Zions Bancorporation N.a. · NASDAQ:ZION

Zions Bancorporation N.a — Q2 2023 Earnings Presentation

38 slides from Zions Bancorporation N.a's earnings presentation, Jul 19, 2023

  1. Slide 1: Second Quarter 2023 Financial Review

    Second Quarter 2023 Financial Review July 19, 2023

  2. 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

  3. Slide 3: Select Themes

    Select Themes Second quarter results reflect customer confidence and active management of risks  Customer deposit growth led by relationship-focused bankers  Customer deposits grew $2 billion, or 3.2% including recapture of some off-balance sheet deposits  Total deposits increased $5 billion, or

  4. Slide 4: Second Quarter 2023 Financial Highlights

    Second Quarter 2023 Financial Highlights Improved customer fees offset by lower NII reflecting higher funding costs; Capital and credit quality remain strong  Earnings and Profitability:  Loans and Deposits: vs. 1Q23, growth rates not annualized  $1.11 diluted earnings/share, compared to $1.33 

  5. Slide 5: Diluted Earnings Per Share

    Diluted Earnings Per Share Positive impact to EPS from interest income and fees offset by increased funding costs Diluted Earnings per Share Notable Items1: $1.84 2Q23: $1.40  $(0.07) per share negative impact from $1.29 $1.33 severance expense $1.11  $0.07 per share positive impact from gain on s

  6. Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)

    Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR declined 13% from the prior quarter, primarily due to higher funding costs Adjusted PPNR(1) Linked quarter (2Q23 vs. 1Q23): ($ millions)  Adjusted PPNR declined 13% primarily from: $420  A decrease of 7% in adjusted revenue from increased i

  7. Slide 7: Net Interest Income (NII) and Net Interest Margin (NIM)

    Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Increased cost of total deposits negatively impacted the net interest margin in 2Q23 Net Interest Income ($ millions) Net Interest Margin Linked quarter (2Q23 vs. 1Q23): $720 5.00%  Net interest income declined 13% $663 $679  Interest ear

  8. Slide 8: Net Interest Margin (NIM)

    Net Interest Margin (“NIM”) Earning asset growth and the impact of free funds offset funding costs and positively impacted the margin compared to 2Q22 The NIM benefited early in the cycle as loans repriced more quickly than deposits; this trend changed in 2Q23  Loan yields have steadily increased a

  9. Slide 9: Noninterest Income and Revenue

    Noninterest Income and Revenue Total customer-related noninterest income increased 7% vs. 1Q23 and grew 5% from the year-ago period; adjusted revenue decreased 7% vs. 1Q23 and was up 4% from the year-ago period Customer-Related Noninterest Income (1) Total Revenue (2) ($ millions) ($ millions) $162

  10. Slide 10: Noninterest Expense

    Noninterest Expense Noninterest expense decreased 1% vs. 1Q23 and was up 9% from the year-ago period Noninterest Expense (NIE) Total noninterest expense decreased $4 million, compared to the ($ millions) prior quarter, primarily due to seasonal increases during 1Q  Typical seasonal decrease in 2Q o

  11. Slide 11: Average Loan and Deposit Balances

    Average Loan and Deposit Balances Vs. 1Q23, average loans increased 0.9% in 2Q23; average deposits decreased 0.7% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) Average Noninterest-bearing Deposits $100.0 $100.0 Average Interest-beari

  12. Slide 12: Impact of Noninterest-bearing (NIB) Demand Deposits

    Impact of Noninterest-bearing (NIB) Demand Deposits The increased value of noninterest-bearing deposits has exceeded the decline in volumes Average Noninterest-bearing Demand Impact of NIB on NIM 1 Noninterest-bearing demand deposits have ($ billions) declined as interest rates have risen, though $5

  13. Slide 13: Ending Deposit Balance Trends

    Ending Deposit Balance Trends Ending deposit balances grew $5 billion vs. 1Q23; insured deposit balances increased $3 billion 2Q23 reflects growth of insured deposits  Insured deposit growth includes $3 billion of brokered time deposits  Total customer deposits grew $2 billion during the quarter 

  14. Slide 14: Securities & Money Market Investments

    Securities & Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio The investment portfolio is designed to be a storehouse of balance sheet liquidity and Money Market Investments  2Q23 period-end securities declined $950 million. Net cash flow provided (perio

