Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation, National Association — Q3 2019 Earnings Presentation
30 slides from Zions Bancorporation N.a's earnings presentation, Oct 21, 2019
Slide 1: Third Quarter 2019 Financial Review
Third Quarter 2019 Financial Review October 21, 2019
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 regarding f
Slide 3: Third Quarter 2019 Financial Highlights
Third Quarter 2019 Financial Highlights Continued strong PPNR growth and profitability vs. year-ago period ✓ Earnings and Profitability: Diluted earnings per share increased from the year-ago period, to $1.17 in 3Q19 from $1.04 • Adjusted PPNR less Net Charge-Offs / Share was $1.69 in 3Q19, up 19% o
Slide 4: Diluted Earnings per Share
Diluted Earnings per Share EPS growth of 13% compared with the year-ago period $1.17 ▪ Diluted earnings per share increased to $1.17 in 3Q19 from $1.04 $1.08 $1.04 $1.04 in the year-ago period $0.99 ▪ The year-over-year increase was driven by a 23.9 million, or nearly 12%, reduction in average dilut
Slide 5: Adjusted Pre-Provision Net Revenue
Adjusted Pre-Provision Net Revenue(1) Year-over-year 6% improvement; Adjusted PPNR Less NCOs per share up 19% ▪ Growth primarily attributable to: ▪ Strong loan growth which produced greater interest and fees on loans ▪ Continued expense control ▪ Linked quarter improvement in Adjusted PPNR is primar
Slide 6: Tech Initiatives On the Horizon: Digital and Simplification Investments
Tech Initiatives On the Horizon: Digital and Simplification Investments Investments seek to improve the customer experience while simplifying our processes CO MM MME RE CR ICAI LA L SSMMAAL LL L AFFLUENT CO AFFLUENT CONSUMER BBUUSSI N I NEESSSS Treasury Internet Banking 2.0 2018-2019 CLIENT EXPERIEN
Slide 7: Key Objectives
Key Objectives Growth through simplification and focus ▪ Remain focused on achieving long-term positive operating leverage: ▪ Realize broad based loan and fee income growth through focus on small and medium sized enterprises, and their owners ▪ Manage noninterest expense growth linked to revenue gro
Slide 8: Balance Sheet Profitability
Balance Sheet Profitability Zions’ profitability has doubled since embarking on the efficiency initiative in 2015 Return on Assets Return on Tangible Common Equity 14.2% 14.5% 13.9% 14.2% 1.33% 1.34% 1.26% 1.25% 12.7% 1.14% 0.88% 8.4% 0.74% 7.4% 0.68% 6.2% 0.57% 5.0% 4Q14 4Q15 4Q16 4Q17 3Q18 4Q18 1Q
Slide 9: Net Interest Income
Net Interest Income Loan growth and interest rate environment driving net interest income performance Net Interest Income ▪ Up less than 1% over the year-ago period, to $567 Net Interest Margin million ▪ Down less than 1% versus the prior quarter driven ($mm) primarily by declines in loan yields and
Slide 10: Average Loan and Deposit Growth
Average Loan and Deposit Growth Solid loan growth in a lower rate environment, while deposits remain a source of strength ▪ Average loans held for investment: +8% over the year-ago period ▪ Average deposits: +3% over the year-ago period Average Total Loans Average Total Deposits Loan Yields Cost of
Slide 11: Yields and Costs
Yields and Costs NIM compression reflects the effect of the lower rate environment Net Interest Margin (NIM) ▪ Relative to the prior quarter, the net interest 5.0% margin was down 6 bps to 3.48% Loan Yield ▪ Lower loan yields due to declines in short-term 4.0% interest rates and maturing loans rolli
Slide 12: Loan Growth
Loan Growth Solid loan growth achieved in certain targeted growth categories Year-over-Year Loan Balance Growth Year over year: Total Loans: +7% ▪ Loan growth predominantly in C&I, Owner Occupied, Municipal, 50% Note: circle size indicates Term CRE and Residential Mortgage (1-4 Family) Municipal, re
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity Zions is actively managing balance sheet sensitivity Earnings at Risk Sensitivity (1) ▪ Actively reducing interest rate sensitivity by adding interest rate hedges +200 +100 -100 ▪ $4.6 billion of interest rate swaps as of 3Q19 -200 bps bps bps bps ▪ Additional floors and sw
Slide 14: Noninterest Income
Noninterest Income Strong growth of 11% over the prior year primarily due to continued robust lending activity Customer-Related Fee Income (1) ($mm) ▪ Customer-related fee income up 11% from the year $140 $131 $130 ago period due to strength in: $126 $122 ▪ Capital markets product sales ▪ Lending ac
Slide 15: Noninterest Expense
Noninterest Expense Focus on “Simple, Easy, Fast, Safe” expense controls and streamlining ▪ Total noninterest expense declined 1%, and adjusted ($mm) noninterest expense was flat to the year-ago period due to: ▪ Declines in FDIC premiums, other real estate expense and $431 $430 $424 $423 $420 $420 $
Slide 16: Efficiency Ratio
