ZIONS BANCORPORATION
Press Release – Page 1
January 22, 2018
| Zions Bancorporation One South Main Salt Lake City, UT 84133 January 22, 2018 |  |
| www.zionsbancorporation.com | |
Fourth Quarter 2017 Financial Results: FOR IMMEDIATE RELEASE
Investor and Media Contact: James Abbott (801) 844-7637
| Zions Bancorporation Reports: 4Q17 Net Earnings¹ of $114 million, diluted EPS of $0.54 |
| compared with 3Q17 Net Earnings¹ of $152 million, diluted EPS of $0.72, and 4Q16 Net Earnings¹ of $125 million, diluted EPS of $0.60 |
| 2017 Annual Net Earnings¹ of $550 million, diluted EPS of $2.60, compared with 2016 Annual Net Earnings¹ of $411 million, diluted EPS of $1.99 |
FOURTH QUARTER RESULTS
| $0.54 | $114 million | 3.45% | 12.1% | |||
| Earnings per diluted common share | Net Earnings 1 | Net interest margin (“NIM”) | Common Equity Tier 1 | |||
| FOURTH QUARTER HIGHLIGHTS² | ||
| Net Interest Income and NIM | • | Net interest income was $526 million, up 10% |
• | NIM was 3.45% compared with 3.37% | |
Operating Performance2 | • | Pre-provision net revenue ("PPNR") was $257 million, up 21% |
• | Adjusted PPNR³ was $259 million, up 19% | |
• | Noninterest expense was $417 million, compared with $404 million | |
• | Adjusted noninterest expense³ was $415 million, compared with $395 million | |
• | Efficiency ratio³ was 61.6%, compared with 64.5% | |
| Loans and Credit Quality | • | Net loans and leases were $44.8 billion, compared with $42.6 billion |
• | Classified loans declined 28% and nonperforming assets declined 27% | |
• | Provision for credit losses was $(12) million, compared with less than $1 million | |
• | Annualized net charge-offs were 0.11% of average loans compared with 0.25% | |
| Capital Returns | • | Return on average tangible common equity³ was 7.4%, compared with 8.4% |
• | Common stock repurchases of $115 million, 2.3 million shares, or 1.2% of shares outstanding as of September 30, 2017, during the quarter | |
• | Common dividend increased to $0.16 per share from $0.08 per share | |
| Notable Items | • | $47 million tax expense associated with the revaluation of deferred tax assets related to the Tax Cuts and Jobs Act |
• | $12 million contribution to a charitable foundation, also related to the Tax Cuts and Jobs Act | |
| CEO COMMENTARY |
| Harris H. Simmons, Chairman and CEO, commented, “We are pleased with the results of both the quarter and the year. Fourth quarter earnings per share increased to $0.80, a 33% increase over the prior-year period, when adjusted for both the deferred tax asset revaluation and the larger charitable contribution expense, which were directly related to the passage of tax reform legislation. When adjusted for these items, the efficiency ratio improved materially to 59.8%, and the return on tangible common equity rose to 10.9%, up from 8.4% in the year-ago period.” Mr. Simmons continued, “We were pleased with loan growth over the year-ago period, which increased at a rate roughly double that of large domestic commercial banks. We’ve also seen strong improvement in credit quality, with classified loans and other measures of quality at their best levels in a number of years.” Mr. Simmons concluded, “We are pleased to have achieved each of the financial goals we established in mid-2015, and we remain focused on building a culture of continuous improvement and operational excellence that will allow us to continue to produce profitable growth in the years ahead.” |
OPERATING PERFORMANCE3 |
| ¹ Net Earnings is net earnings applicable to common shareholders. ² Comparisons noted in the bullet points are calculated for the current quarter versus the same prior-year period, unless otherwise specified. ³ For information on non-GAAP financial measures and why the Company presents these numbers, see pages 18-21. Included in these non-GAAP financial measures are the key metrics to which Zions announced it would hold itself accountable in its June 1, 2015 efficiency initiative, and to which executive compensation is tied. |
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ZIONS BANCORPORATION
Press Release – Page 2
January 22, 2018
Comparisons noted in the sections below are calculated for the current quarter versus the same prior-year period, unless otherwise specified.
RESULTS OF OPERATIONS
| Net Interest Income and Margin | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Interest and fees on loans | $ | 477 | $ | 468 | $ | 438 | $ | 9 | 2 | % | $ | 39 | 9 | % | |||||||||||
| Interest on money market investments | 5 | 5 | 4 | — | — | 1 | 25 | ||||||||||||||||||
| Interest on securities | 80 | 84 | 59 | (4 | ) | (5 | ) | 21 | 36 | ||||||||||||||||
| Total interest income | 562 | 557 | 501 | 5 | 1 | 61 | 12 | ||||||||||||||||||
| Interest on deposits | 17 | 15 | 13 | 2 | 13 | 4 | 31 | ||||||||||||||||||
| Interest on short and long-term borrowings | 19 | 20 | 8 | (1 | ) | (5 | ) | 11 | 138 | ||||||||||||||||
| Total interest expense | 36 | 35 | 21 | 1 | 3 | 15 | 71 | ||||||||||||||||||
| Net interest income | $ | 526 | $ | 522 | $ | 480 | $ | 4 | 1 | $ | 46 | 10 | |||||||||||||
| bps | bps | ||||||||||||||||||||||||
| Net interest margin | 3.45 | % | 3.45 | % | 3.37 | % | — | 0.08 | |||||||||||||||||
Net interest income increased to $526 million in the fourth quarter of 2017 from $480 million. The $46 million, or 10%, increase in net interest income was due to a $39 million increase in interest and fees on loans resulting from loan growth in commercial and consumer loans and increases in short-term interest rates, and a $21 million increase in interest on securities, resulting from a 3.4 billion, or 28%, increase in the size of the average investment securities portfolio. Interest expense increased $15 million primarily due to an increase in wholesale borrowings and a $4 million increase in interest on deposits.
The net interest margin remained at 3.45% in the fourth quarter of 2017 when compared with the third quarter of 2017. The rate paid on total average deposits and average wholesale borrowings increased by 1 basis point and 9 basis points, respectively. The rate earned on average available-for-sale securities decreased 8 basis points due to increased prepayments of Small Business Administration (“SBA”) backed securities. These changes were offset during the quarter by an increase in the average loan yield (3 basis points), primarily on commercial real estate loans (8 basis points) and commercial loans (4 basis points).
| Noninterest Income | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Service charges and fees on deposit accounts | $ | 44 | $ | 42 | $ | 43 | $ | 2 | 5 | % | $ | 1 | 2 | % | |||||||||||
| Other service charges, commissions and fees | 56 | 55 | 52 | 1 | 2 | 4 | 8 | ||||||||||||||||||
| Wealth management income | 12 | 11 | 11 | 1 | 9 | 1 | 9 | ||||||||||||||||||
| Loan sales and servicing income | 6 | 6 | 6 | — | — | — | — | ||||||||||||||||||
| Capital markets and foreign exchange | 9 | 8 | 6 | 1 | 13 | 3 | 50 | ||||||||||||||||||
| Customer-related fees | 127 | 122 | 118 | 5 | 4 | 9 | 8 | ||||||||||||||||||
| Dividends and other investment income | 10 | 9 | 4 | 1 | 11 | 6 | 150 | ||||||||||||||||||
| Securities gains (losses), net | — | 5 | (3 | ) | (5 | ) | (100 | ) | 3 | 100 | |||||||||||||||
| Other | 2 | 3 | 9 | (1 | ) | (33 | ) | (7 | ) | (78 | ) | ||||||||||||||
| Total noninterest income | $ | 139 | $ | 139 | $ | 128 | $ | — | — | $ | 11 | 9 | |||||||||||||
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ZIONS BANCORPORATION
Press Release – Page 3
January 22, 2018
Total noninterest income for the fourth quarter of 2017 increased by $11 million, or 9%, to $139 million from $128 million. The increase was driven by a $9 million increase in customer-related fees and a $6 million increase in dividends and other investment income as a result of increased market values of the Company’s Small Business Investment Company (“SBIC”) investments, partially offset by a $7 million decrease in other noninterest income primarily related to a decline in fair value and nonhedge derivative income resulting from fair value adjustments. The increase in customer-related fees was primarily due to increases in credit card fee income.
