Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Investor Day (February 2016)
141 slides from Zions Bancorporation N.a's investor day presentation, Feb 25, 2016
Slide 1: 2016 Biennial Investor Conference: Focus on Performance
February 25, 2016 2016 Biennial Investor Conference Focus on Performance
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
Agenda 3 • Company Overview • Geographic Footprint • Commercial Bank Orientation • Commercial Lender • Small Business Focus • Strong Capital, Reserves & Low Debt • Credit Quality Today and Through the Cycles • Liquidity • Profitability • Asset Sensitivity • Accomplishments and Strategic Outlook • Ef
Slide 4: A Collection of Community Banks
Bank Headquarters Assets % of Total Zions Bank Salt Lake City $20B 33% Amegy Houston $14B 23% CB&T San Diego $12B 20% NB|AZ Phoenix $5B 8% NSB Las Vegas $4B 7% Vectra Denver $3B 6% Commerce Bank - WA/OR Seattle $1B 2% Zions Bancorporation Salt Lake City $60B 100% Strategic local “ownership” of mar
Slide 5: Zions Is a Commercially-Oriented Bank
13% 35% 20% 17% 15% 4% 30% 10% 28% 22% Cash Commercial Loans Commercial Real Estate Loans Consumer Loans Securities Earning Assets 5 Zions Is a Commercially-Oriented Bank 55% of earning assets are commercial loans (vs. 40% for peers), and 38% of earning assets are funded by noninterest bearing depos
Slide 6: Small Business Lending: Zions Punches Above Its Weight
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 WF C B A C JP M US B B B T P N C ZIO N M TB R F ST I C H B A N FIT B KE Y CM A U B Commercial Loans Sized $100k - $1M Small Business Lending: Zions Punches Above Its Weight 6 Source: Call report data via SNL Financial, as of 2Q15; peer group differen
Slide 7: Top Quartile Balance Sheet
Top Quartile Balance Sheet: Capital and reserve ratios are among the strongest, debt ratio the lowest of peers Regulatory capital ratios are Basel III. Source: SNL Financial as of 3Q15 for peers, 4Q15 for ZION 7 12.2% B O K F ZIO N CF G C B SH R F EWB C FH N FR C FM ER SN V CM A KE Y B B T M TB ST I
Slide 8: Credit Quality
Credit Quality Current and through-the-cycle losses rank in the best quartile of peers 8 Source: SNL Financial as of 3Q15; ZION data as of 4Q15. FRC and PBCT had insufficient history during financial crisis to be included in the 1990-2013 analysis 0.0% 0.5% 1.0% 1.5% 2.0% B O K F M TB C B SH A SB ZI
Slide 9: Strong Liquidity, Superior Deposit Franchise Over Time
Strong Liquidity, Superior Deposit Franchise Over Time Zions Liquidity Coverage Ratio is comfortably in excess of the regulatory minimum 9 0% 10% 20% 30% 40% 50% 60% 2000 2005 2010 2015 Noninterest-Bearing Deposits / Total Deposits* ZION Peer Median Source: SNL Financial as of 3Q15; ZION data as of
Slide 10: Profitability: Expected Improvement via Efficiency Initiative
Profitability: Expected Improvement to be Driven Primarily by Positive Operating Leverage via the Efficiency Initiative 10 Source: SNL Financial, Zions calculations *Adjusted ROAA and ROTCE for ZION excludes gains/losses on fixed income securities, debt extinguishment and preferred stock redemption
Slide 11: Asset Sensitivity
Asset Sensitivity Zions is among the most asset sensitive of its peers 11 -5% 0% 5% 10% 15% 20% 25% 30% EW B C C M A ZIO N FH N M TB SN V CF G R F P BC T ST I FR C FM ER B B T A SB K EY FI TB H B A N CB SH BO K F Percent Change in Net Interest Income Interest Rates +200 basis points Company Reported
Slide 12: Agenda
Agenda 12 • Company Overview • Accomplishments and Strategic Outlook • Focus on Performance • Accomplishments • Local Brands = Strong Brand Value • Reduced Risk Profile / Enhanced Risk Management • Strategic Outlook: Next Two Years • Efficiency Initiative • Technology Upgrade • Financial Performance
Slide 13: Zions: A Focus on Performance
Zions: A Focus on Performance 13 • Substantial Progress: Many action items accomplished during the past five years • Lower risk profile • Lower cost of capital • Lower operating costs • Self-Help Story: Actions initiated and expected to be completed during next two years • Greater focus on growth op
Slide 14: Major Accomplishments since 2014 Investor Day
Major Accomplishments since 2014 Investor Day 14 • Profitability: The Adjusted Return on Assets increased by approximately 20 basis points • Substantially strengthened pre-provision net revenue profile with increased investment in medium duration assets • Simplified and reduced the cost of the capit
Slide 15: Major Announcement: Organizational Restructure
On June 1, 2015, Zions announced several organizational and operational changes, including: • Consolidate bank charters from seven to one while maintaining local leadership, local product pricing, and local brands • Create a Chief Banking Officer position; realign responsibility for retail banking,
Slide 16: Why Maintain Local Brands?
