Zions Bancorporation N.A. · NASDAQ:ZION
Zions Bancorporation N.A — Zions Bancorporation — Q4 2016 Earnings Presentation
30 slides from Zions Bancorporation N.A's earnings presentation, Jan 23, 2017
Slide 1: Fourth Quarter 2016 Financial Review
Fourth Quarter 2016 Financial Review January 23, 2017
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: Fourth Quarter 2016 Key Performance Indicators
Strong growth in EPS: Diluted earnings per share increased substantially from the year-ago period, to $0.60 in 4Q16 from $0.43 Strong growth in pre-provision net revenue (1): 25% growth over year-ago period • A 7.2% year-over-year increase in adjusted revenue (1) • A 0.6% year-over-year increase
Slide 4: Zions' Announced Financial Targets
Zions’ Announced Financial Targets 4 On June 1, 2015 Zions announced several financial targets, including: 2H15 FY16 FY17 Hold to below $1.58 (2) billion Hold to below $1.58 (1) billion Slightly above $1.58 (1) billion TBD ≤70% <66% Low 60s TBD 50% >80% 100% TBD 100% -- -- -- -- -- -- -- -- Lower by
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 Due in part to continued discipline on CRE concentration limits and O&G attrition, period-end loan growth was slow, increasing 0.3% on a linked qu
Slide 8: Credit Quality (Excluding Oil & Gas Portfolio)
Credit Quality (Excluding 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 Key Metrics: Criticized loans equaled 3.1% of loans and averaged the same for the year Classified loan
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 challenged, although recovery in commodity prices has aided in the portfolio’s overall improvement Relative to September 30, 2016: Criticized O&G loans declined by $152 million, the second consecutive linke
Slide 10: Financial Results
Financial Results 10 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) Dec 31, 2016 Sept 30, 2016 Dec 31, 2015 Earnings Results: Diluted Earnings Per Share $ 0.60 $ 0.57 $ 0.43 Net Earnings Applicable to Common Shareholders 125 117 88
Slide 11: Loan Growth by Type
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), Term Commercial Real Estate (CRE), Residential Mortgage (1-4 Family) Declines in National Real Estate (NRE), and Oil and Gas (O&G) Over the n
Slide 12: Net Interest Income
Net interest income growth continued its positive trajectory, increasing 6.9% over the year-ago period On a linked quarter basis, net interest income grew by $11 million over 3Q16 The accelerated purchase of securities in Q4 relative to prior quarters was driven by the repositioning of the bal
Slide 13: Active Balance Sheet Management: Securities Portfolio Growth
Active Balance Sheet Management: Securities Portfolio Growth 13 Short to medium duration portfolio; limited duration extension risk Total Securities (end of period balances) ($mm) $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 4Q15 1Q16 2Q16 3Q16 4Q16 Other Securities Municipal Secur
Slide 14: Net Interest Income Drivers
Loans 74% Securities 22% Cash 4% Net Interest Income Drivers 14 December 2016 rate hike expected to benefit net interest income in 1Q17 Net Interest Margin (NIM) Earning Asset Mix Relative to the prior quarter, the 4Q16 NIM was 3.37%, up one basis point Securities yield increased 4 bps to 2.04%,
Slide 15: Noninterest Income
113 112 118 125 118 $100 $110 $120 $130 4Q15 1Q16 2Q16 3Q16 4Q16 Total noninterest income increased to $128 million from $119 million a year ago Customer-related fee income increased to $118 million from $113 million The year-over-year increase was driven by strength in wealth management, trea
Slide 16: Noninterest Expense
Noninterest Expense ($mm) 397 396 382 403 405 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 4Q15 1Q16 2Q16 3Q16 4Q16 Noninterest Expense 16 Expense controls have resulted in performance that met our stated goal Total NIE increased 1.8% versus the year-ago period; adjusted NIE declined by 0.6% (1)
Slide 17: Continue to Achieve Positive Operating Leverage
Continue to Achieve Positive Operating Leverage Maintain annual mid-single digit loan growth rates while maintaining strong CRE concentration limits Continue to moderately reduce the Company’s interest rate sensitivity Continue to purchase medium duration securities with limited duration ext
Slide 18: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (4Q17E, vs. 4Q16A) 18 Outlook Comments Moderately Increasing • Over the next 12 months, we expect continued strong growth from residential mortgage, moderate growth in C&I and CRE Increasing • Expect continued increases in loans and securities, limited increase in fundi
Slide 19: Appendix
Impact of Warrants 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 19 Appendix
Slide 20: Impact of Warrants
Zions has two tranches of warrants outstanding (ZIONZ and ZIONW), both of which are currently in the money Dilution is calculated using the treasury method of accounting, which relies upon the following assumptions: Warrants are exercised at the beginning of the period Issuer uses proceeds f
Slide 21: Oil & Gas (O&G) Portfolio Detail
21 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 22: Oil & Gas (O&G) Portfolio Trends
$- $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Allowance for Credit Losses Upstream Services Other Oil & Gas (O&G) Portfolio Trends 22 Loan Balances by O&G Segment Classifieds by O&G Segment Steadily declining balances in Upstream and Services Nonaccruals by O&G Segment ($m
Slide 23: Oil & Gas Loss Outlook and Reserve
O&G Loan Loss Expectation O&G loan losses are expected to decline substantially 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 55% of classified O&G loans are from services loans 80% of O&G losses incurred since
Slide 24: The Derivative Effect: Zions' Commercial Real Estate Portfolio in Texas
24 Note: Data as of 4Q16. 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 Office Hospitality Indu
Slide 25: Commercial Real Estate Portfolio Summary
Commercial Real Estate Portfolio Summary 25 Credit Quality Remains Strong Note: Data as of 4Q16. CRE Balances up 10% YoY, Delinquencies and nonaccruals improved YoY, Classifieds stable Criticized balance by type (Total CRE: 2.5%) Commercial Construction – 6.1% Home Builder Construction – 0.0
Slide 26: CRE Term Portfolio
CRE Term Portfolio 26 Strong CRE metrics and conservative structures, Houston emphasized Houston Term: DSCR’s and LTV’s are in line with overall term portfolio. Adverse migration of loan grades is occurring; portfolio benefits from conservative advance rates, > 1.0 DSCR’s and guarantor support A
Slide 27: CRE Construction Portfolio
CRE Construction Portfolio 27 Balanced, performing portfolio Note: Data as of 4Q16. Diversified construction portfolio with 37% Homebuilder Residential, 63% Commercial Commercial construction is 6.1% criticized – some stress in Houston CRE. Homebuilder Residential performing well YoY construct
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 82% 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