WAL - Earnings call transcript Q4 2018 | Western Alliance Bancorporation

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Operator

Good day everyone and welcome to the Earnings Call for Western Alliance Bancorporation for the Fourth Quarter of 2018.

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

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 2:00 P.M. Eastern Time on January 25, 2019, through Feb 25, 2019, at 9:00 A.M. X-XXX-XXX-XXXX passcode dialing by Time and XXXXXXXX. entering Eastern expressions may statements future historical that discussion and and during to facts. forward-looking call this similar trends, or projections, The relate are contain expectations, anticipated events matters concerning that strategies, not plans, beliefs, financial results assumptions, our The and historical and significantly those circumstances may herein cause changes results any future contained subject to forward-looking from are statements our current in and forward-looking about expressed in to actual differ views and reflect events performance risks, uncertainties, statement. that

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

for I opening over Ken now Vecchione. turn to go remarks, to like the ahead. call Please the Now would

Kenneth Vecchione

earnings Good fourth Alliance's afternoon, quarter Welcome to everyone. call. Western

Linked some positive prior or the QX. Balance net loan position performance, economy as this and generated this as lines. share, and rose Year-over-year our growth operating quarter per revenue QX loans per unsettle I performance loans sheet from and the Bank's Dale will contributed is of to the slowing you These loans stable XX.X% net posted for charge-offs questions on detail. and your to $X.XX million its from XX%, Several Gibbons results then our the of provide quarter-over-quarter will $XXX broad Dale our $X.XX charge-offs sustainable concerns program X.X $XXX.X the quarter call and residential by asset million, and Dale supported X.XX% declined remarks. of X Robert, income end and quality of greater results the our revenue at quarter. credit NIM and million special address million net quarterly with stocks financial bank's costs in target national $XXX or rising growth which ratio. regional will business all annualized are and XX%, EPS Joining $XXX.X Alliance achieve were through valuations $XX annualized volatile deposits me the potentially quarter share increased quarter to growth today and Net a annual million of banks compared XX%. results Robert grew mentioned throughout prior overview in dropping by stable $X to walk company were and was from stable and I the Sarver. market. expense to into and million consistent rose income growth to to QX. basis points. factors built maintain efficiency were X million $X.X linked graded Western

move to year the Before NIM. I bearing the on non-interest I wanted acknowledge deposits and results, associated to full in the decline impact

before balances. loan the comes shave quarter, credit our from loss basis was During protect balance it with and told management to carried deposits while growth. over a which these but relationship, The have we to $XXX lending sheet the declined X repeatedly asset that and maintained million profitability, DDA of board continue we NIM, prudent I it of discipline. quality points

Additionally and servicing quarter DDA and in fourth Title seasonally trough mortgage in decline balances as the businesses. Escrow

or billion, $XXX equity deposits to and was net balance XXXX. billion at were sheet to net end. $XX $XX.X $XX.X return Loans share X.XX% year, assets Non-interest nearly income The $X.XX full while XX.X%. of $XXX.X represented deposits million tangible on compared year or XX% bearing on share charge-offs XX.XX%, million, tangible out XX% the billion, our was deposits remained to attention flat million grew or capital at per ratio year-over-year common while $X.XX was billion. for per or stands and $X.X $XX.X topped billion XX% rose at $X.X our to total annual return Turning

Bank began, me my to offered stock shares. valuations of Let dislocation the where use capital us in finish an attractive comments repurchase I the

X,XXXX This Dale, an spend million now we average to $X.XX through will you performance. $XX.XX, take quarter $XX financial which to of XXXX shares repurchase at add earnings. price will our

Dale Gibbons

third year to operating excludes The income. Net growth. third Net sales due million up for $XXX.X third rose to income which on million, Net million credit provision average and XX.X% increase losses loan interest before $X.X costs. driven items the largely rose by $XXX.X income was interest the million expense, quarter. in ago from the deposit period. quarter warrant in million the was up $XXX Operating in increase asset rose $X.X value fair was losses. to million remained to to were in an $XXX.X charitable quality million annualized with tax and million and million, $XXX other income in growth the for million which quarter contribution security million, XX% as $XX.X to million quarter, income, foundation an excludes from taxes losses Operating increase growth largely $X $X.X Income $XX.X million. was the $X.X non-interest loan is net due quarter from which the $XX.X adjustments in steady $XXX third million from and

to were $XX.X and related operating revenue benefit tax rate well X-time doubled. XX.X% again to double forward. corporate costs. a expected Bringing gains non-interest losses also expense $XX.X as shares were from XXX,XXX a over recognized repurchased, at for reduction was million XXXX over average was growth million $X.XX. restricted Adjusting are was the XXX,XXX or net Operating growth. in certain loan share benefit the the year. They the average billion the slightly that increased $X.XX climbed XXXX the the looking XX%. It credits quarter QX. compensation non-interest from originally Tax or in as per items election loan recurring from resulting vesting resulting $XX.X million quarter to higher of in taxes, be as back earlier $XX third rate the year from due in Income up election. by the Driven fell While XX.X%, to and XX% EPS expense driven by interest Act of $XXX.X carry third Net XX.X% in back deposit from than million. income rose or XXXX, is to the share. effect decreased expense rate share income which reduced Operating Diluted more $X $XXX.X tax nearly from to these Provision that XX.X% good shares anticipated. QX unlike prior than unusually for expense $XX.X -- was to as low this million the warrant carry tax million Cut Earnings received last than the company's million. tax Jobs

