Western Alliance Reports First Quarter 2014 Net Income of $31.1 Million, or $0.35 Per Share

PHOENIX--()--Western Alliance Bancorporation (NYSE:WAL) announced today its financial results for the first quarter 2014.

First Quarter 2014 Highlights:

  • Net income of $31.1 million, compared to $31.4 million for the fourth quarter 2013 and $20.9 million for the first quarter 2013
  • Net income of $30.1 million for the first quarter 2014, excluding the following, net of tax effect: $1.6 million net gain on repossessed and other assets and $0.6 million net loss from debt valuation adjustments and securities gains
  • Earnings per share of $0.35, compared to $0.36 per share in the fourth quarter 2013 and $0.24 per share in the first quarter 2013
  • Earnings per share of $0.34 for the first quarter 2014, excluding the following, net of tax effect: $0.02 net gain on repossessed and other assets and $0.01 net loss from debt valuation adjustments and securities gains
  • Pre-tax, pre-provision operating earnings of $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 20131
  • Net interest margin of 4.41%, compared to 4.44% in the fourth quarter 2013 and 4.36% in the first quarter 2013
  • Total loans of $7.11 billion, up $307 million from December 31, 2013 and up $1.25 billion from March 31, 2013
  • Total deposits of $8.15 billion, up $311 million from December 31, 2013 and up $1.41 billion from March 31, 2013
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.30% of total assets from 1.53% in the fourth quarter 2013 and from 2.10% in the first quarter 2013
  • Net loan recoveries (annualized) to average loans outstanding of 0.02%, compared to net loan charge-offs to average loans of 0.13% in the fourth quarter 2013 and 0.38% in the first quarter 2013
  • Tier I Leverage Capital of 9.9% and Total Risk-Based Capital ratio of 12.4%, compared to 10.1% and 12.6%, respectively, at March 31, 2013
  • Total equity of $895 million, up $39 million from December 31, 2013

Financial Performance

“Our company is off to a strong start for 2014,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Loans and deposits each grew over $300 million during the first quarter, driving record net interest income. Asset quality continued to improve with net loan recoveries and a reduction in non-performing assets during the period. For the past four quarters, net loan losses have averaged less than five basis points of total loans.”

Sarver continued, “With WAL's revenue growth rate again exceeding our operating expense growth rate, our efficiency ratio improved by 90 basis points to 51%. The legal merger of our subsidiary banks at the end of last year should enable us make business practice improvements to drive this key metric to under 50% in the near future.”

Income Statement

Net interest income was $90.8 million in the first quarter 2014, an increase of $0.8 million, or 0.9%, from $90.0 million in the fourth quarter of 2013 and an increase of $14.6 million, or 19.1%, compared to the first quarter 2013. The Company’s net interest margin decreased in the first quarter 2014 to 4.41%, compared to 4.44% in the fourth quarter 2013, and increased compared to 4.36% in the first quarter 2013.

Operating non-interest income was $5.7 million for the first quarter 2014, compared to $5.2 million in the fourth quarter of 2013 and $5.1 million for the first quarter of 2013.1

Net operating revenue was $96.5 million for the first quarter 2014, an increase of 1.4% compared to $95.2 million for the fourth quarter of 2013 and an increase of 18.7% compared to $81.3 million for the first quarter 2013.1

Operating non-interest expense was $52.1 million for the first quarter 2014, compared to $51.4 million for the fourth quarter of 2013 and $46.2 million for the first quarter of 2013.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 51.0% for the first quarter 2014, compared to 51.9% for the fourth quarter 2013 and 54.6% for the first quarter 2013.

The Company had 1,105 full-time equivalent employees and 39 offices at March 31, 2014, compared to 992 full-time equivalent employees and 40 offices at March 31, 2013.

The Company views its pre-tax, pre-provision operating earnings as a key metric for assessing the Company’s earning power, which it defines as net operating revenue less operating non-interest expense. For the first quarter 2014, the Company’s pre-tax, pre-provision operating earnings were $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 2013.1

The following are non-core items, which are discussed below on a pre-tax basis.

Net gain on repossessed and other assets (primarily other real estate) was $2.5 million for the first quarter 2014, which resulted primarily from the sale of two properties, compared to a net gain of $2.2 million in the fourth quarter 2013 and a net loss of $0.5 million in the first quarter 2013. At March 31, 2014, other repossessed assets totaled $56 million, compared to $67 million at December 31, 2013 and $78 million at March 31, 2013.

Net loss from debt valuation adjustments and securities gains were $0.9 million for the first quarter 2014. Securities gains of $0.4 million were offset by a loss on junior subordinated debt resulting from an increase in their fair value.

