Good day, everyone. Welcome to Western Alliance Bancorporation's First Quarter 2024 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. Please go ahead.

Thank you, and welcome to Western Alliance Bank's first quarter 2024 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer; Dale Gibbons, Chief Financial Officer; and Tim Bruckner, our Chief Banking Officer for Regional Banking will join for Q&A. 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 a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please refer to the company's SEC filings, including the Form 8-K filed yesterday, which are available on the company's website. Now for opening remarks, I'd like to turn the call over to Ken Vecchione.

Good morning, everyone. I'll make some brief comments about our first quarter earnings before turning the call over to Dale; he will review the financial results in more detail. I'll come back and discuss the '24 outlook, and then Tim Bruckner, our Chief Banking Officer, will join us for Q&A. For the last three quarters, the mission of the company has been to reposition the balance sheet and optimize our funding structure to establish an unassailable foundation of higher capital, liquidity and insured and collateralized deposits and further distance us from last year's challenges. Together, these factors provide a hallmark to better shield the bank from future industry and market volatility, as well as support more predictable, superior long-term returns. This quarter, we generated exceptional deposit growth of $6.9 billion that accelerated our repositioning plan at a faster pace than anticipated. We reached our CET1 capital target of 11%, lowered our HFI loan-to-deposit ratio by 10 points to 81%, and increased our already leading insured deposit ratio to 81%. Our liquidity profile was also enhanced by a $6.5 billion increase in unencumbered securities and cash from year-end, which also will allow us to pay down borrowings by $1 billion. In summary, our repositioning goals have largely been accomplished. I'm pleased that during the quarter of outsized liquidity growth, Western Alliance earned $1.72 per share, excluding the increased special assessment from the FDIC, and tangible book value continued to climb despite rate headwinds. Asset quality remained steady with special mention loans and classified assets declining $139 million in aggregate from Q4. Net charge-offs remained low at only 8 basis points of average loans. Our excellent liquidity positions us to drive stronger loan growth starting in Q2. Loan growth should track proportionately with deposits to maintain our improved loan-to-deposit ratio and allow us to exit 2024 in line with market expectations. Dale will now take you through the financial results.

Thanks, Ken. During the first quarter, Western Alliance generated reported pre-provision net revenue of $247 million, net income of $177 million and earnings per share of $1.60. Excluding the $18 million FDIC special assessment charge, PPNR was $265 million, net income of $191 million and earnings per share was $1.72. Net interest income increased $7 million from Q4 to $599 million from higher average earning asset balances as well as lower average borrowings. Non-interest income of $130 million increased $39 million quarter-over-quarter from consistent performance in mortgage banking, including an improved MSR valuation from a higher balance of servicing rights owned. We look at mortgage revenue holistically because our conservative valuation process when servicing rights are created often results in understated MSR values, which dampened gain on sale revenue. GAAP non-interest expense was $482 million or $464 million excluding the FDIC special assessment. Deposit costs of $137 million or $6 million above Q4 levels essentially offset the net interest income growth during the quarter, driven by strong deposit growth from both existing and new clients in our HOA and Juris Banking businesses, along with the continued rebound in mortgage warehouse from seasonal lows. Economic outlook remains stable. Lastly, our effective tax rate fell to 23.5% from a temporarily elevated rate last quarter. Loans held for investment grew $403 million to $50.7 billion, while deposits increased $6.9 billion to $62.2 billion at quarter end. As a result, our held-for-investment loan-to-deposit ratio fell to 81% from 91% last quarter. Our deposit growth accelerated our liquidity building efforts. Securities and cash increased by $0.4 billion quarter-over-quarter and allowed for a further $1 billion reduction in borrowings. Finally, tangible book value per share expanded $0.58 for the quarter to $47.30 from retained earnings, which more than offset a modest rate-driven increase in our negative AOCI position. Held-for-investment loan growth of $403 million occurred predominantly in commercial and industrial categories. Commercial and industrial growth of $646 million demonstrated noteworthy progress in our regional commercial banking strategy as well as success in both mortgage warehouse and tech and innovation. C&I growth also mitigated a purposeful reduction in commercial real estate. Overall, in a more stable rate environment, we are experiencing minimal mix shift of existing client funds into higher-cost deposits.

