Zions Bancorporation, National Association: Form 10-Q for the period ended Jun 30, 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 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 of our assets and liabilities, the availability and cost of deposits and other capital, and our ability to manage liquidity; and deterioration in economic conditions may result in increased loan and lease losses;
• Political developments, including those that result in significant disruptions and changes in the 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, tokenized deposits, and other digital currencies, blockchain, artificial intelligence, quantum computing, and related innovations and regulatory developments 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; 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. Reasons for changes in the current year-to-date period compared with the same prior year period are generally consistent with the quarter-to-date comparisons unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they typically reflect a low starting point.

Second 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 second quarter of 2025, relative to the prior year period, reflected solid growth in net earnings, diluted earnings per share (“EPS”), and adjusted pre-provision net revenue (“PPNR”). Diluted EPS increased to $1.63, compared with $1.28 in the second quarter of 2024, as higher net interest income and noninterest income, along with a lower provision for credit losses, were partially offset by increased noninterest expense.

• Net interest income increased $51 million, or 9%, compared with the prior year period, primarily due to lower funding costs and an increase in average interest-earning assets. As a result, the net interest margin improved to 3.17%, compared with 2.98%.
• Average interest-earning assets increased $1.5 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 $1.4 billion, or 3%, due to an increase in both average borrowed funds and average interest-bearing deposits.
• Total loans and leases increased $2.4 billion, or 4%, primarily driven by growth in the consumer 1-4 family residential mortgage and commercial and industrial loan portfolios.
• Total deposits remained relatively stable, as an increase in noninterest-bearing demand deposits was partially offset by a decline in interest-bearing deposits. The growth in noninterest-bearing deposits was largely the result of the migration of a consumer interest-bearing product into a new noninterest-bearing offering. Customer deposits (excluding brokered deposits) totaled $69.9 billion, compared with $69.5 billion.
• Total loans and deposits at June 30, 2025 included approximately $390 million in loans and $585 million in deposits associated with the four FirstBank Coachella Valley, California branches that we acquired in late March 2025.
• The provision for credit losses was negative $1 million, compared with positive $5 million in the prior year period.
• Customer-related noninterest income increased $11 million, or 7%, primarily due to higher capital markets fees and income, along with improved retail and business banking fees. Noncustomer-related noninterest income remained flat. Net securities gains increased $10 million, which included an $11 million unrealized gain related to the successful initial public offering (“IPO”) of one of our Small Business Investment Company (“SBIC”) investments. This increase was offset by a $10 million decline in dividends and other

income, largely due to higher gains in the prior year period associated with the sale of our Enterprise Retirement Solutions business.

• Noninterest expense increased $18 million, or 4%, primarily due to higher incentive compensation accruals as a result of improved profitability, as well as an increase in other noninterest expense. These increases were partially offset by a decline in professional and legal services.
• Net loan and lease charge-offs totaled $10 million, or 0.07% of average loans and leases annualized, compared with $15 million, or 0.10%, in the prior year quarter. The ratio of allowance for credit losses (“ACL”) to total loans and leases was 1.20%, compared with 1.24%.
• Nonperforming assets totaled $313 million, or 0.51% of total loans and leases and other real estate owned, compared with $265 million, or 0.45%. The increase was primarily in the term commercial real estate (“CRE”), consumer 1-4 family residential, and owner occupied loan portfolios.
• Classified loans totaled $2.7 billion, or 4.43% of total loans and leases, compared with $1.3 billion, or 2.16%, in the prior year quarter, and decreased from $2.9 billion, or 4.82%, in the prior quarter. The year-over-year increase in classified loans 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. Additionally, weaker performance in the 2021, 2022, and 2023 construction loan vintages 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 composed of secured borrowings, increased $845 million, or 14%, compared with the prior year quarter. This increase was driven by higher levels of long-term debt and Federal Home Loan Bank (“FHLB”) short-term advances, partially offset by the full repayment of borrowings under the Federal Reserve Board (“FRB”) Bank Term Funding Program (“BTFP”).

Net Interest Income and Net Interest Margin

NET INTEREST INCOME AND NET INTEREST MARGIN

(Dollar amounts in millions)

1 Includes interest income recoveries of $2 million for both the three months ended, and $6 million and $4 million for the six months ended June 30, 2025, and 2024, respectively.

