns of 9.2%, 10.9%, and 8.4% 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) |
March 31,
2025 |
December 31,
2024 |
March 31,
2024 |
|||||||||||||||||
| Total shareholders’ equity (GAAP) | $ | 6,327 | $ | 6,124 | $ | 5,829 | ||||||||||||||
| Goodwill and intangibles | (1,104) | (1,052) | (1,057) | |||||||||||||||||
| Tangible equity (non-GAAP) | (a) | 5,223 | 5,072 | 4,772 | ||||||||||||||||
| Preferred stock | (66) | (66) | (440) | |||||||||||||||||
| Tangible common equity (non-GAAP) | (b) | $ | 5,157 | $ | 5,006 | $ | 4,332 | |||||||||||||
| Total assets (GAAP) | $ | 87,992 | $ | 88,775 | $ | 87,060 | ||||||||||||||
| Goodwill and intangibles | (1,104) | (1,052) | (1,057) | |||||||||||||||||
| Tangible assets (non-GAAP) | (c) | $ | 86,888 | $ | 87,723 | $ | 86,003 | |||||||||||||
| Common shares outstanding (in thousands) | (d) | 147,567 | 147,871 | 147,653 | ||||||||||||||||
| Tangible equity ratio (non-GAAP) | (a/c) | 6.0 | % | 5.8 | % | 5.5 | % | |||||||||||||
| Tangible common equity ratio (non-GAAP) | (b/c) | 5.9 | % | 5.7 | % | 5.0 | % | |||||||||||||
| Tangible book value per common share (non-GAAP) | (b/d) | $ | 34.95 | $ | 33.85 | $ | 29.34 | |||||||||||||
41
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. We believe these adjustments allow for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how we are managing our expenses. Adjusted pre-provision net revenue (“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 | Year Ended | |||||||||||||||||||||||||
| (Dollar amounts in millions) |
March 31,
2025 |
December 31,
2024 |
March 31,
2024 |
December 31,
2024 |
||||||||||||||||||||||
| Noninterest expense (GAAP) | (a) | $ | 538 | $ | 509 | $ | 526 | $ | 2,046 | |||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
|
Severance costs
|
3 | 1 | — | 3 | ||||||||||||||||||||||
|
Other real estate expense, net
|
— | — | — | (1) | ||||||||||||||||||||||
|
Amortization of core deposit and other intangibles
|
2 | 2 | 2 | 7 | ||||||||||||||||||||||
| SBIC investment success fee accrual | — | — | — | 1 | ||||||||||||||||||||||
| FDIC special assessment | — | (3) | 13 | 11 | ||||||||||||||||||||||
|
Total adjustments
|
(b) | 5 | — | 15 | 21 | |||||||||||||||||||||
|
Adjusted noninterest expense (non-GAAP)
|
(c)=(a-b) | $ | 533 | $ | 509 | $ | 511 | $ | 2,025 | |||||||||||||||||
| Net interest income (GAAP) | (d) | $ | 624 | $ | 627 | $ | 586 | $ | 2,430 | |||||||||||||||||
|
Fully taxable-equivalent adjustments
|
(e) | 11 | 12 | 10 | 45 | |||||||||||||||||||||
|
Taxable-equivalent net interest income (non-GAAP)
|
(f)=(d+e) | 635 | 639 | 596 | 2,475 | |||||||||||||||||||||
| Noninterest income (GAAP) | g | 171 | 193 | 156 | 700 | |||||||||||||||||||||
|
Combined income (non-GAAP)
|
(h)=(f+g) | 806 | 832 | 752 | 3,175 | |||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
|
Fair value and nonhedge derivative gains (losses)
|
— | 3 | 1 | — | ||||||||||||||||||||||
|
Securities gains (losses), net
|
6 | 8 | (2) | 19 | ||||||||||||||||||||||
|
Total adjustments
|
(i) | 6 | 11 | (1) | 19 | |||||||||||||||||||||
|
Adjusted taxable-equivalent revenue (non-GAAP)
|
(j)=(h-i) | $ | 800 | $ | 821 | $ | 753 | $ | 3,156 | |||||||||||||||||
|
Pre-provision net revenue (non-GAAP)
|
(h)-(a) | $ | 268 | $ | 323 | $ | 226 | $ | 1,129 | |||||||||||||||||
| Adjusted PPNR (non-GAAP) | (j)-(c) | 267 | 312 | 242 | 1,131 | |||||||||||||||||||||
| Efficiency ratio (non-GAAP) | (c/j) | 66.6 | % | 62.0 | % | 67.9 | % | 64.2 | % | |||||||||||||||||
42
ITEM 1. FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED BALANCE SHEETS
| (In millions, shares in thousands) |
March 31,
2025 |
December 31,
2024 |
|||||||||
| (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.
43
CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) |
Three Months Ended
March 31, |
||||||||||
| (In millions, except shares and per share amounts) | 2025 | 2024 | |||||||||
| 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 and income |
|
|
|||||||||
| Wealth management fees |
|
|
|||||||||
| Other customer-related fees |
|
|
|||||||||
| Customer-related noninterest income |
|
|
|||||||||
| Dividends and other income |
|
|
|||||||||
| 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.
44
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Three Months Ended
March 31, |
|||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Net income for the period | $ |
|
$ |
|
|||||||
| Other comprehensive income, net of tax: | |||||||||||
| Net unrealized holding gains on investment securities |
|
|
|||||||||
| Unrealized loss amortization associated with the securities transferred from AFS to HTM |
|
|
|||||||||
| Unrealized holding gains (losses) on derivative instruments |
|
(
|
|||||||||
|
Reclassification adjustment for cash flow hedges
|
|
|
|||||||||
| Other comprehensive income, 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 December 31, 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 March 31, 2025 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
| 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 March 31, 2024 | $ |
|
|
$ |
|
$ |
|
$ |
(
|
$ |
|
||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
45
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| (In millions) |
Three Months Ended
March 31, |
||||||||||
| 2025 | 2024 | ||||||||||
| 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 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 (increase) 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 |
(
|
(
|
|||||||||
| Acquisition of California branches, net of cash acquired |
|
|
|||||||||
|
Other, net
|
|
|
|||||||||
| Net cash provided by investing activities |
|
|
|||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Net decrease in deposits |
(
|
(
|
|||||||||
| Net change in short-term borrowed funds |
(
|
|
|||||||||
| 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 (decrease) 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 |
|
|
|||||||||
| Deposits acquired in purchase of California branches (at time of purchase) |
|
|
|||||||||
| Loans acquired in purchase of California branches, net (at time of purchase) |
|
|
|||||||||
See accompanying notes to consolidated financial statements.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2025
1.
