Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zions Bancorp NA (ZION, Financial) reported net earnings of $204 million for the quarter, an improvement of $14 million due to higher revenues and lower expenses.
- The company saw a 1.5% increase in customer deposits, with non-interest bearing demand deposits rising by 1%.
- Net interest margin expanded by 5 basis points in the quarter, driven by higher earning asset yields and stable funding costs.
- Zions Bancorp NA (ZION) announced an agreement to acquire four branches from First Bank, adding approximately $730 million in deposits and $420 million in loans, which will strengthen its market position.
- The company's capital markets division had a record quarter, contributing to strong customer-related fee income growth.
Negative Points
- Classified loan balances increased by $829 million, primarily due to downgrades in the multifamily portfolio affected by higher interest rates and rent concessions.
- Non-performing assets rose by $103 million to $306 million, driven by a small number of commercial and real estate credits.
- The allowance for credit losses increased slightly, reflecting ongoing credit quality concerns.
- Zions Bancorp NA (ZION) experienced a slight decline in average non-interest bearing deposit balances.
- The company anticipates moderate headwinds from the refinancing of real estate assets, which could impact future performance.
Q & A Highlights
Q: Can you explain how you expect deposit costs to progress following the recent Fed rate cut?
A: R. Ryan Richards, CFO, explained that they anticipate a 36% beta on the down cycle for total deposits, with interest-bearing deposits showing a closer to 60% beta. They are encouraged by the current trends and are operationally prepared to manage these changes effectively.
Q: What factors contributed to the increase in classified loans, and why didn't this necessitate a corresponding increase in loan loss reserves?
A: Derek Steward, Chief Credit Officer, noted that the increase in classified loans was partly due to a more conservative grading approach, particularly in multifamily loans. The changes in risk ratings have less impact on the allowance due to the Cecil accounting standard, which considers future economic forecasts.
Q: How is the decline in interest rates impacting your loan portfolio, particularly in terms of refinancing and loan modifications?
A: R. Ryan Richards, CFO, mentioned that while short-term rates remain high, the decline in long-term rates is encouraging refinancing activity. This trend is expected to continue, making it easier to manage loan situations and potentially increase loan proceeds.
Q: What is your outlook on further asset acquisitions, such as branch pickups or whole bank mergers?
A: Harris Simmons, CEO, stated that while they will consider opportunities opportunistically, asset acquisitions are not a primary focus for growth. They have more latitude post-core conversion but are not actively pursuing such deals.
Q: Can you provide more details on the recent performance and future expectations for your capital markets division?
A: R. Ryan Richards, CFO, highlighted a record quarter for the capital markets division, driven by growth in swaps, fees, and loan syndications. The division has seen a 10% compound annual growth rate over the past few years, and they expect continued growth due to strategic investments in infrastructure and expertise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
