ZION - Earnings call transcript Q4 2020 | Zions Bancorporation, National Association

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Zions Bancorporation’s Fourth Quarter 2020 Earnings Results Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce Director of Investor Relations, James Abbott.

James Abbott

good and Andrew, you, evening. Thank to We our call discuss conference fourth welcome quarter you XXXX and to earnings. this full year I that you be although to call, results like actual materially. will statements, making during differ may we forward-looking would this remind

which related the deck measures. call press non-GAAP presentation and encourage release in on the as you and dealing applies this deck information presentation the the zionsbancorporation.com. to or made of non-GAAP release, measures, contains supplemental at to forward-looking earnings this during equally references slide several with slide call. the two slide the of Additionally, disclaimer the statements to full well We slide copy A earnings available earnings review are release, as the

referring these call. to this during be slides We will

Officer, provide today, will strategic in our financial performance. certain For Chairman Simmons, high overview Officer, Executive Operating comments areas. will Chief Chief and Scott of Harris level agenda McLean, on President key a provide strengths our recent and

Burdiss, also Finally, Morris, us conclude on With condition. our -- call who Chief Michael Keith Zions’ to financial of Maio additional may will Chief our and Officer, will be to one We Credit call you by this Officer to responding are limit questions and have respectively, providing quality. Risk pro credit on detail Paul the today Financial length Officer, regarding will intend the Chief hour.

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

Harris Simmons

non-PPP loans, prior losses credit a increase We basis resulted very quarter. XX which average the earnings afternoon. annualized on to relative losses per the for results coupled pleased points want million. credit loan slide significant the James. three, share of reduction for in in allowance the or negative loss, welcome to very you provision this are all was Beginning very of the with to of our quarter with overall the $XX driver we One from when only in call nearly Thanks of much,

we losses to borrowers trend ultimate will many to continued credit have and long-term higher ago uncertainty relative of the pre-provision pandemic, Notably, our fee level income our resiliency revenue expect interest respect by related the we great was from encouraged a period, million, linked-quarter there’s impact customer PPNR and a customers. Program. continue While remain with net been the to $XXX the by that reflecting elevated income. of the slight to decline income Protection helped year in than stable the is slightly from adjusted Adjusted figure net Paycheck very

over consider still surprising last repurchases strong the share regional was we we we of At for and capital increasing stated that spending other saw although it’s and we non-performing seen stability, ratio we several premature credit the the charge-offs non-PPP numbers noted net ratios. whatever the in real and one deferral. allowance classified As absolute but XXXX. of is credit have loans horizon the year to of we Earlier numerous on to were expected business rounds an the risk enter relative on Tier certainly been net quarter, in the of was data loans on the years, downturn notably X.XX% loans, common realized to XX.X% loans noted encouraging. for indicators equity the losses resolved Throughout times capital elevated strength where we on relative what X capital will to ACL we which into space. are -- not banking anything maintain and strongest approaching the CETX earlier the today. will the as that’s That a point and passes that loans end, large we within COVID-XX signs we we Perhaps we have resume storm have have The distributions are would more that grouped the most quarter combinations announce hopeful in time assets, zero, consumer category. the showed the I and charge-offs are there

For indicators year summary of down ago two the by and example, performance negative the been month years. was part was spending compared to customers ago. entertainment more to month is spending for December card credit the than ago some has and year a travel our same often of which spending quick the period, compared year XX% slightly full as from in positive December, four went a prior of debit for card key when year a Slide month the

Although, net assets declined… on and income, earnings share return per

Scott McLean

James we have Harris may there. lost

Okay, so…

James Abbott

to, we I audio. we Harris would was like where his left where Harris’ off lost think

Scott McLean

happy to be do that. I’d Yeah.

I think we were on slide four. Yeah.

Harris This will slot reengages we over will here if is and in. him Okay. up McLean Scott back and pick I it

four, for of slide key performance the summary So two full on the indicators to compared as quick year, years. some prior

Charitable in PPP efficiency excluded declined, to for the earnings revenue XXXX on XXXX. with return $XX stable ratio XX.X% and $XX fairly related Charitable in not a about million net level improvement would pre-provision increased per of assets was contribution million have Although, on X. been the our success Round to achieved you right chart contribution, slightly net see the the if income, by modest the the that on can Similarly, was if we share and the would top had have

Harris Simmons

Hey, I connection My back. Scott, apologies. I my lost am there.

Scott McLean

you, Terrific. I ball Harris. will to the give back

five. We are slide on

Harris Simmons

the increase of filling in share depiction the five. of slide with a to significant for provision Slide in quarter in in. On XXXX, largely change fourth attributable a per EPS earnings Thank is five expense. Perfect. you

which as $XX moderate adversely in pre-provision the as a contribution, decrease $XXX profitability early in The the negative made detail Turning metrics. likely a quarter’s to as by six, revenue, sheet prior that On highlight slight remarks. an prior of long will prior the quarter to number the the of the quarter $XXX a attributable in provision decrease million, would well quarter not in provide in largely have Charitable run. depressed adjusted balance slide expense, the was noted. in in from profitability has his our to was level the resulted not net was million the Obviously, increase profitability affected Similar is million slide Paul we fourth which prepared part persist. view sustainable seven, revenue also the was year

we I As lower a faster progress encouraged made the front us and do the to at technology with things XXXX, on enabled that has am enter cost.

bear were XXXX, I as after strengthens time further We McLean, years seeds by of loan economy into that non-PPP challenging further are some to planted resume will our as We the banking, we wealth The the and optimistic including more get of management that will Scott. slides loan a year. the will sanguine mortgage turn growth initiatives, syndications. which Scott and next so, section ago, back fruit be covered will of over remain

Scott McLean

Harris, again to and evening good Thank everyone. you,

Protection Let Round have the you about slide X to over eight, last me with you direct Paycheck of the few success talk heard Program. our us months,

