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| 8-K - 3Q2016 EARNINGS RELEASE - ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ | a3q20168-kcoverpage.htm |
| EX-99.1 - EXHIBIT 99.1 3Q2016 EARNINGS RELEASE - ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ | exh9913q20168-k.htm |
Third Quarter 2016
Financial Review
October 24, 2016
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 Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be
understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide
current expectations or forecasts or intentions regarding future events or determinations. These forward-looking
statements are not guarantees of future performance or determinations, nor should they be relied upon as
representing management’s views as of any subsequent date. Forward-looking statements involve significant risks
and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in
this presentation. Factors that could cause actual results to differ materially from those expressed in the forward-
looking statements include the actual amount and duration of declines in the price of oil and gas, our ability to
meet our efficiency and noninterest expense goals, as well as other factors discussed in the Company’s most
recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, filed with the Securities and Exchange
Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov).
Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly
announce the result of revisions to any of the forward-looking statements included herein to reflect future events
or developments.
This document contains several references to non-GAAP measures, including pre-provision net revenue and the
“efficiency ratio,” which are common industry terms used by investors and financial services analysts. Certain of
these non-GAAP measures are key inputs into Zions’ management compensation and are used in Zions’ strategic
goals that have been and may continue to be articulated to investors. Therefore, the use of such non-GAAP
measures are believed by management to be of substantial interest to the consumers of these financial
disclosures and are used prominently throughout the disclosures. A full reconciliation of the difference between
such measures and GAAP financials is provided within the document, and users of this document are encouraged
to carefully review this reconciliation.
Increasing EPS: Diluted earnings per share increased substantially from the year-ago period
• EPS increased to $0.57 in 3Q16 from $0.41 (GAAP)
• Adjusting for items used to calculate our efficiency ratio, including the effect of securities gains and
losses (1), EPS increased to $0.54 from $0.43, or 26%
Increasing pre-provision net revenue (1): 22% growth over year-ago period
• A 10.6% year-over-year increase in adjusted revenue (1)
• A 5.6% year-over-year increase in adjusted noninterest expense (1)
Increasing noninterest income: Customer-related noninterest income increased 7% over the
prior quarter and 11% from the year-ago period
Loans: relatively stable with the prior quarter (period end loans increased 0.1% vs. 2Q16)
Tracking on the efficiency initiative:
• Efficiency ratio equaled 66.0% in 3Q16 and 66.3% YTD; ratio is expected to be less than 66% for the
full year
• Adjusted noninterest expense was somewhat elevated due to several items considered to be
operating items in nature although not frequently recurring
• Remain committed to reporting adjusted noninterest expense less than $1.58 billion in 2016
Maintaining overall healthy credit quality: stabilization of overall credit metrics
• Very strong credit metrics in non-oil & gas loans (95% of the loan portfolio), while oil & gas loan
challenges remain
• Overall allowance for credit losses remains strong; oil & gas allowance for credit losses decreased
$10 million from the prior quarter, but continues to exceed 8% of the O&G portfolio
3
Third Quarter 2016 Key Performance Indicators
Solid and improving fundamental performance
(1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and
losses and debt extinguishment costs. See Appendix for GAAP to non-GAAP reconciliation tables.
Zions’ Announced Financial Targets
4
On June 1, 2015 Zions announced several financial targets, including:
2H15 FY16 FY17
Goal
Actual
Result
Goal Result Goal Result
Hold to
below
$1.58 (1)
billion
100%
Hold to
below
$1.58 (1)
billion
On Track
Slightly
above
$1.58 (1)
billion
TBD
≤70% 69.3% <66%
On Track:
YTD
66.3%
Low 60s TBD
50% ~57% >80% On Track 100% TBD
100% 100% -- -- -- --
-- -- -- --
Lower by
~$20
million vs.
