8-K: Zions Bancorp 3Q25 Earnings: NIM Rises, Credit Losses Impact EPS

Zions Bancorporation, N.A. reported third quarter 2025 net earnings of $221 million, or $1.48 diluted EPS, with strong core earnings growth offset by elevated credit losses from two related commercial and industrial loans.

Summary

• Net earnings applicable to common shareholders were $221 million for Q3 2025, an 8% increase from $204 million in Q3 2024, but a 9% decrease from $243 million in Q2 2025.
• Diluted earnings per share (EPS) was $1.48 for Q3 2025, up 8% from $1.37 in Q3 2024, but down 9% from $1.63 in Q2 2025.
• Net interest income increased 8% year-over-year to $672 million, primarily due to lower funding costs and a favorable shift in interest-earning assets.
• The net interest margin (NIM) improved to 3.28% in Q3 2025, up 25 basis points from 3.03% in Q3 2024 and 11 basis points from 3.17% in Q2 2025.
• Pre-provision net revenue (PPNR) was $345 million, up 14% year-over-year; adjusted PPNR grew 18% year-over-year to $352 million.
• Customer-related noninterest income was $163 million, up 3% year-over-year; adjusted for net CVA, it was $174 million, up 8%.
• Noninterest expense increased 5% year-over-year to $527 million; adjusted noninterest expense rose 4% to $520 million.
• Net loan and lease charge-offs totaled $56 million in Q3 2025, including $50 million associated with two related commercial and industrial (C&I) loans where irregularities were detected.
• The annualized ratio of net loan and lease charge-offs to average loans and leases was 0.37% in Q3 2025, significantly up from 0.02% in Q3 2024.
• The provision for credit losses was $49 million in Q3 2025, compared with $13 million in Q3 2024, primarily due to the two large related C&I loans.
• Nonperforming assets were $324 million, or 0.54% of loans and leases and other real estate owned, down from $368 million, or 0.62%, in Q3 2024.
• Classified loans totaled $2.4 billion, or 4.00% of loans and leases, up from $2.1 billion (3.55%) in Q3 2024, but down from $2.7 billion (4.43%) in Q2 2025.
• Total deposits were $74.9 billion, down 1% year-over-year; customer deposits (excluding brokered deposits) were $71.1 billion, up 1% year-over-year.
• The estimated Common Equity Tier 1 (CET1) capital ratio was 11.3%, up from 10.7% in Q3 2024.
• Tangible book value per common share increased 17% year-over-year to $38.64.

Sentiment

Score: 5

Explanation: While core earnings and NIM showed strong growth, the significant increase in credit losses due to specific C&I loans and the linked-quarter decline in EPS temper the overall positive sentiment. The strong capital ratios and improved tangible book value are positive, but the credit event is a notable negative.

Positives

• Net earnings applicable to common shareholders increased 8% year-over-year to $221 million.
• Diluted EPS increased 8% year-over-year to $1.48.
• Net interest income grew 8% year-over-year to $672 million, driven by lower funding costs and favorable asset composition.
• Net interest margin (NIM) expanded to 3.28%, up 25 basis points year-over-year and 11 basis points sequentially.
• Adjusted pre-provision net revenue (PPNR) increased 18% year-over-year to $352 million, reflecting strong core earnings growth.
• Customer-related noninterest income, adjusted for CVA, grew 8% year-over-year to $174 million, boosted by loan sales and syndication activity.
• The efficiency ratio improved to 59.6% from 62.5% year-over-year, indicating positive operating leverage.
• Loans and leases increased 2% year-over-year to $60.3 billion, primarily in consumer (1-4 family residential) and commercial loans.
• Customer deposits (excluding brokered deposits) grew 1% year-over-year to $71.1 billion, and 7% on an annualized linked-quarter basis.
• The estimated Common Equity Tier 1 (CET1) capital ratio strengthened to 11.3% from 10.7% year-over-year.
• Tangible book value per common share increased 17% year-over-year to $38.64.
• Nonperforming assets decreased 12% year-over-year to $324 million, or 0.54% of loans and leases and OREO.
• Classified loans decreased 10% linked-quarter to $2.4 billion, or 4.00% of loans and leases.
• Accumulated other comprehensive income (AOCI) loss improved by $280 million year-over-year.
• The bank maintains strong on-balance sheet liquidity, with approximately 90% of investment securities in U.S. Government and U.S. Government Agency/GSE securities.
• The commercial real estate portfolio is granular, well-diversified, with weighted average LTVs of less than 60%, and low delinquencies.
• Zions' net charge-offs to loans ratio is frequently in the best (lowest) quartile of peer banks.

