Good day, everyone. Welcome to Western Alliance Bancorporation's first quarter 2023 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 2023 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer, and Dale Gibbons, Chief Financial Officer, and Tim Bruckner, Chief Credit Officer. 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 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. For opening remarks, I'd like to turn the call over to Ken Vecchione. Thank you, Miles. I would like to start by thanking our clients for the trust they place in Western Alliance and to the people of Western Alliance for their extraordinary efforts over the last month. Since the collapse of three competitor banks in mid-March, our team has worked relentlessly to meet our clients' banking needs. Flexibility of our diversified national commercial banking strategy with a broad range of value-added deposit channels and deep commercial customer relationships in a wide variety of sectors and geographies all contributed to our firm's resilience in the face of recent turbulence in the banking industry. We believe our focus on sound financial fundamentals, stable asset quality, and rebuilding capital and liquidity levels over the past several quarters have all helped us navigate through this challenging time. As we move forward with a renewed perspective, we are well-positioned to expand our client relationships and continue to achieve strong return profiles. Balance sheet repositioning, which included surgical sales of assets and loans reclassifications, resulted in after-tax net non-operating charges of $110 million and will have an immediate accretive impact to regulatory capital and allow us to prioritize core client relationships with holistic lending, deposit, and treasury management needs. Company earned through these charges and achieved net income of $142 million and earnings per share of $1.28 for the quarter, increasing tangible book value per share 3.3% to $41.56 from year-end with a CET ratio of 9.4%. Immediately after the exogenous events of mid-March, WAL experienced elevated net deposit outflows that soon returned to normalized levels. Outflows were concentrated in a few key client groups that will inform our funding strategy going forward. Suffering from the taint of SVB's failure, approximately $3.3 billion or 43% of our technology and innovation deposits were withdrawn, less than anticipated, given that 50% also had lending relationships. Our mortgage warehouse business remained fairly stable on a net basis, with only the loss of a single customer that we expect to return to Western Alliance with more stable deposits. Although settlement services experienced some initial volatility from very recently acquired clients, lows normalized quickly. Balances were stable quarter-over-quarter. Our regional divisions with strong local brands and small to mid-size metro business relationships acted as a core source of strength and saw only modest deposit attrition. Non-core regions, which included title companies and other fiduciaries, reacted more reflexively to stock market volatility and withdrew approximately $2.6 billion. These are not deposit channels that we are prioritizing going forward. Since March 20th, our deposit flows stabilized and returned to a healthy growth trajectory with deposits of $2.9 billion- $49.6 billion as of April 14th. Some business lines were never impacted, including HOA, with deposits higher by $900 million since the beginning of the year to April 14th. Our flexible, diversified business model proved its worth in Q1, while monoline banking models dependent on single industries or concentrated customer types failed. 85% of our customers already have more than one product or service with us, and we will continue to prioritize client segments with wholesome banking service needs that include credit and treasury management while de-emphasizing credit-only relationships. Overall, we'll successfully retain deep-rooted relationships and those for which we offer proprietary integrated treasury management technology solutions like HOA, and we'll continue to do more of these. It is also worth mentioning that not a single deposit channel of ours represented greater than 60% of total deposits at the onset of the deposit crisis. We responded to our clients' desire for and the market scrutiny surrounding enhanced deposit protection. Since year-end, we have taken concrete steps to dramatically grow our insured deposits from approximately 45% of total deposits to 73% as of April 14th. This places WAL in the top decile among the 50 largest U.S. banks. As of April 14, uninsured deposit coverage now stands at 158%. This resulted from the shift towards insured deposits to accommodate depositors' desires to have their funds safe and protected. We will continue to provide clients deposit alternatives that accentuate safety in these uneasy times. I think it's important to offer some thoughts on the volatility experience in our industry since mid-March. We'll navigate through these developments through strategies initiated in 2022 and initially described in our Q3 and Q4 earnings calls, such as de-emphasizing loan growth in advance of an economic slowdown, growing deposits and liquidity faster than loan growth, and achieving a greater than 10% CET1 ratio. Informed by lessons learned in the recent stress of the banking system, we have moved up our medium-term CET1 goal to 11%. We are targeting a mid-80s loan-to-deposit ratio. At the onset of this turmoil, we acted decisively to tap various sources to enhance our liquidity position, engaged with stakeholders through measured but impactful financial updates, maintained normal business operations. Looking forward, we will remain focused on building additional liquidity and capital while reaffirming our deposit-led growth strategy. Driving increased diversification and additional deposit streams are also our top strategic goals. To ensure adequate liquidity over the medium term, we will aim to drive our loan-to-deposit ratio to the mid-80s by cultivating deeper client relationships. We look to organically but expeditiously rebuild capital to greater than 10% before the end of the second quarter. Our medium-term CET1 target is 11%. Emulating larger banks that typically have larger capital cushions will be an important step to drive sustained core deposit growth against a regulatory environment that will likely become stricter in response to recent industry turmoil. Higher capital, higher liquidity, and lower dependence on market rate funding should attract more core deposits and hopefully lead to higher investment-grade ratings. Accelerating HQLA growth and securities book is also something that we plan to do. To bolster liquidity and capital, we chose to reposition our balance sheet through very targeted reclassification of certain loans and assets from held for investment to held for sale and specific non-core asset sales. We reclassified approximately $6 billion of HFI loans, recognizing an approximately 2% fair value adjustment of $92.2 million after tax. That includes expected future P&L and capital impacts. After-tax charge will be immediately accretive to regulatory capital as the loans are liquidated and allows us to devote efforts to full client relationships with lending, deposit, and treasury management needs. We have already made significant progress in executing this strategy with actions that add 51 basis points to CET1. Q1, $920 million of loan sales were executed before quarter end, with another $3 billion already under contract but not closed by March 31. MSR sales of $360 million, select security sales of $460 million, and the unwind of high-cost mortgage warehouse equity fund resources CLNs all contributed to help offset the HFI reclassification one-time charge. We are moving expeditiously to execute the remaining $3 billion of HFS loan sales. Loan sales realized smaller losses than we expected. Note the marks that on the remaining HFS loans are incorporated into our Q1 numbers. These actions reaffirmed our plans to surpass 10% CET1 capital by June 30th. Even with the mark-to-market adjustments from balance sheet repositioning, we still advanced our CET1 ratio 6 basis points to 9.38. When considering the contracted loan sales for this month and the unwind of our EFR, CLN, capital call, and subscription lines, we have already locked in CET1 ratio above 9.71% before considering our organic capital generation or completing sales of the remainder of the HFS loans, which should ultimately push CET1 above 10%. Finally, Western Alliance has significantly access to more than $21 billion in contingent sources of liquidity to meet customer and operating needs. Access to on-balancing cash and unused borrowing capacity increases to greater than $26 billion with the near-term completion of HFS asset sales, $3 billion of which are contractually agreed to and will be used to pay down higher-cost BTFP and FHLB short-term borrowings and return to more normal sources of financing. Continue to evaluate additional opportunities to establish secured borrowing facilities from other sources. At this time, I'll let Dale take you through the financial results. Thanks again. Turning to the first quarter results, Western Alliance earned total adjusted net revenue of $712 million, excluding non-operating charges. Net income was $142 million, while adjusted net income was $252 million. Earnings per share was $1.28, with an adjusted EPS of $2.30. Quarterly loans decreased $5.4 billion, as $6 billion was transferred to HFS, matching the deposit decline of $6 billion. Total adversely graded assets increased $35 million, quarterly net loan charge-offs were $6 million for 5 basis points annualized. Operating return on average assets and return on average tangible common equity of 1.43% and 21.9% provide sustainable go-forward earnings. In the quarter, Western Alliance generated pre-provision net revenue of $352 million. Total adjusted net revenue of $712 million was an increase of 