Western Alliance Bancorporation (WAL) 25 Jan 232022 Q4 Earnings call transcript

Good day, everyone. Welcome to Western Alliance Bancorporation's Fourth Quarter 2020 Earnings Call.

You may also view the presentation today via webcast through the company's website at www.westernalliancebancorporation.com.

I would now like to turn the call over to Miles Pondelik, Director of Investor Relations and Corporate Development. Go ahead.

Bancorporation's XXXX Alliance Call. Western to Fourth Conference Quarter Welcome

and Ken Officer; Officer. Our are President Chief Financial speakers today Chief Vecchione, Executive Gibbons, and Dale

I company risks, forward-looking uncertainties note assumptions, Ken, update except forward-looking over any by the statements. undertake and which today's law. any required The to statements, to presentation contains not Before please subject are as hand does call that to obligation

any to forward-looking and risks please For the more are differ that cause company's materially actual of available from the filed the complete to uncertainties results including Form statements, could refer the on filings, yesterday, website. discussion SEC company's X-K which

like Ken for remarks, I'd call the Vecchione. to Now to over opening turn

and morning, Thanks, to everyone. today. reviews bank's Officer, before Bruckner, approach I'd the room Miles. Dale XXXX in XXXX Credit Chief us overview Tim performance. is mention Good that performance also also preface the I then our should financial provide our to an like of our with

strong had Alliance in a Western year XXXX.

commercial national XX%, strong as total and XX% non-performing XX posted assets of bank loans diversified stable We maintaining to all quality charge-offs to Our were loans and for average X% the nearly this XX% year, revenue asset points. income growth accomplished while record net XX.X%, net deposits and approximately assets basis respectively. net by and grew while to improved

credit-protected of positioned an XX% or environment the evolving is resistant. insured well portfolio as classified weather is to of sheet loans and economically can as Balance loan the be XX%

in our we a as this or environment bank top-performing to currently the asset position is on quality group, Our slowing emerge occupy. goal peer recessionary

economy interest headwinds rate generate industry. the For XXXX, for will higher and banking environment slowing the

growth levels, focused call, earnings. maintaining mentioned our year-over-year while growth, restraining loan leading on outpacing bolstering CETX As earnings WAL quality asset growing originations with deposit and loan I is QX on

progress with pleased the substantial goal. made this are towards We

quarter. the points XX at Our which was year than CETX ratio X.XX%, higher over previous basis ended the

capital billion interest capital in Without driven low grown incremental loans facility, and approximately purposeful and $X.X such rise as income. held actions, and these The investment corporate indications. call for reducing lines low-margin, generated billion certain categories $X.X was would have in subscription a quarterly by deposit finance

in billion QX investments of million quarter-over-quarter. deposits billion liquidity by average QX which from and escrow declined group, deposit provide with $XXX driven primarily deposit in recovered, up has short-term was quarter, decline in deposits only outflows deposit seasonal quarter-to-date ongoing tax excess the mortgage businesses loan Our from since declined year-end. should than $X.X ending diversified balances last insurance while average growth. by This more $X.X warehouse

Previous other several settlement the to income out, businesses improve meaningful NIM escrow investments interest our initiatives trust as soon-to-be deposit XXXX. well corporate this incremental predictable gather grow sheet year. We to opportunities and in and deposits to platform, in look for launched provide we as HOA combined net look business services, balance roll with growth

XXXX Dale's I our After will outlook detail. discuss more in comments,

Thanks, Ken.

consecutive net For tangible net $X book to year-over-year. on year X.X% with and XXX% and higher per leading $X.XX, equity performance and of $XX.XX, of billion respectively. of billion, year, common produced XXth of XX%, Grew over earnings. average income Alliance on interest EPS share record tangible the assets Western the return maintained rising We revenues average $X.X return value

net with This of interest earnings. in led As increasing our points over QX. progress and bolstering CETX inhibiting We're identified capital substantial with our Ken made X.X% income towards previously mentioned, growth priority XX the to to proactively without strategy this balance pleased us key we ratios. restrain ratio basis call sheet a near-term record

to XX% interest income billion. net increased year, The $X.X

the than purely interest franchises that margin. net EPS to maximize drives funding on interest higher deposit deposit income Our and are attractive core rather diversified betas focused generating minimizing

$XX Non-interest income result $XXX million mortgage the softness as industry. million to ongoing declined of in a

bank money could revenue large be in very correspondent and early of stages in stabilizing. from the withdrawal as sale income mortgage-related improved of pending a the QX However, mortgage the and servicing on business margins center core gain

remains assets strong are and on pre-pandemic as underwriting bank total become specialization Finally, than business business asset levels. has classified stable as national quality greater percentage a focused last non-performing decade transformed and its expertise, segment to deep WAL a and dramatically diversification. lower still the commercial of assets over

million net less loans. charge-offs average X reported than the point year, For of $X.X of basis or Western Alliance just

million $XXX $XXX quarter pre-provision $X.XX the During trends XXXX. average $XXX but of and Operating increased million, during all drivers, was revenue the interest for $XX or fourth was business higher $X.XX and of revenue EPS or of of an Total income million, net driven million increase million. net asset EPS income Net year-over-year. generated by to earning net XX% X% $XXX Alliance Western expansion, $X.XX quarter also from from of primarily QX benefited balances. NIM was

completed a note bringing issuances to $XXX company the quarter, credit-linked the During transaction, total million. XXXX

was protected in the of non-interest to at million year-end, $XX pools mark-to-market $XX is million mortgage as $X $XX.X income prior offset loans Overall, revenue $X.X company As quarter a the totaling approximately other essentially of increased adverse charge remained included banking-related reference on This credit losses partially million billion. million. income. from flat by increase from

approximately $XX costs was cost ratio or deposit in -- operating flat. expense efficiency adjusted to primarily million, expenses earnings XX%, remaining were and The an higher to X% related ratio of efficiency as interest Non-interest to classify increased as expense essentially due XX% credits. included deposit resulting