Negatives

• Net earnings applicable to common shareholders declined 9% linked-quarter to $221 million.
• Diluted EPS declined 9% linked-quarter to $1.48.
• Net loan and lease charge-offs totaled $56 million, a significant increase from $3 million in the prior year quarter, primarily due to a $50 million charge-off from two related C&I loans.
• The provision for credit losses increased to $49 million from $13 million in the prior year period, mainly due to the two large related C&I loans.
• A $10 million specific reserve was established against the approximate remaining balance of the problematic C&I loans.
• Total deposits decreased 1% year-over-year to $74.9 billion.
• Total borrowed funds increased 51% year-over-year to $5.2 billion, driven by higher long-term debt and FHLB advances.
• A net credit valuation adjustment (CVA) loss on client-related interest rate swaps of $11 million, or $0.06 per share, was recorded, primarily due to an update to valuation methodology.
• Loans contracted at a 3% annualized linked-quarter rate.

Risks

• The quality and composition of our loan and investment securities portfolios and the quality and composition of our deposits.
• Changes in general industry, political, and economic conditions, including increases in the national debt, elevated inflation, economic slowdowns or recessions, and other macroeconomic challenges; changes in interest and reference rates, which could negatively impact our revenues and expenses, the valuation and performance of our assets and liabilities, and the availability and cost of capital and liquidity.
• Political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope, and effectiveness of the government and its agencies and services.
• 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.
• Actions taken by governments, agencies, central banks, and similar organizations, including those that result in decreases in revenue, increases in regulatory bank fees, insurance assessments, and capital standards; and other regulatory requirements.
• Evolving trade policies and disputes, such as proposed and implemented tariffs and resulting market volatility and uncertainty, including the effects on supply chains, expenses, and revenues for both us and our customers.
• 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.
• Changes in our credit ratings.
• 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.
• The potential for both positive and disruptive impacts of emerging technologies, including stablecoins and other digital currencies, blockchain, artificial intelligence, quantum computing, and related innovations affecting both us and the banking industry.
• 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.
• Our ability to develop and maintain technology and information security systems, along with effective controls designed to guard against fraud, cybersecurity, and privacy risks and related incidents, particularly given the accelerating pace at which threat actors are developing and deploying increasingly sophisticated and targeted tactics against the financial services industry.
• 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.
• The effects of wars, geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future.
• 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.
• Governmental and social responses to environmental, social, and governance issues, including those with respect to climate change and diversity.
• Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital.
• The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and shareholders' equity.
• The impact of bank closures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks.
• Adverse news and other expressions of negative public opinion whether directed at us, other banks, the banking industry, or otherwise that may adversely affect our reputation and that of the banking industry generally.

Future Outlook

Zions Bancorporation expects slightly to moderately increasing loan balances, led by commercial loans, with modest growth in commercial real estate and consumer loans. Net interest income is projected to moderately increase, driven by earning asset remix, loan and deposit growth, and fixed-rate asset repricing. Adjusted customer-related noninterest income is also anticipated to moderately increase due to increased customer activity and new client acquisition, with capital markets contributing significantly. Adjusted noninterest expense is expected to moderately increase due to technology costs, marketing, and investments in revenue-generating businesses, but positive operating leverage is still expected. The forward curve at September 30, 2025, assumes two additional rate cuts in 2025 and two cuts in 2026.

Management Comments

• "We're pleased with the Company's core earnings, which included 14% growth in pre-provision net revenue over the prior year period, and 18% on an adjusted basis." Harris H. Simmons, Chairman and CEO.
• "The net interest margin increased 25 basis points over the prior year period, while customer-related noninterest income, adjusted for the net credit valuation adjustment, grew 8%." Harris H. Simmons, Chairman and CEO.
• "Although loans contracted at a 3% annualized linked-quarter rate in the quarter, deposits, excluding brokered deposits, grew at an annualized rate of 7%." Harris H. Simmons, Chairman and CEO.
• "Over the past year, tangible book value per share grew 17%." Harris H. Simmons, Chairman and CEO.
• "The quarter's credit results were marred by a $50 million charge-off, and a $10 million specific reserve established against the approximate remaining balance, arising from loans to two related companies in which apparent irregularities and misrepresentations were recently detected." Harris H. Simmons, Chairman and CEO.
• "Legal action has been initiated to pursue recovery of the amounts owed from guarantors of the credits." Harris H. Simmons, Chairman and CEO.
• "Excluding this loss, remaining net charge-offs were very benign at $6 million, or 4 basis points of average loans on an annualized basis." Harris H. Simmons, Chairman and CEO.