Why Maintain Local Brands? Zions is Nationally Recognized for Excellence 16 Staying Local Where it Matters: • Maintaining our strong local brands • Experienced regional executive leadership teams • Credit decision-making close to the customer • Regional pricing of credit and noncredit services • Reg
Slide 17: Superior Brand: Nationally Recognized for Excellence
Superior Brand: Nationally Recognized for Excellence • Ranked #1 Nationally by Greenwich Associates (2015) • Thirty-One (31) Greenwich Excellence Awards in small business and middle market banking This year including: Excellence: Overall Satisfaction (seven consecutive years) Excellence: Likelih
Slide 18: Reduced Risk Profile
Reduced Risk Profile Expect substantially reduced volatility in credit performance in future cycles 18 Excerpts from Zions’ Corporate Policies Collateralized Debt Obligations (CDOs): “The Company’s CDO portfolio is a legacy asset that is in run-off and should be prudently managed down. No new CDO se
Slide 19: New Board Members Since 2013
New Board Members Since 2013 Additional Risk Management Expertise • Edward F. Murphy, CPA • Served as CFO of Federal Reserve Bank of New York from 2005 to 2013 • Held the position of Global Audit Director at JP Morgan & Co. • Served as Executive Vice President and CFO of retail division and Chief Op
Slide 20: Next Two Years: Growth Through Simplification and Focus
Next Two Years: Growth Through Simplification and Focus 20 • Accelerate Positive Operating Leverage • Implement Technology Strategies • Increase the Return on and of Capital • Execute on our community bank model – doing business on a “local” basis
Slide 21: Next Two Years: Accelerate Positive Operating Leverage
Next Two Years: Growth Through Simplification and Focus 21 • Accelerate Positive Operating Leverage Accelerate loan growth rates • Key drivers of acceleration include: Invest cash into medium duration securities Maintain mid-single digit growth rates in core fee income: • Stronger corporate product
Slide 22: Next Two Years: Technology, Capital, Community Model
22 Next Two Years: Growth Through Simplification and Focus • Implement Technology Strategies: Achieve substantial progress on core systems upgrade • Increase the Return on and of Capital: • Improvements in operating leverage and loan growth lead to stronger returns on capital • Improved risk profile
Slide 23: Agenda
Agenda 23 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 24: Major Announcement: The Efficiency Initiative
These changes are designed to: • Improve the customer experience (e.g., faster turnaround times) • Simplify the corporate structure and how Zions does business • Drive substantial positive operating leverage: + Increased revenue from growth in loans, deployment of cash to mortgage-backed securities,
Slide 25: The Efficiency Initiative: Path to Low 60% Efficiency Ratio
25 The Efficiency Initiative Path to low 60% or Better Efficiency Ratio 76 % Low 60s FY14 Actual Normalized FY14 (1) Debt Reduction Savings from Operational, Technology and Charter Consolidation Balance Sheet Repositioning (e.g. MBS) Loan & Fee Income Growth Other Expense Increases (2) Pro Forma FY1
Slide 26: Efficiency Initiative Expense Progress
Efficiency Initiative Expense progress is tracking well 26 Noninterest Expense: • Commitment to hold expenses below $1.6 billion in 2015 (and 2016). • Status: On track Cost savings: • Commitment to achieve $120 million of gross savings by FY17 • Status: On track $0 $20 $40 $60 $80 $100 $120 $140 201
Slide 27: Efficiency Ratio: Sharp Focus Leading to Improvement
Efficiency Ratio: Sharp focus leading to substantial improvement 27 • The efficiency ratio improved to 69.8% (4Q15), from 74.1% a year ago. • Achieved the commitment of an efficiency ratio of less than or equal to 70% in 2H15. • Reiterating the commitment to drive the efficiency ratio to: • Less tha
Slide 28: Agenda
Agenda 28 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 29: Major Investments in the Business
Major Investments in the Business Substantial planning and effort has resulted in an on-track outcome 29 Chart of Accounts / Financial Reporting Simplification Credit Approval Front-End Work Flow System Enterprise Loan Operations Core System (FutureCore): Loan and Deposit Processing Systems
Slide 30: Key Benefits of Technology Upgrade: FutureCore
Key Benefits of Technology Upgrade One integrated loans, deposits, and customer system Easier integration with a significant reduction in system interfaces Real-time payments and transaction processing Quicker product development and deployment Expense reductions through greater efficiency Regular v
Slide 31: Systems Upgrade Benefits: Chart of Accounts
Systems Upgrade Benefits– Chart of Accounts 31 “Creating One Reporting Language” 2013 Functions 2017 Yes One General Ledger Yes 7 Uses Use of GL 1 Use Multiple Robust Reporting Platform Hyperion Inconsistent Data Standards Consistent Non-Existent LOB/Product Reporting* Robust Complex Regulatory and
Slide 32: System Upgrade Benefits: Credit LEAD
System Upgrade Benefits– Credit LEAD 32 • One workflow system to originate and maintain loans across all commercial lending phases (new, renewal, modification, review) • Facilitates credit approval • Enhances data consistency • With auto-boarding…will require most data entry only once • Single syste
Slide 33: System Upgrade Benefits: Loan Operations Consolidation
System Upgrade Benefits– Loan Operations Consolidation 33 • Transition 15 affiliate centers to 2 • Will rely heavily on an effective affiliate “middle office” • Simplifies FutureCore implementation • Reduces complexity • Ability to support growth of banks in a more agile manner…scalable • Simplifies
Slide 34: Agenda
Agenda 34 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Pre-Provision Net Revenue • Net Interest Income • Interest Rate Sensitivity • Capital Management • Financial Outlook • R
Slide 35: Pre-Provision Net Revenue Building on Positive Momentum
35 • This improvement has been driven by a focus on expense control and improved contribution from the investment portfolio • Looking forward, loan growth and improvement in non- interest income is expected to continue this positive trend Pre-Provision Net Revenue Building on Positive Momentum Pre-P
