Q1 2026 Zions Bancorp Earnings Call

April 20, 2026

Operator 2: Greetings, and welcome to Zions Bancorporation's Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. It is now my pleasure to turn the conference over to Andrea Christoffersen. Thank you. You may begin.

Operator: Greetings, and welcome to Zions Bancorporation's Q1 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. It is now my pleasure to turn the conference over to Andrea Christoffersen. Thank you. You may begin.

Speaker #2: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note that this conference is being recorded. It is now my pleasure to turn the conference over to Andrea Christopherson.

Speaker #2: Thank you. You may begin.

Speaker #1: Thank you, Jillian, and good evening, everyone. Welcome to our conference call to discuss Zions Bancorporation's first quarter 2026 results. My name is Andrea Christopherson, Director of Investor Relations.

Andrea Christoffersen: Thank you, Julian, and good evening, everyone. Welcome to our conference call to discuss Zions Bancorporation's Q1 2026 results. My name is Andrea Christoffersen, Director of Investor Relations. Before we begin, I would like to remind you that during this call, we will make forward-looking statements. Actual results may differ materially. We encourage you to review the forward-looking statements and non-GAAP disclosures in our press release and on slide two of today's presentation, which apply equally to statements made during this call. A copy of the earnings release and presentations are available at zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer Harris Simmons will provide opening remarks. Following Harris's comments, Chief Financial Officer Ryan Richards will review our financial results and outlook. Also with us today are Scott MacLean, President and Chief Operating Officer, Derek Stewart, Chief Credit Officer, and Chris Kyriakakis, Chief Risk Officer.

Speaker #1: Before we begin, I would like to remind you that during this call, we will make forward-looking statements. Actual results may differ materially. We encourage you to review the forward-looking statements and non-GAAP disclosures in our press release and on slide 2 of today's presentation.

Speaker #1: Which apply equally to statements made during this call. A copy of the earnings release and presentation are available at zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer Harris Simmons will provide opening remarks.

Speaker #1: Following Harris's comments, Chief Financial Officer Ryan Richards will review our financial results and outlook. Also with us today are Scott McLean, President and Chief Operating Officer; Derek Stewart, Chief Credit Officer; and Chris Kiriakakis, Chief Risk Officer.

Speaker #1: After our prepared remarks, we will hold a question-and-answer session. This call is scheduled for one hour. I will now turn the time over to Harris.

Andrea Christoffersen: After our prepared remarks, we will hold a question and answer session. This call is scheduled for one hour. I will now turn the time over to Harris.

Speaker #2: Thanks very much, Andrea, and good evening, everyone. We're reasonably pleased with our performance and financial results for the first quarter, which reflect meaningful year-over-year improvement and continued progress against our long-term strategic priorities.

Harris H. Simmons: Thanks very much, Andrea, and good evening, everyone. We're reasonably pleased with our performance and financial results for Q1, which reflect meaningful year-over-year improvement and continued progress against our

Harris Simmons: Thanks very much, Andrea, and good evening, everyone. We're reasonably pleased with our performance and financial results for Q1, which reflect meaningful year-over-year improvement and continued progress against our

Harris H. Simmons: Long-term strategic priorities. Our capital markets division continues to be an important driver of fee income growth. Since launching the business in 2020, we've invested heavily in talent, technology, and product capabilities, expanding our presence across investment banking, sales and trading, and real estate capital markets. In late March, we announced an agreement with Basis Investment Group to acquire their Fannie Mae and Freddie Mac lending programs, related mortgage servicing rights, and an experienced team supporting those platforms. Subject to regulatory and customary closing approvals, we expect this transaction will meaningfully enhance our ability to serve commercial real estate clients across the Western United States and beyond, and to further strengthen our capital markets franchise. We continue to invest in our consumer and small business franchises.

Harris Simmons: Long-term strategic priorities. Our capital markets division continues to be an important driver of fee income growth. Since launching the business in 2020, we've invested heavily in talent, technology, and product capabilities, expanding our presence across investment banking, sales and trading, and real estate capital markets. In late March, we announced an agreement with Basis Investment Group to acquire their Fannie Mae and Freddie Mac lending programs, related mortgage servicing rights, and an experienced team supporting those platforms. Subject to regulatory and customary closing approvals, we expect this transaction will meaningfully enhance our ability to serve commercial real estate clients across the Western United States and beyond, and to further strengthen our capital markets franchise. We continue to invest in our consumer and small business franchises.

Speaker #2: Our capital markets division continues to be an important driver of fee income growth. Since launching the business in 2020, we've invested heavily in talent, technology, and product capabilities, expanding our presence across investment banking, sales and trading, and real estate capital markets.

Speaker #2: In late March, we announced an agreement with Basis Investment Group to acquire their Fannie and Freddie lending programs-related mortgage servicing rights, and an experienced team supporting those platforms.

Speaker #2: Subject to regulatory and customary closing approvals, we expect this transaction will meaningfully enhance our ability to serve commercial real estate clients across the Western United States and beyond, and to further strengthen our capital markets franchise.

Speaker #2: We continue to invest in our consumer and small business franchises. Following the launch of our new Gold Account consumer deposit product in the second half of 2025, we recently introduced its companion offering for small business customers.

Harris H. Simmons: Following the launch of our new Gold Account consumer deposit product in H2 2025, we recently introduced its companion offering for small business customers. Branded as "Business Beyond Account," we began piloting the product in Colorado and Arizona late in the quarter, and it's expected to roll out more broadly across our affiliate banks later this quarter. This tiered checking solution is designed to support clients as they grow, from basic banking needs to more complex cash flow and money movement capabilities. Our focus on small business is also reflected in continued momentum in SBA lending, where we now rank 11th nationally in SBA 7 loan approvals during H1 of the SBA's fiscal year. Shifting now to the financial results for the quarter, slide 3 presents certain Q1 results versus the prior quarter and prior year.

Harris Simmons: Following the launch of our new Gold Account consumer deposit product in H2 2025, we recently introduced its companion offering for small business customers. Branded as "Business Beyond Account," we began piloting the product in Colorado and Arizona late in the quarter, and it's expected to roll out more broadly across our affiliate banks later this quarter. This tiered checking solution is designed to support clients as they grow, from basic banking needs to more complex cash flow and money movement capabilities. Our focus on small business is also reflected in continued momentum in SBA lending, where we now rank 11th nationally in SBA 7 loan approvals during H1 of the SBA's fiscal year. Shifting now to the financial results for the quarter, slide 3 presents certain Q1 results versus the prior quarter and prior year.

Speaker #2: Branded as "Beyond the Business," we began piloting the product in Colorado and Arizona late in the quarter, and it's expected to roll out more broadly across our affiliate banks later this quarter.

Speaker #2: This tiered checking solution is designed to support clients as they grow, from basic banking needs to more complex cash flow and money movement capabilities.

Speaker #2: Our focus on small business is also reflected in continued momentum in SBA lending, where we now rank 11th nationally in SBA 7(a) loan approvals during the first half of the SBA's fiscal year.

Speaker #2: Shifting now to the financial results for the quarter, slide 3 presents certain first quarter results versus the prior quarter and prior year. First quarter results reflect typical seasonal expense patterns, while revenue and profitability improved meaningfully relative to the prior year period.

Harris H. Simmons: Q1 results reflected typical seasonal expense patterns, while revenue and profitability improved meaningfully relative to the prior year period. Net earnings were $232 million, or $1.56 per diluted share, up 37% from a year ago, driven by revenue growth, a lower provision for credit losses, and a lower effective tax rate. Compared to Q4 2025, earnings declined 11%, primarily reflecting lower revenue, including the impact of two fewer days in the period, and significantly lower securities gains, as well as seasonal compensation expenses. The net interest margin was 3.27%, down four basis points from the prior quarter, reflecting lower earning asset yields and a decline in average demand deposits, partially offset by improved funding costs. Average loans grew 2.4% on an annualized basis, led by commercial lending. While average customer deposits showed a modest seasonal decline, period-end customer deposits grew $1.3 billion, or 1.8% from year-end.

Harris Simmons: Q1 results reflected typical seasonal expense patterns, while revenue and profitability improved meaningfully relative to the prior year period. Net earnings were $232 million, or $1.56 per diluted share, up 37% from a year ago, driven by revenue growth, a lower provision for credit losses, and a lower effective tax rate. Compared to Q4 2025, earnings declined 11%, primarily reflecting lower revenue, including the impact of two fewer days in the period, and significantly lower securities gains, as well as seasonal compensation expenses. The net interest margin was 3.27%, down four basis points from the prior quarter, reflecting lower earning asset yields and a decline in average demand deposits, partially offset by improved funding costs. Average loans grew 2.4% on an annualized basis, led by commercial lending. While average customer deposits showed a modest seasonal decline, period-end customer deposits grew $1.3 billion, or 1.8% from year-end.

Speaker #2: Net earnings were $232 million, or $1.56 per diluted share, up 37% from a year ago. This was driven by revenue growth, a lower provision for credit losses, and a lower effective tax rate.

Speaker #2: Compared to the fourth quarter of 2025, earnings declined 11%, primarily reflecting lower revenue including the impact of two fewer days in the period and significantly lower securities gains, as well as seasonal compensation expenses.

Speaker #2: The net interest margin was 3.27%, down 4 basis points from the prior quarter, reflecting lower earning asset yields and a decline in average demand deposits.

Speaker #2: Partially offset by improved funding costs. Average loans grew 2.4% on an annualized basis, led by commercial lending. While average customer deposits showed a modest seasonal decline, period-end customer deposits grew $1.3 billion, or 1.8%, from year-end.

Speaker #2: Credit losses were very modest at 3 basis points annualized, of average loans. On slide 4, diluted earnings per share were $1.56, down from $1.76 in the prior quarter and up from $1.13 a year ago.

Harris H. Simmons: Credit losses were very modest at 3 basis points annualized on average loans. On slide 4, diluted earnings per share were $1.56, down from $1.76 in the prior quarter and up from $1.13 a year ago. As a reminder, the year-ago quarter included an 11-cent per share headwind related to the revaluation of deferred tax assets due to newly enacted state tax legislation. There were no notable items in Q1 with an impact greater than 5 cents per share. As shown on slide 5, adjusted pre-provision net revenue was $301 million, declined 9% from the prior quarter, reflecting some of the items noted earlier, including a slightly lower day count adjusted tax equivalent net interest income. Pre-provision net revenue increased 13% versus the year-ago quarter on improved revenue and positive operating leverage.

Harris Simmons: Credit losses were very modest at 3 basis points annualized on average loans. On slide 4, diluted earnings per share were $1.56, down from $1.76 in the prior quarter and up from $1.13 a year ago. As a reminder, the year-ago quarter included an 11-cent per share headwind related to the revaluation of deferred tax assets due to newly enacted state tax legislation. There were no notable items in Q1 with an impact greater than 5 cents per share. As shown on slide 5, adjusted pre-provision net revenue was $301 million, declined 9% from the prior quarter, reflecting some of the items noted earlier, including a slightly lower day count adjusted tax equivalent net interest income. Pre-provision net revenue increased 13% versus the year-ago quarter on improved revenue and positive operating leverage.

Speaker #2: As a reminder, the year-ago quarter included an $0.11 per share headwind related to the revaluation of deferred tax assets due to newly enacted state tax legislation.

Speaker #2: There were no notable items in the first quarter with an impact greater than $0.05 per share. As shown on slide 5, adjusted pre-provision net revenue was $301 million.

Speaker #2: Net interest income declined 9% from the prior quarter. This reflects some of the items noted earlier, including a slightly lower day-count adjusted taxable equivalent.

Speaker #2: Pre-provision net revenue increased 13% versus the year-ago quarter on improved revenue and positive operating leverage. With that overview, I'll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and to walk through our outlook.

Harris H. Simmons: With that overview, I'll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and to walk through our outlook. Ryan?

Harris Simmons: With that overview, I'll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and to walk through our outlook. Ryan?

Speaker #2: Ryan?

Speaker #3: Thank you, Harris, and good evening, everyone. Beginning on slide 6, you can see the five-quarter trend for net interest income and net interest margin.

Ryan Richards: Thank you, Harris, and good evening, everyone. Beginning on slide six, you can see the five-quarter trend for net interest income and net interest margin. Taxable equivalent net interest income was $662 million, down $21 million or 3% from the prior quarter, and up $38 million or 6% from the year-ago quarter. Earning asset yields fell faster than funding costs during the quarter, most notably in January when loan repricing reflected the impact of the December rate cuts. Term deposit costs also moved lower but with a lag over the quarter. Net interest margin was 3.27%, down four basis points linked-quarter and up 17 basis points year-over-year. Slide seven provides additional detail on the drivers of net interest margin. The linked-quarter walks reflect the lower asset yields mentioned previously, as well as a lower contribution from average demand deposit balances.

Speaker #3: Taxable equivalent net interest income was $662 million, down $21 million, or 3%, from the prior quarter, and down $38 million, or 6%, from the year-ago quarter.

Speaker #3: Earning asset yields fell faster than funding costs during the quarter, most notably in January, when loan repricing reflected the impact of the December rate cuts.

Speaker #3: Return on deposit costs also moved lower, but with a lag over the quarter. Net interest margin was 3.27%, down 4 basis points late quarter and up 17 basis points year-over-year.

Speaker #3: Slide 7 provides additional detail on the drivers of net interest margin. The late-quarter walks reflect the lower asset yields mentioned previously, as well as a lower contribution from average demand deposit balances.

Speaker #3: These factors were partially offset by improved deposit costs. Year-over-year, the improvement in margin primarily reflects deposit and borrowing repricing and our continued focus on optimizing the balance sheet.

Ryan Richards: These factors were partially offset by improved deposit costs. Year-over-year, the improvement in margin primarily reflects deposit and borrowing repricing and our continued focus on optimizing the balance sheet. For Q1 2027, our outlook for net interest income is moderately increasing, given the uncertain path of benchmark rates. The forward curve as of 31 March assumed no rate changes over the next 12 months. If that plays out, we estimate net interest income growth of about 7% to 8%, which would exceed our guide. Moving to non-interest income on slide 8. Customer-related non-interest income was $172 million, compared to $177 million in the prior quarter and $158 million a year ago. Excluding net credit valuation adjustment, adjusted customer-related non-interest income was $174 million, compared with $175 million in the prior quarter, and up $16 million or 10% from the year-ago quarter.

