Oct 16, 2015
Operator
Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the Third Quarter 2015.
Our speakers today are Robert Sarver, Chairman and CEO and Dale Gibbons, Chief Financial Officer. You may also view the presentation today via webcast through the company’s website at www.westernalliancebancorp.com.
The call will be recorded and made available for replay after 2 o’clock p.m. Eastern Time, October 16, 2015 through Monday, November 16, 2015 at 9:00 a.m.
Eastern Time by dialing 1-877-344-7529 and entering pass code 10071677. 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 update any forward-looking statements. Now for the opening remarks, I would like to turn the call over to Robert Sarver.
Please go ahead.
Robert Sarver
Yes, thank you. Welcome to Western Alliance third quarter earnings call.
Obviously, you can tell it was a very good quarter for the company and business was very strong here at Western Alliance. This is our first quarter reporting financial performance including Bridge Bank, which contributed to the best quarter in the bank’s history.
I will review the highlights and Dale will discuss our results in a little more detail. I will give you some color moving forward and we will open the lines up for questions.
As you may recall, we closed the Bridge transaction on June 30. Consequently, all of the balance sheet information at last quarter end included Bridge.
However, combining our income performance didn’t occur until July 1. So, this is the first quarter we have included Bridge’s revenue in expenses.
Net income for the third quarter was $59.1 million or $0.58 per share. However, this did include a $5.4 million debt valuation benefit from our outstanding trust preferred as credit spreads widened towards the end of the quarter, a $1.3 million gain from accelerated accretion on purchase loans, a $2.1 million benefit from non-recurring tax items, all partially offset by a little under $1 million in acquisition cost and $600,000 in other cost.
Net of these items, net of tax, it represented a benefit to our earnings per share of $0.05. Top line revenue growth was up over 40% from the third quarter of last year to $145.9 million, while our efficiency ratio increased modestly from the second quarter as we began to integrate Bridge, but was still better than the 47% a year ago.
Loan growth was strong at $427 million for the quarter, while deposits increased $203 million. Non-performing assets declined to 76 basis points of total assets at September 30 compared to 1.23% of total assets a year ago in the third quarter of 2014.
Our tangible book value per share was up $0.61 during the quarter to $11.86 and it’s up 24% over the past year. Our capital growth kept pace with the increase in our assets as our tangible common equity ratio rose to 8.9% at quarter end.
Return on assets was once again above 1.5% and return on tangible common equity exceeded 18% even after adjusting for the non-recurring benefits we had during the quarter. Dale?
Dale Gibbons
Thanks, Robert. Net interest income for the third quarter increased $28.7 million sequentially to $137.4 million.
Excluding Bridge, from the prior quarter, net interest income was up $3 million and is up 14% over the prior year, which is generally consistent with the rate of our organic loan growth. Non-interest income rose $2.9 million during the quarter to $8.5 million, which is essentially all attributable to Bridge.
The effect of the Durbin Amendment was to reduce our debit interchange revenue by $400,000 on a linked quarter basis. Operating expenses increased $17.6 million during the quarter all but three of this increase was due to Bridge Bank.
We also incurred a $1 million increase from higher FDIC fees as we are now a large institution for deposit insurance assessment purposes. No loan loss provision was again required this quarter as stable asset quality and net loan recoveries sufficiently covered the reserve needed for our higher loan balances.
During the second quarter, we recognized a non-cash $7.7 million fair value debt valuation charge as spreads tightened on the $84 million of trust preferred debt that we owe. $5.3 million of this charge was reversed in the third quarter as credit spreads reversed and widened again.
Adding back the $800,000 merger charges, which we backed out of our pre-earnings results in pre-tax income for the quarter of $78.3 million. Non-recurring tax benefits reduced the rate from just over 27% to 24.5%.
Income to common shareholders was $58.9 million, with 101.5 million average diluted shares outstanding resulting in EPS of $0.58 or $0.53 on a run-rate basis, excluding the items that Robert enumerated. The high cash position of the bank at this end of the second quarter was largely deployed into securities purchases during July.
