Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q1 2020 Earnings Presentation
23 slides from Western Alliance Bancorporation's earnings presentation, Apr 17, 2020
Slide 1: Earnings Call 1st Quarter 2020
EARNINGS CALL 1st QUARTER 2020 April 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: Impact and Response to COVID-19 Pandemic
Impact and Response to COVID-19 Pandemic Western Alliance 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. Focusing on well-being of our people, customers and communities − Mandatory work
Slide 4: Impact and Response to COVID-19 Pandemic (cont'd)
Impact and Response to COVID-19 Pandemic (cont’d) Implemented broad-based risk management strategy to manage credit segments on real-time basis Borrower-Level Strategies: Direct customer dialogue to develop long-term contingency financial plans Credit − Risk management conversations with all bor
Slide 5: 1st Quarter 2020 Financial Highlights
1st Quarter 2020 | Financial Highlights Q1-20 Q4-20 Q1-19 Earnings & Profitability Net Interest Income $ 269.0 $ 272.0 $ 247.3 Net Income EPS Operating PPNR1 163.4 158.7 148.1 Net Income 84.0 128.1 120.8 $84.0 million $0.83 EPS 0.83 1.25 1.16 Net Interest Margin 4.22% 4.39% 4.71% Operating Efficienc
Slide 6: Quarterly Consolidated Financial Results
Quarterly Consolidated Financial Results Q1-20 Q4-19 Q1-19 Q1 2020 Highlights Interest Income $ 307.2 $ 315.4 $ 291.2 • Net Interest Income decreased Interest Expense (38.2) (43.4) (43.8) $3.0MM primarily as a result of decreased yields on loans and one Net Interest Income $ 269.0 $ 272.0 $ 247.3 le
Slide 7: CECL and Allowance for Credit Losses ("ACL")
CECL and Allowance for Credit Losses (“ACL”) ACL Reserve Build Q1 2020 Highlights • CECL adoption impact of $37MM comprised of ACL for Loans, Unfunded Loan Commitments and HTM Securities, $19.1MM, $15.1MM and $2.6MM, respectively − Capital impact related to CECL adoption is phased in over 5 Q4-19 Ad
Slide 8: Net Interest Drivers
Net Interest Drivers Total Investments and Yield Loans and Yield Q1 2020 Highlights Spot Spot • Loan yields decreased 31 Rate Rate bps points following 2.95% 5.02% declines across most loan types, mainly driven by a decline in LIBOR and a flattening yield curve • Cost of interest-bearing deposits de
Slide 9: Net Interest Income
Net Interest Income Net Interest Income, NIM, and Impacts on Quarterly NIM Average Interest Earning Assets Components NIM Q4 - 19 4.39% Basis Risk (0.14%) Liquidity (0.03%) Mix Shift / De-Risking 0.00% Q1 - 20 4.22% Q1 2020 Highlights • Strong growth in core deposits, coupled with declining market r
Slide 10: Interest Rate Environment
Interest Rate Environment Percentage (Decrease) to Net Interest Income Q1 2020 Highlights Shock Scenarios • $9.8Bn, or 66%, of variable rate loans have floors 8.1% 7.2% 7.0% 6.1% 4.3% − 82% of variable rate loans with floors are at floors • Fixed rate loans are 29% of total loans • Adjustable rate l
Slide 11: Operating Expenses and Efficiency
Operating Expenses and Efficiency1 Operating Expenses and Efficiency Ratio Q1 2020 Highlights • The operating efficiency ratio1 decreased 200 basis points to 41.8% compared to the prior quarter and 20 basis points over the same period last year • Improved efficiency was driven by a decrease in compe
Slide 12: Operating Pre-Provision Net Revenue, Net Income, and ROA
Operating Pre-Provision Net Revenue1, Net Income, and ROA Q1 2020 Highlights • Core earnings remain strong as Operating PPNR ROA1 remained flat from the prior quarter and decreased 22 basis points from Q1-19 • Decline in Operating PPNR ROA1 from Q1-19 was directly impacted by margin decline of 17 ba
Slide 13: Consolidated Balance Sheet
Consolidated Balance Sheet Q1 2020 Highlights • Loans increased $2.0 billion (9.7%) over prior quarter and $5.0 billion (27.9%) over prior year • Deposits increased $2.0 billion (8.9%) over prior quarter and $4.6 billion (22.9%) over prior year • Shareholders' Equity decreased $17 million over prior
Slide 14: Five Quarter Deposit Growth and Composition
Five Quarter Deposit Growth and Composition $4.6 Billion Year Over Year Growth Highlights Total Deposits $20.2 $21.4 $22.4 $22.8 $24.8 Qtr. Change +$1.0 +$1.2 +$1.0 +$0.4 +$2.0 Quarter-over-quarter deposit growth of $2.0 billion driven by (in millions): Non-Interest Bearing DDA $ 1,349 Interest Bear
Slide 15: Five Quarter Loan Growth and Composition
Five Quarter Loan Growth and Composition $5.0 Billion Year Over Year Growth Highlights Total Loans $18.1 $19.3 $20.2 $21.1 $23.1 Qtr. Change +$0.4 +$1.1 +$0.9 +$1.0 +$2.0 Quarter-over-quarter loan growth of $2.0 billion driven by (in millions): C&I $ 1,822 Construction & Land 107 Residential & Consu
Slide 16: Adversely Graded Loans and Non-Performing Assets
Adversely Graded Loans and Non-Performing Assets Adversely Graded Loans and OREO Q1 2020 Highlights $500 • Total Adversely Graded Loans plus OREO of $351MM $439 (1.20% to Total Assets) increased $10MM in Q1 $450 $399 • NPAs of $97MM (33bps to Total Assets) increased $400 $27MM in Q1 primarily due to
Slide 17: Credit Losses and ACL Ratios
Credit Losses and ACL Ratios Gross Charge-offs and Recoveries Q1 2020 Highlights $3.0 • Net recoveries of $3.2MM, (6bps), compared to net $3.0 $2.0 $2.3 $2.6 $2.1 $2.2 charge-offs of $1.2MM, 3bps, in Q1-19 $1.0 $1.0 $0.1 • Provision expense increased to $51.2MM, driven by the $0.0 adoption of CECL a
Slide 18: Strong Capital Base
Strong Capital Base Robust Capital Levels Q1 2020 Highlights 10.9% 11.0% 11.0% 10.8% 10.6% Tangible Common Equity / Tangible Assets Drivers 10.8% 10.3% 10.6% 10.3% • During the quarter TCE/TA declined 90bps 10.2% 10.3% 10.1% 9.7% • Negatively impacted by: 9.4% − Balance sheet growth (-76bps impact)
Slide 19: Ample Liquidity Access
Ample Liquidity Access Liquidity Access Investment Portfolio • Loan growth funded through core deposits • Total Carrying Value of Investment Portfolio ($4.7Bn) • Access to $10Bn of liquidity • 96.3% of the rated portfolio is investment grade • $7.0Bn in unused borrowing capacity − Federal Reserve: $
Slide 20: Hotel Franchise Finance Overview
Hotel Franchise Finance Overview Financial flexibility is maximized through deep industry expertise, strong operating partners, and conservative underwriting structure Hotels By Product Q1 2020 Highlights As of 3/31/2020 • Direct dialogue with sophisticated sponsors drives plan to # of Avg. conserve
Slide 21: Technology & Innovation Overview
Technology & Innovation Overview Primarily focused on established growth companies with successful products and strong investor support, which provides greater operating and financial flexibility Tech. & Innovation Loans by Segment Q1 2020 Highlights Subscription & • $2.1bn (8.9%) of loan portfolio
Slide 22: Management Outlook
Management Outlook • Pre-Provision Net Revenue • Asset Quality • Capital and Liquidity 22 22 22
Slide 23: Questions and Answers
Questions and Answers WA Western Alliance Bancorporation® 23
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