Zions Bancorporation, National Association (ZION, NASDAQ)
Industry: Banks - Regional
Annual report, fiscal year 2015


ZIONS BANCORPORATION

Increasing

2015

YEAR IN REVIEW

Improving

Investing



## A COLLECTION OF GREAT BANKS

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. Zions is a national leader in small business lending and public finance advisory services, and received 31 “Excellence” awards by Greenwich Associates for the 2015 survey — the most of all banks in the United States.

## ZIONS BANK

Zions Bank
Salt Lake City, UT; Boise, ID;
Jackson, WY
$20 billion assets



## NEVADA STATE BANK

Nevada State Bank
Las Vegas, NV
$4 billion assets



## AmegyBank of Texas

Amegy Bank of Texas
Houston, TX
$14 billion assets



California Bank & Trust
San Diego, CA
$12 billion assets



## VECTRABANK

National Bank of Arizona
Phoenix, AZ
$5 billion assets

Vectra Bank Colorado
Denver, CO
$3 billion assets

THE COMMERCE BANK

The Commerce Bank of Washington
The Commerce Bank of Oregon
Portland, OR / Seattle, WA
$1 billion assets

## INTEREST EARNING ASSET MIX






## FINANCIAL HIGHLIGHTS

<table><tr><td>(In millions, except per share amounts)</td><td>2015/2014 Change</td><td>2015</td><td>2014</td><td>2013</td><td>2012</td></tr><tr><td>FOR THE YEAR</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net interest income (A)</td><td>2%</td><td>$ 1,715.3</td><td>$1,680.0</td><td>$ 1,696.3</td><td>$ 1,731.9</td></tr><tr><td>Noninterest income (B)</td><td>-26%</td><td>377.1</td><td>508.6</td><td>337.4</td><td>419.9</td></tr><tr><td>Total net revenue (A+B)</td><td>-4%</td><td>2,092.4</td><td>2,188.6</td><td>2,033.7</td><td>2,151.8</td></tr><tr><td>Noninterest expense</td><td>-4%</td><td>1,600.5</td><td>1,665.3</td><td>1,714.4</td><td>1,595.0</td></tr><tr><td>Provision for loan losses</td><td>141%</td><td>40.0</td><td>(98.1)</td><td>(87.1)</td><td>14.2</td></tr><tr><td>Income (loss) before income taxes</td><td>-27%</td><td>451.9</td><td>621.4</td><td>406.4</td><td>541.6</td></tr><tr><td>Income taxes (benefit)</td><td>-36%</td><td>142.4</td><td>222.9</td><td>142.9</td><td>193.4</td></tr><tr><td>Net income (loss)</td><td>-22%</td><td>309.5</td><td>398.5</td><td>263.5</td><td>348.2</td></tr><tr><td>Preferred stock dividends and redemptions</td><td>-13%</td><td>(62.9)</td><td>(71.9)</td><td>(95.5)</td><td>(170.9)</td></tr><tr><td>Net earnings (loss) applicable to common shareholders</td><td>-24%</td><td>246.6</td><td>326.6</td><td>294.0</td><td>178.6</td></tr><tr><td>PER COMMON SHARE</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net earnings (loss) - diluted</td><td>-29%</td><td>1.20</td><td>1.68</td><td>1.58</td><td>0.97</td></tr><tr><td>Net earnings (loss) - basic</td><td>-29%</td><td>1.20</td><td>1.68</td><td>1.58</td><td>0.97</td></tr><tr><td>Dividends declared</td><td>38%</td><td>0.22</td><td>0.16</td><td>0.13</td><td>0.04</td></tr><tr><td>Book value1</td><td>4%</td><td>32.67</td><td>31.35</td><td>29.57</td><td>26.73</td></tr><tr><td>Market price - end</td><td></td><td>27.30</td><td>28.51</td><td>29.96</td><td>21.40</td></tr><tr><td>Market price - high</td><td></td><td>33.03</td><td>33.33</td><td>31.40</td><td>22.81</td></tr><tr><td>Market price - low</td><td></td><td>23.72</td><td>25.02</td><td>21.56</td><td>16.40</td></tr><tr><td>AT YEAR-END</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Assets</td><td>4%</td><td>59,670</td><td>57,209</td><td>56,031</td><td>55,512</td></tr><tr><td>Net loans and leases</td><td>1%</td><td>40,650</td><td>40,064</td><td>39,043</td><td>37,670</td></tr><tr><td>Deposits</td><td>5%</td><td>50,374</td><td>47,848</td><td>46,363</td><td>46,134</td></tr><tr><td>Long-term debt</td><td>-25%</td><td>817</td><td>1,092</td><td>2,274</td><td>2,337</td></tr><tr><td>Shareholders&#x27; equity:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Preferred equity</td><td>-17%</td><td>829</td><td>1,004</td><td>1,004</td><td>1,128</td></tr><tr><td>Common equity</td><td>5%</td><td>6,679</td><td>6,366</td><td>5,461</td><td>4,924</td></tr><tr><td>PERFORMANCE RATIOS</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Return on average assets</td><td></td><td>0.53%</td><td>0.71%</td><td>0.48%</td><td>0.66%</td></tr><tr><td>Return on average common equity</td><td></td><td>3.75%</td><td>5.42%</td><td>5.73%</td><td>3.76%</td></tr><tr><td>Return on average tangible common equity</td><td></td><td>4.55%</td><td>6.70%</td><td>7.44%</td><td>5.18%</td></tr><tr><td>Net interest margin</td><td></td><td>3.19%</td><td>3.26%</td><td>3.36%</td><td>3.57%</td></tr><tr><td>CAPITAL RATIOS1</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Equity to assets</td><td></td><td>12.58%</td><td>12.88%</td><td>11.54%</td><td>10.90%</td></tr><tr><td>Tangible common equity</td><td></td><td>9.63%</td><td>9.48%</td><td>8.02%</td><td>7.09%</td></tr><tr><td>Common Equity Tier 1 (Basel III), Tier 1 Common (Basel I)2</td><td></td><td>12.22%</td><td>11.92%</td><td>10.18%</td><td>9.80%</td></tr><tr><td>Tier 1 leverage2</td><td></td><td>11.26%</td><td>11.82%</td><td>10.48%</td><td>10.96%</td></tr><tr><td>Tier 1 risk-based capital2</td><td></td><td>14.08%</td><td>14.47%</td><td>12.77%</td><td>13.38%</td></tr><tr><td>Total risk-based capital2</td><td></td><td>16.12%</td><td>16.27%</td><td>14.67%</td><td>15.05%</td></tr><tr><td>SELECTED INFORMATION</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Average common and common-equivalent shares (millions)</td><td></td><td>203.7</td><td>192.8</td><td>184.3</td><td>183.2</td></tr><tr><td>Common dividend payout ratio</td><td></td><td>18.30%</td><td>9.56%</td><td>8.20%</td><td>4.14%</td></tr><tr><td>Full-time equivalent employees (actual)</td><td></td><td>10,200</td><td>10,462</td><td>10,452</td><td>10,368</td></tr><tr><td>Commercial banking offices (actual)</td><td></td><td>450</td><td>460</td><td>469</td><td>480</td></tr></table>

