ZION - Earnings call transcript Q3 2017 | Zions Bancorporation, National Association

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Operator

Good day, ladies and gentlemen, and welcome to Zions Bancorporation Third Quarter 2017 Earnings Results Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to hand the conference over to Mr. James Abbott, Director of Investor Relations. begin. may you Sir,

James Abbott

much, call evening. third to very to quarter welcome this conference discuss and you We good you earnings. Thank our XXXX

Executive Officer, brief agenda will which, and Scott our today, wrapping and Simmons, financial an after and For Chief President Operating Harris financial additional and Chief objectives; provide Financial our provide of overview Chief a for on McLean, key will update strategic Chairman detail Zions' X Paul regarding finally, quarters. the our effects of Burdiss, up financial next the condition, will outlook Hurricane Officer, provide with Harvey; Officer,

materially. to executives Risk your question-and-answer release at supplemental review may information, the equally I the differ Officer; forward-looking you Additional and we in questions room would a Chief Chief section. remind actual you making in be like Morris, call, to Ed earnings with statements, copy available the are release Credit this statements Officer; Schreiber, although as the on this which available full deck or the well as who forward-looking in that applies results of address us Michael made deck will to executives website dealing during disclaimer the other during A today with Zions slide call. slide And our we encourage to include press zionsbancorporation.com. be will

investors. published these which this used and release, inputs revenue Zions' call. be and net to strategic that non-GAAP contain in investors management earnings substantial reconciliation efficiency the management the disclosures financial including of believed throughout be and such to related to difference consumers use financial to prominently during measures to industry compensation Therefore, been hour. to will are reconciliation. presentation of these non-GAAP full the are measures key turn time are documents, the are I interest X limit earnings We by into continue articulated have this The used these such of to [Operator measures, within non-GAAP A slides provided over participants review and to Zions' are measures now common used goals be the Instructions]. carefully is and and of length between intend call call references We by ratio, several the referring the will may services' Harris. this and of analysts. to disclosures. terms Certain slide the the this are of to preprovision encouraged

Harris Simmons

all some with pleased call quarter. the of absorbing much, and we for our quarter. Hurricane of to the the we the presentation, while have Thanks to as On performance discuss improve you highlights today results. profitability very continue on welcome of really Harvey We're the X James, to quarter during provided cost third the Slide quite

C&I upon the impressive. increase are conservatively linked-quarter And incredibly the We is deposits. points a quarter. of growth note in Harvey, of led regard quality, classified generally of within of bank, Texas of employees million continued recover net basis been relatively space, what pricing the of years. didn't been income. proud combination them disciplined loan the oil those we cetera. the on gas consumer losses, front, the market, damage there annualized even the pristine consumer regard underwritten has We conditions have but in only growth we've loans soft Hurricane front the the credit a of of in X portfolio and the particularly net X and effort rely past over industry-wide XX% the far. with with homes so oil because in estate couple sustained cars, remain loan Loans working loans, which the X they've pleased loan to result in With mortgages. strong as I'm jumbo charge-offs for and all at family I including of the hard with the $X really we've and And experienced recovery gas X context to seen seen a with with improvement to growth, that doing our commercial was in the growth from work and in remained outside oil factors to decline interest consistent healthy that the that In sustainable they pleased instead many performance et real to particularly primarily of gas and personal the loan been only and on

top-down this we've disruptive, the relatively our certainly we direct aside perspective, major the reserves was damage hurricane reviewing bottom-up as that net revenue preprovision up adjusted concern. the materially the in indicators our there $XX customers, XX% out lot reached of both Slide through and cover on of X, of exposure that to a I'll listed On billion were hurricane-related move key improvement, Houston. few set the on of page information $X minor nothing impacted, in many of portfolio million has loan year-over-year. reflects from rest lot steady presentation. While we After them causes really but us a and

to strong foreseeable moderating we moderate expense expect rising experienced since the should Some combined of we've the loan XXXX. pace the leverage, fee to operating securities that due the customer-related contribute which continued of growth, income we contributor to discipline, at over significant do further positive pace growth with benefits and very relative growth continued purchases, although a which interest is not expect and future. a do But rates to to growth be

ratio increased tangible second competitive X. peers. points common X.X% return with points basis of ago. XX.X% profitability return basis in XX.X%, which goal adversely from assets Harvey-related the which understood income is both of to efficiency in achieve repeat an year expected comparison common is best quarter. the tangible was and year-to-date in did recoveries not X our remain XXXX Slide ratio when In by Turning efficiency low efficiency by kind year to to range. XXXX on on experienced in improvement to assets the consistent We linked-quarter quarter, third Return a ago. the encouraged and achieving XX the which continued Nevertheless, considering as metrics, Slide a X.X% percentage XX interest relative the the expense. increased assets third metrics, focused third an from equity the quarter, on posted We're on to returns XXs our Hurricane affected on the ratio on Return depicts in of X was equity. quarter

commercial real and amount, Slide investment year-over-year the X. oil In despite and to this deposit the growth and a experienced million, were gas we $XXX quarters. upon growth portfolios. with the attrition year year, portfolio generally from which the prior national experienced estate, strength all loans quarter. and comfortable strong. moderate just estate Moving incremental to X wholesale in in should lending. And slightly over of economy in We concentrations. Loan which not growth continued estate shy quarter past outpaced we some X.X% held real loan declined modest We're improvements contribute the continued funded to continued dependent over industrial is made loan growth third term municipal commercial process, with We've for our family that in origination our quarter. X We growth in The of next commercial real to borrowings. fact, few by the