These purchases increased the portfolio by $460 million on a net basis and drove down the yield to less than 3% as the new securities acquired yield in the mid- to high twos. Loan yield increased 0.25 point to 5.31%, which was attributable to the higher yield on Bridge’s loans and discount accretion from purchase accounting.
Without the Bridge acquisition, loan yields would have been 5.05%, essentially flat with the prior quarter. Interest bearing deposit cost flipped 1 basis point from the second quarter to 30.
If we include non-interest bearing deposits, funding cost declined by 3 basis points quarter-over-quarter to 28, which predominantly reflects Bridge’s higher concentration of DDA. Looking at the top graph, the margin increased 18 basis points during the quarter to 4.59%.
The graph at the bottom has been modified from what we reviewed last quarter to back out all purchase accounting effects on the margin. Prior to the third quarter, almost all of the margin impact was due to accretion of discounts on purchase credit-impaired loans.
This has now changed with the merger with Bridge as we recognized $4.7 million in the third quarter for non-PCI loans and $2.3 million for PCI discounts. Of this $7 million total, $1.3 million was due to early payoffs and acceleration of discounts.
The graph on the right quantifies the scheduled accretion for the next five quarters, which shows the total benefit to the margin could decline from $7 million in the third quarter to $4 million in the fourth. However, this forecast does not include any additional accretion that could be realized from loan payouts before contractual maturity.
Bridge’s loans are generally shorter lived than our earlier acquisitions and consequently, the loan discounts are accreted over a shorter term. Operating expense of $72.2 million was up $17.6 million during the quarter, while revenue increased $31.9 million.
This resulted in a marginal efficiency ratio of 55% of the change. This efficiency ratio is lower than what Bridge’s ratio was on a standalone basis.
Despite the increase in the ratio from the second quarter to 46.8%, it is still below 47%, as Robert mentioned a year ago. FTE increased by 4 during the quarter to 1,415.
However, this total obscures the significant reallocation of resources that occurred from administrative and operations functions to business development as relationship officers and managers were up by 17 during the quarter. Pre-pre ROE held steady to last quarter at 2.16%, which drove pre-pre income to $73.7 million on our larger asset base.
ROA was 1.73% for the quarter and 1.58% excluding the $5 million in non-recurring benefits, which is about the same level as the second quarter when adjusted for one-time items as well. Reflecting the strong loan growth, total assets grew to just under $14 billion during the quarter.
The allowance increased from continued loan recoveries, our asset growth was funded by a combination of deposits and borrowings, while our capital was up $69 million from retained earnings and improved valuation of available for sale securities. Tangible common equity was $1.21 billion at quarter end or $11.86 on a per share basis.
For the quarter, loan growth was strong in all major product categories with increases in commercial and industrial, commercial real estate and construction. Both WAL and Bridge growth momentum continued as the $427 million third quarter increase was split roughly 70-30 on a pre-merger basis.
Geographically, each region contributed to growth, except for Nevada which was essentially flat. Among the central business lines, technology, non-profit and municipal had the strongest growth while mortgage warehouse declined as we continue to trim outstandings as pricing pressures remained firm in that category.
DDA balances increased $150 million during the quarter, taking non-interest bearing deposits to over 35% of the total. CDs were up $89 million offsetting a modest decline in money market accounts.
Deposit growth was strongest in Arizona and in our homeowners associations, central business lines while declining in Northern California. Asset quality was fairly flat during the quarter as the decline in non-performing loans was offset by an increase in special mentioned or criticized assets.
During the past year, total adversely graded assets from our own originations as well as acquisitions rose from $333 million to $367 million, but declined by a fifth as a percentage of total assets from 3.24 to 2.6 as the balance sheet rose significantly from September 30 due to organic growth as well as the acquisition of Bridge. We believe $103 million of acquired adversely graded assets is well reserved since it is already net of $28 million in credit discounts to contractual balances.
Gross loan charge-offs were $1.1 million during the quarter or only four basis points of total loans annualized. Offsetting these losses were recoveries of $3.1 million resulting in a net recovery rate of eight basis points, our seventh consecutive net recovery quarter.
