Zions Bancorp Q3 2026 Earnings Call Transcript
Zions Bancorp (NASDAQ:ZION) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Zions Bancorp reported a 20% year-over-year increase in net earnings to $262 million, with a corresponding rise in earnings per share to $1.78.
The company’s net interest margin slightly declined to 3.23%, attributed to higher deposit costs despite a growth in net interest income and customer deposits.
Strategically, Zions Bancorp acquired Basis Investment Group’s multifamily agency lending business, aiming to expand its multifamily financing solutions and enhance its one-stop platform capabilities.
The capital markets division has shown significant growth, with expectations for increased fee income contributions in the upcoming quarters.
The company anticipates an 8% to 12% increase in net interest income for the third quarter of 2027, influenced by expected interest rate hikes and deposit cost adjustments.
Zions Bancorp’s credit quality remained strong, with modest credit losses and a stable Common Equity Tier 1 ratio at 11.8%.
Management highlighted ongoing strategic initiatives, including expanding wealth management offerings and focusing on core deposit and small business growth through its Strategic Six products.
Operational expenses are expected to rise by 4% to 6% in 2027, with continued investments in technology and talent to support growth.
Full Transcript
OPERATOR
Greetings. Welcome to Zions Bancorp third quarter earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jason Arbuckle. Thank you. You may begin.
Jason Arbuckle (Senior Director of Investor Relations)
Thank you, Cleo, and good evening, everyone. Welcome to our conference call to discuss Zions Bancorp’s third quarter 2026 results. My name is Jason Arbuckle, Senior Director of Investor Relations, and before we begin I would like to remind you that during the call we will make forward-looking statements. Actual results may differ materially. We encourage you to review the forward-looking statements and non-GAAP disclosures in our press release and on slide 2 of today’s presentation, which apply equally to statements made during this call.
A copy of the earnings release and the presentation are available at our website, zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer Harris Simmons will provide opening remarks. Following Harris’s comments, Chief Financial Officer Ryan Richards will review our financial results and outlook, and also with us today are Scott McLean, President and Chief Operating Officer, and Derek Stewart, Chief Credit Officer. After our prepared remarks, we will hold a question-and-answer session. This call is scheduled for one hour, and I will now turn the time over to Harris Simmons.
Harris Simmons (Chief Executive Officer)
Thanks very much, Jason, and good evening, everyone. We’re reasonably pleased with our financial results for the third quarter, which reflect meaningful year-over-year earnings improvement and continued progress on our strategic priorities. Going to the slides. Slide 3 summarizes second quarter results versus the prior quarter and last year’s third quarter. Net earnings available to common was $262 million, or $1.78 per share, an increase of 20% compared to $1.48 in last year’s third quarter and an increase of 2% compared with $1.74 last quarter after adjusting for that quarter’s large equity securities gains. The increase from a year ago was due to growth in net interest income and customer-related noninterest income, modest loan growth, and exceptional credit performance.
The net interest margin was 3.23%, down 4 basis points from the prior quarter and down 5 basis points from a year ago. When compared to the prior quarter, average loans grew 3.7% on an annualized basis, led by commercial lending. Average customer deposits grew 8.8% on an annualized basis. Credit losses were modest at 2 basis points annualized of average loans. Slide 4 presents the recent history of our earnings performance together with the impact of the provision for loan losses on quarterly results. Notable items in each of the recent quarters are also included on this slide.
As shown on slide 5, adjusted pre-provision net revenue was $338 million. It increased 2% from the prior quarter, reflecting improvement in adjusted taxable-equivalent revenue, which more than offset a modest increase in adjusted noninterest expense. Adjusted pre-provision revenue declined $14 million, or 4% from the prior-year period, which represented a particularly strong comparison quarter. In addition, results for the current quarter included $4 million of expense associated with a recently acquired multifamily agency platform that was not included in our original forecast.
Turning to Slide 6, our capital markets division continues to be an important driver of fee income growth. Since launching the business in 2020, we have nearly doubled the annual fee income contribution by investing steadily in talent, technology, and product capabilities, including investment banking, commodities, hedging, real estate, capital markets, and multifamily agency capabilities, which I’ll discuss in more detail on the next slide. Before moving on, I’ll note that the $136 million fee income number shown for 2026 is annualized based on our performance through September 30th.
Given the momentum we are seeing across the business and our expectations for the fourth quarter, we anticipate the full-year results to come in somewhat above that level. Turning now to Slide 7, I’d like to highlight the acquisition of Basis Investment Group’s multifamily agency lending business, which closed during the third quarter. This acquisition represents an important step in building what we believe can be a highly differentiated multifamily franchise. Our goal is straightforward: to provide clients with a single source of financing solutions across market rate, affordable, construction, bridge, agency, and CMBS products.
With this acquisition, we are now one of only four banks in the country that combines direct access to both Fannie Mae Designated Underwriter Servicer and Freddie Mac’s Optigo programs, together with originations to third-party CMBS conduit platforms. When combined with the broader capabilities of the bank, this creates a differentiated one-stop multifamily platform capable of serving clients throughout the life cycle of an asset. In addition to the talented team that joined us from Basis, we have added seasoned lenders with deep experience in multifamily agency lending and servicing to help scale the platform.
We’re excited about the opportunities this creates and the talent that we have assembled. This acquisition enhances our ability to serve commercial real estate clients and, in particular, those in the Western United States where we see a real market opportunity with population growth and housing affordability issues that drive demand for multifamily products. Included in the quarter were approximately $4 million of expenses associated with our newly acquired multifamily agency platform, including personnel and other integration-related costs, and approximately $300,000 of revenue. We expect the financial benefits to build gradually over time as the platform is integrated and production ramps up. For 2027, we anticipate approximately $17 to $20 million of revenue and $12 to $13 million of expense, recognizing that we are in the early process of scaling the business.
Over the medium term, we expect the business to generate approximately $30 to $40 million of annual revenue. The pace of growth and ultimate revenue potential will be influenced by market conditions, including the interest rate environment. Moving to slide 8, we see wealth management as a compelling growth opportunity given our broad customer base and the size of wealth assets under management relative to the size of our banking franchise. We have seasoned affiliate and wealth leadership teams focused on continuing to enhance coordination between our banking and advisory businesses, which we believe positions us to deepen client relationships and capture additional growth opportunities.
