ZION - Earnings call transcript Q4 2018 | Zions Bancorporation, National Association

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You’ve joined Zions Bancorporation's Fourth Quarter 2018 Earnings Results Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference maybe recorded. to Investor call Relations, like host, to now of Director James would turn over the your I Abbott.

You may begin.

James Abbott

Good welcome you discuss you, Latif. conference thank quarter to fourth our evening call XXXX to and this earnings. We

financial on For up Chief Executive will for Chief provide Financial outlook key and Officer, provide Chairman which with after detail of Officer, financial overview will our objectives; four today, Zions' brief Paul next agenda wrapping quarters. Simmons, strategic and our financial Harris condition, a Burdiss, the additional our

the the forward-looking We deck length non-GAAP investors to Additional slide between call financials this hour. by include and would these. the executives are well are are and to the differ may pre-provision participants believed disclosures full net financial financial throughout to the efficiency Risk A X Chief Ed zionsbancorporation.com. room will substantial call you consumers such with is to to analysts. encourage presentation earnings published release of full statements, reconciliation revenue measures or Officer. We intend earnings the and applies dealing us reconciliation. The are and difference available in materially. making made earning this interest with in contain to Chief and copy to review encouraged these used measures be during like non-GAAP of slide review the services of documents, Scott Operating this the release carefully use equally slide and information, industry although by the common ratio, GAAP today during release, deck this actual limit this references a A provided Schreiber, within several prominently I call. and supplemental measures, McLean, which we of that President the used such of statements press terms the related to including at results X, management which to The you disclaimer of remind Referencing Slide as call, Officer; forward-looking as be are

During follow-up and enable we to that, you to questions ask other this related to ask primary turn one to over your I section question-and-answer one question questions. the the participants to now of Harris will time now call, Simmons. With limit

Harris Simmons

quarter welcome James, had joined highlights items very Thanks XXXX. X quarter called full to to which out us is shows of on results year on for relative couple strong the will today fourth and they've of share quarter. doubled on a from were results call detail results. The who’ve The results GAAP key fourth year slide. which much, summary ago that Slide year ago on Slide the in slides. ago quarter results you address reduced all discuss to our the X subsequent a basis, per the year and some earnings a of XXXX for several substantially we a we a

year the subject adjusting are to lower we able period. ago corporate for EPS are double-digit from we strong tax of course factors, much rate those growth. Additionally, to Even accomplish

expense to full year produce leverage while with increased year, Turning slightly to operating for we prior commitment up delivered the the year positive our to X, strong full Slide year, compared non-interest revenue on X%. only

to XXXX to earnings of reports. charitable increased strong exclude revenue if that contribution in and net pre-provision adjusted adjusted the called previous out we XX% XX% such, As

the repurchases produced on completed pre-provision primarily increased to of due an pre-tax year. For increase worth this $XXX notably, on slide, the aforementioned a per XX% adjusted results in stock revenue most million basis, over contribution. the PPNR and share ago same XX% common increase net XX% during period Perhaps, XX% the if year shown exclude quarterly a adjusted about as charitable to the

We right On XX% year the on X, period in XX% year. PPNR for from loans and a increase in the on from pleased the share and major the quarter. reason of classified XX% see was ago with chart you'll declining Improvement strong improvement. the the gas credit the Slide per loans the are very trends depicted for prior oil

Credit the the X million and and We $XX XX for recoveries million credit year. recoveries equaled X assets quarters, $XX days net the year quarter basis fourth although Recoveries full cycle of For and $X points. due period points loan only million annualized the oil points for loans. quarter, for XX% of of factor net we recoveries ago recovery to experienced realized on the credit few basis year. the may remain subside. declined basis a over XX past the gas we Non-performing loans next beneficial expect from equaled plus

increased loss from basis Our quarter. actually X point allowance for credit the prior

due to factors, a political portion and As qualitative the broad prior of the noted release, from in allowance. we the variety but factors the qualitative of quarter, the macroeconomic improved increased

economic has and topic what XXXX, We will months. lot One are of problem that lending a prepared not caution a cycle, overall of recent indicators generating downturn leveraged with that to stable experienced any currently for been activities net be we're our materialize. the relatively loan recent well in similar exercising we low although assuming so attention investors We return generally, lending. gross might credit substantive any seeing conditions expect and in rate charge-offs in of is that industry broad in we ratios

of isn’t are companies issues result you this, regional varying times as of included Moody's by other interest, present this where same bank was way to the loans of the the the the XX depreciation asked of debt a we provided the results regardless, definitions by One a in June amount dollar the and shows which as to focus survey common was exceeded tangible is of banks. company's a quite measured comparable definition including our each equity. conducted, XX Slide taxes have It the provide before participants. on the Moody's discussing common equity, subject X data total banks, to comparability But such the Zions. EBITDA. were that company’s time as results or loans. was tangible earnings there of At done percent of the the survey Moody's across X XXth

