Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Barclays 2016 Global Financial Services Conference
38 slides from Zions Bancorporation N.a's conference presentation, Sep 12, 2016
Slide 1: Barclays 2016 Global Financial Services Conference
Barclays 2016 Global Financial Services Conference September 12-14, 2016
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures; Peer Group
2 Forward-Looking Statements; Use of Non-GAAP Financial Measures; Peer Group Key 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 Sec
Slide 3: A Collection of Community Banks
3 A Collection of Community Banks Local decision-making and top-notch service separates Zions from peers Source: SNL Financial, BEA.gov, Zions’ calculations, using simple average of trailing 10 years of annual GDP growth by state multiplied by the percent of deposits in each state. Strategic local
Slide 4: Superior Brand: Nationally Recognized for Excellence
4 Superior Brand: Nationally Recognized for Excellence (1) One of five winning teams, 2015, Zions Bank. (2) Readers of the San Diego Union-Tribune, August 2016, for six consecutive years; Orange County Register, for three consecutive years. (3) Ranking Arizona, 2015. Ranked #1 nationally by Greenw
Slide 5: Zions is a Commercially-Oriented Bank
Zions is a Commercially-Oriented Bank Earning Assets Liabilities and Equity 5 58% of earning assets are commercial loans (vs. 39% for peers), and 38% of earning assets are funded by noninterest-bearing deposits (vs. 24% for peers) 5% 36% 22% 18% 19% 3% 29% 10% 30% 22% Cash Commercial Loans Commercia
Slide 6: Small Business Lending
Small Business Lending Commercial Loans sized $100k - $1M Commercial Loans sized $100k - $1M as a percent of total commercial loans 6 0% 5% 10% 15% 20% 25% ZIO N B B T H B A N R F M TB US B WF C JP M B A C CM A P N C KE Y ST I FIT B U B C Note: Call report data via SNL Financial, as of 2Q16; peer gr
Slide 7: Strongest Decile Balance Sheet
Strongest Decile Balance Sheet Common Equity Tier 1 Capital Ratio Tier 1 Risk-Based Capital Ratio 8% 9% 10% 11% 12% 13% 14% 15% ZI O N FR C C B SH M TB B O K F R F B B T C FG K EY H BA N FH N FM ER FI TB EWB C ST I C M A SN V A SB PB C T Note: Regulatory capital ratios are Basel III. Source: SNL Fin
Slide 8: Credit Quality
0.00% 0.50% 1.00% 1.50% 2.00% BOKF MTB CBSH EWBC ASB ZION CMA BBT FMER CFG STI RF HBAN FITB KEY FHN SNV 0.00% 0.50% 1.00% 1.50% 2.00% FR C C B SH EWB C ST I PB C T B B T FI TB FM ER K EY H BA N C M A SN V C FG ZI O N A SB B O K F FH N M TB R F Credit Quality Last 4 Quarter Average (NPAs + 90DPD) / (
Slide 9: Zions' Announced Financial Targets
Zions’ Announced Financial Targets 9 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 10: Strategic priorities
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 11: Second quarter highlights
Increasing EPS: Diluted earnings per share increased substantially from the year-ago period • EPS increased to $0.44 in 2Q16 from $(0.01) • Adjusting for items used to calculate our efficiency ratio, including the effect of securities gains and losses (1) and preferred stock redemption expense, EP
Slide 12: Pre-Provision Net Revenue
Pre-Provision Net Revenue Pre-Provision Net Revenue (1) 12 Steady improvement driven by disciplined expense and balance sheet management (1) Adjusted for items such as severance, provision for unfunded lending commitments, and debt extinguishment costs. See GAAP to non-GAAP reconciliation tables on
Slide 13: Total Loan and Deposit Growth
Total Loan and Deposit Growth Total Loans Total Deposits 13 Solid loan and deposit growth support targeted revenue and expense initiatives Period-end loan growth continued to build upon 1Q16 momentum, up 2.6% on a linked quarter basis Period-end deposits experienced modest growth ($mm) $36,000 $
Slide 14: 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 -20% -10% 0% 10% 20% 30% Loan Growth by Type 14 Solid loan growth achieved in targeted growth categories Year-over-Year Loan Growth Loan growth in Commercial and Industrial (C&I), Term
Slide 15: Active Balance Sheet Management: Securities Portfolio Growth
Active Balance Sheet Management: Securities Portfolio Growth 15 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 2Q15 3Q15 4Q15 1Q16 2Q16 Other Securities Municipal Securities Small Busi
Slide 16: Net Interest Income
Net interest income growth continued its positive trajectory, increasing nearly 9.7% over the year-ago period On a linked quarter basis, net interest income grew by $12mm over 1Q16 Net interest income is expected to continue to increase due to further deployment of cash into higher yielding, h
Slide 17: Noninterest Income
Customer-related fee income increased 5% from the year-ago period Key components of fee income: Mortgage up 17%, Wealth management up 9%, Treasury management up 8%, and Bankcard up 6% Loan sales and servicing income increased from the prior quarter, due in part to a valuation adjustment (1) 11
Slide 18: Noninterest Expense
Noninterest Expense ($mm) 399 391 397 396 382 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 2Q15 3Q15 4Q15 1Q16 2Q16 Noninterest Expense 18 Expense controls have resulted in performance tracking modestly better than stated goal Total NIE declined 4.3% versus the year-ago period; adjusted NIE decl
Slide 19: Efficiency Ratio
Efficiency Ratio Efficiency Ratio (1) 19 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, and debt extinguishment costs. See GAAP
Slide 20: Credit Quality (Ex-Energy)