that Line exempt period three to XXXX the we've these next show recall change. benefits without the added QX the tax due been pages an ratios what in to have reduction to tax would Orange For the

of the increased fed are during benefited QX. effect the basis beta the year points The appear actual yields quarters investment semiannual related point Loan the year. XXXX reported Investment in a performance X.XX% have quarter from some numbers in green climbed yield XX and basis a up in second in of XX% rising in points the provide that linked the XX fourth exchange While the -- quarter. from QX been quarters last X.XX% funds are resulting in and over the over past orange past target had XX loan to year. numbers continuity rose dividend quarter. QX quarter XXXX basis in basis the yield last basis points X.XX% basis points yields to On XX in to payments in X and during increase of

portfolio XX includes total effect of overall basis deposit asset this this peak the quarter X of that loan X equivalent earlier lower XX than held was during at book, and reduction but our balance increase the the a XXXX. rose points second due XX the of quarter last less which rate QX, lower said margin better rose Ken sensitivity to low from Using in during quarter, loans However, XX% bearing bearing points the increase XX% sheet, high moderation the the much taxable the X.XX%. the yield basis third the from in deposits beta. flat the margin capital We average yields points a has points residential sensitive points mix the to lower strategy. margin XX% Interest beta basis in to effect after from The beta our climbed cost accretion less an the and reported and and captures the non-interest to When in to the increasing quarter a balances the executing given in company’s XX% trade-off in changes quarter loans during decided loan to acquired funding linked basis the at and in considered, basis total including for borrowings, X.XX% portion are rates. points in basis margin cost the year quarter from increases. and quarter. X.XX, bearing in sensitive rate is the and interest client interest From remains in all XX%. margin beta resulting sources earning funding further prior of added mentions back deposits which of a rate to diversification X the from of the quality time interest of loan residential non-interest by increase benefit, points, fourth cost back the The absorption, funding due adjusting increased the XX basis

is of the the time, change. expected ratio ratio adjusting after a tax $X.X quarter basis than remained over at for XX.X% the shown on will XX.X% but a million higher year and here activity. from virtually prepayment flat flat likely ago, Forecasted accretion because loan decline linked efficiency be loan The to

$XXX.X For strong million operating annual net year, the was our revenue is profile. maintaining expenses leverage million times, increase growth $XX.X the operating operating X.X in full

return have are These a on been the consistently was peers. and decile assets company fourth X.XX% was record revenue the net pre-provision for top to ROA in compared and Our our quarter. for X.XX% metrics

loan Continued took assets year-end. and billion total to deposit at $XX.X growth

quarter past XX% deposit annual rates continued to in XX% Fourth million annualized $XXX as linked Our to each during of growth deposits an the consistent us sheet annual XX% loans increased $XXX growth growth the quarter year growth momentum about compared and generated for the of year. three growth for balance to million brought our of years. rates of three basis. loan XX% on These quarter

Loan in C&I our construction. million market year-over-year The million. and also types and all growth driven loan million Our National growth loan million, growth by up Business of was spread in of loans in of loan CRE growth Lines. residential decreased also residential driven throughout $XXX the up is million occupied by across was $XXX $XXX largest and $XXX C&I Deposit and with non-owner offset increases interest-bearing bearing non-interest spread DDA $XXX money our was demand. regions by deposits, savings growth

rose grew the the also quarter increase for the all repossess assets grown total $XX largest $X.X X.X% losses increase of a declined December non-accrual no from principal slowest and million stable. year up $XXX to the credit checking This market unpaid loans provision million, in across $XXX XX. and million and only loss each $XX were of The of X XXst in to deposits adversely mentioned $X.X and $XXX,XXX savings were Seasonally during of million Non-performing by consistent annualized. and During adversely at on $X loss to points in deposit of Total acquisitions. have with the recoveries, estate reserve years. $XX year, lease types of prior interest-bearing quarter million, by past discount loans assets. fourth ago. offset and non-acquired of have billion losses million with to loans improved deposits of total X.XX% million money basis allowance of and were as was of $XXX quarter loan loan comprised loans or Gross million. reserve essentially balance credits losses as $X as during graded graded was three in assets assets the the million credit net partially resulting or net the the decrease to booked quarter for a The special real acquired

from transactions. million. tangible company The totaled the quarter $XX.X been Finance purchase in credit X.X% book ratios Hotel the is these as a declined. reduction the XX.X% income, down average which common Tangible Even of book your-end, $XX for ratio securities the portfolio, tangible total the value in the fell Capital of XX.X% per I'll available a with in from as in part group. with to basis loans interest losses of comprehensive rates the are primarily prior sale $X slightly and thus discounts our share turn reduced program back peer top during which shares far rose quarter the past acquired value and year is just is tangible that points. have XXXX. ratios million on half recorded quarter as the under repurchased up benefiting quartile an common of billion to other a the For for $XX.XX, Bank quarter purchases equity equity by share at call from of in XX $X.XX XXX,XXX part in shares Ken. unrealized of repurchase at the loan Bridge exception repurchased the the by No share price $XX.XX during Franchise

Kenneth Vecchione

Thanks, Dale.

expect our and we year in $XXX this from pipeline While net remains growth loan million anticipate quarter. we to slow approximately economic growth XXXX, per strong

always, underwriting decisions not growth predicated for sound on credit. As reaching and this is