2 Taxable-equivalent rates used where applicable.

Net interest income accounted for 77% of total net revenue (sum of net interest income plus noninterest income) in both the second quarters of 2025 and 2024. It increased $51 million, or 9%, for the three months ended June 30, 2025, relative to the same prior year period. This increase was primarily due to lower funding costs and growth in average interest-earning assets. As a result, the net interest margin improved to 3.17%, compared with 2.98%.

The following chart presents the changes in yields on average interest-earning assets:

The yield on average interest-earning assets, net of hedging activity, declined 20 basis points (“bps”) in the second quarter of 2025, compared with the prior year period. This decrease reflects a lower interest rate environment, partially offset by a favorable shift in the composition of average interest-earning assets, including growth in average loans and money market investments, and a reduction in average securities. The yield on average money market investments declined 104 bps, while the net yield on average loans decreased 25 bps, and the net yield on average securities declined 16 bps during the second quarter of 2025.

The following chart presents the changes in rates paid on average interest-bearing liabilities:

The total cost of deposits decreased 43 bps, and the rate paid on total deposits and interest-bearing liabilities decreased 39 bps during the second quarter of 2025, compared with the prior year period, reflecting the lower interest rate environment. The rates paid on interest-bearing deposits and total borrowed funds decreased 68 bps and 40 bps, respectively.

Average interest-earning assets increased $1.5 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 $2.2 billion, or 4%, to $60.5 billion, primarily due to growth in average consumer and commercial loans. Average securities decreased $1.4 billion, or 7%, to $18.4 billion, largely attributable to principal reductions. At June 30, 2025, average loans and leases included approximately $400 million in loans associated with the four FirstBank Coachella Valley, California branches that we acquired in late March 2025.

Average interest-bearing liabilities increased $1.4 billion, or 3%, from the prior year quarter. This growth was primarily driven by increases in average borrowed funds and average interest-bearing deposits.

Average deposits remained relatively stable at $74.3 billion during the second quarter of 2025 and included approximately $620 million in deposits associated with the four FirstBank Coachella Valley, California branches that we acquired in late March 2025. Average interest-bearing deposits increased $461 million, or 1%. Average noninterest-bearing deposits decreased $423 million or 2%, and represented 33% of total deposits for the quarter, compared with 34% during the same prior year period.

Average borrowed funds, primarily composed of secured borrowings, increased $962 million, or 14%, to $7.8 billion. This growth was driven by increases in long-term debt, security repurchase agreements, and FHLB short-term advances, partially offset by the full repayment of borrowings under the FRB BTFP. The increase in long-term debt reflects 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 18 and the “Liquidity Risk Management” section on page 37. 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 34.

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

(Dollar amounts in millions)

1 Taxable-equivalent rates used where applicable.

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

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 $732 million at June 30, 2025, compared with $726 million at June 30, 2024. The year-over-year increase in the ACL primarily reflects increased lending activity and more adverse economic scenarios, partially offset by lower reserves associated with certain portfolio-specific risks, such as commercial real estate (“CRE”). The ratio of ACL to total loans and leases was 1.20% at June 30, 2025, compared with 1.24% at June 30, 2024.

The provision for credit losses, which includes both the provision for loan and lease losses and the provision for unfunded lending commitments, was negative $1 million in the second quarter of 2025, compared with a positive $5 million in the second quarter of 2024. The provision for securities losses was less than $1 million during both the second quarters of 2025 and 2024.

The bar chart above illustrates the primary drivers of changes in the ACL compared with the prior year period. To estimate current expected losses, we use econometric loss models that incorporate multiple economic scenarios, ranging from optimistic to baseline to stressed economic conditions. The outcomes of these scenarios are weighted to derive the credit loss estimate. Management may adjust these scenario weightings based on their assessment of prevailing conditions and reasonable and supportable forecasts.

The second bar reflects changes in economic forecasts and current economic conditions, incorporating management’s judgment regarding the weighting of these forecasts during the current quarter. These changes resulted in a $36 million increase in the ACL from the prior year quarter, primarily due to the incorporation of more adverse economic scenarios.

The third bar captures changes in credit quality factors, including risk grade migration, portfolio-specific risks, and specific reserves on loans. Collectively, these factors contributed to a $52 million decrease in the ACL, largely driven by a reduced emphasis on portfolio-specific risks associated with the CRE loan portfolio.

The fourth bar represents changes in the composition of the loan portfolio, including shifts in loan balances and mix, the aging of the portfolio, and other qualitative risk factors. These changes resulted in a $22 million increase in the ACL, primarily driven by $2.4 billion in period-end loan growth, partially offset by changes in the mix of the loan portfolio.

