Slide 1: Second Quarter 2020 Earnings Conference Call
Second Quarter 2020 Earnings Conference Call 7/21/2020
Slide 2: Important cautionary statement about forward-looking statements
Important cautionary statement about forward-looking statements This presentation contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we ma
Slide 3: Non-GAAP Reconciliations & Glossary of Terms
Non-GAAP Reconciliations & Glossary of Terms Throughout this presentation we may use non-GAAP numbers to supplement the evaluation of our performance. The items noted below with an asterisk, "*", are considered non-GAAP. These non-GAAP financial measures should not be considered alternatives to GAAP
Slide 4: Corporate Profile (as of June 30, 2020)
Corporate Profile (as of June 30, 2020) ▸ $33.2 billion in Total Assets ▸ $22.6 billion in Total Loans (includes $2.3 billion in PPP loans) ▸ $27.3 billion in Total Deposits ▸ CET1 ratio 9.77%(e); Tangible Common Equity (TCE) ratio 7.33% ▸ $1.8 billion in Market Capitalization ▸ Over 200 banking loc
Slide 5: Energy Loan Sale Overview
Energy Loan Sale Overview ► Sell $497 million, or 53% of our energy portfolio as of March 31, 2020; receive $257.5 million of proceeds ($s in millions) March 31, 2020 June 30, 2020 from the sale; loans included in HFS at 6-30-20 Total Energy Loans* $940 $352 ► Special provision for chargeoffs in exc
Slide 6: Energy Portfolio Reduced to 1.7% of Total Loans
Energy Portfolio Reduced to 1.7% of Total Loans* March 31, 2020 June 30, 2020 Support - Midstream Nondrilling 1% Support - 40% Drilling Upstream 32% 26% Support - Nondrilling 73% Support - Midstream Drilling 15% 13% Total Energy Loans $940 million Total Energy Loans $352 million Energy Loans/Total l
Slide 7: Second Quarter 2020
Second Quarter 2020 ► Net loss of $117.1 million, or ($1.36) per diluted share; excluding loan sale, net income totaled $9.4 million, or $.11 per share ($s in millions; except per share 2Q20 1Q20 2Q19 ► Provision for loan losses totaled $306.9 million in 2Q20 data) — $160.1 million, or $1.47 per sha
Slide 8: NPLs Decrease $94 Million or 33%
NPLs Decrease $94 Million or 33% ▸ Nonperforming energy loans totaled $16 million at June 30, 2020, down $89 million, or 85%, linked-quarter ▸ Nonperforming nonenergy loans totaled $178 million at June 30, 2020, down $5 million, or 3%, linked-quarter $400 1.75% $300 $s in millions % of total loans $
Slide 9: Criticized Commercial Loans Down $182 Million or 34%
Criticized Commercial Loans Down $182 Million or 34% ▸ Criticized commercial loans down $182 million, or 34%, linked-quarter; reflects impact of the energy loan sale ― Criticized energy loans totaled $56 million at June 30, 2020, down $173 million, or 76%, linked-quarter ― Criticized nonenergy loans
Slide 10: 2Q Loan Growth Reflects PPP, Loan Sale
2Q Loan Growth Reflects PPP, Loan Sale ▸ 2Q loan growth reflects $2.3 billion in Paycheck Protection Program (PPP) loan fundings, partly offset by energy loan sale, lack of demand throughout the footprint and approximately $500 million in paydowns on lines of credit — Paydowns are mainly related to
Slide 11: Commercial Loans (C&I, CRE, C&D)
Commercial Loans (C&I, CRE, C&D)* Total Commercial Loans % of Total ($s in millions) Outstanding Loans Commitment Real Estate, Rental and Leasing $ 3,329 16.4% $ 4,139 Retail Trade 1,758 8.6% 2,090 Health Care and Social Assistance 1,594 7.8% 2,106 Hospitality 1,161 5.7% 1,314 Manufacturing 1,001 4.