 \( ^{1} \)  At year-end, as a percent of total assets (GAAP), or risk-weighted assets (regulatory)

 \( ^{2} \) For 2015, ratios are based on Basel III. For years prior to 2015, ratios are based on Basel I.



## PERFORMANCE METRICS

ADJUSTED RETURN ON
AVERAGE ASSETS \( ^{1} \) 



ADJUSTED RETURN ON
TANGIBLE COMMON EQUITY \( ^{1} \) 



COMMON EQUITY TIER 1 AS A PERCENTAGE OF RISK-WEIGHTED ASSETS as of December 31, 2015



WHOLESALE BORROWINGS PROFILE



 \( ^{1} \) Primarily adjusted to exclude the impact of securities impairment and debt extinguishment charges taken in 2014 and 2015. Full reconciliation on page 19.



















HARRIS H. SIMMONS
Chairman and CEO



## TO OUR SHAREHOLDERS

We’re focused on increasing our capacity for growth, improving and streamlining our organizational structure and investing in technologies that will allow us to create an unsurpassed experience for our customers.

Over the course of the past year the management team and all of our dedicated colleagues at Zions Bancorporation have made significant strides in transforming your company into an organization capable of producing strong returns to investors in a low-growth environment. We’ve reduced risk in the balance sheet and in our operations, which should lower our overall cost of capital and allow for greater flexibility in returning capital to shareholders in the years ahead. And we’ve simplified our organizational structure in a manner that should allow us to accelerate our growth with a focus on streamlining the way we do business. Our goal is to create experiences that are simple, easy and fast for both our clients and our colleagues who serve them, while maintaining the intense local focus on serving customers and communities that has consistently resulted in Zions Bancorporation achieving customer satisfaction scores that place us at the top of the industry.

The past few years have presented their share of challenges, but we continue to work through them vigorously, and in the process we’ve built an institution with some extraordinary strengths. These include one of the industry’s strongest geographical footprints; a core deposit franchise that is nearly second to none; common equity, total capital and loan loss reserve measures that are among the strongest of any of the nation’s larger banks; and virtually unsurpassed customer loyalty and favorability ratings.
Like any institution being built for the long term, ours will always be a “work in progress.” The progress we made in 2015, and our focus in the immediate future is on increasing our capacity for growth, improving and streamlining our organizational structure and investing in technologies that, when paired with our focus on building the strongest client relationships in the industry, will allow us to create an unsurpassed experience for our customers. And we’re highly focused on achieving earnings performance that will match our balance sheet and reputational strengths.

## FINANCIAL RESULTS

Net earnings applicable to common shareholders was $247 million, or $1.20 per diluted common share in 2015, compared to $327 million, or $1.68 per diluted common share, in 2014. During the second quarter of 2015, we took actions to substantially reduce potential risk in our balance sheet by selling our remaining portfolio of collateralized debt obligation (“CDO”) securities, realizing a loss of $137 million, or $0.42 per diluted common share. Shareholders’ equity was not incrementally impacted in an adverse manner by this sale, as the loss had previously been included in accumulated other comprehensive income, or “AOCI,” which is a component of total shareholders’ equity. Excluding this securities loss, net earnings applicable to common shareholders in 2015 was $332 million, or $1.62 per diluted common share.



## COLLATERALIZED DEBT OBLIGATIONS, PAR VALUE $ in millions



All CDOs sold; zero balance remaining

Although we experienced further pressure to our net interest margin as a result of a highly competitive loan market and the continued very low interest rate environment, our major source of revenue, taxable-equivalent net interest income, rose modestly to $1,733 million in 2015 from $1,696 million in 2014. While average loan volumes saw sluggish growth, increasing to $40.2 billion in 2015 from $39.5 billion in 2014, total average earning assets increased 4.6% to $54.4 billion. Higher average volumes of deposits, and particularly non-interest bearing demand deposits, which increased 9% to $21.4 billion, facilitated strong 41% growth in our securities portfolio. We are encouraged that loan demand accelerated in the fourth quarter of 2015, and that stronger demand appears to be continuing in the early months of 2016.

Noninterest income, excluding gains and losses on fixed-income securities, increased 3.5% to $515.8 million in 2015 from $498.2 million in 2014, with particularly strong growth in capital markets, mortgage banking and treasury management, which saw revenue increases of 28%, 14% and 13%, respectively. Like most other banks across the industry, we continued to experience weakness in consumer deposit service charge revenue, which decreased 5% in 2015, primarily as a result of lower volumes of overdrafts, as consumers are more responsibly managing their accounts. We also experienced a 16% decrease in loan fees, primarily as a result of reduced energy lending activities during the year.

Total noninterest expense decreased 3.9% to $1,600 million in 2015 from $1,665 million in 2014. When adjusted for non-operating items including severance costs, the provision for unfunded lending commitments and other real estate expenses, non-cash amortization of core deposit premiums and other intangible assets and restructuring charges and debt extinguishment costs, 2015 operating expenses totaled $1,581 million. Our “efficiency ratio,” reflecting adjusted operating expenses as a percentage of taxable-equivalent net revenue, showed continual progress during 2015, decreasing from 74.1% in the fourth quarter of 2014 to 69.6% in the second half of 2015.



