Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — RBC Capital Markets Global Financials Conference 2023
45 slides from Zions Bancorporation N.a's conference presentation, Mar 8, 2023
Slide 1: 2023 First Quarter Investor Update
2023 First Quarter Investor Update February 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: Zions Is A Collection of Community Banks
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 and Zions’ Markets1 Ending challenges Bank Headquarters Deposits % of Total Zi
Slide 4: Key Corporate Objectives
Key Corporate Objectives Focus on four growth areas supported by investments in key “enablers,” intended to drive robust financial performance People & Empowerment Data Small & Business Commercial Technology Analytics BALANCED GROWTH & PROFITABILITY Capital Affluent Markets Risk Operational Manageme
Slide 5: 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 6: Noninterest-Bearing Deposits (NIB) Mix
Noninterest-Bearing Deposits (“NIB”) Mix Through multiple rate cycles, Zions’ NIB deposit concentration and cost have been consistently among the best of peers Average Noninterest Deposits / Zions’ NIB deposit mix has consistently exceeded % most peers due in part to a higher concentration of 7 Av
Slide 7: Funding – Cost of Total Deposits and Cost of Total Funding
Funding – Cost of Total Deposits and Cost of Total Funding Through multiple rate cycles, Zions’ total deposit and funding costs have been consistently among the best of peers Average Cost of Total Deposits Average Cost of Total Funding ZION Peer Top Quartile % ZION Peer Top Quartile % 7.00 7.00 Peer
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: 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: 14% Excluding PPP loans, period-end loans Other, 12% Gro
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 $477
Slide 14: Adjusted Pre-Provision Net Revenue (PPNR)
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR increased 20% from the prior quarter, primarily due to the benefit of higher rates Linked quarter: Adjusted PPNR increased 20% primarily from Adjusted PPNR(1) ($ millions) An 8% increase in adjusted revenue 420 Significantly higher yiel
Slide 15: 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 16: Credit Quality Trends Relative to Peers
Credit Quality Trends Relative to Peers Zions’ NCOs/Loans ratio is frequently in the best (lowest) quartile of peers; very low loss rates on NPAs or classified loans Classified & NPA Ratios NCOs / Loans (Excluding PPP) Classified Loans and NPAs + 90 DPD, as a percentage (Trailing 12-month Average) o
Slide 17: Loan Loss Severity
Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2018 – 2022) Fifteen Year Average (2008 – 2022) 71% 60% 59% 59% 59% 57% 57% 56% 55% 54% 53% 52
Slide 18: Profitability Measures
Profitability Measures Risk-Adjusted PPNR as a percent of risk-weighted assets & return on risk-weighted assets are in line with peer median Pre-Provision Net Revenue less Net Charge Offs / Return on Risk-Weighted Assets (modified)(1) Risk Weighted Assets Substitutes Net Charge-Offs 2.5% for Provisi
Slide 19: Loss-Absorbing Capital
Loss-Absorbing Capital In context with the risk profile of the Bank, our Common Equity Tier 1 capital plus the allowance for credit loss compares well relative to peers Common Equity Tier 1 Capital Ratio CET1 Capital and Allowance for Credit Losses / Risk-Weighted Assets 1.2% CET1 % ACL/RWA 12.7% 12
Slide 20: 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 21: 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 22: Appendix
Appendix Company Abbreviation Key Financial Results Summary Quarterly Financial Highlights Earnings Per Share and Tangible Book Value Per Share Growth Greenwich Excellence Awards Technology Roadmap and FutureCore Balance Sheet Profile Securities and Money Market Loan Portfolio Prof
Slide 23: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp HBAN: Huntington Bancshares Incorporated BAC: Bank of America JPM: JPMorgan Chase & Co. BOKF: BOK Financial Corporation KEY: KeyCorp C: Citigroup, Inc. MTB: M&T Bank Corporation CFG: Citizens Financial Group, Inc. PNFP: Pinnacle Fina
Slide 24: 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 25: 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 26: Earnings Per Share and Tangible Book Value Per Share Growth
Earnings Per Share and Tangible Book Value Per Share Growth Assisted by lower credit costs and greater returns of capital to shareholders, EPS growth currently ranks second among peers, while the TBV/Share has grown steadily Earnings per Share (modified) Tangible Book Value per Share Substitutes Net