  15. Slide 15: Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis

    Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis Incorporating recent deposit behavior into interest rate sensitivity analysis suggests reduced asset sensitivity Simulated Net Interest Income Sensitivity(1) Interest Rate Impacts -200 bps -100 bps +100 bps +200 bps on Net Interest

  16. Slide 16: Capital Strength

    Capital Strength Loss-absorbing capital remains strong relative to our risk profile; low credit losses relative to CET1 + ACL Common Equity Tier 1 Capital Net Charge-offs and Allowance for Credit Losses annualized, as a percentage of risk-weighted assets as a percentage of risk-weighted assets 12.5%

  17. Slide 17: Credit Quality

    Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.07% of average loans Key Credit Metrics Credit Quality Ratios  1.3%: Classified loans/loans Classified / Loans 2.5% NPAs + 90 / Loans + OREO  Classified balance improved (declined) by 16% in ACL / Loans 2.0% 2

  18. Slide 18: Financial Outlook (2Q24E vs 2Q23A)

    Financial Outlook (2Q24E vs 2Q23A) Outlook Comments Loan Balances Slightly  Interest rates and economic outlook resulting in softening loan demand (period-end) Increasing Net Interest Income Stable to  Funding cost pressures expected to continue despite positive impact of (NII) Slightly Decreasing

  19. Slide 19: Appendix

    Appendix  Financial Results Summary  Balance Sheet Profitability  Monthly Net Interest Income, Net Interest Margin, & Impact of Noninterest-bearing Deposits  Loan Growth by Geography and Type  Noninterest-bearing Deposit Mix – 20+ Year Time Series  Earning Asset Repricing  Interest Rate Swaps

  20. Slide 20: Financial Results Summary

    Financial Results Summary Healthy fundamentals, strong credit quality Three Months Ended (Dollar amounts in millions, except per share data) June 30, March 31, December 31, September 30, 2023 2023 2022 2022 Earnings Results: Diluted Earnings Per Share $ 1.11 $ 1.33 $ 1.84 $ 1.40 Net Earnings Applica

  21. Slide 21: Balance Sheet Profitability

    Balance Sheet Profitability Profitability impacted by lower NII due to increased funding costs Return on Assets Return on Tangible Common Equity (Excludes Accumulated Other Comprehensive Income) 16.9% 13.2% 12.5% 12.3% 1.27% 10.0% 0.97% 0.91% 0.91% 0.79% 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23

  22. Slide 22: Monthly Net Interest Income, Net Interest Margin, & Impact of Noninterest-bearing Deposits

    Monthly Net Interest Income, Net Interest Margin, & Impact of Noninterest-bearing Deposits Net interest income and net interest margin declines leveled off in the latter portion of the quarter Net Interest Income Average Noninterest-bearing Demand Net Interest Margin Impact of NIB on NIM 1 ($ millio

  23. Slide 23: Loan Growth in Detail

    Loan Growth in Detail Loan growth achieved in several categories: residential real estate, CRE construction and consumer construction Linked Quarter Loan Balance Growth, Excluding PPP Total Loans: +1.0% 10% Other, 9% CRE C&D, 8% Growth Rate: Linked Quarter, not annualized 8% Linked quarter: 1-4 Fami

  24. Slide 24: Loan Growth - by Bank Brand and Loan Type

    Loan Growth - by Bank Brand and Loan Type Loan growth achieved in several categories and across our footprint Period-End Year-over-Year Loan Growth (2Q23 vs. 2Q22) (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Other Total C&I (ex-Oil & Gas) 350 215 460 77 143 55 (16) 1 1,285 SBA PPP (91) (

  25. Slide 25: Noninterest-bearing Deposits (NIB) Mix

    Noninterest-bearing Deposits (“NIB”) Mix Through multiple rate cycles, Zions’ NIB deposit concentration has been consistently among the best of peers Average Noninterest Deposits / Average Total Deposits 7.0 60%  Zions’ NIB deposit mix has consistently exceeded most peers due in part to a higher pr

  26. Slide 26: Simulated Repricing Expectations: Earning Assets and Loans

    Simulated Repricing Expectations: Earning Assets and Loans A substantial portion of earning assets reset within one year with additional resets in later periods Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 52% 40% 40% Earning Assets After Hedging Loans

