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| EX-99.1 - 4Q2016 EARNINGS RELEASE - ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ | exh9914q20168-k.htm |
| 8-K - 8-K 4Q16 EARNINGS RELEASE - ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ | a4q20168-kcoverpage.htm |
Fourth Quarter 2016
Financial Review
January 23, 2017
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.
Strong growth in EPS: Diluted earnings per share increased substantially from the
year-ago period, to $0.60 in 4Q16 from $0.43
Strong growth in pre-provision net revenue (1): 25% growth over year-ago period
• A 7.2% year-over-year increase in adjusted revenue (1)
• A 0.6% year-over-year increase in adjusted noninterest expense (1)
Tracking on the efficiency initiative:
• Efficiency ratio equaled 64.5% in 4Q16 and 65.8% for FY16, meeting our target of “less than
66%” for the full year
• Committed to “low 60s” for 2017
Loans: Due primarily to continued discipline on commercial real estate concentration
limits as well as paydowns on energy loans, loans increased only slightly from the prior
quarter (period end loans increased 0.3% vs. 3Q16)
Maintaining overall healthy credit quality: Reduced credit costs largely attributable
to reduced problem loans in the oil & gas portfolio
• Criticized, classified and nonaccrual oil and gas balances declined 16%, 11%, and 15%,
respectively, relative to balances at September 30, 2016
• Non oil & gas loan quality remains strong
3
Fourth Quarter 2016 Key Performance Indicators
Solid PPNR growth; improving credit costs and profitability
(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
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 by
~$20
million vs.
2014A
Expected
to beat by
$10mm+
Adjusted
Noninterest Expense1
Gross Cost Savings of
$120 million
Pay Off High Cost
Subordinated Debt
Preferred Equity
Dividends
Efficiency Ratio
(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.
(2) 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)
174
182
211
208
217
$100
$125
$150
$175
$200
$225
4Q15 1Q16 2Q16 3Q16 4Q16
Adjusted pre-provision net
revenue has strengthened
measurably over the past year, up
25%
Persistent improvement driven by
success on multiple fronts:
Improved expense control,
Improved return on liquid assets (cash
into securities)
Loan growth and other balance sheet
management
Customer-related fee income growth
This positive trend is expected to
continue in the near term
Efficiency Ratio
Efficiency Ratio (1)
6
Substantial improvement driven by expense control and revenue growth
(1) Defined as noninterest expenses as a percentage of net revenue, adjusted for items such as severance,
provision for unfunded lending commitments, securities gains and losses and debt extinguishment costs. See
Appendix for GAAP to non-GAAP reconciliation table.
The efficiency ratio improved to
64.5% (4Q16) from 69.6% in the
year-ago period
We remain committed to driving
the efficiency ratio to the low 60s
for 2017
Solid progress on the efficiency
ratio while investing substantially
in enabling technology
74.1%
69.6%
68.5%
64.5%
66.0%
64.5%
low 60s
55%
60%
65%
70%
75%
4Q14 4Q15 1Q16 2Q16 3Q16 4Q16 FY17
Total Loan and Deposit Growth
Total Loans Total Deposits
7
Annual mid-single digit loan and deposit growth are key drivers of our efficiency initiative
Due in part to continued discipline on CRE concentration limits and O&G attrition, period-end loan growth
was slow, increasing 0.3% on a linked quarter basis
Year-over-year growth rates of both loans and deposits tracked with our stated objectives
Period-end deposits experienced strong growth, the majority of it noninterest-bearing
($mm)
$36,000
$37,750
$39,500
$41,250
$43,000
4Q15 1Q16 2Q16 3Q16 4Q16
35%
40%
45%
50%
$46,000
$48,000
$50,000
$52,000
$54,000
4Q15 1Q16 2Q16 3Q16 4Q16
Total Deposits (left)
Noninterest-Bearing Deposits as a % of Total (right)
($mm)
Credit Quality (Excluding 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
Key Metrics:
Criticized loans equaled 3.1% of loans
and averaged the same for the year
