Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the Q1 2018. Our speakers today are Ken Vecchione, Chief Executive Officer Dale Gibbons, Chief Financial Officer and Robert Sarver, Executive Chairman. You may also view the presentation today via webcast through the company's website at www.westernalliancebancorporation.com. The call will be recorded and made available for replay after 2 o'clock p.
M. Eastern Time April 20, 2018 through May 20, 2018 at 9 o'clock am Eastern Time by dialing 1-eight seventy seven-three forty four-seven thousand five hundred and twenty nine and entering passcode 10,118,783. The discussion during this call may contain forward looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward looking statement. Some factors that could cause actual results to differ materially from historical or expected results include those listed in the filings with the Securities and Exchange Commission.
Except as required by law, the company does not undertake any obligation to to state any forward looking statements. Now for the opening remarks, I would like to turn the call over to Ken Vecchione. Please go ahead, sir.
Good afternoon, everyone. I'd like to welcome you to Western Alliance's Q1 earnings call. Joining me on the call are Dale Givens and Robert Sava. This is the first earnings call in 15 years that has not been led by anyone other than Robert Sauber. I am honored to succeed Robert and very pleased to have the confidence of the Board of Directors and excited to share our financial results for the quarter.
Robert will be participating in the questions and answer section of the call. This quarter, I've met with nearly 100 current and prospective investors, and I offer them the following comments. 1, I returned to the management team because of the passion I have for the people of the company and the enjoyment I received working with our customers to grow their business, which in return grows our business. And 2, I wanted to reinforce the seamlessness of the transition. I've been involved with the company for over 10 years as both a Board member and a member of senior management.
Positioning the company to deliver predictable, consistent earnings are the twin objectives for Robert and me. I am proud to say The momentum the company has built over the years was demonstrated again in our strong financial results for the quarter. This quarter, we achieved record earnings of $100,900,000 or $0.96 per share. Both net income and earnings per share grew 37% year over year and 13% on a linked quarter basis. The increase in income from the Tax Cut and Jobs Act, inclusive of reinvestments by the company, was $9,500,000 or $0.09 per share.
Return on tangible common equity grew to 20.46% and return on assets rose to 1.99%, supported by loan and deposit growth of $466,000,000 $382,000,000 respectively, along with stable asset quality. Our record earnings benefit from the continued growth of our business and lower tax expense. The effective tax rate for Q1 was 17.1% as the company benefited from both the reduction in the federal tax rate as well as cyclical excess tax benefits on shared base payment awards. The interest margin decreased by 13 basis points on a linked quarter basis to $460,000,000 and is down 3 basis points from $463,000,000 in the Q1 of 2017. This decrease is primarily related to a decrease in the tax equivalent adjustment, resulting from the decrease in the statutory corporate tax rate, which was partially offset by favorable impacts of rising short term interest rates.
Excluding the effect of the lower tax equivalent adjustment, net interest margin for the quarter would have been 4.71%, which would have been consistent with Q4 and 8 basis points higher than prior year. For the quarter, our operating efficiency ratio increased to 42.7% as the tax equivalent adjustment decreased by almost 50% from Q4 as well as an increase in the cyclical compensation costs. The reduced benefit of tax exempt revenue increased the ratio by 1%. Balance sheet growth continues to be consistently strong as loan growth for the quarter was $466,000,000 and deposit growth was $382,000,000 Non performing assets improved to 33 basis points of total assets from 36 basis points at December 31. It also declined 11 basis points from the prior year, demonstrating the stable asset quality of our portfolio.
Net charge offs of $1,400,000 were consistent with prior quarter and prior year's performance and were only 4 basis points of total loans annualized. Our balance sheet growth was matched with our rising capital and TCE of 9.8 percent of total assets, up from 9.6% in the prior quarter and 9.4% in the prior year. Tangible book value per share climbed to $18.86 atquarterend, up 19% from a year ago. I'll turn you over to Dale, who will take you through the financial results.