Okay. Thanks, Dale. We have transformed the bank several times in the company's history. Starting as a Las Vegas Bank in 1994 and expanding into Arizona and California in 2003. In 2010, after the GFC, during which we were landlocked in some of the most stressed markets nationally, we began our diversification strategy into national business lines, with HOA and mortgage warehouse that created diversity, growth and sustainable earnings without undue risk. In 2015 and 2016, we added Bridge Bank to enter into the tech and innovation economy and that purchased the hotel franchise finance business, which provides expertise and deep industry knowledge, enabling us to become a leader in that vertical. In 2018 and '19, the bank entered, developed and launched three specialty deposit verticals: settlement services, business escrow services, and corporate trust that expanded the business diversification strategy and produced access to new deposit sources. In 2023, we launched a digital consumer deposit strategy to gain access to a granular deposit base. Now in 2024, the company has worked hard to reposition and fortify its balance sheet and liquidity. The management team continues to optimize funding, significantly improved capital and maintain higher levels of insured and collateralized deposits to form a solid, sturdy balance sheet, which can be used as the foundation to reignite earnings, grow the balance sheet and generate organic capital while ensuring asset quality remains safe and protected. So what does WAL look like in the future? Well, using and reinforcing the disciplines I just mentioned, Western Alliance has and will continue to have risk management architecture that will enhance the company's guardrails as we continue to develop new organic avenues for growth to deliver consistent upper teens return on tangible common equity and sustainable earnings growth that maintains historical capital accumulation at multiples higher than other banks. We are excited that the repositioning strategy has been largely completed. We have fortified our balance sheet, which will allow the company to generate earnings velocity through the back half of 2024 and into 2025. To that end, from our first quarter results, we updated our 2024 guidance as follows: continued thoughtful balance sheet growth at a slightly higher level building on the momentum of Q1 and more focused on deploying incremental liquidity into sound, safe loans. Our current loan-to-deposit ratio provides flexibility to selectively make more loans as opportunities arise. For the full year, loans are expected to grow $4 billion up from $2 billion, given the new client wins in current pipelines. We also expect deposits to end the year up $11 billion, which is $3 billion above our previous consensus. Turning to capital, we expect our CET1 ratio to remain steady at or near 11%, capturing the forecasted increase in loan volume. Regarding net interest income, we reaffirm our 5% to 10% growth expectation from Q4 2023's annualized jumping off point and are tracking to the upper end of this range. Our rate outlook includes two 25 basis point cuts in the back half of the year and a higher for longer rate environment. We would expect NIM to incrementally benefit by mid-single digit basis points from loans repricing in an elevated rate environment. Our expectation is that net interest margin will trough in Q2, but the full effect of our liquidity build should help net interest income to continue to move higher from Q1 levels, with NIM expected to ascend due to repricing of existing loans and new loan originations.

We will now begin the question-and-answer session. The first question comes from Jared Shaw with Barclays. Jared, please go ahead.

Hey. Good morning, guys.

Good morning.

Thanks. Regarding the guidance, the increase in expenses mainly stems from the ECR. I’m curious as to why this wouldn't also contribute to a higher expectation for net interest income. You're indicating that you're aiming for the higher end of that range, but considering the significant deposit growth and the potential for loan growth, what are we sacrificing in terms of spread during the early stages related to the ECR?

No. It will help drive NII. The issue is that, that growth came in somewhat ratably over the first quarter. We haven't ramped up to the degree we can the origination of good quality credit to disperse those additional funds. That's going to take some time, particularly in the second quarter. So it will catch up, but the second quarter is a little bit of a pivot point whereby we're going to look for higher asset growth than we had in Q1, which could hold the second quarter back a bit.

The prior guide included four rate cuts, which have now been revised to two cuts. To offset that, we've increased our loan growth from $500 million a quarter to $1 billion a quarter, and that's what helps our net interest income continue to grow quarter-to-quarter throughout the rest of the year.

Okay. All right. Thanks for that. I guess maybe shifting a little to the capital and now that you're at the target floor of 11%. How should we be thinking about the desire to grow that from here? And can you give an update on how the credit-linked notes impact that going forward and sort of the timing on that?

Yeah. So we see capital remaining modestly at or above 11% for the remainder of the year. Increasing loan growth above trend will absorb the excess capital formation for the rest of the year. I will note that since we started our repositioning strategy on capital from Q3 2023, we've increased the CET1 ratio by 230 basis points without raising capital. We do have a couple of CLNs embedded into these numbers, and the runoff of the CLN is very modest year-over-year.

