Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Morgan Stanley US Financials, Payments & CRE Conference 2023
44 slides from Zions Bancorporation N.a's conference presentation, Jun 12, 2023
Slide 1: 2023 Second Quarter Investor Update
2023 Second Quarter Investor Update June 12, 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, superior credit performance Affiliate CEOs “own” their local market opportunities Zions’ Markets1 Ending and challenges Bank Headquarters Deposits % of Total Zions B
Slide 4: 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 Bankers1 (2015-2020) Consistently Voted Best Bank in Most Powerful Wome
Slide 5: Zions Finishes Fifth Nationally in 2022 Greenwich Excellence Awards
Zions Finishes Fifth Nationally in 2022 Greenwich Excellence Awards Zions compares favorably to major competitors (JPMorgan, Bank of America, Wells Fargo, US Bank) Greenwich Associates Customer Satisfaction (2022) % Excellent Citations* (Major Bank Competitors: JP Morgan, Bank of America, Wells Farg
Slide 6: First Quarter 2023 Financial Highlights
First Quarter 2023 Financial Highlights A quarter marked by overall healthy profitability, continued strength in credit quality, and increased capital Earnings and Profitability: Loans and Deposits: Vs. 4Q22, growth rates not annualized $1.33 diluted earnings/share, compared to $1.84 1.2% in
Slide 7: Average Loan and Deposit Balances
Average Loan and Deposit Balances Vs. 4Q22, average loans increased 2.7% in 1Q23; average deposits decreased 5.5% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) Average Noninterest-bearing Deposits ($ billions) $100.0 Average Interest-bearing Depo
Slide 8: Noninterest-Bearing Deposits ("NIB") Mix
Noninterest-Bearing Deposits (“NIB”) Mix Through multiple rate cycles, Zions’ NIB deposit concentration has been consistently among the best of peers Average Noninterest Deposits / % 7 Average Total Deposits 60% Zions’ NIB deposit mix has consistently exceeded most peers due in part to a higher pr
Slide 9: Deposit Portfolio Composition
Deposit Portfolio Composition 55% of deposits are insured; an additional 3% of deposits are collateralized; 66% of commercial balances are on analysis Composition of Deposit Portfolio Total Deposits: $69.2 Billion Commercial Deposits Commercial Deposit Accounts $36.6 Billion Commercial Operating D
Slide 10: Immediately Available Sources of Cash vs. Uninsured Deposits
Immediately Available Sources of Cash vs. Uninsured Deposits Zions has ample capacity to fund 100%+ of its uninsured deposits Unutilized and Immediately Available Sources of Built for Resilience: Cash(1) vs. Uninsured Deposits $38B Risk Management Practices: Longstanding Money Market 3.4 practice
Slide 11: Securities & Money Market Investments
Securities & Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio (at Fair Value) The investment portfolio is designed to be a storehouse of and Money Market Investments balance sheet liquidity (end of period balances) Money market investments and securitie
Slide 12: Accumulated Other Comprehensive Loss Accretion
Accumulated Other Comprehensive Loss Accretion Accretion of unrealized loss is projected to add 1.1 percentage points to Avg. Equity / Avg. Asset ratio by year-end 2024 Accumulated Other Comprehensive Loss Accretion by Quarter(1) Accumulated Other Comprehensive Loss: (Cumulative) Principal amortiz
Slide 13: Loan Growth in Detail
Loan Growth in Detail Loan growth achieved in several categories: residential real estate, term CRE, consumer construction, and C&I (ex-O&G) Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +1.3% Linked quarter: 10% Excluding PPP loans, period-end loans Growth Rate: Li
Slide 14: Net Interest Income ("NII") and Net Interest Margin ("NIM")
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 4Q22, continued interest income growth offset by increased interest expense from deposits and borrowings Net Interest Income Net Interest Margin Net Interest Margin A shift in funding from deposits to short-term borrowings negatively im
Slide 15: Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis
Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis Net Interest Income is expected to decline over the next 12 months Simulated Net Interest Income Sensitivity (1) Vs.1Q23: −200 bps −100 bps +100 bps +200 bps Latent(2) sensitivity: Modeled to reduce NII by approximately 6.6% 6% in