Net interest income increased $3,200,000 for the first quarter to $214,200,000 driven by $470,000,000 increase in average loan growth. Net interest income rose nearly 20% from the year ago period. Operating non interest expense was relatively flat from the prior quarter at 12 point Non interest income flat from prior quarter at $12,700,000 Operating expense rose $4,000,000 from the 4th quarter to 99.4 primarily due to seasonal compensation costs in the past due to some of our team members as part of the benefit from the tax rate reduction. Supporting strong loan growth, the provision for credit losses was $6,000,000 for the quarter compared to $5,000,000 in Q4. We reported a $1,200,000 gain on an OREO disposition as well as a $1,100,000 loss on fair market position as well as a $1,100,000 loss on fair market value adjustments on preferred securities.
These fair value fluctuations were previously recorded in Other comprehensive income, however, due to the adoption of the new accounting guidance effective January 1 this year, these fluctuations are now reflected in the income statement. The income tax rate was $17,100,000 for the quarter or $20,800,000 as the tax effects from the Tax Cuts and Jobs Act and similar to the Q1 of last year includes a 3% benefit from higher share price vesting at restricted share awards higher than when the equity grant was awarded. Zulubic's share count held flat at 105,000,000 EPS $0.96 Consistent with our expectations, yield on securities decreased 8 basis points to 3.07, while yield on loans decreased 13 basis points to 5.59, reflecting a more modest benefit of tax exempt Excluding the effect of the tax rate change, 1Q securities yield would have increased 13 basis points to 3.28, while loan yields would have declined 2 basis points to 5.7. We compute our net interest margin on a 93.60 60 basis, which results in a lower margin of 8 basis points from the prior quarter due to 2 less days in the current period on the loan portfolio. The end result of these items is that loan yields would have risen by 6 basis points on a linked quarter basis.
Interest bearing deposits climbed to $9,900,000,000 from $9,500,000 on a linked quarter basis as the weighted average funding cost increased 7 basis points. Including the benefit of non interest bearing deposits and borrowings. Funding costs rose 6 basis points from the 4th quarter to The step down in margin by 13 basis points to 4.6 is due to the decrease in the tax equivalent adjustment The margin would have been $472,000,000 excluding the reduction in tax equivalent benefits. Additionally, the effect of 2 fewer days during the quarter reduced the margin by an additional 6 basis points. The net result of these items is the margin would have increased 5 basis points in Q1, which is consistent with our moderate asset sensitive profile.
Accretion on acquired loans slipped to $5,700,000 from $7,100,000 in the 4th quarter. Forecast accretion will fall to $2,100,000 for the 2nd quarter if all discounted acquired loans paid just their contractual principal payments. However, because of loan prepayment activity, actual accretion should exceed this estimate. The efficiency ratio rose to 42.7% from 40.7% on a linked quarter basis and is down from 44.4% a year ago. Excluding the effect of the lower taxable equivalent revenue adjustment in the first The efficiency ratio would have been 41.7 percent or 1% lower than reported.
The remainder of the increase in the ratio primarily relates to at seasonal elevated compensation costs, which increased expenses and the day count, which decreased revenue. Our pre provision net revenue of return on assets of $2,501,000 and return on assets of 1.99 are consistently among the top decile relative to peers. Strong first quarter loan growth took total assets to nearly $20,800,000,000 at year end, our deposit growth of $382,000,000 during the period helped reduce outstanding borrowings during the quarter and gave a strong start to the Q2 of 2018. Our liquidity remains strong with a loan to deposit So of 89.7 percent at quarter end. Our strong first quarter loan growth of $466,000,000 was led by $318,000,000 Construction and land development loans after they declined modestly during the Q4.
C and I loans rose $103,000,000 Regionally, the loan growth leaders were Arizona at $149,000,000 and Southern California at $79,000,000 Each of the national business lines grew loans during the quarter, except for public finance. Growth in total deposits was $382,000,000 driven by an increase of $190,000,000 in non Interest bearing DDA and $140,000,000 in CDs. Among the business segments, the Homeowners Association Group Lead growth was $245,000,000 followed by Arizona of $179,000,000 and Northern California of 133 These increases were partially offset by a decrease in Nevada of $303,000,000 Totally adversely rated loans increased by $24,000,000 during the quarter to $379,000,000 primarily due to an increase in special mention credits, but still comprised less than 2% of total assets. Classified assets to Tier 1 capital plus the allowance for credit losses decreased to 9.4% from 10.3% at year end. Nonperforming assets, which is comprised of nonperforming loans and other real estate declined $5,000,000 to $67,000,000 There's only 33 basis points of total assets.