2014A
Expected
to beat by
$10mm+
Adjusted Noninterest
Expense
Gross Cost Savings of
$120 million
Pay Off High Cost
Subordinated Debt
Preferred Equity
Dividends
Efficiency Ratio
(1) Reduced by $20 million from original stated target of “less than $1.60 billion,” driven by an accounting
adjustment made in 1Q16 which effectively re-categorized corporate card rewards program expense from a
separate line item to now be netted against its associated revenue.
Pre-Provision Net Revenue
Adjusted Pre-Provision Net Revenue (1)
5
Steady improvement driven by disciplined expense and balance sheet management
(1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and
losses and debt extinguishment costs. See Appendix for GAAP to non-GAAP reconciliation table.
($mm)
171
174
182
211
208
$100
$125
$150
$175
$200
$225
3Q15 4Q15 1Q16 2Q16 3Q16
Adjusted pre-provision net
revenue has strengthened
measurably over the past year, up
22%
Persistent improvement driven by
focus on expense control, loan
growth, and higher return on
liquid assets
This positive trend is expected to
continue in the near term
Efficiency Ratio
Efficiency Ratio (1)
6
Substantial improvement driven by expense control and revenue growth
(1) Defined as noninterest expenses as a percentage of net revenue, adjusted for items such as severance,
provision for unfunded lending commitments, securities gains and losses and debt extinguishment costs. See
Appendix for GAAP to non-GAAP reconciliation table.
The efficiency ratio improved to
66.0% (3Q16) from 69.1% in the
year-ago period
We remain committed to driving
the efficiency ratio to:
Less than 66% for 2016
The low 60s for 2017
Solid progress on the efficiency
ratio while investing substantially
in enabling technology
69.1%
69.6%
68.5%
64.5%
66.0%
<66%
Low 60s
55%
60%
65%
70%
3Q15 4Q15 1Q16 2Q16 3Q16 FY16 FY17
Total Loan and Deposit Growth
Total Loans Total Deposits
7
Annual mid-single digit loan and deposit growth are key drivers of our efficiency initiative
Period-end loan growth increased 0.1% on a linked quarter basis, in what is typically a seasonally soft
quarter
Year-over-year growth rates of both loans and deposits are tracking with our stated objectives
Period-end deposits experienced moderate growth
($mm)
$36,000
$37,750
$39,500
$41,250
$43,000
3Q15 4Q15 1Q16 2Q16 3Q16
35%
40%
45%
50%
$44,000
$46,000
$48,000
$50,000
$52,000
3Q15 4Q15 1Q16 2Q16 3Q16
Total Deposits (left)
Non-Interest Bearing Deposits as a % of Total (right)
($mm)
Credit Quality (Ex-Oil & Gas Portfolio)
8
Key Credit Quality Ratios (Ex-O&G)
Excluding oil and gas lending, credit quality remains very good
Overall stable and healthy credit quality
Relative to June 30, 2016:
Criticized loans increased slightly to
3.3% of loans
Classified loans increased to 2.1% of
loans
NPAs decreased to 0.60% of loans
Annualized NCOs equaled -0.11% of
average loans
Allowance for credit losses remains strong at
1.13% of total loans and leases
1.9x coverage of NPAs
Not meaningful coverage of
annualized NCOs (net recoveries)
Reaffirming full year 2016 net charge-off
outlook of 30-35 basis points of average
loans (overall, inclusive of O&G)
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
3Q15 4Q15 1Q16 2Q16 3Q16
Criticized / Loans Classifieds / Loans
Nonperforming Assets / Loans Net Charge-offs / Loans
Note: Net Charge-offs/Loans ratio is annualized for all periods shown. Oil and gas loans discussed in greater
detail later in this presentation.
