Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Raymond James 2013 United States Bank Conference
39 slides from Zions Bancorporation N.a's conference presentation, Aug 20, 2013
Slide 1: Raymond James 2013 United States Bank Conference
August 22, 2013 Raymond James 2013 United States Bank Conference
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains statements that relate to the projected or modeled performance or condition of Zions Bancorporation and elements of or affecting such performance or condition, including statements with respect to forecasts, opportunities, models, illustrations,
Slide 3: Agenda
II. Capital A. Capital Adequacy B. Allowance For Credit Losses C. Improvements to Profitability From Expected Capital Actions III. Profitability A. Net Interest Income Drivers i. Volume ii. Rate/Spread iii. Cash/MBS Exposure iv. Asset Sensitivity B. Fee Income and Non-interest Expense IV. Financial
Slide 4: Zions Bancorporation Overview
Multi-bank holding company in the Western United States Assets: ~$55 billion Loans: ~$38 billion Market cap: ~$5.5 billion Exchange: NASDAQ Ticker: ZION Major stock indices: S&P 500 NASDAQ Financial 100 Rating Agency Ratings Zions Bancorporation Overview 4 S&P Moody’s Fitch DBRS Kroll Senior Debt BB
Slide 5: A Collection of Great Banks
A Collection of Great Banks More than 70% of Assets in Utah / Texas / Coastal California 5 Subsidiary information as of 2Q13 Superior lending capacity relative to community banks Superior local customer access to bank decision makers relative to big nationals Centralization of some processing and ot
Slide 6: Awards: Nationally Recognized for Excellence
Awards: Nationally Recognized for Excellence • • Ahead of Wells Fargo, Bank of America, Key Bank, PNC, US Bank, and many other highly regarded banks. • Thirteen (13) Greenwich Excellence Awards in Small Business and Middle Market Banking (2013) • Including: • The Reputation Institute (cited in the A
Slide 7: Stronger Economic Growth than Overall U.S.
Job Creation: Jobs grew in Zions' footprint by 11.4% during the last 10 years, a full 8 percentage points better than U.S. nonfarm payroll growth GDP Growth: GDP growth in our footprint exceeded nominal U.S. GDP by an average of 1.1 percentage points per year (compounded) over the last ten years Str
Slide 8: Balance Sheet Mix
Balance Sheet Mix Strengths include a strong mix of loans and DDA funding 8 Source: Company documents as of 2Q13
Slide 9: Strong Focus on Business Banking - Loan Mix
Source: SNL Financial as of 2Q13 *Includes farm, home equity, consumer, and other loans Commercial and CRE Loans: Retail & Other Loans: 9 Strong Focus on Business Banking - Loan Mix Loan Portfolio as of 2Q13 § 79% § 21%
Slide 10: Credit Quality is Improving and Losses are Better Than Peers
Credit Quality is Improving and Losses are Better Than Peers For Zions, Net Charge-offs Have Returned to Pre-Crisis Levels 1. Nonperforming ratio consists of nonaccrual loans, real estate owned, and loans 90+ days past due and still accruing. The ratio excludes accrual troubled debt restructured (TD
Slide 11: Credit Quality Continues to Improve
11 Credit Quality Continues to Improve Source: Company documents as of 2Q13 Trailing 12-Month Gross Losses Realized on Classified Loans
Slide 12: Agenda: II. Capital
I. Overview A. Capital Adequacy B. Allowance For Credit Losses C. Improvements to Profitability From Expected Capital Actions III. Profitability A. Net Interest Income Drivers i. Volume ii. Rate/Spread iii. Cash/MBS Exposure iv. Asset Sensitivity B. Fee Income and Non-interest Expense IV. Financial
Slide 13: Zions' Investment Thesis
Zions’ Investment Thesis: Zions issued expensive capital and debt in 2009 and 2010 during the global financial crisis. This capital and debt is callable or refinancable within the next 2 years, at much lower costs. Zions’ credit quality continues to improve; strong reserves relative to peers and ind
Slide 14: Zions' Investment Thesis: Scenarios
If the economy maintains sluggish improvement (and the Fed keeps interest rates low and flat): § Significant improvement from restructuring and lowering costs of non-common capital and debt financing If short-term interest rates rise and/or yield curve steepens further: § Significant earnings and ca
Slide 15: Capital Levels are Strong Relative to Peers
Capital Levels are Strong Relative to Peers Source: SNL Financial as of 2Q13. Loss absorbing capital defined to include tangible common equity, Basel III-qualifying non-common Tier 1 equity, and the allowance for credit losses
