Western Alliance Bancorporation (WAL) Earnings Call Transcript & Summary

So as [ Gerard ] mentioned, next up is Western Alliance Bank, headquartered in Phoenix. Assets' about $69 billion today. Most people refer to it as WAL, W-A-L, the ticker symbol. The company operates a branch-lite national commercial bank with several unique businesses that will be discussed, I'm assuming today. As I looked at the presentation, what stood out to me is 17% compound annual growth rate in tangible book value over the last 5 years. So with us today, Ken Vecchione, who's the President and CEO of Western Alliance, previously served as the company's President and Chief Operating Officer from 2010 to 2013. He's been a member of the Board since 2007. Prior to Western Alliance, he's held positions at Apollo group, MBNA and others. And then to my left is Dale Gibbons, Vice Chairman of Western Alliance, have been the CFO since May of 2003. He's been in the commercial banking business for over 30 years, including the CFO of Zions Bank from '96 to 2001. So the format is Ken will conduct the presentation and then we'll open it up to Q&A.

Thank you, and good morning, everyone -- I'm sorry, good afternoon, everyone. Since joining the company in 2010 and then rejoining in 2017, I, along with the mostly new management team have re-envisioned and reinvigorated and reinvested in the bank to focus solely on commercial banking with a laser focus on sustainable, profitable growth through thoughtful, safe and solid loan originations. We look to be the nation's leading commercial credit bank focusing on credit verticals, referred to as national business lines, which by definition, have few competitors, offer pricing stability, have outstanding asset quality and generate operating leverage of 3, 4 or 5 to 1. This strategy has produced industry-leading return on average assets, return on average tangible common equity with outstanding asset quality while producing the industry's highest organic deposit and loan growth. Western Alliance began as a community bank with its roots in Nevada and then migrated to Southern California and Arizona, and are now morphed into a national bank with a regional platform. Here are some of the most recent quarterly results. I'm not going to go over them, but I will leave you with some of the takeaways from our earnings call. Number one, consistent loan growth, no greater than $1.5 billion. Deposit growth outpacing loan growth at $2 billion per quarter. Our loan-to-deposit ratio should drop from 94% down to the high 80s by the end of 2023. Sequentially, greater net interest income per quarter with a higher NIM, steady and stable asset quality and an adjusted operating efficiency, excluding deposit costs in the low 40s. Mortgage banking revenues should remain consistent to Q3 results, and we expect to have a rising CET1 ratio throughout 2023, targeting 10% by the back half of 2023. And a return on average assets and again average tangible common equity, closely mirroring 2022's results. Our business strategy is rooted in a conservative credit culture using specialized high-quality business verticals, those are the national business lines, to manufacture revenue generation from a growing deposit base. Alignment with large clients, similar to those at money-center banks that can manage uncertainty with greater dexterity because of their management team sophistication, capital structure and access to liquidity has significantly reduced WAL's credit exposure. Western Alliance business model is wrapped around a risk management framework, allowing for real-time credit, capital and liquidity allocation. The bank was founded in 1994 as BankWest of Nevada, expanded its geography in 2003 to both Arizona and Southern California, and then launched its national platform in 2011 and accelerated growth in 2018 from $20 billion in assets to the nearly $70 billion as we continue to accentuate the national commercial bank platform. Western Alliance is a national bank with a regional footprint, that's how we describe ourselves, providing the agility to profitably grow both regionally and nationally. The [indiscernible] pinwheel depicts WAL's loan, deposit and capital and liquidity allocation model. The model is highly dependent on centers of excellence to drive credit underwriting, industry knowledge and client development. Our diversified business model allows flexibility to adapt to changing business and economic conditions and allocate capital in an appropriate manner to sustain earnings. Western Alliance deliberate post-GFC business transformation strategy to become a national commercial bank focused on deep underwriting specialization and greater business diversification has resulted in cumulative net charge-offs of only $27 million versus $356 million in current reserves. 55% of our loan book is in low-to-no loss categories. 