WAL - Earnings call transcript Q3 2017 | Western Alliance Bancorporation

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Operator

Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the Third Quarter 2017.

Our speakers today are Robert Sarver, Chairman and CEO; and Dale Gibbons, Chief Financial Officer.

You may also view the presentation today via webcast through the Company’s website at www.westernalliancebancorporation.com. The call will be recorded and made available for replay after 2 o’clock p.m. XXXX, November XX, X XXXX October a.m. Time, through XX, Monday, at Eastern dialing passcode and Time, X-XXX-XXX-XXXX Eastern by entering XXXXXXXX. anticipated future The discussion relate and similar projections, that matters facts. that forward-looking contain trends are strategies, expressions plans not concerning during this to call expectations, may events and or historical statements beliefs, our and differ reflect in risks, to uncertainties, from and changes The herein views and in future subject our forward-looking those statements to events any are about that actual may historical results forward-looking cause circumstances current significantly contained and results financial performance expressed assumptions statement.

that actual Securities Company update undertake any in could the Some required Exchange differ any factors listed expected does not forward-looking the with as cause the and materially or from law, to historical filings those obligation Commission. to include statements. results Except results by

Now, the turn ahead, like for call Please I over opening the go would Sarver. sir. Robert to remarks, to

Robert Sarver

morning, will growth to Thank you operating quarter regarding high grew everybody, at Net pretty for going that’s in of $XX.X be $X.XX the and record record net the Vecchione is We and and joined quarter margin value then. the the the with I’m quarter quarter our and expanded charges Good of interest X.XX% our which then and any basis from end points per earnings operating while from quarter consecutive on of call. EPS share, share. to earnings, welcome net were a basis Dale the interest with quality. income was will review may that up points us, and good and year on details, continue, Yes. a XXth maintain Ken on I, questions we overall, book linked some all as $X.XX ago also you. operating has follow XXXX. Dale XXXX, available third our some The of a results level plan was to of we’re you basis third quarter XX% efficiency $X.XX back can again, and much quarter. answer have the tangible sheet balance to see the to But, X.XX% of numbers, a fronts. as of X achieved was up third million, margin our before able acquisition XX asset by It in

basis from for rose Non-performing XX our improved as points growth million from masked are with For up during the the loan revenue during XX the very down and X% XX% basis operating drove $X.X $XXX,XXX basis billion XX months. over to billion quarter, $XXX loan climbed quarter plan of for assets, on Deposit growth quarter June efficiency one down gross while recoveries assets months. for at Net XX quarter, charge-offs and was XX total modest year last ago. essentially $XXX our has were the last was in This on only million growth loan annualized in sheet $X.X Balance rose quarter. expenses ratio third the to growth X%. been losses. points but leverage the points the XXth,

masked balance was rising Our capital. with growth sheet

the X.X% past XX% equity. per assets. grew book ratio on matched share of common our was Tangible tangible Our TCE which value during return year essentially

second increase interest has increase the third and June. to of rose net are third effect in deposit growth of $XXX.X was was investment gains rate what as just of loan Net the loan from quarter, count. loans, put in the sale a $XXX or $X.X quarter million driven off. average revenue of in million. and X% the the cyclical, and from by realizing expense growth up loan our tax $X interest We half The rate book investments driven ago, quarter income growth during in had. and during quarter portfolio climbed Operating $XX.X Our $X the the loan the for the all year during during income is the loss in income which Operating which provision increase equity is fell compared the to million of XX% X% drove quarter; rose income income non-interest share some declined the quarter. growth. the million year million $X.X on EPS our resulted X% to net from XX% as total million, $XX.X income by a essentially SBA million quarter full FOMC quarter stable Strong on ago. million And in this this a under of $XX.X $X.XX billion our was rate the for

again, the increase FOMC average originations in term primarily XX rose the While increased loan the the loan resulting deposits June. flat from basis during past the points yields curve fairly X the the the basis-point loan environment, securities of primary in after yield quarter. yield rates average of Reflecting been structure three rising new slightly interest-bearing the period. quarters, for have tracking the climbed for above rate yields on The was the the yield cost