Speaker #3: For the first quarter of 2027, our outlook for net interest income is moderately increasing, given the uncertain path of benchmark rates. The forward curve as of March 31st assumed no rate changes over the next 12 months.

Speaker #3: If that plays out, we estimate net interest income growth of about 7% to 8%, which would exceed our guide. Moving to non-interest income on slide 8, customer-related non-interest income was $172 million compared to $177 million in the prior quarter, and $158 million a year ago.

Speaker #3: Excluding net credit valuation adjustment, adjusted customer-related non-interest income was $174 million, compared with $175 million in the prior quarter, and up $16 million, or 10%, from the year-ago quarter.

Speaker #3: We are particularly pleased with the broad-based growth achieved during the quarter relative to last year, which reflects higher residential mortgage loan sales activity, and growth in retail and business banking, commercial account, and wealth management fees.

Ryan Richards: We are particularly pleased with the broad-based growth achieved during the quarter relative to the last year, which reflects higher residential mortgage loan sales activity and growth in retail and business banking, commercial account, and wealth management fees. We continue to see attractive opportunities in capital markets and have strong pipelines going into Q2. For Q1 2027, our outlook for adjusted customer-related fee income is moderately increasing versus the Q1 2026 results of $174 million. With broad-based growth and capital markets continuing to contribute in an outsized way, we currently expect results towards the top end of that range. Turning to slide nine. Adjusted non-interest expense was $558 million. Expenses increased versus the prior quarter, driven primarily by seasonal compensation and were higher year over year, reflecting increased marketing, technology costs, professional and outsourced services, and higher incentive compensation.

Speaker #3: We continue to see attractive opportunities in capital markets and have strong pipelines going into the second quarter. For the first quarter of 2027, our outlook for adjusted customer-related fee income is moderately increasing, versus the first quarter 2026 results of $174 million.

Speaker #3: With broad-based growth, and capital markets continuing to contribute in an outsized way, we currently expect results towards the top end of that range. Turning to slide 9, adjusted non-interest expense was $558 million.

Speaker #3: Expenses increased versus the prior quarter, driven primarily by seasonal compensation, and were higher year-over-year, reflecting increased marketing, technology costs, professional and outsourced services, and higher incentive compensation.

Speaker #3: We will continue to manage expenses prudently while investing to support growth. Our first quarter 2027 outlook for adjusted non-interest expense is moderately increasing versus the first quarter of 2026.

Ryan Richards: We will continue to manage expenses prudently while investing to support growth. Our Q1 2027 outlook for adjusted non-interest expense is moderately increasing versus Q1 2026. Based on Q1 performance and full year expectations, we continue to expect positive operating leverage for our full year 2026 in the range of 100 to 150 basis points. Slide 10 presents trends in average loans and deposits. Average loans grew 2.4% annualized during the quarter, primarily within the commercial and industrial portfolio, and increased 2.5% year over year. Loan yields declined sequentially as benchmark rate cuts in the latter part of 2025 were reflected in variable rate repricing. Average deposits were modestly lower than the prior quarter by $540 million.

Speaker #3: Based on first quarter performance and full-year expectations, we continue to expect positive operating leverage for the full year 2026, and the range of 100 to 150 basis points.

Speaker #3: Slide 10 presents trends in average loans and deposits. Average loans grew 2.4% annualized during the quarter, primarily within the commercial and industrial portfolio, and increased 2.5% year-over-year.

Speaker #3: Loan yields declined sequentially as benchmark rate cuts in the latter part of 2025 were reflected in variable-rate repricing. Average deposits were modestly lower than the prior quarter by $540 million.

Speaker #3: Approximately one-half of the decline was due to average brokered deposits, while the remainder can be attributed to seasonal runoff across business operating accounts early in the quarter.

Ryan Richards: Approximately one half of the decline was due to average broker deposits, while the remainder can be attributed to seasonal runoff across business operating accounts early in the quarter. Importantly, period-end customer deposits increased by $1.3 billion or 1.8% from year-end. The cost of total deposits declined sequentially, benefiting from both repricing and a more favorable mix within interest-bearing deposits. Slide 11 presents the five-quarter trend of our average and ending funding sources. Our total funding costs declined eight basis points linked quarter to 1.68%, largely as a result of the aforementioned deposit repricing. Period-end customer deposits grew $1.3 billion and short-term borrowings declined significantly as we continue to replace higher cost wholesale funding with customer deposit growth and securities cash flows while also remixing into senior debt. Turning to slide 12.

Speaker #3: Importantly, period-end customer deposits increased by $1.3 billion, or 1.8%, from year-end. The cost of total deposits declined sequentially, benefiting from both repricing and a more favorable mix within interest-bearing deposits.

Speaker #3: Slide 11 presents the five-quarter trend of our average and ending funding sources. Our total funding costs declined 8 basis points late quarter to 1.68%.

Speaker #3: Largely as a result of the aforementioned deposit repricing, period-end customer deposits grew $1.3 billion, and short-term borrowings declined significantly as we continue to replace higher-cost wholesale funding with customer deposit growth and securities cash flows, while also remixing into senior debt.

Speaker #3: Turning to slide 12, the investment securities portfolio continues to serve as an important source of on-balance-sheet liquidity, and a tool to balance interest rate risk through deep access to the repo markets.

Ryan Richards: The investment securities portfolio continues to serve as an important source of on-balance sheet liquidity and a tool to balance interest rate risk through deep access to the repo markets. During the quarter, principal and prepayment-related cash flows from investment securities of $493 million were partially offset by reinvestment of $299 million. The continued pay down of lower yielding mortgage-backed securities supports earning asset remix or reduction in wholesale funds. The estimated price sensitivity of the portfolio, inclusive of hedging activity, was 3.7 years. Credit quality remains strong as shown in slide 13. Net charge-offs were three basis points annualized of average loans, and the non-performing assets ratio declined to 48 basis points. Classified and criticized balances also declined during the quarter. The allowance for credit losses ended the quarter at 1.16% and remains well positioned relative to our risk profile with a 239% coverage of non-accrual loans.

Speaker #3: During the quarter, principal and prepayment-related cash flows from investment securities of $493 million were partially offset by reinvestment of $299 million. The continued paydown of lower-yielding mortgage-backed securities supports earning asset remix, or reduction in wholesale funds.

Speaker #3: The estimated price sensitivity of the portfolio, inclusive of hedging activity, was 3.7 years. Credit quality remained strong, as shown in slide 13. Net charge-offs were 3 basis points annualized of average loans.

Speaker #3: And the non-performing assets ratio declined to 48 basis points. Classified and criticized balances also declined during the quarter. The allowance for credit losses ended the quarter at 1.16%, and remains well-positioned relative to our risk profile, with a 239% coverage of non-accrual loans.

Speaker #3: Slide 14 provides an overview of our $13.7 billion commercial real estate portfolio, which represents approximately 22% of total loans. The portfolio remains granular and well-diversified by property type and geography.

Ryan Richards: Slide 14 provides an overview of our $13.7 billion commercial real estate portfolio, which represents approximately 22% of total loans. The portfolio remains granular and well diversified by property type and geography, with conservative loan-to-value characteristics. Credit metrics remain favorable, including low levels of non-accruals and delinquencies. Our capital position remains strong, as shown on slide 15. The common equity Tier 1 ratio was 11.5%, flat during the quarter, as earnings growth was somewhat offset by the $77 million in common shares repurchased and dividends paid in addition to the growth in risk-weighted assets. We continue to expect net capital generation through earnings and continued improvement in AOCI. Tangible book value per share increased 19% versus the prior year, reflecting earnings generation and continued balance sheet normalization. Slide 16 summarizes the outlook we've discussed across loans, net interest income, fee income, and expenses.

Speaker #3: With conservative loan-to-value characteristics, credit metrics remain favorable, including low levels of non-accruals and delinquencies. Our capital position remains strong, as shown on slide 15.

Speaker #3: The common equity Tier 1 ratio was 11.5%, flat during the quarter as earnings growth was somewhat offset by the $77 million in common share repurchases and dividends paid, in addition to the growth in risk-weighted assets.

Speaker #3: We continue to expect net capital generation through earnings and continued improvement in AOCI. Tangible book value per share increased 19% versus the prior year, reflecting earnings generation and continued balance sheet normalization.

Speaker #3: Slide 16 summarizes the outlook we've discussed across loans, net interest income, fee income, and expenses. This outlook reflects our best estimate based on current information, and is subject to the risks and uncertainties discussed in our forward-looking statements.

Ryan Richards: This outlook reflects our best estimate based on current information and is subject to the risks and uncertainties discussed in our forward-looking statements.

Speaker #1: This concludes our prepared remarks. As we move to the question-and-answer section of the call, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask their questions.

Andrea Christoffersen: This concludes our prepared remarks. As we move to the question and answer section of the call, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask their questions. Julian, please open the line for questions.

Speaker #1: Julian, please open the line for questions.

Speaker #2: Thank you. And once again, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

Operator 2: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of John Pancari from Evercore ISI. Please proceed with your question.

Operator: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of John Pancari from Evercore ISI. Please proceed with your question.

Speaker #2: You may press *2 to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #2: One moment while you pull for questions. And our first question comes from the line of John Pam Carey from Evercore ISI. Please proceed with your question.

Speaker #3: Good afternoon.

David Brown: Good afternoon.

John Pancari: Good afternoon.

Speaker #4: Hi.

Ryan Richards: Hi, John.

Speaker #3: Just on the margin side, I know your loan yield compressed about 14 basis points late in the quarter. I think you had mentioned that it was largely a function of the rate cuts and variable rate repricing.

David Brown: Just on the margin side, I know your loan yield compressed about 14 basis points linked quarter. I think you had mentioned that it was largely a function of the rate cuts and variable rate repricing. I guess that linked quarter change was that all the benchmark rate change? Any other impact to loan yields in the quarter? Maybe if you can give us your new money loan yields, just to give us an idea where originations are coming on the books.

John Pancari: Just on the margin side, I know your loan yield compressed about 14 basis points linked quarter. I think you had mentioned that it was largely a function of the rate cuts and variable rate repricing. I guess that linked quarter change was that all the benchmark rate change? Any other impact to loan yields in the quarter? Maybe if you can give us your new money loan yields, just to give us an idea where originations are coming on the books.

Speaker #3: When you—I guess that late quarter change, was that all the benchmark rate change? Any other impact to the loan yields in the quarter, and maybe if you can give us your new money loan yields, just to give us an idea of where originations are coming on the books.

Speaker #4: Hey, thanks, John. Really appreciate that. Yeah, so listen, I think you picked up on the main thrust of it. So we would have had some benchmark repricing and expectation of the rate cut that came in the middle of December.

Ryan Richards: Hey, thanks, John. Really appreciate that. Yeah. Listen, I think you picked up on the main thrust of it. We would have had some benchmark repricing and expectation of the rate cut that came in the middle of December and some that trailed thereafter, and where we remain just skewing a little bit more on the asset sensitive side, that was the biggest contributor. In terms of the repricing characteristics, of course, we've got the nice materials in our appendix that I know you're familiar with, but I think maybe the question that you're getting at on front book versus back book for the loan portfolio is really the most meaningful part of that as we sort of think about the trajectory moving forward is for those fixed rate loan portfolios, the things that have yet to reprice through.

Speaker #4: And some that trailed thereafter, and where we remain just skewing a little bit more on the asset-sensitive side—that was the biggest contributor.

Speaker #4: In terms of the repricing characteristics, of course, we've got the nice materials in our appendix that I know you're familiar with. But I think maybe the question that you're getting at on front book versus back book for the loan portfolio is, really, the most meaningful part of that as we sort of think about the trajectory moving forward is for those fixed-rate loan portfolios—the things that have yet to reprice through.

Speaker #4: And there we're seeing a 72 basis point spread on the front book, basically the back book.

Ryan Richards: There we're seeing a 72 basis point spread on the front book vis-à-vis the back book.

Speaker #2: Okay. All right. And then, I guess, in terms of your positive operating leverage expectation of 100 to 150 basis points, that is—for the year?

David Brown: Okay. All right. I guess in terms of your positive operating leverage expectation of 100 to 150 basis points, that's for the year. What rate assumption does that imply? I know you mentioned if there's no rate changes consistent with the forward curve, your next 12-month NII outlook could come in at 7% to 8% above the range. Does that 100 to 150 basis points expectation imply the forward curve? Maybe if you can give us a little bit more detail in terms of that NII expectation.

John Pancari: Okay. All right. I guess in terms of your positive operating leverage expectation of 100 to 150 basis points, that's for the year. What rate assumption does that imply? I know you mentioned if there's no rate changes consistent with the forward curve, your next 12-month NII outlook could come in at 7% to 8% above the range. Does that 100 to 150 basis points expectation imply the forward curve? Maybe if you can give us a little bit more detail in terms of that NII expectation.

Speaker #2: And so, what rate assumption does that imply? I know you mentioned if there are no rate changes, and, you know, consistent with the forward curve, your next 12-month NII outlook could come in at 7 to 8 percent above the range.

Speaker #2: Does that 100 to 150 basis points expectation imply the forward curve? And maybe if you can give us a little bit more detail in terms of that NII expectation?

Speaker #4: Yeah, thank—thank you for that, John. Listen, we, in the past, we've brought a view of, kind of, latent and emergent. It's less interesting this quarter, since there's not much to talk about in the forward curve in terms of rate.

