The paragraph is an introduction to a conference call discussing Zions Bancorporation's 2024 fourth quarter and full-year earnings. Shannon Drage, Senior Director of Investor Relations, opens the call by noting the presence of forward-looking statements and directing listeners to review the applicable disclaimers and materials on their website. The agenda includes remarks by Chairman and CEO Harris Simmons, and a review of financial results by CFO Ryan Richards, followed by a Q&A session. Harris Simmons begins by expressing concern for the victims of recent wildfires in Southern California, highlighting the company's focus on the safety of colleagues and gratitude towards first responders.

The paragraph discusses the company's financial performance and response to potential credit losses from wildfires. It mentions minimal anticipated losses due to insurance and experience with past disasters, as well as programs to assist affected borrowers. Financial highlights include a 19% increase in fourth quarter adjusted pre-provision net revenue, net earnings of $737 million for the year, and earnings of $200 million for the fourth quarter. The net interest margin improved for the fourth consecutive quarter, reaching 3.05%, and the efficiency ratio improved to 62%. The company saw growth in customer deposits and modest loan growth, with expectations for continued profitability improvements and positive operating leverage into 2025.

The paragraph discusses financial performance during a recent quarter, highlighting net loan losses of $36 million, primarily due to a single commercial credit. Classified balances increased by $777 million, especially in commercial real estate, but non-accrual loans decreased by 18%. Earnings per share were $1.34, slightly down from the previous period. A $41 million provision for credit losses negatively impacted earnings per share by $0.21. Adjusted pre-provision net revenue improved by 4% from the last quarter and 19% from the previous year. The Capital Markets business performed well, expenses were controlled despite inflation, and the company is optimistic about growth and profitability in the coming year. The Chief Financial Officer, Ryan Richards, is set to provide further details.

The paragraph discusses the improvement in net interest income and net interest margin over five consecutive quarters, highlighting factors such as lower funding costs and reduced short-term borrowings as key contributors. Specifically, a 2 basis point increase in net interest margin was mainly driven by decreased funding costs, although partially offset by declining asset yields and reduced contributions from noninterest sources. There was also a 14 basis point improvement compared to the previous year. Non-interest income saw a 7.5% quarterly increase and a 15% annual increase, with significant contributions from customer fees and strategic investments in capital markets, which grew 36% over the year. Commercial account fees also contributed to the increased revenue for both the quarter and the full year.

The paragraph discusses financial performance and future outlooks for revenue, expenses, loans, and deposits. Total and adjusted revenue have increased compared to previous periods, driven by net interest income and customer-related fees. For 2025, a moderate increase in customer-related fee income and a slight to moderate rise in adjusted non-interest expenses are expected, with additional spending on marketing and branch acquisitions. Average loans saw a small increase, particularly in consumer mortgages and commercial & industrial loans, though loan yields fell due to lower benchmark rates. A slight increase in loan balances is anticipated for 2025, led by commercial loans but offset by declining mortgage and commercial real estate exposures. Average deposit balances grew modestly in the fourth quarter.

The paragraph discusses trends in deposit costs and funding for a financial institution. Non-interest-bearing deposits have remained stable, while interest-bearing deposit costs have decreased. Specifically, total deposit costs declined by 21 basis points to 1.93%, and interest-bearing deposit costs dropped by 32 basis points to 2.87%. The total deposit spot rate at the end of December was 1.78%. The paragraph highlights disciplined deposit repricing and close alignment with expectations regarding higher cost deposits. Total deposits increased by $500 million, primarily due to growth in customer deposits. Non-interest-bearing demand deposits were stable, making up 32% of total deposits. The paragraph also notes a 24 basis point decline in total funding costs and discusses the institution's investment portfolio, which acts as a financial buffer to accommodate customer balance sheet changes, with significant cash flows from investment securities in the quarter.

