Zions earnings increased in the third quarter of 2026, with diluted earnings per share rising 20% to $1.78 as lower credit costs supported profitability. The bank reported net earnings of $262 million on October 19, compared with $221 million a year earlier. Customer deposits grew, reducing reliance on borrowed funds, but its net interest margin narrowed.
Key Takeaways
- An $8 million credit-loss provision benefit helped lift profit, compared with a $49 million expense a year earlier.
- Net interest income rose 2% year over year, although higher quarterly deposit costs squeezed the interest margin.
- The acquired multifamily agency platform added expenses ahead of management’s expected revenue expansion in 2027.
Table of Contents
- Zions earnings benefit mainly from lower credit costs
- Deposit growth lowers borrowing needs but compresses margin
- Fee growth is smaller after valuation adjustments
- Multifamily expansion adds costs before expected growth
- Conclusion
Zions earnings benefit mainly from lower credit costs
The bank’s third-quarter 2026 financial results showed net loan and lease charge-offs of $3 million, down from $56 million a year earlier. Chairman and Chief Executive Harris Simmons identified improved credit quality as the primary driver of the increase in earnings per share.
The comparison benefited from unusually large losses in the prior-year period, which included $50 million of charge-offs tied to two related commercial borrowers that financed commercial mortgage originations and purchases.
Underlying operating performance was less strong than headline earnings growth. Adjusted pre-provision net revenue, a non-GAAP measure that excludes credit provisions, fell 4% year over year to $338 million. Reported net earnings also declined from $452 million in the second quarter, when securities gains had boosted results.
| Item | Details |
|---|---|
| Estimated common equity tier 1 ratio | 11.8%, versus 11.3% a year earlier |
| Tangible book value per common share | $43.50, up 13% year over year |
| Nonperforming asset ratio | 0.50%, versus 0.48% in Q2 2026 and 0.54% a year earlier |
| Allowance for credit losses | $696 million, equivalent to 1.11% of loans and leases |
Deposit growth lowers borrowing needs but compresses margin
Net interest income reached $684 million, up $12 million from a year earlier and $7 million from the preceding quarter. Deposit growth outpaced lending, allowing Zions to reduce higher-cost short-term borrowings while adding to money market investments.
Quarter-end customer deposits, excluding brokered deposits, rose to $74.5 billion from $72.7 billion at June 30. Loans and leases were essentially unchanged sequentially at $62.5 billion, despite growth in average loan balances during the quarter.
The funding shift carried a trade-off. Total deposit costs rose 11 basis points from the second quarter to 1.59%, partly because customers held more higher-cost interest-bearing deposits. An accounting presentation change contributed approximately three basis points to that increase. Net interest margin fell four basis points sequentially to 3.23%.
Fee growth is smaller after valuation adjustments
Customer-related noninterest income increased 18% year over year to $192 million. Excluding credit valuation adjustments on client-related interest rate swaps, adjusted customer-related income rose a more modest 5% to $182 million.
Capital markets fees and income nearly doubled on a reported basis to $46 million, but most of that increase reflected valuation adjustments. Excluding those changes, capital markets income increased by $1 million, supported by higher swap fees.
Costs also rose. Adjusted noninterest expense increased 6% year over year to $549 million, reflecting higher compensation, technology and outsourced-service costs, among other items.
Multifamily expansion adds costs before expected growth
Zions completed its acquisition of the Basis Multifamily Finance agency lending platform in July 2026. The business contributed approximately $300,000 of revenue and $4 million of expense during the quarter.
Management expects the platform to generate $17 million to $20 million in revenue in 2027, against expenses of $12 million to $13 million. Those figures are forecasts rather than results, with the bank positioning the business to broaden financing services for multifamily clients.
Including the acquisition, management reduced its full-year 2026 operating leverage outlook to approximately 40–50 basis points from an initial 100–150 basis points. The change highlights the near-term expense burden even as the bank anticipates a larger revenue contribution.
Conclusion
Zions’ next results will show whether deposit growth translates into stronger interest income without further margin compression. The multifamily platform’s contribution will also be measured against management’s stated 2027 revenue and expense expectations.
Read More News
Disclaimer
This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
