Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q2 2020 Earnings Presentation
20 slides from Western Alliance Bancorporation's earnings presentation, Jul 17, 2020
Slide 1: Earnings Call 2nd Quarter 2020
EARNINGS CALL 2nd QUARTER 2020 July 17, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This release contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Examples of forward-looking statements in
Slide 3: 2nd Quarter 2020 Financial Highlights
2nd Quarter 2020 | Financial Highlights Q2-20 Q1-20 Q2-19 Earnings & Profitability Net Interest Income $ 298.4 $ 269.0 $ 254.7 Net Income EPS Operating PPNR1 194.7 163.4 152.5 Net Income 93.3 84.0 122.9 $93.3 million $0.93 EPS 0.93 0.83 1.19 Net Interest Margin 4.19% 4.22% 4.59% Operating Efficiency
Slide 4: COVID-19 Response To Date
COVID-19 Response To Date WAL is actively engaged with our people, customers and the communities we serve to help weather the current environment and be best positioned for future recovery Paycheck Protection Program (“PPP”) ▪ Prioritized PPP loans guaranteed by SBA to provide expedient liquidity to
Slide 5: Quarterly Consolidated Financial Results
Quarterly Consolidated Financial Results Q2-20 Q1-20 Q2-19 Q2 2020 Highlights Interest Income $ 318.2 $ 307.2 $ 302.8 • Net Interest Income increased $29.4 Interest Expense (19.8) (38.2) (48.1) million primarily as a result of loan growth under the PPP, lower rates on deposits Net Interest Income $
Slide 6: Net Interest Drivers
Net Interest Drivers $9.0 Total Investments and Yield Spot $40.0 4.00% Loans and Yield Spot7.00% Q2 2020 Highlights Rate 5.98% Rate $8.0 3.34% $35.0 2.95% 3.50% 5.79% 5.58% 4.66% • 6.00% Loan yields decreased 45bps $7.0 5.27% points following declines 3.08% 3.02% $30.0 4.82% 2.96% 2.98% 5.00% $6.0 3
Slide 7: Net Interest Income
Net Interest Income Net Interest Income, NIM, and Impacts on Quarterly NIM Average Interest Earning Assets 5.00% Components NIM $298.4 Q1 - 20 4.22% $300.0 4.80% Basis Risk (0.14%) Liquidity (0.04%) $280.0 PPP Lending 0.07% 4.60% 4.59% $272.0 Mix Shift 0.08% $266.4 $269.0 Q2 - 20 4.19% 4.40% $260.0
Slide 8: Operating Expenses and Efficiency
Operating Expenses and Efficiency1 Operating Expenses and Efficiency Ratio Q2 2020 Highlights 50.0% $180.0 • The operating efficiency ratio1 decreased 550bps to 36.3% compared to the prior quarter 43.8% 45.0% $160.0 42.0% 42.5% 41.8% and 570bps over the same period last year $140.0 40.0% • Improved
Slide 9: Operating Pre-Provision Net Revenue, Net Income, and ROA
Operating Pre-Provision Net Revenue1, Net Income, and ROA $300.0 2.54% 2.56% Q2 2020 Highlights 2.44% 2.38% 2.38% 2.50% • Core earnings remain strong as 2.05% 2.00% Operating PPNR ROA increased 18bps 1 1.94% $250.0 1.92% from the prior quarter and increased 2bps 1.50% from Q2-19 1.22% 1.22% $200.0 1
Slide 10: Consolidated Balance Sheet
Consolidated Balance Sheet Q2-20 Q1-20 Q2-19 Q2 2020 Highlights Investments & Cash $ 5,712 $ 4,471 $ 4,938 • Loans increased $1.9 billion (8.0%) Loans 25,029 23,166 19,250 over prior quarter ($1.7 billion Allowance for Credit Losses (311) (235) (160) attributable to PPP) and $5.8 billion (30.0%) ove
Slide 11: Five Quarter Loan Growth and Composition
Five Quarter Loan Growth and Composition $5.8 Billion Year Over Year Growth Highlights Total Loans: Quarter-over-quarter Total Loans $19.3 $20.2 $21.1 $23.1 $25.0 loan growth of $1.9 billion driven by Qtr. Change +$1.1 +$0.9 +$1.0 +$2.0 +$1.9 (in millions): C&I $ 1,552 $2.5 9.8% Residential & Consum
Slide 12: Five Quarter Deposit Growth and Composition
Five Quarter Deposit Growth and Composition $6.1 Billion Year Over Year Growth Highlights Total Deposits $21.4 $22.4 $22.8 $24.8 $27.5 Quarter-over-quarter deposit growth of $2.7 billion driven by (in millions): Qtr. Change +$1.2 +$1.0 +$0.4 +$2.0 +$2.7 Non-Interest Bearing DDA $ 2,350 $2.0 7.2% Sav
Slide 13: Adversely Graded Loans and Non-Performing Assets
Adversely Graded Loans and Non-Performing Assets Adversely Graded Loans and OREO Q2 2020 Highlights $750 • Total Adversely Graded Loans plus OREO of $694 million $694 (2.18% to Total Assets) increased $343 million in Q2 $650 − Special Mention loans increased $291 million as loan monitoring was eleva
Slide 14: CECL and Allowance for Credit Losses
CECL and Allowance for Credit Losses (“ACL”) ACL Reserve Build Q2 2020 Highlights • Provision expense of $92.0 million for Q2, due to worsening of macroeconomic assumptions relative to March 31 and increases in net charge-offs and specific loan reserves • Increase in ACL was attributable to change i
Slide 15: Credit Losses and ACL Ratios
Credit Losses and ACL Ratios Loan ACL Adequacy Ratios 3.00% 400% Q2 2020 Highlights 2.50% 327% 346% 306% 248% • Total Loan ACL / Funded Loans increased 25bps to 316% 200% 77.8% 1.39% in Q2 as a result of increased provision expense 44.5% 41.1% 53.9% 2.00% 50.7% 0% • Total provision expense increased
Slide 16: COVID-19 Impacted Portfolios
COVID-19 Impacted Portfolios Strong Fundamental Characteristics Current Status Financial flexibility is maximized through deep • National occupancy reaching ~46% (end of June) industry expertise, strong operating partners, and − With low leverage, select service hotels can support Hotel Franchise co
Slide 17: COVID-19 Impacted Portfolios (cont'd)
COVID-19 Impacted Portfolios (cont’d) Strong Fundamental Characteristics Current Status Focused on off-strip, middle market gaming-linked • 95% (% oustandings) of locations are open for companies driven by local demand factors operation, inclusive of recent closure mandates in Gaming • 78% local, of
Slide 18: Capital Accumulation & Ratios
Capital Accumulation & Ratios Robust Capital Levels Q2 2020 Highlights 11.0% 11.0% 10.9% 10.6% • During the quarter, Western Alliance issued $225 10.6% 10.6% 10.3% million of bank-level subordinated debt due 2030 10.2% 10.0% 10.2% 10.3% − Coupon of 5.25% (10-year non-call 5-year) 10.1% − Total Capit
Slide 19: Management Outlook
Management Outlook • Balance Sheet Growth • Interest Margin • Operating Pre-Provision Net Revenue • Asset Quality • Capital and Liquidity 19 19 19
Slide 20: Questions and Answers
Questions and Answers WA Western Alliance Bancorporation® 20
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