Effective as of the first quarter 2014, the Company elected early adoption of Accounting Standards Codification 323-740, an amended Financial Accounting Standards Board standard related to accounting for low income housing tax credit investments. Under this amended standard, the amortization of the investment may now be calculated under the proportional amortization method and is included in income tax expense rather than as a separate line item in non-interest income. Prior period amounts have been adjusted to reflect the adoption of this new accounting guidance, which has resulted in an increase in non-interest income and income tax expense. See the supplemental schedule at the end of this press release for additional detail on the impact that adoption of this standard has had on prior period financial information.

Balance Sheet

Gross loans totaled $7.11 billion at March 31, 2014, an increase of $307 million from December 31, 2013 and an increase of $1.25 billion from $5.86 billion at March 31, 2013. At March 31, 2014, the allowance for credit losses was 1.46% of total loans, compared to 1.47% at December 31, 2013 and 1.63% at March 31, 2013, reflecting an improvement in the Company’s asset quality profile.

Deposits totaled $8.15 billion at March 31, 2014, an increase of $311 million from $7.84 billion at December 31, 2013 and an increase of $1.41 billion from $6.73 billion at March 31, 2013. Non-interest bearing deposits were $2.09 billion at March 31, 2014, compared to $2.20 billion at December 31, 2013 and $1.93 billion at March 31, 2013. Non-interest bearing deposits comprised 25.7% of total deposits at March 31, 2014, compared to 28.1% at December 31, 2013 and 28.7% at March 31, 2013, while the proportion of savings and money market accounts increased to 45.1% from approximately 42.0% at December 31, 2013 and March 31, 2013. Certificates of deposit as a percent of total deposits remained consistent at approximately 20.0% at March 31, 2014 and March 31, 2013. The Company’s ratio of loans to deposits was 87.2% at March 31, 2014, compared to 86.8% at December 31, 2013 and 86.9% at March 31, 2013.

Stockholders’ equity at March 31, 2014 increased to $895 million from $856 million at December 31, 2013 and increased $114 million from $781 million at March 31, 2013. At March 31, 2014, tangible common equity was 7.5% of tangible assets1 and total risk-based capital was 12.4% of risk-weighted assets. The Company’s tangible book value per share1 was $8.32 at March 31, 2014, up 18.2% from March 31, 2013.

Total assets increased 4.7% to $9.75 billion at March 31, 2014 from $9.31 billion at December 31, 2013, and increased 19.2% from $8.17 billion at March 31, 2013.

Asset Quality

The provision for credit losses was $3.5 million for the first quarter 2014, compared to $4.3 million in the fourth quarter 2013 and $5.4 million for the first quarter 2013. Net loan recoveries in the first quarter 2014 were $0.3 million, or 0.02% of average loans (annualized), compared to net loan charge-offs to average loans of 0.13% for the fourth quarter 2013. Net charge-offs for the first quarter 2013 were $5.4 million, or 0.38% of average loans (annualized).

Nonaccrual loans decreased $5.3 million to $70.4 million during the quarter. Loans past due 90 days and still accruing interest totaled $0.2 million at March 31, 2014, down from $1.5 million at December 31, 2013 and $1.6 million at March 31, 2013. Loans past due 30-89 days, still accruing interest totaled $11.1 million at quarter end, down from $13.4 million at December 31, 2013 and $14.8 million at March 31, 2013.

As the Company’s asset quality improved and its capital increased, the ratio of classified assets to Tier I capital plus the allowance for credit losses, a common regulatory measure of asset quality, improved to 24% at March 31, 2014 from 30% at March 31, 2013.1

Segment Highlights

On December 31, 2013, the Company consolidated its three bank subsidiaries under one charter, Western Alliance Bank. As a result, the Company has redefined its operating segments to reflect the new organizational and internal reporting structure. Prior year segment information has not been recast to conform to the new segmentation methodology due to the impracticability of restating segments because of the change in legal structure at December 31, 2013. The new operating segments are as follows: Arizona, Nevada, California, Specialty Finance, and Corporate & Other.

The Company's reportable segments are aggregated primarily based on geographic location, services offered and markets served. The Arizona, Nevada and California segments provide full service banking and related services to their respective regions. The Company's Specialty Finance segment provides banking services to niche markets. These Specialty Finance businesses are broader in geographic scope and are managed centrally. Corporate & Other consists of corporate-related items, income and expense items not allocated to our other reportable segments and inter-segment eliminations.

Key management metrics for evaluating the performance of its Arizona, Nevada, California and Specialty Finance segments include loan and deposit growth, asset quality, total revenues1 and pre-tax, pre-provision operating earnings.1

Arizona reported a gross loan balance of $2.03 billion at March 31, 2014, an increase of $8 million during the quarter. Deposits were $2.17 billion at March 31, 2014, an increase of $78 million during the quarter. Net operating revenues were $27.4 million and pre-tax, pre-provision operating earnings were $14.1 million for the first quarter 2014.

