Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q3 2017 Earnings Presentation
31 slides from Zions Bancorporation N.a's earnings presentation, Oct 23, 2017
Slide 1: Third Quarter 2017 Financial Review
Third Quarter 2017 Financial Review October 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: Third Quarter 2017 Key Performance Indicators
Strong growth in EPS: Diluted earnings per share increased substantially from the year-ago period, to $0.72 in 3Q17 from $0.57 Strong growth in adjusted pre-provision net revenue (1): 20% growth over year-ago period • An 8.5% year-over-year increase in adjusted revenue (1) • A 2.5% year-over-yea
Slide 4: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted Pre-Provision Net Revenue (1) 4 Strong improvement driven by active balance sheet management, loan growth, expense control, and the benefit of higher benchmark interest rates (1) Adjusted for items such as severance, provision for unfunded lending commitments, secu
Slide 5: Efficiency Ratio
The efficiency ratio in the quarter was 62.3% (3Q17), declining 3.6 percentage points from 65.9% in the year-ago period Solid progress on the efficiency ratio driven by factors previously mentioned, while investing substantially in enabling technology Remain committed to driving the efficiency
Slide 6: Profitability
Profitability 6 Zions’ profitability is improving Return on assets has improved steadily since announcing the efficiency initiative Return on tangible common equity continues to improve, to 9.8% in 3Q17 from 7.9% a year ago Return on Assets 0.84% 0.88% 0.88% 1.03% 0.97% 0.0% 0.2% 0.4% 0.6% 0.8%
Slide 7: Total Loan and Deposit Growth
Total Loan and Deposit Growth Total Loans Total Deposits 7 Moderate balance sheet growth is expected to be a key driver of Zions’ positive operating leverage Period-end loans held for investment increased 3.8% over the year-ago period, and 4.3% (annualized) from the prior quarter Period-end depo
Slide 8: Topical Issues: Hurricane Affected Areas
$2,962 $835 $128 $519 $1,144 $1,841 $117 $178 $253 $47 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 C&I - C&I C&I - Owner Occupied C&I - Other CRE - Constr. & Land CRE - Term Consumer - SFR Consumer - Revovlers Consumer - Const. Consumer - HELOC Consumer - Other Loan Balance Composition for Har
Slide 9: Topical Issues: Hurricane Harvey
9 Topical Issues: Hurricane Harvey Commercial Loans The vast majority of Amegy commercial customers in affected areas contacted by loan officers $64 million of loans downgraded (most remain pass grade) due to Harvey Consumer Loans 1-4 Family Residential balance in Houston area $2.2B Average
Slide 10: Financial Results
Financial Results 10 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) Sept 30, 2017 Jun 30, 2017 Sept 30, 2016 Earnings Results: Diluted Earnings Per Share $ 0.72 $ 0.73 $ 0.57 Net Earnings Applicable to Common Shareholders 152 154 11
Slide 11: Net Interest Income
Net interest income increased 11% over the year-ago period Majority of the increase attributable to: An increase in interest on securities from an increase in the average investment securities portfolio An increase in interest and fees on loans due to loan growth in commercial and consumer l
Slide 12: Active Balance Sheet Management
Active Balance Sheet Management Short to medium duration portfolio; minimal duration extension risk Total Securities (end of period balances) ($ billion) $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 3Q16 4Q16 1Q17 2Q17 3Q17 Municipal & Other Securities SBA Loan-Backed Securities Agency Securities Agency MBS S
Slide 13: Loan Growth by Type
C&I (ex-O&G) 5.7% Owner Occupied (ex-NRE) 6.6% C&D 1.1% Term CRE (ex- NRE) -2.6% 1-4 Family 12.7% National Real Estate -15.8% O&G -11.6% Home Equity 6.3% Other 24.6% -30% -20% -10% 0% 10% 20% 30% 40% Loan Growth by Type 13 Moderate to strong loan growth achieved in targeted growth categories Year-ov
Slide 14: Net Interest Income Drivers
Loans 76% Securities 19% Cash 5% Loans 72% Securities 26% Cash 2% Net Interest Income Drivers 14 Net interest income reflects higher short-term interest rates Net Interest Margin (NIM) Avg Earning Asset Mix Relative to the prior quarter, the 3Q17 NIM was 3.45%, down 7 basis points, but excluding i
Slide 15: Interest Rate Sensitivity and Historical Deposit Beta