Slide 36: Net Interest Income: Expecting Stronger Loan Growth in 2016
Balance Sheet - Net Interest Income Expecting stronger loan growth in 2016 36 We expect headwinds in: • Energy, National real estate We are targeting mid- to high-single digit growth in: • Small and middle-market C&I, Residential mortgage & Consumer -20% -10% 0% 10% 20% C&I (ex Energy) Owner Occupie
Slide 37: Expecting Continued Investment Portfolio Growth
$0 $2,000 $4,000 $6,000 $8,000 $10,000 4Q14 1Q15 2Q15 3Q15 4Q15 Total Securities Other Securities Municipal Securities Small Business Administration Loan-Backed Securities Agency Securities Agency Guaranteed MBS Securities Balance Sheet - Net Interest Income Expecting continued investment portfolio
Slide 38: Deposit Growth Remains a Key Focus
Balance Sheet - Net Interest Income Deposit growth remains a key focus 38 In Millions • Properly priced core deposits are a key factor in both profitability and liquidity • Deposits continue to grow: • Noninterest-bearing deposits are up over 8% in the past year • Interest-bearing deposits are up ov
Slide 39: Net Interest Margin and Risk-Adjusted NIM Remain Strong
Source: SNL Financial as of 4Q15. *Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earning assets. Revenue – Net Interest Income Net Interest Margin and Risk-Adjusted NIM Remain Strong 39 • NIM in 4Q15 expanded primarily due to recoveries of interest incom
Slide 40: Loan and Deposit Pricing Provide Strong NIM Foundation
Source: SNL Financial as of 4Q15. Revenue – Net Interest Income Loan and Deposit Pricing Provide Strong NIM Foundation 40 • Strength in the net interest margin can be found in the core business, as yields on loans are among the highest in the peer group while the cost of total deposits is among the
Slide 41: Loan Yield Stable; Margin Higher Due to Mix Shift
3.25% 3.22% 3.18% 3.11% 3.23% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 4Q14 1Q15 2Q15 3Q15 4Q15 Net Interest Margin (NIM) Revenue – Net Interest Income Loan yield has been relatively stable; margin higher in part due to mix shift 41 • 4Q15 NIM was 3.23% • If adjusted for income recoveries in 4Q15, the NIM woul
Slide 42: Loan Pricing Generally Stable During the Past Year
Revenue – Net Interest Income Loan pricing has been generally stable during the past year 42 3.64% 4.24% 3.87% 2.5% 3.0% 3.5% 4.0% 4.5% 4Q14 1Q15 2Q15 3Q15 4Q15 Portfolio Yield vs. Production Yield • Linked-quarter loan yield higher entirely due to recoveries of interest income • Yield essentially f
Slide 43: Debt Reductions Driving Lower Interest Expense
43 $0 $50 $100 $150 $200 $250 $300 $350 $0 $500 $1,000 $1,500 $2,000 $2,500 2012 2013 2014 4Q15 (Annualized) Wholesale Borrowings Profile Senior Debt Subordinated Debt Total Interest Expense Interest Expense on Debt Borrowings (In Millions) Annual Interest Expense (In Millions) Wholesale borrowings
Slide 44: Interest Sensitivity Profile Is Being Actively Managed
Interest Sensitivity Profile is Being Actively Managed Moving Potential Income to Current Income 44 The movement of cash to liquid, fixed rate securities is increasing net interest income and reducing estimated asset sensitivity. * 12-month simulated impact using a static size balance sheet and a pa
Slide 45: Deconstructing Interest Rate Sensitivity: Deposit Repricing
45 Deconstructing Interest Rate Sensitivity Deposit Repricing • In addition to changes in interest-bearing deposit rates, ZION assumes large movements from noninterest-bearing demand deposit products to interest-bearing deposit products as interest rates change Assumptions regarding the reaction of
Slide 46: Deconstructing Interest Rate Sensitivity: Asset Repricing
Deconstructing Interest Rate Sensitivity Asset Repricing 46 Earning Asset Basis Volume Investments Fed Funds $ 6.7 Prime 1.9 Loans LIBOR 13.2 Prime 6.9 Swaps & Rate Floors1 (4.4) Net repricing < six months $24.3 • Approximately 44% of earning assets (net) reprice within six months • The movement of
Slide 47: Capital Management: Opportunity for Improved Shareholder Payout
47 Source: SNL Financial; most recent available data. Capital Management Opportunity for Improved Shareholder Payout ZION capital ratios are among the highest while capital return is the lowest among peers Our focus on revenue improvements and risk positioning are designed to improve our return on c
Slide 48: Working Toward Improved CCAR Stress Test Result
Actively working toward an improved result in the annual CCAR stress tests Expected Improvements: • CDO Sales1 • Stronger starting capital position • Higher base pre-provision net revenues Possible Headwinds: • Stress in Oil & Gas portfolio, including impact on overall classified loans • Negative in
Slide 49: Next Four Quarter Outlook Summary
Next Four Quarter Outlook Summary Relative to 4Q15 Results Financial Measure Outlook Comment Loan Balances Slightly to Moderately Increasing • Expect strengthening growth in residential mortgage (mostly short duration ARMs) and general C&I, partially offset by continued attrition from National Real
Slide 50: Agenda
Agenda 50 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 51: Substantially Completed Buildout of Risk Management Infrastructure
Substantially Completed Buildout of Risk Management Infrastructure 51 Key Takeaways: • Strong concentration risk management • Strong oversight of areas that are growing faster than expected levels, or of “hot spots” – resulting in detailed white papers and reporting to the Board • Strong subject mat
Slide 52: Enhanced and Reorganized Risk Management Staffing
Enhanced and Reorganized Risk Management Staffing • Increased risk management staffing with expertise in specific areas including: • Investments • Operations • Model management • Credit 52 2012 2016
Slide 53: 2016+ Loan Administration: Streamlined and Efficient
2016+ Loan Administration: Streamlined, Efficient, Expedites Risk Identification and Decision-Making 53
Slide 54: Risk Management Emphasis / Accomplishments
