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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |
FORM 8-K
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CURRENT REPORT |
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported) | July 20, 2015 |
ZIONS BANCORPORATION |
(Exact name of registrant as specified in its charter) |
Utah | 001-12307 | 87-0227400 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
One South Main, 15th Floor, Salt Lake City, Utah | 84133 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code | 801-844-7637 |
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(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On July 20, 2015, Zions Bancorporation (“the Company”) announced its financial results for the quarter ended June 30, 2015 and its intent to host a conference call to discuss such results at 5:30 p.m. Eastern Time on July 20, 2015. The press release announcing the financial results for the quarter ended June 30, 2015 is furnished as Exhibit 99.1 and incorporated herein by reference. A presentation to be used in conjunction with the conference call regarding the Company’s second quarter financial results is furnished as Exhibit 99.2 and incorporated herein by reference.
The information in this Current Report on Form 8-K, including the exhibits, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibits, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are furnished as part of this Current Report on Form 8-K:
Exhibit 99.1 Press Release dated July 20, 2015
Exhibit 99.2 Earnings Release Presentation dated July 20, 2015
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| ZIONS BANCORPORATION |
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| By: | /s/ Paul E. Burdiss |
| Name: | Paul E. Burdiss |
| Title: | Executive Vice President and Chief Financial Officer |
Date: July 20, 2015
***FOR IMMEDIATE RELEASE***
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For: ZIONS BANCORPORATION | | | | | Contact: James Abbott |
One South Main, 15th Floor | | | | | Tel: (801) 844-7637 |
Salt Lake City, Utah | | | | | July 20, 2015 |
Harris H. Simmons | | | | | |
Chairman/Chief Executive Officer | | | | | |
ZIONS BANCORPORATION REPORTS SECOND QUARTER 2015 RESULTS
SALT LAKE CITY, July 20, 2015 – Zions Bancorporation (NASDAQ: ZION) (“Zions” or “the Company”) today reported second quarter net income of $14.0 million and a net loss applicable to common shareholders of $(1.1) million, or $(0.01) per diluted common share. During the second quarter, the Company sold the remaining portfolio of its collateralized debt obligation (“CDO”) securities and recognized a one-time pretax loss of approximately $137 million, or $0.42 after-tax per diluted common share. Shareholders’ equity was not adversely affected as the loss had been previously recognized in accumulated other comprehensive income (“AOCI”). Excluding the loss, net earnings applicable to common shareholders was $83.4 million, or $0.41 per diluted common share, for the second quarter of 2015, compared to $75.3 million, or $0.37 per diluted common share, for the first quarter of 2015.
Second Quarter 2015 Highlights
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• | Credit quality metrics were generally stable with a decrease in nonaccruing loans and a slight increase in classified loans from the prior quarter. Annualized net charge-offs were 0.11% of average loans. The overall effect contributed to a $0.6 million provision for loan losses. |
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• | Total noninterest expense was $404 million during the second quarter and $802 million year-to date. Certain one-time and seasonal expenses during the second quarter of 2015 were partially offset by other expense credits, including insurance recoveries of $9.2 million. The Company is maintaining its commitment to hold noninterest expenses below $1.6 billion in 2015 and 2016. |
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• | Loan balances, excluding energy-related loans, increased $128 million during the second quarter compared to a $25 million increase during the first quarter calculated on the same basis. Energy-related loans declined $284 million linked quarter. Overall, net loans and leases declined $156 million during the second quarter. |
ZIONS BANCORPORATION
Press Release – Page 2
July 20, 2015
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• | Net interest income increased slightly from the prior quarter; however, the net interest margin declined 4 basis points to 3.18%, primarily driven by an increased concentration of cash and securities. Loan yields were generally stable with the prior quarter. |
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• | Noninterest income, excluding securities gains and losses, increased due to continued success in sales of treasury management products and credit card fee growth. |
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• | Total deposits increased at an annualized rate of 6.8% during the second quarter, led by strength in noninterest-bearing deposits. |
“We are pleased to have completed the disposition of the remaining collateralized debt obligations in our securities portfolio during the second quarter, a move which both reduces risk and will allow us to deploy the cash received in more productive and profitable earning assets,” said Harris H. Simmons, chairman and chief executive officer. “We are also encouraged by the Company’s continued low credit costs. Although the effects of the energy price decline are not yet fully manifest, we are encouraged with the results of the spring borrowing base redetermination process, the strength of the capital markets in recapitalizing a substantial number of energy companies, and other factors – including strong portfolio management by our energy lending team – which contributed to linked-quarter stability in nonaccrual energy loans.”
Mr. Simmons continued, “Total loan growth was the major soft spot of the quarter, although much of that was primarily attributable to higher prepayment rates within the energy sector.” Mr. Simmons concluded, “Finally, I am very appreciative of the great work being performed by so many of my colleagues throughout Zions Bancorporation with respect to the various initiatives we’ve undertaken to simplify our organizational structure and increase our productivity. We are fully committed to achieving the goals we announced during the quarter.”
Loans
Net loans and leases held for investment decreased $156 million, or 0.4%, to $40.0 billion at June 30, 2015 from $40.2 billion at March 31, 2015. The decrease was primarily attributable to commercial and industrial loans, including a quarterly decline of $284 million in energy-related loans primarily at Amegy Bank. This decrease was consistent with expectations of reduced loan volume within the energy industry and was a contributing factor in maintaining relatively stable classified loan balances. Excluding energy-related loans, net loans and leases increased $128 million during the quarter, compared to $25 million during the prior quarter. The Company’s exposure to commercial real estate declined slightly from the prior quarter due to elevated paydowns and payoffs.
ZIONS BANCORPORATION
Press Release – Page 3
July 20, 2015
Average loans and leases held for investment of $40.1 billion during the second quarter of 2015 decreased slightly from $40.2 billion during the first quarter. Unfunded lending commitments were $17.6 billion at June 30, 2015, compared to $17.5 billion at March 31, 2015.
Energy-Related Exposure
The following table presents the distribution of energy-related loans by customer market segment:
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ENERGY-RELATED EXPOSURE* | | | | | % of total loans | | | | | | % of total loans | | | | | | % of total loans |
(In millions) | June 30, 2015 | | | March 31, 2015 | | | December 31, 2014 | |
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Loans and leases | | | | | | | | | | | | | | | | | |
Oil and gas-related | | $ | 2,883 |
| | | 7.2 | % | | | $ | 3,157 |
| | | 7.9 | % | | | $ | 3,073 |
| | | 7.7 | % |
Alternative energy | | 222 |
| | | | | | 232 |
| | | | | | 225 |
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Total loans and leases | | 3,105 |
| | | | | | 3,389 |
| | | | | | 3,298 |
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Unfunded lending commitments | | 2,403 |
| | | | | | 2,451 |
| | | | | | 2,731 |
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Total credit exposure | | $ | 5,508 |
| | | | | | $ | 5,840 |
| | | | | | $ | 6,029 |
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Private equity investments | | $ | 13 |
| | | | | | $ | 20 |
| | | | | | $ | 21 |
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Distribution of oil and gas-related balances | | | | | | | | | | | | | | |
Upstream – exploration and production | | 33 | % | | | | | | 34 | % | | | | | | 34 | % |
Midstream – marketing and transportation | | 20 | % | | | | | | 21 | % | | | | | | 19 | % |
Downstream – refining | | 5 | % | | | | | | 4 | % | | | | | | 4 | % |
Other non-services | | 3 | % | | | | | | 2 | % | | | | | | 2 | % |
Oilfield services | | 30 | % | | | | | | 30 | % | | | | | | 31 | % |
Energy service manufacturing | | 9 | % | | | | | | 9 | % | | | | | | 10 | % |
Total loans and leases | | 100 | % | | | | | | 100 | % | | | | | | 100 | % |
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* | Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as energy-related, including a particular segment of energy-related activity, e.g., upstream or downstream. |
The Company’s overall balance of oil and gas-related loans decreased 9% to $2.9 billion. Exploration and production balances declined approximately 12%, and energy services loan balances declined approximately 8% from the prior quarter.
As a result of the second quarter spring redetermination of exploration and production energy loan borrowing bases, most borrowing bases declined, although some remained unchanged or expanded. The Company’s assessment of credit quality of the energy loan portfolio was consistent with the first quarter. The results of the shared national credit exam are reflected in the Company’s financial statements.
At June 30, 2015, approximately $66 million, or 2.1%, of the energy-related loan balances were nonaccruing, compared to $65 million, or 1.9%, at March 31, 2015. Approximately 87% of energy-related nonaccruing loans were current at June 30, 2015, compared to 93% at March 31, 2015. Classified energy-related loans were $325 million at June 30, 2015, compared to $295 million at March 31, 2015.