28% year-over-year and an increase of $1.9 million fourth quarter. Net interest income decreased during the quarter to $610 million. Average earning assets increased $1.5 billion, while lower yielding cash grew 5% from 2.1% of interest-earning assets, creating a drag on the yield. GAAP non-interest income decreased to $120 million to a - $58 million, while adjusted non-interest income grew $31.7 million from the prior quarter. Mortgage banking revenue increased $26 million quarterly to $73.3 million as AmeriHome continues to see green shoots in its operating environment. Production margins have widened to more historically normalized levels of 26 basis points as the industry capacity has been rationalized. The retreat of a large money center bank from the correspondent lending market has paved the way for higher margins and win rates. Servicing rights assets continue to produce attractive returns given the lower prepayment speeds and strong underlying asset quality and continue to attract interest from investors. Q1 sale of $360 million of MSRs at par provides flexibility and a long life path before we come to the market again. Loans held for investment decreased $5.4 billion- $46.4 billion, and deposits decreased $6 billion, which brought balances to $47.6 billion at quarter end. MSR balances decreased $238 million in the quarter to $910 million. Total borrowings increased $9.6 billion over the prior quarter to $16.7 billion due to an increase in short-term borrowings of $9.8 billion, partially offset by redemptions of credit link notes of $265 million. Finally, tangible book value per share increased to $31 or 3.3% over the prior quarter to $41.56 and up nearly 12% over the prior year. We announced the decomposition of our quarterly go forward and go forward net interest drivers. Our investment securities portfolio grew approximately $600 million to $9.1 billion as we sold $460 million of securities, predominantly credit CLOs. Other investments increased approximately $900 million, which primarily consists of high-quality liquid assets such as Treasury bills as part of our strategy to further enhance our liquidity position. Investment yields increased 24 basis points from the third quarter to 4.69%, with an end of quarter spot rate of 4.60%. Given the uncertain economic environment, we curtailed loan growth early in the first quarter. This slowdown in credit accelerated in March as we right-sized existing loan balances through reclassification to held for sale and targeted loan sales of approximately $7 billion, primarily from limited credit relationship credits or with limited credit spreads. These actions lowered our period-end balance to $46.4 billion. Loan yields continue to benefit from repricing to the higher rate environment and wider overall spreads, with an end of quarter spot rate of 6.45% compared to an average rate of 6.28%. Our residential loan portfolio of $15 billion is match funded with non-interest bearing deposits of $16.5 billion. Turning to a decomposition of our held for investment loan class reclassification, loans transferred to HFS, nearly half were syndicated credits in capital call and subscription lines, areas we had previously mentioned we would be de-emphasizing. The $5.9 billion loan held for sale portfolio had a quarter end spot yield of 7.34%, which are now funded by FHLB borrowings with a current spot cost of 5.05%, resulting in a modest 2.3% margin. Completing the sales transaction lends support and buoyancy to our net interest margin guide. Total cost of deposit spot rates increased 45 basis points to 1.85% at quarter end compared to an average of 1.72%. This was primarily driven by a $1.5 billion increase in CDs that now comprise 14% of deposits, while non-interest bearing DDAs comprise 35% of our total deposit mix, of which 52% have no cash payment to earnings credits. Notably, the spot rate for interest-bearing DDA is lower than the average for the quarter as migration from non-interest bearing checking was accomplished at lower rates than the average interest checking rate. Spot savings and money market rates also were lower as balance attrition tended to be from larger and higher cost accounts. Cost of interest-bearing deposits increased 78 basis points for the quarter to 2.75% compared to the ending spot rate of 2.82%. The $6 billion decline in deposits during the quarter was roughly evenly split between money market accounts and demand deposits. Overall, net interest income decreased $30 million or 4.7% over the prior quarter, nearly half due to two fewer days in the quarter, and the remainder due to balance sheet repositioning actions in light of the deposit loss. Held for sale loans contributed $31 million, which will decline as we liquidate these assets. Net interest margin compression compressed 19 basis points to 3.79% due to increased borrowings and short-term excess cash on the balance sheet we had to ensure liquidity at an incremental drag of 11 basis points. Going forward, we estimate that our balance sheet is fairly interest rate neutral with rate shock sensitivities either up or down, only changing net interest income by less than 1%. Our adjusted efficiency ratio increased to 43% from 39% in the quarter but was flat year-over-year. Higher deposit costs of $5 million related to higher earnings credit rates and normal Q1 seasonality were the primary drivers of the increase from the fourth quarter. Pre-provision net revenue was $352 million during the quarter, a 15% increase from the same period last year, and a decrease of $25 million or 7% from the prior quarter. It resulted in PPNR return on assets of 2% for the quarter, a decrease of 15 basis points from Q4. The aggregate of adversely graded credits increased $35 million this quarter. We see nothing significant in this modest migration to indicate a more widespread deterioration is looming. Total non-performing assets increased $22 million to 17 basis points of total assets. Net loan charge-offs were $6 million or 5 basis points of average loans compared to net loan charge-offs of $1.8 million or 1 basis point in the fourth quarter. Our total loan ACL decreased $7 million from the prior quarter to $350 million as loans were marked down and the ACL released as these credits were transferred to held for sale. Total loan ACL to funded loans increased to 75 basis points compared to 69 in Q4 as some of the loans transferred had low loss rate assumptions, including capital call and subscription lines and mortgage warehouse credits. The reserve associated with commercial real estate was increased as the economic outlook softened. Tangible common equity to total assets of 6.5% and common equity tier one ratio of 9.4% were both bolstered by net income. Like the increase we expect for CET1 in the second quarter, the tangible common equity ratio should rise in tandem. Inclusive of our quarterly cash dividend payment of $0.36 per share, our TBV per share increased to $1.31 in the quarter to $41.56. TBV per share continued its long ascent as the earnings power of the company surpassed charges associated with the bank's balance sheet repositioning. TBV also benefited from a reduced AOCI impact after crimping book value last year as bond prices fell when rates rose. Now returning the call back to Ken. Okay, thanks, Dale. Our guidance for the rest of 2023 continues to be driven by the strategies and priorities laid out in our Q3 and Q4 2022 earnings calls and informed by the recent banking disruptions. In order to best serve our sophisticated commercial clients, we will continue to aim to be more aligned with the country's largest banks by rebuilding our capital levels, enhancing insured deposits and liquidity, lowering our loan to deposit ratio, and deepening our client relationships. We want to be seen as equal to these peer banks from our depositors perspective. Eliminating these differences allows us to compete more on service, performance, and what I call management intimacy, where C-suite relationships can drive deeper banking relationships. Organic earnings, balance sheet repositioning will continue to grow capital as we reposition the company for slower growth ahead of a potential economic slowdown. Let me tell you what this means going forward. Regarding capital, we discussed our imminent lift in CET1 to 9.7%, and that we expect to exceed 10% by the end of Q2 through planned loan HFS sales and organic capital growth. Over the medium term, we will target an 11% CET1 ratio, which will be driven by our continued strong return on average tangible common equity and capital generation. As we complete our planned HFS loan sales, we will pay off short-term borrowings and return to more traditional bank funding. Deposits are expected to grow at approximately $2 billion a quarter and exceed more muted loan growth. This will lower our loan to deposit ratio over time towards a mid-80% target. Net interest margin is expected to slightly compress in 2023 to 3.65%-3.75% given the anticipated flat rate environment, slower loan growth, and increasing price competition for deposits. As our liquidity grows, we will look to accelerate HQLA growth in our securities book to further enhance liquidity flexibility. Our efficiency ratio, excluding the impact of deposit costs, should increase slightly to the mid to high forties given our smaller loan book, partially offset by the inherent operating leverage of our business. Asset quality remains well-positioned and steady as she goes. Depending on future economic environment, net charge-offs could begin to normalize. We expect net charge-offs to range between the first quarter's 5 basis points, maybe up to 15 basis points. Overall, we expect PPNR for the full year of 2023 to be down 5%-10% from 2022 levels due to small interest earning assets and higher borrowing costs. As we execute our balance sheet repositioning efforts and continue to reestablish our core deposit growth trajectory, we see Western Alliance as even a better institution and better, well-positioned for the future. At this