WAL - Earnings call transcript Q4 2020 | Western Alliance Bancorporation

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Operator

Good day, everyone, welcome to the earnings call for Western Alliance Bancorporation for the Fourth Quarter 2020.

Our speakers today are Ken Vecchione, President and Chief Executive Officer; 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 3 p.m. Eastern Time, January 22, 2021, through February 22, 2021 at 11 p.m. X-XXX-XXX-XXXX, ID: dialing by Time using XXXXXXX. conference 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, statements. that actual that could this to Factors release the historical from or related Exchange the results cause and in results included and differ filings with Securities materially are our earnings expected Commission. presentation, any update Except statements. forward-looking obligation to law, as not required by any the Company undertake does

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

Kenneth Vecchione

Alliance's welcome and to afternoon, Good quarter Western earnings call. fourth

Dale Financial in I will Tim while provide And through our broke for and Afterwards, and Joining the performance. walk take economic growth, fortifying position. bank's today and our quarterly net business Western are Bruckner, me how sheet many Officer. then And environment. balance Credit earnings, current Gibbons Chief results we XXXX, we open the Chief your are balance and will managing the our will you overview and of of the all call financial the our records questions. in Alliance this lines own an income on Dale first Officer interest sheet

balance financially year rising was flexibility to earnings. external of as economic borrowers asset while us the strong strength consecutive our nationwide we sheet and and XXXX to challenges, simultaneously income, volatility align XXth Despite managing strategy Our strong the and quality. provided a was company grew our with navigate the

$XXX For the million revenues than expense EPS by despite net we $XXX.X increasing XXXX record produced provision of X% and of $X.XX, the million. net billion, income $X.X of greater year,

XX%, expenses PPNR operating expanded $X.X and To growth, XX% complex a increased total while on to difficult, in XXx and be environment. to continues or revenue which expenses put $XXX perspective, rate approximately of uneven the million modest income increased XXXX interest million net focus Our a in rose this million. $XXX.X

actions, per share grew Given book to tangible these $XX.XX. all year-over-year value XX.X%

to economic billion, an loss clients and deposit consensus quarterly billion million consistent by growth total and throughout credit was and driven [indiscernible] and for achieved record $XX.X increase quarter lines growth year. with opportunities. fourth Turning the $XX.X the investment assets under geographies of a $X as billion, forward for asset go million from future benefited Outstanding results. quarter, outlook. improved These from $XXX.X which XX% net provision loan of broad-based following We our of of $X.XX EPS income results and business prior a of $X.X reversal results respectively, our lifted to strong

our initiatives gained business of several Additionally, internal traction.

third PPNR. from COVID X.XX%, was for Quarterly of XX fourth interest revenue propelled sheet quarter, quarter a points incremental shutdowns. the up to decline net basis XX% basis. to improved the economy For funding and healthy million. the our million to created heal full-year, Xx grew record earnings increased the XX.X%. flexibility ongoing million continues growth to billion, efficiency for $X.X X.X% provide and million $X.X aided foundation continues CET of income an $X.X as ratio a PPP grew XX.X% believe to On operating non-interest XX% grew basis, for NIM a This income a costs by growth of income loan warrant deposits balance as equity year-over-year and as on fell. and $XXX to excluding we which expense Fee or $XX.X program full-year increased fee $X.X growth $XX.X a or non-interest loans the shattering, to and PPP strong quarter, costs, improved $XXX.X billion, million Full-year quarter ratio million, was grow the income growth producing expense efficiency In of income.

quarter XX amount pandemic relative the At just being deferrals clients. and $XXX to remediation a our both end, levels LTV million to positive increasingly this and XX of strategy absolute quality than fallen loans, assets quarter for XXXX total low Asset COVID assets, of QX results including $XXX classified total for Total total residential felt. as basis $XX was was or in points as produce which continued QX improve impact on million basis to declined points had lower million dollar our loans.

this loans today, financials our into is And of noticeably specific million but our ACL growth As in million economic improved These residential of QX $X.X loss points ACL to of excluding loans quarter. hotel the were charge-offs to excluding and XXX%. Dale loan loans X.XX% $XX and at Charge-offs of total are classified there reserves loan on positive findings X to $XXX basis loans. provision, our details paid or loan asset will drove amount franchise the total million. agreed. trends, more consensus drivers stands of loan funded and are PPP go ratio full-year were total now deferrals assets risk credit in of less as release $XX.X outlook portfolio of million low all than our

industry. for Our in CETX equity return strong common capital robust basis and on We average of assets XX.X%, loan points on the to Return XX% continues average levels were XXX the profitable respectively. PPNR of drive tangible X.X%, remain year-over-year one generation and banks growth. the ratio supporting most

will as rolling program we out. are in throughout participation by second the our their and As support we PPP XXXX, encouraged continue clients round is demonstrated to

volumes. given rise in expect begun application and we processing one. to size other constraints to factors, are steady saw seeing and round But have levels the We the don't total amount we

successfully our which prepared positioned respond company most immense to to during Dale environment, events. strongly XXXX. importantly, Alliance may our accomplishments performance. efforts the we but cannot be will made without performance challenging enter of Finally, of you into our people now pride in take the come peer-leading financial COVID-XX the challenging and for above achieved way in Western and by the all take as the through has times, our good We whatever all