A key component of our strategy is a product we call Wealth Select, which is a new offering that expands our addressable market by allowing us to serve clients with approximately $100,000 to $1 million of investable assets through a scalable advisory model. Wealth Select helps us engage clients earlier, deepen relationships over time, and create a pathway for those relationships to grow alongside their financial needs. Slide 9 provides more information about what we refer to as our Strategic Six products. While each serves a different client segment and business need, they all share a common objective, which is strengthening sustainable growth through our branch footprint and core deposits, small business relationships, and fee income. We continue to be encouraged by the early results. For example, year to date at September 30th we’ve opened over 14,000 Gold accounts for consumers totaling approximately $275 million in new-to-bank deposits and 1,300 Business Beyond accounts bringing in about $120 million in new deposits.
In addition, we currently rank number 10 nationally in SBA 7 lending based on approval volume, number 9 in SBA 504 loans. While the near-term financial contribution is modest relative to the size of the bank, these products are helping us grow long-term relationships and creating opportunities to deliver additional banking, payments, lending, and wealth management solutions over time. With that overview, I’ll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and walk through our outlook.
Ryan Richards (Chief Financial Officer)
Ryan, thank you. Harris, and good evening, everyone. Beginning on slide 10, you can see the five-quarter trends for net interest income and net interest margin. Taxable-equivalent net interest income was 684 million, up 7 million, or 1%, from the prior quarter, and up 12 million, or 2%, from the year-ago quarter. Earning-asset yields were relatively stable sequentially while our cost of funding increased, resulting in a decline in the net interest margin compared to the prior quarter.
Slide 11 provides additional detail on the drivers of net interest margin, which decreased 4 basis points from the prior quarter and 5 basis points from a year ago. The linked-quarter decline was primarily driven by higher deposit costs and growth in lower-yielding assets. As Harris noted in his opening remarks, deposit growth significantly outpaced loan growth during the quarter, with average customer deposits growing by 8.8% on an annualized basis.
This compares with annualized loan growth of 3.7% during the quarter and a slight decrease in ending loan balances. We used this excess funding to pay down short-term FHLB borrowings, with the residual deployed into money market investments, which increased meaningfully during the quarter. Moving forward, these lower-yielding money market balances, which are dilutive to our net interest margin, will be utilized to fund loan growth and/or reduce brokered deposits as those balances mature.
The total cost of deposits increased 11 basis points to 1.59% during the quarter. This increase was driven, in part, by a recent change in how we present interest paid on cash collateral associated with our derivatives portfolio. Earlier this year we began presenting derivatives and related cash collateral on a net basis. Beginning this quarter, we reflected the interest costs associated with the cash collateral held in the cost of deposits as opposed to short-term borrowings.
This increased our reported cost of deposits by approximately three basis points but had no impact on our overall cost of funds. As Harris noted in our earnings release, we expect our asset-sensitive balance sheet to produce stronger net interest income in a higher-rate environment. For the third quarter of 2027, we anticipate net interest income to increase by approximately 8% to 12%. Our outlook is based on the forward curve as of September 30, which assumes three rate increases occurring in December, March, and June, respectively.
The forecast assumes our cost of deposits rises to around 2% from current levels of 1.59%, which includes migration of some noninterest-bearing deposits into interest-bearing products. If deposit pricing and mix trends develop more favorably than we have assumed, there is potential for net interest income to exceed our guidance. Moving to noninterest income on slide 12, customer-related noninterest income was 192 million compared with 182 million in the prior quarter and 163 million a year ago. Excluding the net credit valuation adjustment, adjusted customer-related noninterest income was 182 million compared with 181 million in the prior quarter and up 8 million, or 5%, from the year-ago quarter. As Harris mentioned earlier, capital markets continues to deliver strong performance and remains on pace for a strong fourth quarter.
In Wealth, we are seeing encouraging momentum and remain focused on executing our strategy to drive growth and deepen client relationships. Looking ahead to the third quarter of 2027, we expect adjusted customer-related fee income to grow 6% to 9% relative to the third quarter 2026 results of 182 million. We anticipate broad-based growth across our fee businesses led by continued momentum in capital markets. Turning to slide 13, adjusted noninterest expense was 549 million, representing an increase of 3 million, or 1%, from the prior quarter, and as Harris mentioned earlier included 4 million of expense related to the newly acquired multifamily agency platform. Technology, telecom, and information processing expense increased 4 million, driven by higher application software licensing and maintenance costs. Additionally, deposit regulatory expense increased 5 million related to the decrease to our FDIC special assessment in the prior quarter.
Expenses were higher year over year, reflecting higher incentive compensation, increased professional outsourced services, and higher technology costs. We will continue to manage expenses prudently while investing to support growth. For the third quarter of 2027, we expect adjusted noninterest expense to increase by approximately 4% to 6% relative to the third quarter 2026. We also continue to expect positive operating leverage for the full year 2026.
Our initial outlook of 100 to 150 basis points of operating leverage did not contemplate the acquisition of the multifamily agency platform. For basis, including the impact of that acquisition, we now expect operating leverage of approximately 40 to 50 basis points. Excluding the acquisition, operating leverage would approach the low end of our prior expectations of 100 to 150 basis points. Slide 14 presents trends in average loans and deposits. Average loans grew 3.7% annualized during the quarter, primarily within the commercial and industrial portfolio, and increased 2.7% year over year. Loan yields remained relatively stable sequentially and were down 28 basis points year over year, primarily reflecting lower interest rates. Looking ahead, we expect loan growth to be between 2% to 4% for the third quarter of 2027 compared with the third quarter of 2026.
Our outlook reflects current pipeline activity, customer utilization trends, and the broader economic environment. Given the expected path of interest rates, we are tempering our outlook for loan growth, particularly within commercial real estate. Average deposits increased 17 billion from the prior quarter driven—excuse me, thank you—average deposits increased 1.7 billion from the prior quarter, driven largely by an increase in interest-bearing deposits.
The cost of total deposits was 1.59%, an increase of 11 basis points sequentially, primarily reflecting deposit repricing and, to a lesser extent, the presentation change related to interest paid on cash collateral associated with our derivatives portfolio. Our deposit growth allowed us to reduce wholesale funding sources during the quarter, tempering the increase in total cost of funding. Year over year, the cost of deposits declined 8 basis points, primarily due to lower interest rates.