Turning now to drivers. net interest

basis increased end-of-quarter prior environment. to securities reprice the variable as basis, rate Risk the from XX X.XX% from quarter an linked-quarter higher. Our rate On a loan points yields XX increased asset-sensitive balance sheet investment yields of rate XXX with X.XX. benefited points basis to rising spot

average from of net an quarter of points from of Loans basis rate Federal Irrespective continue increased X.XX%. in mortgage billion will maturing to rising higher XXXX. $X.X had interest repricing rates Reserve's sale trajectory, held each benefited benefit loans for to the XX our income or

wider being yield costs, use are on of loans loans loans these rate to deposits Total funding rate proportion increased of liabilities. points basis since increased spreads on interest-bearing short-term repricing borrowings average average. points fixed X% CDs and by X.XX% the replaced borrowings basis to as while over XX the higher variable XX During and the including are

Net demonstrating continued continues expansion funding interest than Increase average income interest asset or assets. basis increase by growth the of in NIM was a basis million change be sensitivity. powered on a point in modest total interest-earning our ECR expenses, costs, greater a in income to linked-quarter including $XX total X% XX and

grow on XXX interest income growth net Using shock expected balance shock scenario basis incident asset shows we sheet, to rates would projecting might a on with rate to analysis a Fed The some happen expect decreasing static over the XX%. that income that net still declined, this our year. later sheet, rises with over interest are is net interest as X%. sensitivity sheet, lift plus same to Growth income balance balance point profile. the

increased demand declined. rate $XX the to rates on Our than essentially quarter expense. flat increased from credit paying approximately after costs deposits basis of due efficiency but the slower higher XX% again operating credit interest deposit reclassifying Adjusted leverage at demonstrating earnings rate Deposit high company. a points deposits, QX at prior costs as ratio earnings to the XXX million XX%, efficiency was

capital XX% equity, average revenue year-over-year, growth, Western increase XX fund Pre-provision bill higher climbed million significant for $XXX provides quarter. X% common organic credit balance continued XX% sheet tangible return all to basis income, or other record a net or in generation the points and resulted on excluding last capital than quarter demands. meet ratios flexibility Alliance's leading to performance comprehensive strong and

decreased held by $XX warehouse credit primarily borrowings, in by linked $X.X Total reference loans. short-term Loans million seasonal mortgage over million short-term of $XX.X residential of issuance a notes factors. a the million million quarter, borrowings million for pool year-end, prior $XX.X $XX from primarily decline on at declined $XXX to billion, fell deposits offset investment in and driven to

$X.XX earnings, available-for-sale in and due to Finally, drag recorded securities share quarter X% increased with strong prior reduced from value the X% tangible over AOCI. or marks along organic year-over-year book $XX.XX to per

quarter, was billion C&I corporate billion finance would total. resources growth in $X.X $XXX of by a loans with such lesser to equity grown basis. quarter decision net C&I and, loan $X.X our temper categories, on reductions, impacted have This by total for loans linked approximately purposeful million extent, certain loan investment These growth a as to fund held

estate, On real C&I growth residential. sponsor-backed was construction driven by from $XXX $XXX million million $XXX million and from commercial from

demand $XXX million, $XXX regional in and lines Finance Franchise Additionally, was innovation than million QX. million. rose which of banking, our breadth $XXX was up healthy tech generated the Hotel and loan business higher

and estate diversified positioned well prudent regional environment between maintain through business national economic We our residential uncertain to a lines, real are more loan mix banking. given growth

from the loss Over Furthermore, account of loss which structured XX% asset has our which of categories, we three prevention portfolio. fortify quality. protected, low additional loan no should entire years, credit last growth XX% our as to for robust now are have XX% loans of industry-leading our come

during temporarily outflows earnings range by deposit and larger-than-expected combined for factors escrow mortgage deposits, group, to but driven up rates. in seasonal funding in The short-term warehouse reduced billion, declined our picked deposits non-interest-bearing the are quarter competition deposits, deposit Early credit in to seasonal balances. $X.X which included primarily subject

same from already have warehouse As reversed with balances average Ken factors $X since from than the seasonal year-end mentioned, period year-over-year. XX% billion year-end, higher mortgage or quarter-to-date these QX more up

Additionally, DDA. XQ's million balances in of are noninterest-bearing than more and for quarter-to-date greater than the balance. $XXX warehouse average Western total billion average up XX/XX $X.X comprised deposits XX% approximately reduction from Alliance's

$X.X in total noninterest-bearing $X.X decline End more CDs an Increased last DDA. versus billion of from quarter a in on of including in from only pronounced deposits interest-bearing part year grew increase decline the for billion deposits, environment XX% rate deposits seasonality basis. million quarter, period-end a a in drove growth higher Interest-bearing liquidity evident linked average competition migration in is demand in $XXX the from

funding franchise of quarter the pleased and momentum million growth $XXX and provide -- opportunities services attractive deposit our meaningful to continues are attract we generate nearly produced lines, to business in to scalable to loan support $XXX We associations. growth. respectively. settlement million, with national continuing homeowners’ Among Diversified linked