24% of our loan portfolio is credit protected to the issuance of credit-linked notes. And during the great financial crisis, 67% of losses came from loan categories representing 44% of the 2009 loan portfolio, which today only make up 6% of loans. We spent the last decade reimagining and repositioning the bank to minimize these risks going forward. The primary impediment actually, we think, to our higher stock valuation is the misplaced concern about credit risk heading into a likely recession. The diverse mix of regional banking and national business lines has produced loan growth of 26.2% over the last 10 years compared to 13% for our peer competitors. WAL's decade of business transformation has resulted in consistent relative outperformance in asset quality. For year-to-date 2022, WAL's in a net recovery position, and our total loan ACL divided by funded loans, less loans covered by credit-linked notes is 86 basis points. Risk management, underwriting expertise and WAL's dynamic business model structure has positioned WAL to withstand economic uncertainty. Today, 24% of the loan book is insured, 33% is classified as economically resistant and 31% is characterized as resilient. It is probable that credits in the resistant and the resilient categories will find a way into the special-mention status or substandard categories. But it is very unlikely that we're going to see high credit losses. Our case in point would be our hotel book. Nearly our entire hotel book during COVID migrated into special mention and substandard loan categories. And we did not have $1 of loss. In fact, we did not even have one client pay late. The bank's deposit book stands at $55.6 billion and deposits have grown 32% in the last 10 years, 10 full percentage points higher than our peers. We have a number of specialized deposit franchises that have meaningfully contributed to growth. We have an HOA business that was started 12 years ago, maybe closer to 10, that's now $6 billion in deposits. Settlement services, which was launched at the back end of 2019 is now nearly $3 billion. Business escrow services launched in the beginning of 2020 stands at $800 million. Our AmeriHome purchase, which many people thought was a mortgage purchase, but we told everyone, and we keep reiterating, that it was the purchase of an emerging commercial bank, has gone from 0 to $7 billion in deposits in just 7 quarters. We are also in the process of launching 3 new deposit initiatives in 2023, one of which we described on our earnings call, which is our corporate trust business, that should be live in the first quarter of 2023. And as we get closer to launching the other 2 initiatives, we'll provide details at that time. The bank's national commercial banking strategy has pushed the efficiency ratio from 53% 10 years ago to 44.2% in Q3. Without deposit costs, which we view as interest expense, the adjusted efficiency ratio is 41.5%. We continue to invest in risk management and technology programs and in our platform to prepare for crossing over the $100 billion asset threshold in the near future. Q3 quarterly results produced a return on average assets of 162 basis points, return on average tangible common equity of 25.1%, among the highest in the industry. Our PPNR has grown 27% per annum since 2013. Net interest income grew $77 million in the quarter or 15% on a linked-quarter basis, aided by higher average earning assets of $3.8 billion, and NIM expansion of 24 basis points to 3.78%. Our rate shock analysis shows 100 basis point rise in rates over a 12-month period on a static balance sheet. We'll lift net interest income by 6% and move net interest income by 15% using a growth balance sheet. Net interest income will rise 12% and 25%, respectively, using a 200 basis point shock analysis. Western Alliance generate significant capital to fund organic growth and maintain well-capitalized regulatory ratios. Capital One CET1 ratio stands at 8.7%, but through lower loan growth, CLNs and an unfunded commitment optimization program, CET1 will return to 10% in the middle to back end of 2023. Our tangible book value stands at $37.16 and has grown 19% since the end of 2013, which is 3.5x that of our peer group. This is the last slide, and then we'll open it up for questions. This last slide demonstrates how WAL's business diversification model leads to superior earnings growth with reduced volatility. Among the 33 U.S. banks with assets between $25 billion and [ $150 billion ], WAL has produced the highest risk-adjusted average net income growth, even though we were not the leader in earnings growth or the lowest in earnings volatility, but our combined performance has produced the top risk adjusted earnings growth in this peer group. And with that, I'll turn it over to you, and we're happy to take some questions.

Thank you, Ken. I'll kick things off with some questions, and then we'll have the mic available for others as well. So maybe just talk about your competitive position between the regional banks and the kind of the large national banks and how a $69 billion bank -- can you show that outsized growth? And whether you think that market position can continue to work to your advantage?

So I think it can work to our advantage. The national business lines started in 2011. I can't emphasize enough the 4 critical components of the national business line that we have few competitors in each one of those national business lines, which allows us for pricing stability and power, which also gives us great asset quality and has very high operating leverage. And we will continue to move forward with those national business lines that will help generate loan growth going forward, but they also generate a significant amount of deposit growth. The regional footprint, certainly in Arizona, California and Nevada right now is still strong. Arizona and Nevada are net migration in states. California seems to be holding its own, depends on what part of California we want to talk about. But I still think that we feel comfortable in our guide of $1.5 billion of loan growth and $2 billion in deposit growth.

