Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Q2 2022 Earnings Presentation
31 slides from Zions Bancorporation N.a's earnings presentation, Jul 26, 2022
Slide 1: Second Quarter 2022 Financial Review
Second Quarter 2022 Financial Review July 26, 2022
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 Rising rates are expected to lead to a significant increase in revenue. Credit quality remains clean. ▪ We are well positioned for rising interest rates ▪ We have positioned the bank’s balance sheet for higher interest rates ▪ Our loans are underwritten to withstand the effects of high
Slide 4: Second Quarter 2022 Financial Highlights
Second Quarter 2022 Financial Highlights Vs. 1Q22, a solid increase in non-PPP loans and strong growth in adjusted PPNR ✓ Earnings and Profitability: ✓ Loans and Deposits: Vs. 1Q22, growth rates not annualized ▪ $1.29 diluted earnings/share, compared to $1.27 ▪ 2.2% increase in period-end loan balan
Slide 5: Diluted Earnings Per Share
Diluted Earnings Per Share Primary variance to prior periods attributable to provision for credit losses and PPP-related income Diluted Earnings per Share Notable Items: $2.08 2Q22: ▪ $0.05 per share favorable impact from a credit valuation $1.45 $1.34 adjustment (“CVA”) $1.27 $1.29 ▪ $0.02 per shar
Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR increased considerably from 1Q22, primarily due to the benefit of higher rates and loan growth Linked quarter: ▪ Adjusted PPNR increased 24% primarily from Adjusted PPNR(1) ($ millions) ▪ Higher yields on all major asset categories from risin
Slide 7: Average Loan and Deposit Balances
Average Loan and Deposit Balances Vs. 1Q22, average non-PPP loans increased 3.1% in 2Q22; average deposits decreased 0.9% 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: Securities, Money Market Investments
Securities, Money Market Investments Outsized deposit growth during the pandemic was primarily invested in highly liquid assets Total Securities Portfolio and Money Market Investments (end of period balances) Strong deposit growth during the pandemic was primarily invested in highly liquid assets ($
Slide 9: Net Interest Income (NII) and Net Interest Margin (NIM)
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 1Q22, net interest income increase driven by rate increases, loan growth Net Interest Income Net Interest Margin Net Interest Margin Zions’ active efforts to invest excess liquidity in securities, combined ($ millions) Net Interest Marg
Slide 10: Interest Rate Sensitivity
Interest Rate Sensitivity Latent and emergent interest rate sensitivity are expected to lead to a significant increase in net interest income Simulated Net Interest Income Sensitivity (1) Latent interest rate sensitivity refers to future changes in −100 bps +100 bps +200 bps NII based upon past rate
Slide 11: Noninterest Income
Noninterest Income Total customer-related noninterest income improved vs. 1Q22, and was up 11% from the year-ago period Customer-Related Noninterest Income (1) Customer-related noninterest income continued to improve ($ millions) $154 ▪ Relative to the prior quarter, Commercial account fees decrease
Slide 12: Noninterest Expense
Noninterest Expense Noninterest expense was elevated due primarily to increased incentive compensation from current and anticipated profitability Noninterest Expense (NIE) Total noninterest expense was flat compared to the prior ($ millions) quarter ▪ Salaries and benefits were flat to the previous
Slide 13: Credit Quality
Credit Quality Net charge-offs remain very low, with last 12 months net charge-offs at just 0.03% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 3.5% 3.0% Key credit metrics: 2.5% ▪ 1.9%: Classified loans/loans Classified / Loans NPAs + 90 / Loans + OREO 2.0% ▪ Classified balanc
Slide 14: Allowance for Credit Loss
Allowance for Credit Loss (“ACL”) The ACL increase vs. 1Q22 is due to increased economic uncertainty Allowance for Credit Loss 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 1.05 777 695 526 574 529 553 514 546 1/1/20 CECL 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
Slide 15: Capital Strength
10.0% 0.0% 4.0% 6.0% 8.0% 12.0% 14.0% 2.0% 1Q19 11.3% 12.3% 2Q19 10.8% 11.8% 3Q19 10.4% 11.4% 4Q19 10.2% 11.2% Capital Strength 1Q20 10.0% 11.4% CET1 2Q20 10.2% 11.8% 3Q20 10.4% 12.0% 12.3% ACL/RWA 4Q20 10.8% 1Q21 11.2% 12.5% 2Q21 11.3% 12.3% as a percentage of risk-weighted assets Common Equity Tie
