Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Barclays Global Financial Services Conference 2020
35 slides from Zions Bancorporation N.a's conference presentation, Sep 15, 2020
Slide 1: Investor Update Third Quarter 2020
Investor Update Third Quarter 2020 September 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 and assumpt
Slide 3: Zions' Profile: Zions Is A Collection of Community Banks
Zions’ Profile: Zions Is A Collection of Community Banks Key Differentiators: Local decision-making and top-notch service, commercial banking focus, granular and low-cost deposit base ▪ Strategic local “ownership” of market opportunities Zions’ Markets Average and challenges Bank Headquarters Deposi
Slide 4: Overview of How the Pandemic has Affected Zions Bancorporation
Overview of How the Pandemic has Affected Zions Bancorporation Reduced earnings, strong capital, more than 10k new customers primarily from PPP loans, slow down of technology upgrades ✓ Earnings reduced due to reserve build, pension charge ▪ Pre-Provision Net Revenue has increased modestly as revenu
Slide 5: Zions' Profile: Zions is a Leader in Small Business Lending
Zions’ Profile: Zions is a Leader in Small Business Lending Zions punches above its weight Commercial Loans Commercial Loans ($ billion) sized $100k - $1M sized $100k - $1M $25 30% as a percent of total commercial loans 25% $20 20% $15 15% $10 10% $5 5% $0 0% ZION KEY JPM HBAN SNV CMA FHN ASB RF C B
Slide 6: Zions Receives National and Local Recognition for Excellence
Zions’ Profile: Zions Receives National and Local Recognition for Excellence Affiliates have strong brands in their markets One of only 11 banks to have averaged 10 or more Greenwich Excellence Awards since 2009 (survey inception in 2009; Zions has averaged 14 awards per year) Top team of women bank
Slide 7: Zions' Business Banking Reputation is Highly Ranked
Zions’ Profile: Zions’ Business Banking Reputation is Highly Ranked Zions compares favorably to key competitors (JPMorgan, Bank of America, US Bank, Wells Fargo) Overall Satisfaction Customer Satisfaction With Our Bankers Customer Satisfaction - Credit Process % of "Excellent" Customer Citations 90
Slide 8: Advanced our Digital Capabilities Meaningfully Over the Last Several Years
Advanced 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 2021-2022 $10B Demand Deposits 625,000 consumer accounts $100MM Fee Income 125,000 business accounts Di
Slide 9: Deposit Portfolio is Diversified and of High Quality
Deposit Portfolio is Diversified and of High Quality High concentration of granular retail and small business deposits; small businesses are net contributors of stable deposits Deposit Composition(1) Noninterest-Bearing Deposits / 35% Percent Total Deposits 3.5 50% 30% 3.0 25% 40% 20% 2.5 15% 30% 2.
Slide 10: A Leader in Small Business: Summary of Zions' PPP Loans
A Leader in Small Business: Summary of Zions’ Paycheck Protection Program Loans Zions ranked 9th in PPP loans approved as of August 8th and is ranked 37th in U.S. Deposit Market Share(1) Loans Approved Total SBA PPP Loans Zions PPP Loans % of Total ▪ Median size: <$35,000 ▪ Average size: <$150,000 ▪
Slide 11: Loss-Absorbing Capital
Loss-Absorbing Capital Common Equity Tier 1 capital plus the allowance for credit loss is strong relative to peers Common Equity Tier 1 Capital Ratio(1) CET1 Capital and Allowance for Credit Losses (2) / Risk Weighted Assets 1.7% CET1 Ratio ACL/RWA 12.7% 12.7% 1.4% 1.6% 1.4% 11.4% 11.4% 1.2% 1.9% 1.
