Zions Bancorporation
Annual Report 2020

Plain-text annual report

ANNUAL REPORT 2020& RESPONSE RESPONSIBILITY | 1 | A Collection of Great Banks On the cover: Top left: NSB client Rolando Velasquez is the owner of Velasquez Immigration Law Group of Las Vegas. Top right: Zions Bank branch manager Alex Rosen- han meets with Miss Essie's BBQ owners Deonn Henderson and Marcus Jones in Salt Lake City. Bottom left: CB&T client service associate Gabriela Gonzales cleans an ATM in Oakland. Bottom middle: Zions Bancorporation Chairman and CEO Harris H. Simmons honors Pastor France A. Davis. Bottom right: CB&T client service associate Hilda Casado prepares to help clients in Fresno. | 2 | CHAIRMAN’S MESSAGE TO OUR SHAREHOLDERS Over the past year, I’ve thought frequently of the story I heard a while back about an inscription found outside a small church in Leicestershire, England: “In the year 1653, when all things sacred were either demolished or profaned, Sir Robert Shirley built this church, whose singular praise it is to have done the best of things in the worst of times, and hoped them in the most calamitous.” By any measure, 2020 was a calamitous time for many. Most of us approached 2020 with great optimism: In recent years, it may have been the exceptional strategic plan or aspirational forecast that had not embraced the double meaning suggested by “2020” to convey a sense of vision and focus. But as if with the flip of a switch, in mid-March the global COVID-19 pandemic upended those plans, and with unprecedented immediacy broad swaths of the U.S. economy were locked down or shut in. In addition to the pandemic, we saw record-breaking wildfires in California, a major earthquake in our headquarters state of Utah, and so many hurricanes along the Gulf Coast that, after exhausting the English alphabet, a third of the Greek alphabet was consumed in naming them. And as a nation, and in our local communities, we found ourselves reflecting deeply on the need for a much greater commitment to racial equity and to ensuring that all Americans have access to the tools needed to succeed in our economy after the series of racially charged events that culminated with the tragic killing of George Floyd in Minneapolis last summer. As bankers, we’ve never experienced a time when so many of our clients were in such great need of immediate help as was the case in 2020. I was incredibly proud of our team, who rose to the challenge of doing “the best of things in the worst of times,” and of providing hope during such a tumultuous period. This past year tested | 1 | our ability to respond to challenges in our communities, and to demonstrate our responsibility to provide leadership in delivering solutions. To its credit, the U.S. Congress recognized the urgency of providing economic aid to businesses and individuals impacted by the pandemic, and almost immediately at its onset provided important tools for banks to use in assisting clients. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. At a total cost of $2.2 trillion, it was by far the largest economic stimulus initiative in our nation’s history, amounting to about 10% of U.S. GDP. Included in the bill was $300 billion in one-time payments to individuals, $260 billion in increased unemployment benefits, and $840 billion in loans and grants to corporations and local governments. RESPONDING TO THE PANDEMIC Top left: As essential workers, CB&T Irvine Branch employees mask up and make preparations to safely serve bank clients. Top right: Zions Bancorporation supplier diversity program manager James Jackson adjusts to working remotely. Bottom left: Nevada State Bank branch relationship manager Carina Marino wears a mask to work safely in her branch office. Bottom right: Vectra Bank employees organize an essential items donation drive. The CARES Act also included $350 billion (later increased to $669 billion) in forgivable, fully government-guaranteed Paycheck Protection Program (PPP) loans for small businesses. The PPP program was designed to help small businesses pay their employees and meet other pressing financial needs while their businesses were adversely affected by the pandemic, by providing for loan forgiveness if the proceeds were used to meet specific needs. Three days after the CARES Act was signed into law, and even before the program’s final rules were in place, we’d begun training nearly 2,000 of our front-line bankers, encouraging them to reach out to their clients and to prospective clients in need of help. Within a week, we began taking loan applications, quickly introducing a digital application available via our websites and on mobile devices. remotely. One visiting our nearly vacant headquarters offices during those early weeks of the pandemic would never have guessed that a giant home-based invisible army of bankers was working through tens of thousands of applications, delivering help to their clients. Small businesses have always been one of our most important target market segments, and we understood the importance of going the extra mile to reach out to them during an incredibly stressful time. It was fascinating to witness how various competitors responded to the opportunity to deliver PPP aid to small businesses. At least two of the nation’s largest banks at one time or another posted notices on their websites suggesting that clients in need of a PPP loan might want to talk to another bank. Another initially indicated that it would accept applications only from clients who were existing borrowers. This was all being done a mere two weeks after moving thousands of our office-based bankers to working from home, and it was a great test of our ability to work Our own approach was to unite great technology with great bankers, and in so doing to provide an experience to clients that combined the simplicity and elegance of | 2 | PAYCHECK PROTECTION PROGRAM Top left: The Commerce Bank of Oregon clients Jonathan, Abraham, Rhonda, and Hans Wrobel operate the family-owned business Higher Taste in Cornelius. Top right: Zions Bank employees Robert Rendon and Michael Brussock meet with Red Iguana restaurant owners Lucy Cardenes and Bill Coker in Salt Lake City. Bottom left: New clients through the Paycheck Protection Program, Mike Buich and his daughter Melissa Buich, are the owner and CFO of Tadich Grill in San Francisco. Bottom right: Vectra Bank client Dr. Jeff Patrician is the owner of Boulder Dental Arts in Boulder. a digital application with the assurance and coaching of a helpful banker focused on seeing that client expectations were exceeded. employees, and the median size of the loans we made was $33,200. It was a huge success: By the time the “2020 round” of the PPP program concluded, Zions Bancorporation was the ninth largest PPP lender in the nation, providing more than $7 billion of loans to over 47,000 businesses, over 30% of which were new clients. In total, our aggregate PPP lending in 2020 equaled 24% of the volume produced by the nation’s largest bank — a company 41 times our asset size. We were particularly proud of the fact that approximately one-third of the dollars loaned were to businesses in low-to-moderate income census tracts, or where minority groups constitute over 50% of the population. This was the result, in part, of outreach to numerous Black, Hispanic, and Asian/Pacific Islander chambers of commerce throughout our market area. Seventy percent of our loans were to businesses with fewer than ten Our success with the PPP program generated approximately $220 million in fee-based revenue (all of which, under accounting rules, is being deferred and recognized as Top PPP Lenders Rank Lender Name Loan Count Net Dollars Average Loan Size 1 JP Morgan Chase Bank 280,185 $29,352,233,698 $104,760 2 Bank of America 343,626 $25,557,615,698 $74,376 3 PNC Financial Services 73,925 $13,003,814,963 $175,906 4 Truist Financial Corporation 82,047 $12,631,618,727 $153,956 5 Wells Fargo & Company 194,451 $10,597,856,807 6 TD Bank 7 KeyCorp 85,970 43,172 $8,557,036,274 $8,211,676,707 $190,208 $54,501 $99,535 8 U.S. Bancorp 108,365 $7,608,550,070 $70,212 9 Zions Bancorporation 10 M&T Bank Corporation 47,828 34,651 $7,003,731,087 $146,436 $6,762,506,609 $195,161 Source: U.S. Small Business Administration Paycheck Protection Program Report, August 8, 2020. | 3 | interest income in our financial statements). We donated a portion of those fees, $30 million, to our charitable foundation, the earnings from which will be used in future years to benefit charities we help support throughout the Western United States. was thrilled! When I asked her for her 2019 taxes, she started to cry and said she could not do them as she has no money to pay her accountant. I knew then that I needed to do everything in my power to get this application through and done quickly. The PPP experience served to validate our belief that the future of banking businesses and their owners — a focal point of our long-term strategy — will continue to be grounded in the intersection of technology and strong banker-to-client relationships. I want to share a sampling of a few of the stories, letters and emails I received during the course of the PPP campaign. I include them because they communicate, more eloquently and convincingly than I can, why we believe building strong relationships is critical to our success. Clients’ names have been changed, where appropriate: FROM MIKE BUICH, OWNER OF TADICH GRILL IN SAN FRANCISCO, CA: “Since [we’ve had a] long relationship with [a major national bank], I was confident ’my bank’ would take care of me … My hope for assistance quickly turned to frustration when I realized [they] were not processing applications nor providing any direction or answers to my inquiries. On April 13, 2020 I called Zions Bank … and was immediately transferred to Mel Hugentobler, Vice President and Branch Manager, who took personal interest in my plight, and personally handled the application process for the PPP loan … My experience with Zions Bank and the PPP application was seamless. I know your employees have been working long hours, often dealing with clients that are scared, frustrated, and angry, however I wanted to take this time to give you some positive feedback and assure you that their hard work did pay off. I always felt like we were a team working together towards a common goal.” FROM NANCY PEARCE, A ZIONS BANK BRANCH MANAGER IN BOUNTIFUL, UT: “Jane Anders is a single divorced woman who has her own photography business. Her business came to a screaming halt with the pandemic. She originally sent in an incomplete PPP application. I called Jane, and she was surprised to hear from me as she had heard the [PPP money was exhausted]. I assured her there was money available and I would be happy to help her if she still wanted to pursue it. She “After spending all day Friday with numerous obstacles of expired registration, unfiled 2019 taxes, and account issues I was able to help Jane and finally get her application submitted. With the assistance of Shelly Johnson, we were able to quickly get it moved through the queue. When I informed Jane Friday night she replied, ’Oh my goodness! Best news EVER! I cannot thank you enough. Just know that all your hard work and reopening my application is actually putting groceries in my fridge today.’” FROM THE OWNER OF A HOSPICE CARE BUSINESS IN BURBANK, CA: “It is with great gratitude that I write this letter of appreciation to Ms. Nhienle Mac [a relationship banker in Pasadena] for the exemplary service I received from her last week. “I am a Small Business owner and … I was so frustrated with the process of trying to get a PPP loan from [a major national] bank. When I submitted my request for the loan, because of the numerous applications and [the] huge scale of the whole system, I didn't hear anything from the bank. Waiting and waiting and it's like it went into a dark hole. I almost gave up, until a friend of mine referred me to California Bank & Trust and I spoke directly to Ms. Nhienle Mac. It was a surprise that I finally was able to speak to a live person in the bank. “Ms. Nhienle Mac's enthusiastic, natural, and attentive tone of voice while on the phone helped me feel comfortable during our conversation. She answered my questions with sincerity and honesty that made me feel satisfied in moving forward with the application ... She worked on my loan tirelessly and got it done so swiftly. I got my PPP loan approval in less than 72 hours. Ms. Mac’s performance surpassed my expectations. [It’s] hard to find words to describe the positive experience I had with her. I am a Registered Nurse, and as part of the health care workers during this COVID-19 global pandemic crisis, we are being hailed as ‘heroes.‘ For me and for sure to many other small business applicants she is helping now, Ms. Nheinle Mac is a true ‘superhero.