Much of the reduction in rate sensitivity was due to securities purchases during 2016 and early 2017 The average investment portfolio is $11.6 billion higher than 4Q14; interest income from this investment portfolio growth is nearly $90 million more per year than if the same average balance were
Slide 16: Noninterest Income
Customer-related fee income decreased 3.2% from 3Q16, primarily due to: 3Q17 write-down in a loan HFS (within loan sales and servicing line) Decline from non-sufficient funds charges Strength from: Wealth management Capital markets (primarily foreign exchange related revenue) Noninterest
Slide 17: Noninterest Expense
Noninterest Expense ($ millions) $403 $404 $414 $405 $413 $0 $125 $250 $375 3Q16 4Q16 1Q17 2Q17 3Q17 Noninterest Expense 17 Expense controls have resulted in improved profitability Total NIE increased 2.5% from the year- ago period Compared to the prior quarter, 3Q17 included a $6 million incr
Slide 18: Credit Quality
Credit Quality 18 Key Credit Quality Ratios Credit quality remains healthy and is improving Key Credit Metrics: Classified loans were 2.8% of loans Down 5.2% from prior quarter Down 23% from the prior year NPAs were 1.1% of loans Down 4.5% from prior quarter Down 20% from the prior yea
Slide 19: 2018-2019 Objectives: Growth Through Simplification and Focus
Continue to Achieve Positive Operating Leverage Maintain annual mid-single digit loan growth rate, generally balanced within all three types (Commercial, CRE, and Consumer) Target mid-single digit growth rates in customer-related fee income Extract efficiencies through automation and simplif
Slide 20: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (3Q18E, vs. 3Q17A) 20 Outlook Comments Moderately Increasing • Over the next 12 months, we expect continued strong growth from residential mortgage, moderate growth in C&I and CRE Moderately Increasing • Expect continued increases in loans and a moderate increase in fun
Slide 21: Appendix
Impact of Warrants Oil & Gas (O&G) Portfolio Detail Credit Quality Metrics, O&G and Ex-O&G Commercial Real Estate Portfolio, CRE Term, CRE Construction Loan Growth by Bank Brand and Loan Type GAAP to Non-GAAP Reconciliation 21 Appendix
Slide 22: 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 23: Oil & Gas (O&G) Portfolio Detail
23 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 24: Credit Quality: Oil & Gas and Non-O&G
Credit Quality: Oil & Gas (O&G) and Non-O&G 24 Key Credit Quality Ratios O&G credit quality remains challenged, but improving. Ex-O&G credit quality remains very good. Note: Net Charge-offs/Loans ratio is annualized for all periods shown. NM: not meaningful -5% 5% 15% 25% 35% 45% 3Q16 4Q16 1Q17 2Q17
Slide 25: 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 51% of classified O&G loans are from services loans Approximately three quarters of
Slide 26: Commercial Real Estate Portfolio Summary
Commercial Real Estate Portfolio Summary 26 Stable CRE Credit Quality Note: Data as of 3Q17, published semi-annually. CRE Balances down 3% YoY; stable credit metrics for delinquencies, nonaccrual, and classifieds Criticized balance by type (Total CRE: 2.4%) Commercial Construction – 1.8% Hom
Slide 27: CRE Term Portfolio
CRE Term Portfolio 27 Strong CRE metrics and conservative structures, Houston emphasized Houston Term: DSCR’s and LTV’s are slightly worse than overall term portfolio. Portfolio benefits from conservative advance rates; DSCR’s reflect performing portfolio with strong guarantor support. Balance
Slide 28: CRE Construction Portfolio
CRE Construction Portfolio 28 Balanced, performing portfolio Note: Data as of 3Q17, published semi-annually. Diversified construction portfolio with 30% Homebuilder Residential, 70% Commercial Homebuilder Residential performing well; ~75% of portfolio in CA and TX YoY construction growth of 2%
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. Totals s
Slide 30: GAAP to Non-GAAP Reconciliation
30 GAAP to Non-GAAP Reconciliation (Amounts in millions) 3Q17 2Q17 1Q17 4Q16 3Q16 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 413 $ 405 $ 414 $ 404 $ 403 Adjustments: Severance costs 1 - 5 1 - Other real estate expense (1) - - - - Provision for unfunded lending commitments (4) 3 (5) 3 (3)
Slide 31: GAAP to Non-GAAP Reconciliation
31 GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 3Q17 2Q17 1Q17 4Q16 3Q16 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense (1) $413 $405 $414 $404 $403 LESS adjustments: Severance costs 1 - 5 1 - Other real estate expense (1) - - - - Provision for unfunded lend