Slide 15 presents the five-quarter trend of our average and ending funding sources. Our total funding costs increased to 1.75% compared with 1.69% in the prior quarter period, and deposit balances increased by 1.3 billion compared with the prior quarter, driven by a 1.8 billion increase in customer deposits partially offset by a decrease of 448 million in brokered deposits. Short-term borrowings decreased 376 million linked quarter and declined by 2.7 billion versus the prior-year quarter.
Turning to slide 16, the investment securities portfolio continues to serve as an important source of on-balance-sheet liquidity and a tool to balance interest-rate risk. During the quarter, principal prepayment-related cash flows from investment securities of 631 million were partially offset by reinvestment of 296 million. The continued paydown of lower-yielding mortgage-backed securities supports earning-asset remix and/or a reduction in wholesale funds.
The estimated price sensitivity of the portfolio, inclusive of hedging activity, was 3.4 years. Credit quality remains strong as shown in slide 17. Net charge-offs were 2 basis points of average loans, annualized, and the nonperforming asset ratio was 50 basis points compared with 48 basis points from the last quarter. Classified and criticized balances declined 12% and 8%, respectively, during the quarter. The allowance for credit losses ended the quarter at 1.11% and remains well positioned relative to our risk profile, with 207% coverage of nonaccrual loans.
Our capital position remains strong as shown on slide 18. The Common Equity Tier 1 ratio remained stable at 11.8% during the quarter, notwithstanding a 229 million increase in goodwill and intangible assets arising from our newly acquired multifamily agency business. We expect continued strong capital generation through earnings, and improvement in AOCI-related improvements resulted in a 13% increase in tangible book value per share versus the prior year.
When compared with June 30, 2026, unrealized losses in AOCI increased by 122 million, reflecting declines in the fair value of AFS securities resulting from increased term interest rates. This mark-to-market impact was tempered by pay-fixed, receive-floating interest rate swaps designated as hedges of our AFS securities to reduce volatility in our AOCI balance. It also bears noting that a significant portion of our unrealized losses recorded in AOCI relate to securities previously transferred from AFS to held to maturity, the related balance of which does not fluctuate with mark-to-market changes.
Slide 19 summarizes the outlook we discussed across loans, net interest income, fee income, and expenses. This outlook remains our best estimate based on current information and is subject to the risks and uncertainties discussed in our forward-looking statements.
Jason Arbuckle (Senior Director of Investor Relations)
This concludes our prepared remarks. As we move to the question-and-answer section of the call, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask questions. Cleo, please open the line for questions.
OPERATOR
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star-one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you please limit yourself to one question and one follow-up.
One moment, please, while we poll for questions. Thank you. Your first question comes from Bernard von Gizicki with Deutsche Bank. Please proceed with your question.
Bernard von Gizicki (Analyst at Deutsche Bank)
Hey, good afternoon. Just on the first question on the NII guide of up 8% to 12%, can you just break down some of those assumptions, like the deposit growth and mix, beta, and just the rate hikes assumed within that period of time?
Ryan Richards (Chief Financial Officer)
Yeah, thank you, Bernard, for the question. Listen, I tried to call out in my prepared remarks that we are anticipating three rate hikes as part of that guidance — December, March, and June. We certainly expect a larger contribution in terms of deposit growth coming from interest-bearing deposits. Expecting the noninterest-bearing deposit growth would be very modest in that type of rate environment. We also kind of reserved or expected, relative to the last rate-hiking cycle when we were pretty much awash with deposits and perhaps could have been more patient, that we are now in a position that’s a very competitive market, and so we’re anticipating that it’ll be a slightly different deposit repricing behavior than what we might have experienced in the last cycle. And so our guidance that you might have heard in my prepared remarks — we’ve allowed for an increase in deposit costs to the extent of about 40 basis points.
That would imply sort of a beta in the upper 40s to low 50s — that’s sort of the assumption that we’re thinking of. As in prior quarters, the contributions that you would expect there: of course variable-rate repricing is a given. Fixed-rate loans are a significant contributor there. We see potential for 3 to 4 basis points on earning asset yields arising from the fixed-rate loan repricing and, of course, a continued remix out of investment securities into loans. But also this notion that we continue to kind of reinvest a portion of our investment securities, and there we expect 2 to 3 basis points of earning asset pickup as well.
So think about, you know, 5 to 7 basis points increase in earning asset yields in that rate environment. We’re thinking about it.
Bernard von Gizicki (Analyst at Deutsche Bank)
Great, thanks for that color. Maybe just a follow-up, maybe just longer-term. I know you guys have talked about this 3.50% NIM, and I think intra-quarter maybe you’ve dialed that back a little bit with the timing. Just thoughts on, you know, maybe when you could reach that. Is it still kind of a goal? Just any commentary you can add on that. Thank you.
Ryan Richards (Chief Financial Officer)
Yeah, thanks, Bernard. Listen, I think when we talked about the mid-3s NIM, we always sort of conditioned it in the past on the kind of rate environment that we would be in. You know there’s tons of uncertainty in the future about how deposits behave — we know that. But we do see scenarios that would allow us to operate in the mid-3s moving forward with this type of rate environment. Of course that’s always dependent upon deposit growth, the rate paid on those deposits, the beta.
But we think, with some reasonably conservative assumptions, that we can reach those mid-3 levels in 2027.
Bernard von Gizicki (Analyst at Deutsche Bank)
Great. Thanks for taking my questions.
OPERATOR
Your next question comes from John Pakari with Evercore ISI. Please proceed with your question.
John Pakari (Analyst at Evercore ISI)
Good afternoon. First, I commend you on providing the quantitative ranges to the outlook and simplifying your NII outlook. I definitely think it is helpful, so appreciate that. Just in terms of the implication for the margin, I know you didn’t provide a margin outlook, but given the dynamics that you just walked through in terms of deposit cost dynamics and some of the earning asset shifts, how do you view the trajectory of the margin, particularly as you see some of the growth on the asset side shifting away from CRE as you indicated?
Ryan Richards (Chief Financial Officer)
Yeah, great call-out, John. And maybe we should have a moment of silence for “moderately increasing.” Let’s take this moment to celebrate those terms. Listen, you’re right. I mean, we do expect some growth from CRE. It’ll probably be a little bit more pressured from the rate environment. But if you think about even not going back that far in time, there was a point where we were getting a pretty outsized contribution from consumer loan growth. And given our guidance, which is reasonably modest at 2% to 4% loan growth, we really pointed to C&I, owner-occupied, and then to a little bit lesser contribution from CRE. That’s still typically a better outcome than consumer-led growth.
