Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Goldman Sachs Conference 2022
44 slides from Zions Bancorporation N.a's conference presentation, Dec 6, 2022
Slide 1: 2022 Fourth Quarter Investor Update
2022 Fourth Quarter Investor Update November 2022
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information This earnings presentation includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements, often accompanied by words such as “may,” “mi
Slide 3: Zions Is A Collection of Community Banks
Zions Is A Collection of Community Banks Key Differentiators: Local decision-making and top-notch service, commercial banking focus, granular and low-cost deposit base Strategic local “ownership” of market opportunities and Zions’ Markets1 Ending challenges Bank Headquarters Deposits % of Total Zi
Slide 4: Key Corporate Objectives
Key Corporate Objectives Focus on four growth areas supported by investments in key “enablers,” intended to drive robust financial performance People & Empowerment Data Small & Business Commercial Technology Analytics BALANCED GROWTH & PROFITABILITY Capital Affluent Markets Risk Operational Manageme
Slide 5: Average Loan and Deposit Balances
Average Loan and Deposit Balances Vs. 2Q22, average non-PPP loans increased 3.1% in 3Q22; average deposits decreased 4.2% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) Average Total Loans Excluding PPP Loans, Average Noninterest-bear
Slide 6: Deposit Growth and the Loan-to-Deposit Ratio
Deposit Growth and the Loan-to-Deposit Ratio Zions’ low loan-to-deposit ratio provides ample funding for future loan growth Deposit Growth Loan-to-Deposit Ratio % Indexed: 1H17 = 100 190 100 180 Zions ranked 9th 90 170 160 80 150 Notably, Zions was typically 140 averaging an ~85% L/D ratio 70 prior
Slide 7: Deposits – Noninterest Bearing Mix and Cost of Total Deposits
Deposits – Noninterest Bearing (“NIB”) Mix and Cost of Total Deposits Through multiple rate cycles, Zions’ NIB deposit concentration and cost have been consistently among the best of peers Average Noninterest Deposits / Average Cost of Total Deposits 7% Average Total Deposits 60% ZION Peer Top Quart
Slide 8: Deposit Trends
Deposit Trends Deposits for smaller businesses and households1 has been stable to slightly increasing Deposits by Balance Tier Deposit attrition composition and destination: (excl. Brokered & Select Trust Accounts) Balance attrition has been concentrated in larger balance, $60 more rate sensitive
Slide 9: Net Interest Income and Net Interest Margin
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 2Q22, net interest income increase driven by continued rate increases and loan growth Net Interest Income Net Interest Margin Net Interest Margin Zions’ strong loan growth and rising interest rates have combined to ($ millions) Net Inte
Slide 10: Interest Rate Sensitivity
Interest Rate Sensitivity Latent and emergent interest rate sensitivity are expected to lead to an increase in net interest income Simulated Net Interest Income Sensitivity (1) Latent interest rate sensitivity refers to future changes in −200 bps −100 bps +100 bps +200 bps NII based upon past rate m
Slide 11: Noninterest Income and Revenue
Noninterest Income and Revenue Revenue increased 10% vs. 2Q22, and was up 16% from the year-ago period, and up 26% excl. PPP revenue Customer-Related Noninterest Income (1) Revenue (2) ($ millions) ($ millions) $152 $154 $156 $151 $151 $819 $747 $706 $705 $695 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22
Slide 12: Noninterest Expense
Noninterest Expense Noninterest expense increased 3% vs. 2Q22, and was up 12% from the year-ago period Noninterest Expense (NIE) Total noninterest expense increased compared to the prior ($ millions) quarter Salaries and benefits increased by $5 million driven by: $479 $477 $464 $464 $464 $463 A
Slide 13: Adjusted Pre-Provision Net Revenue
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR increased 17% from the prior quarter, primarily due to the benefit of higher rates and loan growth Linked quarter: Adjusted PPNR increased 17% primarily from Adjusted PPNR(1) ($ millions) A 9% increase in adjusted revenue 351 Significan
Slide 14: Credit Quality
Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.09% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 3.5% 3.0% Key credit metrics: 2.5% 1.8%: Classified loans/loans Classified / Loans 2.0% NPAs + 90 / Loans + OREO Classified balance imp
Slide 15: Credit Quality Trends Relative to Peers
Credit Quality Trends Relative to Peers Zions’ NCOs/Loans ratio is frequently in the best (lowest) quartile of peers; very low loss rates on NPAs or classified loans Classified & NPA Ratios NCOs / Loans (Excluding PPP) Classified Loans and NPAs + 90 DPD, as a percentage (Trailing 12-month Average) o