As a result of these recoveries, no loan loss provision was required. While the allowances increased from $109 million to $117 million during the quarter, credit discounts on acquired loans have doubled from $13 million to $26 million.
Since both of these amounts are resources to cover potential bad debts, we think the aggregation of them better represents the reserves available for adverse credit developments. On a combined basis, the aggregate of these reserves has declined from 1.54% of total loans a year ago to 1.32% at the end of the third quarter.
This allowance analysis shows two ways to compute an aggregate reserve ratio, which we think improves comparability to other banks that have not conducted mergers or acquisitions. In the first analysis, the allowance of $117 million is divided by loans held for investment of $10.8 billion to derive the allowance ratio of 1.09.
Pulling out the total discounted loans that were acquired at $1.8 billion, results in loans – the reserve is supposed to support of $8.9 billion or a ratio of 1.31. The second computation leaves the acquired loans in, but adds to total loans and the allowance the $26 million credit discounts that have been taken.
With an adjusted allowance of $143 million and loans of $10.8 billion, the ratio would be 1.32, as shown on the previous page. Again, our balance sheet growth was matched by increase in capital as each ratio remains strong.
Reported return on tangible common equity for the last quarter was 20.1% and adjusting this ratio for trust preferred gains and merger charges, our ROTC has been about 18% for each of the past five quarters. One of our key goals has been to boost our tangible book value per share, which during the past year has risen from $9.53 to just under $12, an increase of 24%.
Robert Sarver
Looking forward for the remainder of the year, our Bridge integration is proceeding extremely well as the number of operational functions were fully integrated during the third quarter. You should see some expense savings related to the integration in the fourth quarter as we will pick up an entire quarter of these benefits.
From now, there will not be much change for the Bridge operation until our systems conversion, which we expect to be completed at the end of 2016 or early ‘17. We are ahead of schedule on expense savings and expect to be modestly exceeding our $10 million annual run rate that we targeted when we put the deal together.
We reiterate our guidance on loan and deposit growth at $1.4 billion annual run rate that’s organic or $350 million per quarter, as our business development pipelines remain strong. Net increase of 17 FTEs and business development officers in the quarter should bode well for continued balance sheet growth.
We are moving a little greater percentage of those in the deposit area and are expecting a pretty good quarter on the deposit growth for the fourth quarter. Excluding purchase accounting entries, our margin rose 9 basis points for the quarter, largely due to the higher loan yields from Bridge.
While competitive pricing pressures remain unabated, the third quarter did not reflect the full benefit of lower cash balances and higher security investments that were not in place at the beginning of July. In addition, our 10% senior debt was not paid off until September 1, and our ending loan balances were $260 million higher than the average balance for the quarter.
So due to these items, we expect our core margin to increase modestly in the fourth quarter. We expect operating expenses to decline about $2 million in the fourth quarter from the third, as the fourth quarter benefit is realized from the initiation of efficiency savings from Bridge.
This lower cost base coupled with an expanding core margin should result in the resumption of our improving efficiency ratio trend into the fourth quarter. Obviously, we have been in a net recovery position for quite some time.
Although there is no crystal ball to predict how long that will continue, we do continue to have a list of recoveries coming in through the company primarily from the Nevada franchise. And today, we have been fortunate that we haven’t had any single loan losses over $2 million of the last 4 years.
So at this time, I would like to open it up for your questions. Please.
Operator
We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Joe Morford of RBC Capital.
Joe Morford
Good morning. RBC.
I guess I was curious on the loan growth side, any color on why Arizona was so strong this quarter. And also last quarter, you deliberately exited that $100 million of family priced credits.
And did you do any more of that this quarter as well?
Robert Sarver
Yes. We did about $50 million this quarter in terms of some of the more thinly priced assets.
Actually, overall it was pretty well distributed in terms of loan growth. We had a few larger credits in Arizona due to big shopping center with good credit tenant Anchor here on Camelback or 24th Street and a couple of other homebuilder deals.
We had another company that did a major expansion that fights fires with airplanes. And then on top of that, we had probably a little less payoffs over there than typical.