Classified loans equaled 2.2% of loans
and averaged 2.1% for the year
NPAs equaled 0.69% of loans and
averaged 0.66% of loans for the year
Annualized NCOs equaled 0.11% of
average loans and equaled 0.2 basis
points for the full year
Allowance for credit losses remains strong at
1.08% of total loans and leases
1.6x coverage of NPAs
10.0x coverage of annualized NCOs
2017 non-O&G NCOs may increase slightly
from 2016 results as recoveries may not be
as substantial
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4Q15 1Q16 2Q16 3Q16 4Q16
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 challenged, although recovery in commodity prices has
aided in the portfolio’s overall improvement
Relative to September 30, 2016:
Criticized O&G loans declined by $152
million, the second consecutive linked-
quarter dollar decrease since the cycle
began
Classified O&G loans declined by $85
million, also the second consecutive
linked-quarter dollar decrease since
2014
O&G NPAs declined by $52 million
Annualized NCOs equaled 3.0% of
average loans, primarily related to
classified loans under contract to sell
$470 million of equity raised in 4Q16 to
O&G portfolio companies, more than
double the level achieved in 3Q16
Allowance for credit losses remains strong,
at 9% of O&G balances
0.7x coverage of NPAs
3.0x coverage of annualized NCOs
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
4Q15 1Q16 2Q16 3Q16 4Q16
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) Dec 31,
2016
Sept 30,
2016
Dec 31,
2015
Earnings Results:
Diluted Earnings Per Share $ 0.60 $ 0.57 $ 0.43
Net Earnings Applicable to Common Shareholders 125 117 88
Net Interest Income 480 469 449
Noninterest Income 128 145 119
Noninterest Expense 405 403 397
Pre-Provision Net Revenue (1) 217 208 174
Provision for Credit Losses 1 16 16
Ratios:
Return on Average Assets 0.89 % 0.84 % 0.68 %
Return on Average Common Equity 7.10 % 6.66 % 5.17 %
Tangible Return on Average Tangible Common Equity 8.40 % 7.88 % 6.20 %
Net Interest Margin 3.37 % 3.36 % 3.23 %
Yield on Loans 4.11 % 4.11 % 4.24 %
Yield on Securities 2.04 % 2.00 % 2.13 %
Average Cost of Deposits* 0.10 % 0.10 % 0.10 %
Efficiency Ratio (1) 64.5 % 66.0 % 69.6 %
Ratio of Nonperforming Assets to Loans, Leases and OREO 1.34 % 1.37 % 0.87 %
Annualized Ratio of Net Loan and Lease Charge-offs to Average Loans 0.25 % 0.28 % 0.13 %
Basel III Common Equity Tier 1 12.1 % 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.
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), and Oil and Gas (O&G)
Over the next four quarters, we expect
moderate total loan growth, driven
by:
Continued solid growth in
consumer-related
Moderate growth in non-O&G
C&I, Construction and Land
Development (C&D), and Term
CRE
Some further attrition in O&G
Continued 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 4Q16.
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%
Net interest income growth continued its positive trajectory, increasing 6.9% over the year-ago period
On a linked quarter basis, net interest income grew by $11 million over 3Q16
The accelerated purchase of securities in Q4 relative to prior quarters was driven by the repositioning of the
balance sheet as Zions continues to moderately reduce its interest rate sensitivity
Net Interest Income
Net Interest Income
12
Improving at a sustainable rate, driven largely by transition to securities from cash
($mm)
449
453
465
469
480
$400
$420
$440
$460
$480
$500
4Q15 1Q16 2Q16 3Q16 4Q16
(1) Preliminary analysis, subject to refinement.
Modeled Annual Change in a
+200bps Interest Rate Environment(1)
Fast Slow
∆ in NII 5% 12%
Beta of Total
Deposits
45% 32%
12-month simulated impact using a static-sized balance sheet and a parallel
shift in the yield curve, and is based on statistical analysis relating pricing
and deposit migration to benchmark rates (e.g. LIBOR, U.S. Treasuries).
“Fast” refers to an assumption that deposit rates and volumes will adjust at
a faster speed. “Slow” refers to an assumption that deposit rates and
volumes will adjust at a more moderate speed.