| Noninterest Expense | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Salaries and employee benefits | $ | 254 | $ | 253 | $ | 241 | $ | 1 | — | % | $ | 13 | 5 | % | |||||||||||
| Occupancy, net | 29 | 35 | 32 | (6 | ) | (17 | ) | (3 | ) | (9 | ) | ||||||||||||||
| Furniture, equipment and software, net | 34 | 32 | 33 | 2 | 6 | 1 | 3 | ||||||||||||||||||
| Other real estate expense, net | — | (1 | ) | — | 1 | 100 | — | NM | |||||||||||||||||
| Credit-related expense | 6 | 7 | 7 | (1 | ) | (14 | ) | (1 | ) | (14 | ) | ||||||||||||||
| Provision for unfunded lending commitments | (1 | ) | (4 | ) | 3 | 3 | 75 | (4 | ) | (133 | ) | ||||||||||||||
| Professional and legal services | 12 | 14 | 17 | (2 | ) | (14 | ) | (5 | ) | (29 | ) | ||||||||||||||
| Advertising | 5 | 6 | 5 | (1 | ) | (17 | ) | — | — | ||||||||||||||||
| FDIC premiums | 13 | 15 | 11 | (2 | ) | (13 | ) | 2 | 18 | ||||||||||||||||
| Amortization of core deposit and other intangibles | 1 | 2 | 2 | (1 | ) | (50 | ) | (1 | ) | (50 | ) | ||||||||||||||
| Other | 64 | 54 | 53 | 10 | 19 | 11 | 21 | ||||||||||||||||||
| Total noninterest expense | $ | 417 | $ | 413 | $ | 404 | $ | 4 | 1 | $ | 13 | 3 | |||||||||||||
Adjusted noninterest expense 1 | $ | 415 | $ | 414 | $ | 395 | $ | 1 | — | % | $ | 20 | 5 | % | |||||||||||
1 | For information on non-GAAP financial measures, see pages 18-21. |
Noninterest expense for the fourth quarter of 2017 was $417 million and included a $12 million charitable contribution, which was largely attributable to the passing of the Tax Cut and Jobs Act (“the Act”). Excluding the effect of the contribution, noninterest expense was $405 million, which is generally stable when compared with the $404 million of noninterest expense in the same prior year period.
Salaries and employee benefits increased $13 million as a result of higher incentive compensation, increases in base salaries, and an increase in the Company’s profit sharing contribution to the 401(k) plan. The increase in other noninterest expense reflects the $12 million charitable contribution previously discussed. These increases were partially offset by a $5 million decline in professional and legal services primarily due to a decrease in consulting services, and a $4 million decline in the provision for unfunded lending commitments.
Adjusted noninterest expense for the fourth quarter of 2017 increased $20 million, or 5%, to $415 million compared with $395 million for the same prior year period. Adjusted noninterest expense for 2017 increased $61 million, or 4%, to $1.640 billion compared with $1.579 billion for 2016. Excluding the charitable contribution, the increase was $49 million, or 3%, which was consistent with the goal to hold adjusted noninterest expense growth to 2-3% for the full-year 2017.
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ZIONS BANCORPORATION
Press Release – Page 4
January 22, 2018
Zions met its goal that was initially established in June 2015 to achieve an efficiency ratio in the low 60% range for 2017, with an efficiency ratio of 62.3%. We expect adjusted noninterest expense to increase slightly in 2018 compared with 2017, although we expect revenue to grow at a faster pace, and therefore, we expect additional improvement in the efficiency ratio in 2018. Longer term, we expect the efficiency ratio to be near 60% for the full year 2019. Incentive compensation will continue to be closely aligned with profitability improvement and income growth objectives. For information on non-GAAP financial measures, see pages 18-21.
| Income Taxes | |||||||||||||
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Act makes significant changes to the U.S. Internal Revenue Code of 1986, including a decrease in the current corporate federal income tax rate to 21% from 35%, effective January 1, 2018. The estimated impact of the Act on the net deferred tax asset resulted in a non-cash charge of $47 million through income tax expense. Excluding the effects of stock-based compensation and state tax law changes, Zions expects its 2018 statutory and effective tax rates to both be in the 24%-25% range.
BALANCE SHEET ANALYSIS
| Asset Quality | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | bps | bps | ||||||||||||||||||||
| Ratio of nonperforming assets to loans and leases and other real estate owned | 0.93 | % | 1.06 | % | 1.34 | % | (13 | ) | (41 | ) | |||||||||||||||
| Annualized ratio of net loan and lease charge-offs to average loans | 0.11 | % | 0.07 | % | 0.25 | % | 4 | (14 | ) | ||||||||||||||||
| Ratio of total allowance for credit losses to loans and leases outstanding | 1.29 | % | 1.36 | % | 1.48 | % | (7 | ) | (19 | ) | |||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||||
| Classified loans | $ | 1,133 | $ | 1,248 | $ | 1,577 | $ | (115 | ) | (9 | )% | $ | (444 | ) | (28 | )% | |||||||||
| Nonperforming assets | 418 | 468 | 573 | (50 | ) | (11 | )% | (155 | ) | (27 | )% | ||||||||||||||
| Net loan and lease charge-offs | 12 | 8 | 27 | 4 | 50 | % | (15 | ) | (56 | )% | |||||||||||||||
| Provision for credit losses | (12 | ) | 1 | — | (13 | ) | NM | (12 | ) | NM | |||||||||||||||
Asset quality improved for the entire loan portfolio when compared with the prior quarter and the same prior year period, primarily due to improvements in the oil and gas-related portfolio, highlighted by decreases in classified and nonperforming assets. Classified loans and nonperforming assets for the oil and gas-related portfolio decreased $327 million and $143 million, respectively, from the fourth quarter of 2016.
The Company recorded a $(12) million provision for credit losses during the fourth quarter of 2017, compared with $1 million during the third quarter of 2017 and less than $1 million for the fourth quarter of 2016. The $(12) million provision is primarily the result of improving credit quality in the oil and gas-related portfolio and a partial release of the reserve taken for Hurricane Harvey in the third quarter of 2017. The allowance for credit losses was $576 million at December 31, 2017, compared with $632 million at December 31, 2016, or 1.29% and 1.48% of loans and leases, respectively.
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ZIONS BANCORPORATION
Press Release – Page 5
January 22, 2018
| Loans and Leases | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Loans held for sale | $ | 44 | $ | 71 | $ | 172 | $ | (27 | ) | (38 | )% | $ | (128 | ) | (74 | ) | |||||||||
| Loans and leases: | |||||||||||||||||||||||||
| Commercial | 22,926 | 22,539 | 21,615 | 387 | 2 | 1,311 | 6 | ||||||||||||||||||
| Commercial real estate | 11,124 | 11,114 | 11,341 | 10 | — | (217 | ) | (2 | ) | ||||||||||||||||
| Consumer | 10,730 | 10,503 | 9,693 | 227 | 2 | 1,037 | 11 | ||||||||||||||||||
| Loans and leases, net of unearned income and fees | 44,780 | 44,156 | 42,649 | 624 | 1 | 2,131 | 5 | ||||||||||||||||||
| Less allowance for loan losses | 518 | 541 | 567 | (23 | ) | (4 | ) | (49 | ) | (9 | ) | ||||||||||||||
| Loans held for investment, net of allowance | $ | 44,262 | $ | 43,615 | $ | 42,082 | $ | 647 | 1 | $ | 2,180 | 5 | |||||||||||||
Loans and leases, net of unearned income and fees, increased $2.1 billion, or 5%, to $44.8 billion at December 31, 2017 from $42.6 billion at December 31, 2016, predominantly in commercial and industrial loans and 1-4 family residential loans. Commercial real estate loans declined slightly from the prior year, primarily due to payoffs and moderate originations because of active management of credit risk concentrations. Unfunded lending commitments increased to $20.5 billion at December 31, 2017, compared with $19.3 billion at December 31, 2016.
| Deposits | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Noninterest-bearing demand | $ | 23,886 | $ | 24,011 | $ | 24,115 | $ | (125 | ) | (1 | )% | $ | (229 | ) | (1 | )% | |||||||||
| Interest-bearing: | |||||||||||||||||||||||||
| Savings and money market | 25,620 | 25,179 | 26,364 | 441 | 2 | (744 | ) | (3 | ) | ||||||||||||||||
| Time | 3,115 | 2,909 | 2,757 | 206 | 7 | 358 | 13 | ||||||||||||||||||
| Total deposits | $ | 52,621 | $ | 52,099 | $ | 53,236 | $ | 522 | 1 | $ | (615 | ) | (1 | ) | |||||||||||
Total deposits decreased by $0.6 billion, or 1%, from $53.2 billion at December 31, 2016. Average total deposits increased slightly to $52.3 billion for the fourth quarter of 2017 compared with $52.2 billion for the fourth quarter of 2016. Average noninterest bearing deposits increased to $24.0 billion for the fourth quarter of 2017, compared with $23.6 billion for the fourth quarter of 2016, and were 46% of average total deposits compared with 45% for the same prior year period.