which we'll effects the increase to who've places, of the history strong rate, based base the with helping Houston deposit our customers, with and Our customers led in market. Harvey but people California, cetera, dealing the turn more, deposit enormity and discipline this and the within inches beta, you. hit particularly XX to needs and in building But before continue or to market increase of reported those Hurricane forget community. with how I unprecedented storm going with funds our and I Houston to there favorable magnificently, Harvey rises Scott the moment a the McLean helping down States. we and had deal the take call around need very I'm been or with some rainfall a it's rate evaluate of pricing We deposit in deposit to Irma, cost very appreciation our the fires in in to in that the continue United discuss difficulties do, to the to a pricing deposits upon express over short helping employees want relative further other to Hurricane conditions et to balance in has of followed of challenges desire pressures to the funding easy market. federal Between the really responded a my who each and period, and

time the to to over congratulate I of him turn Scott, before you. want I Before all

going was for Houston, United of he our was helping $XX of We this response leadership our also had of and of proud providing Way Vilutis, in really on, them. million for all area. chair coordinate He customers in another real employees. great Barb of some the I'm down raising down with We people, Houston and who's the busy Cross Red the was had people Houston. While stress at the time a own

over that, to the for Scott, thanks call all you and so with do, And I'll turn you.

Scott McLean

we up that we've $XX over exceed actually happy we that Thank to We total, to motivated Way time exceed to were to his you, fund million. had to but $XX extra I'm J.J. too, got Harris. into highly relief go report, so... so million, Watts' innings did, United

Harris Simmons

great. That's

Scott McLean

If X. you Slide turn to

expecting have, obligation balances to balances credit and million XX% fact $X we more approximately area, securities just address To quickly outstanding. securities not these as securities, slightly of noted largely municipal material there, loan than due that we're billion the Harvey-impacted the of general Within issues. are the losses $XXX of outstanding municipal any municipal

chart. balances, relates out by to on As it type the the they're loan broken

interaction, affiliate. to several Amegy allowance $XX groups the vast inform portfolio, of can our line depicts allowance held loan key and of that You the decision diversified client the dotted techniques vertical models a it's X within which credit takeaway outreach with major a portfolio, our for with that is significant within qualitative In the the and to applied majority combination loss book being see we million.

generally was credit can This and loans non-interest-bearing in in loans about solid form the note million. and $X totaling you as to really housing we grants, made employees, of that the up to important and allowances. X-year were $X assistance damage associated that expenses Additionally, that with were buildings we noninterest recognized from of expenses, costs about X/X amount, occupancy less given which storm. our million about basically, to one-time than about the was $X million X/X was recovery deductibles; employees And of about to temporary It's also $X,XXX, over Harvey-related of form to of XXX imagine. quality,

turn to the million due you very Harris to We If worked than the effects loans our of I and to commercial hurricane. and ultimately contact as downgraded noted, customers, noted hard $XX Slide X. as less of

Although most grading were it's important to note of the downgraded remained past that within scale. range of our that those

commercial have to Amegy's Pivoting loans. So made covenant minimal loans modifications been as far, well. there waiver to consumer

We area. the This is and family X credit are the June X the after average of within in highlighting ratios known reflected consumer scores of profile the impacted to loan-to-value loans credit rather there than storm. FICO the

have tail we've But may notion it that I $X.X it's little reviewed in And loans are loan portfolio. authorized for we the activity it this that a of profile. took a low-risk averages so-called affected as billion program. only storm. strong long-term our result the modification of no-penalty But too, so on a consumer the change we the a goes the XX-day area support seen loans, some offer to deferrals. that have X% although and we have payment recognize, somewhat of And Only very option, risk of helpful. really situations

available with in are combined Houston.org, sense at our results our of general with a this, of All qualitative statistics comfort allowance. $XX million that

the on on fact we Monday, opening it successfully Wednesday, the large. there were employees on Houston, day. required that which able the ways, on. the on to of efforts of a commented. than On at began, branches August great rain brief branch. a you be he And conduct had Just as did before sense despite night, -- as Paul. on running, There's safe. attention and customers of of customers And was our back in flood goes Texas, we it turn that started I'll relocated storm resilient know, of and activities The knows, Wednesday, the we on Clearly, the ensure as were its that, bit rising, company. able Harris many were still to it that the August our business what the for started begin the were rain And and is leadership waters some is need. to really, very were even concentrated XX, question diverse conduct on that With XX. so and that digital noted, before. XXth, a aspect vast operations XXth, feet and community of the We world, stronger turned is to for as stories well volunteerism economy. raining the and to other families our with we a economy And than everyone fundamentally our well-being as then storm over no Friday the the of color really transacted important to transactions the ended that majority you rest in as every clients that's the have our

Paul Burdiss

Thank you, XX. everyone. begin Scott, I'll good and evening, Slide on

noninterest XXXX, period. some For There common sales, $XXX are up include, on extreme impairments $X other of net applicable from of that show quarter the just shareholders are operating other of real million, within but about other to in per assets $X.XX in per those $X diluted is those and items $X million $X.XX of third item; million generally million, up noninterest securities and which the $X the XXXX weather-related of of of income. line earnings quarter Scott gains third the million; year-ago expense estate expense reported gains Zions about share, which branch recognized infrequent, in and share or to discussed;