PPP base. impact economic business X.X, rate a with for interest pandemic business opportunities the near-term Given with our of as low success meaningful in oversized environment, as negative our resulted it, core customer and creating earnings, cushion small has well as the we describe new the

helpful handling meaningful future significant in volume to new ways core API proven our system enablement. including Additionally, in this PPP be has its several

XX% in note, now the SBA over have volume XX% engaged forgiveness the of are of than has customers, are Of forgiven. received XX,XXX of in aspect excess $X.X approval. We average forgiveness the less $XXX,XXX loans of balance been on representing approximately, loan program, billion and of these

have assist, the part of X,XXX referenced We which process week trained by yesterday, the applications. have of a handling launched we Round Last Wednesday, the engaged and to PricewaterhouseCoopers non-interest January for expense is highly taken frontline bankers and as have approximately the we phase over Harris. program, and elements X of controlled XX,XXX XXth. last forgiveness we increase

X.X. So for than smaller average are we the on far, experience average applications these PPP

are X time. provide While it’s say small stimulus great into need ready of Round the accounts too in Round deposit the the to this to are early able resources and money X, businesses how will get to we compare at to that

Turning PPP to our actively new more bankers that bank customers. to calling frequently recipients, XX,XXX have which we focused have X.X on on laser the highlighted been also slide than represent nine, XX,XXX of

customers, our billion that $X.X Regarding you existing these relationship loans. in with can were deposits in active see $X.X and billion

existing reflecting amount this historical customers will we attrition and While rate new we churn of the in the have of portfolio originating pandemic a been experienced. experience and successful loans significant of that the impact of services,

loans than customers. deepening we of Further has by to a reaffirming of loan. on their specific relationships, Additionally, originated the these been new able approximately greater we these were these for relationships PPP a average reflecting XX,XXX customers banker for have XX% strengthen

the to using bank good initial businesses DDA account as Regarding these loan well. new small with XX,XXX we their actively XX% now customers, and are are activity seeing

be that not these Although, pleased we we know we these early able results. to of with clients, retain will are all

amount pandemic. loan observation liquidity This a a of businesses PPP and real appear strength have should original funding the many been building Finally, that it significant still to accounts. of their a we source it’s that in as small our financial deposit in have navigate businesses small continue their available would number resourceful these represent of

prior at group, our approximately and increasing year history reduce the process, others $XX by in Originations mortgage in -- Finally interest XXXX. large among higher turn full ago in for in driven mortgage for million for combination million the the part to which in exceeded digital originations revenue, in level increase the the loan a to advancing to application The service times million in $XX to us mortgage also the year That’s by substantial $XX decline significant zip significant successful of with two the allowed quarters three occurred rollout slide pipeline increase country. and levels. million been XX, in our of This XXXX these revenue the our $XXX XXXX factors than of year improved is versus new facing $XX customer process banking led from rates our XX%. XXXX banking in our has beginning has XX% in mortgage XXXX. sales million very our by

condition. additional financial will Paul? and Paul over Next, for on remarks detail and I our performance the on call turn credit to

Paul Burdiss

joining quality Scott, everyone. presentation for XX. earnings loans. slide PPP ratios comments Thank have Generally Thanks presented the on in good you, we and will begin materials us. excluding I my evening, our credit

were the we four-fifth Harris fourth were basis with quarter points About loans points. do XX portfolio. charge-offs attributable full As prior were the the classified and loss against just and and one-third Overall, oil future. net credit energy charge-offs million to portfolio, charge-offs basis year XX expect net allowance our of for year of noted, $XXX the with the gas loans loan quarter. that non-performing and somewhat of stable the in Consistent

that some However, with the restructurings our commodity on reserve improvement reflects an and loss of in improving place, credit have taken this outlook. prices portfolio the

deferrals slide the Advancing page shows bottom have as these total days borrowers those basis in On accruing. to to between our points to non-PPP steady still the of that loves. loans deferral XX the are The engaged represented note, over left remained to payment bars default believe of XX, and the the pandemic delinquent of non-PPP XX due. loans environment. has were regarding This are December points risk we by in XX, more recently loans. very past right current which days and XXst, slide the X at side that statistics side here X.X% basis on payment modifications are are greatest X early status At of of this relatively industries granting we Please payment worsened. of loans or

collateral of As being coverage real for billion the XX% estate. the by of $X shown the is by loans, right on often side this page, with excellent collateral covered

left Within the real on presents loans average previous grade highlighted time with lines. the median the top series loan three of collateralized shows is X% XX%. loans, XX groupings in The a and weighted these the loan-to-value have in columns, than in format. slide XX% balances by the three chart these Slide shown estate, LTV only ratio greater the ratios risk

improvement The great excluding indicated As gas did shown here weighted oil average some the September remaining grade and the lines, portfolio the of portfolios only. the unchanged. lending. risk as relatively grades default remained and The risk risk by elevated probability lower represent portfolio experienced oil gas since

loans non-accrual probability of ratio the the default loss slide the with which current the reminder, a stability the non-accrual drivers encouraging is relative ratio, non-accrual XX% given As top classified each other portfolio represents and economic non-PPP total the right combined in in for being the with of the key smaller The allowance loss. credit trend chart being and number ratio default larger loan of bar. The the XX number loans within are classified on environment. shows of the

see bottom came XX about for to portfolio the total you from credit these of the portfolio. small Slide four-fifth a oil the The right groups. ACL. On quarter’s for the accounted net charge-offs, net can or charge-offs while related losses detailed gas and risk net very charge-offs our allowance elevated of amount

the top $XXX loans. see left X.XX% you or of the million On total XXst non-PPP The was at trend. can December recent ACL

