Zions Banc 1Q16 Earnings Call Notes

Zions Bancorporation’s (ZION) CEO Harris Simmons on Q1 2016 Results

Strong loan growth has been an emerging trend

“Another item that appears to be an emerging trend in the last six months is stronger loan growth. In the first quarter, loans increased at an annualized rate of 7.6%, accelerating from the prior quarter’s rate of 5.3%. It was one of the best first quarter growth rates Zions has posted in the last decade.”

Excluding energy credit quality is solid

“excluding energy loans, credit quality is really solid across the Company by various loan types and geographies. Total classified loans increased to 3.7% from 3.4% in the prior quarter, but aside from energy, classified loans declined slightly to 2% of total loans.”

Loan growth has been encouraging so far in the second quarter

“loan growth for us has been a little bit of a fickle kind of a thing the last several quarters. What we can tell you is that we have seen quite a lot of consistency over the last six months and so far what we’re seeing into the second quarter is encouraging. But it’s hard to extrapolate that out very far.”

Paul Burdiss

Continue to be cautious on rate sensitivity

“We continue to exercise caution with respect to the impact on overall balance sheet sensitivity, interest rate sensitivity, as we purchased fixed-rate investments, and with respect to duration extension risk inherent in the investment [ph] portfolio. The securities we are adding are relatively short in duration, just over three years. The duration of the entire securities portfolio is about 2.6 years today.”

Loan growth coming from strength in C&I and CRE

“As shown, Zions is generally growing where we want to grow, while owner-occupied C&I and residential mortgage remain opportunities for additional growth. Compared to the prior quarter, period-end loans grew 7% on an annualized basis, with particular strength in C&I and term CRE. It is important to note that we have accomplished this growth while maintaining our underwriting standards.”

Many criticized energy loans are still current on payments

“it may be helpful to understand that the vast majority of our criticized and classified energy loans, and even non-accrual loans, are still current on their payments. Only 9% of non-accrual loans are past due.”

If oil were to hover in mid 30s…

“if oil were to hover in the mid-30s area, we currently expect losses in 2016 to be in the $100 million area. Recall, our prior outlook was for a range of $75 million to $100 million for the year. Clearly, prices today are above the mid-$30 range level. However, we always want to be prepared for lower prices. ”

Scott Mclean

Erring on the side of caution for oil modeling

“We’ve seen $40 before. We saw it coming down. And so now we’re seeing it going up. But we could be back at $30 again. So we’re just — prefer to err on a more conservative side.”

Even if prices come back, oil service will be under pressure for a while

“I would also say on the — as it relates to oilfield service, the longer this goes, which it’s going to go, you know, even if prices improve, there is general understanding in the industry that the oilfield companies will not come back as quickly as the E&P companies do, there are a lot of reasons for that, and so we feel pretty confident that oilfield service will be under considerable stress for the remainder of this year and a fair amount of next year.”

Banks are putting in anti-hoarding provisions to prevent defensive draws

“Well, first of all, the — in terms of kind of the second part of your question, in terms of mitigating it, most banks are putting in anti-hoarding provisions and you don’t have to wait for the maturity of a transaction to do that. It’s generally almost everything in the energy space right now is being amended, renegotiated, etcetera, every six months or so. And so we’re having pretty good luck at getting these anti-hoarding provisions in, number one.”