$X.XX you share. of than them these a all However, items, net when amount out, less to

$XX few continued decline quarter in the million million net prior Let growth in income which me revenue in year in $XX increased trend substantial last million the which the from small relatively or increase portfolio. of quarter, interest the loan to by flat linked-quarter to is in period. footnote about income, XX%. third the from the most recoveries The revenue. third XX our and significant noted of portion the securities in income the depicts income the loans interest Net The a interest a Nearly securities yield curve, XX the explained of income. investment comments net XX% quarter, the third from quarter, of portfolio comes a Slide make quarter, of recent shows interest $X relative of this highlighted is cash on a we we have X demonstrate prior the the factor to With average the flow net increase utilized in year-over-year the securities interest portion the in page. billion -- Slide securities cash balance balance fund of securities. growth in flow $X.X growth. from period-end

caution As in respect we to past, exercise continue duration I've indicated the extension risk. to with

loans. and stability circles. incremental growth equity general have and national the occupied loan range, our and experienced in real year-ago growth, estate, X.X%. the at are rate X oil the quarter and going chart the will for to gas the and case of existing the relatively The to while on term, would was on the past. Originations has increased C&I, included this the for lines to X during had to become expect dependent upon and securities family relative key the and million. the been loan loan be of loan of is the If it loan year, all representation by and $XXX Slide of the draws was the near portfolios, real more stronger in estate our of particular is including expected effects we credit graphical category. for in home than most growth growth a stable construction been by which growth X.X%. represented of in experienced gas owner stable interest We as term balanced than income the is the the and closer gas be period in Shown will size estate. from the by loans more year-ago the oil they portfolio mid-single-digit represent in we declines portfolios, size the the relative growth than other solid forward, page. the real growth These recent no type order and circles a portfolio, by period. bottom expectation commercial the development in portfolio relatively in The oil As XX declining past growth the during product land and Total right are is net national portfolio municipal type. takeaway

We real top mid-single-digit with yield, of which loan our our points XX cost growth X to second interest to was real commercial are And estate from our net Slide commercial XX basis X.XX%, of in loan that loan and from our key is the The recoveries at with net XX rate. quarter points. breaks line basis and loan plan comfortable X quarter consistent grow estate increased points yield yield down about loans. of to generally margin. but of prior interest decreased basis the overall income rates effect, attributable concentrations rate components

XX Turning resulting basis has rate federal in deposits. during to cost points deposit of The which X%. about basis points points, cost year so-called beta total of a total of funds XX increased the the from average deposits increased to time ago, a basis XX

XX. in deposit clients. markets experiencing we and On certain deposit pressure months, are Slide not few have past the with we general, Over significant in increasing selectively But certain been pricing. pricing to

company duration $XX annual results profitability. current experience implies that, substantial so, from a of experience we spread when the securities the size than know, the XXXX. incremental and a the would quarter to of the our expected stress to to the boost transitioned reduced and XXXX by in cash, Because the and we you doing the company to million third of limited difference testing improvement revenue securities of most in securities of As sensitivity cash of portfolio fourth in the between more quarter compared interest

rate the increase model level. a On XXX in to income X% on net show current this net the higher environment interest annually. interest bottom expect the immediately is to we across would a that basis left, curve We in relative points the generate effect income

decline to down a year $XXX Total gains noninterest fee had customer-related income. shown noninterest slight in decline sorry, We million customer-related we in ago. Slide -- fees moderate a ago. as million, this from with income. a of securities million and from income as experienced I'm Beginning decline to $XXX $XXX from on Turning was a XX year million a decline XXX well $XXX a slide,

sales for charges, $X which included are line to and loan impairment quarter the a period. that item, we Treasury held loan was sale deposit fees, that in were year-ago Within the management from servicing an stable had was related this nearly million. service

slightly, funds deposit service due overdraft declined entirely almost nonsufficient charges retail and fees. However, to

overall, a While does outcome income. impact overall fee it that's adversely bad not

certain planned the in on performance we had acknowledge strong income products, noted in management although dividends as the investments, and markets much company such in experienced securities small bottom and as the As not that fee we year-ago We've line, some and are press of period. the not well capital as we release, items. to investment as tracking gains wealth and noncustomer-related business activity, as other from contributed

year-ago we period. unfunded still increased such over adjusted $XXX year-ago million and of More noninterest about the income Harvey $XXX annual from million severance, mostly and to items $XX period. low than mid-single-digit commitments from in is other Hurricane $XXX are items, Scott noninterest to is unusually If Debt period, to expense increased related $X accruals explained growth Slide million in by period. million that on similar expense, increase for and in in X/X from million million. which, lending to incentive $XXX employee for X/X the next in expense provision Noninterest for year-ago increased XX, year. benefits between half expense. the as which about was as the customer-related targeting year-ago However, rounded said, fee Salaries other the compensation split occupancy

and third some the the line FDIC is in hurricane indicated XXXX However, increase for about in that higher XXXX year, results in paid actual last with sharing experience XXXX at in the when due to credit should loan sales, accruals recent associated and results. of of of portfolio. revenue-sharing year improved year profit ago, of improvement and this in Recall which of experienced of overall total million Department substantial expected the range. noninterest to metrics profitability depicts we major better to between expense overall compensation adjusted expense and X% only versus compared associated X% loan expense quarter higher-than-expected the Slide loan employees. about year, to with we also the growth. an last a that growth the $XX we and in a quality incentive legal settlement XX A our we all with that Justice, that end Despite year increase