Risk Management Emphasis / Accomplishments • Further Refinements in: • Risk Appetite Framework • 1st Line of Defense • Accountability for Risk Management with EMC Performance • Implementation of “White Paper” Process: • Oil & Gas (example provided) • Main CRE asset classes completed (Multifamily, Of
Slide 55: Agenda
Agenda 55 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 56: Credit Quality Executive Summary
Credit Quality Executive Summary 56 Key Takeaways • Credit Trends are still strong by historical measures • Weakness is only noticeably present in energy lending • Net charge-offs expected to be 30-35 basis points in 2016 • Still below the through-the-cycle average for ZION • About in line with peer
Slide 57: Overall Credit Quality Trends
Overall Credit Quality Trends Credit quality ratios are solid, with NPAs+90s at 0.95% of loans; NCOs for 2016 expected to be 30-35 bps, still very low compared to peer quarterly median for the last decade of 48 bps. 57 -1% 0% 1% 2% 3% 4% 5% 6% 7% -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 1Q 0
Slide 58: Non-Energy vs. Energy Loan Performance
$0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 Classified Loans (CRE and C&I), EXCL. Energy Loans Classified Loans Classified Loan Inflows (Qtly) Credit Quality: Non-Energy Loan Performance vs. Energy Loan Performance Continued strength in non-energy classified loans, better by 20% in 2015 58 (In billions) $0.0
Slide 59: C&I Probability of Default Grade Migration
Commercial and Industrial Probability of Default Grade Migration Grade improvement reflects continued risk reduction and cautious approach 59 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 C&I Energy Grade Distribution 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec-1
Slide 60: Commercial Real Estate PD Grade Migration
Commercial Real Estate PD Grade Migration Risk reduction and grade improvement reflects continued cautious approach 60 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Nonaccrual Classified Special Mention Small Business - Auto Pass Graded Low Pass Mid Pass High Pass •
Slide 61: Consumer Lending
Consumer Lending Stability in delinquency trends and credit scores (shown on slide 86) 61 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 90+ DPD 30-89 DPD Data is based upon outstanding balances; consumer loans defined as 1-4 family mortgage, home equity credit lines, and other con
Slide 62: Reserve Coverage: Total and Excluding Energy
Reserve Coverage: Total and Excluding Energy Reserve coverage is strong relative to peers 62 -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% ZIO N A SB FIT B R F M TB KE Y CM A ST I B O K F H B A N CF G FH N C B SH EWB C SN V B B T FM ER PB C T FR C Total Allowance for Credit Losses / Loans Allowance for Credit Loss
Slide 63: Agenda
Agenda 63 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Total Energy Portfolio Deep Dive • Upstream / Exploration & Produc
Slide 64: Energy Lending: Executive Summary
Energy Lending: Executive Summary 64 Loss Content Manageable Relative to Earnings • No capital erosion expected – losses absorbed through earnings • Strong reserve / loan ratio The reserve for loan losses for the oil and gas portfolio is greater than 5% of oil and gas related loans Loan attritio
Slide 65: Energy Lending: At a Glance
Energy Lending: At a Glance 65 • O&G (“O&G”) balances represents 6.5% of total balances. • Oil & Gas balances decreased 15% during 2015. • Criticized and classified balances increased to 31% and 20%, respectively, as of 12/31/15. • During the last cycle, criticized and classified peaked at 29% and 2
Slide 66: Oil & Gas Portfolio Trends
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 4Q14 1Q15 2Q15 3Q15 4Q15 Loan Balances by Energy Segment Upstream Services Other Oil & Gas Portfolio Trends Steadily declining balance trend in upstream and energy services 66 $0 $100 $200 $300 $400 $500 Classifieds by Energy Segment In Millions In Million
Slide 67: Oil & Gas Portfolio Criticized Changes
Oil & Gas Portfolio Criticized Changes Strong resolutions offsetting much of the inflow; substantial favorable resolutions 67 • Zions is working through numerous amendments and restructurings; options include • Covenant relief in exchange for commitment reductions • Equity contributions • Workout pl
Slide 68: Oil & Gas Portfolio Key Actions to Mitigate Risk
Oil & Gas Portfolio Key Actions to Mitigate Risk 68 Following are representative key actions taken to mitigate risks in the O&G portfolio: – Active and regular discussions with borrowers about reduction of risk and deleveraging – Corporate Credit Risk in conjunction with Executive Management complet
Slide 69: Exploration & Production Executive Summary
Agenda: Exploration & Production Executive Summary 69 • Multiple “haircuts” on oil / gas values and commodity prices to arrive at borrowing base. • Semi-annual borrowing base redeterminations and sensitivity testing to ensure proper equity cushion throughout the life of the loan. • The O&G price dec
Slide 70: Example of Upstream (Reserve-Based) Underwriting
Example of Upstream (Reserve-Based) Underwriting 70 Typical Oil & Gas Reserve-Based Loan $100 - E&P company’s PV of oil & gas reserves using current NYMEX prices, discounted at a 9% rate (“PV9”) $ 90 - Apply “bank price deck” (generally ~90% of NYMEX) to determine collateral value. $ 77 - Zions’ ris
Slide 71: Zions' Price Deck vs. NYMEX Oil Futures Strip
$- $20 $40 $60 $80 $100 $120 $140 $160 M ar -0 0 Oc t- 0 0 M ay -0 1 D e c- 0 1 Ju l- 0 2 Fe b -0 3 Se p -0 3 A p r- 0 4 N o v- 0 4 Ju n -0 5 Ja n -0 6 A u g- 0 6 M ar -0 7 Oc t- 0 7 M ay -0 8 D e c- 0 8 Ju l- 0 9 Fe b -1 0 Se p -1 0 A p r- 1 1 N o v- 1 1 Ju n -1 2 Ja n -1 3 A u g- 1 3 M ar -1 4 Oc
Slide 72: Upstream Collateral Coverage Distribution
Upstream Collateral Coverage Distribution Strong collateral coverage of upstream borrowers; built to withstand further shocks 72 • Upstream commitments reduced approximately 20% during 2015 due largely to the borrowing base redetermination process • Since 12/31/14 there have been six borrowing base
Slide 73: Upstream Collateral Coverage Distribution
Upstream Collateral Coverage Distribution Strong collateral coverage of upstream borrowers; built to withstand further shocks 73 • We use multiple discounts in our underwriting process. • Unrisked Reserves, Price-Deck Adjusted: Bank Price Deck applied to unrisked, proven oil and gas reserves. • Risk
