Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q1 2020 Earnings Presentation
31 slides from Western Alliance Bancorporation's earnings presentation, May 13, 2020
Slide 1: Investor Call Presentation May 2020
INVESTOR CALL PRESENTATION May 2020
Slide 2: Company Overview
AV VAN COMPANY OVERVIEW
Slide 3: Western Alliance Bancorporation Overview
Western Alliance Bancorporation Overview NYSE: WAL $29B+ Headquarters: Phoenix, AZ Regional Footprint in assets IPO: 2005 National Presence Market Cap1: $3.5B Consolidated Capital Ratios: Top Performing Commercial Client Focused Bank TCE/TA: 9.4% CET1 Ratio: 10.0% 20.0% Total RBC Ratio: 12.3% tangib
Slide 4: WAL's Value Proposition
WAL’s Value Proposition 1 Seasoned leadership team 2 Diversified business model allows flexibility to sustain growth across market cycles 3 Stable, low-cost deposit franchise 4 Diverse, high quality loan portfolio 5 Conservative credit culture resulting in superior asset quality 6 Industry-leading p
Slide 5: Seasoned Leadership Team
1 Seasoned Leadership Team Management averages 25+ years of industry experience Kenneth A. Vecchione Dale M. Gibbons President & Chief Executive Officer Vice Chairman, Chief Financial Officer 12 total years at WAL 16 years at WAL 35+ years experience, including 30+ years in commercial banking senior
Slide 6: Diversified Business Model Allows Flexibility to Sustain Growth
2 Diversified Business Model Allows Flexibility to Sustain Growth WAL can actively adapt business and capital allocation in response to changing external environment Regional Trajectory Banking Residential Ample potential maintained with Divisions Mortgage Initiative for expansion prudent credit ris
Slide 7: Stable, Low Cost Deposit Franchise
3 Stable, Low Cost Deposit Franchise Diversified funding channels reflect long-term, stable relationships • $24.8Bn in stable deposits, typically tied to lending Solid Noninterest-Bearing Deposit Base¹ relationship • Scalable national funding channels, such as HOA, Tech CDs & Innovation, Life Scienc
Slide 8: National Bank With a Regional Footprint
4 National Bank With a Regional Footprint Diversified by product, client-type and geography emphasizing underwriting discipline • Diverse mix of regionally-focused commercial Diversified Business Mix banking divisions & nationally-oriented specialized businesses Loans by Product Type NBL Composition
Slide 9: Conservative CRE and CLD portfolios
4 Conservative CRE and CLD portfolios • CRE portfolio was $7.6bn (32.7%) of loan portfolio • CLD portfolio was $2.1bn (8.9%) of loan portfolio CRE Composition CLD Composition Raw/Undeveloped Land 6% OO CRE Const. Other 7% HFF Senior Care 18% 1% 23% Multifamily Restaurant Const. Institutional Lot 8%
Slide 10: Hotel Franchise Finance Structured for Superior Through-Cycle Performance
4 Hotel Franchise Finance Structured for Superior Through-Cycle Performance Financial flexibility is maximized through deep industry expertise, strong operating partners, and conservative underwriting structure Hotels By Product • Hotel Franchise Finance portfolio, focused on “select-service” hotels
Slide 11: Technology & Innovation Segment Serves Emerging Technology-Focused Ventures & Investors
Technology & Innovation Segment Serves Emerging Technology-Focused 4 Ventures & Investors Primarily focused on established growth companies with successful products and strong investor support, which provides greater operating and financial flexibility • As of 3/31/2020, Tech. & Innovation portfolio
Slide 12: Conservative Credit Culture
5 Conservative Credit Culture Credit quality is placed before profitability ACL¹ / Total Loans • Strong risk management culture and framework WAL Peer Median established throughout organization − Model focused on process-driven early elevation 1.30% 1.07% and speed to resolution 1.02% 0.93% 0.86% 0.
Slide 13: Asset Quality Stable Relative to Overall Balance Sheet Growth
5 Asset Quality Stable Relative to Overall Balance Sheet Growth While loans have historically seen double digit growth, adversely graded loans and non- performance assets have been consistent Non-Performing Assets and Adversely Graded Assets as a Percentage of Total Assets $353 Over last 5+ years, l
Slide 14: Industry-Leading Profitability Drives Capital Generation
6 Industry-Leading Profitability Drives Capital Generation Pre-Provision Net Revenue/ Avg. Assets • Outstanding performance compared to peers with WAL Peer Median PPNR/AA and ROAA among highest in industry 2.49% 2.51% 2.50% • Leading earning asset yield of 4.80% 2.29% 2.24% 2.11% • Net Interest Inco
Slide 15: Top Decile Efficiency Contributes to Capital Generation
6 Top Decile Efficiency Contributes to Capital Generation Track record of simultaneously driving industry-leading growth and efficiency • Branch-light model and continued focus on expense management, while investing in growth initiatives and scalable infrastructure to be a leading nationwide banking
Slide 16: Reduced Asset Sensitivity with Asymmetric Return Profile
6 Reduced Asset Sensitivity with Asymmetric Return Profile Percentage (Decrease) to Net Interest Income As of 3/31/2020 Shock Scenarios • $9.8Bn, or 66%, of variable rate loans have 8.1% 7.2% 7.0% 6.1% floors 4.3% − 82% of variable rate loans with floors are at floors • Fixed rate loans are 29% of t
Slide 17: Fortress Capital and Liquidity Position
7 Fortress Capital and Liquidity Position Strategic positioning supports ongoing versatility of business model • MRQ net charge-offs bottom • Loan growth funded through decile versus peers core deposits • Strategic balance sheet • $9.8Bn in unused borrowing reallocation towards low capacity (corresp
Slide 18: First Quarter Results & Financial Detail
FIRST QUARTER RESULTS & FINANCIAL DETAIL
Slide 19: 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 20: 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 21: 1st Quarter 2020 Financial Highlights
1st Quarter 2020 | Financial Highlights Q1-20 Q4-20 Q1-19 Earnings & Profitability Net Income EPS Net Interest Income $ 269.0 $ 272.0 $ 247.3 Operating PPNR1 163.4 158.7 148.1 $84.0 million $0.83 Net Income 84.0 128.1 120.8 EPS 0.83 1.25 1.16 Net Interest Margin 4.22% 4.39% 4.71% Operating Efficienc
Slide 22: 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 Net Interest Income $ 269.0 $ 272.0 $ 247.3 decreased yields on loans and one le
Slide 23: CECL and Allowance for Credit Losses
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 24: 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 25: 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 (1.20% to Total Assets) increased $10MM in Q1 $450 $439 $399 • NPAs of $97MM (33bps to Total Assets) increased $400 $27MM in Q1 primarily due to
Slide 26: 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 $2.0$3.0 $2.6 charge-offs of $1.2MM, 3bps, in Q1-19 $2.3 $2.1 $2.2 $1.0 $1.0 $0.1 • Provision expense increased to $51.2MM, driven by the $0.0 adoption of CECL an
Slide 27: Abundant Liquidity Access
Abundant Liquidity Access Liquidity Access (as of May 12, 2020) Investment Portfolio (as of March 31, 2020) • Loan growth funded through core deposits • Total Carrying Value of Investment Portfolio ($4.7Bn) • Access to $12.9Bn of liquidity • 96.3% of the rated portfolio is investment grade • $9.8Bn
Slide 28: Appendix
AV VAN APPENDIX
Slide 29: Historical Bank-Level Income Statement
Historical Bank-Level Income Statement ($Millions) For the Year Ended December 31, Annualized 2015 2016 2017 2018 2019 Q1-20 Interest Income 520 696 843 1,030 1,222 1,226 Interest Expense 26 36 49 104 170 140 Net Interest Income 494 660 793 927 1,052 1,086 Non-Interest Income 29 41 41 53 51 67 Net R
Slide 30: Historical Bank-Level Balance Sheet
Historical Bank-Level Balance Sheet ($Millions) For the Twelve Months Ended December 31, 2015 2016 2017 2018 2019 Q1-20 Investments & Cash 2,157 2,951 4,137 4,127 4,345 4,645 Gross Loans 11,099 13,191 15,091 17,711 21,123 23,166 Allowance for Credit losses 118 124 140 153 168 235 Total Other Assets
Slide 31: 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
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