are meaningful will in that to and loans, gas further and from gas-related assets Much the and net and with and We measures. encouraged to changes the credits improvement favorable charge-offs. continue classified optimistic portfolio, we oil see we of oil remain the nonperforming came improvement

risk average Although consumer and improved have our materially loan not commercial estate grade on real remain disciplined substantially years, we portfolios in underwriting and the the both this during and commercial loan shown we weighted criteria. on slide, the X last

of such, our cover to manageable provision a credit list key for growth. incremental much for XXXX XXXX and credit expect objectives As will loan shareholders. XX we our Slide of while the commitment cost, and losses is

leverage. positive achieving to committed operating We are fully to continuing

of to of further processes. have improve our grow effort materially in simplification point at us and remain committed operational improvement profitability and behind our a this to We We years couple earnings.

XXXX. that We efficiency ratio year of is with full XX% operate expect an consistently to below the for

substantial Back on expect technology in return tracking XXXX, are core which systems. be invest more continue substantial improvements, what indicated those to much were to the although targeting we our we a still to we include goals, capital there improvement. that then, is could to toward going for see room we than in We and overhaul significantly well

Regarding capital, moderate the have particularly appropriate, amount balance increase view we level a and of the the peer given profile returns we sheet of to of risk the of reduction as median, company. above that a increased leverage

We are asked as be, what primary frequently have of stress we testing are that and driver. would to capital results by level investors responded the the appropriate the

well You midyear ratio afternoon. can stress results test is more on our to which full the our our percentage of But run website, we within our where than years a regulatory better our rank see X.X%, point post-stress second threshold. company common first X in midyear and which highlight peer result group. equity X were A minimum single this iteration just number, published is the a exam consideration than to X.X% the ago above is Tier

We For is recognize median is decline to various than the stronger believe time. peer important peer the median. to that reasons, it likely somewhat remain over we

a peer-median is the analysis for us, threshold to we an that relative And maintain. threshold while so need test is absolute stress the

depicts the relative recent next months XX the XX Finally, for quarter. outlook Slide most our to

We which an annual as is growth to for growth maintaining in moderately mid-single the digits. increasing, outlook are of be interpreted at loan rate our

additional next outlook. We We rate increase expect moderately net interest assume months. income hikes XX this no the in over to

funded continue. both our unfunded has a Additional of outperform in third in quarter. expectations. continued to And has expected short-term to which Credit $X improve net for are loans We commitments interest less provision and net thus, trend may the been expected, than increases posted million cost the rates income. a

over larger the our case calls However, several provision next credit quarters recent modest scenario somewhat most quarter. is a base for than the losses that for

press customer-related should in fees, the the expect dividend quarter. and our second securities income exclude the release defined losses, and gains from and reported in level moderately We are which increase

Harris Simmons

the In first.

Paul Burdiss

quarter, adjusted In noninterest first the expenses.

experience Bear when in over $X stability costs, quarter that providing not in adjusted expense our that out million hurricane-related noninterest X stripping we are and the to mind expect We contains quarters. general the of outlook. third next

Excluding changes in XXXX to for adjustments for X the XX% tax any range the expect the stock-based be tax code. to compensation, meaningful for rate accounting effective our barring next we guidance the quarters, XX% in

preferred stock, approximately which sensitivities both earnings the we may the the questions? and the please shares upon the on cumulative open be expect of The our to is warrant would share price dividends further describe Brian, for due This appendix detail repurchases in We X and fluctuate predominantly outstanding Please prepared line for in of next warrants. million report. Thank January you from diluted the dilutive to $XX the dilutive see remarks. warrants quarters, over effect dependent future you. the effect. the the concludes effect

Operator

[Operator our Raymond Instructions]. with And James. come Long of line first David question the from will

David Long

guys Looking deposit at for the and you -- kudos give you pretty that. guys low, your held beta I

about deposit versus on little color there and Within I talk bit betas increasing there, you give a retail deposits mentioned some selective in deposit maybe business rates. wonder if deposits. could you more

Paul Burdiss

The this geographically-dependent. I'll are start, betas somewhat Paul. is

the of are know, deposits you our majority As retail. not commercial,

so end we're those seeing of the larger would on is pressure say, the, where And I deposits. commercial

And deposit in our those be of our extremely bulk portfolio, deposits, resilient the particularly stable. deposit proven the represent base, deposits. As portfolio, primarily comprised you is and operational and granular of our have which is to value know, commercial

David Long

Got in about with it, process talked okay. regards question, sheet, And managing second CCAR and your the regulators. to balance the you

there changes over of sheet you're manage As in out any quarters? XXXX, balance next couple going looking process to in how the CCAR we're is that to the

Paul Burdiss

were sounded questions there. it there like Well, X

Capital what quarters, that process. by not plan about, asking Horizontal that Review CCAR think that which is management defined objected or I next As is several the part was it relates capital capital the of you're to to as

managing the the dependent defined models that that out process. the is macroeconomic portfolio to activity that our in I that measured beyond by stress the testing Looking stress relates balance as that, upon position be underlying scenario sheet, and would the say the will of in capital