BASIS OF PRESENTATION
Zions Bancorporation, National Association (“Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”) is a 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 affiliates: 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 Commerce Bank of Oregon in Oregon.
The consolidated financial statements include our accounts and those of our majority-owned, consolidated subsidiaries. This also includes our wholly-owned subsidiaries, such as ZMFU II, Inc., which is utilized for our municipal lending business, and Zions Direct, Inc., a registered broker-dealer under the Exchange Act, among other subsidiaries.
Investments in which we have the ability to exercise significant influence over the operating and financial policies of the investee are accounted for using the equity method. All intercompany accounts and transactions have been eliminated in consolidation. Assets held in an agency or fiduciary capacity are excluded from the consolidated financial statements.
The accompanying unaudited consolidated financial statements of Zions Bancorporation, N.A., and its majority-owned subsidiaries 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 months ended March 31, 2025 and 2024 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 consolidated financial statements and accompanying Notes. Actual results could differ from those estimates. For further information, refer to the consolidated financial statements and accompanying Notes included in our 2024 Form 10-K.
In late March 2025, we purchased
four
FirstBank Coachella Valley, California branches and their associated deposit and loan accounts. At March 31, 2025, in addition to the
four
branches, the purchase included approximately $
630
million in deposits, $
420
million in consumer and commercial loans, $
39
million in goodwill, and $
15
million in core deposit intangibles. These amounts may be subject to change as a result of final valuation measurements.
We evaluated events that occurred between March 31, 2025 and the date the consolidated financial statements were issued, and determined that there were no material events requiring adjustments to our consolidated financial statements or significant disclosure in the accompanying Notes.
47
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 March 31, 2025 | ||||||||||||||||||||
|
ASU 2024-03,
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)
|
This accounting standards update (“ASU”) requires additional disclosures of certain costs and expenses in both interim and annual reporting periods, including:
•
Amounts of employee compensation, depreciation, and intangible asset amortization included in certain expense lines presented on the face of the income statement within continuing operations.
•
A qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.
•
The Bank's definition and amount of selling costs.
|
Annual periods beginning January 1, 2027; Interim periods beginning January 1, 2028 | We are evaluating the new disclosure requirements. The overall effect of this standard is not expected to have a material impact on our consolidated financial statements. | |||||||||||||||||
| Standards adopted by the Bank during the first quarter of 2025 | ||||||||||||||||||||
|
ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
|
This ASU requires additional detailed information to improve the usefulness of income tax disclosures. This includes providing detailed annual disclosures on rate reconciliation and income taxes paid for specific categories and when certain quantitative thresholds are met. | January 1, 2025 | The overall effect of this standard did not have a material impact on our consolidated financial statements. | |||||||||||||||||
3.
FAIR VALUE
Fair value is defined as the price that would be received to sell 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 2024 Form 10-K.
Fair Value Hierarchy
The following schedule presents assets and liabilities measured at fair value on a recurring basis:
| (In millions) | March 31, 2025 | ||||||||||||||||||||||
| 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 | |||||||||||||||||||||||
| Fed funds and other short-term borrowings: | |||||||||||||||||||||||
| 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.
48
| (In millions) | December 31, 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 | |||||||||||||||||||||||
| Fed funds and other short-term borrowings: | |||||||||||||||||||||||
| 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 designated for sale to third-party conduits for securitization and hedged with derivative instruments. This election mitigates the accounting volatility that would otherwise arise from the asymmetry of accounting for loans held for sale at the lower of cost or fair value and 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. Associated fair value gains and losses are included in “Capital markets fees and income” on the consolidated statement of income, while accrued interest is included in “Interest and fees on loans.”
At March 31, 2025 and December 31, 2024, we had $
62
million and $
25
million of loans measured at fair value, with an unpaid principal balance of $
61
million and $
26
million, respectively. During the first three months of 2025 and 2024, we recognized approximately $
2
million and $
5
million of net gains from loan sales and valuation adjustments of loans measured 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 2024 Form 10-K.
49
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
March 31, 2025 |
Three Months Ended
March 31, 2024 |
||||||||||||||||||||||
| (In millions) | Private equity investments | Ag loan servicing | Private equity investments | Ag loan servicing | |||||||||||||||||||
|
Balance at beginning of period
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Unrealized securities gains, net |
|
|
|
|
|||||||||||||||||||
| Other noninterest 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 | ||||||||||
|
March 31,
2025 |
March 31,
2024 |
||||||||||
| Securities gains, net | $ |
|
$ |
|
|||||||
Nonrecurring Fair Value Measurements
Certain assets and liabilities may be measured at fair value on a nonrecurring basis. These include impaired loans measured at 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 March 31, 2025, we had
no
collateral-dependent loans marked to fair value. During the first quarter of 2025, we recognized
no
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 2024 Form 10-K.
Fair Value of Certain Financial Instruments
The following schedule presents the carrying values and estimated fair values of certain financial instruments:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (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 excludes certain financial instruments 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 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 2024 Form 10-K.
50
4.
OFFSETTING ASSETS AND LIABILITIES
The following schedule presents gross and net information for selected financial instruments on the balance sheet:
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| 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, 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 | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||
Security repurchase and reverse repurchase agreements are offset on the balance sheet according to master netting agreements, when applicable. Security repurchase agreements are included in “Federal funds and other short-term borrowings” on the consolidated balance sheet. Derivative instruments may also be offset under their master netting agreements; however, for accounting purposes, these items are presented on a gross basis on our balance sheet. For more information regarding derivative instruments, see Note 7.
51
5.
