Margins expand as credit stabilizes and fee income grows
- Zions relies heavily on net interest income, which makes up about 78% of its net revenue.
- Net interest margin recently expanded to 3.27% driven by lower funding costs.
- Credit concerns are fading with nonperforming assets holding flat at 0.48% of total loans.
- The recently closed Basis Investment Group acquisition adds agency lending capabilities to the commercial real estate suite.
From credit cleanup to margin expansion
Zions faced severe credit fears in 2024 when classified loans jumped. That fear has largely faded. Credit metrics are stable, with nonperforming assets flat at 0.48% in the 2026 second quarter. Net charge-offs remain exceptionally low.
The bull case is now shifting from credit repair to earnings growth and margin expansion. Net interest margin expanded to 3.27% recently, driven by lower funding costs. The closing of the Basis Investment Group acquisition in July 2026 adds another growth avenue by expanding noninterest income capabilities in the multifamily space.
The bear case focuses on deposit costs and intense funding competition. While noninterest-bearing deposits grew by $1.4 billion recently, the growth was primarily a mechanical shift of an existing consumer product. If the bank cannot organically grow granular deposits, rising funding pressures could threaten the expected gains in net interest margin.
Deposits in, loans out
Zions operates as a classic regional bank. It gathers deposits from customers and lends that money out at higher rates. The difference between interest earned and interest paid is net interest income, which accounts for about 78% of net revenue.
The model relies heavily on keeping deposit costs low and avoiding large loan losses. When deposits are stable, the bank generates steady cash flow. Zions also earns noninterest income through commercial account fees, wealth management, and capital markets services.
The weak point is funding competition and credit cycles. A loan book can look fine until borrowers struggle to refinance or face higher rates. Zions navigated a rough patch in commercial real estate, but the focus has now turned to managing deposit pricing against aggressive competitors.
Loans are the product
Commercial lending
This is the largest loan group at 52.3% of the portfolio. It includes commercial and industrial loans, owner-occupied real estate, municipal finance, and equipment leasing.
Consumer lending
Consumer loans are 24.8% of the portfolio. The main pieces are 1-4 family mortgages and home equity lines of credit.
Commercial real estate lending
CRE is 22.9% of the loan portfolio. It includes construction, land development, and term loans. The Basis Investment Group acquisition added Fannie Mae and Freddie Mac agency lending programs to this suite.
Deposit accounts
Deposits are the bank's main funding source. Noninterest-bearing demand deposits were 33% of deposits, which helps funding costs when balances stay in place.
Fees and wealth services
Noninterest income comes from customer services such as commercial account fees, capital markets fees, and wealth management. The Basis Investment Group acquisition adds new capital markets revenue.
A Western loan book
The mix below uses the loan portfolio split cited in recent filings. Commercial lending is concentrated in Texas at 25.2%, Utah and Idaho at 20.4%, and California at 20.0%.
What could still break
Deposit costs surge
High impact · Medium oddsThe bank faces intense competition for deposits. If granular deposit growth initiatives fail, the bank may have to pay higher rates to keep funds, which would compress the expected net interest margin.
Classified loan cleanup stalls
High impact · Low oddsThe central thesis depends on classified loans continuing to fall or stay low. If progress stops, investors may treat the credit issue as delayed rather than solved.
Deposit migration reverses
Medium impact · Medium oddsRecent deposit growth relied partly on migrating consumer interest-bearing products to noninterest-bearing offerings. If these deposits do not stick long-term, funding costs could rise.
Basis acquisition integration struggles
Medium impact · Low oddsThe closed acquisition of Basis Investment Group is expected to boost capital markets revenue. If the integration is messy or the revenue run-rate falls short, noninterest income could disappoint.
In one breath
What does Zions Bancorporation do?
Zions is a regional bank based in Salt Lake City. It serves customers mainly across 11 Western states through deposits, commercial loans, real estate loans, consumer loans, and related banking services.
Why do classified loans matter for Zions?
Classified loans are loans the bank has marked as higher risk. For Zions, this metric became the main investor concern after a large 2024 increase, so the recent decline is a major sign that credit risk is easing.
Is Zions mainly a commercial real estate bank?
No. Commercial real estate is important at 22.9% of the loan portfolio, but commercial lending is larger at 52.3%. The reason CRE gets so much attention is that it drove much of the earlier classified loan jump.
What is the next key thing to watch for ZION?
Watch whether the bank achieves its projected upper single-digit growth in net interest income. Additionally, monitor the revenue contribution from the closing of the Basis Investment Group acquisition.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- September 13, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
Comparable Banks - Regional companies
Companies near Zions Bancorporation, National Association in Finn's Banks - Regional industry ranking.
