Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q1 2015 Earnings Presentation
35 slides from Zions Bancorporation N.a's earnings presentation, Feb 10, 2015
Slide 1: First Quarter 2015 Company Update
February 10, 2015 First Quarter 2015 Company Update
Slide 2: Forward-Looking Statements & Peer Group Abbreviations
Forward-Looking Statements & Peer Group Abbreviations 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, opportuniti
Slide 3: Agenda
• Capital / Leverage • Credit Quality • Energy Lending • Profitability • Updated Outlook • Appendix 3
Slide 4: Capital Levels are Strong
Capital Levels are Strong Source: SNL Financial as of 3Q14 for peers, 4Q14 for ZION 4 11.9% C U B B A C ZIO N R F KE Y WF C PN C CM A B B T H B A N JP M M TB US B FIT B ST I Tier 1 Common Risk-Based Capital Ratio 14.5% 8% 9% 10% 11% 12% 13% 14% 15% ZIO N C B A C PN C R F U B WF C M TB B B T KE Y H B
Slide 5: Debt to Tier 1 Common Ratio
Debt to Tier 1 Common Ratio: Zions has the least debt relative to tier 1 common equity Source: SNL Financial as of 3Q14 for peers, 4Q14 for ZION 5 0% 50% 100% 150% 200% 250% 300% 350% 400% ZIO N CM A R F U B KE Y H B A N MT B ST I FI TB PN C B B T W FC U SB C B A C JP M Debt / Tier 1 Common
Slide 6: Agenda
• Capital / Leverage • Credit Quality • Energy Lending • Profitability • Updated Outlook • Appendix 6
Slide 7: Zions' Credit Quality Metrics are Among the Best in the Industry
Zions’ Credit Quality Metrics are Among the Best in the Industry 7 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% U B ST I CM A B B T KE Y ZIO N US B FIT B H B A N JP M P N C M TB R F B A C WF C C Nonperforming Lending Related Assets (Includes 90+ Days Past Due) As a percentage of loans Source: SNL Financial as of 3
Slide 8: Net Charge Off Rate Compares Favorably with Peers Through the Cycle
Net Charge Off Rate Compares Favorably with Peers Through the Cycle Through Multiple Cycles, Zions ranks well; no adjustment made for survivorship bias Source: SNL Financial. Net charge-off ratios annualized. 8 0% 1% 2% 3% 4% 5% 6% U B M TB CM A PN C ZIO N US B B B T ST I WF C KE Y H B A N R F FIT B
Slide 9: Reserve for Loan Losses is Strong Relative to Peers
Reserve for Loan Losses is Strong Relative to Peers Reserve is strong relative to loans and relative to credit loss rates Source: SNL Financial as of 3Q14 for peers, 4Q14 for ZION Allowance for Credit Losses includes the Allowance for Loan & Lease Losses and the Allowance for Unfunded Commitments 9
Slide 10: Agenda
• Capital / Leverage • Credit Quality • Energy Lending • Profitability • Updated Outlook • Appendix 10
Slide 11: Energy Loan Portfolio Key Takeaways
Energy Loan Portfolio 11 Key Takeaways • $3.2 billion of outstanding balances at December 31, 2014 • 8% of total loans • Diversified portfolio, primarily upstream / midstream / services (see slide 12) • No junior or second liens • Very modest growth in 2014 • Internal concentration limits result in
Slide 12: Segmentation of Energy Portfolio
Segmentation of Energy Portfolio 12/31/14 12 Energy Cycle Source: Company Documents Upstream (E&P) 32% Midstream 19% Downstream & Other Non-Services 4% Oilfield Services 33% Mfg. Services 12% Outstandings $3.2B Oil Gas
Slide 13: Conservative Underwriting: What We Do, and What We Avoid
Conservative Underwriting: What We Do, and What We Avoid 13 Source: Company Documents What We Do: • Upstream lending – multiple “haircuts” on oil / gas values and commodity prices to arrive at borrowing base (loan commitment amount) • Semi-annual borrowing base redeterminations and sensitivity testi
