ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/
For the period ended Jun 30, 2025. Filed Aug 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 7, 2025
ZION$64.76-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0000109380-25-000084
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-07.
0000109380-25-000102
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 310 previous paragraphs and 314 current paragraphs.
184 unchanged; 98 reworded; 28 added; 27 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 45 previous and 46 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
•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;
Current report
Second Quarter 2025 Financial Performance
Current report
◦Average interest-bearing liabilities increased $1.4 billion, or 3%, due to an increase in both average borrowed funds and average interest-bearing deposits.
Current report
◦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.
Current report
•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.
Current report
•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.
Current report
•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”).
Current report
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%.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
The following schedule presents the components of the ACL and credit-related balances and metrics:
Current report
ACL AND CREDIT-RELATED BALANCES AND METRICS
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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
Current report
1 Effective the first quarter of 2025, fair value and nonhedge derivative income (loss) is included in capital markets fees and income.
Current report
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%.
Removed paragraphs (27)
Previous report
•Political developments, such as transitions in administration, shifts in congressional control and influence, and policy changes, can significantly impact government operations and effectiveness. These effects may include disruptions in and disbursement of government funding, protracted litigation, increased risk of government shutdowns, and potential downgrades in United States (“U.S.”) credit ratings;
Previous report
First Quarter 2025 Financial Performance
Previous report
EPS was negatively impacted $0.11 per share by an increase of $16 million in income tax expense due to a required revaluation of our deferred tax assets resulting from newly enacted Utah state tax legislation during the quarter. Approximately $14 million of this additional expense is related to investment securities with unrealized losses in accumulated other comprehensive income (“AOCI”) and is expected to accrete back into income over the life of the respective securities. Additionally, this legislation is expected to reduce Utah tax expense related to investment securities and trading income in future periods.
Previous report
◦Average interest-bearing liabilities increased $2.3 billion, or 4%, primarily due to an increase in average interest-bearing deposits, which was partially offset by a decrease in average borrowed funds.
Previous report
◦Total deposits increased $1.5 billion, or 2%, primarily due to an increase in interest-bearing deposits, partially offset by a decrease in noninterest-bearing deposits. Customer deposits (excluding brokered deposits) totaled $70.9 billion, compared with $69.9 billion.
Previous report
•Customer-related noninterest income increased $6 million, or 4%, primarily due to higher loan-related fees and income, as well as improved capital markets fees and income. Noncustomer-related noninterest income increased $9 million, mainly due to an increase in net securities gains, largely attributable to valuation adjustments in our Small Business Investment Company (“SBIC”) investment portfolio and a valuation loss associated with one of our equity investments in the prior year period.
Previous report
•Noninterest expense increased $12 million, or 2%, primarily due to increases in salaries and employee benefits expense; technology, telecom, and information processing expense; and other noninterest expense. These increases were partially offset by a decrease in deposit insurance and regulatory expense, primarily due to a $13 million Federal Deposit Insurance Corporation (“FDIC”) special assessment accrual during the prior year quarter.
Previous report
•Total borrowed funds, primarily consisting of secured borrowings, decreased $1.0 billion, or 18%, from the prior year quarter, primarily due to a reduction in security repurchase agreements and Federal Reserve Board (“FRB”) short-term advances, partially offset by an increase in long-term debt.
Previous report
Net interest income represented 78% and 79% of our net revenue (net interest income plus noninterest income) during the first quarters of 2025 and 2024, respectively. It increased $38 million, or 6%, relative to the prior year quarter, as the decrease in funding costs outpaced the repricing of interest-earning assets. The net interest margin improved to 3.10%, compared with 2.94%.
Previous report
Average deposits increased $1.5 billion, or 2%, to $74.9 billion. Average interest-bearing deposits increased $2.9 billion, or 6%, primarily due to customer deposit growth. Average noninterest-bearing deposits decreased $1.4 billion, or 5%, and represented 32% of total deposits during the first quarter of 2025, compared with 35% during the same prior year period.
Previous report
Customer-related noninterest income increased $6 million, or 4%, compared with the prior year period. This growth was largely driven by higher loan-related fees and income, as well as improved capital markets fees and income, primarily due to increased investment banking advisory fees.
Previous report
Noncustomer-related noninterest income increased $9 million, compared with the prior year period, primarily due to an $8 million increase in net securities gains. This increase was largely attributable to valuation adjustments in our SBIC investment portfolio, and a $4 million valuation loss associated with one of our equity investments in the prior year period.