David Long

before Okay, the asset got sheet side you on get looking it. balance next to to making here I that the be adjustments the XXXX out process we Yes, of may in was again. process and any

Paul Burdiss

good the that have over a to And course over through to that relates through our our I think years. couple sheet think balance -- stress activity, stress place I portfolio several steadily of think, results the improving in management testing you've our seen management of concentration I as testing. it of managed course investment the last years, we process, the have we last

may as next of couple So sheet that I'm out balance quarters the seeing any. required, and look I over not adjustments be

Operator

And from with Zerbe come our Stanley. Morgan line question will the Ken next

Kenneth Zerbe

you're for correctly, pricing. being core this read opening up if actually mentioned deposits you down. I your But it Harris, you that core mentioned deposit your disciplined your everyone, but are certainly very going with release

Your Can understand you us to going increasing is the borrowing and is short-term shrinking right just decision wholesale help why wholesale your core up. make?

Harris Simmons

trying that water likened alternatives. watch -- you particularly analogy to what it to creating get I little at are to Well, -- they're first an And where worthwhile year I larger a it but really then see the I last we've of bubbles, certainly some that we're over starts increases the -- boil. depositors, into don't a environment or is are boil. mean, it it at not gets good stage looking if around hotter, had starting of where, we're this pot a few and think I sort know finding is to

lot that. of can to that price a some sweeping mutual but money very We funds. are back, over sweeping there's depositors, We market the get think largest do we of -- a into we're that

up just I deposit going of industry. terms or raising pace point, train the The listen, at the front across at is that prices the some in kind back of mean, so is pick to And you're of train. of whether question the the

train. going the tend toward the think of I back be we're to

of rates keeping because lose depositors. to larger but some the time, something what as change on rate base, the more of from low deposit about start to rate-sensitive without further -- science hikes, suspect -- part about the And I art the you that. which probably of much can as you'll ultimately, that's see entire thing all with to margin of repricing every is it's -- too. is from deposits the those There's talking particularly is, start we're more cost bank that's you and other So

in are the are rise. the right, -- than at less hood of innings, to that's So rates about accounts. was under I deposits, if early deposit they going if it. you some you're it, beta you smaller the Paul explain what's I And best stickiest, see the can the get and continue core look about to talk much think, I the

As some of they those to get larger, challenge on having little margin. on more holding the you're a

little about how And we just artistically so kind of of of think a kind -- it. description that's

Kenneth Zerbe

how done And No, of the noncredit-related like with that of you side, costs? even actual the know does Okay. are? that question, the soon sort process are hurricane the losses, mean, just hurricane the how on losses in long other I we And helps. then terms what will credit take?

Harris Simmons

employees. million I thing just the take on I think modest -- noninterest-bearing noncredit we drag, we We've a that me continuing $X I to -- made side, mentioned, be think a loans about just very the let -- only little mean, will made. it's that

off, nonearning so have amortize be that's a that And asset you'll as will modest. -- pretty those but effectively

the other side... On

Scott McLean

Ken, this allowances, and don't that the is we much were has I housing in I -- making pretty think grants subsided. Scott.

We'll on -- that And expect and I so the really, way able at story end assess the on that quarters. then but million by fourth second next it next the year, X credit other. or quarter of reserve think, over pretty be good have visibility over one of be will we'll to I the the -- side, we'll the quarter $XX

Operator

with Dave line of from Our the Bank. next question will Deutsche come Rochester

David Rochester

a level on expense adjusted here. you to know this X% like this XQ. you're you that hit you're step generally real trend little like XQ. It in little to question a sounds it down about bit but growth need quick. what Harvey-related to guidance largely said is about the Is expense like in envisioning that that seems X% here year. stable, talking million a It bouncing forward? I And you're potentially bit in gone order sounds in Just the going when talking around $X expense

Paul Burdiss

outlook X%. Dave, that it's to to in Paul, said was be you the a that generally true. X-quarter that's X% calendar, outlook we within know, XXXX combine remarks, which going The the prepared -- say with view I'd we as of

back accrued Ken's in are math believe, think to fully respect there. and quarter. appropriately the that's going third you've Hurricane last then, we to with right, And expense last I Harvey, done occurred kind So question for the of any and things, associated that the we Harvey incremental that question, with the

David Rochester

about what And can expense had an you just bit side bit a a expense be because I detail XXXX, you headlined talk just maybe to kind you the great. talk you that about that's rate but Can X%? bit for you're little the those more to of where offsets guiding on guided to saves? little like less would X% it a seems growth know last than quarter seeing little you're the

Paul Burdiss

I'm if lower but guiding I a we're number. don't to me think correct wrong -- don't I that here,

think pretty moderately would consistent we've that would we increasing. I be -- been expenses

say we've this you to referred XXXX, expenses If that June In said to increasing. X%, go back be XXXX, moderately refine X% year. would to we

And that by sticking so we're guidance.