INVESTMENT SECURITIES
Investment Securities
We classify our investment securities as either available-for-sale (“AFS”) or held-to-maturity (“HTM”). AFS securities are measured at fair value and consist of debt securities used to manage liquidity and interest rate risk and to generate interest income. Unrealized gains and losses from AFS securities, after applicable taxes, are recorded as a component of other comprehensive income (“OCI”). HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. The amortized cost represents the original investment cost, adjusted for related amortization or accretion of any purchase premiums or discounts, and for any impairment losses, including credit-related impairment. Gains or losses on the sale of investment securities are recognized using the specific identification method and are recorded in noninterest income.
The carrying values of our investment securities do not include accrued interest receivables of
$
56
million
and $
60
million at March 31, 2025 and December 31, 2024, respectively. These receivables are included in “Other assets” on the consolidated balance sheet.
Investment securities with a carrying value of $
17.8
billion and $
17.9
billion were pledged as collateral for potential borrowings at March 31, 2025 and December 31, 2024, respectively.
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. 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 accumulated other comprehensive income (“AOCI”) will offset the effect of the amortization of the premium or discount in interest income created by the transfer. The discount associated with securities previously transferred from AFS to HTM was $
1.8
billion
(
$
1.3
billion
after tax)
at March 31, 2025, compared with $
1.8
billion ($
1.4
billion after tax) at December 31, 2024.
See Notes 3 and 5 of our 2024 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:
| March 31, 2025 | |||||||||||||||||||||||
| (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 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
52
| December 31, 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 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
1
Gross unrealized gains for the respective AFS security categories without values were individually less than $
1
million.
53
Maturities
The following schedule presents the amortized cost and weighted average yields of debt securities by remaining contractual maturity of principal payments at March 31, 2025. It does not incorporate interest rate resets and fair value hedges. The remaining contractual principal maturities do not reflect the duration of the portfolio, which includes amortization and expected prepayments; these effects result in measured durations shorter than contractual maturities.
| March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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.
54
The following schedule presents gross unrealized losses for AFS securities and the estimated fair value, categorized by the length of time the securities have been in an unrealized loss position:
| March 31, 2025 | |||||||||||||||||||||||||||||||||||
| 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, 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 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
At March 31, 2025 and December 31, 2024, the number of AFS investment securities in an unrealized loss position was
2,440
and
2,534
, 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 2024 Form 10-K.
AFS Impairment
We did not recognize any impairment
on our AFS investment securities portfolio during the first three months of both 2025 and 2024. Unrealized losses primarily relate to higher interest rates subsequent to the purchase of securities and are not attributable to credit. Therefore, absent any future sales, we expect to receive full principal value at maturity. At March 31, 2025, 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 recovering 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 March 31, 2025, 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.
55
Investment Securities Gains and Losses Recognized in Income
We recognized
no
investment securities gains and losses in income during the first three months of both 2025 and 2024.
The following schedule presents interest income categorized by investment security type:
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| (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
The following schedule presents our loan and lease portfolio according to major portfolio segment and specific class:
| (In millions) |
March 31,
2025 |
December 31,
2024 |
|||||||||
| Loans held for sale | $ |
|
$ |
|
|||||||
| Commercial: | |||||||||||
| Commercial and industrial | $ |
|
$ |
|
|||||||
| Owner-occupied |
|
|
|||||||||
| Municipal |
|
|
|||||||||
| Leasing |
|
|
|||||||||
| Total commercial |
|
|
|||||||||
| Commercial real estate: | |||||||||||
| Term |
|
|
|||||||||
| Construction and land development |
|
|
|||||||||
| Total commercial real estate |
|
|
|||||||||
| Consumer: | |||||||||||
| 1-4 family residential |
|
|
|||||||||
| Home equity credit line |
|
|
|||||||||
| Construction and other consumer real estate |
|
|
|||||||||
| Bankcard and other revolving plans |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total consumer |
|
|
|||||||||
|
Total loans and leases
|
$ |
|
$ |
|
|||||||
Loans and leases classified as held for investment are measured and presented at their amortized cost basis, which includes net unamortized purchase premiums, discounts, and deferred loan fees and costs totaling $
56
million and $
43
million at March 31, 2025 and December 31, 2024, respectively. The amortized cost basis of the loans does not include accrued interest receivables of $
279
million and $
281
million at March 31, 2025 and December 31, 2024, 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 $
270
million at March 31, 2025 and $
260
million at December 31, 2024.
56
Loans with a carrying value of $
41.4
billion at March 31, 2025 and $
40.4
billion at December 31, 2024 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.
Loans held for sale are measured individually at fair value or the lower of cost or fair value and primarily consist of CRE loans sold into securitization entities, and conforming residential mortgages 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
March 31, |
|||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Loans added to held for sale | $ |
|
$ |
|
|||||||
| Loans sold from held for sale |
|
|
|||||||||
Occasionally, we have continuing involvement in sold loans through servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was approximately $
669
million and $
615
million at March 31, 2025 and December 31, 2024, respectively. Income from sold loans, excluding servicing, was $
2
million for the three months ended March 31, 2025, and $
1
million for the three months ended March 31, 2024, respectively.
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 2024 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. For more information regarding our methodology used to estimate the ACL on AFS and HTM debt securities, see Note 5 of our 2024 Form 10-K.
57
Changes in the ACL are summarized as follows:
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||
| (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 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Three Months Ended March 31, 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 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Nonaccrual Loans
Loans are generally placed on nonaccrual 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 it is both well-secured and in the process of collection. Factors we consider when placing a loan on nonaccrual status include delinquency status, collateral value, financial statements of the borrower or guarantor, bankruptcy status, and other indicators that suggest uncertainty in the full and timely collection of principal and interest.
58
A nonaccrual loan may be restored to accrual status when the following conditions are met: (1) all delinquent principal and interest are brought current in accordance with the loan agreement; (2) the loan, if secured, is well secured; (3) the borrower has made payments according to the contractual terms for a minimum of six months; and (4) an analysis of the borrower indicates a reasonable assurance of their ability and willingness to continue making payments.
