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Greetings, welcome to the Zions Bancorporation Q2 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] Please note, this conference is being recorded
I will now turn the conference over to your host James Abbott, Director of Investor Relations. You may begin.
Thank you, Kyle, and good evening. We welcome you to this conference call to discuss our 2022 second quarter earnings.
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 this press release or the slide deck on Slide 2, dealing with forward-looking information and the presentation of non-GAAP measures, which apply equally to statements made during this call. A copy of the earnings release as well as the slide deck are available at zionsbancorporation.com.
For our agenda today, Chairman and Chief Executive Officer, Harris Simmons, will provide opening remarks, followed by a brief review of our financial results by Paul Burdiss, our Chief Financial Officer. With us also today is Scott McLean, President and Chief Operating Officer; Keith Maio, Chief Risk Officer; and Michael Morris, Chief Credit Officer.
After our prepared remarks, we will anticipate to hold a 30-minute question-and-answer session. During the Q&A, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask questions.
I will now turn the time over to Harris Simmons.
Thanks very much, James, and welcome to all of you who are joining our call this evening. Beginning on Slide 3, there are some things that are particularly applicable to Zion's recent quarters as well as those that are likely to be prominent over the near-term horizon.
First, as Paul will discuss in greater detail, we're in -- I think we think we're in a very good position for rising interest rates. The futures market is pricing in a Fed funds upper target rate of approximately 3.5% by the spring of next year or an increase of about 175 basis points.
Our earning assets generally reprice faster and have a higher correlation or beta to the movement in rates and to our liabilities. Despite a typical lag of a month or so for variable rate loans and a longer lag for securities and longer-duration loans, we're already beginning to see significant benefits to asset yields due to recent rate hikes, while funding costs during the quarter remained low and well contained.
We also estimate the impact of borrowers' cash flows under significantly higher interest rates when we are underwriting loans, and we expect that the portfolio will perform relatively well in a somewhat higher interest rate environment.
Exclusive of PPP loans, our period-end loans increased $1.7 billion or 3.3% annualized during the quarter. We've achieved robust loan growth while maintaining strong underwriting standards. For example, our growth in commercial real estate loans over the past year was just over half the rate of the growth for the industry as a whole.
In recent years, our risk selection has been very consistent and has resulted in one of the lowest ratios of net charge-offs to loans in our peer group. It appears that the probability of a near-term recession is more likely than not. We would expect loan growth to slow from the recent double-digit annualized rate.
Turning to deposits, we experienced deposit attrition in the most recent quarter as the impact of the Fed's monetary policy tightening started to become apparent, just over half of the 4% reduction in period-end deposits came from accounts with first quarter balances of $50 million or more, constituting about 11% of our total deposit portfolio.
We continue to expect that the granularity of our deposit base will continue to provide us with ample and attractively priced liquidity and funding. We are starting from a position of strength with a securities portfolio that generated more than $900 million of cash flow during the quarter.
We're well prepared for a recession, having spent many years increasing concentrations in generally safer loans such as low loan-to-value jumbo residential mortgage loans and loans to municipalities, while significantly limiting or reducing concentrations in high-leverage lending, enterprise value lending, land development and certain other segments within commercial real estate, to name a few. And our capital is strong relative to the risk profile of our balance sheet.
Turning to Slide 4. We're generally pleased with the quarterly financial results, which are summarized on this slide. Circled in green, adjusted taxable equivalent revenue net of interest expense increased about 8% relative to the prior quarter. And if excluding PPP income, the increase was about 10%. Adjusted pre-provision net revenue increased 24%, and if excluding PPP, it was a 31% increase. Those growth rates are not annualized.
Our credit metrics are very clean. And as previously noted, loan growth was strong when adjusted for PPP forgiveness, while deposits experienced attrition following several quarters of outsized growth. Non-interest expense came in higher than we'd like to see, something Paul will discuss momentarily.
