Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Q4 2022 Earnings Presentation
34 slides from Zions Bancorporation N.a's earnings presentation, Jan 23, 2023
Slide 1: Fourth Quarter 2022 Financial Review
Fourth Quarter 2022 Financial Review January 23, 2023
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 presentation includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements, often accompanied by words such as “may,” “mi
Slide 3: Select Themes
Select Themes The high quality, low-cost nature of our deposits, along with strong loan growth helped to drive a significant increase in PPNR ▪ The value of our deposit base contributed to a strong increase in net interest income ▪ Our low-cost deposits have been a catalyst for growth in our quarter
Slide 4: Fourth Quarter 2022 Financial Highlights
Fourth Quarter 2022 Financial Highlights Vs. 3Q22, another quarter of strong increases in non-PPP loans and growth in adjusted PPNR ✓ Earnings and Profitability: ✓ Loans and Deposits: Vs. 3Q22, growth rates not annualized ▪ $1.84 diluted earnings/share, compared to $1.40 ▪ 3.2% increase in period-en
Slide 5: Diluted Earnings Per Share
Diluted Earnings Per Share Strong linked-quarter growth due to significant increase in PPNR from strong net interest income and lower expenses Diluted Earnings per Share Notable Items: $1.84 4Q22: ▪ $(0.03) per share negative impact from a valuation loss on securities $1.34 $1.29 $1.40 ▪ $(0.02) per
Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR increased 20% from the prior quarter, primarily due to the benefit of higher rates Linked quarter: ▪ Adjusted PPNR increased 20% primarily from Adjusted PPNR(1) ($ millions) ▪ An 8% increase in adjusted revenue 420 ▪ Significantly higher yiel
Slide 7: Average Loan and Deposit Balances
Average Loan and Deposit Balances Vs. 3Q22, average non-PPP loans increased 3.6% in 4Q22; average deposits decreased 4.1% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) Average Total Loans Excluding PPP Loans, Average Noninterest-bear
Slide 8: Deposit Trends
Deposit Trends Deposit attrition is primarily from larger and less operational accounts; 47% has moved to off-balance sheet sweep accounts Deposit attrition composition and destination: ▪ Attrition in 2022 was concentrated in larger balance, more Deposits by Balance Tier rate sensitive / non-operati
Slide 9: Securities, Money Market Investments
Securities, Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio (at Fair Value) We expect to use a portion of our highly liquid assets to fund loan growth and deposit attrition in the immediate future and Money Market Investments ▪ Money market investments a
Slide 10: Net Interest Income and Net Interest Margin
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 3Q22, net interest income increase driven by continued rate increases and loan growth Net Interest Income Net Interest Margin Net Interest Margin Zions’ strong base of noninterest bearing deposits and rising interest ($ millions) Net In
Slide 11: Interest Rate Sensitivity
Interest Rate Sensitivity With slowing rate hikes and funding costs expected to increase, NII may decline slightly on a static balance sheet; however, with loan growth, we expect a further slight increase in NII in 4Q23 vs. 4Q22 Simulated Net Interest Income Sensitivity (1) Latent interest rate sens
Slide 12: Noninterest Income and Revenue
Noninterest Income and Revenue Total customer-related noninterest income declined slightly vs. 3Q22 and was up 1% from the year-ago period; revenue increased 7% vs. 3Q22 and was up 24% from the year-ago period. Customer-Related Noninterest Income (1) Revenue (2) ($ millions) ($ millions) $152 $154 $
Slide 13: Noninterest Expense
Noninterest Expense Noninterest expense decreased 2% vs. 3Q22 and was up 5% from the year-ago period Noninterest Expense (NIE) Total noninterest expense decreased $8 million, compared to ($ millions) the prior quarter, primarily due to a net decrease of certain incentive compensation items $479 $477
Slide 14: Credit Quality
Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.08% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 3.0% Key credit metrics: 2.5% ▪ 1.7%: Classified loans/loans Classified / Loans 2.0% ▪ Classified balance improved (declined) by 4% in NPAs
Slide 15: Allowance for Credit Losses
Allowance for Credit Losses (“ACL”) The ACL increase vs. 3Q22 is primarily due to increased probability of an economic downturn Allowance for Credit Losses 1.88 1.91 ACL (%) ex-PPP ($ millions) 1.74 1.56 1.48 1.22 1.08 914 917 835 1.11 1.13 1.02 1.05 1.10 1.15 777 695 574 553 546 590 636 526 529 514
Slide 16: Capital Strength
Capital Strength Risk-weighted assets increased 12.6% YoY, while the balance of CET1 capital increased 6.8% Common Equity Tier 1 Capital and Allowance for Credit Losses Net Charge-offs as a percentage of risk-weighted assets annualized, as a percentage of risk-weighted assets 14% 12.5% 12.3% 12.3% 1
Slide 17: Financial Outlook (FY 2023E vs FY 2022A)
Financial Outlook (FY 2023E vs FY 2022A), as of January 23, 2023 Outlook Comments Loan Balances Moderately (period-end) Increasing ▪ We expect full year 2023 NII to increase at a rate in the high single digits Net Interest Income relative to FY22 Increasing (NII) ▪ We expect 4Q23 NII to increase sli
Slide 18: Appendix
