Western Alliance Bancorporation Earnings Call NUGGETS: OREO Appraisal Expense, Nevada Credits Outlook
OREO Appraisal Expense
Joseph Morford III – RBC Capital Markets: I just had a few questions on credit. I guess first for the OREO appraisal expense, could you talk about what like gross write-downs were in the quarter and just in general should we (indiscernible) we should start to see less volatility in this line item? And then related to this, when should we start to see some of the other credit-related workout costs start to come down like the legal fees and the other repossessed asset expense?
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Robert G. Sarver – Chairman and CEO: The actual appraisals we got on the OREO was about a breakeven, write-up of little over $1 million that we couldn’t take because, well the property was written down quite a bit from when we made the loan. You can only write the property back up to the level that it was taken in when it came in as REO. So, at this point I think going forward, the REO number should not be material. I think the valuations are flat to maybe even improving a little bit in terms of where we have everything marked. In terms of the credit cost, yeah, we’re still running probably about $1.5 million a quarter in collection costs, that excludes even people and salaries just external collection costs and REO cost, and the number when we look at and try to forecast the number of REO properties that are kind of coming in verses what’s selling, I think you’re going to see that number start to gradually decline over the next three or four quarters those costs. So we should be picking up a little benefit there.
Joseph Morford III – RBC Capital Markets: I guess lastly just follow-up to, despite this steady improvement in credit, the charge-off level itself is still relatively elevated up over 1% of average loans. When do you think we’ll start to see that fall back to more normalized levels?
Robert G. Sarver – Chairman and CEO: I think we have – we’ll first of all say we’re not really getting new problem credit. It just is some of the problems credits we have are still working away through the system and some of them are turning out where we have some losses to recognize. But, I think we’re going to see a step down in terms loan losses and that step down either is going to be next quarter or the fourth quarter.
Nevada Credits Outlook
Casey Haire – Jefferies: Just a couple of follow-ups on credit, can you give us a little bit of color on the Nevada credits that that pushed the classifieds higher, and then also the $92 million that’s still on the watch list, just your outlook there, and how much of that is from Nevada?
Robert G. Sarver – Chairman and CEO: Yeah. The one thing I’ll say about the loans that moved, the bulk of those loans are current, and we just finished with a pretty tough exam process, and we had a handful of loans that moved from watch to sub that I think the collection outcomes is going to be pretty good, and as I said for the most part the payments are current. So, I wouldn’t read too much into that.
Casey Haire – Jefferies: The $92 million on the watch list, how much of that is Nevada? How comfortable are you with that kind of?
Robert G. Sarver – Chairman and CEO: About half of that is Nevada.
Dale M. Gibbons – EVP and CFO: Yes $55 million.
Casey Haire – Jefferies: Then just switching to I guess to capital, loan pipeline sounds pretty good. You guys are growing risk-weighted assets at a decent clip here, but the capital generation is not as fast. Tier 1 common down a little bit. How comfortable are you, how low can you run that ratio, and would you slow down loan growth to prevent of an offensive minded capital raise?
Robert G. Sarver – Chairman and CEO: We don’t plan on an offensive minded capital raise unless it’s in conjunction with a (screaming deal). So hopefully that answers your question. And on the credit stuff, I keep a pretty good handle on that. I was just in Vegas yesterday at the special assets meeting. Credit doesn’t have me real concerned right now. Whether the costs and charge-offs start coming down significantly in a quarter or two quarters or three quarters, its coming. So I guess from that standpoint I’m just not – that’s not a hot button for me right now.
Dale M. Gibbons – EVP and CFO: 75% of our provision expense was incurred to cover the legacy book and 25% kind of going forward, and what we’re seeing is again as we’ve talked about in the past, loans originated during what we call kind of the bubble years is where those losses are still coming from, and our asset quality performance since that time, since that kind of the mid-2000s has I think been very strong, and so as we continue to see that fall off, it was a little bit higher this quarter as you saw in the migration in terms of kind of the classified assets, but again all the $2 million of that was in Nevada. That number is getting smaller. We feel pretty good that kind of going forward that our provision costs can fall off as our NPAs decline and consequently our internal capital generation can support our growing balance sheet.
Casey Haire – Jefferies: And just last one for me on the margin, the NIM down 7 bps. How much more flexibility do you guys have him on the deposit side with loan yields coming down at a pretty decent clip here.
Dale M. Gibbons – EVP and CFO: Well we saw a little bit of improvement this last quarter and frankly I think there was a little bit more room, but that is a declining benefit that we’re going to be able to see. Our cost of funding earning assets was 43 basis points. I think we can continue to see that ebb. But that is a little bit of pressure, but again, how we think we’re mitigating that is really on the net interest income line as opposed to necessarily the margin as we think our margin is going to continue to slope down over here, but not more rapidly than kind of what we’ve seen.