Slide 74: Upstream Deep Dive: Takeaways
Upstream Deep Dive: Takeaways 74 • Balances expected to continue to decrease during the year as borrowers control operating expenses and capital expenditures, using free cash flow for debt reduction. • Commitments also expected to decrease during 2016 given borrowing base redeterminations utilizing
Slide 75: Energy Services Lending Executive Summary
Energy Services Lending Executive Summary 75 • Low Leverage at origination • Low cash-flow leverage at origination • Low balance sheet leverage at origination: higher probability of recapitalization from investors if needed • Cash flows sensitized at underwriting; loan size based upon sensitized cas
Slide 76: Services Companies: Low Leverage
76 Services Companies: Low Leverage Very conservative cash flow leverage at underwriting, strong balance sheet capitalization • Services underwriting standards have been conservative at origination • Typical total leverage of approximately 1.5x debt / EBITDA • Aggregate services portfolio remains we
Slide 77: Segmenting the Services Portfolio
77 Segmenting the Services Portfolio Larger corporate loans vs. more granular, guarantor-supported deals • Corporate Energy Services: • Handled by dedicated team of energy service specialists • Public companies (32%) • Owned by energy service-focused private equity groups (51%), • Larger privately h
Slide 78: Oilfield Services Deep Dive
78 Oilfield Services Deep Dive • Revolving debt: • 65% of services commitments • 36% of balances • Revolver utilization was 30% • Generally borrowing base governed unless to large corporate or public companies. • Non-formula revolvers generally subject to asset coverage test or other controls • Term
Slide 79: Corporate Energy Services Deep Dive
79 Corporate Energy Services Deep Dive • Highly Impacted: • Providing completion and production services or equipment manufacturers • Typically already experiencing pressure; likely to continue to be stressed as long as commodity prices remain low • Moderately Impacted: • Offshore services and diver
Slide 80: Oilfield Services Deep Dive: Takeaways
Oilfield Services Deep Dive: Takeaways 80 • Services is actively managed by a dedicated team of oilfield service specialists in a unit formed in 1997 with strong executive management depth and experience across several historical commodity cycles. • Services underwriting standards have been conserva
Slide 81: Houston Economic Data
Stepping Back: Houston Economic Data: Unemployment remains in line with national levels; housing indicators show healthy volume and “seller’s market” inventory levels (<5 months of supply); businesses are less optimistic than on a national level 81 Source: Bureau of Labor Statistics, Bloomberg, Texa
Slide 82: Houston Commercial Real Estate Data
Houston Commercial Real Estate Data Moderate weakness realized and expected in vacancy rates; rents still above 2012 levels 82 0% 5% 10% 15% 1Q1 2 2Q1 2 3Q1 2 4Q1 2 1Q1 3 2Q1 3 3Q1 3 4Q1 3 1Q1 4 2Q1 4 3Q1 4 4Q1 4 1Q1 5 2Q1 5 3Q1 5 4Q1 5 Vacancy Rate - Houston 100 110 120 130 140 150 1Q1 2 2Q1 2 3Q1
Slide 83: Zions' Commercial Real Estate Portfolio in Texas
83 Zions’ Commercial Real Estate Portfolio in Texas Houston is approximately 3/5ths of total Texas exposure; Construction and Land Development loans in Houston have declined more than 80% from the prior credit cycle $ $100 $200 $300 $400 $500 Other Industrial Hospitality Office Retail Multifamily Co
Slide 84: The Derivative Effect: Commercial Real Estate
The Derivative Effect: Commercial Real Estate Limited expected NPAs or losses on Zions’ commercial real estate portfolio in Houston Key Risks: • Heightened supervision of 23 loans/$235MM in CRE balances among multifamily/office/hospitality in Houston, as follows: • 9 multi-family construction loans
Slide 85: The Derivative Effect: Commercial Real Estate Actions
The Derivative Effect: Commercial Real Estate Limited expected NPAs or losses on Zions’ commercial real estate portfolio in Houston Key Actions to Mitigate Risk: • Heightened supervision of the portfolio. The portfolio is monitored routinely for accurate Risk Grading, with more stress testing in 201
Slide 86: The Derivative Effect: Consumer
The Derivative Effect: Consumer Zions’ Customers in high oil and gas employment counties (HOGECs) have not experienced credit score deterioration 86 Takeaways: • Consumer loans from high O&G employment counties performing similarly to overall consumer portfolio. Nearly all of these consumer loans ar
Slide 87: Agenda
Agenda 87 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 88: Fee Income: Zions vs. Large Regional Peer Group
Fee Income: Zions vs. Large Regional Peer Group Glass half full: Zions has a substantial opportunity to increase its fee income 88 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% B O K F K E Y FIT B FH N CB S H S T I B B T C M A M T B R F HB A N A S B CF G P B C T F M E R S N V ZIO N F R C E WB C Fee Inco
Slide 89: Fee Income: Zions vs. Community Bank Peers
Fee Income: Zions vs. Community Bank Peers in Footprint Relative to other community banks, Zions’ fee income ratio is strong 89 Source: SNL Financial for the most recent 12 months; for ZION it is FY2015; assets $5-$15 billion in assets headquartered in Zions’ footprint. 0% 5% 10% 15% 20% 25% 30% 35%
Slide 90: Fee Income Growth vs. Peers
Fee Income Growth vs. Peers 90 80 90 100 110 120 130 140 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 Indexed Fee Income Growth Trailing 10 Years excludes securities gains / losses 2005=100 ZION Peer Median • Zions’ fee income grew faster than peers for sev
Slide 91: Fee Income: Increased Focus Is Paying Dividends
Fee Income Increased focus is paying dividends 91 $400 $425 $450 $475 $500 2014 2015 Managed Fee Income 4% Growth In Millions • Managed fee income1 increased 4% from the year ago period • Strong growth in Treasury Management, Bankcard, Capital Markets, and Mortgage • Declines in loan fees attributab
Slide 92: Fee Income: Growth in Treasury Management