David Rochester

of I less you guess, than it were growth guiding meant. I in Yes. XXXX what were XXXX, in you I in -- meant terms for over to sounded XXXX, expense like that's

Paul Burdiss

I give -- have terms language as we're used we color XXXX in similar expect used next Dave. what but percentage on more that not have think using defined XXXX. in say -- Ken that, in XXXX or for yet, quarter we We'll we I'd to

David Rochester

So one. just more quick one

the the big particularly that how ways, economy expecting the on I Houston wondering you're a could uptick, result growth mentioned as side You've it in of is was running, just efforts, rebuild potential be. any in before. some stronger was than impact if and deposit

Scott McLean

Dave, this Scott. is

consumer doing having impact They've oilfield and contributor over the not ought regard. not the quarter, a the in And solid that a continue. If C&I terrific last you and last on the in would solid just it's that, been loan it's company. Clearly, we energy-related, a been to year nice Texas growth. job it's really look It's services-related, say just it's think at that overall to over I growth the company.

probably We it pretty but activities opportunities. picks market. funding source reconstruction think capital good. working Texas a think you'll some of will solid revolvers windfall it of as be don't of looking out are see the opportunity, And continued growth and their as think I I pipelines more certainly than some growth they up have

Operator

next with Moss of question our will Steve And from line come the FBR.

Stephen Moss

was up more wondering just color Following you drivers can on a C&I I if what this little give as the the quarter. to were loans,

Paul Burdiss

It's interesting because small. we've really got a really diversified C&I loan is portfolio, and largely, average size

that. sorts go to coming because provides characterize hard in But little portfolio, to Slide nature more it kind that. really we me driving pretty of as all are color there's a X kind where loans of that the it the or have of believe as geographically of of the I that trends ascribe be broad. So are XX, would the appendix, from. a for that would things I industries into slide X any or

Scott McLean

it think I of company, frankly. our sort Well, describes quite

but on in just on year-over-year solid -- you just our 'XX across too, If a quarter. quarter the in same you it company. basis, look And the you XX, nice, really particular so trend see at growth growth large across-the-board quarter, of some you full it's it's any skew third Slide -- year-to-date see a that here 'XX, will But particularly smaller third in versus the on second some that good, markets, solid quarter growth. have payoffs

Stephen Moss

where new your then deals? booked going versus what And the money And are loans wondering are forward. second Okay. margin your on question, my thoughts yields today

James Abbott

yields is are this Steve, James. The consistent. about new money

the in that to we're would are rolling of some the somewhat on as accepting higher opposed off. coming old the that loans to are portfolio. them of at that overall be quality the And today loans of credit those levels Some characteristics dilutive are

X-or-so little a per there's dilution loan quarter explained of headwind, that basis So is by points and bit helps. if maybe of yield that,

So high Xs.

Operator

Evercore. the come question next will line from with our And of John Pancari

John Pancari

I've XXXX you're low ratio. year that you efficiency Paul, Below looking the at I through to full and provided guidance your here know, XX, I got know for you've 'XX. expenses, Back consistently mentioned the XXs for 'XX.

some out. the So about that happens -- Just XX%? when it that it -- will is, where is of 'XX? Is there, breaks get where of can get we do can trying trying trajectory how play you that assume think to at fair to the expect an to Just midyear? it idea breakpoint -- we point

Paul Burdiss

chose we to to expect John, those thanks XXXX. ratio that, We The by to get not your efficiency -- time be for have implied operate in a we at any there more -- XXs guidance relates as as will we're And transition be specific low deliberately. And XXXX, XX. providing year. yet by into question. expecting point. below correctly we're obviously, this point we words the the out, But it in you

John Pancari

it's I the given around pipeline just you terms of the all trends around Is color borrowers know granular, been an get a separately, is there seeing you're the pickup this the seeing. -- But in around to to post know of is just if said What to I And line demand, on want Okay, you seeing utilization? play it topic, you starting are commenting there? yet optimism any the back broader are that out? idea, growth outlook elections right. had some have a -- you the then and in loan uptick? demand, general the the very us

Scott McLean

speaking, mid-single-digit nicely, X X postelection again, pipelines generally reporting balance our achievable. banks good are to their X our most growth think reported, from CRE But good groundswell also modestly. will simply pretty affiliates, hasn't pipelines. a -- affiliates very get grow should again, have trying We'll but to X And it across mix. other our family and -- growing and to be CRE of is of are in see, good of the optimism growing loan of family all But to and we demand, just like model resulted I that. really shape, in think all

James Abbott

this some that's much in we're John, comment positive results Scott's to our rates. initiatives, banking and is just James, add resulting from that streamlining Yes, pull-through briefly the I'll seeing business stronger small of

balance some actual into growth small it than faster translating a of is volume for pace much those origination the now at before. was So loans

when that area that's the peel can starting you get you And So to down emerge. size, several into where, the hopefully, another trend layers, onion definitely will back continue. see it you

Harris Simmons

real continues both down with the look plus estate, probably the add, year-over-year. they're XX, that But combined anxious The is slow portfolio of commercial at to just just a Estate combination on them, million mean, assets. of banks, CRE, of I national $XXX that's somewhat. term term which they're all a real to if estate to combination CRE run you'll would the attrition little of and a lot I just good earning community occupied Real to see Slide owner really pace continues bit. market, National hold off secondary a you

be. the product used not as so as it great there of to And supply is

down to continue that growth objective rebalance this we're it's little XX growing will portfolio less general XX trend has to actually have a run away is our that a than been over the in the that seeing way overall, portfolio to time, somewhat over pace the absolute commercial continues that just So of real from And bit. at term The last runoff next CRE. been expect the running the months. I that, months. estate, down don't same

I at tough we've a a net production last it's and every headwind. loan Monday help. there. should That weekly It's cliffhanger morning, I but than So like that it's I will seen of as the think to to out week's a others, whether... less better change, and it's be week. But week still look most mean, market growth