Dale Gibbons

Thanks, Ken.

the million each of or net $X.XX quarter, income XX% For Alliance more $XXX.X a EPS, Western basis. than up generated quarter on linked

$X.X lower net increase quarter a of QX and of release during in the mainly outlook were $XX.X As benefited loan quarter, supported driven million from mentioned, classes. original XX.X% pre-pandemic. budget $XX.X risk grew to accruals income economic of incentive the primarily to million, income quarter-over-quarter growth prior million, by $X.X targets, increase million in asset warrant from expense established million fourth lending. the performance Non-interest related provision the by $XXX.X guided. we in technology million increased quarter which as Net during $XX.X increased our an performance million, interest driven an the our to $X.X which exceeding improvement Non-interest above by to gains income and in significantly expense quarter

fee sheet XXXX interest and up balance second recognition pre-provision of from income growth restructuring. one-time PPP items life loan net up first generating from of quarters revenue third million, Continued grow superior as and bank-owned net the insurance substantially the quarter and benefited XX.X% of year-over-year $XXX.X

million for per considering elevated $XXX.X $XXX.X $XXX an income XX.X% record the the the generated even increase QX million during billion, Alliance expense net increase one-time in fully grew $X.XX $X.X Western year prior $X.X loan year, provision PPP mainly attributable million increased increased reduction of of interest to the or restructuring million year. from of million when income $X.X income and balances, $XX.X of to interest to year-over-year an share, Non-interest We XX% loan over a For year. Net during XXXX million. recognized of full-year fees, expense. benefit

or short-term increased incentive expense million as and just non-interest deposit accruals year-over-year costs in lower were $X.X costs. offset X% Finally, technology by increases

loan changing yield XX Interest-bearing yields Investment QX the yields basis of rate for the XX Spot by PPP and for rate in mainly amounts. loan net to On for to quarter prior the our roll X.XX% X.XX% of prior quarter. points higher points prepayment from related year deposits, a includes basis to XX increased with across to forgivable costs to basis X points XX total quarter quarter mix an drivers. by following spot points, reduced compared lower basis end on fell basis were XX now and X.XX% rate deposits, third off. interest PPP deposit the the CD yields Turning assumptions cost points was from environment. points decreased non-interest-bearing basis basis, higher due points. quarter which as basis linked to loan was a XX most rose types, driven a yields

have essentially stabilized costs these funding expect levels. We at

spot Current continue CDs are as marginal XXXX. stable lower we as and However, rates. relatively rates at there cost be in benefits indicate could enter to margin place mature a higher

regards mix is residential yields our asset as variable with Some due of for notably loan to changed rate towards loans now since decline segments. to the XXXX, declined loans our floors shift has as lower XX% With of expected to mix has rate profile beginning fixed in behaving our loans. risk the sensitivity, risk fixed rate and

an and We continue in income to scenario in net be at in parallel interest rate fell point net estimated any of from shock from interest versus rates rate benefit income, zero. line increase contraction X.X% X.X% increase increases basis future XXX a to with asymmetrically positioned if flat

by income lower our year-over-year the $XX.X PPP rates. year we XX.X% or the deposit margin substantially fee this a during improved XX.X% environment. transition shift, mentioned, as both from net related benefited million interest despite interest grow X.XX%. a net deposit interest rate increased recognition, to ability mix Ken favorable Margin and true-up As Net to income increased demonstrated to quarter

gave margin during to quarter, quarterly basis PPP showing points line Average liquidity PPP mentioned essentially which in of from excess changes held weigh continues margin approximately NIM a PPP, our this NIM X Notice by bar at last to flat was XX up this, is and QX, third As quarter, volatility quarter. of the slightly fourth quarter. of as points prepayment resulting our guidance and $XXX the trued points million by the the chart QX during Adjusting impact we during would to to NIM above basis build excluding growth X.XX%. had liquidity have we reduced increased the earlier, in and basis loans FRB related X NIM, the made for X.X% the minimal gold which QX loan X.X% aggregate. deposit yield returns, a for on been majority the increased assumptions the call. on relative extraordinary and the during in the or loans negative

recognized million $XX loan Referring quarters. section to dissipate coming to total million yielding is a origination expect We to the off loan QX the we margin of $XX expect PPP quarter. the the funds in in million on up costs, page, in loan from pipeline of and healthy be and was taper these fee the lower third recognition and $X.X fourth realized. to our assets, deploy fees recognized it reversal and are chart to in $X.X left earning higher ability and Given the PPP approximately net fees, drag prepayments forgiveness million in as quarter of