Fee Income Strong double-digit growth in treasury management partially offset by the effects of a more healthy consumer (less overdraft income) and lower loan fees 92 $0 $20 $40 $60 $80 $100 $120 $140 $160 Treasury Management Bankcard Capital Markets Mortgage Loan Fees NSF Other Managed Fee Income C
Slide 93: Support and Create Additional Value from Key Business Focus
Support and create additional value from the company’s key business focus 93 Small / Middle Market Business Retail • Focus on becoming primary personal banking relationship by improved cross sell and customer relationship analytics • Improve execution and customer experience Mortgage • Focus on jumb
Slide 94: Enterprise Retail Banking
Enterprise Retail Banking Improved coordination to capitalize on a strategic growth opportunity • 447 branches • $6 billion in loans • $21 billion in deposits • More than 800,000 consumer households • More than 290,000 small business relationships 2016 Key Initiatives • Corporate product development
Slide 95: Mortgage: 2015 Production
Mortgage 2015 A strong production year • 2015 production levels outpaced market growth by more than 10 percentage points – approximate 15% growth in market • Funding Production in Excess of $2 Billion • Up 28% from 2014 2016 Key Initiatives: • More than $2.5 billion in fundings • “Bank of Choice” fo
Slide 96: Mortgage: 2015 Highlights
Mortgage: 2015 Highlights 96 • Finishing strong: December Funding Total Exceeded $220 Million • Consistency: Each Affiliate Met Production Goal • Increased growth expectations in underserved areas where Loan Officer acquisition is underway • CB&T, Dallas, Reno, Phoenix, & Denver - 100 200 300 400 50
Slide 97: Mortgage Portfolio Performance
97 Mortgage Portfolio Performance Portfolio has grown at a compound annual growth rate of 6%2 • 1-4 family loan fundings for portfolio of $1.3 billion • First lien mortgage portfolio up $288 million (+8%) • Home equity portfolio up $98M (+4%) $ in Millions 0.9% 0.6% 0.7% 1.3% 1.0% 0.8% 0.7% 1.1% 0 1
Slide 98: Our Mortgage Advantage
Our Mortgage Advantage • Experienced leadership team – Focus on Retail production with customer interfacing originations • Focused business model – Segregated into Retail and Private Banking channels • Referral accountability – Receive and service for our bank partners and reciprocal referrals to th
Slide 99: Wealth Management
Wealth Management Unifying investment offerings under a single model • 2015 Wealth Management (WM) fee income: $28 million • Represents 6% of non-interest income • Less than 1% of current bank account holders have a WM relationship • Continued focus on consolidation, including eliminating duplicate
Slide 100: Agenda
Agenda 100 • Company Overview • Accomplishments and Strategic Outlook • Efficiency Initiative • Technology Upgrade • Financial Performance, Interest Rate Risk, Capital Management • Risk Management • Credit Quality • Energy Portfolio • Fee Income / Retail / Mortgage / Wealth Management • Wrap-Up
Slide 101: Next Two Years: A Focus on Performance
Next Two Years: A Focus on Performance Growth Through Simplification and Focus 101 • Accelerate Positive Operating Leverage • Stronger loan growth rates • Investing cash into securities to convert potential earnings into current earnings • Grow fee income • Maintain adjusted noninterest expense in 2
Slide 102: Appendix
Appendix • Risk Management • Zions Bank (Utah & Idaho) • Amegy Bank (Texas) • California Bank & Trust (California) 102
Slide 103: Risk Appetite Framework: Core Principles
Risk Appetite Framework: Core Principles 3 Lines of Defense: 1.The first line of defense: business lines 2.The second line of defense: Enterprise Risk Management 3.The third line of defense: independent assurance 5 Key Basic Concepts: 1. We take risks we assess 2. We take risks we understand 3. We t
Slide 104: CRE Limits Continue to be Reduced
104 CRE Limits Continue to be Reduced by Board Chartered Concentration Risk Committee C o m m itm en t as % o f To ta l R isk B ased C ap it al C o m m itm en t as % o f To ta l R isk B ased C ap it al 370% 300% 250% 225% 169% 0% 50% 100% 150% 200% 250% 300% 350% 400% Peak 2013 Limit 1H 2014 Limit S
Slide 105: Oil & Gas Limits Reduced by Concentration Risk Committee
105 Oil & Gas Limits Reduced by Concentration Risk Committee to Reflect Changing Risk Appetite Commi tt ed Ex p o su re a s % of T o ta l Ri sk B as ed Ca p it al Sources: Total Risk Based Capital = SNL Financial, Bank Balance and Remaining Commitment from internal data Notes: Exposures as of Date =
Slide 106: CRE Risk Hurdles
CRE Risk Hurdles – Disciplined Approach to Asset Classes and Markets 106 High highest risk; falling rents/values; rising vacancy; high historical loss content; high portfolio concentration Medium moderate risk; moderate concentration levels; specific issues addressed Low lowest risk; balanced supply
Slide 107: Zions Bank Overview
An Overview of Presented by: Scott Anderson, President and CEO February 25, 2016
Slide 108: Economic Overview: Diverse Utah Economy
Economic Overview • Utah has the nation‘s most diverse economy 10 Most Diversified Economies in the Country: Hachman Index 2015 Source: Kem C. Gardner Institute Analysis of BEA data Note: A Hachman Index value of 100 means that the distribution of employment among industries is exactly the same as t
Slide 109: Economic Overview
Economic Overview • “… some places in the U.S., like Salt Lake City and San Jose, have mobility rates as high as anywhere else in the developed world. … So if you could figure out exactly what Salt Lake City is doing right, and apply that lesson elsewhere, you might be able to get people movin’ on u
Slide 110: Economic Overview: Population
Source: Historical – U.S. Census Bureau; Projections - Utah Governor’s Office of Management and Budget Economic Overview Three million in population in 2015 3
Slide 111: U.S. Employment Growth by State
Percent Change in Employment for States: Dec 2014 to Dec 2015 U.S. Rate = 1.9% Note: Seasonally Adjusted Source: Bureau of Labor Statistics NM 0.3% UT 3.2% AZ 2.5% CA 2.9% NV 2.0% OR 2.7% TX 1.4% OK -0.5% CO 1.9% WA 2.8% ID 4.4% MT 0.5% WY -2.2% ND -4.0% SD 2.2% MN 1.5% NE 1.4% KS 0.5% IA 1.6% MO 0.
