Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Investor Presentation (May 2018)
42 slides from Zions Bancorporation N.a's investor presentation, May 14, 2018
Slide 1: Second Quarter 2018 Financial Update
Second Quarter 2018 Financial Update May 2018
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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements in this presentation that are based o
Slide 3: Agenda
Agenda Company Introduction Capital and Liquidity Profile Risk Management & Credit Quality: A Decade of Enhancements Technology Initiatives “Simple, Easy, Fast” Initiative (announced June 2015) 2018-2019 Objectives Review of Recent Financial Results (1Q18) Financial Outlook 3
Slide 4: The Big Picture: Zions Is A Collection of Community Banks
The Big Picture: Zions Is A Collection of Community Banks Local decision-making and top-notch service separates Zions from peers Strategic local “ownership” of Avg Bank Headquarters Deposits % of Total market opportunities and Zions Bank Salt Lake City $16B 31% challenges Amegy Houston $11B 22% CB
Slide 5: Zions Receives National and Local Recognition for Excellence
Zions Receives National and Local Recognition for Excellence Bank Brand, Trust, Management • Only three other banks have consistently received as many Greenwich Excellence Awards as Zions since 2009 • 16 Greenwich Excellence Awards (2017) for middle-market and small business banking • Averaged 16 Ex
Slide 6: Loan Profile: Zions is a Leader in Small Business Lending
Loan Profile: Zions is a Leader in Small Business Lending Zions punches above its weight Commercial Loans sized $100k - $1M Commercial Loans sized $100k - $1M ($ billion) as a percent of total commercial loans $30 20% 18% $25 16% 14% $20 12% $15 10% 8% $10 6% 4% $5 2% $0 0% C C RF RF UB UB STI STI K
Slide 7: Capital Profile: Operating From a Position of Strength
Capital Profile: Operating From a Position of Strength Capital ratios are strong relative to peers Common Equity Tier 1 Capital Ratio Tier 1 Risk-Based Capital Ratio Peer Median 10.5% (-16 bps from 1Q17) 14% 14% 13% 13% 12% 12% 11% 11% 10% 10% 9% 9% 8% 8% RF RF STI STI KEY KEY FRC FRC BBT ASB ASB BB
Slide 8: Liquidity and Deposit Profile
Liquidity and Deposit Profile: “Some of our greatest assets are our very small liabilities” Solid liquidity profile as measured by healthy loan-to-deposit ratio and above peer noninterest bearing deposits as a percentage of total deposits Noninterest-Bearing Deposits / Loans/Deposits Total Deposits
Slide 9: Decade-Long Risk Profile Improvement
Decade-Long Risk Profile Improvement Since the recession, Zions has addressed the following: Concern Mitigation Negative/Low Improved ROA to levels approximately in line with peers Profitability Improved Efficiency Ratio to 62.3% (2017), consistent with commitment to “low 60s” for 2017 Energy Lo
Slide 10: Strong Risk Management Infrastructure
Strong Risk Management Infrastructure Substantial improvement in practices and policies that should lead to superior through-the- cycle performance Risk Matrix: dollar limits on different industries for lending and investments Strong concentration risk management Strong oversight of areas that
Slide 11: Portfolio Probability of Default (PD) Grades
Portfolio Probability of Default (PD) Grades The weighted average PD grade on loans has come down significantly since 2012 Weighted Average PD Grade (Portfolio Balances) Rating Scale 9 PD Grade S&P Equivalent 1 AAA / AA / AA- 8 2 A+ / A- 3 BBB+ 4 BBB 7 5 BBB- 6 BB+ C&I CRE 7 BB 6 8 BB- 9 B+ 10 B 5 1
Slide 12: Risk Identification & Escalation
Risk Identification & Escalation Zions established comprehensive risk identification Like other SIFIs, Zions developed and implemented a Risk Identification process. This process assists Zions in prioritizing risks into Level 1 and Level 2 categories Examples of Level 1 risks include Credit, L
Slide 13: Credit Quality
Credit Quality Through-the cycle losses better than most peers; current ratios reflect oil and gas exposure Last 4 Quarter Average Last 12 Months (NPAs + 90DPD) / (Loans + OREO) NCOs / Avg Loans 2.00% 2.00% Note: approximately 2/5 of LTM average NPAs are from energy loans 1.50% 1.50% Note: approxima
Slide 14: Differentiating Technology Investments
Differentiating Technology Investments Meaningful infrastructure investments to enable the future CustomerInsights Systems of Systems of Systems Customer Engagement Customer Next Generation Automation, APIs, and Robotic Platforms Integration Cybersecurity Platform (API) Data Management Platform Core
Slide 15: Core Computing Investment - FutureCore