Slide 16: Loan Loss Severity
Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2017 – 2021) Fifteen Year Average (2007 – 2021) 74% 65% 64% 63% 60% 59% 58% 57% 55% 55% 55% 54
Slide 17: Profitability Measures
Profitability Measures Risk-Adjusted PPNR as a percent of risk-weighted assets & return on risk-weighted assets are in line with peer median Pre-Provision Net Revenue less Net Charge Offs / Return on Risk-Weighted Assets (modified)(1) Risk Weighted Assets Substitutes Net Charge-Offs 2.5% for Provisi
Slide 18: Loss-Absorbing Capital
Loss-Absorbing Capital Common Equity Tier 1 capital plus the allowance for credit loss compares well relative to peers Common Equity Tier 1 Capital Ratio CET1 Capital and Allowance for Credit Losses / Risk-Weighted Assets CET1 % ACL/RWA 1.2% 11.8% 0.7% 12.3% 12.3% 1.1% Zions ranked 10th 11.8% 1.3% M
Slide 19: Select Themes
Select Themes Strong loan growth, fee income growth, and rising rates are driving a significant increase in revenue Our planned interest rate sensitivity has yielded significant revenue benefits; as rates have increased, we’ve begun to position the bank for stable or falling rates We continue to
Slide 20: Financial Outlook (3Q 2023E vs 3Q 2022A)
Financial Outlook (3Q 2023E vs 3Q 2022A), as of October 24, 2022 Outlook Comments Moderately Loan Balances, ex-PPP Excludes PPP loans, which are now significantly less impactful Increasing Net Interest Income See We expect latent and emergent interest rate sensitivity, combined with Slide 10 con
Slide 21: Appendix
Appendix Company Abbreviation Key Financial Results Summary 3Q22 Financial Highlights Earnings Per Share and Tangible Book Value Per Share Growth 2021 Greenwich Excellence Awards Technology Roadmap and FutureCore Balance Sheet Profile Securities and Money Market Loan Portfolio Prof
Slide 22: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp HBAN: Huntington Bancshares Incorporated BAC: Bank of America JPM: JPMorgan Chase & Co. BOKF: BOK Financial Corporation KEY: KeyCorp C: Citigroup, Inc. MTB: M&T Bank Corporation CFG: Citizens Financial Group, Inc. PNFP: Pinnacle Fina
Slide 23: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) September 30, June 30, March 31, December 31, 2022 2022 2022 2021 Earnings Results: Diluted Earnings Per Share $ 1.40 $ 1.29 $ 1.27 $ 1.34 Net Earnings Applica
Slide 24: Third Quarter 2022 Financial Highlights
Third Quarter 2022 Financial Highlights Vs. 2Q22, another quarter of strong increases in non-PPP loans and growth in adjusted PPNR Earnings and Profitability: Loans and Deposits: Vs. 2Q22, growth rates not annualized $1.40 diluted earnings/share, compared to $1.29 3.0% increase in period-end
Slide 25: Earnings Per Share and Tangible Book Value Per Share Growth
Earnings Per Share and Tangible Book Value Per Share Growth Assisted by lower credit costs and greater returns of capital to shareholders, EPS growth ranks sixth among peers, while the TBV/Share has grown steadily Earnings per Share (modified) Tangible Book Value per Share Substitutes Net Charge-Off
Slide 26: Zions Consistently Receives National and Local Recognition for Excellence
Zions Consistently Receives National and Local Recognition for Excellence Affiliates have strong brands in their markets One of only four banks to have averaged 15 or more Greenwich Excellence Awards since 2009 Top team of women bankers (2015-2020) 1 Consistently Voted Best Bank in San Diego and Ora
Slide 27: Zions Finishes 2nd Among All US Banks in Greenwich 2021 Excellence Awards
Zions Finishes 2nd Among All US Banks in Greenwich 2021 Excellence Awards Zions has Consistently Achieved “Excellence” vs Four Major Competitors1 and Peers2 Business Segment 100 100 100 100 Zions Bancorp Middle Market 80 80 80 80 Zions’ Peer Group Avg 81 77 60 65 60 60 60 Average of Four Major 63 62
Slide 28: Technology Roadmap
Technology Roadmap We continue to invest in technology solutions focused on customer experience & empowering bankers COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking & Gateway Enhancements Digital Banking Replacement Improved Customer Experience (2022) Consumer Customer Migratio
Slide 29: FutureCore: A Strategic Technology Advantage for Years to Come
FutureCore: A Strategic Technology Advantage for Years to Come Replacing the entire core legacy environment to improve operational resiliency and efficiency Modern Architecture Improved Customer Empowered Driving Built for Resiliency and Experience Bankers Modernization Speed FutureCore as a Catalys
Slide 30: Balance Sheet Profile
Balance Sheet Profile Zions’ liquidity profile is notably stronger, with higher securities. Funding advantages include granularity and more noninterest bearing deposits. Very substantial Earning Asset Composition Liabilities and Equity Composition funding advantage with More liquid assets = stable h