Slide 112: Economic Overview: Utah and Idaho
Economic Overview UTAH • Employment growth: 3.2% (3rd) • Unemployment rate: 3.5% (7th) • Population growth rate: 1.7% (6th) • Personal income growth: 6.3% (2nd) • Home Price Index: 7.0% increase • State Bond Rating: AAA • #1 Best Economic Outlook – American Legislative Exchange Council (ALEC) • A+ i
Slide 113: Key Initiatives at Zions Bank: Mortgage Lending
Key Initiatives at Zions Bank 1. Mortgage Lending • GOAL = Be the leading 1st and 2nd mortgage lender in Utah and Idaho • 2015 1st mortgage production - $557 million • 2016 1st mortgage target - $750 million • 2015 HECL/2nd mortgage production - $153 million • 2016 HECL/2nd mortgage target - $200 mi
Slide 114: Key Initiatives: Small Business and Middle Market
Key Initiatives at Zions Bank 2. Small Business Banking • #1 SBA lender in Utah for 22 straight years • #1 SBA lender in Idaho (Boise District) for 14 straight years • 2016 target – 10% growth ($80.3 million) • Products-per-relationship: 7.2 3. Middle Market C&I Banking • $4.1 billion portfolio • 20
Slide 115: Key Initiatives at Zions Bank: Loan and Deposit Distribution
Key Initiatives at Zions Bank Loan Portfolio Distribution Deposit Distribution (personal v. non-personal) Deposit Distribution (by product type) 9
Slide 116: Key Initiatives: National Real Estate
Key Initiatives at Zions Bank 4. National Real Estate – reduce the runoff • Portfolio balance at 12/31/12 - $3.923 billion • Projected portfolio balance at 12/31/16 - $2.023 billion • Reduce % of net runoff from 17% to 11% (2015 v. 2016) • 2015 net loan recoveries: $931,000 Annual Run-Off in Nationa
Slide 117: Key Initiatives: Practice Pathways
Key Initiatives at Zions Bank 5. Practice Pathways • On April 1, 2015 Practice Pathways commenced operations with an experienced team of professional practice bankers. The department staff of 17 individuals conducted business for nine (9) months within the Zions Bancorporation footprint. • 2015 prod
Slide 118: Key Initiatives: Non-Interest Income Growth
Key Initiatives at Zions Bank 6. Non-Interest Income Growth • 2015 non-interest income growth - $11.3 million • 2016 non-interest income growth target - $11.2 million 23.2% 76.8% Non-Interest Income Net Interest Income Income Distribution 2014 24.2% 75.8% Non-Interest Income Net Interest Income Inco
Slide 119: We Haven't Forgotten Who Keeps Us in Business
WE HAVEN'T FORGOTTEN WHO KEEPS US IN BUSINESS® ZIONS BANK. ‘division of 2B, NA. Member FDIC —_—$_—_—_————
Slide 120: Amegy Bank Update
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Amegy Bank Update Presented by Steve Stephens, President & CEO Zions Bancorporation Investor Conference February 25, 2016
Slide 121: Texas Economy: Amegy Footprint Region GDP
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Houston, Dallas and San Antonio make up 75% of Texas GDP. 121 Texas Economy: Amegy Footprint Region GDP 2010 GDP 2014* % Change Houston $400 billion $517 billion 29% Dallas $379 billion $447 billion 18% San Antonio $80 billion $96 billion 20% Tex
Slide 122: Texas Economy: Industries Driving GDP Growth
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Industries driving GDP growth Energy Education and health services Trade, transportation and utilities Professional and business services Leisure and hospitality Manufacturing Financial activities Information and technology Hous
Slide 123: Houston Economy: We've Been Here Before
2016 Amegy Bank, a division of ZB, N.A. Member FDIC 123 Houston Economy: We’ve Been Here Before 0 20 40 60 80 100 120 140 160 1.5 1.8 2.0 2.3 2.5 2.8 3.0 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 WTI ($/bbl) Jobs (millions) Source: U.S. Energy Information Administration and Texas Workf
Slide 124: Houston Economic Outlook
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Estimation of 56,000 energy related job losses for the cycle. 2016 forecast of 22,000 net jobs led by healthcare and nondurable manufacturing. Barclay’s expects North American exploration budgets to fall at least 27% this year. The U.S. Energ
Slide 125: Amegy Strategic Drivers: Revenue Diversification
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Over $1.2 billion in cumulative loan growth generated in 2014 and 2015 exclusive of energy and construction CRE lending Successful diversification through Mortgages Term real estate Non-energy commercial Small business and retail bankin
Slide 126: Amegy Strategic Drivers: San Antonio Region
2016 Amegy Bank, a division of ZB, N.A. Member FDIC Amegy Bank San Antonio grew loans from $375 in 2013 million to $616 million in 2015. (Up 64%) 75% of the loan portfolio is C&I lending, private banking and business banking. Non-interest fee income grew $3.4 million in 2013 to $5.1 million in
Slide 127: Amegy Strategic Drivers: Talent Optimization and Expense Management