Appendix ▪ Financial Results Summary ▪ Credit Metrics ▪ Loan Loss Severity (NCOs as a percentage of nonaccrual loans) ▪ Balance Sheet Profitability ▪ Earning Asset Repricing ▪ Interest Rate Swaps ▪ Deposit Cost Advantage – 20+ Year Time Series ▪ Loan Growth by Geography and Type ▪ Mortgage Banking ▪
Slide 19: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) December 31, September 30, June 30, March 31, 2022 2022 2022 2022 Earnings Results: Diluted Earnings Per Share $ 1.84 $ 1.40 $ 1.29 $ 1.27 Net Earnings Applica
Slide 20: Long-Term View: Credit Quality at the Subportfolio Level
Long-Term View: Credit Quality at the Subportfolio Level Zions’ loss rates across nearly all loan portfolio categories are better or much better than peer loss rates ▪ In three of the seven major categories in which Zions has significant exposure, Zions loss rate has been much better (top quartile)
Slide 21: Credit Quality: Consumer Real Estate Secured
Credit Quality: Consumer Real Estate Secured (Term 1-4 Family and Home Equity Credit Lines) Minimal risk layering shows strength of the consumer real estate loan portfolio. Term 1-4 family mortgages (“1-4 family residential”) account for approximately $10.7 billion of the outstanding balances or 19%
Slide 22: Exercising CRE Discipline Through Growth Management
Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags due to continued exercise of concentration risk discipline Total CRE CRE >$1 million 200 200 Indexed: 2017 Q2 = 100 Indexed: 2017 Q2 = 100 150 150 100 100 50 50 ZION Peer Top Quartile Peer Bottom Quartile ZIO
Slide 23: Credit Quality: Term Commercial Real Estate
Credit Quality: Term Commercial Real Estate (“CRE”) Low loan-to-values ratios in the Term CRE portfolio demonstrates the ability of the portfolio to withstand stress Term CRE loans account for $10.2 billion of the outstanding balances; 18% of the total loan portfolio Distribution of Term Commercial
Slide 24: CRE Portfolios of Interest: CRE Office
CRE Portfolios of Interest: CRE Office ($2.3B Balance) CRE Office portfolio is 18% of total CRE exposure; elevated criticized levels with significant guarantor / borrower support Portfolio Trends ▪ Stabilized term office portfolio is 89% leased (wtd. avg.) ▪ Portfolio contains significant guarantor
Slide 25: 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 (2017 – 2021) Fifteen Year Average (2007 – 2021) 74% 65% 64% 63% 60%
Slide 26: Balance Sheet Profitability
Balance Sheet Profitability Profitability improving due to improved net interest income and loan growth Return on Assets Return on Tangible Common Equity (Excludes Accumulated Other Comprehensive Income) 16.9% 13.5% 13.2% 12.9% 12.5% 1.27% 0.97% 0.92% 0.90% 0.91% 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2
Slide 27: Simulated Repricing Expectations: Earning Assets and Loans
Simulated Repricing Expectations: Earning Assets and Loans Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 53% 40% Earning Assets After Hedging Percent of Loans Loans After Hedging 40% Percent of Earning Assets 31% 22% 22% 14% 14% 14% 13% 11% 12% 12% 12% 12% 1
Slide 28: Interest Rate Swaps
Interest Rate Swaps Although the outlook is for rising rates, we continue to create some protection from falling rates Interest rate sensitivity managed in part with interest Average total swaps in effect during quarter rate hedges: Average Fixed Rate (right scale) Average Weighted 8.0 2.0% Outstand
Slide 29: Deposits – Noninterest Bearing Mix and Cost of Total Deposits
Deposits – Noninterest Bearing (“NIB”) Mix and Cost of Total Deposits Through multiple rate cycles, Zions’ NIB deposit concentration and cost have been consistently among the best of peers Average Noninterest Deposits / Average Cost of Total Deposits 7% Average Total Deposits 60% ZION Peer Top Quart
Slide 30: Loan Growth in Detail
Loan Growth in Detail Strong loan growth achieved in several categories: C&I (ex-O&G), residential real estate, & term Commercial Real Estate Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +3.4% Linked quarter: 10% Other loans (including Consumer Construction), not sho
Slide 31: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (4Q22 vs. 4Q21) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 440 397 844 118 209 138 64 - 2,210 SBA PPP (300) (332) (517) (165) (124) (141) (79) - (1,658) Owner occupied 151 293
Slide 32: Mortgage Banking
Mortgage Banking Record originations, in contrast to industry decline, in 2022 have led to strong portfolio growth 2019 2020 2021 ($ millions) ▪ Roll-out ▪ Record production ▪ Enhanced Digital Fulfillment driven by refinance Process volumes ▪ Record Fee income ▪ 33% reduction in turn-time contributi
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures In millions, except per share amounts 4Q22 3Q22 2Q22 1Q22 4Q21 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $471 $479 $464 $464 $449 LESS adjustments: Severance costs 1 Other real estate expense 1 Amortization of core deposit and other intangibles 1 1 Pe
Slide 34: Non-GAAP Financial Measures (Continued)
Non-GAAP Financial Measures (Continued) In millions, except per share amounts 4Q22 3Q22 2Q22 1Q22 4Q21 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $277 $211 $195 $195 $207 Diluted Shares (average) 149 150 151 152 154 (k) Diluted EPS 1.84 1.40 1.29 1.27 1.3
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