Zions Bancorporation N.a. · NASDAQ:ZION

Zions Bancorporation N.a — Q4 2023 Earnings Presentation

39 slides from Zions Bancorporation N.a's earnings presentation, Jan 22, 2024

  1. Slide 1: Fourth Quarter 2023 Financial Review

    Fourth Quarter 2023 Financial Review January 22, 2024

  2. Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures

    Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information This earnings release includes “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

  3. Slide 3: Select Themes

    Select Themes Loan Customer Net Charge-off Earnings Common Equity Growth Deposits Ratio per Share Tier 1 Ratio +1.6% (Ending, vs 3Q23) +2.4% (Ending, vs 3Q23) 6 bps $4.35 10.3% Solid financial performance Risk management reflected in strong Positioned for growth and  Customer deposit growth balance

  4. Slide 4: Financial Highlights

    Financial Highlights Highlights Key Metrics 4Q23 FY23 Zions is poised for growth; credit and capital Net income to common $116 million $648 million remain strong Diluted earnings per  Earning assets continue to reprice in the higher share (GAAP) $0.78 $4.35 interest rate environment Ending Average

  5. Slide 5: Diluted Earnings Per Share

    Diluted Earnings Per Share The FDIC special assessment reduced earnings per share by $0.46 in the current quarter Diluted Earnings per Share Notable Items1: $1.84 4Q23: $1.33  $(0.46) per share negative impact from FDIC $1.11 $1.13 Special Assessment $0.78  $(0.05) per share negative impact from C

  6. Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)

    Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR was supported by stable net interest income Adjusted PPNR(1) Linked quarter (4Q23 vs. 3Q23): ($ millions)  Adjusted PPNR declined 4% with: $420  Stable net interest income $341  Customer-related fees down 4% $296  Adjusted noninterest exp

  7. Slide 7: Net Interest Income (NII) and Net Interest Margin (NIM)

    Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Net interest income was stable as earning asset repricing offset a modest increase in funding costs Net Interest Income ($ millions) Net Interest Margin Linked quarter (4Q23 vs. 3Q23): $720 5.00%  Net interest income was flat $679  Intere

  8. Slide 8: Net Interest Margin (NIM)

    Net Interest Margin (“NIM”) The net interest margin has been stable for the past three quarters Accelerated liability repricing early in the year has slowed to match earning asset yield improvement  Earning assets continue to reprice with the higher interest rate environment  Heightened focus on g

  9. Slide 9: Noninterest Income and Revenue

    Noninterest Income and Revenue Linked-quarter noninterest income trend was impacted by the sale of mortgage servicing rights and higher loan sale activity in 3Q23, and lower dividends on FHLB activity stock in the current quarter Customer-Related Noninterest Income (1) Total Revenue (2) ($ millions)

  10. Slide 10: Noninterest Expense

    Noninterest Expense Active management of noninterest expense has flattened growth Noninterest Expense (NIE) Total noninterest expense increased $85 million linked quarter and ($ millions) included the FDIC special assessment of $90 million $581 The efficiency ratio increased 70 basis points to 65.1%

  11. Slide 11: Average Loan and Deposit Balances

    Average Loan and Deposit Balances Average loans and deposits increased slightly in 4Q23 vs. 3Q23 Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) $100.0 $100.0 $74.3 $75.6 $75.9 $75.0 $70.2 $69.6 $75.0 $38.0 $27.9 $26.9 $34.4 $29.8 $56.

  12. Slide 12: Deposit Balance and Borrowing Trends

    Deposit Balance and Borrowing Trends Ending deposits declined ~$400 million vs. 3Q23; customer deposits increased $1.7 billion 4Q23 total funding costs increased 15 basis points  Brokered deposits were managed down $2 billion during the quarter  Short-term borrowings have been reduced by $8 billio

  13. Slide 13: Impact of Noninterest-bearing (NIB) Demand Deposits

    Impact of Noninterest-bearing (NIB) Demand Deposits The increased value of noninterest-bearing deposits has exceeded the decline in volume Average Noninterest-bearing Demand Noninterest-bearing demand deposits have Impact of NIB on NIM 1 declined as interest rates have risen, ($ billions) though the

  14. Slide 14: Securities & Money Market Investments

    Securities & Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio The investment portfolio is designed to be a storehouse of balance sheet liquidity and Money Market Investments  Principal and prepayment-related cash flows from securities were $732 (period-e

