ZIONS BANCORPORATION, N.A. FORWARD-LOOKING INFORMATION This quarterly report on Form 10-Q includes "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, industry results or regulatory outcomes to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements include, among others: •statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance ofZions Bancorporation, National Association and its subsidiaries (collectively "Zions Bancorporation, N.A .," "the Bank," "we," "our," "us"), and statements concerning the potential effects of the COVID-19 pandemic on the Bank's businesses and financial results and condition; and •statements preceded by, followed by, or that include the words "may," "might," "can," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "target," "commit," "design," "plan," "projects," "will," and the negative thereof and similar words and expressions. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about future financial and operating results. Actual results and outcomes may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Management's Discussion and Analysis. Important risk factors that may cause such material differences include, but are not limited to: •the effect of the COVID-19 pandemic, and other infectious illness outbreaks that may arise in the future, on the Bank's customers, businesses, liquidity, financial results and overall condition and which has created significant uncertainties inU.S. and global markets; •changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as theSmall Business Administration's ("SBA") Paycheck Protection Program ("PPP"), theFederal Reserve Board's efforts to provide liquidity to the financial system and provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic; •the Bank's participation as a lender in the PPP and similar programs and its effect on the Bank's liquidity, financial results, businesses and customers, including the availability of program funds and the ability of customers to comply with requirements and otherwise perform with respect to loans obtained under such programs; •the Bank's ability to successfully execute its business plans, manage its risks, and achieve its objectives, including its operating leverage; •the impact of acquisitions, dispositions, and corporate restructurings; •increases in the levels of losses, customer bankruptcies, bank failures, claims, and assessments; •the ability of the Bank to retain and recruit executives and other personnel necessary for their businesses and competitiveness; •changes in local, national and international political and economic conditions, including without limitation the political and economic effects of the fiscal imbalance inthe United States ("U.S.") and other countries, potential or actual downgrades in ratings of sovereign debt issued by the U. S. and other countries, and other major developments, including wars, military actions, and terrorist attacks; 3 -------------------------------------------------------------------------------- Table of ContentsZIONS BANCORPORATION , NATIONAL ASSOCIATION AND SUBSIDIARIES •changes in business, financial and commodity market prices and conditions, either internationally, nationally or locally in areas in which the Bank conducts its operations, including without limitation rates of business formation and growth, commercial and residential real estate development, real estate prices, agricultural-related commodity prices, and oil and gas-related commodity prices, particularly with respect to the effects on the economy and the Bank's customers, businesses, and financial results of segments subject to high volatility and stress that may be exacerbated by the COVID-19 pandemic, such as the recent sudden decreases in oil and gas prices; •changes in markets for equity, fixed-income, and other securities, commodities, including availability, market liquidity levels, and pricing; •changes in interest rates, the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows and competition; •uncertainty regarding the future of the London Interbank Offered Rate ("LIBOR"), and the potential transition away from LIBOR toward new benchmark interest rates; •the rate of change of the Bank's interest-sensitive assets and liabilities relative to changes in benchmark interest rates; •changes in fiscal, monetary, regulatory, trade and tax policies and laws, and regulatory assessments and fees, including policies of theU.S. Department of Treasury , theOffice of the Comptroller of the Currency ("OCC"), theBoard of Governors of theFederal Reserve System , theFederal Deposit Insurance Corporation ("FDIC"), theSecurities and Exchange Commission ("SEC"), and theConsumer Financial Protection Bureau ("CFPB"); •changes in consumer spending and savings habits; •inflation and deflation; •increased competitive challenges and expanding product and pricing pressures among financial institutions; •legislation or regulatory changes which adversely affect the Bank's operations or business; •the Bank's ability to comply with applicable laws and regulations; •costs of deposit insurance and changes with respect toFDIC insurance coverage levels; •any impairment of our goodwill or other intangibles, or any adjustment of valuation allowances on our deferred tax assets ("DTAs") due to adverse changes in the economic environment, declining operations of the reporting unit, or a change to the corporate statutory tax rate or other similar changes if and as implemented by local and national governments, or other factors; •the impact of rules and regulations on our required regulatory capital and liquidity levels, governmental assessments on us, the scope of business activities in which we may engage, the manner in which we engage in such activities, and the fees we may charge for certain products and services; •uncertainties related to the application of the National Bank Act of 1863, 12 U.S.C. 38 (the "National Bank Act") and OCC regulations to the Bank's corporate affairs as more fully described under "Risk Factors" in our 2019 Annual Report on Form 10-K; •changes in accounting policies or procedures as may be required by theFinancial Accounting Standards Board ("FASB") or regulatory agencies; •risks and uncertainties related to the ability to obtain shareholder and regulatory approvals when required, or the possibility that such approvals may be delayed; •new legal claims against the Bank, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies, or changes in existing legal matters; •economies of scale attendant to the development of digital and other technologies by much larger bank and non-bank competitors, and the possible entry of technology "platform" companies into the financial services business; •the Bank's ability to develop and maintain secure and reliable information technology systems, including as necessary to guard against fraud, cybersecurity and privacy risks; and •the Bank's implementation of new technologies, including its core deposit system, to remain competitive. 