Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Q2 2024 Earnings Presentation
38 slides from Zions Bancorporation N.a's earnings presentation, Jul 22, 2024
Slide 1: 2024 Second Quarter Financial Review
ZIONS 2024 SECOND QUARTER Financial Review July 22, 2024
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS; USE OF NON-GAAP FINANCIAL MEASURES Forward Looking Information This presentation includes “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 and assu
Slide 3: FutureCore: A Competitive Technology Advantage for Years to Come
FUTURECORE: A COMPETITIVE TECHNOLOGY ADVANTAGE FOR YEARS TO COME Digital to the Core is key to being competitive in a digital world FutureCore Scope Delivering Benefits to our Replacement of three legacy loan systems Customers and Employees (consumer, commercial and construction • One data model for
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Net interest margin expanded for a second consecutive quarter while credit continues to perform as expected Key Metrics 2Q24 1Q24 • Earning asset repricing modestly outpaced funding Net earnings to common $190 million $143 million cost increases in the quarter resulting in 4 ba
Slide 5: Diluted Earnings Per Share
DILUTED EARNINGS PER SHARE Earnings per share was positively impacted by gains on the sale of our Enterprise Retirement Solutions business and bank-owned property Diluted Earnings per Share Notable Items1: $1.28 2Q24: $1.11 $1.13 $0.96 • $0.07 per share positive impact from gains on sale of our Ente
Slide 6: Pre-Provision Net Revenue (PPNR)
PRE-PROVISION NET REVENUE (“PPNR”) Linked-quarter improvement in Adjusted PPNR reflects increased adjusted revenue and lower adjusted noninterest expense PPNR1 Linked quarter (2Q24 vs. 1Q24): ($ millions) • Adjusted PPNR increased 15%: • Increased net interest income • Increased customer-related non
Slide 7: Net Interest Income & Net Interest Margin
NET INTEREST INCOME & NET INTEREST MARGIN Net interest income up due to the benefit of earning asset repricing and changes in asset mix, partially offset by an increase in cost of funding Net Interest Income Linked quarter (2Q24 vs. 1Q24): Net Interest Margin Net interest income increased $11 millio
Slide 8: Net Interest Margin
NET INTEREST MARGIN The net interest margin expanded from prior year as asset repricing offset cost of funding increases Earning asset yields continued to improve while rate of increase on liabilities slowed Linked Quarter (2Q24 vs. 1Q24) Year-Over-Year (2Q24 vs. 2Q23) Money Mkt Loans Borrowings Mon
Slide 9: Noninterest Income and Revenue
NONINTEREST INCOME AND REVENUE Increased customer-related income attributable to growth in commercial account, card, and loan-related fees Customer-Related Noninterest Income (1) Total Revenue (2) ($ millions) ($ millions) $162 $157 $154 $150 $151 $790 $784 $780 $776 $765 $765 $753 $751 $742 $731 2Q
Slide 10: Noninterest Expense
NONINTEREST EXPENSE Adjusted noninterest expense decreased linked quarter due to seasonality in compensation during the prior quarter Noninterest Expense (NIE) • Total noninterest expense decreased $17 million linked quarter ($ millions) • Adjusted noninterest expense decreased $5 million linked $58
Slide 11: Average Loans and Deposits
AVERAGE LOANS AND DEPOSITS Yields on loans increased 5 basis points; total cost of deposits also increased 5 basis points Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits $100.0 $100.0 ($ billions) $75.6 $75.9 $74.2 $73.4 $75.0 $69.6 $75.0 ($ billions) $27.9 $26
Slide 12: Deposit Balance and Borrowing Trends
DEPOSIT BALANCE AND BORROWING TRENDS Ending customer deposits declined ~$460 million vs. 1Q24; brokered deposits were flat 2Q24 total funding costs increased 2 basis points • Period-end noninterest-bearing demand deposits declined ~$400 million, or 1.6% linked-quarter • Brokered deposits were flat l
Slide 13: Securities & Money Market Investments
SECURITIES & MONEY MARKET INVESTMENTS The bank has 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 (period-end balances) • Principal and prepayment-related cash flows from sec