Slide 12: Earnings Trends: Long-time Focus on Expense Control
Earnings Trends: Long-time Focus on Expense Control, EPS Impacted in 1H20 by Large Provisions For Credit Losses Positive operating leverage achieved through revenue growth and expense control Net Revenue Noninterest Expense 160 ZION 160 Indexed: 4Q14 = 100 Indexed: 4Q14 = 100 150 Peer Top Quartile 1
Slide 13: Profitability Metrics
Profitability Metrics Efficiency and ROA improvement linked to relatively stable noninterest expense and revenue growth 80 % Return on Assets 1.8% Efficiency Ratio Adjusted for Allowance For 1.6% 75 Credit Loss Builds and Reductions 1.4% 70 1.2% 1.0% 65 0.8% 60 0.6% 0.4% 55 0.2% 50 0.0% 1H14 2H14 1H
Slide 14: Net Interest Income
Net Interest Income Changes in interest rates and balance sheet composition impact net interest income performance Net Interest Income Net Interest Margin Net Interest Margin 1Q20 2Q20 ($ millions) Wholesale $569 $567 Funds and $559 $563 Interest Other $548 MM and Bearing Securities Deposits Loan Yi
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity Zions is actively managing balance sheet sensitivity Earnings at Risk Sensitivity (1) ▪ Interest rate sensitivity reduced through interest rate hedges −200 bps −100 bps +100 bps +200 bps ▪ $3.4 billion: Loan interest rate swaps as of Q2 2020 1 13% In the down 100 and ▪ $4.5
Slide 16: Decade-Long Risk Profile Improvement
Decade-Long Risk Profile Improvement Since the global financial crisis, Zions has addressed the following: Concern Mitigation Concern Mitigation Negative/Low ✓ Improved profitability levels to be approximately in line with peers ✓ Reduced risk through simplified business model and structure, Recent
Slide 17: Credit Quality
Credit Quality Zions entered the COVID-19 economic downturn with very clean credit quality Key Credit Metrics: All Ratios Exclude Credit Quality Ratios ▪ Classified loans (3.1%) PPP Loans 14.00% ▪ NPAs+90(1)/loans + OREO ( 0.74%) 12.00% ▪ Annualized net loan losses: ▪ 0.25% of average loans in 2Q20
Slide 18: Credit Quality Trends
Credit Quality Trends Best quartile for NPAs and NCOs relative to peers NPAs+90 DPD / NCOs / Loans (Excluding PPP) Loans (Excluding PPP) + OREO (Trailing 12-month Average) Oil and gas recession 1.70% 1.70% 1.50% 1.50% 1.30% 1.30% 1.10% 1.10% 0.90% 0.90% 0.70% Bump in charge offs 0.70% (and later the
Slide 19: Nonperforming Assets and Loan Loss Severity
Nonperforming Assets and Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral NPAs+90DPD / Loans (Excluding PPP)+OREO Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Last 12 Months Average Five Year Average (3Q15 –
Slide 20: Additional Recent Trends In Loan Balance, Credit Quality and Line Utilization
Additional Recent Trends In Loan Balance, Credit Quality and Line Utilization We have experienced generally stable credit quality trends outside of C19ER(1) and Oil and Gas loans (data excludes PPP loans) Loan Balances by Portfolio and Weighted Average Risk Grades Classified and Nonaccruals 10.0 12.
