Zions Bancorporation: Q4 Earnings Snapshot - A Mixed Bag of Results

Zions Bancorporation, N.A. (NASDAQ: ZION) recently reported its fourth quarter 2024 financial results, providing a mixed bag of earnings and performance metrics. The bank's net earnings applicable to common shareholders for the quarter came in at $200 million, or $1.34 per diluted common share, compared with $116 million, or $0.78 per diluted common share, in the fourth quarter of 2023. While the earnings per share (EPS) increased by 72% year-over-year, the net earnings figure was slightly below the Street's estimates of $205 million.

One of the standout aspects of Zions' Q4 results was the improvement in net interest margin (NIM), which increased to 3.05% from 2.91% in the prior year quarter. This improvement was driven by an 8% increase in net interest income, which was partially offset by a 12% decrease in noninterest expense. The yield on interest-earning assets remained relatively stable, decreasing by only 22 basis points (bps) to 5.13%, while the rate paid on total deposits and interest-bearing liabilities decreased by 24 bps to 2.12%. This combination of factors contributed to the improvement in Zions' NIM.

However, there were some concerning trends in Zions' loan portfolio. The provision for credit losses was $41 million, compared with less than $1 million in the prior year quarter, and the annualized ratio of net loan and lease charge-offs to average loans and leases increased to 0.24% from 0.06%. Additionally, nonperforming assets increased to $298 million, or 0.50% of loans and leases and other real estate owned, compared with $228 million, or 0.39% in the prior year quarter. While Zions' management has taken steps to mitigate the risks associated with these trends, such as ensuring adequate collateral and guarantor support, the increase in classified loans, particularly in the commercial real estate portfolio, is a cause for concern.

Zions' capital position remains strong, with an estimated CET1 capital ratio of 10.9% compared with 10.3% in the prior year quarter. The bank has taken steps to maintain this strong capital base, such as redeeming preferred stock and managing its loan portfolio efficiently. However, the increase in classified loans and the higher provision for credit losses may put pressure on Zions' capital position in the future.

In conclusion, Zions Bancorporation's Q4 earnings snapshot is a mixed bag of results, with improvements in net interest margin and earnings per share offset by concerns about the loan portfolio and capital position. As an investor, it is essential to monitor these trends closely and consider the potential risks and opportunities that Zions' financial performance presents.