Going funding to elevated soften ongoing attractive including deposits, the growth deposit impact and overall balance business growth of from business forward, we expect lines, sheet fund on services our to costs. rates continue continued escrow generate

basis and classified in as $X point non-performing non-performing basis Classified increased assets, of QX total strong points assets pre-pandemic the increased total total -- Our basis XX X QX. Total are of last assets and remains XX. X down from points percentage than to quarter assets lower were higher a levels. assets asset Total still million than stable. assets to only to assets quality total

for well to may additional credit economic our through business discipline We continues evolve. strategies The prepared greater volatility national believe out headwinds. underwriting our macro prospects us that line greater stress for accompany has borne

categories not to reduce and we more material preliminary any trends, also expect of observed year. our However, and of the have sensitive to exposure loan signs this we uptick credit to instead migration

Sound asset heightened dictate thoughtful quality decisions growth us will and trajectory to enable economic maintain uncertainty. profitability despite loan our

of or recoveries. million per past quarter have net quarter the of $X.X of $X.X from net X quarterly volatility charge-off to while XXXX Those in been basis stable full for variances charge-offs at the and result charge-offs Quarterly year, charge-offs year net million point loans $X the million. average approximately

recession cases consensus expense surrounding and a loss and risk-weighted capital for finance by conservative subscription corporate forecast, Base increasing due sale allowance Neo's million, mild shifted towards recessionary uncertainty offset line $X.X exposure. scenario. optimization asset credit Provision more has weighted reducing recession, for efforts, assumptions a call was toward for and to credit of which indications losses listed primarily percentage the

to at linked loans to funded believe ACL XX first We ample loans deliberate where non-accrual Western the million by are business economic coverage XX the points, to is Alliance's trends for quality loans basis coverage cycles XXX% $XX third year-end. a assumed loss these superior rises due transformation to ACL post-GFC ACL was by credit sustainable asset loan throughout party, of basis was points. while Total strategy. covered Testing notes, our

portfolio rate during portfolio. to Those period, nearly up losses and loan the of incurred loan resilient loans. less Coming of categories. insured categories of XX% XX% from back current prices Contrast, total of Western categories came financial make comprising than XX% X% the that is time Alliance

The are Resistant insured experienced have of since categories XXXX. secured The cash credit category losses guarantees government losses. which and low de or no loans consists loans. have minimis historically Categories protected,

a counterparties maximum due only as basis loss experience underwriting [Indiscernible] loans are and with of points supported some might and by just collateral migration, average our strong expertise. quarterly category of X basis -- as to losses recovery uncovered grade XX realized are well annualized limited risk collateral points. This minimal loss

more this Lending to sub-segments unique economic the has growth. is offer and in risk-adjusted that where focused XX% highest sensitive on returns category the been we our blew of portfolio XXXX, leverage capabilities maintain underwriting of average have and of losses maximum asset superior only relative knowledge with to these annualized a sector loss five. XX basis quarterly quality. loans experienced rate In points we

billion billion based charge-offs quality charge-offs Comparing lowest net the States, of held asset since over GFC United to between the total minimal the highlighted only charge-offs XXXX. $XX post has average and the Exceptional assets $XXX as of time percentage publicly period. the realized a we by million of the in maximum loans quarterly XX $XX the banks beginning same performance and annualized net with lowest ARP been

among and, credit the Alliance will to volatility low While losses leading the bodes and has well more Western when been low stress, performance outperform if our importantly, acute. stress past decade in credit becomes loss period more average peers as peers lowest how of relatively a

discussed earnings and focus rebuild On have our last call, renewed our to strong we so capital far. progress made

Our both higher materially tangible common quarter-over-quarter. total of equity and X.X% to ratio common X.X% Tier of assets X were equity

ratios. our continue X.X this fund to assets, shares. regulatory is and issuing capital industry-leading to significant approximately This equivalent million In organic to the lift growth during generate on of generation equity and quarter strong we capital return well-capitalized

quality share As in will We XXXX a ability our X.X high-performing previously excellent per faster group. operating softer all-weather $X has a as mentioned, peer $XX.XX generate leverage TBV our to the and than business validate economy solid since diversification, bank. and growth continue times asset believe grown increased franchise to and

Ken. to Back

those income was to to pleased growth ability with both with XXXX, position conjunction of capitalize as Thanks, environment matters Dale. sheet to the of executional sensitivity team's produce on the operating results quality and I with industry-leading with thoughtful management economic the signs balance adapt in growing interest sides changing record the performance in remains a elevated focus, solid rate stress. the simultaneously to while balance bank stable sheet

expect Looking to origination careful we interest with continued diversified income. growth model balance forward business for mix the flexible full sheet designed XXXX, maximize by our year net a driven

between XX% to between and We for deposits and XX% held expect investment XX%. and loans grow grow XX% to

in specialized generate Our of deposit sectors, offer loan more excess secularly which franchises economically growth agnostic strong for and funds deposit growth. opportunities significant

term quarter expense Fed fewer as to interest-bearing interest actions. improved expected marginal interest pauses earning between will growth exceed for asset NIM and expect and the margin deposits rate in even XX% rising per favorable in a Net income in the the it also year. We X.XX% year repricing environment if is raised expected costs. between X% fund expand is had to on grow deposits. we dynamics this support moves hikes ECR-related Fed deposits and as with concert Favorable interest XX% to and deposit Net

new revenue to management, us. remain of should the as net the XX%. technology but invest enters Growth the ratio risk front should to and in Excellent take advantage XXs we to see aggregate, expect of we for attractive and continue normalized losses opportunities economy will lines of we intact, business growth more growth year In we efficiency in low if could remain recession. into in quality a XX% asset the return to pre-provision

