Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Q3 2023 Earnings Presentation
37 slides from Zions Bancorporation N.a's earnings presentation, Oct 18, 2023
Slide 1: Third Quarter 2023 Financial Review
Third Quarter 2023 Financial Review October 18, 2023
Slide 2: Forward-Looking Statements; Use of Non-GAAP Financial Measures
Forward-Looking Statements; Use of Non-GAAP Financial Measures Forward Looking Information This earnings presentation includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements, often accompanied by words such as “may,” “mi
Slide 3: Select Themes
Select Themes Third quarter results reflect continued customer deposit growth, stable net interest income, and strong credit performance Customer deposit growth led by relationship-focused bankers Customer deposits grew $3 billion, or 5% including recapture of some off-balance sheet deposits T
Slide 4: Diluted Earnings Per Share
Diluted Earnings Per Share Stable net interest income and reduced noninterest expense resulted in flat earnings per share vs. prior quarter Diluted Earnings per Share Notable Items1: $1.84 3Q23: $1.40 No items with impact > $0.05 per share during $1.33 the quarter $1.11 $1.13 2Q23: $(0.07) per s
Slide 5: Third Quarter 2023 Financial Highlights
Third Quarter 2023 Financial Highlights Earnings consistent with prior quarter; capital and credit quality remain strong Earnings and Profitability: Loans and Deposits: vs. 2Q23, growth rates not annualized $1.13 diluted earnings/share, compared to $1.11 0.0% change in period-end loan balanc
Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR declined 8% from the prior quarter due to lower adjusted revenue Adjusted PPNR(1) Linked quarter (3Q23 vs. 2Q23): ($ millions) Adjusted PPNR declined 8% primarily from: $420 A decrease of 3% in adjusted revenue from reduced $351 nonintere
Slide 7: Net Interest Income (NII) and Net Interest Margin (NIM)
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Flat net interest margin as asset repricing offset funding cost pressure Net Interest Income ($ millions) Net Interest Margin Linked quarter (3Q23 vs. 2Q23): $720 5.00% Net interest income declined 1% $663 $679 Interest earned on loans
Slide 8: Net Interest Margin (NIM)
Net Interest Margin (“NIM”) Higher asset yields and lower short-term borrowings offset higher deposit costs vs. 2Q23 After declining early in the year, the net interest margin is showing stability Loan yields have steadily increased as rates have risen Year-over-year, increased earning asset yie
Slide 9: Noninterest Income and Revenue
Noninterest Income and Revenue Total customer-related noninterest income decreased 3% vs. 2Q23 and was stable vs. the year-ago period; Adjusted Revenue decreased 3% vs. 2Q23 and decreased 8% from the year-ago period Customer-Related Noninterest Income (1) Total Revenue (2) ($ millions) ($ millions)
Slide 10: Noninterest Expense
Noninterest Expense Adjusted noninterest expense was flat vs. 2Q23 and was up 3% from the year-ago period Noninterest Expense (NIE) ($ millions) $512 $509 $508 Total noninterest expense decreased $12 million, compared to the $496 $494 $493 $479 $477 $472 $471 prior quarter, primarily due to the one-
Slide 11: Average Loan and Deposit Balances
Average Loan and Deposit Balances Average loans increased slightly in 3Q23 vs. 2Q23; average deposits increased 9% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) Average Noninterest-bearing Deposits $100.0 $100.0 Average Interest-bear
Slide 12: Deposit Balance and Borrowing Trends
Deposit Balance and Borrowing Trends Ending deposit balances grew $1 billion vs. 2Q23; customer deposit balances increased $3 billion 3Q23 total funding costs increased 22 basis points as customer deposits replaced wholesale funding Brokered deposits were managed down by $2 billion during the quar
Slide 13: Impact of Noninterest-bearing (NIB) Demand Deposits
Impact of Noninterest-bearing (NIB) Demand Deposits The increased value of noninterest-bearing deposits has exceeded the decline in volumes Average Noninterest-bearing Demand Impact of NIB on NIM 1 ($ billions) Noninterest-bearing demand deposits have $50.0 declined as interest rates have risen, tho