Ryan Richards: Yeah. Thank you for that, John. Listen, in the past, we've brought a view of kind of latent and emergent. It's less interesting this quarter since there's not much to talk about in the forward curve in terms of rate changes that were implied, at least at the quarter end. Those were kind of right on top of each other. We were able to firm up our guide for the full year. As you sort of think about the trajectory of that, where we normally guide on a one year, four quarter basis, we believe you'll see there's a much more powerful positive operating leverage, probably not unlike what we've seen this quarter relative to last quarter where and Harris' quote in his remarks, you will see positive operating leverage of 270 basis points.

Speaker #4: Changes that were implied, at least as of the quarter end. So those are kind of right on top of each other. So, we were able to firm up our guide for the full year.

Speaker #4: As you sort of think about the trajectory of that, where we normally guide on a one-year forward quarter basis, what we believe you'll see is there's a much more powerful positive operating leverage, probably not unlike what we've seen this quarter relative to last quarter where, in Harris’s quote and his remarks, you know, you will see positive operating leverage of 270 basis points.

David Brown: Mm-hmm.

John Pancari: Mm-hmm.

Speaker #4: So we think that as repricing plays through from the investment securities into loans, as we have less of those headwinds associated with our terminated swaps, some of the other things play through, we do see really good prospects for the one-year forward quarter.

Ryan Richards: We think that as our repricing plays through from the investment securities into loans, as we have less of those headwinds associated with our terminated swaps, some of the other things play through. We do see really good prospects for 2024, Q4. Last year when we were with you, we were anticipating, as part of our sensitivity and our guidance, that we could have had rate cuts. I think we were anticipating in June and September. Based upon the forward curve, those are now off the table. Having no cuts is embedded into our full year positive operating leverage guide.

Speaker #4: Last year, when we were with you, we were anticipating, as part of our sensitivity and our guidance, that we could have had rate cuts.

Speaker #4: I think we were anticipating in June, in September. And based upon the forward curve, those are now off the table. So, that having no cuts is embedded into our full-year positive operating leverage guide.

Speaker #2: Got it. All right, thanks, Brian. Appreciate it.

David Brown: Got it. All right, thanks, Ryan. Appreciate it.

John Pancari: Got it. All right, thanks, Ryan. Appreciate it.

Speaker #4: Yeah.

Ryan Richards: You bet.

Speaker #2: Thank you. And our next question comes from the line of Manon Gosalia with Morgan Stanley. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your question.

Speaker #5: Hi, good afternoon. On the deposit cost side—deposit costs—I guess they came down quarter on quarter, but they were pretty flat relative to the spot rate as of December 31st.

Manan Gosalia: Hi, good afternoon.

Ryan Richards: Good afternoon.

Manan Gosalia: On the deposit cost side. Deposit costs, I guess they came down quarter-over-quarter, but they were pretty flat relative to the spot rate as of December 31. It looks like the spot rate as of March 31 has moved lower again. Can you just help us connect the dots on the trajectory there? Maybe give us an update on deposit pricing, competition, and also what you're expecting in terms of CD rolls coming up.

Speaker #5: And it looks like the spot rate as of March 31st has moved lower again. So can you just help us connect the dots in the trajectory there?

Speaker #5: Maybe give us an update on deposit pricing and competition, and also what you're expecting in terms of CD rolls coming up?

Speaker #4: Hey, thank you for that, Manon. And I'll try to unpack that in places and invite my colleagues to jump in as well. Listen, I think—and I've seen the questions come in other calls in this earnings cycle about, you know, where do deposit costs go.

Ryan Richards: Hey, thank you for that, Manan, and we'll try to unpack that in places and invite my colleagues to jump in as well. Listen, I think, and I've seen the questions come in other calls in this earning cycle about where do deposit costs go if rates kind of stay static here for the remainder of the year. There's still some trailing activity, some repricing down on term deposits. I'm thinking about customer time deposits that have yet to play through. That would definitely be an element of this. You will have heard us talking increasingly quarter over quarter and when you catch us at conferences about some of our strategic initiatives. We think that those are going to be really valuable to us in driving deposit balances as well. You heard Harris talk about in his prepared remarks, the Gold Account, the Business Beyond.

Speaker #4: If rates kind of stay static here for the remainder of the year, there's still some trailing activity, some repricing down on term deposits. Thinking about customer time deposits that have yet to play through.

Speaker #4: So, you know, that would definitely be an element of this. You will have heard us talking increasingly, quarter over quarter, and when you catch us at conferences, about some of our strategic initiatives. We think that those are going to be really valuable to us in driving deposit balances as well.

Speaker #4: So you heard, you heard Harris talk about in his prepared remarks, the Gold Account, the business beyond—well, there's a lot we've talked about with SBA lending that brings deposits with us.

Ryan Richards: There's a lot we've talked about with SBA lending that brings deposits with us. We think that's useful. There's some other work we've been doing around wholesale deposits with customers relative to other sources of wholesale funding that we think can defray deposit costs moving forward. While we don't have explicit deposit guidance and we don't explicitly guide towards deposit costs, all that would be embedded into our, I believe to be very constructive for your NII guidance.

Speaker #4: We think that's useful. There's some other work we've been doing around wholesale deposits with customers, relative to other sources of wholesale funding, that we think can defray deposit costs moving forward.

Speaker #4: So while we don't have explicit deposit guidance and we don't explicitly guide towards deposit costs, all that would be embedded into our, our, our, I believe, to be very constructive for your NII guidance.

Speaker #4: And I think there was a deposit competition comment in there, too.

Manan Gosalia: I think there's a deposit competition comment in there too.

Speaker #5: Right.

Ryan Richards: Right.

Speaker #2: Yeah, I, I, Manon this is Scott, McLean. And I, I would just add to that that the, this, deposit campaign we've had going on, to bring some of our off-balance sheet deposits back on balance sheet, you know, we've, we've had anywhere from 7 billion to 12 billion in off-balance sheet deposits.

Scott J. McLean: Yeah. Manan, this is Scott McLean, and I would just add to that this deposit campaign we've had going on to bring some of our off-balance sheet deposits back on balance sheet. We've had anywhere from $7 billion to $12 billion in off-balance sheet deposits. It's really just a client decision as to where they want to sit. We've been successful at bringing more of those back on balance sheet at rates that are attractive. They're accretive versus broker deposits and overnight cost to borrowings. At various points in time, we focused on that and so we've been very successful at bringing those deposits back on, and all of it is, oh, I would say 25 to 30, 35 basis points accretive to broker deposits. You'll see us continue to do that.

Scott McLean: Yeah. Manan, this is Scott McLean, and I would just add to that this deposit campaign we've had going on to bring some of our off-balance sheet deposits back on balance sheet. We've had anywhere from $7 billion to $12 billion in off-balance sheet deposits. It's really just a client decision as to where they want to sit. We've been successful at bringing more of those back on balance sheet at rates that are attractive. They're accretive versus broker deposits and overnight cost to borrowings. At various points in time, we focused on that and so we've been very successful at bringing those deposits back on, and all of it is, oh, I would say 25 to 30, 35 basis points accretive to broker deposits. You'll see us continue to do that.

Speaker #2: And it's really just a client decision as to where they want to sit. But we've been successful at bringing more of those back on balance sheet at rates that are attractive.

Speaker #2: They're accretive versus brokered deposits and overnight cost of borrowings. At various points in time, we focused on that. And so we've been very successful at bringing those deposits back on.

Speaker #2: And all of it is, oh, I would say, 25 to 30, 35 basis points accretive to brokered deposits. You'll see us continue to do that.

Speaker #2: And, you know, in terms of deposit costs in general, I'm not sure I've ever seen a time when it wasn't real competitive, other than maybe 2020 and 2021.

Scott J. McLean: In terms of deposit costs in general, I'm not sure I've ever seen a time when it wasn't real competitive other than maybe 2020 and 2021. Almost all of this are relationship deposits that we're bringing on, and it's not just coming from off-balance sheet. Quite a bit is coming from new clients or existing clients that we didn't have their deposits to begin with.

Scott McLean: In terms of deposit costs in general, I'm not sure I've ever seen a time when it wasn't real competitive other than maybe 2020 and 2021. Almost all of this are relationship deposits that we're bringing on, and it's not just coming from off-balance sheet. Quite a bit is coming from new clients or existing clients that we didn't have their deposits to begin with.

Speaker #2: So, but we, we all of these almost all of this are relationship deposits. That we're bringing on. And it's not just coming from off-balance sheet of quite a bit is coming from new clients or existing clients that we didn't have their deposits to begin with, so.

Speaker #5: Got it. I appreciate the color there. And then maybe on the buyback side, buybacks were up this quarter, but the CET1 ratio was still relatively flat as you accrete more capital through earnings.

Manan Gosalia: Got it. I appreciate the color there. Maybe on the buyback side, buybacks were up this quarter, but the CET1 ratio is still relatively flat as you accrete more capital through earnings. Maybe if you can talk about the level of buybacks that you think you can do for the rest of the year, especially as you narrow the gap with peers in that CET1 including AOCI ratio.

Speaker #5: So maybe if you can talk about the level of buybacks that you think you can do for the rest of the year, especially as you narrow the gap with peers in that CET1, including the AOCI ratio.

Speaker #4: Manon, thank you. I think you said that very well, because our nominal CD1 ratio has been kind of hanging in there. And, as we said before, we see the path for AOCI coming in as becoming unreasonably predictable over time.

Ryan Richards: Manan, thank you. I think you said that very well, because our nominal CET1 ratio has been kind of hanging in there. As we said before, we see the path for AOCI coming in as becoming reasonably predictably over time. Something that's really contributed to our kind of outperformance on tangible book value add year over year. I think those all things are encouraging. We've also taken note of the Basel III endgame proposal. As others have noted in this earnings cycle, there's some good things in that proposal for us and others in terms of what it would imply about RWA moving forward. I never like to get in front of our board, ahead of our board. That's usually a pretty poor practice for management.

Speaker #4: And it's something that's really contributed to our kind of outperformance on tangible book value, add year over year. So, I, I think those all things are encouraging.

Speaker #4: We've also taken note of the Basel III endgame proposal, as others have noted in this earnings cycle. There are some good things in that proposal.

Speaker #4: For us and others, in terms of what it would imply about RWA moving forward. So I— I never like to get in front of our board, ahead of our board.

Speaker #4: That's usually a pretty poor practice for management. But it looks like we could be in a position to talk about share of purchases moving forward responsibly.

Ryan Richards: Looks like that we could be in a position to talk about share purchases moving forward responsibly as our board will allow, and as regulators sign off. As Harris mentioned during his remarks, we're really, really excited about the acquisition of the multifamily agency program that's still pending. It's pending regulatory approvals. Should that see all the way through as we expect, not knowing the timeline for all that, not trying to predict any of that. That would be a source of consuming capital. There's some other things that are happening in the environment, including things like Visa exchanges, that could be considered by our team as well. That's a long-winded way of saying I think the prospect of share purchases are still on the table subject to board approval.

Speaker #4: As our board will allow, and as regulators sign off. As Harris mentioned during his remarks, we're really, really excited about the acquisition of the multifamily agency program that's still pending.

Speaker #4: It's pending regulatory approvals, you know. Should that see all the way through, as we expect—not knowing the timeline for all that and not trying to predict any of that.

Speaker #4: That would be a source of, of consuming capital. But there are some other things that are happening in the environment, including things like Visa exchanges, that could be considered by our team as well.

Speaker #4: So, that's a long-winded way of saying, I think, the prospect of share repurchases are still on the table, subject to board approval.

Speaker #5: Great. I'll step back. Thank you.

Manan Gosalia: Great. I'll step back. Thank you.

Speaker #2: Thank you. And our next question comes from the line of Dave Rochester from Cantor Fitzgerald. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Dave Rochester from Cantor Fitzgerald. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Dave Rochester from Cantor Fitzgerald. Please proceed with your question.

Speaker #6: Hey, good afternoon, guys. Hi, Dave. On the guidance, I know we shifted back to the one-year-ahead quarter-over-quarter look, but I was curious how you feel about the annual guide for '26.

Dave Rochester: Hey, good afternoon, guys.

Ryan Richards: Hi, Dave.

Dave Rochester: On the guidance, I know we shifted back to the one-year ahead quarter-over-quarter look, but I was curious how you feel about the annual guide for 2026 you gave last time. It seems like given everything that you're saying together, you would still feel pretty good about that and maybe with a little bit of upside. Is that fair?

Speaker #6: You gave last time. It seems like, given everything that you're saying together, you would still feel pretty good about that, and maybe with a little bit of upside.

Speaker #6: Is that fair?

Speaker #4: Yeah, Dave, I think that's a reasonable observation, particularly given my earlier comments here about having those two rate cuts off the table that we would've been talking about last quarter.

Ryan Richards: Yeah, Dave, I think that's a reasonable observation, particularly given my earlier comments here about having those 2 rate cuts off the table that we would've been talking about last quarter. Definitely.

Speaker #4: So, definitely. I mean, we don't make a practice of doing this all the way through the year. But firming up that, you know, the things that we talked about last quarter were better, so.

Dave Rochester: Yeah

Ryan Richards: I mean, we don't make a practice of doing this all the way through the year, but firming up that the things that we talked about last quarter are better.

Speaker #2: Yep, yep. Sounds good. Maybe just as a follow-up on the loan outlook—I was wondering how things are shaping up in Q2 at this point.

Dave Rochester: Yep. Sounds good. Maybe just as a follow-up, on the loan outlook, was wondering how things were shaping up in Q2 at this point. How does the pipeline look overall heading into the quarter versus where you started at the beginning of the last quarter? And what are you seeing on the C&I front that has you excited? And maybe if you could talk about the little bit of a pullback on the consumer side, that'd be great. Thanks.

Speaker #2: How does the pipeline look overall heading into the quarter versus, you know, where you started, you know, at the beginning of the last quarter?

Speaker #2: And, and what are you seeing on the CNI front that has you excited, and maybe if you could talk about the little bit of a pullback on the consumer side, that'd be great.

Speaker #2: Thanks.

Speaker #6: Sure, thanks, Dave. This is Derek. You know, the pipelines are looking healthy, actually, at this point. We're seeing cost activity in small business, middle market, corporate banking, and syndications.