Slide 16: Loan Loss Reserve is Also Strong
Source: SNL Financial as of 2Q13 CYN excluded from Reserve/NCO ratio due to a net recovery for 2Q13 Annualized charge-off ratio. Reserves include loan loss reserve plus reserve for unfunded lending commitments. 16 Loan Loss Reserve is also Strong
Slide 17: Securities & Cash Portfolio
Securities & Cash Portfolio ZION has one of the Smallest Securities (and MBS) Portfolio vs. its Peers Source: SNL Financial as of 2Q13 MBS securities include resi mortgage pass-through investments that are not guaranteed by the U.S. Government Estimated option-adjusted duration of Zions’: portfolio
Slide 18: Long-Term Capital Risk not Traded for Short-Term Profitability
Long-Term Capital Risk not Traded for Short-Term Profitability 18 Source: Zions' estimates based upon Bloomberg MBS models; key assumptions include the WAC of the underlying mortgages is between 3.0% and 3.5%, 30-year pass-through paper, Bloomberg's DAPAX model for duration extension (increasingly s
Slide 19: Recent Rise In Rates Has Taken A Bite Out of Tangible Common Equity
Recent Rise In Rates Has Taken A Bite Out of Tangible Common Equity Source: SNL Financial as of 2Q13. Avoiding the Next Big Risk to Equity:
Slide 20: Capital Actions
Capital Actions 20 2012 Capital Actions § Redeemed $1.4 billion TARP preferred equity § Repaid $255 million of TLGP debt § Upstreamed more than $800 million of capital from subsidiaries and issued new senior debt to maintain liquidity ratios § Redeemed 11.0% Series E preferred shares § Issued $144 m
Slide 21: Remaining Opportunities In Debt Maturity Profile
Remaining Opportunities In Debt Maturity Profile 21 Preferred Stock: $798M Subordinated Debt: $457M Senior Debt: $243M Assumptions on the cost to replace debt can be found on Slide 38 in the appendix. Par Value of Total Maturing / Callable Capital & Financing, 2013-2015: § § § § Total: $1.5 billion
Slide 22: Agenda: III. Profitability
I. Overview II. Capital A. Capital Adequacy B. Allowance For Credit Losses C. Improvements to Profitability From Expected Capital Actions A. Net Interest Income Drivers i. Volume ii. Rate/Spread iii. Cash/MBS Exposure iv. Asset Sensitivity B. Fee Income and Non-interest Expense IV. Financial Outlook
Slide 23: Summary View of Profitability
Summary View of Profitability Further improvement expected in 2013 from capital actions 1. ROAA and reserve release adjusted ROAA based on net income available to common. Source: SNL Financial and Company documents. Net Income normalized for one-time debt extinguishment expense in 2Q13
Slide 24: Loan Growth Remains Positive
Loan Growth Remains Positive Favorable Trend in Commitments 24 Source: Company documents as of 2Q13. • Small/Medium Loans < $5M • Large/ Very Large Loans > $5M
Slide 25: Loan Origination Growth Driven by Small/Medium Loans
Loan Origination Growth Driven by Small/Medium Loans Source: Company documents All totals annualized Small/Medium Loans <$5M and Large/Very Large Loans > $5M (In Billions) (In Billions)
Slide 26: Net Interest Margin Remains Strong Relative to Peers
Source: SNL Financial as of 2Q13. ZION with peer median securities NIM & RANIM is calculated assuming Zions had a median 20% securities as a percentage of earning assets, with a median yield of 3.5%. 1. Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earni
Slide 27: Balance Sheet Remains Significantly Asset Sensitive
Balance Sheet Remains Significantly Asset Sensitive 27 Zions estimates net interest sensitive income would increase between an estimated 18.1% and 20.9% if interest rates were to rise 200 bps* in the first year. Rate sensitive income includes the expected impact on fee income due to interest rates c
Slide 28: Continued Reduction of Non-Interest Expense in Medium Term Outlook
Continued Reduction of Non-Interest Expense in Medium Term Outlook 28 Source: Company Documents Assumes static profitability and balance sheet, both of which are factors in employee compensation. Reductions to Interest Expense: Indemnification Asset Expense* Legal Regulatory Related Credit Related A
Slide 29: Agenda: IV. Financial Outlook
I. Overview II. Capital A. Capital Adequacy B. Allowance For Credit Losses C. Improvements to Profitability From Expected Capital Actions III. Profitability A. Net Interest Income Drivers i. Volume ii. Rate/Spread iii. Cash/MBS Exposure iv. Asset Sensitivity B. Fee Income and Non-interest Expense V.
