Western Alliance Bancorporation Common Stock (DE)

Good day, everyone. Welcome to the Western Alliance Band Corporation's second quarter 2023 earnings call. You may also view the presentation today via webcast through the company's website at www.westernalliancebandcorporation.com. I would now like to turn the call over to Myles Ponelik, Director of Investor Relations and Corporate Development. Please go ahead.

Thank you and welcome to Western Alliance Bank's second quarter 2023 conference call. Our speakers today are Ken Vecchione, President, Chief Executive Officer, and Dale Gibbons, Chief Financial Officer, and Tim Bruckner, Chief Credit 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 more complete discussion of the risks and uncertainties that could cause action results to differ materially from any forward-looking statements, please refer to the company's SEC filing, including the form 8K filed yesterday, which are available on the company's website. Now for opening remarks, I'd like to turn the call over to Ken Beccione.

Thanks, Miles, and good morning, everyone. As usual, I'll make some brief comments about our financial results and action items, and then I'll turn the call over to Dale, who will review the quarterly results in more detail before opening the call for Q&A. Our Chief Credit Officer, Tim Bruckner, as Miles said, is here with us as well. In many ways, this quarter represented a transitional period for Western Alliance following the events of mid-March, as our firm and our clients increasingly returned to a sense of normalcy. We continued to successfully execute on the balance sheet repositioning strategy we laid out last quarter. We exceeded our liquidity guidance by growing deposits by $3.5 billion and repaying over $6 billion in short-term borrowing. The second quarter, Wall generated total net revenues of $669 million, net income of $216 million, and EPS of $1.96. We maintained strong profitability with return on average assets and return on average tangible common equity of 1.23% and 18.2% respectively, which grew tangible book value per share by $1.53 to $43.09, or 18% year over year. and will continue to support building capital levels in the quarters to come. We achieved significant progress on the immediate and short-term objectives identified last quarter to establish a sound foundation for Wall to sustain ongoing client and financial success. Notably, deposits grew $3.5 billion and exceeded our $2 billion quarterly guidance. Growth was diversified across business lines, and included brisk core deposit growth from new and returning customers. Net liquidity growth of $2 billion allowed us to significantly reduce higher-cost wholesale borrowings. We will continue to expeditiously execute our balance sheet repositioning strategy and completed $4 billion in total asset dispositions in Q2, which included $3.5 billion in loan dispositions ahead of the $3 billion outlined in Q1. Meaningful deposit growth and asset dispositions lowered Wall's loan-to-deposit ratio to 94% and allowed us to rapidly reduce reliance on higher-cost FHLB borrowings by $6.1 billion over the quarter. I'm proud to report core deposits have rebounded another $3.2 billion quarter to date, meaning Wall's deposit levels are now $600 million above our year-end 2022 balance. CET1 capital of 10.1% increased from 9.4% on March 31st and 8.7% or 140 basis points since Q3 2022 when we initially announced the bank's capital building initiative through organic capital generation without equity issuance. Finally, we continue to focus on meeting our core client banking needs in order to cultivate strong long-term relationships, leveraging third-party products to significantly grow reciprocal deposits has lifted our insured and collateralized deposit levels to 81%, one of the highest among large U.S. banks. As we move through the back half of the year, we believe bank investors will place more emphasis on balance sheet strength, stressing the fundamentals of growing capital, improved liquidity, deposit cost composition and granularity, stable asset quality, moderate and thoughtful loan growth, and producing predictable and sustainable returns. The bank's diversified funding strategy continued to focus on growing attractive funds from a diverse set of clients and channels in order to prioritize repayment of the more expensive wholesale funding sources and then to optimize deposit balances from lower cost sources to deploy into superior risk-adjusted lending opportunities as we have done historically. Driving the $3.5 billion in deposit growth was significant new and return on customer activity throughout Western Alliance. Q2, we attracted $1 billion from approximately 1,000 new and returning commercial relationships at an attractive average total deposit cost of 1.98%, with notable contributions from mortgage warehouses, regional banking, and settlement services. Over $400 million of net new deposit money was in non-interest-bearing DDA. Our commitment to foster multi-product customer relationships has been the key to onboarding new deposits a very competitive environment. Additionally, we will utilize other diversified sources of deposits to accelerate repayment of wholesale borrowings and return to prudent movement. Our recently launched online consumer channel is demonstrating steady progress, providing another source of uncorrelated liquidity and generated approximately $700 million this quarter at attractive rates compared to the marginal costs of repaid borrowing. Going forward, continued deposit channel optimization and growth in new and returning core client commercial relationships will lower the proportion of funds generated from the broker CD market. Now, Dale will take you through our financial report.