Net Interest Income Sensitivity
Active Balance Sheet Management: Securities Portfolio Growth
13
Short to medium duration portfolio; limited duration extension risk
Total Securities
(end of period balances)
($mm)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
4Q15 1Q16 2Q16 3Q16 4Q16
Other Securities
Municipal Securities
Small Business Administration Loan-Backed Securities
Agency Securities
Agency MBS Securities
Added net $3.2 billion of securities
during 4Q16
Securities Portfolio Duration
Current: ~3.2 years
200 bps increase from current
interest rates: ~3.3 years
Future net additions to securities
balances not limited by cash
currently on the balance sheet
Loans
74%
Securities
22%
Cash
4%
Net Interest Income Drivers
14
December 2016 rate hike expected to benefit net interest income in 1Q17
Net Interest Margin (NIM)
Earning Asset Mix
Relative to the prior quarter, the
4Q16 NIM was 3.37%, up one
basis point
Securities yield increased 4
bps to 2.04%, due to reduced
premium amortization
Yield on loans was stable, at
4.11%
Cost of deposits was stable, at
0.10%
Fed funds rate increase in
December 2016 is expected to
benefit 1Q17
Loan portfolio interest rate
characteristics1:
Loans repricing within:
1 year: 67%
1-5 years: 24%
5+ years: 9%
3.23% 3.35% 3.39% 3.36% 3.37%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
4Q15 1Q16 2Q16 3Q16 4Q16
Loan Yield
Securities Yield
Interest Expense / Interest Earning Assets: Red
Net Interest Margin
Cash Yield: Gray
Loans
76%
Securities
8%
Cash
15%
CDOs
1%
1Q15 4Q16
(1) Loans repricing within 1 year includes loans with fixed interest rates that mature within the next year, or are tied to
other rate indices that reprice within 1 year. The 1-5 year and 5+ year categories include fixed rate loans that mature during
those respective periods and loans tied to rate indices also repricing during those periods.
113 112
118
125
118
$100
$110
$120
$130
4Q15 1Q16 2Q16 3Q16 4Q16
Total noninterest income increased
to $128 million from $119 million a
year ago
Customer-related fee income
increased to $118 million from
$113 million
The year-over-year increase was
driven by strength in wealth
management, treasury
management, and customer-
related swaps activity
Noninterest Income
15
Continued momentum largely a function of increased focus
(1) Reflects total customer-related noninterest income.
Customer-Related Fee Income (1) ($mm)
Noninterest Expense
($mm)
397 396
382
403 405
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
4Q15 1Q16 2Q16 3Q16 4Q16
Noninterest Expense
16
Expense controls have resulted in performance that met our stated goal
Total NIE increased 1.8% versus the year-ago
period; adjusted NIE declined by 0.6% (1)
In 4Q16, elevated noninterest expense
directly resulted in lower than planned
management incentive compensation
Full year 2016 adjusted noninterest expense
achieved the stated FY16 target of less than
$1.58 billion
Expect adjusted noninterest expense to
increase between 2% and 3% for FY17 vs.
FY16A
Reflects expected increase in technology
expenditure
Normal salary adjustments
Partially offset by additional cost savings
efforts
(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.
Continue to Achieve Positive Operating Leverage
Maintain annual mid-single digit loan growth rates while maintaining strong CRE concentration limits
Continue to moderately reduce the Company’s interest rate sensitivity
Continue to purchase medium duration securities with limited duration extension risk
Continue to increase market share in residential mortgage
Maintain mid-single digit growth rates in customer-related fee income
Maintain strong expense controls: expect noninterest expense to increase between 2% and 3% in
FY17 vs. FY16, while continuing to invest in substantial technology overhaul
Maintain continued alignment of compensation expense to profitability improvement objectives
Implement Technology Upgrade Strategies
Increase the Return on and of Capital
Improvements in operating leverage lead to stronger returns on capital
Improvements to risk profile and risk management expected to lead to increasing returns of capital
Target: repurchase up to $180 million of common equity from 3Q16 to 2Q17 (~3% of shares
outstanding)
Completed $90 million in 2H16
Shares repurchased equaled 2.9 million, or approximately 1.4% of shares outstanding in 2H16
Execute on our Community Bank Model – doing business on a “Local” basis
17
2017-2018 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 (4Q17E, vs. 4Q16A)
