Long-Term Debt And Shareholders' Equity

9 Months Ended

Sep. 30, 2020

LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY

Long-Term Debt

Long-term debt is summarized as follows:


(In millions)	September 30, 2020		December 31, 2019



Subordinated notes	$	627	$	572
Senior notes	716		1,147

Finance lease obligations	4		4
Total	$	1,347	$	1,723

The preceding carrying values represent the par value of the debt adjusted for any unamortized premium or discount, unamortized debt issuance costs, and basis adjustments for interest rate swaps designated as fair value hedges. The change in outstanding senior and subordinated debt balances from December 31, 2019 to September 30, 2020 was primarily a result of the repurchase and retirement of senior notes that had adjustments to their carrying values from being in designated hedge relationships with interest rate swaps. During the second quarter of 2020, the Bank repurchased and retired $219 million of senior notes with an interest rate of 3.50% and $210 million of senior notes with an interest rate of 3.35%.

During the first quarter of 2020, the Bank terminated two receive-fixed interest rate swaps designated as hedges on senior notes, resulting in one outstanding receive-fixed interest rate swap designated as a hedge on a $500 million subordinated note with an interest rate of 3.25% at September 30, 2020. The outstanding swap constitutes a qualifying fair value hedging relationship. The terminated interest rate swaps adjusted the carrying value of the debt and this adjustment will be amortized into earnings until the original maturity date. For more information on derivatives designated as qualifying fair value hedges, see Note 7 – Derivative Instruments and Hedging Activities.

Common Stock

The Bank’s common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. As of September 30, 2020, there were 164.0 million shares of 0.001 par value

common stock outstanding. The balance of common stock and additional paid-in capital was $2.7 billion at September 30, 2020, and decreased $55 million, or 2%, from December 31, 2019, primarily due to Bank common stock repurchases. During the first quarter of 2020, the Bank repurchased 1.7 million shares of common stock outstanding with a fair value of $75 million at an average price of $45.02 per share.

On May 22, 2020, 29.2 million common stock warrants (NASDAQ: ZIONW), with an exercise price of $33.31, expired unexercised. Each common stock warrant was convertible into 1.10 shares and the exercise of the common stock warrants was cashless as the warrants were settled on a net share basis.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income improved to $332 million at September 30, 2020 from $43 million at December 31, 2019 primarily as a result of increases in the fair value of AFS securities due to changes in interest rates. Changes in AOCI by component are as follows:


(In millions)	Net unrealized gains (losses) on investment securities		Net unrealized gains (losses) on derivatives and other		Pension and post-retirement		Total
Nine Months Ended September 30, 2020
Balance at December 31, 2019	$	29	$	28	$	(14)	$	43

OCI before reclassifications, net of tax	228		72		13		313
Amounts reclassified from AOCI, net of tax	—		(24)		—		(24)
OCI	228		48		13		289
Balance at September 30, 2020	$	257	$	76	$	(1)	$	332
Income tax expense included in OCI	$	75	$	16	$	4	$	95
Nine Months Ended September 30, 2019
Balance at December 31, 2018	$	(228)	$	(1)	$	(21)	$	(250)

OCI before reclassifications, net of tax	257		39		—		296
Amounts reclassified from AOCI, net of tax	—		3		—		3
OCI	257		42		—		299
Balance at September 30, 2019	$	29	$	41	$	(21)	$	49
Income tax expense included in OCI	$	84	$	14	$	—	$	98


	Amounts reclassified from AOCI 1				Amounts reclassified from AOCI 1				Statement of income (SI)
(In millions)	Three Months Ended September 30,				Nine Months Ended September 30,
Details about AOCI components	2020		2019		2020		2019			Affected line item











Net unrealized gains (losses) on derivative instruments	$	16	$	(1)	$	32	$	(4)	SI	Interest and fees on loans
Income tax expense (benefit)	4		—		8		(1)
Amounts Reclassified from AOCI	12		(1)		24		(3)

1 Positive reclassification amounts indicate increases to earnings in the statement of income.