Dale Gibbons
Joe, we also had a little bit of a transfer. So in our equipment finance area, we have moved some of those loans to our – to Arizona, that explains half of that growth.
So outside of that, it was fairly typical and consistent with the prior quarters. So part of that is a transfer and not actually new loans in Arizona.
Joe Morford
And then did that come from the CBL book too, Dale?
Dale Gibbons
It did.
Joe Morford
Okay, alright. That’s helpful.
That was going to be my other question there. And then I guess any comment on deposit growth at Bridge and how you feel about that going forward?
Robert Sarver
Well, I think we are pretty strong. In addition, we just started a new division, a life sciences division that will be run through Bridge.
We just hired a team to get started on that. And in that business, the deposits are 2:3:1 of the loans.
So, I think that’s pretty strong. We are kind of beefing up our marketing efforts on the deposit side trying to get a little more out of our branch infrastructure in terms of deposits for local businesses around there.
And I think the fourth quarter we are going to have pretty good quarter on the deposit side. So, we have got a pretty strong pipeline there, but it’s definitely more of a priority and a necessity for us to keep our growth rate going.
Joe Morford
Okay, thanks very much.
Robert Sarver
Thanks.
Operator
And the next question will come from Brad Milsaps of Sandler O’Neill.
Brad Milsaps
Hey, good morning.
Robert Sarver
Hey.
Brad Milsaps
Hey, Rob, you touched on a little bit with the life sciences group, but any additional new hires that you have made in the quarter that you would consider significant or maybe the number that you guys added during the quarter?
Robert Sarver
Well, they are all pretty significant, I guess. I wouldn’t want to call it any significant.
But as I said, we did set up a life science group. And we added a couple of people in there to kind of get that group running originally starting out and based in San Diego, but we just hired some people back east there.
We are building a new office in downtown San Francisco, a big commercial office. So, we are beginning to hire there.
We hired a couple of people in capital finance. We hired a couple of people in municipal finance.
And then the balance were really more just traditional C&I relationship managers.
Brad Milsaps
Got it. And then now that you have got a quarter of Bridge under your belt, I know you commented last quarter that you had some confidence through a lot of deal activity out there.
Maybe you could see something else from you guys the next 6 to 12 months. Any change to that or kind of your view on the M&A environment would be great?
Robert Sarver
Yes, that deal is working good. I think from a people standpoint that’s probably what I am most excited about is, all the good people are excited.
The company actually grew most times after an acquisition. The first few quarters are a little sloppy and you are having trouble keeping some people and some clients and stuff, but the company is actually growing.
I have been around almost all the offices, I met the people. I am really encouraged with the sophistication.
I am going to D.C. to make some calls, on Wednesday, that’s the last office, I haven’t been to.
And just overall in terms of the integration, I think it’s been really good. So, it’s everything we hope for.
So, I am real positive from that standpoint. We continue to look at other acquisition opportunities on a selective basis and we will continue to do that obviously with our currency, which is pretty strong given our results, but we have fair amount organically in the pipeline too.
So, we don’t want to lose sight of that. And the reality is if you can grow organically and then you can grow through strategic acquisitions, which themselves can grow organically, to me that’s more of a preferred means than just kind of buying things that will begin to shrink after you buy them over time, because the fit and the people and everything just aren’t the best match.
So, I think that’s kind of how we look at the business. We don’t need to buy anything to grow.
We can grow our EPS at numbers that exceed our peers without buying anything.
Brad Milsaps
That’s great. Thank you.
Operator
And next we have a question from Brian Klock of Keefe, Bruyette & Woods.
Brian Klock
Hey, good morning guys.
Robert Sarver
Hey, Brian.
Brian Klock
So the M&A, the other guys asked all the good questions on the loan growth. I mean, it’s a strong quarter from both Bridge and organic growth out of wall.
As everything was pretty good, pretty positive versus my numbers, the only question I have is your credit quality has been great. You mentioned the recoveries have been out there for seven consecutive quarters.
I guess, can you talk about this quarter, the increase again – a little bit of an increase again in the classifieds and the accruing classifieds in the special mention loans and kind of what – maybe what was in there, what was driving it, and is there a risk of any migration in the near-term from those credits?
