Zions Bancorporation N.a. · NASDAQ:ZION

Zions Bancorporation N.a — Q1 2023 Earnings Presentation

43 slides from Zions Bancorporation N.a's earnings presentation, Apr 19, 2023

1. Slide 1: First Quarter 2023 Financial Review

   First Quarter 2023 Financial Review April 19, 2023

2. 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

3. Slide 3: Agenda

   Agenda Built For Resilience  Summary of 1Q23 Financial Results  Profile of our Deposits  Cash & Securities  Interest Rate Sensitivity  Duration Management  CRE Credit Quality, and In-Depth Review of Our Office CRE Portfolio  Capital and AOCI Accretion  Financial Outlook 3

4. Slide 4: First Quarter 2023 Financial Highlights

   First Quarter 2023 Financial Highlights A quarter marked by overall healthy profitability, continued strength in credit quality, and increased capital  Earnings and Profitability:  Loans and Deposits: Vs. 4Q22, growth rates not annualized  $1.33 diluted earnings/share, compared to $1.84  1.2% in

5. Slide 5: Diluted Earnings Per Share

   Diluted Earnings Per Share Positive impact to EPS from interest income offset by elevated funding costs and seasonal noninterest expenses Diluted Earnings per Share Notable Items1: $1.84 1Q23: $1.40 $1.33 Ex PPP income and Notable Items, YoY  $(0.06) per share negative impact from tax $1.27 $1.29 c

6. Slide 6: Adjusted Pre-Provision Net Revenue (PPNR)

   Adjusted Pre-Provision Net Revenue (“PPNR”) Adjusted PPNR declined 19% from the prior quarter, primarily due to seasonal increases in noninterest expense and lower NII Linked quarter (1Q23 vs. 4Q22):  Adjusted PPNR declined 19% primarily from: Adjusted PPNR(1) ($ millions)  An 8% increase in adjus

7. Slide 7: Net Interest Income and Net Interest Margin

   Net Interest Income (“NII”) and Net Interest Margin (“NIM”) Vs. 4Q22, continued interest income growth offset by increased interest expense from deposits and borrowings Net Interest Income Net Interest Margin Net Interest Margin During 2022, Zions’ strong base of noninterest bearing deposits during

8. Slide 8: Noninterest Income and Revenue

   Noninterest Income and Revenue Total customer-related noninterest income declined 1% vs. 4Q22 and was flat from the year-ago period; revenue decreased 5% vs. 4Q22 and was up 19% from the year-ago period. Customer-Related Noninterest Income (1) Revenue (2) ($ millions) ($ millions) $154 $156 $153 $15

9. Slide 9: Noninterest Expense

   Noninterest Expense Noninterest expense increased 9% vs. 4Q22 and was up 10% from the year-ago period Noninterest Expense (NIE) Total noninterest expense increased $41 million, compared to the prior quarter, primarily due to seasonal increases ($ millions)  $35 million increase in Salaries and Bene

10. Slide 10: Average Loan and Deposit Balances

    Average Loan and Deposit Balances Vs. 4Q22, average loans increased 2.7% in 1Q23; average deposits decreased 5.5% Average Total Loans Average Total Deposits Yield on Total Loans Cost of Total Deposits ($ billions) Average Noninterest-bearing Deposits ($ billions) $100.0 Average Interest-bearing Depo

11. Slide 11: Deposit Portfolio Composition

    Deposit Portfolio Composition 55% of deposits are insured; an additional 3% of deposits are collateralized; 66% of commercial balances are on analysis Composition of Deposit Portfolio Total Deposits: $69.2 Billion Commercial Deposits Commercial Deposit Accounts $36.6 Billion  Commercial Operating D

12. Slide 12: 1Q23 Deposit Performance, By Balance

    1Q23 Deposit Performance, By Balance Although Zions’ exposure to large deposit customers is limited, such accounts were more sensitive Deposit Changes by Account Balance Deposit Portfolio Changes: March 31, 2023 vs December 31, 2022 • Not all uninsured deposits behave the same or similarly in uncert

13. Slide 13: Deposit Balance Trends – Returning to Pre-Pandemic Levels

    Deposit Balance Trends – Returning to Pre-Pandemic Levels The pandemic was an anomaly, with recent deposit composition and levels representing a profile more typical of our portfolio Returning to pre-pandemic levels of uninsured deposits  Large deposits increased from 2019 to 2021 and have been rec

14. Slide 14: Cash and Immediately Available Sources of Cash vs. Uninsured Deposits

    Cash and Immediately Available Sources of Cash vs. Uninsured Deposits Zions has capacity to fund 100%+ of its uninsured deposits Cash and Unutilized and Immediately Available Built for Resilience: Sources of Cash(1) vs. Uninsured Deposits Relative $38B  Risk Management Practices: Longstanding Money

15. Slide 15: Securities & Money Market Investments

    Securities & Money Market Investments We have strong on-balance sheet liquidity Total Securities Portfolio (at Fair Value) The investment portfolio is designed to be a storehouse of and Money Market Investments balance sheet liquidity (end of period balances)  Money market investments and securitie