Moving to Slide 5. Diluted earnings per share was $1.29. Comparing the second quarter to the first quarter, the single most significant difference was in the provision for credit loss, which was a $0.37 per share negative variance, as can be seen on the bottom-left chart, as we added the loss reserve to reflect the increased probability of an economic slowdown.
The other major factor affecting earnings was interest income from PPP loans, which was $0.07 per share this quarter, down from $0.12 per share in the first quarter. Other items that affected earnings per share are noted on the right side of the page.
Turning to Slide 6. Our second quarter adjusted pre-provision net revenue was $300 million. The adjustments which most notably eliminate the gain or loss on securities are shown in the latter pages of the press release in the slide deck.
Within the PPNR chart, the top portion of each column denotes the revenue that we've received from PPP loans net of direct external professional services expense. These loans contributed $15 million to PPNR in the second quarter. Exclusive of PPP income, we experienced an increase in adjusted PPNR of 28% over the year ago period.
With that high-level overview, I'm going to ask Paul Burdiss, our Chief Financial Officer, to provide additional detail related to our financial performance. Paul?
Thank you, Harris. Good evening, everyone, and thank you for joining us. I'm going to start from the top. Thank you, everyone, and good evening.
On Slide 7, a significant highlight for us this quarter was the strong performance in average and period-end loan growth. Average non-PPP loans increased $1.5 billion or 3.1%, while period-end non-PPP loans increased $1.7 billion or 3.3% when compared to the first quarter. Areas of strength included commercial and industrial, residential mortgage, owner-occupied and home equity, as can be seen in the appendix on Slide 25.
The yield on average total loans increased 15 basis points from the prior quarter, which is primarily attributable to increases in interest rates. Average PPP loans declined $658 million to $801 million. Excluding PPP loans, the yield improved 18 basis points to 3.61% from 3.43%. We expect loan balances to increase at a moderate rate of growth by the second quarter of 2023.
Deposit costs remain low. Shown on the right, our cost of total deposits was stable at just 3 basis points in the second quarter. Our average deposits declined $718 million or 0.9% linked quarter. Period-end deposits declined $3.3 billion or 4%. A substantial portion of the runoff was attributable to large balance low-activity accounts.
Some of our customers experienced merger and acquisition-related activity. While this activity is recurring, the size of some of these transactions over the past several months caused a brief influx of large deposits. And as expected, we've seen much of that money move elsewhere. As Harris noted, we have planned for and are prepared for deposit balance volatility as our customers emerge from the unusual pandemic period.
Moving to Slide 8. We show our securities and money market investment portfolios over the last five quarters. The size of the securities portfolio remained flat over the previous quarter as we slowed new securities purchases. Money market investments declined to $3.5 billion, reflecting the decline in period-end deposits. The combination of securities and money market investments is now 36% of total assets at period end, which remains above our pre-pandemic average of 26%.
The $1.3 billion of securities purchases in the quarter had an average yield of 2.91%, which is about 80 basis points higher than the prior quarter's yield. We anticipate that securities balances will decline somewhat over the near term. Over three quarters of our revenue is net interest income, which is significantly influenced by loan and deposit balances and associated interest rates.
Slide 9 is an overview of net interest income and the net interest margin. The chart on the left shows the recent five-quarter trend for both. While the net interest margin in the white boxes has trended down over the past year, it gained 27 basis points in the current quarter. Also shown is the estimated net interest margin excluding the effect of PPP loans, which improved by about 30 basis points.
The largest contributor to improved net interest income is rising rates, combined with our asset sensitivity. As expected, our earning assets are repricing faster than our deposits, resulting in improved net interest income. Over the past year, the decline in PPP-related revenues have largely been replaced with the strategic repositioning of the securities portfolio.
Slide 10 provides information about our interest rate sensitivity. The rapidly changing environment has made our traditional disclosures regarding interest rate sensitivity somewhat less useful. Therefore, we are introducing two new terms, latent interest rate sensitivity and emergent interest rate sensitivity.