Yeah. As you recall, we collapsed two of our CLNs last year in mortgage warehouse and capital calls. We've got a few residentials that don’t have substitution credits in them. So they are just running off. We're gaining about 40 basis points to 50 basis points in CET1 from that.

Thank you. The next question comes from the line of Casey Haire with Jefferies. Casey, please go ahead.

Great. Thanks. Good morning, guys. Question on the loan and deposit growth. Just wondering how you guys got to those numbers. I mean you guys have demonstrated that you're capable of putting up stronger growth than that, and just wondering, if it's conservative or if you're just looking to manage the growth and have an eye on, obviously, the $100 billion line, so just some color there?

Yeah. So Casey, while we continue to remain cautious about future economic activity, and we have deemphasized certain asset classes, we do believe that we can actively grow loans $1 billion per quarter. We feel rather comfortable with that based on the pipeline that we review on a weekly basis. So we are deemphasizing certain areas, as you would expect, commercial real estate office, residential, general construction; a little cautious on multifamily. However, we also see better opportunities in warehouse lending and the regional C&I business is beginning to take hold. Resource lending and maybe lot banking also give us the best risk-reward dynamics on the loan side. So if we can do better than $1 billion, we will, as long as it's safe, sound, and thoughtful growth and the economic environment hasn't changed. But right now, we feel comfortable with $1 billion. As it relates to the deposit guide, we certainly had a strong quarter at $6.9 billion. A lot of that came from our service levels, and we had a number of market share wins as well as our new deposit verticals beginning to take hold. More specifically, our regions contributed approximately $1 billion HOA and digital consumer each over $800 million; Juris Banking over $400 million; and Corporate Trust added $160 million. Overall, we've grown total deposits by $14.3 billion, if you take out $1 billion for broker deposits, we grew $13 billion in a year. And that gives us the confidence level to say that $2 billion seems very reasonable and practical.

Yeah. Okay. And then, just switching to the expense front. Just to clarify, does the expense guide include the $17 million FDIC assessment for this year? And then, if I layer in your guide, it looks like it's delivering an efficiency ratio in the low 60s. That's obviously with the deposit costs, but it's running a little bit higher than what you've been guiding to in the past. I think it's been around 50%. So just wondering what's the new expectation on that front.

Yeah. I would look for something in kind of the mid-50s. We were 54% for the first quarter. There were some seasonality in costs, which we talked about a little bit primarily related to compensation and FICA. We do believe that we can get that number back to the beginning with a four again. We do think that there's a significant pent-up demand with AmeriHome and that there are a lot of people that do want to move out of their houses. As the FOMC commentary after the CPI in January that it really resonated. So with that, on the cost side, we think that number can trail down over time. But for now, we maintain it in the mid-50s.

Casey, on the FDIC special assessment, that's not in our numbers and our guide and our adjusted efficiency is expected to be in the low 50s as we work towards that, but that's what I would say.

Thank you. The next question comes from the line of Steven Alexopoulos with JPMorgan. Steven, please go ahead.

Hi, everybody. I want to start...

Steven, can you get a little closer to the phone? You'll probably get muted.

Yeah. Could you hear me now?

Much better. Thank you.

Okay. So let me start on the deposit side. Ken, I thought you said you thought you could grow deposits $2 billion per quarter. Is that right? Because that would take you above the $11 billion for the year?

Well, on average, $2 billion a quarter, but Q4 is a little softer, as you've seen from last quarter where the warehouse lending deposits roll out. So we think that's more of a private estimate. Basically, we're just trying to tell you think about the end number of $11 billion is where we think we'll end up.

Got it. Okay. It's funny, Ken. I've asked you, I don't know, maybe two or three calls in a row. Once you get to your targets, how should we think about Western Alliance and growth desire appetite, where you could be long term? So if we think about if we average this out, you’ll probably see $2 billion to $3 billion per quarter in loans and deposits run rate, so call it $5 billion per year for each. Is that how we should think about this now that you're at target, maybe that $5 billion-ish growth per year balance sheet?