Previous report
Adjusted noninterest expense increased $22 million, or 4%. The efficiency ratio was 66.6%, compared with 67.9%, as the increase in adjusted taxable-equivalent revenue outpaced the increase in adjusted noninterest expense. For more information on non-GAAP financial measures, see page 40.
Previous report
Total technology spend increased $6 million, or 5%, relative to the prior year quarter, primarily due to the aforementioned increase in technology, telecom, and information processing expense driven by higher application software, license, and maintenance costs, partially offset by a decrease in certain capitalized technology investments.
Previous report
The effective tax rate was 28.9% and 24.6% for the three months ended March 31, 2025 and 2024, respectively. This year-over-year increase was primarily attributable to new Utah state tax legislation enacted in the first quarter of 2025 related to our investment securities and trading assets. This legislation required a revaluation of our net deferred tax asset, which primarily arises from unrealized losses in AOCI on certain securities. Consequently, this resulted in $16 million of additional tax expense for the quarter, or a $0.11 per share negative impact. Approximately $14 million of this additional expense is related to investment securities with unrealized losses in AOCI and is expected to accrete back into income over the life of the respective securities. Additionally, this legislation is expected to reduce Utah tax expense related to investment securities and trading income in future periods.
Previous report
Other noninterest-bearing investments increased $25 million, or 2%, during the first three months of 2025. This increase was primarily due to higher Federal Home Loan Bank (“FHLB”) borrowings, which drove an increase in FHLB stock, as we are required to hold FHLB stock equivalent to approximately 4% of our FHLB borrowings to maintain our borrowing capacity. Additionally, our SBIC investment portfolio increased $7 million, mainly due to valuation adjustments associated with related investments. These increases were partially offset by a decrease in Federal Reserve stock, driven by a reduction in Federal Reserve short-term advances.
Previous report
Total deposits decreased $531 million, or 1%, from December 31, 2024, due to a $619 million decrease in interest-bearing deposits, partially offset by an $88 million increase in noninterest-bearing demand deposits. At March 31, 2025 and December 31, 2024, customer deposits (excluding brokered deposits) totaled $70.9 billion and $71.2 billion, respectively, and included approximately $6.7 billion and $7.0 billion of reciprocal deposits.
Previous report
The following schedule presents the changes in the ACL and certain credit-related metrics:
Previous report
We strive to position the Bank for interest rate changes and manage balance sheet sensitivity to reduce the volatility of both net interest income and economic value of equity (“EVE”). With the generally higher interest rate environment over the past couple of years, customer deposit behavior has deviated from the trends observed during the relatively low interest rate period of the previous 15 years. As a result, customers have been more inclined to (1) move deposits to nonbanking products, such as money market mutual funds, that offer higher interest rates, and (2) reduce their balances in noninterest-bearing accounts.
Previous report
Observed changes in deposit behavior have been incorporated into our deposit models used for managing interest rate risk. These changes give more weight to the recently observed behavior and have increased both the deposit beta for interest-bearing products and the percentage of noninterest-bearing deposits assumed to migrate to interest-bearing products. Changes to models are independently reviewed by our Model Risk Management function.
Previous report
We generally have granular deposit funding, with much of this funding in the form of demand deposits with no maturity, which can be withdrawn at any time. Instead of using contractual maturities, our interest rate risk model employs dynamically modeled behavioral assumptions based on historical behavior and future projections. Since many deposits from household and business accounts have proven to be stable over time and less sensitive to rate changes, their duration is generally longer than that of our loan portfolio. Consequently, we have historically been “asset-sensitive,” meaning our assets are expected to reprice faster or more significantly than our liabilities.
Previous report
We also assume a correlation, referred to as a “deposit beta,” with respect to interest-bearing deposits, wherein the rates paid to customers change at a different pace compared with changes in average benchmark interest rates. Generally, certificates of deposit are assumed to have a high correlation, while interest-bearing checking accounts are assumed to have a lower correlation.
Previous report
2 Cash flow hedges of liabilities consist of a pay-fixed swap hedging rolling FHLB advances. This swap matures in May 2025. Amounts for the second quarter of 2025 are not prorated to reflect this hedge maturing during the period.