Robert Sarver
Maybe a little bit, but I don’t think a lot, because they are kind of concentrated in a couple of deals. So, we did a good job in kind of moving some of our credits either out of the bank or credits that could be upgraded because of company performance.
But where we slipped back was, there are two credits totaling about $32 million, one for $25 million that went to sub and special mention and one for $7 million that went to sub. And the big one that went to special mention, I think we are in pretty good shape.
The company has got good cash flow coverage. It’s got a couple other issues.
We think that will get resolved probably in the first quarter of next year, but maybe in the fourth quarter. So, we feel good about that credit.
The other credit is a business that is probably going to be going through a wind down, but we are heavily collateralized and it should be happening pretty quickly. But one of the things I was stressing on our employee call this morning, because we have a call with all 1,400 employees before we talk to you guys is now that the economy is doing really well, there is really more time to get aggressive in terms of trying to manage out a few of these weaker credits and also to be more vigilant in being out with your customers.
So, listen, we know we are going to have some credits over time that are going to migrate down, that’s just the way our business works, but we are focused to do a better job of – while business is good now, trying to get that list a little bit lower, but it was really just a couple of credits and we don’t see any loss in either one of those credits. And we think they will eventually get either in one case kind of liquidated and paid off and then the other case back to a pass category within the next six months.
Brian Klock
Okay, great. Thanks.
Thanks for that, Robert. And on the past dues, the 30 to 89, was there anything – any resolution to that post quarter or is that something that....
Robert Sarver
At the end of the day, those are just like really small balances compared to – I mean, it kind of looks big when you go like 7 to 19, but at the end of the day, out of $10 billion, it’s – I don’t know, I wouldn’t worry about that.
Brian Klock
Alright, great. Hey, thanks for taking my questions and nice quarter with Bridge.
Robert Sarver
Yes, thanks.
Operator
And the next question comes from Brett Rabatin of Piper Jaffray.
Brett Rabatin
Hi, guys. Good morning.
Robert Sarver
Hi.
Brett Rabatin
Nice results. I wanted to ask just going back you mentioned you had $50 million go.
Robert, do you anticipate doing any more of that? Are you seeing any other potential piece of the portfolio where you might see some larger banks come in and compete too aggressively on price?
Robert Sarver
We do see some of it, and we just – that’s one of the reasons we have a lot of different types of products and types of loans we can do. I think I mentioned before, it’s like these franchise finance loans now, the market is out there 3.5% or whatever, we are doing at 5.5%, 6%.
We just won’t do them. So, we are seeing a little more in terms of overall basic C&I competition, but when you get into the types of businesses where the company really wants to speak to someone who has some expertise in their industry, maybe it’s medical, maybe it’s legal, maybe they are a mortgage company, maybe it’s a municipality.
So, there is things like that. There is still a lot of niches that we are in, that we are pretty good and smart in that we are able to grow our business and that’s really the main thing that separates us from the typical large community bank or in some cases many regional banks.
They are competing against too many commodity based credit products and that’s why our margin is better. I really don’t think it’s related to credit risk.
I think it’s just related to we are picking niches where we have got strong expertise and clients will pay money for it.
Brett Rabatin
Okay, that’s great color. And then the other thing I was curious about, I just want to make sure I understood.
You mentioned $2 million reduction in expenses from Bridge. I want to make sure if I understood that properly, that’s a net reduction from them but you might have other expense growth as you are doing other things to grow…?
Robert Sarver
Yes. Probably not a lot, I mean I was looking through some of their earnings as some of these – I mean we were one of the few banks that wasn’t emptying the cupboards to try to figure out how to squeeze their numbers to beat – to make their estimates by $0.01, so.
Dale Gibbons
We think total...
Robert Sarver
We are in pretty good shape on expenses.
Brett Rabatin
Okay, great. Thanks for the color.
Operator
And our next question comes from Casey Haire of Jefferies.
Robert Sarver
By the way, on some of those expenses too, we had to pick up some new stuff that hurts a little bit like the FDIC assessment. Now we are over the – we are in the big bank category, that went up.