The paragraph discusses the interest rate sensitivity of an investment portfolio and its impact on net interest income. The portfolio's duration is 3.4 years, indicating its price sensitivity to interest rate changes. The presentation provides a model of net interest income sensitivity, assuming a Fed funds target of 4.25% by December 31, with a projected 6.8% increase in net interest income in Q4 2025 compared to Q4 2024. Sensitivity to 100 basis points rate shocks is estimated between 4% and 9.4%. These figures assume a static balance sheet and some deposit migration but do not account for strategic factors in full-year forecasts. The outlook for 2025 suggests moderate net interest income growth, with risks and opportunities affecting this, such as loan growth and deposit behavior. Positive operating leverage is expected to continue into 2025, with a discussion on credit quality following on the next slide.

The paragraph discusses the financial performance and management of a loan portfolio, highlighting that realized losses remain manageable with a significant increase this quarter due to one commercial credit. Non-performing assets decreased due to successful resolutions and a large charge-off, while criticized and classified loans rose, driven mainly by commercial real estate, specifically in multi-family, industrial, and office sectors. The effective loss content for classified loans remains low due to strong borrower equity and support. Short-term interest rate reductions may reduce operating costs and stabilize loan grades, but higher term rates could keep criticized balances elevated. The allowance for credit losses remained stable, and loan loss coverage improved. A $13.5 billion commercial real estate portfolio represents 23% of total loans, is well-diversified, and has been managed with strict concentration limits over a decade.

The paragraph discusses the company's commercial real estate (CRE) portfolio, highlighting a $777 million increase in classified loans, with $609 million from CRE, mainly in multifamily, industrial, and office credits. Despite this increase, most loans have a loan-to-value (LTV) ratio of less than 60%, suggesting limited losses based on current economic conditions and support from sponsors. The Common Equity Tier 1 ratio improved to 10.9%, showing a strong risk profile. The company also redeemed preferred stock and subordinated debt, replacing them with lower-cost notes to improve earnings per share in 2025.

The paragraph discusses the company's financial outlook for 2025, predicting positive operating leverage and improved efficiency due to revenue growth outpacing funding and expense pressures. During the Q&A session, Manan Gosalia from Morgan Stanley asks about the high deposit betas, noting their spot basis is close to 60% and questioning the expected progression, considering the fewer rate cuts projected. Ryan Richards responds, stating satisfaction with current pricing responses and mentions a lag factor in time and broker deposits. He anticipates continued performance in line with previous patterns, despite potential future rate decreases.

In the conversation, Manan Gosalia inquires about the impact of AOCI on the CET1 ratio amid current market volatility, specifically regarding long-term interest rates. Ryan Richards acknowledges the importance of managing capital, considering both current AOCI losses and future regulatory uncertainty under Basel III. The organization aims to maintain capital levels in line with peers and foresees a focus on growing capital. In response to potential market volatility, Harris Simmons suggests that any impact would likely affect buyback decisions rather than loan book growth. He adds that the tangible book value has been improving significantly, and while regulatory guidelines remain uncertain, they monitor these developments closely.

The paragraph discusses the company's expectations and assumptions regarding interest rate sensitivity and net interest income (NII). The speaker anticipates that Accumulated Other Comprehensive Income (AOCI) will return to capital, though the timing is unclear. Despite this uncertainty, they expect no immediate need for capital actions and will continue assessing buybacks. Bernard von Gizycki from Deutsche Bank questions about the interest rate model assumptions, particularly changes in the deposit beta and their impact on NII. Ryan Richards responds, explaining their assumptions on deposit beta align with recent trends and that they have become more optimistic about non-interest-bearing deposit behaviors, allowing more positive views on NII sensitivity. He also mentions that some fixed asset repricing benefits and a stable deposit base may reduce reliance on wholesale funding.

