Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Investor Presentation (November 2014)
44 slides from Zions Bancorporation N.a's investor presentation, Nov 3, 2014
Slide 1: Fourth Quarter Update
November, 2014 Fourth 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 34% CB&T San Diego $11B 20% Amegy Houston $13B 23% NBA Phoenix $5B 9% NSB Las Vegas $4B 7% Vectra Denver $3B 5% Commerce Bank - WA Seattle < $1B 1% Commerce Bank - OR Portland < $1B 1% Zions Bancorporation Salt Lake City $55B 100%
Slide 4: Awards: Nationally Recognized for Excellence
Awards: Nationally Recognized for Excellence • Twelve (12) Greenwich Excellence Awards in Small Business and Middle Market Banking (2013) • Including: Excellence: Overall Satisfaction Excellence: Likelihood to Recommend Excellence: Treasury Management Excellence: Financial Stability Only 11
Slide 5: Stronger Economic Growth than Overall U.S.
Job Creation: Jobs grew in Zions' footprint by 13.5% during the last 10 years, a full 8 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 1.3 percentage points per year (compounded) over the last ten years
Slide 6: Agenda
• Capital / Leverage • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 6
Slide 7: Capital Levels Compare Favorably with Peers
Capital Levels Compare Favorably with Peers Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 7 11.9% C U B B A C ZIO N R F WF C KE Y PN C CM A H B A N B B T JP M ST I M TB FIT B US B Tier 1 Common Risk-Based Capital Ratio 14.5% 8% 9% 10% 11% 12% 13% 14% 15% ZIO N C WF C PN C U B B A C
Slide 8: Reserve for Loan Losses is Strong Relative to Peers
Reserve for Loan Losses is Strong Relative to Peers Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 Allowance for Credit Losses includes the Allowance for Loan & Lease Losses and the Allowance for Unfunded Commitments 8 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% C JP M P N C U SB FIT B ZI O N
Slide 9: Debt to Tier Common Ratio: Zions Has Least Debt
Debt to Tier 1 Common Ratio: Zions’ Has Least Debt to Tier 1 Common of CCAR commercial banks Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 9 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% ZIO N CM A R F U B KE Y M TB H B A N ST I FIT B P N C WF C B B T US B C B A C JP M Debt / Tier
Slide 10: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 10
Slide 11: Zions' Loan Loss Ratio is Among the Best in the Industry
Zions’ Loan Loss Ratio is Among the Best in the Industry 11 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% U B CM A ST I B B T ZIO N KE Y US B H B A N FIT B JP M M TB P N C R F WF C B A C C Nonperforming Lending Related Assets (Includes 90+ Days Past Due) As a percentage of loans Source: Zion as of 3Q14 and peers vi
Slide 12: Net Charge Off Rate Compares Favorably with Peers Through the Cycle
Net Charge Off Rate Compares Favorably with Peers Through the Cycle Net Charge-offs: Through Multiple Cycles, Zions ranks well; no adjustment made for survivorship bias Source: SNL Financial. Net charge-off ratios annualized. 12 0% 1% 2% 3% 4% 5% 6% U B M TB CM A PN C ZIO N US B B B T ST I WF C KE Y
Slide 13: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 13
Slide 14: Profitability Improvement driven primarily by capital actions
-$100,000 -$50,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 2Q1 2 3Q1 2 4Q1 2 1Q1 3 2Q1 3 3Q1 3 4Q1 3 1Q1 4 2Q1 4 3Q1 4 Net Earnings Applicable to Common NEAC, As reported NEAC, Adjusted Profitability Improvement driven primarily by capital actions 14 (In Thousands) Source: SNL Financial *Adju
Slide 15: Net interest margin in-line to stronger than peers
Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 *Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earning assets. Net interest margin/income, although still under pressure, is still in-line to stronger than peers 15 3.2% B B T M TB H B A N US
Slide 16: Net Interest Income Drivers
Net Interest Income Drivers Pressures: • Reduction of FDIC Income • Repricing of Loan Portfolio Benefits: • Loan Growth • Debt Redemptions • Asset Sensitivity (positive leverage to rising interest rates) 16
Slide 17: FDIC Supported Loan Income is Declining
