Greetings, and welcome to Zions Bancorporation Q2 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shannon Drage, Director of Investor Relations. Thank you, Shannon. You may begin. Thank you, Alicia, and good evening. We welcome you to this conference call to discuss our 2023 2nd quarter earnings. As many of you know, our long-term Director of Investor Relations, James Abbott, has decided to pursue a self-employment opportunity, and we wish him well. My name is Shannon Drage, and I am the interim director until a permanent replacement for James is selected. I would like to remind you that during this call, we will be making forward-looking statements, although actual results may differ materially. We encourage you to review the disclaimer in our press release or the slide deck on slide two, dealing with forward-looking information and the presentation of Non-GAAP measures, which applies equally to statements made during this call. A copy of the earnings release, as well as the slide deck, are available on zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer, Harris Simmons, will provide opening remarks. Following Harris's comments, Paul Burdiss, our Chief Financial Officer, will review our financial results. Also with us today are Scott McLean, President and Chief Operating Officer, and Keith Maio, Chief Risk Officer. After our prepared remarks, we will hold a question and answer session. This call is scheduled for one hour. I will now turn the time over to Harris Simmons. Thanks very much, Shannon, and we welcome all of you to our call this evening. We're pleased that the environment around the banking industry seems to have stabilized relative to the disruption we saw during the first quarter. One notable outcome across the industry has been the acceleration of deposit pricing. While deposit attrition appears to have been largely transitory, the higher cost of deposits remains. Beginning on slide three, we've shown some themes that are particularly applicable to Zions this quarter, as well as those that are likely to be prominent over the near-term horizon. Customer deposits were up $2 billion for the quarter. We're grateful but not surprised that our customers have demonstrated their loyalty and confidence in us. We continue to actively manage our balance sheet and responses. in response to changes in interest rate risk. This includes funding mix optimization, changes in our interest rate hedging strategies, and our product strategy. We're also committed to managing our expenses in relation to a more challenging revenue environment. Our second quarter results reflect a $13 million severance expense related to our objective of flattening expenses over the next year. Our levels of non-performing and criticized assets declined slightly compared to the prior quarter. We experienced $13 million in net charge-offs, higher than the first quarter, but well below historic norms and reflective of one of one-off events, rather than portfolio trends. Loss-absorbing capital increased and remains healthy, particularly relative to our risk profile. Turning to slide four, we've included a summary of quarterly financial results showing a linked quarter comparison with the first quarter of 2023. Circled on the slide, we reported total deposit costs of 127 basis points for the quarter, compared with 47 basis points in the first quarter. Period-end customer deposits increased 3.2%. Including the impact of brokered deposits, deposit growth was 7.4%. Loan growth has slowed year to date relative to 2022, to a moderate annualized pace of growth. Moving to slide five, diluted earnings per share was $1.11. As shown on the right side, we accrued $0.07 per share or $13 million of severance expense. Offsetting that was an equal positive impact from the gain on the sale of a piece of property. These one-time items aside, the largest contributor to the decline in earnings per share was the impact of increased deposit and other funding costs on net interest income. We were successful throughout the quarter in maintaining and growing customer deposits through more competitive pricing, including moving customer deposits from off-balance sheet products to on-balance sheet products. These efforts are reflected in the higher cost of deposits. Paul will discuss this further in his comments. Turning to slide six, our second quarter adjusted pre-provision net revenue was $296 million. The linked quarter decline was attributable to the primary factors I've just noted and was slightly down compared to the year ago quarter. With that high-level overview, I'm going to ask Paul Burdiss, our Chief Financial Officer, to provide additional detail related to his financial performance. Paul? Thank you, Harris, and good evening, everyone. I'll begin with a discussion of the components of pre-provision net revenue, or PPNR. Over three-quarters of our revenue is from the balance sheet through net interest income. Slide seven includes our overview of net interest income and the net interest margin. The chart on the left shows the recent five-quarter trend for