Nevada reported a gross loan balance of $1.72 billion at March 31, 2014, a decrease of $31 million during the quarter. Deposits were $3.02 billion at March 31, 2014, an increase of $127 million during the quarter. Net operating revenues were $30.9 million and pre-tax, pre-provision operating earnings were $14.8 million during the first quarter 2014.

California reported a gross loan balance of $1.66 billion at March 31, 2014, an increase of $48 million during the quarter. Deposits were $1.87 billion at March 31, 2014, a decrease of $30 million during the quarter. Net operating revenues were $24.0 million and pre-tax, pre-provision operating earnings were $11.0 million during the first quarter 2014.

Specialty Finance reported a gross loan balance of $1.62 billion at March 31, 2014, an increase of $271 million during the quarter. Deposits were $845 million at March 31, 2014, an increase of $93 million during the quarter. Net operating revenues were $14.4 million and pre-tax, pre-provision operating earnings were $7.9 million during the first quarter 2014.

Attached to this press release is summarized financial information for the quarter ended March 31, 2014.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its first quarter 2014 financial results at 12:00 p.m. ET on Tuesday, April 22, 2014. Participants may access the call by dialing 1-888-317-6003 and using passcode: 4395570 or via live audio webcast using the website link: http://services.choruscall.com/links/wal140422.html. The webcast is also available via the Company’s website at www.westernalliancebancorp.com. Participants should log in at least 15 minutes early to receive instructions. The call will be recorded and made available for replay after 2:00 p.m. ET April 22nd through May 6th at 9:00 a.m. ET by dialing 1-877-344-7529 passcode: 10044322.

About Western Alliance Bancorporation

Western Alliance Bancorporation (NYSE:WAL) is a leading bank holding company providing comprehensive business banking and related financial services through its wholly-owned banking subsidiary, Western Alliance Bank (the "Bank"). With local teams of experienced bankers, the Bank provides a superior level of capabilities, products and services, to assist the growth of local businesses and the quality of life in the markets it serves. In addition to a national platform of specialized financial service units, the Bank operates full service banking divisions in its local markets as Alliance Bank of Arizona, Bank of Nevada, First Independent Bank and Torrey Pines Bank. Western Alliance Bancorporation is publicly traded on the New York Stock Exchange. Additional investor information can be accessed on the Investor Relations page of the Company's website, www.westernalliancebancorp.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains 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. Examples of forward-looking statements include, among others, statements we make regarding guidance, outlook or expectations relating to loan and deposit growth, interest margin, operating efficiency and asset quality. 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, among others: the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; inflation, interest rate, market and monetary fluctuations; increases in competitive pressures among financial institutions and businesses offering similar products and services; higher defaults on our loan portfolio than we expect; changes in management’s estimate of the adequacy of the allowance for credit losses; legislative or regulatory changes or changes in accounting principles, policies or guidelines; supervisory actions by regulatory agencies which may limit our ability to pursue certain growth opportunities; management’s estimates and projections of interest rates and interest rate policy; the execution of our business plan; and other factors affecting the financial services industry generally or the banking industry in particular.

Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements, whether written or oral, that may be made from time to time, set forth in this press release to reflect new information, future events or otherwise.

This press release contains both financial measures based on accounting principles generally accepted in the United States (“GAAP”) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Western Alliance Bancorporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

1 See Reconciliation of Non-GAAP Financial Measures

                 
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
 
At or for the Three Months Ended March 31,
2014 2013 Change %
 
Selected Balance Sheet Data:
(dollars in millions)
Total assets $ 9,746.6 $ 8,173.8 19.2 %
Loans, net of deferred fees 7,108.6 5,855.3 21.4
Securities and money market investments 1,671.2 1,302.4 28.3
Securities purchased under agreement to resell 111.1 134.0 (17.1 )
Total deposits 8,149.0 6,734.9 21.0
Borrowings 342.8 293.8 16.7
Junior subordinated debt 42.8 36.7 16.6
Stockholders' equity 894.8 781.1 14.6
 
Selected Income Statement Data:
(dollars in thousands)
Interest income $ 98,701 $ 83,108 18.8 %
Interest expense 7,924   6,905   14.8
Net interest income 90,777 76,203 19.1
Provision for loan losses 3,500   5,439   (35.6 )
Net interest income after provision for credit losses 87,277 70,764 23.3
Non-interest income 4,835 4,799 0.8
Non-interest expense 49,749   46,929   6.0
Income from continuing operations, before income tax expense 42,363 28,634 47.9
Income tax expense 10,624   7,787   36.4
Income from continuing operations 31,739 20,847 52.2
(Loss) income on discontinued operations, net (654 ) 38   (1,821.1 )
Net income $ 31,085   $ 20,885   48.8 %
Diluted net income per common share from continuing operations $ 0.36   $ 0.24   50.0 %
Diluted net loss per common share from discontinued operations, net of tax $ (0.01 ) $  
Diluted net income per common share $ 0.35   $ 0.24   45.8 %
 
