Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q1 2016 Earnings Presentation
28 slides from Zions Bancorporation N.a's earnings presentation, Apr 25, 2016
Slide 1: First Quarter 2016 Financial Review
April 25, 2016 First Quarter 2016 Financial Review
Slide 2: Forward-Looking Statements
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 Litigation Reform Act of 1995. Statements based on historical data are no
Slide 3: Chairman’s Message: First Quarter Highlights
Chairman’s Message 3 First Quarter Highlights: Strong 21% pre-provision net revenue growth over year-ago period Strong loan growth (7.6% annualized), building on the prior quarter’s strength Achieving positive operating leverage: solid progress in 1Q16, expect continuation throughout 2016 Tr
Slide 4: Pre-Provision Net Revenue
Pre-Provision Net Revenue 4 • Pre-Provision Net Revenue has strengthened measurably over the past year, up 21% y-o-y, continuing to build on positive momentum • This persistent improvement has been principally driven by intense focus on expense control and higher return on liquid assets due to activ
Slide 5: Total Loan and Deposit Growth
$36,000 $37,750 $39,500 $41,250 $43,000 1Q15 2Q15 3Q15 4Q15 1Q16 Total Loans 35% 40% 45% 50% $44,000 $46,000 $48,000 $50,000 $52,000 1Q15 2Q15 3Q15 4Q15 1Q16 Total Deposits Total Deposits (left) Non-Interest Bearing Deposits as a % of Total (right) Total Loan and Deposit Growth 5 In Millions In Mill
Slide 6: Efficiency Ratio
Efficiency Ratio 6 • The efficiency ratio improved to 68.5% (1Q16), from 71.9% a year ago • We remain committed to drive the efficiency ratio to: • Less than or equal to 66% for 2016 • The low 60s for 2017 71.9% 71.1% 69.1% 69.6% 68.5% 60% 65% 70% 75% 1Q15 2Q15 3Q15 4Q15 1Q16 Noninterest Expenses as
Slide 7: Credit Quality: Overall Credit Quality Remains Generally Strong
Credit Quality: Overall Credit Quality Remains Generally Strong 7 -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 1Q15 2Q15 3Q15 4Q15 1Q16 Key Credit Quality Ratios Classifieds / Loans Non-O&G Classifieds / Loans Nonperforming Assets / Loans Net Charge-offs / Loans Note: the Net Charge-offs / Loa
Slide 8: Zions’ 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 9: Zions’ Major Announcement: Financial Targets
Financial Metric Category 2H15 Goal 2H15 Actual Result FY16 Goal FY16 Result FY17 Goal FY17 Actual Result Adjusted noninterest expense Hold to below $1.6 billion 100% Hold to below $1.6 billion On Track Slightly above $1.6 billion TBD Efficiency Ratio ≤70% 69.4% ≤66% On Track Low 60s TBD Gross cost
Slide 10: Financial Results
Financial Results 10 Three Months Ended (Dollar amounts in millions, except per share data) March 31, 2016 December 31, 2015 March 31, 2015 Earnings Results: Diluted Earnings Per Share 0.38 0.43 0.37 Net Interest Income 453 449 417 Provision for Loan Losses 42 23 (1) Noninterest Income 117 119 117 N
Slide 11: Revenue: Net Interest Income
Revenue: Net Interest Income Moving meaningfully higher after a period of stability 11 417 424 425 449 453 $400 $420 $440 $460 $480 1Q15 2Q15 3Q15 4Q15 1Q16 Net Interest Income In Millions • Net interest income growth continued its positive trajectory, increasing nearly 8.5% over the year-ago period
Slide 12: Active Management of the Balance Sheet: Securities Portfolio Growth
$0 $2,000 $4,000 $6,000 $8,000 $10,000 1Q15 2Q15 3Q15 4Q15 1Q16 Total Securities (end of period balances) Other Securities Municipal Securities Small Business Administration Loan-Backed Securities Agency Securities Agency Guaranteed MBS Securities Active Management of the Balance Sheet: Securities P
Slide 13: Loan Growth by Type
Loan Growth by Type 13 Source: NRE = National Real Estate Group, a division of Zions Bank that focuses on small business loans with low loan-to-value ratios, generally in line with SBA 504 program parameters. Note: Other loans includes municipal and other consumer. C&I (ex-O&G) Owner Occupied (ex-NR
Slide 14: Net Interest Income Drivers
Loans 75% Securities 16% Cash 9% Earning Asset Mix Loans 75% Securities 9% Cash 15% CDOs 1% 3.22% 3.18% 3.11% 3.23% 3.35% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 1Q15 2Q15 3Q15 4Q15 1Q16 Net Interest Margin (NIM) Net Interest Income Drivers Loan yield has been relatively stable; margin higher in part due to m