Scott J. McLean: Sure. Thanks, Dave. This is Derek. The pipeline's looking healthy actually at this point. We're seeing lots of activity in small business, middle market, corporate banking, syndications, just general C&I, we're just seeing lots of activity. Another thing that's coming back is we're seeing increased CRE activity. We're cautious there, but we are seeing increased activity as some of the markets have reached more stabilization. I think we'll continue to see growth coming from those areas.

Derek Stewart: Sure. Thanks, Dave. This is Derek. The pipeline's looking healthy actually at this point. We're seeing lots of activity in small business, middle market, corporate banking, syndications, just general C&I, we're just seeing lots of activity. Another thing that's coming back is we're seeing increased CRE activity. We're cautious there, but we are seeing increased activity as some of the markets have reached more stabilization. I think we'll continue to see growth coming from those areas.

Speaker #6: Just general CNI, we're just seeing lots of activity. Another thing that's coming back is we're seeing increased CRE activity. We're cautious there.

Speaker #6: But we are seeing, increased activity is, some, some of the markets have reached, more, more stabilization. And, so I think I think we'll continue to see, growth coming from those areas.

Speaker #6: But pro-probably pricing pressure on CRE. I mean, I, I, I hear our people talking about the fact that they're, they're seeing as much pricing pressure in CRE as they've seen for some time.

Harris H. Simmons: Probably pricing pressure on CRE. I mean,

Harris Simmons: Probably pricing pressure on CRE. I mean,

Harris H. Simmons: I hear our people talking about the fact that they're seeing as much pricing pressure in CRE as they've seen for some time.

Harris Simmons: I hear our people talking about the fact that they're seeing as much pricing pressure in CRE as they've seen for some time.

Speaker #2: I would, Dave, I would just add also—and I made this comment at the RBC Conference back in early March—that I think investors increasingly really need to peel back the onion on the type of loan growth that banks are producing.

Scott J. McLean: Dave, I would just add also, and I made this comment at the RBC conference back in early March, that I think investors increasingly really need to peel back the onion on the type of loan growth that banks are producing. The MFL kind of issue that has sprung up. There are massive differences in banks' reliance on MFL growth. It should be a good asset class for many, many reasons, managed responsibly. As you know, for us, as we report, it's about $2 billion of our portfolio in outstandings and has not grown in five years. You can see that our peers and banks, smaller and larger, pretty much gulping down these loans, just as there has been a difference in CRE growth.

Scott McLean: Dave, I would just add also, and I made this comment at the RBC conference back in early March, that I think investors increasingly really need to peel back the onion on the type of loan growth that banks are producing. The MFL kind of issue that has sprung up. There are massive differences in banks' reliance on MFL growth. It should be a good asset class for many, many reasons, managed responsibly. As you know, for us, as we report, it's about $2 billion of our portfolio in outstandings and has not grown in five years. You can see that our peers and banks, smaller and larger, pretty much gulping down these loans, just as there has been a difference in CRE growth.

Speaker #2: The NDFI, the NDFI kind of issue that has sprung up, has just—I mean, there are massive differences in banks' reliance on N-NDFI growth.

Speaker #2: It should be a good asset class for, for many, many reasons. Managed responsibly, as you know, for us, as we report, it's about $2 billion of our portfolio and outstandings and has not grown in five years.

Speaker #2: And you can see that our peers—and banks, smaller and larger—are pretty much gulping down these loans, just as there has been a difference in CRE growth.

Speaker #2: And so I think what investors, if they'll really peel back the onion, will find is that if they're worried about NDFI, if they're worried about rapid CRE growth, if they're worried about personal unsecured lending, that's not us.

Scott J. McLean: I think what investors, if they'll really peel back the onion, will find that if they're worried about MFL, if they're worried about rapid CRE growth, if they're worried about personal unsecured lending, that's not us. Again, I think it just requires a little more investigation of the topic.

Scott McLean: I think what investors, if they'll really peel back the onion, will find that if they're worried about MFL, if they're worried about rapid CRE growth, if they're worried about personal unsecured lending, that's not us. Again, I think it just requires a little more investigation of the topic.

Speaker #2: So I, again, I think it just requires a little more investigation of the topic.

Speaker #6: Yeah, all right. Great. Thanks, guys.

Bernard von Gizycki: Yeah. All right, great. Thanks, guys.

Speaker #2: Thank you. And our next question comes from the line of Bernard von Gesicki with Deutsche Bank. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Bernard von Gizycki with Deutsche Bank. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Bernard von Gizycki with Deutsche Bank. Please proceed with your question.

Speaker #5: Hey, guys. Good morning, good afternoon. Sorry, I know we were talking about the positive balances earlier. You had a nice pickup in the non-interest-bearing deposits of about $1.3 billion versus Q4.

Bernard von Gizycki: Hey guys, good morning. Good afternoon. Sorry. I know we were talking about deposit balances earlier. You had a nice pickup in the non-interest-bearing deposits of about $1.3 billion versus Q4. I believe the migration of the legacy Gold Accounts was done last quarter. Harris, you mentioned the rolling out of the companion offering for small business customers, the Business Beyond Account. Just what drove the sequential increase? And any color you can share on customer acquisitions on the Gold and the Business Beyond Account accounts for the quarter?

Speaker #5: I believe the migration of the legacy Gold accounts was done last quarter. But Harris, you mentioned the rolling out of the companion offering for small business customers, the Beyond the Business.

Speaker #5: Just what drove the sequential increase, and any color you can share on customer acquisitions on the Gold and the Beyond the Business accounts for the quarter?

Speaker #6: Yeah. So, first, first of all, I, I, if I, I and I, I, I have I'm, I'm dyslexic with this product. It's actually Business Beyond is what we what the product is called.

Harris H. Simmons: Yeah. First of all, I'm dyslexic with this product. It's actually Business Beyond is what the product is called, and I can't read my own words here on the front of the page. The Business Beyond, this product suite, it's too new to have had any impact in Q1 and won't have much in Q2. We've rolled it out in Arizona and Colorado beginning on 26 March. The early reaction to it, with a very limited sample. It's the first really new product offering we've had for small businesses for quite some time, and it's being really well received. I'm excited about the prospects for it, but we'll be rolling it out across the rest of the organization later in May. It'll be kind of in Q3, Q4 before we start to understand what the impact might be.

Harris Simmons: Yeah. First of all, I'm dyslexic with this product. It's actually Business Beyond is what the product is called, and I can't read my own words here on the front of the page. The Business Beyond, this product suite, it's too new to have had any impact in Q1 and won't have much in Q2. We've rolled it out in Arizona and Colorado beginning on 26 March. The early reaction to it, with a very limited sample. It's the first really new product offering we've had for small businesses for quite some time, and it's being really well received. I'm excited about the prospects for it, but we'll be rolling it out across the rest of the organization later in May. It'll be kind of in Q3, Q4 before we start to understand what the impact might be.

Speaker #6: And I can't read my own words here on the on the page. But the, the, the Business Beyond, this product suite, i-it's too new to have had any impact in the first quarter and won't have much in the second.

Speaker #6: We, we rolled it out in Arizona and Colorado beginning on March 26th. But the early reaction to it, with a very limited sample of, you know, I—it's the first really new product offering we've had for small businesses for quite some time.

Speaker #6: And it's being really well received. And so I, you know, I'm excited about the prospects for it. But we'll be rolling it out across the rest of the organization later in May.

Speaker #6: And it'll, it'll be kind of in the third, fourth quarter before we start to understand what the impact might be. On the gold account, you know, the first quarter, I mean, again, we started rolling this out in the second half of last year.

Harris H. Simmons: On the Gold Account, the Q1, again, we started rolling this out in the H2 of last year. Really the full impact started to come kind of in the Q4. In terms of new account activity, we opened about 4,000 new accounts in the Q1. I'm hopeful that we'll see that kind of ramp up to kind of 20,000 new accounts for the year. What we're seeing is over time, the total relationship balances are somewhere around $100,000. It's not immediate, but we're seeing the accounts build up to that. Anyway, we think that this is a really great opportunity for us, and we have a lot of energy, and we'll be devoting a lot of marketing to it.

Harris Simmons: On the Gold Account, the Q1, again, we started rolling this out in the H2 of last year. Really the full impact started to come kind of in the Q4. In terms of new account activity, we opened about 4,000 new accounts in the Q1. I'm hopeful that we'll see that kind of ramp up to kind of 20,000 new accounts for the year. What we're seeing is over time, the total relationship balances are somewhere around $100,000. It's not immediate, but we're seeing the accounts build up to that. Anyway, we think that this is a really great opportunity for us, and we have a lot of energy, and we'll be devoting a lot of marketing to it.

Speaker #6: And really, the full impact started to come, kind of, in the fourth quarter. We've, in terms of new account activity, opened about 4,000 new accounts.

Speaker #6: In the first quarter. And, you know, I—I’m hopeful that we’ll see that kind of ramp up to kind of 20,000 new accounts for the year.

Speaker #6: What we're seeing is, over time, you know, the total relationship balances are somewhere around $100,000. And, you know, it's not immediate, but we're kind of seeing accounts build up to that.

Speaker #6: And so, anyway, we've—we think that this is a really great opportunity for us. And we have a lot of energy, and we'll be devoting a lot of marketing to it.

Speaker #6: So, it's, you know, still early innings, but I'm hopeful that that will really contribute to not only a well-priced deposit base, but one that's granular and really sturdy, with the kinds of customers that we can do a lot of business with.

Harris H. Simmons: It's still early innings, but I'm hopeful that that will really contribute to not only a well-priced deposit base, but one that's granular and really sturdy with the kinds of customers that we can do a lot of business with.

Harris Simmons: It's still early innings, but I'm hopeful that that will really contribute to not only a well-priced deposit base, but one that's granular and really sturdy with the kinds of customers that we can do a lot of business with.

Speaker #5: Great, thanks for that color. And just on capital markets fees, the $28 million—you know, it was slightly higher year over year, but down $9 million versus a strong Q4.

Bernard von Gizycki: Great. Thanks for that color. Just on the capital markets fees, the $28 million, slightly higher year over year, but down $9 million versus a strong Q4. Just anything to call out during the quarter? Ryan, I think you called out the strong pipelines in capital markets going into Q2. If you could just unpack the quarter and trends you're seeing right now.

Speaker #5: Just anything to call out during the quarter? And, you know, Ryan, I think you called out the strong pipelines in capital markets going into Q2.

Speaker #5: So if you could just unpack the quarter and trends you're seeing right now.

Speaker #2: Yeah, this is Scott. I'd be happy to do that. Y-you know, we had a—it was a tough quarter to compare against last year, because of a really large M&A transaction fee that we reported on.

Scott J. McLean: Yeah, this is Scott. I'd be happy to do that. It was a tough quarter to compare against last year because of a really large M&A transaction fee that we reported on. We were delighted with the quarter as it ended. Really, all of the businesses continue to show good opportunity. In Q1, we saw real strength with our syndications and our interest rate hedging businesses. Also with a new commodity hedging, oil and gas hedging practice that we started in Q3, Q4 of last year. We think it has the potential to generate. I don't know, $7 to $10 million a year in revenue, and we're just getting started there. Basically, that business is positioned against about 80 of our energy reserve-based lending clients. We've already had about 30 of those, 35 transact with us on this oil and gas hedging activity.

Scott McLean: Yeah, this is Scott. I'd be happy to do that. It was a tough quarter to compare against last year because of a really large M&A transaction fee that we reported on. We were delighted with the quarter as it ended. Really, all of the businesses continue to show good opportunity. In Q1, we saw real strength with our syndications and our interest rate hedging businesses. Also with a new commodity hedging, oil and gas hedging practice that we started in Q3, Q4 of last year. We think it has the potential to generate. I don't know, $7 to $10 million a year in revenue, and we're just getting started there. Basically, that business is positioned against about 80 of our energy reserve-based lending clients. We've already had about 30 of those, 35 transact with us on this oil and gas hedging activity.

Speaker #2: So, we were delighted with the quarter as it ended. And, really, all of the businesses continue to show, you know, good opportunity.

Speaker #2: We in the in the first quarter, we saw real strength with our syndications and our interest rate hedging, businesses. And also with a new commodity hedging, oil and gas hedging, practice that we started in the, third, fourth quarter of last year, we think it has the potential to, to generate, I don't know, 7 to 10 million dollars a year in revenue.

Speaker #2: And we're just getting started there. So, but it's basically that POS business is positioned against about 80 of our energy reserve-based lending clients. We've already had about 30 of those—30, 35—transact with us on this interest rate, this oil and gas hedging activity.

Speaker #2: And so, I think between syndications, indicated interest rate hedging, our foreign exchange business, commodity hedging, and our real estate capital markets business, it was a soft quarter for them.

Scott J. McLean: I think between syndications, interest rate hedging, our foreign exchange business, commodity hedging, our real estate capital markets business, it was a soft quarter for them. The second quarter, that can kind of ebb and flow. They're still very confident they're going to have a real solid Q2, Q3, and Q4. In our M&A business, again, which is sporadic, we've invested quite a bit in new colleagues there, and deal flow looks good. It's been a high growth business for us. We've made a lot of investments there, and we don't anticipate it'll disappoint this year.

Scott McLean: I think between syndications, interest rate hedging, our foreign exchange business, commodity hedging, our real estate capital markets business, it was a soft quarter for them. The second quarter, that can kind of ebb and flow. They're still very confident they're going to have a real solid Q2, Q3, and Q4. In our M&A business, again, which is sporadic, we've invested quite a bit in new colleagues there, and deal flow looks good. It's been a high growth business for us. We've made a lot of investments there, and we don't anticipate it'll disappoint this year.

Speaker #2: And, but the second quarter, that can kind of ebb and flow. They're still very confident they're gonna have a real solid second, third, and fourth quarter.

Speaker #2: And our M&A business, again, which is sporadic, we've invested quite a bit in new colleagues there. And deal flow looks, looks good. So we're—it's been a high growth business for us.

Speaker #2: We've made a lot of investments there, and we don't anticipate it'll disappoint this year.