of in On the and right reserves the probability a bar bar, quarter. grade is net factors migration the most shows weightings in recent the forecasts the on reduction change, $XX broad ACL decrease risk represented prior of quarter. of Credit to million of by for those side loans, the which when middle forecasts. the and change impact right leading specific the compared categories economic the described changes the due we to in factors includes in ACL combined bottom the the quality against changes ACL million to The $X chart

relative by income prior factors in Finally to as losses overview segments aging and net and the such margin ACL allow and segments portfolio the net both, of the the shift have ACL quarter. the in shows credit municipal left shows The and boxes attached an similar from Slide of has toward generated in higher lending gas current XX compressed other in for margin. interest lower interest the quarter in a on mortgages as portfolio such $XX and to portfolio, the oil the recent trends chart driven changes net reduction million interest have the them, white that consumer the ACL. the that

of essentially on market right, chart securities. money change greater in the increased The However, deposits. declined namely Average including investment and by as been growth driven the compression lower loans billion. by shown a to the average $X assets, has in to a the composition composition concentration of in earning the is attributable of while effort earning strong the $X.X billion, yielding PPP deposits

and both money average to billion them breaks XX market deposit and securities down and volume. compared As increased a result, investments highlight Slide prior the by $X.X quarter. when rate loan and growth,

lower XXXX. non-PPP loans the million. $X the to loans average on this shown As chart, billion, of the while continue $XXX only about about balances $X.X reduce expected left PPP million side by PPP were quarter end and end in while were Average into non-PPP down billion. PPP period loans is by declined forgiveness declined loan $XX PPP period loans

basis fallen. on loans PPP PPP the loan factor X XX-basis-point Turning X.XX% loans, differential overall from partially than quarter. deposits XX points sheet the the quarter important from in modestly that is yield third to prior including to prior balance meaning loans, average PPP increase yield, loan rates yield and The lower X.XX% the points have yield XX loans an points declined X interest decreased The X.X% in X loan about sensitivity quarter. total right basis remained trend that X.XX% or increased yield. Shifting basis reports has in from new funding, -- loans of the over increased change, increased the points increased on in yields the yield prior the loan to downs. account from quarter. loan that resulting the the and of to average the benchmark about total chart to overall a basis increase added have the as positive yield quarter. X maturing cost prior consistent production, drawers pay The points Slide XX% This line the basis was deposits on nearly quarter. yield for offsetting on in the non-PPP deposits from on with our and prior

the comfortable are believe risk we lower to the rates with limited. sensitivity rate increase because We is in

release, sensitivity indicated absolute interest interest the some sorry, rate still rate in fueled of purchases sheet of average asset offset reset some on additional sensitivity, that profile detail deployed the but to unusually X.XX% X.XX. had deposits an of in asset swap the the the the long-term the The helps balance is quarter can and book. into rate purchase the level on The interest include activity relative to we show the deposit our page securities. high press right growth about The increase -- for tables XX, page, we charts of see loan portfolio side and our yield risk, in history. the of you As October securities as of in in the

improvement On used at while the loans -- stable compared the including X.X% in in in consumer-related than profitability bottom $XX as overall in rates than fix Helping associated sales upper foreign in capital excluding $X expense expense revenue, to retail compensation are expected employees Charitable highlights loan swaps $XX Mortgage nearly declined million Total $XX and hedge for fourth Non-interest to severance showed as full or efforts several found million. technology. increase On and quality quarter, fees. simplify X.X% as better quarter contribution benefits and and which right, line, streamline declined with was million are has in right markets earlier the broad-based savings equivalent the on our XX XXXX, the XX, the compensation to investments in other the million $XXX exchange continued possible, and year. lower. rate in full-time offset year re-pricing volumes, by time sale for loans drive rate $XXX million declined and well while for wealth the incentive in million maturities Average management non-interest in which in the the categories an fees characteristics. was X%. by revenue After increase where were part about floating prior prior been these normalizing period quarter. full enabled XXXX, operations swap interest shown, the included slide in was credit our as and employees Slide is fees been our less to XXXX had was and equivalent

of our XXX,XXX application of estimated an workspace, that in As in organization. of our been and in XXXX, an incrementally hours can able has operations savings example to automate a the seen be our automation labor for group significant technology

We also ongoing expense, reported the legal of PPP million technology about that forgiveness related process Round be to attributed an can services remainder and of to increase in for our X loans. The professional increase largely forgiveness, the initiatives. increase $X was

are due of to reintroducing suspended our the we uncertainty much the outlook, financial extreme We for XXXX surrounding pandemic. which

our Our earlier financial general on to slide best fourth of XX found updated performance would be Quarters result. reiterate compared and of outlook can seasonality fourth to actual between normal in I is quarter forward-looking in of reference are on XXXX, quarter two. the estimate our it the and statements page as the subject our XXXX to the

can digits. which the slightly establishing rate outlook, growth increasing, We which at interpreted excludes a as low-single loan be growth are our loans PPP in

growth driven by for We expect in mid low continued solid and growth an in expectation lending. municipal single-digit commercial, single-digit

low to and be real we experience We lending expect stable single-digit expect consumer estate commercial growth. relatively to

slightly for lower the modest which pressure outlook margin, increasing, some loan yield on the PPP reset income, of asset on to modest our as the experienced revenue loan we growth the incorporates securities yields. continued also interest some current pressure net yield establishing portfolio are curve, and shape at interest earning net We and excluding

outlook with if categories rise, strength for PPP may as related relationships We customers. banking customer increasing. to Mortgage weakness from we rates be strengthen especially interest income are revenue slightly our deepen many expect but we longer some term fees at subject establishing other and our

our stable. adjusted expense We are for generally establishing non-interest at outlook