| Shareholders’ Equity | |||||||||||||||||||||||||
| 4Q17 - 3Q17 | 4Q17 - 4Q16 | ||||||||||||||||||||||||
| (In millions) | 4Q17 | 3Q17 | 4Q16 | $ | % | $ | % | ||||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||||
| Preferred Stock | $ | 566 | $ | 566 | $ | 710 | $ | — | — | % | $ | (144 | ) | (20 | )% | ||||||||||
| Common Stock | 4,445 | 4,552 | 4,725 | (107 | ) | (2 | ) | (280 | ) | (6 | ) | ||||||||||||||
| Retained earnings | 2,782 | 2,700 | 2,321 | 82 | 3 | 461 | 20 | ||||||||||||||||||
| Accumulated other comprehensive income (loss) | (114 | ) | (57 | ) | (122 | ) | (57 | ) | (100 | ) | 8 | 7 | |||||||||||||
| Total shareholders' equity | $ | 7,679 | $ | 7,761 | $ | 7,634 | $ | (82 | ) | (1 | ) | $ | 45 | 1 | |||||||||||
During the fourth quarter of 2017, the Company increased its common stock dividend to $0.16 cents per share from $0.12 cents per share in third quarter of 2017. Common stock repurchases during the current quarter totaled $115
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ZIONS BANCORPORATION
Press Release – Page 6
January 22, 2018
million, or 2.3 million shares, which is equivalent to 1.2% of common stock as of September 30, 2017, at an average price of $49.57 per share. The Company has repurchased $320 million, or 7.0 million shares, of common stock during the last four quarters at an average price of $45.66 per share. The Company has $235 million of buyback capacity remaining in its 2017 capital plan, which spans the timeframe of July 2017 to June 2018. Weighted average diluted shares increased by 4.2 million compared with the fourth quarter of 2016, as repurchased shares were more than offset by the dilutive impact of warrants that have been outstanding since 2008 (“TARP” warrants - NASDAQ: ZIONZ) and 2010 (NASDAQ: ZIONW) and employee grants.
Preferred stock decreased by $144 million from December 31, 2016 to December 31, 2017 as a result of the Company redeeming all outstanding shares of its 7.90% Series F Non-Cumulative Perpetual Preferred Stock during the second quarter of 2017. Preferred dividends are expected to be $7.5 million for the first and third quarters of 2018 and $9.6 million for the second and fourth quarters of 2018.
Tangible book value per common share increased to $30.87 at December 31, 2017, compared with $29.06. The estimated Basel III common equity tier 1 (“CET1”) capital ratio was 12.1% at December 31, 2017 compared with 12.1%. Basel III capital ratios are based on the applicable phase-in periods; however, the fully phased-in ratio is not substantially different. For information on non-GAAP financial measures, see pages 18-21.
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ZIONS BANCORPORATION
Press Release – Page 7
January 22, 2018
Supplemental Presentation and Conference Call
Zions has posted a supplemental presentation to its website, which will be used to discuss these fourth quarter results at 5:30 p.m. ET this afternoon (January 22, 2018). Media representatives, analysts, investors, and the public are invited to join this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 5750193, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at zionsbancorporation.com. The webcast of the conference call will also be archived and available for 30 days.
2018 Investor Day
On March 1, 2018, Zions expects to host an investor day, including presentations from various members of Zions Bancorporation and affiliate managers. The event is expected to begin at 8:00 a.m. MST. Please contact Zions’ investor relations for further details by emailing investor@zionsbancorp.com or calling 801-844-7637, extension 2.
About Zions Bancorporation
Zions Bancorporation is one of the nation's premier financial services companies with total assets exceeding $65 billion. Zions operates under local management teams and distinct brands in 11 western states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming. The company is a national leader in Small Business Administration lending and public finance advisory services. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to local banking brands can be accessed at zionsbancorporation.com.
Forward-Looking Information
This earnings release includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements in the earnings release that are based on other than historical information or that express Zions Bancorporation’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect, among other things, our current expectations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, industry results or regulatory outcomes to differ materially from those expressed or implied by such forward-looking statements.
Without limiting the foregoing, the words “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “would,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about future financial and operating results, the potential timing or consummation of the proposed transaction described in the presentation and receipt of regulatory approvals or determinations, or the anticipated benefits thereof, including, without limitation, future financial and operating results. Actual results and outcomes may differ materially from those presented, either expressed or implied, in the presentation. Important risk factors that may cause such material
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ZIONS BANCORPORATION
Press Release – Page 8
January 22, 2018
differences include, but are not limited to, the actual amount and duration of declines in the price of oil and gas; Zions’ ability to meet efficiency and noninterest expense goals; the rate of change of interest sensitive assets and liabilities relative to changes in benchmark interest rates; risks and uncertainties related to the ability to obtain shareholder and regulatory approvals or determinations, or the possibility that such approvals or determinations may be delayed; the imposition by regulators of conditions or requirements that are not favorable to Zions; the ability of Zions Bancorporation to achieve anticipated benefits from the consolidation and regulatory determinations; and legislative, regulatory and economic developments that may diminish or eliminate the anticipated benefits of the consolidation. These risks, as well as other factors, are discussed in Zions Bancorporation’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 (https://www.sec.gov/), and other risks associated with the proposed transaction will be more fully discussed in the proxy statement that will be filed with the Securities and Exchange Commission in connection with the proposed transaction.
Except as required by law, Zions Bancorporation 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.
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ZIONS BANCORPORATION
Press Release – Page 9
January 22, 2018
FINANCIAL HIGHLIGHTS
(Unaudited)
| Three Months Ended | |||||||||||||||||||
| (In millions, except share, per share, and ratio data) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
BALANCE SHEET 1 | |||||||||||||||||||
| Loans held for investment, net of allowance | $ | 44,262 | $ | 43,615 | $ | 43,139 | $ | 42,198 | $ | 42,082 | |||||||||
| Total assets | 66,288 | 65,564 | 65,446 | 65,463 | 63,239 | ||||||||||||||
| Deposits | 52,621 | 52,099 | 52,378 | 53,475 | 53,236 | ||||||||||||||
| Total shareholders’ equity | 7,679 | 7,761 | 7,749 | 7,730 | 7,634 | ||||||||||||||
| STATEMENT OF INCOME | |||||||||||||||||||
| Net earnings applicable to common shareholders | $ | 114 | $ | 152 | $ | 154 | $ | 129 | $ | 125 | |||||||||
| Net interest income | 526 | 522 | 528 | 489 | 480 | ||||||||||||||
Taxable-equivalent net interest income 2 | 535 | 531 | 537 | 497 | 488 | ||||||||||||||
| Total noninterest income | 139 | 139 | 132 | 132 | 128 | ||||||||||||||
| Total noninterest expense | 417 | 413 | 405 | 414 | 404 | ||||||||||||||
Adjusted pre-provision net revenue 2 | 259 | 251 | 268 | 213 | 217 | ||||||||||||||
| Provision for loan losses | (11 | ) | 5 | 7 | 23 | (3 | ) | ||||||||||||