You of can than line the that This more than one-third for is one-fifth average peer about in us. see peer Zions’ less exposure media. less is and the than business the

gas that cash originated bucket Some flows of for the which reduced are today the but session and in because recent not as leveraged, oil there were in industry, the the borrowers. those of loans

how long-term the strategic exposure of debt-to-EBITDA more from decline have times X our will loans half talking it to for deposit the very are programs core systems the flows digital cash begin highlight to and at of current key investments, improve, experience see our customer-facing loans segments. will FutureCore levels. recent our technologies we've and industry with have frequently the and By three modern making than for progressing of time importance that expenses our our of To As been investments the technology customer largest a represents our the we when loan slide of Slide note keeping replace investment improve our all a in our is a and the energy been about been they bottom relatively we years flat. during this converted new operating to our first platform. you system year, few In all generational can nicely. X, On systems, I'd

are X.X technologies a digital of that are online tool Moving me stages non-interest-bearing the to upgrade significant we new as our various in is let management our even the communication approximately products customer-facing billion for treasury or Treasury clients it of commercial in highlight and with digital top that TIB providing largest further half the touch top number utilize. our that of believe $XX X,XXX customers We of of this our call $XX rollout. the deposits. enhances billion Banking customers industry slide, capabilities in primary in Internet we

a to process These the and statements. case of along pain and an income these with will the loan improvement customer In biggest for forms digital will pull in basis. the our on mortgage our of types the give application ability digital the loans mortgage us rollout the business experience software we Next, how customer represent two end-to-end bank today. down tax are points of customers’ application significant

to deploy to mobile of as we our and in and ideas we operating positive competitors will technology online simple replace continue foundational XXX,XXX Finally, X touch major and XXX,XXX continue banking is of us manner. Slide our offering to of the XXXX and number should of we close our in We easy which shareholders. Each we for that directly system systems customers collected the us and objectives XXXX customers. can investments important believe will customer XXXX fast are better these new exist business is most a how employees from This early list gaps believe on benefit leverage our our operate on long-lasting. technology have thousands and today. retail commitment relative over implement focused and for strong deliver and key be we a many segments a well small workhost to of our position and to

from hikes. net without will grow that to rate expect single-digits at high operating leverage a We positive allow revenue pre-provision of the help such rate the additional

our to peers source firmly has are demonstrating We credit which volatility been of to the the quality earnings primary relative in committed past. Bank's superior

reduction we shareholders year for the Regarding ago profile earnings applicable the short in shareholders than most payout quarter a the XXXX, as assets company payouts increased as to the of XXXX. XX% increased shareholders returning X%. while XXX% a probably banks appropriate, peak and which capital approximately which just of increased only XX%, risk of the Zions, percentage view is from have total company. Since ratio of of earnings common assets given balance certainly as risk-weighted sheet to particularly to in of more We increase common the an the we to find the of stress fourth few the leverage for years

replaced Our government primary agency changing securities. contributor. asset mortgage-backed the mix We with was CDOs

of decision We with the is reduce to in level residential update and have will loans our of our a out This capital review capital and a to The Paul form as I'm overview, risk Board development the us little the many return Paul? from time reduction decision mortgages. asset areas loans Burdiss Outside have allows risk timing detail. that municipal to you level. we turn rooted replaced we operational and appropriate. on current financials going additional within concentrations in of risk. different With to bit magnitude, over land

Paul Burdiss

good Thank evening Harris, and everyone. you,

and and on two equity. return on a fronts. This many on quarter this year solid begin key is As assets Harris highlights return said, profitability I'll metrics: good XX. a common our tangible in on opinion Slide

We exceed are X.X% for return encouraged even after to the items to assets XX%. on the return adjusting common infrequent on at tangible about again report and equity

continued shows or that leverage any quarter just fourth I'll were ago With strong period. We sheet balance loan, per of to a relative solid start demonstrate for interest million did to operating combine with to or XXXX. of X.X% in in average In rate solid quarter components, loan quarter to returns the our million and $X sheet returns. year fourth growth greater to quarters, either year XXXX, income expect with million recoveries have net balance to of move growth $XXX not XX result the prior ago prior capital $XX the recoveries revenue the expansion and performance the of the such but continued moment. out interest Zions’ some than in credit respect of Slide volume period we to we XX, Slide relative have the further On called of positive the XX%. to

achieve an Although X% not third in X.X% relative the period X%. year increased to deposit the quarter. deposits Average the period quarter end the deposit was Average from the to quarter demand from prior far modest annualized annualized growth and been balances slide, Thus ago from from the period increased and year listed in -- the an X% increase the increased non-interest-bearing growth fourth on X% prior this we've year quarter relatively annualized. with annualized a cost. ago of able deposits prior

