Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q3 2016 Earnings Presentation
31 slides from Zions Bancorporation N.a's earnings presentation, Oct 24, 2016
Slide 1: Third Quarter 2016 Financial Review
Third Quarter 2016 Financial Review October 24, 2016
Slide 2: Forward-Looking Statements and Use of Non-GAAP Financial Measures
2 Forward-Looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation that are based on other than historical data or that express the Company’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litig
Slide 3: Third Quarter 2016 Key Performance Indicators
Increasing EPS: Diluted earnings per share increased substantially from the year-ago period • EPS increased to $0.57 in 3Q16 from $0.41 (GAAP) • Adjusting for items used to calculate our efficiency ratio, including the effect of securities gains and losses (1), EPS increased to $0.54 from $0.43, o
Slide 4: Zions' Announced Financial Targets
Zions’ Announced Financial Targets 4 On June 1, 2015 Zions announced several financial targets, including: 2H15 FY16 FY17 Goal Actual Result Goal Result Goal Result Hold to below $1.58 (1) billion 100% Hold to below $1.58 (1) billion On Track Slightly above $1.58 (1) billion TBD ≤70% 69.3% <66% On T
Slide 5: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted Pre-Provision Net Revenue (1) 5 Steady improvement driven by disciplined expense and balance sheet management (1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and losses and debt extinguishment costs. See Append
Slide 6: Efficiency Ratio
Efficiency Ratio Efficiency Ratio (1) 6 Substantial improvement driven by expense control and revenue growth (1) Defined as noninterest expenses as a percentage of net revenue, adjusted for items such as severance, provision for unfunded lending commitments, securities gains and losses and debt exti
Slide 7: Total Loan and Deposit Growth
Total Loan and Deposit Growth Total Loans Total Deposits 7 Annual mid-single digit loan and deposit growth are key drivers of our efficiency initiative Period-end loan growth increased 0.1% on a linked quarter basis, in what is typically a seasonally soft quarter Year-over-year growth rates of b
Slide 8: Credit Quality (Ex-Oil & Gas Portfolio)
Credit Quality (Ex-Oil & Gas Portfolio) 8 Key Credit Quality Ratios (Ex-O&G) Excluding oil and gas lending, credit quality remains very good Overall stable and healthy credit quality Relative to June 30, 2016: Criticized loans increased slightly to 3.3% of loans Classified loans increased to
Slide 9: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality 9 O&G Key Credit Quality Ratios O&G credit quality remains substantially challenged, although higher commodity prices are helpful Relative to June 30, 2016: Criticized O&G loans decreased $3 million, the first linked-quarter decrease since the cycle began Classif
Slide 10: Financial Results
Financial Results 10 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) Sept 30, 2016 June 30, 2016 Sept 30, 2015 Earnings Results: Diluted Earnings Per Share $ 0.57 $ 0.44 $ 0.41 Net Earnings (Loss) Applicable to Common Shareholders 11
Slide 11: Loan Growth by Type
C&I (ex-O&G) Owner Occupied (ex-NRE) C&D Term CRE (ex- NRE) 1-4 Family National Real Estate O&G Home Equity Other -30% -20% -10% 0% 10% 20% 30% Loan Growth by Type 11 Solid loan growth achieved in targeted growth categories Year-over-Year Loan Growth Loan growth in Commercial and Industrial (C&I),
Slide 12: Net Interest Income
Net interest income growth continued its positive trajectory, increasing 10.3% over the year-ago period On a linked quarter basis, net interest income grew by $4 million over 2Q16 Net interest income is expected to continue to increase Net Interest Income Net Interest Income 12 Improving at a
Slide 13: Active Balance Sheet Management: Securities Portfolio Growth
Active Balance Sheet Management: Securities Portfolio Growth 13 Short to medium duration portfolio; limited duration extension risk Total Securities (end of period balances) ($mm) $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 3Q15 4Q15 1Q16 2Q16 3Q16 Other Securities Municipal Securities Small Busi
Slide 14: Net Interest Income Drivers
Loans 76% Securities 19% Cash 5% Net Interest Income Drivers 14 Net interest margin slightly lower from prior quarter due primarily to higher securities premium amortization Net Interest Margin (NIM) Earning Asset Mix The 3Q16 NIM was 3.36%, down three basis points from the prior quarter Two of
Slide 15: Noninterest Income
113 113 112 118 125 $100 $110 $120 $130 3Q15 4Q15 1Q16 2Q16 3Q16 Total noninterest income increased to $145 million from $126 million a year ago Approximately $11 million of the 3Q16 revenue was due to the increase in the valuation of a publicly-traded SBIC investment Approximately $3 million
Slide 16: Noninterest Expense
Noninterest Expense ($mm) 391 397 396 382 403 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 3Q15 4Q15 1Q16 2Q16 3Q16 Noninterest Expense 16 Expense controls have resulted in performance tracking in line with our stated goal Total NIE increased 3.1% versus the year-ago period; adjusted NIE increas