Gross credit losses of 3.6 1,000,000 during the quarter were offset in part by $2,200,000 in recoveries resulting in net credit losses of $1,400,000 only 4 basis Supporting our strong loan growth, provision expense was $6,000,000 compared to $5,000,000 in the prior quarter and increased the allowance for loan and lease losses to $145,000,000 up $17,000,000 from a year ago. This reserve was 1.02 percent of non acquired loans at March 31, as acquired loans are booked at a discount to the unpaid principal balance and hence have no reserve at acquisition. For acquired loans on the lower right, credit discounts totaled $23,000,000 at quarter end, which were 1.73 percent of the $1,340,000,000 of purchased loan portfolio, which was primarily from the Hotel Franchise Finance Our strong capital growth for the quarter essentially matched our strong balance sheet growth leaving ratios essentially flat to modestly higher from year end. Our capital ratio metrics have trended higher during the past year. Tangible book value per share rose $0.55 in the quarter to $18.86 and is up 19% over the past year.
Growth in PBV was held backed by the $38,000,000 decrease in accumulated other comprehensive income related to the valuation marks on our available for sale investment securities portfolio as interest rates rose during the period. At 9.8%, our tangible common equity ratio was near the top quartile of the peer group. Our return on tangible equity was also very strong at over 20%. I'll turn the call back to Ken.
Thanks Dale. Our Q1 performance confirmed our outlook for low double digit growth in loans and deposits for 2018. Credit demand appears to be climbing after a seasonally strong Q1. Competition for deposits also appears to be climbing, but we remain Confident we can grow deposits to fully fund loan originations. With the new base level of margin set in the Q1, we expect Changes will be largely driven by FOMC action as we remain asset sensitive and anticipate roughly 5 basis points of expansion per 1 quarter point of increase in the target Fed funds rate.
We still expect deposit betas to climb to the 50% area as interest rates and competition continue to rise. With a reset of our efficiency ratio in the Q1 from the tax rate change and related items, We expect to continue our 3:two ratio of revenue growth rate compared to the rate of growth of expenses, which will reduce our efficiency ratio over time. Because the base of revenue is more than double of expenses, the dollar increase in revenue should be more than triple the dollar expense growth. We have a disciplined credit culture and our asset quality metrics remain strong. We don't currently foresee any significant credit events that would notably change our Stable performance in this area as we expect our non performing assets and gross loan losses to remain consistent with our prior results.
However, with continued negligible gross loan losses, even a one off event could result in a significantly higher charge in a future period. We also expect our stream of loan recoveries to continue to wane. Excluding the 1st quarter benefit in the tax rate Investing equity awards at a higher stock price than when granted, the tax rate would have been 20.5%, which should approximate our rate for the rest of 2018. That's the end of our prepared remarks. Operator, if you would open the line for questions, we'd be happy to take them.
Thank you. And our first question will come from Casey Haire of Jefferies.
Hey, thanks guys. So wanted to follow-up, I guess, On the NIM, the loan yields, just give us some updated thoughts as to where the new production yields are versus the existing book, I believe, was 25 basis points lower last quarter. How is that trending today?
Yes, it's very consistent Today. As we estimated last quarter, we weren't sure that that was necessarily a data point of a trend that appears not to be the case.
Okay. And then also Dale, isn't there day count does factor in addition to the FOMC hikes, wouldn't an extra day add about Five basis points to the NIM in 2Q as well?
Yes, 4 or 5.
Okay, great. And then just switching to the loan growth outlook, I'm curious about the mix. Obviously, we had a very Heavy quarter for construction. You guys are now at about 13% of total loans. Just what is the appetite there to take that higher?
And What should sort of be the what are some other areas of the portfolio that might contribute more strongly? I know it's uneven quarter to quarter And you guys have talked about Nevada being a little bit stronger than it has in the years past. It was down this quarter. Just some color on the mix, please.
Yes. I think construction loans are about where we like them, about 13%. I don't really foresee them going much higher. We do have a strong construction pipeline. So if we do originate new loans, we'll also be selling some of those down And keeping it the rate about 13%.