For more information regarding the methodology used to determine the appropriate levels of the ALLL and RULC, see “Credit Risk Management” on page 22 and Note 6 in our 2024 Form 10-K.

Noninterest Income

Noninterest income is comprised of revenue generated from products and services that typically do not bear an associated interest rate or yield. It is categorized as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, and insurance-related income.

Noninterest income accounted for 23% of total net revenue (sum of net interest income plus noninterest income) in both the second quarters of 2025 and 2024. It increased $11 million, or 6%, for the three months ended June 30, and $26 million, or 8%, for the six months ended June 30, 2025, relative to the same prior year period. The following schedule presents a comparison of the major components of noninterest income:

NONINTEREST INCOME

(Dollar amounts in millions)

1 Effective the first quarter of 2025, capital markets fees and income includes fair value and nonhedge derivative income, which was previously disclosed under noncustomer-related noninterest income. These amounts totaled less than $1 million for the three and six months ended June 30, 2025, and for the six months ended June 30, 2024. For the three months ended June 30, 2024, the amount reflected a loss of $1 million.

Customer-related Noninterest Income

Customer-related noninterest income increased $11 million, or 7%, compared with the prior year period. This growth was driven by an $8 million increase in capital markets fees and income, largely attributable to higher swap fees and loan syndication activity. Additionally, retail and business banking fees increased $3 million, primarily due to increased deposit service fees.

Noncustomer-related Noninterest Income

Noncustomer-related noninterest income was flat compared with the prior year period. Net securities gains increased $10 million, which included an $11 million unrealized gain related to the successful completion of an IPO of one of our SBIC investments, FatPipe, Inc. This investment will be marked-to-market until our shares, which are subject to a minimum 180-day lock-up period from the IPO, are fully divested. An associated $2 million accrued success fee payable to the investment manager will also be adjusted based on the investment’s fair value. The increase in net securities gains was offset by a $10 million decline in dividends and other income, primarily due to higher gains in the prior year period associated with the sale of our Enterprise Retirement Solutions business.

Noninterest Expense

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

NONINTEREST EXPENSE

(Dollar amounts in millions)

Noninterest expense increased $18 million, or 4%, relative to the prior year quarter. Salaries and employee benefits expense increased $18 million, primarily due to higher incentive compensation accruals as a result of improved profitability. Other noninterest expense increased $6 million, largely driven by increases in certain legal reserves and the success fee accrual associated with the IPO of the previously discussed SBIC investment. These increases were partially offset by a $4 million decline in professional and legal services, mainly due to reduced technology-related consulting expenses.

Adjusted noninterest expense increased $15 million, or 3%. The efficiency ratio improved to 62.2%, compared with 64.5%, reflecting positive operating leverage as adjusted pre-provision net revenue increased $38 million, or 14%. For more information on non-GAAP financial measures, see page 40.

For the six months ended June 30, 2025, noninterest expense increased $30 million, or 3%, relative to the same prior year period. Salaries and employee benefits expense increased $29 million, primarily due to higher incentive compensation accruals and increased benefits and severance-related expenses. Other noninterest expense increased $12 million, partly due to a $3 million impairment of certain long-lived assets, in addition to items previously discussed. Technology, telecom, and information processing expense increased $7 million, driven by higher application software, license, and maintenance costs. These increases were partially offset by a $13 million reduction in deposit insurance and regulatory expense, reflecting the Federal Deposit Insurance Corporation (“FDIC”) special assessment accrual in the same prior year period, and a $7 million decline in professional and legal services, due to the same factors previously noted.

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 $9 million, or 8%, relative to the prior year quarter. This increase was primarily driven by higher capitalized technology investments associated with other lending and customer-related technology initiatives following the completion of the core system replacement project in the prior year period. The increase was partially offset by a reduction in other technology-related expenses, largely due to lower noncapitalized salary costs related to technology functions.

For the six months ended June 30, 2025, total technology spend increased $15 million, or 6%, compared with the same prior year period. This increase was primarily driven by higher capitalized technology investments and increased technology, telecom, and information processing expense as previously discussed.

