Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation, National Association — Corporate Update (May 2020)
40 slides from Zions Bancorporation N.a's corporate update, May 18, 2020
Slide 1: Investor Update Second Quarter 2020
Investor Update Second Quarter 2020 May 2020
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information These materials include “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations regarding f
Slide 3: Zions' Profile: A Collection of Community Banks
Zions’ Profile: 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 Zions’ Markets Deposits % and challenges Bank Headquarters $Bi
Slide 4: Zions' Profile: Leader in Small Business Lending
Zions’ Profile: Zions is a Leader in Small Business Lending Zions punches above its weight Commercial Loans Commercial Loans ($ billion) sized $100k - $1M sized $100k - $1M $25 30% as a percent of total commercial loans 25% $20 20% $15 15% $10 10% $5 5% $0 0% C RF C FRC KEY RF CFG ASB FNB USB BAC SN
Slide 5: Zions Receives National and Local Recognition for Excellence
Zions’ Profile: Zions Receives National and Local Recognition for Excellence Affiliates have strong brands in their markets One of only six banks to have averaged 14 Greenwich Excellence Awards since 2009 (survey inception) Top team of women bankers (2015-2019) 1 Voted Best Bank in San Diego and Ora
Slide 6: Business Banking Reputation is Highly Ranked
Zions’ Profile: Zions’ Business Banking Reputation is Highly Ranked Zions compares favorably to key competitors (JPMorgan, Bank of America, US Bank, Wells Fargo) Overall Satisfaction Customer Satisfaction With Our Bankers Customer Satisfaction - Credit Process 90 90 90 80 80 80 Middle Market 70 70 7
Slide 7: Digital Capabilities Meaningfully Upgraded Over Several Years
Zions’ Profile: Digital Capabilities Meaningfully Upgraded Over the Last Several Years COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking 2.0 2018-2019 Online and Mobile Banking Replacement 2020-2021 $10B Demand Deposits 625,000 consumer accounts $100MM Fee Income 125,000 business
Slide 8: Earnings Trends: Expense Control, EPS Impacted in 1Q20
Earnings Trends: Long-time Focus on Expense Control, EPS Impacted in 1Q20 by a Large Provision For Credit Losses Positive operating leverage achieved through revenue growth and expense control Net Revenue Noninterest Expense 160 ZION 160 Indexed: 4Q14 = 100 Indexed: 4Q14 = 100 150 Peer Top Quartile
Slide 9: Noninterest Expense Management – a Long-Standing Focus
Noninterest Expense Management – a Long-Standing Focus One of the strongest expense control performances among peers… despite significant investments in technology Noninterest Expense Year-over-year % change 15.3% 12.9% 13.6% 11.3% 11.7% 9.6% 8.7% 6.7% Year-over-year Adjusted Noninterest 5.8% Expens
Slide 10: Profitability Metrics
Profitability Metrics Efficiency and ROA improvement linked to relatively stable noninterest expense and revenue growth. Expense cuts in 4Q19 expected to benefit 2020 financial performance. Efficiency Ratio 80 % Return on Assets 1.8% 1.6% 75 1.4% 70 1.2% 1.0% 65 0.8% 60 0.6% 0.4% 55 0.2% 50 0.0% 1H1
Slide 11: Allowance for Unfunded Lending Commitments and Capital
Allowance for Unfunded Lending Commitments, Zions Allowance Zions for Credit Commitments,Loss to Allowance LendingLoan for Ratio Unfunded was 1.56% 1Q20.in Note: capitalRegulatory ratios are Basel III 1Q20;for source: SNL Global. Financial/S&P Total Risk Loss Common equity plus the allowanceequity p
Slide 12: Net Interest Income: Benefitting from High Quality Deposit Profile
Net Interest Income: Significantly Benefitting from a High Quality Deposit Profile High concentration of granular retail and small business deposits; small businesses are net contributors of stable deposits Deposit Composition(1) Noninterest-Bearing Deposits / 40% Percent Total Deposits 3.5 50% 35%
Slide 13: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin Changes in interest rates and balance sheet composition impact net interest income performance Net Interest Income Net Interest Margin Net Interest Margin 4Q19 NIM 1Q20 NIM 0.16% -0.08% ($ millions) 3.46% -0.13% Impact of 3.41% $576 Yield on Cost of Nonint
Slide 14: Net Interest Margin Volatility
Net Interest Margin Volatility Actively reducing net interest margin volatility – most recent eight year ranking is considerably better than prior eight 25% Net Interest Margin Net Interest Margin Volatility 20% 5.0(%) Last 15 Years 2004-2011 15% 4.5 9% 10% 5% 4.0 0% RF FRC KEY CFG ASB FNB SNV FHN F
