Ed Zito began his financial career with the United States Treasure Department. As president of Alliance Bank of Arizona, a subsidiary of Western Alliance Bancorporation, Zito helped the financial institution cross the $10 billion mark in June, obtain a $2 billion market cap for its stock and grow into the 67th-largest publicly traded bank-holding company in the country. Az Business sat down with Zito after Alliance celebrated record earnings in the second quarter to talk about the state of the banking industry.
Az Business: What is Alliance doing right?
Ed Zito: We had a record second quarter and we are very proud of that. We are just a commercial bank, so we focus on commercial business lending, commercial real estate, public finance and nonprofit organizations. As the largest headquartered bank in Arizona, we work very hard pitch local first, buy local and bank local. It’s a lot more blood, sweat and tears since the marketplace is much more competitive now, but we’re hitting on just about all eight cylinders. We’ve had great deposit growth, which in turn funds our loan growth, which has been strong, albeit competitive.
AB: What sectors are driving your loan growth?
EZ: Everybody knows the Great Recession is over. The economy may not have recovered as strongly as everyone had liked, so there is some owner fatigue out there that is driving some merger and acquisition activity. Virtually all asset types or product types and our commercial real estate sector are all very strong. RED Development is one of our biggest clients and we are fortunate to be financing their Town & Country Shopping Center overhaul. Two other notable projects we are working on is we are financing Building 3 at SkySong and we are financing the acquisition of MetroCenter by the Carlisle Group out of New York City. We feel that economic development is truly within our DNA, so the kinds of projects we are seeing in our commercial real estate area fit within our organization’s makeup.
AB: Both of those projects are revitalizing neighborhoods. How important is that to Alliance?
EZ: That is huge. Western Alliance has more than $10 billion in total assets. We see the importance or reinvesting the deposit dollars we take it back into our local communities to spur job growth, re-employment and economic development. A multitude of our executive team are involved in organizations across the state promoting economic growth and development. We look at it as investing forward, as opposed to giving back. We feel very strongly in taking a leadership role in economic development because that underscores our role as the largest headquartered bank in Arizona, but we also feel that it’s just the right thing to do.
AB: How has the commercial real estate space changed over the last four years?
EZ: It’s dramatically different. Everybody who was in commercial real estate back in 2007 got a cold shower in 2008 and 2009. We saw dramatic unemployment, basically no construction and negative absorption. Slowly, but surely, that’s coming back. The beauty of the difference now is that it was a fairly narrow commercial real estate environment before the Recession. The environment now is much more broad based. It’s underscoring the point that everyone’s economic development efforts are starting to pay off because we have a much more diversified economy. So we are seeing a lot of activity in hospitality, healthcare, education, industrial development, land acquisition for future homebuilding and construction, and multi-family.
AB: Does your record quarter signify anything regarding the economic recovery?
EZ: The banking industry in general has enjoyed the better part of three years of gradual recovery. Banking profitability is nearly at an all-time high. Bank capital is setting record level almost on a quarter-by-quarter basis because profitability is good and earnings are being retained. Fundamentally, the cooperation with the regulatory community in building a more stable and sustainable banking environment has been successful. I do think we are seeing banks marching to the beat of the regulatory drum, but also realizing that the capital base that is needed given the risks and challenges that we face daily are important to be sound, stable, prudent, enabling, but also mindful of the risks that are involved. So there is a good balance being struck right now and the earnings are reflective of that.
AB: Will the increase in the use of mobile banking mean the end for brick-and-mortar banks?
EZ: Not really. As a commercial bank, it’s important to be close to our customers. I have a saying: When someone asks, “Where is your office?” I answer, “Wherever my customer or prospect needs it to be.” We just opened a new office at Loop 101 and Ray Road to serve the rapidly growing Southeast Valley and we are hoping to purchase a piece of land in Gilbert to build more offices. We are trying to go where the business community is growing. We already have a number of offices in Phoenix and Tucson and we will always go where our customers need us.
AB: What are your goals for Alliance over the next five years?
EZ: We are a growth-oriented and goal-oriented organization. Alliance Bank of Arizona opened in 2003 and will celebrate our 12th anniversary in February. Western Alliance, currently a $10 billion bank, will likely grow into a $15 billion or $20 billion bank over the next five years because of organic growth and acquisitions.
