Western Alliance Bancorp (NYSE:WAL) Q3 2019 Earnings Conference Call - Final Transcript

Oct 18, 2019 • 12:00 pm ET


Western Alliance Bancorp (NYSE:WAL) Q3 2019 Earnings Conference Call - Final Transcript


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Kenneth A. Vecchione

or 14.6% year-over-year. Our earnings per share grew 4.2% to $1.24 per share and 18.1% from the prior year. Balance sheet growth continues to be exceptional and exceeded our guidance of $600 million per quarter for both loans and deposits. Total loans were $20.2 billion, an increase of $903 million or 18.8% on a linked-quarter annualized basis and have risen by $2.4 billion over the last three quarters.

On a year-over-year basis, loans rose by 20.4% with $1 billion of growth coming from the residential program. As part of our strategic de-risking plan, we view residential loans as a thoughtful responsible alternative to managing our loan growth, while deepening our warehouse lender relationships. Residential loans now comprise 9.3% of our portfolio.

During the quarter, we also reduced our construction and land and development loans by $55 million, lowering their proportion in our overall portfolio to 10.7% compared to the 12.6% in quarter one. This puts us within striking distance of our 10% target for year-end 2020 with opportunities to balance future reductions. We had another stellar quarter in deposit growth, which really highlights the continued strength of our diversified funding channels and overall deposit franchise. This quarter, total deposits grew over $1 billion or 18.7% on a linked-quarter annualized basis to $22.4 billion, which is the third consecutive quarter of more than $1 billion in organic deposit growth. This growth was attributable to an increase in savings and money market accounts of $1.2 billion, primarily driven by our Tech & Innovation business due to a healthy capital fundraising environment.

Non-interest bearing demand deposits rose another $78 million to $8.8 billion and over $1.3 billion of our year-to-date deposit growth has been in DDAs. DDA as a percentage of total deposits declined slightly to 39% from 40% in Q2. Overall, the loan to deposit ratio remained consistent at 89.8% compared to the prior quarter. Continued balance sheet growth drove healthy net interest income expansion of $11.7 million in Q3 or 18.4% annualized, while confronting yield curve headwinds, which resulted in an 18 basis point reduction in NIM to 4.41%. NIM compression was driven by recent pressure on yield curve, increased deposit liquidity and continued de-risking of our loan portfolio, partially offset by proactive steps taken to reduce our deposit rates, all of which Dale will speak to in greater detail later in the call.

Total operating revenues grew $15.2 million for the quarter compared to an expense increase of $7.7 million, producing a two times revenue to expense growth ratio and an efficiency ratio of 42.4%. We remain one of the most profitable banks in our industry and produce return on assets of 1.94% and return on tangible common equity of 19.4%. We believe our ability to simultaneously drive industry-leading growth and efficiency is the key differentiator. Our financial results were accompanied by continued stable asset quality, as the markets we operate in are experiencing some of the strongest economic growth in the country. Non-performing assets were $66 million, down $4