So that, coupled with the traditional things you’ve heard us talk about over time — the remix out of securities into loans, the lessening of the headwind from those discontinued swaps — are all contributors to, I think, a brighter prospect for NIM. And of course you heard Harris talk about our underlying strategic six offerings that we continue to grind away at, and building net new relationships that will also be very, very important as we continue to drive down our wholesale borrowing costs.
We’ve been very, very successful year over year in driving down our brokered deposits and our other short-term borrowings, and we certainly look for that to continue.
John Pakari (Analyst at Evercore ISI)
Great, Ryan, thank you. And then if I could just hop over to capital, maybe you could give a little more color around how we should think about the pace of buybacks for the coming quarters — and not just maybe fourth quarter, but as you look at next year. Any reason to think that, despite the volatility in the rate backdrop, you can’t stay around the $75 million level, or should we think about some change in that pace?
Ryan Richards (Chief Financial Officer)
Hey, John, with all such things, I think, you know, we’re subject to regulatory approvals and where the board wants us to go. But listen, with the kind of rate environment that I just described, provided that it holds, that can translate — as you can see in our guide — to some pretty positive outcomes for us. So I wouldn’t be giving up on capital absorption and the potential even for it to potentially grow in that type of operating environment. But I don’t want to prejudge outcomes with our regulators and the board. I think that we see scenarios where we could actually increase our capital absorption moving forward.
If you think about our results this quarter, certainly the mark-to-market and the run-up of the term rates was challenging for the industry. We actually fared pretty well on that basis. A bigger driver of capital absorption this quarter for us was the goodwill and the intangibles that we absorbed through the multifamily agency business. Setting that aside, with the hedges we have in place and the fact that a very large portion of our AOCI is sort of frozen from the transfer into HTM, we had very, very good performance on a relative basis.
If you think about the mark-to-market, we had about a 50% or better offset with the hedges that we have in place that we call out in the appendix of our materials. So I think with that extra level of protection and potential for a very positive operating environment, there may be room to do a little more.
John Pakari (Analyst at Evercore ISI)
Great. Thank you, Ryan.
OPERATOR
Thank you. Your next question comes from Dave Rochester with Cantor Fitzgerald. Please proceed with your question.
Dave Rochester (Analyst at Cantor Fitzgerald)
Hey, good afternoon, guys. On the loan growth outlook, if you’re reeling in your expectations for CRE loan growth within that, which sounds like is a driver for it slowing, is that just a function of greater competitive pressures, or is it less activity given higher rates that you’re expecting? Or are you becoming somewhat concerned about credit in that area given your rate and economic outlook? Or is it a little bit of everything? And if you could talk about the total pipeline today — if that’s improved at all versus last quarter — and utilization trends that you mentioned as well, that’d be great.
Derek Steward (Chief Credit Officer)
Dave, this is Derek. And to the commercial real estate side, as far as growth there, the pipeline’s actually pretty good right now. It is competitive, but we’re being very disciplined in our underwriting as well as risk selection as far as our approach there. I think just given the competitive environment, given some of the supply-demand issues that are going on in our market, as well as just the increase in interest rates, it could have an impact on the CRE growth.
But as you look in the last quarter, we actually had pretty good growth in CRE — actually was able to offset a number of payoffs that we had that exited from our classified book. As far as the rest of the portfolio, the pipeline has been good in the C&I. I think this quarter, just at the period end, we had a little decrease in utilization. Second quarter was actually strong utilization and just saw a little decline in some capital call usage, and a number of other just general business activity seemed — just utilization was down for the quarter.
Scott McLean (President and Chief Operating Officer)
Hey Dave, this is Scott. I might add a little more color to that, too. I think Derek covered the CRE as well as just other topics related to pipeline. But, you know, 3Q, if you just look at H.8 data, total loan growth was down and C&I growth was down, and we tracked pretty close to what H.8 data was. And I don’t know why — third quarter seemed to be soft. Third quarter last year was soft. Third quarter in ’23 was soft. I don’t know if it’s summer vacation or what it is, but there is something about the third quarter going on.
If you look at slide 25, just another way to kind of think about what’s happening — basically what you can see there is we’re basically no growth for the quarter. You can see that negative $9 million over there in the bottom right-hand corner. And we kind of fundamentally need about $500 million to $600 million to hit a kind of a good solid 3% to 4% growth rate. And basically it’s happening at Amegy. Amegy was down $293 million for the quarter as opposed to being up $150 million to $200 million.
That’s kind of the difference between, you know, $500 million to $600 million in quarterly growth, which isn’t great — we’d like for it to grow better — but that’s kind of 3% to 4% growth. And to put that in additional perspective, if you look at slide 26, where you see the year-over-year growth, 3Q26 versus 3Q25, you’ll see that Amegy — those first two lines, C&I excluding oil and gas and owner-occupied — produced over half of the C&I and owner-occupied growth year over year. So they’ve been outperforming all of our other affiliates for some time in terms of C&I growth, including owner-occupied. They just happened to have a soft quarter.
And so we’re not especially worried about that. It just happened to be a soft quarter for them. Otherwise I think we would have seen growth more in line with, you know, $500 million to $600 million for the quarter. And their pipelines are just fine. There’s nothing unusual about their pipelines at the moment.
Dave Rochester (Analyst at Cantor Fitzgerald)
Got it. I thought that you had mentioned CRE is potentially slowing down in terms of growth going forward, and that’s why you were a little bit lower on your loan growth expectations.
Ryan Richards (Chief Financial Officer)
Right. I mean, it’s a low-growth number. It’s a kind of a 1% to 3% sort of growth number is what we’re trying to achieve — anything slightly less than the growth rate of the overall portfolio. So that’s a moderately consistent message for us over time.
Dave Rochester (Analyst at Cantor Fitzgerald)
Can you just talk about — just switching gears to wealth and wealth expansion that you’re trying to drive here — what’s the penetration of wealth in your current customer base? And can you talk about any recent incentive changes or any new targets you have for hires or anything like that that’ll help drive greater growth in that line over the next year. Thanks.
Scott McLean (President and Chief Operating Officer)
Taking incentive comp first, we made some incentive comp adjustments 12 to 18 months, 12 to 24 months ago that, quite frankly, created some churn in our bankers, and we sort of thought that might happen. And so this kind of no-growth period that we’ve had in wealth fees that total about $58 million, plus or minus right now, you know, there’s been—we’ve kind of had a no-growth phase. We think the incentive comp elements, both for our wealth colleagues and our private banking colleagues around the company, are aligned better now and that everybody’s sort of adjusted to it.