XXXX this non-interest in GAAP non-interest level page, GAAP of to expense billion. a $X.X at on about basis, in the GAAP section be on consistent the for XXXX we common noted expect expense with As overall

program good revenue announce the regarding low with the about relatively XX.X%, Finally, It when of common our particularly pre-provision net is credit Tier equity ratio stable premature X we throughout capital any pandemic. to very strength management, today. feel share relatively repurchase losses at the compared and

our However, any said improves, share prospects repurchase our our approval would program we by Andrew, approval regulators. the of Directors the Board actively have is questions? please of you for through course, line subsides, of and subject remarks. concludes as prepared uncertainty of that the open repurchase our managing to capital That

Operator

with first of comes Erika the America. line [Operator from Instructions] Your of Certainly. Bank Najarian question

Erika Najarian

Good afternoon, prepared the Thank Hi. for remarks and financial everybody. you the outlook.

about the think we on future. As tone a upbeat more

XQ income interest expect ‘XX XQ bottomed fourth we net would income of PPP cadence it any As ‘XX income? have between about net we ‘XX, and ex of quarter think the and loan in interest the should that

Harris Simmons

saying in saw will modestly the in, in in sort take is income we of am expect you I will is where above be sorry of that in modestly we I that said Well, net by -- relatively it interest XXXX today it above Erika. start today that that, the was XXXX. XXXX fourth to what what I quarter outlook

of growing we modestly we is saying it be kind to again from a bottom. what But that expect here. excluding officially think So PPP, I call are

Erika Najarian

peers, on in credit borne to quality that has middle quality And just you capital back you we seeing would management complex what out -- to pandemic. the larger need capital great. and peers? see That’s which levels fed so in it. Got your significant in allowing clearly your to for arguably shift quarter, the relative is to of more first buy are even -- and the the What the been have stock

Scott McLean

little respect a affect. pandemic how this clarity will see to to continue to want more just we think, I Well, with

a we we little coming a there’s bit who might XXXX. a that people that more impact of delayed see of have lot However, thought in have been may impact

from increasingly there. us think risk you growing are in we think but there’s we as out still release the quarter, I evidenced saw still reserve optimistic by fourth the

into hoping I that will we to but we be as so XXXX. absolutely will expect get to share we look And cautious, buybacks be

Erika Najarian

you. Thank

Operator

And Point. you. next Thank Dave question with line Rochester comes from Compass your the of

Dave Rochester

afternoon, guys. Good Hey.

Harris Simmons

Dave. Hi,

Dave Rochester

Yeah.

maybe new NII the On a discussion, yields roll-off was it bit book still you below little yields loan or were maybe guys mentioned yields.

what point. just guys assuming NII this large at guidance, securities that much regarding that? And in how wondering differential the you Just then how is growth

Harris Simmons

-- that, at I look specific. will haven’t you Dave. loan, we as The take been

I to think is. haven’t what to modest. are been growth, terms the of we word, what about used is the fair to word the are on we super that relates in a Q similar The what trying specific are that say think and that, as of we modest a in it’s see third to is -- being is we have sheet But quarter balance we we continuing that today. it securities lot qualification. I cash But --

that net margin. impact on saw You interest

economy working half year duration incremental treasury really that general internally team things this a to into are that the the to putting careful of the also added. yield so sort nature view want are too begin And the of really engage of I as we we to say, get that of be with been to the that The We would working improve We start we that’s much a really very curve. will in year. cash cash. as expectation are finance improve really the of on a about next are whole hard and second could team. flat mindful manage But half actively given

may but it’s a to of over you won’t cash portfolio securities see anywhere of put So close the course the it grow, amount saying, quarter. way the the the last long out securities of excess been grow that’s --

Dave Rochester

Yeah.

will runoff then loan think Great. loans this maybe just loan to outlook you some business could how on program, cash with as flushed for And does loan for in subset expecting that at the spending given that small guys what then books? growth, C&I picture, be much impact now probably going and point the maybe demand more of that your just forward? of switching about near-term? quick that C&I that they energy in demand Okay. Does real And are forward, going be are bigger PPP the demand you

Scott McLean

the I Dave, speak this first that. to is McLean. of will Scott part

that. outstandings $XXX maybe well, reflect I we -- -- of sure energy how all here, of not think The energy am but in actually the PPP there’s loans I about it well, outstandings. are million about

And if they down little bit billion think greater to credit. so $X.X see you and oil or could are so utilization a excluding will prices and you I further. are PPP and where lines I drilling of some of there, gas do maintain see going energy that and think, outstandings But stay around increased go stability

down have that. do that quarter it. quarters pick anticipate don’t utilization they the I see we we It So but general in could lending seen next will go business for two up. I the liquidity, or -- some, to start think I small And think borrowers our building are

and they to of well. proportion have on the still their healthy PPP we it fundings have across a rely country think seen as I

it’s lines start to a improvement and the people environment. up the start to builds of I to as working credit to going show real pace post-pandemic be at as to capital So and again see we think economy will utilized starting broader adjust being greater

Harris Simmons

probably to to I actually at to used has $X.XX also been that cash be employees impacted. when the offset seriously just to have have keep on note of forgiveness be revenues a trillion and obtain specific the to expenses time used payrolls kind

a for way. think into does a in businesses as use I we that the it these economy really rebound will strong get further the So, year lot they those way and of

and for see pick can kinds I of their to up just longer think borrow I term them start investments businesses. in building

and that that’s going hope to intuition would my be is certainly happen. So that the

Operator

Thank you.