FDIC Supported Loan Income is Declining 17 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 2011A 2012A 2013A 2014E 2015E Net Interest Margin Contribution from FDIC Supported Loan Income 2014 and 2015 amounts are estimated, and could be revised materially higher or lower, depending upon borrower repayment
Slide 18: Coupon of New Production Slightly Lower Than the Overall Portfolio Coupon
Coupon of New Production Slightly Lower Than the Overall Portfolio Coupon Small lift in short term rates would substantially neutralize this dilution 18 Source: Company documents as of 3Q14. Production defined as new loans and marginal draws on existing lines of credit; portfolio yield includes defe
Slide 19: Loan Growth Remains a Positive Driver
Loan Growth Remains a Positive Driver 19 Source: Company documents as of 2Q14. “FDIC” refers to FDIC-supported loans; “NRE” refers to National Real Estate. Both of these portfolios are currently in run-off mode 90 100 110 120 130 2 Q 1 2 3 Q 1 2 4 Q 1 2 1 Q 1 3 2 Q 1 3 3 Q 1 3 4 Q 1 3 1 Q 1 4 2 Q 1
Slide 20: Significant Reductions to Interest Expense Through Debt Reduction
Significant Reductions to Interest Expense Through Debt Reduction 20 Source: company documents Total Debt Outstanding ($, in millions) Annual Interest Expense ($, in millions) 3rd Quarter Capital Actions • Retired at maturity or through calls: $335 million of debt • Successfully tendered for $500 mi
Slide 21: Balance Sheet Remains Asset Sensitive
-5% 0% 5% 10% 15% 20% 25% 30% - 100 bps 0 bps +100 bps +200 bps +300 bps C 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 Recovery and Rising Rates 21 Zions estimates net interest income would incre
Slide 22: Zions has among the smallest securities portfolios
Zions has among the smallest securities portfolios, but expects to add incrementally to it, while avoiding significant negative convexity risk 22 Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 MBS securities include resi mortgage pass-through investments that are not guaranteed by th
Slide 23: Noninterest Expense Drivers
Noninterest Expense Drivers Additions: Systems Upgrade (Core processing, accounting system overhaul, loan data entry system, etc. ) Salary Expenses Seasonal (CCAR) Reductions: Credit Related Indemnification Asset Expense Takeaway: Zions expects generally stable core noninterest expense over near ter
Slide 24: Noninterest Expense Views
Noninterest Expense Views Efficiency ratio is weak relative to peers, partly a function of asset sensitivity positioning 24 Source: Zion as of 3Q14 and peers via SNL Financial as of 2Q14 Noninterest expense adjusted for debt extinguishment cost and provision for unfunded lending commitments for Zion
Slide 25: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 25
Slide 26: Larger Loan Growth Outpacing Small Loan Growth
$(600) $(400) $(200) $- $200 $400 $600 $800 $1,000 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Gross Change from Previous Quarter Small Mid & Large Larger Loan Growth Outpacing Small Loan Growth 26 In Millions Source: Company documents as of 3Q14. Small Loans < $5M Commitment Middle Market & L
Slide 27: Smaller Loan Coupons Are In-Line with the Overall Portfolio Yield
3.99% 3.25% 3.71% 0% 1% 2% 3% 4% 5% 6% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Smaller Loans vs. Larger Loans Small Production Coupon Mid & Large Production Coupon Total Production Coupon Smaller Loan Coupons Are In-Line with the Overall Portfolio Yield A shift to smaller business loa
Slide 28: Loan Portfolio Driven by Healthy C&I and Consumer Growth
Loan Portfolio Driven by Healthy C&I and Consumer Growth 28 Source: Company documents as of 3Q14. -15% -10% -5% 0% 5% 10% 15% 20% 25% 2 Q1 2 3 Q1 2 4 Q1 2 1 Q1 3 2 Q1 3 3 Q1 3 4 Q1 3 1 Q1 4 2 Q1 4 3 Q1 4 Loan Growth by Type C&I O/O C&D Term CRE Consumer • Strong C&I and Consumer loan growth the last
Slide 29: Loans Growing Across the Subsidiaries
Loans Growing Across the Subsidiaries 29 • Increased loan production the past two years is attributable across the affiliates. • Amegy has experienced the most loan growth among the affiliates partially due to the strong growth in its energy portfolio. • ZFNB loan growth has been depressed during th
Slide 30: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 30
Slide 31: Stronger fee income vs. community banks in footprint