The following schedule presents the amortized cost basis of loans on nonaccrual:
| March 31, 2025 | |||||||||||||||||||||||
| Amortized cost basis | Total amortized cost basis | ||||||||||||||||||||||
| (In millions) | with no allowance | with allowance | Related allowance | ||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Municipal |
|
|
|
|
|||||||||||||||||||
| Leasing |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Construction and land development |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| Construction and other consumer real estate |
|
|
|
|
|||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Amortized cost basis | Total amortized cost basis | ||||||||||||||||||||||
| (In millions) | with no allowance | with allowance | Related allowance | ||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Owner-occupied |
|
|
|
|
|||||||||||||||||||
| Municipal |
|
|
|
|
|||||||||||||||||||
| Leasing |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Term |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
59
For accruing loans, interest is accrued, and interest payments are recognized as interest income in accordance with the contractual loan agreement. For nonaccruing loans, the accrual of interest is discontinued, and any uncollected or accrued interest is promptly reversed from interest income, generally within one month. Payments received on nonaccruing loans are not recognized as interest income, but are applied to reduce the outstanding principal balance. When the collectability of the amortized cost basis of a nonaccrual loan is no longer in doubt, interest payments may be recognized as interest income on a cash basis. For the three months ended March 31, 2025 and 2024,
no
interest income was recognized on a cash basis while the loans were on nonaccrual.
The following schedule presents the amount of accrued interest receivables reversed from interest income, categorized by loan portfolio segment during the periods presented:
|
Three Months Ended
March 31, |
|||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| 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:
| March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| (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 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Leasing |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Term
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Construction and other consumer real estate
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
60
| December 31, 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 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Owner-occupied |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Municipal |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Leasing |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Term
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
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 align with published regulatory risk classifications.
Definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:
•
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 warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or 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 the collateral pledged, if any. Assets classified as Substandard 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 less than $
1
million at March 31, 2025, compared to $
14
million at December 31, 2024.
61
For commercial and CRE loans with commitments greater than $
1
million, we assign one of multiple grades within the Pass classification or one of the previously described risk classifications. We assess our internal risk grades quarterly, or as soon as we identify information that affects the credit risk of the loan.
For consumer loans and for commercial and CRE loans with commitments of $
1
million or less, we generally assign internal risk grades similar to those previously described based on automated rules that consider refreshed credit scores, payment performance, and other risk indicators. These loans are generally assigned either a Pass, Special Mention, or Substandard grade, and are reviewed as we identify information that might warrant a grade change.
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. Loans that have been modified resulting in substantially different terms than the original loan are included in the period in which the modification occurred.
62
| March 31, 2025 | |||||||||||||||||||||||||||||
| 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) |
2025
|
2024
|
2023
|
2022
|
2021
|
Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | |||||||||||||||||||||||||||||
| Pass | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial and industrial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Owner-occupied | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Municipal | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total municipal |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Leasing | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total leasing |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Term | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
63
| March 31, 2025 | |||||||||||||||||||||||||||||
| 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) |
2025
|
2024
|
2023
|
2022
|
2021
|
Prior | Total | ||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Home equity credit line | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 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
| December 31, 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 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Owner-occupied | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total owner-occupied |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Municipal | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total municipal |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Leasing | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total leasing |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Term | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total term |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Construction and land development | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total construction and land development |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
65
| December 31, 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: | |||||||||||||||||||||||||||||
| 1-4 family residential | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Home equity credit line | |||||||||||||||||||||||||||||
| Pass |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Special Mention |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Accruing Substandard |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Nonaccrual |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total home equity credit line |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| 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 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
66
The following schedules present gross charge-offs by year of loan origination for the periods presented.
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||
| 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) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total | ||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Three Months Ended March 31, 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 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Bankcard and other revolving plans |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
| Total gross charge-offs | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||
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
67
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 months ended March 31, 2025 and 2024, which were still in default at period end, and were within 12 months or less of being modified was
zero
and approximately $
18
million, primarily commercial real estate loans, 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 March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
|
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: | |||||||||||||||||||||||||||||||||||||||||
|
Term
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
||||||||||||||||||||||||||||
68
| Three Months Ended March 31, 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 |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||||||||
|
Term
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
Construction and land development
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| 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
$
3
million
at March 31, 2025 and March 31, 2024, 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
March 31, 2025 |
Three Months Ended
March 31, 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 |
|
|
|
|
|||||||||||||||||||
| Total commercial |
|
|
|
|
|||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
|
Term
|
|
|
|
|
|||||||||||||||||||
| Construction and land development |
|
|
|
|
|||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|||||||||||||||||||
|
Consumer:
1
|
|||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|||||||||||||||||||
| Home equity credit line |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total consumer |
|
|
|
|
|||||||||||||||||||
| Total weighted average financial impact |
|
|
|
|
|||||||||||||||||||
1
Primarily relates to a small number of loans within each consumer loan class.
69
Loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024 resulted in less than $
1
million and
zero
principal forgiveness, respectively, for the total loan portfolio for the period.
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after April 1, 2024 through March 31, 2025, presented by portfolio segment and loan class:
| March 31, 2025 | |||||||||||||||||||||||||||||
| (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: | |||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
||||||||||||||||||||||||
|
Bankcard and other revolving plans
|
|
|
|
|
|
||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after April 1, 2023 through March 31, 2024, presented by portfolio segment and loan class:
| March 31, 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: | |||||||||||||||||||||||||||||
| Term |
|
|
|
|
|
||||||||||||||||||||||||
| Construction and land development |
|
|
|
|
|
||||||||||||||||||||||||
| Total commercial real estate |
|
|
|
|
|
||||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||
| 1-4 family residential |
|
|
|
|
|
||||||||||||||||||||||||
| Home equity credit line |
|
|
|
|
|
||||||||||||||||||||||||
| Other |
|
|
|
|
|
||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
70
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:
| March 31, 2025 | |||||||||||||||||
| (Dollar amounts in millions) | Amortized cost | Major types of collateral |
Weighted average LTV
1
|
||||||||||||||
| Commercial: | |||||||||||||||||
| Commercial and industrial | $ |
|
Single family residential |
|
|||||||||||||
| Owner-occupied |
|
Retail facility |
|
||||||||||||||
| Municipal |
|
Multifamily apartments |
|
||||||||||||||
| Commercial real estate: | |||||||||||||||||
| Term |
|
Office building |
|
||||||||||||||
| Consumer: | |||||||||||||||||
| 1-4 family residential |
|
Single family residential |
|
||||||||||||||
| Home equity credit line |
|
Single family residential |
|
||||||||||||||
| Total | $ |
|
|||||||||||||||
| December 31, 2024 | |||||||||||||||||
| (Dollar amounts in millions) | Amortized cost | Major types of collateral |
Weighted average LTV
1
|
||||||||||||||
| Commercial: | |||||||||||||||||
| Owner occupied | $ |
|
Retail facility |
|
|||||||||||||
| Municipal |
|
Multifamily apartments |
|
||||||||||||||
| Commercial real estate: | |||||||||||||||||
| Term |
|
Office building |
|
||||||||||||||
| Consumer: | |||||||||||||||||
| 1-4 family residential |
|
Single family residential |
|
||||||||||||||
| Home equity credit line |
|
Single family residential |
|
||||||||||||||
| Total | $ |
|
|||||||||||||||
1
The fair value is based on the most recent appraisal or other collateral evaluation.