Previous report
1 Assumes rates cannot go below zero in the negative rate shifts.
Previous report
Additionally, we hold direct and indirect investments in predominantly pre-public companies, primarily through various SBIC venture capital funds. This strategy aims to provide beneficial financing, growth, and expansion opportunities to diverse businesses generally within our geographic footprint. At March 31, 2025 and December 31, 2024, our equity exposure to these investments was approximately $211 million and $204 million, respectively. Occasionally, companies within our SBIC investment portfolio may issue an initial public offering (“IPO”). In such cases, the fund is generally subject to a lockout period before we can liquidate the investment, introducing additional market risk. For additional information regarding the valuation of our SBIC investments, see Note 3 of the Notes to Consolidated Financial Statements.
Previous report
Regulatory Developments
Previous report
During 2023 and 2024, federal bank regulators issued proposals to (1) implement Basel III Endgame and revise capital requirements for large banking organizations, (2) revise requirements for resolution and recovery planning, and (3) expand a long-term debt requirement to all banks with $100 billion or more in total assets. For more information about these regulatory proposals and their potential impact on the Bank, see “Regulatory Developments” in the Supervision and Regulation section of our 2024 Form 10-K.
Reworded paragraphs (98)
Previous wording
•Changes in general industry, political, and economic conditions, including elevated inflation, economic slowdown or recession, or other economic challenges; imposition of announced or future tariffs (including retaliatory tariffs) and resulting market volatility and uncertainty, including the effects on supply chains, operations, consumer confidence, and financial performance of us and our customers; changes in interest and reference rates, which could adversely affect our revenues and expenses, the value of assets and liabilities, and the availability and cost of capital and liquidity; and deterioration in economic conditions that may result in increased loan and lease losses;
Current wording
•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;
Previous wording
•Actions taken by governments, agencies, central banks, and similar organizations, including those that result in decreases in revenue, increases in regulatory fees, insurance assessments, and capital standards; and other regulatory requirements;
Current wording
•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;
Previous wording
•The potential for both positive and disruptive impacts of technological advancements, such as digital currencies and commerce, blockchain, artificial intelligence, quantum and cloud computing, and other innovations affecting us and the banking industry;
Current wording
•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;
Previous wording
•Our ability to develop and maintain technology, information security systems, and controls designed to guard against fraud, cybersecurity, and privacy risks and related incidents;
Current wording
•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;
Previous wording
•The effects of wars, domestic and international trade policies and disputes, geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
Current wording
•The effects of wars, geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
Previous wording
•The impact of bank closures or adverse developments at other banks on general public, customer, and investor sentiment regarding the stability and liquidity of banks; and
Current wording
•The impact of bank closures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; and
Previous wording
Comparisons noted below are calculated for the current quarter versus the same prior year period, unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they typically reflect a low starting point.
Current wording
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.
Previous wording
Our financial performance in the first quarter of 2025, relative to the prior year period, reflected growth in net earnings, diluted earnings per share (“EPS”), and adjusted pre-provision net revenue. Diluted EPS was $1.13, compared with $0.96 in the first quarter of 2024, as higher net interest income and noninterest income were partially offset by increased noninterest expense, and a higher provision for credit losses.
Current wording
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.
Previous wording
•Net interest income increased $38 million, or 6%, compared with the prior year period, primarily as a result of lower funding costs and a favorable mix change in average interest-earning assets. The net interest margin improved to 3.10%, compared with 2.94%.
Current wording
•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%.
Previous wording
◦Average interest-earning assets increased $1.4 billion, or 2%, primarily driven by growth in average loans, leases, and money market investments, partially offset by a decline in average securities.
Current wording
◦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.
Previous wording
◦Total loans and leases increased $1.8 billion, or 3%, primarily driven by growth in the consumer 1-4 family residential mortgage and commercial and industrial loan portfolios.
Current wording
◦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.
Previous wording
◦Total loans and deposits at March 31, 2025 included approximately $420 million of consumer and commercial loan balances and $630 million of deposit balances, respectively, which were acquired from the purchase of four FirstBank Coachella Valley, California branches in late March 2025.
Current wording
◦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.
Previous wording
•The provision for credit losses was $18 million, compared with $13 million in the prior year period.
Current wording
•The provision for credit losses was negative $1 million, compared with positive $5 million in the prior year period.
Previous wording
•Net loan and lease charge-offs totaled $16 million, or 0.11% of average loans and leases annualized, compared with $6 million, or 0.04%, in the prior year quarter. The ratio of allowance for credit losses (“ACL”) to total loans and leases was 1.24%, compared with 1.27%.
Current wording
•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%.
