Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Investor Presentation (May 2016)
41 slides from Zions Bancorporation N.a's investor presentation, May 10, 2016
Slide 1: Second Quarter 2016 Update
May 2016 Second Quarter 2016 Update
Slide 2: Forward-Looking Statements
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 Litigation Reform Act of 1995. Statements based on historical data are no
Slide 3: A Collection of Community Banks
Bank Headquarters Assets % of Total Zions Bank Salt Lake City $20B 33% Amegy Houston $14B 23% CB&T San Diego $12B 20% NB|AZ Phoenix $5B 8% NSB Las Vegas $4B 7% Vectra Denver $3B 6% Commerce Bank - WA/OR Seattle $1B 2% Zions Bancorporation Salt Lake City $60B 100% Strategic local “ownership” of mar
Slide 4: Superior Brand: Nationally Recognized for Excellence
Superior Brand: Nationally Recognized for Excellence • Ranked #1 Nationally by Greenwich Associates (2015) • Thirty-One (31) Greenwich Excellence Awards in small business and middle market banking This year including: Excellence: Overall Satisfaction (seven consecutive years) Excellence: Likelih
Slide 5: Zions Is a Commercially-Oriented Bank
9% 38% 21% 16% 16% 4% 30% 9% 29% 23% Cash Commercial Loans Commercial Real Estate Loans Consumer Loans Securities Earning Assets 5 Zions Is a Commercially-Oriented Bank 59% of earning assets are commercial loans (vs. 39% for peers), and 38% of earning assets are funded by noninterest bearing deposit
Slide 6: Small Business Lending: Zions Punches Above Its Weight
$0 $5,000 $10,000 $15,000 $20,000 $25,000 WF C B A C JP M US B B B T P N C ZIO N M TB R F C ST I H B A N FIT B CM A KE Y U B Commercial Loans Sized $100k - $1M Small Business Lending: Zions Punches Above Its Weight 6 Source: Call report data via SNL Financial, as of 4Q15; peer group shown different
Slide 7: Top Quartile Balance Sheet
Top Quartile Balance Sheet: Capital and reserve ratios are among the strongest, debt ratio the lowest of peers Note: Regulatory capital ratios are Basel III. Source: SNL Financial, data as of 4Q15 for peers, 1Q16 for ZION. 7 12.13% 9% 10% 11% 12% 13% ZIO N B O K F CF G C B SH M TB KE Y R F FR C FM E
Slide 8: Credit Quality: Through-the-cycle losses rank in the best quartile of peers
8 Source: SNL Financial, data as of 1Q16. Note: FRC and PBCT have insufficient history to be included in the 1990-2015 analysis. 0.00% 0.50% 1.00% 1.50% 2.00% B O K F M TB C B SH EW B C A SB ZI O N CM A B B T FM ER C FG ST I R F H B A N FIT B KE Y FH N SN V Average Annual NCOs / Loans 1990-2015 0.00
Slide 9: 2016-2017 Objectives: Growth Through Simplification and Focus
2016-2017 Objectives: Growth Through Simplification and Focus 9 • Accelerate Positive Operating Leverage • Accelerate loan growth rates • Invest cash into medium duration securities • Maintain mid-single digit growth rates in core fee income • Maintain non-interest expenses below $1.58 billion1 in 2
Slide 10: First Quarter Highlights
First Quarter Highlights 10 Strong 21% pre-provision net revenue growth over year-ago period Strong loan growth (7.6% annualized), building on the prior quarter’s strength Achieving positive operating leverage: solid progress in 1Q16, expect continuation throughout 2016 Tracking on efficienc
Slide 11: Pre-Provision Net Revenue
21% -5% 0% 5% 10% 15% 20% 25% FIT B ZIO N CF G EWB C FR C H B A N M TB PB C T FH N SN V A SB KE Y B B T B O K F C B SH CM A ST I R F FM ER Year over Year PPNR Improvement2 Pre-Provision Net Revenue Second best growth of peers over the past year 11 1 Adjusted for items such as severance, provision fo
Slide 12: Total Loan Growth
$36,000 $37,750 $39,500 $41,250 $43,000 1Q15 2Q15 3Q15 4Q15 1Q16 Total Loans Total Loan Growth 12 In Millions • Loan growth has accelerated in the last six months. In 1Q16, normally a seasonally soft growth quarter, it increased at its strongest quarterly rate in nine quarters. • Strong deposit mix,
Slide 13: Active Management of the Balance Sheet: Securities Portfolio Growth
$0 $2,000 $4,000 $6,000 $8,000 $10,000 1Q15 2Q15 3Q15 4Q15 1Q16 Total Securities (end of period balances) Other Securities Municipal Securities Small Business Administration Loan-Backed Securities Agency Securities Agency Guaranteed MBS Securities Active Management of the Balance Sheet: Securities P
Slide 14: Net Interest Income
Net Interest Income Moving meaningfully higher after a period of stability 14 417 424 425 449 453 $400 $420 $440 $460 $480 1Q15 2Q15 3Q15 4Q15 1Q16 Net Interest Income In Millions • Net interest income growth continued its positive trajectory, increasing nearly 8.5% over the year-ago period • On a l