In terms of the mix, let me kind of break it down maybe this way. Overall for the divisions, the market trends remain positive and there's good economic growth, which is positively impacting All the real estate sectors. In Arizona, you're seeing single family market demand outpacing supply. You're seeing CRE market have more attractive investments coming in from investment funds. In Nevada, there's a strong pipeline for construction projects.
I'm talking on the strip construction projects. Residential supply is tight. You're seeing low vacancies and increasing rents in the state that can be seen also in the industrial and multifamily sectors. And you're seeing rising rates there as well for rents. In California, again, Southern low vacancy and increasing rental rates can be seen in all sectors.
Available land is somewhat limited there. And then up in Northern California, the residential market remains strong with rapid absorption of completed projects and demand outpaces supply for rental and multifamily projects. So those are sort of the regions. In just take the bigger contributors to loan growth generally mortgage warehouse, I think the market remains strong and collateral values are strong and we see a fairly robust pipeline coming in, but there is more competition there. The same could be said of the hotel group.
We're seeing a lot of volume. There is more But we're winning our fair share of deals. Pricing pressure is a little bit we can observe that in both actually in all the regions And in all the national business lines, we're seeing a little bit more pricing pressure. But we think we can offset that with our customer service platform. So I'll leave it there and see what other questions you have.
I'd say technology I should also say technology and innovation also. There's far more VC firms that are raising larger global funds. There's more liquidity, These are flowing in our direction in health tech and biotech and in those areas as well.
Okay, great. And just on the deal front, just any updated thoughts there? There's been some activity in your footprint. I can understand pricing might be not To your liking, but what about loan portfolio deals if whole bank deals are not on the tape?
Well, we've had some success. This is Robert. We've Have some success buying whole banks and also buying portfolios. Primarily, we're an organic grower, but We do have a successful track record of executing on select acquisition opportunities. A lot of deal flow goes through here.
We're pretty selective. Deposit initiatives as well as whole banks, but we're pretty selective. If you look at our history of M and A, you'll notice that We've executed it pretty successfully and we've executed in a way that the results have been very accretive to the share price of the stock.
Yes, great. Thanks guys.
Thanks. The next question will come from Brad Milsaps of Sandler O'Neill.
Hey, guys. How are you doing?
Good. Thank you.
Dale, I was curious if you could just maybe comment on the Overall size of the balance sheet, I know the interest rate environment is not maybe a favorable for the bond portfolio, but maybe it was a little smaller than I thought, maybe some of your deposit growth came later. Can you just talk a little bit about maybe the overall size of the balance sheet? Did you expect it to get larger? Do you expect Continue to draw down the securities book a bit to fund your loan growth going forward.
I don't think we need to draw down our securities to fund loans. And we're expecting that for the year loan growth will be matched by our deposit growth. It may not have as much of an excess that we had in 2017 where loan growth was about $500,000,000 higher. But I think we can kind of hold our own On our securities portfolio. I mean, you can tell by looking at the average balance relative to the ending balance that our growth was Very back end loaded at quarter end.
We're hopeful that we're going to be able to kind of mitigate that trend going forward and have a little more even Type of growth throughout the period. But that had an effect, of course, on the average balance sheet size and net interest income as a result.
Okay, thanks. And then just maybe a follow-up for Ken. Ken, I know you talked during the quarter about several new initiatives you guys were working on both on the loan and deposit side. I think you mentioned that the expenses for those businesses are in the guidance, but not necessarily the revenue. Just kind of curious if you could update us maybe on timing, is it still too early?
Any other color on when you might see some of the revenue come through for some of these things that you're working on?
Yes. So we've got a couple of things in the works, both on the deposit and the loan side. And there's a process that we go through. 1st, Do we like the business segment? And then second, and this is very important, do we have the expertise in house to run that business inside of that segment or do we have to go out and bring in the talent.
And in a couple of places, we need to go out and bring in the talent. And that's what's slowing us down a little bit, is bringing in the talent. We think we see a couple of good opportunities. So yes, basically 80% of the expense is into the P and L for 2018. We didn't put any of the loan growth or the revenue growth that could come from these developments because we weren't quite certain how quickly we can get the management teams.
My hope is that these Tunies for us really blossomed. We get the management teams, but it's all back ended towards 'eighteen, which then would give us a catalyst going into 'nineteen.