First, I will describe latent sensitivity. Recent increases in interest rates have not yet been fully recognized in net interest income because the balance sheet does not reprice instantaneously. Like a coiled spring, we expect these rate changes, which were in place at June 30, to work through our balance sheet and income statement over the near term.
We expect this latent sensitivity to add approximately 15% to our net interest income in the second quarter of 2023 when compared to the second 30. We would expect the forward path of interest rates, as predicted by the yield curve at June 30, would add an additional 8% to net interest income in the second quarter of 2023 when compared to the second quarter of 2022.
Both measures assume that earning assets will remain flat and that non-specific maturity deposits will move and reprice in accordance with our interest rate risk modeling assumptions. In other words, and for example, loan growth would be expected to add to net interest income beyond latent and emergent sensitivity estimates, which only consider changes due to rates.
With respect to our traditional interest rate risk disclosures, our estimated interest rate sensitivity to a 100 basis point parallel interest rate shock has declined by about two percentage points from the first quarter. This change reflects the recent decline in deposits, an increase in our interest rate swap portfolio and a higher net interest income denominator.
In summary, we expect latent and emerging interest rate sensitivity combined with continued loan growth and manageable changes in deposit volumes and pricing to meaningfully increase net interest income over the coming year.
Moving on to non-interest income on Slide 11. Customer-related non-interest income was $154 million, an increase of 2% over the prior quarter and 11% over the prior year. As has been noted, we have modified our overdraft and non-sufficient funds practices beginning in the third quarter. We expect these changes will reduce our non-interest income by about $5 million per quarter from the second quarter run rate. Including this reduction, our outlook for customer-related non-interest income in the second quarter of 2023 remains stable when compared to the current quarter.
Noninterest expense on Slide 12 was flat to the prior quarter at $464 million. While certain seasonal first quarter items such as share-based compensation reverted to lower levels, that reduction was offset by increased base salaries. Higher base salary expense reflects the inflationary pressures of the tight labor market and an increase in staff as we invest for future growth.
Incentive compensation and profit sharing accruals increased in the current quarter as our expectations have again been reset toward expanded full year PPNR and EPS growth relative to recent expectations. Our outlook for adjusted non-interest expense is to moderately increase in the second quarter of 2023 compared to the second quarter of 2022.
Another significant highlight for the quarter was the continued excellent credit quality of our loan portfolio, as illustrated on Slide 13. Relative to the prior quarter, we saw continued improvement in problem loans. Using the broadest definition of problem loans, the balance of criticized and classified loans dropped 7% and classified loans were down 12%.
Of course, net charge-offs to average loans is the most important measure of credit quality. We had only 7 basis points of annualized net charge-offs relative to average non-PPP loans in the second quarter, and the loss rate was only 5 basis points in the prior quarter. Shown in the chart on the bottom right, one can see the volatility of the provision for credit loss contrasted with the stability of reported net charge-offs.
Slide 14 details the recent trend in our allowance for credit losses, or ACL, over the past several quarters. At the end of the second quarter, the ACL was $546 million or 1.05% of non-PPP loans. The economic scenarios that we use to build our quantitative ACL were stable relative to the prior quarter. However, in our qualitative assessment, we increased the probability of recession. This change in outlook was the primary driver of the increase in the ACL to loan ratio.
Our loss absorbing capital position is shown on Slide 15. We believe that our capital position is generally well aligned with the balance sheet and operating risk of the bank. The CET1 ratio is now 9.9%. Our stated goal continues to be that the CET1 capital ratio will remain at or slightly above the peer median which we believe positions us well for unforeseen internal or external risk.
We repurchased $50 million of common stock in the second quarter. As a reminder, share repurchase and dividend decisions are made by our Board of Directors, and as such, we expect to announce any capital actions for the second quarter or the third quarter in conjunction with our regularly scheduled board meeting this coming Friday.
The chart on the right side of the Page of 15 shows recent annualized net charge offs as a percentage of risk rated assets. We have intentionally matched the scales on both charts, so that you can see the order of magnitude of losses incurred during this timeframe, relative to the capital set aside for expected losses. The allowance for credit losses and the capital set aside for unexpected losses, in the form of common equity. Given the relatively low level of losses, we feel our capital position is appropriately strong relative to our risk profile.
