Zions Bancorporation
Annual Report 2022

Plain-text annual report

B U I L T F O R R E S I L I E N C E A N N U A L R E P O R T 2 0 2 2 PERFORMANCE AT A GLANCE EARNINGS PER SHARE Annual earnings per share over the past five years 6.79 5.79 2021 2022 4.08 4.16 2018 2019 3.02 2020 ZION EARNINGS PER SHARE Growth in earnings per share indexed to 2017 Indexed: 2017 = 100 2017 2018 2019 2020 2021 2022 ZION Peer Top Quartile Peer Bottom Quartile $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 300 250 200 150 100 50 0 TOTAL SHAREHOLDER RETURN Includes the reinvestment of cash dividends into shares of the company . % 6 3 7 1 . % 1 2 5 1 % 3 1 1 . % 8 8 . % 6 3 . % 5 2 - . . % 0 0 2 - . % 4 1 2 - 10-Year 5-Year 3-Year 1-Year ZION KBW Nasdaq Bank Index 180% 150% 120% 90% 60% 30% 0% -30% $13.3B average loans $24.3B average deposits $925M total net revenue 6.2% deposit market share Salt Lake City, UT $13.1B average loans $16.2B average deposits $703M total net revenue 0.6% deposit market share $12.1B average loans $15.7B average deposits $671M total net revenue 1.2% deposit market share $4.9B average loans $8.0B average deposits $289M total net revenue 3.3% deposit market share $3.0B average loans $7.4B average deposits $231M total net revenue 6.3% deposit market share San Diego, CA Houston, TX Phoenix, AZ Las Vegas, NV $3.6B average loans $4.1B average deposits $184M total net revenue 1.7% deposit market share $1.6B average loans $1.6B average deposits $70M total net revenue 0.3% deposit market share Denver, CO Seattle, WA A COLLECTION OF GREAT BANKS Zions Bancorporation is comprised of a collection of extraordi- nary, locally led and community-focused banks serving busi- nesses, households and local governments in some of the best growth markets in the nation. We’re determined to help build strong, successful communities, create economic opportunity and help our clients achieve greater financial strength through the relationships we develop and the services we provide. 01 ANNUAL REPORT | 2022WHILE CHANGE AND IMPROVEMENT WILL CONTINUE, I EXPECT THAT THE MAJOR [TECHNOLOGICAL AND OPERATIONAL] RENOVATIONS WE’RE FINALIZING WILL ALLOW US TO INCREASINGLY BECOME MORE OUTWARDLY FOCUSED IN THE YEARS AHEAD. HARRI S SI MM ON S Chairman and CEO Zions Bancorporation had a very successful year in present both challenges and opportunities for years 2022. Emerging from the pandemic, we produced to come. Uncertainty, inflation, and concerns about record operating results even as we continued to economic recession that developed as the year wore make substantial investments in people, processes, on created the conditions for a very challenging and technologies that we believe will provide period for bank equities, with the KBW Nasdaq Bank a strong foundation for a great deal of future Index declining 24% during the year, in line with the profitable growth. The “pandemic era” left in its performance of our own share price. But the past trail a variety of issues, including an extraordinary two or three years have also demonstrated the increase in government debt, a very substantial resilience of the American economy and the ability increase in the nation’s money supply, inflation, and of people and institutions to rebound and come back changes in work habits. Some of these issues will stronger than before. 02 ZIONS BANCORPORATIONTO OUR SHAREHOLDERSCHAIRMAN’S MESSAGE03 ANNUAL REPORT | 2022FINANCIAL RESULTS Zions Bancorporation produced net income of $878 As we think about our fundamental performance and million, or $5.79 per share in 2022. While this was a how we should assess our progress, the past three decrease from the $1,100 million or $6.79 per share years provide a good example of why we supple- we earned last year, the prior year’s earnings included ment traditional accounting results with so-called the very material positive impact of a $276 million “non-GAAP” measures other than those prescribed negative provision for credit losses — the result of an by Generally Accepted Accounting Principles. In our overestimation during the first year of the pandemic incentive plans, we generally focus more closely on (2020) of the volume of credit losses that would a measure of operating income we term Adjusted be incurred in the following years. With the help of Pre-provision Net Revenue less Net Charge-offs, a great deal of government stimulus, credit losses or Adjusted PPNR less NCOs. This measure incor- in 2021 were incredibly benign across the banking porates taxable-equivalent revenue, less operat- industry, and the loss reserves most banks built ing expenses, and further adjusts for non-operating in 2020 were largely “released” and returned to items such as market value adjustments on hedges. earnings in 2021. In 2022, as the Federal Reserve hiked interest rates in an attempt to control inflation, The measure also reflects actual credit losses and as many economists began to speculate that realized, rather than including the provision for esti- economic recession may be imminent, reserves were mated future losses. In other words, traditional GAAP once again increased. accounting results tend to include historical revenues PRE-PROVISION NET REVENUE LESS NET CHARGE- OFFS (PERCENT OF RISK WEIGHTED ASSETS) 5-year average, 2018-2022 Peer Banks: Strongest Quartile 2% ZION 04 Peer Banks: Weakest Quartile 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% actually