time, Dale, Tim, and I are happy to take your questions. Thank you. If you would like to ask a question, please do so now by pressing star followed by one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. The first question today comes from the line of Steven Alexopoulos with JP Morgan. Steven, please go ahead. Hi, everyone. Thanks. I wanted to start with a big picture question first. Just following up on the balance sheet repositioning in the quarter, a fair portion of your growth over the past few years has come from these non. Core segments, right, which you're now exiting. With you shrinking the company down to focus more on core relationships, you know, one, when do you get there, right? When is the bank primarily done in terms of shrinking down to get to these more fuller relationships? Then even more important, what does Western Alliance look like after that? Do you focus on ROE, profitability? Are you still a growth bank? You know, what is Western Alliance 2.0? Okay, a couple things there. Let me unpack them all. One, the EFR loans that we have exited and some syndication lines that we exited, again, those were all non-core, and they reflected our excess liquidity that we had in the company. Let's go back to the days of 2020 when we had $6 billion-$7 billion of cash sitting at the Fed earning 10 basis points. It was a good alternative to increase net interest income, and it was an excellent asset quality. That's what we did there. We're not as we continue to reemerge from this. First things first, I want to say our focus near term is on moving that deposit ratio down and also moving the capital levels up. We're going to do that with a heavy focus and concentration on deposit growth, and again, a more muted growth in loans about $500+ million. As we emerge from Q4 and position ourselves for 2024, we should be just about ready, as we enter into 2024 to hit our CET1 ratios and hit our liquidity to loan to deposit ratios. We've got plenty of opportunity here to grow. I think you'll see us go to some of our core strengths that have always been with us, that have always helped us grow in the past. C&I loans out of warehouse lending is still active. Part of this is going to be economically driven as well. Note financing is going to be there. We've been strong in CRE, especially in lot banking. We've always had good performance out of our hotel book. I want to say very clearly, it's all dependent upon where the economy is at the end of 2023 moving into 2024. In the big picture, you know, we will go back to some of the things that we've done well. Also during the course of the remainder of this year, we have a number of different business lines that we are working on to developing. Some of those are on the deposit side, and some of them are on the loan side. As we've done every year and a half, we've rolled out new business lines and opportunities to make sure we propel growth. I will say, Steven, in the past, we've been if you go back and look from 2022 backwards to 2014, you've seen we've grown loans and deposits on average both about 23%-26% per year. We never got paid for that. I think what we're going to do is we're going to be a little more cautious on that loan growth. but again, accelerating on the deposit side. One, we never have to experience a disruption with some information that was put in the marketplace, which I think was inappropriate, but we can get to that point at another time. I think, you know, we're going to be a very steady grower. I think we should be able to grow above peer trend like we've always have. I just don't think we're going to grow at the very top end of the peer trend. I don't think that's necessary for us. I might add that we're really taking a surgical strike here on these types of things. Capital call, for example. I mean, we got into that, as Ken said, when we had a lot of liquidity. Those are thinly priced deals, and we did syndications where we received no deposits. We're not exiting that space entirely. We're still going to do bilateral deals where it's a complete relationship. That's a way that we can kind of continue to be here, but really step away from the stuff that's really the marginal cost and marginal benefit from that is fairly muted. Got it. That's helpful. Thank you. Maybe just one follow-up. If I look at the deposit decline in the quarter, right, the $3.3 billion you're calling out through March in the tech and innovation segment. You know, we heard from, you know, many other regional banks at this point that they were beneficiaries of the flight out of Silicon Valley Bank. You know, what did you hear from your customers through this period which drove them to take deposits out of your bank? I would have thought you could have been a beneficiary also. Were they just watching your stock price and panicking? You know, what was it? Did they close accounts or did they just bring balances down to the insured level? Thanks. One, they didn't close accounts. They moved deposits out. Let's kind of break down the deposit outflow. $3 billion of the deposit outflow, 50% came out of our tech innovation and life science area. Bridge Bank, which is our technology and innovation arm of the company, was always set up as a challenger to SVB. During the panic of Monday morning the thirteenth, I think people looked and said, "What most looks like SVB? Well, here is Western Alliance." What was interesting, only 14% of our deposits and about 11% of our total loans was in the tech and innovation sector. Still, there was a lot of pressure put on our stock price. What you saw was a modern-day bank run, right? You saw heavy social media and commentary on social media, which got shareholders nervous, which drove the stock price down. We can talk about this a little later too. Which then forced some of the larger corporates that we had to through treasury management systems to move their mouse, click, point, click, and send the funds out. Then we received a phone call that said, "Gee, I'm sorry I'm moving my money, but I see the stock price going down and better to be safe than sorry." 68% of our $ that went out, went out to larger banks, the money center banks. Everyone all said the same thing. "When the crisis is over, we're gonna come back." We'll wait and see if that happens, and we'll wait and see if they come back dollar for dollar. I doubt it, but they should come back because we haven't lost touch with these with these folks. All right? The second part of your question as it relates to tech and innovation. We were still fighting the fight to hold on to deposits during the 13th and the 14th of March. That has begun to change a little bit, and we are more optimistic that deposit growth will begin to happen in our tech and innovation. That kind of informs us to say why we feel comfortable with growing $2 billion per quarter. Anything to add? Well, you know, in terms of kind of the stock situation. Again, appreciate it. Yeah. Got it. You know, really, I think the question starts with how did we get caught up in this? We think the original tie is because of Bridge and the relationship that we have as the prime competitor to Silicon Valley Bank. For us, it was only, you know, 16% of our total versus for Silicon Valley Bank, it's basically their entire business. What happened is that issue when the run started on SVB, I think they looked around, "Well, who else is in the space?" That perception quickly metastasized into a short narrative. If you look at our options activity, we a lot of days we wouldn't trade options at all. On that Friday, March 10th, we traded about 1,000x our normal volume. The most common issue was somebody bought $30 puts. Mind you, this is when our stock was trading at $50, so they're $20 out of the money, and they expired next week, the March 17th, in a week. To me, that's somebody that had an agenda. On Monday morning, before the market opens at 5:00 A.M. New York time, they're in the pre-market session selling. Nobody trades pre-market. So it was pretty easy to move the stock price around and push it down, down. We opened at $12 on Monday morning. Well, when that's what the print was. When, when depositors saw that, they go, "Oh my gosh, you know, you're down 75% over the weekend." Hence that triggered an $8 billion withdrawal on that Monday. We traded down to into the sevens and then nearly quadrupled and closed at $26 per share. That's not typical bank trading in terms of what goes on. I think the stock price recovery calmed down depositors, we had a sharp drop, about 85% in terms of withdrawals on Tuesday. You know, since then it's been basically flat. After that entire week, you know, we've been on this kind of uptrend again. Got it. I appreciate all the color. The next question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead. Thank you. I guess maybe forward-looking, thinking about just your deposit growth outlook. Given sort of the new perspective, talk to us around where you expect deposit growth to come from in terms of business segments. How are you thinking about just the incremental of the deposit cost that's coming into the bank? Yeah, if we can start there. Okay. We'll split this up. I'll take the first half. I'll give Dale the second half. In terms of deposit growth, we see deposit growth coming from our HOA segment, which was unaffected. One of the lessons learned here, by the way, when you take our technology, use APIs to connect to the management company's technology, and then they connect to the HOA's back office or technology, those accounts and dollars can't move. That's a nine-month to a year conversion. One of the things that has informed us and what we're looking at is where else can we find channels to do just that and be very deeply rooted into the back offices of our clients. HOA is one place where we expect growth. Our new business lines. I'll take you back to 2018 and early 2019. Building settlement services, building escrow services. We just launched corporate trust. All those should contribute during the course of the