Slide 14: Securities & Money Market Investments
Securities & Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio The investment portfolio is designed to be a storehouse of balance sheet liquidity and Money Market Investments 3Q23 period-end securities declined $879 million. Principal and (period-end bal
Slide 15: Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis
Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis Incorporating recent deposit behavior into interest rate sensitivity analysis suggests reduced asset sensitivity Simulated Net Interest Income Sensitivity(1) Interest Rate Impacts -200 bps -100 bps +100 bps +200 bps on Net Interest
Slide 16: Credit Quality
Credit Quality Net charge-offs remain low, with trailing 12 months net charge-offs at just 0.04% of average loans Key Credit Metrics Credit Quality Ratios 1.4%: Classified loans/loans Classified / Loans 2.5% NPAs + 90 / Loans + OREO Classified balance remained flat in 3Q23 from 2Q23 ACL / Loans
Slide 17: Disciplined Commercial Real Estate Growth
Disciplined Commercial Real Estate Growth Commercial real estate loan growth lags peers due to continued exercise of concentration risk management Commercial Real Estate Zions has exercised caution in CRE 250 Excluding Owner Occupied concentrations for more than a decade, and in underwriting standar
Slide 18: Commercial Real Estate Summary
Commercial Real Estate Summary CRE is 23% of total loans: $13.1 billion total CRE; $10.5 billion term & $2.6 billion construction Portfolio Composition Term CRE As of September 30, 2023 Conservative weighted-average LTVs (< 60%) All Other CRE, Maturity distribution: 17% per year on average over
Slide 19: Capital Strength
Capital Strength Loss-absorbing capital remains strong relative to our risk profile; low credit losses relative to CET1 + ACL Common Equity Tier 1 Capital Net Charge-offs and Allowance for Credit Losses annualized, as a percentage of risk-weighted assets as a percentage of risk-weighted assets 12.5%
Slide 20: Financial Outlook (3Q24E vs 3Q23A)
Financial Outlook (3Q24E vs 3Q23A) Outlook Comments Loan Balances Stable Interest rates and economic outlook resulting in weak loan demand (period-end) Net Interest Income Positive impact of continued asset yield repricing expected to offset funding Stable (NII) cost pressures Customer-Related M
Slide 21: Appendix
Appendix Financial Results Summary Balance Sheet Profitability Loan Growth by Geography and Type Noninterest-bearing Deposit Mix – 20+ Year Time Series Earning Asset Repricing Interest Rate Swaps Credit Metrics: Commercial Real Estate Loan Loss Severity (NCOs as a percentage of nonac
Slide 22: Financial Results Summary
Financial Results Summary Healthy fundamentals, strong credit quality Three Months Ended (Dollar amounts in millions, except per share data) September 30, June 30, March 31, December 31, 2023 2023 2023 2022 Earnings Results: Diluted Earnings Per Share $ 1.13 $ 1.11 $ 1.33 $ 1.84 Net Earnings Applica
Slide 23: Balance Sheet Profitability
Balance Sheet Profitability Profitability impacted by lower NII in most recent two quarters due to increased funding costs Return on Assets Return on Tangible Common Equity 33.4% 1.27% 22.7% 19.6% 0.97% 17.8% 0.91% 17.3% 0.79% 0.80% 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Return on Tangibl
Slide 24: Loan Growth in Detail
Loan Growth in Detail Loan growth in CRE and 1-4 Family offset by shrinkage of the C&I, Energy, and Municipal portfolios Linked Quarter Loan Balance Growth, Excluding PPP Total Loans: -0.04% 10% Growth Rate: Linked Quarter, not annualized 8% Linked quarter: Period-end loans decreased $24 million o
Slide 25: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Loan growth reflected in several categories and across our footprint Period-End Year-over-Year Loan Growth (3Q23 vs. 3Q22) (in millions) Zions Bank Amegy CB&T NBAZ NSB Vectra CBW Other Total C&I (ex-Oil & Gas) 314 (72) 304 72 11 39 (50) - 618 SBA PPP (42) (4