received and costs actually incurred during the most recent period, then subtract an estimate of incremental credit losses expected to be realized in the future. The results are thus a combination of history and forecast — and as baseball player-phi- losopher Yogi Berra memorably observed, “It’s tough to make predictions, especially about the future.” Our pre-tax operating results, as measured by Adjusted PPNR less NCOs, totaled $1,273 million in 2022, up 14% from $1,115 million in 2021. This included taxable-equivalent net interest income, ZIONS BANCORPORATIONwhich rose 14% to $2,557 million; customer-related Although loan growth was strong, deposit growth noninterest income that increased 7% to $614 million, was weak. Average deposits increased 3% to despite a much slower mortgage market; adjusted $78.5 billion, but with steadily-rising interest rates, noninterest expense that grew 8% to $1,876 million; particularly in the back half of the year, ending and net charge-offs of $39 million, or 0.07% of deposits decreased to $71.7 billion, a 13% reduction average loans and leases, as compared to $6 million, from the ending balance a year ago. This “turning of or 0.01% of loans and leases, in the year prior. the tide” with respect to deposits is not particularly NET CHARGE-OFFS / AVERAGE LOANS (EXCLUDING PPP) 5-year average, 2018-2022 % 7 0 0 . C R F L A W N O Z I N H F C F T W C B W E P F N P A M C B N F B S A B T M F K O B V N S B T F I N A B H Y E K G F C F R C W H surprising. Over the prior two years, Federal Reserve monetary policy had been as accommodating as during perhaps any period in the institu- tion’s history, with the result that total deposits in the banking system had grown by roughly a third during the pandemic period. As it became appar- ent that the “zero interest rate policy” that had provided an important boost during the pandemic was now contrib- The increase in Adjusted PPNR less NCOs was uting to the highest levels of inflation seen in several particularly strong given the runoff of a substan- decades, the Federal Reserve reversed course and tial volume of the Paycheck Protection Program, began to withdraw money from the system. So, while or “PPP,” loans we made during the previous two our average deposits grew 20% during 2021, the years. The outstanding volume of these loans, change in course by the Fed created the conditions approximately 99% of which have now been totally for an offsetting outflow in the latter half of 2022. forgiven by the U.S. Small Business Administration under the terms of the program, averaged $4.6 billion with a yield of 5.16% in 2021, but had decreased to $0.7 billion with a yield of 6.53% in 2022, creating a reduction of $188 million in revenue attributable to these loans. Loan growth, exclusive of the PPP portfolio, was particularly strong during 2022, with average non-PPP loans totaling $51.9 billion, up 9% over the prior year. Growth was particularly pronounced in the commercial portfolio, while commercial real estate loan volumes were relatively flat, by design, as we have been constraining growth in this category. 05 ANNUAL REPORT | 2022LIQUIDITY, INTEREST RATE RISK MANAGEMENT, AND CAPITAL The deposit inflows we experienced in 2020 and As the pace of interest rate increases picked up 2021 created exceptionally strong liquidity for Zions throughout 2022, our strong beginning liquidity as we entered 2022. For example, our ratio of loans profile positioned us well to exercise disci- to deposits at the beginning of 2022 was 61%, pline in repricing our liabilities. As a result, our compared to a longer-term average closer to 85%, “funding beta,” a measure of the change in total and our securities portfolio had grown from $16.6 liability costs relative to the change in the short-term billion at the beginning of 2021 to $24.9 billion at the federal funds rate, was among the best of any large beginning of 2022. bank in the United States, at 14%, when comparing 06 ZIONS BANCORPORATIONthe fourth quarter of 2022 with the same prior-year bringing it back down to 4.8% in 1976. But like a stub- quarter, and our deposit beta was a mere 5%. Much born, antibiotic-resistant infection, inflation returned of the change in our cost of funds in the past year with a vengeance and in 1981, Federal Reserve was attributable to very large deposit accounts and Chairman Paul Volcker took the fed funds rate to an wholesale sources of funds which are inherently astonishing peak of 19.1%, which finally did the trick, more sensitive to changes in interest rates. breaking the inflationary cycle for years to come. We expect our funding costs in the coming year will be more sensitive to higher rates than was the case LOANS AS A PERCENT OF DEPOSITS At December 31, 2022 in 2022. One of our great strengths is that a very Peer Banks: Weakest Quartile large portion of our deposits are held in “operating” accounts by households and businesses, which are both less sensitive to interest rate changes and in which noninterest bearing balances are often used to compensate for payments and other services. We have long held that our granular deposit base is the source of a great deal of our franchise value, 78% Peer Banks: Strongest Quartile ZION 100% 90% 80% 70% 60% 50% and that value has been more manifestly apparent Managing our exposure to changes in interest in recent quarters as interest rates have