Great. That's helpful. Thank you, guys.
And our next question comes from Brett Rabatin of Piper Jaffray.
Hi, good morning guys.
Good morning.
I wanted just to ask, talking about these new initiatives, you give us any color on the business lines that you're looking at and just if they're more geography focused or if they're more industry focused, any
Well, I'm hesitant to give a lot of information. I don't want this call to be the strategic planning session for our competitors. And the more we talk about what our national business lines look like, the more our competitors show up. So I'm reluctant really to say much, but They do span industry. And if we could get some of the things rolling, remember, we think of ourselves as So to the extent we can develop national business lines, great.
One of our initiatives is actually coming out of Region which we think we can then export throughout the country, but we'll wait and see. So very early into these initiatives, And I'm not going to really give more color than that, sorry.
Okay, fair enough. And then the other thing is, Maybe you guys can help me compound capital and earnings at 20% plus clip And I realize there's a pushback on the 3 times tangible book multiple and the sort of guardrail there. But As I look at it, your stocks had a bit of a discount to peers. And I guess I'm just curious what pushbacks you get And kind of how you think about that?
Yes. Well, I mean, so I mean, the first one is what you've kind of indicated there In terms of kind of the price to tangible book and kind of where that looks. As you know, I mean our tangible book value multiple We think it's really supported by our return on tangible equity, if you linear regress the ROTCE versus the tangible book multiple. But we continue to grow On these types of things and I think we've demonstrated our national business lines in terms of the asset quality that they've had. And I
don't know, I would hope that the discount relative to kind of expectations or valuation, particularly on a price Earnings to growth ratio would dissipate over time. As I said, I went out and saw about 100 different customers, new And existing, they bring this point up quite a lot. And quite frankly, they say most banks are envious The results that we post quarter after quarter and they for those reasons see RPE trading much lower than our peers and think it's a buy. And so we hope through delivering these types of earnings, we'll generate more buyers and sellers. And that's where we're at.
Okay, great. I appreciate the color.
The next question comes from Chris McGratty of KBW.
Hey, good morning. Thanks for the question. Maybe Dale or Ken for you. You obviously are West Coast Banks, But you have a national component to the franchise. With respect to M and A, are there certain geographies that would be off limits You guys or do you feel like you have the scale and the breadth in some of your business lines to consider opportunistically anything across the country?
Thanks.
Well, Robert's really running that side of the show as Executive Chairman, but my standard answer is anywhere I have to wear A heavy winter coat is a place I don't want to be. But I'll turn it over to Robert.
Yes. I mean, as I said a Few calls ago, we're looking in other areas outside of the West at opportunities. We have national business lines now in 42 states. And so we're looking at other areas, but we are very select in terms of making sure the market we're going into There's a market along with the management team that can drive earnings growth commensurate with the earnings growth that this company is seeing over the last 10 years. I don't want to really get into any specific markets, but I would say, to answer your question, we're not confined to the contiguous states or the states we're in.
Yes, I'll just add one bit of color. We see investment bankers cycle through here every other week and always showing us properties. And the projections of future growth are straight up. And then when you look at it versus prior performance, flat to down. And so we kind of look at these meetings sometimes as intelligence tests.
And we are trying to find to Robert's point that management team That can help us continue to grow and be the organic grower once you acquire these assets that we've been, because I think that's part of our brand and what people expect from
That's great color. Thank you. Thank you for that. Dale, maybe one on the costs. Given the seasonal pressure in Q1, How much of the bump in the salaries line gets moderated next quarter and any color on the near term expense rate?
Thanks.
Yes, I mean, the Q1 is always hot. 2nd quarter tends to be fairly muted. I mean, we've guided to this 3:2 ratio. I think that makes sense for us on an annual basis. On a linked quarter basis relative to Q2, I expect we're going to beat that, I.
E. Expenses aren't going to grow very much And but going forward from there, I mean seasonally the high watermarks for us are 1Q and 4Q.
And I just want to add embedded in Q1 with the benefit of the taxes that we received, we did give back to Our folks here at the company, so we mentioned that folks under $75,000 got a significant lift in their compensation and then we also increased 401 ks. And when you compare Q4 to Q1, that expense is now present in our Q1 results and will stay constant going forward.