Common Share Data:
Diluted net income per common share $ 0.35 $ 0.24 45.8 %
Book value per common share $ 8.61 $ 7.35 17.1 %
Tangible book value per share, net of tax (1) $ 8.32 $ 7.04 18.2 %
Average shares outstanding (in thousands):
Basic 86,256 85,324 1.1
Diluted 87,123 85,980 1.3
Common shares outstanding 87,554 87,079 0.5
 
(1) See Reconciliation of Non-GAAP Financial Measures.
 
 

                 
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data (continued)
Unaudited
 
At or for the Three Months Ended March 31,
2014 2013 Change %
 
Selected Performance Ratios:
Return on average assets (1) 1.35 % 1.07 % 26.2 %
Return on average tangible common equity (2) 17.55 13.93 26.0
Net interest margin (1) 4.41 4.36 1.1
Net interest spread 4.27 4.21 1.4
Efficiency ratio - tax equivalent basis (2) 51.00 54.58 (6.6 )
Loan to deposit ratio 87.23 86.94 0.3
 
Capital Ratios:
Tangible equity (2) 8.9 % 9.2 % (3.3 )%
Tangible common equity (2) 7.5 7.5
Tier 1 common equity (2) 8.8 8.6 2.3
Tier 1 Leverage ratio (3) 9.9 10.1 (2.0 )
Tier 1 Risk Based Capital (3) 11.1 11.3 (1.8 )
Total Risk Based Capital (3) 12.4 12.6 (1.6 )
 
Asset Quality Ratios:
Net (recoveries) charge-offs to average loans outstanding (1) (0.02 )% 0.38 % (105.3 )%
Nonaccrual loans to gross loans 0.99 1.60 (38.1 )
Nonaccrual loans and repossessed assets to total assets 1.30 2.10 (38.1 )
Loans past due 90 days and still accruing to total loans 0.03 (100.0 )
Allowance for credit losses to loans 1.46 1.63 (10.4 )
Allowance for credit losses to nonaccrual loans 147.58 101.86 44.9
 
(1) Annualized for the three month periods ended March 31, 2014 and 2013.
(2) See Reconciliation of Non-GAAP Financial Measures.
(3) Capital ratios are preliminary until the Call Reports are filed.
 
 

           
Western Alliance Bancorporation and Subsidiaries
Condensed Consolidated Income Statements
Unaudited
Three Months Ended March 31,
2014 2013
Interest income: (dollars in thousands)
Loans $ 86,804 $ 74,725
Investment securities 11,325 8,158
Federal funds sold and other 572   225  
Total interest income 98,701   83,108  
Interest expense:
Deposits 4,665 3,732
Borrowings 2,838 2,707
Junior subordinated debt 421   466  
Total interest expense 7,924   6,905  
Net interest income 90,777 76,203
Provision for credit losses 3,500   5,439  
Net interest income after provision for credit losses 87,277   70,764  
Non-interest income:
Service charges 2,530 2,534
Bank owned life insurance 949 1,036
Gains on sales of investment securities, net 366 147
Unrealized losses on assets/liabilities measured at fair value, net (1,276 ) (471 )
Other 2,266   1,553  
Total non-interest income 4,835   4,799  
Non-interest expenses:
Salaries and employee benefits 29,555 26,574
Occupancy 4,682 4,846
Legal, professional and directors' fees 3,639 3,023
Insurance 2,393 2,370
Data processing 2,674 1,865
Marketing 559 667
Loan and repossessed asset expenses 1,234 1,596
Customer service 620 643
Net (gain) loss on sales and valuations of repossessed and other assets (2,547 ) 519
Intangible amortization 597 597
Merger / restructure expense 157 195
Other 6,186   4,034  
Total non-interest expense 49,749   46,929  
Income from continuing operations before income taxes 42,363 28,634
Income tax expense 10,624   7,787  
Income from continuing operations $ 31,739 $ 20,847
(Loss) income from discontinued operations net of tax benefit (654 ) 38  
Net income $ 31,085 $ 20,885
Preferred stock dividends 353   353  
Net income available to common stockholders $ 30,732   $ 20,532  
 
