Western Alliance Bancorporation (NYSE:WAL) Q2 2023 Earnings Call Transcript

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Dale Gibbons: Well, yeah, I mean, I am going to say roughly 30%, maybe a third have come back and why haven’t they, why haven’t we seen more? I think a lot of them — I mean, some of these are related to particular types of actions. So I will give you an example. In the settlement services, you might have a settlement on and then that’s moved to another institution and what we get back is the promise that, we are not going to move that one back, but future settlements will come to us. I think that’s part of it. I think that there was some question about what’s the new landscape going to look like? I think it’s well publicized that SVB had a policy, if you got a bank with us and you can’t take anywhere else. That has proven to have been kind of damaging and damaging to some of these franchises and so some of them are like, okay, we were banking with you as most of them are just single entity institutions and now they are building relationships at two or three banks.

Ken Vecchione: Yeah. The other thing is back to, we recaptured one large client that left us out of warehouse lending. And in bringing that client back, they have a lot of funds in what we call P&I, principal and interest accounts and those build up rather quickly come down, pay build up come down every month and it just oscillates back and forth. Well, when we went back to them and establish the relationship, we now took in T&I, tax and insurance accounts, which have a more steady stream to it. So what we have also done here is traded off volatility of volume for more consistency and we have done that, too. So as we bring clients back, we are trying to get better quality deposits longer term and stickier, and so this has allowed us to have a lot of great conversations with our client base.

But I can tell you, I spend more time with depositors in meetings that feel like an earnings report. That’s what we did coming out of Q1 and in Q2. Now that has all changed and it’s about really the growth of the relationships, the growth of the business and how we work together. So that’s some color there.

Steven Alexopoulos: Well, this quarter should help those conversations. Final question…

Ken Vecchione: Yeah. We are seeing the pipeline build.

Steven Alexopoulos: Yeah. Even with the increase in more expensive type funding, if I just look at the sequential roll in both interest-bearing deposit costs and total funding, these are decelerating pretty nicely over the past few quarters. Do you guys expect that trend to continue through the back half of this year? Thanks.

Dale Gibbons: So that’s what gives us a little bit of comfort to provide the net interest margin guide going up. And again, as you saw June was 3.50% and we think it rises from there and it also gives us comfort as to why we think net interest income is going to be higher in Q3 than in Q2. Only a modest part of that net interest income rise is coming actually from loan growth, because we are going to grow $500 million to $1 billion, probably, closer to $500 million is a good number to use. That’s going to come in ratably across the quarter. So you won’t see that benefit until Q4. So most of the growth in net interest income for Q3 is really coming from minimizing the rise in cost of funds which we are very excited about it.

Steven Alexopoulos: Got it. Okay. Thanks for taking my questions.

Ken Vecchione: Thanks, Steve.

Operator: Thank you. The next question will come from the line of Chris McGratty with KBW. Your line is now open.

Ken Vecchione: Hey, Chris.

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