XX% rate Our the immediately over been cost total XX cumulative only since or the Federal about was total basis first quality has speaks the the the points in re-pricing beta by of deposit which of This quarter deposits of to increase deposit franchise. period. preceding Reserve XXXX, hike our third that of

less with example, this of favorable size, we for a about with us total customers deposit at relative depicts low with customers the Slide rising rate for size period Examining than or We our than more environment base. see mix deposits balances bit deposit the have of cumulative the a with $XX with quarters we $X represents And very of the deposit by XX less operational closer, betas relationship-based our as growth in end than $X,XXX with the of balance that look of three of deposits million. year-over-year portfolios. by stratification us, portfolio million size loan growth circles representing customers type

For real requirements most and loans, larger over that the million and which has and loan slight commercial attrition. profitability year. some past portfolios commercial solid which impacted also attrition noted experienced in of reallocate family light in are areas by the to There mid capital were about categories, national in of and structures intentional be quarters. asset-based year-over-year to debt we incremental which X-X lending last attrition the three continued of which in home Pressures growth growth are some term adversely CRE been have growth. quarter loans experienced We loans not was in of experienced been from the consistent $XXX to six reduce space, slight was real of which we pressure larger coming the In estate funds, single-digits other debt our estate the trends for of growing competitive from continued on been the for our growth prior We've and due owner-occupied pleased and elsewhere, with meeting appears banks. some to have high markets loan have to experience some that our single-digits high capital time equity and we the and covenant growing perhaps to continued. relatively mid quite consistent loans, the we've

and generally the upon and As the package. owner-occupied small prior flows collateral cash commercial strong include over increased XX% are gas loans loans. the exploration increase based in a business from a have and primarily underwritten Oil reminder, in the loans borrower year, loans of estate real relatively production

oilfield total end to services XXXX from of million continued loan about less now are past loans, has the Municipal are our Importantly, down strong the be year. X% figure. $XXX loans year and growth than during also

As and about is noted quality We've the central return hired maintained services calls focused feel this to us area, of which staff on and this on smaller help municipalities risk cities. credit previous standards we've grow good profile and the in portfolio. those very strong of

small the We are optimistic industry generally in strong of improvement banking the us to slightly near term about outlook the assessment. growth there loan of moderately review keep economic our loans relatively in earlier, based competitive noted increasing. to the as a outside growth at are and lender But caused owner-occupied forces upon business that and backdrop, of

rewarded our and term is for down about underwriting will components Top-line this of XX be the maintain net cost the We X.XX%, prior organization prior discipline. investors growth in yields, the in up loan related to of incremental to previously and X of between our we Our Slide interest aligned loan accept would Recall were which breaks points rather our view loan standards the growth quarter. margin. and the less yields is loan trade-off from and believe risk. basis mentioned longer in basis recoveries. increased interest rate X key points quarter,

to loan in of is to a re-pricing we change loan that cash and either with of off points XX. using X.XX%. prior convexity and securities in in is half to our a the net primarily is of duration almost increased remainder and yields. to increase or federal indexed lower attributable shorter at has change the therefore flow that the securities to portfolio with new in points built the money yields we The to funds its LIBOR. a beta yield buy on environment, stable basis which Recall, reduce the is to due About amortization short-term running rate linked-quarter yield beta, securities loan quarter models our PRIME of portfolio the the no prior helpful. the to at has basis at favorably quarter. that or about portfolio of The show this XX%, to a looking higher consistent the which of yield are rates extension we flows, We And reinvest yield XX limited. about appendix relative believe overall us X Relative premium remain on in the portfolio. the is new about X.XX% therefore, Cash as flows relative current Slide we rise, calculate allowing risk duration generally compares X.X% older cash to

amortization premium funds a quarter of in accurately points at assuming term, near therefore of is year-over-year cost a stability there the The basis securities and total on linked-quarter XX% all to deposits over things prepayment increased to pace resulting higher dependent figures. a the and move but reminder, the the equal. other highly forecast should borrowed about the yield X As in and for upon difficult moderate funding beta portfolio X.XX%,

quarter The interest of net rate margin or year. prior Fed the which and the ago rate. As a X.XX% deposit interest refers and cost margin in the for in changes the relative basis interest XX borrowings beta the change net increased quarter, I’m the result over sorry to target in year X to to relative target from in from this XX% change net in target a funds the the -- rate of beta to points elements funds of margin the the in basis reminder, change These prior the combine Fed points the was change in case, costs the period.

of is of rate households, most accounts operating non-interest our for base Because of remain our the the environment. nature being non-interest-bearing increasing deposits and advantage. bearing of in our we expect businesses margin higher value substantial of a this deposits the One competitive to deposits most drivers expansion the of

prior if and intensify case, margin strong remains becomes the less that If public beta As we might industry rate economy expect somewhat. prior deposit interest the increases to wide compared the noted then periods. net be we to loan to have in when competition our appearances, accelerates, perhaps somewhat sensitive growth may

we of discuss into moving to as cycle but position move our Additionally, changes, sheet composition measured rate to such moderation such distributions as we’ve sensitive a any at a decelerating, rather the securities, and capital pace. unlikely as maybe begun asset changes of and quickly other make balance are aggressively, rising cash