Diluted net income per share $ 0.35   $ 0.24  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited
Three Months Ended
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(in thousands, except per share data)
Interest income:
Loans $ 86,804 $ 86,902 $ 83,994 $ 81,093 $ 74,725
Investment securities 11,325 10,137 8,286 7,822 8,158
Federal funds sold and other 572   543   400   370   225  
Total interest income 98,701   97,582   92,680   89,285   83,108  
Interest expense:
Deposits 4,665 4,442 4,232 3,929 3,732
Borrowings 2,838 2,717 3,429 2,749 2,707
Junior subordinated debt 421   442   460   455   466  
Total interest expense 7,924   7,601   8,121   7,133   6,905  
Net interest income 90,777 89,981 84,559 82,152 76,203
Provision for credit losses 3,500   4,300     3,481   5,439  
Net interest income after provision for credit losses 87,277   85,681   84,559   78,671   70,764  
Non-interest income:
Service charges 2,530 2,512 2,425 2,449 2,534
Bank owned life insurance 949 905 1,832 1,036 1,036
Gains (losses) on sales of investment securities, net 366 342 (1,679 ) (5 ) 147
Unrealized losses on assets/liabilities measured at fair value, net (1,276 ) (2,618 ) (7 ) (3,290 ) (471 )
Loss on extinguishment of debt (1,387 )
Bargain purchase gain from acquisition 10,044
Other 2,266   1,803   1,558   1,528   1,553  
Total non-interest income 4,835   1,557   4,129   11,762   4,799  
Non-interest expenses:
Salaries and employee benefits 29,555 30,071 28,689 28,100 26,574
Occupancy 4,682 4,626 4,901 4,753 4,846
Legal, professional and directors' fees 3,639 4,623 3,438 2,549 3,023
Insurance 2,393 1,744 1,884 2,096 2,370
Data processing 2,674 2,040 1,872 2,175 1,865
Marketing 559 619 585 710 667
Loan and repossessed asset expenses 1,234 793 1,136 721 1,596
Customer service 620 860 677 717 643
Net (gain) loss on sales and valuations of repossessed and other assets (2,547 ) (2,153 ) 371 (1,124 ) 519
Intangible amortization 597 597 597 597 597
Merger / restructure expense 157 1,919 1,018 2,620 195
Other 6,186   5,392   4,507   4,617   4,034  
Total non-interest expense 49,749   51,131   49,675   48,531   46,929  
Income from continuing operations before income taxes 42,363 36,107 39,013 41,902 28,634
Income tax expense 10,624   3,992   10,390   7,661   7,787  
Income from continuing operations $ 31,739 $ 32,115 $ 28,623 $ 34,241 $ 20,847
(Loss) income from discontinued operations, net of tax (654 ) (701 ) (29 ) (169 ) 38  
Net income $ 31,085   $ 31,414   $ 28,594   $ 34,072   $ 20,885  
Preferred stock dividends 353   352   352   353   353  
Net income available to common stockholders $ 30,732   $ 31,062   $ 28,242   $ 33,719   $ 20,532  
 
Diluted net income per share $ 0.35   $ 0.36   $ 0.33   $ 0.39   $ 0.24  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(in millions)
Assets:
Cash and due from banks $ 354.8 $ 305.5 $ 380.9 $ 248.9 $ 422.3
Securities purchased under agreement to resell 111.1     128.1   134.0   134.0  
Cash and cash equivalents 465.9 305.5 509.0 382.9 556.3
 
Securities and money market investments 1,671.2 1,689.6 1,370.8 1,313.1 1,302.4
Loans held for sale 25.4 27.6 27.9
Loans held for investment:
Commercial 2,723.4 2,478.2 2,234.9 2,174.1 2,084.9
Commercial real estate - non-owner occupied 1,849.2 1,841.1 1,864.3 1,839.7 1,538.4
Commercial real estate - owner occupied 1,606.2 1,561.9 1,551.2 1,550.0 1,414.3
Construction and land development 553.7 535.7 459.8 416.7 381.1
Residential real estate 344.9 350.3 359.0 381.7 388.7
Consumer 38.3 43.1 29.8 28.5 26.0
Deferred fees, net (7.1 ) (8.9 ) (8.1 ) (6.8 ) (6.0 )
Gross loans and deferred fees, net 7,108.6 6,801.4 6,490.9 6,383.9 5,827.4
Allowance for credit losses (103.9 ) (100.1 ) (97.9 ) (96.3 ) (95.5 )
Loans, net 7,004.7   6,701.3   6,393.0   6,287.6   5,731.9  
 