So we've got a number of levers to pull, and we have a great deal of optionality. The first thing I'd say is, the way we're thinking about it is, from here, whatever liquidity we bring in, whatever deposit growth we bring in, we would like to put out at about an 80% loan-to-deposit ratio. So we could stay between that 80% to 85% level. It will take a little time to build up that loan growth engine. You've got to get the deals done, documented, and have clients put their cash in before we fund, and that will just build up as we go throughout 2024 and into 2025. And then if we do better than that, meaning higher deposits or loans staying in the $1 billion-plus range, then we’ll use some of that incremental liquidity, and we’ll use it to pay down borrowings, and that will also mute the growth of the balance sheet. Dale, do you want to add anything to that?

Yeah. I mean to say it another way, I expect that we can exceed those numbers a bit because we've been paying down borrowings coincident with growing deposits faster than your $5 billion a year number.

Thank you. The next question comes from the line of Chris McGratty with KBW. Chris, please go ahead.

All right. Good morning. Ken, Dale, it feels like the $100 billion threshold has obviously got a ton of attention. It feels like you've more or less addressed every piece of it. Obviously, there's ongoing regulation, but liquidity expenses, capital is that a message you're trying to send with the actions over the last few quarters?

Yeah. We are taking actions today and preparing to cross over $100 billion in a few years. The improvements we've made in our risk management architecture, both on capital analysis, liquidity analysis and planning indicated to us that it was better to build that liquidity reservoir early on, and we wanted to accomplish that. The other thing was let's get capital out of the way. We think 11% is the right number going forward, and we've done all that. Behind the scenes as well, there’s much more risk management build that has to occur, which has been embedded into the company over the last couple of years. So where we are today, we'll say we're about 75% of the way to being ready for $100 billion. $100 billion is just a number for us. We're not looking to get there sooner. It all depends on, again, the economy and the opportunities in front of us. But what we don’t want to happen is to be stopped when we hit that level. We want to grow in an unencumbered way. In the meantime, the risk architecture that we’ve been putting into the company is paying dividends, and that's how we think and manage the company. So we're happy that we've been able to achieve that.

Okay. Great. Thank you.

Thank you. The next question comes from the line of Bernard Von Gizycki with Deutsche Bank. Your line is now open.

Hi, good morning. So you guys had a nice quarter with fees, but you didn't change the full-year non-interest income guide outlook. You noted that mortgage will be dependent on rates, but you were encouraged by the resilient results. How should we think about maybe the seasonality after Q1 for the different fee lines for the rest of the year? Additionally, equity investments have picked up the past two quarters. Wondering if you could provide any color there and how you think it should trend for the rest of the year?

So there are a couple of questions inside of that, and I'll take a shot at it and Dale will fill in if I miss anything. A good portion of the fee income comes from mortgage. I would say that mortgage hangs around the hoop for the next couple of quarters, similar to Q1. And, of course, Q4 for mortgage is always linear because of seasonal reasons. The gains you mentioned on the warrants are consistent with the prior quarter. They consist of valuing over 500 positions every quarter. As the tech business grows, we expect there to be more positioned to be valued. Currently, we don't see a retracement in value at this time, and we think the way we're valuing it based on where the tech industry is represents the lower point of the cycle.

Just a couple of things. So other seasonality implications. So HOA, their best quarter is Q1, and that helped contribute to our nearly $7 billion increase as well as the recovery in kind of mortgage warehouse deposits. Future quarters are likely to be lower than what we put out in the first quarter. In terms of our guidance, we are tracking towards the upper end of our guide and our non-interest income.

Okay. Got it. And Dale, I think you noted earlier that you don't expect much deposit mix shift from here. Obviously, the quarter was great with the amount of deposits you brought in, but the mix shift was favorable, mostly in non-interest-bearing. What are your thoughts on the additional $4 billion?

Well, if I put on my optimistic hat, we're really doing creative things in the regions, which would be a primary source of where we might get non-interest-bearing deposits. I would hope that we could show growth there. We saw growth in the first quarter, and we're looking for that to continue. As you mentioned, the trends in higher-cost CDs will likely continue to taper off as we progress through 2024. The preponderance of growth will come in money market accounts.

Thank you. The next question comes from the line of Ben Gerlinger with Citi. Your line is now open.

Hey. Good morning, guys. Sorry about the background noise, I had to step out. I just had a question in terms of the ECR. I know you guys lowered the cut expectations to two in the latter half of this year. But just kind of thinking philosophically, if we have two more in early next year, so a total of four just kind of pushed it out six months, do you think next year's expenses could actually be flat, if not down?