Slide 12: Retail Loan Portfolio Mix
Retail Loan Portfolio Mix Retail – 8.6% of Total Loans* Food & Beverage 8% $1.8 billion 6/30/20 Gasoline Stations ▸ ICRE Retail portfolio is fairly segmented and primarily comprised of national 21% anchored centers, single credit tenant facilities, and unanchored centers Motor Vehicle & ▸ Retail tra
Slide 13: Healthcare Loan Portfolio Mix
Healthcare – 7.8% of Total Loans* Healthcare Loan Portfolio Mix $1.6 billion ▸ Healthcare predominantly includes doctors’ offices, 6/30/20 Ambulatory Healthcare nursing/long-term care and hospitals and represents Social Assistance 4% 12% 7.8% of total loans Assisted Living (non-ICRE) ▸ Approximately
Slide 14: Hospitality Loan Portfolio Mix
Hospitality – 5.7% of Total Loans* Hospitality Loan Portfolio Mix ▸ As a result of COVID-19, business, leisure and international travel $1.2 billion has generally ceased and is likely to continue to be significantly Restaurants 6/30/20 curtailed Limited Service 10% ▸ Hospitality is comprised of Acco
Slide 15: Energy Loan Portfolio Mix
Energy – 1.7% of Total Loans* Energy Loan Portfolio Mix ▸ Energy loans totaled $352 million, or 1.7% of total loans, down $352 million $588 million, or 63%, linked-quarter Midstream 6/30/20 1% Support - ― Linked-quarter change reflects loan sale of $497 million, Drilling additional net charge-offs o
Slide 16: 2Q20 Sectors Under Focus
2Q20 Sectors Under Focus* Tier 2 Tier 1 (Limited Tier 3 $ % $ % 7-15-20 $ % $ in million (Concerned) Concern) (No Concern) Loans NPL NPL Criticized Criticized Deferrals Deferrals Healthcare and Social Assistance Hospitals 290 — — 290 2 1% 2 1% 17 6% Offices of Physicians & Dentists — 478 — 478 12 2%
Slide 17: PPP Loans
PPP Loans ▸ The company originated more than 12,000 PPP loans totaling $2.3 billion in rounds 1 and 2 of the program, with 11,241 loans, or $769 million, in loans less than $350K (see chart below) ▸ Total fees approximate $74 million ▸ Expect effective yield on PPP loans to approximate 4% based on c
Slide 18: Q2 2020 Provision for Credit Losses
Q2 2020 Provision for Credit Losses ▶ Provision for the second quarter of 2020 totaled $306.9 million, including $160.1 million related to the energy loan sale ▶ Reflects execution of strategy to reduce concentrations in energy credits, improve overall credit quality, and provide for expected losses
Slide 19: Allowance for Credit Losses (ACL)
Allowance for Credit Losses (ACL) 3/30/2020 6/30/2020 $ in millions % of Loan and % of Loan and % of Loan and Leases Leases Leases Outstanding Outstanding Portfolio Amount Outstanding Amount (Including PPP) (Excluding PPP) Nonenergy Commercial $255 1.65% $317 1.82% 2.10% Energy 80 8.47% 18 5.30% 5.3
Slide 20: Second Quarter Allowance Build
Second Quarter Allowance Build $600 $99.9 $82.5 $550 $500 $475.0 $13.1 $479.2 $450 - New loans - Changes in - Transfer of $497.1 $400 - Change in product mix macroeconomic million Energy loans to Millions $350 - Aging of existing variables held for sale portfolio - Changes in scenario $300 - Credit
Slide 21: NIM Contraction From Lower Rates, Excess Liquidity
NIM Contraction From Lower Rates, Excess Liquidity ▸ Net interest margin (NIM) of 3.23%, down 18 bps linked-quarter; net interest income (TE) up $6.5 3.60% million 3.50% 0.40% ▸ 2Q20 Headwinds: 3.40% — Reduction in LIBOR 3.30% 0.30% — Recent subdebt issuance (partial quarter impact) 3.20% — Impact o
Slide 22: Securities Portfolio Conservative with Minimal Risk
Securities Portfolio Conservative with Minimal Risk ▸ Portfolio totaled $6.1 billion, down $42 million, or less than 1%, linked- quarter Securities Portfolio Mix 6/30/20 ▸ 100% fixed, no credit impairment $s in millions CMO ▸ MBS and CMO holdings are all US Agency backed securities or direct CMBS $8
Slide 23: Strong Liquidity
Strong Liquidity $17 Billion in Available Sources Total Amount Net $ in millions Available Used Availability Internal Sources Free Securities and other $ 3,931 $ — $ 3,931 External Sources Federal Home Loan Bank (FHLB) 6,193 2,587 3,605 Federal Reserve Bank (FRB) 4,721 — 4,721 Brokered Deposits 4,09
Slide 24: Strong Growth in DDA From PPP Fundings
Strong Growth in DDA From PPP Fundings Total Deposits ▸ Total deposits of $27.3 billion, up $2.3 billion, or 9%, linked- 6/30/20 quarter $s in millions ― Noninterest-bearing demand deposits (DDAs) increased $2.6 billion Time Deposits (brokered) ― Interest-bearing transaction and savings deposits inc