Speaker #5: Great. Thanks for taking my questions.

Bernard von Gizycki: Great. Thanks for taking my questions.

Speaker #2: Thank you. And our next question comes from the line of David Cheverini with Jefferies LLC. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of David Chiaverini with Jefferies LLC. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of David Chiaverini with Jefferies LLC. Please proceed with your question.

Speaker #7: Hi. Thanks for taking the questions. I wanted to go back to—you alluded to the Basel III endgame benefit. It sounded like a modest net benefit.

David Chiaverini: Hi. Thanks for taking the questions. Wanted to go back to, you alluded to the Basel III endgame benefit. It sounded like a modest net benefit, but are you able to quantify what that benefit could be for Zions?

Speaker #7: But are you able to quantify what that benefit could be for Zions?

Speaker #3: Hey, thanks for the question, David. Happy to provide some color there. Listen, we're still working all the way through the process, but our scoping on the standardized approach would suggest some RWA relief, as others have reported.

Ryan Richards: Yeah. Thanks for the question, David. Happy to provide some color there. Listen, we're still working all the way through the process. Our scoping on the standardized approach would suggest some RWA relief, as others have reported. Right now, we would size that between 9% and 10% of RWA relief, which would contribute, all else being equal, about 93 basis points to common equity Tier 1. We are still studying the ERBA just to understand the puts and takes there with the risk sensitivity compared to the operational risk RWA, so probably more to be said there in future quarters. As you know, we've been sort of talking capital, both nominally and including AOCI, and by formalizing AOCI into the standard moving forward, albeit with a pretty lengthy phase-in.

Speaker #3: Right now, we would size that between 9 to 10 percent of RWA relief, which would contribute, all else being equal, about 93 basis points to common equity Tier 1.

Speaker #3: We are still studying the ERBA, just to understand what the puts and takes are with the risk sensitivity, compared to the operational risk RWA.

Speaker #3: So, you know, probably more to be said there in future quarters. As you know, we've been sort of talking capital, both nominally and including AOCI, and by formalizing AOCI into the standard moving forward, albeit with a pretty lengthy phase-in.

Speaker #3: Of course, that cuts the other way, but we've already been operating as though AOCI is something that we're cognizant of in setting our capital, you know, glide path.

Ryan Richards: Of course, that cuts the other way, but we've already been operating as though AOCI is something that we're cognizant of in setting our capital glide path. Hopefully that helps.

Speaker #3: So hopefully that helps.

Speaker #7: Yes, very helpful. Thanks for that. And then, you alluded to pricing pressure on the CRE side. Could you talk about the CNI pricing environment?

David Chiaverini: Yes, very helpful. Thanks for that. You alluded to pricing pressure on the CRE side. Could you talk about the C&I pricing environment?

Speaker #3: Sure. This, this is Derek again. Yeah. I mean, it's—we're, well, the activity levels are healthy and it certainly is a competitive market out there today.

Scott J. McLean: Sure. This is Derek again. Yeah. While the activity levels are healthy, and it certainly is a competitive market out there today, so we're seeing some price competition. But it's not significant, but it's something that we're definitely very aware of.

Derek Stewart: Sure. This is Derek again. Yeah. While the activity levels are healthy, and it certainly is a competitive market out there today, so we're seeing some price competition. But it's not significant, but it's something that we're definitely very aware of.

Speaker #3: So, we're seeing some pricing—competitive price competition. But, you know, it's, it's not significant, but it's something that we're definitely very aware of.

Speaker #7: Thank you.

David Chiaverini: Thank you.

Speaker #3: Yep.

Ryan Richards: Yep.

Speaker #2: Thank you. And our next question comes from the line of David Smith with Truist Securities. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of David Smith with Truist Securities. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of David Smith with Truist Securities. Please proceed with your question.

Speaker #8: Hey. Good afternoon.

David Smith: Hey, good afternoon.

Speaker #3: Good afternoon.

Ryan Richards: Hey, David.

David Smith: Can you please talk a little bit about where you're spending the most time managing credit today? Obviously, it was a really strong quarter with just three basis points in that charge-offs and criticized non-accruals. Pretty much all the forward indicators all trending down versus Q4. To the extent that you're seeing problem or areas of concern in the portfolio, where those might be and what trends you're seeing specifically for those sub-portfolios.

Speaker #8: Can you please talk a little bit about where you're spending the most time managing credit today? Obviously, you know, it was a really strong quarter with just 3 basis points in net charge-offs.

Speaker #8: And for that size, non-accruals, pretty much all the forward indicators are trending down versus the fourth quarter. But, you know, to the extent that you were seeing problems or areas of concern in the portfolio, you know, where those might be, and, you know, what trends you're seeing specifically for those sub-portfolios?

Speaker #3: Yeah, thanks. Thanks for the question. Overall, we're continuing to see improvement in commercial real estate. As you can see from the numbers, criticized and classified, as well as non-accruals, continue to decrease there.

Scott J. McLean: Yeah, thanks for the question. Overall, we're continuing to see improvement in commercial real estate, as you can see from the numbers, the criticized and classifieds and non-accruals continue to decrease there. If anything, we're focused on the commercial and industrial space. Actually, year over year, our criticized and classifieds have improved there. We saw a slight increase this quarter. That's the area where we're paying the most attention. We are not seeing a lot of impacts from tariffs, or from the events in the Middle East at this point. We're watching, really, just focused on some increases to expenses in certain areas, such as restaurants and consumer-focused businesses. That seems to be what we're watching the most these days.

Scott McLean: Yeah, thanks for the question. Overall, we're continuing to see improvement in commercial real estate, as you can see from the numbers, the criticized and classifieds and non-accruals continue to decrease there. If anything, we're focused on the commercial and industrial space. Actually, year over year, our criticized and classifieds have improved there. We saw a slight increase this quarter. That's the area where we're paying the most attention. We are not seeing a lot of impacts from tariffs, or from the events in the Middle East at this point. We're watching, really, just focused on some increases to expenses in certain areas, such as restaurants and consumer-focused businesses. That seems to be what we're watching the most these days.

Speaker #3: If anything, we're focused on the commercial and industrial space. It's over, actually—year over year, our criticized classifieds have improved there. Saw slight increases quarter.

Speaker #3: But that's the area where we're, you know, our attention—where we're paying the most attention. We are not seeing a lot of impacts from tariffs.

Speaker #3: Or from the events in the Middle East at this point. But watching, really just focused on some increases to expenses in certain areas such as restaurants and consumer-focused businesses, that seems to be, you know, what we're watching the most these days.

Speaker #8: Do you have a sense of how long oil prices might have to be elevated before that plays through more broadly with some of your industrial client base?

David Smith: Do you have a sense of how long oil prices might have to be elevated before that plays through more broadly with some of your industrial client base?

Speaker #3: Yeah, that—that's a great question. The forward curve on oil right now is going out a year, you know, at a little higher level. But it starts to drop actually pretty fast.

Scott J. McLean: Yeah, that's a great question. The forward curve on oil right now is going out a year at a little higher level. It starts to drop actually pretty fast, and by next year, it's back to a lower level. We'll just have to watch and see where the curve goes.

Scott McLean: Yeah, that's a great question. The forward curve on oil right now is going out a year at a little higher level. It starts to drop actually pretty fast, and by next year, it's back to a lower level. We'll just have to watch and see where the curve goes.

Speaker #3: And by next year, it's back to a lower level. So, we'll just have to watch and see where the curve goes.

Speaker #8: All right. Thank you.

David Smith: All right. Thank you.

Speaker #2: Thank you. And our next question comes from the line of Ken Oostin with Autonomous Research. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question.

Speaker #9: Hey, thanks a lot. Hey, Ryan. Can I just ask and follow up on the NII comments? When you mentioned the 78% growth with no rate cuts, were you referring to the full year 2026 commentary, or were you referring to the Q2 '27 over Q2 '26?

Ken Usdin: Hey, thanks a lot. Hey, Ryan, can I just ask and follow up on the NII comments? When you mentioned the 7-8% growth with no rate cuts, were you referring to the full year 2026 commentary, or were you referring to the 1Q27 over 1Q26?

Speaker #3: Yeah. For our NII guide, that's the forward quarter view is how we how we guide that. so, you know, at the certainly at the upper end of moderately increasing and with we think the ability to overachieve if rates hang in for us.

Ryan Richards: Yeah, for our NII guide, that's the shorter view is how we guide that. Certainly at the upper end of moderately increasing, and with, we think, the ability to overachieve if rates hang in for us.

Speaker #9: Okay, got it. I just wanted to make sure, because there was a little bit of back and forth between talking about the full year versus the standard guide.

Ken Usdin: Okay. Got it. Just wanted to make sure because there was a little bit back and forth between talking about the full year versus the standard guide. It's on the standard guide. Okay.

Speaker #9: So it's on the standard guide. Okay.

Speaker #3: Yes. Right. Understood. Apologies.

Ryan Richards: Yes. Right. Understood.

Ken Usdin: And then-

Speaker #9: And then, yep. And then, as you go forward, you know, the earning asset base has been pretty steady for the, you know, for the last couple quarters.

Ryan Richards: I'll answer that.

Ken Usdin: Yep. As you go forward, the earning asset base has been pretty steady for the last couple quarters. As you have reworked the mix of the balance sheet from here, do we start to see more AEA growth, or is the benefit that you get from NII going to come more from the margin expansion from here? Thanks, Ryan.

Speaker #9: And as you kind of have reworked the mix of the balance sheet, from here, do we start to see more AEA growth, or is the benefit that you get from NII going to come more from the margin expansion from here?

Speaker #9: Thanks, Ryan.

Speaker #3: It's a very fair question, Ken, 'cause you're right. I mean, if you look year over year, average earning assets are kind of hanging in around these same levels.

Ryan Richards: It's a very fair question, Ken, because you're right. If you look year over year, average earning assets are kind of hanging in around these same levels. The loan growth that we're seeing has sort of been offset by the average investment securities and money market funds. Listen, one of the things that we're probably getting closer to, I talked about in my prepared remarks, the reinvestment that's occurring for investment securities, where we've still been allowing a decent amount of that to flow over to paying for loans or paying down wholesale funding. We're getting close to the point in time where we will think about reinvesting fully just to make sure we keep the same comfortable headroom on our liquidity measures and the like. If you see in our guide, we certainly expect for loans to build from here.

Speaker #3: and so the loan growth that we're seeing has sort of been offset by the average, investment securities and money market funds, listen, what one of the things that we're probably getting closer to, you know, I talked about in my prepared remarks, the reinvestment that's occurring, for our investment securities where we've still been allowing a, a decent amount of that to, to flow over to, paying for loans or paying down wholesale funding.

Speaker #3: We're getting close to the point in time when we would think about reinvesting fully, just to make sure we keep the same comfortable headroom on our liquidity measures and the like.

Speaker #3: So, but, you know, if you see in our guide, we certainly expect for loans to build from here. And you all are, I think, very attuned to where we expect to see that.

Ryan Richards: You all, I think, are very attuned to where we expect to see that. One of the things that maybe could be potentially a little bit lost in the message this quarter is we had a really nice loan fee result. You'll see that, and that was on the back of some of the things that we said we were going to do. Part of our strategy was saying, "Hey, going forward, we want to do more held-for-sale activity around residential mortgage loans." That showed up in this quarter. We had a pool in excess of $500 million that we sold out that would have otherwise been part of our story for loan growth.

Speaker #3: One of the things that maybe could be potentially a little bit lost in the message this quarter is, we had a really nice loan fee result.

Speaker #3: You'll see that in, and that was on the back of some of the things that we said we were gonna do. Part of our strategy was saying, 'Hey, going forward, we want to do more health-for-sale activity around residential mortgage loans.' And that showed up in this quarter.

Speaker #3: So we had a pool in excess of $500 million that we sold out of, that would have otherwise been part of our story for loan growth.

Speaker #3: Another thing that we haven't yet featured on this call, but would be in the earnings release, is we did roll out an accounting change this quarter moving forward on the netting of derivative assets and derivative liabilities, and cash collateral and things associated with that.

Ryan Richards: Another thing that we haven't yet featured on this call but would be in the earnings release is we did roll out an accounting change this quarter moving forward on the netting of derivative assets, derivative liabilities, cash collateral, and things associated with that. That would also have sort of a knock-on effect on some netting down of some loan balances to the tune of about a $100 million difference. I acknowledge that our loan growth looks modest, but there were some other pieces in there that, were they in our base results, would have looked like a stronger loan growth story. Moving forward, it's going to be both, a long-winded answer. It's definitely going to be a margin expansion and growth in average earning assets.

Speaker #3: And that would also have sort of a knock-on effect on some netting down of some loan balances, to the tune of about $100 million difference.

Speaker #3: So, it—I acknowledge that our loan growth looks modest. But there were some other pieces in there that, you know, were they in our base results?

Speaker #3: Would it look like a stronger loan growth story? So moving forward, it's gonna be both, along with an answer. It's definitely gonna be a margin expansion and, and, growth in average earning assets.

Speaker #8: Yeah, I'd just add that I, you know, the consumer book, the wonderful family residentials of Jumbo ARMs—you know, I'd expect that that'll remain flat to kind of drifting down over time.

Harris H. Simmons: Yeah, I'd just add that the consumer book, the 1 to 4-family residential jumbo ARMs, I'd expect that that'll remain flat to kind of drifting down over time. We're just trying to remove some of the risk in a world where higher rates may be the norm, and so some of the convexity risk there. We're really trying to focus more on the held for sale, turning that activity into more fee-based activity. That'll be a little bit of a drag, but we think that we'll see moderate loan growth despite that.

Harris Simmons: Yeah, I'd just add that the consumer book, the 1 to 4-family residential jumbo ARMs, I'd expect that that'll remain flat to kind of drifting down over time. We're just trying to remove some of the risk in a world where higher rates may be the norm, and so some of the convexity risk there. We're really trying to focus more on the held for sale, turning that activity into more fee-based activity. That'll be a little bit of a drag, but we think that we'll see moderate loan growth despite that.