Scott McLean

first It's we the all on open Monday e-mail mornings.

to Friday set see In out on road, out we've said even is million thing quarter, it's the about I been be when the potentially anticipate fact, other energy The last portfolio $XXX up. has I'd couple for on flat years. months, occasionally, now it. million $XXX it know we the And want year to we XX portfolio add declining that per -- the that nights next coming they energy to that we've -- to of been on maybe only but last

support drag should -- modest removed growth be that be a may even supporter. So and

Operator

come the our of line from And question next will Piper with Jaffray. Barker Kevin

Kevin Barker

bit quite disclosure. a to regards put of sensitivity, In asset the you out

NIM granular, in growth last looking due the But the debt. the changes from in and your obviously, balance in that. portfolio very some appreciate So seen sheet we growth it's back securities we've in to that were at been the headwinds year, the expansion there

now, very, deposit your low be changes has balances, would no If you year, NIM debt past where the your very were assuming to in disclosures? to sensitivity it interest significantly above compared your right securities beta given rate replay is your been balances or

Paul Burdiss

I go not clear had what to the you understand of net and securities? what back I purchased we be the to reset just you Are asking been would Is said? us sort margin interest want the have question. that

Kevin Barker

Yes.

Paul Burdiss

would X%, Think be basis below not has them about NIM XX X.XX%, where the fact, these fact, been from risen would at be be and in fed the NIM today. The be rate points. would, below, buying bonds. it -- we've to NIM is in basis The not XXX like been above. We've points where buying funds

the the So even outcome, that would we're have in the yield yield the best on cash been. far possible on what getting the securities exceeds

Kevin Barker

-- your replay have that expect if to the were move you the you the and in basis balance XX going right interest we now, sensitivity would NIM to if sheet, assuming expect increase another points on in to a fed? rate forward, continue So significant were

Paul Burdiss

the in which is talking trick lot rate basis the tried upon a the generally that's this, we and been our disclosures, how about interest rate a view we sensitivity we've to I and it, talk industry parallel is about about disclose standard. and Well, that XXX point talk James shock, have based a

relates rate important a because of parallel shock has remained different end more short a However, outcome of points flattener, in has every a or that, kind bank, flat. the net fact, we've what rates. here changes been And of the bare curve where I margin curve. the twist the while end interest think, income the to the creates is sensitive in as observed related it pretty risen really actually of changes longer in to different And of is to curve has

I interest quarter. not the which is that amount seen not rate through point what I'd to certainly and to make is stand it And "interest shock, as in in income rate sensitivity" so has parallel full The a the why net like we, relates you to of fact, that, have flow maybe parallel observing absolutely, shock. been that disclosures any we're our by given

Operator

Jefferies. And the Ken of our next question Usdin with line will come from

Kenneth Usdin

up if follow Paul, that. could I on

the bigger from hikes? assets proportion cost more additional earning we than if increase loans the before funding improvement consider can So that are forward mix here, overcome going a of becoming rate any expected in

Paul Burdiss

about a I, actually, little Ken, Yes, differently. think it

interest the much I asset sensitivity side driven generally think or the more of the by bank as liability is than balance sheet side.

loans is and are forward, income, in the are be to relationship loan is, net of funded important. beta way high-quality environment. would particularly growth, really it interest rate going drive control I really and continued expect, to going would I a And growth deposit So management what say, as changing deposit continued relates to those

Kenneth Usdin

think if Then, here? okay. second hikes, is just the rate benefit a given beta from then, gradual were more next question to the one, would the be what we guess, you of increase So do in I get

Paul Burdiss

than Well, in the said, the stay the and of what short-term it or my X, annual kind to that's the XX basis to going up the stable basis Generally, curve. take point a if But X part come basis of as I the is probably XXX different with I linear. saw rates is shift sensitivity it X -- decent or have curve. could very If to depends point is disclosure, you're divide XX the curve. to rates go down, across long-term by a is depends, trick going curve, and the predicting kind outcome go you a our across what saw say, up asset you it answer happens as proxy of hate XX pretty and for shift effect. That a if you of this a to said, the rest our happens of probably, on real but kind point

Kenneth Usdin

expect one to loan growth? below little So be relationship-based or then. growth you liberty deposit core give core above then Do me your

Paul Burdiss

in predict. high-quality this am our grow hopeful certainly we rate all increasingly that's hard difficult banks that deposits, close are environment. core Well, is But that's deposits, think going for growth. a to really And at to -- loan that that I to continue to I is

Scott McLean

that have done traditionally. we But

Operator

the D.A. Davidson. question Tenner come our of next And line with will Gary from

Gary Tenner

for to I just growth a specific go opposed quarter, oil portfolio, runoff little the as certainly, back second and saw maybe what to a loan ago. to to this wanted we and gas very year just

about today the are where redetermination kind thoughts around kind quarter demand -- your talk around what fourth me, the now commitment levels -- are and energy kind business. utilization the period So and or where fall, the of appetite excuse going you loans prices through through in with can in getting of of and that for

Scott McLean

Sure.