| Provision for unfunded lending commitments | (1 | ) | (4 | ) | 3 | (5 | ) | 3 | |||||||||||
| Provision for credit losses | (12 | ) | 1 | 10 | 18 | — | |||||||||||||
| PER COMMON SHARE | |||||||||||||||||||
| Net earnings per diluted common share | $ | 0.54 | $ | 0.72 | $ | 0.73 | $ | 0.61 | $ | 0.60 | |||||||||
| Dividends | 0.16 | 0.12 | 0.08 | 0.08 | 0.08 | ||||||||||||||
Book value per common share 1 | 36.01 | 36.03 | 35.54 | 34.65 | 34.09 | ||||||||||||||
Tangible book value per common share 1, 2 | 30.87 | 30.93 | 30.50 | 29.61 | 29.06 | ||||||||||||||
| SELECTED RATIOS AND OTHER DATA | |||||||||||||||||||
| Return on average assets | 0.74 | % | 0.97 | % | 1.03 | % | 0.88 | % | 0.88 | % | |||||||||
| Return on average common equity | 6.3 | % | 8.3 | % | 8.6 | % | 7.5 | % | 7.1 | % | |||||||||
Tangible return on average tangible common equity 2 | 7.4 | % | 9.8 | % | 10.2 | % | 8.8 | % | 8.4 | % | |||||||||
| Net interest margin | 3.45 | % | 3.45 | % | 3.52 | % | 3.38 | % | 3.37 | % | |||||||||
| Cost of total deposits, annualized | 0.13 | % | 0.12 | % | 0.11 | % | 0.10 | % | 0.10 | % | |||||||||
Efficiency ratio 2 | 61.6 | % | 62.3 | % | 59.8 | % | 65.9 | % | 64.5 | % | |||||||||
| Effective tax rate | 52.5 | % | 34.2 | % | 32.3 | % | 24.5 | % | 33.8 | % | |||||||||
| Ratio of nonperforming assets to loans and leases and other real estate owned | 0.93 | % | 1.06 | % | 1.12 | % | 1.37 | % | 1.34 | % | |||||||||
| Annualized ratio of net loan and lease charge-offs to average loans | 0.11 | % | 0.07 | % | 0.06 | % | 0.43 | % | 0.25 | % | |||||||||
Ratio of total allowance for credit losses to loans and leases outstanding 1 | 1.29 | % | 1.36 | % | 1.39 | % | 1.41 | % | 1.48 | % | |||||||||
| Full-time equivalent employees | 10,083 | 10,041 | 10,074 | 10,004 | 10,057 | ||||||||||||||
CAPITAL RATIOS 1 | |||||||||||||||||||
| Tangible common equity ratio | 9.34 | % | 9.57 | % | 9.57 | % | 9.31 | % | 9.49 | % | |||||||||
Basel III: 3 | |||||||||||||||||||
| Common equity tier 1 capital | 12.1 | % | 12.2 | % | 12.3 | % | 12.2 | % | 12.1 | % | |||||||||
| Tier 1 leverage | 10.5 | % | 10.6 | % | 10.5 | % | 10.8 | % | 11.1 | % | |||||||||
| Tier 1 risk-based capital | 13.2 | % | 13.3 | % | 13.4 | % | 13.6 | % | 13.5 | % | |||||||||
| Total risk-based capital | 14.8 | % | 15.0 | % | 15.1 | % | 15.3 | % | 15.2 | % | |||||||||
| Risk-weighted assets | $ | 51,457 | $ | 51,043 | $ | 50,575 | $ | 50,016 | $ | 49,937 | |||||||||
| Weighted average common and common-equivalent shares outstanding (in thousands) | 209,681 | 209,106 | 208,183 | 210,405 | 205,446 | ||||||||||||||
Common shares outstanding (in thousands) 1 | 197,532 | 199,712 | 202,131 | 202,595 | 203,085 | ||||||||||||||
1 | At period end. |
2 | For information on non-GAAP financial measures, see pages 18-21. |
3 | Basel III capital ratios became effective January 1, 2015 and are based on the applicable phase-in periods. Current period ratios and amounts represent estimates. |
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ZIONS BANCORPORATION
Press Release – Page 10
January 22, 2018
CONSOLIDATED BALANCE SHEETS
| (In millions, shares in thousands) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
| ASSETS | |||||||||||||||||||
| Cash and due from banks | $ | 548 | $ | 541 | $ | 481 | $ | 566 | $ | 737 | |||||||||
| Money market investments: | |||||||||||||||||||
| Interest-bearing deposits | 782 | 765 | 1,167 | 1,761 | 1,411 | ||||||||||||||
| Federal funds sold and security resell agreements | 514 | 467 | 427 | 363 | 568 | ||||||||||||||
| Investment securities: | |||||||||||||||||||
| Held-to-maturity, at amortized cost (approximate fair value $762, $743, $774, $803 and $850) | 770 | 746 | 775 | 815 | 868 | ||||||||||||||
| Available-for-sale, at fair value | 15,161 | 15,242 | 15,341 | 15,606 | 13,372 | ||||||||||||||
| Trading account, at fair value | 148 | 56 | 61 | 40 | 115 | ||||||||||||||
| Total investment securities | 16,079 | 16,044 | 16,177 | 16,461 | 14,355 | ||||||||||||||
| Loans held for sale | 44 | 71 | 53 | 128 | 172 | ||||||||||||||
| Loans and leases, net of unearned income and fees | 44,780 | 44,156 | 43,683 | 42,742 | 42,649 | ||||||||||||||
| Less allowance for loan losses | 518 | 541 | 544 | 544 | 567 | ||||||||||||||
| Loans held for investment, net of allowance | 44,262 | 43,615 | 43,139 | 42,198 | 42,082 | ||||||||||||||
| Other noninterest-bearing investments | 1,029 | 1,008 | 1,012 | 973 | 884 | ||||||||||||||
| Premises, equipment and software, net | 1,094 | 1,083 | 1,069 | 1,047 | 1,020 | ||||||||||||||
| Goodwill | 1,014 | 1,014 | 1,014 | 1,014 | 1,014 | ||||||||||||||
| Core deposit and other intangibles | 2 | 3 | 5 | 7 | 8 | ||||||||||||||
| Other real estate owned | 4 | 3 | 4 | 3 | 4 | ||||||||||||||
| Other assets | 916 | 950 | 898 | 942 | 984 | ||||||||||||||
| Total assets | $ | 66,288 | $ | 65,564 | $ | 65,446 | $ | 65,463 | $ | 63,239 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing demand | $ | 23,886 | $ | 24,011 | $ | 24,172 | $ | 24,410 | $ | 24,115 | |||||||||
| Interest-bearing: | |||||||||||||||||||
| Savings and money market | 25,620 | 25,179 | 25,165 | 26,071 | 26,364 | ||||||||||||||
| Time | 3,115 | 2,909 | 3,041 | 2,994 | 2,757 | ||||||||||||||
| Foreign | — | — | — | — | — | ||||||||||||||
| Total deposits | 52,621 | 52,099 | 52,378 | 53,475 | 53,236 | ||||||||||||||
| Federal funds and other short-term borrowings | 4,976 | 4,624 | 4,342 | 3,137 | 827 | ||||||||||||||
| Long-term debt | 383 | 383 | 383 | 383 | 535 | ||||||||||||||
| Reserve for unfunded lending commitments | 58 | 59 | 63 | 60 | 65 | ||||||||||||||
| Other liabilities | 571 | 638 | 531 | 678 | 942 | ||||||||||||||
| Total liabilities | 58,609 | 57,803 | 57,697 | 57,733 | 55,605 | ||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||
| Preferred stock, without par value, authorized 4,400 shares | 566 | 566 | 566 | 710 | 710 | ||||||||||||||
| Common stock, without par value; authorized 350,000 shares; issued and outstanding 197,532, 199,712, 202,131, 202,595, and 203,085 shares | 4,445 | 4,552 | 4,660 | 4,696 | 4,725 | ||||||||||||||
| Retained earnings | 2,782 | 2,700 | 2,572 | 2,435 | 2,321 | ||||||||||||||
| Accumulated other comprehensive income (loss) | (114 | ) | (57 | ) | (49 | ) | (111 | ) | (122 | ) | |||||||||
| Total shareholders’ equity | 7,679 | 7,761 | 7,749 | 7,730 | 7,634 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 66,288 | $ | 65,564 | $ | 65,446 | $ | 65,463 | $ | 63,239 | |||||||||
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ZIONS BANCORPORATION
Press Release – Page 11
January 22, 2018
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended | |||||||||||||||||||
| (In millions, except share and per share amounts) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| Interest income: | |||||||||||||||||||
| Interest and fees on loans | $ | 477 | $ | 468 | $ | 469 | $ | 433 | $ | 438 | |||||||||
| Interest on money market investments | 5 | 5 | 5 | 4 | 4 | ||||||||||||||
| Interest on securities | 80 | 84 | 84 | 78 | 59 | ||||||||||||||
| Total interest income | 562 | 557 | 558 | 515 | 501 | ||||||||||||||
| Interest expense: | |||||||||||||||||||
| Interest on deposits | 17 | 15 | 14 | 13 | 13 | ||||||||||||||
| Interest on short- and long-term borrowings | 19 | 20 | 16 | 13 | 8 | ||||||||||||||
| Total interest expense | 36 | 35 | 30 | 26 | 21 | ||||||||||||||
| Net interest income | 526 | 522 | 528 | 489 | 480 | ||||||||||||||
| Provision for loan losses | (11 | ) | 5 | 7 | 23 | (3 | ) | ||||||||||||
| Net interest income after provision for loan losses | 537 | 517 | 521 | 466 | 483 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Service charges and fees on deposit accounts | 44 | 42 | 43 | 42 | 43 | ||||||||||||||
| Other service charges, commissions and fees | 56 | 55 | 56 | 49 | 52 | ||||||||||||||
| Wealth management income | 12 | 11 | 10 | 10 | 11 | ||||||||||||||
| Loan sales and servicing income | 6 | 6 | 6 | 7 | 6 | ||||||||||||||
