Zions’ Net Interest Income Growth Slowed Again

The Tip Desk · October 20, 2026 · 3 min read

Zions’ third-quarter net interest income rose 2% to $684 million, extending a slowdown while its lending margin narrowed after a quarter of stability.

Zions Bancorporation, National Association (ZION), a financial services company serving the western United States, recorded a second consecutive slowdown in net interest income growth in the third quarter. Net interest income rose 2% year over year to $684 million, following growth of 4% in the second quarter and 6% in the first. The latest results also broke the margin stability recorded across the first two quarters.

Net interest margin fell 4 bps QoQ to 3.23%, after standing at 3.27% in both preceding quarters. Its year-over-year net interest income increase primarily reflected lower funding costs and changes in its balance-sheet mix. Deposit growth exceeded loan growth, allowing the bank to reduce more expensive borrowed funding and place excess liquidity in money market investments.

That funding shift carried a sequential cost, however. Deposit costs rose 11 bps QoQ to 1.59% from 1.48%. The increase partly reflected a greater proportion of higher-cost interest-bearing deposits and partly an accounting presentation change that added approximately 3 bps. Short-term borrowings ended the quarter at $843 million, leaving the bank less reliant on that source of financing.

Loans and leases were $62.5 billion, up 4% YoY but flat QoQ. Chairman and Chief Executive Harris H. Simmons attributed the sequential standstill to faster loan payoffs and a highly competitive market. Customer deposits, excluding brokered balances, reached $74.5 billion, rising 2% QoQ. The contrast left deposit gathering ahead of loan deployment, with excess liquidity the principal reason for larger money market investment balances.

Credit costs supplied a more favorable earnings contribution. The provision for credit losses was an $8 million benefit, against a $49 million expense a year earlier. Net charge-offs totaled $3 million, with an annualized charge-off ratio of 0.02%. Classified loans stood at $2.1 billion. Lower reserves partly reflected changes in portfolio composition and reduced commercial real estate risks, although less favorable economic forecasts and changes in scenario weightings partly offset those effects.

Fee revenue added another source of income, though valuation adjustments affected the headline result. Customer-related noninterest income totaled $192 million; excluding credit valuation adjustments, the adjusted figure was $182 million. Capital markets fees and income were $46 million. Changes in net credit valuation adjustments accounted for most of that business’s year-over-year increase, while higher swap fees contributed to the underlying improvement. Wealth management benefited from portfolio management and personal trust fees.

Operating costs absorbed part of the revenue. Noninterest expense totaled $553 million, or $549 million on an adjusted basis, while adjusted pre-provision net revenue was $338 million. Incentive compensation and employee benefits, outsourced services, and software, licensing and maintenance costs were among the sources of higher spending. Marketing expenditure also included customer acquisition and deposit growth initiatives, linking some of the expense base to its funding strategy.

Net earnings were $262 million, or $1.78 a share. The sequential earnings picture was complicated by securities results: a $4 million net loss replaced the second quarter’s $269 million net gain. That reversal primarily reflected the preceding quarter’s Visa share-sale gains and unrealized gains in its Small Business Investment Company portfolio.

The forward question centered on whether interest rates and fees could offset the slower interest-income trajectory. Zions completed its acquisition of the Basis Multifamily Finance agency lending platform in July. Simmons said the bank expects continued improvement in noninterest income into next year. He also said its moderately asset-sensitive balance sheet should produce stronger net interest income in a higher-rate environment, after short- and medium-term rates began rising late in the quarter.

Source: Zions Bancorporation quarterly earnings releases dated October 19, July 20 and April 20, 2026.