PRE-PROVISION NET REVENUE \( ^{1} \)  IMPROVEMENT
2015 VS. 2014



INCREASING REVENUE GROWTH,
HOLDING THE LINE ON NONINTEREST EXPENSE

Target: $120M of gross cost savings from operational initiatives



Operations - Affiliate Banks

Operations - Bancorp

Technology

Charter Consolidation

NONINTEREST EXPENSES AS A PERCENTAGE OF NET REVENUE \( ^{1} \) 






ANNE WEAVER, OWNER, ELEPHANT'S DELICATESSEN
Commerce Bank of Oregon



MARKET VOLATILITY AND MIXED SIGNALS ABOUT THE ECONOMY'S PERFORMANCE HAS MUTED EXPECTATIONS WITH RESPECT TO THE FREQUENCY AND CUMULATIVE SIZE OF RATE HIKES OVER THE NEXT SEVERAL QUARTERS.

The provision for loan and lease losses increased to $40 million in 2015 from (98.1) million in 2014. The negative loss provision in 2014 reflected substantial strengthening in credit quality metrics. While the loan portfolio continued to demonstrate strong overall quality, as reflected by a very low ratio of net charged-off loans to total average loans of only 0.10% over the past year, we've continued to maintain a strong allowance for total credit losses, which totaled 1.68% of total loans and leases at the end of 2015, owing to stress in the energy sector resulting from the current unusually low levels of oil and gas prices.

Our total oil and gas-related exposure at the end of 2015 was $4.8 billion, a 17% reduction from the $5.8 billion in credit commitments to this sector at the end of 2014. Total outstanding loans to this sector amounted to $2.6 billion at the end of 2015 as compared to $3.1 billion at the end of the prior year. We have a highly experienced team of energy credit professionals dedicated to this portfolio, and while we expect to see higher loss rates than have been experienced in recent years, we believe that, short of seeing a prolonged period of energy prices below current levels, total credit losses in our overall loan portfolio will remain manageable relative to peer levels.

## A CHALLENGING ENVIRONMENT FOR BANKING

While there has been a great deal of recent focus on the energy exposure of banks like ours that provide credit to this critical sector of our economy, this is likely to be a relatively short-term phenomenon that we will manage appropriately. As we survey the operating environment for traditional commercial banks like Zions Bancorporation in recent years and consider the risks and challenges facing the industry in the foreseeable future, there are three major longer-term themes that largely frame our thinking about the strategies and objectives we're pursuing.

## 1. Persistent Low Interest Rates

The first major environmental theme that is defining our operating environment is a prolonged period of very low interest rates that has shown few signs of abating. Following the financial crisis precipitated by events in the housing and financial markets in 2008, a variety of governmental policy responses were pursued to lessen the risk of financial contagion and to attempt to catalyze economic growth. A “zero interest rate policy” has been one of the primary tools employed by central bankers around the world, including by the Federal Reserve System in the United States, to foster economic growth.

The Federal Reserve’s target for the overnight domestic interbank interest rate known as the federal funds rate was maintained in a range between 0% and .25% from December, 2008 through December, 2015, at which time it was increased to a range of .25% to .50% in response to emerging signs of stronger economic growth and the potential for accompanying higher rates of inflation. While the modest increase in the federal funds rate at the end of



OUR ABILITY TO COLLECT, MANAGE AND ANALYZE DATA IS INCREASINGLY IMPORTANT AS A COMPETITIVE TOOL IN UNDERSTANDING THE TYPES OF PRODUCTS AND SERVICES OUR CUSTOMERS DESIRE, AND HOW TO BEST DELIVER THEM.

2015 was accompanied by widespread expectations that additional rate hikes would follow over the course of the next year or two, subsequent market volatility and mixed signals about the economy’s performance has, as of the date of this writing, muted expectations with respect to the frequency and cumulative size of rate hikes over the next several quarters.

During the early weeks of 2016 there was actually intermittent commentary about the possibility of recession in the U.S., and of the possibility of negative interest rates — a distinctly unappetizing environment for banking which presents the possibility, in Alice in Wonderland fashion, that depositors would be charged for keeping their money in the bank, and borrowers would be paid for borrowing. The United States has never in its history experienced the phenomenon of negative interest rates. But the theoretical possibility is not entirely remote: the Federal Reserve’s hypothetical “severely adverse scenario” for stress tests currently being conducted by the nation’s larger banks, including Zions, requires that banks model the impact that a period of negative interest rates would have on their future financial results.

Inasmuch as over three quarters of Zions Bancorporation’s revenue is derived from “spread” income — the difference between interest earned on assets and interest paid on liabilities — this prolonged period of very low interest rates over the past seven years has had a highly detrimental impact on our income. Our balance sheet is, by nature, quite “asset sensitive,” meaning that loans and other earning assets tend to re-price more quickly than do liabilities in a changing rate environment.

One way to think about the damage inflicted by low interest rates is to compare our current net interest margin (the net interest income yield on earning assets) with levels preceding the crisis. Our net interest margin in 2015 was 124 basis points (or 1.24 percentage points) lower than in 2007. This difference, when multiplied by average earning assets in 2015, reflects a reduction of more than $600 million in net interest income as a result of margin compression inflicted by this prolonged period of low rates. Such severe margin erosion has created an intense focus on operating costs. While the effects of changing rates can, to a degree, be hedged, we have in recent years been conservative about unduly locking in long-term asset yields at unprecedentedly low interest rate levels.