Oil & Gas (O&G) Credit Quality
9
O&G Key Credit Quality Ratios
O&G credit quality remains substantially challenged, although higher commodity
prices are helpful
Relative to June 30, 2016:
Criticized O&G loans decreased $3
million, the first linked-quarter decrease
since the cycle began
Classified O&G loans decreased $44
million
O&G NPAs increased $60 million
Annualized NCOs equaled 7.1% of
average loans, and includes NCOs
associated with classified loans under
contract to sell
Results reflect the results of the recent
SNC exam
Sponsors contributed more than $200
million of equity in 3Q16 to O&G
portfolio companies, more than double
the 2Q16 contribution
Allowance for credit losses remains strong,
in excess of 8% of O&G balances
0.6x coverage of NPAs
1.3x coverage of annualized NCOs
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
3Q15 4Q15 1Q16 2Q16 3Q16
Criticized / Loans Classifieds / Loans
Nonperforming Assets / Loans Net Charge-offs / Loans
Note: Net Charge-offs/Loans ratio is annualized for all periods shown.
Financial Results
10
Solid and improving fundamental performance
Three Months Ended
(Dollar amounts in millions, except per share data) Sept 30,
2016
June 30,
2016
Sept 30,
2015
Earnings Results:
Diluted Earnings Per Share $ 0.57 $ 0.44 $ 0.41
Net Earnings (Loss) Applicable to Common Shareholders 117 91 84
Net Interest Income 469 465 425
Noninterest Income 145 126 126
Noninterest Expense 403 382 391
Pre-Provision Net Revenue (1) 208 211 171
Provision for Credit Losses 16 30 20
Ratios:
Return on Average Assets 0.84 % 0.77 % 0.69 %
Return on Average Common Equity 6.66 % 5.30 % 5.02 %
Tangible Return on Average Tangible Common Equity 7.88 % 6.31 % 6.05 %
Net Interest Margin 3.36 % 3.39 % 3.11 %
Yield on Loans 4.11 % 4.16 % 4.18 %
Yield on Securities 2.00 % 2.13 % 2.17 %
Average Cost of Deposits* 0.10 % 0.10 % 0.10 %
Efficiency Ratio (1) 66.0 % 64.5 % 69.1 %
Ratio of Nonperforming Assets to Loans, Leases and OREO 1.37 % 1.30 % 0.92 %
Annualized Ratio of Net Loan and Lease Charge-offs to Average Loans 0.28 % 0.36 % 0.31 %
Basel III Common Equity Tier 1 12.0 % 12.0% 12.2 %
(1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and
losses and debt extinguishment costs. See Appendix for GAAP to non-GAAP reconciliation tables.
* Includes noninterest-bearing deposits.
C&I (ex-O&G)
Owner Occupied
(ex-NRE)
C&D
Term CRE (ex-
NRE)
1-4 Family
National Real
Estate
O&G
Home Equity
Other
-30%
-20%
-10%
0%
10%
20%
30%
Loan Growth by Type
11
Solid loan growth achieved in targeted growth categories
Year-over-Year Loan Growth
Loan growth in Commercial and
Industrial (C&I), Term Commercial
Real Estate (CRE), Residential
Mortgage (1-4 Family)
Declines in National Real Estate
(NRE), Oil and Gas (O&G) and
Owner Occupied
Over the next four quarters, we
expect:
Solid growth in non-O&G C&I and
Residential Mortgage
Moderate growth in Construction
and Land Development (C&D)
Term CRE
Attrition in O&G
Attrition in NRE
Note: National Real Estate (NRE) is a division of Zions Bank (which is a division of ZB, N.A.) 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.
Note: Bubble size indicates relative balance as of 3Q16.
Net interest income growth continued its positive trajectory, increasing 10.3% over the year-ago period
On a linked quarter basis, net interest income grew by $4 million over 2Q16
Net interest income is expected to continue to increase
Net Interest Income
Net Interest Income
12
Improving at a sustainable rate
($mm)
425
449
453
465
469
$400
$420
$440
$460
$480
3Q15 4Q15 1Q16 2Q16 3Q16
Modeled Annual Change in a +200 Interest
Rate Environment
Fast Slow
Net Interest Income –
3Q16 (1)
8% 14%
Net Interest Income –
2Q16
9% 15%
12-month simulated impact using a static-sized balance sheet and a
parallel shift in the yield curve, and is based on statistical analysis
relating pricing and deposit migration. “Fast” refers to an assumption
that deposit rates and volumes will adjust at a faster speed. “Slow”
refers to an assumption that deposit rates and volumes will adjust at a
more moderate speed.
