Conferencia de resultados del 3T 2026 de Zions Bancorporation (ZION): perspectiva de crecimiento del NII

Puntos clave

• Zions Bancorporation informó de un beneficio neto disponible para accionistas ordinarios en el T3 de 2026 de 262 millones de dólares, o 1,78 dólares por acción, un 20% más que los 1,48 dólares de un año antes.
• El ingreso neto por intereses en equivalente imponible aumentó un 1% intertrimestral y un 2% interanual hasta los 684 millones de dólares. El margen neto de interés cayó 4 puntos básicos intertrimestralmente hasta el 3,23%, a medida que aumentaron los costes de los depósitos y el exceso de liquidez se desplazó hacia activos del mercado monetario de menor rendimiento.
• Los préstamos medios crecieron a una tasa anualizada del 3,7% respecto al trimestre anterior, mientras que los depósitos medios de clientes aumentaron un 8,8%. El fuerte crecimiento de los depósitos respaldó una menor financiación mayorista, incluyendo una reducción de los depósitos intermediados y de los préstamos del FHLB.
• El desempeño crediticio se mantuvo sólido. Las cancelaciones netas anualizadas fueron de 2 puntos básicos sobre los préstamos medios, mientras que los saldos señalados y clasificados cayeron un 8% y un 12%, respectivamente.
• Para el T3 de 2027, la directiva prevé que el ingreso neto por intereses aumente entre un 8% y un 12%, que los ingresos ajustados por comisiones de clientes crezcan entre un 6% y un 9%, y que los gastos ajustados no procedentes de intereses se incrementen entre un 4% y un 6% frente al T3 de 2026.
• La dirección señaló que las perspectivas asumen tres subidas de tipos hasta junio de 2027 y un aumento de los costes de los depósitos del 1,59% a aproximadamente el 2%.

Datos financieros clave

Desempeño comercial y operativo

Mercados de Capitales siguió siendo un motor importante de ingresos por comisiones. Su contribución anualizada por comisiones en 2026 fue de 136 millones de dólares con base en los resultados al 30 de septiembre, y la directiva prevé que el resultado de todo el año sea algo superior. La compañía también destacó una cartera de proyectos de banca de inversión y asesoramiento en M&A, aunque la dirección señaló que los ingresos de mercados de capitales pueden ser irregulares entre periodos.

Zions completó la adquisición del negocio de préstamos de agencia multifamiliar de Basis Investment Group durante el trimestre. La plataforma proporciona acceso tanto al programa de suscriptor y servicer designado de Fannie Mae como al programa Optigo de Freddie Mac, junto con originaciones de conductos CMBS de terceros.

La operación adquirida aportó aproximadamente 300.000 dólares en ingresos e incurrió en unos 4 millones de dólares en gastos de personal y relacionados con la integración en el T3. La dirección prevé que la contribución aumente gradualmente a medida que avance la integración y crezca la producción.

Según la dirección, la gestión de patrimonios sigue teniendo una penetración baja en la base de clientes existente de Zions. La oferta Wealth Select se dirige a clientes con activos invertibles de entre 100.000 y 1 millón de dólares aproximadamente mediante un modelo de asesoramiento escalable. La directiva afirmó que las estructuras retributivas para los equipos de gestión patrimonial y banca privada están ahora mejor alineadas tras los cambios realizados en los últimos 12 a 24 meses.

Las iniciativas estratégicas de depósitos de Zions también ganaron impulso. Hasta el 30 de septiembre, el banco había abierto más de 14.000 cuentas Gold, generando aproximadamente 275 millones de dólares en nuevos depósitos para la entidad. También abrió 1.300 cuentas Business Beyond, que representan cerca de 120 millones de dólares en nuevos depósitos.

Orientación de la dirección

Las perspectivas del ingreso neto por intereses utilizan la curva forward al 30 de septiembre y asumen subidas de tipos en diciembre de 2026, marzo de 2027 y junio de 2027. La dirección prevé que los costes totales de los depósitos aumenten hasta situarse en torno al 2%, lo que incluye cierta migración de depósitos sin remuneración a depósitos remunerados. La beta implícita asumida para los depósitos se sitúa en el rango entre el 40% alto y el 50% bajo.

La dirección también espera que los rendimientos de los activos rentables se beneficien del reajuste de tipos en los préstamos a tipo fijo y del trasvase continuo de valores hacia préstamos. En el entorno asumido de tipos y depósitos, la compañía cree que podría ser alcanzable un margen neto de interés en la parte media del rango del 3% durante 2027, aunque no proporcionó una orientación formal sobre el margen.

Para el conjunto del año 2026, Zions prevé ahora un apalancamiento operativo positivo de aproximadamente 40 a 50 puntos básicos, incluida la adquisición de Basis. Excluyendo dicha adquisición, la dirección indicó que el apalancamiento operativo se aproximaría al extremo inferior de sus previsiones anteriores, de 100 a 150 puntos básicos.

Para la plataforma de agencia multifamiliar, la dirección proyecta unos ingresos de entre 17 y 20 millones de dólares y unos gastos de entre 12 y 13 millones de dólares en 2027. Los ingresos anuales a medio plazo se fijan como objetivo entre aproximadamente 30 y 40 millones de dólares, dependiendo el calendario en parte de las condiciones del mercado y de los tipos de interés.

Riesgos y aspectos a vigilar

El precio de los depósitos sigue siendo una variable clave. Zions prevé que los depósitos remunerados representen una mayor cuota de financiación en un entorno de tipos más altos, mientras que los saldos no remunerados podrían ser más difíciles de captar. La dirección indicó que la competencia en precios es actualmente más pronunciada en el activo que en el lado de la financiación.

Unos tipos más altos podrían frenar la actividad en bienes raíces comerciales (CRE) y multifamiliares. Por ello, la dirección prevé que el crecimiento de los préstamos CRE se mantenga por debajo del crecimiento general de la cartera, al tiempo que enfatiza la continuidad de la disciplina en la concesión de créditos y la selección de riesgos.

La competencia en el crédito incluye presiones sobre los precios, las estructuras y las cláusulas restrictivas. La dirección afirmó que el banco mantiene sus estándares de concesión de créditos a pesar del entorno competitivo.

El negocio de agencia multifamiliar aún se encuentra en una fase temprana de su proceso de integración y escalado. La trayectoria de sus ingresos dependerá de la producción, la incorporación de talento y las condiciones del mercado. Los ingresos de mercados de capitales y asesoramiento en M&A también pueden mostrar volatilidad entre trimestres.

Puntos destacados del turno de preguntas y respuestas de analistas

La dirección atribuyó el aumento proyectado del 8% al 12% en el ingreso neto por intereses del T3 de 2027 a la sensibilidad de los activos, el reajuste de tipos variables, el reajuste de préstamos a tipo fijo, la reinversión de los flujos de caja de los títulos y a nuevas mejoras en la composición de la financiación. Una fijación de precios o una mezcla de depósitos más favorable podría situar los resultados por encima del rango fijado.