Slide 27: Zions Consistently Receives National and Local Recognition for Excellence
Zions Consistently Receives National and Local Recognition for Excellence Affiliates have strong brands in their markets One of only four banks to have averaged 15 or more Greenwich Excellence Awards since 2009 Top team of women bankers (2015-2020) 1 Consistently Voted Best Bank in San Diego and Ora
Slide 28: Zions Finishes 2nd Among All US Banks in Greenwich Excellence Awards
Zions Finishes 2nd Among All US Banks in Greenwich 2021 Excellence Awards Zions has Consistently Achieved “Excellence” vs Four Major Competitors1 and Peers2 Business Segment 100 100 100 100 Zions Bancorp Middle Market 80 80 80 80 Zions’ Peer Group Avg 81 77 60 65 60 60 60 Average of Four Major 63 62
Slide 29: Technology Roadmap
Technology Roadmap We continue to invest in technology solutions focused on customer experience & empowering bankers COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking & Gateway Enhancements Digital Banking Replacement & Enhancements Consumer Customer Migration, Small Business Cus
Slide 30: FutureCore: A Strategic Technology Advantage
FutureCore: A Strategic Technology Advantage for Years to Come Replacing the entire core legacy environment to improve operational resiliency and efficiency Modern Architecture Improved Customer Empowered Driving Built for Resiliency and Experience Bankers Modernization Speed FutureCore as a Catalys
Slide 31: Balance Sheet Profile
Balance Sheet Profile Zions’ liquidity profile is notably stronger, with higher securities. Funding advantages include granularity and more noninterest bearing deposits. Very substantial Earning Asset Composition Liabilities and Equity Composition funding advantage with More liquid assets = stable h
Slide 32: 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 33: Loan Portfolio Profile
Loan Portfolio Profile Zions’ loan portfolio is skewed towards commercial lending, at 78% of total loans Loan Portfolio Composition Loan Sub-Portfolio Composition Construction & Land Development Commercial and Industrial Paycheck Protection 14% Term 20% Foreign Loans Leasing 31% 53% $12,419 , 22% Ow
Slide 34: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (4Q22 vs. 4Q21) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 440 397 844 118 209 138 64 - 2,210 SBA PPP (300) (332) (517) (165) (124) (141) (79) - (1,658) Owner occupied 151 293
Slide 35: Zions is a Leader in Small Business Lending
Zions is a Leader in Small Business Lending Zions punches above its weight Commercial Loans Commercial Loans ($ billion) sized $100k - $1M 25% sized $100k - $1M $20,000 as a percent of total commercial loans $18,000 $16,000 20% $14,000 $12,000 15% $10,000 $8,000 10% $6,000 $4,000 5% $2,000 $0 0% JPM
Slide 36: Simulated Repricing Expectations: Earning Assets and Loans
Simulated Repricing Expectations: Earning Assets and Loans A substantial portion of earning assets reset within one year; additionally, yield benefits are expected in later periods Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile Earning Assets After Hedging Lo
Slide 37: Interest Rate Swaps
Interest Rate Swaps Although the outlook is for rising rates, we use interest rate swaps to hedge against 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% Outstan
Slide 38: 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 five of the seven major categories in which Zions has significant exposure, Zions’ loss rate has been much better (top quartile)
Slide 39: 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 40: 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 Q3 = 100 Indexed: 2017 Q3 = 100 150 150 100 100 50 50 0 0 2017Q3 2018Q1 2018Q3 2019Q1 2019Q3 2020Q1 2
Slide 41: 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 42: CRE Portfolios of Interest: CRE Office
CRE Portfolios of Interest: CRE Office ($2.3B Balance) CRE Office portfolio is 18% of total CRE exposure; elevated criticized levels with significant guarantor / borrower support Portfolio Trends Stabilized term office portfolio is 89% leased (wtd. avg.) Portfolio contains significant guarantor
Slide 43: Allowance for Credit Losses
Allowance for Credit Losses (“ACL”) The ACL increase vs. 3Q22 is primarily due to increased probability of an economic downturn Allowance for Credit Losses 1.88 1.91 ACL (%) ex-PPP ($ millions) 1.74 1.56 1.48 1.22 1.08 914 917 835 1.11 1.13 1.05 1.10 1.15 777 695 1.02 574 553 546 590 636 526 529 514
Slide 44: 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 45: 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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