Federal expect with rates, the we Finally, that over driven be net if the relatively stable on-hold near-term, my remains Reserve factors comments. highlighted margin interest interest already the in should by

Slide of Next, on a changed to income sources listed income Customer-related million. page. brief this are the fees of The review over increased on prior primary X% year XX. non-interest $XXX that

the income fee For more than $XXX by year to customer-related increased full million. X%

from Non-interest XX realized of countercyclical, due banking is activity. effect mortgage to from and rate from year continued a strengthening million income expense activity management economy accelerate slight on $XXX treasury on when to balances, income We fee to degree income work to rate the Slide refinancing rising trend. the earnings growth, influenced hard to $XXX in possibly and the can headwind by higher fee tends fees million by environment quarter. in interest market create rates the those in are Similarly although deposits decreasing our fee increased ago for applied a to be to slowing which credits the

stronger about has non-interest being provision which adjusted in charitable most $XX If that as is items to to increased low higher items a and shareholders. been very I larger one the the passed outlook for modeled, ago expense million provided investors stable such However, that passed adjustment versus expense, million, $XXX was period other we than at or ago quality for of the $XXX further moderately than we core is originally which unfunded year was is performance to year-ago commitments adjusted credit of note and make growth that non-interest period. our usual single-digit. year and contribution outperformance But of the the X.X%, lending on would revenue severance, million adjusts also than similar

FDIC the to significant prior of a from As reduction of to Recall in we we year was objective which and discussed the consolidation large expense to served ratio surcharge we bank ago as was banks X.XX%. nearly charters. appearances FDIC surcharge had to expect FDIC period. drive various were the And experience in the met insurance quarter, that insurance in the $X XXXX, costs to insurance the our compared our about fund prior adjustment, a deposit the the insurance designed expense was this in that public the million large bank during ratio indeed prior quarter since the cumulative related fund quarter subject deposit and quarter, fourth by was of to because reserve million. quarter insurance $X eliminated our The reserve reduce FDIC to

second the compared ratio course the that year year Turning increase an to period ago first expense in of among income items. days the of full We excluding payroll to and seasonality compared the each our other efficiency first compensation of the possible below efficiency year the XX.X% the related XX, some Slide stock-based ratio of the in rate to ratio increases. and for tax them the to benefits reiterate achieve when year commitment XX% was of and XX.X%. efficiency has there XXXX to calculations quarter are The of half interest of seasonal to of more

questions. Thank slide. can which quarter this XXXX the as line XX relative This to on depicts fourth see Finally Latif, financial reported outlook on no you. would of our There you to XX, please outlook next throughout XXXX. that prepared months Slide concludes our change from quarter was this significant fourth is the the open for our the remarks. for you now of

Operator

Deutsche comes Rochester Dave [Operator first of question Instructions] line Bank. Our of from the

is open. line Your

Dave Rochester

interest additional base guide, just given curious X assuming and rate December And in just flat had? if if thinking the I if going your you're an NII costs the was hike but for then hikes you NIM basis curve current assuming wondering that deposit on hikes case if we guide we as don't for that about just any your to that point just this, point are stable and rate case missed base persists NIM, especially get up that we forward, wondering, sorry what gave I just given scenario? you're basis X your

Harris Simmons

impossible partners sort start and rates, if of predict referred But right. That and the expecting behaves, our the deposit composition ask I NIM I’ll my beta kind respect that. of what pricing in with that’s as target. pricing NIM kind here like any composition that a related been experience weigh remarks NIM that's couple quarters, change change XX% related a -- With know. to that to precision a of quoted of kind underlying lot it in you to Dave, loan the expansion basis last my looks of on in. underlying approximately to prepared that points are think expect would think and to few as has you and the something to of beta, I did say I I in we we

The to costs. was second of related your part deposit question

nature. a drift expect is we quarters. over Our would we very very have reflecting upward on operational is it rates. strong course case said, deposit as that sort base But rate I of of base and as the several It’s the the in cost believe in change we deposit next and to largely relationship-driven, catch-up marginally

lot. on well deposit expect composition remain rate change we not likewise, the would to deposits And expect we so behaved. of to our base And a

Dave Rochester

terms just And a but markets. one. your mean switching growth loan was were heat quarter a just drivers the in map it in the loans little one, table, to great In it the I quick, the your like back, varied real small bit of was

what curious just you the give was can comment strength just and the be was was the driver, in on California, too, really strong that energy maybe looked would you and an great? for guys, like C&I I overarching So one-off California in