Yeah. I think that could certainly be the case. That would also probably help with revenue significantly on AmeriHome as we discussed as well.

Another way to look at it is any future rate cuts into 2025 will help fund any inflation we see in the base. And I think that's what you're suggesting.

Just one more point, getting to Ken's comment earlier about optionality, one thing this pool of liquidity gives us is the ability to remove some of our higher-cost ECRs now, which we are undertaking to mitigate those costs proactively. You saw that a little bit in Q4 compared to Q3 where the average ECR actually declined slightly. We'd like to see more of that, of course.

Got you. That's great. And it's nice to see WAL get back to the kind of powerhouse that used to be in terms of growth potential. Kind of with that though, have you guys thought about any sort of potential M&A? Not necessarily over 100, but just bolt-on technology or any kind of FinTechs, just any sort of capital deployment outside of the share repurchase?

So it's still a little premature for us to think about M&A. Given the prospects that we see in front of us, we'd like to take any excess capital we have and put it into organic growth; we think that would serve us best.

Thank you. The next question comes from the line of Matthew Clark with Piper Sandler. Matthew, please go ahead.

Hey, thanks. Good morning, everyone. On your interest-bearing deposit costs, I think you're up 11 bps this quarter. I think the prior quarter up 7 bps. Can you give us a spot rate on interest-bearing deposits and what's your outlook there? Is it fair to assume that that rate of change will start to slow here and maybe stabilize the next quarter or two?

Yeah. We're looking at really kind of stability across the board, both on asset repricing and liabilities here. There hasn't been since it's obviously been since last September kind of the last kind of rate changes we were talking about in July. It's really kind of tapered off and the volatility is very stable. As I mentioned earlier, I think you see that net interest income going up for approximately the same amount as earnings credit costs rose. There are no great disparities between spot rates and average rates presently.

What I'd add is that while deposit costs went up, we got rid of $1 billion in borrowings, and our overall cost of funds stays flat quarter-to-quarter. So when you think about what happened for the quarter relative to net interest margin, our loan yields went up 12 basis points. Our deposit costs went up 11. We paid down debt. The bottom line here is the margin dropped a little bit because of the excess liquidity we brought in that we're keeping on the balance sheet in cash and in investment securities.

Yeah. Got it. Okay. And then just last one for me. The uptick in classified assets and non-performers. Can you just speak to what drove those increases and what the plan for resolution is?

Yeah. Sure. Tim Bruckner, I'll take that. The majority is related to secured investor real estate loans. This results from how we manage our portfolio. So we've taken every opportunity to tell our constituents, we press hard for re-margining and have since early in the rate increase cycle, that drives resolution. Classified loans will move up as we reach the endpoint of the negotiations that don't result in effective re-margin. We then take those loans and we ledger the balance appropriately based on the value of the asset. I think it's important to note that two-thirds of our NPLs are current in terms of payments being made. We're not waiting for delinquency to take our action here.

All the ones we moved in this quarter were paying.

Thank you. The next question comes from the line of Timur Braziler with Wells Fargo. Your line is now open.

Hi. Thanks. Maybe just following up on that last line of questioning. Could you talk us through the interplay between non-performing loan migration and the allowance? I guess I was a little surprised to see NPLs move higher while overall allowance level is pretty much flat quarter-over-quarter?

Sure. Tim, again. The majority of the charge that we took this quarter was associated with adjusting the balances of those loans as they migrate, so we have plenty of coverage based on the current appraised value of the asset. We move fairly aggressively into non-performing. We adjust our balance as opposed to placing reserves.

Our charge-off rate for the quarter annualized was 8 basis points, which is only about a fifth or a fourth of what the industry is. On a reserve level at 74 basis points, we walk that up to the 130 level considering the things we do that others don't, like a higher level of residential real estate as well as CLNs we talk about. We think that's a strong level at 74 basis points; if you take 8 basis points into 74, you’ve got nine years of loss coverage.

When we look at this category, it's performing as expected and moving to resolution as expected.

Thank you. The next question comes from the line of David Smith with Autonomous Research. Your line is now open.

Could you just confirm what you think your true asset sensitivity is today? The 10-K said that a 100 basis point higher shock would boost NII by 3%. And I thought I heard you saying earlier that the NII guide is towards the high end, but the better loan growth is being offset by there being two fewer cuts in the model. So if you could expand on that?