Slide 14: Net Interest Income – Outlook & Rate Sensitivity
NET INTEREST INCOME – OUTLOOK & RATE SENSITIVITY Net interest income is expected to increase as asset repricing outpaces changes in funding costs Interest Rate Impacts on Net Interest Income1 Net Interest Income Sensitivity 2Q25 vs 2Q24 Reflects continued asset repricing, assumes total deposit Laten
Slide 15: Credit Quality
CREDIT QUALITY Net charge-offs remain low, with trailing 12 months net charge-offs at 0.08% of average loans Key Credit Metrics Credit Quality Ratios • Net charge-offs relative to average loans: 5.0% Criticized / Loans NPAs + 90 / Loans + OREO • 0.10% annualized in 2Q24 Classified / Loans ACL / Loan
Slide 16: Commercial Real Estate Summary ($13.5 Billion Balance)
COMMERCIAL REAL ESTATE SUMMARY ($13.5 BILLION BALANCE) The commercial real estate portfolio is granular and well diversified CRE Portfolio Composition Term CRE ($10.8B) As of June 30, 2024 • Conservative weighted-average LTVs (< 60%) All Other CRE, 14% • Maturity distribution: 20% on average annuall
Slide 17: 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 14% 1
Slide 18: Financial Outlook (2Q 2025E vs 2Q 2024A)
FINANCIAL OUTLOOK (2Q 2025E VS 2Q 2024A) Outlook provided as of July 22, 2024 Outlook Comments Loan Balances Stable to Slightly ▪ Slow near-term growth due to interest rates, though customer sentiment and (period-end) Increasing commercial pipelines suggest modest growth expectations as rates declin
Slide 19: Zions Bancorporation Drives Value for Its Stakeholders
ZIONS BANCORPORATION DRIVES VALUE FOR ITS STAKEHOLDERS We are determined to help build strong, successful communities, create economic opportunity and help our clients achieve greater financial strength through the relationships we develop and the services we provide. Distinctive Local Operating Mod
Slide 20: Appendix
APPENDIX • Financial Results Summary • Accumulated Other Comprehensive Income (AOCI) • Balance Sheet Profitability • Loan Growth by Type • Earning Asset Repricing • Interest Rate Swaps • Interest Rate Sensitivity – Parallel Shock Analysis • Allowance for Credit Losses • Loan Loss Severity (NCOs as a
Slide 21: Financial Results Summary
FINANCIAL RESULTS SUMMARY Financial Highlights Three Months Ended (Dollar amounts in millions, except per share data) June 30, March 31, December 31, September 30, 2024 2024 2023 2023 Earnings Results: Diluted Earnings Per Share $ 1.28 $ 0.96 $ 0.78 $ 1.13 Net Earnings Applicable to Common Sharehold
Slide 22: Accumulated Other Comprehensive Income/Loss (AOCI)
ACCUMULATED OTHER COMPREHENSIVE INCOME/LOSS (AOCI) Projected AOCI improvement reflects relative stability in higher rate environment due to hedging strategy AOCI Loss Projection Actual Projection The loss in AOCI will decline as the underlying Based on forward curve: investments pay down and mature
Slide 23: Balance Sheet Profitability
BALANCE SHEET PROFITABILITY Profitability impacted by higher funding costs while 4Q23 & 1Q24 include the impact of the FDIC special assessment Return on Assets Return on Tangible Common Equity 17.8% 17.5% 17.3% 13.7% 11.8% 0.91% 0.79% 0.80% 0.70% 0.57% 2Q23 3Q23 4Q23 1Q24 2Q24 2Q23 3Q23 4Q23 1Q24 2Q
Slide 24: Loan Growth in Detail
LOAN GROWTH IN DETAIL Loan growth in 1-4 Family Mortgage, Commercial, and Home Equity Linked Quarter Loan Balance Growth Total Loans: +0.5% 10% Linked quarter: Growth Rate: Linked Quarter, not annualized 8% 1-4 Family, 4% • Period-end loans increased $306 million or 0.5% 6% • Loan growth in dollars
Slide 25: Simulated Repricing Expectations: Earning Assets & Loans
SIMULATED REPRICING EXPECTATIONS: EARNING ASSETS & LOANS A substantial portion of earning assets reset within one year with additional resets in later periods Earning Assets: Rate Reset and Cash Flow Loans: Rate Reset and Cash Flow Profile Profile 52% 53% 46% Earning Assets Loans 43% After Hedging A
Slide 26: Interest Rate Swaps at June 30, 2024