Slide 15: Fee Income
$90 $100 $110 $120 1Q15 1Q16 Customer-Related Fee Income 15 7% Growth In Millions • Customer-related fee income increased 7% from the year ago period • Key components of fee income: • Loan Fees: up 38% • Bankcard: up 17% • Treasury management: up 3% • Although mortgage origination volume increased b
Slide 16: Efficiency Ratio
Efficiency Ratio: We remain committed to driving the efficiency ratio to less than 66% for 2016 and to the low 60s for 2017 16 71.9% 71.1% 69.1% 69.6% 68.5% <66% low 60s 60% 65% 70% 75% 1Q15 2Q15 3Q15 4Q15 1Q16 FY16 FY17 1 Adjusted for items such as severance, provision for unfunded lending commitme
Slide 17: Simplifying & De-Risking How We Do Business
17 Simplifying & De-Risking How We Do Business Creating a modern core loan and deposit platform Enterprise Loan Operations Consolidating 15 sites into 2 sites Data Governance Corporate-wide stewardship of all elements of data General Ledger Simplification Streamlining the general ledger and enhancin
Slide 18: Energy Lending
Upstream 31% Midstream 23% Downstream 5% Other non- service 2% Oilfield Services 30% Energy Service Manufacturing 9% 18 • Oil & Gas (“O&G”) balances represent 6.4% of total loan balances as of 1Q16 • O&G balances decreased 16.3% between 1Q15 and 1Q16 • O&G commitments decreased 16.6% over the same p
Slide 19: Oil & Gas Portfolio Trends
$0 $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Classifieds by O&G Segment In Millions $0 $300 $600 $900 $1,200 $1,500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Loan Balances by O&G Segment Upstream Services Other Oil & Gas (O&G) Portfolio Trends Steadily declining balance trend in O&G services balanc
Slide 20: Energy Peer Analysis
Energy Peer Analysis Although challenges are substantial, Zions’ portfolio compares favorably to many peers 20 37.5% 28.9% 21.6% 39.1% 34.1% 16.3% 0% 10% 20% 30% 40% Criticized % of Total NAL % of Total Reserve % of Criticized ZION Peer Median Source: Company press releases. Data as of 1Q16. Note: P
Slide 21: Understanding Unfunded O&G Commitments
$0 $200 $400 $600 $800 High Pass Mid Pass Low Pass Special Mention Classified Unfunded O&G Commitments by Loan Grade 21 “Criticized” In Millions • Approximately 80% of the unfunded commitments are in the “pass” grade category, while 20% of the loans are graded “criticized” (which includes “special m
Slide 22: Payment Status: Adversely Graded O&G Loans
$0 $100 $200 $300 $400 $500 $600 $700 $800 Special Mention Classified Non Accrual Payment Status Current Non current Payment Status: Adversely Graded O&G Loans Most of the adversely graded loans remain current on payments 22 • Virtually all Special Mention balances are current • 96% of Classified ba
Slide 23: O&G Loss Expectation
• O&G Loan Loss Expectation • O&G loan losses are estimated to be in the $100 million area in 2016 • Losses are likely to emerge beyond 2016, but are expected to be manageable • Heading into this cycle, Zions had no second lien or mezzanine debt on its balance sheet that was extended to the O&G indu
Slide 24: Texas Commercial Real Estate: Significantly De-Risked
Texas Commercial Real Estate: Significantly De-Risked vs. pre-08-09 Cycle 24 • Total CRE exposure in Texas is $841 million less than at December 2008 • Significant pivot from high volatility CRE to CRE Term lending: land development and construction balances have been reduced from 76% to 35% of the
Slide 25: The Derivative Effect: Commercial Real Estate
The Derivative Effect: Commercial Real Estate Limited expected NPAs or losses on Zions’ commercial real estate portfolio in Houston 25 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 26: Capital Management Opportunity for Improved Shareholder Payout
19.8% 0% 20% 40% 60% 80% 100% PB C T B O K F CM A FM ER A SB M TB B B T FH N H B A N C B SH KE Y FIT B SN V R F ST I EWB C CF G ZIO N FR C Common Payout Ratio 26 Source: SNL Financial; most recent data available. Capital Management Opportunity for Improved Shareholder Payout ZION capital ratios are
Slide 27: Next 12-Month Outlook Summary Relative to 1Q16 Results
Next 12-Month Outlook Summary Relative to 1Q16 Results Topic Outlook Comment Loan Balances Increasing • Expect strengthening growth in residential mortgage (mostly short duration ARMs) and general C&I, partially offset by continued attrition from National Real Estate and O&G portfolios • QTD growth
Slide 28: 2016-2017 Objectives: Growth Through Simplification and Focus