both. Net interest income on the bars and the net interest margin in white boxes declined in the second quarter as our cost of funds, including the rates we pay on deposits, reflected the impact of the rising rate environment and more competitive pricing. Additional detail on changes in the net interest margin are outlined on Slide eight. On the left-hand side of this slide, we've provided a linked quarter waterfall chart outlining the changes in key components of the net interest margin. The approximately 100 basis point adverse impact associated with deposits, including both changes in rate and volume, was partially offset by the positive impact of loans, lower borrowing levels, and the increased value of non-interest-bearing funds. As noted on prior calls, we have been more competitive with deposit pricing, a tactic that has accelerated in the second quarter due to increasing depositor sensitivity. Our success in growing customer deposits contributed to reducing the level of borrowed funds as we moved through the second quarter, and non-interest-bearing sources of funds continue to serve as a significant contributor to balance sheet profitability. The right-hand chart on this slide shows the net interest margin comparison to the prior year quarter. Higher rates were reflected in earning asset yields, which contributed an additional 187 basis points to the net interest margin. This, combined with a nearly 100 basis point increase in the value of non-interest-bearing funds, was almost entirely offset by increased deposit and borrowing costs. Our outlook for net interest income in the second quarter of 2024 is stable to slightly decreasing relative to the second quarter of 2023. Risks and opportunities associated with this outlook include realized loan growth, competition for deposits, and the path of interest rates across the yield curve. Moving to non-interest income and revenue on Slide nine, customer-related non-interest income was $162 million, an increase of 7% versus the prior quarter and 5% versus the prior year. As we have previously noted, we modified our non-sufficient funds and overdraft fee practices near the beginning of the third quarter of 2022, which has reduced our non-interest income by about $3 million per quarter over the past year. Improvement in commercial account fees, including treasury management fees, has allowed us to make up the loss of this revenue. Compared to the first quarter, customer fees grew $11 million, or 7%, due to strength in loan syndications, interest rate derivative sales, and other capital markets activity. Our outlook for customer-related non-interest income for the second quarter of 2024 is moderately increasing relative to the second quarter of 2023. The chart on the right side of this slide includes adjusted revenue, which is the revenue included in adjusted pre-provision net revenue and is used in our efficiency ratio calculation. Adjusted revenue grew 3% from a year ago and decreased by 7% versus the first quarter due to the factors noted previously. Adjusted non-interest expense, shown in the blue bars on Slide 10, decreased 3% from the prior quarter to $494 million. The first quarter typically includes seasonal items such as stock-based compensation for retirement-eligible employees and payroll taxes, and the second quarter therefore reflects a decrease due to the lack of those seasonal expenses. Reported expenses at $508 million includes $13 million in severance expense associated with our intent to flatten expenses over the next year. Our outlook for adjusted non-interest expense is stable in the second quarter of 2024 when compared to the second quarter of 2023, and excludes any impact associated with the proposed FDIC special assessment. Slide 11 highlights trends in our average loans and deposits over the past year. On the left side, you can see that loan growth has moderated in the current quarter. Our expectation is that loans will increase slightly in the second quarter of 2024 when compared to the second quarter of 2023. Turning to deposits on the right side of Slide 11, total deposits had declined for several quarters prior to the current quarter, and while average deposits for the second quarter were down slightly, ending balances grew 7% compared to the end of the first quarter. Customer deposits, excluding brokered deposits, grew 3%. As noted previously, our deep customer relationships enable deposit growth while also bringing new business to the bank. The cost of deposits, shown in the white boxes, increased during the quarter to 127 basis points from 47 basis points in the prior quarter. As measured against the fourth quarter of 2021, the repricing beta on total deposits based on average deposit rates in the second quarter was 25%, and the similar measure for interest-bearing deposits was 43%. On a spot basis, at the end of the second quarter, the total cost of deposits was 1.7%, and the interest-bearing deposit yield was 2.8%, bringing the realized deposit betas to 34% for total deposits and 55% for interest-bearing deposits at the end of the second