Foreclosed Residential Real Estate
At both March 31, 2025 and December 31, 2024, we had less than $
1
million in foreclosed residential real estate property. The amortized cost basis of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure was $
9
million and $
14
million for the same periods, respectively.
71
7.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Accounting
Our primary objective for using derivatives is to manage interest rate risk. We utilize derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or duration of fixed-rate financial assets or liabilities. Additionally, we assist customers 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, while cash flows from undesignated derivatives are classified as operating activities. For more information about the use of and accounting policies regarding derivative instruments, see Note 7 of our 2024 Form 10-K.
Collateral and Credit Risk
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 2024 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our 2024 Form 10-K.
Our derivative contracts require us to pledge collateral for derivatives in a net liability position at a given balance sheet date. Certain derivative contracts include credit risk-related contingent features, such as the requirement to maintain a minimum debt credit rating. If a credit risk-related feature were triggered, such as a downgrade of our credit rating, we may be required to pledge additional collateral. Historically, not all counterparties have demanded additional collateral when contractually permitted.
At March 31, 2025, the fair value of our derivative liabilities was $
292
million, for which we pledged $
13
million in cash collateral in the normal course of business to satisfy variation margin requirements. Additionally, we pledged $
180
million in U.S. Treasuries to satisfy initial margin requirements with certain dealer counterparties and central clearing houses. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at March 31, 2025, it is unlikely that additional collateral would be required to be pledged. Derivatives that are centrally cleared do not have credit risk-related features requiring additional collateral in the event of a credit rating downgrade.
We measure counterparty credit risk by calculating a credit valuation adjustment (“CVA”), which captures the value of nonperformance risk for both our counterparties and ourselves. The fair value of derivatives includes a net CVA, reducing the fair value of the derivative liabilities by $
9
million at both March 31, 2025, and December 31, 2024. CVA is included in “Capital markets fees and income” on the consolidated statement of income.
Derivative Amounts
The following schedule presents derivative notional amounts and recorded gross fair values at March 31, 2025 and December 31, 2024:
72
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
|
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: | |||||||||||||||||||||||||||||||||||
|
Hedges of floating-rate assets
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Hedges of floating-rate liabilities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||||||||
| Hedges of fixed-rate assets |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Hedges of fixed-rate liabilities |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 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 and offsetting dealer-facing derivatives.
The following schedules present the amount of gains (losses) from derivative instruments designated as cash flow and fair value hedges that were deferred in AOCI or recognized in earnings for the three months ended March 31, 2025 and 2024:
| Three Months Ended March 31, 2025 | |||||||||||||||||
| (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 | ||||||||||||||
|
Cash flow hedges:
1
|
|||||||||||||||||
| Hedges of floating-rate assets | $ |
|
$ |
(
|
$ |
|
|||||||||||
| Hedges of floating-rate liabilities |
|
|
|
||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||
| Hedges of fixed-rate assets |
|
|
|
||||||||||||||
| Hedges of fixed-rate liabilities |
|
|
(
|
||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
|
$ |
(
|
$ |
|
|||||||||||
| Three Months Ended March 31, 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 | ||||||||||||||
|
Cash flow hedges:
1
|
|||||||||||||||||
| Hedges of floating-rate assets | $ |
(
|
$ |
(
|
$ |
|
|||||||||||
| Hedges of floating-rate liabilities |
|
|
|
||||||||||||||
|
Fair value hedges:
2
|
|||||||||||||||||
| Hedges of fixed-rate assets |
|
|
|
||||||||||||||
| Hedges of fixed-rate liabilities |
|
|
(
|
||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ |
(
|
$ |
(
|
$ |
|
|||||||||||
73
1
For the 12 months following March 31, 2025, we estimate that $
54
million of net losses from active and terminated cash flow hedges will be reclassified from AOCI into interest income, compared with an estimate of $
102
million at March 31, 2024. At March 31, 2025, there were $
76
million of losses deferred in AOCI related to terminated cash flow hedges that are expected to be fully reclassified into earnings by October 2027.
2
We had total cumulative unamortized basis adjustments from terminated fair value hedges of debt of $
38
million and $
45
million at March 31, 2025 and 2024, respectively. We had $
3
million of cumulative unamortized basis adjustments from terminated fair value hedges of assets at both March 31, 2025 and 2024. Interest on fair value hedges presented above includes the amortization of the remaining unamortized basis adjustments.
The following schedule presents the amount of gains (losses) recognized from derivatives not designated as
accounting hedges:
| Other Noninterest Income/(Expense) | |||||||||||
| (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||||
|
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, along with pre-tax gains (losses) recorded on these derivatives and the related hedged items for the periods presented:
| Gains (losses) recorded in income | |||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||
| (In millions) |
Derivatives
|
Hedged items | Total income statement impact |
Derivatives
|
Hedged items | Total income statement impact | |||||||||||||||||||||||||||||
|
Hedges of fixed-rate assets
1, 2
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||||||||||||||||||
|
Hedges of fixed-rate debt
1, 2
|
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||
1
Includes hedges of benchmark interest rate risk for fixed-rate long-term debt, fixed-rate AFS securities, and fixed-rate commercial loans. Gains and losses were recorded in interest income or expense, 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.
