Zions Bancorporation N.A.

Ladies and gentlemen, thank you for standing by and welcome to Zion's BAN Corporation's fourth quarter 2021 earnings results webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to turn the conference over to your speaker for today. Mr. James Abbott, you may begin.

Thank you, Tawanda, and good evening, everyone. We welcome you to this conference call to discuss our 2021 fourth quarter earnings and full year earnings results. I would like to remind you that during this call, we will be making forward-looking statements, although actual results may differ materially. We encourage you to review the disclaimer in the press release or slide deck on slide two dealing with forward-looking information and the presentation of non-GAAP measures, which applies equally to statements made during this call. A copy of the earnings release as well as the slide deck are available at zionsbankcorporation.com. For our agenda today, Chairman and Chief Executive Officer Harris Simmons will provide opening remarks. followed by comments from Scott McLean, our President and Chief Operating Officer. Paul Burtis, our Chief Financial Officer, will conclude by providing additional detail on Zion's financial condition. With us also today is Keith Mayo, our Chief Risk Officer. We intend to limit the length of this call to one hour. During the question and answer section of the call, we request that you limit your questions to one primary and one follow-up question to enable other participants to ask questions. I will now turn the time over to Harris.

Thank you very much, James, and we want to welcome all of you to our call this evening. Beginning on slide three are themes that are particularly applicable to Zions in recent quarters as well as those that are likely to be themes over the near-term horizon. Loans exclusive of PPP loans increased $1.4 billion during the quarter. roughly double the dollar amount of growth in the third quarter. One of our primary goals is to increase new-to-bank customers, and our promotional campaigns during the fourth quarter were successful at facilitating that, which Scott McLean will discuss more in his section. In addition, we saw improved demand for revolving credit for the first time in several quarters, with line utilization improving somewhat. We saw strong deposit growth, which continued in the fourth quarter, It's positioned Zions well relative to many of our peers to be able to invest in securities and offer promotions on loan products to core customer segments. As reported by the Federal Reserve, domestic commercial banks grew deposits by 12% over the past year, while Zions accomplished growth of 19%. Third, we're well positioned for rising interest rates. Met in this form three months ago, the interest rate futures market had implied a single quarter point rate hike by mid-2022. Today, we have approximately doubled that, and by year end, the futures market is pricing in for rate hikes. We're well positioned for this environment with each quarter point increase in rates experienced in parallel across the curve, adding approximately $60 million of net interest income over the subsequent year, or about 30 cents per share. Paul will add some additional detail on this topic in his prepared remarks. The final item on this slide refers to our ongoing significant investment in technology, which is designed to enable Zions to remain very competitive in the future relative to the largest U.S. banks, the fintechs, and to well-established community banks. Turning to slide four, we are faced with the quarterly financial results. We'll touch on all of these items in subsequent slides, so I'll move on to slide five. Valued earnings per share was $1.34. Comparing the fourth quarter to the third quarter, the single most significant difference was in the provision for credit loss, which was $0.34 per share variance, which can be seen on the bottom left chart. Although we had only one basis point or one one-hundredth of a percent of annualized net loan charge-offs in the fourth quarter and a substantial length quarter improvement in problem loans, we judged that the environment was somewhat more uncertain than last quarter, especially with respect to the potential impact of the Omicron variant of the COVID virus. Consequently, we slightly increased our allowance for credit loss from the prior quarter. Our provision this quarter reduced our earnings per share by 12 cents as shown on the bottom left chart, whereas in the prior quarter, the negative provision lifted earnings per share by 22 cents. Additionally, there were other items noted on the right side of the page that had a significant effect on earnings per share. Adjusting for those items, the length quarter earnings per share was relatively stable. We think this is encouraging given the decline of about 10 cents per share in income from PPP loans. On slide six, we highlight some balance sheet profitability metrics, which you can review on your own. Turning to slide seven, our fourth quarter adjusted pre-provision net revenue was $288 million. The adjustments, which most notably exclude the gain or loss on securities, are shown in the latter pages of the press release in this slide deck. However, the gain on the sale of buildings and the expense associated with the contribution to our charitable foundation have not been excluded. Both of those items were similar in size. The PP&R bars are split into two portions. The bottom portion represents what we think of as generally recurring income, while the top portion denotes the revenue net of direct external professional services expenses we've received from PPP loans. We saw a $20 million decline in such income in the fourth quarter relative to the third quarter. However, we were able to offset that impact with growth in recurring net interest income from both securities and loans made possible through strong deposit growth. Moving to slide eight, a significant highlight for us this quarter was the strong performance in average and period-end loan growth. Average non-PPP loans increased $1.2 billion, or an annualized 2.5% when compared to the third quarter. And on a period end basis, that growth was $1.4 billion, or 2.9%. The yield on average total loans decreased slightly from the prior quarter, which is attributable to a shift in the mix of loans, with average PPP loans declining $1.4 billion and being replaced by non-PPP loans. Recall the PPP loans have experienced yields near 7 percent due to accelerated amortization of capitalized fees, and the loans that are replacing them have yields generally in the 3 to 4 percent range. Excluding PPP loans, the yield declined three basis points to 3.56 percent from 3.59 percent. Deposit costs remain low. Shown on the right, our cost of total deposits was stable at just three basis points in the fourth quarter. Deposit growth remains strong with an average total deposits increasing $4 billion or 5.2% unannualized and period end deposits increasing $4.9 billion or 6.3%. In part because of the quantitative tapering by the Federal Reserve, we do not expect deposit growth to remain as strong in coming quarters. As previously noted, another significant highlight for the quarter was the credit quality of the loan portfolio, as illustrated on slide 9. Relative to the prior quarter, we saw significant improvement in problem loans. Using the broadest definition of problem loans, criticized and classified loans dropped 19%, and classified loans declined 11%. Although not shown relative to the prior quarter, special mention loans declined 34%. Of course, the metric that matters in the end is the net charge-off to average loans ratio. We experienced just one basis point of annualized loan losses relative to average total non-PPP loans, and the same holds true of the full year figure. Shown in the chart on the bottom right, one can see the volatility of the provision contrasted with the relative stability of net charge-offs. This is mostly the result of changing economic forecasts. Now I'd like to turn the time over to Scott McClain, our President and Chief Operating Officer, and he'll provide an update on certain fee income and growth initiatives and our technology initiatives. Scott?