Premises and equipment, net 106.6 105.6 105.9 106.1 107.1
Other repossessed assets 56.5 66.7 76.5 76.5 77.9
Bank owned life insurance 141.5 140.6 139.7 140.4 139.4
Goodwill and other intangibles 26.8 27.4 28.0 28.6 29.2
Other assets 273.4   270.7   272.2   229.9   201.7  
Total assets $ 9,746.6   $ 9,307.4   $ 8,920.5   $ 8,592.7   $ 8,173.8  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $ 2,093.6 $ 2,200.0 $ 1,972.5 $ 1,919.6 $ 1,930.4
Interest bearing:
Demand 750.4 709.8 673.7 631.3 619.7
Savings and money market 3,672.3 3,310.4 3,050.0 2,945.1 2,826.7
Time certificates 1,632.7   1,618.0   1,579.1   1,505.3   1,358.1  
Total deposits 8,149.0 7,838.2 7,275.3 7,001.3 6,734.9
Customer repurchase agreements 57.4   71.2   55.5   51.9   64.7  
Total customer funds 8,206.4 7,909.4 7,330.8 7,053.2 6,799.6
Securities sold short 99.1 126.6 129.5 132.6
Borrowings 342.8 341.1 394.1 418.6 293.8
Junior subordinated debt 42.8 41.9 39.4 39.9 36.7
Accrued interest payable and other liabilities 160.7   159.5   203.1   152.2   130.0  
Total liabilities 8,851.8   8,451.9   8,094.0   7,793.4   7,392.7  
Stockholders' Equity
Common stock and additional paid-in capital 795.3 797.2 792.2 789.5 786.9
Preferred stock 141.0 141.0 141.0 141.0 141.0
Accumulated deficit (30.4 ) (61.2 ) (92.2 ) (120.4 ) (154.0 )
Accumulated other comprehensive (loss) income (11.1 ) (21.5 ) (14.5 ) (10.8 ) 7.2  
Total stockholders' equity 894.8   855.5   826.5   799.3   781.1  
Total liabilities and stockholders' equity $ 9,746.6   $ 9,307.4   $ 8,920.5   $ 8,592.7   $ 8,173.8  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses
Unaudited
Three Months Ended
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(in thousands)
Balance, beginning of period $ 100,050 $ 97,851 $ 96,323 $ 95,494 $ 95,427
Provision for credit losses 3,500 4,300 3,481 5,439
Recoveries of loans previously charged-off:
Commercial and industrial 922 666 2,242 1,757 441
Commercial real estate - non-owner occupied 83 395 273 154 440
Commercial real estate - owner occupied 477 297 149 479 502
Construction and land development 211 273 966 120 701
Residential real estate 553 549 430 549 569
Consumer 170   179   726   11   14  
Total recoveries 2,416 2,359 4,786 3,070 2,667
Loans charged-off:
Commercial and industrial 1,478 621 544 1,065 1,770
Commercial real estate - non-owner occupied 160 2,268 466 1,000 1,908
Commercial real estate - owner occupied 11 238 398 1,391 979
Construction and land development 686 238 614
Residential real estate 406 281 1,138 2,010 2,493
Consumer 12   366   712   18   275  
Total loans charged-off 2,067 4,460 3,258 5,722 8,039
Net loan (recoveries) charge-offs (349 ) 2,101   (1,528 ) 2,652   5,372  
Balance, end of period $ 103,899   $ 100,050   $ 97,851   $ 96,323   $ 95,494  
 
Net (recoveries) charge-offs to average loans outstanding - annualized (0.02 )% 0.13 % (0.10 )% 0.17 % 0.38 %
Allowance for credit losses to gross loans 1.46 1.47 1.50 1.50 1.63
Nonaccrual loans $ 70,401 $ 75,681 $ 76,641 $ 82,899 $ 93,748
Repossessed assets 56,450 66,719 76,475 76,499 77,921
Loans past due 90 days, still accruing 167 1,534 5,456 3,893 1,640
Loans past due 30 to 89 days, still accruing 11,087 13,425 8,689 7,341 14,795
Classified loans on accrual 125,903 128,586 144,041 140,192 97,351
Special mention loans 117,540 129,965 137,247 162,482 125,660
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
      Three Months Ended March 31,
2014 2013