This Durbin Amendment hit us. We staffed up our group for DFAST and so we are pretty loaded there on expenses.
Casey Haire
Good morning guys, Casey here. I also wanted to follow-up on expenses, so the $2 million reduction, is that versus the operating number of $72.2 million?
Dale Gibbons
Yes. We expect operating expenses to decline sequentially in the fourth quarter.
We alluded to this in the kind of the comments, I mean so I mean we had a great quarter. Our bonus pool, we had to fund those up, that’s now kind of loaded to close to the maximum.
So that should ease off a little bit in the fourth quarter. We will see some of the efficiencies we talked about on Bridge as well.
So we are looking for a sequential decline in operating costs.
Casey Haire
Okay. And can you give us – it sounds like you guys are feeling pretty good about doing better than that $10 million in cost save number from Bridge.
If you just give us an update of how much of that $10 million you have gotten thus far, I think you said it’s going to be bar-belled. So there is – probably got a decent chunk in the back half of this year, another chunk coming in the back half of ‘16.
And then…
Robert Sarver
So we got most of that $10 million is going to be in for the fourth quarter on an annual – the $10 million is an annual number, so most of it will be in the fourth quarter. And then when we do the system conversion, we actually – or we got some better pricing than we thought, so we are going to pick up some more – we will pick up a few million on an annual basis when that happens.
Casey Haire
Got it. And that will be a second half ‘16 event?
Robert Sarver
At the earliest.
Dale Gibbons
It could be at the end of ‘16.
Robert Sarver
Fourth quarter of ‘16, first quarter of ‘17.
Casey Haire
Okay, alright. And then just switching to credit, just wondering what is the – on new loan production, I know you guys have a lot of different products and obviously different LLRs on each of them.
But on a blended basis, what is the incremental LLR percentage versus that 1.32 adjusted that you guys are reporting?
Dale Gibbons
It’s coming in around 1%, maybe a tad over.
Casey Haire
Okay, great. And then just one last housekeeping, the go forward tax rate, it sounds like there were some benefits this quarter, what is the good go forward rate going forward?
Dale Gibbons
I will take that rate up a couple of percent anyway, maybe to 27%, 26.5% in there.
Casey Haire
Okay, great. Thanks guys.
Operator
And the next question is from John Moran of Macquarie.
John Moran
Hi, how is it going?
Robert Sarver
Good.
John Moran
Good. Just a real quick question on deposits, I noticed that they were down in both Southern California and Northern California, anything going on there or seasonality in Bridge’s business that sort of impacted things.
And I know that you alluded to some new hires that are kind of focused on the deposit side, any additional color you can give us there?
Dale Gibbons
On the deposit side, no we don’t see anything that gives us pause in terms of what our growth trajectory is. I would say that Bridge’s deposit clients have an average balance that is higher than Western Alliance has been.
And so consequently, they have more volatility on their balances. And I think you are just seeing that in terms of dollars.
We look at the Bridge pipeline for deposits and it looks good in proportionate relative to the whole enterprise. So as Robert mentioned, I mean our fourth quarter pipeline for deposits, we say – to us appears really quite strong.
And we think we are well positioned.
John Moran
Great. And then the new hires, that’s I guess, more focused on treasury management or I mean you referenced sort of life sciences and a really good deposit opportunity there.
Is there anything else in terms of the hires?
Robert Sarver
Yes. Treasury management will be the other one that you mentioned.
I mean we bought up life sciences as unlike – so when we do traditional our commercial real estate lending, the amount of deposits we get from a borrower is really a small fraction of the lending opportunity, say about seven to one, so $7 in loans per $1 of deposits. When you look at life sciences, it may be two to one or three to one the other way because we hold all the funds from the venture capital that’s supporting that business on our balance sheet as they build out their intellectual property.
And so you get – it’s a good complement to what we were doing previously in terms of these technology based loans that skew towards higher deposits and you obviously see that with Silicon Valley in particular.
John Moran
Sure. Got it.
Thanks. That's helpful.