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
Increasing
• Expect continued increases in loans and securities, limited
increase in funding costs
Increasing
• Expect loan loss provisions in FY17 to be consistent with FY16,
particularly if energy prices remain at/near current levels
Moderately
Increasing
• 4Q16 included adverse valuation marks due to changes in
benchmark interest rates
• Customer-related fees excludes securities gains, dividends
Slightly to
Moderately
Increasing
• FY17 adjusted NIE expected to be 2% to 3% higher than FY16A
• Includes continued spending on technology systems overhaul
Stable
• Not including any changes to the corporate tax rate, Zions’
effective tax rate is expected to be in the area of 34-35%
• Expect preferred dividend to be approximately $40 million
• Accounts for expected 1H17 reduction of $144 million of
preferred equity
• Expect diluted share count to increase slightly to reflect warrant
dilution, partially offset by share buyback
Customer-Related
Fees
Loan Balances
Net Interest Income
Loan Loss Provision
Tax Rate
Preferred Dividends
& Diluted Shares
Adjusted
Noninterest Expense
Impact of Warrants
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
19
Appendix
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 from exercise to repurchase shares at the average market price during period
Net shares issued = shares issued from warrant exercise – shares repurchased
Impact of Warrants
Dilutive Impact Sensitivity
Reflects potential dilution given various average common stock share prices over any given period
20
Potential dilution is expected to be slight to moderate, depending upon future stock price
(mm)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
-
2
4
6
8
10
12
$35 $36 $37 $38 $39 $40 $41 $42 $43 $44 $45 $46 $47 $48 $49 $50
Dilutive shares (mm) % Dilution
Note: Analysis utilizes current warrant strike prices and assumes no additional dividends will be paid (which
affect the ZIONW strike price), such that the warrant strike prices in this analysis are assumed to be held
constant.
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 is used as a guide. (1) Total loan and lease balances and the credit quality measures do not include $40 million
of oil and gas loans held for sale at December 31, 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) 4Q16
% of
Total
3Q16
$
Change
%
Change
4Q15
Loans and Leases:
Oil and gas related:
Upstream – exploration and production $ 733 34% $ 752 $ (19) (3)% $ 817
Midstream – marketing and
transportation 598 28% 623 (25) (4)% 621
Downstream – refining 137 6% 123 14 11% 127
Other non-services 38 2% 44 (6) (14)% 44
Oilfield services 500 23% 596 (96) (16)% 784
Oil and gas service manufacturing 152 7% 176 (24) 14)% 229
Total loan and lease balances (1) 2,158 100% 2,314 (156) (7)% 2,622
Unfunded lending commitments 1,722 1,784 (62) (3)% 2,151
Total credit exposure 3,880 4,098 (218) (5)% 4,773
Private equity investments 7 6 -- 6% 13
Credit Quality Measures (1):
Criticized loan ratio 37.8% 41.8% 30.3%
Classified loan ratio 31.6% 33.1% 19.7%
Nonaccrual loan ratio 13.6% 15.0% 2.5%
Ratio of nonaccrual loans that are
current 86.1% 87.3% 71.2%
Net charge-off ratio, annualized (2) 3.0% 7.1% 3.7%
$-
$100
$200
$300
$400
$500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Allowance for Credit Losses Upstream Services Other
Oil & Gas (O&G) Portfolio Trends
22
Loan Balances by O&G Segment
Classifieds by O&G Segment
Steadily declining balances in Upstream and Services
Nonaccruals by O&G Segment
($mm)
$-
$500
$1,000
$1,500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Upstream Services Other
($mm) ($mm)
$-
$100
$200
$300
$400
$500
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Upstream Services Other
O&G balances and commitments continue to
decline, down 18% and 19%, respectively, over
the past four quarters
Criticized, classified and nonaccrual levels all fell
in 4Q16
Net charge-offs were $43 million during 2015, and
$130 million during 2016
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
55% of classified O&G loans are from services loans
80% 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 2H16 vs 1H16
Strong Reserve Against O&G Loans
Zions’ O&G allowance for credit losses is:
9% of O&G loan balances
24% of criticized O&G loan balances
23
Oil & Gas Loss Outlook and Reserve
The outlook is improving for the O&G portfolio
(1) Assuming oil and gas commodity prices remain relatively stable.