Average
Balance

Interest

Average
Yield/ Cost

Average
Balance

Interest

Average
Yield/ Cost

($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets
Loans (1) $ 6,893.2 $ 86,804 5.27 % $ 5,610.4 $ 74,725 5.42 %
Securities (1) 1,651.6 11,325 3.15 1,283.4 8,158 3.21
Federal funds sold and other 210.3   572   1.09   404.8   225   0.22  
Total interest earning assets 8,755.1 98,701 4.77 7,298.6 83,108 4.74
Non-interest earning assets
Cash and due from banks 137.5 126.4
Allowance for credit losses (101.2 ) (96.9 )
Bank owned life insurance 140.9 138.7
Other assets 433.1   421.9  
Total assets $ 9,365.4   $ 7,888.7  
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 765.0 $ 384 0.20 % $ 608.7 $ 301 0.20 %
Savings and money market 3,452.3 2,562 0.30 2,620.9 1,911 0.29
Time certificates of deposit 1,619.6   1,719   0.42   1,449.4   1,520   0.42  
Total interest-bearing deposits 5,836.9 4,665 0.32 4,679.0 3,732 0.32
Short-term borrowings 163.3 130 0.32 176.4 214 0.49
Long-term debt 301.8 2,708 3.59 272.9 2,493 3.65
Junior subordinated debt 41.9   421   4.02   36.2   466   5.15  
Total interest-bearing liabilities 6,343.9 7,924 0.50 5,164.5 6,905 0.53
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 2,054.1 1,855.1
Other liabilities 81.1 90.7
Stockholders’ equity 886.3   778.4  
Total liabilities and stockholders' equity $ 9,365.4   $ 7,888.7  
Net interest income and margin $ 90,777   4.41 % $ 76,203   4.36 %
Net interest spread 4.27 % 4.21 %
 
(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $5,705 and $3,382 for the first quarters ended 2014 and 2013, respectively.
 
 

                   
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
     
Arizona Nevada California

Specialty
Finance

Corporate &
Other

Consolidated
Company

(dollars in millions)
At March 31, 2014
Assets $ 2,054.0 $ 1,819.7 $ 1,667.2 $ 1,616.0 $ 2,589.7 $ 9,746.6
Gross loans and deferred fees, net 2,032.3 1,723.8 1,663.1 1,621.2 68.2 7,108.6
Less: Allowance for credit losses (29.7 ) (25.2 ) (24.3 ) (23.7 ) (1.0 ) (103.9 )
Loans, net 2,002.6   1,698.6   1,638.8   1,597.5   67.2   7,004.7  
 
Goodwill and intangible assets, net 2.4 24.4 26.8
Deposits 2,166.0 3,024.6 1,867.3 845.1 246.0 8,149.0
Borrowings 342.8 342.8
Stockholders' equity $

219.4

$

207.9

$

178.7

$

123.2

$

165.6

$ 894.8
 
No. of branches 10 18 11 39
No. of full-time equivalent employees 216 326 217 93 253 1,105
 
(in thousands)
Three Months Ended March 31, 2014:
Net interest income (expense) $ 26,608 $ 28,595 $ 22,792 $ 13,964 $ (1,182 ) $ 90,777
Provision for credit losses 1,558   (884 ) 655   2,170   1   3,500  
Net interest income (expense) after provision for credit losses 25,050 29,479 22,137 11,794 (1,183 ) 87,277
Non-interest income 820 2,289 1,250 82 394 4,835
Non-interest expense

(13,304

)

(15,236

)

(13,043

)

(6,508

)

(1,658

) (49,749 )
Income (loss) from continuing operations before income taxes

12,566

16,532

10,344

5,368

(2,447

) 42,363
Income tax expense (benefit)

4,929

 

5,787

 

4,350

  2,013  

(6,455

) 10,624  
Income (loss) from continuing operations

7,637

10,745

5,994

3,355

4,008

31,739
Loss from discontinued operations, net         (654 ) (654 )
Net income (loss) $

7,637

  $

10,745

  $

5,994

  $

3,355

  $

3,354

  $ 31,085  
 
 

 
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
                     
Pre-Tax, Pre-Provision Operating Earnings by Quarter
Three Months Ended
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(in thousands)
Total non-interest income $ 4,835 $ 1,557 $ 4,129 $ 11,762 $ 4,799
Less:

Unrealized losses on assets/liabilities measured at fair value, net

(1,276 ) (2,618 ) (7 ) (3,290 ) (471 )
Loss on extinguishment of debt (1,387 )
Bargain purchase gain from acquisitions 10,044
Legal settlements 38
Gains (losses) on sales of investment securities, net 366   342   (1,679 ) (5 ) 147  
Total operating non-interest income 5,745 5,220 5,815 5,013 5,085
Add: Net interest income 90,777   89,981   84,559   82,152   76,203  
Net operating revenue (3) $ 96,522 $ 95,201 $ 90,374 $ 87,165 $ 81,288
 
Total non-interest expense $ 49,749 $ 51,131 $ 49,675 $ 48,531 $ 46,929
Less:
Net (gain) loss on sales and valuations of repossessed and other assets (2,547 ) (2,153 ) 371 (1,124 ) 519
Merger / restructure expense 157   1,919   1,018   2,620   195  
Total operating non-interest expense (3) $ 52,139 $ 51,365 $ 48,286 $ 47,035 $ 46,215
         
