ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ Q2 FY2024 earnings call

• Completed final major conversion to new core operating system for loans and deposits, improving fraud detection, error correction, and customer experience. - Replaced nearly entire digital front-end over 3 years, including consumer online/mobile banking, treasury Internet banking, and digital mortgage/small-business applications. - Net interest margin expanded 4 basis points QoQ and 6 basis points YoY as asset repricing outpaced funding cost increases. - Loan growth measured, deposit balances declined seasonally, noninterest-bearing demand deposits ratio flat. - Net charge-offs low at 10 basis points annualized, classified loan balances increased $298 million mostly in C&I portfolio, CRE portfolio remains relatively strong.

Net earnings for the quarter were $190 million. Period-end loan balance increased 0.5%, with average loan balances up nearly 1% led by 1-4 family residential loans. Customer deposit balances declined nearly 1% seasonally, with noninterest-bearing demand deposits to total deposits ratio flat at 34%. Common Equity Tier-1 ratio was 10.6%, up from 10.4% in Q1 and 10% a year ago. Tangible book value increased 20.1% year-over-year. Adjusted pre-provision net revenue was $278 million in Q2, up from $242 million in Q1.

• Net interest income expected to be slightly to moderately increasing in 2Q 2025 vs 2Q 2024, considering deposit behavior and interest rate changes. - Optimistic about growth in capital markets capabilities over next four quarters for noninterest income. - Adjusted noninterest expense slightly increasing in 2Q 2025 vs 2Q 2024, focusing on managing technology, vendor, and employment costs. - Loans expected to be stable to slightly increasing, deposits average balances slightly up, cost of total deposits increased 5 basis points.

• Technology and vendor risks: Managing technology costs, vendor contractual increases, and employment costs. - Interest rate risks: Sensitivity to interest rate changes, impact of deposit mix on net interest income. - Credit risks: Potential credit deterioration, especially in C&I and multifamily CRE sectors, but reserves deemed sufficient.

Q: Noninterest-bearing deposit trends and impact of rate cuts A: Ryan Richards noted modest decrease in noninterest-bearing deposits during the quarter, and revised models to expect less migration of noninterest-bearing deposits to higher cost products.

Q: Classified loans in C&I portfolio A: Scott McLean said ~70% of classified loan increase came from C&I portfolio, due to idiosyncratic issues in various industries, with CRE portfolio remaining relatively strong.

Q: Technology costs and shareholder benefits A: Harris Simmons discussed benefits of new core system including improved employee experience, fraud detection, and customer experience, with technology costs managed and expected to free up capacity for further investments.

Q: Cost reduction from core system and capital outlook A: Ryan Richards and Harris Simmons mentioned cost reduction from core system amortization, with capital expected to continue growing organically through earnings and AOCI improvement.

Q: Houston storm impact on credit A: Scott McLean discussed minimal impact on loan book from Hurricane Beryl, with no expected reserve set aside for losses.