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 21.8% and 23.3% for the three months ended June 30, 2025 and 2024, respectively. 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 $11 million for the second quarter 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 during 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 primarily to provide balance sheet liquidity. The portfolio largely consists of securities that can be readily converted to cash or used to generate liquidity through secured borrowing agreements, without the need to sell the securities. Our investment securities portfolio also helps to balance the inherent interest rate mismatch between loans and deposits, thereby helping to preserve the economic value of shareholders’ equity. The estimated deposit duration at June 30, 2025 was assumed to be longer than the loan duration (including swaps). At June 30, 2025, the estimated duration of the investment securities portfolio, which measures price sensitivity to interest rate changes, was 3.8 years, compared with 3.4 years at December 31, 2024, primarily due to revised prepayment assumptions on 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 37. 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 declined $592 million, or 3%, from December 31, 2024, primarily due to principal reductions. At both June 30, 2025 and December 31, 2024, approximately 7% of the portfolio consisted of floating-rate instruments. Additionally, at June 30, 2025, we had active pay-fixed interest rate swaps with an aggregate notional amount of $4.2 billion. These swaps are designated as fair value hedges of fixed-rate available-for-sale (“AFS”) securities and effectively convert the fixed interest income on the hedged portion of the securities to a floating rate.

At June 30, 2025, our AFS investment securities portfolio included approximately $152 million in net premium, distributed across various security categories. Taxable-equivalent premium amortization for these investment securities totaled $12 million for the second quarter of 2025, compared with $14 million in 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 34, the “Capital Management” section on page 38, and Note 5 of the Notes to Consolidated Financial Statements.

Municipal Investments and Extensions of Credit

We support our communities by offering a range of financial products and services to state and local governments (“municipalities”), including deposit services, lending, and investment banking services. Additionally, we invest in securities issued by municipal entities. Our municipal lending portfolio generally includes obligations that are repaid from, or secured by, the general funds or pledged revenues of municipalities, as well as by real estate or equipment. It also includes loans extended to private commercial and 501(c)(3) not-for-profit organizations that utilize a pass-through municipal structure to benefit from 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 concentrated within our geographic footprint. At June 30, 2025, approximately $5 million of municipal loans and leases were on nonaccrual, compared with $11 million at December 31, 2024. These nonaccrual loans were extended to private commercial entities utilizing a pass-through municipal structure to obtain favorable tax treatment.

Municipal securities are internally risk-graded, using methodologies aligned with those applied to loans, with grading frameworks tailored to the size and nature of the credit exposure. These internal risk grades—Pass, Special Mention, and Substandard—are consistent with published regulatory risk classifications. At June 30, 2025, all municipal securities were rated as Pass. For additional information regarding the credit quality of our 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 six months of 2025, the loan and lease portfolio increased $1.4 billion, or 2%, to $60.8 billion at June 30, 2025. This growth was primarily driven by increases in the commercial and industrial, consumer 1-4 family residential mortgage, and term commercial real estate loan portfolios. The ratio of loans and leases to total assets was 68% at June 30, 2025, compared with 67% at December 31, 2024. Commercial and industrial loans remained the largest loan segment, representing 29% and 28% of total loans for the same respective periods.

At June 30, 2025, total loans and leases included approximately $390 million in loans associated with the four FirstBank Coachella Valley, California branches that we acquired in late March 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 $162 million, or 16%, during the first six months of 2025. This increase was primarily due to higher FHLB borrowings, which resulted in an increase in FHLB stock, as we are required to maintain FHLB stock equivalent to approximately 4-5% of our outstanding FHLB borrowings to preserve borrowing capacity. Additionally, our SBIC investment portfolio increased $27 million, largely due to valuation adjustments on related investments. During the second quarter of 2025, we recognized an $11 million unrealized gain associated with the successful IPO of one of our SBIC investments, FatPipe, Inc. This investment will continue to be marked to market until our shares, which are subject to a minimum 180-day lock-up period from the IPO, are fully divested.

Premises, Equipment, and Software

In July 2024, we successfully completed the final phase of our multi-year project to replace our core loan and deposit banking systems. As a result, we transitioned substantially all commercial, commercial real estate, and non-mortgage consumer loans, as well as deposit accounts, to a modern, integrated core platform. We continue to invest in additional lending, deposit, and other customer-related technology initiatives aimed at further modernizing our systems, improving customer experiences, and enhancing operational performance.

The following schedule summarizes the capitalized costs associated with the core system replacement 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 declined $2.4 billion, or 3%, from December 31, 2024, primarily driven by a $3.1 billion reduction in interest-bearing deposits. This reduction included decreases of $1.1 billion in brokered deposits and $521 million in reciprocal deposits. The overall decline in total deposits was partially offset by a $709 million increase in noninterest-bearing demand deposits, primarily attributable to the migration of a consumer interest-bearing product into a new noninterest-bearing offering. At June 30, 2025, customer deposits (excluding brokered deposits) totaled $69.9 billion, compared with $71.2 billion at December 31, 2024.