16. Slide 16: Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis

    Interest Rate Sensitivity – Net Interest Income Sensitivity Analysis Net Interest Income is expected to decline moderately over the next 12 months Simulated Net Interest Income Sensitivity (1) Vs.1Q23: −200 bps −100 bps +100 bps +200 bps Latent(2) sensitivity: Modeled to reduce NII by approximately

17. Slide 17: Understanding the Value of Duration on the Asset Side of the Balance Sheet

    Understanding the Value of Duration on the Asset Side of the Balance Sheet Duration associated with the investment and swap portfolios balances Zions’ overall interest rate risk Net Interest Income Sensitivity Analysis Economic Value of Equity Sensitivity Analysis (“Earnings at Risk” or “EaR”) As re

18. Slide 18: Capital Strength

    Capital Strength Risk-weighted assets increased 8% YoY, while the balance of CET1 capital increased 7% Common Equity Tier 1 Capital and Allowance for Credit Losses Net Charge-offs as a percentage of risk-weighted assets annualized, as a percentage of risk-weighted assets 14% 12.5% 12.3% 12.3% 12.3%

19. Slide 19: Accumulated Other Comprehensive Loss Accretion

    Accumulated Other Comprehensive Loss Accretion Accretion of unrealized loss is projected to add 1.1 percentage points to Common Equity / Asset ratio by year-end 2024 Accumulated Other Comprehensive Loss Accretion by Quarter(1) Accumulated Other Comprehensive Loss: (Cumulative) 39%  Principal amorti

20. Slide 20: Credit Quality

    Credit Quality Net charge-offs remain low, with last 12 months net charge-offs at just 0.06% of average loans All Ratios Exclude PPP Loans Credit Quality Ratios 2.5% Key credit metrics: 2.0% Classified / Loans  1.6%: Classified loans/loans NPAs + 90 / Loans + OREO 1.5%  Classified balance improved

21. Slide 21: Commercial Real Estate Loan Portfolio

    Commercial Real Estate (“CRE”) Loan Portfolio CRE is 23% of Total Loans: $12.9B total, $2.3B construction, $10.6B term Commercial Real Estate by Location Commercial Real Estate by Type Other, 4% $ billions Balance % of CRE CO, 5% WA/OR, 7% Multi-family $3.2 25% CA, 30% Industrial / Warehouse 2.7 21%

22. Slide 22: CRE In-Depth Review: Exercising CRE Discipline Through Growth Management

    CRE In-Depth Review: Exercising CRE Discipline Through Growth Management Commercial real estate loan growth lags peers due to continued exercise of concentration risk discipline Commercial Real Estate Zions has exercised caution in CRE 200 Excluding Owner Occupied concentrations for more than a deca

23. Slide 23: CRE In-Depth Review: Term Commercial Real Estate

    CRE In-Depth Review: Term Commercial Real Estate Low loan-to-values ratios in the Term CRE portfolio demonstrates the ability of the portfolio to withstand stress Term CRE loans account for $10.6 billion of the outstanding balances; 19% of the total loan portfolio Term Commercial Real Estate Term Of

24. Slide 24: Financial Outlook (1Q24E vs 1Q23A)

    Financial Outlook (1Q24E vs 1Q23A), as of April 19, 2023 Outlook Comments Loan Balances Slightly  Adjusted downward from the prior quarter outlook due in part to a slowing (period-end) Increasing economy Net Interest Income Moderately  Last week of March had a daily net interest income rate of $7.

25. Slide 25: Appendix

    Appendix  Financial Results Summary  Balance Sheet Profitability  Credit Metrics  Loan Loss Severity (NCOs as a percentage of nonaccrual loans)  Allowance for Credit Losses  Loan Growth by Geography and Type  Earning Asset Repricing  Interest Rate Swaps  Economic Value of Equity  Deposit C

26. Slide 26: Financial Results Summary

    Financial Results Summary Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) March 31, December 31, September 30, June 30, 2023 2022 2022 2022 Earnings Results: Diluted Earnings Per Share $ 1.33 $ 1.84 $ 1.40 $ 1.29 Net Earnings Applica

27. Slide 27: Balance Sheet Profitability

    Balance Sheet Profitability Profitability impacted by lower NII due to increased funding costs and seasonal noninterest expenses Return on Assets Return on Tangible Common Equity (Excludes Accumulated Other Comprehensive Income) 16.9% 12.9% 13.2% 12.5% 12.3% 1.27% 0.97% 0.90% 0.91% 0.91% 1Q22 2Q22 3

28. Slide 28: 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 five of the seven major categories in which Zions has significant exposure, Zions’ loss rate has been much better (top quartile) Me

29. Slide 29: CRE In-Depth Review: Office ($2.2B Balance)

    CRE In-Depth Review: Office ($2.2B Balance) CRE Office portfolio is 17% of total CRE exposure; strong underwriting Office Portfolio Trends 3.0 Construction Outstandings Term Outstandings  Office balances are down 6% since 1Q 2018 and 8% since peak (2Q 2021) 2.5  92% term, 8% construction 2.0  Les