The following schedule presents information regarding basis adjustments for hedged items in fair value hedging relationships:
| Par value of hedged items |
Carrying amount of the hedged items
1
|
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items | |||||||||||||||||||||||||||||||||
| (In millions) |
March 31,
2025 |
December 31, 2024 |
March 31,
2025 |
December 31, 2024 |
March 31,
2025 |
December 31, 2024 | |||||||||||||||||||||||||||||
|
Hedges of fixed-rate assets
1, 2
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
$ |
(
|
|||||||||||||||||||||||
|
Hedges of fixed-rate debt
1
|
(
|
(
|
(
|
(
|
(
|
|
|||||||||||||||||||||||||||||
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
At March 31, 2025, the amortized cost basis of assets designated using the portfolio layer method was $
9.9
billion; the cumulative basis adjustment associated with these hedging relationships was $
3
million; and the notional amounts of the designated hedging instruments were $
3.5
billion.
8.
LEASES
We have operating and finance leases for branches, data centers, and corporate offices, including our headquarters in Salt Lake City, Utah. At March 31, 2025, we had
407
branches, with
278
owned and
129
leased. The remaining
74
maturities of our lease commitments range from the year
2025
to
2062
, with some lease arrangements including options to extend or terminate the leases.
Leases with terms longer than twelve months are reported as a lease liability with a corresponding right-of-use (“ROU”) asset. ROU assets for operating leases and finance leases are included in “
” and “
” on the consolidated balance sheet, respectively. The corresponding liabilities for those leases are included in “
” and “
” respectively. For more information about our lease policies, see Note 8 of our 2024 Form 10-K.
The following schedule presents ROU assets and lease liabilities with the associated weighted average remaining life and discount rate:
| (In millions) |
March 31,
2025 |
December 31, 2024 | |||||||||
| 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 |
|
% |
|
% | |||||||
The following schedule presents additional information related to lease expense:
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Lease expense: | |||||||||||
| Operating lease expense | $ |
|
$ |
|
|||||||
|
Other expenses associated with operating leases
1
|
|
|
|||||||||
| Total lease expense | $ |
|
$ |
|
|||||||
| Related cash disbursements for 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 | ||||
|
2025
1
|
$ |
|
|||
| 2026 |
|
||||
| 2027 |
|
||||
| 2028 |
|
||||
| 2029 |
|
||||
| Thereafter |
|
||||
| Total lease payments |
|
||||
| Less imputed interest |
|
||||
| Total | $ |
|
|||
1
Represents contractual maturities remaining in 2025.
75
We enter into certain lease agreements as the lessor of real estate, involving bank-owned and subleased properties to generate cash flow. This includes leasing vacant suites within buildings we partially occupy. Operating lease income totaled
$
4
million
and
$
3
million
for the first quarters of 2025 and 2024, respectively.
We originated equipment leases, classified as sales-type leases or direct-financing leases, totaling
$
377
million
at both March 31, 2025 and December 31, 2024. Income from these leases totaled
$
5
million
and $
4
million
for
the first quarters of 2025 and 2024, 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 fair value hedge basis adjustments.
The following schedule presents the components of our long-term debt:
LONG-TERM DEBT
| (In millions) |
March 31,
2025 |
December 31, 2024 | |||||||||
|
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.
Shareholders' Equity
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At March 31, 2025, there were
147.6
million
shares of
$
0.001
par value common stock outstanding. Common stock and additional paid-in capital was
$
1.7
billion
at both March 31, 2025 and December 31, 2024. During the first quarter of 2025, we repurchased
0.7
million common shares outstanding for $
40
million at an average price of $
53.53
per share. This repurchase amount excludes certain insignificant balances related to the common shares acquired in connection with our stock compensation plan, which were acquired from employees to cover their payroll taxes and stock option exercise costs upon the exercise of stock options.
The AOCI balance was a loss of
$
2.3
billion
at March 31, 2025, and largely reflects a decline in the fair value of fixed-rate AFS securities as a result of changes in interest rates, and includes $
1.8
billion ($
1.3
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:
76
| (In millions) | Net unrealized gains (losses) on investment securities | Net unrealized gains (losses) on derivatives and other | Pension and post-retirement | Total | |||||||||||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||
| Balance at December 31, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Other comprehensive income before reclassifications, net of tax
|
|
|
|
|
|||||||||||||||||||
| Amounts reclassified from AOCI, net of tax |
|
|
|
|
|||||||||||||||||||
| Other comprehensive income |
|
|
|
|
|||||||||||||||||||
| Balance at March 31, 2025 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Income tax expense included in other comprehensive income
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Other comprehensive income (loss) before reclassifications, net of tax
|
|
(
|
|
|
|||||||||||||||||||
| Amounts reclassified from AOCI, net of tax |
|
|
|
|
|||||||||||||||||||
| Other comprehensive income |
|
|
|
|
|||||||||||||||||||
| Balance at March 31, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||
|
Income tax expense included in other comprehensive income
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Amounts reclassified from AOCI
|
||||||||||||||||||||
| (In millions) |
Three Months Ended
March 31, |
|||||||||||||||||||
| AOCI components | 2025 | 2024 | 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 and other
|
$ |
(
|
$ |
(
|
Interest and fees on loans; Interest on short- and long-term borrowings | |||||||||||||||
| Less: Income tax expense (benefit) |
(
|
(
|
||||||||||||||||||
| Total | $ |
(
|
$ |
(
|
||||||||||||||||
10.
COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES
Commitments and Guarantees
We utilize various financial instruments, including loan commitments, commercial letters of credit, and standby letters of credit, to meet our customers’ financing needs. They involve varying degrees of credit, liquidity, and interest rate risk beyond the amounts presented on the consolidated balance sheet. The credit risk associated with these commitments is assessed similarly to the ALLL. The RULC is presented separately on the consolidated balance sheet.
77
The following schedule presents the contractual amounts related to off-balance sheet financial instruments used to meet our customers' financing needs:
| (In millions) | March 31, 2025 | December 31, 2024 | |||||||||
|
Unfunded lending commitments
1
|
$ |
|
$ |
|
|||||||
| Standby letters of credit: | |||||||||||
| Financial |
|
|
|||||||||
| Performance |
|
|
|||||||||
| Commercial letters of credit |
|
|
|||||||||
| Total unfunded commitments | $ |
|
$ |
|
|||||||
1
Net of participations.