The other one I had is kind of ticky-tack. But on the fee line, other ran up I presume on Bridge and I am just wondering if there is any – I know that those guys had warrant income from time to time and some kickers and things like that on the loans, anything in there this quarter and in outlook there?
Dale Gibbons
Yes. I think I mean they do have warrant income.
They had warrant income in the third quarter. They also have some SBA gains.
We are talking about maybe we will provide a little more specificity or breakout on that prospectively what that might look like. So yes, and again that’s a little bit volatile.
But their numbers were not outsized in terms of what that looks like. And so we had kind of the $3 million increase that’s net of a $400,000 reduction from the Durbin Amendment that we mentioned.
But overall, yes we will give a little more color but they do have those items there. And they also have foreign exchange, which is basically currency translation and so that’s where that growth has come from.
But we see that as consistent as well.
Robert Sarver
Yes. It wasn’t anything heavy this quarter, like that it wasn’t a lumpy big quarter.
John Moran
Alright, perfect, good stuff guys. Thanks.
Operator
Next we have a question from Gary Tenner of D. A.
Davidson.
Gary Tenner
Good morning. I had just a couple of questions on Bridge.
With the new line of business announcements you have made over the past month, month and a half especially on the equity fund resources group, do you think of getting involved there in terms of venture capital and PE funds as a prelude the doing more of the way of early stage lending, something that Bridge hadn’t really done a lot in the past?
Dale Gibbons
A little, but we are not jumping in heavy right now in it.
Robert Sarver
And I want to keep that in perspective also. So if you look at Bridge’s technology loans it was about 40% of their total loans and then they are about one-sixth of our size.
So in total, they are about 7% of our loans are now technology loans. And then if we – with our movement into these potential areas, I mean for that even get to be 1% of our loans, I think it’s going to take a little bit a while.
So it’s not going to – it’s not moving towards a concentration or anything like that.
Dale Gibbons
Also the majority of their technology loans are not an asset based lending. So they are companies that actually have collateral and receivables.
Gary Tenner
Well, exactly which is why I was asking if you are kind of going in different direction or broadly…?
Robert Sarver
No, not in a different direction, we are just – we are trying to provide some more services to these venture capital companies in terms of some subscription lines and they carry good deposits. And it is an entrée to help us get a little more business because right now most of the business we get there comes from the management side, the relationships with the CEOs and the CFOs in that space.
But we are not just jumping in full speed into early startups.
Gary Tenner
Okay. And then also on Bridge, I think you had footnoted that their loan growth this quarter was 130 some odd million dollars, which seems like that was a decent jump from what we had seen from Bridge standalone over the past couple of years prior to the deal.
Do you think that – has anything changed there in terms of how you – under Western Alliance, the kind of the growth dynamic or the maybe being more aggressive or something in the calling...
Robert Sarver
Yes, it’s not really more aggressive. It’s just that Bridge given the size of its capital and it’s entire balance sheet had to kind of measure the growth of their technology business, so it wasn’t too high a percentage of their entire loan book.
And so they kind of had a governor on them. And that’s one of the reasons they were excited to find a partner like us who can allow them to keep doing what they are doing, but do more of it because our balance sheet is bigger and we could absorb it.
Gary Tenner
Okay. So little more of a capacity issue than anything else?
Robert Sarver
Exactly, yes.
Gary Tenner
Alright, that’s helpful. Thank you.
Operator
And at this time, this concludes our question-and-answer session and I would like to turn the conference back over to management for any closing remarks.
Robert Sarver
Okay. Yes, I appreciate you calling in and listening.
We will – I think we will be off to a good fourth quarter. Of course, this is the only quarter in the last 3 years Dale has predicted the margin to go up instead of down, so, hopefully…
Dale Gibbons
I was wrong all the other times.
Robert Sarver
He has been wrong, but hopefully he is not wrong this quarter. But business is good here.
We are pretty excited, but it is a tough business. So, we are continuing to work hard, but there is a lot of opportunity for us right now.
So, we are feeling pretty good. Thanks for your interest and participation in the call and we will talk to you next quarter.
Operator
The conference has now concluded. Thank you for attending today’s presentation.
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