At June 30, 2025, total deposits included approximately $585 million in deposits associated with the four FirstBank Coachella Valley, California branches that we acquired in late March 2025.

At June 30, 2025, the total estimated amount of uninsured deposits was $32.6 billion, or 44% of total deposits, compared with $34.4 billion, or 45%, at December 31, 2024. The loan-to-deposit ratio was 82%, 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 37.

RISK MANAGEMENT

Risk management is a core component to our operations and a critical factor in achieving our strategic objectives. We employ various strategies to prudently manage the risks inherent in our business, 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. Oversight of these risks is conducted through 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 United States (“U.S.”) government agencies, including 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 June 30, 2025, $583 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)

22

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 2.2% and 2.6% for June 30, 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 3.2% and 3.4% for June 30, 2025 and December 31, 2024, respectively.

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.

As part of our disciplined underwriting and collateral evaluation practices, real estate appraisals are typically obtained when extending credit secured by commercial real estate. In some instances, automated valuation services or internal evaluations may be used. Appraisals are ordered and reviewed prior to loan closing, and new appraisals or evaluations are generally initiated when market conditions suggest a potential decline in collateral value, or when a loan is modified, renewed, or demonstrates signs of credit deterioration. CRE LTV ratios are calculated by dividing the outstanding loan balance by the estimated collateral value based on the most recent appraisal. At June 30, 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 $378 million and $342 million of unsecured loans at June 30, 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 investor interest in multifamily, industrial, and office collateral types, we provide additional analysis of these segments of our CRE portfolio below.

Multifamily CRE

At both June 30, 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 41% 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)

26

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 June 30, 2025 and December 31, 2024, respectively.

Industrial CRE

At both June 30, 2025 and December 31, 2024, our industrial CRE loan portfolio totaled $3.0 billion, representing 22% of the total CRE loan portfolio for both periods. Approximately 36% 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)

27

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 June 30, 2025 and December 31, 2024.

Office CRE

At June 30, 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 28% 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 June 30, 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 June 30, 2025, our 1-4 family residential mortgage loan portfolio totaled $10.4 billion, representing 67% of our total consumer loan portfolio, compared with $9.9 billion, or 66%, at December 31, 2024. The increase was partly due to the acquisition of consumer loans associated with the purchase of four FirstBank Coachella Valley, California branches in late March 2025.

At June 30, 2025 and December 31, 2024, approximately 89% and 90%, respectively, of our 1-4 family residential mortgage loan portfolio consisted of variable-rate loans. We generally retain variable-rate loans in our loan portfolio and sell conforming fixed-rate loans to third parties, including the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. In connection with these sales, we provide customary representations and warranties affirming that the loans satisfy specified underwriting standards and collateral documentation requirements.

Home Equity Credit Lines

We also originate home equity credit lines (“HECLs”). At June 30, 2025 and December 31, 2024, our HECL portfolio totaled $3.8 billion and $3.6 billion, respectively. Approximately 35% and 37% of our HECLs were secured by first liens for the same respective time periods.

At June 30, 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 June 30, 2025, approximately 93% of our HECL portfolio was still in the draw period, and about 22% 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 June 30, 2025 and December 31, 2024, was 0.01% and 0.00%, respectively. For additional information on the credit quality of our HECL portfolio, see Note 6 of the Notes to Consolidated Financial Statements.

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. For more information on these factors and the ACL, see Note 6 of the Notes to Consolidated Financial Statements.

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 $313 million, or 0.51% of total loans and leases and other real estate owned at June 30, 2025, and increased when compared with $298 million, or 0.50%, at December 31, 2024. For more information about nonaccrual loans, see Note 6 of the Notes to Consolidated Financial Statements.

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 $2.7 billion and decreased $173 million when compared with December 31, 2024. Approximately 55% 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 incorporating historical credit loss experience, prevailing economic conditions, and economic forecasts, which collectively inform the quantitative component of our ACL. Additionally, we consider qualitative and environmental factors that may indicate actual losses could differ from levels estimated by our quantitative models. The impact of these factors on our ACL may vary from quarter to quarter. Because economic forecasts may not always align with observed credit quality trends, changes in the ACL may not necessarily correspond directionally with changes in credit quality.