normalized. rates is an important item on our risk management agenda, and especially during a period like the Rates in the last half of 2022 seemed shockingly present when interest rates are more volatile than high to many in younger generations, who perhaps they have been in many years. The management of had become accustomed to short-term rates interest rate risk involves both science and art. We bordering zero. However, the 4.33% federal funds model the expected behavior of every asset and effective rate at the end of 2022 was actually about liability on our balance sheet, including any hedges 30 basis points (hundredths of a percentage point) and off-balance sheet exposures, under a variety lower than the average federal funds rate has of interest rate scenarios and in the context of the been over the course of my own lifetime, a period contractual terms of each balance sheet item. But stretching back to the mid-fifties. In historical context, the embedded optionality in many of our assets and today’s interest rates remain relatively low. liabilities requires the use of judgment and estimates Interest rates at current or higher levels may be with avail themselves of the option to prepay a loan or us for some time. It’s worth remembering that the withdraw a deposit as interest rates change. as to what extent borrowers and depositors will inflation that gained traction in the wake of the Viet- nam War led the Fed to increase the fed funds rate We have a balance sheet that tends to be to 9.2% in the fall of 1969, before bringing it down to naturally “asset sensitive,” meaning that our net 3.7% in 1971. Inflation returned, and by the summer interest margin tends to expand as interest rates of 1974, the Fed took the rate to 12.9%, before increase. But as interest rates have risen, and there 07 ANNUAL REPORT | 2022is increased “downside” risk that rates will fall and in the equity account of the lead to a contraction in our margin, we’ve reduced balance sheet, through an our asset sensitivity primarily through interest item called “accumulated rate swaps. We would accordingly expect further other comprehensive income,” increases in interest rates to have a less meaningful or AOCI. Interest rate-related favorable impact on our margins than has been the changes in the market value case in recent quarters. of securities intended to be “held-to-maturity” are, under Rising interest rates have also had an adverse normal circumstances, not impact on our capital as reported under GAAP, reflected in the holder’s fina- primarily through its treatment of changes in the ncial statements. As a result, market value of securities. two identical securities, albeit held in different accounts, This is another case where the GAAP framework will produce very different presents a picture that doesn’t accord with the accounting outcomes and underlying economics of our business. Under GAAP impacts on reported equity standards, the accounting treatment for depreciation capital. In this respect, GAAP in the current market value of a fixed-rate investment accounting often results in security in a rising interest rate environment varies financial reports that can COMMON EQUITY TIER 1 RATIO At December 31, 2022 Peer Banks: Strongest Quartile OCC Well-Capitalized level of 4.5% plus the capital conservation buffer of 2.5% 9.8% Peer Banks: Weakest Quartile ZION seem akin to a Picasso painting: a study in abstrac- tion that has one ear (or, for our purposes, investment security value) grotesquely out of proportion to the other, even when the subject of the painting has a perfectly symmetrical face. In our case, as with many other banks, the nega- tive “mark” to the value of our available-for-sale securities created by higher interest rates produced a sizable decrease in our stated shareholders’ equity, even though the higher rates have created better margins and increased income. This happens because the offsetting beneficial impact of higher 12% 10% 8% 6% 4% 2% 0% depending on whether the owner of the security has rates on the core deposits and other liabilities that designated the instrument as “available-for-sale” finance the securities is not correspondingly reflected or “held-to-maturity.” Traditionally, many banks, in the equity account. including Zions, have designated a large portion of their securities as available-for-sale. For these secu- Fortunately, most banks, including Zions, are allowed rities, changes in market value are recorded directly by regulators to ignore these accounting-driven 08 ZIONS BANCORPORATIONas commercial banking, where such disparities in methodology are further amplified by the reasonably substantial financial leverage inherent in the indus- try’s business model. In the latter part of 2022, we accordingly designated $13.1 billion of securities, previously deemed as available-for-sale, as held-to-maturity, to minimize further volatility in shareholders’ equity. In so doing, the securities will be restricted from sale prior to their maturity but will remain available as collat- eral for repurchase agreements and other financing arrangements that can provide liquidity, as needed. Despite this accounting noise, our strong perfor- mance in 2022 allowed us to raise the quarterly divi- dend from $0.38 to $0.41 in the third quarter, and to repurchase $200 million of our common shares in the open market. Incidentally, there’s been