The market saw one ugly loan and hit the panic button.
But the core business is chugging, deposits are growing, and you’re getting paid a tidy dividend to be patient.
This looks more like a speed bump than a sinkhole.
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Strategic Positioning
Zions Bancorporation (NASDAQ: ZION) is a plain-vanilla, block-and-tackle regional bank with deep roots across 11 western states.
Think small and mid-sized businesses, local governments, and long-time households that know their branch manager by name.
That community-first footprint is a feature, not a bug, and it’s why Zions regularly shows up in small-business lending and public-finance league tables.
When the economy hums, that mix gives you steady loan demand; when it wobbles, long relationships help keep deposits sticky.
A few reasons the franchise matters right now:
Deposits are behaving. In the latest quarter, customer deposits (excluding brokered hot money) grew at about a 7% annualized clip. That’s the lifeblood.
Earning power improved. Core earnings before loan provisions rose 14% from a year ago. The spread between what Zions earns on loans and pays on deposits widened versus last year, which is banker-speak for the machine worked better.
Fee businesses help. Customer-related fee income rose around 8% (adjusted), giving you more than just lending to lean on.
Yes, there was an ugly headline: two related borrowers at a California subsidiary went sideways, leading to a roughly $50 million charge-off and another reserve set aside.
Annoying? Yup. Systemic? No. Management called it out as a one-off with legal action underway. Outside of that, charge-offs were a rounding error.
Action Plan
Don’t overthink the spreadsheets. Treat this like a quality bank that got tripped by a shoelace.
Starter buy: $49–$53 (shares recently ~ $52). That’s you getting paid a ~3.5% yield while waiting.
Add on proof: Above $55–$56 after one clean quarter (no surprise losses, steady deposits, stable credit).
Near-term target: $60–$62 (a re-test of the year’s better levels).
Stretch target (12–18 months): $65–$68 if deposit growth holds, credit stays boring, and core earnings grind up.
Risk line to reassess: A break below ~$47 and evidence of broader credit slippage (not just one borrower drama).
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Recent Momentum
Quarter three delivered net income to common of $221 million, or $1.48 per share, up from $1.37 a year ago, down from $1.63 last quarter.
Why I’m not clutching my pearls:
Core trends are up. Pre-provision profit up mid-teens year over year.
Book value climbed. Tangible book value per share rose about 17% year over year, quietly great news for long-term owners.
Loans dipped a touch; deposits rose. Loans shrank at roughly a 3% annualized rate (fine to tap the brakes), and deposits grew at a 7% annualized rate (chef’s kiss).
The market, being the market, saw bad loan and went full drama.
One broker even tallied about a billion dollars of market cap gone in a day, then promptly upgraded the stock, arguing the punishment didn’t fit the crime.
That whiplash is your opportunity.
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The Setup You’re Actually Betting On
You’re not betting on a moonshot. You’re betting on a steady bank to keep doing bank things a bit better than expected:
Sticky customers. A community-bank model means relationship deposits, less flighty, more predictable.
Boring credit is beautiful. Outside the known problem credits, losses were tiny. If that stays true, earnings don’t spring leaks.
More than loans. Fees from customer services add a second engine.
Capital cushion. Core capital sits around the low-double-digit range, which is code for we can absorb bumps.
Execution discipline. Keep expenses in line, price loans sensibly, grow deposits without bribing them with sky-high rates. It’s not flashy, it works.
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Valuation Check (no alphabet soup required)
At about 9–10 times this year’s earnings and roughly 1.1 times book value, you’re not paying up for perfection.
Add a ~3.5% dividend yield, and the math tilts friendly if earnings merely jog instead of sprint. Could it get cheaper?
Sure, banks always can. But for a franchise adding deposits, growing book value, and tightening operations, this is a fair entry with income attached.
Bear Case
Next update: Look for steady deposits, calm credit costs, and no surprise categories lighting up.
The bad-loan wrap-up: Any recovery news or closure on the legal side would help sentiment.
Small-business pulse: Zions leans into Main Street. A solid pipeline in small-business lending and public-finance deals is a tell that demand is fine.
Rate path. If funding costs stop climbing (or even ease), that helps the spread and lifts profits.
Shareholder friendliness: Think steady dividend, maybe opportunistic buybacks if the stock stays moody and capital remains strong.
Risks (we’re adults, let’s name them)
Credit cycle. If commercial real estate or small-business credit sours broadly, losses rise and the boring is beautiful pitch breaks.
Deposit competition. If rivals pay way up for deposits, funding costs pinch profits.
One-off turns two-off. Another surprise credit would test the isolated event claim, at least in the court of public opinion.
Regulatory mood swings. More rules, more capital, or higher fees can sit on returns.
Regional concentration. A sharp downturn in the western footprint would weigh more than for a coast-to-coast bank.
Key Actions
Build on weakness: Start nibbling between $49–$53.
Earn your add: Only add above $55–$56 after a clean quarter and stable deposit commentary.
Use mileposts: Trim a little near $60–$62 if we pop there fast; if we grind there on improving trends, hold for $65–$68.
Walk-away rules: Two straight quarters of rising losses across categories, or deposit shrinkage paired with rising funding costs, cut size and wait.
Sizing: Keep it 2–3% of an equity sleeve; pair with something dull and defensive so one bank doesn’t swing your mood (or your month).
Final Take
This is a keep calm and carry loan setup.
A single borrower blew a gasket, the stock got punished, and underneath you still have a solid, dividend-paying regional bank that just posted better year-over-year profit, added core deposits, and grew book value.
If you like getting paid to be patient while the market gets over its latest scare, this is your kind of dip. Start small, add on proof, and let compounding do the heavy lifting.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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