30. Slide 30: CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity

    CRE In-Depth Review: Office Loans – Distribution of DSCR, LTV and Loan Maturity Zions’ has minimal intersecting elements of risk in the office CRE portfolio, while having a significantly large collateral cushion CRE Office Term by Maturity  2023 term office maturities = $617 million 700  Criticize

31. Slide 31: 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 $11.0 billion of the outstanding balances or 19%

32. Slide 32: 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 (2018 – 2022) Fifteen Year Average (2008 – 2022) 71% 60% 59% 59% 59%

33. Slide 33: Allowance for Credit Losses

    Allowance for Credit Losses (“ACL”) The ACL increase vs. 4Q22 is primarily due to increased probability of an economic downturn in applied scenarios Allowance for Credit Losses ($ millions) 1.88 1.91 ACL (%) ex-PPP 1.74 1.56 1.48 1.22 1.21 1.08 914 917 835 1.11 1.13 1.05 1.10 1.15 777 695 1.02 590 6

34. Slide 34: Loan Growth in Detail

    Loan Growth in Detail Loan growth achieved in several categories: residential real estate, term CRE, consumer construction, and C&I (ex-O&G) Linked Quarter Loan Balance Growth, Excluding PPP Total Loans, excluding PPP: +1.3% Linked quarter: 10%  Excluding PPP loans, period-end loans Growth Rate: Li

35. Slide 35: Loan Growth - by Bank Brand and Loan Type

    Loan Growth - by Bank Brand and Loan Type Loan growth achieved in several categories and across our footprint Period-End Year over Year Loan Growth (1Q23 vs. 1Q22) Zions (in millions) Amegy CB&T NBAZ NSB Vectra CBW Other Total Bank C&I (ex-Oil & Gas) 369 364 653 47 245 171 (2) (1) 1,846 SBA PPP (157

36. Slide 36: Simulated Repricing Expectations: Earning Assets and Loans

    Simulated Repricing Expectations: Earning Assets and Loans A substantial portion of earning assets reset within one year; additionally, yield benefits are expected in later periods Earning Assets Rate Reset and Cash Flow Profile Loans: Rate Reset and Cash Flow Profile 52% 40% 46% Earning Assets Afte

37. Slide 37: Interest Rate Swaps

    Interest Rate Swaps We continue to create some protection from falling rates Interest rate sensitivity managed in part with interest Average total swaps in effect during quarter rate hedges: Average Weighted Average Fixed Rate (right scale) Outstanding average Fixed 6.0 2.5% Notionial Rate Received

38. Slide 38: Managing the Stability of Economic Value of Equity

    Managing the Stability of Economic Value of Equity (“EVE”) Some are focusing only on the marks on the asset side of the balance sheet, resulting in a Picasso-like portrait view of equity Zions’ Economic Value of Equity $ Billions However, when marks on deposits are considered, a “fair value” view of

39. Slide 39: Funding – Cost of Total Deposits and Cost of Total Funding

    Funding – Cost of Total Deposits and Cost of Total Funding Through multiple rate cycles, Zions’ total deposit and funding costs have been consistently among the best of peers Average Cost of Total Deposits Average Cost of Total Funding ZION Peer Top Quartile % ZION Peer Top Quartile % 7.00 7.00 Peer

40. Slide 40: Not All Uninsured Deposits Are Created Equal

    Not All Uninsured Deposits Are Created Equal Zions’ average partially insured deposit account is materially smaller than that of the largest U.S. and peer banks Average Account Balance: Where the balance exceeded $250,000 at December 31, 2022 Smaller-Sized Accounts Are More Stable 4.2  A high perce

41. Slide 41: Concentrations Risk Management: Granularity of Deposits

    Concentrations Risk Management: Granularity of Deposits Deposits of both commercial and consumer customers are granular Commercial Customer Deposit Consumer Customer Deposit Balance Distribution Balance Distribution 40% 40% Commercial deposits total $36.6 B and Consumer deposits total $23.6 B and ac

42. Slide 42: Non-GAAP Financial Measures

    Non-GAAP Financial Measures In millions, except per share amounts 1Q23 4Q22 3Q22 2Q22 1Q22 Pre-Provision Net Revenue (PPNR) (a) Total noninterest expense $512 $471 $479 $464 $464 LESS adjustments: Severance costs 1 1 Other real estate expense 1 Amortization of core deposit and other intangibles 2 1

43. Slide 43: Non-GAAP Financial Measures (Continued)

    Non-GAAP Financial Measures (Continued) In millions, except per share amounts 1Q23 4Q22 3Q22 2Q22 1Q22 Net Earnings Applicable to Common Shareholders (NEAC) Net earnings applicable to common $198 $277 $211 $195 $195 Diluted Shares (average) 148 149 150 151 152 (k) Diluted EPS 1.33 1.84 1.40 1.29 1.2

Zions Bancorporation, N.A. — Q1 2023 Earnings Presentation on 6ix