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity Actively managing balance sheet sensitivity Net Interest Income Sensitivity (1) ▪ Interest rate sensitivity reduced through use of interest rate hedges −200 bps −100 bps +100 bps +200 bps ▪ $3.5 billion of loan interest rate swaps as of Q1 2020 1 11% In the down 100 and ▪ A
Slide 16: Decade-Long Risk Profile Improvement
Decade-Long Risk Profile Improvement Since the recession, Zions has addressed the following: Concern Mitigation Concern Mitigation Negative/Low ✓ Improved ROA to levels approximately in line with peers ✓ Reduced risk through simplified business model and structure, Profitability ✓ Efficiency Ratio i
Slide 17: Credit Quality
Credit Quality Zions entered the COVID-19 economic downturn with very clean credit quality Key Credit Metrics: Credit Quality Ratios ▪ Classified loans (1.8% of loans) 4.00% 3.50% ▪ NPAs+90(1) (0.56% of loans + OREO) 3.00% ▪ Annualized net loan losses of: ▪ 0.06% in 1Q20 2.50% ▪ 0.09% net charge-off
Slide 18: Credit Quality Trends
Credit Quality Trends Zions has reached the best quartile for NPAs and ranks the best of peers for NCOs NPAs+90 DPD / NCOs/Loans Loans + OREO (Trailing 12-month Average) Oil and gas recession 1.70% 1.70% 1.50% 1.50% 1.30% 1.30% 1.10% 1.10% 0.90% 0.90% 0.70% 0.70% Bump in charge offs related to oil 0
Slide 19: Credit Quality: Nonperforming Assets and Loan Loss Severity
included in Zions’ peer group have been excluded due to to or excludedstatus.theirduemergedbeenfailedpeerhavegroupZions’ in included Source: SNL GlobalFinancial/S&P as 1Q20. of averagetheCalculatedusing Note: of results.annualizedquarterly Survivorship Credit Quality: Nonperforming Assets and Loan L
Slide 20: Loan Portfolio Risk Assessment – Select Industries Affected by COVID-19
Loan Portfolio Risk Assessment – Select Industries Significantly Affected by COVID-19 Select industries believed to be at elevated risk due to COVID-19 pandemic and are being closely managed Industries Impacted by COVID-19: Totaling $5.6 billion of Loan Balances Deferrals as of Mid-May 2020: 11.2% o
Slide 21: Condition of Borrowers Within Select Industries Affected by COVID-19
Condition of Borrowers Within Select Industries Significantly Affected by COVID-19 Deep dive reviews of certain sub-portfolios have provided key insights regarding loan grading, borrower resiliency Hotels1 (1.5% of loans @ 3/31/20) Retail – CRE2 (3.5% of loans @ 3/31/20) ▪ ▪ Severely impacted – some
Slide 22: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality Oil and gas loans account for $2.6 billion or 5% of total loans As of March 31, 2020: Oil and Gas ▪ Annualized NCOs equaled 0.2% of loans Key Credit Quality Ratios 35% ▪ Classified loans equaled 3.4% of loans 30% ▪ Allowance for credit losses of $145 million or 5.6% of
Slide 23: Oil & Gas Portfolio
Oil & Gas Portfolio Significant realignment since downturn ▪ Services, which accounted for bulk of charge offs in the Portfolio Trends 3,500 14 last cycle, account for 18% of the portfolio versus 42% 3,000 12 going into the cycle (Dec 2014) 2,500 10 ▪ Using current mix of loans, if net loss rates we
Slide 24: Risk Mitigation Strategies
Risk Mitigation Strategies: We’re not just “closely monitoring” the areas of risk Active management strategies employed to reduce downgrades and losses Strategies Deployed or In Process of Being Deployed ▪ Implementing temporary policy triage guidelines: ▪ Deferrals ▪ Modifications and restructuring
Slide 25: Allowance for Credit Loss
Allowance for Credit Loss Significant 1Q20 increase in qualitative reserve vs. January 1, 2020 due to COVID-19 ▪ The 1Q20 Allowance for Credit Loss reflects expected losses from a severe and prolonged recession ▪ Increase from January 1, 2020 to March 31, 2020 was primarily a qualitative adjustment
Slide 26: Allowance for Credit Losses: Historical Perspective
Allowance for Credit Losses: Historical Perspective Today’s loan portfolio consists of higher concentrations of lower risk segments Using the framework of the Global Financial Actual 2009-10 Loss Rates Crisis (recession of 2008-2010) 2009-2010 Applied to 1Q20 Mix Percentage Percentage of Applied Ann
Slide 27: Allowance for Credit Losses – Comparison to other Banks