‘” | 4 | One of my favorite stories to come out of the PPP experience was the client in Idaho’s Wood River Valley who took out a newspaper ad [see below], at his/her own expense, to laud Zions Bank for its performance in delivering PPP aid. FROM DR. JEFF PATRICIAN, A DENTIST IN BOULDER, CO: “I want to say how lucky I am to have a banking relationship with Vectra and the entire team, specifically Drew Britton [a business banker in Boulder]. Over close to a decade I have depended on Vectra for my business and personal banking needs … That relationship has now saved my office during this disaster. I read horror stories online of dentists who bank with the evil faceless Big Boys finding themselves thrown to the curb and scrambling completely on their own. “I want to thank Drew and everyone involved for their tireless efforts in the last few weeks. This was a heck of a test you were given, but your tremendous skill with what you do, combined with an inner sense of care for the people you serve … has saved my business, and surely many more. I know how long and hard you've been working, and I wish there was a way I could show my appreciation. This letter will have to do for now. Please feel free to pass it along to people who will want to know.” AND A TWEET FROM ONE OF OUR NEW UTAH CLIENTS, in response to Shark Tank’s Mark Cuban, who asked for both positive and negative PPP experiences: After being with @[large credit union] for 17 years, they wouldn't even process our #PPPLoans app. I called @ZionsBank and they were AWESOME! I can't recommend them more highly! Very hands-on. We will definitely be sending all our deposit business to #zionsbank. What a phenomenal experience! We helped our clients in other ways, as well. We provided payment deferrals or modifications on loans totaling $4.3 billion to clients impacted by COVID-19. At the end of the year, only 1% had payments that were past due 90 days or more. We also participated in the Main Street Lending Program, a facility provided by the Federal Reserve System to assist certain middle market borrowers access the credit markets, originating $148 million in such deals during the year. As you can imagine, I’m proud beyond words of the work of so many of our bankers — some of whom worked virtually around the clock, at home, for days on end — in helping many thousands of businesses. Of the many heroes we’ve read about in recent months, they certainly rank among them for their role in helping to rescue these businesses. They truly did the best of things in the worst of times, and provided hope in the most calamitous. | 5 | FINANCIAL RESULTS The bank’s financial results in 2020 were materially impacted by the pandemic, which led the Federal Reserve to more vigorously promote a “zero interest rate policy” that adversely affected our primary revenue source — net interest income. The pandemic also resulted in a substantial addition to the bank’s loan loss reserves due to concerns about our borrowers’ ability to withstand the pandemic’s impact on their businesses and their personal financial situations. Net income available to common shareholders totaled $505 million, or $3.02 per share, a reduction from the prior year’s results of $782 million, or $4.16 per share. The most notable factor adversely impacting our performance in 2020 was a provision for credit losses of $414 million, as compared with $39 million in 2019. Aside from the pandemic, the increased provision was also precipitated in part by a new accounting standard that became effective at the beginning of 2020, known as Current Expected Credit Loss, or CECL. This standard, in many cases, requires larger reserves than previously, as reserves must be established for losses expected during the life of a loan, as opposed to only reserving for losses currently inherent in our loans under the prior standard. Actual net loan and lease charge-offs during the year were $105 million or 0.22% of average (non-PPP) loans, up from $37 million or 0.08% of average loans in 2019. PPNR-NCOs. This measure employs adjusted PPNR (which we reconcile to Generally Accepted Accounting Principles, or GAAP, in our financial statements), which adjusts tax-exempt revenue to its taxable equivalent value and further adjusts for non-recurring expenses. In 2020, the most significant adjustment was a one-time expense of $28 million to fully terminate our dormant defined-benefit pension plan. PPNR-NCOs also substitutes actual net charge-offs for the provision for credit losses. Net charge-offs is a measure of actual losses during the period, while the provision for credit losses results from a forecast of future losses that is subject to the increased imprecision (certainly a feature of any forecast) inherent with the implementation of the CECL accounting standard. When measured by our PPNR-NCOs results, 2020 was a respectable year, considering the impact of the pandemic. PPNR-NCOs was $1.038 billion, a 7.7% reduction from $1.125 billion in 2019 — a year in which realized credit losses were exceptionally low. The pandemic had a sizable impact on loans and deposits. Average non-PPP loans increased only 0.5%, to $48.5 billion, and non-PPP loans at year end were down $805 million or 1.7%, and would have been down further but for $550 million, or 4.8%, growth in commercial real estate loans, and strong growth of $558 million or 23.3% in municipal loans. Internally, and for many of our management incentive programs, we focus on a measure we refer to as adjusted Pre-provision Net Revenue, less Net Charge-offs, or Deposits, on the other hand, experienced massive growth as a result of the government stimulus programs and Fed monetary policy. Average deposits increased EARNINGS PER SHARE (DILUTED) STOCK PRICE PERFORMANCE HISTORY $4.08 $4.16 102.2% 79.3% $3.02 59.1% 36.8% $2.60 $1.99 Zions Zions' Peers 2016 2017 2018 2019 2020 10-year 5-year 3-year 1-year (14.5%) (10.6%) (9.1%) (16.3%) Source for peer financial data throughout this report: S&P Global Market Intelligence; peer group corresponds with the peer group defined in the Bank’s proxy statement and found on page 16 of this report. | 6 | NET CHARGE-OFFS / AVG LOANS (2020) PRE-PROVISION NET REVENUE LESS NET CHARGE-OFFS / RISK-WEIGHTED ASSETS (2020) 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% C R F L A W T C B P C F T W C B W E N O I Z B N F V N S N H F B T M F K O B A M C B S A B T I F Y E K G F C F R N A B H L A W C O W E F K O B B T M F R N H F N O I Z N A B H T C B P B T I F C R F B N F V N S C F T W Y E K G F C A M C B S A 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Excluding PPP loans, Zions’ NCO/Avg Loan ratio was 0.22% for 2020 15.6% to $63.7 billion, while average noninterest-bearing demand deposits increased 23.6% to $28.9 billion. At year end, noninterest-bearing demand deposits had increased a phenomenal 37.8% to $32.5 billion, constituting 47% of total deposits. This enormous increase in money supply was accomplished through the open market purchase of securities, which injected immense amounts of cash into the economy. All that cash must end up somewhere, and much of it appears to be in deposit accounts on banks’ balance sheets. The extraordinary