much changes in shareholders’ equity when calculating political din and thunder of late with respect to regulatory capital. But in my view the balance sheet, companies buying their own shares — a transaction which is an abstract blend of historical cost and the equivalent of one partner buying out another. mark-to-market accounting, presents a picture that As Warren Buffet recently wrote in a letter to doesn’t always accurately reflect the real econom- Berkshire Hathaway’s shareholders, “When you are ics of the business, especially in an industry such told that all repurchases are harmful to shareholders ADJUSTED RETURN ON TANGIBLE COMMMON EQUITY (EXCLUDING AOCI) Adjusted for securities losses and other non-recurring items 2018 2019 2020 2021 2022 ZION Peer Top Quartile Peer Bottom Quartile or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).” In our case, share repurchases in recent times have been highly beneficial: over the past five years, we’ve reduced our average diluted share count by 28%, from 209.7 million to 150.3 million, while net earnings applicable to common shareholders have increased 60%, from $550 million to $878 million, resulting in a 123% increase in earnings per share. 20% 16% 12% 8% 4% 0% 09 ANNUAL REPORT | 2022 FORTIFYING OUR TECHNOLOGY AND OPERATIONAL PROCESSES We continue to spend heavily on technologies that I’ve occasionally told the story of an experience I had are vital to our competitiveness and ability to provide a few years ago flying from Denver to Salt Lake exceptional customer experiences. In 2022, we spent City. The flight was delayed because of a computer $451 million, or 14% of total revenue, on technology, system malfunction, and eventually the gate agent and began providing via our Form 10-K filed with the boarded the flight, jotting down passengers’ names SEC what we believe is some of the most transpar- and ticket numbers on a yellow legal pad. The ent reporting on technology-related spending in the thought occurred to me that a prolonged outage of banking industry. this type at a major bank would be catastrophic. With the millions of transactions any large bank processes The largest single component of our technology spending in recent years is attributable to a long- term project we call “FutureCore” that we’ve been engaged in for over a decade. The objective of this massive endeavor is to replace legacy core loan and deposit systems, which in some cases dated back to the 1980s. We completed the consumer and commercial loan system conversions in recent years, and we expect to complete the final lap of the race in 2023 with the conversion of our deposit systems and branch operations platform. Among other benefits, our new core system will support instantaneous posting of every transaction, will significantly reduce training time for new branch-based employees, and will be fully digital signature-enabled. It is also natively enabled to connect with other applications through application programming interfaces, or APIs, which will allow us to adopt software from other vendors more quickly and with less integration risk. 10 ZIONS BANCORPORATIONeach day, yellow legal pads would hardly be an the flights so that they can let the computer find option. This past Christmas, the same airline expe- and locate the crews and aircraft. Gate agents are rienced a more severe information systems problem in tears. They’ve been yelled at, cussed at, slapped that resulted in the grounding of thousands of flights, and spit on. Flight attendants have been taking a with hundreds of thousands of disaffected customers, beating... Embarrassing is an understatement. In 24 and the obligatory congressional hearings. years, I’ve never seen anything like this. Rumors on One pilot blogged, “I don’t know what to say. pilots are staging sick calls. Absolutely not true at all. [Our] antiquated software system has completely This is a computer system meltdown.” fried… Crews are stranded in the airports with the passengers, volunteering to take the passengers in Try to imagine a similar scenario with a major media are floating that there is a lack of crews and the parked planes but the software won’t accept it. U.S. bank. Phone lines are overwhelmed for both passenger and crews… Crews have been calling to fly anyone, The world has changed a great deal over the past anywhere, but the company says the system decade or two, as overnight “batch” processing has needs a reset. They have effectively shut down the succumbed to the need for real-time solutions. The operations for the rest of the year, running 1/3 of core processing applications that sit at the center of virtually every major U.S. bank’s information ecosystem were designed for teller-enabled branch banking, and not with the demands of a 24/7 real- time digital era in mind. They require the use of “middleware” and other fixes to connect to more modern applications and to imitate real-time activity. Many banks are beginning to confront the need to rethink their technology architecture. We know from our experience that it’s a long, complex and costly journey. We’re pleased to be nearing the finish line, and I’m particularly proud of our team. An outside consultant employed to monitor progress and provide occa- sional coaching with respect to this project recently noted to our board of directors, “[Over the course of this project], the effort has evolved from a