growth. benefited funding a as non-interest-bearing basis it the driving X increased of total from Although strong the asset liability earning basis X only to margin our X.XX. up basis XX quarter, to points basis yield X The deposit points our rose points, during points total cost

the from on past $X.X $X.X million was effect stable total, shows The accretion growth the basis-point rose expect the loan cash million purchase million. down third, weighted, had remained $XXX marks level we the XX in step a year, the loan accretion As the the and during fairly in of to the for in quarters. backend acquired quarter at elevated that on right a the average graph several margin. from albeit quarter accounting next second balances from Total

trend time. Dale? than is higher activity, expect what been projected to due usually this over prepayment loan has accretion actual lower to While accretion we

Dale Gibbons

Yes. XX% in XX% quarter Strong the with the rising record of ratio expenses, third coupled quarter drove growth to efficiency our modestly compared the during last low year. to a revenue of

of growth net $XXX Our was a at our to top steady by in billion. $XX as return million equity $XX were and to $XXX compared Growth loans and quarter the from $XXX the growth growth assets million funding held X $XXX the new led by of billion XX% core segments portfolio in drove Among liability and northern in $XX return deposits second of compared investment consistently million shareholders’ high while California docile also period. X.XX assets to performance in in $XX deposits on non-interest revenue non-interest strong one of to rose to loan-to-deposit million Regionally, ago. XX% liquidity deposit bearing loan increased increase peers. quarter-end, The warehouse been at points deposit the in XX% Nevada. XX% innovation. the $XXX X.XX%, compared is Consistently year ago success it’s Arizona which business, $XX just increase September has million bearing quarter. in million under Loan Total $X.X the deposit total. pre-provision of Arizona, million in XX% portfolio. Southern $XX to basis year for of at provided deposits cost that continued mortgage the California, million, declining down ratio in one to during million and million for a grew was $XXX the technology million Growth gathering led XXth to in our followed comprised while million reduced Cal, $XXX in Southern increase proportion and

Phoenix, shared million largely Arizona’s total receiving million. million with dependent conservative activity Upon the nonperforming million in during the As of on is from downgraded call. the in assessment a results, Exam adversely October more in $XX headquarters National total loans increased graded a deposit that million, up bringing $XXX special are sold assets the to was growth mention loss company to markets. Included reflecting last $XX our nonperforming Shared in this loans investor loan of discussed that these released $X.X on Total other we quarter technology to of national the credit benefits million. a we results Credit Xst, $XX $XX

this reflected charge-offs as at is lease balance September non-acquired Net acquired to and slightly loan booked for a conditions no charge-offs, true a points million of third the shown was loan NPAs, recoveries in $X.X X.X%, third are and downgraded losses $XXX,XXX losses growth a as including to net here. losses quarter. reflected would offset million allowance basis, loan X adversely increased. point assets that been of loan down up XX $XXX,XXX, of $XXX for loss year [hp] in total expense net was the same quarter XXth, million was $X.X of principal of This NPAs disposition at have reserve loans disposition prior just October total the Gross points of of Provision The for the basis of in from quarter by loans. instead credit ago. are which at $X $XXX,XXX a of the prior substantially XX quarter rose but acquisition. to unpaid the bit to loans losses to basis loan as $XX million the during As the results. discount this The were rose a Xst, year-to-date. ratio which On basis graded loan have $X million, third a of rate reserve million is consequently were for occurred only in and resulting of loss resulted are the assets the X.XX%

on of was loans, billion totaled a discounts X% just acquired million lower quarter-end, loan For $X.X purchased portfolio. over at credit right, which the $XX.X

sheet that during essentially to in is past quarter book June capital the Our edging $X.XX the rose XX% on value we’ve XX, per the past our third matching return strong up while flat matched tangible average past equity the in for from the the share XX% growth, our four for year, and common capital growth higher quarters. had $XX.XX balance solid leaving ratios year. essentially quarter Tangible

Robert Sarver

think Looking see forward any year, in I terms surprises. the of finishing don’t really out you

numbers are quarters. to kind of the we last three on the have and guidance over We you the essentially given plan

we deposits positive billion. I As our would $X.X frontend year-to-date our were organically loaded. have little $X.X a loans that are up mentioned more probably and billion up growth is say earlier, the

be will us. quarter fourth deposit growth for the quarter slower a so, And

hand, should other the on the quarter be the On side pretty loan robust. fourth

the is to come end right where sheet So, at day, of the going at year. balance about we the growth the guided beginning of in

looks a revenue of so Maybe we continue we’ll if that’s good. our about that at a our will all where in go horizon, today the And us quarter which terms bump talk, much quality, as we’re we’re get than asset In little help different double at still December, growing I operating the to at. the leverage, look on little expense really bit. as nothing growth, up rates it

on just should up So, the essentially year strong we pretty kind and plan. finish for of

So, can At anything some try this you think it to I in we you ask want particular. open up questions that’s any to point, and good. color on more give for

Operator

today of the from And Instructions] [Operator Casey you. first Thank Jefferies. question will Haire come

Casey Haire

on outlay? the excess book you to wanted or looks so wondering on on was that I degree? and liquidity you yield incremental excess plan guys. off pick -- Thanks, looks did was quickly to the mean, that average. quarter. at then, end It It I how And like was what of you guys securities the XXX I it like what on up the start the rightsizing liquidity. elevated,

Robert Sarver

Yes.

purchases the rates it was did frankly, of end disagreed with and out the be got. kind didn’t We think in we how of toward extending environment we quarter, to So, best the securities. the then, that

so that And been seems correct. far, to have

higher. the to and we Xs were do mentioned. backend was on bit our little the fourth where we $XXX kind well. I significantly mid was that to in in of did position buy in cash loan yielding as September, million down cash, quarter. have So, Also, But, expect average that’s in securities a you growth our like loaded they high come

purchases that that’s coupled bps decent little some environment softer have about what could growth additional that we’ve be securities these shown. I XX think I -- rate out. of at with expect loan. to And than a going higher, we’re will Deposit put bit

Casey Haire

year? revenues this level that that the some here. expenses, just grow standard, And of was X.X around tracking in having spend now obviously going we’re earlier times expenses, switching message to to the the to I the Is quarter infrastructure Xx thought that digested and in were

Robert Sarver

the always, Dale the Dale listen on or -- you to margin. leverage can’t operating

would, he we’re a better So, than doing know. thought don’t -- little we but we I

We’re fine… doing

Casey Haire

Okay.

Robert Sarver

You model. of got your to kind own do

Casey Haire

All right, very good.

and levels you there? an just active it activity some the being just front, pipeline thoughts just guys -- updated M&A still Just lastly, is disciplined,

Robert Sarver

at -- expectations have been to growth in, to some of the some earnings deals, the lending platforms, of look been us. actually Yes. have little We’ve interesting at work. looked our we of at price you of you that non-bank But, some look the we’re which more able and pace in at some we markets looked we’ve make interest some haven’t anything when

And going you’re your to be a got deviate to we’ve and when to going that’s more growing so, opportunistic, something really we once we’re we’re and because find earnings to in. folded that going than not year, select from XX% XX% grow

led anything months. XX last to hasn’t the activity in that So,

Operator

next question The Brad Milsaps from with comes Sandler O’Neill.

Brad Milsaps

some industries. your runway you set but year. do can opportunity this growth, grow I amongst know, there? continuing give more which developed there want big you been can in just a is it and the the What deposit and longer the quarter niches last the to has what’s quarter, kind see, DDA great if this get in balances think mentioned you’ve term? maybe you different on fourth Robert, to slow Hey, your how tremendous little Obviously, some of color might mind, over the

Robert Sarver

that on been Ken. Lines our going and road different a the groups. Business has I’m month He regional turn last lot and in over National to different to meeting heads the with

Ken. ahead, go So,

Ken Vecchione

is said, million. the had will going a that ingrained $XXX growth it exceptional growing we growth think of would whether as and relationship things versus So, always better. be we million trail understand relationship to I folks in our I deposit managers because lenders, into clients, $XXX deposit that mean, better It performance one those loan also drives loans develop they’re credit constantly and BDOs, growth quarter, the And deeper QX. businesses an relationship working with our deeper deposits. drives we

deposit this growth. business remainder deposit to line generated or the looking not always some culture deposit from growth Having about product region specifically, incremental where piece. quarter, as growth regions drive product $XXX the comes said by generated here So, for of important the region line, that, lines other the as by all banks, is million that fact the and forward, the the of

are So, also we the always look opportunities for growth opportunities to and tied well. those as loan

Brad Milsaps

sounds couple business. other categories offset Okay. Maybe think up on I got million, decline but loan like maybe just Dale, you seasonal mentioned the is hundred you offset maybe a the growth. that that in it warehouse of to

kind of growing curious see what areas the fastest. Just you

year, Just as loan of drivers think Is in back pricing I business? half the grown - it’s the the get of the really updated just year? guys that interesting tough haven’t of big is kind on et any you around any still -- year CRE at cetera? all growth still quarter last the into color it this thoughts you the kind of of terms

Dale Gibbons

Yes.

in fairly of in we’re standards more I have frothy selective terms -- area. an think little now pretty it’s gotten are the that it’s competitive. front, as commercial front, And valuations on the seeing area CRE probably we underwriting on our

values little of houses think bit the the are construction been we’ve diversified. of C&I different lot we’ve side, different fortunate well and and demand. And we’re the and a got niches, terms on lot visibility and earlier and better we in little which residential recovery focused in have pretty on there business divisions, we lots stage So, a side, of we’re more that of

disappointing a now incentive of is demand maybe up of is the a of money picking side say businesses faster that deposits lot are growing one or new bit of to is a and lot right I’d muted. relationships, pretty the and our mindset reasons quite actual borrow We’re -- actual

they for plant, build on where businesses of borrow to to new want facilities really the money So, growth credit, low. drivers new fairly lines is uses average

their a So, is lot we’re that more money. now, adding appetite muted. But borrowing of start for little a customers hopefully still debt will pretty right

Robert Sarver

isn’t this will players doing steep warehouse, down. mortgage but we’re going as it to don’t for as instead for the we to we refi business think of know, a indicated have be in with space decline Obviously, toward us, you fourth the going other skew of Regarding rates be some higher. money quarter, well have the purchase so But refi.

Operator

of question next come will Fargo. Braziler our Wells And from Timur

Timur Braziler

follow-up on new came clients clients? versus from percentage one increased existing the the business. just growth utilization at Maybe warehouse What of

Robert Sarver

Mostly new clients.

Timur Braziler

that And heading pipeline new quarter into look, how client XXXX? fourth does and

Ken Vecchione

Yes.

So, very they what towards this optimistic is spent of they And as just signing road I are we’re optimistic of coming Ken. see well. new came time and them, a with lot and lenders. off the warehouse up that clients lot we’re about also a

company. that So, for I’m product, the more growth volume on for and probably constructive

Robert Sarver

mortgage developed would, in are money we on a put also making XX% lending where the little a niche more at at commercial than that We’ve loans rate side rate. line funds lenders the advance and in together their maybe product companies XX%, higher they’ve advance

putting in essentially We’re to we’re warehouse their what clients, of where those lines lending for XX% lending. XX%

another so, but than for what We’ve risk XX% folks doing, profile lender nice between what -- that much yet niche some lending with to And got lower there. are we’re penetrate of versus is developed in market it’s putting what the we��ve the a we’re to us way supporting. cushion little these money because

Timur Braziler

incremental maybe then other in growth particular is -- national at warehouse, the business pretty lines, or fairly growth And still excluding that other category the strong. broad the just Any driving looking that based?

