Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Investor Presentation (May 2015)
36 slides from Zions Bancorporation N.a's investor presentation, May 14, 2015
Slide 1: Zions Bancorporation Second Quarter Update
May 2015 Zions Bancorporation Second Quarter Update
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: A Collection of Great Banks
Bank Headquarters Assets % of Total Zions Bank Salt Lake City $19B 33% Amegy Houston $14B 24% CB&T San Diego $12B 20% NBA Phoenix $5B 9% NSB Las Vegas $4B 7% Vectra Denver $3B 5% Commerce Bank - WA/OR Seattle $1B 2% Zions Bancorporation Salt Lake City $58B 100% Superior lending capacity relative t
Slide 4: Self Assessment: Strengths & Opportunities for Improvement
Strengths: Superior Footprint Superior Reputation Strong Capital Strong Credit Quality Strong Liquidity Superior Deposit Franchise Strong NIM Well-Positioned for Rising Rates Leader in Small Business Lending Risk Management Framework Opportunities for Improvement: Efficiency (Expense/Revenue) ra
Slide 5: Stronger Economic Growth than Overall U.S.
Job Creation: Jobs grew in Zions' footprint by 15% during the last 10 years, a full 9 percentage points better than U.S. nonfarm payroll growth GDP Growth: GDP growth in our footprint exceeded nominal U.S. GDP by an average of 1.2 percentage points per year (compounded) over the last ten years S
Slide 6: Awards: Nationally Recognized for Excellence
Awards: Nationally Recognized for Excellence • Twenty Four (24) Greenwich Excellence Awards in Small Business and Middle Market Banking (2014) • Including: Excellence: Overall Satisfaction Excellence: Likelihood to Recommend Excellence: Treasury Management Excellence: Financial Stability Zio
Slide 7: Capital Levels are Among the Best in the Industry
Capital Levels are Among the Best in the Industry Source: SNL Financial as of 4Q14 for peers, 1Q15 for ZION 7 11.8% C U B B A C ZIO N R F KE Y WF C P N C B B T CM A JP M H B A N M TB US B FIT B ST I Tier 1 Common Risk-Based Capital Ratio 14.0% 8% 9% 10% 11% 12% 13% 14% 15% ZIO N B A C C U B P N C R
Slide 8: Zions' Credit Quality Metrics are Strong
Zions’ Credit Quality Metrics are Strong 8 Source: SNL Financial as of 4Q14 for peers, 1Q15 for ZION; trailing 12 months net charge-offs used in the allowance / loan chart 0.0% 0.5% 1.0% 1.5% 2.0% U B C M A ZIO N M TB K EY P N C H B A N ST I WF C R F B B T B A C U SB FI TB JP M C Last 12 Month Net C
Slide 9: Strong Liquidity profile, Superior Deposit Franchise
Strong Liquidity profile, Superior Deposit Franchise Over Time 9 Zions’ Strengths 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2000 2002 2004 2006 2008 2010 2012 2014 Noninterest-Bearing Deposits / Total Deposits ZION Peer Median C M A ZI O N K EY M TB B A C U B FI TB R F JP M P N C B B T WF C ST I U S
Slide 10: Net Interest Margin Remains Stronger Than Peers
Source: SNL Financial as of 4Q14 for peers, 1Q15 for Zions *Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earning assets. Net Interest Margin Remains Stronger Than Peers Some Pressures Remain, but Outlook is For Slightly Increasing Net Interest Income 10
Slide 11: Balance Sheet Remains Asset Sensitive
-5% 0% 5% 10% 15% 20% 25% - 100 bps 0 bps +100 bps +200 bpsC h an ge in N e t In terest In co m e Net Interest Income Sensitivity NII Slow NII Fast Balance Sheet Remains Asset Sensitive Zions is Positioned for Economic Recovery and Rising Rates 11 Zions estimates net interest income would increase b
Slide 12: Zions Punches Above Its Weight in Small Business Lending
$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 W FC B A C JP M US B B B T P N C ZIO N M TB R F C ST I H B A N FIT B KE Y CM A U B Commercial Loans Sized $100k - $1M Zions Punches Above Its Weight in Small Business Lending 12 Source: Call report data via SNL Financial, as o
Slide 13: Significant Change to Risk Profile May Not Be Reflected in Stock
• Risk Management • Complete overhaul of risk management infrastructure since 2009 • Exhaustive review and enhancement of policies / procedures • Complete overhaul of organization structure and staffing levels • Risk Profile • Construction & Land Development loan concentration significantly reduced
Slide 14: Construction & Land Development Exposure Significantly Reduced
2008 2014 0% 5% 10% 15% 20% 25% 30% 35% C&I C&D Owner Occupied Term CRE 1st Lien Mtg HELOC / 2nd Lien Mtg Consumer 4Q08 4Q14 Risk Management: Construction & Land Development (C&D) Exposure Has Been Significantly Reduced 14 • Orange bars show loan balance at the sub-type level as a percentage of tota
Slide 15: CDO Exposure Has Been Significantly Reduced
Risk Management: CDO Exposure Has Been Significantly Reduced 15 In Billions Source: Company earnings releases, par values shown $1.3 $0.4 $1.1 $0.2 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 1Q13 1Q15 Performing Nonperforming 72% reduction of total portfolio Zions’ Strengths
Slide 16: Noninterest Expense / Efficiency
Noninterest Expense / Efficiency Efficiency ratio is soft relative to peers, partly a function of asset sensitivity positioning 16 Source: SNL Financial as of 1Q15 40% 50% 60% 70% 80% US B C B B T WF C FIT B JP M M TB P N C H B A N ST I CM A R F KE Y U B ZIO N B A C Efficiency Ratio 0.0% 0.5% 1.0% 1
Slide 17: System and Operational Upgrades
Zions Bancorporation System and Operational Upgrades Currently five major initiatives underway to implement best-in- class operating systems and simplify our operating model • FutureCore – Replaces three core systems which have been customized for each of our affiliates with a fully-integrated core
Slide 18: Systems Upgrade Overview - FutureCore
Systems Upgrade Overview-- FutureCore • FutureCore is a program initiated by Zions Bancorporation to replace its core operating systems into a single application • Zions managed, but 3rd party oversight reports directly to the board 18 batch batch online batch batch batch batch batch batch batch bat
Slide 19: Fee Income Comparable to Smaller Regional Banks
Fee Income Comparable to Smaller Regional Banks, but Soft vs. Lg. Banks 19 What to expect from the Fee Income Initiative: • Growth focused within Zions’ footprint with relationship customers • Greater focus and tracking • Enhanced utilization of corporate infrastructure, product development with loc
Slide 20: Efficiency Ratio Waterfall - What If Scenario
Efficiency Ratio Waterfall – What If Scenario 20 74% 68% 55% 60% 65% 70% 75% 1Q15 Actua l N o rm al iza ti o n : Se cu ritie s G ai n s, FD IC -Su p p o rte d Lo an s Te ch n o lo gy P ro jec t B u ild o u t C o st Ad d $ 5 B M B S Im p ac t o f h ig h c o st d eb t Adj u ste d Ef fi ci e n cy R at
Slide 21: Profitability
Profitability Historical Improvement driven primarily by capital actions; expected improvement likely driven by positive operating leverage 21 Source: SNL Financial *Adjusted ROAA and ROTCE for ZION excludes gains/losses on securities, debt extinguishment and preferred stock redemption cost, and res
Slide 22: Loan Growth In Line with CCAR Banks, Lagging Small Regional Banks
Loan Growth In Line with CCAR Banks, Lagging Small Regional Banks 22 Source: SNL Financial Smaller Non-CCAR Regional peer group selected based upon asset size that is reasonably comparable to the asset sizes of Zions’ affiliate banks Softer Growth Driven in part by risk management overhaul: • Discip
Slide 23: Loan Growth By Geography and Type
Loan Growth By Geography and Type Growth Has Been Strongest in Texas, and in Residential Mortgage & C&I 23 Source: Company documents; VBC = Vectra Bank Colorado; NSB = Nevada State Bank; NBA = National Bank of Arizona; CBT = California Bank & Trust; Amegy = Amegy Bank (Texas); ZFNB = Zions Bank (UT/
Slide 24: Capital Return Opportunities
Capital Return Opportunities 24 Source: SNL Financial *UB not included as it is not a publically traded company Strong Capital Levels, but Limited Return of Capital: • Low 5.1% Tier 1 Common result on 2014 DFAST from Federal Reserve vs. Zions’ modeled 8.6%. • Further enhancement to post- stress capi
Slide 25: One-Year Outlook Summary Relative to 1Q15 Results
One-Year Outlook Summary Relative to 1Q15 Results Topic Outlook Comment Loan Balances Slightly to Moderately Increasing • Prepayments remain volatile, making net loan growth difficult to forecast • Line utilization rates likely to increase on energy portfolio, generally due to reducing commitments.
Slide 26: Appendix
Appendix 26 • Energy Lending • CDO tables • High-Cost Debt Redemption Actions Taken
Slide 27: Energy Loan Portfolio Key Takeaways
Energy Loan Portfolio 27 Key Takeaways • $3.2 billion of outstanding balances at March 31, 2015 • 8% of total loans • Diversified portfolio, primarily upstream / midstream / services (see slide 28) • No junior or second liens • Very modest growth in 2014. Growth constrained due to: • Internal concen
Slide 28: Segmentation of Energy Portfolio
Segmentation of Energy Portfolio 03/31/15 28 Source: Company Documents Oil Gas Upstream 34% Midstream 21% Downstream 4% Other 2% Oilfield Services 30% Energy Services Manufacturing 9%
Slide 29: Conservative Underwriting: What We Do, and What We Avoid
Conservative Underwriting: What We Do, and What We Avoid 29 Source: Company Documents What We Do: • Upstream lending – multiple “haircuts” on oil / gas values and commodity prices to arrive at borrowing base (loan commitment amount) • Semi-annual borrowing base redeterminations and sensitivity testi
Slide 30: Price Deck: Consistently Conservative vs. 12-Month Oil Futures Strip
0 20 40 60 80 100 120 140 160 Jan -0 8 Ju l- 0 8 Jan -0 9 Ju l- 0 9 Jan -1 0 Ju l- 1 0 Jan -1 1 Ju l- 1 1 Jan -1 2 Ju l- 1 2 Jan -1 3 Ju l- 1 3 Jan -1 4 Ju l- 1 4 Jan -1 5 Ju l- 1 5 Jan -1 6 Ju l- 1 6 $ / B b l Amegy Price Deck vs. NYMEX Oil 12-mo. Fwd Strip NYMEX Amegy Strip Base Amegy Strip Sensit
Slide 31: Upstream (Reserve-Based) Underwriting
Upstream (Reserve-Based) Underwriting 31 Typical Oil & Gas Reserve-Based Loan $100 - E&P company’s PV of oil & gas reserves using current NYMEX prices $ 85 - Zions’ risk-adjusted value of reserves (e.g. Zions applies discounts to non-producing reserves) $ 77 - Apply “bank price deck” (generally ~90%
Slide 32: Energy Services - Key Credit Metrics
Energy Services – Key Credit Metrics 32 How We Mitigate Risk in Energy Service Lending • Conservative Capital Structures • Senior Debt / EBITDA: Generally in the 1.5-to-1 area • Average Debt / Capitalization: less than 50% • Strong sponsorship / access to capital • Private Equity firms sponsor a lar
Slide 33: Oil Price Decline History
Oil Price Decline History Drilling Rig Count Has Corrected Quickly and Significantly 33 Source: Bloomberg 0 20 40 60 80 100 120 140 T+ 0 T+ 5 T+1 0 T+1 5 T+2 0 T+2 5 T+3 0 T+3 5 T +4 0 T+4 5 T+5 0 T+5 5 T+6 0 T+6 5 T+7 0 T+7 5 T+8 0 T+8 5 T+9 0 T+9 5 T+10 0 T+10 5 T+11 0 T+11 5 In d exe d O il a n d
Slide 34: CDO Portfolio Composition & Values as of 1Q13
34 CDO Portfolio Composition & Values as of 2 Years Ago (1Q13) March 31, 2013 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 27 $774 $694 $560 -$134 Insurance CDOs 22 447 443 331 -112 Other
Slide 35: CDO Portfolio Composition & Values as of 1Q15
CDO Portfolio Composition & Values as of 1Q15 35 March 31, 2015 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 17 $439 $417 $313 -$104 Insurance CDOs -- -- -- -- -- Other CDOs -- -- -- -- -
Slide 36: Significant Reductions to Interest Expense Through Debt Reduction
Significant Reductions to Interest Expense Through Debt Reduction 36 Source: company documents Total Debt Outstanding ($, in millions) Annual Interest Expense ($, in millions) • Additional very expensive sub debt expected to be retired in the second half of 2015, reducing interest expense by nearly
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