Efficiency Ratio Substantial improvement since 2014 driven by both revenue growth and expense control 74.1% ▪ The efficiency ratio(1) in 3Q19 was 57.3%, an 69.6% improvement when compared to the year ago period and the prior quarter 64.5% ▪ Adjusted net revenue growth: +2% from the year 61.6% ago pe
Slide 17: Credit Quality
Credit Quality Exceptional credit quality ▪ Key Credit Metrics: Credit Quality Ratios ▪ Classified loans (1.6% of loans) 4.00% ▪ Increased 2% from the prior year ▪ Increased 4% from the prior qtr 3.50% ▪ NPAs+90(1) (0.5% of loans + OREO) 3.00% ▪ Decreased 25% from the prior year ▪ Decreased 10% from
Slide 18: Current Expected Credit Losses (CECL) Estimates
Current Expected Credit Losses (CECL) Estimates Allowance to be affected by several key drivers – and will likely increase earnings volatility There are several key drivers that will affect the allowance upon adoption of CECL: ▪ Relatively benign consensus “reasonable and supportable” (R&S) economic
Slide 19: Financial Outlook (3Q 2020E vs 3Q 2019A)
Financial Outlook (3Q 2020E vs 3Q 2019A) Outlook Comments ▪ Moderate growth reflects activity in the next twelve months which may not be as Loan Balances Moderately Increasing strong as that experienced in the past twelve months Net Interest Income Slightly ▪ Assumes rate cuts generally consistent w
Slide 20: Appendix
Appendix ▪ Financial Results Summary ▪ Profitability compared to A/A- rated peer banks ▪ Asset Quality compared to A/A- rated peer banks ▪ Capital and Liquidity Ratios compared to A/A- rated peer banks ▪ Stress Test Capital Consumption in Severely Adverse Stress Scenario ▪ Impact of Warrants ▪ Loan
Slide 21: Financial Results Summary
Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) September 30, June 30, March 31, 2019 2019 2019 Earnings Results: Diluted Earnings Per Share $ 1.17 $ 0.99 $ 1.04 Net Earnings Applicable to Common Shareholder
Slide 22: Profitability
Profitability Profitability has improved markedly and is in line with A and A- rated peer banks(1) Adjusted ROA PPNR / RWA Net Income, less securities gains, less net charge-offs plus provision A/A- rated banks: 1.6% Strongest Quartile 2.5% 1.4% 2.0% 1.2% A/A- rated 1.0% 1.5% banks: Weakest 0.8% Qua
Slide 23: Asset Quality
Asset Quality Recent net charge-offs have been substantially better than A/A- rated peer banks NPAs + 90DPD / Loans + OREO LTM NCOs / Avg Loans 1.25% 1.20% 1.00% A/A- rated banks: Worst Quartile 0.95% 0.75% 0.70% A/A- rated banks: Worst Quartile 0.50% 0.45% A/A- rated banks: Best Quartile 0.25% 0.20
Slide 24: Capital and Liquidity Ratios
Capital and Liquidity Ratios Capital and liquidity ratios are better than A/A- rated peer banks CET1 Ratio Loans, as a Percent of Deposits A/A- rated banks: A/A- rated banks: 12% Strongest Quartile 100% Weakest Quartile 95% 10% 10.4% 90% 8% A/A- rated banks: 85% A/A- rated banks: Weakest Quartile 86
Slide 25: Stress Test Results
Stress Test Results CET1 Ratio deterioration in the severely adverse stress scenario has improved ▪ Change in CET1 Ratio: Pre-to-Post-Stress Delta – Strong improvement from 2014 to 2019 ▪ Improvement primarily due to resilience of PPNR, in part due to improved overall profitability and securities po
Slide 26: Impact of Warrants
Impact of Warrants Potential dilution is expected to be slight to moderate, depending upon future stock price ▪ Zions has 29 million warrants (Nasdaq: ZIONW) outstanding which are currently in the money and expire on May 22, 2020 ▪ Dilution is calculated using the treasury method of accounting, whic
Slide 27: Loan Growth by Bank Brand and Loan Type
Loan Growth by Bank Brand and Loan Type Year over Year Loan Growth (3Q19 vs. 3Q18) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 204 (22) 267 (113) 117 (28) (34) - 391 Owner occupied (ex-NRE) 60 136 9 139 38 (6) 11 - 387 Energy (Oil & Gas) (2) 355 - 4 - 3 (1)
Slide 28: Deposit Growth by Account Type
Deposit Growth by Account Type Year-over-Year Average Balance Deposit Growth: +3% Deposit Growth by Product 3Q19 vs. 3Q18 (QTD Avg.) Interest Checking, 25.0% Time, 20.7% 20.5% 20.0% Growth Rate (%) 15.0% 10.0% Money Market, 5.0% 1.2% Noninterest Bearing Demand, -2.6% 0.0% $(5) $- $5 $10 $15 $20 $25
Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (Amounts in millions) 3Q19 2Q19 1Q19 4Q18 3Q18 Efficiency Ratio Noninterest expense (GAAP) (1) (a) $ 415 $ 424 $ 430 $ 420 $ 420 Adjustments: Severance costs 2 1 - 2 2 Other real estate expense (2) - (1) - 1 Debt extinguishment cost - - - - - Amortization of core depo
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ In millions except per share amounts 3Q19 2Q19 1Q19 4Q18 3Q18 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense (1) $415 $424 $430 $420 $420 LESS adjustments: Severance costs 2 1 - 2 2 Other real estate expense (2) - (1) - 1 Debt extinguishment cost - -
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