  27. Slide 27: Interest Rate Swaps at June 30, 2023

    Interest Rate Swaps at June 30, 2023 Swaps are used to balance our interest rate sensitivity Interest rate sensitivity is managed in part with portfolio interest rate hedges1  $2.5 billion in interest-rate swaps on loans were terminated in Q2  $2.5 billion in 5 year pay fixed swaps were added as p

  28. Slide 28: Long-Term View: Credit Quality at the Sub-portfolio Level

    Long-Term View: Credit Quality at the Sub-portfolio Level Zions’ loss rates across nearly all loan portfolio categories are better or much better than peer loss rates In five of the seven major categories in which Zions has significant exposure, Zions’ loss rate has been top quartile Peer Net Charge

  29. Slide 29: Commercial Real Estate Summary

    Commercial Real Estate Summary CRE is 23% of total loans: $12.9 billion total CRE; $10.4 billion term & $2.5 billion construction Portfolio Composition Term CRE As of June 30, 2023  Conservative weighted-average LTVs (< 60%) All Other CRE 15% Multifamily  Near-term maturities ~15-20% per year Resi

  30. Slide 30: CRE In-Depth Review: Exercising CRE Discipline Through Growth Management

    CRE In-Depth Review: Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags peers due to continued exercise of concentration risk discipline Commercial Real Estate Zions has exercised caution in CRE Excluding Owner Occupied 200 concentrations for more than a deca

  31. Slide 31: CRE In-Depth Review: Commercial Real Estate

    CRE In-Depth Review: Commercial Real Estate Limited tail LTV risk in portfolio; controlled CRE growth over last five years CRE Portfolio Trends Construction Outstandings Term Outstandings % of CRE Term WAVG LTV % of CRE Term Construction Multi-family 59% 25% 30% Industrial / Warehouse 53% 22% 23% 9.

  32. Slide 32: CRE In-Depth Review: Office ($2.2 billion balance)

    CRE In-Depth Review: Office ($2.2 billion balance) CRE Office portfolio is 17% of total CRE exposure; conservatively underwritten, lowly levered  Less than $1 million of nonaccruals and no charge-offs in recent years Office Portfolio Trends  Median loan size: $890 thousand; average loan size: $4.6

  33. Slide 33: CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity

    CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity Zions has minimal intersecting elements of risk in the office CRE portfolio, while having a significantly large collateral cushion ($ millions) CRE Office Term by Maturity  Remaining 2023 term office maturities = $436 m

  34. Slide 34: 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 (2018 Q2 – 2023 Q1) Fifteen Year Average (2008 Q2 – 2023 Q1) 71% 61% 60% 59% 57% 56% 56% 56% 55

  35. Slide 35: Allowance for Credit Losses (ACL)

    Allowance for Credit Losses (“ACL”) The ACL increase vs. 1Q23 is primarily due deterioration in economic forecasts Allowance for Credit Losses ($ millions) ACL (%) ex-PPP 1.48 1.22 1.21 1.25 1.11 1.13 1.10 1.15 1.02 1.05 695 678 711 574 590 636 529 553 514 546 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22

  36. Slide 36: Non-GAAP Financial Measures

    Non-GAAP Financial Measures In millions, except per share amounts 2Q23 1Q23 4Q22 3Q22 2Q22 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $508 $512 $471 $479 $464 LESS adjustments: Severance costs 13 1 1 Other real estate expense Amortization of core deposit and other intangibles 1 2

  37. Slide 37: Non-GAAP Financial Measures (Continued)

    Non-GAAP Financial Measures (Continued) In millions, except per share amounts 2Q23 1Q23 4Q22 3Q22 2Q22 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $166 $198 $277 $211 $195 Diluted Shares (average) 148 148 149 150 151 (k) Diluted EPS 1.11 1.33 1.84 1.40 1.2

  38. Slide 38: Non-GAAP Financial Measures (Continued)

    Non-GAAP Financial Measures (Continued) In millions 2Q23 1Q23 4Q22 3Q22 2Q22 Return on Average Tangible Common Equity (Non-GAAP) Net earnings applicable to common $166 $198 $277 $211 $195 Adjustments, net of tax: Amortization of core deposit and other intangibles 1 1 - 1 - (a) Net earnings applicabl

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