## 2. Increased Levels of Regulation

While hardly new, increased regulatory requirements are a second fundamental theme that is important to thinking about how we must organize our structure and implement strategies to compete effectively in a post-Dodd Frank Act environment. Since the financial crisis, fines and penalties totaling more than $300 billion have been assessed to banks around the globe as a result of compliance failures and breaches of law, with approximately half of that amount paid by banks — including, disproportionately, the very



BANKS WILL NEED TO RAPIDLY ADAPT TO AN ENVIRONMENT IN WHICH THE GREAT
MAJORITY OF TRANSACTIONS ARE CONDUCTED DIGITALLY, WITH THE NEED TO PROCESS
INFORMATION AND PROVIDE CUSTOMERS WITH REPORTING AND ANSWERS TO THEIR
QUESTIONS AND NEEDS IN NEARLY REAL TIME AND ACROSS A VARIETY OF CHANNELS.

largest banks – in the United States. Historically, credit risk has been the greatest source of risk for most traditional commercial banks in the U.S. But the number and increasing complexity of regulations and regulatory agencies, in the context of a social and political atmosphere characterized by populist hostility toward financial institutions in general and banks in particular, has created an environment in which compliance risks have risen to a level of prominence never before experienced. Across the industry, banks have added additional people, systems and processes to help protect against material compliance failures.

A particular theme arising from the regulatory framework established by the Dodd-Frank Act is the critical importance of very granular and uniformly high quality data. When it came to data, virtually our sole focus historically was on making sure we could accurately track debits and credits used to populate customers' bank statements and to complete our financial reports. We, and other larger banks, must now with great fidelity catalog vast amounts of information, particularly about our borrowing customers. Information on the appraised value of collateral, property locations, industry codes, and many other data elements are used in capital adequacy stress tests conducted both by ourselves and by the Federal Reserve System. But beyond stress tests, our ability to collect, manage and analyze data is increasingly important as a competitive tool in understanding the types of products and services our customers desire, and how to best deliver them.

## 3. The Digitalization of Banking

The importance of information technologies in banking is hardly a new theme. Banking is fundamentally an information business, and over the years a number of innovations employing new technologies have made it ever more convenient and secure for customers to conduct business with banks. Some of these innovations, including “remote deposit capture” (the ability to deposit the image of a check, in lieu of the actual physical item), and digital signatures using encrypted keys, have in fact been pioneered by Zions Bancorporation. But the rapid and nearly universal adoption of smartphones by consumers has fueled an unprecedented level of investment in digital financial services technologies.

Over the past two or three years, hundreds of financial technology, or “FinTech,” companies have been launched. Many of them aspire to disintermediate the traditional banking system in areas such as payments, loan origination and investment management. Most will fail, a few will at least in some measure succeed, and others will become vendors to traditional banks that maintain significant advantages as safe depositories and as low-cost sources of funds for loans. What is certain is that banks will need to rapidly adapt to an environment in which the great majority of transactions are conducted digitally, with the need to process information and provide customers with reporting and answers to their questions and needs in nearly real time and across a variety of channels, including branches,



FOX RESTAURANT CONCEPTS
National Bank of Arizona



ON JUNE 1, 2015 WE ANNOUNCED A SERIES OF INITIATIVES DESIGNED TO IMPROVE OUR CUSTOMERS' EXPERIENCE BY REDUCING THE VARIETY AND COMPLEXITY OF BACK OFFICE PROCESSES, AND TO SIMPLIFY OUR CORPORATE STRUCTURE AND REDUCE OPERATING COSTS. PERHAPS MOST NOTABLY, WE ANNOUNCED THE CONSOLIDATION OF OUR SEVEN SUBSIDIARY BANKS UNDER A SINGLE BANKING CHARTER, A TRANSACTION THAT WAS COMPLETED AT YEAR END.

call centers, ATMs, personal computers, mobile devices and even “wearables” such as smartwatches.

## OUR RESPONSE: TRANSFORMING THE WAY WE DO BUSINESS

As we’ve considered the implications of these themes that seem likely to play a major role in our industry’s evolution in coming years, we’ve responded with an intensified focus on increasing revenue generation; improving and streamlining our structure, and thereby reducing our operating costs; and investing in foundational technology that will simplify our operating environment and support our ability to provide customers with innovative products at a competitive cost. At the same time, we’ve reaffirmed our commitment to local leadership in each of the markets we serve, with virtually all of our front-line banking colleagues belonging to our local affiliate teams and working together to strengthen our locally-based brands.

On June 1, 2015 we announced a series of initiatives designed to improve our customers' experience by reducing the variety and complexity of back office processes, and to simplify our corporate structure and reduce operating costs. Perhaps most notably, we announced the consolidation of our seven subsidiary banks under a single banking charter, a transaction that was completed at year end. The resulting banking subsidiary is a national bank formally known as ZB, N.A. (ZB, National Association). But we've also maintained the strong local brands and local management teams in each market that we believe have been highly effective in differentiating us from some of our large national competitors, and that underscore our commitment to understanding and responding to local needs. Consequently, while customers will see references to the ZB, N.A. name in legal documents, the brands they will identify with will continue to be Zions Bank, California Bank & Trust, Amegy Bank of Texas, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado and The Commerce Banks of Washington and Oregon. And most all of our customer-facing employees in each market will continue to report to the CEOs of these local "affiliates."

The new legal structure for our banking operations will allow us to seamlessly move capital and other funds between affiliates, and will substantially reduce regulatory reporting and examination requirements. It will also facilitate the standardization, delivery and support of a uniform set of quality products and services; and the standardized collection, management and analysis of data across the organization.

Concurrent with the consolidation of our bank charters, we added additional strength to our retail banking business by appointing Keith Maio, formerly CEO of National Bank of Arizona, to the new role of Chief Banking Officer with responsibility for the coordination and oversight of retail banking, mortgage banking and wealth management across the company. LeeAnne Linderman, formerly head of retail banking at Zions Bank, took on the new role of EVP for Enterprise Retail Banking. The additional



WE ESTABLISHED TARGETS TO REDUCE SPECIFIC GROSS OPERATING COSTS BY $120 MILLION (RELATIVE TO 2014 LEVELS) BY 2017; TO MAINTAIN ADJUSTED OPERATING EXPENSES AT OR BELOW $1.6 BILLION IN 2015 AND 2016, AND INCREASING ONLY MODESTLY IN 2017; AND TO ACHIEVE AN “EFFICIENCY RATIO” OF LESS THAN OR EQUAL TO 70% IN THE LATTER HALF OF 2015, LESS THAN OR EQUAL TO 66% IN 2016, AND IN THE LOW 60% AREA IN 2017.

emphasis we seek to place on retail banking reflects our conviction that there is a great deal of “low hanging fruit” to be harvested, particularly outside of our Zions Bank franchise, from a greater focus on product design and sales discipline in our branches, and from greater coordination of our retail banking activities with mortgage banking and wealth management. Scott McLean, our president, took on the additional title of Chief Operating Officer; and we significantly simplified our risk management organizational structure by consolidating risk functions that had existed in our bank affiliates into the corporate risk organization under Chief Risk Officer Ed Schreiber and Chief Credit Officer Michael Morris. These officers, together with others including Paul E. Burdiss, who joined the Company as Chief Financial Officer last spring, have added substantial strength to our Executive Management Committee.

