Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation, National Association — Q1 2020 Earnings Presentation
32 slides from Zions Bancorporation N.a's earnings presentation, Apr 20, 2020
Slide 1: First Quarter 2020 Financial Review
First Quarter 2020 Financial Review April 20, 2020
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information These materials include “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 regarding f
Slide 3: First Quarter 2020 Financial Highlights
First Quarter 2020 Financial Highlights Well-positioned to withstand downturn; quarterly earnings adversely impacted primarily by provision for credit losses ✓ Earnings and Profitability: ✓ Credit quality: ▪ $0.04 diluted earnings per share compared to $1.04 in 1Q19 ▪ 0.56%: ratio of NPAs/Loan and l
Slide 4: Diluted Earnings Per Share
Diluted Earnings Per Share EPS were adversely impacted primarily by the COVID-19 related increase in the provision for credit losses Diluted Earnings per Share Notable Items: ▪ In 1Q20: $1.17 ▪ Large provision for credit loss attributed primarily to the COVID-19 pandemic $1.04 $0.99 $0.97 ▪ $0.05 pe
Slide 5: Adjusted Pre-Provision Net Revenue
Adjusted Pre-Provision Net Revenue 5% growth year-over-year from increases in loans and deposits, deposit pricing discipline and ongoing expense control Adjusted PPNR(1) Adjusted PPNR and Provision for Credit Losses ($ millions) ($ millions) $305 $309 $309 $294 $299 $299 $285 $294 $275 $285 $275 $25
Slide 6: Loss-Absorbing Capital
Loss-Absorbing Capital Common equity plus the allowance for credit loss is strong relative to peers Common Equity Tier 1 Capital Ratio CET1 Capital Ratio and Allowance for Credit Losses / Risk Weighted Assets 1.0% Peer banks who have CET1 Ratio ACL/RWA 12.9% 12.9% reported in 1Q20 0.7% 11.4% 11.4% 1
Slide 7: Credit Quality
Credit Quality Zions entered the COVID-19 economic downturn with very clean credit quality Key Credit Metrics: Credit Quality Ratios ▪ Classified loans (1.8% of loans) 4.00% 3.50% ▪ NPAs+90(1) (0.56% of loans + OREO) 3.00% ▪ Annualized net loan losses of: 2.50% ▪ 0.06% in 1Q20 2.00% ▪ 0.09% net char
Slide 8: Credit Quality: Nonperforming Assets and Loan Loss Severity
Credit Quality: Nonperforming Assets and Loan Loss Severity Due to strong collateral, when problems arise Zions generally experiences less severe loan losses NPAs+90DPD / Loans+OREO Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Last 12 Months Average Five Year (2015-2019) Ave
Slide 9: Loan Portfolio Risk Assessment – Select Industries Significantly Affected by COVID-19
Loan Portfolio Risk Assessment – Select Industries Significantly Affected by COVID-19 Select industries are believed to be at elevated risk due to COVID-19 pandemic and are being closely managed COVID-19 Selected Risk Industries: Totaling $5.6 billion of Loan Balances 11.2% of Loans ▪ As of mid-Apri
Slide 10: Loan Portfolio – Deferrals and Line Utilization
Loan Portfolio – Deferrals and Line Utilization Deferral requests have been moderate and rate of requests has slowed; line utilization increase has been modest Loan Portfolio Deferrals Line Utilization Rate ▪ Approximately 2% of loan balances have been ▪ Increased approximately two percentage points
Slide 11: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality Oil and gas loans account for $2.6 billion or 5% of total loans As of March 31, 2020: ▪ Annualized NCOs equaled 0.2% of loans Oil and Gas 35% ▪ Classified loans equaled 3.4% of loans Key Credit Quality Ratios 30% ▪ Allowance for credit losses of $145 million or 5.6% of
Slide 12: Oil & Gas Portfolio
Oil & Gas Portfolio Significant realignment since downturn ▪ Services, which accounted for bulk of charge offs in the Portfolio Trends 3,500 14 last cycle, account for 18% of the portfolio versus 42% Probibility of Default Risk Grade 3,000 12 going into the cycle (Dec 2014) Balance ($Millions) 2,500
Slide 13: Risk Mitigation Strategies
Risk Mitigation Strategies: We’re not just “closely monitoring” the areas of risk Active management strategies employed to reduce downgrades and losses Strategies Deployed or In Process of Being Deployed ▪ Implementing temporary policy triage guidelines: ▪ Deferrals ▪ Modifications and restructuring
Slide 14: Net Interest Income
Net Interest Income Changes in interest rates and balance sheet composition impact net interest income performance Net Interest Income Net Interest Margin Net Interest Margin 4Q19 NIM -0.08% 1Q20 NIM -0.13% 0.16% ($ millions) 3.46% Impact of 3.41% $576 Yield on Yield on Noninterest- $569 $567 $559 E
Slide 15: Average Loan and Deposit Growth
Average Loan and Deposit Growth Moderate loan growth in a lower rate environment, while deposits remain a source of strength Average Total Loans Average Total Deposits Loan Yields Cost of Total Deposits ($ millions) ($ millions) $55,000 $55,000 $50,000 $50,000 0.49% 0.50% 4.93% 4.85% $45,000 0.43% 0
Slide 16: Interest Rate Sensitivity
Interest Rate Sensitivity Zions is actively managing balance sheet sensitivity Earnings at Risk Sensitivity (1) ▪ Interest rate sensitivity has been reduced by adding interest rate hedges −200 bps −100 bps +100 bps +200 bps ▪ $3.5 billion of loan interest rate swaps as of Q1 2020 1 11% In the down 1