For more information about these commitments and guarantees including their terms and collateral requirements, see Note 16 of our 2024 Form 10-K.
Legal Matters
We are involved in various legal proceedings or governmental inquiries, which may include litigation in court, arbitral proceedings, investigations, examinations, and other actions initiated or considered by governmental and self-regulatory agencies. Litigation may pertain to lending, deposit and other customer relationships, supplier and contractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. While most matters involve individual claims, we are also subject to putative class action claims and similar broader claims. Proceedings, investigations, examinations, and other actions initiated or considered by governmental and self-regulatory agencies may relate to our banking, investment advisory, trust, securities, and other products and services; and our customers’ involvement in money laundering, fraud, securities violations and other illicit activities or our policies and practices concerning such customer activities. Additionally, these actions may pertain to our compliance with the broad range of banking, securities and other applicable laws and regulations. At any given time, we may be responding to subpoenas, requests for documents, data, and testimony relating to these matters and engaging in discussions to resolve them.
At March 31, 2025, we were subject to the following material litigation:
•
Two
civil cases,
Lifescan, Inc.
and
Johnson & Johnson Health Care Services v. Jeffrey C. 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. Discovery is substantially complete for most parties in both cases. However, final rulings on certain dispositive motions remain outstanding, and other dispositive motions have yet to be filed or ruled upon. No trial dates have been set for either case.
•
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 was resolved favorably, with the Bank incurring no liability to the claimants.
•
Cayon and Reesor v. Zions Bancorporation, N.A.
, is an arbitration matter pending before Judicial Arbitration and Mediation Services. The claimants have asserted claims for unpaid overtime, meal and rest break violations, and failure to reimburse work-related expenses. They have also initiated a related action under the California Private Attorneys General Act. The arbitration is in the discovery phase, with a final hearing scheduled for February 2026.
78
At least quarterly, we review both outstanding and new legal matters utilizing the latest information available. If we determine that a loss from a matter is probable and can be reasonably estimated, we establish an accrual for the best estimate of the loss. If no amount within a range of probable losses is a better estimate than any other amount within the range, we establish an accrual for the minimum amount in that range. For matters where a loss is not probable, we do not establish an accrual. Once established, accruals are adjusted to reflect any developments related to the matters.
We also assess whether we can determine the range of reasonably possible losses for significant matters where the likelihood of a loss is not remote. Due to the difficulty of predicting the outcome of legal matters, discussed subsequently, we can meaningfully estimate such a range for only a limited number of cases. Based on information available at March 31, 2025, the estimated aggregate range of reasonably possible losses for these matters is
zero
to approximately $
10
million in excess of amounts accrued. The matters underlying this estimated range will change over time, and actual results may vary significantly from this estimate. Matters for which a meaningful estimate is not possible are not included within this estimated range; 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, as reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate. We also believe that any liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions and claims for which an estimate is possible, will not have a material impact on our financial condition, results of operations, or cash flows. However, given the significant uncertainties involved in these matters, and the potentially large or indeterminate damages sought in some cases, an adverse outcome in one or more of these matters could materially affect our financial condition, results of operations, or cash flows for any given reporting period.
Any estimate or determination regarding the future resolution of litigation, arbitration, governmental or self-regulatory examinations, investigations 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 fully articulated, reviewed, analyzed, and vetted through discovery, trial or hearing preparation, substantive and productive mediation or settlement discussions, or other actions. It is also especially true for class actions and similar claims involving multiple defendants, matters with complex procedural requirements or substantive issues, novel legal theories, and examinations, investigations, and other actions conducted or brought by governmental and self-regulatory agencies, where the normal adjudicative process is not applicable. As a result, we are often 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. Consequently, our judgments and estimates relating to claims will change over time in light of developments, and actual outcomes will differ from our estimates. These differences may be material.
11.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Noninterest income and revenue from contracts with customers are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We recognize noninterest income from certain contracts with customers when the contractual performance obligations are satisfied. For more information about our revenue from contracts with customers, see Note 17 of our 2024 Form 10-K.
Disaggregation of Revenue
The following schedule presents revenue from contracts with customers and provides a reconciliation to total noninterest income by operating business segment for the three months ended March 31, 2025 and 2024. Customer-related noninterest income from other sources represents revenue from customers that falls outside the scope of the applicable accounting guidance for revenue from contracts with customers.
79
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
1
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees and income
2, 3
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 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
3
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
1
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees and income
2, 3
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 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
3
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
|
Commercial account fees
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
|
Card fees
1
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Retail and business banking fees
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Capital markets fees and income
2, 3
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 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
3
|
|
|
|
(
|
|
|
|||||||||||||||||||||||||||||
|
Total noninterest income
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
1
Card fees exclude costs associated with reward programs that are netted against interchange fees, as these costs are not within the scope of applicable accounting guidance for revenue from contracts with customers.
2
Capital markets fees and income excludes revenue associated with real estate capital markets, swaps, loan syndications, foreign exchange activities, and CVA, as the related fees and income are not within the scope of applicable accounting guidance for revenue from contracts with customers.
3
Effective for the first quarter of 2025, capital markets fees and income includes fair value and nonhedge derivative income (loss). These amounts were previously disclosed under noncustomer-related noninterest income. No other income statement line items were affected by these changes and reclassifications. Prior period amounts have been reclassified for comparative purposes.
80
Revenue from contracts with customers did not result in 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 the completion of performance obligations and payment is generally not significant.
12.
INCOME TAXES
The effective income tax rate was
28.9
% for the first quarter of 2025, compared with
24.6
% for the first quarter of 2024. These tax rates were increased by the nondeductibility of certain Federal Deposit Insurance Corporation (“FDIC”) premiums, certain executive compensation, and other fringe benefits. The FDIC insurance premiums are nondeductible, whereas the FDIC special assessments are tax deductible. Both periods saw reductions in tax rates due to nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance policies.
The tax rate for the first quarter of 2025 was higher relative to the same prior year period, primarily due to new Utah state tax legislation enacted in the first quarter of 2025 related to our investment securities and trading assets. This legislation required a revaluation of our net deferred tax asset (“DTA”), which primarily arises from unrealized losses in AOCI on certain securities. Consequently, this resulted in $
16
million of additional tax expense for the quarter.