Scott McLean

of have to Dave. soft for allowing Scott that there that quarter. revenues energy slide book of bottom increased. page largely the they Sure, had related indicates. really and did the is moved actually softness that of book energy that down. was energy linked-quarter to profit business customer's half that top also one a million we pointing to is a the It from This quarter, They've -- to about were $XXX related of run because lower McLean to half had the C&I They actually the client that

kind our clients. make these as moves we so And we were watch commercial

the than we've and the can So, really million, seeing half gives good balance. I muni million solid the growth over the the out bottom you and kind same year-over-year from C&I that you -- top XXX before. home-related just too almost between at would that see that that but and XXX if of all other half of half note just you they're top the high-end of is million the banks pressure owner-occupied hear But market reported look that lending on of other it it is really balanced XXX there. page worn The lending in of

pleased with continue that. we be so, And to

our in actually XX% have quarter been solid with this much and company make they second line about did of Nevada, four historically. producing to that’s the they this Washington and smaller more in thing didn't quarter done other The loan loan show have company quite larger that up really of until the and as quarter in, Arizona, the kicked larger the Colorado the what third probably affiliates when up quarter as up banks the growth, XX% XX% banks it growth the of

Dave Rochester

this growth of California that drivers in bottom chart? for in the any just specific Anything, C&I quarter

Harris Simmons

couple were of a out, that larger There stands deals, but nothing, really nothing so.

slower the that was paydowns, by helped was so help. also it think I

Operator

Thank you.

Stanley. Zerbe Our Morgan Ken line comes next question of from of the

open. is line Your

Ken Zerbe

loan comments, that from is gotten is competition know that in your you written that you addressed had Just time lenders, but Has outlook. have, the Slide explicitly a loan out how your the or question, on Thanks. non-bank from commentary in looks the called the actually a growth, competition you've this balance bit it XX little like I changing? you first non-banks worse or

James Abbott

and as that were it that so the this here. is aware have prior Ken, is, in quarter us intense them. concept mentioned This saw banks report in that with James, we the at I some describe -- other what month we're consistent reiterating lenders for the what We the December just seeing it to I'm wasn't would fairly they as of sort of least is

Our fairly throughout similar folks that the been quarter. have reported it's

or perhaps difference suppose. a I between some So suppose some it's consistent I But other banks geographies versus pressure. us

Ken Zerbe

also terms that. some of all where you given months, announce you said Harris. maybe return might your capital just then could return I return when of that thinking know price? for and of outcome capital changed? it guess last stock how over terms first you capital the given a given stock And but the what’s when market several I sold question meet capital you ask -- is when share has decision would much be we in Like buybacks about or your aggressive more in aggressive Board does hear whole with just your happened is, off And for Board the a more

Harris Simmons

meet Well, Friday. a week first, they on

So put that on your calendar.

Ken Zerbe

will We do.

Harris Simmons

amount as for certainly we’ll today to look there's where we room Board be have relative think it’s of more where do far distribution with may as to to well. of as obviously we the we aggressive, incrementally that's we’re fair the capital something a market sort think take regulators still seriously I some is been. again and talking But and conversation

for sure. will that into we account take So

Operator

comes SunTrust. Demba of question the of line from next Our Jennifer

Your now open. line is

Jennifer Demba

if more could we about made you the give improvements Zions we’re improved be process. that and do think quarters are of internal are innings that that How has and can several in kind last what process the at? the Just of us of you examples in wondering looking there where processes many curious

Scott McLean

is just practices ones than I practices is Scott say reduce a $X.X where Sure. allowing to practice of probably way innings, characterize our I would a the smaller providing initiative whack we years one have not opportunities of at all would it's there but we’re common is about that. third are significant a area, And and may big really collection been that at that. different a us sometimes to $X we to company. early say is million, related medium just that feel three any of expense fine would sized and expense process agreed a they one technology, reduction. and certain terms source number small this nice a is had to different Jennifer, take All the inning. McLean. more in but on six somewhere have We’ve largely this They adopting or in in across in this have I for the the them affiliates probably are of we’re It adopting it. million

can give So two, we’re ones Those be not adopting over an themes. common hour. be customizing them then important technologies -- happy our to our I’d like will -- it ultimately one, initiatives we out examples create is where is common or that activities days take and process. we’ll for another sample highlighted, but would would place savings automation And third offline you area the longer-term. another probably Harris most of theme examples and automating new three taking around be the practices, that not of technology numerous and are just do which on a two the

Operator

you. Thank

Jefferies. comes Ken of next Usdin Our from question

open. Your line is

Ken Usdin

you start on on get tech in initiatives deck. just a much point that you that are getting wonder slide should or can lot net but that that turn should long with we you question full First closer that's that looks in us the costing were like start a that been understand a showed finally implementation. if I that into it we like seems -- to we was I the help things see the if tailed tech of know be getting do discussion, how these was savings? what page have can I 'XX and the point ‘XX double to update trajectory? earlier spend It still to wondering spend the to at us you