2016-2017 Objectives: Growth Through Simplification and Focus 28 • Accelerate Positive Operating Leverage • Accelerate loan growth rates • Invest cash into medium duration securities • Maintain mid-single digit growth rates in core fee income • Maintain non-interest expenses below $1.58 billion1 in
Slide 29: Appendix
Appendix 29 O&G Portfolio Detail Example of Upstream (Reserve-Based) Underwriting Price Deck Upstream Collateral Coverage Distribution – Overview Upstream Collateral Coverage Distribution – December 31, 2015 Zions’ Commercial Real Estate Portfolio in Texas High Oil & Gas Employment Cou
Slide 30: O&G Portfolio Detail
O&G Portfolio Detail 30 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
Slide 31: Example of Upstream (Reserve-Based) Underwriting
Example of Upstream (Reserve-Based) Underwriting 31 Typical Oil & Gas Reserve-Based Loan $100 - E&P company’s PV of oil & gas reserves using current NYMEX prices, discounted at a 9% rate (“PV9”) $ 90 - Apply “bank price deck” (generally ~90% of NYMEX) to determine collateral value. $ 77 - Zions’ ris
Slide 32: Zions' Price Deck v. NYMEX Oil 12-mo. Fwd Strip
$- $20 $40 $60 $80 $100 $120 $140 $160 M ar -0 0 Oc t- 0 0 M ay -0 1 D e c- 0 1 Ju l- 0 2 Fe b -0 3 Se p -0 3 A p r- 0 4 N o v- 0 4 Ju n -0 5 Ja n -0 6 A u g- 0 6 M ar -0 7 Oc t- 0 7 M ay -0 8 D e c- 0 8 Ju l- 0 9 Fe b -1 0 Se p -1 0 A p r- 1 1 N o v- 1 1 Ju n -1 2 Ja n -1 3 A u g- 1 3 M ar -1 4 Oct
Slide 33: Upstream Collateral Coverage Distribution
Upstream Collateral Coverage Distribution Strong collateral coverage of upstream borrowers; built to withstand further shocks 33 • Upstream commitments reduced approximately 20% during 2015 due largely to the borrowing base redetermination process • Since 12/31/14 there have been six borrowing base
Slide 34: Upstream Collateral Coverage Distribution – December 31, 2015
0 200 400 600 800 1,000 1,200 < 60% 60% - 70% 70% - 80% 80% - 90% 90% - 100% > 100% Upstream Commitments As a Percent of Collateral Value Unrisked Reserves, Price-Deck Adjusted Pass Criticized Upstream Collateral Coverage Distribution – December 31, 20151 Strong collateral coverage of upstream borro
Slide 35: Zions' Commercial Real Estate Portfolio in Texas
35 Zions’ Commercial Real Estate Portfolio in Texas Houston is approximately 3/5ths of total Texas exposure; Construction and Land Development loans in Houston have declined more than 80% from the prior credit cycle 14 45 35 15 67 84 $19 $41 $45 $35 $82 $104 $159 $0 $100 $200 $300 $400 $500 Industri
Slide 36: Consumer credit scores in high oil and gas employment counties
Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others 5% 606 642 600 640 6 2 597 636 9 6 10% 643 677 640 677 3 0 639 674 4 3 50% 753 778 749 781 4 -3 749 780 4 -2 2016 Q1 2015 Q1 1-Year Difference 2014 Q1 2-Year Difference Data includes consumer loans with FICO scores refr
Slide 37: Loan Growth by Type
Loan Growth by Type 37 Source: NRE = National Real Estate Group, a division of Zions Bank that focuses on small business loans with low loan-to-value ratios, generally in line with SBA 504 program parameters. Note: Other loans includes municipal and other consumer. C&I (ex-O&G) Owner Occupied (ex-NR
Slide 38: Loan Growth by Bank Brand and Type
Loan Growth by Bank Brand and Type 38 Source: Company documents; NRE = National Real Estate Group, a division of Zions Bank that focuses on small business loans generally underwritten using SBA 504 guidelines. Other loans includes Municipal and other consumer. Linked Quarter Loan Growth (all values
Slide 39: Deconstructing Interest Rate Sensitivity
39 Deconstructing Interest Rate Sensitivity Deposit Repricing • In addition to changes in interest-bearing deposit rates, ZION assumes large movements from noninterest-bearing demand deposit products to interest-bearing deposit products as interest rates change Assumptions regarding the reaction of
Slide 40: Strong Liquidity, Superior Deposit Franchise
40 0% 10% 20% 30% 40% 50% 60% 2000 2005 2010 2015 Noninterest-Bearing Deposits / Total Deposits* ZION Peer Median Source: SNL Financial, data as of 4Q15 for peers, 1Q16 for ZION. Note: FRC and PBCT have insufficient history to be included in the 2000-2015 analysis. 50% 60% 70% 80% 90% 100% CBS H BO
Slide 41: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 41 (Amounts in thousands) 1Q16 4Q15 3Q15 2Q15 1Q15 Efficiency Ratio Noninterest expense (GAAP) 1 (a) $ 395,573 $ 397,353 $ 391,280 $ 398,997 $ 392,977 Adjustments: Severance costs 3,471 3,581 3,464 1,707 2,253 Other real estate expense (1,329) (536) (40) (445) 374 Pro
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