ZIONS BANCORPORATION
Press Release – Page 4
July 20, 2015
Asset Quality
Credit quality was generally stable when comparing the second quarter to the first. Nonperforming assets declined to $386 million at June 30, 2015 from $399 million at March 31, 2015. Classified loans increased slightly to $1.29 billion at June 30, 2015 from $1.27 billion at March 31, 2015. The ratio of nonperforming assets to loans and leases and other real estate owned declined to 0.96% at June 30, 2015, compared to 0.99% at March 31, 2015. Net charge-offs were $11 million in the second quarter, or an annualized 0.11% of average loans. The allowance for credit losses declined $13 million to $689 million, which was 1.72% of loans and leases at June 30, 2015, compared to $702 million, or 1.75% of loans and leases at March 31, 2015.
Deposits
Total deposits increased $814 million to $48.9 billion at June 30, 2015, compared to $48.1 billion at March 31, 2015, resulting primarily from increased noninterest-bearing deposits. Average total deposits increased $641 million to $48.1 billion for the second quarter of 2015, compared to $47.5 billion for the first quarter of 2015.
Shareholders’ Equity
Tangible book value per common share improved to $26.95 at June 30, 2015, compared to $26.64 at March 31, 2015. Compared to June 30, 2014, tangible book value per common share improved by approximately 7.2%.
The estimated Basel III common equity tier 1 (“CET1”) capital ratio on a 2015 phase-in basis was 11.91% at June 30, 2015. As was previously announced, due to the sale of the remainder of its CDO portfolio, the Company experienced a reduction of its risk-weighted assets. However, regulatory agencies recently published a frequently-asked question document regarding the risk weighting of certain construction and land development loans. As a result of its review of the FAQ, the Company increased the risk-weighting of the portion of its construction and land development portfolio characterized as high volatility commercial real estate (“HVCRE”), which resulted in an increase of risk-weighted assets of approximately $0.75 billion at June 30, 2015. The Company’s HVCRE interpretation includes loans on construction projects that have greater than 15% cash equity, are completed and cash flowing, but have not been converted to a “permanent loan.” On this basis, the CET1 capital ratio was estimated to be 11.76% at March 31, 2015. Although the risk weighting of these loans was adjusted, the risk profile of these loans is not materially different than was previously reported; only 1% of construction and land development loans are on nonaccrual status, unchanged from the prior quarter, and the Company has experienced net recoveries on such loans for several consecutive quarters.
Accumulated other comprehensive income (loss) improved to $(35) million at June 30, 2015 from $(115) million at March 31, 2015, primarily as a result of the CDO sales.
ZIONS BANCORPORATION
Press Release – Page 5
July 20, 2015
Net Interest Income
Net interest income increased to $424 million in the second quarter of 2015 from $417 million in the first quarter of 2015. The increase resulted primarily from an additional day of income. The net interest margin decreased to 3.18% in the second quarter of 2015, compared to 3.22% in the first quarter of 2015, primarily due to an increased concentration of cash and securities. During the quarter, as it executes its strategy to improve yields on interest earning assets, the Company increased its government agency residential mortgage backed securities by $583 million and increased its interest rate swap portfolio by approximately $438 million.
Noninterest Income
Excluding the losses from sales of CDOs, noninterest income for the second quarter of 2015 was $137 million, compared to $122 million for the first quarter of 2015. Service charges and fees on deposit accounts and other service charges, commissions and fees increased 4.1% during the first half of 2015 compared to the first half of 2014. The increases were primarily driven by credit card and interchange fees, mortgage loan fees, and interest rate swap management fees. Other noninterest income included a $2.4 million gain related to a branch sale.
During the second quarter of 2015, the Company received approximately $13 million in paydowns and payoffs on its CDO portfolio and by mid-June the Company sold its remaining portfolio of CDO securities ($574 million amortized cost), resulting in net realized pretax losses of approximately $137 million. These sales were accretive to shareholders’ equity as the realized losses were somewhat less than the unrealized losses recorded in AOCI at March 31, 2015.
Noninterest Expense
Noninterest expense for the second quarter of 2015 was $404 million, compared to $397 million for the first quarter of 2015 and $406 million for the second quarter of 2014. Salaries and employee benefits increased by $7.6 million as a result of annual incentive stock awards and variable compensation accruals driven by price changes in the Company’s common stock. Other noninterest expense declined primarily due to $9.2 million in insurance recoveries.
Supplemental Presentation and Conference Call
Zions has posted a supplemental presentation to its website, which will be used to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 20, 2015). Media representatives, analysts, investors, and the public are invited to join this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 71960337, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at zionsbancorporation.com. The webcast of the conference call will also be archived and available for 30 days.
ZIONS BANCORPORATION
Press Release – Page 6
July 20, 2015
About Zions Bancorporation
Zions Bancorporation is one of the nation’s premier financial services companies, consisting of a collection of great banks in select Western markets. Zions operates its banking businesses under local management teams and community identities in 11 Western and Southwestern states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. The Company is a national leader in Small Business Administration lending and received 24 “Excellence” awards by Greenwich Associates for the 2014 survey. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to subsidiary banks can be accessed at zionsbancorporation.com.
Forward-Looking Information
Statements in this press release that are based on other than historical data or that express the Company’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include the actual amount and duration of declines in the price of oil and gas as well as other factors discussed in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov).
Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
ZIONS BANCORPORATION
Press Release – Page 7
July 20, 2015
FINANCIAL HIGHLIGHTS
(Unaudited)
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| Three Months Ended |
(In thousands, except share, per share, and ratio data) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
BALANCE SHEET | | | | | | | | | |
Loans and leases, net of allowance | $ | 39,414,609 |
| | $ | 39,560,101 |
| | $ | 39,458,995 |
| | $ | 39,129,295 |
| | $ | 38,954,172 |
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Total assets | 58,365,459 |
| | 57,555,931 |
| | 57,208,874 |
| | 55,458,870 |
| | 55,111,275 |
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Deposits | 48,937,124 |
| | 48,123,360 |
| | 47,848,075 |
| | 46,266,562 |
| | 45,672,140 |
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Total shareholders’ equity | 7,530,175 |
| | 7,454,298 |
| | 7,369,530 |
| | 7,322,159 |
| | 6,700,090 |
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STATEMENT OF INCOME | | | | | | | | | |
Net interest income | $ | 423,704 |
| | $ | 417,346 |
| | $ | 430,430 |
| | $ | 416,819 |
| | $ | 416,284 |
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Taxable-equivalent net interest income | 428,015 |
| | 421,581 |
| | 434,789 |
| | 420,850 |
| | 420,202 |
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Provision for loan losses | 566 |
| | (1,494 | ) | | 11,587 |
| | (54,643 | ) | | (54,416 | ) |
Total noninterest income | 421 |
| | 121,822 |
| | 129,396 |
| | 116,071 |
| | 124,849 |
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Total noninterest expense | 404,100 |