X.XX% in with to environment capital goal and a CETX ratios ratio between bolster prudently remains Our line of with macro key XX%.

our capital quarter, tangible of ratios, return of other achieve grow provides growth net Our actions. to on produces flexibility with bank's or dividends on capital approximately objectives, industry-leading us points significant of balance common CETX significant capital strategic average equity take which basis organic XX to sheet per

Tim At time, to take Dale, are happy your and questions. I this

line Please from Haire the proceed. comes of Jefferies. Casey question with first The Instructions] [Operator

guys. way morning, I hear I all Ken. cut guide, I But guide. Good NIM just -- that No Thanks. did the

And the think are and the Thank how I'm year. forecast guys what just year? assuming? see X% to for of you X.X%. the give exiting said the trending I you. progression, year Fed us you assuming sort Can it you that's you throughout

of the basis have XX Fed for increase rate the That's one at a from on we now points on about forecast, week actually the the So, only upside. year. beginning

We also and forecast. about confident our XX do to decreases, have revenue in rate have we less thing placed think declines, basis our but to points X We're run probably QX not a good, manage expenses it's efficiency order both rate into prudent those potential ahead of ratio increases.

that's So rate forecast. the

On X% expect us. we through NIM, X.XX% to slowly it for between grow is pretty the tight year and

QX little crosses end QX towards the probably of and a just more then So over grows X%, from generally into there.

within baked deposit of settle any can I to total sense guide, today? deposits lot shift of XX% a XX%, there's as we're that which assuming I'm that. think, sense said XXs And negative low a -- Okay. percentage I think But DDA you where any growth versus into that, of mix

answer deposits the is and and XX%. what mentioned just on right? rate what billion, that loan deposit start, I'll at to to a I'll grow is And second That's let trying we're to QX. do that's of half be clear, than faster Dale question, but we and $X between $X billion growth, XX%

In in growth the billion, around areas still and you for kind our terms grew confidence us, business give of that being same. the some see that of in of we terms $X.X may XXXX deposits, HOA businesses,

then growth in into of from business. got from well rest we rollout and services 'XX did XXXX. regions. Certainly, deposit settlement We did And come also -- with terms invested in, and business XXXX in services the our rather growth those coming XXXX, as see stronger the settlement our those, will services businesses escrow And is lines a rather well. of and in we

as garner mortgage to quarter, the approximately relationships. were half is DDA have to non-interest indicated, environment today's the we But seen declined related primarily and bearing of a trough banking Okay. of fourth operations It's that the seasonal in pretty XQ. new difficult we recovery in deposit

think in going fourth what I'm down that, quarter. with that half hold So to the can stick of we we came about

we're spread our what between Fed does. on them, then the on focused deposit what XXX from loans more putting income and again, But or more have kind plus regardless drive we that how sustaining of here growth that interest of trajectory do is and can net --

of Okay. together. all just tying Great. kind And this

the it The is talked XX.XX% I that like year, for at do components got this about XX.XX% just feel feel there. and wondering, X.XX% like you input work 'XX. doable you had with you -- this guys I'm the You all number Street you Do through? But can guide?

I'd and what XX% going our Casey, PPNR to economy viewpoint there, the So is in say you have between a is what to the happen guide And XX%. you think take determining from terms of in on provision. is

the naturally good. seeing balance will So in asset We sheet any provision of looks grow quality. We're not -- it pretty growth. cracks because

see listening Again, some But XX% number But is many XXXX, charge-offs of any back a top in of on for haven't regarding towards the that, so of need asset the between and weakening to the think to assumptions guide of XX% seen own we'll your heads, going you're make talking people provisioning. half PPNR quality. we year. to next

Understood. that loan And or last the is period growth, end? one average me, just for deposit

the So we of recover the this expect of from numbers. I to by half fourth talked But period end. quarter of both those here, about kind decline in DDA about

you. Thank Okay.

The of Milsaps with next comes from Sandler. proceed. question Piper the Please Brad line

little color on, all I of Dale, color, to -- going taking for Maybe a you everything kind credit into uncertainty. with around Thanks of bit that's appreciate just afternoon. the questions. delve I wanted curious a but all more. gave the lot Good my guidance. maybe

most maybe provision. to talk it a it within seem you worsened outlooks some as of million lot the But have more a assets, movement would quarter? million drivers you bit understand relative of in lot that have seem get to there, loan XXXX? provision color light, $X that relates environment. a I wanted Might particularly about didn't a to the were little the growth, this just the $X the but what risk-weighted Just maybe more can little of just

add finance plus with the backwards let's we in and we is where this to to kind applications, the that we've have which $X the on of sold, of a million Well, quarter our been sale posted didn't EFR and if the took closer we fact -- corporate start reverse engineer you from work previous grow when down we quarters. balances, would it, you what that

really net represents those So of the $X actions. million

CECL Dale, want about the stuff? talk you to

Yes.