We this loan the credit mortgage than may us. loss also stable mix losses conditions believe residential behind the for relatively as are large presume construction from market charges over time shift at change mix preponderance augment total loans. result our This lower loans is loans rate proportion residential of we mix as holding a cycle loan provision while of mute sensitivity other increase to lower will continue will asset Bank’s categories. to in arise, lower This

deposit non-interest growth fourth also In side, rate in should continuing be most offerings. enhancing and environment, to On in fund service the deposit core interest-bearing new deposit growth to the building product with Stability expand we likely funding loan look from growth this reduce account. betas of our to by quarter. today's and relationships, existing our relationships our bearing is

the on in XX, As from expense. decline be basis basis a the be analysis year-over-year two the two the always results reduces first ratio company margin quarter our point XX and for the first the its efficiency with metric as margin reflects a the flat X.X basis report to calendar times, moderately we is days margin assets about fourth. this fourth we is calendar reduction from quarter quarter recall appropriate the expect Please increase fairly On quarter challenged for in should the from increasing in sensitivity, year, XXXX somewhat the expectations constrained XX improve a of XXXX. and this days. operating considering will revenue on due linked Year-over-year comparison to revenue of since loss the

resumption the seasonal will beginning that rise other the FICO expense of and from at items charges While the pick up year. of

to that into performance continue While in achieving time-to-time expense we'll are volatility new and our revenue this X.X we ratio, targeting earnings technology growth goals. products times introduce long-term modest while from investing may

the change in trend. that on we nothing strong see signifies horizon remains this and quality Asset stable, and any

the Moving operating stable risk real At in happy growth and questions. coupled result cycle. reduce through time, residential estate efficiency margin to sheet your Low-double-digit in volatility business EPS with a and take I Dale this into should growth Robert, balance the XXXX. credit are should double-digit

Operator

will Haire question-and-answer Jefferies. question first We Casey go Instructions] of Please session. the now comes [Operator Our ahead. begin from

Casey Haire

Yes. Thanks. guys. morning, Good

Kenneth Vecchione

Casey. morning, Good

Casey Haire

relationship deposit and the what's growth I DDA from Starting you the credit your decision, the NIB that be just going is you I avoiding on deposit attrition driven related level, hold further in a get here. Morning. that at know interest but the can level bearing, by on this forward. but to holding outlook level Good going confidence lost confidence

Dale Gibbons

year but we the we going it approach, basis year. stability. a the think into bit, stable with hold looking a wise bearing is can that we're we're may a which drop Yes, that's non-interest to what last deposits -- On dollar for percentage little

Dale Gibbons

add know two we you to As be that that. should that our should line on have coming initiatives

seasonal a on recovery some to. that get alluded I should also We basis,

Casey Haire

Okay.

So DDA that is are a there the focus there. -- new initiatives those

Dale Gibbons

yes. significant a element, Certainly DDA

Just initiatives. Casey, two deposit initiatives recall, and were loan to there two then

live and then will somewhere basically one first in initiative go live second the third the quarter. has The deposit gone towards

Casey Haire

loan then, so quarter borrowings are that from great. go borrowings. the on I to can the are you mean loan huge the some see we Okay, was growth you of generation here confident or forward? And core the that down use this going you fund going

Dale Gibbons

Yes.

-- would growth to loan if do on we so a yes, I of two. for So those on mean we looking we're -- roughly match payoff that growth be what the deposit kind

thing a their last that funds. runs that actually We that don't could $XXX bank also securities low. a is assets We size is we our it say typically average in of bit about the have the portfolio billion pretty But little have our of total that million off but X% like I'd a well. as borrowed bleed borrowings $X position

So line we've billion FHLB got $X a capacity there too. We've with got the also.

Casey Haire

loan the would that mean you ratio above? to to a not is not there mean would -- I you where want Okay. level where violate I deposit go

Dale Gibbons

where we're the as we we think got I higher XXs fine get I XX if I reconsider -- that. Well, think think to we we are, would

Robert Sarver

But that the Robert. -- different those at is mortgage and profiles capital you marketability the too this growth and When risk some book requirement in carries assets. think different I book residential a look of also

of between security. a think mortgage a So loan of as kind of it’s -- investment kind and you can that book mix

Casey Haire

willing I quarter. of guess, total as that this forward take looking how million the XX Okay. resi. in from and mix. benefits are far last that at proportionally for you -- going get get loans? into of sort diversifying mix slide guys is resi percentage Yes, growth that that's the that loan what you my actually just on are the per $XXX I to is question a I looking But with XXXX

Dale Gibbons

the average XX% Well, at runs XX% our bank total loans of and here. we're so about to seven size

I that So going think could we we're -- continue have to to increase.

of was $XXX be maybe kind residential that million would a said you of are. third If what proportionately the where the about others

So some for of time could I quite we really sustain kind that forward. going think

Kenneth Vecchione

customers. or Casey. opportunities add the our We're that, or those quarter lending to our accelerated and increase there me arrangements pricing targeting more Let million residential can just for rates but all $XXX opportunistic about economy buy in be if purchases, to with per inclusive allow and flow warehouse forward interest

of like a we when lot or higher. tenure to arrangements So XXX forward little was a buy the started flow entering loans these and

has So bps. tenure the XX dropped

And we on doing in so think buy as to going be we deals, good and got hindsight opportunistic we're a we so looking this. look at these

Casey Haire

Okay, great…

Kenneth Vecchione

well. That as to runway see a got said, of us we ahead

Casey Haire

Okay, the more new just fourth in just great. follow-up. loan And yield the versus on The XXX sorry one production money quarter?

Kenneth Vecchione

higher than in QX. it it's was Yes,

Dale Gibbons

current bit a It's than little higher the portfolio.

Casey Haire

that why I come a at if loans I -- a proportion could -- -- resi mortgage assume growth of I would yield would the lower How that mean, driving is loan of significant mean would now?

Dale Gibbons

Okay.

it's no versus kind is we proportion that at -- on mix because what look of there. acquired of a you what's it's a higher out the portfolio if So basis larger

So course than loans essentially what were C&I higher QX. during were the of residential other estate flat. loans they're But the real the they categories

Casey Haire

you. Got you. Thanks

Operator

O'Neill. from Millsaps next Please question with ahead. Our comes Brad Sandler go

Brad Millsaps

Hey, good guys. morning

Kenneth Vecchione

Brad. morning Good

Brad Millsaps

be credit lending. the quality, look market about quality. obviously better appreciate a around lot to get to particularly of leveraged I in -- the Ken, focus continue commentary Things asset

on that you that rest more of curious get any of the book? the didn't fit pushed specifics sort other But provide any and of more that the loan on to details might one you Just out if customer. why how any kind obviously just And can’t anymore apply there. color color into on the could then

Kenneth Vecchione

that, at risk our you could to too negative loan And it Yes, would be that fit higher probably a can just we -- we frankly be deposit the into also I a mention that downgraded. I would there profile our so didn't thought size see stay to size high upon they with And impact the was of reward the we level very relationship have being a all of given think think and capitalization. special the viewed will of probability but market have the risky have trade because and first and as be quite want negative don't here. -- that loan

book making risk tell So on set even to Bridge we it reward a right profile the us. what on to just any from that's I easier was thing have it that or corporate and say it sits finance ethos the numbers leverage right move Bank of or decision $X.X question for of corporate the you just just $XXX of to of billion of is customer sense we million return have sits by half has to It's BBB your half that the in it's the do. make that either but let's finance in round overall having got we with corporate do. our thought in finance in to precepts away a thing near it, loan half deposits, On the do this it, sits was at it wasn't if to loans, about other of rating.

it So lot liquidity it. generally -- has and of to a

from price, a maybe to time those lot but us industry that if particular don't particular haircut credit of you've of it small liquidity So or to a trade get don't to the has of take like like loans. out out us we allows and a and seen we time

Brad Millsaps

of Great, and helpful. year in about picture I deposit of business kind are it’s two various then I And you've two of the you getting know just projects. new one kind businesses sort of thinking Ken where bigger of start stages ground. time question. or the follow-up off that's got loan this that know usually

of mind of top kind on sort terms top about most As kind year you in kind your of five top of next what’s list? or think important the of of XX

Kenneth Vecchione

in at, this. things out. to got that announce rolling but we're want very some prudent tell nothing or Well you looking that either we've try we be We we're to

to and initiatives First ready the yet rolled let say me out isn't be just one rolled other deposit out. the two

that in and of we front that those well have on what the performance important is. complete us execute is and what then it we it's see So

all now we two loan On maybe last year, embedded at four of we of those inside the focus million want a initiatives are opportunities, one growth, that over growth, one on want decide contribute but million sure talk now up. our to other loan side, then really we ratio quarter. initiatives we time look things, our of $XXX lot grew full about but inside our mentioned those booked different growth make is ramp just X the to loan continue the during we forward, And and now efficiency net that XXXX the to on kind programs sense. that of of four. to on we should But And of $XX take our inside per we execute to EPS and ready X.X on what nicely we’ll year right makes to well

Brad Millsaps

Great, thank you guys.

Operator

comes Our go SunTrust. Michael next question ahead. from Please Young of

Michael Young

morning. good Hey,

Kenneth Vecchione

Good morning, Michael.

Michael Young

like staffing on initiatives the the of sides since new probably and about running the It they're kind seems following last up place. on is up comment now. both Just in fully

-- at incremental I four the next two of So or year those guess expenses really with associated initiatives aren't this kind point.

Kenneth Vecchione

correct, generally of anticipated that's year one we've to of those And initiatives. out have some four say to and each that -- inside those three embedded in of hiring those for the still throughout we've we scattered our X, then X.X would I but initiatives. do got

Michael Young

other kind NBLs. that? profit greater I don't funds on color just from, contribution I year of NBLs, profit the interested to kind provide you this pricing in Okay. all just other transfer if of holistically And more the because quarter, was of to not know and could that's Or the other little attributing seem the any the then be on there? this maybe segments? color that's a growth

Dale Gibbons

On question. the on don't the profitability sorry, understand that maybe I growth, I'm

Michael Young

wasn't Yes, volume, on contribution both was like there terms sides growth the of it really NBLs it but dollar coming from in in more of area. the seems seem that other like strong profit

areas. know didn't attributing to of that I transfer back funds the other was higher some profit So pricing, if

of on dynamics color I the So, playing wanted kind were just that there. some out

Dale Gibbons

of it's timing okay. part within the is this Well, just quarter, just

have in average loans million So noticed, our higher $XXX as may balances you ending our balances. than were

is going earnings And an that but based an this statement, are see to upon balance so the you're average. ending

So most is estate I as that would of the this consolidate have significant this within look NBL you shift real where change we balances. The is kind higher now initiative. our for NBLs residential

that so that's And pulled up.

December. And settled some in of those

Kenneth Vecchione

little a Business than regions. bit of operating has to lines than better general the leverage rule National the And the

keep just So in mind. that

Michael Young

But Okay. national significant anything the in any there space weren't credits shared NBLs purchases other of quarter? else this or

Kenneth Vecchione

No.

Michael Young

you. Okay. All right, thank

Operator

next Our Timur ahead. Fargo. Wells comes question Braziler Please of go from

Timur Braziler

morning. good Hi,

Kenneth Vecchione

Good morning.

Timur Braziler

other wanted business of how growth follow-up national lines. again the quarter? guess, on Just business the this much the I that from came warehouse

Kenneth Vecchione

So residential business the real estate includes piece. the warehouse

So that the $XXX there. million that came we in in had category

was As really warehouse business a away from participant. that not the

Timur Braziler

Okay.

to that with It as to kind residential than footprint. So that Is correct? and starting there we're about partners, much purchases originate through your right. of this a going got want thinking going out coming growth, is of I be just seems like to strategy make rather through sure, warehouse I

Kenneth Vecchione

this. on Yes. quarter. I want last about second to We spend this a chatted

which their an branches, to us. many but any their We ourselves doing arrangement is loan there has brand, it and with way upfront to volume lenders, in keep. to we forward loans full not only relationships growth, costs, what compliance a warehouse the a we and underwrite what all deposit pick benefits on is then want bring to have to have get opportunity deeper using as maintaining also And our we're relationship we're their We network, well.

that part with an finance piece. about component of other MSR heading that have There's relationship inclusive of lending, along a of of we go residential the warehouse house and pieces that's lending, learning talk So we lending. there's when note under the there the are where warehouse finance part

Timur Braziler

one understood. me. then one from just Okay, And last

of back forward we a looking income year. end of on As you have ramping and how warrant higher in the that basis? go at within the visibility modeling we at you that as segment look be kind the been that here should for that's What's think purposes,

Kenneth Vecchione

icing we volatility flow that on it reason it. we're when of a That's about it, with all to come about honest as little quarter we're has are to in particular know the the public. whatever relationship, for in know times you. think deals it get And the it, as be concerned, income and far doesn't hard cake we We of There to going terms predict quarter-by-quarter a to almost. it's

Timur Braziler

do this have amount. amount the of dollar know And income I said a the you warrant Okay. you actual double of dollar quarter?

Kenneth Vecchione

Yes, $XXX,XXX.

Timur Braziler

thank very Okay, much. you

Dale Gibbons

$XXX,XXX from Up in QX.

Kenneth Vecchione

sometimes were you $XXX,XXX. we to but there use income, another warrant just success out, success fees so help So are fees,

warrant, can $XXX,XXX it’s in, okay. long does as as flip the a success. come flop in little it in between $XXX,XXX indifferent So It bit two,

Timur Braziler

Got you. it, thank

Kenneth Vecchione

You're welcome.

Operator

next of comes Tyler go question ahead. Stephens Inc. Our from Please Stafford

Tyler Stafford

morning good guys. Hey,

Kenneth Vecchione

Good morning.

Tyler Stafford

wanted from just to XQ that of relatively levels? Is I outlook levels or XXXX clarify flattish. the the year NIM full the

Kenneth Vecchione

level. XQ No,

Tyler Stafford

Okay. negative and trajectory off a thinking from about throughout the NIM mentioned moved so starting you day year. And counts point then then impact the in quarter a we start the up lower just having first should the back

way XXXX is NIM, So right full that with think the is about flat the that trajectory? or to roughly XQ XXXX equals year

Dale Gibbons

Exactly.

Tyler Stafford

loan given will lower you going you're just does that year on the so does forward Okay. reserve? Can does and the resi that more from residential provisioning impact in growth what how about that the of viewing And the talk then impact incrementally this the the how just growth, following from much loss back reserve provision here? the risk -- be how

Dale Gibbons

right. basically So of a I substitution mean sorts, it's

kind higher. at is today low C&I look estate other is construction bit you tends a commercial if of allocation, our higher, bit categories very have real a So

means these the And of overall allocation be so that doing other reserve That that to degree lower. to more is that residential kind some the for going elbows in of out you're categories.

that our how translates a expectations and and terms that's toward by like less look historical a a a loss kind in of time. provisioning exact But in Now requirements should of hence on of is category risky looking into our rates at volatile basis. moving what diminish reserve to less class general asset going process provisioning category over

Tyler Stafford

it. got Okay,

one of last the story. hotel me, a guys color Just today. how I portfolio the you just from perspective about your of from the on I some for questions It's talking get wanted get franchise view to credit you quality one

LTVs any flags if So of of got dominant curious coverage their service debt I'm metrics like of what just kind kind look you there.

overview Hotel book. the Thanks. credit a Franchise of Just

Kenneth Vecchione

our about flags book They're Hilton major $X.X continue strong. to very Yes, numbers RevPAR fast seasoned book all for service ratios. The operators. accrete and of strong sponsors is are of but although business about the so still with they as debt We Marriott. partners or still under deals billion XX% coverage were the seasoned work not of two upwards producing our and as

book very with put right But capital up mention. any margin have call. XX entire So been book now well there a money that in deal. we is two the case of special in performing we it equity liquidity the the that are -- with years. along only require have XX is very, came sit and the credits And hotels borrowers the usually us generally doing to number that a to have XX% these and our and front they've of for We work folks of in

Dale Gibbons

rates I'll The north just of lot we debt XX, sensitive are have lot to sensitive interest not as in loans. portfolio have, a the of loans to add that. a to we we're or things of so relationships increases changes in as RevPAR. average And two yield

from market cash if one has hotel that and issue there's market. So an one extra another flow

strong. it's So been underwritten very

Operator

Chris go question ahead. McGratty next Please comes KBW. of from Our

Chris McGratty

your talked it. many of for deposits morning. speak relationships at $XXX any of this Ken, kind larger other point? might Thanks about watching be Dale can have good of are or you you you the you speak How plus question. can XXX given and Hey, of about, there granularity just million relationship these -- the you the

Kenneth Vecchione

And our the our of booted that that we is very similar one have $XXX over X% have largest -- XX Yes, funding to about relationship today. we we so million. are about

more We have limit no of X% largest that. than and just funding I our mentioned, a half policy of as of

Chris McGratty

of And any like contemplating to of others kind Okay. boot described? are kind deal you

Kenneth Vecchione

in them than there. advance in we And No, we go. enterprise I higher mean, situation, we I that offered another go wouldn't mean, had

Chris McGratty

strategy of as And interest Okay. bit would income? NIM $XXX maybe some great. credit do balance maybe view there you kind security a quarterly the one Question growth, is, of the growth exercise accretive just a kind to net little that factoring at another also on of And million net sheet, lower in profile. the and comments be

Kenneth Vecchione

outlook, that -- what would interest of we're that be assets. with net in I stable basically earning would with margin terms our our So income in-line we're grow mean seeing

dollar basis. follow stable terms And your were $XXX it's net to so, so, low-double-digit change provision quality, And should then Then earning track assets on be tax expense of as our what X.X no million, than we're you're range, be should we income to credit in should that. going higher XXXX going to in X revenue in average running kind you've an the And well. the interest situation the the certainly got improvement. that of efficiency

Chris McGratty

Okay, is on using about this tax just some… rate, the we a what quarter's I know should great. there rate And is be clarification don't

Kenneth Vecchione

thought some this in So, going to in, were QX. items that of benefit some come quarter we had probably

that quarter the from on may not the which what first lower you take this forward. XX.X%, of going restricted aggregate, in of for is, quarter, benefit at point should back but from did the bit not had we run rate XXXX carry At little XXXX happen So a that that And our vesting in in be I'm was loss we out that in kind this awards time, sure. the rate the third quarter average little number rate than is a the if a rate a benefit about look quarter. run that share of good

Chris McGratty

FTE a number. is that And Okay.

sure Just clear. I'm to make

Kenneth Vecchione

Well, for only and tax that then to so yields up -- XX%. well, take securities okay exempt want gross wouldn't I you the

coming in the the in exempt So yes, have, XX.X%. we that if take that securities considering some revenue at and interest XX% loans look mix and tax you XX%, of

Chris McGratty

for Got the it. clarification. Thanks

Operator

Tenner of D.A. next question Gary ahead. from comes Our Davidson. go Please

Gary Tenner

Hi. Good Tenner. morning, Gary it's

Kenneth Vecchione

Good morning.

Dale Gibbons

Gary. Hey,

Gary Tenner

Hey.

But beyond the business, that like to resi degree quarter? quarter. regarding any quarter obviously came fourth specific have above in the that in rate that a in the side opportunistic the pulled Just It trends were you the or quarter, expected terms of on forward well the bit first way fourth close are regular you into XXXX. deals just in may other run suggesting in fourth some to you’re loan sounds that growth for the

Kenneth Vecchione

No. nothing was that There pulled was forward.

Gary Tenner

pipelines a So you as strong. number it fit your into clean XXXX and I mean, remain said very doesn't

So okay.

Kenneth Vecchione

that's Yes, Right, correct. right.

Gary Tenner

Okay. regardless. of this mean absence sizable even that I of in the run-off quarter have deposit, kept the your up deposits would

So catch and exciting up to I trying about if deposit XXXX was the first quarter of or kind just not just will XXXX really XXXX? there's in track wonder

Dale Gibbons

to I going things. of up. a But guess not I'm they're Well, sure catch couple

$XXX is, XX% them of you've $XXX if a every the is increase One mentioned, third kind were map is, took our roughly be we in typical we look I residential would if we what bank for to that wouldn't of million which like in million quarter, that, opportunistic residential it. of

more in balance. And is yes, So there. $XXX put Seasonally piece gone. bit million maybe which as account expect in fourth of quarter versus that recover residential million per to lighter, $XXX then well, would a the quarter would is, excluding little kind the second that's we that

of better, would significance you growth lower. bit wouldn't lost be bit So be would and little little a deposit a a loan have growth then account

Gary Tenner

color. right. for All the Thank you

Operator

comes ahead. Jaffray. from of Rabatin question go Our Piper Please Brett next

Brett Rabatin

Hey, guys. morning. Good

Kenneth Vecchione

Good morning.

Brett Rabatin

that to you adversely have people too, and had issues worried quarter scope down just Can maybe about are for thoughts trend Wanted talk portfolio. a few continues your credits that about second, banks Finance some some it in like out nicely credit a Franchise to your on credit. seems graded past with the just there

Kenneth Vecchione

the to restaurant quick what referring you are… you loans. that service Is Are

Brett Rabatin

Correct.