Slide 17: Capital Actions: 2H16 – 1H17
Increased Payout Increased the common dividend payout to an annualized $0.32 per share from $0.24 per share previously Target: repurchase up to $180 million of common equity from 3Q16 to 2Q17 (~3% of shares outstanding) Completed $45 million in 3Q16 Reduce preferred equity by up to $144 mi
Slide 18: Oil & Gas (O&G) Portfolio Trends
$- $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Allowance for Credit Losses Upstream Services Other Oil & Gas (O&G) Portfolio Trends 18 Loan Balances by O&G Segment Classifieds by O&G Segment Steadily declining balances in Upstream and Services Nonaccruals by O&G Segment ($mm) $-
Slide 19: Oil & Gas Loss Outlook and Reserve
O&G Loan Loss Expectation O&G loan losses are expected to decline somewhat over the next 12 months as compared to the last 12 months (1) Most of the expected loss is likely to come from services loans 60% of classified O&G loans are from services loans 79% of O&G losses incurred since Sep
Slide 20: Accelerate Positive Operating Leverage
Accelerate Positive Operating Leverage Accelerate loan growth rates (from then prevailing low-single digit rate) Invest cash into medium duration securities Maintain mid-single digit growth rates in core fee income Maintain noninterest expenses below $1.58 billion (1) in 2016, increasing s
Slide 21: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (4Q16-3Q17, vs. 3Q16) 21 Outlook Comments Moderately Increasing • Over the next 12 months, we expect continued solid growth from residential mortgage and C&I, while expecting more moderate growth from CRE than in the last 12 months. Increasing • Expect continued increas
Slide 22: Appendix
Oil & Gas (O&G) Portfolio Detail CRE Portfolio: Subtype, cash flow coverage, collateral coverage High O&G Employment Counties: Consumer Credit Scores Loan Growth by Bank Brand and Loan Type GAAP to Non-GAAP Reconciliation 22 Appendix
Slide 23: Oil & Gas (O&G) Portfolio Detail
23 Note: Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as oil and gas- related, including a particular segment of oil and gas-related activity, e.g., upstream or downstream; typically, 50% of revenues coming from the oil and gas sector
Slide 24: Zions' Commercial Real Estate Portfolio in Texas
24 The Derivative Effect: Zions’ Commercial Real Estate Portfolio in Texas Houston is approximately 3/5 of total Texas exposure. Construction and Land Development loans in Houston have declined by more than 80% since prior credit cycle $0 $100 $200 $300 Land Other Single Family Housing Residential C
Slide 25: Commercial Real Estate Portfolio Summary
Commercial Real Estate Portfolio Summary 25 Credit Quality Remains Strong Note: Data as of 3Q16. Nonaccruals and delinquencies stable year- over-year, Classifieds down 26% Percent criticized by type; total CRE = 2.7%: Commercial Construction – 6.5% Residential Construction – 0.3% CRE Term
Slide 26: CRE Term Portfolio
CRE Term Portfolio 26 Strong CRE metrics and conservative structures, Houston emphasized Houston Term: debt service coverage ratios and LTV ratios are in line with overall term CRE portfolio. Adverse migration of loan grades is occurring; portfolio benefits from conservative advance rates plus cas
Slide 27: CRE Construction Portfolio
CRE Construction Portfolio 27 Balanced, performing portfolio Note: Data as of 3Q16. Diversified construction portfolio with 38% Homebuilder Residential, 62% Commercial Commercial construction is 6.5% criticized - stress in Houston CRE and TX construction delays. Homebuilder Residential performin
Slide 28: High O&G Employment Counties: Consumer Credit Scores
Takeaways: Consumer loans from high O&G employment counties performing in line with overall consumer portfolio; nearly all of these consumer loans are with Amegy (96%) located in Texas, primarily in the Houston area 83% of consumer loans in high O&G counties are residential mortgage and home equ
Slide 29: Loan Growth by Bank Brand and Loan Type
29 Loan Growth by Bank Brand and Loan Type Note: National Real Estate (NRE) is a division of Zions Bank with a focus on small business loans with low LTV ratios, which generally are in line with SBA 504 program parameters. “Other” loans includes municipal and other consumer loan categories. Linked Q
Slide 30: GAAP to Non-GAAP Reconciliation
30 (1) In Q1 2016, to be consistent with industry practice, the Company reclassified its bankcard rewards expense from “Other noninterest expense” to “Other service charges, commissions and fees”, offsetting this expense against associated noninterest income. Prior period amounts have also been recl
Slide 31: GAAP to Non-GAAP Reconciliation (cont.)
31 Note: Please refer to the prior page for line items comprising the aggregate adjustments to noninterest expense (b) and revenue (g) that appear in this schedule. (1) Represents estimated diluted EPS, which includes the effect of restricted stock. GAAP to Non-GAAP Reconciliation (cont.) (Amounts i