Slide 16: Noninterest Income and Revenue
Noninterest Income and Revenue Total customer-related noninterest income declined 1% vs. 4Q22 and was flat from the year-ago period; revenue decreased 5% vs. 4Q22 and was up 19% from the year-ago period. Customer-Related Noninterest Income (1) Revenue (2) ($ millions) ($ millions) $154 $156 $153 $15
Slide 17: Noninterest Expense
Noninterest Expense Noninterest expense increased 9% vs. 4Q22 and was up 10% from the year-ago period Total noninterest expense increased $41 million, compared to the Noninterest Expense (NIE) prior quarter, primarily due to seasonal increases ($ millions) $35 million increase in Salaries and Bene
Slide 18: Adjusted Pre-Provision Net Revenue ("PPNR")
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR declined 19% from the prior quarter, primarily due to seasonal increases in noninterest expense and lower NII Linked quarter (1Q23 vs. 4Q22): Adjusted PPNR declined 19% primarily from: Adjusted PPNR(1) ($ millions) An 8% increase in adjus
Slide 19: Credit Quality
Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.06% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 2.5% Key credit metrics: 2.0% Classified / Loans 1.6%: Classified loans/loans NPAs + 90 / Loans + OREO 1.5% Classified balance improved
Slide 20: Commercial Real Estate ("CRE") Loan Portfolio
Commercial Real Estate (“CRE”) Loan Portfolio CRE is 23% of Total Loans: $12.9B total, $2.3B construction, $10.6B term Commercial Real Estate by Location Commercial Real Estate by Type Other, 4% $ billions Balance % of CRE CO, 5% WA/OR, 7% Multi-family $3.2 25% CA, 30% Industrial / Warehouse 2.7 21%
Slide 21: CRE In-Depth Review: Exercising CRE Discipline Through Growth Management
CRE In-Depth Review: Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags peers due to continued exercise of concentration risk discipline Commercial Real Estate Zions has exercised caution in CRE 200 Excluding Owner Occupied concentrations for more than a deca
Slide 22: CRE In-Depth Review: Term Commercial Real Estate
CRE In-Depth Review: Term Commercial Real Estate Low loan-to-values ratios in the Term CRE portfolio demonstrates the ability of the portfolio to withstand stress Term CRE loans account for $10.6 billion of the outstanding balances; 19% of the total loan portfolio Term Commercial Real Estate Term Of
Slide 23: CRE In-Depth Review: Office ($2.2B Balance)
CRE In-Depth Review: Office ($2.2B Balance) CRE Office portfolio is 17% of total CRE exposure; strong underwriting Office Portfolio Trends 3.0 Construction Outstandings Term Outstandings Office balances are down 6% since 1Q 2018 and 8% since peak (2Q 2021) 2.5 92% term, 8% construction 2.0 Les
Slide 24: CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity
CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity Zions has minimal intersecting elements of risk in the office CRE portfolio, while having a significantly large collateral cushion CRE Office Term by Maturity 2023 term office maturities = $617 million 700 Criticized
Slide 25: Common Equity Tier 1 Capital & Allowance for Credit Losses
Common Equity Tier 1 (“CET1”) Capital & Allowance for Credit Losses (“ACL”) Zions’ CET1 ratio is healthy relative to peers, and is strong relative to the regulatory “well capitalized” threshold of 6.5% Common Equity Tier 1 Capital Ratio Trailing 12-month Net Charge-offs / CET1 Capital and Allowance
Slide 26: Financial Outlook (1Q24E vs 1Q23A)
Financial Outlook (1Q24E vs 1Q23A) Outlook Comments Loan Balances Slightly Adjusted downward from the prior quarter outlook due in part to a slowing (period-end) Increasing economy Net Interest Income Updated as of Decreasing 2Q23 Net Interest Margin is trending toward 2.85% (NII) June 12, 2023
Slide 27: Appendix
Appendix Company Abbreviation Key Financial Results Summary Loan Portfolio Profile – Concentration Interest Rate Risk Detail (incl. Earning Asset Repricing, Interest Rate Swaps, Duration, Economic Value of Equity) Deposits Detail (Granularity) Credit Detail: Credit Quality, Loss Severity
Slide 28: Company Abbreviation (Ticker Symbol) Key
