![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation1.jpg)
Citigroup
2009 Financial Services Conference
27 January 2009 ■ New York City, NY
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Forward-Looking Statements
This presentation contains statements that relate to the projected performance of
Zions Bancorporation and elements of or affecting such performance, including
statements with respect to the beliefs, plans, objectives, goals, guidelines,
expectations, anticipations and estimates of management. These statements
constitute forward-looking information within the meaning of the Private Securities
Litigation Reform Act. Actual facts, determinations, results or achievements may
differ materially from the statements provided in this presentation since such
statements involve significant known and unknown risks and uncertainties. Factors
that might cause such differences include, but are not limited to: competitive
pressures among financial institutions; economic, market and business conditions,
either nationally or locally in areas in which Zions Bancorporation conducts its
operations, being less favorable than expected; changes in the interest rate
environment reducing expected interest margins; changes in debt, equity and
securities markets; adverse legislation or regulatory changes and other factors
described in Zions Bancorporation’s Annual Report on Form 10-K for the year
ended December 31, 2007. In addition, the statements contained in this
presentation are based on facts and circumstances as understood by management
of the company on the date of this presentation, which may change in the future.
Zions Bancorporation disclaims any obligation to update any statements or to
publicly announce the result of any revisions to any of the forward-looking
statements included herein to reflect future events, developments, determinations or
understandings.
Zions Bancorporation and elements of or affecting such performance, including
statements with respect to the beliefs, plans, objectives, goals, guidelines,
expectations, anticipations and estimates of management. These statements
constitute forward-looking information within the meaning of the Private Securities
Litigation Reform Act. Actual facts, determinations, results or achievements may
differ materially from the statements provided in this presentation since such
statements involve significant known and unknown risks and uncertainties. Factors
that might cause such differences include, but are not limited to: competitive
pressures among financial institutions; economic, market and business conditions,
either nationally or locally in areas in which Zions Bancorporation conducts its
operations, being less favorable than expected; changes in the interest rate
environment reducing expected interest margins; changes in debt, equity and
securities markets; adverse legislation or regulatory changes and other factors
described in Zions Bancorporation’s Annual Report on Form 10-K for the year
ended December 31, 2007. In addition, the statements contained in this
presentation are based on facts and circumstances as understood by management
of the company on the date of this presentation, which may change in the future.
Zions Bancorporation disclaims any obligation to update any statements or to
publicly announce the result of any revisions to any of the forward-looking
statements included herein to reflect future events, developments, determinations or
understandings.
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation3.jpg)
Agenda
Summary of Q4 and Full Year 2008 |
Key Drivers –Securities Portfolio –Credit Quality –Net Interest Margin –Lockhart funding –Capital |
Outlook Summary |
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation4.jpg)
$Mil | $ Per Share | |
Net Income To Common | ($498) | ($4.36) |
Goodwill Impairment | ($354) | ($2.97) |
Securities Impairments | ($204) | ($1.07) |
Provisions For Credit Losses | $285 | |
Net Charge-offs | $180 |
Q4 2008 Earnings Highlights
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation5.jpg)
$Mil | $ Per Share | |
Net Income To Common | ($291) | ($2.66) |
Goodwill Impairment | ($354) | ($2.97) |
Securities Impairments | ($317) | ($1.73) |
Provisions For Credit Losses | $648 | |
Net Charge-offs | $394 |
Full Year 2008 Earnings Highlights
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation6.jpg)
Agenda
Summary of 4Q and 2008 |
Key Drivers –Securities Portfolio –Credit Quality –Net Interest Margin –Lockhart funding –Capital |
Outlook Summary |
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation7.jpg)
Bank & Insurance Trust Preferred CDOs
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation8.jpg)
• $204 million pre-tax Other Than Temporarily Impaired
(OTTI) charges on 29 CDO tranches in Q408
(OTTI) charges on 29 CDO tranches in Q408
– 20 new bank & insurance trust preferred tranches
– 9 other tranches that had been previously impaired
• Key valuation Drivers
– 3rd-party probabilities of default (PDs); cumulative failures assumed:
Year Failures Percentage
2008 14 (Actual)
2009 106 10.6% of our universe
2013 164 16.5% of our universe
2038 246 24.7% of our universe
– Selected discount rates applied to CDOs (1st 10 yr cash flows, after credit defaults)
A rated LIBOR + 9.75%
BBB rated LIBOR + 13.0%
Other Than Temporarily Impaired Securities
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation9.jpg)
• Stress Tests
Scenario Approx. additional OTTI
– All PDs increase by 20% (PD x 1.2): $150mm
– Default all LACE* E & D rated banks: $200mm
– Default all LACE* E, D, & 1/3 of C rated banks: $450mm
• Additional OTTI possible in the event of an increase in
forecasted default rates
forecasted default rates
• Finally,
If we impaired all Bank & Insurance backed CDOs that do not
have a AAA rating and wrote them down to 20% of par (total par
value of $1.46B):
have a AAA rating and wrote them down to 20% of par (total par
value of $1.46B):
The resulting Tangible Common Equity ratio would be 5.04%
Other Than Temporarily Impaired Securities
* LACE Financial Corp.
