Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q1 2018 Earnings Presentation
27 slides from Zions Bancorporation N.a's earnings presentation, Apr 23, 2018
Slide 1: First Quarter 2018 Financial Review
First Quarter 2018 Financial Review April 23, 2018
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information The attached presentation includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements in the attached presentation
Slide 3: First Quarter 2018 Key Performance Indicators
First Quarter 2018 Key Performance Indicators Continued PPNR growth and improved profitability EPS: Diluted earnings per share increased from the year-ago period, to $1.09 in 1Q18 from $0.61 • Notable items that are operating but believed to be infrequent included: • $0.04 per share of interest reco
Slide 4: Earnings per Share
Earnings per Share Continued strong EPS growth Diluted Earnings per Share $1.20 Diluted earnings per share increased $1.09 to $1.09 in 1Q18 from $0.61 in the $1.10 year-ago period $1.00 Notable infrequent operating items in $0.90 1Q18: $0.80 • Four large loans which produced $0.73 $0.72 $11 million
Slide 5: Credit Quality
Credit Quality Healthy and improving credit quality metrics Key Credit Metrics: Credit Quality Ratios Classified loans were about 2% of loans 4.0% Down 10% from prior quarter Down 30% from the prior year 3.5% NPAs were 0.9% of loans 3.0% Down 6% from prior quarter Down 33% from the prior year 2.5% A
Slide 6: Pre-Provision Net Revenue
Pre-Provision Net Revenue Strong year-over-year improvement driven by loan growth, expense control, and the benefit of higher benchmark interest rates Adjusted Pre-Provision Net Revenue (1) ($mm) $300 Adjusted pre-provision net revenue has strengthened measurably, up 24% over the past year and 80% s
Slide 7: Profitability
Profitability Zions’ profitability continues to improve since announcing the “Simple, Easy, Fast” initiative Return on assets was 1.45% in 1Q18; up from 0.88% a year ago Return on tangible common equity was 15.5% in 1Q18; up from 8.8% a year ago 1Q18 includes interest recoveries of $11 million (pre-
Slide 8: Average Loan and Deposit Growth
Average Loan and Deposit Growth Moderate balance sheet growth is expected to be a key driver of Zions’ positive operating leverage Average loans held for investment increased 5.4% over the year-ago period, and about 5% (annualized) from the prior quarter Average deposits were relatively stable over
Slide 9: 2018-2019 Objectives
2018-2019 Objectives: Growth through simplification and focus Demonstrate positive operating leverage: Broad based loan growth with major loan portfolio concentrations within acceptable limits Momentum from noninterest income growth initiatives Slightly increasing noninterest expense growth, primari
Slide 10: Financial Results
Financial Results Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) March 31, December 31, March 31, 2018 2017 2017 Earnings Results: Diluted Earnings Per Share $ 1.09 $ 0.54 $ 0.61 Net Earnings Applicable to Common Shareholders 231 11
Slide 11: Net Interest Income
Net Interest Income Growth due primarily to loan growth, securities growth and wider net interest margin Net interest income increased 11% Net Interest Income over the year-ago period, to $542 ($mm) million, up 8.6% over the prior year $550 (1) period when excluding the interest (1) recoveries on fo
Slide 12: Net Interest Drivers: Loan Growth
Net Interest Drivers: Loan Growth Moderate to strong loan growth achieved in targeted growth categories Year-over-Year Loan Balance Growth Year over year: Total Loans: +5% Loan growth predominantly in Note: circle size indicates relative proportion of loan Residential Mortgage (1-4 Family) Municipal
Slide 13: Net Interest Income Drivers: Yields and Costs
Net Interest Income Drivers: Yields and Costs Growth of net interest income reflects a benefit on assets from higher short-term interest rates with only a moderate increase in funding costs Net Interest Margin (NIM) 5.0% Relative to the prior quarter, the Loan Yield 4.5% NIM increased 11 bps to 3.56
Slide 14: Noninterest Income
Noninterest Income Continued focus on fee income Customer-Related Fee Income (1) ($mm) Customer-related fee income increased $150 approximately 7% from the year ago period, primarily due to increases in: Non-deposit service charges, primarily card fee $120 income growth $115 $121 $122 $127 $123 Trus