And so that’s the incentive comp side. The answer to your first question of what’s our penetration and what’s the outlook? Our penetration is really low and the outlook is really positive. Any data I would give you, you would say, boy, your penetration is really low. Guys, come on now. And part of that is because the dog didn’t eat our homework papers, but we just have never had a large trust business that we acquired, and most of our peers either acquired large trust businesses somewhere in their past or they grew one, and we just never did.
So we’re kind of starting from behind. But we think the calling efforts with our private bankers, wealth bankers, our commercial bankers, and the energy level we have there right now is really positive.
OPERATOR
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the queue. You may press star 2 to remove your question from the queue. We please ask that you limit yourself to one question and one follow-up. Your next question comes from Chris McGrady with KBW. Please proceed with your question.
Chris McGrady (Analyst at KBW)
Oh great. Thanks. I’ll echo the new guide, thank you for doing that. On the operating leverage, I guess a question on operating leverage: is there anything in the crystal ball that would say that some degree of operating leverage next year wouldn’t be possible as well? And I hear you on the small impact from the deal, but I guess from the NII momentum and the expenses that you may need to invest in the company, any reason why operating leverage shouldn’t continue?
Ryan Richards (Chief Financial Officer)
Oh, listen, hopefully I understood that correctly, Chris. If not, just re-guide me here, but certainly based upon how we guided to the third quarter 2027, we see very positive prospects for operating leverage. Some of our assumptions and models would point to six points or better that quarter. And, you know, we don’t typically go too far afield for that, but even for the full year 2027, we’re seeing the prospects for a pretty positive spread there.
So if that’s where you’re going, then that’s probably the color. But if you’re looking at something else, please let me know.
Scott McLean (President and Chief Operating Officer)
Yeah, I think the other thing Ryan was talking about was our full year operating leverage in ’26. And he was commenting about we were guiding to 100, 150. We’ve talked about that all year for 2026. The third quarter has obviously been a little soft here. We actually saw it coming, but we still think for the fourth quarter—I won’t repeat what he said—but that’s what he was talking about in terms of the operating leverage there being a lower number.
Ryan Richards (Chief Financial Officer)
I think it’s a great call. Scott, thank you for course-correcting. I mean, if we look at the adjusted PPNR that we had this quarter relative to what, as Harris noted, very strong third quarter of 2025, I would just gently remind everybody that that was actually shaping up to be a very, very strong quarter for us. And on PPNR it was. But we had the credit matter that presented that quarter that kind of was kind of dour tone for that quarter. But underlying that, you know, on a year-over-year basis, certainly a contributor to our softer—just keeping our performance and there kind of eroding some of our potential for operating leverage.
In this quarter we saw some increased incentive accruals. Our incentive accruals are sensitive to credit performance, and we’ve had really truly outstanding credit performance this year. So while the core performance is a little bit softer against a strong comp, the credit has been excellent. And there’s been some other things that showed up in the third quarter 2025 that were different. On the noninterest fee income side, non-customer-related, there was a pretty sizable difference in terms of our securities gains and losses period over period. That was about a $15 million delta. And then in the prior-year quarter, we also had higher dividends and other income, FHLB dividends and other matters. So it would be understandable if people sort of looked at our full year and said, hey, tough quarter for operating leverage, tough PPNR versus a strong comp.
Can you still get there for the full year? And we do see, as I guided, once you adjust for basis not having been our run rate, we think we can get close to the lower end of our prior guide of 100, 150 basis points. If some things were to break our way, could we fit our way within there? Possibly, but we’ll just see how the quarter shapes up.
Chris McGrady (Analyst at KBW)
Okay, thanks for all that color. And then just to follow up on capital, Ryan, I have you just under 9% on the adjusted CET. You want to confirm that one? And then any change in uses of capital—you talked about the basis deal, the Cinco Momentum depository acquisitions, I guess would be the question from there. Any change in appetite?
Ryan Richards (Chief Financial Officer)
I don’t think much is. I would agree with your assessment. I think we would show ourselves on a market capital basis being just shy of 9% as well. So I don’t think anything that you would hear from this management team would change about how we would think about capital deployment, other than just what I’ve said already, that moving forward we could have a more constructive operating environment for capital—capital actions, I should say.
Chris McGrady (Analyst at KBW)
Great. Thank you very much.
OPERATOR
Our next question comes from Ryan Kenny with Morgan Stanley. Please proceed with your question.
Ryan Kenny (Analyst at Morgan Stanley)
Hi, good afternoon. Can you walk through some of the dynamics that you’re seeing on deposit competition? Is it intensifying significantly? Is it more on the retail side, more on the commercial side? Any geography within your footprint where things are getting more—significantly more—competitive?
Harris Simmons (Chief Executive Officer)
I don’t think so. I think it’s—I mean, it’s just very across the board. It’s a competitive environment out there. I don’t think we’re seeing a lot of impact from, you know, kind of neobanks and that kind of thing. I mean, certainly that’s out there, something the industry will be watching here the next few years. But no, I think it’s a competitive deposit market, but it’s manageable. I think probably more price competition on the asset side than on the liability side, but it’s just competitive all over.
Ryan Kenny (Analyst at Morgan Stanley)
It sounds like the spot rate for interest-bearing deposits was up only a couple of basis points versus the average. So given that the rate hike came in September, does that mean that clients were asking for higher rates throughout the quarter? And could you see that dynamic going forward where deposits reprice ahead of future rate hikes?
Ryan Richards (Chief Financial Officer)
I think a lot of the deposit growth was in kind of higher-cost deposits. We’ve moved a lot of money back on the balance sheet—customers that, you know, that we chased away a few years ago; everybody was awash with liquidity. And so bringing that back on, our goal, as we said before, was really just bringing down our total cost of funding. And so, you know, a lot of the growth was higher-cost deposits, but certainly lower cost than our marginal cost of funding.
That’s kind of what you saw this quarter.
Ryan Kenny (Analyst at Morgan Stanley)
Thank you.
OPERATOR
Your next question comes from Ken Ooston with Autonomous Research. Please proceed with your question.
