Zions Bancorporation N.A. · NASDAQ:ZION
Zions Bancorporation N.A — Zions Bancorporation — Q1 2017 Earnings Presentation
29 slides from Zions Bancorporation N.A's earnings presentation, Apr 24, 2017
Slide 1: First Quarter 2017 Financial Review
First Quarter 2017 Financial Review April 24, 2017
Slide 2: Forward-Looking Statements and Use of Non-GAAP Financial Measures
2 Forward-Looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation that are based on other than historical data or that express the Company’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litig
Slide 3: First Quarter 2017 Key Performance Indicators
Strong growth in EPS: Diluted earnings per share increased substantially from the year-ago period, to $0.61 in 1Q17 from $0.38 Strong growth in adjusted pre-provision net revenue (1): 17% growth over year-ago period • An 8.0% year-over-year increase in adjusted revenue (1) • A 3.8% year-over-yea
Slide 4: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted Pre-Provision Net Revenue (1) 4 Steady improvement driven by expense controls and active balance sheet management (1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and losses and debt extinguishment costs. See Ap
Slide 5: Efficiency Ratio
Efficiency Ratio Efficiency Ratio (1) 5 Substantial improvement driven by expense control and revenue growth (1) Defined as noninterest expenses as a percentage of net revenue, adjusted for items such as severance, provision for unfunded lending commitments, securities gains and losses and debt exti
Slide 6: Total Loan and Deposit Growth
Total Loan and Deposit Growth Total Loans Total Deposits 6 Moderate annual growth of loans and deposits are among the key drivers of our efficiency initiative Due in part to continued discipline on CRE concentration limits and O&G attrition, period-end loan growth was slow, increasing 0.2% from th
Slide 7: Credit Quality
Credit Quality 7 Key Credit Quality Ratios Credit quality remains healthy Key Credit Metrics: Classified loans were 3.4% of loans NPAs were 1.4% of loans Annualized NCOs were 0.43% of average loans for the quarter Nearly 2/3rds of the 1Q17 NCOs were attributable to a single credit that was
Slide 8: Profitability
Profitability 8 Zions’ profitability is improving Return on assets has improved steadily since announcing the efficiency initiative Average return on tangible common equity continues to improve, to 8.8% in 1Q17 from 5.6% a year ago Multi-year objective is to achieve highly competitive balance
Slide 9: Financial Results
Financial Results 9 Solid and improving fundamental performance Three Months Ended (Dollar amounts in millions, except per share data) Mar 31, 2017 Dec 31, 2016 Mar 31, 2016 Earnings Results: Diluted Earnings Per Share $ 0.61 $ 0.60 $ 0.38 Net Earnings Applicable to Common Shareholders 129 125 79 Ne
Slide 10: Net Interest Income
Net interest income growth continued its positive trajectory, increasing 8.0% over the year-ago period On a linked quarter basis, net interest income grew by $9 million over 4Q16 Approximately 75% of year-over-year growth in NII is due to investment portfolio activity, the remainder is due to
Slide 11: Active Balance Sheet Management: High Quality Securities Portfolio Growth
Active Balance Sheet Management: High Quality Securities Portfolio Growth 11 Short to medium duration portfolio; limited duration extension risk Total Securities (end of period balances) ($ billion) $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 1Q16 2Q16 3Q16 4Q16 1Q17 Agency MBS Securities Agency Securities S
Slide 12: Loan Growth by Type
C&I (ex-O&G) 2.9% Owner Occupied (ex-NRE) 2.6% C&D 7.9% Term CRE (ex- NRE) 5.1% 1-4 Family 14.2% National Real Estate -15.8% O&G -22.0% Home Equity 8.5% Other 14.1% -25% -15% -5% 5% 15% 25% Loan Growth by Type 12 Healthy loan growth achieved in targeted growth categories Year-over-Year Loan Growth T
Slide 13: Net Interest Income Drivers
Loans 72% Securities 25% Cash 3% Net Interest Income Drivers 13 December 2016 and March 2017 rate hikes expected to benefit net interest income throughout 2017 Net Interest Margin (NIM) Avg Earning Asset Mix Relative to the prior quarter, the 1Q17 NIM was 3.38%, up one basis point Securities yie
Slide 14: Interest Rate Sensitivity and Historical Deposit Beta
Over the past year (measured from 1Q16 to 1Q17), Zions has reduced its net interest income sensitivity in a +200bps scenario from +16% to +10% in its modeled Slow case, and from +9% to +3% in its modeled Fast case Much of the reduction in rate sensitivity was due to securities purchases during 2
Slide 15: Noninterest Income
112 118 126 118 115 0 20 40 60 80 100 120 140 1Q16 2Q16 3Q16 4Q16 1Q17 Customer-related fee income decreased from 4Q16 by 3%, primarily due to decline in loan fees Growth (YoY) is somewhat lower than our target due in part to accounting true-up in year-ago period Targeted growth includes treas