quarter. Earlier, I mentioned the contribution that non-interest-bearing funds has on the net interest margin. Slide 12 shows non-interest-bearing demand deposit volume trends. Although deposit volumes have been declining as more customers move into interest-bearing alternatives, the contribution to the net interest margin, and therefore the value of the remaining deposits, has increased significantly. Slide 13 provides additional information on deposits, including a stratification by FDIC insurance status. As the chart on the left shows, we reported a notable increase in uninsured deposits throughout 2020 and 2021. Has been previously reported, the level of uninsured deposits has been falling back toward historical levels. During the second quarter, the ratio of insured deposits to total deposits stayed consistent at 55%. The growth in insured deposit balances included both reciprocal deposits and brokered deposits. Our loan to deposit ratio on the right side is at 77%. To put this in historical context, total deposits are up 32%-- I'm sorry, total deposits are up 30% or 22%, including, excluding brokered deposits since the end of 2019. Moving to slide 14, our investment portfolio exists primarily to be a ready storehouse of funds to absorb client-driven balance sheet changes. On this slide, we show our securities and money market investment portfolios over the last five quarters. The size of the investment portfolio declined versus the previous quarter, but as a% of earning assets, it remains larger than it was immediately preceding the pandemic. This portfolio continues to behave as expected. Principal and prepayment-related cash flows were over $900 million in the second quarter. With this somewhat predictable portfolio cash flow, we anticipate that money market and investment securities balances combined will continue to decline over the near term, which will in turn be a source of funds for the rest of the balance sheet. The duration of the investment portfolio is slightly shorter compared to the prior year period, estimated at 3.7 years currently versus 4.4 years one year ago. This duration helps to manage the inherent interest rate mismatch between loans and deposits, with loan durations estimated to be 1.8 years and a larger deposit portfolio duration estimated to be about 2.5 years. Fixed-term investments are required to bring balance to asset and liability duration. Slide 15 provides information about our interest rate sensitivity. A comparison of our model results to recent actual deposit behavior suggests reduced asset sensitivity, which we are showing on this page with the bars labeled as adjusted deposit assumptions. In light of this change, we are actively managing our asset duration to the emerging liability duration. During the second quarter, $2.5 billion of receive-fixed interest rate swaps were canceled, and $2.5 billion of pay-fixed interest rate swaps were added. On the right side of this slide, we've included detail on the impact current and implied rates are expected to have on net interest income. As a reminder, we have been using the terms latent interest rate sensitivity and emergent interest rate sensitivity to describe the effects on net interest income of rate changes that have occurred, but have yet to be fully reflected in the repricing of financial instruments, as well as those expected to occur as implied by the shape of the yield curve. Importantly, earning assets are assumed to remain unchanged in size or composition in these descriptions. These estimates also assume deposit behavior is in line with how the behavior realized over the past 12 months. Regarding latent sensitivity, the in-place yield curve as of June thirtieth will work through our net interest income over time. Assuming a funding cost beta based on recent history, we would expect net interest income to decline approximately 4% in the second quarter of 2024 when compared to the second quarter of 2023. Regarding emergent sensitivity, if the June 30th, 2023 forward curve, forward path of interest rates materializes, the emergent sensitivity measure indicates an improvement in net interest income of approximately 1% in addition to the latent sensitivity estimate in the second quarter of 2024 when compared to the second quarter of 2023. Noted previously, our outlook for net interest income for the second quarter of 2024 relative to the second quarter of 2023 is stable to slightly decreasing. Our loss-absorbing capital position is shown on slide 16. Our capital position is aligned with the bank's risk profile. The CET1 ratio continued to grow in the second quarter to 10.0%. This, when combined with the allowance for credit losses, compares well to a very low level of ongoing loan net charge-offs. As the macroeconomic environment remains uncertain, we would not expect share repurchases in the third quarter. We expect to maintain strong levels of regulatory capital while managing to a below-average risk profile. On slide 17, credit quality remains strong, with non-performing assets and classified loan levels remaining stable and low. Net