As round of initial the fee just PPP these to assumptions the underway, is second accretion of round funding. only apply

to the efficiency. now Turning

Our efficiency was to quarter XX.X% X% growth fourth the expenses QX, ratio revenue increase by rose as outweighed improved of from XXXX. and the in only in

historical the the management meet loan ROA to quarter, And levels and the points prior we as provides or XXs. for pre-provision from would been flexibility Pre-provision to and indicated and significant in from from the interest, balance our X.XX credit from revenue same the quarter period. $XX.X efficiency revenue last last low PPP XX.X%. the net increased demands have equal of fees performance period basis XX.X% ratio an in quarter, increase year. be resulted to fund XX growth, XX.X% This million capital sheet capital generation should This for quarter strong to returning net ongoing of the QX in clients. year-ago us net actions Excluding

and broader loan as payoffs of us focus a Loan while loan sheet capacity with momentum $X of billion, net during needs. deposit $XXX from continued strong in $XX.X meet million loans in position as quarter growth billion of XX% segments QX XX.X% balances balance deposit our decreased XX.X% strong loan billion $X.X provide grew PPP, ratio of deposit DDA. to at to sheet balance PPP of increased continues year-over-year loans $XX.X the year-end. deposits liquidity Our Inclusive XX% loss grew funding to with approximately year-over-year to on billion,

billion continues elevated As to our deposit outpace growth position origination, loan cash at remains at year-end. $X.X

for resumes. selective as inventory it provides credit believe demand we However, growth

increased share year. over the per prior the XX.X% with $X.XX book or tangible increase of $XX.XX, prior an Finally, value quarter over to $X.XX

result direct which C&I loans the supplemented is consumer and by vast non-owner enables strong of Residential increased cycles. of in driven growth loan million. increases commercial economic was loan while comprise Our growth relationships banking of majority thoughtful by million X% combines X.X% $XXX of our The national total billion business regional and CRE with our flexible loan model, throughout footprint our occupied of portfolio, growth $X $XXX loans of loans to construction modestly loans. now concentration a

net originations the of risk grew workout million finance million $XXX $XX C&I million loan assets, $XXX focus added balances growth grew in loans for million, repayment our decreased the Within lines to and low by highlighting mortgage capital this lines quarter and call end, Residential activity. $XXX on quarter. quarter corporate

quarter, billion, growth the DDA market mortgage $X.X significant and of grow and year-over-year share interest-bearing firm's and value growth a deposits core creation. year. grew Robust $X.X our of by both previous increases comprises growth which in the of driver deposit of $X.X and value We XX% money than tech any profitably warehouse innovation during non-interest deposit continue is double the more base. a $XXX million, continue of to ability believe fourth XX.X% savings million DDA $XXX billion bearing be our to deposit deposit differentiator in quarter. to calendar million is in or Notably, gains to market activity drivers annual of key our driven long-term Deposits and in of

in of Additionally, deposit is $X initiatives deposit our pulling contributed growth over billion online that XXXX. in one

WAL. at asset and classified $XXX payoffs, to in Looking million decreased total quality, credit from due activity to assets upgrades, QX away refinance

the at to and to OREO during the fell decreased XXXX. basis total assets funded non-performing XX below was to loans ratio year-end, of Special X.XX% to and points the total points assets of which loans. Our decreased quarter end basis at loans XX total assets million of mentioned ratio $XX classified

As before, apply and mentioned of we've and fluctuate strategy segments by elevate, credit are losses heightened in to the to monitoring environment do COVID loans special as out. not current these risk mitigation and identify, material credit discussed credits. of migrates result see or We early coming loans from impacted our a

million million of value as weighted low LTV average than deferrals, deferrals, XX%. loan today, mentioned, Ken residential Regarding as under excluding of approximately $XX we with to of less have in $XX loans loan

Net are All X recognized of or $X.X the million as compared paying sponsors million loans losses our hotels confirm sophisticated of support and in franchise hotel agreed to quarter QX. basis to our finance in were average continue credit for their points loans $X.X project. during

loss expected portfolio credit excluding to ACL basis improvement Our low in funded X.XX% to XX capital prior loan X.XX% In of lines, on $XX portfolio loans forecasts when ACL million account loan warehouse, mortgage is call economic When the or segments our with allowance the components, residential declined of loan for lending, granular these include points the quarter due resort total portfolio excluding and finance million X.X%. and more decreased the our for PPP lending. from and growth the in funded losses a level, for loss HOA to loans and all, loans. rate. assets remainder XX% public $XXX On to approximately

payment share, an to our of Inclusive past share book due the our tangible to a XX% increase of in per value capital common basis in strong loan ratio the capital XX significant $X.XX per decrease generate to cash continue of the our maintain regulatory Tier dividend year. equity growth. X assets of $XX.XX, points with to quarter quarter quarterly rose tangible ratios equity common during tangible and X.X% $X.XX of and strong the We of X.X%,

continue share past We our value now of Ken. the I'll tangible grow to Xx hand years. per at over has the call the that book peer rapidly back it for increased to six group

Kenneth Vecchione

and for balance future Thanks, that fourth the our we a in earnings baseline believe off quarter. Dale. had building quarter performance a growth, robust sheet was We growth fourth

next Our Both to seasonal on quarters. we have not aligned and and for cyclical million are expect $XXX their own several basis. deposits the behavior growth loan and deposit a pipelines million that $XXX strong and loan are quarterly of each

growth mentioned, some into liquidity pressure on attractive NIM liquidity downward given of and to we deployment mix to deposit expect be Dale our build, the As changes there asset classes. related and

growth of increase planned interest Additionally, we being to quarterly PPNR continue expense. PPP online. non-interest which of Strong on the and will will see will basis a more continue drive the higher second NIM coming net influence than round wave offset balance loans by the in sheet income, momentum and forgiven PPP loans

ahead, in operational infrastructure eventually offering back to Looking push we will which low and levels product sustainable XXs. to in maintain ratio we to efficiency, efficiency invest continue the will new our

indicators expect long-term do are not that consensuses of steady quality believe reserves as on in material the began of the to pandemic loss reserve the be sub-standard. the not by do Our recovery, are timing is some special forward we but loan which and forecast, losses excess cycle since we sufficient horizon. it charge-offs pace the loan could into cover through mentioned economic formed asset the the imply a We going could any consistent the and to on migration ratio. Depending category, migration that provision material see are more charge-offs fee than imply

in the one Finally, prolific the capital of industry. WAL generators most is

take to credit to and advantage while of At questions. your leading returns. capital ample market this Dale, Our flexibility liquidity returns all strong take take, risk-adjusted to I time, maintaining access we Tim, to shareholder address future are and demands, improve to any base dislocation allows happy and any

Operator

Brad [Operator Milsaps Piper comes Sandler. Instructions] from Your with first question

open. is line Your

Bradley Milsaps

are doing? you Hey guys. How

Kenneth Vecchione

Good, Brad.

Bradley Milsaps

And as sounds are margin, could kind Would going a generate on PPP fund a that might portfolio? this you that able to like it continuing ex you were to to focus deposit mostly normal then that? just is the might with you the abnormal? growth. fees in than you this maybe the quarter, growth that to loan fees like, have or be more that Dale, add expect the did with that, of just considered the you balance that loan you be look bond follow-up to new category Have sheet, found the it year continued maybe wanted higher liquidity address anticipate something to

Dale Gibbons

Yes.

you if fourth in we So quarter. the bond probably increased purchases saw, did

going loan to under with think I deposit We're certainly I'm XX% is We're if not sure ratio. climbing. happen. continue. going on to comfortable that that to that's

As pipeline to strong continues us the fairly to deposit look certainly.

So if We've capital. the that's chunk It I passed mean are case, nominal. deals been to a the large although some a do want all been we're deploy this are think negative getting sitting I of cash. of bit. back little quite on we hasn't up returns

rather investments So it fall rather a securities now even I'd of a difficult in to X% reach extending maybe last to than from start on when terms mortgage-backed was GSE. residential

fees, In essentially that elevated that I'm right, in things going even number PPP quarter Brad, bit call fourth excluding the and a number. to helped terms had off that some the loan paid that you're of we that was just non-recurring,

little for That's And was that for it's than it quarter. reflected in average rate at bit look was can if the year a of that versus higher. bit there kind book. at the the fourth lower that rate the the You note yield little see you a the of end loan the

just as as will That up two. started getting excluding bit here of lower So PPP. going be a in PPP loan could be fees round we're that little said, know, on you kind forward,

Bradley Milsaps

the And in question helpful. That's queue. I'll final and Great. here, hop back then

program deferrals of we up all as payments making three said your borrowers put around that don't plus that paying portfolio, agreed, escrow hotel have these that six terms under paying it's of six P&I I didn't category. as that institutional or or new any your operators, initially? of in the think three Should plus understand agreed it's Just are as they both all as actually the you

Kenneth Vecchione

programs the Brad, completed. are deferral

good seeing our Tim sponsors, So these implemented. the Bruckner agreed released this and original these always and they terms. We're me, with end the And as of could the feel guys commitment vaccine are tells at being paying sponsorship to issue being under see as properties. coming least

sitting to too So them lot ours this longer. Plus to much support loan as done of it's well and in their properties. on that value impression us. know, a the makes And be going very for to there's won't a you feel and what that's we've front equity as good comfortable continue here of

Bradley Milsaps

say support? properties with able Can be sponsor without you you percentage cash flow sales own that the to of the define way? their it of are what Would supporting kind

Kenneth Vecchione

that about I'll to to expenses. hotel would would was two-thirds say I how I October our occupancies say trying – had and best occupancy I'll define – I'm it. answer, over XX% of book our of way Overall, the that say give about November operating think you

been to flow when is back think they to So expenses generate – one Today, but their to come level. changed their They yet coverage. cut holds, about could flow service down in group have you out year the gotten go offset breakeven cash keep expenses. cover fully to where still operating there haven't the debt a XX% cash operators but generating occupancy order what's it, the XX% you that if RevPAR point was able dramatically, has

Bradley Milsaps

guys helpful. much. you very Thank Great. Very

Operator

Your next question comes Truist from Michael Securities. Young with

open. is line Your

Michael Young

Brad's well round is give that eligible most infusion operators as won't and nice them will as dependent the sponsors, the in so the kind of light Hey. be of quick tack Wanted will just of a update fair? of and hotel assume that capital PPP, I maybe kind question. second those question on And on book to real of casino an for on book and even Thanks the follow-up that be on that well. as cash

Kenneth Vecchione

lot from management of time away got these the the Well, million out separate and loans. flow companies management. the lot have between of $XX don't – probably A hotel of hotel PPP $XX around, we put cash first from because the PPP million get they

that's going hotel the around the to $X PPP than on than is that also And a will expect do cap would be that's want I greater group go amount anything the funding you to dollars amount add distributed, one. Tim, there that? being to of of less no to So million.

Timothy Bruckner

Yes. book. follow we hotel, the when our We much gaming. with underwrite as as underwrite we I will sponsorship underwrite hotel

round, is a PPP taker there because strength PPP two not Ken of $XX the of big So [indiscernible] big, the not of One, for have of first usually as two, hotel and that management on company. reasons. as mentioned, the and million because structure the the loans sponsorship

expect don't big taker. we a So

We also are in such frequent and ongoing dialog sponsorship that we don't carry. to see the inability of

We the gaining in that off-strip. are very With confident there. that gaming, sponsorship to is have relationship we ongoing and respect again our

our of for most So reduction. gaming gains, because qualify revenue revenue got won't not PPP they

in has So spotlight the we've gaming because seen. terms concern the out of the performance really that moved of strong portfolio of

Kenneth Vecchione

their Yes. be lot would of that? XXX% funds have portfolio XXX% has from people cash spent haven't these why little outperforming There's pre-COVID think cash. flow to majority better plans. casinos open operate of and excess demonstrated the at open casinos I said, as business. are in to no And these are revenue The off-strip, receive The a and government they statement, you Tim plus cash the would about cash the or they ability the times. flow a categorize for when breakeven that are for are they doing go, else that they place

an represent or of for this it to just a us So entertainment. not And outsized Tim concern reemphasize does risk portfolio time. represents said, at form what this

Michael Young

with out. the what pressure color particular million the held you're just side, seeing in a being guidance And a warehouse, back et to $XXX that really million a investment of just That's on on kind maybe you include does give and you touching on – color. warehouse, year-over-year for on loans a Can basis growth potentially today bit mortgage us or helpful little that $XXX with on maybe peel onion that the called cetera? the Okay.

Kenneth Vecchione

Yes.

$XXX say, $XXX previous said to million million thing was million. than a what higher the $XXX $XXX which quarters, little So to in first million I'll is bit we

by in that. warehouse $XXX note lending, was would XXXX, that I lending grew tech and by by $X.X collectively of bank I million, billion, but growing call year-over-year million. million-plus, during $XXX our million $XXX Warehouse tell resi the All you, growth and resort of and grew grew So a $XXX lending to grew traditional our would by innovation and year million. no course the year-over-year regions is over $XXX followed business, even we the come capital financing million. lot had our this for grew $XXX by

think the we As that's backwards. perspective

at think we that end number, holds warehouse XXXX, we We're about out its it forward that lending. coming growth assuming to just for little no As traditional of in have year predominantly. position

results Now, [indiscernible] to we're folks, lot pressure if full-year our and us XXXX, is forward can in terms of upside, off loans. a percentage through bank have surprised, XXXX residential you belt we more remind loans. will on want as if I see for Dale around lot what and got build come a would a a but didn't a the went we that the opportunity. close just knob be can surprised residential that into of that lot of residential to loans runway of need we turn anywhere bit to We've a traditional to. to be always total that in little we loans And of of bring ahead

Michael Young

helpful. step That's I'll back. Okay.

Operator

Your from comes Chris McGratty with next question KBW.

open. is line Your

Christopher McGratty

BOLI you're of that. kind or I'm Hey. Dale, and that the in details on efficiency morning question. thanks talking about the the Good XX% interested ratio, for

that of you kind of there Just at at of is expenses XX%... this a this result, component? remarkably that trying or to are growth more just revenue quite sense X%, a to telegraphing – going was are expense is a the growth years bit given low reaccelerate get Looking next year,

Dale Gibbons

Well, I'm certainly optimistic about revenues.

going be they're I think strong. to

from strong deal minute I into loan again ago, growth discussed in as think a securities will now. more that have pick perhaps we some what's we're right deploying it cash going to a

expense elements. there side, to catch up is For be some the going

quarter, to that on just think the later this benefit is get in So that going by maybe that – second, the think that. a in road, And come pick probably than two into things related third than down expenses will something with this, as management didn't we meeting that play thirds. couple I that's travel as have clients. up gosh, of our conference year. costs past we held – we a our getting to to We were XXXX XXXX there actually no other well. There's That's back more expenses

there's So suppressed the that were pandemic in costs to XXXX. related

have management to make continually that risk in infrastructure. investments IT also We we need and

put those continue on to expect a path we reaccelerate XXXX, been They've are degree. and expect that. probably to going some We to do for growth to slower of

So yes, going right four to – low to be with is our there of XXs, going certainly. going a to do going revenue it. think be to with a are I numbers instead be begin three. It's And it's

So than we're per doing increase will in revenue be in be share, earnings in in more seeing we're dollars double expense of growth terms growth to of significant going certainly dollars. what

Kenneth Vecchione

sitting billion, practices Chris, $XX.X I billion billion our to $XX now to just management we're as assets. we add, risk at total or to when want hit continue of have we $XX And evolve. hit

to start money spending So today. we need

I rate thought. growth has Our think even been far than we greater

it's that well. business infrastructure on we maintain line in said, that invest to XX%, of And new depressed growth always the that to needed operational not terms course, side just in are business as And there's to always so to we've And some at development, that folks Dale grow. like well. embedded some and of all to level in lines new rate as artificially technology we need the not on hire continue sustainable as

you the again, So can growth to the XXs. be the to expense got us exceed and next for in revenue coverage year back low we've look

Christopher McGratty

the one just margin. if on And more I ask Okay. could

Just sure got want to messaging. the make I

So experiencing and different liquidity but And of lot your the margin if fees. core [indiscernible], going think build, are put then through Is look modest deposit think to about pressure. peers things. talked we or and just excluding I way two you you I that's did pressure the right any PPP, to about the loan heard

Dale Gibbons

yielding and lower fourth I pressure we've the in I PPP, lower think had absolutely, hence even loan because Yes, there's mix these modest we've quarter, risk into think categories.

on a in some pressure loan you away fourth pay as brought that loan low from back the PPP. have little bit we in. had payoffs have fees we the early, a that little a fees that's So once the that quarter, put excluding and elevated We're been all from had

a added as the necessarily which fourth anticipate continuing. to little number that don't so And quarter I bit well,

I'm fourth quarter. interest going the I have that that a away big had our this of. to think not to I the like because I growth mean, We number PPNR going in pushed is a hey there's net dollars. be of of have. little a could liquidity call growth. But, income – those it's on and focused we obviously that have Again, deposit pressure So to number, today. take we're get terms that's but industry some in would problem able damages know abundance to the average NIM. I'd we to within good have

we have a isn't can going case years. that over be want and the to is trajectory superior out lend to the that view be sustain the inventory able Our resources, growth always have and we to

Kenneth Vecchione

warehouse Chris, business wanted divorce note, sort perspective, we've sometimes our to financing, our of important an at quarter what's a you resort of call, those And then credit funding, nonprofit. some talks financing, I number add, you capital NIM lines, incremental about everyone quality. got are to and MSR of and due When collected to residential muni loan, that I from also give is those, the lending, just think note fourth areas. of what look balances

a never our of that have base. have of had XX% business ago, from, had total We but sorry, loss loan as correct of balances several years attached basically $XXX,XXX and have a that's loss myself, never they've a me $XX.X loss let one billion had

you NIM. think about So when

I also in about it's risk still that we're important think based Dale's the upon the which see in adjusted be that's growth going mentioned. growth, these comment, go way to NIM, just about think to shrinks strong the to that I also yes, think is going sub a to good in okay that but provisioning that's little going bit, to income interest but a sectors I getting it NIM we're net increase sense not

Christopher McGratty

appreciate I Great. the color.

Kenneth Vecchione

of net quarter. we one $X of the it's reasons losses had why only million this But

Christopher McGratty

lot. Thanks a Awesome.

Operator

from Timur with question Braziler [Operator Fargo. Instructions] Your Wells next comes

is open. line Your

Timur Braziler

morning everyone. Hi, good

Kenneth Vecchione

Good morning, Timur.

Timur Braziler

those quarter out taking in Galton should on, next just of for and and about relationships, relationships addition building necessarily in context with of fourth we existing the at as come about be just your wondering how what the was new that Looking just contribution not balances warehouse thinking in comments kind share maintaining flat those market guide year? your

Kenneth Vecchione

there. other Galton He area a case to to go, there enough formal going I going said, their to our is so right. big funny on Galton well. no because me talking the and to everyone sign We I is be about got I let’s The of that process. integration say existing was you legal platform and review question had of Today go question tell assured me hey, that up onto let's had day. in the – not customers be what's about it. going kind and as It's would it's just All we through that Head let

which to out engine. approach, had and thing to of the other our a end QX. of completed credit a go going roll a had The lot as into pre-qualified the we rollout engine be quarter we by fully And pricing is that's a means we do rollout

hundred in XX% only it QX, are in it base. than is an with they have different impact volume and – No, pipeline the some QX. gotten Yes. of And it's clients, So have in we a existing see more expect? remember will from Galton. the there have impact that our yet. volume I Have of an And cover Q not we more will have building. to crossover gotten think we going We overlapping

Timur Braziler

gains business And this on the this you. warrant every you still that of gauge Thank equity in ecosystem but you're to speaking, just from not is know very obviously how tech be understood. going pipeline generally but then, to the the investments, is the historically, easy there as spotty for single look would or I line they're sure quarter, and Okay, down looking quarter? of strength in some income seeing strong call looks a when kind the answer what capital be up at and you're