| Capital markets and foreign exchange | 9 | 8 | 6 | 7 | 6 | ||||||||||||||
| Customer-related fees | 127 | 122 | 121 | 115 | 118 | ||||||||||||||
| Dividends and other investment income | 10 | 9 | 10 | 12 | 4 | ||||||||||||||
| Securities gains (losses), net | — | 5 | 2 | 5 | (3 | ) | |||||||||||||
| Other | 2 | 3 | (1 | ) | — | 9 | |||||||||||||
| Total noninterest income | 139 | 139 | 132 | 132 | 128 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Salaries and employee benefits | 254 | 253 | 242 | 262 | 241 | ||||||||||||||
| Occupancy, net | 29 | 35 | 32 | 33 | 32 | ||||||||||||||
| Furniture, equipment and software, net | 34 | 32 | 32 | 32 | 33 | ||||||||||||||
| Other real estate expense, net | — | (1 | ) | — | — | — | |||||||||||||
| Credit-related expense | 6 | 7 | 8 | 8 | 7 | ||||||||||||||
| Provision for unfunded lending commitments | (1 | ) | (4 | ) | 3 | (5 | ) | 3 | |||||||||||
| Professional and legal services | 12 | 14 | 13 | 14 | 17 | ||||||||||||||
| Advertising | 5 | 6 | 6 | 5 | 5 | ||||||||||||||
| FDIC premiums | 13 | 15 | 13 | 12 | 11 | ||||||||||||||
| Amortization of core deposit and other intangibles | 1 | 2 | 2 | 2 | 2 | ||||||||||||||
| Other | 64 | 54 | 54 | 51 | 53 | ||||||||||||||
| Total noninterest expense | 417 | 413 | 405 | 414 | 404 | ||||||||||||||
| Income before income taxes | 259 | 243 | 248 | 184 | 207 | ||||||||||||||
| Income taxes | 136 | 83 | 80 | 45 | 70 | ||||||||||||||
| Net income | 123 | 160 | 168 | 139 | 137 | ||||||||||||||
| Preferred stock dividends | (9 | ) | (8 | ) | (12 | ) | (10 | ) | (12 | ) | |||||||||
| Preferred stock redemption | — | — | (2 | ) | — | — | |||||||||||||
| Net earnings applicable to common shareholders | $ | 114 | $ | 152 | $ | 154 | $ | 129 | $ | 125 | |||||||||
| Weighted average common shares outstanding during the period: | |||||||||||||||||||
| Basic shares (in thousands) | 198,648 | 200,332 | 201,822 | 202,347 | 202,886 | ||||||||||||||
| Diluted shares (in thousands) | 209,681 | 209,106 | 208,183 | 210,405 | 205,446 | ||||||||||||||
| Net earnings per common share: | |||||||||||||||||||
| Basic | $ | 0.57 | $ | 0.75 | $ | 0.76 | $ | 0.63 | $ | 0.61 | |||||||||
| Diluted | 0.54 | 0.72 | 0.73 | 0.61 | 0.60 | ||||||||||||||
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ZIONS BANCORPORATION
Press Release – Page 12
January 22, 2018
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | |||||||||||
| (In millions, except share and per share amounts) | 2017 | 2016 | 2015 | ||||||||
| (Unaudited) | |||||||||||
| Interest income: | |||||||||||
| Interest and fees on loans | $ | 1,847 | $ | 1,729 | $ | 1,686 | |||||
| Interest on money market investments | 19 | 21 | 23 | ||||||||
| Interest on securities | 326 | 204 | 124 | ||||||||
| Total interest income | 2,192 | 1,954 | 1,833 | ||||||||
| Interest expense: | |||||||||||
| Interest on deposits | 59 | 49 | 49 | ||||||||
| Interest on short- and long-term borrowings | 68 | 38 | 69 | ||||||||
| Total interest expense | 127 | 87 | 118 | ||||||||
| Net interest income | 2,065 | 1,867 | 1,715 | ||||||||
| Provision for loan losses | 24 | 93 | 40 | ||||||||
| Net interest income after provision for loan losses | 2,041 | 1,774 | 1,675 | ||||||||
| Noninterest income: | |||||||||||
| Service charges and fees on deposit accounts | 171 | 171 | 168 | ||||||||
| Other service charges, commissions and fees | 217 | 208 | 187 | ||||||||
| Wealth management income | 42 | 37 | 31 | ||||||||
| Loan sales and servicing income | 25 | 35 | 31 | ||||||||
| Capital markets and foreign exchange | 30 | 22 | 26 | ||||||||
| Customer-related fees | 485 | 473 | 443 | ||||||||
| Dividends and other investment income | 40 | 24 | 30 | ||||||||
| Securities gains (losses), net | 14 | 7 | (127 | ) | |||||||
| Other | 5 | 12 | 11 | ||||||||
| Total noninterest income | 544 | 516 | 357 | ||||||||
| Noninterest expense: | |||||||||||
| Salaries and employee benefits | 1,011 | 983 | 973 | ||||||||
| Occupancy, net | 129 | 125 | 120 | ||||||||
| Furniture, equipment and software, net | 130 | 125 | 123 | ||||||||
| Other real estate expense, net | (1 | ) | (2 | ) | (1 | ) | |||||
| Credit-related expense | 29 | 26 | 29 | ||||||||
| Provision for unfunded lending commitments | (7 | ) | (10 | ) | (6 | ) | |||||
| Professional and legal services | 54 | 55 | 50 | ||||||||
| Advertising | 22 | 22 | 25 | ||||||||
| FDIC premiums | 53 | 40 | 34 | ||||||||
| Amortization of core deposit and other intangibles | 6 | 8 | 9 | ||||||||
| Other | 223 | 213 | 225 | ||||||||
| Total noninterest expense | 1,649 | 1,585 | 1,581 | ||||||||
| Income before income taxes | 936 | 705 | 451 | ||||||||
| Income taxes | 344 | 236 | 142 | ||||||||
| Net income | 592 | 469 | 309 | ||||||||
| Preferred stock dividends | (40 | ) | (48 | ) | (62 | ) | |||||
| Preferred stock redemption | (2 | ) | (10 | ) | — | ||||||
| Net earnings applicable to common shareholders | $ | 550 | $ | 411 | $ | 247 | |||||
| Weighted average common shares outstanding during the year: | |||||||||||
| Basic shares | 200,776 | 203,855 | 203,265 | ||||||||
| Diluted shares | 209,653 | 204,269 | 203,698 | ||||||||
| Net earnings per common share: | |||||||||||
| Basic | $ | 2.71 | $ | 2.00 | $ | 1.20 | |||||
| Diluted | 2.60 | 1.99 | 1.20 | ||||||||
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ZIONS BANCORPORATION
Press Release – Page 13
January 22, 2018
Loan Balances Held for Investment by Portfolio Type
(Unaudited)
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| Commercial: | |||||||||||||||||||
| Commercial and industrial | $ | 14,003 | $ | 14,041 | $ | 13,850 | $ | 13,368 | $ | 13,452 | |||||||||
| Leasing | 364 | 343 | 387 | 404 | 423 | ||||||||||||||
| Owner occupied | 7,288 | 7,082 | 7,095 | 6,973 | 6,962 | ||||||||||||||
| Municipal | 1,271 | 1,073 | 871 | 811 | 778 | ||||||||||||||
| Total commercial | 22,926 | 22,539 | 22,203 | 21,556 | 21,615 | ||||||||||||||
| Commercial real estate: | |||||||||||||||||||
| Construction and land development | 2,021 | 2,170 | 2,186 | 2,123 | 2,019 | ||||||||||||||
| Term | 9,103 | 8,944 | 9,012 | 9,083 | 9,322 | ||||||||||||||
| Total commercial real estate | 11,124 | 11,114 | 11,198 | 11,206 | 11,341 | ||||||||||||||
| Consumer: | |||||||||||||||||||
| Home equity credit line | 2,777 | 2,745 | 2,697 | 2,638 | 2,645 | ||||||||||||||
| 1-4 family residential | 6,662 | 6,522 | 6,359 | 6,185 | 5,891 | ||||||||||||||
| Construction and other consumer real estate | 597 | 558 | 560 | 517 | 486 | ||||||||||||||
| Bankcard and other revolving plans | 509 | 490 | 478 | 459 | 481 | ||||||||||||||
| Other | 185 | 188 | 188 | 181 | 190 | ||||||||||||||
| Total consumer | 10,730 | 10,503 | 10,282 | 9,980 | 9,693 | ||||||||||||||
| Loans and leases, net of unearned income and fees | $ | 44,780 | $ | 44,156 | $ | 43,683 | $ | 42,742 | $ | 42,649 | |||||||||
Nonperforming Assets
(Unaudited)
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
Nonaccrual loans1 | $ | 414 | $ | 465 | $ | 486 | $ | 585 | $ | 569 | |||||||||
| Other real estate owned | 4 | 3 | 4 | 3 | 4 | ||||||||||||||
| Total nonperforming assets | $ | 418 | $ | 468 | $ | 490 | $ | 588 | $ | 573 | |||||||||
Ratio of nonperforming assets to loans1 and leases and other real estate owned | 0.93 | % | 1.06 | % | 1.12 | % | 1.37 | % | 1.34 | % | |||||||||
| Accruing loans past due 90 days or more | $ | 22 | $ | 30 | $ | 19 | $ | 30 | $ | 36 | |||||||||
Ratio of accruing loans past due 90 days or more to loans1 and leases | 0.05 | % | 0.07 | % | 0.04 | % | 0.07 | % | 0.08 | % | |||||||||
| Nonaccrual loans and accruing loans past due 90 days or more | $ | 436 | $ | 495 | $ | 505 | $ | 615 | $ | 605 | |||||||||
Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans1 and leases | 0.97 | % | 1.12 | % | 1.15 | % | 1.43 | % | 1.41 | % | |||||||||
| Accruing loans past due 30-89 days | $ | 120 | $ | 99 | $ | 98 | $ | 137 | $ | 126 | |||||||||
| Restructured loans included in nonaccrual loans | 87 | 115 | 137 | 131 | 100 | ||||||||||||||