charge-offs were 9 basis points of loans for the quarter. Loan losses in the quarter were associated with borrowers that have struggled with idiosyncratic supply chain issues, delays in inventory build, and changing customer demand. We do not feel these are indicative of emerging stress in the loan portfolio, which otherwise reflected slightly improving credit measures during the quarter. The allowance for credit losses is 1.25% of loans, a 5 basis point increase over the prior quarter as a result of a somewhat weaker economic forecast. As we know, this is a topic of interest, we have included details around the commercial real estate portfolio, including the CRE office portfolio, in the appendix of this presentation, beginning on page 29. CRE represents 23% of our total portfolio, with office representing 17% of total CRE or 4% of the total loan balances. Credit quality measures for this total CRE portfolio remain strong. The office portfolio credit metrics were stable, with lower classified and criticized rates when compared to industry trends. There were no losses in the quarter across the CRE portfolio, we expect the CRE portfolio to continue to perform well based on the current economic outlook. Slide 18 summarizes the financial outlook provided over the course of this presentation. As a reminder, this outlook represents our best current estimate for the financial performance in the second quarter of 2024 as compared to the actual results reported for the second quarter of 2023. The quarters in between are subject to normal seasonality. 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. Alicia, please open the line for questions. 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. One moment, please, while we pull for questions. Thank you. Our first question comes from Manan Gosalia with Morgan Stanley. Please proceed with your question. Hi, good afternoon. Thanks for taking my questions. I wanted to start on some of the trends that you saw on deposit balances and deposit rates during the quarter. At our conference last month, you had mentioned that your NIM was approaching about 2.85% on average for the quarter, and I know it came in a little bit better at 2.92%. I was wondering, is that a function of the rate of change improving in June? It sort of sounded like that based on some of the spot rates that you mentioned, but I was hoping you could give some more color there. Yeah, this is Paul. If I could, I might point you to, in the appendix of our presentation. Forgive me, I'm trying to find the page number. If, in the appendix for our presentation on page 22, we're providing monthly trends in net interest income. Then you can see the net interest margin there, as well as, non-interest-bearing demand deposits. I think what you see there, to your question, I think what you see there is a flattening of those trends, which is informing our outlook. Got it. Maybe on the expense side, you had some severance costs this quarter. If you could expand on what the ongoing benefit is from those cuts? To the extent that some of the pressure on deposit costs and cost of funding returns, how much more room is there for further expense cuts, either through, you know, ongoing expense saves or cuts in non-core businesses? Sure. I'll, this is Paul. I'll start with that response. I am reluctant to quantify the specific expense associated with the severance because it's part of a much larger program, and the larger program is meant to create a non-interest expense non-interest expense level a year from now, which is, you know, roughly consistent with the current quarter, excluding the FDIC special assessment. As it relates to whether or not there's further room, you know, to the extent the environment changes, that's, you know, the kind of thing I think that we're going to have to manage through, to the extent, you know, those, you know, possible changes might occur. Great. Thank you. Sure. Thank you. Thank you. Our next question comes from John Pancari with Evercore ISI. Please proceed with your question. Good afternoon. John, good afternoon. Just on the non-interest-bearing deposit mix, I know it's around, I guess, just shy of 40% right now, on end-of-period balances as of second quarter, after the 7% decline in balances this quarter. Where do you see that bottoming out in terms of that non-interest-bearing mix? I know it's already below the pre-pandemic levels. Thanks. Well, the mix, the issue with the ratio, of course, is that it has two numbers. As I noted, you know, we are having success growing interest-bearing deposits in. Or I'm sorry, yeah, interest-bearing deposits. So it's hard to provide sort of a specific, you know, kind of, you know, quote, unquote, "bottom" to that ratio because it's taken in the context of total deposits, but also the macroeconomic sort of environment has a very large effect. You know, if interest rates were to spike up again from here, you know, we would probably continue to see pressure there. What I can say, though, is that our outlook, sort of our best estimate for where we think net interest