Ken Ooston (Analyst at Autonomous Research)
Hi, thanks. Good afternoon. Ryan, just wanted to ask you a question on the swap adds, presuming that slide 27 with the simulated repricing of earning assets and loans reflects the adds from this quarter. And then just related, do you have any additional purchases in the future built into the 3Q27 outlook on top of what you already bought in the third quarter? Thanks.
Ryan Richards (Chief Financial Officer)
Thanks, Ken. I’ll speak to that maybe in broad strokes. And we’ve got Matt Tyler here in the room, our corporate treasurer, and he could probably drill down maybe another level before I take it. But, you know, I think that the message—the big picture message—that we’re trying to convey with our hedging activity is, you know, we’re sensitive to both earnings sensitivity and sort of tangible common equity or EVE sensitivity. That’s why you see both sides of these hedges.
What you’ve been seeing, and I think what you’re alluding to on the sort of receive-fixed side, is we do tend to measure on a relative basis as being more asset-sensitive than others. I said it before, I’ll say it again: these are not common methodologies of measuring things, but we do want to be also thoughtful and perhaps prudent. And what goes up sometimes goes down. And so while that asset sensitivity is serving us well, we think in this type of rate environment things can always reverse.
And so we’ve, on the receive-fixed side, really tried to think about the downside sensitivity should rates reverse in a minus 100, minus 200 rate environment and maybe take a little bit of the edge off of how we would measure there. So we did add some hedges during the quarter. I think you would have seen reference to that in that related slide to that end, and a little bit more modest activity as we think about that TCE protection on the pay-fixed.
And Matt, I invite you to add anything you want.
Matt Tyler (Corporate Treasurer)
Yeah, the additional hedging—I mean, we’ve really been keeping our cash flow hedges, which are the receive-fixed, shorter maturities, kind of under two years. So, you know, we’re kind of just rolling those out as time goes on, which has been most of the activity. You know, if you have, you know, two years hedged, you know, two months from now it won’t be a year and a half, so two quarters from now. So we’ve just been kind of rolling those on a continuous basis forward over time.
Ryan Richards (Chief Financial Officer)
So I think maybe coming full circle, could there be more hedging activity built into that guidance? Certainly, if we were to persist in adding those short-term receive-fixed hedges.
Ken Ooston (Analyst at Autonomous Research)
Right. Okay. All right, that’s good. Thanks a lot. Ryan.
OPERATOR
Your next question comes from Timur Braziller with UBS. Please proceed with your question.
Timur Braziller (Analyst at UBS)
Hi, good afternoon. Maybe just starting on the funding side, I’m just wondering what’s the remaining portion, either on wholesale or broker, that you’re still looking to reduce going forward? Maybe another way of asking that is how close are we to having asset growth be more closely aligned with deposit growth?
Ryan Richards (Chief Financial Officer)
Yeah, that’s a great, great question. I’ll get started. Invite other members of the team here to jump in. What you called out is a really important part of our story. Our success year over year in paying down broker deposits, paying down wholesale borrowing sources. Having this really positive deposit growth story this quarter enabled us to pay down our FHLB borrowings almost straight away. Where it was a little more tricky is there’s of course a term structure to broker deposits and so it takes a little bit more time for those to run off.
We show, I believe in the fourth quarter we have about $2.2 billion worth of maturity of broker deposits. And we already said that we’re sort of overbuilt on our money market position that could be redeployed. So I do think as part of, as we think about this moving forward is to continue to pay down those sources of funding that aren’t with clients. This is kind of what Harris was talking about. We would rather be reaching out to our clients and serving them and even these higher cost products when they bring net new balances to us than paying away to a broker or some other wholesale funder.
So that’s sort of where we see this going on the funding side.
Matt Tyler (Corporate Treasurer)
So Ryan, in terms of timing, I would just add that on the brokered deposits, their certificates of deposit, they have an average maturity of about three months, which think about it, half of it’s going to roll off within three and we’re bringing that down as we manage. We watch it all the time as we manage, you know, funding coming in from deposits. It just isn’t instantaneous. Like if we had borrowings from the home loan, for example, which would be a spare, but they’ll, you know, it will adjust very quickly and you know, we’ve already seen a lot of it.
We’ve brought it down a lot so far this quarter as it’s mature it’s versus June 30th of last year, it’s down about $3 to $4 billion. It was at about our overnight, our broker deposits and overnight borrowings net of money market investments was about six and a half billion. Then if you adjust for long term debt, we’ve issued et cetera, it’s down about 3 to $4 billion. And it’s been very intentional, it’s not been serendipitous. And we still have about a little over 7 billion in client funds off balance sheet and almost 100% guarantee when we bring them back on.
The cost is accretive to our overnight cost of funding which Harris was mentioning earlier.
Ryan Richards (Chief Financial Officer)
Yeah, listen, I think it has to be. Yes, all of it. It’s both funding mix, it’s assets mix. Sorry, yeah, asset mix. And it’s our sensitivity to that rising rate environment. It’s the driving the net new relationships through these very granular things that Harris described. And all those things combined with that sensitivity to three future rate hikes sets up pretty well for us if it all pulls through at that level. And again reiterating that we recognize that that’s a pretty.
That’s a stronger price response on a positive than what we would experience previously. And we hope that there’s some conservatism in that, but we’ll see.
OPERATOR
Your next question comes from David Smith with Truist Securities. Please proceed with your question.
David Smith (Analyst at Truist Securities)
Hi, good afternoon. To drill down on the funding a little bit more, could you help us size the impact of the on the deposit cost of bringing that off balance sheet funding back on the balance sheet.
Ryan Richards (Chief Financial Officer)
It’ll deposit costs will increase but as Harris was noting, cost of funding will decrease, all things being equal.
David Smith (Analyst at Truist Securities)
Thank you. Thank you. And for the impact on the third quarter specifically though,
Ryan Richards (Chief Financial Officer)
You know, actually as it relates to sequential quarters. The amount and off balance sheet deposits didn’t change appreciably. It was pretty across. But there was plenty of evidence of us inviting in other net new balances that we knew were away from us to come in in the way that exactly how Scott and Harris have described quantifying that impact. I don’t think I have a good number for you now, but that, that’s pretty much, I’d say over the last see 12 to 18 months we’ve attracted certainly north of 3 billion of client deposits that are focused deposit efforts that are accretive to total cost of funding.
And would be otherwise judged to be higher cost deposits.
David Smith (Analyst at Truist Securities)
Right. And then you had mentioned competition being stronger on the loan side than on the deposit side. Right. Now would you characterize that as more just on yield and cost or more on like covenant dynamics or some of both? Right now in terms of where you’re not interested in stepping down to where the competition is?