| Restructured loans on accrual | 139 | 133 | 167 | 167 | 151 | ||||||||||||||
| Classified loans | 1,133 | 1,248 | 1,317 | 1,464 | 1,577 | ||||||||||||||
1 Includes loans held for sale.
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ZIONS BANCORPORATION
Press Release – Page 14
January 22, 2018
Allowance for Credit Losses
(Unaudited)
| Three Months Ended | |||||||||||||||||||
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| Allowance for Loan Losses | |||||||||||||||||||
| Balance at beginning of period | $ | 541 | $ | 544 | $ | 544 | $ | 567 | $ | 597 | |||||||||
| Additions: | |||||||||||||||||||
| Provision for losses | (11 | ) | 5 | 7 | 23 | (3 | ) | ||||||||||||
| Deductions: | |||||||||||||||||||
| Gross loan and lease charge-offs | (27 | ) | (25 | ) | (35 | ) | (57 | ) | (38 | ) | |||||||||
| Recoveries | 15 | 17 | 28 | 11 | 11 | ||||||||||||||
| Net loan and lease charge-offs | (12 | ) | (8 | ) | (7 | ) | (46 | ) | (27 | ) | |||||||||
| Balance at end of period | $ | 518 | $ | 541 | $ | 544 | $ | 544 | $ | 567 | |||||||||
Ratio of allowance for loan losses to loans1 and leases, at period end | 1.16 | % | 1.23 | % | 1.25 | % | 1.27 | % | 1.33 | % | |||||||||
Ratio of allowance for loan losses to nonaccrual loans1 at period end | 129 | % | 120 | % | 115 | % | 99 | % | 107 | % | |||||||||
| Annualized ratio of net loan and lease charge-offs to average loans | 0.11 | % | 0.07 | % | 0.06 | % | 0.43 | % | 0.25 | % | |||||||||
| Reserve for Unfunded Lending Commitments | |||||||||||||||||||
| Balance at beginning of period | $ | 59 | $ | 63 | $ | 60 | $ | 65 | $ | 62 | |||||||||
| Provision charged (credited) to earnings | (1 | ) | (4 | ) | 3 | (5 | ) | 3 | |||||||||||
| Balance at end of period | $ | 58 | $ | 59 | $ | 63 | $ | 60 | $ | 65 | |||||||||
| Total Allowance for Credit Losses | |||||||||||||||||||
| Allowance for loan losses | $ | 518 | $ | 541 | $ | 544 | $ | 544 | $ | 567 | |||||||||
| Reserve for unfunded lending commitments | 58 | 59 | 63 | 60 | 65 | ||||||||||||||
| Total allowance for credit losses | $ | 576 | $ | 600 | $ | 607 | $ | 604 | $ | 632 | |||||||||
Ratio of total allowance for credit losses to loans1 and leases outstanding, at period end | 1.29 | % | 1.36 | % | 1.39 | % | 1.41 | % | 1.48 | % | |||||||||
1 Does not include loans held for sale.
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ZIONS BANCORPORATION
Press Release – Page 15
January 22, 2018
Nonaccrual Loans by Portfolio Type
(Unaudited)
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| Loans held for sale | $ | 12 | $ | 13 | $ | 12 | $ | 34 | $ | 40 | |||||||||
| Commercial: | |||||||||||||||||||
| Commercial and industrial | $ | 195 | $ | 257 | $ | 278 | $ | 358 | $ | 354 | |||||||||
| Leasing | 8 | 8 | 10 | 13 | 14 | ||||||||||||||
| Owner occupied | 90 | 85 | 86 | 89 | 74 | ||||||||||||||
| Municipal | 1 | 1 | 1 | 1 | 1 | ||||||||||||||
| Total commercial | 294 | 351 | 375 | 461 | 443 | ||||||||||||||
| Commercial real estate: | |||||||||||||||||||
| Construction and land development | 4 | 6 | 6 | 7 | 7 | ||||||||||||||
| Term | 36 | 41 | 37 | 38 | 29 | ||||||||||||||
| Total commercial real estate | 40 | 47 | 43 | 45 | 36 | ||||||||||||||
| Consumer: | |||||||||||||||||||
| Home equity credit line | 13 | 11 | 11 | 9 | 11 | ||||||||||||||
| 1-4 family residential | 55 | 40 | 43 | 35 | 36 | ||||||||||||||
| Construction and other consumer real estate | — | 1 | 1 | 1 | 2 | ||||||||||||||
| Bankcard and other revolving plans | — | 1 | — | — | 1 | ||||||||||||||
| Other | — | 1 | 1 | — | — | ||||||||||||||
| Total consumer | 68 | 54 | 56 | 45 | 50 | ||||||||||||||
| Total nonaccrual loans | $ | 414 | $ | 465 | $ | 486 | $ | 585 | $ | 569 | |||||||||
Net Charge-Offs by Portfolio Type
(Unaudited)
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | ||||||||||||||
| Commercial: | |||||||||||||||||||
| Commercial and industrial | $ | 10 | $ | 4 | $ | 11 | $ | 45 | $ | 25 | |||||||||
| Leasing | — | — | — | — | — | ||||||||||||||
| Owner occupied | — | — | 2 | 1 | (1 | ) | |||||||||||||
| Municipal | — | — | — | — | — | ||||||||||||||
| Total commercial | 10 | 4 | 13 | 46 | 24 | ||||||||||||||
| Commercial real estate: | |||||||||||||||||||
| Construction and land development | — | — | (8 | ) | (2 | ) | — | ||||||||||||
| Term | 1 | 2 | — | 1 | 1 | ||||||||||||||
| Total commercial real estate | 1 | 2 | (8 | ) | (1 | ) | 1 | ||||||||||||
| Consumer: | |||||||||||||||||||
| Home equity credit line | — | — | 1 | (1 | ) | — | |||||||||||||
| 1-4 family residential | (1 | ) | 1 | — | (1 | ) | — | ||||||||||||
| Construction and other consumer real estate | (1 | ) | — | — | — | — | |||||||||||||
| Bankcard and other revolving plans | 2 | — | 1 | 3 | 2 | ||||||||||||||
| Other | 1 | 1 | — | — | — | ||||||||||||||
| Total consumer loans | 1 | 2 | 2 | 1 | 2 | ||||||||||||||
| Total net charge-offs | $ | 12 | $ | 8 | $ | 7 | $ | 46 | $ | 27 | |||||||||
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ZIONS BANCORPORATION
Press Release – Page 16
January 22, 2018
Oil and Gas Related Exposure 1
(Unaudited)
| December 31, 2017 | September 30, 2017 | December 31, 2016 | 4Q17 - 3Q17 | 4Q17 - 4Q16 | |||||||||||||||||||||
| (In millions) | $ | % | $ | % | |||||||||||||||||||||
| Loans and leases | |||||||||||||||||||||||||
| Upstream – exploration and production | $ | 730 | $ | 784 | $ | 733 | $ | (54 | ) | (7 | )% | $ | (3 | ) | — | % | |||||||||
| Midstream – marketing and transportation | 617 | 601 | 598 | 16 | 3 | 19 | 3 | ||||||||||||||||||
| Downstream – refining | 123 | 100 | 137 | 23 | 23 | (14 | ) | (10 | ) | ||||||||||||||||
| Other non-services | 34 | 40 | 38 | (6 | ) | (15 | ) | (4 | ) | (11 | ) | ||||||||||||||
| Oilfield services | 367 | 412 | 500 | (45 | ) | (11 | ) | (133 | ) | (27 | ) | ||||||||||||||
| Oil and gas service manufacturing | 102 | 109 | 152 | (7 | ) | (6 | ) | (50 | ) | (33 | ) | ||||||||||||||
Total loan and lease balances 2 | 1,973 | 2,046 | 2,158 | (73 | ) | (4 | ) | (185 | ) | (9 | ) | ||||||||||||||
| Unfunded lending commitments | 1,908 | 1,799 | 1,722 | 109 | 6 | 186 | 11 | ||||||||||||||||||
| Total oil and gas credit exposure | $ | 3,881 | $ | 3,845 | $ | 3,880 | $ | 36 | 1 | $ | 1 | — | |||||||||||||
| Private equity investments | $ | 3 | $ | 4 | $ | 7 | $ | (1 | ) | (25 | ) | $ | (4 | ) | (57 | ) | |||||||||
Credit quality measures 2 | |||||||||||||||||||||||||
| Criticized loan ratio | 25.1 | % | 29.8 | % | 37.8 | % | |||||||||||||||||||
| Classified loan ratio | 17.9 | % | 24.0 | % | 31.6 | % | |||||||||||||||||||
| Nonaccrual loan ratio | 7.7 | % | 10.2 | % | 13.6 | % | |||||||||||||||||||
| Ratio of nonaccrual loans that are current | 88.1 | % | 67.9 | % | 86.1 | % | |||||||||||||||||||
Net charge-off ratio, annualized 3 | — | % | 1.2 | % | 3.0 | % | |||||||||||||||||||
1 | 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. |
2 Total loan and lease balances and the credit quality measures do not include oil and gas loans held for sale at period end.