have to said, performance. subscribe the of we of indicated, not kind So kind we that. I as seeing And we -- gradually of that kind Like Moody's has, deteriorated. we're

variable commercial most the us, happens metric. the significant really on real what For estate is

most has with for to it probably think do banks unemployment. I

of at are rates on are they consider on look you where what -- consensus advance still S-X, above estate transactions. the a the levels when then our decline And well and we kind those towards on also real are

they a pick as little not so some maybe loss, realize. institutions of while terms dramatic might other bit as And up it's in

risky you mind? grow be would Great. of maybe loans. grow mentioned areas variable would your in risk in, rate wanting less areas that in And that the loan portfolio, you in terms to more as have, think more about maybe want areas I those mean XXXX in areas, to you

think Just how curious of how areas want to that of grow about provisioning. vis-a-vis the in kind impact you that might kind to

note long still growing industrial. financing, So build-to-rent. strong see as our pipeline Multifamily in loan would a little I -- more active. I'll well us as looks say remains as

in some will that construction we forward. hotel You'll beginning are look up, previous as did financing pickup active that going be see quarters to fund and from loans we

is going want I probably are there's something in decrease time. is clarity in of do to don't going over asset headed, Fed be residential more kind we be to that of where work could but rates to do that out interesting. of action Specific What begin mortgage until that's with the front believe rates and get terms X sensitivity

queue. guys. Thanks in Great. back I’ll hop

comes from with line Please Alexopoulos the of proceed. The Thank you. JPMorgan. Steven question next

side. everybody. the start deposit to Hi, I on wanted

It's through on the you more curious talk terms getting particularly, the the In time from of deposit do deposits. how the of year? much the growth guide? you I'm could ECR plan growth, about fairly see XX%, deposits, deposit evolving And how growth aggressive obviously mix to a you XX%

Yes.

I terms we of So that like mean hold a be flat, could of think we non-interest-bearing in DDA, would core if said, actual I that kind win.

So to offer interest-bearing in terms accounts, going think there's is and in tied the a come money spreads it be on of I as and larger we the depending relationship market that varieties and -- in those well. ponderance to different whether credit

I that then to to CV we've has, than probably growth a interest-bearing a our be but bit category Much a strong side it's do checking of and to think think also the I going is is of -- in going increase this point kind at it lesser HOA where time. that probably grown what more recently, of lower rate than kind area. flows a at deposits into

accounts So think as going a bit related, market and more The in in in it's going growth to proportion see there at I the probably still ECR CDs. money a diminish you're chunk little DDA, going of the total. big to end, to is be

Got it.

terms of costs to interest-bearing interest-bearing? So What see through assuming NIM this Dale, that 'XX rise we stable what to costs if follow terms $XXX you you moving up in are a were being of by XQ to deposit in that need get you do bit? of this deposit where quarter, to

add income gave interest interest is about ECR X.XX million. deposit But I about costs in what up on now to up we be that net more No. right throw your a see going during If I I from the expense, $XX less bit plus rate that charges, probably the mean costs interest-bearing ECR, I or that, that, -- there depends deposit intact. forecast. really throw range of fourth and was grew think our quarter, if is we it the I

we're quarters. to we debits improve couple a it, think diminished the incrementally against past rate but ECR including saw income, going net what of than I So interest at

on Curious Okay. categories. consumer the just business of of barely you is more new quarter to have them And banks or you a some deposits, paying of in prospects? these at peer of for what's they many with as of regional this businesses? budged your out opportunity have have a I terms look conversation on this Thanks. over When where a see And what -- massive bring some household’s they're do opportunity? you come

in interest net bank, Well, higher our expense. have so we we the so ability of But those income, beta deposits, we interest we're and of to the spread marginal a have floating the them and make on put deposits are much don't at on and way deposits loans, it. in focus XXX% commercial be the end take going consumer hence, and

so been conversation. that's And the

larger conversation. lead we that conversation there's there leave client and clear it very and by us extended now with moving in our of to us a seeing We money to a we thought that having some strong about their very move has with clients bit money of And we're different of last well approach We're that. terms no will business, little received loans, conversations for deposit the to us. relationship, change to really what's how credit is we used like be and unless year middle been And in somewhere the of QX deposit base.

my Thanks for questions. taking

is the with Ebrahim proceed. next from Poonawala of Bank line The question of America. Please

mentioned Maybe follow-up Good questions. sure a you one, morning. Yes, I'm few this, not if already apologies.

around Just as we the think expenses. core expense outlook about

guidance. Just thinking about be your also And the key the one should thinking remind we of of that growth rate us you about. terms PPNR in part as are seasonality

Do I about? that is you thinking last So What one point? be hear should the we about point. thing think

lift marked like I'm that like a quarter watermark seasonality, first efficiency. for be the is should in. expenses we in high I'm first should just historically quarter The be assuming there the seasonal wondering baking if

The first. second that of the yes. part take I'll Yes, answer is

one QX. have pop overall, Our which up the efficiency expenses targeting a the ratio our we industry. we've targeted, the ratios in we're always tend and is little in of But more efficiency XXs, low leading in to bit

technology We us as said, kind management place allows in the the to risk we and on new for settlement to businesses. investing, that's services, make also continue we've escrow in that and of several to products invest bigger, in allows many right to bank the years, investments And been appropriate in It get as continue the both feel bigger last be. us and services. I -- it but new to business

We've about, new to year off to we're that start. We yet launched that's built not we in a good deposits last strong got but a recently ready talk initiative. just

the to ratio future low in invest the operating keeping us the we want, money efficiency allows So performance. leverage today also XXs for generate

just of it year? what just terms single about the it. digits? high does growth the Got in how Is you're thinking And that imply expense for

going to double. might be be it's high So digits, low single

is performance watching we you basically FTE, and things the closely. to sheet, to as are. at element, we're we going But -- this look have revenue XX% a little what as flat If -- I where to XX%, so room. the expense we kind for ratio, we're going we're provide balance of at to efficiency to authorize on the holding of Could more continue demonstrate as do of mean expansion. feed our growth the PPNR

I not other. each across talking want sure we're to make

net just was commentary putting ratio efficiency talked that, about So costs Dale interest adjusted income. without on deposit my the because it towards

the costs, deposit adjusted without be we'll the efficiency low on rise So the that's in in think what we ratio XXs.