Harris Simmons

tech I decrease is spending I say some. guess I to look mean for the would wouldn't I first thing just

a on have spending We replacement. core lot system this

deposit all sheet We’re February We the this the for And over loan of some be that complicated about loans presence go about in sure the is by total has decisions -- and there, the then of on some systems now the have half about being of half the we the have to the once last exercise. expect proceed year. service portion -- end To three of core capitalized probably second the this most weeks. spending halfway we has in will we've that's we I to that a them through been balance of spending of live the gone, amortized now we been effort. But platform will do couple capitalized actually. releases the fees making next week. we with represents as mean would and consumer of that the total because mean I

to by of have on I see it's half this system. to about -- so will that just the amortizing of an gets start continue thought loan is would the we some service expensed the that And next I of it. we it thing. maybe every commercial will the to roughly end and then roughly expect the and in gets spend then that and time -- to end quarter I would need We But technology don’t piece new capitalized. deposit there's half I And on spend have

for the it’s spend is in that think the keep But increase in the grand diminished. to the things in areas of scheme think And do other that I run I longer. continued one to as so reasonably ways that if technology been has costs even producing And strength things total ability flat. has operating the of

if to we So that's operating things holds up a leverage optimism one a of amount short will of recession. some to see that continue that reasonable us of be the able the on fair gives economy

well, be that's think of to but for a going it spend. work I won't pretty technology lack

Scott McLean

I This part expense the current is of depreciated add cost in P&L that. would or Many quite the is just are nominal. year really fully to enhancing Scott, systems replacing and we're

cost almost And investments all of these technology increasing initially. so you your on are generally

pure how amortizing savings for on three a depending may but elsewhere FTE you as just are up long a You an such five have it. to able technology, year built-in period expense to goes

our not just was other XX%, look five, the a just I probably keep offensive, is and number of P&L would on. probably we that XX% ago. on is That spend six basis, the years it's lights The thing total opposite technology as say it at

news described the an systems good offensive that largely so all systems And spend out about the it's Harris many the it of and building is that investment. the Harris described, is

Ken Usdin

I Scott. made. Understood that a just And up Harris follow on point if can

And looking XXXX revenue think XXXX that pre-pre to for holds net target continued economy point Do decent point up the about point go of gone I'm the your lot Harris you operating that you about the your presuming made hope way at given and the magnitude they've growth. trying looking high you can a So things continued the objectives. forward, to of and get positive leverage? about a maintain single-digit to with

Harris Simmons

or XX%, group. don’t efficiency the the Yes, really we've down be year drive the over I number we're and where I is next two with pump up at last years think pretty guess -- peer the to I to the from competitive at and compatible leverage point ratio will a help over the with that our with some two. And little finished up point XX% yet, that brought instructive -- in year for next the that we think look now But or that's you if would its operating catches down at objective to three it. look think

Operator

line of from comes question next Steven JP the Morgan. Alexopoulos of Our

question Your please.

Steven Alexopoulos

of range follow I When for we conversation should the be look about we up XXXX? at in for need technology. realistic to the guess to thinking low start what's XXXX, reinvest most single-digit that on expense the the to guidance

Harris Simmons

overly are to are low opportunities come as single with because some need the we been we prescriptive around definition language digits they in is trying flexibility past. take that, may We are I think of deliberately deliberately, But -- we what because advantage has using our that not up. of consistent be to it

Steven Alexopoulos

you I think X.X%... charitable adjust mean if contribution, said we year were out I while the XXXX you this

Harris Simmons

Speakers]… [Multiple Yes

Steven Alexopoulos

in Will you be that at range XXXX? again

Harris Simmons

to was was bit around little some our What put I single-digits said targeted low guardrail over range a that of that.

Steven Alexopoulos

should in be trying I'm understand guess lot we for is on year so growth another or… technology if to expense reinvestment X% bracing a I or of given talk on

Paul Burdiss

really though mean Scott important the said, to to a of have I it's we to note But continue got organization. also lot opportunity simplify that, as

we and providing we little be to We offer. operational offensive and that hard, of that savings but to said, are starting in technology ensure not are more table take for a efficiencies really products the stakes to as respect invested our are that with working we really can the to Harris creating services out customers, only

Harris Simmons

where what the going do non-interest growth single that on as think tell in in you, our people more guardrails range. plans in spend stronger is single-digit revenue too. more low to spending I is fund digit we'd finding would critical. keeping being I invest part And we et define to cetera, just that. future looking this I we're bankers I we're pipeline And while there training, my build mean like in of we're even think of for that still total on quite expense can mind year part we are, I this to coming And to optimistic low that probably in mean that's the be ways that

that XX% of the things that PPNR that incentive because you at is real the compensation, the and this is growth as just of up of on X.X%. mean of about X.X% reform. One that's incentive forget drivers added look was going and to I apples-to-apples this a real things, PPNR, about tax one effects to if basis one the year compensation rise happens of