En cuanto a la financiación, Zions indicó que había reducido los depósitos intermediados y los préstamos a un día en aproximadamente entre 3.000 y 4.000 millones de dólares con respecto al 30 de junio del año anterior. Se preveía el vencimiento de unos 2.200 millones de dólares en depósitos intermediados en el T4 de 2026, lo que crea una oportunidad para desplegar el exceso de liquidez del mercado monetario o reemplazar la financiación no procedente de clientes por depósitos de clientes.

La directiva señaló que el crecimiento de los préstamos en el T3 se vio afectado por una menor utilización y por la debilidad en Amegy, pero describió las carteras de proyectos en Amegy y en todo el segmento C&I como saludables. Consideró que la perturbación derivada de las adquisiciones bancarias en Texas era más una oportunidad de captación de clientes que una desventaja competitiva.

En cuanto al capital, la directiva afirmó que un entorno operativo constructivo podría dejar espacio para un mayor despliegue de capital, sujeto a la aprobación del consejo de administración y de los organismos reguladores. El ratio CET1 se mantuvo en el 11,8% a pesar de un aumento de 229 millones de dólares en el fondo de comercio y los activos intangibles derivados de la adquisición de la agencia multifamiliar.

Transcripción completa de la llamada de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Greetings. Welcome to Zions Bancorp Third Quarter Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Jason Arbuckle. Thank you. You may begin.

Jason Arbuckle

Thank you, Cleo, and [ Mibie ] good evening everyone. Welcome to our conference call to discuss Zions Bancorporation's Third Quarter 2026 Results. My name is Jason Arbuckle, Senior Director of Investor Relations. And before we begin, I would like to remind you that during the call, we will make forward-looking statements. Actual results may differ materially. We encourage you to review the forward-looking statements and non-GAAP disclosures in our press release and on Slide 2 of today's presentation, which apply equally to statements made during this call. .

A copy of the earnings release and the presentation are available at our website, zionsbancorporation.com. For our agenda today, Chairman and Chief Executive Officer, Harris Simmons, will provide opening remarks. Following Harris' comments, Chief Financial Officer, Ryan Richards, will review our financial results and outlook. And also with us today are Scott McLean, President and Chief Operating Officer; and Derek Steward, Chief Credit Officer. After our prepared remarks, we will hold a question-and-answer session. This call is scheduled for 1 hour, and I will now turn the time over to Harris Simmons.

Harris Simmons

Thanks very much, Jason, and good evening, everyone. We're reasonably pleased with our financial results for the third quarter, which reflect meaningful year-over-year earnings improvement and continued progress on our strategic priorities. Going to the slides. Slide 3 summarizes second quarter results versus the prior quarter and last year's third quarter. Net earnings available to common was $262 million or $1.78 per share an increase of 20% compared to $1.48 in last year's third quarter and an increase of 2% compared with $1.74 last quarter after adjusting for that quarter's large equity securities gains. The increase from a year ago was due to growth in net interest income and customer-related noninterest income, modest loan growth and exceptional credit performance.

The net interest margin was 3.23% and down 4 basis points from the prior quarter and down 5 basis points from a year ago. When compared to the prior quarter, average loans grew 3.7% on an annualized basis, led by commercial lending, average customer deposits grew 8.8% on an annualized basis. Credit losses were modest at 2 basis points annualized of average loans.

Slide 4 presents the recent history of earnings performance, together with the impact of the provision for loan losses on quarterly results. Notable items in each of the recent quarters are also included on this slide. As shown on Slide 5, adjusted preprovision net revenue was $338 million. It increased 2% from the prior quarter, reflecting the improvement in adjusted taxable equivalent revenue which more than offset a modest increase in adjusted noninterest expense. Adjusted pre-provision revenue declined $14 million or 4% from the prior year period, which represented a particularly strong comparison quarter. In addition, results for the current quarter include $4 million of expense associated with the recently acquired multifamily agency platform that was not included in our original forecast.

Turning to Slide 6. Our Capital Markets division continues to be an important driver of fee income growth. Since launching the business in 2020, we have nearly doubled the annual fee income contribution by investing steadily in talent technology and product capabilities, including investment banking, commodities hedging, real estate capital markets and multifamily agency capabilities, which I'll discuss in more detail on the next slide. Before moving on, I'll note that the $136 million fee income numbers shown for 2026 is annualized based on our performance through September 30. Given the momentum we are seeing across the business, our expectations for the fourth quarter, we anticipate the fully review the results to come in somewhat above that level.

Turning now to Slide 7. I'd like to highlight the acquisition of Basis Investment Group's multifamily agency lending business, which closed during the third quarter. This acquisition represents an important step in building what we believe can be a highly differentiated multifamily franchise. Our goal is straightforward, to provide clients with a single source of financing solutions across market rate, affordable construction, bridge, agency and CMBS products. With this acquisition, we are now 1 of only 4 banks in the country that combines direct access to both Fannie Mae designated underwriter servicer and Freddie Mac's Optigo programs. Together with originations to third-party CMBS conduit platforms.

When combined with the broader capabilities of the bank, this creates a differentiated one-stop multifamily platform capable of serving clients throughout the life cycle of an asset. In addition to the talented team that joined us from basis, we have added seasoned lenders with deep experience in multifamily as lending and servicing to help scale the platform. We're excited about the opportunities this creates and the talent we assembled. This acquisition enhances our ability to serve commercial real estate clients and in particular, those in the Western United States, where we see a real market opportunity with population growth and housing affordability issues that drive demand for multifamily products. Included in the quarter were approximately $4 million of expenses associated with our newly acquired multifamily agency platform, including personnel and other integration-related costs and approximately $300,000 revenue, we expect the financial benefits to build gradually over time as the platform is integrated and production ramps up.

For 2027, we anticipate approximately $17 million to $20 million of revenue and $12 million to $13 million of expense, recognizing that we are in the early process of scaling the business. Over the medium-term, we expect the business to generate approximately $30 million to $40 million of annual revenue. The pace of growth and ultimate revenue potential will be influenced by market conditions, including the interest rate environment.

Move to Slide 8. We see wealth management as a compelling growth opportunity given our broad customer base and the size of wealth assets under management relative to the size of our banking franchise. We have seasoned affiliate and wealth leadership teams focused on continuing to enhance coordination between our banking and advisory businesses, which we believe positions us to deepen client relationships and capture additional growth opportunities. A key component of our strategy is a product we call Wealth Select, which is a new offering that expands our addressable market by allowing us to serve clients with approximately $100,000 to $1 million of investable assets through a scalable advisory model. Wealth Select helps us engage clients earlier, deepen relationships over time and create a pathway for those relationships to grow alongside their financial needs.

