Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q4 2022 Earnings Presentation
25 slides from Western Alliance Bancorporation's earnings presentation, Jan 24, 2023
Slide 1: Earnings Call 4th Quarter 2022
EARNINGS CALL 4th Quarter 2022 JANUARY 25, 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: 4th Quarter 2022 Financial Highlights
4th Quarter 2022 | Financial Highlights Earnings & Profitability Q4-22 Q3-22 Q4-21 Earnings per Share $2.67 $2.42 $2.32 Net Income $293.0 $264.0 $246.0 Net Revenue $701.2 $663.9 $561.0 Pre Provision Net Revenue1 $367.8 $358.1 $323.2 Net Interest Margin 3.98% 3.78% 3.33% Efficiency Ratio1 46.9% 45.5%
Slide 4: Annual Consolidated Financial Results
Annual Consolidated Financial Results 4 1 2 4 Dollars in millions, except EPS 2022 Highlights 1) Refer to slide 2 for further discussion of Non-GAAP financial measures. 2) Gain on Sale margin represents spread as of the interest rate lock commitment date. 5 2022 2021 Interest Income $2,691.8 $1,658.
Slide 5: Quarterly Income Statement
Quarterly Income Statement Net Interest Income increased $37.6 million, primarily from expanding NIM Non-Interest Income decreased $0.3 million, driven by the following: • $9.2 million MTM loss, primarily on loan transfers to HFS that were subsequently sold Mortgage Banking Metrics • $8.3 billion mo
Slide 6: Net Interest Drivers
Total Investments and Yield Interest Bearing Deposits and Cost Loans and HFI Yield Deposits, Borrowings & Cost of Liability Funding Net Interest Drivers 6 • Loan yields increased 86 bps due to a higher rate environment • Yield on Loans Held for Sale of 5.63% increased from 4.87% in Q3 • Investment y
Slide 7: Net Interest Income
$36.6 $39.6 $45.7 $50.2 $52.2 $9.2 $6.5 $4.3 $4.0 $2.7 $7.6 $7.7 $8.7 $8.7 $8.5 $1.3 $2.0 $1.6 $1.2 $1.3 3.57% 3.58% 3.91% 4.62% 5.50% $54.7 $55.8 $60.3 $64.1 $64.7 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 $450.6 $449.5 $525.0 $602.1 $639.7 3.33% 3.32% 3.54% 3.78% 3.98% Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Net Intere
Slide 8: Net Interest Income Sensitivity
Net Interest Income Sensitivity 8 • WAL expects a 3.1% increase in NII under a +100 bps rate shock on a static balance sheet • 52% of loans (ex-HFS) are contractually variable ($27.1 billion) • 73% of variable rate loans have rate floors • Moderate NII sensitivity, driven primarily by balance sheet
Slide 9: Expenses and Efficiency
Expenses and Efficiency1 9 • Efficiency ratio1 increased 140 bps to 46.9% compared to the prior quarter and 510 bps from the same period last year • Higher efficiency ratio1 was driven primarily by an increase in deposit costs • Deposit costs increased $26.0 million from the prior quarter primarily
Slide 10: Pre-Provision Net Revenue, ROTCE, and ROA
Pre-Provision Net Revenue1, ROTCE1, and ROA 10 • PPNR1 increased $9.7 million from the prior quarter and $44.6 million, or 13.8%, from the same period last year • ROTCE (ex-AOCI) 1 was 23.1% for the quarter, up from 22.3% during the prior quarter • ROA increased 14 bps from the prior quarter and dec
Slide 11: Consolidated Balance Sheet
Loans decreased $339 million, or 0.6%, and increased $10.9 billion, or 27.9%, over prior year2 Deposits decreased $1.9 billion, or 3.5%, and increased $6.0 billion, or 12.7%, over prior year • Average deposits declined by $295 million from Q3-22 • Quarter-to-date 2023 average total deposits $2.4 bil
Slide 12: Five Quarter Loan Growth and Composition
Five Quarter Loan Growth and Composition 12 $10.91 Billion Year-Over-Year Growth Quarter-over-quarter loan decline of $339 million driven by (in millions): CRE, Non-OO $651 Construction & Land 392 Residential & Consumer 256 Offset by decrease in: C&I (1,608) CRE, OO (30) Total $(339) Year-over-year
Slide 13: Loan Portfolio Optimization
Loan Portfolio Optimization 13 Quarter-over-quarter loan decline of $339 million driven by (in millions): Residential $260 Regional Banking 696 National Business Lines (1,295) Warehouse Lending 36 Equity Fund Resources (1,390) Hotel Franchise Finance 315 Tech & Innovation 140 Corporate Finance (438)
Slide 14: Five Quarter Deposit Growth and Composition
$21.4 $23.5 $23.7 $24.9 $19.7 $6.9 $8.3 $8.4 $8.4 $9.5 $17.3 $18.5 $19.0 $19.2 $19.4 $2.0 $1.8 $2.6 $3.1 $5.0 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 CDs Savings and MMDA Interest Bearing DDA Non-Interest Bearing DDA Five Quarter Deposit Growth and Composition 14 $6.0 Billion Year-Over-Year Growth Quarter-ove
Slide 15: Diversified Deposit Franchise
Diversified Deposit Franchise 15 Q4 2022 Highlights 39% 16% 14% 12% 6% 1% 12%Regions Mtg WH Tech & Innov. HOA Sttlmt Svcs Bus. Escrow Svcs Other Dollars in billions, unless otherwise indicated Net Deposit Growth Drivers Deposit CompositionDeposit Base 37% 36% 18% 9% Nonint. Bearing DDA MMDA & Saving
Slide 16: Asset Quality
$331 $350 $317 $312 $351 0.85% 0.85% 0.65% 0.60% 0.68% Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 $12 $12 $12 $11 $11 $73 $91 $85 $90 $85 $216 $262 $249 $284 $297 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Asset Quality 16 • Total Classified Assets of $393 million (58 bps to Total Assets) increased $8 million in Q4 • Non-Per
Slide 17: Credit Losses and ACL Ratios
$3.9 $2.6 $2.4 $2.1 $2.2 ($2.5) ($2.4) ($1.0) ($4.0) ($0.4) $252 $258 $273 $304 $310 $37 $43 $54 $52 $47 $5 $3 $3 $4 $5 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Credit Losses and ACL Ratios 17 • Provision expense of $3.1 million, driven by changes in the economic environment • Total Loan ACL / Funded Loans inc
Slide 18: Conservative, Economically Resilient Portfolio Positioning
18 Specialized underwriting expertise and conservative sector allocations position portfolio to withstand economic uncertainty Conservative, Economically Resilient Portfolio Positioning Insured (27%) • Residential • Equity Fund Resources • Warehouse Lending • Early Buyout (“EBO”) Resi. & Other Gover
Slide 19: Demonstrated Conservative Credit Culture
0.00% 0.30% 0.60% 0.90% 1.20% Annualized Net Charge-Offs (Q1-14 to Q4-22) Max Average Demonstrated Conservative Credit Culture 19 Deliberate business transformation emphasizing underwriting specialization and diversification strategy, has produced sustained superior asset quality with reduced disper
Slide 20: Capital Accumulation
Capital Accumulation 20 Regulatory Capital Levels • Continue to exceed “well-capitalized” levels • CET1 at 9.3% Tangible Common Equity / Tangible Assets1 • TCE / TA increased 60 bps from the prior quarter to 6.5% due to tempered asset growth and AOCI gain impact Capital Accretion • Robust improvemen
Slide 21: Tangible Book Value per Share
411% 461% 95% 125% 2013 2014 2015 2016 2017 2018 2019 2020 2021 MRQ 21 Tangible Book Value per Share1 • TBVPS increased $3.09 to $40.25 from prior quarter due to strong, organic capital accretion and improvement in AOCI • Increased 6.4% year-over-year • Increased 8.3% quarter-over-quarter, non-annua
Slide 22: Management Outlook
Management Outlook Balance Sheet Growth Net Interest Margin Net Interest Income Adjusted Efficiency Pre-Provision Net Revenue Net Charge-Offs Capital 22
Slide 23: Questions & Answers
——$$ Soa \VAN | Western Alliance Bank® Questions & Answers
Slide 24: Appendix
WAS Appendix
Slide 25: Deliberate business transformation emphasizes credit quality
25 • Deliberate, decade-long business transformation strategy • Nearly 70% of GFC losses from Q4-09 to Q4-12 came from categories comprising 44% of portfolio at Q4-09, which today makes up <6% of loans • Losses concentrated in Nevada and consumer lending during GFC • Since year-end 2013, cumulative
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