Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q3 2023 Earnings Presentation
27 slides from Western Alliance Bancorporation's earnings presentation, Oct 20, 2023
Slide 1: Earnings Call 3rd Quarter 2023
EARNINGS CALL 3rd Quarter 2023 OCTOBER 20, 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: Highlights: 3rd Quarter 2023 Financial Highlights
Highlights 3rd Quarter 2023 | Financial Highlights Earnings & Profitability Q3-23 Q2-23 Q3-22 $1.97 $1.96 $2.42 Earnings per Share Net Income EPS Net Income $216.6 $215.7 $264.0 Net Revenue $716.2 $669.3 $663.9 $216.6 million $1.97 Pre-Provision Net Revenue1 $290.0 $281.9 $358.1 Net Interest Margin
Slide 4: Deposit Franchise Growth Drivers
Q3 2023 Highlights Deposit Franchise Growth Drivers Insured and Collateralized Deposit Exposure Trend Net Deposit Growth Drivers • Diversified deposit businesses attracted >$3.2 billion of deposits in Q3 Qtr. Change +$3.2 billion • Grew core commercial clients by $3.1 billion; primarily within Mortg
Slide 5: Quarterly Income Statement
Q3 2023 Highlights Quarterly Income Statement Net Interest Income increased $36.7 million, primarily as a Q3-23 Q2-23 Q3-22 1 result of expanded net interest margin, driven by higher Interest Income $1,026.6 $1,000.8 $739.4 earning asset yields and lower average borrowings Interest Expense (439.6) (
Slide 6: Consolidated Balance Sheet
Q3 2023 Highlights Consolidated Balance Sheet Investments & Cash increased $2.4 billion to Q3-23 Q2-23 Q3-22 1 $14.9 billion, or 19.1%, primarily due to greater Investments & Cash $14,920 1 $12,527 $10,213 holdings of High Quality Liquid Assets Loans, HFS 1,766 3,156 2,204 HFI Loans increased $1.6 b
Slide 7: Five Quarter Loan Composition
Q3 2023 Highlights Five Quarter Loan Composition Quarter-over-quarter loan increase of Spot Rate $(2.8) Billion Year-Over-Year Change 6.99% $1.6 billion driven by (in millions): C&I $1,687 Total Loans, HFI $52.2 $51.9 $46.4 $47.9 $49.4 Construction & Land 241 Qtr. Change +$3.6 -$0.3 -$5.4 +$1.4 +$1.
Slide 8: Five Quarter Deposit Composition
Q3 2023 Highlights Five Quarter Deposit Composition Quarter-over-quarter deposit increase of $3.2 billion driven by (in millions): Spot Rate $(1.3) Billion Year-Over-Year Change 2.31% Savings and MMDA $1,587 Non-Interest Bearing DDA 1,258 Total Deposits $55.6 $53.6 $47.6 $51.0 $54.3 CDs 204 Qtr. Cha
Slide 9: Net Interest Drivers
Q3 2023 Highlights Net Interest Drivers • Loan yields increased 25 bps due to a higher rate Spot Rate Spot Rate environment Total Investments and Yield 4.94% Loans and HFI Yield 6.99% • Yield on Held for Sale (AMH Resi) of 6.54% 6.48% 6.73% 4.91% 5.70% 6.28% increased from 5.77% in Q2 4.76% 4.84% 4.
Slide 10: Net Interest Income
Q3 2023 Highlights Net Interest Income Net Interest Income and Net Interest Margin Average Earning Assets & Average Yield • Net Interest Income increased $36.7 million, or 6.7%, over prior quarter Dollars in millions Dollars in billions primarily due to balance sheet 5.99% 6.17% 6.37% restructuring
Slide 11: Interest Rate Sensitivity
Q3 2023 Highlights Interest Rate Sensitivity NII Sensitivity – Shock Scenario, 12 Mo. Balance Sheet • Variable assets and liabilities mix increased quarter over quarter with balance 3.8% sheet shifts into cash and non-maturity deposits (48% variable rate assets; 51% variable rate liabilities) • WAL
Slide 12: Non-Interest Expenses and Efficiency
Q3 2023 Highlights Non-Interest Expenses and Efficiency1 • Adjusted efficiency ratio1 (excluding Non-Interest Expenses and Efficiency Ratio Breakdown of Non-Interest Expenses deposit costs) declined 50 bps to 50.0% from the prior quarter, driven primarily by 62.0% higher net interest income and lowe
Slide 13: Pre-Provision Net Revenue and Return Ratios
Q3 2023 Highlights Pre-Provision Net Revenue and Return Ratios • PPNR1 increased $8.1 million from the Income and Return Ratios prior quarter and decreased $68.1 million, or (19.0)%, from the same period last year 24.9% 27.0% 21.9% 18.2% 17.3% • ROTCE1 of 17.3%, down 90 bps from the prior quarter1 a
Slide 14: Asset Quality
Q3 2023 Highlights Asset Quality Special Mention Loans Asset Quality Ratios • Asset quality remained stable, as the aggregate net change in Special Mention loans and 1.45% 1.35% 0.89% 0.90% Classified Assets was only $9 million 0.68% 0.69% 0.65% 0.60% 0.56% 0.58% • Special Mention loans decreased $2
Slide 15: Credit Losses and ACL Ratios
Q3 2023 Highlights Credit Losses and ACL Ratios Allowance for Credit Losses Gross Loan Charge-offs and Recoveries • Provision expense of $12.1 million, primarily reflective of a normalizing Gross Charge Offs $4 $5 $9 $10 $11 economic environment and heightened $41 $38 $52 $47 $45 Recoveries attentio
Slide 16: Key Reserve Level Ratios
Q3 2023 Highlights Key Reserve Level Ratios Reserve levels enhanced by credit protection and low loss loan categories • WAL remains appropriately reserved, especially when considering credit protection from Credit Linked Notes (CLNs) and historically low loss Adjusted Total Loan ACL / Funded Loans:
Slide 17: Capital Accumulation
Q3 2023 Highlights Capital Accumulation Robust Common Capital Levels Regulatory Capital Levels 10.1% 10.6% • Continue to exceed “well-capitalized” levels 9.3% 9.4% 8.7% • CET1 up 50 bps in Q3-23 to 10.6% 6.5% 6.5% 7.0% 6.8% 5.9% Tangible Common Equity / Tangible Assets1 • TCE / TA decreased from the
Slide 18: Tangible Book Value Growth
Q3 2023 Highlights Tangible Book Value Growth Long-Term Growth in TBV per Share1 Tangible Book Value per Share1 6x WAL • TBVPS increased $0.57 to $43.66 from prior WAL with Dividends Added Back 518% quarter due to strong, organic capital Peer Avg accretion, offsetting the impact of AOCI 5x Peer Avg
Slide 19: Management Outlook
Management Outlook Q3 2023 Results Q4 2023 Outlook Loans: $49.4 bn Loans: $0 - $300 mm Balance Sheet Growth Deposits: $54.3 bn Deposits: $0 - $500 mm • In 2024, we expect to return to prior Balance Sheet growth guidance of Loans +$500 mm and Deposits +$2 bn per quarter Continued Growth Toward Capita
Slide 20: Questions & Answers
Questions & Answers
Slide 21: Appendix
VAN Western Alliance Bancorporation® Appendix
Slide 22: Commercial Real Estate Investor Statistics
Commercial Real Estate Investor Statistics CRE Investor Portfolio ($9.8 Billion; 20% of Total Loans) Underwriting Criteria and Mitigating Factors 60% 63% 70% 57% 61% 58% • Low LTV & LTC (50%-low 60%) range underwriting in areas 54% 56% 50% 48% minimizes tail risk 50% 44% 45% 50% 37% • Simple capital
Slide 23: Commercial Real Estate Investor: Office
Commercial Real Estate Investor: Office $2.6 Billion; 27% of Total CRE Investor; 5% of Total Loans Distribution by LTV Underwriting Criteria and Mitigating Factors 37% • Primarily shorter-term bridge loans for repositioning or redevelopment projects 35% • Strong sponsorship from institutional equity
Slide 24: Conservative, Economically Resilient Portfolio Positioning
Conservative, Economically Resilient Portfolio Positioning Specialized underwriting expertise and conservative sector allocations position portfolio to withstand economic uncertainty Insured (22%) Resistant (29%) Resilient (34%) More Sensitive (15%) Limited uncovered collateral risk, Credit protecte
Slide 25: Historical Loan Migration Near Peer Median
Historical Loan Migration Near Peer Median Reflects “Early Identification and Elevation” Credit Strategy Quarterly Classified Loans / Gross Loans Q1-14 to Q2-23 Since 2014, WAL’s level of classified loans has been in the top 40% of peer banks… 12.0% Peer Group 10.0% Maximum of Peers Avg of Peers Min
Slide 26: Proactive migration enhances oversight and mitigates credit losses
Proactive migration enhances oversight and mitigates credit losses Annualized Net Charge-Offs Q1-14 to Q2-23 …but this does not translate into realized losses as WAL has lowest volatility and average 5.25% losses due to our proactive mitigation strategies. 1.53% Peer Group 1.20% Maximum of Peers Avg
Slide 27: Superior Deposit Liquidity and Fortified Adjusted Capital
Superior Deposit Liquidity and Fortified Adjusted Capital Excellent Combined Insured/Collateralized Deposits & CET1 Capital Adjusting for AOCI & HTM Securities Marks Insured Deposits % vs. CET1 Adj. (Incl. of AOCI & HTM Unrealized Securities Marks) for Top 50 Banks by Assets 85% WAL Adj. CET1: 8.8%
Western Alliance Bancorporation Common Stock (DE) — Q3 2023 Earnings Presentation on 6ix