Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q2 2023 Earnings Presentation
26 slides from Western Alliance Bancorporation's earnings presentation, Jul 19, 2023
Slide 1: Earnings Call 2nd Quarter 2023
EARNINGS CALL 2nd Quarter 2023 JULY 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: Highlights: 2nd Quarter 2023 Financial Highlights
Highlights 2nd Quarter 2023 | Financial Highlights Earnings & Profitability Q2-23 Q1-231 Q2-22 $1.96 $1.28 / $2.30 $2.39 Earnings per Share Net Income EPS Net Income $215.7 $142.2 / $251.9 $260.2 Net Revenue $669.3 $551.9 / $712.2 $620.0 $215.7 million $1.96 Pre-Provision Net Revenue2 $282.1 $351.6
Slide 4: Immediate Priorities and Progress-to-Date
Immediate Priorities and Progress-to-Date Safe and Sound Growth, Emphasizing Capital, Liquidity and Holistic Customer Relationships Execution Scorecard for Q2-23 Objectives Objectives Targets Status Results 1 Strong deposit growth to optimize funding profile $2 bn Generated $3.5 bn of deposit growth
Slide 5: Deposit Franchise Growth Drivers
Q2 2023 Highlights Deposit Franchise Growth Drivers Insured and Collateralized Deposit Exposure Trend Net Deposit Growth Drivers • WAL has successfully retained deep-rooted relationships and those for which we offer $51.0 proprietary, integrated treasury management technology • Of depositors, ~82% h
Slide 6: Quarterly Income Statement
Q2 2023 Highlights Quarterly Income Statement Q2-23 Q1-23 Q2-22 Net Interest Income decreased $59.6 million, primarily Interest Income $1,000.8 $968.9 $579.6 1 from an increase in interest expense from higher average Interest Expense (450.5) (359.0) (54.6) short-term borrowings Net Interest Income $
Slide 7: Balance Sheet Repositioning Update
Balance Sheet Repositioning Update Significant progress in executing surgical asset sales to expeditiously improve capital and liquidity, and reduce wholesale borrowings Repositioning Progress • ~$4.0 bn asset dispositions completed in Q2-23 CET1 Benefit Q2-23 Loans HFS (ex-AMH Resi) Composition Com
Slide 8: Consolidated Balance Sheet
Q2 2023 Highlights Consolidated Balance Sheet Q2-23 Q1-23 Q2-22 HFI Loans increased $1.4 billion, or 3.3%, and 1 decreased $697 million, or 1.4%, over prior Investments & Cash $12,527 $13,131 $10,688 year Loans, HFS 3,156 7,022 2,803 Loans HFI, net 47,875 1 46,435 48,572 Deposits increased $3.5 bill
Slide 9: Five Quarter Loan Growth and Composition
Q2 2023 Highlights Five Quarter Loan Growth and Composition Quarter-over-quarter loan increase of Spot Rate $(0.7) Billion Year-Over-Year Change 6.74% $1.4 billion driven by (in millions): C&I $1,154 Total Loans, HFI $48.6 $52.2 $51.9 $46.4 $47.9 CRE, Non-OO 296 Qtr. Change +$5.5 +$3.6 -$0.3 -$5.4 +
Slide 10: Five Quarter Deposit Growth and Composition
Q2 2023 Highlights Five Quarter Deposit Growth and Composition Quarter-over-quarter deposit increase of $3.5 billion driven by (in millions): Spot Rate $(2.7) Billion Year-Over-Year Change 2.05% CDs $2,019 Interest Bearing DDA 1,927 Total Deposits $53.7 $55.6 $53.6 $47.6 $51.0 Non-Interest Bearing D
Slide 11: Net Interest Drivers
Q2 2023 Highlights Net Interest Drivers Spot Rate Spot Rate • Loan yields increased 20 bps due to a higher rate Total Investments and Yield 4.85% Loans and HFI Yield 6.74% environment 5.70% 6.28% 6.48% • Yield on Held for Sale (AMH Resi) of 5.77% 4.84% 4.68% 4.76% 4.19% decreased from 5.90% in Q1; s
Slide 12: Net Interest Income
Q2 2023 Highlights Net Interest Income Net Interest Income and Net Interest Margin Average Earning Assets & Average Yield • Net Interest Income decreased $59.6 million, or 9.8%, over prior quarter Dollars in millions Dollars in billions primarily due to lower NIM and balance $609.9 5.99% 6.17% sheet
Slide 13: Non-Interest Expenses and Efficiency
Q2 2023 Highlights Non-Interest Expenses and Efficiency1 • Efficiency ratio1 improved 5% to 57.1% Non-Interest Expenses and Efficiency Ratio Breakdown of Non-Interest Expenses compared to the prior quarter but increased 14.3% from the same period last 62.1% year $387.4 57.1% 50.5% $347.9 • Higher Qo
Slide 14: Pre-Provision Net Revenue and Return Ratios
Q2 2023 Highlights Pre-Provision Net Revenue and Return Ratios • PPNR1 decreased $69.5 million from the Income and Return Ratios prior quarter and decreased $79.2 million, or 21.9%, from the same period last year 26.4% 25.1% 27.7% 21.9% 18.2% • ROTCE1 of 18.2%, down 3.7% from the prior quarter2 and
Slide 15: Commercial Real Estate Investor Statistics
Commercial Real Estate Investor Statistics CRE Investor Portfolio ($9.9 Billion; 21% of Total Loans) Underwriting Criteria and Mitigating Factors 60% 63% 70% 58% 58% 57% • Low LTV & LTC (50%-low 60%) range underwriting in areas 56% 51% 48% minimizes tail risk 50% 44% 50% 45% 41% 38% 39% • Simple cap
Slide 16: Commercial Real Estate Investor: Office
Commercial Real Estate Investor: Office $2.3 Billion; 23% 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 17: Asset Quality
Q2 2023 Highlights Asset Quality Special Mention Loans Asset Quality Ratios • Special Mention loans of $694 million (145 bps 1.45% 0.89% to Funded Loans) increased 76 bps as a 0.65% 0.60% 0.68% 0.69% percentage to Funded Loans 0.65% $694 0.56% 0.58% • $158 million of the increase is driven by 0.52%
Slide 18: Historical Loan Migration Near Peer Median
Historical Loan Migration Near Peer Median Reflects “Early Identification and Elevation” Credit Strategy Quarterly Adversely Graded Loans / Gross Loans Q1-14 to Q1-23 Over 10 years, WAL’s level of adversely graded loans has been in the 20.0% top third of peer banks… 18.0% 16.0% 14.0% 12.0% 10.0% 8.0
Slide 19: Proactive migration enhances oversight and mitigates credit losses
Proactive migration enhances oversight and mitigates credit losses Annualized Net Charge-Offs Q1-14 to Q1-23 …but this does not translate into realized losses as WAL has lowest volatility and average 5.25% losses due to our proactive mitigation strategies. 1.50% 1.20% 0.90% 0.60% 0.30% 0.00% Max Ave
Slide 20: Credit Losses and ACL Ratios
Q2 2023 Highlights Credit Losses and ACL Ratios Allowance for Credit Losses Gross Loan Charge-offs and Recoveries • Provision expense of $21.8 million, primarily reflective of a normalizing credit Gross Charge Offs $4 $5 $9 $10 environment and heightened attention on $41 $3 $52 $47 $45 Recoveries co
Slide 21: Conservative, Economically Resilient Portfolio Positioning
Conservative, Economically Resilient Portfolio Positioning Specialized underwriting expertise and conservative sector allocations position portfolio to withstand economic uncertainty Insured (23%) Resistant (28%) Resilient (34%) More Sensitive (15%) Limited uncovered collateral risk, Credit protecte
Slide 22: Capital Accumulation
Q2 2023 Highlights Capital Accumulation Robust Common Capital Levels Regulatory Capital Levels 10.1% • Continue to exceed “well-capitalized” levels 9.0% 9.3% 9.4% 8.7% • CET1 up 70 bps in Q2-23 to 10.1% 6.5% 7.0% 6.1% 6.5% 5.9% Tangible Common Equity / Tangible Assets1 • TCE / TA increased from the
Slide 23: 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 WAL (Q2-23) 80%
Slide 24: Tangible Book Value Growth
Q2 2023 Highlights Tangible Book Value Growth Long-Term Growth in TBV per Share1 Tangible Book Value per Share1 600% 6x WAL • TBVPS increased $1.53 to $43.09 from prior WAL with Dividends Added Back quarter due to strong, organic capital Peer Avg 506% accretion and improvement in AOCI 5x 500% Peer A
Slide 25: Management Outlook
Management Outlook Q2 2023 Results H2 2023 Outlook Loans: $47.9 bn Loans: $500 mm / qtr. Balance Sheet Growth Deposits: $51.0 bn Deposits: $2 bn / qtr. Continued Growth Toward Capital 10.1% 2024 Target: +11% Net Interest Margin 3.42% 3.50% - 3.60% Adjusted Efficiency 50.5% High 40s Operating Pre-Pro
Slide 26: Questions & Answers
Questions & Answers
Western Alliance Bancorporation Common Stock (DE) — Q2 2023 Earnings Presentation on 6ix