(1) Preliminary analysis, subject to refinement.
Net Interest Income Sensitivity
Active Balance Sheet Management: Securities Portfolio Growth
13
Short to medium duration portfolio; limited duration extension risk
Total Securities
(end of period balances)
($mm)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
3Q15 4Q15 1Q16 2Q16 3Q16
Other Securities
Municipal Securities
Small Business Administration Loan-Backed Securities
Agency Securities
Agency Guaranteed MBS Securities
Added net $872 million of
securities during 3Q16
Securities Portfolio Duration
Current: 2.8 years
200 bps increase from current
interest rates: 2.8 years
Future net additions to securities
balances not limited by cash
currently on the balance sheet
Loans
76%
Securities
19%
Cash
5%
Net Interest Income Drivers
14
Net interest margin slightly lower from prior quarter due primarily to higher securities
premium amortization
Net Interest Margin (NIM)
Earning Asset Mix
The 3Q16 NIM was 3.36%, down
three basis points from the prior
quarter
Two of the three basis
points of NIM compression
were due to increased
premium amortization on
MBS securities
One of the three basis
points was attributable to a
decline in income from
loans purchased from the
FDIC in 2009
Other favorable factors
such as a lower cost of
funds and a mix shift
toward higher-yielding
assets were offset by loan
yield compression
3.11% 3.23%
3.35% 3.39% 3.36%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
3Q15 4Q15 1Q16 2Q16 3Q16
Loan Yield
Securities Yield
Interest Expense / Interest Earning Assets: Red
Net Interest Margin
Cash Yield: Gray
Loans
75%
Securities
9%
Cash
15%
CDOs
1%
1Q15 3Q16
113 113 112
118
125
$100
$110
$120
$130
3Q15 4Q15 1Q16 2Q16 3Q16
Total noninterest income increased to $145
million from $126 million a year ago
Approximately $11 million of the 3Q16
revenue was due to the increase in the
valuation of a publicly-traded SBIC
investment
Approximately $3 million of additional
noninterest income is considered to be
operating in nature although not
frequently recurring
Customer-related fee income increased 11%
from the year-ago period
Key components of customer-related fee
income (vs. year ago): Treasury management up
12%, Wealth management up 33%, Mortgage
up 18%
Noninterest Income
15
Continued momentum largely a function of increased focus
(1) Reflects total customer-related noninterest income.
Customer-Related Fee Income (1) ($mm)
Noninterest Expense
($mm)
391 397 396 382
403
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
3Q15 4Q15 1Q16 2Q16 3Q16
Noninterest Expense
16
Expense controls have resulted in performance tracking in line with our stated goal
Total NIE increased 3.1% versus the year-ago
period; adjusted NIE increased 5.6%(1)
Linked quarter increase primarily due to a
legal accrual, true-ups related to the
alignment of a single back-office operating
environment, and other employee benefits-
related items
Year-to-date annualized adjusted
noninterest expense tracking consistent
with the stated FY16 target of less than
$1.58 billion
(1) Adjusted for items such as severance, provision for unfunded lending commitments, securities gains and
losses and debt extinguishment costs. See Appendix for GAAP to non-GAAP reconciliation tables.
