Zions Bancorporation, National Association: Form 10-Q for the period ended Mar 31, 2025

FORWARD-LOOKING INFORMATION

This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:

• Statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations, and performance of Zions Bancorporation, National Association, and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
• Statements preceded or followed by, or that include the words “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecasts,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” “will,” and the negative thereof and similar words and expressions.

Forward-looking statements are not guarantees 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:

• 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 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;
• 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;
• 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 fees, insurance assessments, and capital standards; and other regulatory requirements;
• 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 technological advancements, such as digital currencies and commerce, blockchain, artificial intelligence, quantum and cloud computing, and other innovations affecting 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, information security systems, and controls designed to guard against fraud, cybersecurity, and privacy risks and related incidents;
• 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, 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;
• 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 public, customer, and investor sentiment regarding the stability and liquidity of banks; and
• 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 (http://www.zionsbancorporation.com)) and from the SEC (www.sec.gov (http://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.

First Quarter 2025 Financial Performance

Net Earnings Applicable to Common Shareholders (in millions) Diluted EPS Adjusted PPNR (in millions) 1 Efficiency Ratio 1

1 For information on non-GAAP financial measures, see page 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.
• 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.
• 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.
• 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.
• 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.
• 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

(Dollar amounts in millions)

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.

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:

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.

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:

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)

(Dollar amounts in millions)

1 Taxable-equivalent rates used where applicable.

2 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

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.

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.

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

(Dollar amounts in millions)

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.

Noninterest Expense

The following schedule presents a comparison of the major components of noninterest expense:

NONINTEREST EXPENSE

(Dollar amounts in millions)

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).

The following schedule presents the composition of our technology spend:

TECHNOLOGY SPEND

(Dollar amounts in millions)

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

(Dollar amounts in millions)

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.

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

(In millions)

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.

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)

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:

LOAN AND LEASE PORTFOLIO

(Dollar amounts in millions)

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)

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 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

(In millions)

Deposits

Deposits are our primary funding source. The following schedule presents the composition of our deposit portfolio:

DEPOSIT PORTFOLIO

(Dollar amounts in millions)

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.

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

(Dollar amounts in millions)

21

Commercial Lending

The following schedule presents the composition of our commercial lending portfolio:

COMMERCIAL LENDING PORTFOLIO

(Dollar amounts in millions)

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

(Dollar amounts in millions)

1 No other geography exceeds 2.1% and 2.6% for March 31, 2025 and December 31, 2024, respectively.

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

(Dollar amounts in millions)

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

(Dollar amounts in millions)

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.

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

(Dollar amounts in millions)

The following schedule presents our commercial real estate lending portfolio by the type of collateral:

COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE

(Dollar amounts in millions)

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.

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)

The following schedules present our multifamily CRE loan portfolio, categorized by collateral location for the periods presented:

MULTIFAMILY CRE LOAN PORTFOLIO BY COLLATERAL LOCATION

(Dollar amounts in millions)

25

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

(Dollar amounts in millions)

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)

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

(Dollar amounts in millions)

(Dollar amounts in millions)

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:

OFFICE CRE LOAN PORTFOLIO

(Dollar amounts in millions)

The following schedules present our office CRE loan portfolio, categorized by collateral location for the periods presented:

OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION

(Dollar amounts in millions)

(Dollar amounts in millions)

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.

Consumer Lending

The following schedule presents the composition of our consumer lending portfolio:

CONSUMER LENDING PORTFOLIO

(Dollar amounts in millions)

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.

The following schedule presents the geographic distribution of our consumer lending portfolio, based on the location of the primary borrower.

CONSUMER LENDING BY GEOGRAPHY

(Dollar amounts in millions)

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)

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.

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)

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.

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)

1 Ratios are annualized for the periods presented except for the period representing the full twelve months.

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

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.

DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS

(Dollar amounts in millions)

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.

INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY

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.

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.

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

(Dollar amounts in billions)

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:

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.

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)

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.

CAPITAL DISTRIBUTIONS

(In millions, except share amounts)

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:

CAPITAL AMOUNTS AND RATIOS

(Dollar amounts in millions)

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.

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)

(Dollar amounts in millions)

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)

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)

(Dollar amounts in millions)

42

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.

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.

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.