NII is going to increase in a higher rate environment. As you saw, even in a stable environment, we had a bit of an upward slope in yields, net interest income was up $7 million. What's changed though is that we're looking more at what we call earnings at risk, so it considers NII, considers the ECR and also considers AmeriHome. We would prefer a lower rate environment rather than higher because of the additional leverage in AmeriHome. However, NII solely would still increase in a rising rate environment.

It will build quarter-over-quarter with a slight improvement in Q2 as we deploy the $7 billion in deposits that we got in Q1 and looking at an additional $4 million for the remainder of the year into higher-yielding assets.

Thank you. The next question comes from the line of Brandon King with Truist Securities. Brandon, please go ahead.

Hey. I understand NIM is close to trough in the second quarter just given the HOA build at the end of the first quarter. But could you quantify how much NIM compression you're expecting for the second quarter?

We dipped down five in Q1 from Q4. I think we can dip down another 10 million on higher volumes.

Okay. And then the expectation is that as you... throughout the second half of the year, your rates stay stable from here; that mid-single-digit expansion quarter-over-quarter is correct, right?

Yeah. We look for it to increase because the marginal spread between deposits and loans means we’re lending out at 80% of the increase in deposits, and that's going to be accretive to the margin overall.

Thank you. The next question comes from the line of Gary Tenner with D.A. Davidson. Your line is now open.

Thanks. Good morning. I had another follow-up on the credit side of things. If I look at the total classified increase of a little over $100 million in the quarter, the investor CRE side, including lower hotel and an increase in office was basically flat. I just wonder if you could comment about within the C&I book, what you're experiencing there; were any particular business lines that were weaker and got more movement this quarter?

Our portfolio remains stable. We remain vigilant in this elevated interest rate environment, but we're really seeing stable performance across all segments. Any movements we see are idiosyncratic and related to specific businesses, not a trend in the portfolio.

Thank you. The next question comes from the line of Jon Arfstrom with RBC. Jon, please go ahead.

Thanks. Good morning. A couple of quick ones here. Dale, you used the term on the mortgage-related deposits that you reacquired $3.5 billion. What do you mean by that, and are you signaling that the deposits might flatten out or maybe decline a bit in Q2, just so we understand that?

The mortgage warehouse deposits mainly originate from two sources: principal and interest. These sources operate on a monthly cycle, as we receive fixed funds from mortgage payments and then remit them to the GSEs about three weeks later. This creates an intra-month cycle. We refer to the funds as reacquired when they are depleted due to payments made to taxing agencies, after which they start to accumulate again quickly. Additionally, we had other clients increasing their deposits, which contributed positively.

What we announced in Q4 came back in Q1 a little stronger than we thought because we had some market share wins at the end of last year that began to fund up in Q1, and that's what Dale means.

Yeah. Okay. Thanks on that. It's just bigger than I thought, and that helps me understand that. Ken, you mentioned very early in your prepared comments on the upper teen return on tangible as your goal. How do you view the sustainability of that? I mean if you can do that, the stock goes up, but is that the key metric you look at and what do you think about the sustainability of that longer term?

We wouldn't have put it in there if we didn't think we had a high confidence level of achieving it. It will build up through 2024. Everything we've talked about on previous earnings calls is about the earnings velocity entering '24 into '25. That return could spike in the event that the Fed does take more actions and reduces rates. You could see a greater share of fee income coming from AmeriHome, but right now, we maintain that at a steady state of where it is today. Rates come down, you can see a lot of gearing up and reducing costs and generating higher return on equity for the entire company.

Thank you. The final question comes from the line of Erik Zwick with Hovde Group. Your line is now open.

A quick follow-up question, maybe kind of a multipart question regarding your loans that are secured by real estate collateral. First, I'm just curious how often are the individual property valuations refreshed and what percentage of your portfolio has received updated valuations in the past six months. The reason I'm asking is that CRE transaction volume has been somewhat muted in recent quarters, and that can obscure or slow market recognition of changes in values; how comfortable are you that the valuations you're currently using and reserving against are reflective of current market valuations?

We're a bridge and construction lender in commercial real estate. We value against appraisal and performance on an ongoing basis. All of our documentation includes terms for reappraisal and re-margin. We're tracking trends in submarket occupancy so we can understand their translation to value in situations with limited sale activity.

Thank you for your question.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.