Increased Payout
Increased the common dividend payout to an annualized $0.32 per share from $0.24 per
share previously
Target: repurchase up to $180 million of common equity from 3Q16 to 2Q17 (~3% of
shares outstanding)
Completed $45 million in 3Q16
Reduce preferred equity by up to $144 million
Expect improved return on tangible common equity due to improved profitability
and less excess equity outstanding
Actively managing capital somewhat lower to better align with improved risk
profile
17
Capital Actions: 2H16 – 1H17
Increased common dividend, initiated common share repurchase and actively managing
preferred equity
$-
$100
$200
$300
$400
$500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Allowance for Credit Losses Upstream Services Other
Oil & Gas (O&G) Portfolio Trends
18
Loan Balances by O&G Segment
Classifieds by O&G Segment
Steadily declining balances in Upstream and Services
Nonaccruals by O&G Segment
($mm)
$-
$500
$1,000
$1,500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Upstream Services Other
($mm) ($mm)
$-
$100
$200
$300
$400
$500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Upstream Services Other
O&G balances and commitments continue to
decline, down 18% and 20%, respectively, over
the past four quarters
Criticized and classified levels fell in 3Q16, while
nonaccrual loans continued to increase,
attributable to the cycle duration
Net charge-offs were $43 million during 2015, and
$114 million year-to-date 2016
O&G Loan Loss Expectation
O&G loan losses are expected to decline somewhat 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
60% of classified O&G loans are from services loans
79% of O&G losses incurred since Sep 30, 2014 are from services loans
Healthy sponsor support has resulted in loss levels that were lower than otherwise would have
been experienced
Improved borrower and sponsor sentiment in 3Q16 vs. prior quarters
Strong Reserve Against O&G Loans
Zions’ O&G allowance for credit losses continues to exceed:
8% of O&G loan balances
21% of criticized O&G loan balances
19
Oil & Gas Loss Outlook and Reserve
We remain cautiously optimistic on the O&G portfolio
(1) Assuming oil and gas commodity prices remain relatively stable.
Accelerate Positive Operating Leverage
Accelerate loan growth rates (from then prevailing low-single digit rate)
Invest cash into medium duration securities
Maintain mid-single digit growth rates in core fee income
Maintain noninterest expenses below $1.58 billion (1) in 2016, increasing slightly in 2017,
made possible through simplification of:
Business processes
Legal organization
Compensation: tighter incentive compensation linked to achievement of well-articulated
efficiency ratio targets
Implement Technology Strategies
Achieve substantial progress on core systems upgrade
Increase the Return on and of Capital
Improvements in operating leverage and loan growth lead to stronger returns on capital
Improvements to risk profile and risk management expected to lead to higher returns of
capital
Execute on our Community Bank Model – doing business on a “Local” basis
20
2016-2017 Objectives:
(1) Reduced by $20 million from original stated target of “less than $1.60 billion”, driven by an accounting
adjustment made in 1Q16 which effectively re-categorized corporate card rewards program expense from a
separate line item to now be netted against its associated revenue.
Growth Through Simplification and Focus
Next 12-Month Outlook Summary (4Q16-3Q17, vs. 3Q16)
21
Outlook Comments
Moderately
Increasing
• Over the next 12 months, we expect continued solid growth
from residential mortgage and C&I, while expecting more
moderate growth from CRE than in the last 12 months.
Increasing
• Expect continued increases in loans and securities, combined
with strong deposit base funding, to result in increased net
interest income
Increasing
• Expect quarterly provisions to be more consistent with levels
experienced in the first half of 2016
Stable
• 3Q16 included $3 million of items not frequently recurring
• Customer-related fees excludes securities gains, dividends
Stable
• Includes continued elevated spending on technology systems
overhaul
Stable • Expected to be in a range of approximately 34% to 35%
Stable • Expected to be between $40 million and $45 million
Loan Loss Provision
Noninterest Expense
Tax Rate
Preferred Dividends
Loan Balances
Customer-Related
Fees
Net Interest Income
Oil & Gas (O&G) Portfolio Detail
CRE Portfolio: Subtype, cash flow coverage, collateral coverage
High O&G Employment Counties: Consumer Credit Scores
Loan Growth by Bank Brand and Loan Type
GAAP to Non-GAAP Reconciliation
22
Appendix
23
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 is used as a guide. (1) Total loan and lease balances and the credit quality measures do not include $29 million
of oil and gas loans held for sale at September 30, 2016. (2) Calculated as the ratio of annualized net charge-offs for each respective
period to loan balances at each period end.