24 Note: Data as of 4Q16.
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
Office
Hospitality
Industrial
Not RE Secured
Land
Retail
Other
Multifamily
Commercial Construction
($500mm outstanding)
Houston (52%) TX-not Houston (48%)
$0 $100 $200
Land
Other
Single Family Housing
Residential Construction
($250mm outstanding)
Houston (69%) TX-not Houston (31%)
$0 $100 $200 $300 $400 $500
Hospitality
Other
Industrial
Office
Retail
Multifamily
Commercial Term
($1,700mm outstanding)
Houston (54%) TX-not Houston (46%)
Commercial Real Estate Portfolio Summary
25
Credit Quality Remains Strong
Note: Data as of 4Q16.
CRE Balances up 10% YoY, Delinquencies
and nonaccruals improved YoY, Classifieds
stable
Criticized balance by type (Total CRE: 2.5%)
Commercial Construction – 6.1%
Home Builder Construction – 0.0%
CRE Term – 2.2%
32% of total CRE in CA, 22% in TX, 14% in
UT/ID, 12% in AZ
2016 Dec
($bn)
2016 Sep
($bn)
QoQ ($MM)
2015 Dec
($bn)
YoY
Term Balance $9.3 $9.3 $25 $8.5 9.90%
Construction Balance $2.0 $2.1 -$120 $1.9 8.90%
Delinquencies 0.26% 0.61% -36bp 0.32% -6bp
Non-Maturity Delinquencies 0.11% 0.18% -6bp 0.20% -9bp
Nonaccrual Loans 0.32% 0.27% +5bp 0.46% -14bp
% of Nonaccruals Current 52.0% 63.3% -11.3% 56.3% -4.3%
Classifieds (% of loans) 1.30% 1.26% +4bp 1.37% -7bp
Net Charge-Offs TTM ($MM) -1.7 (-2 bp) -7.1 (-7 bp) +5bp -14.8 (-15 bp) +13bp
0% 5% 10% 15% 20% 25% 30% 35%
Washington
Colorado
Other
Nevada
Arizona
Utah/Idaho
Texas
California
CRE Balances by Collateral Location
Term CRE (82%) Commercial Construction (11%) Residential Construction (7%)
CRE Term Portfolio
26
Strong CRE metrics and conservative structures, Houston emphasized
Houston Term: DSCR’s and LTV’s are in line with
overall term portfolio. Adverse migration of loan
grades is occurring; portfolio benefits from
conservative advance rates, > 1.0 DSCR’s and
guarantor support
All Term: continued portfolio diversity; ¾ is
Office, Retail, Multifamily and Industrial
Note: Collateral type as of 4Q16; DSCR and LTV 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%
5%
10%
15%
20%
25%
30%
35%
40%
45%
<50% <60% <70% <80% <90% <100% 100%+
Term CRE - LTV
All CRE Houston Only
Office, $2.1 ,
23%
Multifamily,
$1.9 , 20%
Retail, $1.7 ,
19%
Industrial,
$1.3 , 14%
Other, $0.9 ,
10%
Hospitality,
$0.7 , 8%
Hospital/Med
. Centers,
$0.3 , 3%
Rec./Rest.,
$0.2 , 2%
Unsecured
CRE, $0.1 ,
1%
CRE Construction Portfolio
27
Balanced, performing portfolio
Note: Data as of 4Q16.
Diversified construction portfolio with 37%
Homebuilder Residential, 63% Commercial
Commercial construction is 6.1% criticized – some
stress in Houston CRE. Homebuilder Residential
performing well
YoY construction growth of 9.6%. Construction as a
% of total loans is < 5%
Construction by Collateral Type
($2.0 billion)
$7.5
$5.6
$3.5
$2.3 $1.9 $2.2 $2.0 $1.8 $2.0
$6.2
$7.3
$7.7
$7.9
$8.1 $8.0 $8.1 $8.5 $9.3
20%
22%
24%
26%
28%
30%
32%
34%
$0
$2
$4
$6
$8
$10
$12
$14
$16
YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016
Bi
llio
n
s
CRE: Maintaining Construction Discipline
CRE Const. and Land Dev. CRE Term CRE as a % Of Total Net Loans
Homebuilder
Residential,
$0.75 , 37%
Multifamily,
$0.38 , 19%
Other, $0.29
, 15%
Land,
$0.15 , 7%
Retail, $0.14 ,
7%
Office, $0.13
, 6%
Industrial,
$0.11 , 5%
Hospitality,
$0.07 , 4%
Takeaways:
Consumer loans from high O&G employment counties performing in line with overall
consumer portfolio; nearly all of these consumer loans are with Amegy (96%) located in
Texas, primarily in the Houston area
82% of consumer loans in high O&G counties are residential mortgage and home equity lines
Consumer FICO scores are stable in counties with high O&G employment, with some
improvement in the 5th and 10th percentiles
28
High O&G Employment Counties: Consumer Credit Scores
Consumer credit score deterioration has not been substantial in high O&G counties
Credit Score (FICO) Migration in High Oil & Gas Employment Counties
Source: Company documents.