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation10.jpg)
Agenda
Summary of 4Q and 2008 |
Key Drivers –Securities Portfolio –Credit Quality –Net Interest Margin –Lockhart funding –Capital |
Outlook Summary |
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation11.jpg)
Performance in this Cycle
• Avoided Major Industry Issues
– No subprime loans
– Almost no MBS exposure
– No high-LTV HELOCS
– No FNMA/FHLMC Preferred Shares
• But…
– Residential RE and consumer lot loans in the SW
– Missed correlation between CDO risk and
community bank real estate exposure
community bank real estate exposure
– Not immune to broader impact of softening economy
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation12.jpg)
Net Charge-offs (Q4 2008)
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation13.jpg)
Note: Peer group defined as bank holding companies with assets >= $10 billion.
Peer data source: SNL
Non Performing Assets as a %
of Total Assets
of Total Assets
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation14.jpg)
Note: Peer group defined as bank holding companies with assets >= $10 billion.
Peer data source: SNL
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation15.jpg)
Credit Performance
Summary
Summary
• Relatively
– Larger, secured commercial portfolio
– Smaller, high performing consumer
portfolio
portfolio
• Results in
– Higher Non Performing Assets, but
– Lower net charge-offs
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation16.jpg)
Peers
1.4
Note: Peer group defined as bank holding companies with assets >= $10 billion.
Peer data source: SNL
Zions
1.5
Reserves / Annualized Net Charge-offs
(4 Quarter Moving Average)
(4 Quarter Moving Average)
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation17.jpg)
Loan Portfolio Diversification
Loans by Geography & Purpose
12/31/2008
Loans by Geography & Purpose
12/31/2008
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation18.jpg)
Total Outstanding: $2.5 billion (12/31/08)
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation19.jpg)
Total Outstanding: $2.0 billion (12/31/08)
Average HECL FICO: 756
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation20.jpg)
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation21.jpg)
Total Outstanding: $20.6 billion (12/31/08)
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation22.jpg)
Commercial Real Estate
12/31/2008
12/31/2008
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation23.jpg)
Credit Quality
Outlook
Outlook
• Weakness in residential construction activity
and land values in the Southwest expected to
persist through 2009
and land values in the Southwest expected to
persist through 2009
• Credit problems spreading to other geographies
and loan categories as economy weakens
and loan categories as economy weakens
• Continued elevated levels of NPAs, provisions
and net losses
and net losses
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation24.jpg)
Agenda
Summary of 4Q and 2008 |
Key Drivers –Securities Portfolio –Credit Quality –Net Interest Margin –Lockhart funding –Capital |
Outlook Summary |
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation25.jpg)
Historical
*(Net Interest Income - Net Charge-offs)/Average Earning Assets
Peers: Top 50 banks excluding BK, STI, STT, NTRS
Risk-adjusted Net Interest Margin*
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation26.jpg)
As of 12-31-08
Total assets in Lockhart | $748MM |
Lockhart issued CP held by Zions | $412MM |
Net Lockhart assets not held on balance sheet | $336MM |
*Includes the estimated impact of ($71)mm after-tax loss on security
marks under a full consolidation scenario
marks under a full consolidation scenario
Lockhart Funding
• Participating in Federal Reserve’s Commercial Paper
Funding Facility Program
Funding Facility Program
• GAAP Capital Ratio impact for bringing remainder of
Lockhart on balance sheet: -17bps*
Lockhart on balance sheet: -17bps*
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation27.jpg)
4Q07 | 4Q08 | |
Tangible Common Equity | 5.70% | 5.89% |
Tangible Equity | 6.17% | 8.86% |
Tier 1 Risk Based | 7.57% | 10.52% Est |
Total Risk Based | 11.68% | 14.71% Est |
Capital Ratios
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation28.jpg)
Agenda
Summary of 4Q and 2008 |
Key Drivers –Securities Portfolio –Credit Quality –Net Interest Margin –Lockhart funding –Capital |
Outlook Summary |
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation29.jpg)
Outlook Summary
• Continued elevated levels of credit losses and loss provisions in a
weakening economy
weakening economy
• Additional OTTI and goodwill impairment possible
• Continued strong net interest margin
• Reduced dividend will preserve strong capital positions - generally
the highest they’ve been in over a decade
the highest they’ve been in over a decade
• Long-term outlook remains strong when economy begins to recover
– Best long-term growth markets
– Sustainable competitive advantage in operating model
– Superior risk-adjusted NIM through the business cycle
![](https://capedge.com/proxy/8-K/0000109380-09-000013/citipresenation30.jpg)
Citigroup
2009 Financial Services Conference
27 January, 2008
New York City