Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q1 2023 Earnings Presentation
30 slides from Western Alliance Bancorporation's earnings presentation, Apr 19, 2023
Slide 1: Earnings Call 1st Quarter 2023
EARNINGS CALL 1st Quarter 2023 APRIL 19, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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 statemen
Slide 3: What Happened and How Our Deposit Base Fared
What Happened and How Our Deposit Base Fared WAL’s diversified deposit franchise demonstrated its flexibility during this period of unusual volatility March 9 – SIVB’s announced AFS portfolio sale and planned capital raise ignites extreme selling pressure Deposit Flows (12/31/22 – 4/14/23) among a g
Slide 4: Deposit Franchise Characteristics
Q1 2023 Highlights Deposit Franchise Characteristics Insured Deposit Exposure Trend • WAL has successfully retained deep-rooted relationships and those for which we offer 73% $70.0 45% 68% proprietary, integrated treasury management $60.0 50% technology $53.6 $47.6 $49.6 • Of depositors, ~85% have m
Slide 5: Learnings & Near-Term Priorities
Learnings & Near-Term Priorities Well-Positioned at Onset Top Near-Term Priorities Prudent actions undertaken before and during March 2023 enabled WAL Safe and Sound Growth, Emphasizing Capital, Liquidity, and Holistic to serve clients, operate normally as well as avoid the fates of other Customer R
Slide 6: Balance Sheet Repositioning Actions
Balance Sheet Repositioning Actions Balance sheet repositioning, which included surgical sale of assets and Loan HFS reclassifications, resulted in net non- operating charges of $110 million, but will have an immediate accretive impact to regulatory capital and allow us to prioritize core client rel
Slide 7: Projected Capital Build by June 30
Q1 2023 Highlights Projected Capital Build by June 30 • Strong organic capital generation drove net CET1 CET1 Ratio increase in Q1 2023 and allowed us to raise liquidity through other B/S actions Q2-23 Target CET1 >10% • HFS reclassification in Q1 2023 optimizes RWA and positions for stronger capita
Slide 8: Significant Access to Liquidity & Funding Capacity
Q1 2023 Highlights Significant Access to Liquidity & Funding Capacity Pending HFS Pro Forma Addtl. Total Available Source In-Use • Repaid all borrowings from Federal Reserve discount Asset Sales Capacity Liquidity As of 4/14/23 window by 3/31 1. Cash $0 + $0 + $1.9B = $1.9B • Higher advance rates at
Slide 9: 1st Quarter 2023 Financial Highlights
Highlights 1st Quarter 2023 | Financial Highlights Earnings & Profitability Q1-23 Q4-22 Q1-22 $1.28 / $2.30 $2.67 $2.22 EPS / Adjusted1 Net Income EPS Net Income / Adjusted1 $142.2 / $251.9 $293.0 $240.1 Net Revenue / Adjusted1 $551.9 / $712.2 $701.2 $555.8 $142.2 million $1.28 Pre-Provision Net Rev
Slide 10: Quarterly Income Statement
Q1 2023 Highlights Quarterly Income Statement Net Interest Income decreased $29.8 million, primarily Q1-23 Q4-22 Q1-22 1 from a decrease in NIM Interest Income $968.9) $888.3 $484.5 Interest Expense (359.0) (248.6) (35.0) Non-Interest Income decreased $119.5 million, driven by Net Interest Income $6
Slide 11: Consolidated Balance Sheet
Q1 2023 Highlights Consolidated Balance Sheet HFI Loans decreased $5.4 billion, or 10.5%, 1 and increased $5.3 billion, or 12.9%, over prior Q1-23 Q4-22 Q1-22 year Investments & Cash $13,131 $9,803 $10,879 Deposits decreased $6.1 billion, or 11.3%, Loans, HFS 7,022 1,184 4,762 2 and $4.6 billion, or
Slide 12: Investment Portfolio
Q1 2023 Highlights Investment Portfolio Total Investments and Yield1 • Investment yields increased 24 bps to 4.69% Total Investments and Yield $15.0 4.69% 5.00% 4.45% Spot Rate 4.60% • Security sales totaled $460 million for the $13.0 quarter 3.66% 4.00% • Primarily consisted of CLOs $11.0 Q1-23 Ave
Slide 13: Five Quarter Loan Growth and Composition
Q1 2023 Highlights Five Quarter Loan Growth and Composition Quarter-over-quarter loan decline of $5.3 Billion Year-Over-Year Growth $(5.4) billion driven by (in millions): Construction & Land $394 Spot Rate Total Loans, HFI $41.1 $48.6 $52.2 $51.9 $46.4 6.45% CRE, Non-OO 298 Qtr. Change +$2.0 +$5.5
Slide 14: Loans HFI and HFS
Q1 2023 Highlights Loans HFI and HFS Loans and HFI Yield Q1-23 Loans HFS (ex-AMH Resi) Composition • Reclassified $6 billion of HFI loans to HFS $65.0 7.00% at an average mark of ~2% Spot Rate 6.28% Other C&I 6.45% 5.70% • Loans sold before quarter-end realized $60.0 2% 8% Equity Fund 4.84% 5.00% Re
Slide 15: Five Quarter Deposit Growth and Composition
Q1 2023 Highlights Five Quarter Deposit Growth and Composition Quarter-over-quarter deposit decline of $(4.6) Billion Year-Over-Year Growth $(6.1) billion driven by (in millions): CDs $1,509 Spot Rate Total Deposits $52.1 $53.7 $55.6 $53.6 $47.6 1.85% Interest Bearing DDA 1,212 Qtr. Change +$4.5 +$1
Slide 16: Interest Bearing Deposits
Q1 2023 Highlights Interest Bearing Deposits • Cost of interest bearing deposits increased 78 bps to 2.75% Interest Bearing Deposits and Cost Deposit Composition Shift • WAL’s deposit mix shift largely occurred 2.75% 1.97% Spot Rate through interest bearing and non-ECR 2.82% noninterest bearing outf
Slide 17: Net Interest Income
Q1 2023 Highlights Net Interest Income Net Interest Income and Net Interest Margin Average Earning Assets & Average Yield • Net Interest Income decreased $29.9 million, or 4.7%, over prior quarter Dollars in millions $639.7 Dollars in billions primarily due to balance sheet $602.1 $609.9 5.50% 5.99%
Slide 18: Non-Interest Expenses and Efficiency
Q1 2023 Highlights Non-Interest Expenses and Efficiency1 • Efficiency ratio1 increased 1,520 bps to Non-Interest Expenses and Efficiency Ratio Breakdown of Non-Interest Expenses 62.1% compared to the prior quarter and 1,800 bps from the same period last year 62.1% • Higher QoQ adjusted operating eff
Slide 19: Pre-Provision Net Revenue and Return Ratios
Q1 2023 Highlights Pre-Provision Net Revenue and Return Ratios • PPNR1 decreased $25.3 million from the Adjusted Income1 and Return Ratios1 prior quarter and increased $44.7 million, or 14.6%, from the same period last year 23.9% 26.4% 25.1% 27.7% 21.9% • ROTCE, Adjusted of 21.9%, down 5.8% from the
Slide 20: Asset Quality
Q1 2023 Highlights Asset Quality Classified Assets Special Mention Loans • Total Classified Assets of $459 million (65 $385 $393 $459 bps to Total Assets) increased $66 million $365 $346 in Q1 $341 • Non-Performing Loans + OREO of 0.85% $284 $297 0.65% 0.60% 0.68% 0.69% $118 million (17 bps to Total
Slide 21: Credit Losses and ACL Ratios
Q1 2023 Highlights Credit Losses and ACL Ratios Allowance for Credit Losses Gross Loan Charge-offs and Recoveries • Provision expense of $19.4 million, driven $4 $5 $2 by charge-off of a corporate debt security of Gross Charge Offs $3 $52 $47 $45 $7 a financial institution and continued $3 $54 Recov
Slide 22: Capital Accumulation
Q1 2023 Highlights Capital Accumulation Robust Common Capital Levels Regulatory Capital Levels • Continue to exceed “well-capitalized” levels 9.0% 9.0% 9.3% 9.4% 8.7% • CET1 at 9.4%; contracted dispositions poised 6.7% 6.1% 6.5% 6.5% to increase to 9.7% 5.9% Tangible Common Equity / Tangible Assets1
Slide 23: Tangible Book Value Growth
Q1 2023 Highlights Tangible Book Value Growth Long-Term Growth in TBV per Share1 Tangible Book Value per Share1 WAL • TBVPS increased $1.31 to $41.56 from prior WAL with Dividends Added Back quarter due to strong, organic capital Peer Avg accretion and improvement in AOCI Peer Avg with Dividends Add
Slide 24: Management Outlook
Management Outlook 1Q 2023 Results 2023 Outlook Loans: $46.4 Loans: $500mm / qtr. Balance Sheet Growth Deposits: $47.6 Deposits: $2bn / qtr. 2Q23: >10% Capital 9.4% Medium Term Target: +11% Net Interest Margin 3.79% 3.65% - 3.75% Adjusted Efficiency 43.2% Mid to High 40s FY22: $1.38B Operating Pre-P
Slide 25: Questions & Answers
ee M\VAN | Nes Wester Alliance Questions & Answers
Slide 26: Appendix
ee M\VAN | Nes Wester Alliance Appendix
Slide 27: ROAA vs. CET1 adj. for AOCI and HTM
Q1 2023 Highlights ROAA vs. CET1 adj. for AOCI and HTM Other Banks Peers ROAA (2022 4 quarter average) WAL • Q1 2023 Adjusted ROAA of 1.46% vs. 2.2 OZK 1.67% for Q4 2022 and 1.64% ROAA for 2.1 Q1 2022 2.0 1.9 • CET1 adj. for AOCI and HTM increased to 1.8 EWBC ~8.1% in Q1 2023 from ~7.9% in Q4 2022 1
Slide 28: Loans HFI Portfolio
Loans HFI Portfolio Q1-23 Borrower Type Municipal & Nonprofit Tech & 3% Innovation Equity Fund 5% Resources C&D 2% 9% Other C&I 13% CRE, Owner Occupied Residential 4% 32% CRE, Non-Owner Occupied 12% Warehouse Hotel Franchise Lending Finance 10% 8% $46.4 billion 28
Slide 29: Conservative, Economically Resilient Portfolio Positioning
Conservative, Economically Resilient Portfolio Positioning Specialized underwriting expertise and conservative sector allocations position portfolio to withstand economic uncertainty Insured (25%) Resistant (27%) Resilient (33%) More Sensitive (15%) Limited uncovered collateral risk, Credit protecte
Slide 30: Commercial Real Estate Statistics
Commercial Real Estate Statistics CRE ($11.4 Billion; 25% of Total Loans) Office ($2.5 Billion; 5% of Total Loans) • Primarily shorter-term bridge loans for repositioning or redevelopment projects 13% • Strong sponsorship from institutional equity and large regional and national developers 38% • All
Western Alliance Bancorporation Common Stock (DE) — Q1 2023 Earnings Presentation on 6ix