Allowance for Credit Losses – Comparison to other Banks Zions posted the largest increase in its ACL relative to GSIBs and peers. Relative to the 2019 DFAST modeled “Severely Adverse Scenario,” Zions’ ACL is among the strongest when compared to GSIB commercial banks ACL Increase (1) Global Systemica
Slide 28: Small Business Administration – Paycheck Protection Program Loans
Small Business Administration – Paycheck Protection Program Loans Significant success with the SBA program, providing more than $7 billion to small businesses More than $7 billion SBA PPP loans processed through Zions and approval obtained ▪ $7.05 billion: Dollar volume of loans processed and approv
Slide 29: Warrants
Warrants Permanent share dilution is dependent upon share price in mid-May ▪ Zions has 29,236,280 warrants (Nasdaq: ZIONW) outstanding ▪ Strike price: $33.3097 ▪ Warrant Multiplier: 1.0997 ▪ Expiration: May 22, 2020 ▪ If exercised, net share settlement method is used to exchange shares for warrants
Slide 30: Appendix
Appendix ▪ Company Abbreviation Key ▪ 1Q20 Financial Results ▪ Additional Credit Quality Detail ▪ Loan Growth by Brand and Loan Type ▪ GAAP to Non-GAAP Reconciliation 30
Slide 31: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp JPM: JPMorgan Chase & Co. BAC: Bank of America KEY: KeyCorp BOKF: BOK Financial Corporation MTB: M&T Bank Corporation C: Citigroup, Inc. PBCT: People’s United Financial, Inc. CFG: Citizens Financial Group, Inc. RF: Regions Financial
Slide 32: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) March 31, December 31, September 30, 2020 2019 2019 Earnings Results: Diluted Earnings Per Share $ 0.04 $ 0.97 $ 1.17 Net Earnings Applicable to Common Shareho
Slide 33: Credit Quality (Excluding Oil & Gas Portfolio)
Credit Quality (Excluding Oil & Gas Portfolio) Excluding oil and gas lending, credit quality remains exceptional ▪ Key Credit Metrics: Key Credit Quality Ratios (Ex-O&G) ▪ Classified loans (1.7% of loans) 1.8% 1.6% ▪ Nonperforming assets (0.54% of loans) 1.4% 1.2% ▪ Annualized net loan losses of: 1.
Slide 34: Portfolios of Interest – Leveraged Lending
Portfolios of Interest – Leveraged Lending Risk primarily related to Oil & Gas ▪ Relationship and middle-market sponsor driven, not the larger syndicated Portfolio Trends leveraged loan market $1.6 10 ▪ Not a focused growth area; balances generally stable-to-declining $1.4 9 $1.2 ▪ 8 Diversified acr
Slide 35: Portfolios of Interest – Municipal Lending
Portfolios of Interest – Municipal Lending Low risk growth driver Portfolio Trends ▪ Strong growth in municipals loans particularly in the $3.0 10 last three years. $2.5 9 ▪ Growth is focused in core municipal lending exhibiting 8 $2.0 resilient payment sources such as taxes and fees for 7 $1.5 util
Slide 36: Portfolio Overview – Mortgage
Portfolio Overview – Mortgage The portfolio is stable and continues growing at a solid pace with excellent performance metrics Mortgage Portfolio Trends ▪ A majority of the Mortgage loans on the books are in 1st lien $8.0 820 position, with Jr Lien Mortgages only comprising of $19.4 million in $7.0
Slide 37: Loan Growth
Loan Growth Solid loan growth achieved in certain targeted growth categories Year-over-Year Loan Balance Growth Total Loans: +5% 50% Note: Circle size indicates relative proportion of loan portfolio as of 1Q20 40% Municipal, 30% 39.9% Owner 20% O&G, Occupied , C&I (ex-O&G), 8.6% 1-4 Family, 3.8% Ter
Slide 38: Loan Growth by Bank Brand and Loan Type
Loan Growth by Bank Brand and Loan Type Year over Year Loan Growth (4Q19 vs. 4Q18) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 45 25 571 (206) 85 31 36 - 587 Owner occupied 30 93 30 74 47 (20) 38 - 292 Energy (Oil & Gas) (2) 200 - 1 - 6 - - 205 Municipal 19
Slide 39: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 1Q20 4Q19 3Q19 2Q19 1Q19 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 408 $ 472 $ 415 $ 424 $ 430 Adjustments: Severance costs - 22 2 1 - Other real estate expense - - (2) - (1) Debt extinguishment cost - - - - - Amortization of core dep
Slide 40: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 1Q20 4Q19 3Q19 2Q19 1Q19 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $408 $472 $415 $424 $430 LESS adjustments: Severance costs - 22 2 1 - Other real estate expense - - (2) - (1) Debt extinguishment cost - - -
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