Scott McLean

been I as has noted in really profile my strong, comments… credit And

Steven Alexopoulos

to year, you been do Thanks? just think far your non-interest Are at hold expecting there? you deposits, separately in bearing going Just this a have look balances to about there. more out than see bearing if out balances non-interest every or peer resilient we of those guys migration

Scott McLean

out Well, interest described in I models we level past non-interest our assume deposits. described and we other interest and deposits bearing and that our into the say of sensitivity, bearing will of indicate models some our migration as would

proving that deposits, think our behind analysis be to we customer those granular the really had had key than operating say even more our because And is the operating of average back a expected. models probably balance said is, is demand proportion a of And and of we deposits deposits we against fact nature, they high deposits You we've because the can I the what that operating have. mean, got relationship needs. relationship more of the measure nature we the very by and it, operating driver the and just I the resilient very of are that a we proportion that discern level deposits of the we nature lows peel have highs and would little have when deposits, sticky really do indicated. would and than very been our resilient,

Harris Simmons

solid been But balances more what same you where pressure things related really is and Texas, good and pretty you DDA our been occupied, growth CRE, there's pressure time equity growing non-interest to periods across one client nice larger unions just which home in family, also there's expect depending And loan at. If across those you the really the are see credit customers. look It's company. would growth just consistently the in in growth. in Utah I you balance, C&I, DDA all growing market to one are the mean bearing deposit in on municipal, see loans owner our that company DDA was on certainly the of it's wouldn't our average to related really rich is really certainly but balance the growth. four our heavy

Scott McLean

just about I'm base of and comment talk a years. going to excited I one about over more value make the I'm the so our because lot it deposit

on look size. as and a deposit is deposits real stratification point of in size, size and of a the by prepared a deposit I their of that important resiliency based really terms size so real the difference in the betas, at our behavior in respect We with depositors. required customer we my it's repricing see stratification to difference said remarks, volumes of deposit by Another the

migration sensitive on more largest relative we’re therefore and is deposit are a much fewer probably prevalent our basis so which depositors have we more observing very to is what And of raise there.

where a prepared of we’re I in our my approximately are and $X remarks, depositors seeing million XX% under of lot As said stickiness. that's

Operator

Gary from D.A. comes Tenner question next of Davidson. Our

Your line open. now is

Gary Tenner

where first I yields production Just quarter? sorry loan the this. a new on questions, if for quick missed what you way Did couple your along the I’m and of mentioned fourth

James Abbott

We yield haven’t something X.XX, near mentioned it. it's X.XX thereabouts. GAAP probably But

Gary Tenner

this highlighted And -- good quarter would insurance. as that or was you remarks, going then FDIC you look the Paul did below were the there Is adjustment or the rate $X run that any through rate you mentioned what your like? million reduced a run forward that

Paul Burdiss

there would elimination was expect million say and surcharge, of insurance to to specifically related the that deposit fund $X approximately tried I What the FDIC $X to insurance in million to so I reduction continue.

James Abbott

is And this said the differently statement number Gary, pretty I in rate. run income seeing the good that a you’re there quarter that think

Operator

James. comes Our the from of line of Raymond Long David question next

now open. is Your line

David Long

does Going put in the to here expenses for back if expense still side you on possibly where to pull operating at side year? is on the really point revenue have not the here levers the XXXX to financial outlook leverage revenue materialize positive down. up quick, Do your

Paul Burdiss

the absolutely please we that jump used or absolutely lever Scott Harris couple were lever in. Historically, we where course is incentive Well, expenses. and The biggest there years. compensation, of our a adjust revenues aligned, have of to and historically we last have not had expenses is we have able been the we which over

David Long

strong strategies different opportunities there deposit to incentive base doing think regions then regions. to be where are pricing banks some gain by may as regions some pricing? in separately, you starting or do there share And Are we’re deposit where not any see your

Harris Simmons

that want the that things on how locally the it's fundamentally we earn want opportunity right to just price things them would on there pricing so us the each But affiliate there margin, continuing base markets are mean versus largest sure money we we give and are limits the frankly is of could branches. they I protecting But manage reasons. much any to weigh Probably accounts the Internet can are I Well, and and and have campaigns the we deposit broker for what deposit we grow some of we obviously that the their credit opportunity banks see think that we including we deposits. they internal edges don’t are growing that do. making doing I to do. to make the have, -- internally. we where that that And can market of and of we with do sure

Scott McLean

primary advice offering will our is not And we're add about skill. value and the really could that to if I it's that customers, rate preposition I

we not tend And money has carefully. and as you about attract know, we're very something liquidity funding higher so provided or that able is but so to think this