Thanks a lot.
And the next question comes from Michael Young of SunTrust Robinson Humphrey.
Hey, thanks for the question.
I wanted to just ask if there
are any segments within the loan portfolio that are maybe less attractive or potentially Going to become less attractive as deposit pricing increases if that incremental margin tightens, is there anywhere that you would look to Kind of consolidate or rationalize?
Well, we like the segments we're in for loan growth. Ara, each one of those segments produces different types of deposit growth. And what we're trying to do more This when we're sitting in front of a borrower is to engage them on the full picture. So what we say to them is, look, we're here to help grow your business and that's by providing Capital to you. And if you're successful and you grow, then we grow as well.
That's great. But you need to help us grow our business as well. And that is we want your excess liquidity and it's got to be kept at our bank. And sometimes it's as simple as just And making that statement. So not too long ago, I was at the hotel conference out in Atlanta and I was having dinner with 1 of our largest hotel Borrowers and I said that.
And I said, look, you got to help us grow. And within 48 hours, we had monies of $16,500,000 wired to us. So we try to balance the 2 together and we try to look at this as a relationship picture. And I think our customers like that and that's how we've been approaching it. So that's how we get the deposit growth and the loan growth to sort of grow 1 to 1 with each other, which is our goal.
Okay, great. And just wanted to touch on the comment you made in the press release about the benefits of the Tax Reform Act are beginning to be realized. Is that from specific customer conversations or any additional color you could add around that? And any Change of behavior you've seen maybe kind of late in the quarter, early Q2?
So first, let me say coming into the year, the economy was improving. The tax cut is just going to add to that. I think it's still a little early to say the tax cut is very much present. But I do think as we go throughout the year, that's going to grow and it's going to help us. And here's my observation though.
Certainly in Arizona, we are seeing more businesses migrate to Arizona for a variety of reasons. Taxes is just 1. And now with the elimination of We think that will also help. But we're seeing businesses migrate here for corporate relo reasons and also expansion reasons. So there is enough young talent here.
There is cheaper labor here. There's affordable living that's present. And we're seeing some tech businesses and other financial services business relocate to Arizona manufacturing. And also for those companies that are start ups, there's a slower capital burn that they'll experience here in Arizona than they will say in Northern California, Where it's very expensive to do business. And we've got good climate, if you can figure out a way to withstand August here.
And there aren't too many natural disasters. So Arizona is offering an attractive alternative. And we've been seeing that migration for the last couple of years.
Okay, thanks.
And our next question comes from Jerry Tennner of D. A. Davidson.
Hey, good morning. A lot of ground coverage. Just wanted to get an update and a clarification on your floating rate loan Portfolio, how much is LIBOR versus Prime? And was there any benefit from the run up in short term LIBOR in Q1 or
is going to be more of a benefit in 2Q from the
late Q1 rate hike?
Yes. So, a little over 25 Percent of our total loan portfolio is LIBOR based that skews toward 30 day fairly heavily as opposed to 90 or something longer. And so we did see that has been leading certainly the rate increases from the FOMC. I think we expect that We continue, odds are or expectations are that the FOMC is going to raise again in June. You're certainly seeing that in 90 day LIBOR today.
30 day LIBOR should pick that up, assuming that position still holds. So yes, no, we do it does lead into it. Of course, We've had the same thing going on in the Q4 too. So on a quarter to quarter delta basis, I think you're getting about your 25 basis points, which you're getting on the primary.
Thanks, Bill. The next question is from Brock Vandervliet of UBS.
Thanks for the question. I was actually just following up on the very first one in terms of the geographic performance. Could you talk a little bit about Nevada, just noticing some of the softness in loans and deposits, Specialty deposits in the quarter, whether that's just seasonality or something else?
No. So In Nevada, we had a very large deposit flow out that was due to a settlement. So we always knew that deposit was going to leave us. Fortunately for us, we got enough of advanced notice that the whole company worked hard throughout the quarter to make up for that $300,000,000 plus that was leaving. So occasionally you'll see a deposit build up for a settlement and then it rotates out the company.