Zions has proportionately stronger fee income vs. community banks in its footprint ($5-$15B) Source: SNL Financial for the full year 2013 0% 5% 10% 15% 20% 25% 30% 35% 40% IB O C FFI N U M P Q ZIO N C O LB N B H C B B C N C V B F P A C W CAT Y TC B I WA L WAF D Fee Income Ratio (Noninterest Income a
Slide 32: Lower fee income relative to CCAR peers
Zions has proportionately lower fee income relative to CCAR peers Source: SNL Financial for the full year 2013 Fee Income defined as income from fiduciary activities, service charges on deposit accounts in U.S. offices, trading gains from foreign exchange transactions, other foreign transaction gain
Slide 33: Historical Impediments and Growth Areas
Historical “Impediments” and “Growth Areas” Reported values: 2014Q3 annualized and adjusted $13.9MM for fixed income securities gains & losses. 2008 adjusted for fixed income securities gains & losses, nonhedge derivative income (loss), net impairment on OTTI, Treasury Management fees compensated by
Slide 34: What to Expect from Fee Income Initiative
What to Expect from Fee Income Initiative • Growth focused within Zions’ footprint with relationship customers • Greater focus and tracking • Enhanced utilization of corporate infrastructure, product development with local pricing • Above average growth rates, assisted by generally low current penet
Slide 35: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 35
Slide 36: One-Year Outlook Summary Relative to 3Q14 Results
One-Year Outlook Summary Relative to 3Q14 Results Topic Outlook Comment Loan Balances Slightly to Moderately Increasing • Prepayments remain volatile, making net loan growth difficult to forecast Net Interest Income Slightly Increasing • Primarily driven by debt reduction late in 3Q14 • Zions expect
Slide 37: Agenda
• Capital • Credit Quality • Profitability • Loan Growth and Pricing • Fee Income Initiative • Updated Outlook • Appendix 37
Slide 38: CDO Exposure Has Been Significantly Reduced
CDO Exposure Has Been Significantly Reduced Par value of Securities at period shown 38 In Billions Source: Company earnings releases $1.3 $0.5 $1.1 $0.4 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 1Q13 Sep, 2014 Performing Nonperforming 61% reduction of total portfolio
Slide 39: CDO Portfolio Composition & Values as of 1Q13
CDO Portfolio Composition & Values as of 1Q13 39 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 CDOs 6 51 40
Slide 40: CDO Portfolio Composition & Values as of 3Q14
CDO Portfolio Composition & Values as of 3Q14 40 September, 2014 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 19 $497 $462 $379 -$83 Insurance CDOs 2 41 39 40 1 Other CDOs -- -- -- -- --
Slide 41: Significant Variances Between Zions and Federal Reserve Models
Significant Variances Between Zions and Federal Reserve Models There were two major variances between Zions’ Projections in its 2014 Comprehensive Capital Adequacy and Review (CCAR) Submission and the Federal Reserves’ Projections for Zions in that same hypothetical scenario and when compared to the
Slide 42: Fed Projected Much Higher Stress Loan Losses than Zions Experienced
The Federal Reserve Projected Much Higher Stress Loan Losses than Zions Experienced in the Recent Severe Recession 42 4.3% 4.8% 6.6% 0% 1% 2% 3% 4% 5% 6% 7% ZION Mix- Adjusted Actual Worst 9Q ZION Projected CCAR Submission ZION Projected by Federal Reserve Source: SNL Financial Dodd-Frank Act Stress
Slide 43: Net Loan Loss Rates Projected by Federal Reserve Not Materially Worse than Peers
Zions’ Total Net Loan Loss Rates Projected by Federal Reserve Were Not Materially Worse than Peers 43 Source: Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results 0% 2% 4% 6% 8% 10% 12% 14% B B T ST I C M A H B A N U B KE Y P N C M TB FI TB B A C ZI O N W FC R F U SB JP M
Slide 44: Federal Reserve Projected Stress PPNR for Zions Materially Lower than Peers
0% 20% 40% 60% 80% 100% 120% STI RF USB MTB KEY BBT JPM BAC PNC FITB HBAN WFC CMA UB C ZION, As Reported ZION, Adjusted Federal Reserve Projected Stress PPNR for Zions is Materially Lower than for Peers 44 ZION, Adjusted reflects elimination of non-recurring debt extinguishment costs and securities
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