Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q2 2016 Earnings Presentation
28 slides from Zions Bancorporation N.a's earnings presentation, Jul 26, 2016
Slide 1: Second Quarter 2016 Financial Review
Second Quarter 2016 Financial Review July 26, 2016
Slide 2: Forward-Looking Statements and Use of Non-GAAP Financial Measures
2 Forward-Looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation that are based on other than historical data or that express the Company’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litig
Slide 3: Chairman's Message: Second Quarter 2016 Highlights
Increasing EPS: Diluted earnings per share increased substantially from the year-ago period • EPS increased to $0.44 in 2Q16 from $(0.01) • Adjusting for items used to calculate our efficiency ratio, including the effect of securities gains and losses (1) and preferred stock redemption expense, EP
Slide 4: Pre-Provision Net Revenue
Pre-Provision Net Revenue Pre-Provision Net Revenue (1) 4 Steady improvement driven by disciplined expense and balance sheet management (1) Adjusted for items such as severance, provision for unfunded lending commitments, and debt extinguishment costs. See GAAP to non-GAAP reconciliation table on sl
Slide 5: Total Loan and Deposit Growth
Total Loan and Deposit Growth Total Loans Total Deposits 5 Solid loan and deposit growth support targeted revenue and expense initiatives Period-end loan growth continued to build upon 1Q16 momentum, up 2.6% on a linked quarter basis Period-end deposits experienced modest growth ($mm) $36,000 $3
Slide 6: Loan Growth by Type
C&I (ex-O&G) Owner Occupied (ex-NRE) C&D Term CRE (ex- NRE) 1-4 Family National Real Estate O&G Home Equity Other -20% -10% 0% 10% 20% 30% Loan Growth by Type 6 Solid loan growth achieved in targeted growth categories Year-over-Year Loan Growth Loan growth in Commercial and Industrial (C&I), Term
Slide 7: Efficiency Ratio
Efficiency Ratio Efficiency Ratio (1) 7 Substantial improvement driven by expense control and revenue growth (1) Defined as noninterest expenses as a percentage of net revenue, adjusted for items such as severance, provision for unfunded lending commitments, and debt extinguishment costs. See GAAP t
Slide 8: Zions' Announced Financial Targets
Zions’ Announced Financial Targets 8 On June 1, 2015 Zions announced several financial targets, including: 2H15 FY16 FY17 Goal Actual Result Goal Result Goal Result Hold to below $1.58 (1) billion 100% Hold to below $1.58 (1) billion On Track Slightly above $1.58 (1) billion TBD ≤70% 69.3% <66% On T
Slide 9: Credit Quality
Credit Quality 9 Key Credit Quality Ratios Overall credit quality remains generally strong Overall stable and healthy credit quality Relative to March 31, 2016: Classified loans increased to 3.8% of loans NPAs decreased to 1.3% of loans Annualized NCOs equaled 0.36% of average loans Incr
Slide 10: Financial Results
Financial Results 10 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) June 30, 2016 March 31, 2016 June 30, 2015 Earnings Results: Diluted Earnings Per Share 0.44 0.38 (0.01) Net Earnings (Loss) Applicable to Common Shareholders 91 79
Slide 11: Net Interest Income
Net interest income growth continued its positive trajectory, increasing nearly 9.7% over the year-ago period On a linked quarter basis, net interest income grew by $12mm over 1Q16 Net interest income is expected to continue to increase due to further deployment of cash into higher yielding, h
Slide 12: Active Balance Sheet Management: Securities Portfolio Growth
Active Balance Sheet Management: Securities Portfolio Growth 12 Short to medium duration portfolio; limited duration extension risk Total Securities (end of period balances) ($mm) $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2Q15 3Q15 4Q15 1Q16 2Q16 Other Securities Municipal Securities Small Busi
Slide 13: Net Interest Income Drivers
Loans 76% Securities 17% Cash 7% Net Interest Income Drivers 13 Loan yield has been relatively stable; net interest margin higher in part due to mix shift Net Interest Margin (NIM) Earning Asset Mix The 2Q16 NIM was 3.39%, up four basis points from the prior quarter Mix shift: An increase in sec
Slide 14: Noninterest Income
Customer-related fee income increased 5% from the year-ago period Key components of fee income: Mortgage up 17%, Wealth management up 9%, Treasury management up 8%, and Bankcard up 6% Loan sales and servicing income increased from the prior quarter, due in part to a valuation adjustment (1) 11
Slide 15: Noninterest Expense