At the same time we announced our organizational structure initiative, we outlined cost containment and productivity goals extending through 2017. Specifically, we established targets designed to materially improve our operating leverage by reducing specific gross operating costs by 120 million (relative to 2014 levels) by 2017 and to maintain operating expenses (excluding severance and certain other non-operating costs) at or below 1.6 billion in 2015 and 2016, and increasing only modestly in 2017. These commitments, when combined with increased levels of revenue, were designed to allow us to achieve an “efficiency ratio” (adjusted operating expenses as a percentage of taxable equivalent revenues) of less than or equal to 70% in the latter half of 2015, less than or equal to 66% in 2016, and in the low 60% area in 2017.

We achieved our goals for 2015, and we are confident that we will similarly achieve the goals we've established for the next two years. We've been highly focused on reducing discretionary expenditures, including in areas such as travel and professional and consulting services. We continue to rationalize back office functions. For example, we reduced fifteen loan operations sites down to two locations during the past year. And we've consolidated a variety of accounting teams that had existed throughout the organization into a single corporate accounting function, reducing corresponding costs by 30% while decreasing the number of general ledger accounts we use from nearly 8,000 to approximately 2,000. And we remain focused on rationalizing our branch network as digital transactions facilitated by mobile and online banking, direct deposit, etc., continues to reduce transactional volumes in our branches. Since 2008, we've reduced our gross branch count, including the branches we've added through bank acquisitions, by approximately 16%, from more than 535 to 450.

While we’re focused on careful cost management, we’re also investing in a technology foundation that we believe will put



THE CHALLENGES AND COSTS OF MAINTAINING SUCH OLD AND “SILOED” TECHNOLOGY SYSTEMS ARE GREAT, AND WE BELIEVE THAT INCREASINGLY THEY WILL BE INADEQUATE TO SUPPORT THE EVOLVING REQUIREMENTS OF DIGITAL BANKING, INCLUDING REAL-TIME PAYMENTS PROCESSING AND SETTLEMENT. OUR FUTURECORE PROJECT WILL DELIVER A FULLY INTEGRATED WORLD-CLASS CORE OPERATING PLATFORM FOR LOANS AND DEPOSITS THAT WILL PROVIDE A CHASSIS ON WHICH WE CAN DEVELOP GREAT PRODUCTS WHILE DRAMATICALLY REDUCING THE COMPLEXITY OF OUR SYSTEMS.

us at the forefront of the industry. When I’ve occasionally asked employees how many of them use technology from twenty or thirty years ago on their home computers — a time when some of those who remember were still using MS DOS with a “C:” prompt, I get odd looks. My purpose in asking is to remind them that many, if not most, of the legacy core loan and deposit systems currently in use in major banks are of such a vintage. The challenges and costs of maintaining such old and “siloed” technology systems are great, and we believe that increasingly they will be inadequate to support the evolving requirements of digital banking, including real-time payments processing and settlement. Our FutureCore project will deliver a fully integrated world-class core operating platform for loans and deposits that will provide a chassis on which we can develop great products while dramatically reducing the complexity of our systems. We expect the first of three “releases,” a consumer loan module, will be installed in the second half of 2016, with commercial loans following in 2017 and deposits in 2018.

We’ve been hard at work building a balance sheet that is more productive while at the same time complying with new and more stringent liquidity regulations. As previously noted, during the second quarter of 2015 we liquidated our remaining portfolio of 5754 million of collateralized debt obligations, or “CDOs,” backed by trust-preferred securities primarily issued by banks and insurance companies, realizing a pretax loss of 137 million. We’ve been deploying the proceeds from that sale, together with a substantial sum of cash held on deposit at the Federal Reserve, into mortgage-backed securities at a measured pace of approximately 400 million per month. These securities, issued or guaranteed by U.S. Government agencies, and backed primarily by “5/1” adjustable-rate mortgages or fully amortizing mortgages with remaining maturities of ten years or less, provide reasonable protection against the possibility of a more dramatic increase in interest rates than is currently anticipated by the market, while generating higher levels of current income. Notwithstanding the liquidation of the CDO portfolio, we increased the total size of our securities portfolio to 8.2 billion at the end of 2015 from 4.6 billion at the end of 2014.

We also continued to significantly reduce the amount and cost of the Company’s long-term debt and preferred stock during the past year. Following a 52% reduction in parent company long-term debt during 2014, we further reduced outstanding long-term debt by 25%, to 817 million, at the end of 2015. Preferred stock outstanding declined by 17% to 828 million, with further reductions anticipated in 2016. These actions should lead to stronger returns on common shareholders’ equity and additional cash available for investment in our business, or for eventual distribution to shareholders in the form of higher dividends and share repurchases.



DON CROWE, OWNER, ARENA SPORTS, INC.
Commerce Bank of Washington



NOTWITHSTANDING THE LIQUIDATION OF THE CDO PORTFOLIO, WE INCREASED THE TOTAL SIZE OF OUR SECURITIES PORTFOLIO TO $8.2 BILLION AT THE END OF 2015 FROM $4.6 BILLION AT THE END OF 2014. WE ALSO CONTINUED TO SIGNIFICANTLY REDUCE THE AMOUNT AND COST OF THE COMPANY'S LONG-TERM DEBT AND PREFERRED STOCK DURING THE PAST YEAR.