Speaker #8: We're just trying to remove some of the risk in a world where, you know, higher rates may be the norm and, and, so some of the convexity risk there.

Speaker #8: So, we're really trying to focus more on the health for sale in a PR, you know, turning that activity into more fee-based activity. So that'll be, okay, a little bit of a drag.

Speaker #8: But I, you know, I—we think that we'll see, you know, moderate loan growth despite that.

Speaker #9: Okay. Thanks for the caller.

Ken Usdin: Okay. Thanks for the color.

Speaker #8: Yep.

Harris H. Simmons: Yep.

Harris Simmons: Yep.

Speaker #2: Thank you. And our next question comes from the line of Peter Winter with D.A. Davidson. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Peter Winter with the D.A. Davidson. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Peter Winter with the D.A. Davidson. Please proceed with your question.

Speaker #10: Thanks. Good afternoon. I was wondering, with the outlook of fee income coming in at the upper end of your range, and you continue to make these investments, which are clearly working, would you expect expenses to also come in at the upper end of that range of moderately increasing?

Peter Winter: Thanks. Good afternoon. I was wondering, with the outlook of fee income coming in at the upper end of your range and you continue to make these investments which are clearly working, would you expect expenses to also come in at the upper end of that range of moderately increasing?

Speaker #3: Listen, and I'm sure with there are others also that say here, but, you know, I, you know, my, my spoken remarks, I, I purposely kind of guided towards the upper end of the range and, and, NII and fee income.

Ryan Richards: Listen. I'm sure there are others who will have something to say here, but my spoken remarks, I purposely kind of guided towards the upper end of the range in NII and fee income. I'm glad you picked up on that. I didn't do that for expenses. We'll see. For where I sit here today, I think it's a reasonable guide just as it is. I wouldn't guide at the upper end or the lower end. I just leave the degrees of freedom within that.

Speaker #3: I'm glad you picked up on that. I didn't do that for expenses, so we'll see. But I—you know, for where I sit here today, I think it's a reasonable guide, just as it is.

Speaker #3: You know, I—and I wouldn't guide on the upper end or the lower end. I just, you know, leave the degrees of freedom within that, within that.

Speaker #2: Got it.

Peter Winter: Got it.

Speaker #3: But.

Speaker #10: I, I, I would just add that most of the broad-based growth we're seeing in fees now is—I mean, capital markets, we clearly have invested a lot.

Harris H. Simmons: I would just add that most of the broad-based growth we're seeing in fees now is, I mean, capital markets. We clearly have invested a lot. The others, the incremental investment is not that significant. I think we're seeing a lot of our sales practices flowing through. I think we're seeing our call programs are stronger. This is the best broad-based growth we've seen in a long time.

Harris Simmons: I would just add that most of the broad-based growth we're seeing in fees now is, I mean, capital markets. We clearly have invested a lot. The others, the incremental investment is not that significant. I think we're seeing a lot of our sales practices flowing through. I think we're seeing our call programs are stronger. This is the best broad-based growth we've seen in a long time.

Speaker #10: The others, we're not having to—in the—in the incremental investment is not that significant. We're just, I think, we're seeing a lot of our sales practices, you know, flowing through.

Speaker #10: I think we're seeing our call programs are stronger. And we're—you know, we're just—this is the best broad-based growth we've seen in a long time.

Speaker #9: I just thought, with the growth in the fee income also, maybe higher incentive comp as well. That's why I was thinking about it.

Peter Winter: I just thought with the growth in the fee income also maybe higher incentive comp as well. That's why I was thinking about it.

Speaker #10: Well, that's true. You know, that's, that's, that's true. And you can see that a little bit in the first quarter.

Harris H. Simmons: Well, that's true.

Harris Simmons: Well, that's true.

Harris H. Simmons: No, that's true. You can see that a little bit in Q1.

Harris Simmons: No, that's true. You can see that a little bit in Q1.

Speaker #8: But it's—but it's in, it's in the context of a $2.1 billion expense number. So it's—I, I, I—it's not gonna move it materially.

Harris H. Simmons: It is, but it's in the context of a $2.1 billion expense.

Harris Simmons: It is, but it's in the context of a $2.1 billion expense.

Harris H. Simmons: Right

Harris Simmons: Right

Harris H. Simmons: number. It's not going to move it materially.

Harris Simmons: number. It's not going to move it materially.

Speaker #9: Okay. And then just if I can ask a separate question— with these growth initiatives underway, is there anything tangible that you can point to? You know, the investments that you've made in the future core, to modernize the core systems— has that been additive to your growth or helped attract more customers? Just given, you know, we're seeing some nice organic growth from you guys.

Peter Winter: Okay. Just if I can ask a separate question, but with these growth initiatives underway, is there anything tangible that you can point to, the investments that you made in the future core to modernize the core systems? Has that been additive to your growth or helping attract more customers just given we're seeing some nice organic growth from you guys? I'm just wondering if future core is playing into that.

Speaker #9: And I'm just wondering if FutureCore is playing into that.

Speaker #10: I think you know, I—yes, although it's, I—I, you know, I—I—I think it's hard to quantify exactly. But it's helping us just get things done faster.

Harris H. Simmons: I think, yes, although I think it's hard to quantify exactly, but it's helping us just get things done faster. Customers don't choose a bank because of your core systems especially the lending side. They're looking for execution, price, and relationship, et cetera. It's giving us. I go back in time, we did an exceptional job during the whole PPP thing, and that's ancient history now. We couldn't have done it without this new core. We were quickly doing the real land office business in PPP with a great process. That's just an example of how it's allowing us to get things done faster.

Harris Simmons: I think, yes, although I think it's hard to quantify exactly, but it's helping us just get things done faster. Customers don't choose a bank because of your core systems especially the lending side. They're looking for execution, price, and relationship, et cetera. It's giving us. I go back in time, we did an exceptional job during the whole PPP thing, and that's ancient history now. We couldn't have done it without this new core. We were quickly doing the real land office business in PPP with a great process. That's just an example of how it's allowing us to get things done faster.

Speaker #10: I mean, customers don't choose a bank because of your core system, especially on the lending side. I mean, they're looking for execution and price and relationship, etc.

Speaker #10: But, it's giving us I, I mean, it I, I, I'd go back in time. we did an exceptional job during the whole PPP thing, and that's, that's ancient history now.

Speaker #10: We couldn't have done it without this—this new core. We, you know, we were quickly doing, you know, the real land office business in PPP.

Speaker #10: with a great process. So it's that-that's just an example of how it's, it's allowing us to, to get things done faster. Well, and the, the other, couple other points I would add is the, the, the real-time data and the fact that all of our loans and deposits are on one data system.

Scott J. McLean: Well, a couple other points I would add is the real-time data and the fact that all of our loans and deposits are on one data system. Again, that doesn't send tingles through clients' minds, but in a data-driven world, it's absolutely critical that it be accurate. It also. We said on our last call that we were close to closing a transaction with TCS to bring their Quartz, they have a product called Quartz that is a tokenized deposit stablecoin application. Because we're on their platform, the ability to start innovating with tokenized deposits or stablecoin is infinitely cheaper than anybody else trying to do this. We think it's going to be an interesting way to compete way beyond our size in that arena, should we choose to. We've not announced that we are.

Scott McLean: Well, a couple other points I would add is the real-time data and the fact that all of our loans and deposits are on one data system. Again, that doesn't send tingles through clients' minds, but in a data-driven world, it's absolutely critical that it be accurate. It also. We said on our last call that we were close to closing a transaction with TCS to bring their Quartz, they have a product called Quartz that is a tokenized deposit stablecoin application. Because we're on their platform, the ability to start innovating with tokenized deposits or stablecoin is infinitely cheaper than anybody else trying to do this. We think it's going to be an interesting way to compete way beyond our size in that arena, should we choose to. We've not announced that we are.

Speaker #10: Again, that doesn't, you know, that doesn't send tingles through clients' minds. But in a data-driven world, it's absolutely critical that it be accurate. And we, it—it also, we said on our last call that we were close to closing a transaction with TCS to bring their Courts, to have a product called Courts.

Speaker #10: That is a tokenized deposit stablecoin application, and

Speaker #1: Because we're on their platform, the ability to start innovating with tokenized deposits or stablecoins is infinitely cheaper than anybody else trying to do this.

Speaker #1: And so we think it's going to be an interesting way to compete way beyond our size in that arena, should we choose to.

Speaker #1: We've not announced that we are. We just—but we've got a platform that we would not have had if it had not been for our core conversion.

Scott J. McLean: We've got a platform that we would not have had if it not been for our core conversion.

Scott McLean: We've got a platform that we would not have had if it not been for our core conversion.

Speaker #2: That's great. Thanks, Scott. Thanks, Harris. Yep.

Peter Winter: That's great. Thanks, Scott.

Harris H. Simmons: Thanks, Harris.

Peter Winter: Thanks, Harris.

Scott J. McLean: Yep.

Scott McLean: Yep.

Speaker #3: Thank you. And our next question comes from the line of Janet Lee with TD. Please save your questions.

Operator 2: Thank you. Our next question comes from the line of Janet Lee with TD Cowen. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Janet Lee with TD Cowen. Please proceed with your question.

Speaker #4: Good afternoon Just to go back on it , just to go back on your 7 to 8% NII growth , assuming no rate cuts Does is it fair to say that that assumption is baking in .

Janet Lee: Good afternoon.

Scott J. McLean: Good afternoon.

Scott McLean: Good afternoon.

Janet Lee: Just to go back on your 7% to 8% NII growth, assuming no rate cuts, is it fair to say that that assumption is baking in moderately increasing loan growth, so call it mid-single digit or so, but that would also imply a pretty meaningful step up in net interest margin expansion throughout the course of Q1 2026 to Q1 2027 in order to get to the 7% to 8%?

Speaker #4: You know , moderately increasing loan growth ? So call it mid-single digit or so , but that would also imply a pretty

Ryan Richards: Yeah. Listen, I think you're right about that. In terms of allowing for loan growth to be embedded in that figure and margin expansion, we don't guide. That hasn't been our practice to guide on margin. But we see ample opportunity to expand the margin throughout the course from this point in time to that point in time in the years hence. Both of those are encompassed within our guide.

Janet Lee: Got it.

Speaker #5: And I can I can rehearse all those different contributing factors if you like , but I'll give you the short form answer . Yeah ,

Ryan Richards: I can rehearse all those different contributing factors if you'd like, but I give you the short form answer. If you want the long form answer, I can-

Speaker #4: I would take that

Janet Lee: Yeah. I would take that.

Speaker #5: So yeah , listen , I think there's , there's different things that are playing through . And you've heard us talk a little bit about this before .

Ryan Richards: Yeah, listen, I think there's different things that are playing through. You've heard us probably talk a little bit about this before. We do have that, the latent effect of those fixed asset repricing that has yet to play through. There's still some sizable books that have longer repricing kind of patterns. If you think about things like muni, if you think about owner occupied, if you think about some 1 to 4 family resi. All that together with things like, plus those headwinds from those terminated swaps. This quarter, we had about a $10 million headwind through Q4 this year. It goes down to about $5 million. We've got some disclosures in our 10-K that talked about that. All those things blend to an improvement in our earning asset yields, kind of 1 year hence and along the way.

Speaker #5: We do have that latent effect of those fixed asset repricing that has yet to play through. There's still some sizable books that have longer repricing kind of patterns.

Speaker #5: So if you think about things like Muni , if you think about owner occupied , if you think about some 1 to 4 family recipe that So all that together with things like less headwinds from the terminated swaps , this quarter , we had about $10 million headwind through the fourth quarter .

Speaker #5: This year, it goes down to about $5 million. We've got some disclosures in our 10-K that talked about that. All those things led to an improvement in earning asset yields.

Speaker #5: You know, kind of one year hence. And along the way, we've sort of sized that at about 2 to 3 basis points improvement during asset yields.

Ryan Richards: We've sort of sized that about a 2 to 3 basis points improvement in earning asset yields. We are doing some roll-off of our investment securities portfolio to other gainful places like loan growth, and paying down wholesale sources of funding. We size that as a 1 basis point kind of benefit to earning assets. It's that together with a little bit of a taper of things yet to play through, and repricing down of term deposits, are all things that contribute to a better NIM story moving forward.

Speaker #5: We are doing some roll-off of our investment securities portfolio to other gainful places, like loan growth and paying down wholesale sources of funding.

Speaker #5: We size that as a one basis point kind of earning assets, so that, together with a little bit of a taper of things yet to play through and repricing out of term deposits, are all things that contribute to a better NIM story moving forward.

Speaker #4: Got it. That's very helpful. And your 100 to 150 basis points POL for 2026—you seem very comfortable achieving it, even in a no rate cut scenario.

Janet Lee: Got it. That's very helpful. Your 100 to 150 basis points POL for 2026, you seem very comfortable achieving it in a no rate cut scenario. Is it fair to assume it's still the case if we do end up getting a rate cut, or does it get more challenging?

Speaker #4: I would . Is it fair to assume it's still the case ? If we were to get a change in ? If we do end up getting a rate cut or does it get more challenging

Speaker #5: I mean, we were prepared with something analogous to that last quarter, where we were seeing two rate cuts. So I wouldn't necessarily back away from that.

Harris H. Simmons: We were prepared with something analogous to that last quarter where we were seeing 2 rate cuts. I wouldn't necessarily back away from that. I would just say, as with all things, it'll all depend on our success in driving through those lower cost bonds and our deposit growth through the course of the year. That's our biggest variable, and not knowing day to day, week to week, what the bond markets are going to tell us. I just feel like we're at least as good or better place than we were last quarter.

Ryan Richards: We were prepared with something analogous to that last quarter where we were seeing 2 rate cuts. I wouldn't necessarily back away from that. I would just say, as with all things, it'll all depend on our success in driving through those lower cost bonds and our deposit growth through the course of the year. That's our biggest variable, and not knowing day to day, week to week, what the bond markets are going to tell us. I just feel like we're at least as good or better place than we were last quarter.