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

Ken Zerbe

not on slightly guess the I NII I Thanks. you back the gross Great. just in $XXX way million it come got I weeds is base that mean, here guidance. XX to too which What right on the now. here, is don’t get the deep but increasing? slide read least right

out out amortization? non-accelerated million, well you as you back do for -- your is the are how $XX piece, that but the does subtract PPP Should account accelerated about You how thinking the which or it? guidance we

Paul Burdiss

Hey, I income are kind will on take Ken. wasn’t net PPP. I This sorry -- excluding is an if I outlook is provide interest of we clear, that. Yeah. a what to Paul. trying

the sort income the interest a So up in average exclude that you way net that net the billion. are you excluding come that of income yield That’s Those which up the you X.X% so PPP exclude number, that think out at PPP. $X.X about and come with look think. and from the multiply fourth is, I would interest I I of it I with completely think would quarter, third balances base

Ken Zerbe

Got it.

minuses Okay. the you about have All is I just talk can right. the my smaller. of it a you second terms how as math I -- will off. if in facility, could first and suspect guess, in pluses was as be of question second active I it’s facility? potentially don’t right curious program? I involvement kind might what maybe the up follow that the Thanks. Zions your be whether am PPP in do of

Harris Simmons

Only can say… I

Ken Zerbe

Yeah.

Harris Simmons

for less there’s funding it. think I

were smaller So largely program really it’s that our and targeted particularly hard hit. and is a it businesses

that loan think geared lot dollar and also show be we the in I $X are volumes, will think we the engaged smaller expect see the down So I in are will has to the certainly this are because of going terms round. end maximum down round. But to amount nationally been second on very again because businesses think, in by spectrum. numbers the and reduced see a million. of the you I It well that very And to we will up you said, of participation

Ken Zerbe

Thank you.

Operator

line the And your next question ISI. John Evercore from of Pancari with comes

John Pancari

Good afternoon.

know want Board you in in to back you -- buybacks mentioned right just question On from pending and later the there, year, any buybacks in I this regulatory approval. are might resume that the buybacks be to interested Is now? a the keeping you position resuming way the regulators approval pending --

Harris Simmons

little we bank peers Well, that from bit we are we publicly have differently are situated many to, and as you national of our traded a know.

the that permanent back be -- in about so a will what fully capital that I reasonable application for that an reduction to buy to SEC we it make and shares. there the this. And expect takes that’s and thoughtful there’s

this at I to -- has is look I strong capital peers. company I that backdrop, what relative a a see the is As

very here We the last a few been peers solid quality have certainly to credit relative over what’s quarters.

as are with energy huge some increased looks great. that gets but think that charge-offs truly still don’t of relatively then it issues get And a we and we we expect the leaving have -- charge-offs, us I have a in -- energy charge-offs the through you going I the to see demand. absent better low loan probably very

loans growing, expect a are that’s going We lot probably not see earnings. that pace absorb to but to at a going of we

recently sensible but sure to about active so, buyback conditions shares that the we be are want just being all are I be think, buyback program. to to we Board, And our think be the with will were the have as good get engaged We conversation two. it in the and we for the to I that us there and regulators quarter going conditions into pretty make pretty actively year going for or

John Pancari

Okay. the cost helpful. has you us in All Thanks. separately, Thank guess, of and the change the whole in right. terms systems conversion, give all? any an timeline changed on core updated why that change then in materially update And That’s trajectory conversion. don’t involved at I your you. Any expected

Scott McLean

Thank you for that question.

question all going pace the there just and at there project core had was on -- and an in continue projects just there’s our no pandemic future effectiveness. it was a of level We it we difficult mean were impact I month where general. the are to

that. And so but we got through

We have it. to adjusted

going were we to continuing to mid-XXXX. kind of and months costs. That has early probably time is between by we and terms We phased will be in in XXXX early it. time release have of out pandemic originally But to released six definitely rollout terms that. evaluate now delay and of -- then. And of come a been so in in still have a brief delayed caused up to make to deposits kind in three And

Harris Simmons

I just.

Scott McLean

Harris. ahead, Go

Harris Simmons

into face Scott we say get also -- a, with note issue fourth this anybody smart the It’s the not deep fourth wouldn’t I it as would be quarter going was other this to that is was like to further a -- to I going are into the project going just reluctance. that, make do another you to quarter.

a that hit in we kind there’s that’s we So be of as and will But to going window keep we well. to have hope that. to able to something hit are mind

Scott McLean

a for And years not the go two over after period three of in expenses That’s materially the and terms years impact it’s ultimate the to great point. No. live, and cost kind of the then different. P&L, P&L on next our

helps. that hopefully So

John Pancari

It Thank does. right. All you.

Scott McLean

level we that difference about would to being other every our our because the we continues when to we excitement grow, system on place, head during a XX-year to major do. PPP five-year of start it absolutely eight-year, the get you I And really a new have X.X in volume of maybe will And tell bank that, level virtually to on able made were country. in it

Operator

next the Demba your Thank Jennifer with line of question you. from And Truist comes Securities.

Jennifer Demba

evening. Good you. Thank

very if rise contained to Thanks. ‘XX, this at what in and you those And net think in us could you peak? seeing you year. little if give are could and when are wondering more where risk just expecting charge-offs on detail remained portfolios? ‘XX you Your have they more I they am a them --

Keith Maio

-- Hey, Michael. It’s Keith. it’s Jennifer,

Michael me for in more detail. Let turn and jump will over a to I little maybe

Michael Morris

Sure.