Slide 15: Revenue: Fee Income
$90 $100 $110 $120 1Q15 1Q16 Customer-Related Fee Income 15 7% Growth In Millions • Customer-related fee income increased 7% from the year ago period • Key components of fee income: • Loan Fees: up 38% • Bankcard: up 17% • Treasury management: up 3% • Mortgage fees declined by 34%, principally attri
Slide 16: Oil & Gas (O&G) Portfolio Trends
$0 $100 $200 $300 $400 $500 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Classifieds by O&G Segment $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Loan Balances by O&G Segment Upstream Services Other Oil & Gas (O&G) Portfolio Trends Steadily declining balance trend in O&G services
Slide 17: Understanding Unfunded O&G Commitments
$0 $200 $400 $600 $800 High Pass Mid Pass Low Pass Special Mention Classified Unfunded O&G Commitments by Loan Grade 17 “Criticized” In Millions • Approximately 80% of the unfunded commitments are in the “pass” grade category, while 20% of the loans are graded “criticized” (which includes “special m
Slide 18: Payment Status: Adversely Graded O&G Loans
$0 $100 $200 $300 $400 $500 $600 $700 $800 Special Mention Classified Non Accrual Payment Status Current Non current Payment Status: Adversely Graded O&G Loans Most of the adversely graded loans remain current on payments 18 • Virtually all Special Mention balances are current • 96% of Classified ba
Slide 19: Updated O&G Loss Expectation
• O&G Loan Loss Expectation • O&G loan losses are estimated to be in the $100 million area in 2016 • Losses are likely to emerge beyond 2016, but are expected to be manageable • Heading into this cycle, Zions’ lack of second lien or mezzanine debt extended to the O&G industry is a significant source
Slide 20: 2016-2017 Objectives: Growth Through Simplification and Focus
2016-2017 Objectives: Growth Through Simplification and Focus 20 • Accelerate Positive Operating Leverage • Accelerate loan growth rates • Invest cash into medium duration securities • Maintain mid-single digit growth rates in core fee income: • Maintain non-interest expenses at or below $1.6 billio
Slide 21: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary Relative to 1Q16 Results Topic Outlook Comment Loan Balances Increasing • Expect strengthening growth in residential mortgage (mostly short duration ARMs) and general C&I, partially offset by continued attrition from National Real Estate and O&G portfolios Net Interest
Slide 22: Appendix
Appendix 22 O&G Portfolio Detail Houston CRE Portfolio: Sub-type, cash flow coverage, and collateral coverage High Oil & Gas Employment Counties: Consumer credit scores Loan Growth by Bank Brand and Type GAAP to Non-GAAP Reconciliation
Slide 23: O&G Portfolio Detail
O&G Portfolio Detail 23 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
Slide 24: Zions’ Commercial Real Estate Portfolio in Texas
24 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 Industrial Land Hospitality Other Office Retail Multifami
Slide 25: 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 25 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 26: High Oil and Gas Employment Counties: Consumer Credit Scores
Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others 5% 606 642 600 640 6 2 597 636 9 6 10% 643 677 640 677 3 0 639 674 4 3 50% 753 778 749 781 4 -3 749 780 4 -2 2016 Q1 2015 Q1 1-Year Difference 2014 Q1 2-Year Difference Data includes consumer loans with FICO scores refr
Slide 27: Loan Growth by Affiliate and Type
Loan Growth by Affiliate and Type 27 Source: Company documents; NRE = National Real Estate Group, a division of Zions Bank that focuses on small business loans generally underwritten using SBA 504 guidelines. Other loans includes Municipal and other consumer. Linked Quarter Loan Growth (all values i
Slide 28: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 28 (Amounts in thousands) 1Q16 4Q15 3Q15 2Q15 1Q15 Efficiency Ratio Noninterest expense (GAAP) 1 (a) $ 395,573 $ 397,353 $ 391,280 $ 398,997 $ 392,977 Adjustments: Severance costs 3,471 3,581 3,464 1,707 2,253 Other real estate expense (1,329) (536) (40) (445) 374 Pro