Zions Bancorporation N.a. · NASDAQ:ZION

Zions Bancorporation N.a — Zions Bancorporation — Q4 2017 Earnings Presentation

33 slides from Zions Bancorporation N.a's earnings presentation, Jan 22, 2018

  1. Slide 1: Fourth Quarter 2017 Financial Review

    Finance Townhall 4Q17 Financial Review January 31, 2018 Janua y 22, 2018 Fourth Quarter 2017 Financial Review

  2. Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures

    2 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 presentatio

  3. Slide 3: Fourth Quarter 2017 Key Performance Indicators

     EPS: Diluted earnings per share decreased from the year-ago period, to $0.54 in 4Q17 from $0.60 • Diluted EPS was $0.80 per share when excluding two unique items which are not expected to recur with regular frequency: 1. the revaluation of the deferred tax asset as a result of the Tax Cut and Jobs

  4. Slide 4: Pre-Provision Net Revenue

    Pre-Provision Net Revenue Adjusted Pre-Provision Net Revenue (1) 4 Strong year-over-year improvement driven by active balance sheet management, loan growth, expense control, and the benefit of higher benchmark interest rates (1) Adjusted for items such as severance, provision for unfunded lending co

  5. Slide 5: Efficiency Ratio

     The efficiency ratio in the quarter was 61.6% (4Q17), declining about 3 percentage points from 64.5% in the year-ago period  Excluding the charitable contribution previously referenced, the efficiency ratio was 59.8%  Achieved low 60 percent range of 62.3% for 2017  Committed to continuous impr

  6. Slide 6: Profitability

    Profitability 6 Zions’ profitability continues to improve since announcing the efficiency initiative  Return on assets was 0.74% in 4Q17; adjusted for the two items referenced previously, it was up 1.07%, up from 0.88% a year ago  Return on tangible common equity was 7.4% in 4Q17; adjusted it was

  7. Slide 7: Average Loan and Deposit Growth

    Average Loan and Deposit Growth Average Total Loans Average Total Deposits 7 Moderate balance sheet growth is expected to be a key driver of Zions’ positive operating leverage  Average loans held for investment increased 4% over the year-ago period, and about 5% (annualized) from the prior quarter

  8. Slide 8: Financial Results

    Financial Results 8 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) Dec 31, 2017 Sept 30, 2017 Dec 31, 2016 Earnings Results: Diluted Earnings Per Share $ 0.54 $ 0.72 $ 0.60 Net Earnings Applicable to Common Shareholders 114 152 125

  9. Slide 9: Net Interest Income

     Net interest income increased 10% over the year-ago period  Majority of the increase attributable to increases in:  Interest and fees on loans due to loan growth in commercial and consumer loans  Interest on securities from an increase in the average investment securities portfolio  Short-term

  10. Slide 10: Loan Growth by Type

    [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] [CELLRANGE], [Y VALUE] -25% 0% 25% 50% 75% $0 $5 $10 $15 Loan Growth by Type 10 Moderate to s

  11. Slide 11: Net Interest Income Drivers

    Loans 74% Securities 22% Cash 4% Loans 72% Securities 26% Cash 2% Net Interest Income Drivers 11 Net interest income reflects higher short-term interest rates Net Interest Margin (NIM) Avg Earning Asset Mix  Relative to the prior quarter, the 4Q17 NIM was stable at 3.45%  Yield on loans increased

  12. Slide 12: Interest Rate Sensitivity and Historical Deposit Beta

     Much of the reduction in rate sensitivity was due to securities purchases during 2016 and early 2017  The average investment portfolio is $11.4 billion higher than 4Q14; taxable-equivalent interest income from the investment portfolio increased nearly $130 million in FY2017 compared with FY2016 

  13. Slide 13: Noninterest Income

     Customer-related fee income increased approximately 8% from the year ago period, primarily due to:  An 8% Increase in non-deposit service charges, which was primarily due to credit card fee income growth  A 9% increase from trust and wealth management income  An increase capital markets (includ

  14. Slide 14: Noninterest Expense

    Noninterest Expense ($ millions) $404 $414 $405 $413 $417 $0 $125 $250 $375 4Q16 1Q17 2Q17 3Q17 4Q17 Noninterest Expense 14 Expense controls have resulted in improved profitability  Total noninterest expense increased over 3% from the year-ago period:  Included a $12 million contribution to the Co

  15. Slide 15: Credit Quality

    Credit Quality 15 Key Credit Quality Ratios Credit quality remains healthy and is improving  Key Credit Metrics:  Classified loans were less than 3% of loans  Down 9% from prior quarter  Down 28% from the prior year  NPAs were 0.9% of loans  Down almost 11% from prior quarter  Down 27% from t

  16. Slide 16: Tax Rates

    Tax Rates 16 The effective tax rate for 2018 is estimated to be between 24% and 25%, down from the adjusted effective tax rate of 34.8% in 2017  2017 adjusted effective tax rate of 34.8% excludes the effect of:  DTA adjustment of $47 million  One time state tax adjustments in the first half of 20

  17. Slide 17: The Big Picture: 2018-2019 Objectives

     Continue to Achieve Positive Operating Leverage  Maintain mid-single digit loan growth rate  Target mid-single digit growth rates in customer-related fee income  Extract efficiencies through automation and simplification, including merging the holding company into the operating bank  Committed