Slide 21: Select Sub-Industries with Elevated Risk Related to COVID-19 (C19ER)
Select Sub-Industries with Elevated Risk Related to COVID-19 (C19ER) C19ER is less than 10% of loans and has strong collateral coverage Select sub-industries with elevated risk (C19ER) ▪ Portions of broad industry groups with significant growth in criticized rates $4.2 billion (8.6%) of 2Q20 non-PPP
Slide 22: Condition of Borrowers Within Select Sub-Industries Significantly Affected by COVID-19
Condition of Borrowers Within Select Sub-Industries Significantly Affected by COVID-19 Deep dive reviews of certain sub-industries have provided key insights regarding loan grading and borrower resiliency C19ER CRE Retail (2.3% of loans @ 6/30/20) C19ER CRE Hotels (1.3% of loans @ 6/30/20) ▪ Stand-a
Slide 23: Condition of Borrowers Within Select Sub-Industries Significantly Affected by COVID-19
Condition of Borrowers Within Select Sub-Industries Significantly Affected by COVID-19 Deep dive reviews of certain sub-industries have provided key insights regarding loan grading and borrower resiliency C19ER C&I Entertainment/Recreation C19ER C&I Real Estate Management (0.9% of loans @ 6/30/20) (
Slide 24: Allowance for Credit Loss
Allowance for Credit Loss Significant increase in reserve since January 1, 2020 due to expected economic impact related to COVID-19 % of Wtd Avg Loan Segment / 2Q20 Remaining 1/1/2020 1Q20 2Q20 Notes Security Type Balance Life (years) Excluding PPP ACL / Loans ACL / Loans ACL / Loans Commercial 45%
Slide 25: Allowance for Credit Losses – Comparison to other Banks
Allowance for Credit Losses – Comparison to other Banks Zions posted an increase in the allowance for credit losses (ACL) greater than the median of GSIBs and peers 122% ACL Increase (1) Global Systemically Important Bank (“GSIB”) Commercial Banks 84% 78% 74% 57% 43% 32% 22% WFC JPM PNC ZION BAC C U
Slide 26: Appendix
Appendix ▪ Company Abbreviation Key ▪ 2Q20 Financial Results Summary ▪ Loan Growth by Brand and Loan Type ▪ Oil and Gas Portfolio Detail ▪ Mortgage Fee Income Update ▪ GAAP to Non-GAAP Reconciliation 26
Slide 27: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp JPM: JPMorgan Chase & Co. BAC: Bank of America KEY: KeyCorp BOKF: BOK Financial Corporation MTB: M&T Bank Corporation C: Citigroup, Inc. PBCT: People’s United Financial, Inc. CFG: Citizens Financial Group, Inc. RF: Regions Financial
Slide 28: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) June 30, March 31, December 31, 2020 2020 2019 Earnings Results: Diluted Earnings Per Share $ 0.34 $ 0.04 $ 0.97 Net Earnings Applicable to Common Shareholders
Slide 29: Loan Growth
Loan Growth Solid loan growth achieved in certain targeted growth categories Year-over-Year Loan Balance Growth Total Loans: +13% 40% Note: Circle size indicates Municipal, relative proportion of loan 30% 23.1% portfolio as of 2Q20 Growth Rate: Year over Year 20% Term CRE, Owner Occupied , 4.0% O&G,
Slide 30: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (2Q20 vs. 2Q19) 2Q20 (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Other Total Portfolio Size (% of Total Loans) C&I (ex-Oil & Gas) (701) (332) 216 (170) 71 (70) (32) - (1,018) 21% SBA PPP 1,686 1,302 1,576 707
Slide 31: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality Oil and gas loans account for $2.5 billion or 5% of total loans, excluding PPP Loans Excluding PPP Loans and as of June 30, 2020: All Ratios Exclude ▪ Annualized NCOs equaled 0% of loans PPP Loans Oil and Gas 35% ▪ Classified loans equaled 8.8% of loans Key Credit Qual
Slide 32: Oil & Gas Portfolio
Oil & Gas Portfolio Significant realignment since downturn ▪ Services, which accounted for bulk of charge offs in the last cycle, Portfolio Trends accounts for 17% of the portfolio versus 42% going into the previous 3,500 14.0 Probibility of Default Risk Grade cycle (Dec 2014) 3,000 12.0 ▪ Using cur
Slide 33: Mortgage Origination Update
Small Business and Mortgage Update Mortgage Origination Update Successes amid COVID-19 pandemic: Very Strong Mortgage Income 2019 2020 Record Funding $1.03 b ▪ Roll-out ▪ Enhanced Digital Fulfillment Process ▪ 86% of all applications taken digitally $655 m ▪ 25% reduction in turn-time allowing 22% 3
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 2Q20 1Q20 4Q19 3Q19 2Q19 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 430 $ 408 $ 472 $ 415 $ 424 Adjustments: Severance costs - - 22 2 1 Other real estate expense - - - (2) - Debt extinguishment cost - - - - - Amortization of core depos
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 2Q20 1Q20 4Q19 3Q19 2Q19 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $430 $408 $472 $415 $424 LESS adjustments: Severance costs - - 22 2 1 Other real estate expense - - - (2) - Restructuring costs - 1 15 - - Pe
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