We think we have advantages over both the regional banks and the national bank. So compared to regional bank, we've been there. We used -- the bank was started in Nevada. Nevada was the fastest-growing state for 5 decades up until the financial crisis. But we had a really rough time getting through the GFC. And why was that? It was because that was the epicenter for the contraction that took place. We think that actually just a geographic-centered element is actually weak long term. I mean today, Florida and Texas are doing great. I love both of those states. But I don't believe that those states are never going to have a problem again. So we want to have something on top of the regional area that we have. And so we've gone into these national business lines. Well, a national bank, that's great. They're trying to be all things to all people generally. But the issue with that is that there's a lot of things that really aren't as profitable, don't have the growth prospects, don't have the credit risk mitigation that the sectors that we've participated in carry. So for example, we really don't do consumer banking. I mean consumer -- nothing wrong with consumer banking, somebody has got to do it. But we don't see those returns as strong, we don't see -- particularly if you're not a national bank. We have the best app and ubiquity in terms of online and in others. It's also commoditized. You're not going to get the best kinds of returns. We want things that are a little more esoteric known to -- not that many players in that space that gives us pricing power and eventually kind of continue to sustain growth. So we hire teams that have expertise in this, and we compete against them by the things that we don't do as well as the areas that we do execute on. That gives us a superior long-term growth rate in ROA/ROE.

And Ken, you talked about the hotel portfolio, the performance during COVID. When I look at the outsized loan growth, outsized ROA and profitability, inherently, some may take higher credit risk. So what other examples can you share with us to give us some level of comfort that, that theory that may be out there is false?

So let's take the hotel book for a moment. Entering COVID, we had a 60% LTV. We had a 1.85 debt service coverage ratio. We had a 12% debt yield. 86% of the book was flagged with either Marriott, Hyatt or Hilton, which had great reservation systems, of course. We had no loans to operators that had less than 12 hotels, so there was experience. And the borrowers had a lot of liquidity behind them because they were flush with capital and liquidity. They weren't smaller operators or smaller sponsors. So just on the hotel because it's an interesting story. We recognized earlier that we thought the COVID crisis was going to be with us longer. We went out to our client base, and we told them -- when they called in actually and said, "Hey, we'd like a deferral." And we said, "Great. For every month of deferral that you want, you've got to give us a month of principal and interest." And they said, "No, you don't understand how deferrals work." And I said, "No, no, we understand. What we want to do is make sure you're committed to your properties. And if you commit to your properties, what we'll do is we'll, in turn, commit to funding any acquisition or any loan or construction development you want to do during this time frame." And I said, this is when you're going to make all your money. And so 51% of the portfolio took 6 plus 6, meaning they gave us 6 months of principal and interest upfront, and then got a 6-month extension. 3 and 3, it was about 1/3, and then there were some combination of 3s and 2s, and 2s and 3s and what have you. But the whole book basically took the structure that we offered. And what we did was we were open for business. We did make loans during that time. They were higher priced. They are much tighter in credit criteria. We lowered the LTVs and LTCs. They all came with 1 year to 2 years of operating reserves and interest reserves, all right? And we told our borrowers that focus on your returns that you're going to make for your LPs at this time. And as things improve, then vacant -- sorry, occupancy rates increase and ADRs move up, we'll give you an opportunity to do earnouts so that you can improve your returns long term. And we did a number of hotel loans during that time frame. Our hotel book has been pretty strong since then because we do not -- one of the secrets to our success is that we don't step in and out of markets with our clients, depending on economic circumstances. We try to be open all times. And if we're open for business at all times, we will change our pricing dynamics and we'll change our asset quality selection and criteria to match the conditions. But we will allow you to run your business, and we won't be in one day and out the next. And that approach, got us a great deal of loyalty. And so coming out of COVID, for example, we just got business flowing into us. We didn't have to bid for it. They knew what we were offering. They knew the pricing, and that has pushed our book of business up. Relative to other risks, again, I'll tell you that 55% to 56% of our total loan book is in low-to-no loss categories. And when I say low, I think only one of those verticals has -- ever had a loss, it was $400,000. So we've been focused on this transformation coming from the GFC, where we're very cognizant that it flies in the face of convention that you can be a high-growth bank and also have outstanding asset quality. But over the last 10 years, our total losses have been $27 million over the last 10 years. We have a $356 million loan loss reserve. And so I won't say there won't be migrations into classified and criticized categories, but we don't see outsized risk given our growth. Dale, do you want to add anything?