to We about XX% the when have end energy to book. loans. we was XX% started now clearly a total our of Energy It in is XXXX. remix of had closer down our downturn the services of

we we on the are base do side and never new and side. materially. plan downstream don't don't on underwritings We financing, really so And reserve midstream seeing that have, the changing

on. good is seeing see because they're there reserve activity So we'll really up good -- at we're prices, going solid and just going and these loans probably base utilization midstream, at

so should it, industry, to going again, it's right in we as are the stay and know in they've be been least in, because and it know And to think people been from wouldn't best but underwriting as and we've good at energy we're the time it ever flat, the we we for now. -- nice a underwrite a portfolio our over how characteristics business here, will up be possibly go growth outstandings us and

Operator

question next with Marty our from of Vining Sparks. line will come Mosby And the

Marlin Mosby

in look the gave share the the million, look XXX from And your shares last million of and going to appendix at came XXX to a year wanted of shares, like at count up X take I of from count you you share warrants. that. $XX stock estimate the to disclosure you great about presentation. up towards $XX, would this But looks out and the then million if that below year, price

XXX to how to the be adjust for to of you gone Is that relationship million. million million to that works? million, million close the that you pretty all the Is XXX really XXX that would've from dynamic? if X down so XXX So

Paul Burdiss

I that's right. Marty, Well, yes, think

highlight is has moving As things big do that pretty fully other you been correct. and to But this We there the it shares. because a one needle as that impact are will clearly so. know, diluted probably generally, continue lately

Marlin Mosby

rate -- kind part swaps And then you shake start that did to are see start new kind on the still on the putting interest swap-wise, interest this you section, to waiting of of for of out any affecting Or quarter? plan? rates next

Paul Burdiss

for I of rate us, this the, It's around interest curve. Yes, the interest the swaps, purely to gets committee, about curve. shape when the extending along get really providing really hard to on conversation rate think, the for couple on duration excited of the the going years ALCO see fractions only point perspective, of out we that a curve is percentage a a

of we which So putting at we're that it's a swaps your really the answer duration question, extending is on, long the see are we no, value don't curve. to point just of not today -- the

Marlin Mosby

weeks. it's last, the the better when right X in better. call just that bit curve lot let's yield So gotten a And it, look for time you'll little gets a

Paul Burdiss

all That's relative, Marty.

Operator

from the will come with next Wells our line And Chris question of Spahr Fargo.

Christopher Spahr

expenses. of a questions have couple on I

what kind to the plan threshold pay ratio First efficiency question relative the comp not pay this to the of compensation management and for in bonus for or plan out when And kick year? is does out? discretionary is the

Harris Simmons

when as, years. in put the back and in, put as place prior been it's place were plans have kick incentive it plans of you in early Well, when actually well actually, into say couple the year incorporated in does that that

more -- So sort pool for amount longer-term discretionary of those are defined kind the the can total also of kinds bonuses. available and plans of of impact annual

about on we're second to these kind and question that into as be. we of thinking of And things focused to are take going out toward something account think the everybody's of it's and accruing the what payouts the something was? So we part

Christopher Spahr

I'm target? exactly that efficiency of kind on I think low what the you is curious just XXs, mentioned you threshold the Just but guys the...

Harris Simmons

a we mean, XXs. specific have year low at progress. publicly, is particular not a around a years for this this -- it's these is ago. where context on-off been than defined There with into a that plans a we for in number. of consideration of a specific But in I least the is couple lot a other -- factor of you not There's but haven't, target it switch started to taken that put a not

Scott McLean

half very sense ratio and in with directionally we of consistent that but directionally is targets different. in had year the way this much except different this is so about 'XX they it the constraining this variables the we year, comp. targets in what quite dollar consistent it second low And described did of -- and and amount second specific 'XX incentive slightly XXs, very that we've think 'XX, and but on And as and 'XX, were it's half we

Harris Simmons

more a say than was it year Yes, flexibility case last this year. around little the there's

Christopher Spahr

related all healthcare? the And salaries, quarter-over-quarter increase in to that was

Paul Burdiss

benefit was of as -- we slides, component certainly I care the in that highlighted There increase. press the in -- the a and think release there was health

Christopher Spahr

that guidance XXXX, before. X% language if year-over-year for to I've know that Okay. higher. slightly last seen question, expense finally, expense number don't for on And like I the then X%? Is

Paul Burdiss

defined through sort expect although Stone exactly we We I haven't means -- the Rosetta will. what a yet, of that

to back XXXX, go than said that in to June as you 'XX. be defined X% modestly would of what we we higher X%. was 'XX If And ultimately that expenses

a And more that. definition so I little around would maybe expect

As you can imagine, now. planning through process process right we're getting and our budgeting

my into call little as -- more a that. around earnings get how So to that expectation January, quarter bit in what provide the interpret guidance we'll fourth we is

Operator

concludes question-and-answer Thank Ladies today. gentlemen, this for and you. our session

hand Relations, closing and for back remarks. the pleasure Director James Abbott, Investor now conference Mr. to So my over of comments it's to

James Abbott

you evening be for for then couple and available to e-mails for be you Zions. if for your this have participation, call your you everyone, quarter a We more really in and we'll And you, attendance. follow-up much so throughout your hours appreciate today. or interest around respond Thank further the phone Thank the questions, thank joining I'll calls. to

Operator

program, disconnect. thank and wonderful conference. the does gentlemen, today's Everyone, This conclude your and we Ladies have participation day. a on you can all for

Zions Bancorporation, National Association (ZION) 23 Oct 172017 Q3 Earnings call transcript