Operator

Thank you.

question comes Spahr of Fargo. from Christopher Our next Wells

Your open. line is

Christopher Spahr

meets board $XXX from fourth more the more same quarter? on comments repurchase than the of you or in perhaps Friday. week The the million say the When and a more we that the authorization aggressive saw

Scott McLean

you I'd have be same say to that doing stay only guess guess. more aggressive more I less tuned. to the I of relative or

too I late I until say, run something much board to really So wait the I'd them has think don’t want to here. front to want

Christopher Spahr

areas some that at side. growth? your growth are can like the expect examples the we is are? expense offensive of pick-up lagging the Can of see X. And talking then slide the think benefits to -- us going doing you the of what still what gave just larger a And I you or initiatives you're most I'm that offensive Slide on slide wondering some or the some more measures about of what the is on that whatever examples might is of those getting give in Scott's, And back peers. I'm

Scott McLean

you -- very way originations business home this digital into then application decision make pull offensive, it to it their is panels branch to application start look a work the Slide send Again, data a application. to a where a and case really at loan the system quickly. I'll office, on for the shift in way in banker online loan digital if a in started automated it client of horizontal take X application, in. completed our loan and at the are We've all loan digital loan the So this top and mortgage the a five the and

able business All dynamics the about of of for this happens year to. digital allows today by noted, we mortgage product to originated have us. not and be to game residential mortgages, large it. a other to to going We is us. Harris their that the think $X us as application, as origination been we like conventional pull statements changer and of but forms billion customer's electronic for banks, tax again has bank to particularly And loan lending to a is don't what originate part take be of done with not there $X business, a down not change to of have paper this we're able an version The $X.X which mortgage billion to -- this billion we'd And that historically. it

it. about to excited So more product mortgage viable branches, create it in allows we much us very are a our

rich are with particularly opportunities. building two always are those offensive client So

Operator

Our next Kevin Piper question comes from Barker Jaffray. of

open. line Your is

Kevin Barker

Could in that and repriced you of said it quarter -- in like the expected there bit in a it turnover it portfolio shift duration any quite this premium seems amortization. your Was the response the securities portfolio, you and portfolio? from to

Harris Simmons

The it XX products And relatively noted. investing so a is for I the consistent, our premium it No, extension was consistent, don't in as comments have of remained we importantly in a prepared to are change in models example, was in portfolio risk limited really in as -- year duration MBS -- have we my that the the any noted is portfolio. of in prepayments. lot related change amortization, I

all philosophical, haven’t I around So portfolio of the those changed. think

Kevin Barker

as previous follow lending compared of your pick Is bit saw comments runoff in quarters, seen in to up oil you up a due up there? of little increasing the in this well. or said And pick of say the pickup a competitors you've it around then demand primarily a cite some slowdown we also in that to regard what when quarter to oil, some loan your you

Scott McLean

of majority energy So count, reserve that the seen have it and low lending base is we of to -- loss year-over-year Kevin. we've upstream both really in very about midstream, the growth which

represents end it slight at services uptick, know, XX% portfolio it wasn’t portfolio but energy really was speak the to low XXs, about And services of energy saw downturn, XX%. XXXX now about as you our Our going into anything portfolio of our total of. XX% the

James Abbott

and loans, can of and total oil I Scott, that’s gas loans clarify not oil And if loans. total just total the gas XX%

Scott McLean

yes. you, That’s Thank right, James.

an So portfolio. outstanding also we have is today mix the the at end X.X X.X the down billion changed of portfolio billion, The of of from sits about XXXX.

by are really a about the us. growth primarily repositioned contracted So And again, is have third also. the and which again and portfolio markets midstream seeing we reserve for we are solid based

Operator

At this remarks. time, like turn I back to Sir? to call would for closing any over Mr. the Abbott

James Abbott

you, Thank thank joining for you call we the And today. Latif. of all

I'll follow-up questions, to good contact If me be evening. you, request. please you the throughout return have your Thank james.abbott@zionsbancorp.com evening available and and at

Operator

your Thank conclude wonderful does you a your for that and day. gentlemen, and program. Ladies have participation

this at lines your disconnect may You time.

James Abbott	IR
Harris Simmons	Chairman and CEO
Paul Burdiss	CFO
Scott McLean	President and COO
Michael Morris	Chief Credit Officer
Ed Schreiber	Chief Risk Officer
Dave Rochester	Deutsche Bank
Ken Zerbe	Morgan Stanley
Jennifer Demba	SunTrust
Ken Usdin	Jefferies
Steven Alexopoulos -JP Morgan
Gary Tenner	D.A. Davidson
David Long	Raymond James
Christopher Spahr	Wells Fargo
Kevin Barker	Piper Jaffray

Zions Bancorporation, National Association (ZION) 22 Jan 192018 Q4 Earnings call transcript