Slide 30: Financial Outlook
Topic Outlook Comment Loan Balances Moderate growth - Prepayments remain volatile, and make net loan growth difficult to forecast Net Interest Income Stabilizing - Moderate loan growth likely to largely offset asset yield pressure. - Covered Loan income likely to experience significant decline - Exc
Slide 31: Agenda: V. Appendix
I. Overview II. Capital A. Capital Adequacy B. Allowance For Credit Losses C. Improvements to Profitability From Expected Capital Actions III. Profitability A. Net Interest Income Drivers i. Volume ii. Rate/Spread iii. Cash/MBS Exposure iv. Asset Sensitivity B. Fee Income and Non-interest Expense IV
Slide 32: Term CRE Metrics are Solid
• Left- Sample data: As of 2Q13; non-FDIC supported term loans >500k balance • Right - As of 2Q13; LTV’s were adjusted using PPR’s market level/property type value trend indices 32 Term CRE Metrics are Solid
Slide 33: Bank CDOs: Fundamental Trends are Improving
Bank CDOs: Fundamental Trends are Improving Failures and Deferrals Have Declined Sharply 33 As of 06-30-2013 (1) Last 12 months. Prior to 3Q09, averages were predominately large banks, significantly skewing the data. New Bank Deferrals in Zions’ CDOs are Trending Downward (Aggregate Underlying Colla
Slide 34: Bank CDOs: Deferring Bank Re-performance has Increased
Bank CDOs: Fundamental Trends are Improving Deferring Bank Re-performance has Increased 34 As of 6-30-2013 34 (In millions) Net of $223 million of re-deferrals from 7 banks • Peak dollar value of deferring collateral: $3.5 billion (2Q11) • Current deferring collateral: $1.9 billion
Slide 35: Bank CDOs: What To Expect Should the Environment Continue to Improve
Bank CDOs: What To Expect Should the Environment Continue to Improve A Net Positive Impact to Tangible Common Equity per Share Prepayments Increase... § As banks become more healthy and as Trust Preferred is considered to be a weaker form of capital, the more healthy banks are prepaying principal an
Slide 36: Bank & Ins. CDO Portfolio Scenario Assumptions
Bank & Ins. CDO Portfolio Scenario Assumptions After-tax TCE per Share Impact CPR Speed Spread Improves WA Spread to LIBOR From OTTI From AOCI Total Net %TCE/Share Base 9% -- 8.4% Scenario 1 12% 20% 6.7% $(0.00) $0.49 $0.48 2.2% Scenario 2 15% 40% 5.0% $(0.01) $1.03 $1.02 4.6% Scenario 3 18% 60% 3.4
Slide 37: Net Interest Margin Pressure Primarily Due to Rate Floors
Net Interest Margin Pressure Primarily Due to Rate Floors Floors Are A Source of Support to Net Interest Income Today, But Eroding… 37 § $5.6 billion of loans in-the- money, wtd avg 131 bps in the money § Cumulative benefit to Net Interest Income: ~$74 million (pre- tax) § Cumulative benefit to NIM:
Slide 38: Capital Structure Cost Savings Opportunities: 2013-2015
Capital Structure Cost Savings Opportunities: 2013-2015 Capital Issue ($ in millions, except per share figures) Earliest Call or Maturity Date AFTER - Tax Rate Par Amount Out Book Amount Out Current Expense EPS Impact AFTER -Tax Replace- ment Cost Potential EPS Savings High Cost Issues Series B Trus
Slide 39: Capital Structure Cost Savings Opportunities: 2013-2015
Capital Structure Cost Savings Opportunities: 2013-2015 Capital Issue ($ in millions, except per share figures) Earliest Call or Maturity Date AFTER - Tax Rate Par Amount Out Book Amount Out Current Expense EPS Impact AFTER -Tax Replace- ment Cost Potential EPS Savings Additional Select Issues Outst
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