## COMPETING FROM A POSITION OF STRENGTH

We’re operating through a time of great change at Zions Bancorporation, a time I characterize to our bankers as being a “Pardon Our Dust” period. We’re engaged in a great deal of change that will make us simpler, easier, faster, and more efficient and stronger than we’ve ever been before. But it’s important to recognize some of Zions Bancorporation’s considerable strengths even as we work to build a better organization.

Our Guiding Principles postulate that the critical elements of our business that must be mastered if we are to succeed over the long term might be characterized as the three legs of a stool, including:

1. Effective management of a wide variety of risks;

2. Sales and the creation of a quality experience for our customers; and

3. Control of operating expenses

We further note that there is a natural tension between each of these three components of our business - that they are in a sense at odds with one another, and must be continually balanced and strengthened.

In assessing how we’re doing with each of these competing priorities, I’m heartened by the progress we continue to make. Our balance sheet is very strong, with regulatory Common Equity Tier 1 and Tier 1 Capital ratios of 12.22% and 14.08%, respectively, that are stronger than those of the great majority of the nation’s very largest banks. Our Allowance for Credit Losses, at 1.68% of total loans, is likewise among the strongest in the industry, especially when measured against recent loan losses. Total non-interest bearing demand deposits averaged 44% of total deposits in 2015 - one of the highest ratios and correspondingly one of the strongest core deposit franchises of any major bank in America.

Perhaps most importantly, our customers overwhelmingly love doing business with us.

We are, at heart, a “Main Street” bank. Approximately 80% of our loans consist of commercial and commercial real estate loans. Roughly half of our $45 billion in loan commitments to these commercial borrowers consists of credits totaling $5 million or less. In short, banking smaller-to-medium sized and middle market businesses is a critically important part of who we are and what we do. So we were particularly pleased to be recognized by the country’s foremost market research firm that focuses on these segments, Greenwich Associates, as the nation’s premier provider of banking services to the combined small business and middle market banking segments during 2015. After interviewing more than 28,000 business borrowers in these categories across the U.S. last year, and evaluating the performance of more than 750 individual banks, Greenwich awarded Zions Bancorporation 31 “Excellence” awards in a total of 38 possible categories — more than any other bank in the country, and considerably more than any of the nation’s largest half dozen banks. We are in fact one of only four banks across the nation to have received more than ten such Excellence awards from Greenwich Associates every




Source: Greenwich Associates, www.greenwich.com

year since the inception of these extensive surveys. We also continue to accrue recognition in many of our individual markets by being voted our customers' favorite banking organization in surveys conducted by local media outlets.

At a time when the industry continues to recover from the severe reputational damage wrought by the financial crisis and ensuing recession, and when the one thing on which candidates from both major political parties seem to agree is the need to inflict further pain on large banking organizations, knowing that our customers hold us in high regard is no small source of solace. We intend to do everything in our power to make sure that, as we deal with a complex regulatory and economic environment, the relationships we build with customers remain our top priority, and to ensure that, in the words of Zions Bank's tagline, "We Haven't Forgotten Who Keeps Us in Business." I'm fortunate to work with extraordinary people who make innumerable sacrifices to ensure that our future will be bright. I'm extremely grateful to them for the great work they do, and to each of you as investors for your confidence in us. I look forward to some very strong years ahead of us.

Respectfully,



Harris H. Simmons
Chairman and CEO

March 23, 2016



## GAAP TO NON-GAAP RECONCILIATION

<table><tr><td>(In thousands)</td><td>2012</td><td>2013</td><td>2014</td><td>2015</td></tr><tr><td>PRE-PROVISION NET REVENUE (PPNR) &amp; EFFICIENCY RATIO</td><td></td><td></td><td></td><td></td></tr><tr><td>Total noninterest expense</td><td>$ 1,596,017</td><td>$ 1,714,439</td><td>$ 1,665,292</td><td>$ 1,600,486</td></tr><tr><td>LESS adjustments:</td><td></td><td></td><td></td><td></td></tr><tr><td>Severance costs</td><td>5,398</td><td>4,936</td><td>8,644</td><td>11,005</td></tr><tr><td>Other real estate expense</td><td>19,723</td><td>1,712</td><td>(1,251)</td><td>(647)</td></tr><tr><td>Provision for unfunded lending commitments</td><td>4,387</td><td>(17,104)</td><td>(8,629)</td><td>(6,238)</td></tr><tr><td>Debt extinguishment cost</td><td>—</td><td>120,192</td><td>44,422</td><td>2,530</td></tr><tr><td>Amortization of core deposit and other intangibles</td><td>17,010</td><td>14,375</td><td>10,923</td><td>9,247</td></tr><tr><td>Restructuring costs</td><td>—</td><td>—</td><td>—</td><td>3,852</td></tr><tr><td>(a) Total adjustments</td><td>46,518</td><td>124,111</td><td>54,109</td><td>19,749</td></tr><tr><td>(b) Adjusted noninterest expense</td><td>1,549,499</td><td>1,590,328</td><td>1,611,183</td><td>1,580,737</td></tr><tr><td>Taxable-equivalent net interest income (TENII)</td><td>1,750,400</td><td>1,711,900</td><td>1,696,146</td><td>1,733,158</td></tr><tr><td>Total noninterest income</td><td>419,870</td><td>337,376</td><td>508,629</td><td>377,120</td></tr><tr><td>Total revenue</td><td>2,170,270</td><td>2,049,276</td><td>2,204,775</td><td>2,110,278</td></tr><tr><td>LESS adjustments:</td><td></td><td></td><td></td><td></td></tr><tr><td>Fair value and nonhedge derivative income (loss)</td><td>(21,782)</td><td>(18,152)</td><td>(11,390)</td><td>(111)</td></tr><tr><td>Impairment losses on investment securities, net</td><td>(104,061)</td><td>(165,134)</td><td>—</td><td>—</td></tr><tr><td>Equity securities gains (losses), net</td><td>11,253</td><td>8,520</td><td>13,471</td><td>11,875</td></tr><tr><td>Fixed income securities gains (losses), net</td><td>19,544</td><td>(2,898)</td><td>10,419</td><td>(138,735)</td></tr><tr><td>(c) Total adjustments</td><td>(95,046)</td><td>(177,664)</td><td>12,500</td><td>(126,971)</td></tr><tr><td>(d) Adjusted revenue</td><td>2,265,316</td><td>2,226,940</td><td>2,192,275</td><td>2,237,249</td></tr><tr><td>(d) less (b) Adjusted pre-provision net revenue (PPNR)</td><td>715,817</td><td>636,612</td><td>581,092</td><td>656,512</td></tr><tr><td>(b) / (d) Efficiency Ratio</td><td>68.4%</td><td>71.4%</td><td>73.5%</td><td>70.7%</td></tr><tr><td>NET INTEREST MARGIN (NIM)</td><td></td><td></td><td></td><td></td></tr><tr><td>(e) Taxable-equivalent net interest income (TENII)</td><td>1,750,400</td><td>1,711,900</td><td>1,696,146</td><td>1,733,158</td></tr><tr><td>(f) Memo: average interest earning assets</td><td>48,999,000</td><td>51,007,000</td><td>52,007,000</td><td>54,374,000</td></tr><tr><td>(e) / (f) Stated net interest margin (NIM)</td><td>3.57%</td><td>3.36%</td><td>3.26%</td><td>3.19%</td></tr><tr><td>(e) Taxable-equivalent net interest income (TENII)</td><td>1,750,400</td><td>1,711,900</td><td>1,696,146</td><td>1,733,158</td></tr><tr><td>Adjustments:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net charge-offs</td><td>155,283</td><td>51,423</td><td>42,241</td><td>38,655</td></tr><tr><td>(g) Adjusted taxable-equivalent net interest income</td><td>1,595,117</td><td>1,660,477</td><td>1,653,905</td><td>1,694,503</td></tr><tr><td>(g) / (f) Risk-adjusted net interest margin (NIM)</td><td>3.26%</td><td>3.26%</td><td>3.18%</td><td>3.12%</td></tr><tr><td>ADJUSTED NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS (NEAC)</td><td></td><td></td><td></td><td></td></tr><tr><td>Adjusted net earnings applicable to common shareholders (NEAC)</td><td>178,631</td><td>293,979</td><td>326,568</td><td>246,614</td></tr><tr><td>PLUS Adjustments:</td><td></td><td></td><td></td><td></td></tr><tr><td>Adjustments to noninterest expense</td><td>46,518</td><td>124,111</td><td>54,109</td><td>19,749</td></tr><tr><td>Adjustments to revenue</td><td>95,046</td><td>177,664</td><td>(12,500)</td><td>126,971</td></tr><tr><td>Tax effect for adjustments (38.75%)</td><td>(54,856)</td><td>(116,938)</td><td>(16,123)</td><td>(56,854)</td></tr><tr><td>Total adjustments</td><td>86,708</td><td>184,837</td><td>25,486</td><td>89,866</td></tr><tr><td>LESS Preferred stock redemption</td><td>—</td><td>125,700</td><td>—</td><td>—</td></tr><tr><td>(h) Adjusted net earnings applicable to common shareholders (NEAC)</td><td>265,339</td><td>353,116</td><td>352,054</td><td>336,480</td></tr><tr><td>(i) Memo: Average assets</td><td>53,279,000</td><td>54,942,000</td><td>55,890,000</td><td>58,050,000</td></tr><tr><td>(j) Memo: Average tangible common equity</td><td>3,670,703</td><td>4,072,487</td><td>4,978,989</td><td>5,546,009</td></tr><tr><td>PROFITABILITY</td><td></td><td></td><td></td><td></td></tr><tr><td>(h) / (i) Adjusted ROAA</td><td>0.50%</td><td>0.64%</td><td>0.63%</td><td>0.58%</td></tr><tr><td>(h) / (j) Adjusted ROTCE</td><td>7.23%</td><td>8.67%</td><td>7.07%</td><td>6.07%</td></tr></table>



## ZIONS BANCORPORATION

The complete list of officers and directors for Zions Bancorporation and its subsidiaries is available at zionsbancorporation.com.

## BOARD OF DIRECTORS

Jerry C. Atkin \( ^{1,3,5} \) 
Chairman
Skywest Airlines
St. George, Utah

John C. Erickson \( ^{1,2,4} \) 
Retired/Former Vice Chairman
Union Bank
Palos Verdes Estates, California

Patricia Frobes \( ^{1,5} \) 
Retired/Former Senior Vice President
The Irvine Company
Portland, Oregon

Suren K. Gupta \( ^{4} \) 
Executive Vice President of Technology and Strategic Ventures
Allstate Insurance Company
Chicago, Illinois

J. David Heaney \( ^{2,5} \) 
Chairman
Heaney Rosenthal, Inc.
Houston, Texas

Vivian S. Lee \( ^{2} \) 
CEO
University of Utah Health Care
Salt Lake City, Utah

Edward F. Murphy \( ^{1,2,4} \) 
Retired/Former CFO
Federal Reserve Bank of New York
East Williston, New York

Roger B. Porter \( ^{2,5} \) 
IBM Professor of Business and
Government,
Harvard University
Cambridge, Massachusetts

Stephen D. Quinn \( ^{2,4} \) 
Retired/Former Managing Director
and General Partner
Goldman, Sachs & Co.
New Canaan, Connecticut

Harris H. Simmons \( ^{1} \) 
Chairman and Chief Executive Officer
of the Company and Chairman of the
Board of Zions First National Bank
Salt Lake City, Utah

L. E. Simmons
President
SCF Partners, LP
Houston, Texas

Steven C. Wheelwright \( ^{1,3,5} \) 
Retired/Former President
Brigham Young University-Hawaii
Boston, Massachusetts

Shelley Thomas Williams \( ^{3,4} \) 
Communications Consultant
Vashon Island, Washington