Okay?

Yes. I And -- a ahead. Noted. maybe guess question. separate go And

around uncertainty. credit, that But the to wondering, you guidance hesitation outlook about at guidance? $XX.XX. back that mid-year think about assuming the EPS XXXX, anything book would there at PPNR imply when given, earnings just look your macro this I loan provisions causes for relative Going to is you understand I'm and that when even your year you've

would why you obviously, the not the minus achievable? which quality wondering with in of the asset book. would or I'm EPS $XX.XX you what expressed be scenario plus that And comfort be -- just

as the into outlook of the really comes know, year works, end the you then CECL and down it So to XXXX.

Moody increasing bearish on you're should that's So of if risk for we as turn the more the book. put the loans, in provision life loan, not for that your

the we've And control. Those side. reticent where numbers so the little bit things then more on PPNR and are stay we that that's EPS on think quoting can we a are why been more

would our a loan is slides charge-offs two to able seeing in in we're And short moment. very a resilient again, the quality, way presentation, down. keep resistant point any would been grow we've the we bit where or or in little asset think that at categories. On either last the prudent not this of to XX% in growth and you I remind you I book issues

standpoint, Got XX% it. about may, And loan this for be macro just Like in think this there lot that putting sheet a cycle? worried how a the in what should follow-up. we loans of point from right selection -- a I one risk Like growth, adverse now the selection? of we When if of quality uncertainty. of balance just you're the -- terms client XX% is at to the year, on

No.

we're sake. to going growth's not grow So for

the opening is of In important. the to So asset we no incredibly and completely rid different I of want a connection is any one quality comments, GFC that, XXXX and get my the 'XX. want to I things are connection company. 'XX, to

asset quality we to working we both. want We're So have at want asset same above-trend trend. quality. Yet or best-in-class grow the on doing time, above to

to the that we the without gave reviews, or going think and recession quality. and us asset not the we loan after loan remain protect also said grow allows into our growth. quality we're book going a range of stable growing with XX% Having for that, XX% to strong through higher So asset sacrifice to

facts pivot the pandemic, the is it point sure, during and growth to I will situations this two banks vaccine. mean few time and how we as weren't where we a emerge. We one trajectory during sustain a that We in necessary years four or did that as of go. years new

a into never LTV a call went residential, those. of a it dime and on low So lost either capital and

what And model the our about improvement of performance hearing flexibility -- to -- earnings nimble our to sustained using over business we're about sustain be to so going time.

Got it. for taking Thank you my questions.

The Brandon comes with next question Truist. from Please proceed. King

loan mentioned down I wanted to know, loan initially you committee I better quarter, a yields. XX seen loans getting last turn pricing. touch Ken, on

and to was if getting So going clients? this the year still sense for of get loan same I wanted the a you're what from reception into outlook spreads

you another to give story that, I'll too.

that points. we are pricing. our earnings. average, XX had last when not basis in loan up pushback Dale conversation lot are on a did And getting of mentioned, about, holding our we're So yields from QX we on spreads

that loans that deposits. we the deposits that you, greater down not but because seeing loan. and loan the are can quality numbers those those I it's say no has good accompany any And is loans, have we're a turn that want senior don't to returning to I saying now we generating when to tell we no usually you what when pricing, asset for have we been with loan committee good

the loans to accompany pricing we're our deposits more encouraged the from is about been holding our that to is determination committee. what credit see following through and has So

then asset there complete? some to optimization, as do is And helpful. as far That's that process Or this going is year? the into Okay. risk-weighted work still

take that to one. shot love a Tim, at

running the process. been You've

Yes. and our part Thanks, Ken. of ongoing, a definitely it's is That culture.

that There's achieved we'll to to do. benefit something definitely optimization. be continue remaining So through

some in it ongoing Thanks. targeted Some of mix, and just clients. still structural But are that's in, of expected. our the portfolio growth with improvements is

on deposits, in to Got quarter it. I going back forward? as warehouse similar in the seasonality and as a year magnitude the fourth of far in of expect date. this Got But it. fourth And quarter lastly, then the seasonality just kind mortgage this understand should came quarter the we

I was of It taxes seen ever others we our related. the in quarter that principal we've of accounts before, to for have so -- some the fourth some more think reasons and related 'XX of are than insurance and are and pronounced

of taxes California insurance, XQ. in property because largely in we decline a So the due expected are access

intra-month kind P&I ebb more seasonal time. much of to but have tend so payments elements, flow, that a this and and bit The much changed not

few residential in very I were refinancing sales view, estate So almost real few of there that very think December. took and place from our

pays when off remitted a principle that loan REIT including is that deposit, pays And two I'll get so what Xth up somebody that as to the refinanced, December, that one and off of the result us weeks later. of loan. say of has a of say, GSEs the is And somebody that, for or of will show we'll

a happen, projection to think about and going of of December, early didn't was of to do so of turning that than turn I'm but December what significant own look I this. I usual, buying the of which 'XX more kind and trough be season, even spring seasonal Well, that more month in selling like. that contributed dearth you to anyway, see activity the certainly the And don't can now, But is make in that -- an it it seems maybe and was terms not your sure.

taking Thanks Okay. my question. for

proceed. from question Terrell next comes Stephens. of Andrew Please line with The the

Good morning.

loans place the reference quarter. commensurate capital $X.X would expect those next And guess, the there the around portfolio. are pace remain the some fall quarters? I call the down? capital this of at the that securities of Looking of runoff we know associated CLNs in call Is as should billion Or portfolio over down comes book do with out against the the I pool? CLNs couple