year. We also have the natural bill, you know, warehouse lending group. The regions have a very strong brand recognition. Actually stronger than I would have thought. During the outflow, we only saw 3%-5% in that range for the regional bank branch, Torrey Pines, Bank of Nevada, Alliance Bank of Arizona, First Independent Bank, and Bridge Bank on the non-tech side. We're going to make also a deeper commitment and a concerted effort to bring in more of that metro banking there, because that for us is like our consumer deposits, okay? We're not a consumer shop, but those deposits were very sticky. To combine your question with Steve's question from before. One of the things that we've learned. This is really interesting. If someone called us up and said during the crisis of Monday and Tuesday, and really it was just Monday and Tuesday. Mostly Monday, to be honest with you. All right? Said, "What's going on?" If we had that conversation, that was a conversation that 9 out of 10 times we can hold on to the client. If you are a larger corporate and you move your money really quick, it's hard to rationalize a person out of a position that they did not rationalize themselves into. If it was moved, if you made a decision out of fear, it's hard to get to that person. Well, our metro banking clients and depositors, that's a conversation that they know Dale Gibbons who calls on them every, you know, every couple of weeks. They trusted that. All right. That's a way to grow. Additionally, I think one of the things we also learned is more information in terms of times of trouble really is very helpful. One, the 8Ks that we put out were certainly important for the market. Really, it was done so that our business development officers could talk very specifically to our clients and give them very specific data. The more specific the data, the more concrete and finite, the better they felt. If you said, "Gee, we've been here for 40 years, and, you know, we believe in customer service," and all that, great. They needed to see things like what is your insured to uninsured? How much coverage do you have? When you had that data put into the marketplace, and then the BDOs could then take it and talk to clients, that was very helpful. I went a little further than just your question there. I'll let Dale take on the cost side here on this one. Yeah, Ebrahim. Regarding the cost, as we talked, you know, last year, you know, we were not playing the beta game. We were trying to say, you know, we're doing better than others perhaps because our beta is lower in terms of how fast we're raising our funding costs. You know, we were there where the market was, where the price was all along, and we know what that is. Today, that's kind of where we are as well. I don't think many banks can really pull in much in deposits as something meaningfully different than effective Fed funds. So that's what we've dialed in in terms of what we can do. We do have these, you know, a variety of initiatives as well as, you know, our current array of deposit, you know, deposit gathering, divisions whereby we can, we can continue to execute on that. I think that's demonstrated by what we've done for the past, the past three weeks. Maybe, Dale, I guess a different way when we look at the NIM outlook 3.65%-3.75%, how do you think about if the Fed is done with the rate hike, say next quarter and rates remain flat from there? Where do you expect the margin to exit 2023? Yeah. I mean, it's really kind of where that is, where that guide is. You know, as I mentioned, the volatility we have around our margin or net interest income in different rate environments is almost nil, less than 1%, whether up or down, shock or ramp. That's intact. I mean, in terms of, you know, where we go from a, you know, this 379 to this guide of just a little bit lower than that, I think it's important to remember that 379 has a couple of things in it that are depressing that number. One is it has a very large cash position that we had for three weeks of March, basically, whereby, you know, we took down large dollars from, you know, from the FHLB or the FRB, and we had it in cash. I mean, our balance sheet was, you know, close to $90 billion on some of those days, and we ended the quarter at $71 billion. That was at an upside-down spread. That cost our margin by 11 basis points. In addition, we talk about the HFS loans that are coming out of here that have a spread of, you know, of 2.3%. You take that out of our margin at 4.79%, our margin rises about 20 basis points. The 4.79% is already depressed. Holding that level or declining slightly, I think that maybe helps with the modeling. Understood. I'll take you. Thank you. Our next question comes from Casey Haire with Jefferies. Please go ahead. Yeah, thanks. Good morning, guys. Wanted to touch on the borrowing paydown. By my math, if you guys continue to grow loans deposits at $500 million, $2 billion respectively, you get to that mid-80s by the end by summer 2024. Can we expect the borrowings to be the use of the excess liquidity as you get there ratably, and to what level? I mean, I think your borrowings are going to come down, obviously, you know, to a level. I don't have a dollar figure for you, Casey, but yeah, we'll take them down. I mean, we operated last year, you know, with the borrowing position, you know, in kind of the mid-single digits. You know, could be lower than that. You know, we still expect to be using the FHLB, and they also are a good, a good accordion basically for, you know, for day-to-day liquidity is, you know, as people withdraw or deposits come in and things like this. That's a pretty stable, you know, stable source to do something like that. What we don't want to do is we don't want to rely on the FHLB for just, you know, standard operating liquidity. I think your numbers are about right. You know, we could, we could maybe get to that loan-to-deposit ratio a little bit sooner. That'll be informed by our deposit activity, right? If we do a better job, it'll come down quicker. I think your numbers, your direction's about right. Okay, great. On the efficiency ratio guide, I got that. I just, obviously, there's a lot going on in the near term or in the last month. Just wondering if you could give an expense run rate for the second quarter. I think what I'd rather say is, you know, the guide is in the mid to high 40s. The expense run rate for us or the efficiency ratio, I've said this on many calls, is really the exhaust fumes that comes out from the business. We know where we want to get to in terms of EPS. You can kind of then back into, well, you know, certain things we won't sacrifice. We're not going to sacrifice the build that we've been doing in risk management programs and technology, and technology itself. By the by, you know, it was because we put so much money into our technology, our payment systems all work really well. We had no fails. We're very pleased with that. Also the reason why we're able to have some confidence around going the go forward into deposit growth is from new businesses that we have cultivated since 2018 and 2019, specifically on the deposit side. Those things are going to continue. If we don't put money into the company to grow, you're not going to have sustainable deposits and sustainable loan growth. I didn't give you a very specific answer to Q two. I'm just telling you know, mid to high forties is what we're going to do inside of the overall outlook that I presented. Gotcha. This last one from me. If I take the spot rates that you guys provide in the slide deck and then give you credit for all of the HFS sales, and layer in that high 40s efficiency ratio, I get about a 14% ROA and an 18% tangible ROE. Does that sound about right? 14% ROA you said for the year, you mean? More or less. Yeah. Well, like a run rate of $331 with all the spot rates that you guys give and then, you know, giving credit to the balance sheet restructuring, the $6 billion fully offloaded. Yeah. Yeah. You know, maybe you're a little bit off, and I think it's because you're jumping to the efficiency ratio instantly. You said high. I don't know what high means. Yeah, exactly. You know, I mean. Yeah. You know, remember, we're still going to have, you know, we, you know, a lot of these, the $3 billion that's already contracted, that's coming in, you know, this, you know, this quarter in terms of disposition, some more will probably as well. That's going to linger a little bit. That is a revenue source that really doesn't have an expense tie with it. You may be a little bit, you may be jumping up too quickly. Okay. Understood. Thank you. The next question comes from Brad Milsaps with Piper Sandler. Please go ahead, Brad. Hey, thanks for taking my questions. Go ahead. Dale, just wanted to, hey, Ken. Just wanted to follow up on the spot rate discussion. I was encouraged to see those lower on the deposit rates, you know, at the end of the quarter. Do you think that's sort of a one-time phenomenon? Would you expect those to, you know, sort of accelerate again? I think you mentioned, you know, you thought your deposit growth would mostly come from higher cost sources. Just wanted to get a sense of sort of, you know, squaring those spot rates, you know, versus kind of what's going on in the environment with your deposit growth goals. I mean, yeah. I mean, I do think that we have, you know, 2 sources of deposit growth here. One of them is, you know, at a more marginal cost, and that's going to be kind of new money, I believe. The other is recovery of funds from clients that, you know, pulled funds out, you know, in the kind of the last 3 weeks of March. I think that we're going to have success on both of those, on both of those categories. In terms of where the lower cost money went or came from, it really was in, you know, predominantly in the tech space. You know, we've talked to, you know, these enterprises and a lot of them say, you know, that they're going to come back. They just want to see a little bit of, you