team of a few dozen to a team of over five hundred. More importantly, the Bank has gone through a sweeping transformation during this time in terms of technology talent and processes along with product and 11 ANNUAL REPORT | 2022operational changes. A point to emphasize is the many years of continuous improvements the program and risk processes have gone through, and how MODERN ARCHITECTURE BUILT FOR RESILIENCY AND SPEED these enhancements have improved the readiness BENEFITS OF FUTURECORE of the organization. [We express] our admiration for the grit and determination of the entire organization in getting FutureCore to where the finish line is in sight. There are not many organizations that could • Parameter driven • Real time  • One data model • Natively API enabled • Cloud deployable persevere this many years and make the many • Modern cyber paradigm  changes along the way to be successful.” FutureCore is but one of the investments we’ve made in creating a strong and resilient technological foundation for our business. In recent quarters we’ve • Continuously upgraded & tested • Facilitates automation  • Improved customer experience • Empowered bankers also enhanced our information systems architectural hardware assets, and have begun to develop a standards and governance, embarked on a program technology environment that will allow us to move to automate the management of software and data and applications seamlessly between main- frame and cloud environments. We’ve also made major investments to strengthen our operational ecosystem, mapping major processes, and taking steps to ensure that controls are well- documented and, where possible, automated. It’s not particularly glamorous or visible work, but it’s the type of investment that should help us to continue to scale in a well-controlled manner. In mid-2022, we opened the new Zions Technology Center, a 400,000 square-foot campus that allowed us to reduce our total real estate for the employees who work there by 20%, while providing a much- improved work environment. The facility, which has earned a Platinum LEED designation from the U.S. Green Building Council, is built on a former EPA Superfund site — a tremendous example of creating value in the communities we serve and demonstrat- ing our commitment to continuing innovation and technological prowess. 12 ZIONS BANCORPORATIONOUR ULTIMATE STRENGTH IS IN THE RELATIONSHIPS OUR BANKERS HAVE WITH OUR CUSTOMERS Several years ago, we embarked on a fundamental For example, over the past year we introduced a new reengineering of our organizational structure, the digital experience platform that was met with rave way we support our bankers on the front line and reviews from our clients, allowing for much easier how we deliver services to our customers. Our online navigation for our commercial customers. We objective was to maintain the community-centric, also upgraded our treasury internet banking product relationship-focused approach to engaging with to allow for greater customization, uniform displays customers through our local affiliate brands that across devices, and the inclusion of loan balances has long been our hallmark, while creating greater and activity. efficiencies and consistency in our back office. The strategy included a consolidation of the various A treasury management product geared to smaller charters we had for each of our affiliate banks and businesses, TM Select, saw strong revenue growth the elimination of our holding company to create a in 2022. We also introduced a new digital “front more streamlined legal and regulatory structure for end” for small business customers, using NCR’s D3 the company. It also encompassed a great deal of change in our internal operational and organiza- tional processes and systems. As we set out on the journey, I explained to our employees that what we would experience over the next few years could be characterized by the sign one often sees during a remodel: “Pardon Our Dust.” While change and improvement will continue, I expect that the major renovations we’re finalizing will allow us to increasingly become more outwardly platform, creating much greater functionality and a focused in the years ahead. Though even as we’ve more elegant mobile and online experience. During been overhauling foundational technology, we’ve the year we introduced 75 additional features and delivered many new capabilities and products enhancements to this D3 platform, which is used by for customers. both consumers and small businesses. 13 ANNUAL REPORT | 2022As we continue to find ways to automate processes A year ago, we initiated our Champions Program, and reduce cost, we launched our new Spark small which provides local branch bankers the opportunity business loan application for loans up to $175 thou- to complete bronze, silver and gold levels of credit, sand, and a new streamlined process for commercial product and sales training, with associated mentor- real estate term loans of under $2 million. ship from more experienced bankers. As they complete each level, they gain the opportunity to We introduced a new securities-based line of credit receive additional credit authority, ranging from for affluent clients, with over $250 million in new loans $25,000 to $300,000. At year end, 617 bankers originated last year. We also launched a dedicated were participating in the program, and 21 of them