## CORPORATE OFFICERS

Executive Management Committee

Harris H. Simmons
Chairman and Chief Executive Officer

Scott J. McLean
President and Chief Operating Officer

Paul E. Burdis
Chief Financial Officer

Bruce K. Alexander
CEO, Vectra Bank Colorado

A. Scott Anderson
CEO, Zions First National Bank

David E. Blackford
CEO, California Bank & Trust

Dallas E. Haun
CEO, Nevada State Bank

Dianne R. James
Human Resources

Thomas E. Laursen
General Counsel

LeeAnne B. Linderman
Retail Banking

Keith D. Maio
Chief Banking Officer

Michael P. Morris
Credit Administration

Joseph L. Reilly
Chief Technology Strategist

Rebecca K. Robinson
Wealth Management

Stanley D. Savage
CEO, The Commerce Bank
of Washington

Edward P. Schreiber
Chief Risk Officer

Jennifer A. Smith
Operations and Information Systems

Steven D. Stephens
CEO, Amegy Bank

Senior Vice Presidents

James R. Abbott
Investor Relations

Jason J. Brock
Strategic Planning

Travis E. Finstad
Internal Audit

Jacob C. Heugly
Fee Income Strategies

Alexander J. Hume
Controller

Alvin Lee
Corporate Development

Karin J. Lockovitch
Compliance

Marylyn Manis-Hassanein
Enterprise Initiatives

Dale L. Stephens
Credit Examination

J. Brandon Thomas
Chief Data Officer

Kevin L. Thompson
Enterprise Stress Analytics

Matthew L. Tyler
Treasurer

Mark R. Young
CEO, National Bank of Arizona

Vice Presidents
Jennifer R. Johnston
Melvin D. Leibsla
John A. Payne

 \( ^{1} \)  Member, Executive Committee  
 \( ^{2} \)  Member, Audit Committee  
 \( ^{3} \)  Member, Compensation Committee  
 \( ^{4} \)  Member, Risk Oversight Committee  
 \( ^{5} \)  Member, Nominating and Corporate Governance Committee

## Ticker Symbol Key

ASB: Associated Banc Corp.

BBT: BB&T Corporation

BOKF: BOK Financial Corporation

CBSH: Commerce Bancshares, Inc.

CFG: Citizens Financial Group Inc.

CMA: Comerica Incorporated

EWBC: East West Bancorp, Inc.

FHN: First Horizon National Corp.

FITB: Fifth Third Bancorp

FMER: Firstmerit Corp.

FRC: First Republic Bank

HBAN: Huntington Bancshares Incorporated

KEY: KeyCorp

MTB: M&T Bank Corporation

PBCT: People's United Financial, Inc.

RF: Regions Financial Corp.

SNV: Synovus Financial Corp.

STI: SunTrust Banks, Inc.

ZION: Zions Bancorporation



## CORPORATE INFORMATION

## EXECUTIVE OFFICES

One South Main Street
Salt Lake City, Utah 84133-1109
800-974-8800

## ANNUAL SHAREHOLDERS' MEETING

Friday, May 27, 2016, 1 p.m.
Zions Bancorporation
Founders Room, 18th Floor
One South Main Street
Salt Lake City, Utah 84133-1109

## TRANSFER AGENT

Zions First National Bank
Corporate Trust Department
One South Main Street, 12th Floor
Salt Lake City, Utah 84133-1109
801-844-7545 or 888-416-5176

## REGISTRAR

Zions First National Bank
One South Main Street, 12th Floor
Salt Lake City, Utah 84133-1109

## AUDITORS

Ernst & Young LLP
178 S. Rio Grande Street, Suite 400
Salt Lake City, Utah 84101

## NASDAQ GLOBAL SELECT

MARKET SYMBOL
ZION

## OTHER LISTED SECURITIES

Series A Preferred Stock - NYSE: ZBRA  
Series F Preferred Stock - NYSE: ZBPF  
Series G Preferred Stock - NYSE: ZBPG  
Series H Preferred Stock - NYSE: ZBPH  
Series I Preferred Stock - CUSIP: 98970IBD8  
Series J Preferred Stock - CUSIP: 98970IBF3

## DIVIDEND REINVESTMENT PLAN

Shareholders can reinvest their cash dividends in additional shares of our common stock at the market price on the dividend payment date. Shareholders, as well as brokers and custodians who hold our common stock for clients, can obtain a prospectus of the plan on the Zions Bancorporation website at zionsbancorporation.com or by writing to:

Zions Bancorporation
Dividend Reinvestment Plan
P.O. Box 30880
Salt Lake City, Utah 84130-0880

## CREDIT RATINGS

Credit ratings are updated regularly and may be found on the Zions Bancorporation website at zionsbancorporation.com.

## OPTION MARKET MAKERS

Chicago Board Options Exchange Philadelphia Stock Exchange

## SELECTED INDEX MEMBERSHIPS

S&P 500
S&P Global 1200
KBW Bank
NASDAQ Financial 100

## INVESTOR RELATIONS

For financial information about the corporation, analysts, investors and news media representatives should contact:
James R. Abbott
801-844-7637, option 2
James.Abbott@zionsbancorp.com

## ZIONS BANCORPORATION

## NEWS RELEASES

Our news releases are available on our website at: zionsbancorporation.com.

To be added to the email distribution list, please visit zionsbancorporation.com and click on "Email Notification."

## INTERNET SITES

Zions Bancorporation: zionsbancorporation.com

Zions First National Bank: zionsbank.com

California Bank & Trust: calbanktrust.com

Amegy Bank: amegybank.com

National Bank of Arizona: nbarizona.com

Nevada State Bank: nsbank.com

Vectra Bank Colorado: vectrabank.com

The Commerce Bank of Washington: tcbwa.com

The Commerce Bank of Oregon: tcboregon.com

Contango Capital Advisors Inc.: contangocapitaladvisors.com

Zions Direct Inc.: zionsdirect.com

This document may contain statements that could be considered “forward looking.” Readers should review the forward-looking statement disclaimer of Zions’ Annual Report on Form 10-K, which can be found on the website at zionsbancorporation.com and applies equally to this document.

Certain financial measures containing descriptive words such as “core” or “adjusted” are subject to GAAP-to-Non-GAAP reconciliation tables, which can be found on page 19.



## ZIONS BANCORPORATION

One South Main Street

Salt Lake City, Utah 84133

ZIONSBANCORPORATION.COM