Slide 16: Noninterest Expense
Noninterest Expense ($mm) 396 382 403 404 414 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 1Q16 2Q16 3Q16 4Q16 1Q17 Noninterest Expense 16 We expect that expense controls will result in improved profitability Total NIE increased 4.5% versus the year-ago period; adjusted NIE increased 3.8% (1)
Slide 17: Strategic priorities
Continue to Achieve Positive Operating Leverage Maintain annual mid-single digit loan growth rates while holding strong CRE concentration limits Moderately reduce the Company’s interest rate sensitivity by: Active investment portfolio management Continue to increase market share in residen
Slide 18: Next 12-Month Outlook Summary
Next 12-Month Outlook Summary (1Q18E, vs. 1Q17A) 18 Outlook Comments Moderately Increasing • Over the next 12 months, we expect continued strong growth from residential mortgage, moderate growth in C&I and CRE Moderately Increasing • Expect continued increases in loans, continued benefit from recent
Slide 19: Appendix
Impact of Warrants Oil & Gas (O&G) Portfolio Detail Credit Quality Metrics, O&G and Ex-O&G Deep Dive: Commercial Real Estate, C&I Loans Loan Growth by Bank Brand and Loan Type Zion’s Announced Financial Targets GAAP to Non-GAAP Reconciliation 19 Appendix
Slide 20: Impact of Warrants
Zions has two tranches of warrants outstanding (ZIONZ and ZIONW), both of which are currently in the money Dilution is calculated using the treasury method of accounting, which relies upon the following assumptions: Warrants are exercised at the beginning of the period Issuer uses proceeds f
Slide 21: Oil & Gas (O&G) Portfolio Detail
21 Note: Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as oil and gas- related, including a particular segment of oil and gas-related activity, e.g., upstream or downstream; typically, 50% of revenues coming from the oil and gas sector
Slide 22: Credit Quality (Excluding Oil & Gas Portfolio)
Credit Quality (Excluding Oil & Gas Portfolio) 22 Key Credit Quality Ratios (Ex-O&G) Excluding oil and gas lending, credit quality remains very good Overall stable and healthy credit quality Key Metrics: Criticized loans equaled 3.0% of loans, declining slightly from 3.1% in 4Q16 Classified
Slide 23: Oil & Gas (O&G) Credit Quality
Oil & Gas (O&G) Credit Quality 23 O&G Key Credit Quality Ratios O&G credit quality remains challenged, although active management and the recovery in commodity prices has aided in the portfolio’s overall improvement Relative to December 31, 2016: Criticized O&G loans declined by $32 million, the
Slide 24: Oil & Gas Loss Outlook and Reserve
O&G Loan Loss Expectation O&G loan losses are expected to decline substantially over the next 12 months as compared to the last 12 months (1) Most of the expected loss is likely to come from services loans 57% of classified O&G loans are from services loans 75% of O&G losses incurred since
Slide 25: Deep Dive: Retail Commercial Real Estate
Deep Dive: Retail Commercial Real Estate 25 78% of portfolio is neighborhood / stand alone retail Retail CRE totals $1.85 billion Average loan balance: $1.8 million Granular tenant mix: Top ten tenants are < 20% of the total exposure Minimal exposure to national tenants with announced bank
Slide 26: Deep Dive: Retail Commercial & Industrial Loans
Deep Dive: Retail Commercial & Industrial Loans 26 The portfolio is stable, with no material exposure to national brick-and-mortar retailers Retail Commercial and Industrial loans1 total $2.2B and represent exposure to the overall retail industry; More insulated (80%) includes auto dealers, gas
Slide 27: Loan Growth by Bank Brand and Loan Type
27 Loan Growth by Bank Brand and Loan Type Note: National Real Estate (NRE) is a division of Zions Bank with a focus on small business loans with low LTV ratios, which generally are in line with SBA 504 program parameters. “Other” loans includes municipal and other consumer loan categories. Totals s
Slide 28: Zions' Announced Financial Targets
Zions’ Announced Financial Targets 28 On June 1, 2015 Zions announced several financial targets, including: 2H15 FY16 FY17 Hold to below $1.58 (2) billion Hold to below $1.58 (1) billion Slightly above $1.58 (1) billion TBD ≤70% <66% Low 60s TBD 50% >80% 100% TBD 100% -- -- -- -- -- -- -- -- Lower b
Slide 29: GAAP to Non-GAAP Reconciliation
29 (1) In Q1 2016, to be consistent with industry practice, the Company reclassified its bankcard rewards expense from “Other noninterest expense” to “Other service charges, commissions and fees”, offsetting this expense against associated noninterest income. Prior period amounts have also been recl