Slide 17: Noninterest Income
Noninterest Income Growth of 17% over the prior year primarily due to loan related fees and income and capital markets and foreign exchange fees Customer-related fee income up 17% from the year ago Customer-Related Fee Income (1) period due to strength in: $140 $143 ($ millions) ▪ Loan related fees
Slide 18: Noninterest Expense
Noninterest Expense Continued focus on expense controls and streamlining Noninterest Expense ($ millions) ▪ Total noninterest expense decreased 5% over the $472 prior year period primarily due to declines in: ▪ Salaries and employee benefits (-$13 million) $435 $431 $430 $424 $423 $415 $415 $408 $40
Slide 19: Allowance for Credit Loss
Allowance for Credit Loss Significant 1Q20 increase in qualitative reserve vs. January 1, 2020 due to COVID-19 ▪ The 1Q20 Allowance for Credit Loss reflects expected losses from a severe and prolonged recession ▪ Increase from January 1, 2020 to March 31, 2020 was primarily a qualitative adjustment
Slide 20: Allowance for Credit Losses: Historical Perspective
Allowance for Credit Losses: Historical Perspective Today’s loan portfolio consists of higher concentrations of lower risk segments Using the framework of the Global Financial Actual 2009-10 Loss Rates Crisis (recession of 2008-2010) 2009-2010 Applied to 1Q20 Mix ▪ Zions experienced an annualized lo
Slide 21: Impact of Warrants
Impact of Warrants Permanent share dilution is dependent upon share price in mid-May ▪ Zions has 29 million warrants (Nasdaq: ZIONW) outstanding with a strike price of $33.67 and which expire on May 22, 2020 ▪ Treasury method of accounting used to compute dilution effect: Issuer uses (hypothetical)
Slide 22: What is Working Well
What is Working Well Successes amid COVID-19 pandemic ▪ Progress on SBA Loan Production ▪ More than 14,000 loans for nearly $4.4 billion funded by SBA (as of April 16, 2020) ▪ Ranked #9 (dollar volume) of all participating financial institutions ▪ Approximately $2 billion remaining in queue (subject
Slide 23: Appendix
Appendix ▪ Financial Results Summary ▪ Balance Sheet Profitability and Efficiency ▪ Loan Growth ▪ Credit Quality – Excluding Oil and Gas ▪ Technology Initiatives ▪ GAAP to Non-GAAP Reconciliation 23
Slide 24: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) March 31, December 31, September 30, 2020 2019 2019 Earnings Results: Diluted Earnings Per Share $ 0.04 $ 0.97 $ 1.17 Net Earnings Applicable to Common Shareho
Slide 25: Balance Sheet Profitability
Balance Sheet Profitability Zions’ profitability in 1Q20 was impacted by the significant increase in the provision for credit losses due to the expected economic impact of the COVID-19 pandemic Return on Assets Return on Tangible Common Equity 14.5% 14.2% 1.34% 13.9% 1.26% 1.25% 12.7% 1.14% 11.8% 1.
Slide 26: Efficiency Ratio
Efficiency Ratio Substantial improvement since 2014 driven by both revenue growth and expense control ▪ The efficiency ratio(1) in 1Q20 was 57.7%, compared to 60.2% in the year ago period ▪ 74.1% Long term: committed to further improvement of the efficiency ratio 69.6% 64.5% 61.6% 61.3% 60.2% 59.0%
Slide 27: Loan Growth
Loan Growth Solid loan growth achieved in certain targeted growth categories Year-over-Year Loan Balance Growth Total Loans: +5% 50% Note: Circle size indicates relative proportion of loan portfolio as of 1Q20 40% Growth Rate: Year over Year Municipal, 30% 39.9% Owner 20% O&G, Occupied , C&I (ex-O&G
Slide 28: Loan Growth by Bank Brand and Loan Type
Loan Growth by Bank Brand and Loan Type Year over Year Loan Growth (4Q19 vs. 4Q18) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 45 25 571 (206) 85 31 36 - 587 Owner occupied 30 93 30 74 47 (20) 38 - 292 Energy (Oil & Gas) (2) 200 - 1 - 6 - - 205 Municipal 19
Slide 29: Credit Quality (Excluding Oil & Gas Portfolio)
Credit Quality (Excluding Oil & Gas Portfolio) Excluding oil and gas lending, credit quality remains exceptional ▪ Key Credit Metrics: Key Credit Quality Ratios (Ex-O&G) 1.8% ▪ Classified loans (1.7% of loans) 1.6% ▪ Nonperforming assets (0.54% of loans) 1.4% 1.2% ▪ Annualized net loan losses of: 1.
Slide 30: We Have Furthered our Digital Capabilities Meaningfully Over the Last Several Years
We Have Furthered our Digital Capabilities Meaningfully Over the Last Several Years COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking 2.0 2018-2019 Online and Mobile Banking Replacement 2020-2021 $10B Demand Deposits 625,000 consumer accounts $100MM Fee Income 125,000 business ac
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 1Q20 4Q19 3Q19 2Q19 1Q19 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 408 $ 472 $ 415 $ 424 $ 430 Adjustments: Severance costs - 22 2 1 - Other real estate expense - - (2) - (1) Debt extinguishment cost - - - - - Amortization of core dep
Slide 32: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 1Q20 4Q19 3Q19 2Q19 1Q19 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $408 $472 $415 $424 $430 LESS adjustments: Severance costs - 22 2 1 - Other real estate expense - - (2) - (1) Debt extinguishment cost - - -
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