Oil & Gas (O&G) Portfolio Detail
(Amounts in millions) 3Q16
% of
Total
2Q16
$
Change
%
Change
3Q15
Loans and Leases:
Oil and gas related:
Upstream – exploration and production $ 752 32% $ 831 $ (79) (10)% $ 924
Midstream – marketing and
transportation 623 27% 658 (35) (5)% 626
Downstream – refining 123 5% 131 (8) (6)% 124
Other non-services 44 2% 45 (1) (2)% 55
Oilfield services 596 26% 712 (116) (16)% 825
Oil and gas service manufacturing 176 8% 193 (17) (9)% 251
Total loan and lease balances (1) 2,314 100% 2,570 (256) (10)% 2,805
Unfunded lending commitments 1,784 1,823 (39) (2)% 2,341
Total credit exposure 4,098 4,393 (295) (7)% 5,146
Private equity investments 6 6 -- --% 17
Credit Quality Measures (1):
Criticized loan ratio 41.8% 37.8% 23.2%
Classified loan ratio 33.1% 31.5% 15.7%
Nonaccrual loan ratio 15.0% 11.1% 3.0%
Current nonaccrual loan ratio 87.3% 89.2% 45.2%
Net charge-off ratio, annualized (2) 7.1% 5.8% 2.4%
24
The Derivative Effect: Zions’ Commercial Real Estate Portfolio in Texas
Houston is approximately 3/5 of total Texas exposure. Construction and Land Development
loans in Houston have declined by more than 80% since prior credit cycle
$0 $100 $200 $300
Land
Other
Single Family
Housing
Residential Construction
($250mm outstanding)
Houston (72%) TX-not Houston (28%)
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450
Hospitality
Other
Industrial
Office
Retail
Multifamily
Commercial Term
($1,700mm outstanding)
Houston (55%) TX-not Houston (45%)
$0 $100 $200 $300
Office
Hospitality
Industrial
Not RE Secured
Retail
Land
Other
Multifamily
Commercial Construction
($500mm outstanding)
Houston (52%) TX-not Houston (48%)
Note: Data as of 3Q16.
Commercial Real Estate Portfolio Summary
25
Credit Quality Remains Strong
Note: Data as of 3Q16.
Nonaccruals and delinquencies stable year-
over-year, Classifieds down 26%
Percent criticized by type; total CRE = 2.7%:
Commercial Construction – 6.5%
Residential Construction – 0.3%
CRE Term – 2.3%
33% of total CRE in CA, 22% in TX, 13% in UT/ID
Sep 2016
($bn)
Jun 2016
($bn)
QoQ ∆
($mm)
Sep 2015
($bn)
YoY ∆
Term Balance $9.3B $9.2B $80 $8.0B 15.5%
Construction Balance $2.1B $2.1B $48 $2.2B -1.0%
Delinquencies 0.61% 0.45% +16bp 0.45% +16bp
Non-Maturity Delinquencies 0.18% 0.28% -10bp 0.24% -6bp
Nonaccrual Loans 0.27% 0.49% -22bp 0.53% -26bp
% of Nonaccruals Current 63.3% 71.3% -8.0% 62.9% 0.4%
Classifieds (% of loans) 1.26% 1.26% 0bp 1.70% -43bp
Net Charge-Offs TTM ($MM) -7.1 (-7 bp) -4.3 (-4 bp) -3bp -11.6 (-11 bp) +5bp
0% 5% 10% 15% 20% 25% 30% 35%
Washington
Colorado
Other
Nevada
Arizona
Utah/Idaho
Texas
California
CRE Balances by Collateral Location
Term CRE (81%) Commercial Construction (12%) Residential Construction (7%)
CRE Term Portfolio
26
Strong CRE metrics and conservative structures, Houston emphasized
Houston Term: debt service coverage ratios and
LTV ratios are in line with overall term CRE
portfolio. Adverse migration of loan grades is
occurring; portfolio benefits from conservative
advance rates plus cash flow and guarantor
support
All Term: portfolio diversity emphasized; ¾ is
Office, Retail, Multifamily and Industrial
Note: Data as of 3Q16. DSCR excludes loans < $500M, many < 1.0
DSCR term loans maintain pass grade status due to guarantor support.