Keith Maio

to been get know about round we and not get but stimulus what also around we terms don’t couple the A times, which we economy vaccination, through future, still I next think this those of made we we of and not just bit are looking holds. I know industries the this of in some COVID little businesses that a to. bend any couple people forward -- to the seeing to We get detail of things. as lot we a on but are the get of we a comments negative see help don’t those what And related any One charge-offs of impacts are impacts significant portfolio there. seeing in are, into

portfolios. next this materialize. it the those relates earlier, see past of it in substantial oil this mentioned don’t didn’t in have significant this So to as in We couple a the and if other gas to charge-offs the turn quarter losses that certainly portfolios. don’t see We portfolio, of and of portion But you certainly looming add. to quarters -- terms any see me quarter. see as and past portfolios in year let you we Michael in the the We something haven’t real quickly short-term. charge-offs them them don’t And seen

Michael Morris

add well. we small do failures, and I Keith. I or the unit rise and our are I and about bit. down, count and covered business I very see did to are the on ratio Mostly thought but some said we think, sure think the expect with up only disciplined, might you think Well, think, I have business not resilient that net I because well around this although, potentially more vaccine now would it is little they they holding corner small Keith a stimulus borrowers cash immunity than charge-offs ahead. around am up charge-off

Keith Maio

we that are to under If rules add I currently the could accounting just by. CECL living that

a the I -- so punctuation losses to We our portfolio of and really of over million commentary. be are $XXX estimating the to important just all our that lifetime loan think credit of

Jennifer Demba

much. Thanks so

Keith Maio

you. Thank

Operator

And from of with J.P. question your comes next the Steven Morgan. Alexopoulos line

Steven Alexopoulos

wanted a Hi, to ask I everyone. question… first

Harris Simmons

Hi.

Steven Alexopoulos

strong the just out quickly? much from, again Where but is that quarter, in this potentially the is a coming of cash how there this new risk are siphoned incremental dressing with liquidity deposit customers window pretty stimulus no if know and holding quarter. typically be on rates growth I … could rise fourth all that XQ quarter. government is

Harris Simmons

somewhat Well, I will speculative. it’s start,

programs this system are that on including bank in lot liquidity fiscal of a As and we balance balance the the that’s significant sheets and last certainly up sheets. believe referenced creating quarter have washing I our we think quarter, other stimulus

that I the As cash question, their out on But curve put somewhat how because have are reasonable cash said mindful we but about a response we part that work, speculative. in that is to we end do of let to that have say there’s today, the -- chance lot by being think some the will on I sheet we of the year far the may a a of earlier bank. significant that balance really

Steven Alexopoulos

Okay. And just…

Scott McLean

This is Scott.

Steven Alexopoulos

Hi, Scott.

Scott McLean

our Clearly, total the to DDA, ratios increase. Hey. continued deposit

increased hasn’t will time, And at to have -- or small total naturally non-interest-bearing really chasing that you in that client basis people very to I over a that of drop if chasing. has so of figured that. that’s susceptible business operating a been been period mix But of be out deposits it accounts. a look base, just customer long of to right our -- probably point there customer and resistant It small our think largely -- rates very periods function

Steven Alexopoulos

be for Thanks. get don’t X% pressure? need this that’s does lower, much guys that maybe years a from That’s pressure on Okay. to I where if fully this like, NIM And more follow-up, anymore? alleviate would steep helpful. maybe how about securities XX fixed that the for and curve for as see you to Paul, to know regarding and this to to gone we a we need rate resetting have the loans in worry And not

Paul Burdiss

or a specific of curve, of plan portfolio the extent that the they that are the happen of fixed around for kind through at say part me where in of sort loans on sheet, we mitigating about the to sort swaps, the rate too. are It’s three-year of particularly we of kind because the rate that focused where extent to to hard investing discretionary part we that. the margin, that’s got occurs. five-year we really be where I investment will is the part curve the our that’s kind to balance And interest to are of that’s have attempting mitigate risk that

hard for me it’s to that be looks So, like. around specific really what

three-year five-year the probably to to the target would Although part curve. sort it target of XX-year, I I the it wouldn’t of to

Steven Alexopoulos

enough. Fair Thanks Okay. for questions. taking my

Paul Burdiss

you. Thank

Operator

Gary the And D.A. your Davidson. from line Tenner comes of question next with

Gary Tenner

I the guess pretty the Thanks. this quarter. in parts quarter. afternoon. color I the appreciate reserve the you a release moving sizable slide Good for deck on had

positive vaccinations, the commentary Given et in cetera. X of terms PPP

acceleration we rollout, if versus I number a where the mean, sense through a go into is successful of we get think provision in could to XXXX? XXXX that just that release near-term? spring, go get reserve as trying mean, the I Just you an of vaccine

Michael Morris

to lots credit in Well, consistent expectation book the -- losses $XXX with of create know, you I that as losses set best of loan that. CECL, life million the need --that’s we the fourth quarter. The will the start -- that’s with in and that under our for we

on risk saw things that, the We improve, of continue the likewise, and that are economic lead also for noted the does, those are to credit this things losses allowance of over extent would where extent those migrates that we the ratings for it down. sort as could And as any reversal above the the expectations quarter risk fortunes forecast current a And on or ratings, allowance. those the of an as improvement. our as improves portfolio be that offsetting to factor all

Harris Simmons

-- was that were a just for fourth I in Certainly, maybe all will I I have we can to saying -- we what elated pandemic. speak were the us add mean quarter that, expected that by here in charge-off it. would think, of not experience I

And even going damage that, the quarter. real in is test be and outlook experienced everything an some the look a actual then to that’s But I continuation to was will as our we the you see reserve out in see think, -- on going into early change see simply releases. stimulus first on and the I maybe little here I if are there, the I the the yet a to of then whether we quarter it’s that the what vaccine, this to aberration. quarter mean, second is to It know think second quarter, going trend into that I like. absolutely charge-offs that think

Gary Tenner

what think rollover to quite now continues right there, deposits for you that. And you number get and you? down out or of deposits decline booking outstanding this third you time time quarter new and then total on a could that versus kind the do you Thank think rate question bit decline in you that on Okay. what rate are average quarter on a quick XX-basis-point

Paul Burdiss

CD. a of Paul. That Yeah. largely sort This time is is number broker deposit

So it’s us. for sort funding of one sources of of many

broker CDs. tried historically, have to of spread and utilized out our So, we funds sources including

amount washed sheet of that’s nine of over last portfolio that Given months, actually balance letting run massive off. just are we the the the liquidity

I would short it’s So portfolio. a -- and relatively

by evidenced balance. I change as would in the the expect So

expect several would not I to course of be run-off next replaced. frankly over course to course, -- next that continue Of over the several the quarters and

Gary Tenner

you. Thank

Paul Burdiss

you. Thank

Operator

And Ken your you. the from of next Jefferies. comes line Thank question Usdin with

Ken Usdin

Hi. Thanks, guys.