Slide 25: Reduced Activity Drives Linked-Quarter Decline
Reduced Activity Drives Linked-Quarter Decline $90 $88 $86 $84 $s in millions $82 $84.4 $80 $78 $3.7 $76 $7.3 $74 $1.4 $1.8 $0.6 $3.1 $73.9 $72 $70 1Q20 Noninterest Service Charges on Bank Card & ATM Fees Investment & Annuity Trust Fees Secondary Mortgage Other 2Q20 Noninterest Income Deposit Accoun
Slide 26: Noninterest Expense Impacted by Today's Environment
Noninterest Expense Impacted by Today’s Environment $220 $0.2 $4.1 $210 $10.6 $1.2 $s in millions $200 $203.3 $6.9 $196.5 $190 $180 1Q20 Noninterest Personnel Expense Occupancy and Amortization of Other (net) ORE/OFA Expense 2Q20 Noninterest Expense Equipment Intangibles Expense Noninterest Expense
Slide 27: Capital Impacted By Energy Loan Sale; Expect Rebuild in 2H20
Capital Impacted By Energy Loan Sale; Expect Rebuild in 2H20 ▸ TCE ratio 7.33%, down 67 bps linked- Capital Ratios quarter 15% ― Impact of $2.3 billion in PPP loans -56 bps ― Impact of energy loan sale -36 bps ― Net decline in other assets +17 10% ― Net earnings excluding loan sale +4 bps ― Dividend
Slide 28: Solid Capital In Excess of Regulatory Minimums
Solid Capital In Excess of Regulatory Minimums Estimated Regulatory Capital as of June 30, 2020 Common Total Tier 1 Equity Tier 1 Risk-based Leverage $s in millions Tier 1 Capital Capital Ratio Total Asset Base $ 24,344 $ 24,344 $ 24,344 $ 32,244 Total Capital $ 2,378 $ 2,378 $ 3,006 $ 2,378 Capital
Slide 29: Appendix and Non-GAAP Reconciliations
Appendix and Non-GAAP Reconciliations
Slide 30: Results
Results Operating PPNR* Net Interest Income (TE)* Net Interest Margin (TE)* $150 ($s in millions) $245 ($s in millions) $241.1 3.65% $236.7 $140 $240 $234.6 3.45% $125.1 $125.7 $235 3.50% 3.41% 3.43% 3.41% $130 $119.3 $226.6 $115.7 $230 $223.6 $120 $225 3.35% $110 $118.5 3.23% $220 $100 $215 3.20% 2
Slide 31: Balance Sheet Summary
Balance Sheet Summary Average Loans Average Total Securities Average Deposits $24 ($s in billions) $23.0 $7 ($s in billions) $28 ($s in billions) $26.7 $6.2 $6.1 $6.1 $22 $21.0 $21.2 $6.0 $26 $20.2 $20.2 $24.3 $6 $5.6 $23.8 $20 $24 $23.1 $23.1 $18 $5 $22 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20
Slide 32: Operating Earnings & EPS Non-GAAP to GAAP Reconciliations
Operating Earnings & EPS Non-GAAP to GAAP Reconciliations Three Months Ended (in thousands, except per share amounts) 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Net Income (loss) ($117,072) ($111,033) $92,132 $67,807 $88,277 Net income allocated to participating securities (422) (427) (1,566
Slide 33: Operating ROA, ROE & ROTCE Reconciliations
Operating ROA, ROE & ROTCE Reconciliations Three Months Ended (dollars in thousands) 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Net Income (loss) ($117,072) ($111,033) $92,132 $67,807 $88,277 Nonoperating items, net of income tax — — 3,046 22,760 — Operating earnings (loss) ($ 117,072) ($111
Slide 34: Operating Revenue (TE), Operating PPNR (TE) Reconciliations
Operating Revenue (TE), Operating PPNR (TE) Reconciliations Three Months Ended (in thousands) 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Net interest income $237,866 $231,188 $233,156 $222,939 $219,868 Noninterest income 73,943 84,387 82,924 83,230 79,250 Total revenue $311,809 $315,575 $316
Slide 35: More Granular Energy Portfolio
More Granular Energy Portfolio All Categories All Categories $940 million $352 million 481 credits 351 credits 3/31/20 6/30/20 <$1MM >$20MM $80 $191 9% 20% 332 7 <$1MM >$20MM $63 $32 18% 9% 279 1 $10- $20MM $63 18% 4 $1-$10MM $398 42% $10-$20MM 123 $270 29% $1-$10MM 19 $194 55% 67 Excludes HFS loans
Slide 36: Exposure to Support Services Reduced
Exposure to Support Services Reduced Support Drilling Subcategories Equipment $123 million Support Drilling Subcategories manufacturig 3/31/20 Contract Equipment $92 million $18 drillers manufacturig 6/30/20 15% $17 Contract $21 19% drillers 17% $21 23% Other $11 Rental tools Other 9% $18 $5 15% 6%
Slide 37: IRR Sensitivity – Selected Info
IRR Sensitivity – Selected Info ▸ Loan portfolio 54% variable at June 30, 2020 (excludes PPP and HFS loans) ― 59% of variable loans are LIBOR-based (32% of total loan portfolio) • 97% of the LIBOR loans are tied to 1 month LIBOR; 3% of the LIBOR loans are tied to 3 month LIBOR ― 31% tied to Wall Str
Slide 38: Second Quarter 2020 Earnings Conference Call
Second Quarter 2020 Earnings Conference Call 7/21/2020