Well, yes, so I mean those losses are 4 basis points. So our reserve of $86 million means we have more than 2 decades of average loss coverage within our ACL. Meanwhile, the duration of our loan book is under 4 years. So we think we're well, well covered in terms of our reserve adequacy. And I don't think there's a bank, and in fact, I'm sure there's not a bank in the country that has the 24% of insured coverage that we have on our balance sheet and these other elements. Really allocating only 12% of our book, we think is really going to be responsive to a decline in the economic outlook.

And then maybe shifting to deposits. Could you just talk about your ability to grow deposits, maintain your low-cost deposit base, whereas the industry itself is seeing somewhat of the exact opposite?

So our problem is a little bit different than other banks, which is our loan growth look like this and our deposit growth look like this, and we had this gap, and we were funding that gap through the Federal Home Loan Bank. And what we kind of said -- there was a bunch of things that all came together and crystallized for us. Number one, we didn't want to be a fast-growing bank into a recession. So we pulled back our loan growth to $1.5 billion. We're trying to cap it at $1.5 billion. We've always been good at driving deposit growth. And we said, well, we'll have deposit growth be ahead of loan growth. And therefore, we'll push our loan-to-deposit ratio down. We'll also be less reliant on our Federal Home Loan Bank fundings as well. As a company, we've always -- we have about 17 different national business lines. A number of them are really deposit-focused. Most of the credit ones get all the attention. But the HOA business, for example, $6 billion of deposits there, that is not a price-sensitive business, that is a service and technology business. Settlement services, right, these are large settlements that are done, the monies come in and they have to then be administered out. Well, law firms don't really care about what the interest rate you pay on that. They care about making sure the cash moves out when it's supposed to and that they can move on to their next case. Again, the cost there is very low. Business escrow services. We deal with a lot of M&A work. Once again, not focused on the price as much as they are focused on the service. And the new corporate trust business that we're trying to launch or will launch in Q1 has that same criteria. So those are new channels basically that haven't been with us that long, that will continue to produce incremental deposits. In addition, and like I'm sure most of the banks have, we've got deposit minimums that have to come along with any loan commitment. And if those are not met, then pricing of our loans will rise somewhere between 50 and 100 basis points. We also make sure we get all the operating accounts as well. And we have a very strong warehouse lending business, right? And that business generates a lot of deposits. They generate deposits mostly on the margin. So we do have 100% beta there. But we're fortunate that we have a place to put that 100% beta, which is a 100% loan beta. And so for us, it's all about managing that spread. And over the last 3 to 6 months, what we have seen is, on the low end of our spreads previously, we've moved them up about 60 to 70 basis points. And on the higher end of our spreads, we moved them up 10 to 20, maybe 25 basis points. So we're focused on that spread income. And so for us, we're a little bit different. As we focus on net interest income and we have the loan growth, we can bring in the deposits on the margin, which allows us to be a little bit different than many other banks that can't grow net interest income because they don't have the loan growth and, therefore, look to push down their deposit beta or their pricing and see deposits run off the balance sheet.

Any questions in the audience?

Maybe just going back to the credit side of the equation, just given some of the measures that you've taken to protect the balance sheet, I guess, how should we think about provisioning for the new loan growth going forward? Are you getting full credit for some of the defensive measures you've taken? Or are you still thinking that as you bring on new loan growth and if there is migration into special mention and some of these classified categories, even though loss content might be low, you're going to be asked to provide additional kind of dollars for that migration?

Well, when you look at the combination of probability of default and then loss-given default, so it could be in a situation, and I remember this when the MGM was -- that loan was classified that it want was [indiscernible] national credit and they classified the loan even though the loan to value was first [ deed of trust ] on all the properties of MGM was only about 33%. So that's a scenario whereby, yes, there's -- you have a situation and you've moved it to classified assets, but there is basically 0 risk of loss. And obviously, it's recovered and that information was a long time ago. That's where we think we are with the low LTV advance rates that we have. I'll go back to the hotel for a second. I mean when that took a direct hit from the pandemic, the occupancy rates of our hotel book fell from in the 70s to the teens. And we were being told, you're going to lose $200 million to $1 billion in hotels. And as Ken mentioned, we didn't even lose a $0.10 [indiscernible] delinquent on us. Why? Because of how we had underwritten those credits where we were 60% LTV and actually with the valuation improvement, a lot were well below that. There were some hotels that went under. What were they? They were central business district. They were in some kind of a CMBS structure, and we had none. So I think what's really missing the point is if somebody zeros in really tightly on classified, and we've had this metric before, we said, look, what percentage of our loans that are classified even have lost, that is a single-digit number, this percentage of special mention that goes to a loss is less than 1%.