Core Computing Investment - FutureCore A solution to an aging infrastructure • First fully integrated core replacement by a domestic regional or larger bank! • Replaces 3 loan systems, 4 related deposit systems and the teller system • Modern and flexible infrastructure to provide the foundation for
Slide 16: Differentiating Technology Investments: Customer Experience
Differentiating Technology Investments While addressing the foundation, we also are investing in the customer experience 2016-2017 Delivery 2018+ Delivery Customer Upgraded Retail Centric Website Online and Mobile Refresh Banking Platform End to End Third Party Account Payable Connections (API Autom
Slide 17: Deliver a Simple, Easy, Fast Experience
Deliver a “Simple, Easy, Fast" Experience for Customers and Employees Simplify, Strengthen, Improve Simplify the business Strengthen management model and structure information capabilities and Proposed holding company usage elimination Data governance Charter consolidation Business intellige
Slide 18: Zions Intends to Merge Parent Company into Bank Subsidiary
Simplification Continued: Zions Intends to Merge Parent Company into Bank Subsidiary Eliminates duplicative regulatory oversight and enhances capital flexibility What? What are the key benefits? Zions intends to merge the Bank Continuation of ongoing Holding Company (Parent) into its simplificat
Slide 19: Results of Simple, Easy, Fast: Revenue and Noninterest Expense
Results of Simple, Easy, Fast: Revenue and Noninterest Expense Zions’ revenue growth improved from a trend slower than that of peers to in line with peer growth, while noninterest expense growth has been well below peers Indexed Net Revenue Indexed Noninterest Expense 140 140 130 130 120 120 110 110
Slide 20: Results of Simple, Easy, Fast: Pre-Provision Net Revenue
Results of Simple, Easy, Fast: Pre-Provision Net Revenue Zions’ PPNR growth has been above the best quartile of its peer group Indexed Adjusted Pre-Provision Net Revenue 210 180 150 120 90 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 ZION Peer bottom quartile Peer best quart
Slide 21: Results of Simple, Easy, Fast: Efficiency Ratio
Results of Simple, Easy, Fast: Efficiency Ratio Zions improved from an adverse outlier to within the peer group Efficiency Ratio 75 70 65 60 55 50 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 ZION Peer best quartile Peer bottom quartile Source: SNL Financial/S&P Global. Data
Slide 22: Results of Simple, Easy, Fast: EPS Growth
Results of Simple, Easy, Fast: EPS Growth EPS growth has been strong since the launch of Simple, Easy, Fast initiative and has accelerated as the oil and gas recession has turned the corner Indexed EPS Growth 250 220 190 160 130 100 70 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Slide 23: 2018-2019 Objectives
2018-2019 Objectives: Growth through simplification and focus Demonstrate positive operating leverage: Broad based loan growth with major loan portfolio concentrations within acceptable limits Momentum from noninterest income growth initiatives Slightly increasing noninterest expense growth,
Slide 24: Next 12-Month Financial Outlook
Next 12-Month Financial Outlook (1Q19E, vs. 1Q18A) Outlook Comments Loan Balances Moderately Increasing • Moderately Excludes the effects of future interest rate hikes. Contemplates Net Interest Income continued increases in loans, a moderate increase in funding costs Increasing and considers the ef
Slide 25: Appendix
Appendix Company Abbreviation Key Risk Management Enhancements: Hold-Limit Grid and Concentration Risk Examples Commercial Loan and Deposit Profile 1Q18 Financial Results Key Performance Indicators and Results Credit Quality Net Interest Income: Net Interest Margin Components and Inter
Slide 26: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp JPM: JPMorgan Chase & Co. BAC: Bank of America KEY: KeyCorp BBT: BB&T Corporation MTB: M&T Bank Corporation BOKF: BOK Financial Corporation PBCT: People’s United Financial, Inc. C: Citigroup, Inc. PNC: PNC Financial Services Group CB
Slide 27: Risk Management Emphasis / Accomplishments
Risk Management Emphasis / Accomplishments Development of risk management infrastructure includes the following: Further refinements in: Risk Appetite Framework 1st Line of Defense Accountability for risk management with executive management committee performance Implementation of “White P
Slide 28: Concentration Risk Management
Concentration Risk Management Altered Composition of Loan Portfolio Reduced risk stemming from high volatility CRE (Land A&D) and Oil and Gas Total Commitments as % of Risk-based Capital Changes in portfolio composition from 4Q07 1200% to 4Q17: 1000% Land A&D commitments decreased from 72% 800%