Slide 9 provides more information about what we refer to as our strategic 6 products. While each serves a different client segment and business need, they all share a common objective, which is strengthening sustainable growth through our branch for print and core deposits, small business relationships and fee income. We continue to be encouraged by the early results. Example, here today at September 30, we've opened over 14,000 gold accounts for consumers, totaling approximately $275 million in new-to-bank deposits. and 1,300 business beyond accounts, bringing in about $120 million in new deposits.

In addition, we currently rank #10 nationally and SBA 7(a) lending based on approval volume, #9 in SBA 504 loans. While the near-term financial contribution is modest relative to the size of the bank, these products are helping us grow long-term relationships and creating opportunities to deliver additional banking, payments, lending and wealth management solutions over time. With that overview, I'll turn the call over to our Chief Financial Officer, Ryan Richards, to walk through the quarter in more detail and walk through our outlook. Ryan?

R. Richards

Thank you, Harris, and good evening, everyone. Beginning on Slide 10, you can see the 5 quarter trends for net interest income and net interest margin. [indiscernible] equivalent net interest income was $684 million, up $7 million or 1% from the prior quarter and up $12 million or 2% from the year ago quarter. Earning asset yields were relatively stable sequentially, while our cost of funding increased, resulting in a decline in the net interest margin compared to the prior quarter. .

Slide 11 provides additional detail on the drivers of net interest margin, which decreased 4 basis points from the prior quarter and 5 basis points from a year ago. The linked quarter decline was primarily driven by higher deposit costs and growth and lower-yielding assets. As Harris noted in his opening remarks, Deposit growth significantly outpaced loan growth during the quarter, with average customer deposits growing by 8.8% on an annualized basis. This compares with annualized loan growth of 3.7% during the quarter and a slight decrease in ending loan balances. We used this excess funding to pay down short-term FHLB borrowings with the residual deployed into money market investments, which increased meaningfully during the quarter.

Moving forward, these lower-yielding money market balances, which are dilutive to our net interest margin, will be utilized to fund loan growth and/or reduce broker deposits as those balances mature. The total cost of deposits increased 11 basis points to 1.59% during the quarter. This increase was driven in part by a recent change in how we present interest paid on cash collateral associated with our [indiscernible] portfolio.

Earlier this year, we began presenting derivatives and related cash collateral on a net basis. Beginning this quarter, we reflected the interest costs associated with the cash collateral held and the cost of deposits as opposed to short-term borrowings. This increased our reported cost of deposits by approximately 3 basis points but had no impact on our overall cost of funds. As Harris noted in our earnings release, we expect our asset-sensitive balance sheet to produce stronger net interest income in a higher rate environment. For the third quarter of 2027, we anticipate net interest income to increase by approximately 8% to 12%. Our outlook is based on the forward curve as of September 30, which assumes 3 rate increases occurring in December, March and June, respectively. The forecast assumes the cost of deposits rise to around 2% from current levels of 1.59%, which include migration of some noninterest-bearing deposits into interest-bearing products. If deposit pricing and mix trends developed more favorably than we have assumed, there is potential for net interest income to exceed our guidance.

Moving to noninterest income on Slide 12. Customer-related noninterest income was $192 million compared with $182 million in the prior quarter and $163 million a year ago. Excluding the net credit valuation adjustment, adjusted credit -- customer-related noninterest income was $182 million compared with $181 million in our quarter and up $8 million or 5% from the year ago quarter. As Harris mentioned earlier, capital markets continue to deliver strong performance and remains on pace for a strong fourth quarter. In wealth, we are seeing encouraging momentum and remain focused on executing our strategy to drive growth, and deepen client relationships.

Looking ahead to the third quarter of 2027, we expect adjusted customer-related fee income to grow 6% to 9% and relative to the third quarter 2026 results of $182 million. We anticipate broad-based growth across our fee businesses, led by continued momentum in capital markets.

Turning to Slide 13. Adjusted noninterest expense was $549 million, representing an increase of $3 million or 1% from the prior quarter. And as Harris mentioned earlier, included $4 million of expense related to the newly acquired multifamily agency platform. Technology telecom and information processing expense increased $4 million driven by higher application software licensing and maintenance costs. Additionally, deposit regulatory expense increased $5 million related to the decrease to our FDIC special assessment in the prior quarter. Expenses were higher year-over-year, reflecting higher incentive compensation, increased professional outsourced services and higher technology costs.

We will continue to manage expense prudently while investing to support growth. For the third quarter of 2027, we expect adjusted noninterest expense to increase by approximately 4% to 6% relative to the third quarter of 2026. We also continue to expect positive operating leverage for the full year 2026. Our initial outlook of 100 to 150 basis points of operating leverage did not contemplate the acquisition of the multifamily agency platform for basis. Including the impact of that acquisition, we now expect operating leverage of approximately 40 to 50 basis points. Excluding the acquisition, operating leverage would approach to the low end of our prior expectations of 100 to 150 basis points.

Slide 14 presents trends in average loans and deposits. Average loans grew 3.7% annualized during the quarter, primarily within the commercial and industrial portfolio and increased 2.7% year-over-year. Loan yields remained relatively stable sequentially and were down 28 basis points year-over-year. primarily reflecting lower interest rates. Looking ahead, we expect loan growth to be between 2% to 4% for the third quarter of 2027 compared with the third quarter of 2026. Our outlook reflects current pipeline activity, customer utilization trends and the broader economic environment. Given the expected path of interest rates, we are tempering our outlook for loan growth particularly within commercial real estate. Average deposits increased $17 billion from the prior quarter, driven -- excuse me, thank you, average deposits increased $1.7 billion from the prior quarter, driven largely by an increase in interest-bearing deposits. The cost of total deposits was 1.59%. And an increase of 11 basis points sequentially, primarily reflecting deposit repricing and, to a lesser extent, a presentation change related to interest paid on cash lateral associated with our derivatives portfolio.

Our deposit growth allowed us to reduce wholesale funding sources during the quarter, tempering the increase in total cost of funding. Year-over-year, the cost of deposits declined 8 basis points, primarily due to lower interest rates.

Slide 15 presents the 5-quarter trend of our average and ending funding sources. Our total funding cost increased to 1.75% compared 1.69% in the prior quarter. Period-end deposit balances increased by $1.3 billion compared with the prior quarter driven by a $1.8 billion increase in customer deposits, partially offset by a decrease of $448 million in broker deposits. Short-term borrowings decreased $376 million linked quarter and declined by $2.7 billion versus the prior year quarter.

Turning to Slide 16. The investment securities portfolio continues to serve as an important source of on-balance sheet liquidity and a tool to balance interest risk. During the quarter, principal prepayment-related cash flows from investment securities of $631 million were partially offset by reinvestment of $296 million. the continued paydown of lower-yielding mortgage-backed security supports earning asset remix and/or a reduction in wholesale funds. The estimated price sensitive portfolio, inclusive of hedging activity was 3.4 years.

Credit quality remained strong, as shown on Slide 17. Net charge-offs were 2 basis points of average loans annualized, and the nonperforming asset ratio was 50 basis points compared with 48 basis points last quarter. Classified and criticized balances declined 12% and 8%, respectively, during the quarter. The allowance for credit losses ended the quarter at 1.1% and remains well positioned relative to our risk profile with 207% coverage of nonaccrual loans.

Our capital position remains strong, as shown on Slide 18. The common equity Tier 1 ratio remained stable at 11.8% during the quarter, notwithstanding a $229 million increase in goodwill and intangible assets arising from our newly acquired multifamily agency business. We expect continued strong capital generation through earnings, and improvement in AOCI. Related improvements resulted in a 13% increase in tangible book value per share versus the prior year. When compared with June 30, 2026, unrealized losses at AOCI increased by $122 million, reflecting declines in the fair value of AFS securities resulting from increased term interest rates. This mark-to-market impact was tempered by fixed received floating interest rate swaps donated as hedges of our AFS securities to reduce volatility in our AOCI balance. It also bears noting that a significant portion of our unrealized losses recorded in AOCI related to securities previously transferred from AFS to held-to-maturity. The related balance of which does not fluctuate with mark-to-market change.

Slide 19 summarizes the outlook we discussed a cropped loans, net interest income, fee income and expenses. This outlook remains our best estimate based on current information and are subject to the risks and uncertainties discussed in our forward-looking statements. 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 1 primary and 1 follow-up question to enable other participants to ask questions. Cleo, please open the line for questions.

Operator

[Operator Instructions] Thank you. Your first question comes from Bernard Von Gizycki with Deutsche Bank.

Preguntas y respuestas

Bernard Von Gizycki

Just on the first question on the NII guide of up 8% to 12%. Can you just break down some of those assumptions, like the deposit growth and mix beta and just the rate hikes assumed within that period of time?

Unknown Executive

Yes. Thank you, Bernard, for the question. Listen, I'm trying to call out in my prepared remarks that we are anticipating 3 rate hikes as part of that guidance. So December, March and June, we certainly expect a larger contribution in terms of deposit growth coming from interest-bearing deposits, expecting the interest-bearing deposit growth would be very modest, at that type of rate environment. We also kind of reserve or expected relative to the last freight hike cycle, when we were pretty much a wash with deposits and perhaps could have been more patient. We are now in a position, it's a very competitive market. And so we're anticipating that it will be a slightly different deposit pricing behavior than what we might have experienced last cycle.

And so our guidance that you might have heard in my prepared remarks, we've allowed for an increase in deposit costs to the extent of about 40 basis points increase in deposit costs. That would imply sort of a beta in the upper 40s to low 50s is sort of the assumption that we're thinking of. As in prior quarters, the contributions that you would expect here of course, variable rate repricing of a given fixed rate loans is a significant contributor there. We see a potential for 3 to 4 basis points on earning asset yields arising from the fixed rate loan repricing and of course, the continued remix out investment securities into loans, but also the notion that we continue to kind of reinvest a portion of our investment securities and there we expect 2 to 3 basis points of earning asset pick up as well. So think about sort of a 5 to 7 basis point increase in earning asset yields in that rate environment is what we're thinking about.

Bernard Von Gizycki

Great. Maybe just a follow-up, maybe just longer term, I know you guys have talked about this 350 NIM. And I think in your quarter, maybe you're down the back a little bit maybe with the timing. Just thoughts on maybe when you could reach that? Is it still kind of a goal? Just any commentary you can add on that?

Unknown Executive

Yes. Thanks, Bernard. Listen, we -- I think when we talked about the mid-3s NIMs, we always sort of conditioned in the past of the kind of rate environment that we would be in. There's tons of certainty in the future about how deposits behave. We know that. But we do see scenarios that would allow us to operate in the mid-3s moving forward with this type of rate environment. Of course, that's always dependent upon deposit growth, the rate paid on those deposits, the beta, but we think with some reasonably conservative assumptions that we can reach those mid-3 levels in 2027.

Operator

Your next question comes from John Pecari (sic) [ John Pancari ] with Evercore ISI.

John Pancari

First, yes I commend you on providing the quantitative ranges to the outlook and simplifying your NII outlook, I definitely think it is definitely helpful. So appreciate that. The -- just in terms of the implication to the margin, I know you didn't provide a margin outlook. But given the dynamics that you just walked through, in terms of deposit costs dynamic and some of the earning asset shifts. How do you view the trajectory of the margin, particularly as you see some of the growth on the asset side shifting away from CRE as you indicated.

R. Richards

Yes. Great color, John. And maybe we should have a moment of silence for moderately increasing. [indiscernible] celebrate those terms. Listen, you're right. I mean, we do expect some growth from CRE. It'll probably be a little bit more pressure from the rate environment, but if you think about even not going back that far in time, at a point in time where we're getting a pretty outsized contribution from consumer loan growth. And given our guidance, which is recently modest at $0.02 to $0.04 of loan growth we really pointed to C&I, owner-occupied and a little bit lesser contribution for CRE. That's still typically a better outcome than consumer-like growth.

So that, coupled with the traditional things you've heard us talk about over time, the remix of securities into loans, the less of the headwind of the discontinued swaps, are all contributors to, I think, a brighter prospect for NIM. And of course, you heard Harris talk about our underlying strategic offerings that we continue to grind away at and building that new relationship. That will also be very, very important as we continue to drive down our wholesale borrowing costs. We've been very, very successful year-over-year and driving down our broker deposits and our other short-term borrowings, and we really look for that to continue.

John Pancari

Great, Ryan. And then if I could just hop over to capital. Maybe you could just give a little more color just around how we should think about the pace of buybacks for the coming quarters and not just maybe fourth quarter, but as you look at next year, any reason to think that despite the volatility in the rate backdrop that you can't stay on the $75 million level? Or is there -- should we think about some change in that piece?

R. Richards

John, with all those things, I think we're subject to regulatory approvals and where the Board wants us to go. But listen, with the kind of rate environment that I just described, provided that it holds that can translate, as you can see in our guide to some pretty positive outcomes for us. So I wouldn't be giving up on capital absorption and the potential to potentially grow in that type of operating environment.

But I don't want to prejudge outcomes with our regulators on the board. But I think that we see scenarios where we could actually increase our capital absorption moving forward. If you think about our results this quarter, certainly, the mark-to-market and the runoff of the term rates was challenging for the industry we actually fared pretty well on that basis. A bigger driver of capital absorption this quarter for us was the goodwill and the intangibles that we absorbed through the multifamily agency business, when setting that aside, with the hedges we have in place, in fact, that a very large portion of our AOCI and sort of frozen for the transfer into HTM, we have a very, very good performance on a relative basis.

If you think about the mark-to-market, we had about 50% or better offset with the hedges that we have in place that we call out in the appendix of our materials. So I think with that extra level of protection and a potential for a very positive operating environment there may be room to do a little more.

Operator

Your next question comes from Dave Rochester with Cantor Fitzgerald.

David Rochester

On the loan growth outlook, with your reeling in your expectations for CRE loan growth within that, which it sounds like is a driver for slowing. Is that just a function of greater competitive pressures, or is it less activity given higher rates that you're expecting? Or are you becoming somewhat concerned about credit in that area, given your rate and economic outlook? Or is it a little bit of everything? And then if you could talk about the total pipeline today, if that's improved at all versus last quarter and utilization trends that you mentioned as well, that would be great.

Derek Steward

Thanks, Dave. This is Derek. And to the commercial risk take side as far as growth there, pipeline is actually pretty good right now. It is competitive, but we're being very disciplined in our underwriting as well as risk selection as far as our approach there. I think just given the competitive environment, given some of the supply/demand issues that are going on in our market as well as just the increase in interest rates could have an impact on the CRE growth.

But as you look in the last quarter, we actually had pretty good growth in CRE. Actually, it was able to offset a number of payoffs that we had that exited from our classified book. As far as the rest of the portfolio, pipeline has been good in the C&I. I think this quarter, just at the period we had a little decrease in utilization. Second quarter was actually strong utilization and just saw a little decline in some capital call usage and number of other just general business activity seems just utilization was down [indiscernible] quarter.

Scott McLean

Dave, this is Scott. I might add a little more color to that, too. I think Derek covered the CRE as well as just other topics related to the pipeline. But 3Q, if you look at H8 data, total loan growth was down and C&I growth was down, and we tracked pretty close to what HA data was -- and I don't know why third quarter seem to be soft. They were -- third quarter last year was soft third quarter in '23, was soft, I don't know if it's summer vacation or what it is, but there is something about the third quarter going on.

If you look at Slide 25, just another way to kind of think about what's happening Basically, what you can see there is we're basically no growth for the quarter. You can see that negative $9 million over there in the bottom right-hand corner. And we've kind of fundamentally need about $500 million to -- $500 million to $600 million to get a kind of a good solid 3% to 4% growth rate. And basically, it's happening at Amegy. Amegy was down $293 million for the quarter and as opposed to being up $150 million to $200 million. That's kind of the difference between $500 million to $600 million in quarterly growth, which isn't great. We'd like for it to grow better, but that's kind of 3% to 4% growth. And to put that in additional perspective, if you look at Slide 26, where you see the year-over-year growth, 3Q '26 versus 3Q '25. You'll see that Amegy, those first 2 lines, C&I, excluding oil and gas and owner-occupied it produced over half of the C&I and owner-occupied growth year-over-year.

So they've been outperforming all of our other affiliates for some time in terms of C&I growth, including owner-occupied, they just happened to have a soft quarter. And so I don't -- we're not especially worried about that. It just happened to be a soft quarter for them. Otherwise, I think we would have seen growth more in line with $500 million to $600 million for the quarter. And their pipeline are just fine. There's nothing unusual about their pipeline [indiscernible].

David Rochester

Got it. I thought that you had mentioned CRE is potentially slowing down in terms of growth going forward, and that's why you were a little bit lower on your loan growth expectations, is that...

Scott McLean

Right, it's a low-growth number. It's kind of a 1% to 3% sort of growth number as what we're trying to achieve anything slightly less than the growth rate of the overall portfolio. So that's a moderately consistent message for us over time.

David Rochester

And can you just talk about just switching just to wealth and wealth of expansion that you're trying to drive here. What's the penetration of wealth in your current customer base. Can you talk about any recent incentive changes or any new targets you have for hires or anything like that, that will help drive greater growth in that line over the next year?

Scott McLean

Sure. Taking incentive comp first, we made some incentive comp adjustments 12 to 18 months -- 12 to 24 months ago, that quite frankly, created some churn in our bankers. And we sort of thought that might happen. And so this kind of no growth period that we've had in wealth fees that total about $58 million, plus or minus right now. And there's been -- we've kind of had a no growth phase. We think the incentive comp elements, both for our wealth colleagues and our private banking colleagues around the company are aligned better now. And that everybody sort of adjusted to it.

The -- and so that's the incentive comp side. The answer to your question of what our penetration and what's the outlook? Our penetration is really low and the outlook is really positive. Any data I would give you, you would say, boy, "your penetration is really low, guys come on now." And part of that is because the dog didn't need our homework papers, but say we just have never had a large trust business that we acquired.

And most of our peers either acquired large trust businesses somewhere in their past for the group on, and we just never did. So we're kind of starting from behind. But we think the calling efforts with our private bankers, wealth bankers, our commercial bankers and the energy level we have there right now is really positive.

Operator

[Operator Instructions] Your next question comes from Chris McGratty with KBW.

Christopher McGratty

Great. I'll echo the new guide, thank you for doing that. The operating leverage, I guess a question on operating leverage. Is there anything in the crystal ball that would say that some degree of operating leverage next year wouldn't be possible as well. And I hear you on the full impact from the deal. But I guess, from the NII momentum and the expenses that you may need to invest in the company, any reason why operating leverage shouldn't continue?

R. Richards

Listen, hopefully, I understood that, frankly, Chris, if not just reguide me here. But certainly, based upon how we guided to the third quarter 2027, we see very positive prospects for operating leverage. I mean some of our assumptions and models would point to 6 points or better out that quarter. And we don't typically go too far afield for that. But even for the full year 2027, we're seeing the prospects for a pretty positive spread there. So that's where you're going -- and that's probably the color if you're looking at something else, please let me know.

Scott McLean

I think the other thing Yes, I think the other thing, Ryan was talking about was our full year operating leverage in '26. And he was commenting about we were guiding to $100 million, $150 million. We've talked about that all year for 2026. The third quarter has obviously been a little soft here. We actually saw it coming. And -- but we still think for the fourth quarter, I won't repeat what he said, but that's what he was talking about in terms of the operating leverage there being a lower number. .

R. Richards

I think it's a good call, Scott. Thank you for, of course, correcting. I mean -- if we look at the adjusted PPNR that we had this quarter relative to what Harris noted, very strong third quarter 2025. I would just generally remind everybody that, that was actually shaping up to be a very, very strong quarter for us. And on PPNR, it was, but we had the credit matter that presented that quarter that kind of was kind of or tone for that quarter. But underlying that, on a year-over-year basis, certainly a contributor to our softer, keeping -- just keeping our performance and they're kind of eroding some of our potential for operating leverage in this quarter, we saw some increase in incentive accruals.

Our incentive accruals are sensitive to credit performance. So we've had really truly outstanding credit performance this year. So while the core performance is a little bit softer against a strong comp, the credit has been excellent. And there's been some other things that showed up in the third quarter that are different on the noninterest fee income side, noncustomer related. There was a pretty sizable difference in terms of our state securities gains and losses period-over-period, that was about a $15 million delta. And then in the prior year quarter, we also had hired [indiscernible] and other common eventual fee dividends and other matters.

So it would be understandable if people sort of looked at our full year and said, "Hey, tough quarter for operating leverage, tough PPNR versus a strong comp, can you still get there for the full year?" And we do see, as I guided, once you adjust for basis, not having been our run rate, we think we can get close to the lower end of our prior guide of 100 to 150 basis points.

Some things were to break our way, could we fit our way in there? Possibly, but we'll just see how the quarter shapes up.

Christopher McGratty

Okay. And then just a follow-up on capital. And the -- I have you just under 9% on the adjusted [indiscernible] to confirm that one. And then any change in uses of capital, you talked about the [ Basis ] deal, the fee income momentum, depository acquisitions, I guess, would be the question from there. Any change in appetite?

R. Richards

I don't think much -- I would agree with your assessment. I think we would show ourselves on a market capital basis being just shy of 9% as well. So I don't think anything that you would hear from this management team would change about how we would think about capital deployment, other than just what I said already that moving forward, we could have a more constructive operating environment for capital -- capital actions, I should say.

Operator

Your next question comes from Ryan Kenny with Morgan Stanley.

Ryan Kenny

Can you walk through some of the dynamics that you're seeing on deposit competition. Is it intensifying significantly? Is it more on the retail side, more on the commercial side? Any geography within your footprint where things are getting significantly more competitive?

R. Richards

I don't think so. I think it's -- I mean it's just a very -- across the board is a competitive environment out there. I don't think we're seeing a lot of impact from kind of [indiscernible] and that kind of thing. And the -- certainly, that's out there, something that [indiscernible] be watching here in the next few years. But No, I think it's -- it's a competitive deposit market, but it's manageable. I think probably more price competition on the asset side than on the liability side. But yes, it's competitive all go over.

Ryan Kenny

And it sounds like the spot rate for interest-bearing deposits was up only a couple of basis points versus the average, so given that the rate hike came in September, does that mean that clients were asking for higher rates throughout the quarter? And could you see that dynamic going forward where deposits reprice ahead of future rate hikes?

Harris Simmons

I think a lot of -- I mean, a lot of the deposit growth was in kind of higher cost deposits. We've moved a lot of money back on the balance sheet for customers that we chased away a few years ago, and everybody was a wash liquidity. And so bringing that back on, our goal, as we said before, was really just bringing down our total cost of funding. And so it's -- a lot of the growth was higher cost deposits and certainly lower cost than our marginal cost of funding. That was -- that's kind of what you saw this quarter.

Operator

Your next question comes from Ken Usdin with Autonomous Research.

Kenneth Usdin

Ryan, I just wanted to ask you a question on the swap adds. I'm presuming that Slide 27 with the simulated repricing of earning assets and loans reflects the adds from this quarter? And then just related, do you have any additional purchases in the future built into the 3Q 27 outlook on top of what you already bought in the third quarter?

R. Richards

Ken. I'll speak to it maybe in broad strokes, so we've got Matt Tyler here in the room, our Corporate Treasurer, he could probably drill down maybe another level before I take it. But I think that the message -- the big picture message that we're trying to convey with our hedging activity is we're sensitive to both earnings sensitivity and sort of tangible common equity or EV sensitivity. That's why you see both sides these hedges.

What you've been seeing and I think what you're alluding to on the sort of received fixed side is we do tend to measure on a relative basis as being more asset sensitive than others. I said it before, I'll say it again, these are not common methodologies of measuring things. But we do want to be also thoughtful and perhaps prudent. And what goes up, sometimes goes down. And so while that asset sensitivity is serving us well, we think in this type of environment, things can always reverse. And so we've -- on the C6 side, really trying to think about the downside sensitivity should rates reverse and minus 100, minus 200 rate environment and maybe take a little bit to edge off of how we would measure there. So we did add some hedges during the quarter. I think you would have seen reference to that and that related slide to that end and a little bit more modest activity as we think about that TCE protection on the [indiscernible], and Matt, I'd invite you to add anything if you want to?

Matthew Tyler

Yes. The additional hedging, I mean, we've really been keeping our cash flow hedges, which are the received fixed shorter maturities kind of under 2 years. So we're kind of just rolling those out as time goes on. which has been most of the activity. If you have 2 years hedged 2 months from now, it won't be 1.5 years, so 2 quarters from now. So we've just been kind of rolling those on a continuous basis forward, over time.

R. Richards

I think maybe coming full circle, could there be more hedging activity built into that guidance. Certainly, if we were to persist in adding those short-term receive fixed hedges.

Operator

Your next question comes from Timur Braziler with UBS.

Timur Braziler

Maybe just starting on the funding side. I'm just wondering, what's the remaining portion either on wholesale or broker that you're still looking to reduce going forward? Maybe another way of asking that is how close are we to having asset growth be more closely aligned with deposit growth. .

R. Richards

Yes. That's a great question. I'll get started and invite other members of the team here to jump in. which you called out as a really important part of our story. Our success year-over-year in paying down broker deposits, paying down wholesale borrowing sources. Having this really positive deposit growth story this quarter, enabled us to pay down our FHLB borrowings almost straight away. Where it was a little more tricky is there's, of course, a term structure to broker deposits. And so it takes a little bit more time for those to run off. we show, I believe, in the fourth quarter, we have about $2.2 billion worth of maturity of broker deposits.

And we already said that we're sort of overbuilding our money market position that could be redeployed. So I do think as part of -- as we think about this moving forward is to continue to pay down those sources of funding that aren't with clients. This is kind of what Harris was talking about. We would rather be reaching out to our clients and serving them and even these higher-cost products when they bring net new balances to us, than paying away to a broker or some other wholesale funder. So that's sort of where we see this going on the funding side.

Harris Simmons

So Ryan, in terms of timing, I would just add that -- on the brokered deposits, their certificates of deposit, they have an average maturity of about 3 months, which think about it, half of it is going to roll off within 3 months. And we're bringing that down as we manage -- we launch it all the time as we manage funding coming in from deposits. It just is an instantaneous like if we had borrowings from the home loan, for example, which would be a payoff. But the -- it will adjust very quickly. And we've seen a lot of it. We brought down a lot so far this quarter as it's matured.

Scott McLean

It's versus June 30 of last year. It's down about $3 billion to $4 billion. It was at about our overnight -- our broker deposits and overnight borrowings, net of money market investments was about $6.5 billion, then if you adjust for long-term debt, we've issued, et cetera, it's down about $3 billion to $4 billion. And it's been very intentional. It's not been serendipitous. And we still have about a little over $7 billion in client funds off balance sheet and almost 100% guaranteed, when we bring them back on their -- the cost is accretive to our overnight cost of funding, which Harris was mentioning earlier.

Timur Braziler

Okay. And then -- maybe I can take another shot at John Pancari's question. So I appreciate the color on deposits. So getting to, call it, 2% a year from now, so 40 basis points higher, let's call it, 10 basis points a quarter. And then average earning assets are going up, call it, 5 to 7 basis points a quarter. I would imply, I think, that you need margin expansion in order to get to your NII guidance. Is there -- is the bulk of that increase from just funding mix, asset mix, I guess, how are you thinking about margin over the course of the next 12 months in terms of that NII guide? .

Scott McLean

Yes. Listen, I think it has to be, yes, all of it. It's both funding mix, it's asset mix -- sorry, yes, asset mix, and it's our sensitivity to the rising rate environment. It's the drive of the net new relationships through these very granular things that Harris described, all the things combined with that sensitivity to 3 future rate hikes, sets up pretty well for us if it all pulls through at that level. And again, reiterating that we recognize that, that's a pretty -- that's a stronger price response on the pause in some what we would experience previously, and we hope that there's some conservatism in that, but we'll see.

Operator

Our next question comes from David Smith with Truist Securities.

David Smith

I'll drill down on the funding a little bit more. Could you help us size the impact of the -- on the deposit costs of bringing that off-balance sheet funding back on the balance sheet?

Scott McLean

Okay. Deposit costs will increase as Harris was noting, cost of funding will decrease, all things being equal.

David Smith

And for the impact on the third quarter specifically, though?

R. Richards

Actually, as it relates to sequential quarters, the mountain off-balance sheet deposits didn't change appreciatively. It was pretty across, but there was plenty of evidence of us inviting in other net new balances that we do are away from us to come in the way that exactly how Scott and Harris have described, quantifying that impact. I don't think I have a good number for you now, but that's pretty much I'd say over the last 12 to 18 months, we've attracted certainly north of $3 billion of client deposits that are focused deposit efforts that are accretive to cost of funding. It would be otherwise chose to be higher cost deposits.

David Smith

And then you had mentioned competition being stronger on the loan side than on the deposit side right now. Would you characterize that as more just on yield and cost or more on covenant dynamics or some of both right now in terms of where you're not just stepping down to where the competition is?

Derek Steward

It's some of both. This is Derek, David, yes. I mean we're seeing primarily pricing competition, but I would say on structure, covenants, et cetera, but again, we're maintaining our discipline there on the structural side and maintaining our underwriting and just the risk selection. And we're, again, having good luck at still winning our fair share. It's just a more competitive environment, I'd say, today. .

David Smith

Is there any change in that assumed in the outlook for deposit growth next year or pretty consistent to where competition levels sit today?

R. Richards

Yes. I don't think I guess, open question that's been discussed, I think by analysts and others about the amount of sensitivity that people report versus the actual sensitivity that people will actually experience because we've had this higher for longer rate environment, and the prospect of rate hikes will there be a stronger price sensitivity on the upside. And so we've allowed for some of that in sort of the guidance that we provided and the deposit beta that I would have communicated earlier on this call.

Operator

Your next question comes from David Chiaverini with Jefferies.

David Chiaverini

I wanted to first start on the capital markets outlook and the pipeline. It sounds positive. Also curious as to what extent could higher rates impact or be a headwind to the new multifamily businesses you acquired as it relates to that $30 million to $40 million contribution over the medium term?

Scott McLean

This is Scott. I'll start with it. Related to the Basis business, the $30 million to $40 million was several years out. I can't remember the script, it's -- yes, medium term, and interest rates certainly can have an impact. But the production of multifamily in the country is there's just build vibrant to it still. And so -- but you're right, interest rates can have an impact on it. It is a flow business for most people. So the production builders that are doing this they build and sell. Derek may have more color on that. But it's not a hold and then get lucky on rates kind of thing. And then the interest rate business, the interest rate hedging business that we have, which is about a $30 million-ish revenue business just on interest rate hedging for our clients.

That as rates continue to go up, that could actually be impacted some, although we haven't seen too much weaknesses there. One of the things to notice in this to know in this quarter's capital markets revenue, it included almost no investment banking or M&A advisory work. And that's a practice we started about 18 months ago. And our franchise is really fertile grounds for small- and medium-sized business M&A. And we have a very nice pipeline there. It's just very lumpy. So we're very optimistic about that M&A business going forward. And then our garden variety syndications, foreign exchange, the bond underwriting that we do, et cetera, is -- we think moving along at a pretty nice rate.

Derek Steward

I just had, I mean, higher rates will be a little bit of a headwind. But I think we also have the tailwind of we really have a lot of ground to plow here. I think we're seeing a lot of interest from middle market kinds of clients. We've had a long relationship with the investment banking point for example, we think that can turn a really nice business across the West. And so Capital Markets businesses or the nature are kind of lumpy, and we get that. But we think it's it really is a nice value add for us from a client base that needs it. So.

David Chiaverini

Yes. No, I agree. I think that multifamily acquisition is differentiating, which is a nice segue into my kind of follow-up on the capital question as it relates to M&A, in terms of refreshed thoughts, are other whether nonbank or whole bank M&A, what are your current thoughts there?

Derek Steward

Pretty much unchanged. I mean I would be very opportunistic. It's kind of likely to be something many this multifamily agency platform. I mean we've long had a really solid commercial real estate business here. And -- we also know there's kind of a limit to what you can do with a balance sheet with a regional bank and without creating concerns. And so I mean, we -- it was a really nice fit. And we've been looking for some time. We've actually looked at a couple of other opportunities and haven't made it.

So we're really pleased to have this. It's just a really nice strategic fit for us. But over time, we'll look back on this 10 years from now and say, what a fabulous thing that was. I think that's kind of what we're looking for. are things that just fit well. And probably a little on the smaller side and particularly the valuation. Look, we need to see some better valuation before we start thinking about becoming very aggressive. But anyway, I think that's been kind of a consistent theme.

Operator

Your next question comes from Janet Lee with TD Cowen.

Sun Young Lee

You talked about the deposit beta in the upper 40s to low 50s. the different launching point for where we are in the rising rate cycle versus the last one? Are you assuming that the NIB mix can stay relatively stable-ish from here the low to mid-30s? Or I know that you said a lot of the deposit growth will be coming from interest-bearing, obviously, but I just wanted to see if there's any thoughts there.