I'm usually the last guy in the queue, so I'm a little nervous here to go in second. Just on that topic, the classified substandard potential, are you seeing anything? It freaks people out. I mean when you say it could go classified, but we don't have a loss, help us understand that.

Yes. So we're talking about -- I don't know where this downturn might head, maybe there's not even one. But if you had kind of some substantial declines in terms of valuation or something like this, as we think it's possible to see migration in some of these categories, we have no evidence of any of that coming. There isn't anything on the horizon, there isn't any early warning systems that leads us to believe that there's anything going on.

When we do our underwriting, of course, you would expect us to do the underwriting to make sure every asset, every loan is cash good. But we also underwrite to migration risk, too. And we have said no to many loans that we think could actually migrate down to a substandard or special mention category. And we're very cautious or cognizant of if that happens, it does free people out. And what you really see is the impact on our market capitalization. So when we underwrite, we also underwrite our market capitalization in a way to make sure that the -- we pick loans or we prove loans that have the least probability of migrating down to a different category.

On the topic of multiple compression. You did the AmeriHome deal. Your stock took off. You got the [ step up ] in earnings and the multiple came down. So help us understand, maybe deconstruct how profitable has AmeriHome been for you and what kind of a contribution has it had to your company.

Yes. Well, if you look back at our trajectory that we have here a moment ago, we had really a significant step up in earnings per share in '21 and in '22 and AmeriHome was a big chunk of that. Why was that? Because what we saw in AmeriHome wasn't a mortgage company. It was -- we wanted to get necessarily deeper into mortgage, but we saw a nascent bank. They had 800 clients that they provided -- that they purchased loans from that were in need of warehouse lines, and maybe more importantly, mortgage servicing lines. And so when we were mining that group and bringing over deposit accounts related to those escrow funds related to servicing rights. We brought in about $7 billion of that, and that has been powerful in terms of giving us the inventory than we've been able to lend out since we did that deal about 18 months ago. So we think that still makes a lot of sense. Now in terms of the business itself, in terms of correspondent relationships for mortgages, well, that's been a tough area. There has been contraction within that sector. We went from $4 trillion. Mortgage market, down. The estimates are now about $1.7 trillion today. There's a rightsizing going on and [ gaining ] musical chairs within the industry. Maybe you saw Wells Fargo, I think, said that their mortgage business is down 90%. That's a lot steeper than ours, but we don't have this kind of frontline origination function that they've had. So I don't know how long that's going to take. It feels like we're not quite there yet. It's going to take another quarter or 2 before the capacity of that business line really matches the demand in this sector. But we're really going back to where we were in 2018 and 2017 and approaching $2 billion. AmeriHome made a lot of money back then, and we think that's probably where it is. But it is a little bit of a process to get there. And so in the meantime, we're continuing to mine their clients for deposits for us and new credit opportunities that we can do for warehouse lines and the like. So I think over time, I mean, I think it's going to work well, but we probably have a little bit more to go in terms of kind of migration.

On a GAAP basis, we've earned back the platform costs that we pay. And on a management basis, we've accounted for the opportunity cost of the liquidity that we put out. We've probably earned back a little over 50% at this time, [ 7 ] quarters.

I'll just ask one more. I don't know -- your efficiency ratio, just the path to $100 billion. I don't -- with or without ECR, we don't need to get into that. But any material changes in your efficiency ratio as you go to $100 billion?

Well, we get -- I mean with that question, I mean it makes sense that our efficiency ratio could get down lower into the 30s. And you saw that it was, back in 2020, related to some of those funds that came in and of course, cost actually kind of fell away because no one traveled. But that's not what we want to do. We're laying the groundwork for continuing to grow. There's a lot of technology and risk management that goes into that. And so we're sustaining something in the low 40s. We think that's a strong performance. And given that we're moving the balance sheet upward, that should take us to continuous double-digit levels of growth in earnings per share.