Derek Steward (Chief Credit Officer)
It’s some of both. This is Derek, David. Yeah, I mean we’re seeing primarily pricing competition, but I would say on structure, covenants, et cetera. But again we’re maintaining our discipline there on the, on the structural side and maintaining our underwriting and just the risk selection. And we’re, you know, again having good luck at still winning our fair share. It’s just a more competitive environment, I’d say today.
David Smith (Analyst at Truist Securities)
Is there any change in that assumed in the outlook for deposit growth next year or pretty consistent to where it competition level sit today?
Ryan Richards (Chief Financial Officer)
Yeah, I don’t, I don’t think, you know, it’s an open question that’s been discussed, I think by analysts and others about the amount of sensitivity that people report versus the actual sensitivity that people will actually experience because we’ve had this higher for longer rate environment and the prospect of rate hikes. Will there be a stronger price sensitivity on the upside? And so we’ve allowed for some of that and sort of the guidance that we provide in the deposit beta that I would have communicated earlier on this call.
David Smith (Analyst at Truist Securities)
Thank you.
OPERATOR
Your next question comes from David Chiavarni with Jefferies. Please proceed with your question.
David Chiavarni (Analyst at Jefferies)
Hi, thanks for taking the questions. I wanted to first start on the capital markets outlook and the pipeline. It sounds positive. Also curious as to, to what extent could higher rates impact or be a headwind to the new multifamily businesses you acquired as it relates to that 30 to 40 million contribution over the medium term.
Scott McLean (President and Chief Operating Officer)
This is Scott. I’ll start with it related to the basis business, the 30 to 40 million was several years out. I can’t remember the script. It’s 29. Medium term and interest rates certainly can have an impact. But you know, the production of multifamily across, you know, in the country is. There’s just a real vibrance to it still. And so. But you’re right, interest rates can have an impact on it. It is a flow business for most people. So the production builders that are doing this, they build and sell. Derek may have more color on that, but it’s not a hold and then get lucky on rates kind of thing.
And then the interest rate business, the interest rate hedging business that we have, which is about a 30 million-ish revenue business just on interest rate hedging for our clients that as rates continue to go up that could actually be impacted some. Although we haven’t seen too much weaknesses there. One of the things to notice in this, to note in this quarter’s capital markets revenue is it included almost no investment banking or M and A advisory work.
And that’s a practice we started about 18 months ago. And our franchise is really very fertile grounds for small and medium sized business, M and A and we have a very nice pipeline there. It’s just very lumpy. So we’re very optimistic about that M and A business going forward. And then our garden variety syndications, foreign exchange, the bond underwriting that we do, et cetera is, you know, we think moving along at a pretty nice, pretty nice rate.
Harris Simmons (Chief Executive Officer)
I’d just add higher rates will be a little bit of a headwind but I think we also have the tailwind of really have a lot of ground to plow here. I mean we’re seeing a lot of interest from middle market kinds of clients. We’ve had long relationships with the investment banking point, for example. We think that can turn into a really nice business across the west. And so capital markets businesses by their nature are kind of lumpy and we get that. But we think it really is a nice value add for us from a client base that needs it.
David Chiavarni (Analyst at Jefferies)
Yeah, no, I agree. I think that multifamily acquisition is differentiating, which is a nice segue into my kind of follow up on the capital question as it relates to M and A in terms of refresh. Thoughts are other, whether non bank or whole bank. Ma, what are your current thoughts there?
Harris Simmons (Chief Executive Officer)
Pretty much unchanged. I mean it would be very opportunistic. It’s kind of likely to be something like this multifamily agency platform. We’ve long had a really solid commercial real estate business here and we also know there kind of a limit to what you can do with a balance sheet with regional bank and without creating concerns and so I mean we’re, it was a really nice fit and we’d been looking for some time. We’d actually looked a couple of other opportunities and hadn’t made it.
So really pleased to have this. It’s just a really nice strategic fit for us but you know over time we’ll look back on this 10 years from now and say what a, you know, what a fabulous thing that was. I think that’s, you know, that’s kind of what we’re looking for are things that just fit well and probably a little on the smaller side and particularly the valuation look we just, we need to, we need to see some better evaluation before we start thinking about becoming very aggressive.
But anyway I think that’s been kind of consistent theme.
David Chiavarni (Analyst at Jefferies)
Very helpful, thank you.
OPERATOR
Your next question comes from Janet Lee with TD Cowen. Please proceed with your question.
Janet Lee (Analyst at TD Cowen)
Hello. You talked about the deposit beta in the upper 40s to low 50s. Just given the different launching point for where we are in the rising rate cycle versus the last one, are you assuming that the NIB mix can stay relatively stable ish from here in the low to mid-30s or. I know that you said a lot of the deposit growth will be coming from, from interest bearing obviously but just wanted to see if there’s any thoughts there.
Ryan Richards (Chief Financial Officer)
Yeah, thanks for the question Janet. Listen, I think it would be reasonable to assume that interest bearing deposits would take a longer larger share moving forward in that higher rate environment. We’re doing a lot of great things, we’ll continue to do a lot of great things building out the granular strategies that Harris discussed and that’s something you do over many months and years and most valuable part of our franchise. But pressing forward I think those non interest bearing balances are going to be harder to come by.
So I could anticipate potentially a little bit of a slightly different mix there.
Janet Lee (Analyst at TD Cowen)
Got it. And sorry to beat on the dead horse but I just want to make sure that I heard it correctly. I believe you said to Bernard’s question earlier that your net interest margin could reach that mid 350 level in 2027. Is that what you’re assuming in your NII guide for the third quarter of next year, year over year?
Ryan Richards (Chief Financial Officer)
Listen, we do see very healthy nims. We don’t provide them guides. It certainly has been our practice because of all the variables that go into it. But as a general matter just restating what I mentioned before, it really is beholden the operating environment. And if we do see the rate hikes that we see in our forecasts with the type of deposit behavior we described, we think it’s realizable to be operating at that level.
Janet Lee (Analyst at TD Cowen)
Got it. Thank you.
OPERATOR
Your next question comes from Anthony Elliana with JP Morgan. Please proceed with your question.