3 | Calculated as the ratio of annualized net charge-offs to the beginning loan balances for each respective period. |
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ZIONS BANCORPORATION
Press Release – Page 17
January 22, 2018
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)
| Three Months Ended | ||||||||||||||||||||
| December 31, 2017 | September 30, 2017 | December 31, 2016 | ||||||||||||||||||
| (In millions) | Average balance | Average yield/rate 1 | Average balance | Average yield/rate 1 | Average balance | Average yield/rate 1 | ||||||||||||||
| ASSETS | ||||||||||||||||||||
| Money market investments | $ | 1,363 | 1.50 | % | $ | 1,246 | 1.44 | % | $ | 2,367 | 0.71 | % | ||||||||
| Securities: | ||||||||||||||||||||
| Held-to-maturity | 719 | 3.99 | % | 750 | 3.96 | % | 762 | 4.16 | % | |||||||||||
| Available-for-sale | 15,008 | 2.04 | % | 15,197 | 2.12 | % | 11,501 | 1.92 | % | |||||||||||
| Trading account | 72 | 4.11 | % | 43 | 3.73 | % | 120 | 4.12 | % | |||||||||||
| Total securities | 15,799 | 2.14 | % | 15,990 | 2.21 | % | 12,383 | 2.08 | % | |||||||||||
| Loans held for sale | 64 | 4.16 | % | 52 | 4.29 | % | 162 | 2.79 | % | |||||||||||
Loans held for investment 2: | ||||||||||||||||||||
| Commercial | 22,698 | 4.40 | % | 22,261 | 4.36 | % | 21,618 | 4.29 | % | |||||||||||
| Commercial real estate | 11,070 | 4.54 | % | 11,192 | 4.46 | % | 11,463 | 4.32 | % | |||||||||||
| Consumer | 10,574 | 3.84 | % | 10,379 | 3.86 | % | 9,558 | 3.80 | % | |||||||||||
| Total loans held for investment | 44,342 | 4.30 | % | 43,832 | 4.27 | % | 42,639 | 4.19 | % | |||||||||||
| Total interest-earning assets | 61,568 | 3.69 | % | 61,120 | 3.67 | % | 57,551 | 3.59 | % | |||||||||||
| Cash and due from banks | 613 | 767 | 894 | |||||||||||||||||
| Allowance for loan losses | (539 | ) | (540 | ) | (589 | ) | ||||||||||||||
| Goodwill | 1,014 | 1,014 | 1,014 | |||||||||||||||||
| Core deposit and other intangibles | 3 | 4 | 10 | |||||||||||||||||
| Other assets | 3,038 | 2,974 | 2,866 | |||||||||||||||||
| Total assets | $ | 65,697 | $ | 65,339 | $ | 61,746 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||
| Savings and money market | $ | 25,272 | 0.17 | % | $ | 25,190 | 0.16 | % | $ | 25,873 | 0.15 | % | ||||||||
| Time | 3,023 | 0.81 | % | 2,933 | 0.70 | % | 2,638 | 0.55 | % | |||||||||||
| Foreign | — | — | 21 | 0.31 | % | |||||||||||||||
| Total interest-bearing deposits | 28,295 | 0.23 | % | 28,123 | 0.21 | % | 28,532 | 0.18 | % | |||||||||||
| Borrowed funds: | ||||||||||||||||||||
| Federal funds and other short-term borrowings | 4,527 | 1.26 | % | 4,609 | 1.17 | % | 665 | 0.37 | % | |||||||||||
| Long-term debt | 383 | 5.71 | % | 383 | 5.71 | % | 537 | 5.82 | % | |||||||||||
| Total borrowed funds | 4,910 | 1.60 | % | 4,992 | 1.52 | % | 1,202 | 2.80 | % | |||||||||||
| Total interest-bearing liabilities | 33,205 | 0.44 | % | 33,115 | 0.41 | % | 29,734 | 0.29 | % | |||||||||||
| Noninterest-bearing deposits | 24,038 | 23,798 | 23,648 | |||||||||||||||||
| Other liabilities | 668 | 630 | 656 | |||||||||||||||||
| Total liabilities | 57,911 | 57,543 | 54,038 | |||||||||||||||||
| Shareholders’ equity: | ||||||||||||||||||||
| Preferred equity | 566 | 566 | 710 | |||||||||||||||||
| Common equity | 7,220 | 7,230 | 6,998 | |||||||||||||||||
| Total shareholders’ equity | 7,786 | 7,796 | 7,708 | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 65,697 | $ | 65,339 | $ | 61,746 | ||||||||||||||
| Spread on average interest-bearing funds | 3.25 | % | 3.26 | % | 3.30 | % | ||||||||||||||
| Net yield on interest-earning assets | 3.45 | % | 3.45 | % | 3.37 | % | ||||||||||||||
1 Rates are calculated using amounts in thousands and taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.
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ZIONS BANCORPORATION
Press Release – Page 18
January 22, 2018
GAAP to Non-GAAP Reconciliations
(Unaudited)
This press release presents non-GAAP financial measures, in addition to GAAP financial measures, to provide investors with additional information. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. The Company considers these adjustments to be relevant to ongoing operating results and provide a meaningful base for period-to-period and company-to-company comparisons. These non-GAAP financial measures are used by management to assess the performance and financial position of the Company and for presentations of Company performance to investors. The Company further believes that presenting these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as that applied by management.
Non-GAAP financial measures have inherent limitations, and are not required to be uniformly applied by individual entities. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
The following are the non-GAAP financial measures presented in this press release and a discussion of why management uses these non-GAAP measures:
Tangible Book Value per Common Share – this schedule also includes “tangible common equity.” Tangible book value per common share is a non-GAAP financial measure that management believes provides additional useful information about the level of tangible equity in relation to outstanding shares of common stock. Management believes the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income.
Return on Average Tangible Common Equity – this schedule also includes “net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax” and “average tangible common equity.” Return on average tangible common equity is a non-GAAP financial measure that management believes provides useful information about the Company’s use of shareholders’ equity. Management believes the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income.