Robert Sarver

based. broad pretty It’s

Timur Braziler

I could. me guess, one just I then, for last one if And

see down infrastructure coming that expense for looking pipe a that little today for we are are As I any in fairly to coming ask maybe to build? pressure into that going can question as baked revenue projects as expense the on or XXXX what be might ratio you’re different, XXXX, incremental the you what’s far during

Robert Sarver

we recruit add company. recap in with lot. a of an growing bit teams months to continue we’ll And locations Gilbert, over the in to just is really We Raleigh like a open. Bridge, XX type Phoenix in a major offices, significant But, area. mean, we any the opened I good markets another and try in have up us I and we just now. down risk don’t technology to terms new significant we’ve office, in increase one management opened think some to where Atlanta. office little are which last type the of penetrate don’t or would projects have different lead And on over at don’t spend to now right spend in levels that new over and place pipeline to a

I looks it think year. into going So, pretty predictable next

Timur Braziler

just the was then question. And modeling What one quarter? contribution charitable this made

Robert Sarver

a just We lot more spent money.

We kind -- credit nonprofit of you was kids tax a it its low It’s some dollar. in a have credit dollar if of Arizona help program state has. Arizona give you got tax deal get to schools for to a money where income scholarships,

get So, the of it credit the gave they fully called certain our credit is months doesn’t money some income At the more the pops day, helps this and taxes kind will really us a costs will money. tax kids. more so and utilized, that it of in back the but donated up anything, reduce remainder It over little year but we so end is actual the we bit. of a

Dale Gibbons

taken generally comes a than is The tax donation. charge different recovery in the period on the when

Operator

a Michael Young have question we from of Suntrust. next And

Michael Young

of Xx XXX the XXX efficiency Rob, growth of pretend to growth it year years. points that Xx rate. to is to to back that if has big points several I kind like or the just the are for ask I last expense revenue going at ratio mean, sort basis picture wanted continue does a to basis we decline expense on a question

Robert Sarver

I know. know, I but don’t don’t probably maybe. not,

that you that’s our We expense; going long numbers, have we to been our go aggressive a to that’s revenue time. doing a little Whether grow probably model. could those continue to culture, than with are faster

XX%, may but If we better, at lot you you just a of money; be little keep okay. you We it make know... will do

Michael Young

just maybe the professional fees. just little you. on more, a Dale, I greedy, Getting got then, And

is stock. You going run restricted called the mean, pop a forward to that or back up? going board that due director of kind of this out to vesting rate is I good

Dale Gibbons

first the quarter. in up back pop will It

So, in QX in it’s lighter and QX, much QX heavy and QX.

Operator

Christopher And from have next of a we question McGratty KBW.

Christopher McGratty

of headcounts, If bigger revenue of we of in you as year-to-date color, up look versus producing talked is much at of XX%, that how kind kind about as people back office you about company? that kind come a deal I’m interested up

Dale Gibbons

first the twice to say do the lot to quarter, but of producers in involved But we a our mean, support us infrastructure that hires size terms of prepare we revenue the grow to FTEs revenue So, other X as about were talked actual in production. the a today. made bank, I individuals in

that’s and And remaining for we a so, as factor of those -- been focus those teams, are but teams. XXXX mentioned support half Robert to in hiring, about continue people people

Christopher McGratty

a I of can ask margin And maybe, question. Dale, if kind

cash like Excluding the core up bit. helping the points, few but accretion, a it with a obviously basis fed looks June, by in the your was also

kind a you of As moving points the of a assumption. basis dynamics of the stand few about today, kind it’s sheet, again, quarter, balance fair given ex-rates

talked about about the in think you past [indiscernible] each XX, I is

Dale Gibbons

Yes.

insight is we’ve we mitigate as we at modest lift. really the but relatively I what give clients what whereby loans, [ph] recognizing December, with do deploy should So, in with of purchase only count we so see. lift. impaired wouldn’t were credit that of doing things least think we other sixth, million to that in we that that be as don’t to have quarter $XXX necessarily us of get know loans for average might of going -- because that other don’t positive -- that have could we bit X.X an I had excess have are our that position that if risk a going fall. positively have on rise that give bit fourth loans discussed earlier been more going at much But, than we that And what a be the ending in increase a to I we that number we should increase if is we then, a effect us a likely one experience. though that’s think that

Christopher McGratty

rate the And XXXX, maybe contribution, forward, if think could, about I that? fourth we the about the tax should given comments how going into quarter

Dale Gibbons

Yes.

I a tax Washington. see. in to we’re significant nor on we’re basis significant done absent is at to increase, something right I’m being the looking what not continue think going year-to-date rate now likely for recovery,

in We went a have change first our rate that on or XXXX quarter for up rule awards. taxes in the price lower tax will, however, is because restricted into effect that share stock accounting and compensation

Operator

have we Arfstrom a next, RBC. question of from Jon And

Jon Arfstrom

if that Follow-up on in Brad to back continue Milsaps question there deposits even keeps bearing total room earlier is on the non-interest you. there’s lot up. bearing curious like growth. percentage Ken, just it number, That higher terms or anything of that creeping structurally percentage? maybe a of to And grow a holds question a of non-interest going feel for that as does

Ken Vecchione

Maybe little a bit.

Robert Sarver

When as DDA deposits was Bridge percentage we their of a about Bank, total acquired XX%.

an higher And the bearing segments a a clients rate that that more something incentives environment, interest said, But that opportunity. capacity so, have obviously at there’re so. of to little in certain have our portfolio do rises,

Ken Vecchione

our is a really And We is larger credit these of in on their Because on lot did core of side. competition focus lines. some primarily but deposits national the business sectors these too companies. of some focus they a have

the it deposits that. with bank cash together deposit we’re all deposit of there the folks and our our systems some so, were many the wrapping and cases, and the with we’re some got credit get leading In in side And our side. management on how That’s together. we and

real for areas, fact our of they areas. the with of on the some got appreciate specialty really credit the not customers on times, report side real are of that And so, side often some everything. active in focused competitors deposit And they’re those larger bank us a contact the

pull able And business lines. national on to significant strong relationships deposit our from front so, we’re the

Jon Arfstrom

and Okay. lot That that’s costs -- that makes very there sense. continues it’s struggling creep that to other and of a just it obviously are you. -- are like It’s with for banks seems notable up just percentage deposit

Robert Sarver

a franchise, mentioned really I our really hallmark and of it’s always piece Yes. our think The deposit Ken kind culture, has as of so. part been earlier, of

Jon Arfstrom

quarter. that’s it issue touched on seems little there anything bothering the very you, more of And for watching Okay. else Robert, credit the then, and terms it’s in you credit anything isolated like closely? But you’re

Robert Sarver

everything watching We’re closely.

key everything, they’re things vigilant and now. are trying to really And think want to of trying everything, sure good good right not get forever. that I prevent and ahead we I it’s but that’s trying on be to proactive mean, surprises, the we’re now, right realize make very to clients, vigilant.

over So, we’re all everything.

Ken Vecchione

like have move up more way move we quick got maybe start work want to credit get and acceptable, was a is loss one couple younger And acceptable? exercise. what’s folks to zero explain through One that But what for. that. what don’t mention, that’s find to acceptable. -- on ratio or and back out is And go we is these cash I that want to though story loss what substandard. good We’ve importantly, I don’t that credits to credit to the well, offices of amount me, them even to said we out we at pass, pass. down the the is And shoot number loans, tried special

is to doesn’t for that perfection you about [indiscernible], So, mental require of it’s thinking losing and that pass only It’s excellence. strive with -- all end right credit also you it keep that’s set. not only the not loan. the like up it’s sort money, And not it incremental making work as

have the our to communicate to all and set trying fields we’ll that’s we’re losses. the the vendors. So, that mental But

Operator

over would the turn question-and-answer like closing session. back I And Sarver conference for our concludes to to any remarks. Robert this

Robert Sarver

rollin’, like wrap. Yes, theme song them keep Rawhide. thanks. No, rollin’, I that kind just from Rawhide, guys. think another doggies consistent Thanks, rolling quarter, keeping and old we’re it rollin’, rollin’, That’s of a just

Operator

concluded. for attending you conference Thank now The presentation. today’s has

may You now disconnect.

Western Alliance Bancorporation (WAL) 20 Oct 172017 Q3 Earnings call transcript