Slide 15: Noninterest Expense
Noninterest Expense Expense controls have resulted in improved profitability Noninterest Expense Total noninterest expense decreased 0.5% from the year-ago period due to slight (1) ($ millions) decreases in: $414 $405 $413 $417 $412 Amortization of core deposit and other $375 intangibles Professiona
Slide 16: Efficiency Ratio
Efficiency Ratio Substantial improvement driven by both revenue growth and expense control Efficiency Ratio (1) 75% The efficiency ratio in the 1Q18 was 74.1% 61.3%, declining 4.6 percentage points from 65.9% in the year-ago period and 12.8 percentage points from 4Q14 70% Adjusting for the interest
Slide 17: Next 12-Month Financial Outlook (1Q19E, vs. 1Q18A)
Next 12-Month Financial Outlook (1Q19E, vs. 1Q18A) Outlook Comments Moderately Loan Balances Increasing • Excludes the effects of future interest rate hikes. Contemplates Net Interest Income Moderately continued increases in loans, a moderate increase in funding costs Increasing and considers the ef
Slide 18: Appendix
Appendix Impact of Warrants CRE Loan Portfolio Credit Metrics Loan Growth by Bank Brand and Loan Type Interest Rate Sensitivity GAAP to Non-GAAP Reconciliation 18
Slide 19: Impact of Warrants
Impact of Warrants Potential dilution is expected to be slight to moderate, depending upon future stock price Zions has two tranches of warrants outstanding (ZIONZ and ZIONW), both of which are currently in the money During 1Q18, 3.2 million warrants were exercised ZIONZ warrants expire on November
Slide 20: Commercial Real Estate Credit Quality
Commercial Real Estate Credit Quality Comments Commercial Construction 18.0% High overall CRE credit quality; specific concern for 16.0% Texas CRE Term loans 14.0% YoY decrease in total CRE criticized rate of 40 bps, 12.0% currently at 2.4%. 10.0% Texas Term loan pressure (10% criticized) continues
Slide 21: CRE Term Portfolio
CRE Term Portfolio Strong CRE metrics and conservative structures Balanced portfolio; ¾ is Office, Retail, Multifamily, and Industrial/Warehouse CRE Term: LTV CRE Term characteristics include conservative advance rates, significant cash equity and rebalance 40% covenants 35% YoY – CRE Term criticize
Slide 22: CRE Construction Portfolio
CRE Construction Portfolio Balanced, performing portfolio Diversified construction portfolio with 31% Homebuilder Residential, 69% Commercial CRE Construction: LTC 65% of all construction exposure is housing 45% related; Homebuilder Residential and Multifamily 40% Homebuilder Residential performing
Slide 23: Loan Growth by Bank Brand and Loan Type
Loan Growth by Bank Brand and Loan Type Year over Year Loan Growth (1Q18 vs. 1Q17) ZBNA (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Total Other C&I (ex-Oil & Gas) (146) 137 534 158 (10) 89 1 - 763 Owner occupied (ex-NRE) 56 258 55 43 (4) 4 72 - 484 CRE C&D 119 (54) (41) 22 (47) (44) 21 -
Slide 24: Securities Profile
Securities Profile Short to medium duration portfolio; minimal duration extension risk Incremental yield on new securities is moderately accretive to the securities portfolio yield Annual cash flow (1Q18, annualized) was approximately $2.8 billion Duration: 3.4 years (status quo); 3.6 years (+200 pa
Slide 25: Interest Rate Sensitivity and Historical Deposit Beta
Interest Rate Sensitivity and Historical Deposit Beta Zions has partially reduced asset sensitivity in exchange for current income Net Interest Income Sensitivity 2004-2006 and 2015-2017 Rate Cycles Modeled Annual Change in a 6.0 +200bps Interest Rate Environment(1) ZION Cost of Total Deposits ∆ in
Slide 26: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 1Q18 4Q17 3Q17 2Q17 1Q17 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 412 $ 417 $ 413 $ 405 $ 414 Adjustments: Severance costs - 1 1 - 5 Other real estate expense - - (1) - - Provision for unfunded lending commitments (7) (1) (4) 3 (5) D
Slide 27: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 1Q18 4Q17 3Q17 2Q17 1Q17 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense (1) $412 $413 $413 $405 $414 LESS adjustments: Severance costs - 1 1 - 5 Other real estate expense - - (1) - - Provision for unfunded lending