CRE Term by Collateral Type
($9.3 billion)
0%
10%
20%
30%
40%
50%
60%
<1.0 <1.25 <1.50 <1.75 <2.0 2.0+
Term CRE - DSCR
All CRE Houston Only
0%
10%
20%
30%
40%
<50% <60% <70% <80% <90% <100% 100%+
Term CRE - LTV
All CRE Houston Only
Office, $2.1,
22%
Retail, $1.8,
20%
Multifamily,
$1.8, 19%
Industrial,
$1.3, 14%
Other, $0.9,
10%
Hospitality,
$0.7, 8%
Hospital/Med
. Centers,
$0.4, 4%
Rec./Rest.,
$0.2, 2% Unsecured
CRE, $0.1, 1%
CRE Construction Portfolio
27
Balanced, performing portfolio
Note: Data as of 3Q16.
Diversified construction portfolio with 38%
Homebuilder Residential, 62% Commercial
Commercial construction is 6.5% criticized - stress in
Houston CRE and TX construction delays.
Homebuilder Residential performing well, 0.2%
criticized
95% of CRE Construction is < 80% LTC
Construction by Collateral Type
($2.1 billion)
Construction LTC
Vintage Year
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0 to 59 60 to 69 70 to 79 80 to 89 >90
0%
5%
10%
15%
20%
25%
30%
35%
40%
2012 and Prior 2013 2014 2015 2016
Homebuilder
Residential,
$0.82, 38%
Multifamily,
$0.50, 23%
Other, $0.24,
11%
Land,
$0.16, 8%
Retail, $0.14,
7%
Office, $0.11,
5%
Industrial,
$0.11, 5% Hospitality,
$0.06, 3%
Takeaways:
Consumer loans from high O&G employment counties performing in line with overall
consumer portfolio; nearly all of these consumer loans are with Amegy (96%) located in
Texas, primarily in the Houston area
83% of consumer loans in high O&G counties are residential mortgage and home equity lines
Consumer FICO scores are stable in counties with high O&G employment, with some
improvement in the 5th and 10th percentiles
28
High O&G Employment Counties: Consumer Credit Scores
Consumer credit score deterioration has not been substantial in high O&G counties
Credit Score (FICO) Migration in High Oil & Gas Employment Counties
Source: Company documents.
Note: Data as of 3Q16.
Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others
5% 614 646 601 639 13 7 594 635 20 11
10 654 680 646 678 8 2 641 677 13 3
50% 758 776 759 778 -1 -2 759 780 -1 -4
Data includes consumer loans with FICO scores refreshed during the quarter shown.
2016 Q3 2015 Q3 1-Year Difference 2014 Q3 2-Year Difference
29
Loan Growth by Bank Brand and Loan Type
Note: National Real Estate (NRE) is a division of Zions Bank with a focus on small business loans with low LTV
ratios, which generally are in line with SBA 504 program parameters. “Other” loans includes municipal and
other consumer loan categories.
Linked Quarter Loan Growth
($mm)
Zions
Bank
CB&T Amegy NBAZ NSB Vectra CBW
ZBNA
Other
Total
C&I (ex-Energy) 7 (27) (86) 90 11 14 45 -- 54
Owner Occupied (ex-NRE) (102) 6 9 35 5 (2) 2 -- (47)
C&D 25 (28) 12 13 10 8 19 -- 59
Term CRE (ex-NRE) 94 (81) 61 53 (17) (22) 4 -- 92
1-4 Family 19 9 65 8 4 4 -- (4) 105
National Real Estate (72) -- -- -- -- -- -- -- (72)
Energy (1) -- (252) -- -- (3) -- -- (256)
Home Equity (5) 19 16 3 14 25 2 -- 74
Other 2 17 (1) 9 7 (5) -- -- 29
Total (33) (85) (176) 211 34 19 72 (4) 38
30 (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 reclassified.