Do sizing similar come On seen the that size new much with you it’s a have through to existing of think to you customers what customers? way you in have opportunity. to tried interesting just you top a on see bank want new PPP X.X starting that about opportunity? to or are just how have am kind slide, bank through I have presume that get start how the bank, that uplift already of might thinking and wondering, much to It’s you but to customer don’t I

Harris Simmons

question. can are Yeah. bank are absolutely XX,XXX those who we everything customers great -- we doing. It’s to approximately a see new And

and because that’s very We a XX% are they zero number from of relationship DDA that that, indicates short to that’s so carefully, period that are tracking their their moving actively obviously in XX% account a progressed their time. utilization of

these count having hundreds is So thousands. can are these This and we of in lots -- know customers -- we interaction. we not in ones

contact on effort calling We are keeping our system. the of management track them through

Our focused CEOs bankers and are on it. our highly

but to by fun always with customers, growth existing the a and really relationship gave nice services a will customers, know of it’s will have a that encouraged didn’t just to there. probably we seeing some and chance and so the tell XX,XXX relationship experience more up, loans the new this we talk kind we but other of to a And, and those it’s it’s a where that strengthening them there. are you with we have I so closer are of loan about pick-up us little in it early approximately intimate and end hard new see growth But And sexier. services

going your couch were intimate you have had if sitting your So really just on interactions XX,XXX back rather would through jammies. a than pandemic, you in

are it we closely. So watching

it you during the about are period. with a we XXX,XXX we measuring PPP revenues the fact for can when did We energized time progress apply million another have we And a than business are less make got about $X think loan, pretty this closely. customers that that not

Ken Usdin

Got by if question get And lumpiness then like us million progresses. as on think but X.X out, terms NII with of in the of next follow math I what My for it will do much game might top Thanks. it the for more year you as coming guys point I a PPP looks with the the right, so a for of how PPP reported grow next like at year, up is guessing ex-PPP you $XXX even year about we before point NII of presuming you you presume that. start it. left think the end out be this for and think you there forgiveness that? to is some about that do that’s is starting as Paul, implied Obviously, Paul, it you around when

Paul Burdiss

some saw we -- statistics we have in forgiveness the first that of we I the of good first on pretty and level round Well, PPP sort the quarter. of provided think

was to $XXX unamortized September associated That X% of down had with loans. to fees million XX. of amortization As net we of $XX that. noted million with sort as you those of that million attached -- a and know at coupon accelerated We $XXX sort there’s

the to all are trying we it. So pieces provide

kind continue or You is that in. is going you to say that can when that forgiveness. a fourth quarter going forgiveness see it the estimates into was good see own to think we XXXX. would are provide that are how kind of I we expectation on of first XXXX coming that quarter -- My of your that quarter was

with SBA. how So will the round your be a the forgiven hard your that. those those quickly and second of the of can borrowers by PPP you sort the But part lot is how That the murkier are meet get at slightly the that me. to several the program. to will of books the be fast kind is, net come arms of that for point, quarters think, up around and your then on right. threshold, extent interest came a PPP existence income couple will when significantly least I a being be said, And the weeks to the of impacted all answer different XXXX next ago. approximately math impact, I significantly is But this by did I

at so the billion for X.X% divided $XXX that yield and a that’s year million million PPP. and associated If I you $X.X by look yield it’s and full $XX with X like

Ken Usdin

Right. And from I just away the number. taking was FTE it

minus XXX XX. was I So doing just

think we are same I page So the there. on

Paul Burdiss

Right. it. Yeah. Got

Ken Usdin

Yeah.

Thanks lot, a Okay. Paul.

Paul Burdiss

Thanks. Okay.

Operator

question next Piper Sandler. the Brad from of Milsaps line with Your comes

Brad Milsaps

Hey. Good evening.

Harris Simmons

Hi, Brad.

Brad Milsaps

Hey.

for wanted a for a is really GAAP years basis to you expenses. tight guys expenses like Just several It XXXX. on on keeping job on lid looks up done really guidance have the follow great least expenses, flat in at a

pension. of had the donation about to in think million and related the know However, I I XXXX you the termination $XX

about talked that that that opposed that Scott growth curious delayed a spend X% all being against technology of that attributable to things the of you things imply just the or there would ongoing other X% the rate, guys that initiatives going kind place? some you some are with about of Just expense have sort sort of there what have of on, guys in did

Scott McLean

to want speak that? you to do Paul,

Paul Burdiss

Yeah. Yeah. Yeah. Sure.

of similar. reported, GAAP So, be to expense we we kind expect yeah, roughly as

kind items to we to. important out did stack we is are build our unusual ahead You important that part continue of of part out in we who as going a point look XXXX, of XXXX. some an what But really technology of to doing are

the is would to XXXX. a contributor expect So to in add we that? to Scott, that you certainly see expenses

Scott McLean

Yeah. time have period. to got look I I you at think the to longer just --

to time expenses XXXX, annually on our prior up an XXXX absolute back basis go You absolute and are basis not X%, from just about that period.

to our invest the fourth time, the are quarter we same last numbers. by technology. in But year saw continuing you in FTE that reduce FTE absolutely us and count see of X% can at so you our in And

keep encouraged you like it’s the because with is that’s we just have particular the company. one referenced relatively to course are going and about continue wow changes continuous creating pieces change you bucket this expenses have we savings any type to automation all along necessarily our -- of are course little culture that huge of the are the again that pretty But Paul of happening smaller a flat Not initiatives when savings. to of company go and improvement one what So and that ability a way. we

Harris Simmons

quarter said -- were charge I Yeah. also just Expenses the to just the but I just the that earlier -- quality I throughout. I’d by credit is -- fact is expected reflected off better remind. impacted than in number in

so And had of $X accruals as did we increase incentive compensation quarter. for that million about that result a impact on the and

We kind the with associated PPP fees also of addition had some costs program. professional

quarter is So expenses was so, messy a took there a of quarter in there little there that really were it higher. were not noisy a couple items or but

Brad Milsaps

Great. Thank you, guys.