Speaker #5: I would just say, as with all things, it will all depend on our success in driving through those lower-cost funds in our deposit growth through the course of the year.

Speaker #5: That's our biggest, biggest variable. And not knowing day to day, week to week, what the markets are going to tell us, I just feel like we're at least as good or in a better place than we were last quarter.

Speaker #4: Thank you

Janet Lee: Thank you.

Speaker #3: Thank you. And our next question comes from the line of Anthony Elion with J.P. Morgan. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Anthony Elian with JPMorgan. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Anthony Elian with JPMorgan. Please proceed with your question.

Speaker #6: Hi , everyone on M&A , last month , you announced the acquisition of the . Agency lending business from basis , right ? Last year , you acquired four branches in the Coachella Valley .

Anthony Elian: Hi, everyone. On M&A, last month, you announced the acquisition of the agency lending business from Basis. Last year, you acquired four branches in the Coachella Valley. Harris, are these the types of acquisitions we should expect going forward, or would you cast a wider net at some point inclusive of bank acquisitions for what you would look at?

Speaker #6: Harris, are these the types of acquisitions we should expect going forward, or would you cast a wider net at some point? Inclusive of bank acquisitions for what you would look at?

Speaker #7: Well , the first thing I'd say is it's not so much that we're casting a net . We're waiting for fish to swim into the into the pond that we are comfortable with .

Harris H. Simmons: Well, the first thing I'd say is it's not so much that we're casting a net. We're waiting for fish to swim into the pond that we are comfortable with. We're not out looking. It's not an objective to do M&A to grow. I've been pretty consistent about that. As we see opportunities, we ask ourselves the question, is it a good fit strategically? Is it something that strengthens the franchise? It's all about price at the end of the day, too. We'd be opportunistic about it, and I think both of these kind of fit that. These agency relationships, the Fannie Mae Freddie Mac business we've been talking about here, that is something we have been looking to do. We live in a part of the country where you have a combination of a reasonably young population, a high cost of housing affordability.

Harris Simmons: Well, the first thing I'd say is it's not so much that we're casting a net. We're waiting for fish to swim into the pond that we are comfortable with. We're not out looking. It's not an objective to do M&A to grow. I've been pretty consistent about that. As we see opportunities, we ask ourselves the question, is it a good fit strategically? Is it something that strengthens the franchise? It's all about price at the end of the day, too. We'd be opportunistic about it, and I think both of these kind of fit that. These agency relationships, the Fannie Mae Freddie Mac business we've been talking about here, that is something we have been looking to do. We live in a part of the country where you have a combination of a reasonably young population, a high cost of housing affordability.

Speaker #7: I we're not , we're not , we're not out looking to try to , you know , to it's not an objective to to do M&A to grow .

Speaker #7: I've been pretty consistent about that , but I . But you know , as we see opportunities , we ask ourselves the question , is it a good fit strategically ?

Speaker #7: Is it is it something that strengthens the franchise ? And you know , it's all about price at the end of the day to .

Speaker #7: And so , you know , we we'd be opportunistic about it . And I think both of these kind of fit that the , these agency relationships , the , the Fannie Freddie business , we've been talking about here That's something that is something we have been looking to do .

Speaker #7: We , we live in a part of the country where you have a combination of a reasonably young population , a high cost of housing affordability , all of that creates demand for more multifamily over time .

Harris H. Simmons: All of that creates demand for more multifamily over time. It's where about 80% of the population of the nation is taking place through the Mountain West, the Southwest, et cetera. Being able to be a one-stop shop for developers of multifamily product fits really nicely into the capital market strategy we have. It fits nicely with the real estate talent we have in-house to originate that kind of product. I would expect that anything we do would have kind of a story to it in terms of how it fits with a strategy of becoming a stronger presence in the Western United States.

Harris Simmons: All of that creates demand for more multifamily over time. It's where about 80% of the population of the nation is taking place through the Mountain West, the Southwest, et cetera. Being able to be a one-stop shop for developers of multifamily product fits really nicely into the capital market strategy we have. It fits nicely with the real estate talent we have in-house to originate that kind of product. I would expect that anything we do would have kind of a story to it in terms of how it fits with a strategy of becoming a stronger presence in the Western United States.

Speaker #7: It's about it's we're about 80% of the population of the nation is taking place , you know , through the Mountain West , the southwest , etc.

Speaker #7: And so, being able to be a one-stop shop for developers of multifamily product fits really nicely into the capital market strategy.

Speaker #7: We have and , and , and , it fits nicely with the real estate talent we have in house to originate that kind of product .

Speaker #7: So , you know , I , I would expect that anything we do would have kind of a story to it in terms of how it fits with the strategy of becoming a stronger presence in the Western United States .

Speaker #6: Okay . And then my follow up on deregulation . So , Harris , you addressed this in your annual letter . We have the capital proposals a few weeks ago .

Anthony Elian: Okay. My follow-up on deregulation. Harris, you addressed this in your annual letter. We had the capital proposals a few weeks ago. I know we have the comment period now, but I'd like to get your thoughts on if you think those proposals are largely sufficient or what more you'd like to see from those proposals. Thank you.

Speaker #6: I know we have the comment period now, but I'd like to get your thoughts on if you think those proposals are largely sufficient, or what more you'd like to see from those proposals.

Speaker #6: Thank you .

Speaker #7: No , I think we're pretty pleased with what you know , I you know , one of the things what I said in the letter is that , you know , the pendulum , what happens is you get a crisis and and a reaction .

Harris H. Simmons: No, I think we're pretty pleased with what one of the things, what I said in the shareholder's letter is, the pendulum, what happens is you get a crisis and a reaction. That's the history of bank regulation, and the statutes that are passed to turn that into law. What happened in the wake of the passage of Dodd-Frank was there were a lot of things that I think with the benefit now of looking back over the last decade and a half, regulators, sensible people looking at this would say, okay, some of that was actually really useful and needed, necessary, and some of it is overkill. From my perspective, I think the current cast in place in the agencies is doing a really nice job of trying to say, let's focus on the basics.

Harris Simmons: No, I think we're pretty pleased with what one of the things, what I said in the shareholder's letter is, the pendulum, what happens is you get a crisis and a reaction. That's the history of bank regulation, and the statutes that are passed to turn that into law. What happened in the wake of the passage of Dodd-Frank was there were a lot of things that I think with the benefit now of looking back over the last decade and a half, regulators, sensible people looking at this would say, okay, some of that was actually really useful and needed, necessary, and some of it is overkill. From my perspective, I think the current cast in place in the agencies is doing a really nice job of trying to say, let's focus on the basics.

Speaker #7: And that's the history of bank regulation and the statutes that are passed to to turn that into law and the , you know , the , what happened in the wake of the passage of Dodd-Frank was there , you know , there were a lot of things that I think that with the benefit now of looking back over the last decade and a half , regulators , sensible people looking at this would say , okay , some of that was actually really useful and needed , necessary .

Speaker #7: And some of it is overkill . And from my perspective , I think , I think the current cast in place in the agencies is doing a really nice job of trying to say , let's , let's focus on the basics because the risk is you get so involved in the thick of thin things that you miss the main event .

Harris H. Simmons: Because the risk is you get so involved in the thick of thin things that you miss the main event. I think that's one of the things that happened with the bank failures of three years ago. Things that are kind of hiding in plain sight. It wasn't about, I mean, everybody, the industry's actually pretty good at self-regulating. After you've been through the great financial crisis, you don't need to be told a lot about how you adjust your portfolio to make sure that doesn't happen again. Yet that's kind of where the system tends to pile on. A lot of things were done in terms of ability to repay, qualified mortgages, and everything. It's part of the housing affordability problem we have today. It's just more expensive to get a mortgage, for example.

Harris Simmons: Because the risk is you get so involved in the thick of thin things that you miss the main event. I think that's one of the things that happened with the bank failures of three years ago. Things that are kind of hiding in plain sight. It wasn't about, I mean, everybody, the industry's actually pretty good at self-regulating. After you've been through the great financial crisis, you don't need to be told a lot about how you adjust your portfolio to make sure that doesn't happen again. Yet that's kind of where the system tends to pile on. A lot of things were done in terms of ability to repay, qualified mortgages, and everything. It's part of the housing affordability problem we have today. It's just more expensive to get a mortgage, for example.

Speaker #7: And I think that's one of the things that happened . You know , with the bank failures three years ago , you know , things that are kind of hiding in plain sight .

Speaker #7: It wasn't about some of the I mean , everybody , the industry is actually pretty good at self-regulating . I mean , after you've been through the great financial crisis , you don't need to be told a lot about how you adjust your portfolio to make sure that doesn't happen again .

Speaker #7: And yet that's kind of where the system tends to pile on . And , and so , you know , a lot of things were done in terms of , you know , ability to repay qualified mortgages and everything that it's , it's part of the housing affordability problem .

Speaker #7: We have today . It's just more expensive to get a mortgage , for example . I think they're trying to be sensible about how do we how do we get back to kind of a center point .

Harris H. Simmons: I think they're trying to be sensible about how do we get back to kind of a center point. I'm actually quite pleased with what we're seeing.

Harris Simmons: I think they're trying to be sensible about how do we get back to kind of a center point. I'm actually quite pleased with what we're seeing.

Speaker #7: And so I'm actually quite pleased with what we're seeing.

Speaker #6: Thank you

Anthony Elian: Thank you.

Speaker #3: Thank you. And our next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question.

Speaker #8: Hey , thanks . I wanted to ask you about the agency businesses , but you you I think you cleared those up , Harris .

Jon Arfstrom: Hey, thanks. I wanted to ask you about the agency businesses, but I think you cleared those up, Harris. That's just P&L, it's not really use of balance sheet on those businesses, is that correct?

Speaker #8: But that that's just P and L it's not really use of balance sheet on those businesses . Is that correct ?

Speaker #7: Yeah . Yeah , yeah . It shouldn't use I mean , we use the balance sheet for the origination of the deal . The construction the stabilization .

Harris H. Simmons: Yeah. We use the balance sheet for the origination of the deal, the construction, the stabilization. Without fail, our customers who are developing this kind of product, they need a long-term takeout, and so it just allows us to be in the stream for that.

Harris Simmons: Yeah. We use the balance sheet for the origination of the deal, the construction, the stabilization. Without fail, our customers who are developing this kind of product, they need a long-term takeout, and so it just allows us to be in the stream for that.

Speaker #7: But you know , you know , without fail , our customers are developing this kind of product . They need a long term takeout .

Speaker #7: And so, it just allows us to be in the stream for.

Speaker #5: That one way . Maybe stitch it together . Harris is a very good response to the regulatory environment . And if there was anything on the wish list going back to Basel three , endgame , you know , getting some more risk sensitivity on the commercial loan side of the business would be helpful .

Ryan Richards: One way of maybe stitching together Harris's very good response on the regulatory environment, and if there was anything on the wish list, going back to Basel III endgame, getting some more risk sensitivity on the commercial loan side of the business would be helpful. It looks like they may have MSRs in scope of things to at least nominally reconsider, getting away from the dollar for dollar exclusion above certain levels and maybe rethinking the risk weighting. For this type of business, this agency, multifamily business, there will be some MSR generation that would come from it. We'll have to see where that falls out, John.

Speaker #5: And it looks like they may have MSR in scope of things to at least nominally reconsider getting away from the dollar for dollar exclusion above certain levels , and maybe rethinking the risk weighting for this type of business .

Speaker #5: This agency, multifamily business, there will be some MSR generation that would come from it. So we'll have to see where that falls out.

Speaker #5: Yeah .

Speaker #7: Good points .

Jon Arfstrom: Good points. Yep. Okay. Yeah, I know they're rare licenses and very valuable, so that'll be good. Scott, maybe just to go back on lending. Energy and lending appetite, just curious how you're approaching the business with so much volatility. Can you touch a little bit on the Texas or Amegy C&I growth and what's driving that? Thanks.

Speaker #8: Yeah . Okay . Yeah , I know there are rare licenses and very valuable . So that'll be good . Scott . Maybe just to go back on lending energy and lending appetite , just curious how you're approaching the business with so much volatility .

Speaker #8: And then can you touch a little bit on the Texas or C&I growth and what's driving that? Thanks.

Speaker #1: Sure . John , let me on on the the Amity side . They , you know , they had . I'll take the second one first .

Scott J. McLean: Sure, Jon. On the Amegy side, I'll take the second one first. They had really strong loan growth last year, really broad-based C&I growth, and their CRE is holding in there. Energy really did not grow much last year for them. They are seeing better growth in smaller businesses. Principally, they've played more in the middle market, the kind of middle of the middle market and the upper end of it. But just good progress there. Their call programs are great. The bank in the Metroplex, their activities in the Dallas-Fort Worth Metroplex and in San Antonio are doing well. They just have a lot of momentum that they brought into this year, and I know they feel very optimistic about leading the way in terms of loan growth for the company this year, too.

Scott McLean: Sure, Jon. On the Amegy side, I'll take the second one first. They had really strong loan growth last year, really broad-based C&I growth, and their CRE is holding in there. Energy really did not grow much last year for them. They are seeing better growth in smaller businesses. Principally, they've played more in the middle market, the kind of middle of the middle market and the upper end of it. But just good progress there. Their call programs are great. The bank in the Metroplex, their activities in the Dallas-Fort Worth Metroplex and in San Antonio are doing well. They just have a lot of momentum that they brought into this year, and I know they feel very optimistic about leading the way in terms of loan growth for the company this year, too.

Speaker #1: They had really strong loan growth last year, really broad-based C&I growth. And their CRE is holding in. Their energy really did not grow much last year for them.

Speaker #1: They are seeing better growth in in smaller businesses . Principally they've played more on the middle market . The kind of the middle of the middle market in the upper end of it .

Speaker #1: But , but just good progress there . Their call programs are great . The bank and the metroplex , their , their activities in the Dallas Fort Worth metroplex .

Speaker #1: And then in San Antonio, they are doing well. And so they just have a lot of momentum that they brought into this year.