Slide 16 summarizes the financial outlook provided over the course of this presentation, which I will not repeat other than to point out that our outlook for net interest income refers to Slide 10 for the more detailed discussion. As a reminder, this outlook represents our best current estimate for the financial performance in the second quarter of 2023, as compared to the actual results reported for the second quarter of 2022. The quarters in between are subject to normal seasonality.
This concludes our prepared remarks. Kyle, please open the line for questions.
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Ken Usdin with Jefferies. Please proceed with your question.
Just one follow-up on the NII side. And Paul wanted to ask, you've mentioned moderately increasing loan growth and manageable changes in deposit volumes and a likelihood that the securities portfolio shrinks. So, when we think about that increment on top of the emergent and latent, like, could that be a net add to that by 2Q '23? How do we just think about the netting factors of kind of all else X-rates?
If I understand your question correctly and please, feel free to follow up, if I have not. You should absolutely consider the latent and emergent as two different measures, which should be added together. Within the -- as I tried to say, within the latent sensitivity measure, there is an assumption that the balance sheet is kind of flat, but deposits continue to churn in accordance with all of our assumptions. So, all of those interest rate risk pieces are in there, and these are meant to be rate only sort of estimates.
Yes, sorry, go ahead.
Yes. No. So I'll rephrase. Accepting the 15 plus to 8% as the base, then is all other, everything else around mix and loan growth net additive to that base?
The largest part is going to be related to loan growth. And as we stated in our outlook, we expect loans to continue to grow. So, yes, I would expect that to add to that base rate measure.
Okay. And then can you just give us an update on just it's -- the deposit beta's fairly moved at all, just how you're thinking of that moving forward, any changes to your original forecast, which I know you've talked about in the past in the upper teens?
Yes. There's not a change to our original forecast. Although I will say, I think for us and for the industry, given the change in rates that we've seen and probably the change in rates, we'll continue to see this week and over the course of the next couple of quarters. My expectation is that we're going to really start to see deposit rate movement across the industry.
And I think you're going to see again, my opinion, a separation in banks as it relates to their ability to hold those rates lower. We have not changed our outlook for deposit beta. But as has been noted previously, it might be a little bit lumpy, and I think we're going to start to see those changes.
Our next question is from Dave Rochester with Compass Point. Please proceed with your question.
Back on the NII guide. I definitely appreciated the new quantification there on your outlook that was great to see. But Paul, when you mentioned the deposits continue to churn. Is the thought that you'll still get some measure of net growth through the end of this year over the next year? Is that baked into your guidance? Or when you say churn, is it more like flat or down?
I would say, it's closer to flat to down. My expectation is that it's going to be -- as Harris noted in his opening remarks, 50% of the deposit outflows we saw in the quarter were deposits that were over $50 million. And while I would compare our deposit portfolio to anyone as it relates to the nature and granularity of that portfolio, we clearly do have some large depositors who are going to be more rate-sensitive. And so, managing those carefully will be important for us over the next six months, but my expectation would be that we may continue to lose some of those larger dollar deposits.
Yes. And then just as a quick follow-up, are you thinking that you can just use securities and cash liquidity on the balance sheet to fund net loan growth from here? Do you think you'll have to tap wholesale sources going forward?
That's a little bit of a trickier and somewhat speculative question. My expectation is that we have been generating about $1 billion of principal and prepayment and amortization on the securities portfolio, and that will continue for the next several quarters. So, it's a ready source of cash for us. Part of the reason I said that I expected in my prepared remarks that I expected the securities portfolio to be declining a little bit from here was, in fact, to planning for funding loan growth between both securities portfolio and cash reduction.
Our next question is from John Pancari with Evercore ISI. Please proceed with your question.
On your deposit color that you just mentioned in terms of the flat to down, to the extent that there is incremental declines, should the magnitude of the incremental declines in the back half be less than what you saw this quarter because of the lumpier deposits that were M&A related and drove the downward move?
I'd say that's quite possible, John. In our interest rate risk modeling, I'll note that we do assume that there is, as I said, churn in the portfolio. We assume that demand deposits sort of run away to a relatively small extent or move to interest-bearing. And that's all figured into those deposit beta figures.
So as we think about interest sensitivity, our expectation for those changes in the deposit portfolio are already in there. But the most sensitive deposits, I would expect not entirely but perhaps have largely exited for greener pastures.
Got it. Okay. And then separately on the capital front, I know you kind of left the door open the buybacks in your guidance and your commentary, and you bought back 900,000 shares in the second quarter. Can you maybe give us a little bit of color in terms of your outlook and your expectations here given where your capital ratios lie? And is it likely that we could see an increase in the pace of buybacks from where you're at now?
Well, I wouldn't be willing to say that. Ultimately, that's going to be up to the board. I do note that the CET1 ratio was down a little bit even though our earnings were quite strong in the quarter. So as noted, we continue -- we expect our earnings to continue to increase, and the buyback ends up being a little bit of a shock absorber as we think about capital growth through earnings and loan growth. Harris, would you add anything to that?
Just to say that, I mean our first preference always would be to use capital to support quality loan growth. And so it will all hinge on that. I mean I think you can see that our expectation is that PPNR is going to be pretty strong here in the next few quarters. And to the extent that loan growth can -- emerges, that will consume capital. I think it's a fabulous thing. If it doesn't, I expect that we'll be looking at larger amounts of buybacks.
Our next question is from Peter Winter with Wedbush Securities. Please proceed with your question.
Can you give an update how much is left in terms of adding swaps to manage the balance sheet sensitivity and where you'd like to bring the asset sensitivity down to?
Yes. This is Paul. Our asset sensitivity through a combination of balance sheet changes, including the swap portfolio additions and our denominator becoming larger, that is our net interest income is just becoming larger and some deposit outflows. Our net interest income sensitivity has actually fallen quite a bit.
I think that there are probably ultimately be an ALCO decision. But over time, I think we could continue to add to that swap portfolio to make our asset sensitivity sort of less than it is today, although I think we're getting closer to -- certainly from where we were a year ago, we're getting much closer today to where our target sensitivity would be.
Okay. And then just on credit. Obviously, credit is very strong, but are you starting to see any type of stress on the commercial borrowers maybe having trouble passing off price increases with the inflation pressures to the customers?
This is Michael Morris. I'm the Chief Credit Officer. I'll respond to that. We are not seeing a lot of stress with our clients passing through to their core customers yet. Most have been able to pass it on. And those that haven't have had a lot of liquidity to cover what might be a little bit of a settlement period there, so have not detected or seen any forward indicators that would suggest stress there.
Our next question is from Ebrahim Poonawala with Bank of America. Please proceed with your question.
Just wanted to follow up in terms of, Harris, I think you mentioned that the near-term probability for a recession seems more likely than not. Just following up to your previous response, give us a sense of how is that informing just incremental credit risk that you're putting on the balance sheet and how do we think about reserve build and provisioning from here.
I mean the first thing I'd say is it's not creating any major pivot. And I think over the last decade really, we've been doing a lot of things to -- as I also noted, to reshuffle the deck a little bit in terms of greater exposure to municipal credits. A lot of these -- most of these are smaller deals of the average size of about $3 million. These are -- it's an asset class that's fared really well through thick and thin for decades for us as well as jumbo mortgages. And the quality of those is just spectacular.
We've got about 78% of our jumbo mortgage portfolio that has FICO scores of 750 or greater, about 2% that are less than 650, just to give you kind of a couple of indicators. Back when we were doing kind of in the CCAR days when we were considered a SIFI in doing -- and the Fed was actually doing tests on that portfolio, they -- that was -- we were actually faring in their models as one of the very best in the industry.
So I mean -- so, we've made some changes over time that I think make this a lot stronger. We're fundamentally -- I mean we underwrite the cash flow and then we -- the suspenders part of it is collateral. And it's one of the things that's kept our losses low for really over the last decade.
One of the things we noted I think in one of the slides, maybe in the appendix, we -- losses relative to non-accrual loans are -- it's a very conservative side of the industry. I mean -- so we think that we come into whatever we're heading into in a really very strong position.
Obviously, we don't know what the future holds, how deep or how long any recession might be. I tend to think parenthetically that because of the strength in the labor market and job openings relative to available labor and some of the demographic changes, we're seeing that this is not likely to be a really challenging kind of recession.
I think the Fed's got their work cut out, but that -- the higher interest rate thing is going to, I think, more than pay for any problems we have. So I don't know. That's a little around the map kind of view of kind of how I'm thinking about a recession.
This is Scott McLean. I'd just add to that, that our exposure to consumer unsecured, whether it's card or just personal unsecured loans, is very low relative to peers. And we go into this -- if we go into a recession with virtually no land exposure, very different than the pre-'08 period and our leveraged portfolio and other typical portfolio you'd look at. There are good industry comparables on that. There haven't been lately, but there probably will be sooner than later. And the last time they were done, we generally were on the favorable side in terms of exposure.
And I'll add one other just quick final thought about it. And that is the one product that might give people a little bit of pause, we've had some growth in home equity lines of credit. But almost half of those, I think about 47% of that portfolio, are first lien deals. And the credit metrics I mentioned with respect to the jumbo mortgages look very similar with respect to these first lien home equity credit lines. And the ones that are second lien, we're also thinking about very conservatively. So I -- again, I think we're in pretty good shape in that entire consumer portfolio.
Got it. And just when we take that back to your ACL reserves at the end of the quarter, does it assume -- just give us a sense of what that assumes in terms of downside versus base case scenario around the macro outlook and whether or not it actually assumes a recession in your base case?
Well, I'll start with that. This is Paul. We -- our reserve is set with both quantitative and qualitative measures. And we utilize the Moody's macroeconomic forecast as the basis for our modeled outcomes that serve to build our reserve. And so in that, what we have done, as I tried to say in my prepared remarks, was that we have put more emphasis on the probability of recession. That is to say that in that outcome, a recession is more probable than not relative to the base case, and that's serving as the basis for that allowance for credit loss.
Our next question is from Jennifer Demba with Truist Securities. Please proceed with your question.
Two questions. First, with deposit growth being more challenging now, are you changing your strategy in terms of deposit gathering, increasing incentives to employees or anything like that?
I will -- if I could start, our loan-to-deposit ratio is 66%. So I'm not particularly concerned about the level of deposits relative to the balance sheet. I will say that historically, we've had a practice of pricing more -- repricing more on an exception basis than not. And so while we will see some rate increases, my expectation is the primary tool for managing deposit rates will continue to be exception pricing.
I would just add to that, Jennifer, that the -- we've reported the granularity of our deposit base many times in the past, and it relates directly to our orientation to banking small and medium-sized businesses. And we've seen in other periods of rising rates, you saw it in '16 and '17, but even going back to other periods, that the -- those deposits, the granular nature of them cause them not to move at a rate that you might see in other banks.
And it's simply because those small businesses, the owners of those companies, they're more focused on the top line revenue than they are trying to make an extra 10 basis points on their free cash.
And also on fee income, you said you're expecting kind of flattish customer fees over the next 12 months. What do you think will be the best offset for the insufficient funds and overdraft fees you're going to lose?
That's a great question, Jennifer. And we're just -- year-over-year, we're just seeing really good growth in our customer fees across the entire range. And so my basic answer would be, our expectation is that it's going to be good, solid mid-single-digit balanced growth. It used to be -- I mean capital markets, I think, will be a solid dollar and percentage increase performer. This is areas like syndications, swaps, foreign exchanges there, and some other businesses we're investing in from a capital market standpoint.
Our wealth business continues to grow at a nice high single-digit, low double-digit rate. And our commercial account fees, our basic treasury management fees, notwithstanding this accounting change we made -- adjustment we made in the first quarter is growing at nice mid-single-digit rates. So, we're pretty optimistic about customer fees in general.
Our next question is from Chris McGratty with KBW. Please proceed with your question.
Harris, I think in your prepared remarks, you said you were a little disappointed with the expenses in the quarter. I'm wondering -- you're not alone, first off. And I guess maybe potential about how to offset some of these inflationary pressures?
Well, what I -- just a couple of thoughts about it. One is a portion of it is accruing toward what we expect we're going to be wanting and needing to do with respect to incentive compensation, given what we think will be a stronger second half of the year. And so we have accruals there. We -- Scott just mentioned capital markets as a segment that we expect to see.
And I actually think we'll see some really nice growth over time. It's hard to understand entirely how -- if we get into a mild recession, how that may slow things up or what impact that will have, but we're absolutely building a much stronger team there. We've had some really good hires. And so that's -- we're making investments there. It's been -- very notably.
So I expect that over time, we're in the last kind of innings of completing this big technology project, we call future core, replacing all of our core loan deposit systems. And that, I think, will help to flatten things out a little bit in that area. We'll have the amortization of capitalized cost of this last major release or a piece of this that will come into play sometime kind of mid next year.
But we'll also, some of the period expenses we've been incurring should start to come down. I think net-net, that's going to probably be helpful. Beyond that, it's just -- it's a tough -- as you all know, you're seeing it in your firms as well. It's just a tough environment where you have to play strong defense to make sure you're holding on the deeply you want to hold on to.
And so, I think that's going to probably start to get a little easier as we get down the road a quarter or two, as the Fed does its thing right. I think that is going to probably make life a little easier that way. But costs are going to be a challenge across the industry. The good news is that we're going to have the revenues to more than compensate for it.
Our next question is from Gary Tenner with D.A. Davidson. Please proceed with your question.
Thanks. Good afternoon. Wanted to just ask about the swaps. I don't know if I missed this, so I apologize if I did. But can you talk about the amount that you added in the quarter? And then as you think forward, do you have any thoughts on additional adds to get your rate sensitivity down to any particular area, thinking about the other side of this rate cycle.
Yes, this is Paul. I'll start. So I would point you to -- rather than focus on maybe what we've just added, I would point you to Page 24 of the slide deck accompanying today's earnings release, where I think we provide some pretty good disclosures on the notional amount of outstanding swaps and then the associated fixed rate.
Specifically and maybe going back to the prior question, as it relates to our interest rate sensitivity, if we were to get down into sort of mid-single-digit asset sensitivity for a 200 basis point rate change at June 30, that would be another $5 billion, as an example, of interest rate swaps.
To be clear, I'm not predicting that, but what I'm saying, that's the sort of scale that we would require to get our asset sensitivity down for 200 basis point shock down into that mid-single-digit range.
And then second question I had was in terms of the loan kind of promo rate specials you're running for a while, are you totally through those right now given kind of the changing rate and potentially economic environment? Or are you still running any of that throughout your franchise?
Yes. The programs we announced last -- in the second quarter of last year have terminated now. We're always cycling through some promotional pricing for consumer and small business lending, but of the magnitude we were doing before, no, that's discontinued.
And I'll note -- sorry, just quickly, that the figure I provided for that latent sensitivity, that fully incorporates the expiration of all of these sort of promotional rates over the course of the next several quarters.
They were -- it was a one-year promotional rate. And just depending on when they fund it, it will roll off this year and early next year.
We have reached the end of the question-and-answer session. And I will now turn the call over to James Abbott for closing remarks.
Thank you, Kyle, and thank you all of you who have joined the call today. We really appreciate your questions. If you have additional questions, please contact me through e-mail or phone listed on our website. And we will be connecting with you through the next couple of months until we see you again next quarter.
Thank you again for your interest in Zions Bancorporation.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.