know, calmness and stability kind of reenter the space. I think we're on track for that. I think that's, you know, a portion of what you're going to see. Okay. Do you have a sense for, you know, maybe ECR deposit growth? I mean, those were basically flat linked quarter. Is that, you know, what percentage would that be of, kind of how you're thinking about, you know, growth throughout the year? I think ECR deposit growth is going to climb as well. You know, a lot of that comes from, you know, different elements of our HOA division as well as our mortgage warehouse operation and escrow funds related to, you know, principal and interest and title, and taxes and insurance. Those have ECRs with them, and I think we're optimistic about how that can go this year too. Okay. Just to follow up on the loan spot rates that you disclosed on slide 14. You know, you give the average of 6.28%, but I assume that includes the loans that you moved to held for sale at the end of the quarter. With the spot of 6.45%, is that I assume that would exclude those loans held for sale, so it would be up fairly materially over the average if I were able to back out Those loans that you moved, is that the right way to think about it? It is the right way to think about it. Yeah, we've kind of, you know, I'll say reverse engineered it on page 18 where we're, you know, or page 15, page 18 where we took the spot yields for the entire quarter and what that was in that spread. Hence, you know, coming up with $31 million is the revenue piece associated with the HFS disposition. Got it. Finally for me, you know, the bucket that you term as two C, I guess, the $3 billion of non-contracted, you know, planned sales. Is there anything that in your mind that would hold that up or, you know, I mean, I know you guys have been extremely busy. Why that isn't under contract yet? Just, you know, appetite for further unwinding of any additional credit lien notes that you might have out there? I think it's important to say that we've got 50% of that already cemented, and we're just waiting to close towards the end of April. The other $3 billion we're in active conversations with, and so we don't see any reason why we're not going to get it done by the end of Q2. I mean, could something drag into a little bit into Q3? Maybe. Right now we're encouraged with the conversations we're having with the parties across the table from us. Okay. Great. Anything else on, you know, CLN unwinding any or kind of done in that regard? Well, there will be some more CLNs that unwind as part of the $3 billion that we're looking to sell. That's all factored into our net CET1 guide that we have. Of course, you lose capital efficiency when you unwind them, but you're getting rid of the assets on the other side. Net net, these transactions are all capital accretive to us. Yeah. The capital call and subscription CLN, which is the one we're talking about, is already contracted. It's being unwind daily. You know, they're taking loans out of that every day. It's just whittling down. I think it's going to be over by the end of this month. That'll be gone. In terms of the other CLNs we still have three that are all residential. We don't have plans to unwind or dismantle those. Okay, great. Thank you, guys. Our next question comes from Timur Braziler with Wells Fargo. Please go ahead, Tamer. Hi. Good morning. Looking at the HQLA build in the quarter, can you tell us where we are in that process? Maybe provide like HQLA to total assets. As you continue to build that out, is that additive to the current securities balances, or is there going to be some additional repositioning that kind of keeps the securities book flat while HQLA grows? Yeah. You know, I mean, we're going to be taking that up. I don't have a limit for you. You know, I mean, there's demands associated with HQLA as you surpass $100 billion. We're going to be on a trajectory to kind of, you know, have that rise. You know over time, I think it could displace something else in the, in the, you know, the AFS book or whatever that we have presently. You know, I wouldn't look for that to be, you know, that's not going to be some substantial kind of, you know, step variable that you've got to leg into. It's going to be, it's going to be something that as our loan-to-deposit ratio descends, we're going to be climbing that ratio. It's not going to jump, you know, in any substantial way that's going to, I don't know, disturb margin or things like this. Yeah. I would say that's going to be informed by our insured to uninsured level. That's number one. Again, back to lessons learned. If some large corporates bring back their money, then we need to assign a higher level of volatility to those dollars and then hold some of those dollars in HQLA. That also will be part of the composition mix, the fabric of, of the new deposits coming in that we're going to have to determine. Okay. Then construction loans continue to grow at a nice clip. Curious if you can provide what the current unfunded balances are in that book and what the funding schedule looks like there for the rest of the year? Yeah, sure. Tim Bruckner here. Hi. Okay. Hey, Tim. Right now the funding schedule for the rest of the year rolls out at about $400 million a quarter. Within our funded loan balances and for projections, that's accounted for in the volume. That represents the trajectory of the unfunded for this year. Okay, great. One last one for me, maybe going back to Steve's question, on a bigger picture front here, where do you ultimately see Western Alliance falling into the broader technology innovation sector once that recovers? Assuming there's gonna be quite a lot of dislocation from Silicon Valley clients and do you ultimately see Western Alliance playing a larger role in that sector? I think it's gonna be a sector that's gonna be positioned against the other growth areas that we have. It's not gonna overwhelm the deposit composition or the loan composition. That's something we've seen. We're not gonna be the new tech bank. I do feel very strongly that the others that are picking up the tech people out of SVB, and there have been a number of banks, I think people are gonna migrate to us and stay with us because one, consistent performance is very important here. Not only of consistency of the people that you deal with, but consistency of the credit granting process and the credit review. You know, we've seen over our time here, banks that have jumped into tech and innovation, and they think it's C&I lending. Tim Bruckner can pick up on this in a second if he'd likes. It is not. We've seen people jump in and say, "Hey, I'm here to provide you credit." All of a sudden they see, wait a minute, you're lending against, you know, possible negative cash flows or clearly negative cash flows. You're lending against VCs commitments to put in money over time. It's a different C&I loan. Tim, you wanna pick up on that? Yeah, I, thanks, Ken. It is. As our plan and strategy discussed today indicates, we recognize and adapt to a changing environment. In the tech space, we've got a change in competitive landscape with respect to the lenders involved, and we've got a changing landscape with respect to the VC. We've got that in evaluation. We think that we are well suited in the space, that we have a deep understanding of the space. But we're moving forward fully advised by what we've seen and are seeing and the changes that have presented themselves. I don't expect that this will hold a significantly larger position on our balance sheet as we move forward. Okay. Thank you for that color. Our next question comes from Ben Gerlinger with Hovde Group. Please go ahead, Ben. Hey, good afternoon. Yeah. I was curious if you guys, I mean, just kind of philosophically speaking, Western Alliance has always been entrepreneurial in both the left and the right side of the balance sheet. It seems like on the left side, you guys are retrenching, you're sticking with your core clients. It's partially given the volatility and then also just economically speaking, I'm sure you're tapping the brakes a little bit. As we shift beyond a recession or go through one and get through the other side, has the DNA changed on how Western Alliance operates? Could we see you guys reenter the markets that you've left? Just kind of thinking longer term growth and where that could come from? Well, first let me say culturally, we pride ourselves on being entrepreneurial. Many people think it's in on the business development side, whether we bring in deposits or loan growth. I would say, yeah, you're correct if you think about that. I think where we excel in our entrepreneurial behavior is to in times of crisis and in times of working out transactions with clients. You wanna see our entrepreneurial behavior, go back and look at COVID and look at our hotel book, which probably back then was $3 billion. We had projections of anywhere from us losing $100 million-$1 billion in that book, right? We moved quickly. We put a program in place that I think only 1 other bank used, which was, in order to get a deferral, you had to put money up. Every month of deferral you wanted, you actually had to put up a month of cash. While that did not seem to sit immediately well with our sponsors, once they understood that what we were trying to do and get them to commit to their projects so we could then commit to any new deals that they wanted to do, then we had almost 100% uptake in that program. What's the benefit of that program? Not everyone was projecting large losses, not 1 late payment. Let me be clear. Not 1 late payment. What you saw here, we did have a rush for liquidity to run out of this bank on Monday. I will tell you by Tuesday, late afternoon, we already had the basis of the plan that we're talking to you about here today in terms of moving to sell down non-core assets. We also believe moving quickly, and by the way, this was very connected to what we told everyone in Q3 and Q4 coming out of kind of moving out of our EFR loans, capital