The Long and Short
ZION issues new debt for first time in five years
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.
Zion Bancorporation NA (ZION: Baa2/BBB+/BBB+) recently issued public debt for the first time since 2019. ZION is unique among regional banks as it does not use the holding company structure typical among other operators in the US. The bank merged its holding company into its bank operating subsidiary in 2019. As such, there are no holding company notes structurally subordinated to the new or existing subordinated operating company debt in the debt capital structure. Despite some challenges to ZION, the bank’s new and existing notes appear attractively priced within its peer group and offers investors a unique relative value opportunity among the US regional bank sector.
The bank launched a $500 million 11NC10 subordinated bank (rated BBB/BBB) note at a spread of 240 bp over the 10-year Treasury compared to initial price talk of 275 bp on the morning of November 14. After launching, the new notes tightened considerably and priced into the high 220s range as of late afternoon on November 14. Even with the move, the new notes remain among the widest trading in that part of the credit curve relative to its regional bank peer group (Exhibit 1).
ZION is based in Salt Lake City with roughly $87 billion in total assets and $76 billion in total deposits as of third quarter 2024. This places the bank below the $100 billion threshold to qualify as a category IV bank according to US regulators, which would require it to submit to more stringent regulatory oversight and maintain higher capital ratios. The bank has been growing at a moderate rate over the past several years, and has actually reduced in size since 2021, suggesting it is in no immediate risk of being subject to additional oversight. The bank has over 400 branches stretching across its western footprint in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Washington, Wyoming, and its home state of Utah.
Exhibit 1: Investment grade regional bank intermediate maturity bonds

Source: Santander US Capital Markets LLC, Bloomberg/TRACE G-spread indications
One of the bank’s biggest advantages is its use of primarily core deposit funding and limited use of higher risk, competitive wholesale or non-core sources of funding. ZION’s loan-to-deposit ratio was very low at 77.7% as of with deposits well exceeding loan totals. Brokered deposits make up less than 10% of the total amount of deposit funding while wholesale funding makes up less 14% of total funding.
ZION offers a broad range of commercial and consumer banking services, and while it is more catered to commercial banking loan concentration risk appears only limited. The bank’s loan mix is as follows: Commercial Real Estate 28%, Commercial & Industrial 23%, Residential 23%, Construction & Development 7%, Multifamily 4%, and 12% categorized as Other. Management provides a detailed breakdown of its CRE holdings in its quarterly earnings presentations. As of third quarter 2024, 79% of its CRE holdings were term and the other 21% are classified as construction. Office CRE makes up only 14% of the total $13.5 billion CRE balance, with the biggest pieces in Multifamily (29%) and Industrial (22%). Within those Office holdings (just $1.9 billion), 9.7% of loans are criticized, 7.7% are classified, 3.1% are nonaccrual, and delinquencies were just 1.2%. Year-to-date net charge-offs are just $6.1 million.
Another area of criticism for investors, especially in wake of 2023’s multiple bank failures triggered by Silicon Valley, has been ZION’s securities holdings, but much of those concerns appear overblown. According to the bank’s call report, as of third quarter 2024, fair value on ZION’s held-to-maturity (HTM) securities (approximately $10.02 billion) was in excess of amortized cost ($9.86 billion). Meanwhile, fair value of the available-for-sale (AFS) securities holdings was about $9.50 billion versus the amortized cost of about $10.73 billion, or a loss position of about $1.24 billion or about $1.07 billion net of the gain currently in the HTM securities. That compares to CET1 equity on the balance sheet of $7.21 billion and tangible common equity of $4.89 billion. The current CET1 ratio is around 10.71% and the risk-based capital ratio is 13.21% as the bank works through these challenges.
ZION has demonstrated very stable and consistent net interest income generation and net interest margins have also remained very stable over the past year. In the most recent quarter net interest income rose to $620 million from $585 million (+9%) in the prior year period and from $597 million in the sequential quarter. Meanwhile, net interest margin in the third quarter improved to 3.03% from 2.93% in the same period in 2023.
Overall delinquencies remain modest with non-performing assets (NPAs) to total assets year-to-date of just 0.73%, up only marginally from the 0.54% reported in 2023. ZION’s Texas Ratio, which calculates total NPA plus loans 90-day past due versus their tangible common equity and total loan loss reserves stands at 11.46% as of the third quarter. Typically regional banks of this size do not find themselves at considerable risk unless that measure gets up above the 20% threshold relative to available capital.
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