Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Q2 2020 Earnings Presentation
31 slides from Zions Bancorporation N.a's earnings presentation, Jul 20, 2020
Slide 1: Second Quarter 2020 Financial Review
Second Quarter 2020 Financial Review July 20, 2020
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information These materials include “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumpt
Slide 3: Overview of How the Pandemic has Affected Zions Bancorporation
Overview of How the Pandemic has Affected Zions Bancorporation Reduced earnings, strong capital, more than 10k new customers primarily from PPP loans, slow down of technology upgrades ✓ Earnings reduced due to reserve build, pension charge ▪ Pre-Provision Net Revenue has increased modestly as revenu
Slide 4: Second Quarter 2020 Financial Highlights
Second Quarter 2020 Financial Highlights Well-positioned to withstand downturn; quarterly earnings adversely impacted primarily by provision for credit losses ✓ Earnings and Profitability: ✓ Credit quality (excluding PPP Loans): ▪ $0.34 diluted earnings per share compared to $0.99 in 2Q19 ▪ 0.7%: ra
Slide 5: Diluted Earnings Per Share
Diluted Earnings Per Share Continued adverse impact on EPS primarily from the COVID-19 related increase in the provision for credit losses Diluted Earnings per Share Notable Items: ▪ In 2Q20: $1.17 ▪ $0.13 per share adverse impact from pension termination-related expense $0.99 ▪ $0.06 per share adve
Slide 6: Adjusted Pre-Provision Net Revenue
Adjusted Pre-Provision Net Revenue 2% growth year-over-year from increases in loans and deposits, deposit pricing discipline and ongoing expense control Adjusted PPNR(1) Adjusted PPNR and Provision for Credit Losses ($ millions) ($ millions) $305 $309 $309 $294 $299 $300 $299 $300 $294 $275 $275 $25
Slide 7: Loss-Absorbing Capital
Loss-Absorbing Capital Common Equity Tier 1 capital plus the allowance for credit loss is strong relative to peers Common Equity Tier 1 Capital Ratio CET1 Capital and Allowance for Credit Losses (1) / Risk Weighted Assets 1.5% Peers as of 2Q20 CET1 Ratio ACL/RWA Peers as of 1Q20 12.4% 12.4% 1.0% 1.6
Slide 8: Credit Quality
Credit Quality Zions entered the COVID-19 economic downturn with very clean credit quality Key Credit Metrics: All Ratios Exclude Credit Quality Ratios ▪ Classified loans (3.1%) PPP Loans 14.00% ▪ NPAs+90(1)/loans + OREO ( 0.74%) 12.00% ▪ Annualized net loan losses: ▪ 0.25% of average loans in 2Q20
Slide 9: Credit Quality: Nonperforming Assets and Loan Loss Severity
Credit Quality: Nonperforming Assets and Loan Loss Severity Due to strong collateral, when problems arise Zions generally experiences less severe loan losses NPAs+90DPD / Loans+OREO Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Last 12 Months Average Five Year Average (3Q15 –
Slide 10: Loan Portfolio – Select Industries with Elevated Risk Related to COVID-19 (C19ER)
Loan Portfolio – Select Industries with Elevated Risk Related to COVID-19 (C19ER) C19ER select industries are believed to be at higher risk, with strong collateral coverage and substantial amount of PPP loans Select Industries with elevated risk (C19ER) ▪ Broad group of industries with significant g
Slide 11: Loan Portfolio – Trends In Balance, Credit Quality and Line Utilization
Loan Portfolio – Trends In Balance, Credit Quality and Line Utilization We have experienced generally stable credit quality trends outside of C19ER and Oil and Gas loans (data excludes PPP loans) Loan Balances by Portfolio and Weighted Average Risk Grades Classified and Nonaccruals 10.0 12.3% $42.1
Slide 12: Summary of Paycheck Protection Program Loans
Small Business and Mortgage Update Summary of Paycheck Protection Program Loans Zions ranked 9th in PPP loans approved as of June 30th and is ranked 37th in U.S. Deposit Market Share(1) Loans Approved Total SBA PPP Loans Zions PPP Loans % of Total ▪ Median size: <$35,000 ▪ Average size: <$150,000 ▪
Slide 13: Mortgage Origination Update
Small Business and Mortgage Update Mortgage Origination Update Successes amid COVID-19 pandemic: Very Strong Mortgage Income 2019 2020 Record Funding $1.03 b ▪ Roll-out ▪ Enhanced Digital Fulfillment Process ▪ 86% of all applications taken digitally $655 m ▪ 25% reduction in turn-time allowing 22% 3
Slide 14: Net Interest Income
Net Interest Income Changes in interest rates and balance sheet composition impact net interest income performance Net Interest Income Net Interest Margin Net Interest Margin 1Q20 2Q20 ($ millions) Wholesale $569 $567 Fund and $559 $563 Interest Other $548 MM and Bearing Securities Deposits Loan Yie
Slide 15: Average Loan and Deposit Growth
Average Loan and Deposit Growth Achieving slight non-PPP loan growth year-over-year in a slower economic environment, deposit growth aided by PPP funding Average Total Loans Average Total Deposits Loan Yields Cost of Total Deposits ($ millions) ($ millions) $65,000 $65,000 Average Total Loans Exclud