I'll again. be question the It's return by take first expected. driven exit elected Bruckner part not to handful reasons. We Tim transactions. your on no. was for to the runoff. Answer of portfolio is That of a large

all. amounts similar we As at won't of we the coming see dollar quarters, runoff move into

closed. opposed capital I the So subscription appreciate as on residential ones, you have on That lines. which to we do the and are a the call that, CLN -- remembering CLN

done so as is So it's loans. has ability, pool lasts that's of or it a and a off those the -- three one pay CLN substitution whatever, for loans down. specific This And runs years.

because something there. that, through taken an the was purposes, already process. really of portion of comes out our really fraction call lines, CLN is it and much not effect so Tim a capital we've management much those have to down indicated, for, as done of subscription so for It return for that total XX% we ability something So in we if put else it. of That -- capital a to doesn't have could

And have servicing any thoughts quarter? this the was rate And change gain valuation for MSR income? you then, and Okay. Dale, then then run it. do what mortgage sale on just on Got

complete had the very terms was the means hedging and MSR in that of market change We in in QX, taking Yes. so the no materially is place valuation that rates. what basically of what asset

wasn't So adjustment was that happened. -- valuation had there any that

have some going it's not I forward, that on there's a what servicing to going so stability little the terms extend people maybe the going more rights I are think there the MSR could Kind is take of of be worth. of around effect at place, so market. of refinance lives terms time, an and same the to But think what in kind confidence that behavior, and those and in expect dispositions

you look about relatively total to I think would QX. income as flat would quarter-to-quarter, I the mortgage being that, add

say as into was trend, your in encouraged days center by are January, business first that early specific so lending that the that And while XX money think large to would call I I question. market. the rising we bank as too correspondent a margins the or

that And flat think. move continues positive. at forward. I income crossed so point, we've a relatively mortgage But opportunity, QX. got fingers our to keep that, But QX's now, we would emerging That's to an that's this right

correspondent of large business, And if point, to exit Okay. perhaps balance Got of But could in kind to a just in dynamics competitive margin. give sneak the gallon sale the sheet the on does opportunities you then competitor some the the all? I one that the greater it. at just tailwind last does create grow

of relative balance goals have capital sheet We're XX%. towards getting going still to to CETX to X.XX% the our

As grow way if our you versus generation, in they an MSRs, become capital know, outsized internal punitive.

sellers MSRs we our bought AmeriHome. that the we also keep with that possibly that and buyers, -- to hope even be year. as as are with that, was financing premise And So we throughout when MSR we these as sell the always accompanied MSRs to we will deposits well of if providing non-banks

Understood.

question. for the Okay, thanks

proceed. with KBW. of The next comes question the Please from McGratty line Chris

change the in on in how dynamic build way thought you build Great. just of some I'm about kind the you Thanks. you could remind I reserves. by think it, interested quarter, your there to And commentary like capital, time with the maybe some many other. capital of there? thought thinking line I'm recent about the XX% get thinking is the more, target, versus Dale, one I in us you're prior But build would and efforts midyear. building any think

Yes.

reserves. with mean really the So I it starts

don't kind what Moody realize kind with overlay drive that GAAP economic and I loans, our and lower market than own says kind any outlook. quality charge-off and interpretation exposures of space. and in And in of look the in that look what's our further of ratio terms I number, and there. our we seasonal sentiment you of changes at is compliance think -- So market transpired we of some of our than other others asset And terms behavior

of we sensitive X/X I segmentation -- resistant, loan volatility. of resilient is to terms have our the credit And book have some, perhaps, and a in piece. more in we then that going our is mean slide something think just that of deck, we fraction. kind have the protected, small is

but annual think, of are that ACL we than is, divide if most points divide is and And years, by your this year, on -- not measure I is look get charge-offs. points, it and is that I into book XX couple you're at our know X%. had only took Another to is but -- of average going loan under basis mean even a better zero duration this XX that basis charge-offs. you if -- we a years I this the we

works it, we our reserve is. at and think look as we ways of sorts all So

going to this time, of continues the Xs going sheet while an all. grow now to about capital terms fairly sustain we're high trajectory for So do sustain in capital, line terms But what falls at our the about quarter. both. We're of later XX significant income in grow down and of bottom improving one is climb to we line interest equity. I a at same our think common up and points know, balance it's time I move terms going tangible we're toward basis talk to to I our in what wouldn't year. move our net returns the

of We loans got I a end That's think that EFR to very in and real be the towards space. be in year. Chris, line. some for X.XX% selling you capital call QX to to can of then move subscription the us range on back the look specific, quickly and opportunistically to able jump by our capital being XX%,

those in quarter, frankly, back able that year quite can capital pretty the we're numbers. were of towards end bps we the XX look but to proud one So move you think the for I

that's no assumed there's right, in all CLNs And Ken, that? more organically,

don't no in We either. any CLNs there have ATM certainly and assumed

The of from David next with the comes Smith line question Autonomous.

may You proceed.

what the full the deposit and as basis? costs the would rate kind ECR XX/XX, be share on a quarter for of that of You run

we happen deposits. balance can to It Yes, track down wouldn't changed But that came quarterly going equals in didn't dollars for I the from going quite I anticipated say as where terms on as ECR is much from number. think grow of categories. materially That we the the in sheet particular from think of what something actions were number, the fourth overlay because and happen that terms quarter is to in work. what should you those you think maybe

with we have consequent there We have dollars those big. in

and the terms share you mix the between bearing there? a book, Okay. whole the deposit can was non-interest mortgage And of bank as fourth for what as quarter? of Is different the from the breakdown it warehouse interest-bearing notably in

the all mortgage the deposits have. DDA is of in are dollars ECR of preponderance that and most So with warehouse we ECR, an the that