At March 31, 2025 and December 31, 2024, we had a net DTA totaling $
823
million and $
904
million, 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 March 31, 2025 and
December 31, 2024.
81
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
March 31, |
|||||||||||
| (In millions, except shares and per share amounts) | 2025 | 2024 | |||||||||
| 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
March 31, |
|||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Restricted stock and restricted stock units |
|
|
|||||||||
| Stock options |
|
|
|||||||||
14.
OPERATING SEGMENT INFORMATION
We manage our operations with a focus on geographic area, primarily in the states of Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. We conduct our operations primarily through
seven
separately managed affiliate banks, each with its own local branding and management team: 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 operating segments. We emphasize local authority, responsibility, pricing, and customization of certain products to maximize customer satisfaction, strengthen community relations, and improve profitability and shareholder returns.
At March 31, 2025, Zions Bank operated
92
branches in Utah,
25
branches in Idaho, and
one
branch in Wyoming. CB&T operated
78
branches in California. Amegy operated
75
branches in Texas. NBAZ operated
56
branches in Arizona. NSB operated
43
branches in Nevada. Vectra operated
33
branches in Colorado and
one
branch in New Mexico. TCBW operated
two
branches in Washington and
one
branch in Oregon. During the first three months of 2025, all of the Bank's assets, revenues, and expenses were located in or derived from operations within the United States.
In late March 2025, we purchased
four
FirstBank Coachella Valley, California branches and their associated deposit and loan accounts. In addition to the
four
branches, the purchase included approximately $
630
million in deposits and $
420
million in consumer and commercial loans.
82
We focus on serving customers in the communities where we operate. Each of our operating segments offers a wide range of banking products and related services, delivered digitally or through other channels. These include primarily commercial and small business banking, capital markets and investment banking, commercial real estate lending, retail banking, and wealth management.
Our affiliate banks are supported by an enterprise operating segment, referred to as the “Other” segment, which 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. The costs of centrally provided services are allocated to the operating segments based on estimated or actual usage of those services. Capital is allocated according to the risk-weighted assets held by each segment. We use an internal funds transfer pricing (“FTP”) allocation process to report the results of operations for each segment. This process is subject to ongoing changes and refinements. The total average loans and deposits for the operating segments include minor intercompany amounts and may also include deposits with the “Other” segment. Transactions between segments are primarily conducted at fair value, with profits eliminated for consolidated reporting purposes.
We evaluate performance and allocate resources primarily based on income or loss from operations before income taxes. The accounting policies of the operating segments align with those in the Notes to Consolidated Financial Statements.
The chief operating decision maker (“CODM”) is our Chairman and Chief Executive Officer. The CODM regularly receives certain segment information, including net interest income, noninterest income, significant noninterest expenses, and income or loss from operations before income taxes. This information is used to evaluate performance and allocate resources for each segment.
The following schedule presents selected operating segment information that is regularly provided to the CODM to evaluate performance and allocate resources for the three months ended March 31, 2025 and 2024:
| Zions Bank | CB&T | Amegy | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
|
Net interest income
1
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
|
(
|
|
|
|
|
|||||||||||||||||||||||||||||
| Net interest income after provision for credit losses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||||||||||||||
| Salaries and employee benefits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Technology, telecom, and information processing |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Occupancy and equipment, net |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Other direct expenses
2
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Indirect/allocated expenses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Income (loss) before taxes | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
83
| NBAZ | NSB | Vectra | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
|
Net interest income
1
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
(
|
|
|
(
|
|
(
|
|||||||||||||||||||||||||||||
| Net interest income after provision for credit losses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||||||||||||||
| Salaries and employee benefits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Technology, telecom, and information processing |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Occupancy and equipment, net |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Other direct expenses
2
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Indirect/allocated expenses |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Income (loss) before taxes | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| TCBW | Other | Consolidated Bank | |||||||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA | |||||||||||||||||||||||||||||||||||
|
Net interest income
1
|
$ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Provision for credit losses |
(
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Net interest income after provision for credit losses |
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest income |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||||||||||||||
| Salaries and employee benefits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Technology, telecom, and information processing |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Occupancy and equipment, net |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
Other direct expenses
2
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Indirect/allocated expenses |
|
|
(
|
(
|
|
|
|||||||||||||||||||||||||||||
| Total noninterest expense |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Income (loss) before taxes | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
$ |
|
|||||||||||||||||||||||
| SELECTED AVERAGE BALANCE SHEET DATA | |||||||||||||||||||||||||||||||||||
| Total average loans | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Total average deposits |
|
|
|
|
|
|
|||||||||||||||||||||||||||||
1
Interest income is shown net of interest expense consistent with the information regularly provided to the CODM and used to evaluate segment performance.
2
Includes expenses such as professional and legal services, marketing and business development, deposit insurance and regulatory expense, credit-related expense, other real estate expense, and other noninterest expense.
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.
84
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 March 31, 2025. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2025. There were no changes in our internal control over financial reporting during the first quarter of 2025 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 2024
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 | ||||||||||||||||||||||||||||||||
| January | 1,485 | $ | 58.25 | — | |||||||||||||||||||||||||||||||
| February | 769,419 | 53.62 | 747,268 | ||||||||||||||||||||||||||||||||
| March | 464 | 50.35 | — | ||||||||||||||||||||||||||||||||
|
First quarter 2025
|
771,368 | 53.62 | 747,268 | ||||||||||||||||||||||||||||||||
1
Includes amounts related to common shares acquired through our publicly announced plans and those acquired in connection with our stock compensation plan. These shares were acquired from employees to cover their payroll taxes and stock option exercise costs upon the exercise of stock options.
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 March 31, 2025. 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.
85
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. | * | ||||||||||
| 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 March 31, 2025 and December 31, 2024, (ii) the Consolidated Statements of Income for the three months ended March 31, 2025 and March 31, 2024, (iii) the Consolidated Statements of Comprehensive Income for the three months ended March 31, 2025 and March 31, 2024, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2025 and March 31, 2024, (v) the Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and March 31, 2024, 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.
86
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: May 8, 2025
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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