income is going to be a year from now versus today, incorporates some additional migration in DDA out of non-interest-bearing and into interest-bearing. That's all implied in sort of those beta figures that I was referring to. I think, you know, from my perspective, the thing to keep an eye on is the behavior of total deposit costs and how that's affecting net interest income over time. We've lost, as you know, over $10 billion of demand deposits over the last year. My expectation is that we wouldn't under our sort of baseline assumptions, we wouldn't lose nearly that much over the next year. Absent a lot of further increase. Yeah. in rates. Yeah. Hey, John, this is Scott. The slide that Paul just pointed out, slide 22, you know, it shows, you know, as I always just focus on declining DDA in a period of rising rates, but the demand deposits become worth more also, and I think that's what that slide depicts. Clearly, non-interest bearing is lower, but they're worth more than they were a year ago, and it has a very favorable influence. The other thing I would say is that when you look at our mix of DDA, which you're talking about, the total deposits, through, you know, back two decades now, more than two decades, we have always had a competitive advantage in terms of our mix of non-interest bearing to total deposits. That slide is in the deck, also in the appendix, and it's slide 25. We don't anticipate that relationship that's existed for over two decades will change materially in terms of our competitive advantage versus our peers through many different interest rate environments, because it's clearly a function of our strategy of banking businesses and the type of deposits they have with us, which are small, granular, operating accounts that are not as sensitive to interest rate movement. Great. Thanks, Scott. I appreciate that. Secondly, just on capital return, I know you indicated no real intention to buy back the stock in the third quarter. Just give us an update, you know, what could change that? What could bring you back in the market for your shares here? Thanks. I'll start there. You know, there's a lot of uncertainty, I think, including in the regulatory environment, around where capital rules are going. Just, you know, given the environment and the uncertainty around that, you know, we think it's prudent to continue to build capital organically. As I noted, our goal is to balance, the, you know, risk profile with the capital position of the organization. To the extent the, you know, macroeconomic environment becomes more clear, the capital sort of regulatory rules become more clear, then it's possible that you could see us be a little more active. As it stands, my sort of near-term expectation is that there's so much uncertainty that, you know, my personal expectation is that we wouldn't be very active in that market. Great. Thanks for taking my questions. Sure. Thanks, John. Thank you. Our next question comes from Steven Alexopoulos with JPMorgan. Please proceed with your question. Hi, everybody. Hi, hey. I wanted to start, so looking at, you know, one, the growth of brokered deposits, and then two, how customer deposits have started returning to the balance sheet, what's the opportunity to replace some of those brokered deposits with lower-cost customer funds here? Steve, thank you for that question. It's Scott. You know, the events in March, starting on about March 9th or 10th, there was a really quick change and jolt to the marketplace. I think what we tried to demonstrate through March and into the second quarter was the ability to utilize brokered deposits, which we did over the short-term period, March, April, that time period. We were also pulling on the lever of our higher-priced commercial sweep products and reciprocal deposits. Really, all three are important levers for any bank, I think investors should, you know, draw comfort when a bank can demonstrate it can utilize all three. We're seeing, as you noted, as Paul noted, good progress in building customer deposits, those sweep deposits, particularly, and CDs. I think what you'll see is that we'll continue to have success with that, and our broker CDs will go down absent some other big shock to the system. I think pretty confident that's what you'll see over the next six months. The other thing I'll note is those broker CDs are in a sort of a laddered format. They've got kind of an average maturity of about 6 months. There's an opportunity, as Scott said, to replace them as we're able to grow customer deposits. Yeah, I think another important point, Steven, is the growth in interest-bearing deposits for us. We didn't just start talking to our customers about their liquidity and the rates we pay for that. If you go back to 2021, zero interest rate environment, we were pushing clients, we were recommending to them that they move their deposits off our balance sheet. We entered the quarter with about $12 billion in off-balance sheet deposits, customer deposits, and we had recommended that they do that because money market funds were going to pay more