Company Abbreviation (Ticker Symbol) Key ASB: Associated Banc-Corp JPM: JPMorgan Chase & Co. BAC: Bank of America KEY: KeyCorp BOKF: BOK Financial Corporation MTB: M&T Bank Corporation C: Citigroup, Inc. PNFP: Pinnacle Financial Partners CFG: Citizens Financial Group, Inc. RF: Regions Financial Corp
Slide 29: Financial Results Summary
Financial Results Summary Healthy fundamentals, strong credit quality Three Months Ended (Dollar amounts in millions, except per share data) March 31, December 31, September 30, June 30, 2023 2022 2022 2022 Earnings Results: Diluted Earnings Per Share $ 1.33 $ 1.84 $ 1.40 $ 1.29 Net Earnings Applica
Slide 30: Loan Portfolio Profile
Loan Portfolio Profile Zions’ loan portfolio is skewed towards commercial lending, at 77% of total loans Loan Portfolio Composition Loan Sub-Portfolio Composition Construction & Land Development Commercial and Industrial Paycheck Protection 14% Term 18% Foreign Loans Leasing 31% 53% $12,857 , 23% Ow
Slide 31: 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 52% 40% Earning Assets After He
Slide 32: Interest Rate Swaps at March 31, 2023
Interest Rate Swaps at March 31, 2023 Swaps are used to adjust our rate sensitivity – generally so that the company’s interest rate risk profile remains balanced Interest rate sensitivity managed in part with cash- Average total swaps in effect during quarter flow interest rate hedges1: Average Weig
Slide 33: Understanding the Value of Duration on the Asset Side of the Balance Sheet
Understanding the Value of Duration on the Asset Side of the Balance Sheet Duration associated with the investment and swap portfolios balances Zions’ overall interest rate risk Net Interest Income Sensitivity Analysis Economic Value of Equity Sensitivity Analysis (“Earnings at Risk” or “EaR”) As re
Slide 34: Managing the Stability of Economic Value of Equity ("EVE")
Managing the Stability of Economic Value of Equity (“EVE”), at March 31, 2023 Some are focusing only on the marks on the asset side of the balance sheet, resulting in a Picasso-like portrait view of equity Zions’ Economic Value of Equity $ Billions However, when the economic value of deposits is con
Slide 35: 1Q23 Deposit Performance, By Balance
1Q23 Deposit Performance, By Balance Although Zions’ exposure to large deposit customers is limited, such accounts were more sensitive Deposit Changes by Account Balance Deposit Portfolio Changes: March 31, 2023 vs December 31, 2022 • Not all uninsured deposits behave the same or similarly in uncert
Slide 36: Concentrations Risk Management: Granularity of Deposits
Concentrations Risk Management: Granularity of Deposits Deposits of both commercial and consumer customers are granular Commercial Customer Deposit Consumer Customer Deposit Balance Distribution Balance Distribution 40% 40% Commercial deposits total $36.6 B and Consumer deposits total $23.6 B and ac
Slide 37: 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 38: 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 39: 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 Q2 – 2023 Q1) Fifteen Year Average (2008 Q2 – 2023 Q1) 71% 60% 59% 59% 59% 57% 57% 56% 55
Slide 40: 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) Me
Slide 41: 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 $11.0 billion of the outstanding balances or 19%
Slide 42: Non-GAAP Financial Measures
Non-GAAP Financial Measures In millions, except per share amounts 1Q23 4Q22 3Q22 2Q22 1Q22 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $512 $471 $479 $464 $464 LESS adjustments: Severance costs 1 1 Other real estate expense 1 Amortization of core deposit and other intangibles 2 1
Slide 43: Non-GAAP Financial Measures (Continued)
Non-GAAP Financial Measures (Continued) In millions, except per share amounts 1Q23 4Q22 3Q22 2Q22 1Q22 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $198 $277 $211 $195 $195 Diluted Shares (average) 148 149 150 151 152 (k) Diluted EPS 1.33 1.84 1.40 1.29 1.2
Slide 44: Non-GAAP Financial Measures (Continued)
Non-GAAP Financial Measures (Continued) In millions 1Q23 4Q22 3Q22 2Q22 1Q22 Return on Average Tangible Common Equity (Non-GAAP) Net earnings applicable to common $198 $277 $211 $195 $195 Adjustments, net of tax: Amortization of core deposit and other intangibles 1 - 1 - - (a) Net earnings applicabl
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