Previous wording
•Nonperforming assets totaled $307 million, or 0.51% of total loans and leases and other real estate owned, compared with $254 million, or 0.44%. The increase was primarily in the term commercial real estate (“CRE”), consumer 1-4 family residential, and commercial and industrial portfolios.
Current wording
•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.
Previous wording
•Classified loans totaled $2.9 billion, or 4.82% of total loans and leases, compared with $966 million, or 1.66%, in the prior year quarter, and remained relatively stable compared with $2.9 billion, or 4.83%, in the prior quarter. The year-over-year increase was primarily in the multifamily and industrial CRE loan portfolios, largely due to an increased emphasis in risk grading on current cash flows, and less emphasis on the adequacy of collateral values and the strength of guarantors and sponsors. Weaker performance in the 2021, 2022, and 2023 construction loan vintages also contributed to the increase, as borrowers missed projections due to longer-than-anticipated lease-up periods, rent concessions, elevated costs, and higher interest rates.
Current wording
•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.
Previous wording
1 Includes interest income recoveries of $4 million and $2 million for the three months ended March 31, 2025, and 2024, respectively.
Current wording
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.
Previous wording
The yield on average interest-earning assets decreased 17 basis points (“bps”) in the first quarter of 2025, compared with the prior year period. This decline reflects a lower interest rate environment, partially offset by a favorable asset mix change, as average loans and leases and average money market investments increased, while average investment securities decreased. The yield on average loans and leases decreased 22 bps, the yield on average money market investments decreased 115 bps, and the yield on average securities decreased 9 bps in the first quarter of 2025.
Current wording
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.
Previous wording
The total cost of deposits decreased 30 bps, and the rate paid on total deposits and interest-bearing liabilities decreased 33 bps during the first quarter of 2025, compared with the prior year period. This decline also reflects a lower interest rate environment, partially offset by an adverse mix change from noninterest-bearing to interest-bearing products. The rate paid on total borrowed funds decreased 41 bps.
Current wording
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.
Previous wording
Average interest-earning assets increased $1.4 billion, or 2% from the prior year quarter, as growth in average loans and leases and average money market investments was partially offset by a decline in average securities.
Current wording
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.
Previous wording
Average loans and leases increased $1.7 billion, or 3%, to $59.6 billion, primarily due to growth in average consumer and commercial loans. Average securities decreased $1.7 billion, or 8%, to $18.7 billion, primarily due to principal reductions.
Current wording
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.
Previous wording
Average interest-bearing liabilities increased $2.3 billion, or 4%, from the prior year quarter. This growth was largely driven by an increase in average interest-bearing deposits, partially offset by decreases in average noninterest-bearing deposits and average borrowed funds.
Current wording
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.
Previous wording
Average borrowed funds, primarily consisting of secured borrowings, decreased $570 million, or 8%, to $6.7 billion. This decrease was primarily due to a reduction in security repurchase agreements and FRB short-term advances, partially offset by an increase in long-term debt. The increase in long-term debt was due to the issuance of $500 million of 6.82% Fixed-to-Floating Subordinated Notes, partially offset by the redemption of $88 million of 6.95% Fixed-to-Floating Subordinated Notes during the fourth quarter of 2024.
Current wording
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.
Previous wording
The ACL was $743 million at March 31, 2025, compared with $736 million at March 31, 2024. The increase in the ACL primarily reflects credit quality deterioration and loan growth, partially offset by lower reserves associated with portfolio-specific risks, including commercial real estate, improvements in economic forecasts, and changes in loan portfolio composition. The ratio of ACL to total loans and leases was 1.24% at March 31, 2025, compared with 1.27% at March 31, 2024.
Current wording
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.
Previous wording
The provision for credit losses, which includes both the provision for loan and lease losses and the provision for unfunded lending commitments, was $18 million in the first quarter of 2025, compared with $13 million in the first quarter of 2024. The provision for securities losses was less than $1 million during both the first quarters of 2025 and 2024.
Current wording
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.
Previous wording
The bar chart above illustrates the broad categories of changes in the ACL from the prior year period. To estimate current expected losses, we use econometric loss models that incorporate multiple economic scenarios, reflecting optimistic, baseline, and stressed economic conditions. The results derived from these scenarios are weighted to produce the credit loss estimate. Management may adjust the weights to reflect their assessment of current conditions and reasonable and supportable forecasts.
Current wording
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.