mortgage channel for our affluent clients, through had reached the “gold” level. While they primarily which we originated $639 million in mortgage continue to use the centralized underwriting and production last year. We routinely survey our fulfillment resources we provide to support their customers to determine how well we’re doing work, the objective is to ensure, to the greatest in serving them, and where we can improve. It’s extent possible, that our retail bankers have a sense particularly notable that our “net promoter score,” a of ownership and responsibility for the business measure of the percentage of clients who indicate they generate and the skill and authority to get good they are enthusiastic “promoters” of our brand less business done when time is of the essence. the percentage who say they’re “detractors,” was an astonishing 88% for this new mortgage channel that We also want these bankers out in the field to find serves some of our most profitable clients. an increased sense of satisfaction with the work they do, and to create career paths and opportuni- The quality of our technology and products will never ties that allow them to “grow where they’re planted.” allow us to reach our full potential unless we pair This is particularly important given our focus on them with quality bankers. In this regard, I’m confi- serving small and mid-sized businesses across dent that we’re building an organization as good the western United States, and the importance as any in the industry. I’m particu- larly pleased with the fact that the managers and business bankers in our 416 branches made over 100,000 outbound calls to custom- ers in 2022, for the express purpose 100k+ Outbound calls to customers the owners of these businesses place on developing a relationship with a banker who is responsive, understands a customer’s business and can solve problems. of thanking them for their business. In the process One measure of our focus on these types of of doing so, they not only identified opportunities businesses was our ranking as the second leading to meet clients’ needs, but also developed stronger bank in the U.S. last year for the volume of loans we relationships with them. And we’ve been investing a approved under the U.S. Small Business Administra- great deal in making sure that those relationships are tion’s 504 program, which helps small businesses with bankers who possess the knowledge, experi- access credit for real estate and other longer-term ence and authority to get things done for their clients. capital needs. 14 ZIONS BANCORPORATION Another way we’ve been working to help small busi- incidentally, grew 8% last year to $29 million in nesses is through a Special Purpose Credit Program revenue — was explaining how a regional bank like approved last year by federal regulators and focused Zions Bancorporation successfully competes with on the credit needs of businesses owned by women, some of the largest banks in the world. He observed minorities and other underserved groups. This Small that, even in what most would consider a very transactional line of business like foreign exchange, relationships are fundamentally important. He told the story of a client who, for years, called each week to purchase Mexican pesos used to pay one of his suppliers across the border. One week recently, the client didn’t call. Neil made a mental note, thinking it strange that he’d not heard from him. The following week, his customer called and explained that he’d quietly been suffering through a long-term illness, was in hospice care, and would likely not make it through the next day. But in finishing up his affairs, he wanted to call and thank Business Diversity Banking Program is one of only the banker who had helped him so reliably over the a couple of programs of its type in the nation, and years in building a successful business. since its inception in mid-2021 we’ve approved $362 million in loans to businesses that qualified to We have a great organization chock full of extraor- participate. It’s making a real difference in building dinary people like Neil Stogdill who care about stronger communities in every market we serve. customers and who go the extra mile to serve them. They’re the ultimate source of our resilience and the We also completed a small acquisition in 2022. reason we’ll succeed. I’m constantly grateful to be In August, we acquired three branches with approx- associated with every one of them. imately $450 million in deposits and $100 million in loans in the northern Nevada communities of Reno, Carson City and Minden from City National Bank, a division of Royal Bank of Canada, strengthening our market share in this fast-growing region. Finally, an example of why I love working with the people I get to associate with every day. At a recent advisory board meeting at our Amegy Bank affili- ate in Houston, Neil Stogdill, a long-time banker in our foreign exchange business — a business that, HARRI S SI MM ONS Chairman and CEO February 24, 2023 15 ANNUAL REPORT | 202216 ZIONS BANCORPORATIONAMEGY BANKLayoffs at work, unexpected car repairs, or medical emergencies can suddenly force a family to make tough decisions such as choosing between buying food and paying bills. Amegy employees along with their families and friends across the state volunteered at a local food bank to help feed neighbors in need.NATIONAL BANK OF