Slide 14: Price Deck: Consistently Conservative vs. 12-Month Oil Futures Strip
$0 $20 $40 $60 $80 $100 $120 $140 $160 M ar -0 0 N o v-0 0 Ju l- 0 1 M ar -0 2 N o v- 0 2 Ju l- 0 3 M ar -0 4 N o v- 0 4 Ju l- 0 5 M ar -0 6 N o v- 0 6 Ju l- 0 7 M ar -0 8 N o v- 0 8 Ju l- 0 9 M ar -1 0 N o v- 1 0 Ju l- 1 1 M ar -1 2 N o v- 1 2 Ju l- 1 3 M ar -1 4 N o v- 1 4 Ju l- 1 5 M ar -1 6 N o
Slide 15: Upstream (Reserve-Based) Underwriting
Upstream (Reserve-Based) Underwriting 15 Typical Oil & Gas Reserve-Based Loan $100 - Present value of oil & gas reserves using current NYMEX oil and gas prices $ 85 - Zions’ risk-adjusted value of reserves (e.g. Zions applies discounts to non-producing reserves) $ 77 - Apply “bank price deck” (gener
Slide 16: Energy Services – Key Credit Metrics
Energy Services – Key Credit Metrics 16 How We Mitigate Risk in Energy Service Lending • Conservative Capital Structures • Senior Debt / EBITDA: Generally in the 1.5-to-1 area • Average Debt / Capitalization: less than 50% • Strong sponsorship / access to capital • Private Equity firms sponsor a lar
Slide 17: Oil Price Decline History
Oil Price Decline History Drilling Rig Count Has Corrected Quickly and Significantly 17 Source: Bloomberg 0 20 40 60 80 100 120 T + 0 T + 5 T + 1 0 T + 1 5 T + 2 0 T + 2 5 T + 3 0 T + 3 5 T + 4 0 T + 4 5 T + 5 0 T + 5 5 T + 6 0 T + 6 5 T + 7 0 T + 7 5 T + 8 0 T + 8 5 T + 9 0 T + 9 5 T + 1 0 0 In d e
Slide 18: Agenda
• Capital / Leverage • Credit Quality • Energy Lending • Profitability • Updated Outlook • Appendix 18
Slide 19: Profitability Improvement driven primarily by capital actions
Profitability Improvement driven primarily by capital actions 19 Source: SNL Financial *Adjusted ROAA and NEAC excludes gains/losses on securities, debt extinguishment and preferred stock redemption cost, and reserve release, which is defined as provision for credit losses net of NCOs 1Q12 3Q12 1Q13
Slide 20: Net Interest Margin Remains Stronger Than Peers
Source: SNL Financial as of 3Q14 for peers, 4Q14 for ZION *Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earning assets. Net Interest Margin Remains Stronger Than Peers Some Pressures Remain, but Outlook is For Slightly Increasing Net Interest Income 20
Slide 21: Net Interest Income Drivers
Net Interest Income Drivers Pressures: • Reduction of FDIC Income • Repricing of Loan Portfolio Benefits: • Loan Growth • Debt Redemptions • Asset Sensitivity (positive leverage to rising interest rates) 21
Slide 22: Wtd. Avg. Coupon of New Loans is Slightly Lower Than Portfolio
Wtd. Avg. Coupon of New Loans is Slightly Lower Than Wtd. Avg. Portfolio Small lift in short term rates would substantially neutralize this dilution 22 Source: Company documents as of 4Q14. Production defined as new loans and marginal draws on existing lines of credit; portfolio yield includes defer
Slide 23: Loan Growth Remains a Positive NII Driver
90 100 110 120 130 2Q1 2 3Q1 2 4Q1 2 1Q1 3 2Q1 3 3Q1 3 4Q1 3 1Q1 4 2Q1 4 3Q1 4 4Q1 4 Strong Growth in Overall Commitments 4Q10=100 Unused Commitments Gross Loans Loans ex FDIC + NRE (runoff portfolios) Loan Growth Remains a Positive NII Driver 23 Source: Company documents as of 4Q14. “FDIC” refers t
Slide 24: Significant Reductions to Interest Expense Through Debt Reduction