To the extent that we have an early warning on that, we're able to kind of grow through it. So that was that's Nevada on the deposit side. On the loan side, I think we said last quarter, there's about $13,000,000,000 to $14,000,000,000 of projects that are coming On to the strip in Vegas. And so that's very encouraging. But those projects will take time for a secondary effect to happen, which will be Growth in multifamily and so forth.
And so we are beginning to sponsor more of those projects. We saw a few come in just recently into our senior loan committee. In Reno, the Tesla factory has been a great addition to the Reno area as well as distribution centers And data centers. And the vacancy rate there is very low, call it about 3%. But pricing is very, very competitive.
So we've seen a few deals that we thought we were going to have, but the pricing began to get to a point where we just don't think it warrants The use of our capital at that level and the beauty to our platform is we've got a couple of regions we can move the capital around to and we've got national business lines
And just as a follow-up, I know You've answered this in the past, but clearly the CET1 ratio is building up and it's you have a high quality problem, it's Now going to build faster with lower taxes, etcetera. Have you or might you reevaluate your position on capital return, whether it's a dividend or a buyback?
Yes. We're not going to be doing buybacks. But in terms of the dividend, I think at this point, we're not reevaluating it because we think there's because we think there's some good opportunity, but if we get past the year and we think the best way to deploy that is Through a dividend, that's something we would look at, but we think between organic and acquisitions,
The next question comes from Timur Braziler of Wells Fargo.
Hi, good morning. First question is on something you had said in your prepared remarks regarding deposit competition increasing. I'm just wondering is that In a specific geography, is that a specific asset class where you're seeing some of the greatest increases in deposit competition?
So I think we had good growth for the quarter and you're right, competition is increasing. Customers are more aware of pricing. It's really across all our business lines. And what we're trying to do to offset this phenomena is that we require liquidity To be posted with us when we give you a loan, we require your operating accounts to come with us. And fortunately for us, we've got several businesses where Customers are a little less sensitive to pricing and we've discussed those before and that benefits us.
And then we are proactively going out And really asking for deposits, making sure that we don't leave our meetings without saying what can you do for us back to my story I gave already. And we also are trying to get ahead of the pressure and cut off the attrition by getting out there earlier and giving increases to Some of our borrowers before they ask for it and that preempts the rate conversation and also narrows the gap between what market rates are And what we're paying.
Okay, understood. So it's not that there is so much increased kind of Pricing out there in the market, it's taking preemptive steps to kind of shore that off once that does pick up?
That's part of it. We're taking the preemptive steps, but our borrowers are more aware at this point and It's costing us a little bit more to get those deposits.
Understood. And then maybe switching to loan growth, looking at the growth in the other National business lines, that was a pretty strong number this quarter. Anything in particular driving that or is that pretty granular?
No. The national business lines, the nice thing about them and we meet once a week to go through our senior loan committee and That's where our large loans come in. And 1 week it's heavily weighted towards tech and innovation and the next week you see a lot more hotel deals and And you got the warehouse lending. So for us, I think the balance that we have in our segments works well. And if one segment is a little Slower because deals aren't getting done, the paperwork takes a little longer.
Another segment seems to pick up the slack. So but right now we're seeing Good opportunities in all the segments, probably a little less so in our muni That's a little bit slower, but all the other segments have a lot of activity.
Okay. And then looking at the other segments specifically, that other national business lines, it looks like you about $180,000,000 on a linked quarter basis. Anything specific about that number that's maybe tied to a specific business line or geography or is that pretty wide Fred?
Yes. I mean, the biggest factor in there was our mortgage warehouse group, which I know I mean, Year end is always a tough period for mortgage warehouse because not many people buy a house and close it in December. But that picked up a little bit Despite a little bit of a headwind by having a higher rate environment.
Okay. And then last one for me. Just looking at the HOA business, pretty impressive growth there. Can you remind us, is there some seasonality in the Q1 within that business? And maybe just what the outlook is for deposit gathering out of that business going forward?
So there is seasonality. Usually leading up to the Q1, we're making a bunch of our calls and the deposits move in the beginning of the year when the new HOA books, Coupon books are printed up. So they had you're right, they had a great, great quarter and we're seeing some of that momentum carry into Q2.
Great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Ken Vecchione any closing remarks.
Thanks for joining us today and we look forward to seeing you in Q2. Thanks again.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.