Slide 16: Financial Outlook (2Q 2023E vs 2Q 2022A)
Financial Outlook (2Q 2023E vs 2Q 2022A) Outlook Comments Moderately Loan Balances, ex-PPP ▪ Moderate growth in the next twelve months, excluding PPP loans Increasing ▪ We expect latent and emergent interest rate sensitivity, combined with Net Interest Income See continued loan growth and manageable
Slide 17: Appendix
Appendix ▪ Financial Results Summary ▪ Credit Metrics ▪ Loan Loss Severity (NCOs as a percentage of nonperforming assets) ▪ Balance Sheet Profitability ▪ Earning Asset Repricing ▪ Interest Rate Swaps ▪ Loan Growth by Geography and Type ▪ Mortgage Banking ▪ FutureCore Project ▪ Technology Initiatives
Slide 18: 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, September 30, 2022 2022 2021 2021 Earnings Results: Diluted Earnings Per Share $ 1.29 $ 1.27 $ 1.34 $ 1.45 Net Earnings Applica
Slide 19: Credit Quality: Term 1-4 Family Real Estate Secured Loans
Credit Quality: Term 1-4 Family Real Estate Secured Loans Minimal risk layering shows strength of the consumer real estate loan portfolio. Term 1-4 family mortgages (“1-4 family residential”) account for approximately $6.4 billion of the outstanding balances or 12% of the total loan portfolio ▪ 57 p
Slide 20: Credit Quality: Term Commercial Real Estate (CRE)
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 $9.5 billion of the outstanding balances or 18% of the total loan portfolio Distribution of Term Commercial
Slide 21: 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 22: Balance Sheet Profitability
Balance Sheet Profitability Profitability remains healthy; volatility of the results primarily due to variability in the provision for credit losses and PPP income Return on Assets Return on Tangible Common Equity 21.6% 1.65% 17.1% 14.2% 13.9% 13.4% 1.08% 0.92% 0.90% 0.91% 2Q21 3Q21 4Q21 1Q22 2Q22 2
Slide 23: 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 51% 39% Earning Assets After Hedging Percent of Loans Loans After Hedging 40% 33% Percent of Earning Assets 19% 19% 13% 12% 13% 13% 14% 11% 13% 13% 12% 1
Slide 24: Interest Rate Swaps
Interest Rate Swaps Although the outlook is for rising rates, we continue to create some protection for falling rates Interest rate sensitivity managed in part with interest rate hedges: Weighted- Average average Average fixed rate outstanding Average total swaps fixed-rate in effect during quarter
Slide 25: Loan Growth in Detail
Loan Growth in Detail Moderate to strong loan growth achieved in certain targeted growth categories Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +3% Linked quarter: 10% ▪ Excluding PPP loans, period-end loans Growth Rate: Linked Quarter, not annualized increased $1.7
Slide 26: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (2Q22 vs. 2Q21) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 331 511 820 113 148 123 77 - 2,123 SBA PPP (814) (778) (1,114) (370) (343) (336) (172) - (3,927) Owner occupied 215 2
Slide 27: Mortgage Banking
Mortgage Banking Despite Industry decline, Mortgage originations continue at record levels 2019 2020 2021 ($ millions) ▪ Roll-out ▪ Record production ▪ Enhanced Digital Fulfillment $1.3 Bill. driven by refinance Process $1.0 Bill. volumes ▪ Record Fee income ▪ 33% reduction in turn-time contribution
Slide 28: FutureCore: A Strategic Technology Advantage for Years to Come
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 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 Improved Customer Experience (2022) Consumer Customer Migratio
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation In millions, except per share amounts 2Q22 1Q22 4Q21 3Q21 2Q21 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $464 $464 $449 $429 $428 LESS adjustments: Severance costs 1 1 Other real estate expense 1 Amortization of core deposit and other intangibles
Slide 31: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) In millions, except per share amounts 2Q22 1Q22 4Q21 3Q21 2Q21 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $195 $195 $207 $234 $345 Diluted Shares (average) 151 152 154 160 163 (k) Diluted EPS 1.29 1.27 1.34 1.45
Zions Bancorporation, N.A. — Q2 2022 Earnings Presentation on 6ix