Zions earnings rose in the third quarter of 2026 as lower credit costs outweighed a narrower net interest margin and higher operating expenses. The bank reported net earnings of $262 million, or $1.78 per diluted share, on October 19, compared with $221 million, or $1.48 per share, a year earlier.
Key Takeaways
- Diluted earnings per share increased 20%, helped by an $8 million credit-loss provision benefit.
- Net interest income grew 2% year over year, but the interest margin narrowed to 3.23%.
- Customer deposits increased while loan balances were essentially unchanged from the second quarter.
Table of Contents
- Zions earnings gain rests largely on lower credit costs
- Deposit growth reduces reliance on short-term funding
- Valuation adjustments amplify fee-income growth
- Completed acquisition expands multifamily lending
- Conclusion
Zions earnings gain rests largely on lower credit costs
The bank’s third-quarter 2026 financial results showed a sharp improvement in credit costs: an $8 million provision benefit replaced a $49 million expense a year earlier. Chairman and Chief Executive Officer Harris H. Simmons identified improved credit quality as the primary driver of the earnings-per-share increase.
Net loan and lease charge-offs fell to $3 million from $56 million. The year-earlier quarter included $50 million of charge-offs on revolving credit facilities to two related commercial borrowers that financed commercial mortgage originations and purchases.
The improvement was less pronounced before credit provisions. Pre-provision net revenue, a non-GAAP measure, declined 1% to $340 million. Net earnings also fell from $452 million in the second quarter, when securities gains included substantial gains from selling Visa Class B-1 shares and unrealized gains in the bank’s Small Business Investment Company portfolio.
| Item | Details |
|---|---|
| Estimated common equity tier 1 ratio | 11.8%, compared with 11.3% a year earlier |
| Tangible book value per common share | $43.50, up 13% year over year |
| Classified loans | 3.40% of loans and leases, down from 4.00% a year earlier |
| Nonperforming assets | $315 million, compared with $298 million in the preceding quarter and $324 million a year earlier |
Deposit growth reduces reliance on short-term funding
Net interest income increased to $684 million from $672 million a year earlier. Lower funding costs and changes in the balance-sheet mix supported the increase, even as net interest margin narrowed five basis points to 3.23%.
Customer deposits, excluding brokered deposits, reached $74.5 billion, up 5% year over year. Deposit growth exceeded loan growth, allowing the bank to reduce short-term borrowings and hold more money market investments.
Loans and leases totaled $62.5 billion, up 4% from a year earlier but essentially flat sequentially. Simmons attributed the lack of quarterly growth to faster loan payoffs and a highly competitive market.
Funding costs nevertheless rose from the preceding quarter. The total cost of deposits increased to 1.59% from 1.48%, partly reflecting a shift toward higher-cost interest-bearing deposits. An accounting presentation change added approximately three basis points.
Valuation adjustments amplify fee-income growth
Customer-related noninterest income rose 18% to $192 million. Excluding credit valuation adjustments on client-related interest rate swaps, adjusted customer-related noninterest income, a non-GAAP measure, increased a more modest 5% to $182 million.
Noninterest expense increased 5% to $553 million, reflecting higher compensation, technology and outsourced-service costs, among other items. Those increases helped explain why stronger reported earnings did not translate into higher pre-provision net revenue.
Completed acquisition expands multifamily lending
Zions completed its acquisition of the Basis Multifamily Finance agency lending platform at the end of July 2026. Simmons described the platform as a strategic addition for serving commercial real estate clients, particularly in western markets.
Simmons also said the bank’s moderately asset-sensitive balance sheet should generate stronger net interest income in a higher-rate environment. That statement is management’s conditional outlook, not a reported result.
Conclusion
The quarter’s profit improvement depended mainly on lower credit costs rather than stronger pre-provision performance. Loan growth, deposit pricing and the direction of interest rates remain the operating measures to watch as Zions incorporates its acquired multifamily platform.
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