than the banking industry. When we started more actively in February and March and into the second quarter, talking to our clients about our on-balance sheet rates, it wasn't like that was the first time we talked to our customers about their liquidity. They were, generally speaking, happy to bring them back on balance sheet. That, you know, we think that trend will continue as we have become more aggressive about our pricing of short-term deposits. If I could follow up on that, interest-bearing deposit costs increased materially this quarter, right, 130 basis points. The brokered were a key part of that. If we think about the ability maybe to start replacing some of those, and I'm staring at your loan yield at only 5.65%, so there's a repricing opportunity there. How far away are we from your NIM troughing? Oh, sorry. I just want to clarify my question. From troughing. Troughing. Oh, thank you. Troughing. That was the word I missed. You know, when you consider our outlook, which is kind of flat to, you know, slightly decreasing net interest income, and you consider that in the context of what I might describe as somewhat tepid loan growth, combined with an investment portfolio, which is going to continue to pay down. Again, we had nearly $1 billion of pay downs this quarter. My expectation is, you know, earning assets, generally speaking, are going to be kind of flat to down. When you put those two things together, the revenue, as the numerator and the earning assets as a denominator, I actually think we're getting, you know, my point of view, I think we're getting pretty close to, again, barring some unforeseen event, I think we're getting pretty close to the lower edge of the net interest margin in the current environment. In fact, the spot net interest margin, at the end of, at the end of the quarter was very close to the quarterly average. Okay. Also, I mean, the cost of interest-bearing deposits was 2.22% during the quarter. If you exclude the brokered deposits, it was 1.62%. I mean, to your point, to the extent we bring additional customer money back on, I mean, it's, you know, what we're bringing back on is certainly costing more, you know, at the margin than the average, but there's additional room to bring that down a little bit. Okay. Thanks for taking my questions. Thanks, Steven. Thank you. Our next question comes from Chris McGratty with KBW. Please proceed with your question. Hi, this is actually Nick Moutafakis on for Chris. Just going back on the interest-bearing deposit costs, could you guys remind us of your total IBD beta assumptions? I think you're asking about the assumptions that we use in our interest rate risk modeling. Is that correct? Correct. Yeah. Yeah. If I could point you back to the page, I don't have the page in front of me, but we have a page in the slide deck around interest rate risk, specifically, and around the modeled outcome. You know, I'll note again that we've got two sets of bars there. The second set of bars is what we're calling the, a sort of adjusted assumptions, because what we've observed is deposit betas, which have exceeded expectations based on our models, for a lot of reasons. It's on page 15 of the slide deck. As you're thinking about sort of looking ahead, I think the most important measures to consider are the betas that we've realized since the beginning of 2022, and then considering that our net interest income outlook is incorporating the sort of, the most current view on beta, which is, you know, effectively, very close to the beta that we've actually realized since the beginning of 2022. If I look at the standard versus adjusted on that slide 15 there, it's really just the increased beta is the only... It's also a dynamic mix shifts, like further shifts from non-interest to interest-bearing... So in- It's really just a higher beta. Yeah, incorporated in our When I say beta, incorporated in our beta, you know, that's not only the rate of change in interest-bearing deposits, but incorporated in there is some shift from non-interest-bearing. I'm sorry. Yeah, from non-interest-bearing deposits to interest-bearing deposits. It's a combination of mix shift and sort of repricing speed. Okay. Maybe just pay downs coming off the securities book, just quarterly, if you could help me out with that. I don't know if it's in the slide deck or not here. Well, I said it in the script. It is actually in the slide deck. I said it in the script. The pay downs, the net pay downs were just over $900 million in the current quarter, they've ranged kind of between $750 and $1 billion over the course of the last several quarters. Great. Thanks. Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to Shannon for closing comments. Thank you, Alicia, and thank you to all for joining us today. If you have additional questions, please contact us at the email or phone number listed on our website. We look forward to connecting with you throughout the coming months. Thank you for your interest in Zions Bancorporation. This concludes our call. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.