call and subscription lines, and also getting out of some corporate finance credits, which we thought may have some potential credit weakness down the road. We moved so quickly that that allowed us to lock up deals for the low marks that you see that we noted here on the early part of our slide deck. That's the entrepreneurial behavior that we have here. So, yeah, you could say we're retrenching. Right now, we're using all that entrepreneurial behavior to build capital to make sure we have a good deposit franchise, a better deposit franchise. You saw that by the way, from moving our insured deposit level from 45%- 73% inside of 5 weeks. You know, we moved. When we put our mind to do something, it gets done very quickly. So, yeah, to one of the other former questions from one of the other analysts. Yeah, your Q1-- I'm sorry, Q2, Q3, you're going to see sort of this flattish type of balance sheet. As we begin to emerge out of Q4, assuming that we're on track with all the capital and all the liquidity that we want to do, and that's perhaps job one. I just want to make sure everyone understands that. you know, our DNA will be in full view, again as we build into 2024. The only thing I'll say is we don't need to grow as fast. All right. Again, we weren't rewarded for growing as fast. The other thing I'll say, it's all going to be informed again by where the economy stands and what's happening in the economic environment and macro factors. Okay. Yeah, no, that's a great color. I appreciate it. Confidence is the best capital in this environment. The only other question I had is where your share price is today. Seeing WAL under tangible book is like seeing a snowman in Phoenix. I'm curious your appetite of share purchases. I know you're trying to build capital, so that would fly in the face of it, but is there anything on that end? Yeah, that's not in the conversation at the moment. Will not be in the conversation until we cross over 11%. The decision then will be, you know, it'll be dependent upon the economy and other economic events. We'll reassess capital management alternatives at that time. That's not something that's boy, it hasn't even been contemplated here or even discussed. Gotcha. Appreciate the color. Thanks, guys. Thank you. The next question comes from Brandon King with Truist. Please go ahead, Brandon. Hey. I wanted to touch on credit, and I appreciate the guidance from that. I wanted to get a better sense of how you think this credit normalization process will play out for Western Alliance, particularly for this year. Sure. Hi, Tim Bruckner. First, I'd say that as we look at our portfolio right now, it's performing and doing exactly what we want it to do in this economy. We're at our foundation, a relationship bank. At our foundation, we're a direct lender, and we don't enter into transactions where we're complicated with mezzanine and sub debt and so forth. We've got direct, frank, straightforward and ongoing dialogue with each of our customers in that sense. When we talk about how we're doing, how we relate, that's informed by this active dialogue. As you can expect right now in segments like office, we're out in front of the customer with dialogue in the present environment, discussing. I expect that you'll see stability with any economic downturn. I expect that there's also a chance for some migration to criticized or special mention. We don't see significant migration to loss based on the direct relationship and the active dialogue that we're having. That holds true across all segments that we lend in. Okay. My follow-up on that was as far as the up-ticket classified assets, is that kind of the general story there as well? Yeah, exactly. Okay. All right. Just one more follow-up with the PPNR guidance. Within that, what is the outlook for AmeriHome going forward for the rest of the year? Actually, you know, quietly, AmeriHome is having a good several weeks here. What I would tell you is that overall, production margins have improved to more historic normalized levels. That happened towards the end of Q1, and it continues into the current quarter. You know, I would kind of say that the mortgage income that we earned in Q1 probably is about right as we move forward. You know, what's helped us here is the retreat of a large money center bank. I don't know why we just don't say Wells, but the retreat of Wells on the correspondent lending market combined with industry capacity rationalization has paved the path towards higher margins and higher win-win rates. We knew the market would have to rightsize itself. It's taken a little bit longer than we'd like, but it seems like it's getting there now. That's the color around AmeriHome at the moment. Got you. First quarter is a good basic raw flow for the rest of the year? Yeah, more or less. Okay. Thanks. Take more questions. The next question comes from Gary Tenner with D.A. Davidson. Please go ahead, Gary. Thanks. Good morning. Wanted to ask another question just with regard to kind of the use of net inflows or deposits over the, over the next few quarters. I think the question was already asked in terms of the securities portfolio, but, you know, finished the quarter at three and a half billion of cash and equivalents. That's about 5% of your, of your total balance sheet. You know, it's about double where you've been historically in most quarters at least. Is that sort of a level that you'd kind of target over time, or do you think that it trends back towards, you know, that call out 2.5%, 3% level over time? I think that can hold over time. You know, we're holding a bit more cash than we usually do presently. You know, I think that can, you know, I think that can probably trend lower. But the overall liquidity position again, as Ken indicated, I mean, you know, as, you know, assuming we get, you know, continued deposit recovery here, our coverage of uninsured remains robust. I think that it will inform, you know, what that liquidity profile has to look like in terms of, you know, what funds return and what volatility might we associate with them. Okay, thanks. In terms of the ECR or the deposit costs in the quarter, since ECR deposits were essentially flat in the quarter, I would have assumed that expense item would have moved up a little bit more given kind of the, you know, full quarter, fourth quarter hikes and then, and the hikes we had in the first quarter. I was just wondering if there were any changes structurally to the ECR rates or anything along those lines. Yeah. It's interesting and maybe, you know, somewhat counterintuitive. What's transpired is that, you know, a lot of the funds we lost, they were larger, and so consequently they were higher. We lost ECR deposits that were among the highest that we paid. The actual rate of increase went down because the mean spread relative to say, you know, under Fed funds fell. Potentially, as you talk about maybe recovering some of those ECR deposits that have flowed out, that number could have a little bit of volatility to it separate from the rate environment for some period of time? It is possible. Okay. Thank you. The next question comes from Chris McGratty with KBW. Chris, please go ahead. Oh, great. Thanks. Dale, just following up on that one. Obviously there's a correlation between your NIBs and the ECRs. Just given the change in the deposit mix over the last year, I guess how do you see that 35% non-interest-bearing mix progressing? You know, I, you know, in this elevated rate environment, I think it's fairly difficult to get, say a new DDA that has no ECR and non-interest bearing. I think that, you know, I mean, at the same time, the dollars that are still there, you know, have been through a little bit of volatility, and they're still here. My impression is that as we grow, we'll grow outside of that. That will continue to whittle down proportionately. I don't really see dollar exit, you know, from that category. We possibly could get some recovery. As I mentioned, you know, most of the dollars that went out were in the tech space. You know, and a number of those clients, you know, have said, you know, "We'll be back when, you know, when the storm settles a little bit. Just so I make sure that's helpful. Just make sure I understand. The sixteen and a half of NIB you have, what you're saying is the dollars shouldn't be declined at nearly the same rate as what they have, but the mix will have a bias because of growth elsewhere. Is that the right interpretation? Well, the proportionate mix will have a bias downward, but the dollars will be fairly steady. That's what I meant to say. Yeah. That's exactly. Okay. Got it. Maybe if I could, you talk about the mid-80s and the 11% as kind of a medium-term target. You give your efficiency for this year. As you kind of exit the year, I think somebody asked a little bit different, the kind of the efficiency ratio of the company when we're all done with the adjustments, how do we think about it relative to that mid to upper 40, if you're thinking out, you know, one to two years? That's a harder projection to make. You know, I would state that, you know, and as Ken was indicating, AmeriHome seems to be, you know, getting real legs at the moment. We'll have to see how that plays out. You know, if the rate environment, I personally think we're going to be in a declining rate environment in 2024, going into the general election. I think that's probably bullish for, for mortgages. With that could be a greater proportion, you know, of our revenue than what it's been for the past few quarters. Their efficiency ratio is in like the low fifties. That would be something that would keep it up, although the revenue piece would be meaningful. Okay. That's helpful. Thank you. Our next question comes from Andrew Terrell with Stephens. Please go ahead, Andrew. Hey, good morning. Question on the CET1 pickup from the dispositions? The $3 billion of contracted sales in the second quarter gets you a 50 basis points or so CET1 pickup or 33 basis points net of the CLN. I guess