Scott McLean

Yes. Thanks for the question, Janet. Listen, I think it would be reasonable to assume that interest-bearing deposits would take a larger share moving forward in that higher rate environment. We're doing a lot of great things. We'll continue to do a lot of great things. building out the granular strategies that Harris discussed. And that's something you do over many months and years and most valuable part of our franchise. But pressing forward, I think those noninterest-bearing balances are going to be harder to come by. So I could anticipate potentially a little bit of a slightly different mix there.

Sun Young Lee

Got it. And sorry to beat on the dead horse, but I just want to make sure that I heard it correctly. I believe you've said to Bernard's question earlier that your net interest margin could reach that mid-3 -- 350 level in 2027. Is that what you're assuming in your NII for the third quarter of next year, year-over-year?

Scott McLean

Listen, we do see very healthy NIMs. We don't provide them guide. It certainly has been our practice because of all the variables that go into it. But as a general matter, just restating what I mentioned before, it really is behold the operating environment. And if we do see the rate hikes that we see in our forecast with the type of deposit behavior we described, we think it's realizable to be operating at that level.

Operator

Your next question comes from Anthony Elian with JPMorgan.

Anthony Elian

Ryan, I know you don't guide on deposits. Any more color you can give us on what drove the strength in deposits in 3Q and really trying to get at the degree to which you expect this high single-digit annualized level to persistent 4Q and beyond. If I look at Slide 9 the products you online. It just seems like the momentum you have should continue.

R. Richards

Yes. Listen, thanks for the question. I mean -- if you look across the past 2 quarters, it's been a little uneven, right? So the last quarter, we showed up with really, really healthy loan growth. Utilization picked up really, really positive, but we fell a little bit flat on deposits. This quarter, we showed up with a really strong deposit growth and not a whole lot of period end loans to show for. So it is useful to kind of step back, zoom out a little bit and kind of think of longer time horizons. If I think back a year-over-year period, you think about loan growth around 4%, customer deposit growth, about 5% when we talk about ending balances, that's pretty solid, right? It's -- and if you think about the growth of our market, that probably tells you we're getting the growth in our market, we're probably not reaching for it.

So going forward, does it persist at an 8.8% average annualized growth? I'm not sure. It's a lot of -- and probably not, but it's a lot of the same type of deposit gathering that Harris alluded to before. There's -- a lot of the growth came from money market balances. There was what we referred to as our gold suite balances. And these are higher cost deposits. The most important part is we just keep grinding away at what you referenced to that slide and those more granular deposit gathering strategies. That's where I think we'll be having a chance to delight shareholders over a longer period of time.

Harris Simmons

Yes. I mean we could see 0.75%, 1% growth and our total deposits coming from these things that we're really focusing on the small business, consumer noninterest-bearing kinds of accounts or low interest-bearing kinds of accounts. It's not just about deposit growth, it's about the quality of the deposits, the cost of the deposits, the stickiness of the deposits.

Over time, that really makes a difference, but it takes -- I mean, it's like tell people around here, this is a marathon. This isn't a sprint. We'll be talking about this 10 years from now. as a consistent kind of the kind of foundation we're trying to create under everything else that goes on, corporate deposits, everything else. So I hope that's helpful. But that's where a lot of our focus is, but it's a longer-term in some of this will be watching bank vary a little bit.

Anthony Elian

Yes, that's fair. And then on basis, you pointed to $30 million to $40 million of annual revenue over the medium term. What's the level of expense you expect to firm that business in the medium term? I think you pointed Ryan to $12 million to $13 million of expense in '27?

R. Richards

Yes. I mean a very reasonable question. I think we just want to be careful not to get too far over our skis. It's pretty early on here. We closed the deal at the end of July. We certainly want to have some experience. So we did quote all those numbers you cited, and we said we expect this to scale over time. that requires investment to continue to build out the talent against a very good backdrop [indiscernible] as now. So probably would hold off or a little bit more experience before we guide more deeply into the expense, how that grows through 2027 through 2028. We did say for full year 2027, $12 million to $13 million of expenses. Beyond that, it will just depend on the pacing of how much we add in talent and further capability. .

Anthony Elian

Fair enough. And echoing the comments on the updated guidance presentation. Thank you for that.

Operator

Your next question comes from Jon Arfstrom with RBC Capital Markets.

Jon Arfstrom

Just 1 -- 2 quick ones. On Basis, the smaller revenue number for the quarter, I think I understand it, you just closed the deal, but do you expect contributions from the revenue side to step up as soon as the fourth quarter?

Harris Simmons

Yes. I mean look, we're still kind of setting the table. But I expect better fourth quarter revenue than the third quarter. It closed kind of the end of July, and there's a little bit there in the pipeline. But I mean, it's just building. So I don't think we thought a lot about what the fourth quarter is going to look like. We talk more about next year's like look like. That's where we sit in the 17% to 20%. We think it's kind of the target. But I don't think we have anything we'd say about the fourth quarter yet.

Jon Arfstrom

Yes. I just -- it was just a small number, Harris, and I didn't know if it was acquisition, and there is some other reason behind that.

Harris Simmons

Yes.

Jon Arfstrom

Scott, just 1 for you. You mentioned Slide 25, the Amegy loan trends earlier in the call. This has come up? And is it any more or less competitive in Texas. There have been questions around those markets because of new regional bank entrants there? And just confirming you weren't seeing anything new impacting your ability to grow in Texas, just such a growth.

Scott McLean

The only thing we're seeing now is that the disruption there because of these acquisitions, the acquisition of America clearly the acquisition of Cadence, the acquisition of Veritex, a few other small, that is all opportunity for us. I've said this for several quarters. And -- it just -- it's opportunity and it's not just because I'm saying it and its corporate speak, if we had our fellows from Texas on the phone, he would they would not speak with granularity that we can't talk about on a call like this, but that's what we hear internally. And there is disruption. We've already seen it.

And so our calling programs are highly focused those -- they've always been on those banks, but we especially focused on it right now. And there will be competition for people, too. So there's a negative side of this, but we've seen that for decades with folks parachute into Texas.

Jon Arfstrom

Yes. So more positive than negative from your point of view?

Scott McLean

Absolutely. I'm sorry. The bottom line is yes, more positive.

Operator

This now concludes our question-and-answer session. I would like to turn the floor back over to Jason Arbuckle for closing comments.

Jason Arbuckle

Great. Thank you, Cleo, and thank you all for joining today and participating. We appreciate your interest in Zions Bancorporation. If you have additional questions, please reach out to the Investor Relations team at the e-mail and phone numbers provided on our website. We look forward to connecting with you throughout the coming months. This concludes our call.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.