Anthony Elliana (Analyst at JP Morgan)
Thank you. Ryan, I know you don’t guide on deposits, but any more color you can give us on what drove the strength in deposits in 3Q and really trying to get at the degree to which you expect this high single digits annualized level to persist in 4Q and beyond. If I look at slide 9, the products you outline, it just seems like the momentum you have should continue.
Ryan Richards (Chief Financial Officer)
Yeah, listen, thanks for the question. I mean, you know, you look across the past two quarters, it’s been a little uneven. All right, so the last quarter we showed up with really, really healthy loan growth. Utilization picked up, really, really positive, and we fell a little bit flat on deposits. This quarter we showed up with really, really strong deposit growth and not a whole lot of period-end loans to show for. So it is useful to kind of step back, zoom out a little bit, and kind of think of longer time horizons.
If I think back a year-over-year period, you think about loan growth around 4%, customer deposit growth about 5%. When talking about ending balances, that’s pretty solid. Right. And if you think about the growth for our market, that probably tells you we’re getting the growth in our market. We’re probably not reaching for it. So going forward, does it persist at an 8.8% average annualized growth? I’m not sure. It’s, you know, it’s a lot of, and probably not, but it’s a lot of the same type of deposit gathering that Harris alluded to before.
There’s a lot of the growth came from money market balances. There was what we refer to as our cold suite balances. And these are higher-cost deposits. The most important part is we just keep grinding away at what you referenced in that slide at those more granular deposit-gathering strategies. That’s where I think we’ll be having a chance to delight shareholders over a longer period of time.
Harris Simmons (Chief Executive Officer)
Yeah, I mean if we could see three-quarters percent to a point-one percent growth, our total deposits coming from these things that we’re really focusing on, the small business consumer, non-interest-bearing kinds of accounts or low-interest-bearing kinds of accounts. You know, it’s not just about deposit growth, it’s about the quality of the deposits, the cost of the deposits, the stickiness of the deposits over time, that really makes a difference.
But it takes, I mean, it’s. I tell people around here this is a marathon. This isn’t a sprint. We’ll be talking about this 10 years from now, I hope. It’s just really kind of the kind of foundation we’re trying to create under everything else that goes on, corporate deposits, everything else. So I hope that’s helpful. But that’s where a lot of our focus is. But it’s a longer-term kind of. Some of this will be watching paint dry a little bit.
Anthony Elliana (Analyst at JP Morgan)
Yep, that’s fair. Thank you for that. And then on basis you pointed to 30 to 40 million of annual revenue over the medium term, what’s the level of expense you expect from that business in the medium term? I think you pointed out, Ryan, to 12 to 13 million of expense in 27. Thank you.
Ryan Richards (Chief Financial Officer)
Yeah, I mean, very reasonable question. You know, I think we just want to be careful not to get too far over our skis. It’s pretty early on here. We closed the deal at the end of July. We certainly want to have some experience. So we did quote all those numbers you cited and we said we expect this to scale over time. That requires investments and continue to build out the talent against a very good backdrop. Account talent, instance now. So probably we’ll hold off for a little bit more experience before we guide more deeply into the expense, how that grows through 2027 through 2028.
We did say for the full year 2027, 12 to $13 million of expenses. Beyond that, it’ll just depend on the pacing of how much we add in talent and further capability.
Anthony Elliana (Analyst at JP Morgan)
Fair enough. Thank you. And echoing the comments on the updated guidance presentation, thank you for that.
Ryan Richards (Chief Financial Officer)
That’s so popular.
OPERATOR
Your next question comes from John Armstrong with RBC Capital Markets. Please proceed with your question.
John Armstrong (Analyst at RBC Capital Markets)
Hey, thanks for squeezing me in. Just one, two quick ones. On basis, the smaller revenue number for the quarter, I think I understand it, you just closed the deal. But do you expect contributions from the revenue side to step up as soon as the fourth quarter?
Ryan Richards (Chief Financial Officer)
Yeah, I mean, look, we’re still kind of setting the table there, but I’d expect a better fourth quarter revenue than we had in the third quarter. Closed kind of the end of July and, you know, there’s a little bit there in a pipeline, but I mean it’s just building. That’s. So I don’t think we’ve thought a lot about what the fourth quarter is going to look like. We thought more about what next year is going to look like. That’s where we said kind of 17 to 20 we think is kind of a target, but I don’t think we have anything we’d say about the fourth quarter yet.
John Armstrong (Analyst at RBC Capital Markets)
Yeah, it just. It was just a small number. Harris and I didn’t know if it was.
Ryan Richards (Chief Financial Officer)
Yeah, yeah.
John Armstrong (Analyst at RBC Capital Markets)
There was some other reason behind that. Scott, just one for you. You mentioned slide 25, the Amogy loan trends, earlier in the call. This has come up. Is it any more or less competitive in Texas? You know, there have been questions around those markets because of new regional bank entrants there. And just confirming you aren’t seeing anything new impacting your ability to grow in Texas. Just such a growth.
Scott McLean (President and Chief Operating Officer)
The only thing we’re seeing new is the disruption there because of these acquisitions. The acquisition of Comerica, clearly, the acquisition of Cadence, the acquisition of Veritex, a few others small. That is all opportunity for us. I’ve said this for several quarters, and it just. It’s opportunity, and it’s not just because I’m saying it, and it’s corporate speak. If we had our fellows from Texas on the phone, they would not speak with granularity that we can’t talk about on a call like this.
But that’s what we hear internally. And there is disruption. We’ve already seen it. And so our calling programs are highly focused on those. They’ve always been on those banks, but we’re especially focused on it right now. And there will be competition for people, too. So there’s a negative side of this, but we’ve. You know, we’ve seen that for decades with folks parachuting into Texas.
John Armstrong (Analyst at RBC Capital Markets)
Yeah. So more positive than negative from your point of view?
Scott McLean (President and Chief Operating Officer)
Absolutely. No, I’m sorry. The bottom line is. Yes, more positive. Yep.
John Armstrong (Analyst at RBC Capital Markets)
Okay. All right. Thank you.
OPERATOR
This now concludes our question and answer session. I would like to turn the floor back over to Jason Arbuckle for closing comments.
Jason Arbuckle (Senior Director of Investor Relations)
Great. Thank you, Cleo. And thank you all for joining today and participating. We appreciate your interest in Zions Bancorp. If you have additional questions, please reach out to the investor relations team at the email and phone numbers provided on our website. We look forward to connecting with you throughout the coming months. This concludes our call.
OPERATOR
Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. Please disconnect your lines and have a wonderful day.
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