Slide 29: Loan Profile: Commercial
Loan Profile: Commercial Loans to commercial customers are very granular in nature Business Customer Loan Business Customer Loan ($000) Count Distribution ($000) Balance Distribution 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% <0.5% of customer count 10% 10% 0% 0% Commercial loans are very granular, w
Slide 30: Deposit Profile: Commercial
Deposit Profile: Commercial Deposits of commercial customers are granular and have a median balance of less than $20,000 and an average balance of less than $200,000 Commercial Customer Deposit Commercial Customer Deposit Count Distribution Balance Distribution ($000) ($000) 60% 60% 50% 50% 40% 40%
Slide 31: First Quarter 2018 Key Performance Indicators
First Quarter 2018 Key Performance Indicators Continued PPNR growth and improved profitability EPS: Diluted earnings per share increased from the year-ago period, to $1.09 in 1Q18 from $0.61 • Notable items that are operating but believed to be infrequent included: • $0.04 per share of interest re
Slide 32: Credit Quality
Credit Quality Healthy and improving credit quality metrics Key Credit Metrics: Credit Quality Ratios Classified loans were about 2% of loans 4.0% Down 10% from prior quarter Down 30% from the prior year 3.5% NPAs were 0.9% of loans 3.0% Down 6% from prior quarter Down 33% from the pri
Slide 33: Net Interest Income
Net Interest Income Growth due primarily to loan growth, securities growth and wider net interest margin Net interest income increased 11% Net Interest Income ($mm) over the year-ago period, to $542 million, up 8.6% over the prior year $550 (1) period when excluding the interest (1) recoveries on
Slide 34: Net Interest Income Drivers: Yields and Costs
Net Interest Income Drivers: Yields and Costs Growth of net interest income reflects a benefit on assets from higher short-term interest rates with only a moderate increase in funding costs Net Interest Margin (NIM) 5.0% Relative to the prior quarter, the Loan Yield 4.5% NIM increased 11 bps to 3.
Slide 35: Interest Rate Sensitivity and Historical Deposit Beta
Interest Rate Sensitivity and Historical Deposit Beta Zions has partially reduced asset sensitivity in exchange for current income Net Interest Income Sensitivity 2004-2006 and 2015-2017 Rate Cycles Modeled Annual Change in a 6.0 +200bps Interest Rate Environment (1) ZION Cost of Total Deposits ∆ in
Slide 36: Noninterest Income
Noninterest Income Continued focus on fee income Customer-Related (1) Fee Income ($mm) Customer-related fee income increased $150 approximately 7% from the year ago period, primarily due to increases in: Non-deposit service charges, primarily card fee $120 income growth $115 $121 $122 $127 $123
Slide 37: Noninterest Expense
Noninterest Expense Zions’ noninterest expense growth has been well below peers Indexed Noninterest Expense 140 130 120 110 100 90 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 ZION Peer bottom quartile Peer best quartile Source: SNL Financial/S&P Global. Data adjusted to acc
Slide 38: Efficiency Ratio
Efficiency Ratio Substantial improvement driven by both revenue growth and expense control Efficiency Ratio (1) 75% The efficiency ratio in the 1Q18 was 61.3%, declining 4.6 percentage points 74.1% from 65.9% in the year-ago period and 12.8 percentage points from 4Q14 70% Adjusting for the inter
Slide 39: Retail C&I Summary
Retail C&I Summary The portfolio is stable, with limited exposure to national brick and mortar retailers C&I Retail Loan by Segment Retail C&I loans (defined by NAICS codes) total $2.3B and represent exposure to the overall retail industry; More insulated (84%) includes auto dealers, gas station
Slide 40: Retail CRE Summary - Credit Metrics
Retail CRE Summary - Credit Metrics Balanced Retail CRE portfolio with emphasis on stand alone and neighborhood retail CRE Retail Summary Q4-17 $ Balance $1.80B Retail as % of Total CRE 16.2% % Criticized 1.9% % Construction 5.9% By Property Type (% of Retail Portfolio) (millions) Neighborhood Strip
Slide 41: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 1Q18 4Q17 3Q17 2Q17 1Q17 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 412 $ 417 $ 413 $ 405 $ 414 Adjustments: Severance costs - 1 1 - 5 Other real estate expense - - (1) - - Provision for unfunded lending commitments (7) (1) (4) 3 (5) D
Slide 42: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 1Q18 4Q17 3Q17 2Q17 1Q17 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense (1) $412 $413 $413 $405 $414 LESS adjustments: Severance costs - 1 1 - 5 Other real estate expense - - (1) - - Provision for unfunded lending
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