Western Alliance Bancorp Q2 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Dale, I was just hoping to dig a little deeper on the moving parts on the margin. But I wanted to follow up on Steve's question, and I'm sorry if you guys said it, and I missed it, but the $3.2 billion of new deposits, I know it's weighted towards mortgage warehouse. But I was interested and if you have an idea as to what the cost is just because when I look at the new and return deposit growth in the existing client growth. It looks like it had about a 2% cost on it for this quarter. Is that $3.2 billion close to that cost?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Got it. So if you're getting a lot of growth in the -- I know it's got an ECR, but it's noninterest-bearing. I'm looking at that interest-bearing deposit cost and the spot rate of $305 million is lower than the $308 million, you did on average for the quarter. Why -- I guess if you're growing the interest-bearing deposit costs at a blended rate with those new clients, so that were the total deposit cost, I guess, at -- like why wouldn't that interest-bearing deposit costs continue to move lower from here in the third quarter?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Got it. Okay. And then just on the loan yields, the average loan yield for the quarter, the difference between the spot and the average for the quarter is relatively large. So the spot rate is [6.74%], if we think about the third quarter and we think about a potential for another rate hike here, I guess, how does that -- how does the loan yield move off of that 6.74% for the third quarter, assuming that, that happens?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Got it. So I guess if I take those 2 pieces combined, then Dale, just would like the deposit costs kind of stalling out at this level and loan yields continue to move higher. I just look at that 3.50% to 3.60% NIM guide, the implied NII guide and the PPNR guide that you have for the back half of the year. And it just feels exceptionally conservative. And so I guess, why shouldn't we be thinking about something well north of $282 million by the time we hit the fourth quarter of the year?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Got it. And then just last couple on credit for me. I just wanted to ask -- was there -- that you mentioned you did the office CRE deep dive. Was that -- what kind of drove the reappraisals on those office -- those CBD office loans, Ken? Or was there something else specifically that drove that?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Okay. And then just -- I know that when you're working through the special mention...

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : No, that's okay. I was just going to say, I know that when you're working through the special mention loans, at least this is what you did with the hotels during COVID as you kind of -- as you mentioned, you asked them to re-margin the loan. I guess it's early days, but with any of those conversations with your sponsors, has anybody backed that the idea of bringing more equity to the table to help re-margin these loans?

Question: Broderick Dyer Preston - UBS Investment Bank, Research Division - Analyst : Got it. Okay. Yes, just given how proactive it is, and it sounds like the borrowers are willing to kind of meet you there, to meet, again, at -- it sounds like maybe special mention loans we had lower and classified loans heading lower end into the year-end, but I guess we'll watch that going forward.