  18. Slide 18: Next 12-Month Financial Outlook

    Next 12-Month Financial Outlook (4Q18E, vs. 4Q17A) 18 Outlook Comments Moderately Increasing • Over the next 12 months, we expect continued strong growth from residential mortgage and municipal loans, moderate growth in C&I and CRE loans Moderately Increasing • Excludes the effects of future interes

  19. Slide 19: Appendix

     Impact of Warrants  Oil & Gas (O&G) Portfolio Detail  Credit Quality Metrics, O&G and Ex-O&G  Retail CRE and C&I Loan Portfolio  Loan Growth by Bank Brand and Loan Type  GAAP to Non-GAAP Reconciliation 19 Appendix

  20. Slide 20: Impact of Warrants

     Zions has two tranches of warrants outstanding (ZIONZ and ZIONW), both of which are currently in the money  Dilution is calculated using the treasury method of accounting, which relies upon the following assumptions:  Warrants are exercised at the beginning of the period  Issuer uses proceeds f

  21. Slide 21: Oil & Gas (O&G) Portfolio Detail

    21 Note: Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as oil and gas- related, including a particular segment of oil and gas-related activity, e.g., upstream or downstream; typically, 50% of revenues coming from the oil and gas sector

  22. Slide 22: Credit Quality: Oil & Gas and Non-O&G

    Credit Quality: Oil & Gas (O&G) and Non-O&G 22 Key Credit Quality Ratios O&G credit quality remains challenged, but improving and Ex-O&G credit quality remains very good Note: Net Charge-offs/Loans ratio is annualized for all periods shown. NM: not meaningful -5% 5% 15% 25% 35% 45% 4Q16 1Q17 2Q17 3Q

  23. Slide 23: Oil & Gas Loss Outlook and Reserve

     O&G Loan Loss Expectation  O&G loan losses are expected to decline substantially over the next 12 months as compared to the last 12 months (1)  Most of the expected loss is likely to come from services loans  51% of classified O&G loans are from services loans  Approximately three quarters of

  24. Slide 24: Retail CRE Summary - Credit Metrics

    Retail CRE Summary - Credit Metrics 24 Balanced Retail CRE portfolio with emphasis on stand alone and neighborhood retail Note: Data as of 4Q-17  Retail CRE average loan balance < $2.0MM  Retail portfolio metrics:  > 90% occupied  Loan-to-value of ~ 55%  Debt Service Coverage of ~ 2.00x  Granu

  25. Slide 25: Retail CRE Summary – Regional Malls

    Retail CRE Summary – Regional Malls 25 Limited exposure to Regional Malls; performing portfolio Note: Data as of 4Q-17  During recession, the retail and regional mall portfolios performed poorly – high criticized, delinquent and non- accrual levels; however, generally stable today  94% of regional

  26. Slide 26: Retail CRE Summary - Location and Collateral Type

    Retail CRE Summary - Location and Collateral Type 26 Footprint based lending with term loan emphasis Note: Data as of 4Q-17  93% of portfolio is in the Bank’s footprint states  Since 2008-9 recession, Zions identified specific retail types as a concern, thus limiting exposure to shadow anchor reta

  27. Slide 27: Retail C&I Summary

    Retail C&I Summary 27 The portfolio is stable, with limited exposure to national brick and mortar retailers  Retail C&I loans (defined by NAICS codes) total $2.3B and represent exposure to the overall retail industry;  More insulated (84%) includes auto dealers, gas stations, grocery stores, build

  28. Slide 28: Retail C&I Summary - Total

    Retail C&I Summary - Total 28 Total Retail C&I is dominated by Term Debt secured by Real Estate or Dealer Flooring  Approximately half of the Total Retail C&I balances are secured by real estate, primarily auto dealers, gas stations and grocery stores  Flooring lines of credit (those secured by ne

  29. Slide 29: Retail C&I Summary – More Insulated

    Retail C&I Summary – More Insulated 29  More Insulated (84%; $1.9 billion) includes auto dealers, gas stations, supermarkets, home improvement, and non-store retailers  Approximately half of the More Insulated exposure is real estate secured with another 22% comprised of dealer flooring lines  On

  30. Slide 30: Retail C&I Summary – Less Insulated

    Retail C&I Summary – Less Insulated 30  Less insulated (20%; $403 million) includes those providing products widely available both on-line and through traditional brick and mortal channels  Limited exposure to national, legacy brick and mortar retailers  Majority of borrowers defined as less insu

  31. Slide 31: Loan Growth by Bank Brand and Loan Type

    31 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. Totals s

  32. Slide 32: GAAP to Non-GAAP Reconciliation

    32 GAAP to Non-GAAP Reconciliation (Amounts in millions) 4Q17 3Q17 2Q17 1Q17 4Q16 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 417 $ 413 $ 405 $ 414 $ 404 Adjustments: Severance costs 1 1 - 5 1 Other real estate expense - (1) - - - Provision for unfunded lending commitments (1) (4) 3 (5) 3

  33. Slide 33: GAAP to Non-GAAP Reconciliation

    33 GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 4Q17 3Q17 2Q17 1Q17 4Q16 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense (1) $413 $413 $405 $414 $404 LESS adjustments: Severance costs 1 1 - 5 1 Other real estate expense - (1) - - - Provision for unfunded lend

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