  15. Slide 15: Accumulated Other Comprehensive Income (AOCI)

    Accumulated Other Comprehensive Income (AOCI) AOCI improved $400 million in 2023 and is projected to improve another $500 million in 2024 Projected AOCI Accumulated Other Comprehensive Income (loss) will $3.1 decline as the underlying investments pay down and mature $2.7  Principal amortization of

  16. Slide 16: Net Interest Income – Outlook & Rate Sensitivity

    Net Interest Income – Outlook & Rate Sensitivity Active balance sheet management has stabilized net interest income in 2023 and has positioned us for future growth Net interest income in 4Q24 is expected to be stable to slightly increasing when compared to 4Q23 Sensitivity of net interest income to

  17. Slide 17: Credit Quality

    Credit Quality Net charge-offs remain low, with trailing 12 months net charge-offs at 0.06% of average loans Key Credit Metrics Credit Quality Ratios  1.4%: Classified loans/loans Classified / Loans 2.5% NPAs + 90 / Loans + OREO  Classified balance increased $56 million in 4Q23 ACL / Loans 2.0% fr

  18. Slide 18: Disciplined Commercial Real Estate Growth

    Disciplined Commercial Real Estate Growth Commercial real estate loan growth lags peers due to continued exercise of concentration risk discipline Commercial Real Estate Zions has exercised caution in CRE 250 Excluding Owner Occupied concentrations for more than a decade and in underwriting standard

  19. Slide 19: Commercial Real Estate Summary

    Commercial Real Estate Summary The commercial real estate portfolio is granular and well diversified Portfolio Composition Term CRE ($10.7B) As of December 31, 2023  Conservative weighted-average LTVs (< 60%) All Other CRE,  Maturity distribution: 19% on average annually over next 3 years 19% Mult

  20. Slide 20: Capital Strength

    Capital Strength Loss-absorbing capital remains strong relative to our risk profile; low credit losses relative to CET1 + ACL Common Equity Tier 1 Capital Net Charge-offs and Allowance for Credit Losses annualized, as a percentage of risk-weighted assets as a percentage of risk-weighted assets 12.5%

  21. Slide 21: Financial Outlook (FY 2024E vs FY 2023A)

    Financial Outlook (FY 2024E vs FY 2023A), as of January 22nd, 2024 Outlook Comments Loan Balances Stable  Interest rates and economic outlook resulting in weak loan demand (period-end) Net Interest Income Slightly  Positive impact of asset yield repricing expected to be more than offset by (NII) D

  22. Slide 22: Appendix

    Appendix  Financial Results Summary  Balance Sheet Profitability  Loan Growth by Geography and Type  Earning Asset Repricing  Interest Rate Swaps  Interest Rate Sensitivity  Customer Fee Detail  Allowance for Credit Losses  Loan Loss Severity (NCOs as a percentage of nonaccrual loans)  Cre

  23. Slide 23: Financial Results Summary

    Financial Results Summary Healthy fundamentals, strong credit quality Three Months Ended (Dollar amounts in millions, except per share data) December 31, September 30, June 30, March 31, 2023 2023 2023 2023 Earnings Results: Diluted Earnings Per Share $ 0.78 $ 1.13 $ 1.11 $ 1.33 Net Earnings Applica

  24. Slide 24: Balance Sheet Profitability

    Balance Sheet Profitability Profitability impacted by higher funding costs in 2023 while 4Q23 includes the impact of the FDIC special assessment Return on Assets Return on Tangible Common Equity 33.4% 1.27% 22.7% 0.91% 17.8% 17.3% 0.79% 0.80% 11.8% 0.57% 4Q22 1Q23 2Q23 3Q23 4Q23 4Q22 1Q23 2Q23 3Q23

  25. Slide 25: Loan Growth in Detail

    Loan Growth in Detail Loan growth in Commercial, Commercial Real Estate and 1-4 Family Mortgage Linked Quarter Loan Balance Growth, Excluding PPP Total Loans: +1.6% 10% Growth Rate: Linked Quarter, not annualized 8% Linked quarter: 1-4 Family, 4%  Period-end loans increased $886 million or 1.6% 6%

  26. Slide 26: Loan Growth - by Bank Brand and Loan Type

    Loan Growth - by Bank Brand and Loan Type Loan growth reflected in most markets across our footprint for the quarter Period-End Year-over-Year Loan Growth (4Q23 vs. 4Q22) (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Other Total C&I (ex-Oil & Gas) 499 36 (71) 163 23 (6) (63) 13 594 SBA PPP

  27. Slide 27: Simulated Repricing Expectations: Earning Assets and Loans

    Simulated Repricing Expectations: Earning Assets and Loans A substantial portion of earning assets reset within one year with additional resets in later periods Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 52% 44% Earning Assets After Hedging 41% Loans