2016 Amegy Bank, a division of ZB, N.A. Member FDIC 127 Amegy Bank Strategic Drivers: Talent Optimization and Expense Management Influencing the enterprise Amegy senior bankers are engaged in the transformation of the Enterprise and contributing in leadership roles. Mortgage / Private Banking I
Slide 128: California Bank & Trust Analyst Day
California Bank & Trust Analyst Day David Blackford, CEO February 2016 128
Slide 129: California's Economic Engine
California’s Economic Engine Gross State Product = $2.3 trillion, 13% of total US economy1 • Measured independently, CA’s GDP would rank as 8th largest in the world • State attracts 57% of all Venture Capital investment $2 • 5 of top 10 public universities in CA 3 • Increasing base of established te
Slide 130: Focus is on Coastal California Markets
Focus is on Coastal California Markets Dec. 2015 (1) Unemploy- ment Rate Job Growth Y over Y Statewide 5.8% 2.9% San Francisco 3.3% 3.7% Santa Clara 3.7% 4.4% Los Angeles 5.8% 2.2% Orange 4.1% 2.7% San Diego 4.7% 2.7% 1) CA Employment Development Department Economic Watch List • Slowdown in venture
Slide 131: Strategic Objectives
131 Strategic Objectives 1. Continue growth in core commercial banking and term real estate portfolio – Maintain focus on diversification and risk adjusted pricing 2. Increase 1-4 family mortgage loans from 14% of loans to >20% 3. Optimize small business/retail strategy and delivery 4. Increase cont
Slide 132: Continued Growth in C&I and Term CRE
132 1. Continued growth in C&I and Term CRE Commercial Division Loans CAGR 2010 – 2015 was 7.3% CRE Term Loans CAGR 2010-2015 was 7.9% Positioned for continued growth in 2016 assuming stable market conditions De c- 1 0 De c- 1 0 De c- 1 1 De c- 1 1 De c- 1 2 De c- 1 2 De c- 1 3 De c- 1 3 De c-
Slide 133: C&I Loan Portfolio
12/31/15 Commitments % C&I Loan Portfolio Higher Risk 3.7% Leverage 2.5% High Quality C&I Portfolio Real Estate & Rental & Leasing 17% Finance & Insurance 13% Manufact- uring 13% Health Care & Social Assistance 9% Wholesale Trade 8% Constructio n 7% Profess- ional, Scientific, & Technical Services 6
Slide 134: Shift from Construction to Term Real Estate
134 70% 69% 57% 40% 33% 28% 31% 17% 28% 27% 30% 31% 43% 60% 67% 72% 69% 83% 72% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 % C R E Commitm e n ts Construction Term Focus on coastal markets 2015 secured CRE commitment
Slide 135: Diversified Commercial Real Estate Exposure
135 Diversified Commercial Real Estate Exposure Source: Real Estate Portfolio Reports SFR Construc- tion 15% ($ 640) Multi- family 24% ($998) Retail 14% ($565) Office 21% ($856) Industrial R&D 12% ($505) Other 14% ($572) Collateral (Commitments in Millions) Portfolio distribution based on “through
Slide 136: Declining Impact from Runoff Portfolios
136 Declining Impact from Runoff Portfolios $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 11-Dec 12-Dec 13-Dec 14-Dec 15-Dec $ M M FDIC/PCI Out of State SBA Liquidating portfolios are starting at lower levels, thereby creating less drag on core loan growth
Slide 137: Increase Residential Mortgage Lending
137 0 50 100 150 200 250 300 4Q Activity Increased Mortgage Application Volume 2014 2015 13 7 Portfolio declines of $123MM stabilized and then reversed 4Q 2015 with $2MM increase. 2016 projected new originations $365MM, up from $227 FY 2015. Hired experienced residential mortgage sales manager
Slide 138: Optimize Small Business/Retail Strategy and Delivery
138 3. Optimize Small Business/Retail Strategy and Delivery Continued focus on small business banking and high-net worth and mass affluent segments but with enhanced focus, management, and delivery • Brought branch and business banking statewide under management of President • Strong partnership w
Slide 139: Increase Contribution to Revenue from Core Non-Interest Income
Strong Performance in Core Categories in 2015 is expected to continue in 2016 Changes made in 2015 position the following areas for improved performance in 2016 139 4. Increase Contribution to Revenue from Core Non- Interest Income Commercial Card: +$1.6MM (+180%) Core Treasury: +$1.0MM (+7%)
Slide 140: Direct Expense Management
140 5. Direct Expense Management Strong oversight and management of direct expenses • $8.8 million y-o-y reduction in 2015 Full year 2015 efficiency ratio of 62.2% Closed and sold 15 branches since 2011 Continued investment in the bank and employees to support growth of core business units 2
Slide 141: 2016 Outlook: Positioned for Growth
141 2016 Outlook Positioned for Growth • Talented and experienced bankers with low turnover • Core loan growth should exceed 5% • Non-interest income growth is accelerating Investing in our Business • Significant expansion of mortgage lending resources • Optimizing small business/retail banking