Got it.

it tend from you that that must to on risk imagine thought. zero low But lastly, that would And weighting. benefit RWA must you I got risk in reduction in fund expand weighting, resources. be Okay. the the little be loans risk have given equity of not the pretty terms a I Could of it the that bit? a those kind have,

providing a linked taken of to party. by a provide i.e., construct note protection, credit first general is third loss The

in. party, any that that interest -- sell third they losses on arise school. and We less to bond funds are reference that the we this get So a that bond get from

assume have already money, any we how much EFR party, so that back So third control get the they as XX.X% these normally note pay in less losses loans, to back, first XXX% of first And we losses only a done they we've incurred. sold -- we pay. portfolio, they're we've them actually, because their the lines, But they a subscription on risk-weighted. and loss,

it's XX% whereby basically treated you risk-weighted that to architecture, category, the asset. of And product kind a structured because a AA now better of have moved or as the

what you you from, at matter end asset So XX. of no come type up

at started Capital and end to call and XXX warehouse, So XX, you started residential, you XX. XX. still you

Okay. Got it.

you. So XXX. weighting know. it. It's though, good Thank the without the is Got CLN to risk

question Wells of The comes Timur line the Braziler next proceed. Please with Fargo. from

afternoon. good Hi,

Just a layered used With near-term down focus what's of follow-ups. going deposit primary excess be the couple Or funding that expecting growth book? growth is loan into some to borrowing? in the be the to to for? of this funding excess securities 'XX, Is to going exceed initially

lower but and or, borrowings be down probably first would cost. take our Could either goal our that to

space. thank What correspondent Great. to following large market up but the Okay. by share amongst happens market then, the kind again, on bank name, not and that player share? the you mentioning for And constituents? are in And that business as are expecting Is rest the the bank exiting of large of the you that up that split more pretty is? less maybe keeping more AmeriHome's grow? kind you share of that's competitors kind Was of Or market for portion or existing to grabs? of getting ring-fencing and space, the

competitors, think market of the we sale I like balance gain share they and do. on So margin, that's with what other some

and here. and of and industry and do, market we've share there first the quarter. as clearly But left, get to mentioning have on the and be of the can it end And days, see, seems a bank color that's hold little we I on early and we'll existing sort that what where our trying we'll that's for that going grow to on through without think if discipline So more the that sale wait it's been. gain we works is margin, us,

in place a the they've a third dropped, bit activity the margins whereby little experiment we from quarter. somewhat that's we and stayed purchase when a far in scenario. And they is back did volume, up I'm During elevated the and terms move that basically saw but of pulled we margins quarter, fallen how not sure fourth little reason at in why, to which

what don't by know see encouraged happens. that, if we're and So I we'll

Got Thank you. it.

RBC. with line question Please Arfstrom proceed. Jon comes of the next from The

question two everyone. is a you starting a of the where in Thanks chart from That's What economically resilient today? from you positioning. Slide another in on now? emphasis like we're where I you portfolio XX, on that the to for do expect to have drivers is, growth your one Ken, mouthful, years the the mix terms guess to look way sorry.

Tim Bruckner.

You will resistant through reduce that real sensitive recession, some any to our of At particularly time, any exposures see focused recession. same potential the us the are you'll see us in or areas growth, more areas.

industries -- So sticking more resistant we'll out and net. than then our do are specifically precision that sensitive a brush, really that with to getting with the lowering of that's areas broad but exposure, particularly getting

we talking relationship about growth. growth When talk about we're there,

we're loan-to-value, with house. So at amount the we low as not submarkets about the of do that top right estate can as be the just growing sponsors now, at are and in doing differently we're more well if selective selective at the it's deal. lender can specifically being though, sponsor we we're that's these know we're that we it, the level, investment where in And growing. related, but we're very high real What of

obvious. as end? XX% see Dale, question XX% XX%? do the brings put higher Got The it. okay. And a key meaning of what growth to closer what at for or below Okay, could PPNR you you what XX%, But you. you risks, to the maybe

mean, We us can in opportunity leverage. and at the sheet task have other spreads, growth. drive provision will avoiding asset front see With deposit side this balance and we've believe PPNR, the the is in which to balances. we foremost, which of -- of much sustaining terms course, -- deposit significant deploy our costs the than got first NII, obviously I we of higher driving in growth,

a think, thing, the we're think we And our are I to And be on X coming track. of of number to deposit initiatives, them number going I sustaining growth. So some think we've got that's and fruition, now.

reserve qualitative size, of the give that? reserve? you on us help Qualitative piece is any How your can big

adjustments -- on the as -- upgrade, It's as X%. the far about qualitative the you're AC can. about I talking Yes,

How are coming Where Is guys you you it And book we just at you. EPS? you for terms How Thanks. judged? one look guys the metrics it most financial judged? it in that Okay. Ken, tangible then, are are Is credit? the value of year? growth? focused for Is

growth, the quality, determined relates capital compensation, as statement and growth as or up it's deposit in our the by STI growth, asset EPS, our So down of sheet balance sort income it to and quality and the performance, both loan short-term base. operational

price course, the In the in price, the terms of growth motivated share of and is EPS. share LTI, the by it's

the things we are that those focus on. so And

Okay, alright. Thank you.

at you. call time. remarks. Ken this There Thank hand Vecchione additional questions are now the for over will to I no closing

all Thank about you us we you couple for of Thanks. the in joining today, to look talking to forward QX the and results next months.

concludes conference Thank That call. today's you.

may You now your disconnect lines.