Slide 26: Noninterest-bearing Deposits (NIB) Mix
Noninterest-bearing Deposits (“NIB”) Mix Through multiple rate cycles, Zions’ NIB deposit concentration has been consistently among the best of peers Average Noninterest Deposits / Average Total Deposits 7.0 60% Zions’ NIB deposit mix has consistently exceeded most peers due in part to a higher pr
Slide 27: Simulated Repricing Expectations: Earning Assets and Loans
Simulated Repricing Expectations: Earning Assets and Loans A substantial portion of earning assets reset within one year with additional resets in later periods Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 50% 40% 41% Earning Assets After Hedging Loans
Slide 28: Interest Rate Swaps at September 30, 2023
Interest Rate Swaps at September 30, 2023 Swaps are used to balance our interest rate sensitivity Interest rate sensitivity is managed in part with portfolio interest rate hedges1 $1.0 billion in 5 year pay fixed swaps were added as portfolio layer hedges of the fixed rate loans with an average fi
Slide 29: Allowance for Credit Losses (ACL)
Allowance for Credit Losses (“ACL”) The ACL increase vs. 2Q23 is primarily due to an increase in the reserve for CRE Office and other portfolios potentially impacted by higher interest rates Allowance for Credit Losses ($ millions) ACL (%) ex-PPP 1.88 1.91 1.74 1.56 1.48 1.25 1.30 1.22 1.21 1.11 1.1
Slide 30: Loan Loss Severity
Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2018 Q3 – 2023 Q2) Fifteen Year Average (2008 Q3 – 2023 Q2) 71% 61% 60% 58% 57% 57% 56% 55% 55
Slide 31: CRE In-Depth Review: Commercial Real Estate
CRE In-Depth Review: Commercial Real Estate Limited tail LTV risk in portfolio; controlled CRE growth CRE Portfolio Trends % of CRE Construction Balances Term Balances Term WAVG LTV % of CRE Term Construction Multi-family 55% 25% 34% Industrial / Warehouse 52% 22% 22% 9.3 9.6 10.6 9.5 9.7 Office 51%
Slide 32: CRE In-Depth Review: Office ($2.1 billion balance)
CRE In-Depth Review: Office ($2.1 billion balance) CRE Office portfolio is 16% of total CRE exposure; 4% of total loan exposure 10% decrease in balances YOY via payoffs, loan rebalance, amortization < 15% of tenant leases mature in next 12 months Office Portfolio Trends Median loan size: < $1
Slide 33: CRE In-Depth Review: Office Loans – Distribution of LTV and Loan Maturity
CRE In-Depth Review: Office Loans – Distribution of LTV and Loan Maturity Zions is addressing loan level concerns with Clients, monitoring covenants, and assessing valuations ($ millions) We are being proactive with 2023 and 2024 office CRE Term Office by Maturity 450 maturities 400 Cash flow an
Slide 34: CRE In-Depth Review: Multifamily ($3.6 billion balance)
CRE In-Depth Review: Multifamily ($3.6 billion balance) CRE multifamily portfolio is 27% of total CRE exposure 23% increase in balances YOY; construction and term growth Multifamily Portfolio Trends 75% term, 25% construction Construction Balances Term Balances Median loan size: < $1 million;
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures In millions, except per share amounts 3Q23 2Q23 1Q23 4Q22 3Q22 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $496 $508 $512 $471 $479 LESS adjustments: Severance costs 13 1 Other real estate expense Amortization of core deposit and other intangibles 2 1 2
Slide 36: Non-GAAP Financial Measures (Continued)
Non-GAAP Financial Measures (Continued) In millions, except per share amounts 3Q23 2Q23 1Q23 4Q22 3Q22 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $168 $166 $198 $277 $211 Diluted Shares (average) 148 148 148 149 150 (k) Diluted EPS 1.13 1.11 1.33 1.84 1.4
Slide 37: Non-GAAP Financial Measures (Continued)
Non-GAAP Financial Measures (Continued) In millions 3Q23 2Q23 1Q23 4Q22 3Q22 Return on Average Tangible Common Equity (Non-GAAP) Net earnings applicable to common $168 $166 $198 $277 $211 Adjustments, net of tax: Amortization of core deposit and other intangibles 1 1 1 - 1 (a) Net earnings applicabl
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