Credit Quality (Ex-Energy) 20 Key Credit Quality Ratios (Ex-Energy) Overall credit quality remains pristine outside energy Overall stable and healthy credit quality Relative to March 31, 2016: Classified loans decreased to 2.0% of loans NPAs decreased to 0.65% of loans Annualized NCOs equa
Slide 21: Capital Actions: 2H16 – 1H17
Capital plan for next four quarters Increase the dividend payout to an annualized $0.32 from $0.24 Repurchase up to $180 million of common equity (~3% of shares outstanding) Reduce preferred equity by up to $144 million Expect improved return on tangible common equity due to improved profi
Slide 22: Industry's CRE Concentration & Growth
Since concentration limits were put in place in December 2011, CRE at Zions has increased by 22% less than the peer group average Zions’ CRE portfolio has grown at approximately the same pace as the slowest quartile of A-/BBB+ rated peers Including the bank TruPS CDO portfolio, which is worth
Slide 23: Commercial Real Estate, Relative to Capital Levels
Recent Investor Point of Interest: Commercial Real Estate, Relative to Capital Levels 23 Zions’ Total CRE balance is about half of the regulatory guidance issued in 2006 Note: “CRE” includes commercial and industrial, multifamily, and construction and land development loans. Growth indexed to 4Q11,
Slide 24: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality 24 O&G Key Credit Quality Ratios O&G credit quality [has stabilized] O&G credit quality stabilizing Relative to March 31, 2016: Criticized loans increased slightly to 37.8% of loans Classified loans increased to 31.5% of loans NPAs increased to 11.1% of loans
Slide 25: Oil & Gas (O&G) Portfolio Trends
$- $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Allowance for Credit Losses Upstream Services Other Oil & Gas (O&G) Portfolio Trends 25 Loan Balances by O&G Segment Classifieds by O&G Segment Steadily declining balances in O&G Services Nonaccruals by O&G Segment ($mm) $- $200 $400 $60
Slide 26: Energy Peer Analysis
37.8% 29.5% 22.1% 36.0% 28.6% 17.0% 0% 5% 10% 15% 20% 25% 30% 35% 40% Criticized % of Total Nonaccrual % of Criticized Reserve % of Criticized ZION Peer Median Energy Peer Analysis 26 Zions’ energy portfolio credit metrics remain comparable to oil and gas peers, although Zions has a stronger reserve
Slide 27: O&G Loan Loss Expectation
O&G Loan Loss Expectation O&G loan losses are expected to decline moderately in 2H16 (relative to 1H16) and may decline further in 2017 (1) Most of the expected loss is likely to come from services loans 60% of classified O&G loans are from services loans 78% of O&G losses incurred since S
Slide 28: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (3Q16-2Q17, vs. 2Q16) 28 Outlook Comments Moderately Increasing • 3Q16 QTD loan growth is slightly positive • 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 m
Slide 29: Appendix
Financial Results Net Interest Income Drivers Oil & Gas (O&G) Portfolio Detail Houston CRE Portfolio: Subtype, cash flow coverage, collateral coverage High Oil & Gas (O&G) Employment Counties: Consumer credit scores Loan Growth by Bank Brand and Loan Type GAAP to Non-GAAP Reconciliatio
Slide 30: Financial Results
Financial Results 30 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) June 30, 2016 March 31, 2016 June 30, 2015 Earnings Results: Diluted Earnings Per Share 0.44 0.38 (0.01) Net Earnings (Loss) Applicable to Common Shareholders 91 79
Slide 31: Net Interest Income Drivers
Loans 76% Securities 17% Cash 7% Net Interest Income Drivers Loan yield has been relatively stable; net interest margin higher in part due to mix shift Net Interest Margin (NIM) Earning Asset Mix The 2Q16 NIM was 3.39%, up four basis points from the prior quarter Mix shift: An increase in securi
Slide 32: Oil & Gas (O&G) Portfolio Detail
32 Note: Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as O&G-related, including a particular segment of O&G-related activity, i.e. upstream or downstream. Typically 50%+ of revenues coming from the O&G sector is the hurdle rate for inc
Slide 33: Zions' Commercial Real Estate Portfolio in Texas
33 Note: Data as of June 30, 2016. Zions’ Commercial Real Estate Portfolio in Texas Houston is approximately 3/5th of total Texas exposure; Construction and Land Development loans in Houston have declined by more than 80% since prior credit cycle 19 31 14 39 111 $16 $19 $31 $41 $67 $93 $200 $0 $100
Slide 34: The Derivative Effect: Commercial Real Estate
34 The Derivative Effect: Commercial Real Estate Limited expected NPAs or losses on Zions’ commercial real estate portfolio in Houston Overview Statement: Zions expects a moderate adverse migration of loan grades, but does not currently expect substantial loss due to strong collateral and cash flo
Slide 35: High O&G Employment Counties: Consumer Credit Scores
35 High O&G Employment Counties: Consumer Credit Scores Consumer credit score deterioration has not been substantial in high O&G counties Credit Score (FICO) Migration in High Oil & Gas Employment Counties Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others 5% 616 645 60
Slide 36: Loan Growth by Bank Brand and Loan Type
36 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 37: GAAP to Non-GAAP Reconciliation
37 (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 38: GAAP to Non-GAAP Reconciliation (cont.)
38 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
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