Kenneth Vecchione

Our $XXX criticize $X total in there. there that's and is business we than million million of have or either loans classified book less

we like very So return strong aspect risk it. and for of point focal because pricing like hasn't then don't of don't a the mainly it the us been we course then

us there. to of So deal for metrics course strong hit both But us. The return like it's we in falls and credit to that it. we're not pursue got we'll metrics very

Brett Rabatin

I’d think it's of that look, give guys do deal might to curious where the your reacted the your not it's just thought favorably. then would an And past that just market your opportunity more year? I quarters bit about deals and deal just little I you Okay. what to two you the around activity kind this And other me results investors hasn't me think and how and wouldn't about you to might thing a you talk do see and sure a stock some how given parameters odd and is

Robert Sarver

Yes, it's Robert.

comfortable addition, disciplined we are. this where where given we'd to know And enough we have have us. economy we what's what any the that book, at Ken don't have and potential And We I do organic we're we're we we're metrics organically. quite year, have at. very have are stage in perfectly we look for have of we the and given back. wise. competitive are we're position that said do growth non-bank have year in us something we little find there. But that know forecast And stock our opportunistically you for in at if own and think fits then our on frankly And to at deals where capital looked the I that's you price a creative don't were a side think when buy acquisition And we're comfortable kind something do. we’re to and shared continue credit mean, know the really extreme that, good in we organically comfortable would that anything. very where you, a driven. and at the accumulate to weren't comfort now, the we were to look this of to that we with with Dale we results in have that kind couple a Having if we've we information we very were would during it

Brett Rabatin

buybacks year year? help That's keep a this to percent good and thinking the accumulating your should color. accrete just TCE capital growing from And then muted the ratios expect just capital to about we somewhat and

Kenneth Vecchione

make look supposed strength the the opportunities in little being and along. But keep put year we able to to we're the not opportunistically some think, ourselves I buybacks a as that extra goes or there's position there. soften and of economy should at capital decision

Brett Rabatin

color. the all appreciate Okay,

Kenneth Vecchione

you. Thank

Operator

Brock from go comes question Please of Our UBS. Vandervliet next ahead.

Brocker Vandervliet

question. my taking for Thanks

I if yield guessing and that But I least total I'm the your have not lower a with your at average just is originations you're loans than XX% keep on do trouble to bps so by bringing XXXX. So coverage I'm XX%, both yield. about it's highest. that it's I I among the yield, know doing that the here And worry my having I loan in growth just how XXX your next of you NIM -- That's XXX which yield. guess against year, many balance one. flat residential you loan math

Robert Sarver

me step-in.. high guys can give one these you comment Let level

lower where spaces We are there for have bunch out banking business non-resi some whole actually there the tentacles spaces than loan are a of they the in in we’re yields our resi buying. loan

less. loan loans So replace the pockets going the an bank. buying in replace to you average have to loan can't make to or residential residential yield not equal be We look that we're that actually buying may some at we're loans of the to loans

Kenneth Vecchione

up pick comments. me let Yes, on Robert's

investments north X.XX%. yield into how would accretive these to of out from this yields swap to loans loan can be of our about about think when investment yield on And relative a and basis. that that book First you were an our investment think you the

Dale Gibbons

just really And got going one XXXX in not We on a points core our fourth we then month quarter. rose that margin basis we're the we XX last dialed year. course rate you expecting rate know a first to So in affect had quarter that's basis as the increase mid-year. over have of increase

a of Overlaying that to otherwise and that of is asset lift of move line today. as we're we our benefit that should that changes bit to So as sensitive us less It's little mix our and to some instead the margin sheet be risky profile. increase. in give would mute we going balance we are still where have going this kind flat a

Brocker Vandervliet

mid-year NIM? you if And that okay. a hike could we rate didn't get it, Got expect down

Kenneth Vecchione

actually that credit That took the that than you took that about loan the yield that we the mentioned bought at of out that a talked we that that bank pushed lower mortgages guys this lost quarter. we bank, we

loans. make risk don't the market my that's point prices in we And on loan mortgage we're for average we types these that different an and return those loan So types loans. of miss of substituting make a

Brocker Vandervliet

Okay, thank you.

Kenneth Vecchione

Thanks.

Operator

Our Jon go of RBC. next comes ahead. from Arfstrom Please question

Jon Arfstrom

morning good guys. Thanks,

Kenneth Vecchione

Good morning.

Jon Arfstrom

a of couple ups. Just quick follow

of pauses benefits Brock or Fed example, deposit easier we less you stops If in as just but you pricing the for see Fed pausing do think asset what see sensitive, gathering. deposit stopping, there the to an that asking. all path you are and Just or was pressure maybe

Dale Gibbons

on or keep take going up. forward or of there Personally credit I'm in so I but would going of We're not. well -- yet, what's the funding in whether it on, yes, introduce pretty think they it I they these it relentless fine give and in of the terms but side. a at would Not okay system two, not probably perhaps on And kind I think the I'm quarter indifferent as stop but it I'm going pressure serviceability. terms probably energy they if think if pretty stress stop. levels, if overall they're

Jon Arfstrom

Fed need you Okay. Basically to going the keep the message market necessarily to is steady. the hold don't

Dale Gibbons

the kind such call to it halfway down, of want don't are than duration the slower to really No, repricing at assets than of we the -- we're sure. asset to rates we I'm a out but I fact to -- duration think to a we not going anything not that if were and return a swaps going have throw bad saying to that doing But they isn't be there. time or little put been. otherwise take little we're a would longer more there to that's for the this of rate we're saying then but to we're think we're went that closer assets an some top degree in where cycle, we top certainly our And impetus moving

Robert Sarver

lending so construction related It also of warehouse that. our margin issue potentially fees business especially puts volumes break home business, more down lines to to the too housing mortgage slow some include offsets volume that and

Jon Arfstrom

give in about have deposit of may last so that's you a but you touched I Ken, and live this, but it can was you quarter on us how if sense. missed first how initiative makes going, that being terms Okay, far? update it the talked on little an gone bit

Kenneth Vecchione

specifically. avoid expect one talking of to We both that, out it about some brought to initiatives report want really went and roll say QX. deposits I just in deposit business the live now I'll continue to Yes, to in grow Dale. lines each it we with it actually

the how we you works and So, dealing can grow, make we what optimistic found very we're brand to with we to sure our this a Again, up, And a up equity we customers them. service are initiatives have with move if something over here way we all time. you in trying are you're and that will we're can constructive base. have missed and customer it grow that create going through that doing these wind destroying

you like we'll big for next just a the to continue in grand If don't grow quarter, slam look coming on it.

Jon Arfstrom

Okay, got it.

Kenneth Vecchione

what pick live in one which sometime Remember, end up the QX, doesn't second we've until for QX, the always back of said. is

Jon Arfstrom

And some about quarter Robert up the Ken. or funds showing one follow-up of Okay. maybe, potentially and lose. non-bank shaking Robert, talked then last you maybe

in guessing if increasing I'm opportunities bit You just terms little of of touched more and maybe looking that numbers you're curious better some that I'm you've pricing things but lose on it, at. seen ship the and things a December

Robert Sarver

dig in There into a really interest in. I that's have not we is that on things flow I'm definitely terms could of pricing. we increased comment only sure around really amount floating because of deal the couple

on So we couldn’t tell don't macro pricing. -- a basis I you on

Jon Arfstrom

guys. thanks right, All Okay.

Kenneth Vecchione

Thank you.

Operator

Chiaverini question comes David next ahead. go Wedbush. from of Our Please

David Chiaverini

Hey, thanks.

the FICO, mentioned me curious average was other the mortgage you is I just items. is X.XX%, remind but fix I what question average maturity, you additional rate floating north a follow-up already yield size, was can of some First curious, on on the mortgage, average about the stats

Dale Gibbons

Yes.

here debt of XX So XXs, the XXs. this and category. group. jumbo some buy income to in LTV mid the We The is FICOs are is kind in the do on XXX

balances. the figures these of of in but and in fairly dispersed, West the terms And are some concentration So geographically so East. of high six more kind a in

David Chiaverini

in. wanted you to sticking happy you Certainly the that ended prudent ended what share also relationship it. relationship the can to lending underwriting. see in? Got you was follow-up industry I to I And curious on then

Kenneth Vecchione

I would not to. prefer

Okay.

David Chiaverini

Fair thank enough. That's all I had, you.

Kenneth Vecchione

Okay, you’re welcome.

Operator

Our ahead. from of Please next question Young SunTrust. is Michael go a follow-up

Michael Young

Hey, follow-up. thanks the for

the wanted to obviously duration really CECL that residential of forma you in a use quickly context and it's feel time, one under fair? Is mentioned of way still Just good on new CECL extending the you that but the peace the regime. touch kind that of pro capital, more

Kenneth Vecchione

fair. that's Yes,

Michael Young

there? color on And you provide the analysis can any

Kenneth Vecchione

Yes.

So well, start. just just maybe generally let me

So I CECL. mean, number we a don't for have

call, high the loss year, loss cards always are consumer these coming stuff and credit duration is the areas in which some larger current construct. I somewhat would that reserves think for have we're our quarter be have on is to areas others going with on maybe that But consistent in talked particularly some that our general consumer terms second probably guess. that like provide those analysis guidance that, my earnings over higher model from. that's a where one has that with implicit And requirements like

a effect triple still we significant residential we're that, considering where on is from estimation the single-digit But to the us a is My sheet years, commercial estate, average which be that. have a to today, where and had terms of estate, percentages going well. profile our day. bank. on given past that than balance it does No, stand had of typical in quadruple versus add the our that a CECL that or very rate are as we duration less for rate several for can So to real loss real has element low which that lower loss

Robert Sarver

higher we mortgage mortgages us lower AI the that that from some duration, achieve And piece in helps particular, duration are on buying have the we we better yields. use

Michael Young

sense. Okay, makes guys. Thanks,

Operator

question-and-answer over remarks. to the Vecchione our closing session. concludes for turn any would conference to Ken back This I like

Kenneth Vecchione

saying, heard will entered QX, Growing leverage loan about good X. by with for be And pleased in tax lower forward. stable asset year X.X quality we're opportunistic against to as balanced we trends Dale growth stock. going the a expense pleased that to buying with we're full rate you be finished year. just growth, to Yes, steady Generating in we our back very the NIM. very performance performance net the set We the a going with think income talk operating positive interest the

us year, gives momentum bit and next we to talking next forward a look you of our to that all So moving into call. on little

So thank you all for joining us today.

Operator

for attending concluded. now is conference you Thank today's The presentation.

now disconnect. may You

Western Alliance Bancorporation (WAL) 25 Jan 192018 Q4 Earnings call transcript