ARIZONANational Bank of Arizona employees volunteered at various events at food banks around the state, engaging in packing meal boxes, organizing food pantries and unloading truckloads of donations.THE COMMERCE BANKThe Commerce Bank employees ran the gauntlet at the Seattle Mariners’ home field, helping to raise funds for ending domestic violence. Refuse to Abuse is a 26-year partnership between the Seattle Mari-ners and the Washington State Coalition Against Domestic Violence.CALIFORNIA BANK & TRUSTDuring CB&T’s Give Week, hundreds of CB&T employees invested their time and efforts in dozens of giving activities throughout California. Examples include teaching financial literacy at schools, packing Thanksgiving care boxes for families, and framing an eight-family house for Habitat for Humanity.SUPPORTING OUR MARKETSCOMMITTED TO LOCALCOMMUNITIESA SMALL SAMPLING OF OUR EFFORTS TO SERVE17 ANNUAL REPORT | 2022NEVADA STATE BANKAmong other contributions to the community, Nevada State Bank employees, in coordination with the Reno Rodeo Foundation, helped raise money for children in foster care, supplying them with new clothing, teddy bears, books, and rolling backpacks. NSB also supported the Junior Achievement of Southern Nevada with donations in kind and finan-cial contributions.ZIONS BANKZions Bank employees marked the quarter-century milestone of National Teach Children to Save Day by helping nearly 2,500 K-12 students understand the value of a quarter. Our employees shared not only how setting aside a few quarters per week add up to significant savings, but also how the nation’s newest quarters have special face value — they feature the images of influential American women.VECTRA BANKVectra Bank held its VectraGives Week in October 2022. Service opportunities included making meals at the food bank, cleaning up local parks, sort-ing donations, and delivering meals. In the office, employees could donate to a sock drive, or create Thanksgiving baskets to feed those in need during the holidays.18 ZIONS BANCORPORATIONFINANCIAL HIGHLIGHTS1(Figures in millions, except per share amounts)2022/2021Change20222021202020192018For the Year%Net interest income+14$ 2,520$ 2,208$ 2,216$ 2,272$ 2,230Noninterest income-10632703574562552Total net revenue+83,1522,9112,7902,8342,782Provision for credit lossesNM122(276)41439(40)Noninterest expense+81,8781,7411,7041,7421,679Pre-provision net revenue1+91,3111,2021,1141,1181,125Net income-209071,129539816884Net earnings applicable to common shareholders-208781,100505782850Per Common ShareNet earnings - diluted-155.796.793.024.164.08Tangible book value at year-end (ex-AOCI)+943.7240.1536.4434.7233.31Market price - end-2249.1663.1643.4451.9240.74Market price - high+1175.4468.2552.4852.0859.19Market price - low+745.2142.1223.5839.1138.08At Year EndAssets-489,54593,20081,47969,17268,746Loans and leases, net of unearned income and fees+955,65350,85153,47648,70946,714Loans and leases (ex-PPP), net of unearned income and fees+1355,45648,99647,90448,70946,714Deposits-1371,65282,78969,65357,08554,101Common equity-374,4537,0237,3206,7877,012Performance Ratios%%%%%Return on average assets1.011.290.711.171.33Return on average common equity (ex-AOCI)16.014.97.211.212.1Net interest margin3.062.723.153.543.61Net charge-offs to average loans and leases (ex-PPP)0.080.010.220.08(0.04)Total allowance for credit losses to loans and leases outstanding (ex-PPP)1.151.131.741.141.18Capital Ratios at Year End%%%%%Common equity tier 1 capital9.810.210.810.211.7Tier 1 leverage7.77.28.39.210.3Tangible common equity to tangible assets, (ex-AOCI)7.16.67.58.49.2Other Selected InformationWeighted average diluted common shares outstanding-6150.3160.2165.6186.5206.5Common shares repurchased-743.613.51.723.512.9Dividends declared, per share+101.581.441.361.281.04Common dividend payout ratio227.3%21.1%44.6%29.0%23.8%Capital distributed as a percentage of net earnings applicable to common shareholders350%94%59%170%103%Efficiency ratio158.8%60.8%59.4%59.5%59.6%1This table includes certain non-GAAP measures. See “Non-GAAP Financial Measures” on page 19 for more information.²The common dividend payout ratio is equal to common dividends paid divided by net earnings applicable to common shareholders.3This ratio is the sum of the dollars of common dividends paid and dollars used for share repurchases for the year, divided by net earnings applicable to common shareholders.NM = Not Meaningful19 ANNUAL REPORT | 2022NON-GAAP FINANCIAL MEASURES(Figures in millions, except per share amounts)20222021202020192018Pre-Provision Net Revenue (PPNR)(a)Total noninterest expense (GAAP)$ 1,878$ 1,741$ 1,704$ 1,742$ 1,679LESS adjustments:Severance costs111253Other real estate expense, net1-1(3)1Amortization of core deposit and other tangibles11-11Restructuring costs--1152Pension termination-related expense (income)-(5)28--SBIC investment success fee accrual(1)7---(b)Total adjustments2431387(a-b)=(c)Adjusted noninterest expense (non-GAAP)1,8761,7371,6731,7041,672(d)Net interest income (GAAP)2,5202,2082,2162,2722,230(e)Fully taxable-equivalent adjustments3732282622(d+e)=(f)Taxable-equivalent net interest income (non-GAAP)2,5572,2402,2442,2982,252(g)Noninterest Income (GAAP)632703574562552(f+g)=(h)Combined Income (non-GAAP)3,1892,9432,8182,8602,804LESS Adjustments:Fair value and nonhedge derivative gain (loss)1614(6)(9)(1)Securities gains (losses), net(15)71731(i)Total