Note: Data as of 4Q16.
Percentile HOGECs Others HOGECs Others HOGECs Others HOGECs Others HOGECs Others
5% 619 647 605 640 14 7 595 636 24 11
10 657 680 650 678 7 2 645 677 12 3
50% 760 776 761 777 -1 -1 762 780 -2 -4
Data includes consumer loans with FICO scores refreshed during the quarter shown.
2016 Q4 2015 Q4 1-Year Difference 2014 Q4 2-Year Difference
29
Loan Growth by Bank Brand and Loan Type
Note: National Real Estate (NRE) is a division of Zions Bank with a focus on small business loans with low LTV
ratios, which generally are in line with SBA 504 program parameters. “Other” loans includes municipal and
other consumer loan categories.
Linked Quarter Loan Growth
($mm)
Zions
Bank
CB&T Amegy NBAZ NSB Vectra CBW
ZBNA
Other
Total
C&I (ex-O&G) (125) 84 85 13 (10) (2) 3 -- 48
Owner Occupied (ex-NRE) 87 41 12 6 (32) 1 4 -- 119
C&D 6 (70) (39) (33) 9 6 (8) -- (129)
Term CRE (ex-NRE) -- (5) 14 (11) 54 11 21 -- 84
1-4 Family 18 -- 69 2 (1) 22 -- (3) 107
National Real Estate (112) -- -- -- -- -- -- -- (112)
O&G 24 -- (162) (4) -- (13) -- -- (155)
Home Equity (7) 18 14 14 12 13 1 -- 65
Other 45 (4) 41 1 3 (2) (1) -- 83
Total (64) 64 34 (12) 35 36 20 (3) 110
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) 4Q16 3Q16 2Q16 1Q16 4Q15
Efficiency Ratio
Noninterest expense (GAAP) (1) (a) $ 404,515 $ 403,292 $ 381,894 $ 395,573 $ 397,353
Adjustments:
Severance costs 496 481 201 3,471 3,581
Other real estate expense 396 (137) (527) (1,329) (536)
Provision for unfunded lending commitments 3,296 (3,165) (4,246) (5,812) (6,551)
Debt extinguishment cost — — 106 247 135
Amortization of core deposit and other
intangibles 1,909 1,951 1,979 2,014 2,273
Restructuring costs 3,283 356 47 996 777
Total adjustments (b) 9,380 (514) (2,440) (413) (321)
Adjusted noninterest expense (non-GAAP) (a) - (b) = (c) 395,135 403,806 384,334 395,986 397,674
Taxable-equivalent net interest income (GAAP) (d) 487,823 475,699 470,913 458,242 453,780
Noninterest income (GAAP) (1) (e) 128,244 144,887 125,717 116,761 118,641
Combined income (d) + (e) = (f) 616,067 620,586 596,630 575,003 572,421
Adjustments:
Fair value and nonhedge derivative income (loss) 6,885 (184) (1,910) (2,585) 688
Equity securities gains (losses), net (3,432) 8,441 2,709 (550) 53
Fixed income securities gains (losses), net 10 39 25 28 (7)
Total adjustments (g) 3,463 8,296 824 (3,107) 734
Adjusted taxable-equivalent revenue (non-GAAP) (f) - (g) = (h) 612,604 612,290 595,806 578,110 571,687
Pre-provision net revenue (PPNR), as reported (f) – (a) $ 211,552 $ 217,294 $ 214,736 $ 179,430 $ 175,068
Adjusted pre-provision net revenue (PPNR) (h) - (c) $ 217,469 $ 208,484 $ 211,472 $ 182,124 $ 174,013
Efficiency Ratio (1) (c) / (h) 64.5 % 66.0 % 64.5 % 68.5 % 69.6 %