During the first six 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 13 and Note 6 of the Notes to Consolidated Financial Statements.

The following schedule presents the components of the ACL and credit-related balances and metrics:

ACL AND CREDIT-RELATED BALANCES AND METRICS

(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 adverse impacts on current or future earnings and capital arising from changes in interest rates and other market conditions. Given our involvement in transactions with a broad range of financial instruments, we are inherently exposed to these risks. For more information regarding our interest rate and market risk management practices, see “Interest Rate and Market Risk Management” in our 2024 Form 10-K.

We actively manage our exposure to interest rate fluctuations by positioning the balance sheet to reduce volatility in both net interest income and the economic value of equity (“EVE”). Given that a significant portion of our balance sheet funding is derived from non-maturity deposit products, we rely on behavioral models and assumptions to forecast the sensitivity of earnings to interest rate movements. These models and assumptions are subject to ongoing performance monitoring.

When observed deposit behavior diverges from model expectations, the models are updated accordingly, with greater emphasis placed on recently observed behavior. All model changes are independently reviewed by our Model Risk Management function.

Our deposit-behavior models incorporate assumptions about the correlation between the rates paid on interest-bearing deposits and fluctuations in average benchmark interest rates. This is commonly referred to as “deposit beta.” Certificates of deposit are typically modeled with a higher degree of correlation, whereas interest-bearing checking accounts are assumed to exhibit a lower sensitivity to rate changes.

Many consumer and business deposit accounts have historically demonstrated stability and limited sensitivity to rate changes, resulting in a longer duration relative to our loan portfolio. As a result, our balance sheet has typically been “asset-sensitive,” meaning that assets are expected to reprice more quickly or more significantly than our liabilities. Measures of asset sensitivity are particularly influenced by changes in deposit modeling assumptions.

To manage interest rate risk, we regularly employ a combination of interest rate swaps, investments in fixed-rate securities, and funding strategies. Collectively, these tools help moderate the expected sensitivity of net interest income and EVE to changes in interest rates.

The following schedule presents deposit duration assumptions discussed previously:

DEPOSIT ASSUMPTIONS

As previously disclosed, we utilize derivative instruments to manage interest rate risk. The following schedule presents derivatives designated in qualifying hedging relationships at June 30, 2025. It includes the average outstanding derivative notional amounts for each reporting period presented and the weighted-average fixed rates paid or received across cash flow and fair value hedge categories. For more information regarding our hedge accounting strategies and the impact of these hedging relationships on interest income and expense, see Note 7 of the Notes to Consolidated Financial Statements.

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 Fair value debt hedges consist of receive-fixed swaps that hedge fixed-rate subordinated debt.

3 Fair value asset hedges consist of pay-fixed swaps that hedge fixed-rate AFS securities and fixed-rate commercial loans.

At June 30, 2025, we had $60 million of net losses deferred in accumulated other comprehensive income (“AOCI”) related to terminated cash flow hedges. These deferred amounts are amortized into interest income on a straight-line basis over the original maturity periods of the respective hedges, provided the forecasted transactions are expected to occur. For more information regarding amounts deferred in AOCI from 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 designated in qualifying hedging relationships, the following schedule presents our earnings at risk (“EaR”), defined as the percentage change in projected 12-month net interest income, and the estimated percentage change in EVE. Both EaR and EVE are based on a static balance sheet and reflect instantaneous, parallel shifts in interest rates ranging from -200 to +200 bps. These metrics are intended to illustrate the sensitivity of net interest income and equity value to changes in interest rates across a range of scenarios and should not be interpreted as forecasts of expected net interest income.

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

Asset sensitivity, as measured by EaR, declined during the first six months of 2025, primarily due to a reduction in deposit balances. Under our current deposit assumptions, interest rate risk remains within established policy limits. For interest-bearing deposits with indeterminable maturities, the weighted average modeled beta was 47%.

Prepayment assumptions play a critical role in the management of interest rate risk. Certain assets within our portfolio, such as 1-4 family residential mortgages and mortgage-backed securities, are subject to borrower-driven prepayments, which can significantly affect projected cash flows. At June 30, 2025 and December 31, 2024, estimated lifetime prepayment speeds for loans were 14.1% and 13.7%, respectively, reflecting accelerated prepayments triggered by rate resets on adjustable-rate loans. For mortgage-backed securities, estimated prepayment speeds were 7.1% and 7.0% for the same respective periods.