Previous wording
The second bar represents changes in these economic forecasts and current economic conditions, including management’s judgment on the weighting of the economic forecasts during the current quarter. These changes contributed to a $25 million decrease in the ACL from the prior year quarter.
Current wording
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.
Previous wording
The third bar represents changes in credit quality factors, and includes risk grade migration, portfolio-specific risks, and specific reserves against loans. Combined, these factors contributed to a $2 million decrease in the ACL, driven largely by a reduced emphasis on certain portfolio-specific risks, including CRE, partially offset by credit quality deterioration.
Current wording
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.
Previous wording
The fourth bar represents changes in our loan portfolio composition, including changes in loan balances and mix, the aging of the portfolio, and other qualitative risk factors. The effects of $1.8 billion in period-ending loan growth, partially offset by changes in mix of the loan portfolio, resulted in a net $34 million increase in the ACL.
Current wording
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.
Previous wording
See “Credit Risk Management” on page 21 and Note 6 in our 2024 Form 10-K for more information on how we determine the appropriate level of the ALLL and the RULC.
Current wording
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.
Previous wording
Noninterest income represents revenue earned from products and services that generally have no associated interest rate or yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives.
Current wording
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.
Previous wording
Noninterest income represented 22% and 21% of our net revenue (net interest income plus noninterest income) during the first quarter of 2025 and 2024, respectively, and increased $15 million, or 10%, relative to the prior year quarter. The following schedule presents a comparison of the major components of noninterest income:
Current wording
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:
Previous wording
1 Effective for the first quarter of 2025, capital markets fees and income includes fair value and nonhedge derivative income (loss) of less than $1 million and $1 million for the three months ended March 31, 2025 and 2024, respectively. These amounts were previously disclosed under noncustomer-related noninterest income. No other income statement line items or ratios were affected by these changes and reclassifications. Prior period amounts have been reclassified for comparative purposes.
Current wording
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.
Previous wording
Noninterest expense increased $12 million, or 2%, compared with the prior year quarter. Salaries and employee benefits expense increased $11 million, primarily due to higher incentive compensation, benefits, and severance expenses. Technology, telecom, and information processing expense increased $8 million, mainly due to higher application software, license, and maintenance expenses. Other noninterest expense increased $6 million, partly due to a $3 million impairment of certain long-lived assets. These increases were partially offset by a $12 million decrease in deposit insurance and regulatory expense, primarily due to a $13 million accrual associated with an updated FDIC special assessment estimate during the prior year quarter.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
Preferred stock dividends totaled $1 million and $10 million for the first quarters of 2025 and 2024, respectively. The decrease was due to the redemption of the outstanding shares of our Series G, I, and J preferred stock in the fourth quarter of 2024.
Current wording
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.
Previous wording
We invest in securities to manage liquidity and interest rate risk, and to generate interest income. Our portfolio primarily consists of securities that can readily provide cash and liquidity through secured borrowing agreements, without the need to sell the securities. Our fixed-rate securities portfolio helps balance the inherent interest rate mismatch between loans and deposits, and protects the economic value of shareholders’ equity. At March 31, 2025, the estimated duration of our investment securities portfolio, which measures price sensitivity to interest rate changes, was 4.0 years, compared with 3.4 years at December 31, 2024, primarily due to updated prepayment assumptions related to certain securities.
Current wording
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.
Previous wording
The amortized cost of total investment securities decreased $216 million, or 1%, from December 31, 2024, primarily due to principal reductions. Approximately 7% of the total investment securities were floating-rate instruments at both March 31, 2025 and December 31, 2024. Additionally, at March 31, 2025, we had $4.0 billion pay-fixed swaps as fair value hedges against fixed-rate available-for-sale (“AFS”) securities, effectively converting the fixed interest income to a floating rate on the hedged portion of the securities.
Current wording
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.
Previous wording
At March 31, 2025, our AFS investment securities portfolio included approximately $161 million of net premium, distributed across various security categories. Total taxable-equivalent premium amortization for these investment securities was $12 million for the first quarter of 2025, compared with $15 million for the same prior year period.
Current wording
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.
Previous wording
We support our communities by providing products and services to state and local governments (“municipalities”), including deposit services, loans, and investment banking services. Additionally, we invest in securities issued by municipalities. Our municipal lending products generally include loans where the debt service is repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
Current wording
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.
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•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;
Current report — wording carried from elsewhere
1 Taxable-equivalent rates used where applicable.
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2 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
Current report — wording carried from elsewhere
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.
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CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES