Western Alliance Bancorporation Common Stock (DE)

Good day, everyone. Welcome to Western Alliance Bancorp's fourth quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. If you would like to ask a question for today's call, you may do so by pressing star 1 on your telephone keypad. To withdraw your question, press the pound key. You may also view the presentation today via webcast through the company's website at www.westernalliancebankcorporation.com. I would now like to turn the call over to Myles Pondylik, Director of Investor Relations and Corporate Development. Please go ahead.

Thank you and welcome to Western Line Bank's fourth quarter 2021 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer, and Dale Gibbons, Chief Financial Officer.

Before I hand the call over to Ken, please note that today's presentation contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. Except as required by law, the company does not undertake any obligation to update any forward-looking statements. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please refer to the company's SEC filing, including the Form 8 file yesterday, which are available on the company's website. Now for opening remarks, I'd like to turn the call over to Ken Beccione. Okay. Good afternoon, everyone. 2021 was a watershed year for Western Alliance, as we broke many of our own records for balance sheet growth, total net revenue and earnings, while thoughtfully expanding into new business lines and geographies that will make us an even stronger, more diversified bank. For the year, total assets ended just shy of $56 billion, with loans growing 44% over the year to $39.1 billion and deposits rising 49%, to $47.6 billion. This strong balance sheet momentum propelled record net revenues of $2 billion, net income of $899 million, and EPS of $8.67, which is our 12th consecutive year of rising earnings. Turning to the fourth quarter results, Wall earned total net revenues of $561 million, net income of $246 million, and EPS at $2.32. Strong balance sheet expansion continued with quarterly loan growth of $4.3 billion, or 49% on a linked quarter annualized basis, and deposits rose by $2.3 billion, or 20% annualized. Loan demand continued to broaden across our business lines, with C&I loans increasing by $1.8 billion, inclusive of $200 million of PPP runoff, along with a $1.8 billion growth in our residential portfolio and $584 million in CRE. One of the hallmarks of our national commercial business strategy is the ability to develop niche, specially banking businesses and to attract qualified talent to thoughtfully scale new business lines with superior risk-adjusted returns. As an example, since joining in June, our restaurant franchise financing has $151 million in outstanding and has a positive contributor to earnings. Similarly, our Texas-based single-family home construction CRE team has $235 million in improved commitments. Our loan pipeline and channel checks continue to show a burning of loan growth in our traditional commercial loan businesses. Attracting seasoned senior teams to wall provides the opportunity to establish new business lines that ramp up quickly due to their existing client relationships. A $6.2 billion increase in average-earning assets drove net interest income growth of $40 million, or 39% annualized, to $450 million as excess liquidity deployment for loans and loans held for sale contributed significantly to earnings. Fee income was $110 million, representing 20% of total net revenue decline of $28 million from the prior quarter, and mortgage banking-related income was impacted by seasonal fourth quarter weakness and the mortgage sector's transition to a rising rate environment, which compressed gain-on-sale margins. I would like to reiterate that AmeriHome is fully integrated into the strategic fabric of Western Alliance and has thoughtfully managed to maximize value for the entire bank through loan, deposit, and net interest income growth, not just gain-on-sale margins. The B2B correspondent business inside of Western Alliance has several business levers which can be repositioned to sustain earnings throughout rate and economic cycles. Given the flexibility of AmeriHome's business model, ongoing mortgage operations can provide multiple revenue opportunities which serve to offset lower gain-on-sale recognitions. West Alliance's branch-like flexible business model provides us a competitive advantage to leverage operating efficiencies to enhance financial results while investing in business initiatives to drive future growth. Quarterly adjusted non-interest expenses grew $4 million to $235 million, producing an efficiency ratio of 41.3%. To put this in perspective, over the last five years, total loans and deposits have grown two and a half times the rate of operating expenses, excluding America. Productivity improvements provide us with the capability to absorb higher labor costs while continuing to fund products and technology investments. Total adversely graded assets were flat and quarterly net loan charge-offs were just two basis forms. West Alliance is one of the most profitable banks in the industry with a return on average assets and return on average tangible common equities. of 1.69% and 25.8% respectively, which will continue to support capital accumulation and strong capital levels. Finally, what excites me most are the differentiated technology and banking services that Western Alliance is increasingly delivering to our clients to solve unique pain points and facilitate transactions. We recently announced a partnership with Taxit Group to deliver blockchain-based payments to our clients using their passive pay platform. The launch of this program, scheduled for early second quarter, will allow Western Alliance Bank clients to transfer funds instantaneously to one another 24-7. Additionally, yesterday we announced the acquisition of Digital Disbursements, a leading digital payment platform for the class action legal industry that integrates legal settlement claim process with a multi-product This differentiated technology solution enhances the capabilities of Western Alliance Settlement Services' team and solidifies the bank as an industry leader in the $15 billion legal class action market. Our national settlement services business, developed in 2019 and launched in 2020, has been described on previous earnings calls as Deposit Initiative 1. This business has successfully generated $2.3 billion in deposits out of the year-end, and we are thrilled to welcome the new team from Digital Disbursements to help the bank continue to produce unique value-added solutions to the legal service sector. Gail will now take you through our financial performance.