economic stimulus consisted of both federal government fiscal policy, which produced a $3.1 trillion deficit equal to about 15% of GDP, and an equal dose of central bank money creation. The Federal Reserve System’s balance sheet, which had already swollen from $0.9 trillion prior to the 2008 financial crisis to a pre-pandemic level of $4.3 trillion, was further inflated to $7.4 trillion by the end of 2020. To put this $3.1 trillion increase in money supply in context, a $3.1 trillion stack of dollar bills would reach to the moon; 3.1 trillion gallons of water would fill Lake Powell — a massive 185-mile-long reservoir that straddles the Utah-Arizona border and averages 132 feet in depth. DEPOSIT GROWTH Average balances 15.6% 4.0% 3.2% 3.6% 1.9% 2016 2017 2018 2019 2020 The purchase of securities by the Fed boosts the market value of those securities and, inversely, creates downward pressure on interest rates: the average 30-year Treasury rate in 2020, at a mere 1.56%, was a full percentage point lower than in 2019; the average 3-month Treasury rate dropped one and three quarters percentage points to 0.36% in 2020, from 2.11% in 2019. All of this was wonderful for our residential mortgage business — total mortgage production increased 29% from 2019 to $3.5 billion, with another $1.5 billion in the pipeline at the end of December. The profit margins on mortgages we sold increased as well, resulting in an increase in loan sales income of more than 220% when compared with 2019. But the lower interest rates were decidedly less helpful to our net interest margin, which decreased to 3.15% in 2020, from 3.54% in 2019. Average earning asset yields fell 80 basis points (hundredths of a percentage point) as maturing loans were refinanced at current lower rates, while the total cost of deposits and interest-bearing liabilities dropped 45 basis points. With such a large volume of noninterest- bearing demand deposits, and with other deposit rates nearing zero, margin compression is a great challenge in such a low rate environment. Our taxable-equivalent net interest income, which was negatively impacted by this margin pressure, was greatly | 7 | aided by the amortization of deferred PPP revenue, which contributed $148 million to 2020 pretax results. Noninterest income rose 2.1% to $574 million, with customer-related fee income — which excludes dividend income, securities gains and fair value adjustments on derivatives — increasing 4.6% to $549 million. Weakness in retail banking fees and card income was offset by the aforementioned strength in mortgage banking income, which more than tripled during the year, the result of the low interest rate environment and the introduction in 2019 of a very appealing digital mortgage application. Noninterest expense was well controlled. Total noninterest expense was $1.7 billion, down 2.2% from 2019. When adjusted for certain non-operating expenses, such as the termination of our defined-benefit pension plan, severance, and restructuring costs in both years, noninterest expense decreased $31 million, or $61 million when further adjusted for the one-time $30 million donation made to the Bank's charitable foundation in conjunction with our success in the PPP program. In late 2019, we had anticipated earnings pressure from a low interest rate environment during 2020, and implemented a staff reduction program that, when combined with other net workforce reductions accomplished through attrition and associated with lower branch transactional activity, reduced our full-time equivalent employee count by 510, and contributed to a $54 million, or 4.7%, reduction in salary and benefits expense. Travel, business development, and public relations expenses were also down $21 million, or 75.9%, because of the pandemic. Our ability to reduce staffing levels has benefited from a focus on applying robotic automation to a wide range of tasks. In late 2018, we established a Business Process Automation Center of Excellence, with a dedicated team that has implemented over 240 automation solutions, reducing human error, improving consistency, and enhancing competitiveness by reducing costs. In 2020, 281,000 manual hours were eliminated, and the team has established an ambitious goal to eliminate an additional 1 million hours by 2022. I’ve told Ken Collins, an exceptional executive who oversees much of this process automation effort, that the bank of the future will have a person, a dog, and a computer. The person’s job will be to feed the dog, and the dog’s job will be to keep the person from touching the computer. When it comes to back-office processes, at least, I’m pretty sure that’s the future to which Ken is leading us! Our Supply Chain Management group also produced strong results in 2020, with realized savings of $27.5 million, arising from 81 different projects. We continued to rationalize our branch network in 2020, closing 14 branches and consolidating their accounts and people into other branches, while rightsizing five other branches. At the same time, we opened two new branches during the year in growing markets. While we will continue to constantly evaluate and optimize our branch network, these physical locations remain a vitally important component of our strategy to locate empowered, well-trained, and long-tenured relationship bankers close to our clients. CREDIT QUALITY The strength and resiliency of our borrowing clients, combined with the impact of a great deal of government stimulus and high-quality asset selection, resulted in relatively healthy credit results in 2020, given the backdrop of the pandemic. We identified approximately $4 billion of non-PPP loans extended to borrowers in ten industries we deemed to have elevated risk due to the pandemic. We conducted extensive reviews of the significant loans in these portfolios and continue to carefully STRONG CAPITAL POSITION COMMON EQUITY TIER 1 RATIO (CET1) 14% 12% 10% 8% 6% 4% 2% 0% C B W E F K O B N O I Z T C B P B S A A M C B T I F N A B H B T M G F C L A W B N F Y E K F R C R F V N S N H F C F T W | 8 | monitor developments in our clients’ businesses. While a higher proportion of these businesses availed themselves of temporary relief through payment deferral programs, there was almost always a strong secondary source of repayment, and 98% of the loans were secured by collateral, generally with real estate and with a median loan-to-value ratio of 53%. Non-performing asset levels increased during the year, from 0.51% of loans, leases and other real estate owned at the end of 2019 to 0.69% at the end of 2020, but remained at very acceptable levels. Classified loans, those with weaknesses that, if not mitigated, could lead to loss, doubled in 2020, primarily among borrowers in the high-risk COVID-19 industries. CAPITAL AND LIQUIDITY MANAGEMENT We finished the year with a strong capital position, with a regulatory Common Equity Tier 1 ratio of 10.8%, up from 10.2% a year ago. Our Tier 1 Leverage ratio declined to 8.3%, from 9.2%, as a result of the strong deposit growth we experienced, and the coinciding increase in high-quality liquid assets. As pandemic-related concerns produced a sharp decline in equity prices — including our own common share price — throughout the spring, 29.2 million of our ZIONW warrants, issued ten years ago in the aftermath of the financial crisis, expired “out of the money.” While this produced a loss for holders of the warrants (myself included!), it was a boon for the company and its common shareholders, as it eliminated over eight million shares from our fully diluted share count. While we purchased 1.7 million shares of our common stock in the open market during the first quarter, we suspended any share buybacks for the remainder of the year after the onset of the pandemic, while maintaining our common dividend at its existing level. Our balance sheet liquidity increased sharply during the year. At the end of 2019, interest-earning money market investments and securities totaling $15.7 billion comprised 23% of our total assets. By the end of 2020, these liquid assets had increased to $23.5 billion, constituting 29% of total assets. We’ve maintained a reasonably short duration in our securities portfolio. We believe that a persistent negative interest rate environment is unlikely, and that our downside risk in such a scenario is very limited, while our models indicate that a 100 basis point increase in rates would result in a 9% increase in net interest income, and a 200 basis point increase would result in an 18% rise in such revenue. We continue to believe that the government’s posture toward fiscal policy, when combined with the immense amount of liquidity created through very accommodating monetary policy in recent years, creates an environment in which we would expect to see higher levels of inflation — and thus interest rates — in the years ahead. OUR TECHNOLOGY JOURNEY We continue to make substantial investments in technology, to ensure that we’ll be capable of competing in a world that’s become increasingly digital. As noted, we’re strong believers in the symbiotic combination of great bankers and great technology. The investments we’re making and the projects we’ve undertaken will allow us to create exceptional experiences for our clients and provide bankers with the products and tools they need to succeed. Two of our primary projects, the replacement of our core loan and deposit systems (FutureCore), and the replacement of our online and mobile client-facing applications, experienced moderate setbacks due to the pandemic this past year. Work being performed offshore, in particular, was slowed or brought back to the U.S. primarily due to security concerns as contractors moved from working in cleanrooms to working in living rooms. We’re nevertheless proceeding at full speed to complete these two major projects, with the final release of FutureCore — a new and modern deposit system — slated for installation in early 2023; and with the new mobile and online platform beginning its rollout in the first quarter of 2021 with an initial implementation at National Bank of Arizona. The risk of cyberattacks and data theft or compromise continues to escalate each year, as does our response. Over the past three years we have nearly tripled the size of our cybersecurity team, with a major increase in our associated investment in tools to prevent and detect data and network intrusions. Over that same period, we have increased the number of daily cybersecurity | 9 | “signals” or data sources we process and monitor by more than tenfold to secure our systems against this increasing threat. to help bankers identify solutions for clients. Launched in August with 630 users, it will be rolled out to 3,200 bankers over the next few months. In addition to the rapid deployment of a digital solution for PPP loans, a sampling of some of our achievements in 2020 included: › The launch of a New Accounts Opening Platform for our Treasury Management Select product, streamlining the process of opening new accounts for smaller treasury management clients. It was used to open over 400 new treasury management accounts subsequent to its launch in the fall. › The redesign and launch of a digital small business loan application, using the platform we built for the PPP program, and designed to speed the underwriting and processing of unsecured small business loans of under $50,000, and secured loans of up to $175,000. › The implementation of our Intelligent Real-time Information System (IRIS), which uses machine learning › The launch of our Mobile Banker project, equipping hundreds of bankers with iPads that allow them to connect to client data while on calls, and to provide real-time solutions while meeting with clients. › The introduction of an online scheduler, allowing clients to schedule appointments with their branch-based bankers, either in the office or via videoconference — on their mobile phones. › The launch of a new Application Programming Interface, or API, platform, allowing for faster integration between our core systems and other applications. › The completion of a branch teller “capture” project, modernizing the manner in which deposited item information is captured at the point of deposit, eliminating the need for a deposit slip and dramatically reducing balancing and reconciliation issues. PEOPLE & TECHNOLOGY Top: Zions Bank’s marketing team was recognized for their campaign to support local restaurants during the pandemic. Bottom left: Zions Bancorporation director of banking transformation Kristiane Koontz received the “Technology Transformation Excellence” award from the Women Tech Council in 2020. Bottom right: Zions Bancorporation’s enterprise digital strategy team meets virtually. | 10 |  › The upgrade of our telecommunications network and Wi-Fi availability in our branches workforce, in the workplace, and in the marketplace, in an effort we’re calling, “Everyone Counts.” › The launch of new workforce management software, allowing the bank to schedule branch employees at the best possible times and allowing employees to view their schedules via an online tool. We expect that the investments we’re making in foundational technology and digital tools will keep us at the forefront of the banking industry in providing both our bankers and our clients with the capabilities and products they need, and with elegant experiences interacting with us in the years ahead. EVERYONE COUNTS Beyond the pandemic, 2020 was marked by an increased awareness throughout our nation of the need to raise our commitment, both institutionally and individually, to inclusiveness. At Zions Bancorporation, we’re committed to ensuring this takes place in three areas: in the Following the tragic murder of George Floyd, we spent a great deal of time throughout the bank listening to colleagues from minority communities, with the objective of better understanding their hopes and challenges. I expressed my belief that tolerance should never be our objective; none of us aspires to be tolerated. We need to move beyond tolerance and form real friendships with those outside our usual circles and do all we can to help them succeed. In this spirit, we expanded our company-wide Diversity, Equity and Inclusion (DEI) Council to advise the bank’s management on steps we can take to ensure that we’re a truly great place for all of our employees to work. Among the objectives we’ve established are expanding diversity training and ensuring that every new employee participates in it; including DEI questions in our periodic employee surveys; and seeking out more diverse candidates in our recruiting efforts. We’ve developed a DIVERSITY, EQUITY & INCLUSION Top: Employees take part in diversity, equity and inclusion training. Bottom left: Chairman and CEO Harris H. Simmons presents a $100,000 donation to the Pastor France A. Davis Scholarship Foundation. Bottom right: Zions Bank President and CEO Scott Anderson speaks at the presentation of the “Utah Compact on Racial Equity, Diversity and Inclusion” at the Utah State Capitol in Salt Lake City. | 11 | supplier diversity program, with the goal of expanding the list of diverse suppliers with whom we currently do business. We also conducted, as we’ve done for a number of years, a study with the help of an independent third party to review equity in employee compensation. We found that, after adjusting for relevant variables including education, experience and geography, women are paid, on average, above 99% of what men are paid, and minorities are paid above 98% of what non-minorities earn. In a relatively few cases we identified outlier situations that have subsequently been addressed. We’re committed to continue this focus on ensuring that Zions Bancorporation has a workplace where all are treated fairly in accordance with their qualifications and abilities, and that it’s a place where “everyone counts.” I’m especially determined that we will do all in our power to make a difference for women and minority-owned businesses in the marketplace. Our most potent tool in creating positive change is to put our balance sheet and our bankers to work in funding the capital needs of deserving, underrepresented entrepreneurs. We’re working with our regulators at the Office of the Comptroller of the Currency in an effort they’re calling Project REACh to develop innovative and prudent methods for providing greater volumes of credit to these small business owners using both conventional and U.S. Small Business Administration (SBA) guaranteed loans. We have a great opportunity to put our small business banking capabilities to work in better serving these communities. We’ve also announced a partnership with Unity National Bank, a Black-owned community bank headquartered in Houston, Texas, to provide equity capital. More importantly, we’ll be providing Unity National with consulting in compliance and risk; and training, by reserving space in our Banker Development Program for one of their bankers. The events of this past summer brought tragedy to one of our great bankers, Angela Underwood, a most talented regional manager for California Bank & Trust in California’s Antelope Valley, and a woman who has very capably served her community in a number of capacities, including as deputy mayor of the city of Lancaster. During the nation-wide unrest that followed the killing of George Floyd, Angela’s brother, Patrick, was shot and killed while protecting a Department of Homeland Security building in Oakland. As we’ve worked on creating a more equal and inclusive society this year, I’ve thought often of my friend Angela and her late brother, Patrick, two extraordinary Black citizens who are frequent reminders to me of why this work is so important. WHAT THE PRESENT MAY TEACH US ABOUT THE FUTURE One of the pandemic’s not-so-minor miracles was the fact that the videoconferencing technology we and so many other businesses used to quickly pivot to working from home was so recently developed and deployed. In our case, we’d made Microsoft Teams® software available to employees in late 2019, only months before it became critical to our ability to function. By the end of the year, we were supporting 3.7 million monthly Teams® interactions. It’s an open question as to how the capabilities we’ve developed will change the way we work and interact with others. I expect it will allow greater flexibility for occasional work from home for many of us. Long before the pandemic, we’d had a number of employees working remotely, including many of our customer care center employees and some of our technologists. I also expect that we’ll see a reduction in business travel; there are many meetings that simply don’t warrant the cost and the travel time required to show up in person now that “virtual” participation has become a good substitute for being physically present. At the same time, we’ve seen that it’s a real challenge, especially for newly hired employees, to develop the networks and relationships that are critical in our own, and most other businesses if we’re not interacting with the people we work with in informal settings — in hallways, break rooms and elevators. During 2020, we broke ground on two new significant building projects — a new headquarters facility for our Vectra Bank Colorado affiliate bank in Denver and a new technology and innovation campus in the Salt Lake Valley. In both cases, we’re consolidating employees | 12 | located in multiple locations into more efficient space in a single building. Our technology campus, for instance, will reduce by 20% the space we currently occupy in a dozen different buildings, and will do so in a building that’s substantially more energy-efficient and inviting. Certainly, the digitalization of banking will continue. It will allow all of us to reduce costs and provide greater convenience and access to our clients. We currently average over 85 million mobile and online banking logins annually — creating substantial savings relative to the alternative of providing service in a branch or by telephone. At the same time, when a client is frustrated, or needs coaching with respect to a solution, there’s no good substitute for a well-trained, highly qualified banker. Relationships still count. I believe that’s not likely to change anytime soon. As I write this letter, we’re delivering the second round of PPP loans to eligible businesses, with $284.5 billion in funding included in a coronavirus relief bill passed by Congress in late December. The SBA opened its web portal to accept applications submitted through participating banks in mid-January, and in its interim report on results through February 15, 2021, Zions Bancorporation was listed as the nation’s sixth largest PPP lender. Our bankers are at it again! Our support of small and middle-market businesses led Greenwich Associates, a leading global financial services research organization, to name Zions Bancorporation as one of only a small number of “Standout Commercial Banks” amid the crisis for the way our people went the extra mile in serving these clients. After conducting more than 23,000 interviews with small and middle market businesses, resulting in enough data to evaluate more than 600 banks, Greenwich Associates also awarded Zions Bancorporation 15 “Excellence” awards in a variety of categories — the sixth most of any bank in the nation in 2020. Finally, I want to express my appreciation to a long-time member of our Board of Directors who retired from his service with us this past year. During Jerry C. Atkin’s 27 years as a board member he consistently challenged our thinking and added an abundance of common sense to our discourse. He also added the perspective of the kind of individual we seek out as a client — someone who worked hard over several decades to build a very small family-owned business — SkyWest Airlines — into a national leader in its field. We’ll greatly miss Jerry’s wisdom and good humor. At the same time, we were extremely pleased to welcome Claire A. Huang to our board. Claire brings us deep experience in financial services marketing with several of the nation’s leading banks and brokerage firms. We’re delighted to have her with us! My thanks to each of you as shareholders in Zions Bancorporation. You have every reason to be proud to be associated with one of the most extraordinary teams of bankers in the industry. We look forward with you to a new year that will, I hope, see a recovering economy and a brighter outlook — especially for businesses and individuals who’ve been particularly hard-hit by the pandemic. The future is very bright, and we appreciate your support in helping us to capitalize on the opportunities that lie ahead of us. GREENWICH EXCELLENCE AWARDS: 2009-2020 (YEARLY AVERAGE) Zions has outranked several of the nation's largest banking companies Sincerely, 14 5 Zions JP Morgan Chase 3 US Bank 2 Wells Fargo 2 Bank of America Source: Greenwich Associates (February 2021) with multi-year averages calculated by Zions. Awards include recognition of excellence in a variety of banking product and service categories in both small and middle market business banking. Nationally, more than 600 banks were evaluated through the process of surveying more than 23,000 commercial banking clients. Harris H. Simmons, Chairman and CEO February 15, 2021 | 13 | Financial Highlights (Dollar amounts in millions, except per share amounts) For the Year Net interest income Noninterest income Total revenue Provision for credit losses Noninterest expense Income before income taxes Income taxes Net income Net earnings applicable to common shareholders Per Common Share Net earnings – diluted Net earnings – basic Dividends declared Book value at year-end Market price – end Market price – high Market price – low At Year-End Assets Net loans and leases Deposits Long-term debt Federal funds and other short-term borrowings Preferred equity Common equity Performance Ratios Return on average assets Return on average common equity Tangible return on average tangible common equity Net interest margin Equity to assets Common equity tier 1 Tier 1 leverage Tier 1 risk-based capital Total risk-based capital Tangible common equity Tangible equity Selected Information 2020/2019 Change (%) 2020 2019 2018 2017 2016 (2) 2 2 NM (2) (36) (2) (34 ) (35 ) (27 ) (31 ) +6 +8 (16 ) +1 (40 ) 18 10 22 (22 ) (23 ) NM 8 $2,216 574 2,790 414 1,704 672 133 539 505 $3.02 3.06 1.36 44.61 43.44 52.48 23.58 $2,272 562 2,834 39 1,742 1,053 237 816 782 $4.16 4.41 1.28 41.12 51.92 52.08 39.11 $2,230 552 2,782 (40) 1,679 1,143 259 884 850 $4.08 4.36 1.04 37.39 40.74 59.19 38.08 $2,065 544 2,609 17 1,656 936 344 592 550 $2.60 2.71 0.44 36.01 50.83 52.20 38.43 $1,867 516 2,383 83 1,585 705 236 469 411 $1.99 2.00 0.28 34.10 43.04 44.15 19.65 $81,479 $69,172 $68,746 $66,288 $63,239 53,476 69,653 1,336 1,572 566 7,320 48,709 57,085 1,723 2,053 566 6,787 46,714 54,101 724 5,653 566 7,012 44,780 52,621 383 4,976 566 7,113 42,649 53,236 535 827 710 6,924 % 0.71 7.2 8.4 3.15 9.7 10.8 8.3 11.8 14.1 7.8 8.5 % 1.17  11.2  13.1  3.54  10.6  10.2  9.2  11.2  13.2  8.5  9.3  % 1.33 12.1  14.2  3.61  11.0  11.7  10.3  12.7  13.9  8.9  9.7 % 0.91 7.7  9.0  3.45  11.6  12.1  10.5  13.2  14.8  9.3  10.2  % 0.78 6.0  7.1  3.37  12.1  12.1  11.1  13.5  15.2  9.5  10.6  Weighted average diluted shares outstanding (in thousands) Common shares repurchased (in thousands) Common dividend payout ratio1 Capital distributed as a percentage of net earnings applicable to common shareholders2 Full-time equivalent employees Branches -11% -93% -5% -3% 165,613 1,666 45 % 59 % 9,678 422 186,504 23,505 29 % 170 % 10,188 434 206,501 12,943 24 % 103 % 10,201 433 209,653 7,009 16 % 74 % 10,083 433 204,269 2,889 14 % 36 % 10,057 436 1The common dividend payout ratio is equal to common dividends paid divided by net earnings applicable to common shareholders. 2 Common dividends paid plus dollar amount used for share repurchases for the year, divided by net earnings applicable to common shareholders. | 14 | GAAP to Non-GAAP Reconciliation (Dollar amounts in millions, except per share amounts) 2020 2019 2018 2017 2016 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense LESS adjustments: Severance costs Other real estate expense Debt extinguishment cost Amortization of core deposit and other intangibles Restructuring costs Pension termination-related expense (b) Total adjustments $1,704 $1,742 $1,679 $1,656 $1,595 1 1 - - 1 28 31 25 (3) - 1 15 - 38 3 1 - 1 2 - 7 7 (1) - 6 4 - 16 5 (2) - 8 5 - 16 (a-b)=(c) Adjusted noninterest expense 1,673 1,704 1,672 1,640 1,579 (d) (e) Net interest income Fully taxable-equivalent adjustments (d+e)=(f) Taxable-equivalent net interest income (TENII) (g) Noninterest Income (f+g)=(h) Combined Income LESS adjustments: Fair value and nonhedge derivative income (loss) Securities gains, net (i) Total adjustments 2,215 28 2,243 574 2,272 26 2,298 562 2,230 22 2,252 552 2,065 35 2,100 544 1,867 25 1,892 516 2,817 2,860 2,804 2,644 2,408 (6) 7 1 (9) 3 (6) (1) 1 - (2) 14 12 2 7 9 (h-i)=(j) Adjusted revenue 2,816 2,866 2,804 2,632 2,399 (j-c) Adjusted pre-provision net revenue (PPNR) 1,143 1,162 1,132 992 820 Net Earnings Applicable to Common Shareholders (NEAC) (k) (l) Net earnings applicable to common Diluted Shares Diluted EPS PLUS Adjustments: Adjustments to noninterest expense Adjustments to revenue Tax effect for adjustments Preferred stock redemption (m) Total adjustments (k+m)=(n) Adjusted net earnings applicable to common (NEAC) (n)/(l) Adjusted EPS (o) (p) Average assets Average tangible common equity Profitability (n)/(o) (n)/(p) (c)/(j) Adjusted Return on Assets Adjusted Return on Tangible Common Equity Efficiency Ratio 505 165,613 3.02 782 186,504 4.16 850 206,501 4.08 550 209,653 2.60 411 204,269 1.99 31 (1) (7) - 23 528 3.19 76,057 6,035 0.69% 8.7% 59.4% 38 6 (11) - 33 815 4.37 69,571 5,951 1.17% 13.7% 59.5% 7 - (2) - 5 855 4.14 66,569 6,009 1.28% 14.2% 59.6% 16 (12) (2) 2 4 554 2.64 65,116 6,129 0.85% 9.0% 62.3% 16 (9) (3) 10 14 425 2.08 60,050 5,888 0.71% 7.2% 65.8% | 15 | ZIONS’ PEER GROUP Ticker Symbol / Company Name ASB Associated Banc-Corp BOKF BOK Financial Corporation CFG Citizens Financial Group, Inc. CMA Comerica Incorporated EWBC East West Bancorp, Inc. FHN First Horizon National Corporation FITB Fifth Third Bancorp FNB F.N.B. Corporation FRC First Republic Bank HBAN Huntington Bancshares Inc. KEY KeyCorp MTB M&T Bank Corp. PBCT People’s United Financial, Inc. RF Regions Financial Corp. SNV Synovus Financial Corp. WAL Western Alliance Bancorporation WTFC Wintrust Financial Corp. Zions Bancorporation, N.A. BOARD OF DIRECTORS CORPORATE OFFICERS Harris H. Simmons Chairman and Chief Executive Officer Zions Bancorporation Gary L. Crittenden Private Investor Suren K. Gupta Executive Vice President of Technology and Strategic Ventures Allstate Insurance Company J. David Heaney Chairman Heaney Rosenthal, Inc. Claire A. Huang Former Chief Marketing Officer J.P. Morgan Chase and Company Vivian S. Lee President, Health Platforms Verily Life Sciences Scott J. McLean President and Chief Operating Officer Zions Bancorporation Edward F. Murphy Former Chief Financial Officer Federal Reserve Bank of New York Stephen D. Quinn Lead Director Former Managing Director and General Partner Goldman, Sachs & Co. Aaron B. Skonnard Chairman and Chief Executive Officer Pluralsight, Inc. Barbara A. Yastine Former Chair, President and Chief Executive Officer Ally Bank Harris H. Simmons Chairman and Chief Executive Officer Scott J. McLean President and Chief Operating Officer EXECUTIVE VICE PRESIDENTS Bruce K. Alexander CEO, Vectra Bank Colorado A. Scott Anderson CEO, Zions Bank Paul E. Burdiss Chief Financial Officer Kenneth J. Collins Enterprise Program Management Eric Ellingsen Chief Executive Officer California Bank & Trust Travis E. Finstad Chief Audit Executive Alan M. Forney CEO, The Commerce Bank of Washington Olga T. Hoff Retail Banking Thomas E. Laursen General Counsel Scott A. Law Chief Human Resources Officer Keith D. Maio Chief Risk Officer Michael Morris Chief Credit Officer Rebecca K. Robinson Wealth Management Terry A. Shirey CEO, Nevada State Bank Jennifer A. Smith Chief Information Officer Steven D. Stephens CEO, Amegy Bank Randy R. Stewart Enterprise Mortgage Lending Mark Young CEO, National Bank of Arizona | 16 | Corporate Information EXECUTIVE OFFICES One South Main Street Salt Lake City, Utah 84133-1109 801-844-7637 ANNUAL SHAREHOLDERS’ MEETING April 30, 2021, 1 p.m. MDT Webcast details will be provided on the zionsbancorporation.com website TRANSFER AGENT Zions Bank Corporate Trust Department One South Main Street, 12th Floor Salt Lake City, Utah 84133-1109 801-844-7545 or 888-416-5176 REGISTRAR Zions Bank One South Main Street, 12th Floor Salt Lake City, Utah 84133-1109 AUDITORS Ernst & Young LLP 15 W. South Temple Suite 1800 Salt Lake City, Utah 84101 NASDAQ GLOBAL SELECT MARKET SYMBOL ZION OTHER LISTED SECURITIES Series A Preferred Stock – NASDAQ: ZIONP Series G Preferred Stock – NASDAQ: ZIONO Series H Preferred Stock – NASDAQ: ZIONN Series I Preferred Stock – CUSIP: 989701BD8 Series J Preferred Stock – CUSIP: 989701BF3 DIVIDEND REINVESTMENT PLAN Shareholders can reinvest their cash dividends in additional shares of our common stock at the market price on the dividend payment date. Shareholders, as well as brokers and custodians who hold our common stock for clients, can obtain a prospectus of the plan on the Zions Bancorporation website at zionsbancorporation.com or by writing to: Zions Bancorporation Dividend Reinvestment Plan P.O. Box 30880 Salt Lake City, Utah 84130-0880 CREDIT RATINGS Credit ratings are updated regularly and may be found on the Zions Bancorporation website at zionsbancorporation.com. OPTION MARKET MAKERS Chicago Board Options Exchange Philadelphia Stock Exchange SELECTED INDEX MEMBERSHIPS S&P 500 S&P Global 1200 KBW Bank NASDAQ Financial 100 INVESTOR RELATIONS For financial information about the corporation, analysts, investors and news media representatives should contact: James R. Abbott 801-844-7637 james.abbott@zionsbancorp.com ZIONS BANCORPORATION NEWS RELEASES Our news releases are available on our website at zionsbancorporation.com. To be added to the email distribution list, please visit zionsbancorporation.com and click on “Email Notifications.” INTERNET SITES Zions Bancorporation zionsbancorporation.com Zions Bank zionsbank.com Amegy Bank amegybank.com California Bank & Trust calbanktrust.com National Bank of Arizona nbarizona.com Nevada State Bank nsbank.com Vectra Bank Colorado vectrabank.com The Commerce Bank of Washington tcbwa.com The Commerce Bank of Oregon tcboregon.com Zions Direct Inc. zionsdirect.com This document may contain statements that could be considered “forward looking.” Readers should review the forward-looking statement disclaimer of Zions’ Annual Report on Form 10-K, which can be found on the website at zionsbancorporation.com and applies equally to this document. Certain financial measures containing descriptive words such as “core” or “adjusted” are subject to GAAP to Non-GAAP reconciliation tables, which can be found on page 15. Printed on paper that contains 10% post-consumer recycled content and is elemental chlorine free. | 17 | One South Main Street Salt Lake City, Utah 84133 ZIONSBANCORPORATION.COM | 18 | 

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