The national business lines gives us great operating leverage and great operating efficiency, which allows us to always continue to invest in the company. So there are banks that like to take a $0.05 out of the expense line, have a drop to the bottom line. We actually like to figure out how to put a $0.05 into expenses and get $0.20, $0.25 over time. And for us, that's really the key, and that's what really has sustained our loan growth and our deposit growth because we're always continuing to invest and find new business lines, bring on new teams that we can build around these business lines for the future. So keeping something in the low 40s that allows us to continue to invest to be a larger bank, which we need to do on risk-for-risk management, on our technology platforms, and new products and services is what we're going to continue to do. And we're one of the lowest efficiency ratios in the industry today. So dropping in any lower, I don't think gives us -- we don't get much -- we don't get as much out of it as we do investing in the company and looking over the next 3 to 5 years.

I guess given your deposit beta in the third quarter, how are you thinking about the trajectory of net interest income and the net interest margin throughout 2023?

So we said on the call that we think the net interest income is going to continue to grow quarter-over-quarter for the next 5 quarters. We did that in mind when we had 75 bps in for yesterday and 50 bps in for December, feeling even more confident knowing that I think there'll be a couple more raises in the early part of '23, maybe another 2.25s. We haven't figured out what we want to put in there. So we have the confidence that we're going to see that net interest income continue to rise. Plus, we have $1.5 billion of loans that reprice every quarter, and we'll be able to reprice them at a higher level.

And then sticking with 2023 and thinking about loan growth, are there certain parts of the portfolio you see yourself deemphasizing maybe because of the economic outlook and what kind of fills that hole should that be the case?

Well, for us, we're trying to just keep it lower, which is -- so filling the hole is not our concern these days. So what we're going to deemphasize, we're going to deemphasize capital call and subscription lines. Pricing there is thin to begin with. The cross-sell into the funds was less than what we would have hoped for, and it's hard to bring out any deposit relationships. So we're going to do less of that and we're going to do less of residential loan growth. So today, residential loans total about 30% of our loan portfolio. On a percentage basis, they'll drop. We'll probably do $250 million or so in loan growth in Q4 and then bring it down to about $100-ish million for the next couple of quarters going out. And then with our business model, the national business line strategy, combined with the regional, we can move liquidity around to get the best returns that we see -- that we need.

Got a question down here.

Just had a quick follow-up on the capital call. I guess what was the largest sticking point in bringing over those kind of like VC and PE clients from a deposit relationship perspective? And in your experience, where did you find them banking most of the time?

So the big, big lines are run by the big money center banks, and you're taking a piece of their syndicated line. And so they're not going to give up their deposit relationships. That's number one. On some of the smaller clients, so [ smaller or ] clients, again, these are funds so they don't carry a lot of excess liquidity. So what we're hoping too is to pierce see the fund structure and go right down to the portfolio of companies. And that was just a lot harder than we thought. And so -- and again, the return -- so we're putting out -- our pricing there was very thin. They have about a 50% utilization rate, and we have to carry capital against the unfunded commitment. At the end of the day, we wanted to raise our capital level also in advance of the economic uncertainty or recession that's coming. And we didn't really -- when we did the analysis, we didn't really lose much in terms of net interest income and earnings. But pulling back on the capital call and subscription line business, it was a pretty easy math for us to do that. And so we're kind of concentrated where we can get a deeper relationship, both on the liquidity side and on the credit side.

Maybe talk about capital management, the decision to build capital and what are your thoughts going forward.

Do you want to take one?

Sure. Yes, so we've indicated we're going to be taking our capital level with -- the CET1 was 8.7%, take up north of 10% sometime probably next year. And yes, I mean, the reason for that is, one, we don't know necessarily where we're headed in terms of economically, but we think it might be prudent to have a little higher level of capital. We've certainly heard from some shareholders that they would -- that, that maybe has been an issue in terms of something that maybe is held back our valuation. And so garnering more capital we think makes sense in terms of we're listening to kind of what we're hearing from them. We generate more tangible capital than almost any other bank out there with 45 basis points from our return on tangible common equity of 45% -- 45 basis points per quarter with our high ROTCE. And so it really doesn't take that long to do that as long as we kind of curtail our loan growth. As Ken mentioned, we're going to hold that to $1.5 billion. So we can sell that double-digit loan growth, double-digit EPS growth and grow capital kind of coincident with that, and we think that's maybe what people want to see.

Yes. Higher capital, low losses, very strong PPNR in case we do need to fund the provision. These are all things that, in terms of investors' worries, we just want to take off the table.

Great. And I think we're out of time. So with that, please thank [ Liam ], please.

Thank you.