4 -------------------------------------------------------------------------------- Table of ContentsZIONS BANCORPORATION , NATIONAL ASSOCIATION AND SUBSIDIARIES Further, statements about the potential effects of the COVID-19 pandemic on the Bank's businesses and financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Bank's control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on the Bank, its customers and third parties. We caution against the undue reliance on forward-looking statements, which reflect our views only as of the date they are made. Except to the extent required by law, the Bank 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. GLOSSARY OF ACRONYMS ACL Allowance for Credit Losses GAAP Generally Accepted Accounting Principles AFS Available-for-Sale HECL Home Equity Credit Line ALCO Asset/Liability Committee HTM Held-to-Maturity ALLL Allowance for Loan and Lease Losses IMG International Manufacturing Group ALM Asset Liability Management LIBOR London Interbank Offered Rate Amegy Amegy Bank, a division of Zions MD&A Management's Discussion and Analysis Bancorporation, National Association AOCI Accumulated Other Comprehensive Income Municipalities State and Local Governments ASC Accounting Standards Codification NASDAQ National Association of Securities Dealers Automated Quotations ASU Accounting Standards Update NBAZ National Bank of Arizona, a division of Zions Bancorporation, National Association bps basis points NIM Net Interest Margin California Bank & Trust, a division of Nevada State Bank, a division of Zions CB&T Zions Bancorporation, National NSB Bancorporation, National Association Association CECL Current Expected Credit Loss OCC Office of the Comptroller of the Currency CET1 Common Equity Tier 1 (Basel III) OCI Other Comprehensive Income CFPB Consumer Financial Protection Bureau OREO Other Real Estate Owned CLTV Combined Loan-to-Value Ratio OTTI Other-Than-Temporary Impairment COSO Committee of Sponsoring Organizations of PEI Private Equity Investment the Treadway Commission CRE Commercial Real Estate PPNR Pre-provision Net Revenue CVA Credit Valuation Adjustment PPP Paycheck Protection Program
Dodd-Frank Act Dodd-Frank Wall Street Reform and PPPLF
Payroll Protection Program Liquidity
Consumer Protection Act Facility
DTA Deferred Tax Asset ROC Risk Oversight Committee
EaR Earnings at Risk ROU Right-of-Use
ERM Enterprise Risk Management RULC Reserve for Unfunded Lending Commitments
EVE Economic Value of Equity at Risk S&P Standard and Poor's
FASB Financial Accounting Standards Board SBA Small Business Administration
FDIC Federal Deposit Insurance Corporation SBIC Small Business Investment Company
FDICIA Federal Deposit Insurance Corporation SEC Securities and Exchange Commission
Improvement Act
The Commerce Bank of Washington, a division
FHLB Federal Home Loan Bank TCBW of Zions Bancorporation, National
Association
FTP Funds Transfer Pricing TDR Troubled Debt Restructuring
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Table of Contents
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Tier 1 Common Equity Tier 1 (Basel III) and
Additional Tier 1 Capital Association
U.S. United States Zions Bank Zions Bank, a division of Zions
Bancorporation, National Association
Vectra Bank Colorado, a division of
Vectra Zions Bancorporation, National
Association
GAAP to NON-GAAP RECONCILIATIONS
This Form 10-Q presents non-GAAP financial measures, in addition to GAAP
financial measures, to provide investors with additional information. The
adjustments to reconcile from the applicable GAAP financial measures to the
non-GAAP financial measures are presented in the following schedules. The Bank
considers these adjustments to be relevant to ongoing operating results and
provide a meaningful base for period-to-period and company-to-company
comparisons. These non-GAAP financial measures are used by management to assess
the performance and financial position of the Bank and for presentations of Bank
performance to investors. The Bank further believes that presenting these
non-GAAP financial measures will permit investors to assess the performance of
the Bank on the same basis as that applied by management.
Non-GAAP financial measures have inherent limitations, and are not required to
be uniformly applied by individual entities. 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.
The following are non-GAAP financial measures presented in this Form 10-Q and a
discussion of the reasons for which management uses these non-GAAP measures:
Return on Average Tangible Common Equity - this schedule also includes "net
earnings applicable to common shareholders, excluding the effects of the
adjustment, net of tax" and "average tangible common equity." Return on average
tangible common equity is a non-GAAP financial measure that management believes
provides useful information to management and others about the Bank's use of
shareholders' equity. Management believes the use of ratios that utilize
tangible equity provides additional useful information about performance because
they present measures of those assets that can generate income.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
Three Months Ended
June 30 ,
2020 2020 2019 2019
Net earnings applicable to common shareholders
(GAAP) $ 57 $ 6 $ 174 $ 189
Adjustment, net of tax:
Amortization of core deposit and other
intangibles - - - -
Net earnings applicable to common shareholders,
excluding the effects of the adjustment, net of
tax (non-GAAP) (a) $ 57 $ 6 $ 174 $ 189
Average common equity (GAAP) $ 7,030 $ 6,924 $ 6,866 $ 6,988
Average goodwill and intangibles (1,014) (1,014) (1,014) (1,014)
Average tangible common equity (non-GAAP) (b) $ 6,016 $ 5,910 $ 5,852 $ 5,974
Number of days in quarter (c) 91 91 92 91
Number of days in year (d) 366 366 365 365
Return on average tangible common equity
(non-GAAP) (a/b/c)*d 3.8 % 0.4 % 11.8 % 12.7 %
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Table of ContentsZIONS BANCORPORATION , NATIONAL ASSOCIATION AND SUBSIDIARIES Tangible Equity Ratio, Tangible Common Equity Ratio, and Tangible Book Value per Common Share - this schedule also includes "tangible equity," "tangible common equity," and "tangible assets." Tangible equity ratio, tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes provides additional useful information about the levels of tangible assets and tangible equity in relation to outstanding shares of common stock. Management believes the use of ratios that utilize tangible equity provides additional useful information to management and others about capital adequacy because they present measures of those assets that can generate income. TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES)
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