if there's $3 billion of loans remaining beyond that aren't contracted for sale just yet, but no further CLN repositioning. I guess, should we think about the CET1 pickup from that last $3 billion pool as closer to kind of a 50 basis point lift on the CET1? A good question. You know, what we have here is, you know, we believe we're gonna exceed 10%. So, you know, is all of that $3 billion gonna be disposed of in the second quarter? I can't tell you that. If we've got $3 billion contracts, then that'll go. You know, so, you know, is there some tail there associated with it? When it's all gone there, you know, there's more pickup there than just to get you over 10. Okay. Got it. Apologies if you disclosed this, but how much did the MSR sale impact servicing revenues this quarter and any expectation for go forward MSR sales? Yeah. MSRs, the MSR was sold I think on the last day of the quarter, so it didn't really impact any of our servicing income for Q1. It was a significant size, $360 million. We did that in the face of a large money center bank that's disposing of their MSRs, and we did it right on top of par, right on top of our marks. We're very pleased that we're able to get a sizable deal off. That gives us a lot of optionality to when we want to come back to the market, if we want to come back to the market, and the size of the deals. We may do smaller deals if we think the pricing could be better. There's no rush to go ahead and do them. Again, I would also say if the mortgage market, to Dale's viewpoint of the world, if the mortgage market begins to pick up at a faster pace, then maybe I have to retreat from some of my statements and we have to do some sales. Right now, we don't see that we're gonna have to do any sales, and we get all the optionality going one way as to when we want to launch a deal. Yeah. We manufacture MSRs, and so you can look at the ending balance. If you start with the beginning balance, take out 360, obviously that ending balance is higher than that. You know, it's gonna be a fairly stable balance on average but it's gonna move up and down as they manufacture them every day and then as we dispose of them periodically. I will say we're getting a lot of reverse inquiries, and people want to own them. We're a manufacturer. Okay. Very good. Thanks for taking the questions. Okay. Sure thing. The next question comes from Brody Preston with UBS. Please go ahead, Brody. Hey, everyone. Thanks for the time. I have a few questions. I just wanted to ask maybe on the asset sensitivity, just given that the balance sheet sensitivity is down when I layer in the mortgage and then the deposit costs that flow through NIE. Dale, is it fair to say that the earnings stream is liability sensitive in the current rate environment? Oh, you know, we really think it's pretty close to 0 here. You know, you do have a pickup, you know, potentially on the deposit cost like you're alluding to. Again, you know, we're showing that it's a little bit asset sensitive, presently. But like I said, less than 1%. We put it all together and with or without deposit costs as margin or non-interest expense, it's pretty neutral. Got it. Within the PPNR guidance, could you share what your interest rate outlook is for Fed funds? Yeah. We've got one increase, coming up in, at this next meeting, it's 25. Then we have, two, you know, late in the year, I think it's November and December. Cuts. Cuts. Two cuts. Yeah. We may not believe that, but that's what we have in our model. Yeah. Basically tracks the futures we're running off of. Okay. Okay, great. I think the interest-bearing deposit rate was 2.82% at spot versus the 2.75% at quarter end. You know, the average, you know, was up, I think it was like 75-80 basis points quarter-over-quarter. Just trying to help think about, you know, the step-up in deposit costs going forward. Do you think that the spot rate is indicative of where you would expect the 2Q deposit rate, interest-bearing deposit costs to come in? Do you think it'll, you know, kind of be another 70-80 basis point increase? Oh, no. Oh, no. You know, I mean, your spot rate is as of March 31st, what's going to change it from there? You know, we have 1 rate increase, you know, in early May, you know, 20%-25%, and then what's the proportion that's going to follow through? It could be up a little bit more than that, but we wouldn't expect it to be much more. We're not seeing kind of, you know, intra account, you know, volatility. We saw some of that earlier, but a lot of these are indexed at various levels to Fed Funds. I think it's going to be more I mean, the big increase you had from Q4 to Q1 was, you had, you know, significant raises. They were still doing 75 back then in Q4 that didn't layer in. That, you know, kind of that for the full year on an average basis. Going from 179 to 275, you know, was really because the 179 rate was held back, you know, from the average rate and how quickly they were still moving Fed funds, you know, back in the late 2022. Got it. Just on the inter-quarter deposit swings. You know, the I think it was the March ninth update you gave where you were up $8 billion for the quarter. Could you tell us what were the categories that drove that upswing? You know, which ones kind of flowed out and how much of that, you know, you could expect to maybe get back and if that's encompassed within your guidance for deposit growth going forward? Sure. Yeah, we were up $8 billion as just under $8 billion, as you mentioned. You know, we would typically have seen some of, you know, some of those funds to go down a little bit. We were targeting that we're actually going to be up $4 billion for the quarter, instead of $7.8 billion, because we thought we'd lose a little bit in mortgage warehouse deposits in particular, that would flow out. We also had some other dollars of things that were going to be flowing out. Well, that happened and in fact, we, you know, we had some of, you know, some of those dollars a little bit more than we expected. Then, we've mentioned settlement services, you know, which is another division. I mean, they were off to a very strong Q1 in particular. Those accounts had just come in. I mean, we opened accounts that had been here for, you know, single digit weeks. You know, with all the volatility that took place, and I think it kind of spooked them a little bit when they saw our share price on Monday the 13th. They took it out. Now for those, we do have commitments for, you know, for many of them that, they, you know, they were kind of surprised by this and they think they're coming back. We're pretty optimistic about what can reverse there. You know, it was a little bit like LIFO, you know, last in, first out. I mean, a brand new account wasn't as sticky as something that had been here way more than a year. If they hadn't experienced our service levels and our performance, it was easy for them to move. Those folks that have been with us that understood service levels and performance and how important it is, those funds didn't move. We've been on the road last week meeting with just a number of settlement service clients and future clients. There is a big pipeline that's building out there. We hope to gain our fair share of that, of those settlements. Got it. If I could sneak one last one a little bit ticky-tack in, just on the mortgage servicing rights that you sold. Could you maybe ring-fence what the unpaid principal balance was? I mean, if I just look at the valuation, it looks like it was like maybe $22-ish billion. You know, I guess maybe if I could back into it, but just help us ring-fence that. Then I just wanted to clarify that there was no gain on that flowed through the servicing income line item this quarter. No, there was no gain on that went through. There, Yeah, you know, I don't have that number in front of me, but I think your math is about right based upon basis points per dollar. Okay, great. Thank you for all the time this afternoon for taking my questions, guys. I appreciate it. The next question comes from Tim Coffey with Janney. Please go ahead, Tim. Just before you begin. Great. Thanks. Morning, Morning, gentlemen. The answer was it's about $20 billion. Yeah, it was good to hear. I was gonna just. I'm sorry. What was that? Give you color. Yeah. Say that again. It was about $20 billion of unpaid balances that were on the last question. Okay? Sorry. Great. Sorry. No, no. No, thanks. That's actually something I needed. Just given the source of stress in the deposits in March, have you considered, you know, strengthening or limiting the concentration limits to deposits from the VC industry or companies, funded by VCs? Well, you know, I mean, our first tie with these deposits is what we have, when we have a credit relationship with them. You know, and so, you know, and there was, you know, several things that went on there in terms of tweets that people are familiar with, you know, that I think accelerated it. You know, what we've taken note of is kind of volatility around some of this stuff, and we'll reflect that, you know, in, you know, in how we consider what we need in HQLA and liquidity kind of going forward. You know, but hey, we, you know, we're committed to the tech space and, you know, and we think that there's, you know, value to be created for us and for them in that space. Maybe the duration risk is shorter than others might have thought. Lessons learned there, about a third to 40% of our total deposits were operating accounts tied to loan commitments where we had to be the primary banking relationship. Those deposits didn't flow out. That's number one. Number two, the other thing, I like what we did, and this is, goes back to the original Bridge team when they started the company to be a challenger brand to SVB, was to focus on the portfolio companies and not the venture capital funds. Those dollars are less likely to flow in and out on the operating accounts than they are with the venture capital funds. That was something that was started that we