Our EaR analysis primarily evaluates the impact of parallel rate shocks across the term structure of benchmark interest rates. Additionally, we perform non-parallel rate shock scenarios to identify potential risks that may not be captured under parallel rate assumptions. In these non-parallel rate scenarios, the most significant effects on EaR typically stem from movements in short-term interest rates.

EaR has inherent limitations in capturing anticipated changes in net interest income in changing interest rate environments, primarily due to timing mismatches in the repricing behavior of assets and liabilities. To address this, we provide measures of “latent” and “emergent” interest rate sensitivity, which compare current-quarter net interest income with projected net interest income for the same quarter one year forward. Unlike EaR, which assesses net interest income variability over a 12-month horizon, latent and emergent sensitivity metrics provide additional insight into near-term earnings dynamics amid changing rate conditions. As previously noted, these measures are intended to illustrate the sensitivity of net interest income and equity value to changes in interest rates across a range of scenarios and should not be interpreted as forecasts of expected net interest income.

Latent interest rate sensitivity captures anticipated changes in net interest income driven by prior interest rate movements that have not yet been fully reflected in current revenue but are expected to materialize in the near term based on the current yield curve and a static balance sheet. Latent sensitivity is projected to increase net interest income by approximately 9.9% in the second quarter of 2026, compared with the second quarter of 2025.

Emergent interest rate sensitivity reflects the projected, incremental changes in net interest income resulting from future interest rate movements, measured relative to the latent level of net interest income. Assuming interest rates follow the forward curve as of July 9, 2025, emergent sensitivity is modeled to reduce net interest income by approximately 5.8% from the latent level, yielding a cumulative increase of 4.1% in net interest income. Under a parallel interest rate shock of +/- 100 bps to the implied forward rate path, cumulative net interest income sensitivity is projected to range between 0.3% and 6.1%.

Our strategic focus on business banking plays a significant role in our asset-liability management approach. At June 30, 2025, $28.9 billion of commercial and CRE loans were scheduled to reprice within the next six months. To manage the interest rate exposure associated with these variable-rate loans, we executed $750 million in cash flow hedges by receiving fixed rates through interest rate swaps. Additionally, at June 30, 2025, $4.4 billion in variable-rate consumer loans were also scheduled to reprice within the same timeframe. The impact of interest rate floors on asset sensitivity for both commercial and consumer loan portfolios is currently insignificant in the higher interest rate environment. For additional information regarding derivative instruments, see Notes 3 and 7 of the Notes to Consolidated Financial Statements.

Fixed Income

We are subject to market risk arising from fluctuations in the fair value of financial instruments, including trading securities and interest rate swaps used to hedge interest rate exposure. Our underwriting activities include municipal and corporate securities, and we actively trade in municipal, agency, and U.S. Treasury securities. These activities expose us to potential losses resulting from adverse price movements in fixed-income markets.

Changes in the fair value of AFS securities and interest rate swaps that qualify as cash flow hedges are recognized in AOCI each reporting period. For additional information on investment securities and AOCI, refer to the “Capital Management” section on page 38. For more information on the accounting treatment of investment securities, see Note 5 of the Notes to Consolidated Financial Statements.

Equity Investments

Through our equity investment activities, we hold both publicly traded equity securities and non-marketable equity securities in governmental entities and institutions, such as the FRB and the FHLB. For more information regarding our equity investments, see “Interest Rate and Market Risk Management” in our 2024 Form 10-K.

We hold investments primarily in pre-public companies, largely through a variety of SBIC funds. This investment strategy is designed to support the financing, growth, and expansion of diverse businesses, generally within our geographic footprint. At June 30, 2025 and December 31, 2024, our equity exposure to these investments totaled approximately $231 million and $204 million, respectively.

From time to time, companies within our SBIC portfolio may complete an IPO, which introduces additional market risk due to post-IPO lock-up restrictions. During the second quarter of 2025, one of our SBIC investments, FatPipe, Inc., successfully completed an IPO. This investment will be marked-to-market until our shares, which are subject to a minimum 180-day lock-up period from the IPO, are fully divested. For more 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 while effectively managing both anticipated and unanticipated cash flow requirements without negatively impacting our operations or financial strength. We manage liquidity to provide funding for customer credit needs, financial and contractual commitments, and other corporate activities. Our primary sources of liquidity include deposits, borrowings, equity, and the repayment or sale of assets such as loans and investment securities. Investment securities are primarily held as a source of contingent liquidity and are generally comprised of instruments that can be readily converted to cash through secured borrowing arrangements, with the 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 six months of 2025, the primary sources of cash included an increase in short-term borrowings, a decrease in money market investments, and a decrease in investment securities. The primary uses of cash during the same period included a decrease in deposits and an increase in loans and leases. Cash payments for interest, reflected in operating expenses, totaled $829 million and $940 million for the first six months of 2025 and 2024, respectively.