Harris Simmons

Thanks.

Operator

Thank you. Woods. Klock with line of Bruyette, from question Brian And your the next comes Keefe,

Brian Klock

you And the quick bell, evening, Good before follow-ups real two for guys. Hey. Paul.

first the mentioned the first that XXXX impact color the forgiveness, quarter of of quarter. you XXXX? that forgiveness, you so that think the color and On on you the that -- gave may say PPP Are the first you the did of actually what on was saying quarter what quarter was that forgiveness the you some fourth

Scott McLean

The forgiveness will impact. absolutely

really here to we the work that income was expecting to X.X, I press impact as to forgiven. that next loans interest the I release, loans lot communities them we that And then were seen number applications quarters. sort and trying were coming important with point couple have program process is lot on round a call and absolutely of really we see if we is second it’s of, of fourth net to of through that. of very open to in as that period that like misspoke. focused number refer we time Harris I PPP. the quarter it, be midyear round have additional on I as so of through of right, I think prepared the in think on second complexity, sure, we yeah, get and said not forgiveness those, help program. of the layer of before, by said to in available page the earlier, doing that we and still front that an And forgiveness I that have us My very PPP of for am to may because to terms am possibly the our so remarks, And are sort loans statistics a I for on start in So out his on all of of the the or the some

Brian Klock

Great. Okay.

question one Just non-interest the the on adjusted Brad’s follow-up guidance expense. question on to

to that So billion from? in being flat on $X pension the it’s XXXX years, adjusted It’s side. really net based the that’s XXXX, the order of -- interest seven six that, a base expense be guidance just right? like to excludes years in on the the compare from income, a So it’s

Scott McLean

this comparison. quarter, to quarter look to because ways at to two is fourth fourth that’s is One do why of there’s Well, fourth quarter the it. kind

saying I next think at you the is it’s what roughly quarter fourth quarter, the consistent. year look time we fourth get by are the

other is we stable approximately $X.X we the non-interest about and slide which The slide we say year XXXX the expense as right are we pretty say on that thing non-interest year the with the explicit to figure on GAAP do expect full billion. be expense fiscal GAAP

Brian Klock

Okay.

that maybe XXXX? another imply you some to in contribution what is non-GAAP there does similar Charitable that expenses had So

Scott McLean

not imply so yeah, -- sorry, not Well, to that.

in There about same we number to -- expecting expenses with just expenses that. that triangulate are XXXX. you $X.X the trying different a come to We ways billion are are on up be adjusted couple

Brian Klock

it. Got

Okay. Thank for time. That’s helpful. Thanks very your you much.

Scott McLean

you. Yeah. Yeah. Thank

Operator

line question from Riley with comes the Securities. B. next of Moss Your Steve

Steve Moss

Good afternoon.

head question for up on the of by maybe and of reserve allowance follow lot in credit past changes, about a decline Just component half release? think municipal here. that occupied sustainable wondering of good we one that being here XXXX loan to losses me of $XX terms for growth the portfolio owner months? million first XX how a as related Just million $XX The to over do driven we kind of the

Michael Morris

I am quite question. sorry. Could I the didn’t catch it? you repeat

Steve Moss

Oh! Sure.

mix over guys quarters two from at drivers. ACL And growth slide the reduction just owner on with just portfolio million four past changes, of driven by the looking and So there in mentioned occupied and $XX CRE. you XX portfolio loans the are the new been as have municipal loans

continues release first first So XXXX, that see I core am million the the good into continue of think into in do of XXXX? reserve chunk a $XX if half that we quarter

Michael Morris

we I that up on that is sort can which are on loan. portfolio absolutely you candidly I of of to that overall theme, the credit relative but loss allow growing extent an the Well, say it are the to impact for what continues, less risky has the parts picking average -- are

time key of under existing important other though that I of And determinants has move slide is the credit loans. extent, a -- on factor, I growth loan The that is factor portfolio loans probability key shortening it’s default through important the don’t really lifetime we as the of the one the of allowance really the slowed, of mentioned -- and the overlook and loss of to sort decreases. the CECL

that an may that also absolutely has So impact loss. portfolio average to a got that have from credit life we perspective allow shortening the extent for

Scott McLean

slide a -- we see improvement there’s assuming bar the be the XX, economic recovering that certainly, That’s what quality should on activity, XX, credit quality as page credit started there page, well. pandemic Well, reflected to I… net

Steve Moss

Thank you very much.

Scott McLean

…saw in the quarter. fourth

Operator

I am Thank you. showing no questions. And further

So Director turn back James Investor the I closing Abbott, of over with Relations, will remarks. that, any call for to

James Abbott

in fourth forward Thank earnings appreciate call with near-term. We you us XXXX. seeing We you you you speaking for to look quarter the joining for the and everyone.

take will you just are be of we to top of Please the questions, and that number evening the follow-up this those you any Thank at I release. around so me any tomorrow If questions. press have Thank to you. adjourned. and with and at out forth the reach

Operator

today’s concludes Ladies disconnect. conference. you participating now and this you gentlemen, Thank for and may

Zions Bancorporation, National Association (ZION) 20 Jan 212020 Q4 Earnings call transcript