Significant Reductions to Interest Expense Through Debt Reduction 24 Source: company documents Total Debt Outstanding ($, in millions) Annual Interest Expense ($, in millions) • Additional very expensive sub debt expected to be retired in the second half of 2015, reducing interest expense by nearly
Slide 25: Balance Sheet Remains Asset Sensitive
-5% 0% 5% 10% 15% 20% 25% 30% - 100 bps 0 bps +100 bps +200 bps +300 bps C h an ge in N e t In terest In co m e Net Interest Income Sensitivity NII Slow NII Fast Balance Sheet Remains Asset Sensitive Zions is Positioned for Economic Recovery and Rising Rates 25 Zions estimates net interest income wo
Slide 26: Noninterest Expense Views
Noninterest Expense Views Efficiency ratio is weak relative to peers, partly a function of asset sensitivity positioning 26 Source: SNL Financial as of 3Q14 for peers, 4Q14 for ZION 40% 50% 60% 70% 80% 90% US B WF C M TB P N C C B B T U B H B A N JP M R F ST I FIT B CM A KE Y ZIO N B A C Efficiency
Slide 27: Efficiency Ratio Waterfall – What If Scenario
Efficiency Ratio Waterfall – What If Scenario 27 73.6% 67.2% 55% 60% 65% 70% 75% 4Q 1 4 Ac tu al N o rm al iza ti o n : Se cu ritie s G ai n s, Pr o fe ssiona l E xp e n se , FD IC -S u p p o rt ed Loan s Te ch n o lo gy P ro ject s Ad d $ 5 B M B S @ 2 .4 % Im p ac t o f h ig h c o st d eb t Adj u
Slide 28: Agenda
• Capital / Leverage • Credit Quality & Energy Lending • Profitability • Small Business Lending Update • Fee Income Initiative • Updated Outlook • Appendix 28
Slide 29: One-Year Outlook Summary Relative to 4Q14 Results
One-Year Outlook Summary Relative to 4Q14 Results Topic Outlook Comment Loan Balances Slightly to Moderately Increasing • Prepayments remain volatile, making net loan growth difficult to forecast. • Line utilization rates likely to increase on energy portfolio, generally due to reducing commitments.
Slide 30: Agenda
• Capital • Credit Quality • Profitability • Small Business Lending Update • Fee Income Initiative • Updated Outlook • Appendix 30
Slide 31: A Collection of Great Banks
Bank Headquarters Assets % of Total Zions Bank Salt Lake City $19B 34% CB&T San Diego $11B 19% Amegy Houston $14B 24% NBA Phoenix $5B 9% NSB Las Vegas $4B 7% Vectra Denver $3B 5% Commerce Bank - WA Seattle $1B 1% Commerce Bank - OR Portland < $1B 1% Zions Bancorporation Salt Lake City $57B 100% Su
Slide 32: Smaller Loan Coupons Are Above the Overall Portfolio Yield
4.05% 3.02% 3.60% 0% 1% 2% 3% 4% 5% 6% 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 Smaller Loans vs. Larger Loans Small Production Coupon Mid & Large Production Coupon Total Production Coupon Smaller Loan Coupons Are Above the Overall Portfolio Yield A shift to smaller business loans would have a favorable impact
Slide 33: CDO Exposure Has Been Significantly Reduced
CDO Exposure Has Been Significantly Reduced Par value of Securities at period shown 33 In Billions Source: Company earnings releases $1.3 $0.4 $1.1 $0.3 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 1Q13 4Q14 Performing Nonperforming 70% reduction of total portfolio
Slide 34: CDO Portfolio Composition & Values as of 1Q13
CDO Portfolio Composition & Values as of 1Q13 34 March 31, 2013 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 27 $774 $694 $560 -$134 Insurance CDOs 22 447 443 331 -112 Other CDOs 6 51 40
Slide 35: CDO Portfolio Composition & Values as of 4Q14
CDO Portfolio Composition & Values as of 4Q14 35 December, 2014 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 17 $443 $420 $325 -$95 Insurance CDOs -- -- -- -- -- Other CDOs -- -- -- -- --