The FHLB and FRB continue to serve as key sources of contingent liquidity and funding. As a member of the FHLB of Des Moines, we have the ability to borrow against eligible loans and securities to meet liquidity and funding requirements. To maintain our borrowing capacity, we are required to maintain investments in both FHLB and FRB stock. At June 30, 2025, our total investment in FHLB and FRB stock was $258 million and $53 million, respectively, compared with $124 million and $65 million at December 31, 2024.

At June 30, 2025, loans with a carrying value of $24.9 billion and $16.7 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.

At June 30, 2025 and December 31, 2024, investment securities with carrying values of $17.7 billion and $17.9 billion, respectively, were pledged as collateral to support potential borrowings. These pledged securities included $8.6 billion and $8.7 billion, respectively, designated for available use through the Fixed Income Clearing Corporation's General Collateral Finance (“GCF”) program and other repo programs; $4.6 billion and $4.7 billion pledged to the FRB and FHLB; and $4.5 billion for both periods pledged to secure public and trust deposits, advances, and other collateralized obligations.

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 $865 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 June 30, 2025, our total available liquidity was $38.6 billion, compared with $41.6 billion at December 31, 2024. At June 30, 2025, our sources of liquidity exceeded the estimated amount of uninsured deposits of $32.6 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 $472 million, or 8%, to $6.6 billion at June 30, 2025, compared with $6.1 billion at December 31, 2024. Common stock and additional paid-in capital decreased $24 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.

At June 30, 2025, the AOCI balance reflected a net loss of $2.2 billion, primarily attributable to a decline in the fair value of fixed-rate AFS securities driven by changes in interest rates. This amount includes $1.7 billion ($1.3 billion after tax) of unrealized losses associated with securities previously transferred from AFS to held-to-maturity (“HTM”). Compared with December 31, 2024, AOCI improved $216 million, primarily due to $92 million related to paydowns on AFS securities, and $90 million in unrealized loss amortization associated with the securities transferred from AFS to HTM. Additionally, AOCI was impacted by a $34 million decrease in unrealized losses and other adjustments associated with derivative instruments used for risk management purposes. The improvement in AOCI had a positive impact on our tangible book value per common share. 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.

Pursuant to the OCC’s “Earnings Limitation Rule,” dividend payments are limited to the sum of net income for the current fiscal year and retained earnings for the two preceding years, unless prior approval is obtained from the

OCC to exceed this threshold. As of July 1, 2025, we had $1.2 billion in retained net profits available for distribution.

During the second quarter of 2025, we paid $1 million in dividends on preferred stock, compared with $11 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.

During the second quarter of 2025, we paid $64 million in dividends on common stock, or $0.43 per share, compared with $61 million, or $0.41 per share, during the second quarter of 2024. In August 2025, the Board declared a quarterly dividend of $0.45 per common share, payable on August 21, 2025 to shareholders of record at the close of business on August 14, 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 June 30, 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 June 30, 2025, our common equity tier 1 (“CET1”) capital totaled $7.6 billion, an increase of 7%, compared with $7.1 billion in the prior year period. The CET1 capital ratio improved to 11.0%, compared with 10.6%. Tangible book value per common share increased to $36.81, compared with $30.67, primarily driven by higher retained earnings and a reduction in unrealized losses within AOCI. See the section below for more information regarding non-GAAP financial measures.

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 13.1%, 9.2%, and 10.9% for the periods presented, respectively.

TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)

(Dollar amounts in millions, except shares and per share amounts)

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 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)

1 Effective the first quarter of 2025, fair value and nonhedge derivative income (loss) is included in capital markets fees and income.

2 Excluding both the $9 million gain on sale of our Enterprise Retirement Solutions business and the $4 million gain on sale of a bank-owned property (recorded in dividends and other income), the efficiency ratio for the three and six months ended June 30, 2024 would have been 65.6% and 66.7%, respectively, and the efficiency ratio for the year ended December 31, 2024 would have been 64.4%.

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 June 30, 2025. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at June 30, 2025. There were no changes in our internal control over financial reporting during the second 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.