GAAP to Non-GAAP Reconciliation
(Amounts in thousands) 3Q16 2Q16 1Q16 4Q15 3Q15
Efficiency Ratio
Noninterest expense (GAAP) (1) (a) $ 403,292 $ 381,894 $ 395,573 $ 397,353 $ 391,280
Adjustments:
Severance costs 481 201 3,471 3,581 3,464
Other real estate expense (137) (527) (1,329) (536) (40)
Provision for unfunded lending commitments (3,165) (4,246) (5,812) (6,551) 1,428
Debt extinguishment cost — 106 247 135 —
Amortization of core deposit and other
intangibles 1,951 1,979 2,014 2,273 2,298
Restructuring costs 356 47 996 777 1,630
Total adjustments (b) (514) (2,440) (413) (321) 8,780
Adjusted noninterest expense (non-GAAP) (a) - (b) = (c) 403,806 384,334 395,986 397,674 382,500
Taxable-equivalent net interest income (GAAP) (d) 475,699 470,913 458,242 453,780 429,782
Noninterest income (1) (e) 144,887 125,717 116,761 118,641 125,944
Combined income (d) + (e) = (f) 620,586 596,630 575,003 572,421 555,726
Adjustments:
Fair value and nonhedge derivative income (loss) (184) (1,910) (2,585) 688 (1,555)
Equity securities gains (losses), net 8,441 2,709 (550) 53 3,630
Fixed income securities gains (losses), net 39 25 28 (7) (53)
Total adjustments (g) 8,296 824 (3,107) 734 2,022
Adjusted taxable-equivalent revenue (Non-GAAP) (f) - (g) = (h) 612,290 595,806 578,110 571,687 553,704
Adjusted pre-provision net revenue (PPNR) (h) - (c) $ 208,484 $ 211,472 $ 182,124 $ 174,013 $ 171,204
Efficiency Ratio (1) (c) / (h) 66.0 % 64.5 % 68.5 % 69.6 % 69.1 %
31 Note: Please refer to the prior page for line items comprising the aggregate adjustments to noninterest expense
(b) and revenue (g) that appear in this schedule.
(1) Represents estimated diluted EPS, which includes the effect of restricted stock.
GAAP to Non-GAAP Reconciliation (cont.)
(Amounts in thousands, except per share data) 3Q16 2Q16 1Q16 4Q15 3Q15
Adjusted Net Earnings Applicable to Common (NEAC)
Net earnings applicable to common (GAAP) (i) $ 116,895 $ 90,647 $ 78,777 $ 88,197 $ 84,238
Adjustments:
Adjustments to noninterest expense (b) (514) (2,440) (413) (321) 8,780
Adjustments to revenue (g) (8,296) (824) 3,107 (734) (2,022)
Tax effect for adjustments (38%) 3,348 1,240 (1,024) 401 (2,568)
Total adjustments (j) (5,462) (2,024) 1,670 (654) 4,190
Adjusted net earnings (i) + (j) = (k) 111,433 88,623 80,447 87,543 88,428
Less: Preferred stock redemption (l) - (9,759) - - -
Adjusted NEAC (k) - (l) = (m) $ 111,433 $ 98,382 $ 80,447 $ 87,543 $ 88,428
Weighted average diluted common shares
outstanding during the period (n) 204,714 204,536 204,096 204,277 204,155
Adjusted NEAC per share (1) (m) / (n) $ 0.54 $ 0.48 $ 0.39 $ 0.43 $ 0.43