  28. Slide 28: Interest Rate Swaps at December 31, 2023

    Interest Rate Swaps at December 31, 2023 Swaps are used to balance our interest rate sensitivity Interest rate sensitivity is managed in part with portfolio interest rate hedges1  $0.8 billion in <1 year receive-fixed swaps were terminated at an average rate of 1.47% in the current quarter Pay-Fixe

  29. Slide 29: Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis

    Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis Standard parallel rate shocks suggest asset sensitivity, however, the rate path implied by the forward curve reveals liability sensitivity if short-term rates fall faster than long-term rates Simulated Net Interest Income Sensitivi

  30. Slide 30: Customer Fee Detail and Growth Trends

    Customer Fee Detail and Growth Trends Wealth management and capital markets revenues have grown 10% compounded over the past five years Full Year Full Year 5-yr Customer-related noninterest income 2018 2023 CAGR Commercial account fees $129 $174 6% Card fees $94 $101 1% Retail and business banking f

  31. Slide 31: Allowance for Credit Losses (ACL)

    Allowance for Credit Losses (“ACL”) The ACL decrease vs. 3Q23 is primarily due to a less negative economic outlook due to reduced inflation and lower interest rates Allowance for Credit Losses ($ millions) ACL (%) ex-PPP 1.88 1.91 1.74 1.56 1.48 1.22 1.25 1.30 1.26 1.13 1.15 1.21 1.08 1.11 1.05 1.10

  32. Slide 32: Loan Loss Severity

    Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral and underwriting practices Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2018Q4 – 2023Q3) Fifteen Year Average (2008Q4 – 2023Q3) 73% 71% 65%

  33. Slide 33: CRE In-Depth Review: Commercial Real Estate

    CRE In-Depth Review: Commercial Real Estate Limited tail loan-to-value risk in portfolio; controlled CRE growth Total CRE Portfolio Trends % of CRE ($ billions) Construction Balances Term Balances Term WAVG LTV % of CRE Term Construction Multi-family 61% 26% 36% Industrial / Warehouse 54% 23% 25% 10

  34. Slide 34: CRE In-Depth Review: Office ($2.0 billion balance)

    CRE In-Depth Review: Office ($2.0 billion balance) CRE Office portfolio is 15% of total CRE exposure; 3% of total loan exposure  13% decrease in balances YOY via payoffs, loan rebalance, amortization  < 15% of tenant leases mature in next 12 months Office Portfolio Trends  Median loan size: < $1

  35. Slide 35: CRE In-Depth Review: Office Loans – Distribution of LTV and Loan Maturity

    CRE In-Depth Review: Office Loans – Distribution of LTV and Loan Maturity Zions is addressing loan level concerns with clients, monitoring covenants, and assessing valuations  We are proactive with 2024 office maturities CRE Term Office by Maturity ($ millions)  Cash flow and leasing are monitored

  36. Slide 36: CRE In-Depth Review: Multifamily ($3.7 billion balance)

    CRE In-Depth Review: Multifamily ($3.7 billion balance) CRE multifamily portfolio is 28% of total CRE exposure  21% increase in balances YOY; construction and term growth Multifamily Portfolio Trends  76% term, 24% construction ($ billions) Construction Balances Term Balances  Median loan size: <

  37. Slide 37: Non-GAAP Financial Measures

    Non-GAAP Financial Measures In millions, except per share amounts 4Q23 3Q23 2Q23 1Q23 4Q22 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $581 $496 $508 $512 $471 LESS adjustments: Severance costs 13 1 Other real estate expense Amortization of core deposit and other intangibles 2 2 1

  38. Slide 38: Non-GAAP Financial Measures (Continued)

    Non-GAAP Financial Measures (Continued) In millions, except per share amounts 4Q23 3Q23 2Q23 1Q23 4Q22 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $116 $168 $166 $198 $277 Diluted Shares (average) 148 148 148 148 149 (a) Diluted EPS 0.78 1.13 1.11 1.33 1.8

  39. Slide 39: Non-GAAP Financial Measures (Continued)

    Non-GAAP Financial Measures (Continued) In millions 4Q23 3Q23 2Q23 1Q23 4Q22 Return on Average Tangible Common Equity (Non-GAAP) Net earnings applicable to common $116 $168 $166 $198 $277 Adjustments, net of tax: Amortization of core deposit and other intangibles 1 1 1 1 - (a) Net earnings applicabl

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