Slide 16: Interest Rate Sensitivity
Interest Rate Sensitivity Zions is actively managing balance sheet sensitivity Earnings at Risk Sensitivity (1) ▪ Interest rate sensitivity reduced through interest rate hedges −200 bps −100 bps +100 bps +200 bps ▪ $3.4 billion: Loan interest rate swaps as of Q2 2020 1 13% In the down 100 and ▪ $4.5
Slide 17: Noninterest Income
Noninterest Income Unchanged from the prior year, with strength in mortgage offset by lower activity-based fees Customer-Related Fee Income (1) Customer-related fee income unchanged from the year ago period due to: $140 $143 ($ millions) $134 ▪ Loan related fees and income, up 59% from prior year $1
Slide 18: Noninterest Expense
Noninterest Expense Continued focus on expense controls and streamlining Noninterest Expense ▪ Total noninterest expense increased 1% over the prior year period ($ millions) ▪ Total Adjusted noninterest expense declined 5% over $472 the prior year period $435 $430 ▪ Notable items in 2Q20 $424 $423 $
Slide 19: Allowance for Credit Loss
Allowance for Credit Loss Significant increase in reserve since January 1, 2020 due to expected economic impact related to COVID-19 % of Wtd Avg Loan Segment / 2Q20 Remaining 1/1/2020 1Q20 2Q20 Notes Security Type Balance Life (years) Excluding PPP ACL / Loans ACL / Loans ACL / Loans Commercial 45%
Slide 20: Appendix
Appendix ▪ Financial Results Summary ▪ Balance Sheet Profitability and Efficiency ▪ Loan Growth ▪ Technology Initiatives ▪ Oil & Gas Portfolio Credit Quality and Portfolio Details ▪ GAAP to Non-GAAP Reconciliation 20
Slide 21: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) June 30, March 31, December 31, 2020 2020 2019 Earnings Results: Diluted Earnings Per Share $ 0.34 $ 0.04 $ 0.97 Net Earnings Applicable to Common Shareholders
Slide 22: Balance Sheet Profitability
Balance Sheet Profitability Zions’ profitability in 2Q20 continued to be impacted by the increase in the provision for credit losses due to the expected economic impact of the COVID-19 pandemic Return on Assets Return on Tangible Common Equity 14.5% 14.2% 1.34% 1.25% 12.7% 1.14% 11.8% 1.04% 0.88% 8.
Slide 23: Efficiency Ratio
Efficiency Ratio Substantial improvement since 2014 driven by both revenue growth and expense control ▪ The efficiency ratio(1) in 2Q20 was 57.3%, compared to 59.0% in the year ago period ▪ 74.1% Long term: committed to further improvement of the efficiency ratio 69.6% 64.5% 61.6% 61.3% 59.0% 57.8%
Slide 24: Loan Growth
Loan Growth Solid loan growth achieved in certain targeted growth categories Year-over-Year Loan Balance Growth Total Loans: +13% 80% Note: Circle size indicates 70% relative proportion of loan portfolio as of 2Q20 60% Growth Rate: Year over Year 50% 40% Municipal, 23.1% 30% Term CRE, Owner Occupied
Slide 25: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (2Q20 vs. 2Q19) (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Other Total C&I (ex-Oil & Gas) (701) (332) 216 (170) 71 (70) (32) - (1,018) SBA PPP 1,686 1,302 1,576 707 594 469 356 - 6,690 Owner occupied (2) 43
Slide 26: Average Commercial Loans
Average Commercial Loans Commercial loans excluding PPP Loans experienced 3% growth year-over-year Average Commercial Loans Excluding PPP Loans Loan Yields ($ millions) $35,000 $30,000 $25,000 4.94% 4.83% 4.65% 4.53% $20,000 4.05% $15,000 2Q19 3Q19 4Q19 1Q20 2Q20 26
Slide 27: We Have Furthered our Digital Capabilities Meaningfully Over the Last Several Years
We Have Furthered our Digital Capabilities Meaningfully Over the Last Several Years COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking 2.0 2018-2019 Online and Mobile Banking Replacement 2021-2022 $10B Demand Deposits 625,000 consumer accounts $100MM Fee Income 125,000 business ac
Slide 28: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality Oil and gas loans account for $2.5 billion or 5% of total loans, excluding PPP Loans Excluding PPP Loans and as of June 30, 2020: All Ratios Exclude ▪ Annualized NCOs equaled 0% of loans PPP Loans Oil and Gas 35% ▪ Classified loans equaled 8.8% of loans Key Credit Qual
Slide 29: Oil & Gas Portfolio
Oil & Gas Portfolio Significant realignment since downturn ▪ Services, which accounted for bulk of charge offs in the last cycle, Portfolio Trends accounts for 17% of the portfolio versus 42% going into the previous 3,500 14.0 Probibility of Default Risk Grade cycle (Dec 2014) 3,000 12.0 ▪ Using cur
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 2Q20 1Q20 4Q19 3Q19 2Q19 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 430 $ 408 $ 472 $ 415 $ 424 Adjustments: Severance costs - - 22 2 1 Other real estate expense - - - (2) - Debt extinguishment cost - - - - - Amortization of core depos
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 2Q20 1Q20 4Q19 3Q19 2Q19 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $430 $408 $472 $415 $424 LESS adjustments: Severance costs - - 22 2 1 Other real estate expense - - - (2) - Restructuring costs - 1 15 - - Pe