Speaker #1: And I, I know they feel very optimistic about leading the way in terms of loan growth for the company this year, too.

Speaker #1: On the energy side . Holy cow . We've been we've been sitting at 2 billion in outstanding for a long time . And we would love to see that grow .

Scott J. McLean: On the energy side, holy cow, we've been sitting at $2 billion in outstanding for a long time, and we would love to see that grow. The credit metrics, the pricing metrics have never been better, as probably 40% of the banks that play in the reserve-based lending, what I would call middle market of energy lending, about 40% of the banks that used to have exited. A lot of this business is originated by private equity firms that we know extremely well and have decades of experience with. The way we do it, we have about 75 reserve-based loans. These are highly secured. They modulate based on pricing. That has done very well through many cycles. What didn't do well was financing oil field service companies. We have long since reduced our engagement with those companies dramatically. It's about 12% of the book now.

Scott McLean: On the energy side, holy cow, we've been sitting at $2 billion in outstanding for a long time, and we would love to see that grow. The credit metrics, the pricing metrics have never been better, as probably 40% of the banks that play in the reserve-based lending, what I would call middle market of energy lending, about 40% of the banks that used to have exited. A lot of this business is originated by private equity firms that we know extremely well and have decades of experience with. The way we do it, we have about 75 reserve-based loans. These are highly secured. They modulate based on pricing. That has done very well through many cycles. What didn't do well was financing oil field service companies. We have long since reduced our engagement with those companies dramatically. It's about 12% of the book now.

Speaker #1: The credit metrics , the pricing metrics have never been better as , as probably 40% of the banks that that play in the reserve based lending , what I would call middle market of energy lending , you know , about 40% of the banks that use two have exited and a lot of this business is originated by private equity firms that we know extremely well and have decades of experience with .

Speaker #1: And so , and the way we do it , we have about 75 reserve based loans . So these are highly secured . They , they , they modulate based on pricing and , and they , you know , that has done very well through many cycles .

Speaker #1: What didn't do well was financing oil field service companies . We have long since reduced our engagement with those companies dramatically . It's , it's about 12% of the book now .

Speaker #1: It was as high as 35%, 40% at one time. So that was decades. It was 15 to 18 years ago.

Scott J. McLean: It was as high as 35%, 40% at one time. That was decades ago. It was 15 to 18 years ago. Anyway, I think we've got the portfolio structured right. The midstream side of the portfolio is very good. We have a great energy lending team. They're widely recognized across the industry as being pros. Adding this oil and gas commodity hedging activity just has been terrific. We'll see a lot of strength from that because our clients want to do business with us. Anyway, I'm optimistic about it. If that business grew 10% a year for 3 or 4 years, we'd be really happy with it. We had outstandings of $3 billion some years ago. We're not afraid of the level. We just need to see the activity.

Scott McLean: It was as high as 35%, 40% at one time. That was decades ago. It was 15 to 18 years ago. Anyway, I think we've got the portfolio structured right. The midstream side of the portfolio is very good. We have a great energy lending team. They're widely recognized across the industry as being pros. Adding this oil and gas commodity hedging activity just has been terrific. We'll see a lot of strength from that because our clients want to do business with us. Anyway, I'm optimistic about it. If that business grew 10% a year for 3 or 4 years, we'd be really happy with it. We had outstandings of $3 billion some years ago. We're not afraid of the level. We just need to see the activity.

Speaker #1: So, anyway, I think we've got the portfolio structured right. The midstream side of the portfolio is very good, and we have a great energy lending team.

Speaker #1: They're widely recognized across the industry , you know , as being pros and adding this , this oil and gas commodity hedging activity just , just has been terrific .

Speaker #1: And and we'll see a lot of strength from that because our clients want to do business with us . So anyway , I , I optimistic about it .

Speaker #1: And , you know , if that business grew 10% a year for 3 or 4 years , we'd be , you know , really happy with it .

Speaker #1: We had outstandings of $3 billion , you know , some years ago . So it's the level that , you know , we're not afraid of the level we just need to see the activity .

Speaker #8: Okay. Thanks a lot, Scott.

Jon Arfstrom: Okay. Thanks a lot, Scott.

Speaker #3: Thank you. And our next question comes from the line of Chris McGroarty from KBW. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Chris McGratty from KBW. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Chris McGratty from KBW. Please proceed with your question.

Speaker #9: Oh , great . Thanks . Harris on AI , could you speak to perhaps the near-term opportunity for the company , but maybe over time , any risks you see out there on the revenue side ?

Chris McGratty: Oh, great, thanks. Harris, on AI, could you speak to perhaps the near-term opportunities for the company, but maybe over time, any risks you see out there on the revenue side? Thanks.

Speaker #9: Thanks

Speaker #7: Sure . I mean , we have a variety of things going on with , you know , where we're using AI . It's I , you know , I don't suspect we're particularly different than most other peers .

Harris H. Simmons: Sure. We have a variety of things going on where we're using AI. I don't suspect we're particularly different than most other peers this way, other than the fact that I think we have, going back to the core replacement project over the last decade. It forced us to do something that I think few others were forced to do, and that is to dramatically focus on the quality of data and its organization. I tell people, we cleaned the house before we moved into a new house. We threw away a lot of the junk. We organized things. I think that's going to really prove to be useful in terms of speeding up the delivery of solutions. The kinds of things we're using it for, just examples, we're using it for things like appraisal review, all kinds of document review, contract review.

Harris Simmons: Sure. We have a variety of things going on where we're using AI. I don't suspect we're particularly different than most other peers this way, other than the fact that I think we have, going back to the core replacement project over the last decade. It forced us to do something that I think few others were forced to do, and that is to dramatically focus on the quality of data and its organization. I tell people, we cleaned the house before we moved into a new house. We threw away a lot of the junk. We organized things. I think that's going to really prove to be useful in terms of speeding up the delivery of solutions. The kinds of things we're using it for, just examples, we're using it for things like appraisal review, all kinds of document review, contract review.

Speaker #7: This way , other than the fact that I think we have I going back to the core replacement project over the last decade , I mean , it forced us to do some something that I think few others were forced to do .

Speaker #7: And that is that is to dramatically focus on the quality of data . And it's organization and , you know , so I tell people , you know , we cleaned the house before we moved into a new house .

Speaker #7: We , we threw away a lot of the junk . We organized things . And that's proving to be , I think that's going to really prove to be useful in terms of speeding up our , you know , the delivery of solutions , the , you know , the kinds of things we're using it for .

Speaker #7: I mean , just examples . We're using it for things like appraisal review , all kinds of document review , contract review . We're using it in our credit exam or credit review function to expand the population of deals that we're looking at and to basically , instead of having people finding needles in haystacks , they're now , you know , people are now looking at needles that we find with other tools .

Harris H. Simmons: We're using it in our credit exam or credit review function to expand the population of deals that we're looking at and to basically, instead of having people finding needles in the haystacks, people are now looking at the needles that we find with other tools. Use cases go on. People are looking for savings through technology. I came across something earlier today. I was looking, I came across just our headcount back in 2008. That was 18 years ago. There's nothing magic about the year except that our headcount is down 20%. Back then we were about a $54 billion company. You have to inflation adjust that. Even with that, it's about a 25% improvement in productivity per dollar of real assets, and AI is becoming a part of that.

Harris Simmons: We're using it in our credit exam or credit review function to expand the population of deals that we're looking at and to basically, instead of having people finding needles in the haystacks, people are now looking at the needles that we find with other tools. Use cases go on. People are looking for savings through technology. I came across something earlier today. I was looking, I came across just our headcount back in 2008. That was 18 years ago. There's nothing magic about the year except that our headcount is down 20%. Back then we were about a $54 billion company. You have to inflation adjust that. Even with that, it's about a 25% improvement in productivity per dollar of real assets, and AI is becoming a part of that.

Speaker #7: And so the , I mean , the use cases go on . I , you know , people are looking for savings through technology .

Speaker #7: I was , I came across something earlier today . I , I was looking , I came across just our headcount back in , in 2008 , I was , it was 18 years ago .

Speaker #7: There's nothing magic about the year except that , you know , our , our headcount is down 20% and our , you know , our , our , you know , the back then we were about $54 billion company .

Speaker #7: You have to have , you know , inflation adjust that . But even with that , I mean , it's about a 25% improvement in activity per dollar of real assets .

Speaker #7: And AI is , you know , becoming a part of that . It's so I my view is that AI isn't , you know , it's a new shiny object , but a lot of different technologies have led to improvement in productivity over the years .

Harris H. Simmons: My view is AI, it's the new shiny object, but a lot of different technologies have led to improvement in productivity over the years. I think this has the promise of accelerating it somewhat. We'll be looking at it. I touched on the surface of a few things, but we've got a variety of projects going on. As to the threat from AI, certainly there's a concern about agentic AI on margins, et cetera. I also think that some of these things get overplayed. I think that's probably going to be the case some places. A lot of the balances we have, a lot of the free balances we have actually aren't free balances. They're paying for services. A lot of it's analyzed.

Harris Simmons: My view is AI, it's the new shiny object, but a lot of different technologies have led to improvement in productivity over the years. I think this has the promise of accelerating it somewhat. We'll be looking at it. I touched on the surface of a few things, but we've got a variety of projects going on. As to the threat from AI, certainly there's a concern about agentic AI on margins, et cetera. I also think that some of these things get overplayed. I think that's probably going to be the case some places. A lot of the balances we have, a lot of the free balances we have actually aren't free balances. They're paying for services. A lot of it's analyzed.

Speaker #7: I think this has the , the promise of accelerating it somewhat . I mean , we'll be looking at it in , in , you know , we I touched on a surface of a few things , but we've got a variety of projects going on .

Speaker #7: I , you know , as to the , the threat from AI You know , there's certainly there's a concern about agentic AI , on , on margins , etc.

Speaker #7: But I also think that some of these things get overplayed. I, you know, I think that's probably going to be the case.

Speaker #7: Some places, but a lot of the balances, we have a lot of free balances. We have actually earned free balances.

Speaker #7: They're they're paying for services . A lot of it's analyzed and , and in a world where if you see more agentic AI optimizing , you know , you'll see economies .

Harris H. Simmons: In a world where if you see more agentic AI optimizing, you'll see, I'm a great believer that the magic of a free enterprise economy is it's really resilient and responsive to change. You'll see things priced that maybe are free today, that maybe get charged for you. Everybody will kind of figure out their way. I think back to, I've been around long enough, I remember when Regulation Q was removed, and if you told me that 40 years later, that we'd have more in the way of non-interest-bearing demand deposits as a percentage of total deposits than we had in the early 1980s, I'd have said that's impossible. Yet that's the case. I think you have to take with a grain of salt sort of the sky's going to fall because companies adjust, pricing adjusts, et cetera.

Harris Simmons: In a world where if you see more agentic AI optimizing, you'll see, I'm a great believer that the magic of a free enterprise economy is it's really resilient and responsive to change. You'll see things priced that maybe are free today, that maybe get charged for you. Everybody will kind of figure out their way. I think back to, I've been around long enough, I remember when Regulation Q was removed, and if you told me that 40 years later, that we'd have more in the way of non-interest-bearing demand deposits as a percentage of total deposits than we had in the early 1980s, I'd have said that's impossible. Yet that's the case. I think you have to take with a grain of salt sort of the sky's going to fall because companies adjust, pricing adjusts, et cetera.

Speaker #7: I'm a great believer that the magic of our , of free enterprise economy is . It's really resilient and , and responsive to change .

Speaker #7: And so you'll see things priced that maybe are free today that maybe get charged for you , you know , everybody will kind of figure out their way and , and I think back to , I've been around long enough .

Speaker #7: I remember when Reg Q was removed . And if you told me that , you know , that if you know , 40 years later , we'd have more in the way of non-interest bearing demand deposits as a percentage of total deposits .

Speaker #7: And we had in in the early 1980s , I'd have said , that's impossible . And yet that's the case . And so I , I think the you have to take with a grain of salt , sort of the sky is going to fall because , you know , companies adjust pricing , adjusts , etc.

Speaker #7: . So I , I think the important thing is to make sure that you're not , you know , have your head in your sand , in the sand , you're keeping focused on what customers want that you're supplying solutions and , and that's , that's , that's where our head is right now is how do we , how do we develop and participate in solutions that actually help customers and , and improve the relationships we have with them ?

Harris H. Simmons: I think the important thing is to make sure that you don't have your head in the sand. You're keeping focused on what customers want, that you're supplying solutions, and that's where our head is right now is how do we develop and participate in solutions that actually help customers, and improve the relationships we have with them? I think as long as we're doing that, it's going to work out fine.

Harris Simmons: I think the important thing is to make sure that you don't have your head in the sand. You're keeping focused on what customers want, that you're supplying solutions, and that's where our head is right now is how do we develop and participate in solutions that actually help customers, and improve the relationships we have with them? I think as long as we're doing that, it's going to work out fine.

Speaker #7: I think as long as we, you know, we're doing that, it's going to work out fine.

Speaker #3: Okay. And with that, it looks like that's all the questions we have. I would like to now turn the floor back over to Andrea Christopherson for closing remarks.

Operator 2: Okay. With that, it looks like that's all the questions we have. I would like to now turn the floor back over to Andrea Christoffersen for closing remarks.

Operator: Okay. With that, it looks like that's all the questions we have. I would like to now turn the floor back over to Andrea Christoffersen for closing remarks.

Speaker #10: Thank you , Gillian , and thank you to all for joining us today . We appreciate your interest in Zions Bancorporation . If you have additional questions , please contact us at the email or phone number listed on our website .

Andrea Christoffersen: Thank you, Julian, and thank you to all for joining us today. We appreciate your interest in Zions Bancorporation. If you have additional questions, please contact us at the email or phone number listed on our website. We look forward to connecting with you throughout the coming months. This concludes today's call.

Speaker #10: We look forward to connecting with you throughout the coming months. This concludes today's call.

Operator 2: Thank you. With that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful rest of your day.

Operator: Thank you. With that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful rest of your day.

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