Western Alliance Bancorporation (NYSE:WAL) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 12:00 pm ET

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Western Alliance Bancorporation (NYSE:WAL) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Kenneth A. Vecchione

view residential loans as a thoughtful, responsible alternative to manage loan growth. During the quarter, we also reduced our construction and land and development loans by $73 million, reducing their representation in our portfolio to 11.5% compared to 12.6% in Q1.

Deposits remained a bright spot for us during the second quarter as we grew over $1.2 billion from quarter end, supported by $998 million rise in non-interest bearing deposits. Total deposits grew on a linked quarter annualized basis by 24.4%. This bears repeating, 83% of our deposit growth was DDA, and non-interest bearing deposits now comprise over 40% of all deposits. This is the second consecutive quarter during which we grew deposits by over $1 billion. Over the last two quarters, loan growth of $1.5 billion has been fully funded by deposit growth of $2.3 billion. The loan to deposit ratio increased to 89.8% from 89.6% in Q1.

Continued balance sheet growth more than offset NIM reduction to 4.59% as we increased net interest income for the quarter by $7.3 million. Total operating revenues grew $7.4 million for the quarter compared to an expense increase of only $2 million and drove a 40 basis point improvement in our efficiency ratio to 42% from Q1. We are confident in our ability to remain one of the industry's most profitable banks while also prudently investing in growth initiatives even in a declining rate environment.

Return on assets was 2.05%, return on average tangible common equity -- equity was 19.7%, as we continue to post industry-leading performance -- our financial results for our Company by strong asset quality. Charge offs for the quarter were $1.6 million, representing only 3 basis points of average loans. Non-performing assets were $70 million, up $8 million from the prior quarter, but will remain at near historical low levels. Non-accrual loans and OREO to total assets was 27 basis points in line with the past four quarters.

Turning now to capital management, last month we announced the initiation of a dollar annual cash dividend. We also continue to opportunistically repurchase shares. During the quarter, we purchased 793,000 shares at $42.82, which when combined with last quarter share repurchase of 1.7 million shares, combined for a total cost of $41.45 year-to-date. Overall, the share count has been reduced by 2.5% through repurchases since the initiation of the stock buyback program in mid-Q4 2018.

On display this quarter was our ability to thoughtfully manage capital allocation between share repurchases and loan growth. Tangible common equity ratio absorbed significant balance sheet growth and opportunistic share repurchases and was 10.2% at quarter end, down 10 basis points from prior quarter. But up 30 basis points from prior year. The common equity Tier 1 ratio was 10.6% , relatively flat to the prior quarter. Tangible book value per share grew $6.03 [Phonetic] -- sorry 6.3% or $1.45 from the prior quarter to $24.65. Over the past five years, we have grown tangible book value per share by 213% compared to average peer