Kenneth Vecchione

hard come the and increase that. in is for It's of to that terms going It's the you with and determine tell liquidity space, but of gains. What on us down. I very fact for loans be fallen, us innovation offset have the in the these to up we're equity some falling that's tech of in can getting the loans

we get capital as gains. the we're don't So and hard to gains around docs. our lines said have happy I've us built those We call very any that for into loan that equity always forecast

Timur Braziler

line. success step you And business as space. from is great more many see competitive a and of get credits for and relationships starting in that enough some are the standpoint new that lending that the seeing are Or Is growth obviously, competitors into that in there to more everybody? also better lenders

Kenneth Vecchione

competitors, the been There the we're is has a been go see growing, little competition you in if two proven, service are stage maturity. more into product either there many to because of revenues some more you stage our development has them early recognition two, have but like you stage either stage drive type IPO recognition, but is money proven, the to order will, Yes, and still a brand spending some and getting drive of things in to revenue type do marketing their up sale. some up they then name are they in an strategic that ready more lot three are or of a one

us in looking stage those the in three the banks. don't that because would play of be of players at We we're stage some it don't and three are exit fees in larger terms and compete there. So are not really they with

and banks not skill the our we set. where of early Some stage in playing the that's have

we're lot losing we're it's So business But we the going is a – after in And we’re competition. middle it little are where of business there on winning service. stage. winning we're more that it say yes, and a not I would

Timur Braziler

you for color, guys. the Thank

Operator

Your next Markets. from RBC Capital question Jon Arfstrom comes with

is open. Your line

Jon Arfstrom

Hey, thanks, good morning guys.

Kenneth Vecchione

Good morning.

Jon Arfstrom

big couple kind different you in than did and know just of the questions, anything Hey, change changed? and reporting can changes why lines of you quick not touch I have a a what segment reporting. on that understand but help us what's else it's the deal,

Kenneth Vecchione

Yes.

So a couple things. of

structure enterprises, we And institutions. be these a to bit commercial some may we consumers an of are perhaps focus relative So that and we we're that Others more unique so degree of and a we've kind that our that have liquidity. that among accomplished of a have metrics other enterprise businesses of of growth better certainly I the business that our think conveyed lines together did I in. reflects that expertise actually were maybe think able asset what lot being think these liquidity new with appropriately segments in providers it's holistic not that among I lines put to it of of quality the work and were selected out superior of it assimilation think convey have business and some we to to on terms interdependencies

of thing look most is another this where out at segments had the it. industry more – closely almost the aligns is you other there. number The much We with of if any institution

even five. much JP four three. Morgan pretty in we're going has That's I or to and line Now think

it So I looks think that. better like

that us enterprise, but well we commercial is people is segment think and in primarily dependencies I a have thought really is lot what is doing. of related historically, thing have other do think sheet balance a just have we're consumer about we The our consumer and I

think consumer highlights Yes I and as better think It's well. that we're how company managing it. how we this the about really adjacent. more

Jon Arfstrom

other, Okay. mortgage captured what in be But would else there? but And on is different other there, have one this else assuming question. balances, a one is in that, loan consumer I thing what I'm

Kenneth Vecchione

and resort related HOA, our mortgage our related yes. else. are finance, their So Mortgages balances warehouse in to our balances to

Jon Arfstrom

on Okay, good. maybe Tim, reserves. for one you

I your expect probably of some to improvement talk forecasts set you next you the can of a of message and But when quarters some I your over heard economic couple from releases see some the here. whether and see you we're reserve not off qualitative pieces in cut about bit you're of more think on to reserve building? the little it going

Timothy Bruckner

Sure.

Okay.

at So of look reserves portfolio we convergence composition. of is kind the

happening then and remediating the and economy. behaviors Our in what's

over together the lot seen closer economy, really a prognosticators the we've quarter. become last with So the

So progress. aligning consensus a consensus about we view do easier we easier to a and generally become talk to view that's consensus, as

a into lending, cash get longer do. outlook point that small, then term composition our so of it, in business the now portfolio we with separate that We and the this at align that and been the really we under consensus will risk look and look look is that our to what stuff at remediating that at remain in with we potentially economy just right at we secured impressed consensus risk, near-term don't then have have that of And shape we we outlook The things where flow restaurant, near-term much the line we and when dependent reserves are into and things much. when and behaviors business retail this not start look small small is we our February. have

So we year-end. of from down that a million $XXX million brought at what $XX balance substandard was to

then LGD say that look is drivers what going we So very on at we our our impacted the against and composition. look based and at macro to it we portfolio test favorable be it, are

Kenneth Vecchione

but drive go call we the to and to of talk how provisioning little just year off Yes, and chance wrap a for I back next the your a see provisioning. do about the take kind moment [indiscernible] the want really I'll question

just million and towards to going and in it, gave the about quarter under basis as $X.XX. $X.XX you And quarter $X.XX so $X.XX last take of your you Right. gets little think you And about run that you you that million an the out when then of you if QX XXXX, annualized for to going third gets taken and about a added we math do we we and for when income got kind QX, the PPP four if $X.XX we we we reversal $XX a for the forward same we forward normalize are in on you to after-tax are increase $XX the it into times $X.XX that look normalize and rate. and

in forecast as growth low how just down we that I that and as with is increasing economic prepared the if if loss to that economic would our next forecast will year, that in provisions provision we that's to forward segments on coming continue to business viewpoint grow we're the risk remarks or you stronger but improved segments, based moving our mentioned. improves Tim the see be numbers a can So said, EPS if our we no the or those add said

is So we our XXXX. I of we to forward of think wanted into to connect numbers what as set going baseline provision out come XXXX

a you more So I gives of little of you to sense all guys a going. hope that's where company and the is

Jon Arfstrom

and questions That's get mean, the stunned helpful. around answer. the never dance are directly try to because I Ken, not we those I'm ask we because

very helpful. So that's

Kenneth Vecchione

did I again. terrible I you won't Well a then answer that job, give

Jon Arfstrom

Appreciate it. it. appreciate Thanks for everything guys, I

Kenneth Vecchione

Okay.

Operator

comes question Truist next from Your Michael Young with Securities.

Your line is open.

Michael Young

thanks Hey, for taking quick follow-up. the

of guess yet, of end on not gone you've it's the book this size thoughts? of to cetera., or given we've going quite well updated do it cetera, this the certain coming the pandemic, out probably out your may a portfolio just of need I big like through is broaden hotel institution franchise picture kind be on back to the kind et go you growth kind but cetera of of perform forward Just and et et question what looking keep we're relationships, of the it

Kenneth Vecchione

way we've hold, probably maybe Well, discount XX%. I'll when XXXX greater only and from then no to our by – such LTVs in it's than properties, the purchases hotel they say growth restructured hotel a of five, up more were the at the book. our going are away since that took purchased loans. wild not prices done discounted gone be early six hotel borrowers distressed Those to in of part us, pandemic done XX%

the up continue XX%, we our a lowered we've to always same our and the strengthened conditions terms we've and we reduction, and get got, XX% So LTVs to price.

themselves to either So top that, We that, haven't can do they're foot but like. it's cautious, on see they're they MSAs waiting put pick are that. waiting those see any yet we say strong their the deals sold very MSA operators back sponsors now hotel like or don't, to in secondary primary their we to and I that deals they should extend they if the as primary see before We'll come and top distressed little if and down continue want like primary right are very, locations we and they volume notes anything and up also deals. pedal any and haven’t they

handicap. should us criteria little are properties we meet sold distressed. a Our that a worth putting I to properties at refinancing they clients But LTV But when at reserves lower a discount a do it interest. a we principal still and financing bought they're coming that a and it's I'd the they're hard up lower any haven’t worth of can guess and of also their year's say is being so say year's of I on operating LTV. and for

terms those like getting upfront we're – still and doing the like that programs, in So financing because strong we of way of we underwriting. very

Michael Young

I helpful. that's appreciate Okay, the updated thoughts.

Operator

Janney. Your next Tim question comes from Coffey with

Your line is open.

Timothy Coffey

there gentlemen. Thank is of to in the part a industry Bank now. I unique the on wanted company – of Ken, because is right you. that Bridge booming the subsidiary out discussion Good morning, follow-up you ecosystem,

how And counting are much this that so growth year. you company on standpoint, for next or deposit business deposit that growth a from

Kenneth Vecchione

generates X.Xx to side usually growth. tech and innovation the Xx So loan

sheet, there there $X.X this both as see in yes to I lot for getting going of we're deposit So – account that counting gets innovation working we're cash a generate balance the did year. loan a don't with year growth. of process and to much tech last No on budget to that all, was areas flushed us into one come think billion of we're was deposit and business. our but and that nearly in growth, their first all

would and contribute. innovation, quarter. and for of growth So initiatives a this business continue had new some year's to expect on for innovation. of initiatives We one expect business deposit much continue life as terms should and I our the next still of I contribute them in science deposit great But new tech tech our to initiatives also quarter

Timothy Coffey

capital levels right looking on are is management. right. And my All you managing How then now? at question other capital

Kenneth Vecchione

strong our sheet generation so growth growth. is real Well, our is balance and our capital supporting

answer. the first and simplest that's So

initiatives, been products has conversation We enhance there and a are conversation seeing little lot – debt. interested deal the that that we're possibly could somehow niches or for in more new new we is new that that or come us for our deal new a around more across products We're grow.

we have them those of do fit model. of see our some opportunities. So None

said, I've generation So has the support as used been to capital balance growth. sheet our

Timothy Coffey

questions. great, right, my your are those for all Thank you time. Okay,

Kenneth Vecchione

Thanks.

Operator

And call closing turn there are no this Vecchione At further questions queued up. remarks. over time, I'll back to the for Ken

Kenneth Vecchione

good the in Yes, XXXX. about talk to XX quarter to you had, We thanks joining. very you again. days we'll Thank for everyone And all. and on feel we

Operator

concludes call. conference This today's

may now disconnect. You

Western Alliance Bancorporation (WAL) 23 Jan 212020 Q4 Earnings call transcript