In this paragraph, Bernard Von Gizycki and Ryan Richards discuss the potential for reaching a Net Interest Margin (NIM) in the mid-3% range, noting that while they don't specifically target a NIM outcome, a more naturally sloped yield curve could improve their performance. Ryan mentions that achieving this level is possible, but the timing remains uncertain. Christopher McGratty then inquires about balance sheet management, particularly the movement between liquidity and the bond portfolio. Ryan responds by highlighting the stable share of total earning assets in investment securities and money markets, noting a year-over-year decrease in the investment securities portfolio.

In the paragraph, the speakers discuss strategies for using cash flows to reduce high-cost funding or invest in loan growth. They suggest that while runoff in the securities portfolio may slow, there are opportunities for organic growth to support customer objectives. Harris Simmons reflects on past challenges, such as the impact of issues at Silicon Valley and Signature Bank, and notes that progress is being made in profitability and positioning for potential mergers and acquisitions (M&A). While not actively seeking opportunities, they have completed internal system upgrades and are now better prepared for strategic deals.

The paragraph discusses a bank's readiness to handle potential challenges associated with crossing a $100 billion threshold in light of new regulations. Christopher McGratty, Harris Simmons, and Derek Steward address various topics: Steward explains a charge-off situation involving a long-time retail client, purchased by a private equity firm, that faced difficulties due to rapid growth and management issues. Matthew Clark asks about capital market fees, and Scott McLean highlights the bank's efforts over recent years to build its business by improving product capabilities, risk, and technology structures, expressing optimism about the pipeline and potential growth despite environmental changes.

In the fourth quarter, there was a notable increase in basic products like loan syndications, interest rate products, and real estate capital markets, reflecting efforts to build these areas over the past 1.5 years. While acknowledging the inherent variability of capital markets, the paragraph highlights significant investment in infrastructure and personnel, with targeted programs to seize capital market opportunities. Other steady-performing areas like treasury management, merchant services, and corporate trust services are also mentioned, noting their strong market position despite certain industry challenges. The paragraph concludes with optimism for continued growth, supported by a solid pipeline as emphasized by Harris Simmons. Following this discussion, an operator introduced a question from Christopher Spahr of Wells Fargo, focusing on energy sector growth in relation to the election's impact.

In the paragraph, Scott McLean discusses the growth potential of commercial loans, particularly within their energy portfolio, which saw a slight increase despite past price volatility. He notes opportunities in the market due to favorable pricing and credit structures as some banks exit. There's a broader sense of optimism regarding C&I (commercial and industrial) lending, given improved sentiment among small to medium-sized business owners. However, he mentions that one to four family originations may weaken, potentially offsetting some growth. Harris Simmons adds that while regulatory pressures like Basel III are challenging, smaller cumulative regulatory changes might be beneficial for banks of their size.

The paragraph discusses the current landscape of the CFPB and banking industry, highlighting the challenges and internal efforts related to regulatory compliance, such as climate disclosure. It mentions a shift towards a "back to basics" approach, emphasizing the importance of building risk infrastructure to support growth. The speaker, expressing optimism, notes that the new administration and agency leaders are promoting a message of safety and growth for the industry. Despite concerns like tariffs that could hamper economic progress, the overall sentiment is optimistic about a conducive environment for growth. The paragraph ends with a transition to the next question in a discussion.

In the paragraph, Harris Simmons and Derek Steward discuss expectations for steady loan growth throughout the year, despite not being concerned if it is weighted towards the later half of 2025. Derek Steward addresses an increase in classified loans, explaining that it wasn't due to one large credit but rather was spread across their footprint. He highlights that the increase was significantly driven by issues in commercial real estate (CRE), multifamily, and industrial sectors due to construction delays, slow lease-up performance, increased costs, and rising interest rates. Despite these challenges, Steward expects most of these loans to eventually stabilize and be upgraded or refinanced over time due to favorable loan-to-value ratios.

Shannon Drage thanked participants for joining the call and invited them to reach out with additional questions via the contact information on the Zions Bancorporation website. The call concluded, and the operator confirmed the end of the teleconference, inviting participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.