| | 397,461 |
| | 422,666 |
| | 438,536 |
| | 406,027 |
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Net earnings (loss) applicable to common shareholders | (1,100 | ) | | 75,279 |
| | 66,761 |
| | 79,127 |
| | 104,490 |
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PER COMMON SHARE | | | | | | | | | |
Net earnings (loss) per diluted common share | $ | (0.01 | ) | | $ | 0.37 |
| | $ | 0.33 |
| | $ | 0.40 |
| | $ | 0.56 |
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Dividends | 0.06 |
| | 0.04 |
| | 0.04 |
| | 0.04 |
| | 0.04 |
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Book value per common share 1 | 32.03 |
| | 31.74 |
| | 31.35 |
| | 31.14 |
| | 30.77 |
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Tangible book value per common share 1 | 26.95 |
| | 26.64 |
| | 26.23 |
| | 26.00 |
| | 25.13 |
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SELECTED RATIOS | | | | | | | | | |
Return on average assets | 0.10 | % | | 0.66 | % | | 0.57 | % | | 0.69 | % | | 0.87 | % |
Return on average common equity | (0.07 | )% | | 4.77 | % | | 4.06 | % | | 5.10 | % | | 7.30 | % |
Tangible return on avg tangible common equity | 0.03 | % | | 5.80 | % | | 4.95 | % | | 6.19 | % | | 9.07 | % |
Net interest margin | 3.18 | % | | 3.22 | % | | 3.25 | % | | 3.20 | % | | 3.29 | % |
Efficiency ratio | 71.4 | % | | 72.3 | % | | 74.1 | % | | 73.0 | % | | 73.3 | % |
Ratio of nonperforming lending-related assets to loans and leases and other real estate owned | 0.96 | % | | 0.99 | % | | 0.81 | % | | 0.84 | % | | 0.95 | % |
Annualized ratio of net loan and lease charge-offs to average loans | 0.11 | % | | (0.17 | )% | | 0.17 | % | | 0.11 | % | | 0.06 | % |
Ratio of total allowance for credit losses to loans and leases outstanding 1 | 1.72 | % | | 1.75 | % | | 1.71 | % | | 1.74 | % | | 1.95 | % |
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Capital Ratios 1 | | | | | | | | | |
Tangible common equity ratio | 9.58 | % | | 9.58 | % | | 9.48 | % | | 9.70 | % | | 8.60 | % |
Basel III: 2 | | | | | | | | | |
Common equity tier 1 capital | 11.91 | % | | 11.76 | % | | | | | | |
Tier 1 leverage | 11.67 | % | | 11.75 | % | | | | | | |
Tier 1 risk-based capital | 14.15 | % | | 13.93 | % | | | | | | |
Total risk-based capital | 16.20 | % | | 15.98 | % | | | | | | |
Basel I: | | | | | | | | | |
Tier 1 common equity |
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| | 11.92 | % | | 11.86 | % | | 10.45 | % |
Tier 1 leverage |
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| | 11.82 | % | | 11.87 | % | | 11.00 | % |
Tier 1 risk-based capital |
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| | 14.47 | % | | 14.43 | % | | 13.00 | % |
Total risk-based capital |
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| | 16.27 | % | | 16.28 | % | | 14.90 | % |
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Weighted average common and common-equivalent shares outstanding | 202,887,762 |
| | 202,944,209 |
| | 203,277,500 |
| | 197,271,076 |
| | 185,286,329 |
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Common shares outstanding 1 | 203,740,914 |
| | 203,192,991 |
| | 203,014,903 |
| | 202,898,491 |
| | 185,112,965 |
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2 | Basel III capital ratios became effective January 1, 2015 and are based on a 2015 phase-in. The ratios at June 30, 2015 and March 31, 2015 are estimates; the March 31, 2015 ratios vary from previous disclosures as the Company refines its calculation methodology. See previous discussion in this press release under “Shareholders’ Equity.” |
ZIONS BANCORPORATION
Press Release – Page 8
July 20, 2015
CONSOLIDATED BALANCE SHEETS
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(In thousands, except shares) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
| (Unaudited) | | (Unaudited) | | | | (Unaudited) | | (Unaudited) |
ASSETS | | | | | | | | | |
Cash and due from banks | $ | 758,238 |
| | $ | 720,858 |
| | $ | 841,942 |
| | $ | 585,672 |
| | $ | 1,381,262 |
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Money market investments: | | | | | | | | | |
Interest-bearing deposits | 7,661,311 |
| | 6,791,762 |
| | 7,178,097 |
| | 7,467,884 |
| | 6,389,222 |
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Federal funds sold and security resell agreements | 1,404,246 |
| | 1,519,352 |
| | 1,386,291 |
| | 355,844 |
| | 478,535 |
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Investment securities: | | | | | | | | | |
Held-to-maturity, at adjusted cost (approximate fair value $578,327, $602,355, $677,196, $642,529, and $643,926) | 570,869 |
| | 590,950 |
| | 647,252 |
| | 609,758 |
| | 615,104 |
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Available-for-sale, at fair value | 4,652,415 |
| | 4,450,502 |
| | 3,844,248 |
| | 3,563,408 |
| | 3,462,809 |
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Trading account, at fair value | 74,519 |
| | 71,392 |
| | 70,601 |
| | 55,419 |
| | 56,572 |
|
| 5,297,803 |
| | 5,112,844 |
| | 4,562,101 |
| | 4,228,585 |
| | 4,134,485 |
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Loans held for sale | 152,448 |
| | 128,946 |
| | 132,504 |
| | 109,139 |
| | 164,374 |
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| | | | | | | | | |
Loans and leases, net of unearned income and fees | 40,023,984 |
| | 40,180,114 |
| | 40,063,658 |
| | 39,739,572 |
| | 39,630,079 |
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Less allowance for loan losses | 609,375 |
| | 620,013 |
| | 604,663 |
| | 610,277 |
| | 675,907 |
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Loans, net of allowance | 39,414,609 |
| | 39,560,101 |
| | 39,458,995 |
| | 39,129,295 |
| | 38,954,172 |
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| | | | | | | | | |
Other noninterest-bearing investments | 863,443 |
| | 870,125 |
| | 865,950 |
| | 855,743 |
| | 854,978 |
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Premises and equipment, net | 856,577 |
| | 844,900 |
| | 829,809 |
| | 811,127 |
| | 803,214 |
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Goodwill | 1,014,129 |
| | 1,014,129 |
| | 1,014,129 |
| | 1,014,129 |
| | 1,014,129 |
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Core deposit and other intangibles | 20,843 |
| | 23,162 |
| | 25,520 |
| | 28,160 |
| | 30,826 |
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Other real estate owned | 13,269 |
| | 17,256 |
| | 18,916 |
| | 27,418 |
| | 27,725 |
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Other assets | 908,543 |
| | 952,496 |
| | 894,620 |
| | 845,874 |
| | 878,353 |
|
| $ | 58,365,459 |
| | $ | 57,555,931 |
| | $ | 57,208,874 |
| | $ | 55,458,870 |
| | $ | 55,111,275 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | |
Deposits: | | | | | | | | | |
Noninterest-bearing demand | $ | 21,557,584 |
| | $ | 20,854,630 |
| | $ | 20,529,124 |
| | $ | 19,771,631 |
| | $ | 19,611,516 |
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Interest-bearing: | | | | | | | | | |
Savings and money market | 24,744,288 |
| | 24,540,927 |
| | 24,583,636 |
| | 23,742,911 |
| | 23,308,114 |
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Time | 2,263,146 |
| | 2,344,818 |
| | 2,406,924 |
| | 2,441,756 |
| | 2,500,303 |
|
Foreign | 372,106 |
| | 382,985 |
| | 328,391 |
| | 310,264 |
| | 252,207 |
|
| 48,937,124 |
| | 48,123,360 |
| | 47,848,075 |
| | 46,266,562 |
| | 45,672,140 |
|
| | | | | | | | | |
Federal funds and other short-term borrowings | 227,124 |
| | 203,597 |
| | 244,223 |
| | 191,798 |
| | 258,401 |
|
Long-term debt | 1,050,938 |
| | 1,089,321 |
| | 1,092,282 |
| | 1,113,677 |
| | 1,933,136 |
|
Reserve for unfunded lending commitments | 79,961 |
| | 82,287 |
| | 81,076 |
| | 79,377 |
| | 95,472 |
|
Other liabilities | 540,137 |
| | 603,068 |
| | 573,688 |
| | 485,297 |
| | 452,036 |
|
Total liabilities | 50,835,284 |
| | 50,101,633 |
| | 49,839,344 |
| | 48,136,711 |
| | 48,411,185 |
|
| | | | | | | | | |
Shareholders’ equity: | | | | | | | | | |
Preferred stock, without par value, authorized 4,400,000 shares | 1,004,032 |
| | 1,004,032 |
| | 1,004,011 |
| | 1,004,006 |
| | 1,004,006 |
|
Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 203,740,914, 203,192,991, 203,014,903, 202,898,491, and 185,112,965 shares | 4,738,272 |
| | 4,728,556 |
| | 4,723,855 |
| | 4,717,295 |
| | 4,192,136 |
|
Retained earnings | 1,823,043 |
| | 1,836,619 |
| | 1,769,705 |
| | 1,711,785 |
| | 1,640,785 |
|
Accumulated other comprehensive income (loss) | (35,172 | ) | | (114,909 | ) | | (128,041 | ) | | (110,927 | ) | | (136,837 | ) |
Total shareholders’ equity | 7,530,175 |
| | 7,454,298 |
| | 7,369,530 |
| | 7,322,159 |
| | 6,700,090 |
|
| $ | 58,365,459 |
| | $ | 57,555,931 |
| | $ | 57,208,874 |
| | $ | 55,458,870 |
| | $ | 55,111,275 |
|
ZIONS BANCORPORATION
Press Release – Page 9
July 20, 2015
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
(In thousands, except per share amounts) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Interest income: | | | | | | | | | |
Interest and fees on loans | $ | 420,642 |
| | $ | 415,755 |
| | $ | 431,084 |
| | $ | 430,416 |
| | $ | 433,802 |
|
Interest on money market investments | 5,785 |
| | 5,218 |
| | 5,913 |
| | 5,483 |
| | 4,888 |
|
Interest on securities | 28,809 |
| | 27,473 |
| | 24,963 |
| | 24,377 |
| | 24,502 |
|
Total interest income | 455,236 |
| | 448,446 |
| | 461,960 |
| | 460,276 |
| | 463,192 |
|
Interest expense: | | | | | | | | | |
Interest on deposits | 12,321 |
| | 12,104 |
| | 12,548 |
| | 12,313 |
| | 12,096 |
|
Interest on short- and long-term borrowings | 19,211 |
| | 18,996 |
| | 18,982 |
| | 31,144 |
| | 34,812 |
|
Total interest expense | 31,532 |
| | 31,100 |
| | 31,530 |
| | 43,457 |
| | 46,908 |
|
Net interest income | 423,704 |
| | 417,346 |
| | 430,430 |
| | 416,819 |
| | 416,284 |
|
Provision for loan losses | 566 |
| | (1,494 | ) | | 11,587 |
| | (54,643 | ) | | (54,416 | ) |
Net interest income after provision for loan losses | 423,138 |
| | 418,840 |
| | 418,843 |
| | 471,462 |
| | 470,700 |
|
| | | | | | | | | |
Noninterest income: | | | | | | | | | |
Service charges and fees on deposit accounts | 41,616 |
| | 41,194 |
| | 42,224 |
| | 43,468 |
| | 41,400 |
|
Other service charges, commissions and fees | 51,705 |
| | 47,486 |
| | 50,130 |
| | 51,639 |
| | 47,959 |
|
Wealth management income | 8,160 |
| | 7,615 |
| | 8,078 |
| | 7,438 |
| | 7,980 |
|
Loan sales and servicing income | 8,382 |
| | 7,706 |
| | 7,134 |
| | 7,592 |
| | 7,332 |
|
Capital markets and foreign exchange | 7,275 |
| | 5,501 |
| | 6,266 |
| | 5,400 |
| | 5,875 |
|
Dividends and other investment income | 9,343 |
| | 9,372 |
| | 16,479 |
| | 11,324 |
| | 7,995 |
|
Fair value and nonhedge derivative income (loss) | 1,844 |
| | (1,088 | ) | | (961 | ) | | 44 |
| | (1,934 | ) |
Equity securities gains, net | 4,839 |
| | 3,353 |
| | 9,606 |
| | 440 |
| | 2,513 |
|
Fixed income securities gains (losses), net | (138,436 | ) | | (239 | ) | | (11,620 | ) | | (13,901 | ) | | 5,026 |
|
Other | 5,693 |
| | 922 |
| | 2,060 |
| | 2,627 |
| | 703 |
|
Total noninterest income | 421 |
| | 121,822 |
| | 129,396 |
| | 116,071 |
| | 124,849 |
|
| | | | | | | | | |
Noninterest expense: | | | | | | | | | |
Salaries and employee benefits | 251,133 |
| | 243,519 |
| | 238,731 |
| | 245,518 |
| | 238,760 |
|
Occupancy, net | 30,095 |
| | 29,339 |
| | 29,962 |
| | 28,495 |
| | 28,939 |
|
Furniture, equipment and software | 31,247 |
| | 29,713 |
| | 30,858 |
| | 28,524 |
| | 27,986 |
|
Other real estate expense | (445 | ) | | 374 |
| | (3,467 | ) | | 875 |
| | (266 | ) |
Credit-related expense | 8,106 |
| | 5,939 |
| | 7,518 |
| | 6,508 |
| | 7,161 |
|
Provision for unfunded lending commitments | (2,326 | ) | | 1,211 |
| | 1,699 |
| | (16,095 | ) | | 6,779 |
|
Professional and legal services | 13,110 |
| | 11,483 |
| | 26,257 |
| | 16,588 |
| | 12,171 |
|
Advertising | 6,511 |
| | 6,975 |
| | 5,805 |
| | 6,094 |
| | 6,803 |
|
FDIC premiums | 8,609 |
| | 8,119 |
| | 8,031 |
| | 8,204 |
| | 8,017 |
|
Amortization of core deposit and other intangibles | 2,318 |
| | 2,358 |
| | 2,640 |
| | 2,665 |
| | 2,736 |
|
Debt extinguishment cost | 2,395 |
| | — |
| | — |
| | 44,422 |
| | — |
|
Other | 53,347 |
| | 58,431 |
| | 74,632 |
| | 66,738 |
| | 66,941 |
|
Total noninterest expense | 404,100 |
| | 397,461 |
| | 422,666 |
| | 438,536 |
| | 406,027 |
|
Income before income taxes | 19,459 |
| | 143,201 |
| | 125,573 |
| | 148,997 |
| | 189,522 |
|
Income taxes | 5,499 |
| | 51,176 |
| | 43,759 |
| | 53,109 |
| | 69,972 |
|
Net income | 13,960 |
| | 92,025 |
| | 81,814 |
| | 95,888 |
| | 119,550 |
|
Preferred stock dividends | (15,060 | ) | | (16,746 | ) | | (15,053 | ) | | (16,761 | ) | | (15,060 | ) |
Net earnings (loss) applicable to common shareholders | $ | (1,100 | ) | | $ | 75,279 |
| | $ | 66,761 |
| | $ | 79,127 |
| | $ | 104,490 |
|
| | | | | | | | | |
Weighted average common shares outstanding during the period: | | | | | | | | |
Basic shares | 202,888 |
| | 202,603 |
| | 202,783 |
| | 196,687 |
| | 184,668 |
|
Diluted shares | 202,888 |
| | 202,944 |
| | 203,278 |
| | 197,271 |
| | 185,286 |
|
Net earnings (loss) per common share: | | | | | | | | | |
Basic | $ | (0.01 | ) | | $ | 0.37 |
| | $ | 0.33 |
| | $ | 0.40 |
| | $ | 0.56 |
|
Diluted | (0.01 | ) | | 0.37 |
| | 0.33 |
| | 0.40 |
| | 0.56 |
|
ZIONS BANCORPORATION
Press Release – Page 10
July 20, 2015
Note: FDIC-supported/PCI loans previously disclosed separately at September 30, 2014 and June 30, 2014 have been reclassified to their respective loan segments and classes due to declining materiality. Subsequent schedules presented herein reflect, as applicable, these reclassifications.
Loan Balances Held for Investment by Portfolio Type
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Commercial: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 13,111 |
| | | | $ | 13,264 |
| | | | $ | 13,163 |
| | | | $ | 12,874 |
| | | | $ | 12,789 |
| |
Leasing | | 402 |
| | | | 407 |
| | | | 409 |
| | | | 405 |
| | | | 415 |
| |
Owner occupied | | 7,277 |
| | | | 7,310 |
| | | | 7,351 |
| | | | 7,430 |
| | | | 7,499 |
| |
Municipal | | 589 |
| | | | 555 |
| | | | 521 |
| | | | 518 |
| | | | 522 |
| |
Total commercial | | 21,379 |
| | | | 21,536 |
| | | | 21,444 |
| | | | 21,227 |
| | | | 21,225 |
| |
| | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | |
Construction and land development | | 2,062 |
| | | | 2,045 |
| | | | 1,986 |
| | | | 1,895 |
| | | | 2,343 |
| |
Term | | 8,058 |
| | | | 8,088 |
| | | | 8,127 |
| | | | 8,259 |
| | | | 8,093 |
| |
Total commercial real estate | | 10,120 |
| | | | 10,133 |
| | | | 10,113 |
| | | | 10,154 |
| | | | 10,436 |
| |
| | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | |
Home equity credit line | | 2,348 |
| | | | 2,315 |
| | | | 2,321 |
| | | | 2,266 |
| | | | 2,215 |
| |
1-4 family residential | | 5,194 |
| | | | 5,213 |
| | | | 5,201 |
| | | | 5,156 |
| | | | 4,830 |
| |
Construction and other consumer real estate | | 372 |
| | | | 373 |
| | | | 371 |
| | | | 350 |
| | | | 339 |
| |
Bankcard and other revolving plans | | 409 |
| | | | 407 |
| | | | 401 |
| | | | 389 |
| | | | 381 |
| |
Other | | 202 |
| | | | 203 |
| | | | 213 |
| | | | 198 |
| | | | 204 |
| |
Total consumer | | 8,525 |
| | | | 8,511 |
| | | | 8,507 |
| | | | 8,359 |
| | | | 7,969 |
| |
Total loans | | $ | 40,024 |
| | | | $ | 40,180 |
| | | | $ | 40,064 |
| | | | $ | 39,740 |
| | | | $ | 39,630 |
| |
Nonperforming Assets
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
(Amounts in thousands) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
| | | | | | | | | |
Nonaccrual loans | $ | 372,830 |
| | $ | 382,066 |
| | $ | 306,648 |
| | $ | 307,230 |
| | $ | 351,447 |
|
Other real estate owned | 13,269 |
| | 17,256 |
| | 18,916 |
| | 27,418 |
| | 27,725 |
|
Total nonperforming assets | $ | 386,099 |
| | $ | 399,322 |
| | $ | 325,564 |
| | $ | 334,648 |
| | $ | 379,172 |
|
| | | | | | | | | |
Ratio of nonperforming assets to loans1 and leases and other real estate owned | 0.96 | % | | 0.99 | % | | 0.81 | % | | 0.84 | % | | 0.95 | % |
| | | | | | | | | |
Accruing loans past due 90 days or more | $ | 27,204 |
| | $ | 31,552 |
| | $ | 29,228 |
| | $ | 30,755 |
| | $ | 46,769 |
|
Ratio of accruing loans past due 90 days or more to loans1 and leases | 0.07 | % | | 0.08 | % | | 0.07 | % | | 0.08 | % | | 0.12 | % |
| | | | | | | | | |
Nonaccrual loans and accruing loans past due 90 days or more | $ | 400,034 |
| | $ | 413,618 |
| | $ | 335,876 |
| | $ | 337,985 |
| | $ | 398,216 |
|
Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans1 and leases | 1.00 | % | | 1.03 | % | | 0.84 | % | | 0.85 | % | | 1.00 | % |
| | | | | | | | | |
Accruing loans past due 30-89 days | $ | 124,955 |
| | $ | 97,242 |
| | $ | 86,488 |
| | $ | 89,081 |
| | $ | 108,083 |
|
| | | | | | | | | |
Restructured loans included in nonaccrual loans | 118,358 |
| | 110,364 |
| | 97,779 |
| | 109,673 |
| | 103,157 |
|
Restructured loans on accrual | 180,146 |
| | 199,065 |
| | 245,550 |
| | 264,994 |
| | 320,206 |
|
| | | | | | | | | |
Classified loans | 1,293,022 |
| | 1,268,981 |
| | 1,147,106 |
| | 1,187,407 |
| | 1,304,077 |
|
1 Includes loans held for sale.
ZIONS BANCORPORATION
Press Release – Page 11
July 20, 2015
Allowance for Credit Losses
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
(Amounts in thousands) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Allowance for Loan Losses | | | | | | | | | |
Balance at beginning of period | $ | 620,013 |
| | $ | 604,663 |
| | $ | 610,277 |
| | $ | 675,907 |
| | $ | 736,953 |
|
Add: | | | | | | | | | |
Provision for losses | 566 |
| | (1,494 | ) | | 11,587 |
| | (54,643 | ) | | (54,416 | ) |
Adjustment for FDIC-supported/PCI loans | 38 |
| | (38 | ) | | (19 | ) | | (25 | ) | | (444 | ) |
Deduct: | | | | | | | | | |
Gross loan and lease charge-offs | (31,048 | ) | | (20,188 | ) | | (35,544 | ) | | (26,471 | ) | | (23,400 | ) |
Recoveries | 19,806 |
| | 37,070 |
| | 18,362 |
| | 15,509 |
| | 17,214 |
|
Net loan and lease (charge-offs) recoveries | (11,242 | ) | | 16,882 |
| | (17,182 | ) | | (10,962 | ) | | (6,186 | ) |
Balance at end of period | $ | 609,375 |
| | $ | 620,013 |
| | $ | 604,663 |
| | $ | 610,277 |
| | $ | 675,907 |
|
| | | | | | | | | |
Ratio of allowance for loan losses to loans and leases, at period end | 1.52 | % | | 1.54 | % | | 1.51 | % | | 1.54 | % | | 1.71 | % |
| | | | | | | | | |
Ratio of allowance for loan losses to nonperforming loans, at period end | 163.45 | % | | 162.28 | % | | 197.18 | % | | 198.64 | % | | 192.32 | % |
| | | | | | | | | |
Annualized ratio of net loan and lease charge-offs to average loans | 0.11 | % | | (0.17 | )% | | 0.17 | % | | 0.11 | % | | 0.06 | % |
| | | | | | | | | |
Reserve for Unfunded Lending Commitments | | | | | | | | | |
Balance at beginning of period | $ | 82,287 |
| | $ | 81,076 |
| | $ | 79,377 |
| | $ | 95,472 |
| | $ | 88,693 |
|
Provision charged (credited) to earnings | (2,326 | ) | | 1,211 |
| | 1,699 |
| | (16,095 | ) | | 6,779 |
|
Balance at end of period | $ | 79,961 |
| | $ | 82,287 |
| | $ | 81,076 |
| | $ | 79,377 |
| | $ | 95,472 |
|
| | | | | | | | | |
Total Allowance for Credit Losses | | | | | | | | | |
Allowance for loan losses | $ | 609,375 |
| | $ | 620,013 |
| | $ | 604,663 |
| | $ | 610,277 |
| | $ | 675,907 |
|
Reserve for unfunded lending commitments | 79,961 |
| | 82,287 |
| | 81,076 |
| | 79,377 |
| | 95,472 |
|
Total allowance for credit losses | $ | 689,336 |
| | $ | 702,300 |
| | $ | 685,739 |
| | $ | 689,654 |
| | $ | 771,379 |
|
| | | | | | | | | |
Ratio of total allowance for credit losses to loans and leases outstanding, at period end | 1.72 | % | | 1.75 | % | | 1.71 | % | | 1.74 | % | | 1.95 | % |
ZIONS BANCORPORATION
Press Release – Page 12
July 20, 2015
Nonaccrual Loans by Portfolio Type
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
| | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | — |
| | | | $ | — |
| | | | $ | — |
| | | | $ | — |
| | | | $ | 29 |
| |
| | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | 165 |
| | | | 163 |
| | | | 106 |
| | | | 88 |
| | | | 83 |
| |
Leasing | | — |
| | | | — |
| | | | — |
| | | | 1 |
| | | | 1 |
| |
Owner occupied | | 89 |
| | | | 98 |
| | | | 87 |
| | | | 98 |
| | | | 101 |
| |
Municipal | | 1 |
| | | | 1 |
| | | | 1 |
| | | | 8 |
| | | | 9 |
| |
Total commercial | | 255 |
| | | | 262 |
| | | | 194 |
| | | | 195 |
| | | | 194 |
| |
| | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | |
Construction and land development | | 20 |
| | | | 22 |
| | | | 24 |
| | | | 25 |
| | | | 24 |
| |
Term | | 44 |
| | | | 38 |
| | | | 25 |
| | | | 30 |
| | | | 44 |
| |
Total commercial real estate | | 64 |
| | | | 60 |
| | | | 49 |
| | | | 55 |
| | | | 68 |
| |
| | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | |
Home equity credit line | | 9 |
| | | | 10 |
| | | | 12 |
| | | | 12 |
| | | | 11 |
| |
1-4 family residential | | 43 |
| | | | 48 |
| | | | 50 |
| | | | 43 |
| | | | 45 |
| |
Construction and other consumer real estate | | 1 |
| | | | 2 |
| | | | 2 |
| | | | 2 |
| | | | 2 |
| |
Bankcard and other revolving plans | | 1 |
| | | | — |
| | | | — |
| | | | — |
| | | | 1 |
| |
Other | | — |
| | | | — |
| | | | — |
| | | | — |
| | | | 1 |
| |
Total consumer | | 54 |
| | | | 60 |
| | | | 64 |
| | | | 57 |
| | | | 60 |
| |
Subtotal nonaccrual loans | | 373 |
| | | | 382 |
| | | | 307 |
| | | | 307 |
| | | | 322 |
| |
Total nonaccrual loans | | $ | 373 |
| | | | $ | 382 |
| | | | $ | 307 |
| | | | $ | 307 |
| | | | $ | 351 |
| |
Net Charge-Offs by Portfolio Type
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
(In millions) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Commercial: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 13 |
| | | | $ | (5 | ) | | | | $ | 18 |
| | | | $ | 9 |
| | | | $ | 7 |
| |
Leasing | | — |
| | | | — |
| | | | — |
| | | | — |
| | | | — |
| |
Owner occupied | | (3 | ) | | | | — |
| | | | — |
| | | | 2 |
| | | | (2 | ) | |
Municipal | | — |
| | | | — |
| | | | — |
| | | | — |
| | | | — |
| |
Total commercial | | 10 |
| | | | (5 | ) | | | | 18 |
| | | | 11 |
| | | | 5 |
| |
| | | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | | |
Construction and land development | | (1 | ) | | | | (3 | ) | | | | (1 | ) | | | | (2 | ) | | | | (3 | ) | |
Term | | 2 |
| | | | (10 | ) | | | | (1 | ) | | | | 2 |
| | | | 3 |
| |
Total commercial real estate | | 1 |
| | | | (13 | ) | | | | (2 | ) | | | | — |
| | | | — |
| |
| | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | |
Home equity credit line | | — |
| | | | (1 | ) | | | | — |
| | | | — |
| | | | 1 |
| |
1-4 family residential | | — |
| | | | 1 |
| | | | 1 |
| | | | (1 | ) | | | | (1 | ) | |
Construction and other consumer real estate | | — |
| | | | — |
| | | | — |
| | | | — |
| | | | — |
| |
Bankcard and other revolving plans | | 1 |
| | | | 1 |
| | | | — |
| | | | 1 |
| | | | 1 |
| |
Other | | (1 | ) | | | | — |
| | | | — |
| | | | — |
| | | | — |
| |
Total consumer loans | | — |
| | | | 1 |
| | | | 1 |
| | | | — |
| | | | 1 |
| |
Total net charge-offs (recoveries) | | $ | 11 |
| | | | $ | (17 | ) | | | | $ | 17 |
| | | | $ | 11 |
| | | | $ | 6 |
| |
ZIONS BANCORPORATION
Press Release – Page 13
July 20, 2015
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| June 30, 2015 | | March 31, 2015 | | December 31, 2014 |
(In thousands) | Average balance | | Average yield/rate | | Average balance | | Average yield/rate | | Average balance | | Average yield/rate |
ASSETS | | | | | | | | | | | |
Money market investments | $ | 8,414,602 |
| | 0.28 | % | | $ | 8,013,355 |
| | 0.26 | % | | $ | 8,712,588 |
| | 0.27 | % |
Securities: | | | | | | | | | | | |
Held-to-maturity | 583,349 |
| | 5.06 | % | | 632,927 |
| | 5.12 | % | | 634,973 |
| | 4.97 | % |
Available-for-sale | 4,585,760 |
| | 1.99 | % | | 4,080,004 |
| | 2.06 | % | | 3,676,403 |
| | 1.98 | % |
Trading account | 76,706 |
| | 3.19 | % | | 69,910 |
| | 3.47 | % | | 69,323 |
| | 3.02 | % |
Total securities | 5,245,815 |
| | 2.35 | % | | 4,782,841 |
| | 2.49 | % | | 4,380,699 |
| | 2.43 | % |
| | | | | | | | | | | |
Loans held for sale | 115,377 |
| | 3.48 | % | | 105,279 |
| | 3.52 | % | | 115,372 |
| | 3.53 | % |
Loans and leases 1 | 40,131,334 |
| | 4.22 | % | | 40,179,007 |
| | 4.21 | % | | 39,845,470 |
| | 4.31 | % |
Total interest-earning assets | 53,907,128 |
| | 3.42 | % | | 53,080,482 |
| | 3.46 | % | | 53,054,129 |
| | 3.49 | % |
Cash and due from banks | 591,347 |
| | | | 743,618 |
| | | | 764,518 |
| | |
Allowance for loan losses | (621,348 | ) | | | | (609,233 | ) | | | | (607,317 | ) | | |
Goodwill | 1,014,129 |
| | | | 1,014,129 |
| | | | 1,014,129 |
| | |
Core deposit and other intangibles | 22,135 |
| | | | 24,355 |
| | | | 26,848 |
| | |
Other assets | 2,564,121 |
| | | | 2,564,199 |
| | | | 2,692,339 |
| | |
Total assets | $ | 57,477,512 |
| | | | $ | 56,817,550 |
| | | | $ | 56,944,646 |
| | |
| | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | |
Savings and money market | $ | 24,514,516 |
| | 0.16 | % | | $ | 24,214,265 |
| | 0.16 | % | | $ | 24,089,519 |
| | 0.16 | % |
Time | 2,300,593 |
| | 0.43 | % | | 2,372,492 |
| | 0.43 | % | | 2,426,878 |
| | 0.45 | % |
Foreign | 325,640 |
| | 0.14 | % | | 351,873 |
| | 0.14 | % | | 325,013 |
| | 0.15 | % |
Total interest-bearing deposits | 27,140,749 |
| | 0.18 | % | | 26,938,630 |
| | 0.18 | % | | 26,841,410 |
| | 0.19 | % |
Borrowed funds: | | | | | | | | | | | |
Federal funds and other short-term borrowings | 214,287 |
| | 0.14 | % | | 219,747 |
| | 0.14 | % | | 205,507 |
| | 0.13 | % |
Long-term debt | 1,081,785 |
| | 7.10 | % | | 1,091,706 |
| | 7.03 | % | | 1,102,673 |
| | 6.81 | % |
Total borrowed funds | 1,296,072 |
| | 5.95 | % | | 1,311,453 |
| | 5.87 | % | | 1,308,180 |
| | 5.76 | % |
Total interest-bearing liabilities | 28,436,821 |
| | 0.44 | % | | 28,250,083 |
| | 0.45 | % | | 28,149,590 |
| | 0.44 | % |
Noninterest-bearing deposits | 20,984,073 |
| | | | 20,545,395 |
| | | | 20,706,849 |
| | |
Other liabilities | 559,722 |
| | | | 612,752 |
| | | | 563,014 |
| | |
Total liabilities | 49,980,616 |
| | | | 49,408,230 |
| | | | 49,419,453 |
| | |
Shareholders’ equity: | | | | | | | | | | | |
Preferred equity | 1,004,031 |
| | | | 1,004,015 |
| | | | 1,004,006 |
| | |
Common equity | 6,492,865 |
| | | | 6,405,305 |
| | | | 6,521,187 |
| | |
Total shareholders’ equity | 7,496,896 |
| | | | 7,409,320 |
| | | | 7,525,193 |
| | |
Total liabilities and shareholders’ equity | $ | 57,477,512 |
| | | | $ | 56,817,550 |
| | | | $ | 56,944,646 |
| | |
| | | | | | | | | | | |
Spread on average interest-bearing funds | | | 2.98 | % | | | | 3.01 | % | | | | 3.05 | % |
| | | | | | | | | | | |
Net yield on interest-earning assets | | | 3.18 | % | | | | 3.22 | % | | | | 3.25 | % |
1 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.
ZIONS BANCORPORATION
Press Release – Page 14
July 20, 2015
GAAP to Non-GAAP Reconciliations
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
(In thousands, except per share amounts) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Tangible Book Value per Common Share | | | | | | | | |
| | | | | | | | | |
Total shareholders’ equity (GAAP) | $ | 7,530,175 |
| | $ | 7,454,298 |
| | $ | 7,369,530 |
| | $ | 7,322,159 |
| | $ | 6,700,090 |
|
Preferred stock | (1,004,032 | ) | | (1,004,032 | ) | | (1,004,011 | ) | | (1,004,006 | ) | | (1,004,006 | ) |
Goodwill | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) |
Core deposit and other intangibles | (20,843 | ) | | (23,162 | ) | | (25,520 | ) | | (28,160 | ) | | (30,826 | ) |
Tangible common equity (non-GAAP) (a) | $ | 5,491,171 |
| | $ | 5,412,975 |
| | $ | 5,325,870 |
| | $ | 5,275,864 |
| | $ | 4,651,129 |
|
| | | | | | | | | |
Common shares outstanding (b) | 203,741 |
| | 203,193 |
| | 203,015 |
| | 202,898 |
| | 185,113 |
|
| | | | | | | | | |
Tangible book value per common share (non-GAAP) (a/b) | $ | 26.95 |
| | $ | 26.64 |
| | $ | 26.23 |
| | $ | 26.00 |
| | $ | 25.13 |
|
| | | | | | | | | |
| Three Months Ended |
(Dollar amounts in thousands) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Tangible Return on Average Tangible Common Equity | | | | | | | | |
| | | | | | | | | |
Net earnings (loss) applicable to common shareholders (GAAP) | $ | (1,100 | ) | | $ | 75,279 |
| | $ | 66,761 |
| | $ | 79,127 |
| | $ | 104,490 |
|
| | | | | | | | | |
Adjustments, net of tax: | | | | | | | | | |
Amortization of core deposit and other intangibles | 1,472 |
| | 1,496 |
| | 1,676 |
| | 1,690 |
| | 1,735 |
|
Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a) | $ | 372 |
| | $ | 76,775 |
| | $ | 68,437 |
| | $ | 80,817 |
| | $ | 106,225 |
|
| | | | | | | | | |
Average common equity (GAAP) | $ | 6,492,865 |
| | $ | 6,405,305 |
| | $ | 6,521,187 |
| | $ | 6,221,344 |
| | $ | 5,744,696 |
|
Average goodwill | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) | | (1,014,129 | ) |
Average core deposit and other intangibles | (22,135 | ) | | (24,355 | ) | | (26,848 | ) | | (29,535 | ) | | (32,234 | ) |
Average tangible common equity (non-GAAP) (b) | $ | 5,456,601 |
| | $ | 5,366,821 |
| | $ | 5,480,210 |
| | $ | 5,177,680 |
| | $ | 4,698,333 |
|
| | | | | | | | | |
Number of days in quarter (c) | 91 |
| | 90 |
| | 92 |
| | 92 |
| | 91 |
|
Number of days in year (d) | 365 |
| | 365 |
| | 365 |
| | 365 |
| | 365 |
|
| | | | | | | | | |
Tangible return on average tangible common equity (non-GAAP) (a/b/c*d) | 0.03 | % | | 5.80 | % | | 4.95 | % | | 6.19 | % | | 9.07 | % |
ZIONS BANCORPORATION
Press Release – Page 15
July 20, 2015
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
(Dollar amounts in thousands) | June 30, 2015 | | March 31, 2015 | | December 31, 2014 | | September 30, 2014 | | June 30, 2014 |
Efficiency Ratio | | | | | | | | | |
| | | | | | | | | |
Noninterest expense (GAAP) (a) | $ | 404,100 |
| | $ | 397,461 |
| | $ | 422,666 |
| | $ | 438,536 |
| | $ | 406,027 |
|
Adjustments: | | | | | | | | | |
Severance costs | 1,707 |
| | 2,253 |
| | 1,747 |
| | 4,919 |
| | 1,215 |
|
Other real estate expense | (445 | ) | | 374 |
| | (3,467 | ) | | 875 |
| | (266 | ) |
Provision for unfunded lending commitments | (2,326 | ) | | 1,211 |
| | 1,699 |
| | (16,095 | ) | | 6,779 |
|
Debt extinguishment cost | 2,395 |
| | — |
| | — |
| | 44,422 |
| | — |
|
Amortization of core deposit and other intangibles | 2,318 |
| | 2,358 |
| | 2,640 |
| | 2,665 |
| | 2,736 |
|
Restructuring costs | 650 |
| | — |
| | — |
| | — |
| | — |
|
Total adjustments | 4,299 |
| | 6,196 |
| | 2,619 |
| | 36,786 |
| | 10,464 |
|
| | | | | | | | | |
Add-back of adjustments (b) | (4,299 | ) |
| (6,196 | ) |
| (2,619 | ) |
| (36,786 | ) |
| (10,464 | ) |
Adjusted noninterest expense (non-GAAP) (a+b)=(c) | $ | 399,801 |
|
| $ | 391,265 |
|
| $ | 420,047 |
|
| $ | 401,750 |
|
| $ | 395,563 |
|
| | | | | | | | | |
Taxable-equivalent net interest income (GAAP) (d) | $ | 428,015 |
| | $ | 421,581 |
| | $ | 434,789 |
| | $ | 420,850 |
| | $ | 420,202 |
|
Noninterest income (GAAP) (e) | 421 |
| | 121,822 |
| | 129,396 |
| | 116,071 |
| | 124,849 |
|
Adjustments: | | | | | | | | | |
Fair value and nonhedge derivative income (loss) | 1,844 |
| | (1,088 | ) | | (961 | ) | | 44 |
| | (1,934 | ) |
Equity securities gains, net | 4,839 |
| | 3,353 |
| | 9,606 |
| | 440 |
| | 2,513 |
|
Fixed income securities gains (losses), net | (138,436 | ) | | (239 | ) | | (11,620 | ) | | (13,901 | ) | | 5,026 |
|
Total adjustments | (131,753 | ) | | 2,026 |
| | (2,975 | ) | | (13,417 | ) | | 5,605 |
|
| | | | | | | | | |
Add-back of adjustments (f) | 131,753 |
|
| (2,026 | ) |
| 2,975 |
|
| 13,417 |
|
| (5,605 | ) |
Adjusted taxable-equivalent net interest income and noninterest income (non-GAAP) (d+e+f)=(g) | $ | 560,189 |
|
| $ | 541,377 |
|
| $ | 567,160 |
|
| $ | 550,338 |
|
| $ | 539,446 |
|
| | | | | | | | | |
Efficiency ratio (c/g) | 71.4 | % |
| 72.3 | % |
| 74.1 | % |
| 73.0 | % |
| 73.3 | % |
This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results.
The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period and company-to-company comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company and in predicting future performance. These non-GAAP financial measures are used by management to assess the performance of the Company’s business or its financial position for evaluating bank reporting segment performance, for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting these non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
July 20, 2015 Second Quarter 2015 Financial Review
Forward-Looking Statements & Peer Group Abbreviations This presentation contains statements that relate to the projected or modeled performance or condition of Zions Bancorporation and elements of or affecting such performance or condition, including statements with respect to forecasts, opportunities, models, illustrations, scenarios, beliefs, plans, objectives, goals, guidance, expectations, anticipations or estimates, and similar matters. These statements constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act. Actual facts, determinations, results or achievements may differ materially from the statements provided in this presentation since such statements involve significant known and unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to: competitive pressures among financial institutions; economic, market and business conditions, either nationally, internationally, or locally in areas in which Zions Bancorporation conducts its operations, being less favorable than expected; changes in the interest rate environment reducing expected interest margins; changes in debt, equity and securities markets; adverse legislation or regulatory changes; Federal Reserve reviews of our annual capital plan; and other factors described in Zions Bancorporation’s most recent annual and quarterly reports. In addition, the statements contained in this presentation are based on facts and circumstances as understood by management of the company on the date of this presentation, which may change in the future. Except as required by law, Zions Bancorporation disclaims any obligation to update any statements or to publicly announce the result of any revisions to any of the forward-looking statements included herein to reflect future events, developments, determinations or understandings. 2 BAC: Bank of America Corporation BBT: BB&T Corporation CMA: Comerica Incorporated C: Citigroup Inc. FITB: Fifth Third Bancorp HBAN: Huntington Bancshares Incorporated JPM: JPMorgan Chase & Co. KEY: KeyCorp MTB: M&T Bank Corporation PNC: PNC Financial Services Group, Inc. RF: Regions Financial Corporation STI: SunTrust Banks, Inc. UB: UnionBanCal Corporation USB: U.S. Bancorp WFC: Wells Fargo & Company ZION: Zions Bancorporation
On June 1, 2015, Zions announced several organizational and operational changes, including: • Consolidate bank charters from seven to one while maintaining local leadership, local product pricing, and local brands • Create a Chief Banking Officer position, with responsibility for retail banking, wealth management, and residential mortgage lending • Consolidate risk functions, while emphasizing local credit decision-making • Consolidate various non-customer facing operations • Continue investment in building best-in-class technology infrastructure These changes are designed to: • Improve the customer experience (e.g., faster turnaround times) • Simplify the corporate structure and how Zions does business • Drive substantial positive operating leverage: + Increased revenue from growth in loans, deployment of cash to mortgage-backed securities, interest-rate swaps, and core fee income + Holding noninterest expense to below $1.6 billion in FY15 and FY16, slight increase in FY17 = Efficiency Ratio ≤ 70% in 2H15, ≤ 66% in FY16, and low 60s in FY171 3 Major 2Q15 Announcements: Efficiency Initiative 1 Assumes two 25 basis point fed funds rate increases by the end of 2017
Major 2Q15 Announcements: Sold the remainder of the CDOs as de-risking efforts continue 4 • As announced in mid-June, Zions sold the remaining balance of its collateralized debt obligation (CDO) portfolio. • Recognized loss of $137 million on $574 million (amortized cost) of such securities. • 2Q15 sale effectively reduced risk-weighted assets by $1.0 billion • Zions recognized approximately $2 million of interest income from CDOs in 2Q15 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 4Q12 4Q13 4Q14 2Q15 CDOs, Par Value In Millions
Credit Quality 5 -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 2Q14 3Q14 4Q14 1Q15 2Q15 Key Credit Quality Ratios Classifieds / Loans Nonperforming Assets / Loans Net Charge-offs / Loans Net Charge-offs / Loans annualized • Continued strong credit quality performance. Relative to March 31, 2015: • Classified loans increased 1.9% • NPAs declined 3.3% • Moderate increase in classified loans attributable to energy loans; loss content expected to be low • Allowance for credit loss remains strong, at 1.72% of total loans and leases • 1.9x coverage of NPAs • 15x coverage of annualized NCOs
ENERGY-RELATED EXPOSURE* % of total loans % of total loans % of total loans (In millions) June 30, 2015 March 31, 2015 December 31, 2014 Loans and leases Oil and gas-related $ 2,883 7.2 % $ 3,157 7.9 % $ 3,073 7.7 % Alternative energy 222 232 225 Total loans and leases 3,105 3,389 3,298 Unfunded lending commitments 2,403 2,451 2,731 Total credit exposure $ 5,508 $ 5,840 $ 6,029 Private equity investments $ 13 $ 20 $ 21 Energy Portfolio Detail 6 Distribution of oil and gas-related balances Upstream – exploration and production 33 % 34 % 34 % Midstream – marketing and transportation 20 % 21 % 19 % Downstream – refining 5 % 4 % 4 % Other non-services 3 % 2 % 2 % Oilfield services 30 % 30 % 31 % Energy service manufacturing 9 % 9 % 10 % Total loans and leases 100 % 100 % 100 % *Because many borrowers operate in multiple businesses, judgment has been applied in characterizing a borrower as energy-related, including a particular segment of energy-related activity, e.g., upstream or downstream. Energy loans performing better than initially expected due to a variety of factors, including strong YTD capital markets: • $13 billion common raised • $69 billion Investment Grade debt raised • $27 billion High Yield debt raised Substantial influx of capital from private equity firms Continue to expect further downgrades in 2H15, but substantial qualitative reserve should mitigate the need for substantial further provisioning Source of energy capital market data: Deutsche Bank
Financial Results 7 Three Months Ended (Dollar amounts in thousands, except per share data) June 30, 2015 March 31, 2015 June 30, 2014 Earnings Results: Diluted Earnings Per Share $ (0.01) $ 0.37 $ 0.56 Adjusted Earnings Per Share* 0.41 NA NA Net Interest Income 423,704 417,346 416,284 Provision for Loan Losses 566 (1,494) (54,416) Noninterest Income 421 121,822 124,849 Noninterest Expense 404,100 397,461 406,027 Net Earnings (Loss) Applicable to Common Shareholders (1,100) 75,279 104,490 Ratios: Return on Average Assets 0.10% 0.66% 0.87% Return on Average Common Equity (0.07)% 4.77% 7.30% Net Interest Margin 3.18% 3.22% 3.29% Yield on Loans 4.22% 4.21% 4.41% Yield on Securities 2.35% 2.49% 2.63% Average Cost of Deposits** 0.10% 0.11% 0.10% Efficiency Ratio 71.4% 72.3% 73.3% Basel III Common Equity Tier 1 11.91% 11.76% Basel I Tier 1 Common Equity 10.45% * Adjusted for the sale of remaining CDOs in 2Q2015. **Includes noninterest bearing deposits Efficiency ratio defined as noninterest expense adjusted for severance, other real estate expense, provision for unfunded lending commitments, debt extinguishment costs, amortization of core deposit intangibles, restructuring costs, expressed as a percentage of, the sum of fully-taxable equivalent net interest income, noninterest income excluding gains / losses on securities , and fair value and nonhedge derivative income.
Net Interest Income: Net Interest Margin Remains Strong 8 • Continued deposit growth without commensurate increase in loans resulted in slight NIM pressure • Continued investment in medium- duration government agency mortgage-backed securities & execution of interest rate swaps • Continue to expect substantial improvement in earnings if short- term interest rates increase 2.5% 2.7% 2.9% 3.1% 3.3% 3.5% 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 Net Interest Margin (NIM) ZION Peer Median Peer group displayed on slide 2
Net Interest Income: Loan pricing discipline supports NIM stability 9 3.0% 3.5% 4.0% 4.5% 5.0% 2Q14 3Q14 4Q14 1Q15 2Q15 Portfolio Yield vs. Production Yield New Production Coupon Loans HFI Yield Loans HFI Coupon • Stable linked-quarter loan yield • Coupon rate of new loan production (green) increased to 3.74% from 3.65% in the prior quarter, primarily due to a shift towards more smaller and mid- sized loans. • Volume of new production (not shown) increased 5% from prior quarter, but was offset by substantially higher prepayment rates in the Term CRE and 1-4 Family categories Loans HFI = Loans held for investment; the difference between the coupon and the yield is the net of amortizing fee income, partially offset by amortizing expense.
Noninterest Income - Informing the Outlook: Insight into non run-rate items 10 • Strength across multiple businesses • 2Q15 increase (vs. 1Q15) attributable to: • Loan fees • Business and consumer card activity • Customer interest rate swap activity • Top year-over-year performers: • Treasury management (including bankcard) • Mortgage $0.4 $133.6 $1.8 $2.4 $129.8 $0 $20 $40 $60 $80 $100 $120 $140 $160 Reported Noninterest Income Securities Gains/Losses Fair Value and nonhedge Derivative Income/Losses Gain on Branch Sale Adjusted Noninterest Income Adusted Noninterest Income In Millions Securities Gains / Losses includes both Fixed Income gains/losses and Equity gains/losses. Sale of the remaining CDOs this quarter accounted for $137 million of losses.
Noninterest Expense - Informing the Outlook: Insight into seasonality and other specific items 11 $404.1 $5.9 $2.6 $2.7 $2.4 $1.7 $0.7 $9.2 $2.3 $399.6 $380 $385 $390 $395 $400 $405 Reported NIE Seasonal Share- Based Compensation Incentive Plans Based on Stock Price Indemnification Asset Expense Debt restructuring Severance Professional Services Related to Efficiency Initiative Insurance Recovery on Previous Litigation Provision for Unfunded Adjusted NIE Noninterest Expense Adjustments: 2Q 2015 In Millions Adjusted noninterest expense adjusts expenses attributable to share-based compensation grants that immediately vest for employees that are immediately eligible for retirement; incentive compensation plans whereby the expense of the plan increases as the stock price increases; the indemnification asset expense, which is the FDIC’s portion of excess income realized from loans purchased from the FDIC in 2009; debt restructuring expense due to prepayment penalties incurred by paying off debt early; severance; certain professional services expenses; insurance recoveries related to losses incurred in the fourth quarter of 2014; the provision for unfunded lending commitments. • Noninterest expenses were somewhat higher than in the prior quarter due to several items as shown above, partially offset by a $9.2 million insurance recovery on previous litigation and a negative provision for unfunded commitments. • The adjusted noninterest expense figure of $399.6 million is provided to inform the outlook into the second half of 2015. It is not intended to be a “core” or “operating” figure, but may be useful to some investors. • Cost cutting from the efficiency initiative is still in the early stages. • The Company is reiterating its commitment to maintain total noninterest expense (including seasonal items, but excluding restructuring and severance) below $1.6 billion in 2015 and 2016, with a slight increase above that threshold in 2017.
Efficiency Ratio 12 73.3% 73.0% 74.1% 72.3% 71.4% 55% 60% 65% 70% 75% 80% 2Q14 3Q14 4Q14 1Q15 2Q15 Noninterest Expenses as a Percentage of Net Revenue1 • The efficiency ratio improved modestly to 71.4%, from 73.3% a year ago. • The Company is reiterating its commitment to holding the efficiency ratio to 70% or better in the second half of 2015, 66% or better in 2016, and in the low 60s in 2017. 1) Efficiency ratio defined as noninterest expense adjusted for severance, other real estate expense, provision for unfunded lending commitments, debt extinguishment costs, amortization of core deposit intangibles, restructuring costs, expressed as a percentage of, the sum of fully-taxable equivalent net interest income, noninterest income excluding gains / losses on securities, and fair value and nonhedge derivative income.
Next 12-Month Outlook Summary Relative to 2Q15 Results Topic Outlook Comment Loan Balances Slightly to Moderately Increasing • Prepayments remain volatile, energy lending softness making net loan growth difficult to forecast Net Interest Income Moderately Increasing • Driven by loan growth, MBS purchases, and debt reduction late in 2H15 • Deploying cash into medium duration (~3.5 years), HQLA- qualifying agency MBS • Adding 3-5 year interest rate swaps Provisions Flat to Slightly Positive • On average, provisions likely to be flat to slightly positive, reflecting low net charge-offs, loan growth, and expected downgrades of energy-related loans Fee Income Moderately Increasing • Excluding securities gains/losses, branch sales, fair value & nonhedge derivative income, similar items Noninterest Expense Stable • We expect NIE of less than $1.6 billion in FY15 and FY16 • Includes elevated spending on technology systems overhaul to continue, although substantially embedded in 2Q15 run-rate. 13
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