Zions Bancorporation, National Association (NASDAQ: ZION) reported a sharp increase in second-quarter profit on Monday, but the composition of earnings raised concerns among investors. Diluted earnings per share (EPS) came in at $3.05 for the three months ended June 30, 2026, up from $1.63 in the same period last year. However, gains from the sale of Visa Inc. (NYSE: V) Class B-1 shares and small-business investments contributed $1.31 per share, accounting for 43% of total EPS. Excluding these items, core EPS was $1.74, a 10% year-over-year increase and ahead of the analyst consensus estimate of $1.57.
After-hours trading saw Zions shares fall 2.5% to $70.10, compared to Monday's closing price of $71.89. The decline suggests that investors are focusing on the quality of earnings rather than the headline beat. The Nasdaq session had already closed, but after-hours activity continued, reflecting the market's initial reaction.
Revenue and Margin Trends
Adjusted revenue for the quarter rose 2% sequentially to $878 million, driven by modest growth in net interest income and customer-related fees. Net interest income increased to $677 million from $662 million in the first quarter, while net interest margin held steady at 3.27%, up from 3.17% a year earlier. Customer-related fees advanced 11% year-over-year, indicating solid organic momentum. Chairman and CEO Harris Simmons noted he was "particularly pleased with the organic growth in customer-related noninterest income," which included a rise in capital-markets fees to $36 million from $28 million in the prior-year quarter.
Loan balances grew 2% from March to $62.5 billion, representing an annualized growth rate of 8%. Customer deposits dipped slightly from the first quarter to $72.7 billion but were up 4% from a year earlier. Funding costs remained manageable, with total deposit costs averaging 1.48%, down from 1.68% a year ago, supporting higher net interest income despite the flat margin.
Credit Quality and Capital Position
Credit indicators showed overall improvement, though progress was uneven. Net charge-offs were a minimal 0.06% of average loans, and the volume of classified loans declined. Non-performing assets stood at 0.48% of loans. The estimated preliminary common-equity Tier 1 ratio improved to 11.8%, up 80 basis points from a year earlier, reflecting a stronger capital base. Tangible book value per share rose 22% to $44.74. At Monday's closing price, the stock traded at roughly 1.61 times tangible book value, intensifying focus on future capital allocation.
Zions returned $142 million to shareholders during the quarter through dividends and share buybacks, including the repurchase of 1.2 million shares for $75 million. The number of common shares outstanding declined by about 1% year-over-year.
Expenses and Outlook
Adjusted non-interest expenses climbed 5% to $546 million, reflecting higher costs. Adjusted pre-provision net revenue increased 5% to $332 million. Management anticipates moderate increases in loans and net interest income through June 2027, along with positive operating leverage, though these forecasts remain preliminary and subject to changes in interest rates, deposit trends, and the credit environment.
Zions shares rose 2.3% over the prior week before slipping 0.5% in Monday's regular session. Investors will see the first full-session reaction to the results on Tuesday. KeyCorp (NYSE: KEY) is also set to report earnings on Tuesday, providing a benchmark for deposit rates and loan demand. KeyCorp shares fell 0.9% on Monday.
Risks and Considerations
Credit concerns persist due to Zions' exposure to commercial real estate. The bank posted an accumulated other comprehensive loss of $1.9 billion. While lower interest rates could ease funding costs, they may also pressure asset yields. The reliance on non-recurring equity gains for a significant portion of earnings adds an element of uncertainty to the bank's profit quality.