adjustments1851(6)-(h-i)=(j)Adjusted taxable-equivalent revenue (non-GAAP)3,1882,8582,8172,8662,804(j-c)Adjusted pre-provision net revenue (PPNR)1,3121,1211,1441,1621,132Net Earnings Applicable to Common Shareholders (NEAC)Net earnings applicable to common8781,100505782850Diluted shares150.3160.2165.6186.5206.5(k)Diluted EPS5.796.793.024.164.08PLUS Adjustments:Adjustments to noninterest expense2431387Adjustments to revenue(1)(85)(1)6-Tax effect for adjustments-20(8)(11)(2)Total Adjustments1(61)22335(l)Adjustments per share0.01(0.38)0.130.180.02(k+l)=(m)Adjusted EPS5.806.413.154.344.10Provision for Loan Losses101(258)38537(39)(Net Charge-offs) / Recovery(39)(6)(105)(37)16Tax effect for adjustments(15)65(69)-6Total after-tax adjustments47(199)211-(17)EPS impact of substituting net charge-offs for provision0.31(1.24)1.28-(0.08)ProfitabilityAdjusted Return on Assets1.01%1.22%0.74%1.22%1.34%Adjusted Return on Tangible Common Equity (ex-AOCI)13.9%16.8%9.1%13.6%13.6%(c)/(j)Efficiency Ratio (non-GAAP)58.8%60.8%59.4%59.5%59.6%President and Chief Operating Officer of Washington Zions Bancorporation Harris H. Simmons Harris H. Simmons Chairman and Chief Executive Officer Chairman and Chief Executive Officer CORPORATE OFFICERS Scott J. McLean President and Chief Operating Officer EXECUTIVE VICE PRESIDENTS Mark Young EXECUTIVE VICE PRESIDENTS (CONTINUED) Steven D. Stephens CEO, Amegy Bank Randy R. Stewart Mortgage Lending CEO, National Bank of Arizona ZIONS’ PEER GROUP ASB Associated Banc-Corp BOKF BOK Financial Corp CFG Citizens Financial Group, Inc. CMA Comerica Incorporated EWBC East West Bancorp, Inc FHN First Horizon National Corporation FITB Fifth Third Bancorp FNB FRC FNB Corp First Republic Bank HWC Hancock Whitney Corp HBAN Huntington Bancshares Incorporated KEY KeyCorp MTB M&T Bank Corporation PNFP Pinnacle Financial Partners RF Regions Financial Corporation SNV Synovus Financial Corp. 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 CEO, California Bank & Trust Alan M. Forney CEO, The Commerce Bank Olga T. Hoff Retail Banking Christopher Kyriakakis Chief Audit Executive Thomas E. Laursen General Counsel Scott A. Law Chief Human Resources Officer WAL Western Alliance Bancorporation WTFC Wintrust Financial Corp. 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 Technology and Operations Officer Zions Bancorporation Maria Contreras-Sweet Managing Member Contreras Sweet Companies Rockway Equity Partners Gary L. Crittenden Private Investor Suren K. Gupta President Allstate Enterprise Solutions Claire A. Huang Former Chief Marketing Officer J.P. Morgan Chase and Company Vivian S. Lee Executive Fellow Harvard Business School Scott J. McLean Edward F. Murphy Former Chief Financial Officer Federal Reserve Bank of New York Stephen D. Quinn Former Managing Director and General Partner Goldman, Sachs & Co. Aaron B. Skonnard Chief Executive Officer Pluralsight, Inc. Barbara A. Yastine Former Chair, President and Chief Executive Officer Ally Bank 20 ZIONS BANCORPORATIONBOARD OF DIRECTORSZIONS BANCORPORATION, N.A. ANNUAL SHAREHOLDERS’ MEETING May 5, 2023, 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 INTERNET SITES Zions Bancorporation zionsbancorporation.com Zions Bank zionsbank.com California Bank & Trust calbanktrust.com CREDIT RATINGS Credit ratings are updated regularly and may be found on the Zions Bancorpora- tion website at zionsbancorporation.com. Amegy Bank amegybank.com OPTION MARKET MAKING nbarizona.com National Bank of Arizona Chicago Board Options Exchange Philadelphia Stock Exchange SELECTED INDEX MEMBERSHIPS Nevada State Bank nsbank.com Vectra Bank Colorado vectrabank.com S&P 500 S&P Global 1200 KBW Bank NASDAQ Financial 100 NASDAQ GLOBAL SELECT MARKET SYMBOL ZION OTHER LISTED SECURITIES Series A Preferred Stock – NASDAQ: ZIONP INVESTOR RELATIONS For financial information about the bank, analysts, investors and news media representatives should contact: James R. Abbott 801-844-7637 Series G Preferred Stock – NASDAQ: ZIONO james.abbott@zionsbancorp.com Series I Preferred Stock – CUSIP: 989701BD8 Series J Preferred Stock – CUSIP: 989701BF3 The Commerce Bank of Washington tcbwa.com The Commerce Bank of Oregon tcboregon.com Zions Direct zionsdirect.com In addition to this report, please see our website zionsbancorporation.com for our Form 10-K, proxy, and corpo- rate responsibility report. 21 ANNUAL REPORT | 2022ZIONS BANCORPORATIONNEWS RELEASESDIVIDEND REINVESTMENT PLANEXECUTIVE OFFICESOne South Main StreetSalt Lake City, Utah 84133-1109801-844-7637Our 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.”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 zionsbancor-poration.com or by writing to:Zions BancorporationDividend Reinvestment PlanP.O. Box 30880Salt Lake City, Utah 84130-0880CORPORATE INFORMATIONThis 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 the Non-GAAP Financial Measures table, which can be found on page 19. The calculation of deposit market share includes both banks and credit unions. Certain banks, including those with industrial bank charters, have been excluded as those deposits are not market specific.O N E S O U T H M A I N S T R E E T, S A LT L A K E C I T Y, U TA H 8 4 1 3 3 | Z I O N S B A N C O R P O R AT I O N . C O M Printed on paper that contains 10% post-consumer recycled content and is elemental chlorine free. 

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