Noninterest Expense ($mm) 399 391 397 396 382 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 2Q15 3Q15 4Q15 1Q16 2Q16 Noninterest Expense 15 Expense controls have resulted in performance tracking modestly better than stated goal Total NIE declined 4.3% versus the year-ago period; adjusted NIE decl
Slide 16: Capital Actions: 2H16 – 1H17
Capital plan for next four quarters Increase the dividend payout to an annualized $0.32 from $0.24 Repurchase up to $180 million of common equity (~3% of shares outstanding) Reduce preferred equity by up to $144 million Expect improved return on tangible common equity due to improved profi
Slide 17: Oil & Gas Portfolio Trends
$- $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Allowance for Credit Losses Upstream Services Other Oil & Gas (O&G) Portfolio Trends 17 Loan Balances by O&G Segment Classifieds by O&G Segment Steadily declining balances in O&G Services Nonaccruals by O&G Segment ($mm) $- $200 $400 $60
Slide 18: O&G Loan Loss Expectation
O&G Loan Loss Expectation O&G loan losses are expected to decline moderately in 2H16 (relative to 1H16) and may decline further in 2017 (1) Most of the expected loss is likely to come from services loans 60% of classified O&G loans are from services loans 78% of O&G losses incurred since S
Slide 19: Strategic Priorities
Accelerate Positive Operating Leverage Accelerate loan growth rates (from then prevailing low-single digit rate) Invest cash into medium duration securities Maintain mid-single digit growth rates in core fee income Maintain noninterest expenses below $1.58 billion (1) in 2016, increasing s
Slide 20: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (3Q16-2Q17, vs. 2Q16) 20 Outlook Comments Moderately Increasing • Expect stronger growth in residential mortgage (mostly medium duration ARMs) and general C&I, moderate growth in CRE, and continued attrition from National Real Estate Increasing • Expect continued increa
Slide 21: Appendix
Oil & Gas (O&G) Portfolio Detail Houston CRE Portfolio: Subtype, cash flow coverage, collateral coverage High Oil & Gas (O&G) Employment Counties: Consumer credit scores Loan Growth by Bank Brand and Loan Type GAAP to Non-GAAP Reconciliation 21 Appendix
Slide 22: Oil & Gas Portfolio Detail
22 Note: Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as O&G-related, including a particular segment of O&G-related activity, i.e. upstream or downstream. Typically 50%+ of revenues coming from the O&G sector is the hurdle rate for inc
Slide 23: Zions' Commercial Real Estate Portfolio in Texas
23 Note: Data as of June 30, 2016. Zions’ Commercial Real Estate Portfolio in Texas Houston is approximately 3/5th of total Texas exposure; Construction and Land Development loans in Houston have declined by more than 80% since prior credit cycle 19 31 14 0 39 111 $16 $19 $31 $41 $67 $93 $200 $0 $10
Slide 24: The Derivative Effect: Commercial Real Estate
24 The Derivative Effect: Commercial Real Estate Limited expected NPAs or losses on Zions’ commercial real estate portfolio in Houston Overview Statement: Zions expects a moderate adverse migration of loan grades, but does not currently expect substantial loss due to strong collateral and cash flo
Slide 25: High O&G Employment Counties: Consumer Credit Scores
25 High O&G Employment Counties: Consumer Credit Scores Consumer credit score deterioration has not been substantial in high O&G counties Credit Score (FICO) Migration in High Oil & Gas Employment Counties Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others 5% 616 645 60
Slide 26: Loan Growth by Bank Brand and Loan Type
26 Loan Growth by Bank Brand and Loan Type Note: National Real Estate (NRE) is a division of Zions Bank with a focus on small business loans with low LTV ratios, which generally are in line with SBA 504 program parameters. “Other” loans includes municipal and other consumer loan categories. Linked Q
Slide 27: GAAP to Non-GAAP Reconciliation
27 (1) In Q1 2016, to be consistent with industry practice, the Company reclassified its bankcard rewards expense from “Other noninterest expense” to “Other service charges, commissions and fees”, offsetting this expense against associated noninterest income. Prior period amounts have also been recl
Slide 28: GAAP to Non-GAAP Reconciliation (cont.)
28 Note: Please refer to the prior page for line items comprising the aggregate adjustments to noninterest expense (b) and revenue (g) that appear in this schedule. (1) Represents estimated diluted EPS, which includes the effect of restricted stock. GAAP to Non-GAAP Reconciliation (cont.) (Amounts i