continued. That was, I think, a good decision. I think for us going forward, we now need to tie more of the deposit commitment to the loan documents such that if they do move money, the penalty pricing is severe. Today it's a nuisance, but we're gonna tie it to making it more severe in order to keep those deposits with us. By the by, if you want a relationship and you want the experience that we bring, you're gonna need to bring deposits to the table. That's what we say, by the way, to all clients that we sit across the table from them, we say, "We're happy to make your business very, very successful. That's what we wanna do. You've got to do the same for us." If we're giving you credit, we need that deposit relationship, and we need those sticky deposits. Great. Okay. Thanks. That's helpful. In terms of the deposit outlook, of the $2 billion per quarter, how much of that is predicated on deposits that flowed out of the bank in the last month or so coming back? It's a mix, to be honest with you. I don't know that I can give you a very specific number, how much is returning versus how much is new. I will tell you that this whole disruption gave us an opportunity to spend more time with our clients. If there's any silver lining, that's good. To certain clients during the heart of the disruption, we were talking to them every day if they wanted to. It also gave them much more access to the senior management teams, and it allows us now to call on them. I can't give you a number, but, you know, we feel more comfortable with the overall $2 billion coming back per quarter, $2 billion growth per quarter. Okay. Okay. Since you're getting back to just old-fashioned relationship-based banking here, is there a minimum interest spread that you're looking at or targeting? You know, the answer is yes by different loan categories, okay? As Dale said, you know, we're basically pricing at the margin today. Effective Fed funds gets offset by SOFR plus, and that spread is what drives us. Overall, the spread is very close to what you see as our net interest margin spread. Different if you're doing a construction loan versus a C&I loan versus a hotel loan versus a warehouse lending. The blend of that, those spreads are pretty much seen in our net interest margin rate. Okay. Great. Those are my questions. Appreciate the time. Thank you. Our next question comes from David Smith with Autonomous Research. Please go ahead, David. Thank you. I know we're getting late, so just a few quick ones on capital. Do you have plans for, you know, additional credit link note issuance from here, you know, given the way that you've reevaluated the existing, CLN base? No. No. Is it something you've ruled out or just. It's something we don't need, going forward at this point. It's expensive. Very expensive. Got it. We don't need that, we don't need that incremental cost. Okay. Can you talk about what changed that led to that reevaluation? 'Cause I know it's something that, you know, the bank had done a decent amount of in recent quarters. Well, you know, I mean, one of the benefits of them was that you got a reduction in risk-weighted assets and, you know, it held capital. We're moving away from that to a higher capital level, so that, you know, whatever the next storm is, you know, with that and with our insured deposit levels, you know, in the top decile relative to the 50 largest banks, you know, we're not gonna be, you know, in a situation that, you know, for a short game. I don't think the CLNs were productive, you know, in avoiding that scenario. Okay. With the new 11% target, is that something that you view as a long-term target for Western Alliance, or, you know, do you think it'll be able to come back down towards, say, 10% after everything settles down at some point? I think, as I said, we wanna be competitive with our with the money center banks. No one's ever gonna confuse JP Morgan and Western Alliance as one and the same company. At least not in the next quarter, let me just say that. It says here, "Pause for laughter." I think, you know, one of the things we learned when we're out on the road talking to non-sophisticated banking people, they understand their business, they're very smart, but they don't spend a lot of time. For us to come in to say our capital, like there are a number of studies that were done that we used that put into the model, CET1 less HTM marks, less AFS marks, right? When we went in and we showed people and talked to people and said that we were one of the best in terms of this adjusted CET1, they didn't have to understand what the word adjusted meant. They didn't have to understand CET1. When they heard our percentage and compared it to a lot of the other large money center banks, and we were higher than that, boom, they understood that. As I said to folks, if my mom was alive, you know, which she was, she was over 90, you know, I made it as simple as I could if she was alive to tell her. You know, money center bank A was at 6%, we're at 8%. We're better. Money center B had an insured deposit level of this, we're higher. When people just got that very basic math. The meetings went very, very well, and it was well understood, and they were able to check the box and say, "Let's move on. Got it. Thank you. Our final question today comes from Jon Arfstrom with RBC. Please go ahead, John. Okay, thanks. This is gonna be quick. The provision, it looks like it was driven by a charge-off, and it feels like you're comfortable with credit and growth is slowing intentionally, but anything that prevents that provision from coming way back down next quarter? Well, yeah. I mean, it was driven by a charge-off. We disclosed in there. We had a debt obligation of actually Signature Bank. We've written that off. Okay. I refer you back a little to Bruckner's comment. Just in terms of the provision. Yeah. You don't feel like you need to be building reserves from here, I guess is my... Not in any way other than the consistency that we've been. Yep. Okay. That's helpful. Back to the return question. When you guys flush out your model, are you a mid-teen return on tangible company? Is that the goal? Are you a high teen return on tangible company? How do you think about that in your mind? There, in terms of return on average tangible common equity, I think, you know. Return on tangible. Yep. Yeah. Is that right? Yeah. Yeah. Yeah. Yeah. I think, you know, we're gonna be low 20s or greater as we move forward through the end of the year and into 2024. Remember too, that with a smaller balance sheet and small and less spread income, the fee income plays a more dominant role, and that's coming from AmeriHome. Right now we're seeing, we got fingers crossed when we say this, we're seeing the trends move in our favor, and I think that's gonna give us a little extra push in the return on average tangible common equity ratio. Okay, good. That's a good message with your valuation. I guess last question, maybe it probably would've been a good first question. Do you feel like you're dealing with any abnormal stresses right now at your company, or is this kind of over in terms of managing the stressful situations from mid-March? All right. I want to be careful that, I'm not like George Bush that hangs a sign on the aircraft carrier that says, "Mission accomplished." All right. I will say that we are on the aircraft The infidels aren't there. Baghdad Bob. Yeah. The waters are calmer. Okay? I think what's important is what we return to a lot more calm as it relates to depositors, starting the Wednesday, that would be the 15th. Cash inflows and outflows are about the same. As you saw, starting on the 20th or thereabout, we started to grow, and we've grown in. There's calm with the depositors. For us, there is still a heightened level of sensitivity to make sure that everything we just said on this call is executed upon. Right? That to me is incredibly important. One, of course, we like to be known as a company that's transparent, but also, when we tell you we're gonna do something, we do it. We also like to be known as trying to be a little bit more innovative to looking at problems and solving them and then solving them right away. If you're asking me about anxiety and what keeps me up at night is making sure that we work hard to execute on everything that we've said here. If you're asking me for what the other one or two events that could be out there that maybe could impact the industry a little bit, I think, you know, First Republic hasn't been solved yet. I think we've now shown that we are completely different and separated from that company. There was a point where whatever happened to them affected us, but I think we've now separated ourselves from there. The other thing we're just waiting for is, you saw that Fitch gave us, kept us investment grade, but lower us a notch or two. We still have one other rating agency that is probably gonna do something or other, since they've had us on watch, and we're waiting for that. We saw no outflow with any impact to Fitch, zero. No incoming calls, zero. We just want that one last item to be passed. Then it's all about execution or is still right now, execution on the plan that we've presented here and also working on growth. What I think you saw here during the course of this crisis is management's dexterity. I've said that to our board several times. We can balance a few things, keep a few balls in the air and do them well. I like to think we did okay through this whole crisis here. That, that's what's, that's what's front and center in our minds these days, Jon. I appreciate the big question at the end. Yep. Yep. Okay. Thanks for everything. Thank you. Those are all the questions we have, so I'll turn the call back to Ken Vecchione for closing remarks. Listen, this is probably our longest call ever. Not surprising. We hope we answered all your questions, we look forward to the next earnings call. We'll talk some more. Thank you all for your time today. Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines.