Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Q3 2022 Earnings Presentation
36 slides from Zions Bancorporation N.a's earnings presentation, Oct 24, 2022
Slide 1: Third Quarter 2022 Financial Review
Third Quarter 2022 Financial Review October 24, 2022
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 Strong loan growth, fee income growth, and rising rates are driving a significant increase in revenue Our planned interest rate sensitivity has yielded significant revenue benefits; as rates have increased, we’ve begun to position the bank for stable or falling rates Our balance sh
Slide 4: Third Quarter 2022 Financial Highlights
Third Quarter 2022 Financial Highlights Vs. 2Q22, another quarter of strong increases in non-PPP loans and growth in adjusted PPNR Earnings and Profitability: Loans and Deposits: Vs. 2Q22, growth rates not annualized $1.40 diluted earnings/share, compared to $1.29 3.0% increase in period-end
Slide 5: Diluted Earnings Per Share
Diluted Earnings Per Share Strong linked-quarter growth due to increased PPNR, despite a larger provision for credit losses and less PPP-related income Diluted Earnings per Share Notable Items: 3Q22: $1.45 $1.40 $1.34 $1.27 $1.29 $0.02 per share positive impact from sale of equity investments $(
Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)
Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR increased 17% from the prior quarter, primarily due to the benefit of higher rates and loan growth Linked quarter: Adjusted PPNR increased 17% primarily from Adjusted PPNR(1) ($ millions) A 9% increase in adjusted revenue 351 Significan
Slide 7: Average Loan and Deposit Balances
Average Loan and Deposit Balances Vs. 2Q22, average non-PPP loans increased 3.1% in 3Q22; average deposits decreased 4.2% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) ($ billions) Average Total Loans Excluding PPP Loans, Average Noninterest-bear
Slide 8: Deposit Trends
Deposit Trends Deposits for smaller businesses and households ($10 million and smaller, 74% of deposits (excluding brokered and trust deposits) has been stable to slightly increasing Deposits by Balance Tier Deposit attrition composition and destination: (excl. Brokered & Select Trust Accounts) Ba
Slide 9: Securities, Money Market Investments
Securities, Money Market Investments Outsized deposit growth during the pandemic was primarily invested in highly liquid assets Total Securities Portfolio (at Fair Value) and Money Market Investments (end of period balances) Strong deposit growth during the pandemic was primarily invested in highly
Slide 10: Net Interest Income (NII) and Net Interest Margin (NIM)
Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 2Q22, net interest income increase driven by continued rate increases and loan growth Net Interest Income Net Interest Margin Net Interest Margin Zions’ strong loan growth and rising interest rates have combined to ($ millions) Net Inte
Slide 11: Interest Rate Sensitivity
Interest Rate Sensitivity Latent and emergent interest rate sensitivity are expected to lead to an increase in net interest income Simulated Net Interest Income Sensitivity (1) Latent interest rate sensitivity refers to future changes in −200 bps −100 bps +100 bps +200 bps NII based upon past rate m
Slide 12: Noninterest Income and Revenue
Noninterest Income and Revenue Total customer-related noninterest income improved vs. 2Q22 and was up 3% from the year-ago period. Revenue increased 10% vs. 2Q22, and was up 16% from the year-ago period Customer-Related Noninterest Income (1) Revenue (2) ($ millions) ($ millions) $152 $154 $156 $151
Slide 13: Noninterest Expense
Noninterest Expense Noninterest expense increased 3% vs. 2Q22, and was up 12% from the year-ago period Noninterest Expense (NIE) Total noninterest expense increased compared to the prior ($ millions) quarter Salaries and benefits increased by $5 million driven by: $479 $477 $464 $464 $464 $463 A
Slide 14: Credit Quality
Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.09% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 3.5% 3.0% Key credit metrics: 2.5% 1.8%: Classified loans/loans Classified / Loans 2.0% NPAs + 90 / Loans + OREO Classified balance imp
Slide 15: Allowance for Credit Loss (ACL)
Allowance for Credit Loss (“ACL”) The ACL increase vs. 2Q22 is due to increased economic uncertainty Allowance for Credit Loss 1.88 1.91 ACL (%) ex-PPP ($ millions) 1.74 1.56 1.48 1.22 1.08 914 917 835 1.11 1.13 1.05 1.10 777 695 1.02 526 574 529 553 514 546 590 1/1/20 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21
Slide 16: Capital Strength
10.0% 12.0% 14.0% 0.0% 2.0% 4.0% 6.0% 8.0% 1Q19 11.3% 12.3% 2Q19 10.8% 11.8% 3Q19 10.4% 11.4% 4Q19 10.2% 11.2% Capital Strength 1Q20 10.0% 11.4% CET1 2Q20 10.2% 11.8% 3Q20 10.4% 12.0% 4Q20 10.8% 12.3% ACL/RWA 1Q21 11.2% 12.5% 2Q21 11.3% 12.3% 11.8% as a percentage of risk-weighted assets 3Q21 10.9%
Slide 17: Financial Outlook (3Q 2023E vs 3Q 2022A)
Financial Outlook (3Q 2023E vs 3Q 2022A) Outlook Comments Moderately Loan Balances, ex-PPP Excludes PPP loans, which are now significantly less impactful Increasing Net Interest Income See We expect latent and emergent interest rate sensitivity, combined with Slide 11 continued loan growth to me
Slide 18: Appendix
Appendix Financial Results Summary Credit Metrics Loan Loss Severity (NCOs as a percentage of nonperforming assets) Balance Sheet Profitability Earning Asset Repricing Deposit History Interest Rate Swaps Loan Growth by Geography and Type Mortgage Banking FutureCore Project Tech
Slide 19: 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, December 31, 2022 2022 2022 2021 Earnings Results: Diluted Earnings Per Share $ 1.40 $ 1.29 $ 1.27 $ 1.34 Net Earnings Applica
Slide 20: Long-Term View: Credit Quality at the Subportfolio Level
Long-Term View: Credit Quality at the Subportfolio Level Zions’ loss rates across nearly all loan portfolio categories are better or much better than peer loss rates In three of the seven major categories in which Zions has significant exposure, Zions loss rate has been much better (top quartile)
Slide 21: Credit Quality: Consumer Real Estate Secured
Credit Quality: Consumer Real Estate Secured (Term 1-4 Family and Home Equity Credit Lines) Minimal risk layering shows strength of the consumer real estate loan portfolio. Term 1-4 family mortgages (“1-4 family residential”) account for approximately $10.1 billion of the outstanding balances or 19%
Slide 22: Exercising CRE Discipline Through Growth Management
Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags due to continued exercise of concentration risk discipline Total CRE CRE >$1 million 200 200 Indexed: 2017 Q2 = 100 Indexed: 2017 Q2 = 100 150 150 100 100 50 50 ZION Peer Top Quartile Peer Bottom Quartile ZIO
Slide 23: Credit Quality: Term Commercial Real Estate (CRE)
Credit Quality: Term Commercial Real Estate (“CRE”) Low loan-to-values ratios in the Term CRE portfolio demonstrates the ability of the portfolio to withstand stress Term CRE loans account for $9.6 billion of the outstanding balances or 18% of the total loan portfolio Distribution of Term Commercial
Slide 24: CRE Portfolios of Interest: CRE Office
CRE Portfolios of Interest: CRE Office ($2.3B Balance) CRE Office portfolio highly concentrated in footprint, risk grades deteriorating but no losses forecast Portfolio Trends Low LTVs, strong guarantors, and tenants have kept problem loan levels relatively low 3.0 12 Portfolio commitments compo
Slide 25: Loan Loss Severity
Loan Loss Severity When problems arise, Zions generally experiences less severe loan losses due to strong collateral and underwriting practices Annualized NCOs / Nonaccrual Loans Annualized NCOs / Nonaccrual Loans Five Year Average (2017 – 2021) Fifteen Year Average (2007 – 2021) 74% 65% 64% 63% 60%
Slide 26: Balance Sheet Profitability
Balance Sheet Profitability Profitability improving due to improved net interest income and loan growth; in addition, RoTCE has improved due to the effect of accumulated other comprehensive income on the denominator Return on Assets Return on Tangible Common Equity 19.5% 17.1% 14.2% 13.9% 13.4% 1.08
Slide 27: Simulated Repricing Expectations: Earning Assets and Loans
Simulated Repricing Expectations: Earning Assets and Loans Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 39% Earning Assets After Hedging Loans After Hedging 33% 39% Percent of Earning Assets Percent of Loans 19% 19% 13% 12% 13% 13% 15% 11% 13% 13% 10% 1
Slide 28: Deposits – Noninterest Bearing Concentration and Cost of Total Deposits
Deposits – Noninterest Bearing (“NIB”) Concentration and Cost of Total Deposits Through multiple rate cycles, Zions’ NIB deposit concentration and cost have been consistently among the best of peers Average Noninterest Deposits / Average Cost of Total Deposits Average Total Deposits 60% % 4.50 Zions
Slide 29: Interest Rate Swaps
Interest Rate Swaps Although the outlook is for rising rates, we continue to create some protection from falling rates Interest rate sensitivity managed in part with interest rate hedges: Average Weighted Outstanding average Fixed Notionial Rate Received Average total swaps in effect during quarter
Slide 30: Loan Growth in Detail
Loan Growth in Detail Strong loan growth achieved in several categories: C&I (ex-O&G), residential real estate, & commercial construction Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +3% Linked quarter: 10% Excluding PPP loans, period-end loans Other loans (includi
Slide 31: Loan Growth - by Bank Brand and Loan Type
Loan Growth - by Bank Brand and Loan Type Period-End Year over Year Loan Growth (3Q22 vs. 3Q21) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 435 500 851 124 250 111 123 - 2,394 SBA PPP (566) (548) (809) (261) (232) (223) (135) - (2,774) Owner occupied 99 312
Slide 32: Mortgage Banking
Mortgage Banking Despite Industry decline, Mortgage originations continue at record levels 2019 2020 2021 ($ millions) $1.2 Bill. Roll-out Record production Enhanced Digital Fulfillment driven by refinance Process $.9 Bill. volumes Record Fee income 33% reduction in turn-time contribution
Slide 33: FutureCore: A Strategic Technology Advantage for Years to Come
FutureCore: A Strategic Technology Advantage for Years to Come Replacing the entire core legacy environment to improve operational resiliency and efficiency Modern Architecture Improved Customer Empowered Driving Built for Resiliency and Experience Bankers Modernization Speed FutureCore as a Catalys
Slide 34: Technology Roadmap
Technology Roadmap We continue to invest in technology solutions focused on customer experience & empowering bankers COMMERCIAL SMALL BUSINESS AFFLUENT CONSUMER Treasury Internet Banking & Gateway Enhancements Digital Banking Replacement Improved Customer Experience (2022) Consumer Customer Migratio
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation In millions, except per share amounts 3Q22 2Q22 1Q22 4Q21 3Q21 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $479 $464 $464 $449 $429 LESS adjustments: Severance costs 1 1 Other real estate expense 1 Amortization of core deposit and other intangibles
Slide 36: GAAP to Non-GAAP Reconciliation (Continued)
GAAP to Non-GAAP Reconciliation (Continued) In millions, except per share amounts 3Q22 2Q22 1Q22 4Q21 3Q21 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $211 $195 $195 $207 $234 Diluted Shares (average) 150 151 152 154 160 (k) Diluted EPS 1.40 1.29 1.27 1.34
Zions Bancorporation, N.A. — Q3 2022 Earnings Presentation on 6ix