Industry Context

The banking industry is currently navigating a dynamic interest rate environment, which Zions Bancorporation is managing through its hedging strategy and deposit repricing, leading to NIM expansion. The focus on core earnings growth and efficiency is a common theme among banks. The increase in credit losses, particularly from specific C&I loans, highlights ongoing credit risk management challenges, though Zions emphasizes its overall strong credit quality relative to peers. The growth in customer deposits, excluding brokered deposits, indicates a stable funding base, which is crucial in a competitive deposit market.

Comparison to Industry Standards

• Zions' net charge-offs to loans ratio is frequently in the best (lowest) quartile of peer banks, indicating superior credit quality management.
• Zions generally experiences less severe loan losses due to strong collateral and underwriting practices, as evidenced by its annualized NCOs / Nonaccrual Loans (Five Year Average: 14%, Fifteen Year Average: 14%) being significantly lower than many peers like WALC (15%, 16%), MTBC (17%, 18%), and FHN (17%, 24%).
• Commercial real estate loan growth lags peers due to Zions' disciplined approach to concentration risk, which has been maintained for over a decade.
• The bank's strong on-balance sheet liquidity, with approximately 90% of investment securities in U.S. Government and U.S. Government Agency/GSE securities, positions it favorably compared to industry peers facing liquidity concerns.

Legal Proceedings

• Legal action has been initiated to pursue recovery of amounts owed from guarantors of the two related C&I credits that resulted in significant charge-offs.

Stakeholder Impact

• Shareholders: Impacted by a decline in diluted EPS linked-quarter due to credit losses, but benefited from an 8% year-over-year increase in EPS and a 17% increase in tangible book value per share. Common dividends increased to $0.45 per share from $0.41 per share.
• Customers: Benefited from new noninterest-bearing deposit offerings and increased customer activity driving noninterest income.
• Employees: Higher severance and other salary-related costs, along with increased incentive compensation accruals, reflecting improved profitability.
• Creditors: Long-term debt increased due to new senior and subordinated note issuances, reflecting continued access to capital markets.

Next Steps

• Host a conference call to discuss Q3 2025 financial results at 5:30 p.m. Eastern Time on October 20, 2025.
• Legal action initiated to pursue recovery of amounts owed from guarantors of the problematic C&I credits.
• Full reflection of approximately $1 billion in migrated noninterest-bearing deposits in average balances in fourth quarter reporting.
• Continued focus on managing asset sensitivity and hedging strategy.
• Expected slightly to moderately increasing commercial, commercial real estate, and consumer loan growth.
• Expected moderately increasing net interest income and adjusted customer-related noninterest income.
• Expected moderately increasing adjusted noninterest expense, with positive operating leverage.
• Projected AOCI improvement of almost $450 million, or 17%, in 2025 relative to 2024.
• The forward curve at September 30, 2025, assumes two additional rate cuts in 2025 and two cuts in 2026.

Key Dates

Recommendation

While Zions Bancorporation demonstrated strong core operational performance with expanding net interest margin, improved efficiency, and solid capital ratios, the significant credit loss event from two related C&I loans is a material concern. This event led to a notable linked-quarter decline in EPS and a substantial increase in provision for credit losses. The initiation of legal action for recovery is a positive step, but the outcome is uncertain. Given the mixed results—strong underlying performance overshadowed by a specific credit quality issue—a 'hold' recommendation is appropriate. Investors should monitor the progress of recovery efforts and the broader credit quality trends, especially in the commercial loan portfolio, before considering further investment.

Keywords

Zions Bancorporation, ZION, banking, financial results, Q3 2025, earnings, net interest margin, NIM, credit losses, diluted EPS, pre-provision net revenue, PPNR, deposits, loans, capital ratio, CET1, tangible book value, commercial real estate, credit quality, SEC filing, 8-K