Efficiency Ratio – this schedule also includes “adjusted noninterest expense,” “taxable-equivalent net interest income,” “adjusted taxable-equivalent revenue,” and “adjusted pre-provision net revenue (“PPNR”).” The methodology of determining the efficiency ratio may differ among companies. Management makes adjustments to exclude certain items as identified in the subsequent schedules which it believes allows for more consistent comparability among periods. Management believes the efficiency ratio provides useful information regarding the cost of generating revenue. Adjusted noninterest expense provides a measure as to how well the Company is managing its expenses, and adjusted PPNR enables management and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. Taxable-equivalent net interest income allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The efficiency ratio and adjusted noninterest expense are the key metrics to which the Company announced it would hold itself accountable in its June 1, 2015 efficiency initiative, and to which executive compensation is tied.
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ZIONS BANCORPORATION
Press Release – Page 19
January 22, 2018
GAAP to Non-GAAP Reconciliations
(Unaudited)
| (In millions, except shares and per share amounts) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
| Tangible Book Value per Common Share | ||||||||||||||||||||
| Total shareholders’ equity (GAAP) | $ | 7,679 | $ | 7,761 | $ | 7,749 | $ | 7,730 | $ | 7,634 | ||||||||||
| Preferred stock | (566 | ) | (566 | ) | (566 | ) | (710 | ) | (710 | ) | ||||||||||
| Goodwill | (1,014 | ) | (1,014 | ) | (1,014 | ) | (1,014 | ) | (1,014 | ) | ||||||||||
| Core deposit and other intangibles | (2 | ) | (3 | ) | (5 | ) | (7 | ) | (8 | ) | ||||||||||
| Tangible common equity (non-GAAP) | (a) | $ | 6,097 | $ | 6,178 | $ | 6,164 | $ | 5,999 | $ | 5,902 | |||||||||
| Common shares outstanding (in thousands) | (b) | 197,532 | 199,712 | 202,131 | 202,595 | 203,085 | ||||||||||||||
| Tangible book value per common share (non-GAAP) | (a/b) | $ | 30.87 | $ | 30.93 | $ | 30.50 | $ | 29.61 | $ | 29.06 | |||||||||
| Three Months Ended | ||||||||||||||||||||
| (Dollar amounts in millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
| Return on Average Tangible Common Equity | ||||||||||||||||||||
| Net earnings applicable to common shareholders (GAAP) | $ | 114 | $ | 152 | $ | 154 | $ | 129 | $ | 125 | ||||||||||
| Adjustments, net of tax: | ||||||||||||||||||||
| Amortization of core deposit and other intangibles | 1 | 1 | 1 | 1 | 1 | |||||||||||||||
| Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) | (a) | $ | 115 | $ | 153 | $ | 155 | $ | 130 | $ | 126 | |||||||||
| Average common equity (GAAP) | $ | 7,220 | $ | 7,230 | $ | 7,143 | $ | 6,996 | $ | 6,998 | ||||||||||
| Average goodwill | (1,014 | ) | (1,014 | ) | (1,014 | ) | (1,014 | ) | (1,014 | ) | ||||||||||
| Average core deposit and other intangibles | (3 | ) | (4 | ) | (6 | ) | (8 | ) | (10 | ) | ||||||||||
| Average tangible common equity (non-GAAP) | (b) | $ | 6,203 | $ | 6,212 | $ | 6,123 | $ | 5,974 | $ | 5,974 | |||||||||
| Number of days in quarter | (c) | 92 | 92 | 91 | 90 | 92 | ||||||||||||||
| Number of days in year | (d) | 365 | 365 | 365 | 365 | 366 | ||||||||||||||
| Return on average tangible common equity (non-GAAP) | (a/b/c)*d | 7.4 | % | 9.8 | % | 10.2 | % | 8.8 | % | 8.4 | % | |||||||||
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ZIONS BANCORPORATION
Press Release – Page 20
January 22, 2018
GAAP to Non-GAAP Reconciliations
(Unaudited)
| Three Months Ended | ||||||||||||||||||||
| (In millions) | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||||
| Efficiency Ratio | ||||||||||||||||||||
| Noninterest expense (GAAP) | (a) | $ | 417 | $ | 413 | $ | 405 | $ | 414 | $ | 404 | |||||||||
| Adjustments: | ||||||||||||||||||||
| Severance costs | 1 | 1 | — | 5 | 1 | |||||||||||||||
| Other real estate expense | — | (1 | ) | — | — | — | ||||||||||||||
| Provision for unfunded lending commitments | (1 | ) | (4 | ) | 3 | (5 | ) | 3 | ||||||||||||
| Amortization of core deposit and other intangibles | 1 | 2 | 2 | 2 | 2 | |||||||||||||||
Restructuring costs 1 | 1 | 1 | 1 | 1 | 3 | |||||||||||||||
| Total adjustments | (b) | 2 | (1 | ) | 6 | 3 | 9 | |||||||||||||
| Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 415 | $ | 414 | $ | 399 | $ | 411 | $ | 395 | |||||||||
| Net interest income (GAAP) | (d) | $ | 526 | $ | 522 | $ | 528 | $ | 489 | $ | 480 | |||||||||
| Fully taxable-equivalent adjustments | (e) | 9 | 9 | 9 | 8 | 8 | ||||||||||||||
| Taxable-equivalent net interest income (non-GAAP) | (d+e)=(f) | 535 | 531 | 537 | 497 | 488 | ||||||||||||||
| Noninterest income (GAAP) | (g) | 139 | 139 | 132 | 132 | 128 | ||||||||||||||
| Combined income (non-GAAP) | (f+g)=(h) | 674 | 670 | 669 | 629 | 616 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Fair value and nonhedge derivative income | — | — | — | — | 7 | |||||||||||||||
| Securities gains (losses), net | — | 5 | 2 | 5 | (3 | ) | ||||||||||||||
| Total adjustments | (i) | — | 5 | 2 | 5 | 4 | ||||||||||||||
| Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 674 | $ | 665 | $ | 667 | $ | 624 | $ | 612 | |||||||||
| Pre-provision net revenue (PPNR) | (h)-(a) | $ | 257 | $ | 257 | $ | 264 | $ | 215 | $ | 212 | |||||||||
| Adjusted PPNR (non-GAAP) | (j-c) | 259 | 251 | 268 | 213 | 217 | ||||||||||||||
| Efficiency ratio (non-GAAP) | (c/j) | 61.6 | % | 62.3 | % | 59.8 | % | 65.9 | % | 64.5 | % | |||||||||
1 The restructuring costs in the fourth quarter of 2016 are primarily related to the termination of the Zions Direct auction platform and changes to create a simplified lending approach for our business banking customers.
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ZIONS BANCORPORATION
Press Release – Page 21
January 22, 2018
GAAP to Non-GAAP Reconciliations
(Unaudited)
| Twelve Months Ended | |||||||||
| (In millions) | December 31, 2017 | December 31, 2016 | |||||||
| Efficiency Ratio | |||||||||
| Noninterest expense (GAAP) | (a) | $ | 1,649 | $ | 1,585 | ||||
| Adjustments: | |||||||||
| Severance costs | 7 | 7 | 5 | ||||||
| Other real estate expense | (1 | ) | (2 | ) | |||||
| Provision for unfunded lending commitments | (7 | ) | (10 | ) | |||||
| Amortization of core deposit and other intangibles | 6 | 4 | 8 | ||||||
| Restructuring costs | 4 | 2 | 5 | ||||||
| Total adjustments | (b) | 9 | 6 | ||||||
| Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 1,640 | $ | 1,579 | ||||
| Net interest income (GAAP) | (d) | $ | 2,065 | $ | 1,867 | ||||
| Fully taxable-equivalent adjustments | (e) | 35 | 25 | ||||||
| Taxable-equivalent net interest income (non-GAAP) | (d+e)=(f) | 2,100 | 1,892 | ||||||
| Noninterest income (GAAP) | (g) | 544 | 516 | ||||||
| Combined income (non-GAAP) | (f+g)=(h) | 2,644 | 2,408 | ||||||
| Adjustments: | |||||||||
| Fair value and nonhedge derivative income (loss) | (2 | ) | 2 | ||||||
| Securities gains, net | 14 | 7 | |||||||
| Total adjustments | (i) | 12 | 9 | ||||||
| Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 2,632 | $ | 2,399 | ||||
| Pre-provision net revenue (PPNR) | (h)-(a) | $ | 995 | $ | 823 | ||||
| Adjusted PPNR (non-GAAP) | (j-c) | 992 | 820 | ||||||
| Efficiency ratio (non-GAAP) | (c/j) | 62.3 | % | 65.8 | % | ||||
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