INTEREST RATE SWAPS AT JUNE 30, 2024 Swaps are used to balance our interest rate sensitivity Interest rate sensitivity is managed in part with portfolio interest rate hedges1 In 2Q24, $300 million in Receive-Fixed Swaps matured with an average Fixed Rate of 2.41% Pay-Fixed Rate Received-Fixed Rate S
Slide 27: Interest Rate Sensitivity – Parallel Rate Shocks
INTEREST RATE SENSITIVITY – PARALLEL RATE SHOCKS Standard parallel rate shocks suggest asset sensitivity Simulated Net Interest Income Sensitivity (1) −200 bps −100 bps +100 bps +200 bps as of 3/31/2024 7% as of 6/30/2024 6% 4% 3% (3%) (3%) (5%) (6%) 27 (1) 12-month forward simulated impact of an in
Slide 28: Allowance for Credit Losses (ACL)
ALLOWANCE FOR CREDIT LOSSES (“ACL”) The ACL decrease vs. 1Q24 reflects an improved economic outlook partially offset by deterioration in C&I credit quality Allowance for Credit Losses ACL (%) 1.66 1.68 1.56 1.56 1.30 1.25 1.30 1.26 1.27 1.24 1.14 1.20 1.08 1.12 1.09 1.09 1.04 1.00 1.04 914 917 777 8
Slide 29: Loan Loss Severity
LOAN LOSS SEVERITY When problems arise, Zions generally experiences less severe loan losses due to strong collateral and underwriting practices Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2019Q2 – 2024Q1) Fifteen Year Average (2009Q2 – 2024Q1) >100% >100%
Slide 30: In-Depth Review: Commercial Real Estate
IN-DEPTH REVIEW: COMMERCIAL REAL ESTATE Limited tail loan-to-value risk in portfolio; controlled CRE growth Total CRE Portfolio Trends Term % of CRE % of CRE Term Balances Construction Balances WAVG LTV Term Construction Multi-family 57% 26% 49% Industrial / Warehouse 58% 23% 26% 10.4 10.8 Office 55
Slide 31: Disciplined Commercial Real Estate Growth
DISCIPLINED COMMERCIAL REAL ESTATE GROWTH 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 concentrations for more than a decade 350 and in underwriting standard
Slide 32: In-Depth Review: CRE Office ($1.9 Billion Balance)
IN-DEPTH REVIEW: CRE OFFICE ($1.9 BILLION BALANCE) CRE Office portfolio is 14% of total CRE exposure; 3% of total loan exposure • Allowance for credit losses: 3.8% of balances / 39% of criticized balances CRE Office Portfolio Trends • 11% decrease in balances YOY via payoffs, loan rebalance, amortiz
Slide 33: In-Depth Review: CRE Office ($1.9 Billion Balance)
IN-DEPTH REVIEW: CRE OFFICE ($1.9 BILLION BALANCE) Zions’ office collateral is diversified geographically, has limited exposure to CBD offices, and majority of building sizes < 200 thousand sq ft Office Collateral Summary CRE Term Office by Maturity • Largest state exposure (in millions): Utah $436
Slide 34: In-Depth Review: CRE Multifamily ($3.9 Billion Balance)
IN-DEPTH REVIEW: CRE MULTIFAMILY ($3.9 BILLION BALANCE) CRE multifamily portfolio is 28% of total CRE exposure; 7% of total loan exposure • Allowance for credit losses: 2.1% of total multifamily balances or 23% of CRE Multifamily Portfolio Trends criticized balances Term Balances Construction Balanc
Slide 35: Zions Finishes Third Nationally in 2023 Greenwich Excellence Awards
ZIONS FINISHES THIRD NATIONALLY IN 2023 GREENWICH EXCELLENCE AWA RDS Zions compares favorably to major competitors Greenwich Excellence Awards Coalition Greenwich Customer Satisfaction (2023) • Ranked third among all U.S. banks with 20 overall % Excellent Citations* national Excellence Awards (Major
Slide 36: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES In millions, except per share amounts 2Q24 1Q24 4Q23 3Q23 2Q23 (a) Total noninterest expense $509 $526 $581 $496 $508 LESS adjustments: Severance costs 1 13 Other real estate expense (1) Amortization of core deposit and other intangibles 1 2 2 2 1 FDIC special assessment
Slide 37: Non-GAAP Financial Measures (Continued)
NON-GAAP FINANCIAL MEASURES (CONTINUED) In millions 2Q24 1Q24 4Q23 3Q23 2Q23 Return on Average Tangible Common Equity (Non-GAAP) Net earnings applicable to common $190 $143 $116 $168 $166 Adjustments, net of tax: Amortization of core deposit and other intangibles 1 1 1 1 1 (a) Net earnings applicabl
Slide 38: zionsbancorporation.com
ZIONS BANCORPORATION zionsbancor poration.com
Zions Bancorporation, N.A. — Q2 2024 Earnings Presentation on 6ix