Slide 31: Securities, Money Market Investments
Securities, Money Market Investments Outsized deposit growth during the pandemic was primarily invested in highly liquid assets Total Securities Portfolio (at Fair Value) and Money Market Investments (end of period balances) Strong deposit growth during the pandemic was primarily invested in highly
Slide 32: Loan Portfolio Profile
Loan Portfolio Profile Zions’ loan portfolio is skewed towards commercial lending, at 78% of total loans Loan Portfolio Composition Loan Sub-Portfolio Composition Commercial and Industrial Construction & Land Development 14% Term Paycheck Protection 23% Foreign Loans Leasing 31% 53% $11,750 , 22% Ow
Slide 33: Loan Growth in Detail
Loan Growth in Detail Strong loan growth achieved in several categories: C&I (ex-O&G), residential real estate, & commercial construction Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +3% Linked quarter: 10% Excluding PPP loans, period-end loans Other loans (includi
Slide 34: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (3Q22 vs. 3Q21) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 435 500 851 124 250 111 123 - 2,394 SBA PPP (566) (548) (809) (261) (232) (223) (135) - (2,774) Owner occupied 99 312
Slide 35: Zions is a Leader in Small Business Lending
Zions is a Leader in Small Business Lending Zions punches above its weight Commercial Loans Commercial Loans ($ billion) sized $100k - $1M 25% sized $100k - $1M $20,000 as a percent of total commercial loans $18,000 $16,000 20% $14,000 $12,000 15% $10,000 $8,000 10% $6,000 $4,000 5% $2,000 $0 0% JPM
Slide 36: Simulated Repricing Expectations: Earning Assets and Loans
Simulated Repricing Expectations: Earning Assets and Loans Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 39% Earning Assets After Hedging Loans After Hedging 33% 39% Percent of Earning Assets Percent of Loans 19% 19% 13% 12% 13% 13% 15% 11% 13% 13% 10% 1
Slide 37: Interest Rate Swaps
Interest Rate Swaps Although the outlook is for rising rates, we continue to create some protection from falling rates Interest rate sensitivity managed in part with interest rate hedges: Average Weighted Outstanding average Fixed Notionial Rate Received Average total swaps in effect during quarter
Slide 38: Long-Term View: Credit Quality at the Subportfolio Level
Long-Term View: Credit Quality at the Subportfolio Level Zions’ loss rates across nearly all loan portfolio categories are better or much better than peer loss rates In three of the seven major categories in which Zions has significant exposure, Zions loss rate has been much better (top quartile)
Slide 39: Credit Quality: Consumer Real Estate Secured
Credit Quality: Consumer Real Estate Secured (Term 1-4 Family and Home Equity Credit Lines) Minimal risk layering shows strength of the consumer real estate loan portfolio. Term 1-4 family mortgages (“1-4 family residential”) account for approximately $10.1 billion of the outstanding balances or 19%
Slide 40: Credit Quality: Term Commercial Real Estate
Credit Quality: Term Commercial Real Estate (“CRE”) Low loan-to-values ratios in the Term CRE portfolio demonstrates the ability of the portfolio to withstand stress Term CRE loans account for $9.6 billion of the outstanding balances or 18% of the total loan portfolio Distribution of Term Commercial
Slide 41: Exercising CRE Discipline Through Growth Management
Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags due to continued exercise of concentration risk discipline Total CRE CRE >$1 million 200 200 Indexed: 2017 Q3 = 100 Indexed: 2017 Q3 = 100 150 150 100 100 50 50 ZION Peer Top Quartile Peer Bottom Quartile ZIO
Slide 42: Allowance for Credit Loss
Allowance for Credit Loss (“ACL”) ACL increase vs. 2Q22 is due to increased economic uncertainty & loan growth; ACL is strong relative to its recent NCOs Allowance for Credit Loss Allowance for Credit Loss ($ millions) As a Multiple of Annualized Net Charge-Offs ACL (%) ex-PPP Peer 25th to 75th Perc
Slide 43: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation In millions, except per share amounts 3Q22 2Q22 1Q22 4Q21 3Q21 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $479 $464 $464 $449 $429 LESS adjustments: Severance costs 1 1 Other real estate expense 1 Amortization of core deposit and other intangibles
Slide 44: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) In millions, except per share amounts 3Q22 2Q22 1Q22 4Q21 3Q21 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $211 $195 $195 $207 $234 Diluted Shares (average) 150 151 152 154 160 (k) Diluted EPS 1.40 1.29 1.27 1.34
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