Pre-tax, pre-provision operating earnings (4) $ 44,383   $ 43,836   $ 42,088   $ 40,130   $ 35,073  
 
 
Pre-Tax, Pre-Provision Operating Earnings by Segment
      Three Months Ended March 31, 2014
Arizona     Nevada     California    

Specialty
Finance

   

Corporate &
Other

   

Consolidated
Company

(in thousands)
Total non-interest income $ 820 $ 2,289 $ 1,250 $ 82 $ 394 $ 4,835
Less:

Unrealized losses on assets/liabilities measured at fair value, net

(364 ) (912 ) (1,276 )
Gains (losses) on sales of investment securities, net         366   366  
Total operating non-interest income 820 2,289 1,250 446 940 5,745
Add: Net interest income 26,608   28,595   22,792   13,964   (1,182 ) 90,777  
Net operating revenue (3) $ 27,428 $ 30,884 $ 24,042 $ 14,410 $ (242 ) $ 96,522
 
Total non-interest expense $

13,304

$

15,236

$

13,043

$

6,508

$

1,658

$ 49,749
Less:
Net (gain) loss on sales and valuations of repossessed and other assets (26 ) (721 ) (1 ) (20 ) (1,779 ) (2,547 )
Merger / restructure expense   (122 )     279   157  
Total operating non-interest expense (3) $

13,330

$

16,079

$

13,044

$

6,528

$

3,158

$ 52,139
           
Pre-tax, pre-provision operating earnings (losses) (4) $

14,098

  $

14,805

  $

10,998

  $

7,882

  $

(3,400

) $ 44,383  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
Tangible Common Equity
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(dollars and shares in thousands)
Total stockholders' equity $ 894,804 $ 855,498 $ 826,472 $ 799,307 $ 781,021
Less:
Goodwill and intangible assets 26,777   27,374   27,970   28,568   29,166  
Total tangible stockholders' equity 868,027 828,124 798,502 770,739 751,855
Less:
Preferred stock 141,000   141,000   141,000   141,000   141,000  
Total tangible common equity 727,027 687,124 657,502 629,739 610,855
Add:
Deferred tax - attributed to intangible assets 1,243   1,452   1,661   1,870   2,080  
Total tangible common equity, net of tax $ 728,270   $ 688,576   $ 659,163   $ 631,609   $ 612,935  
Total assets $ 9,746,623 $ 9,307,342 $ 8,920,449 $ 8,592,692 $ 8,173,890
Less:
Goodwill and intangible assets 26,777   27,374   27,970   28,568   29,166  
Tangible assets 9,719,846 9,279,968 8,892,479 8,564,124 8,144,724
Add:
Deferred tax - attributed to intangible assets 1,243   1,452   1,661   1,870   2,080  
Total tangible assets, net of tax $ 9,721,089   $ 9,281,420   $ 8,894,140   $ 8,565,994   $ 8,146,804  
Tangible equity ratio (1) 8.9 % 8.9 % 9.0 % 9.0 % 9.2 %
Tangible common equity ratio (1) 7.5 % 7.4 % 7.4 % 7.4 % 7.5 %
Common shares outstanding 87,554 87,186 87,099 86,997 87,079
Tangible book value per share, net of tax (2) $ 8.32 $ 7.90 $ 7.57 $ 7.26 $ 7.04
 
 
Efficiency Ratio
Three Months Ended
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013
(in thousands)
Total operating non-interest expense $ 52,139   $ 51,365   $ 48,286   $ 47,035   $ 46,215  
Divided by:
Total net interest income $ 90,777 $ 89,981 $ 84,559 $ 82,152 $ 76,203
Add:
Tax equivalent interest adjustment 5,705 3,728 3,272 2,929 3,382
Operating non-interest income 5,745   5,220   5,815   5,013   5,085  
$ 102,227   $ 98,929   $ 93,646   $ 90,094   $ 84,670  
Efficiency ratio - tax equivalent basis (5) 51.0 % 51.9 % 51.6 % 52.2 % 54.6 %
 
 

           
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
Tier 1 Common Equity
Three Months Ended March 31,
2014 2013
(in thousands)
Stockholders' equity $ 894,804 $ 781,021
Less:
Accumulated other comprehensive (loss) income (11,131 ) 7,205
Non-qualifying goodwill and intangibles 26,008 27,138
Other non-qualifying assets 2
Disallowed unrealized losses on equity securities 2,550
Add:
Qualifying trust preferred securities 49,120   45,124  
Tier 1 capital (regulatory) (6) (9) 926,497 791,800
Less:
Qualifying trust preferred securities 49,120 45,124
Preferred stock 141,000   141,000  
Estimated Tier 1 common equity (7) (9) $ 736,377 $ 605,676
Divided by:

Estimated risk-weighted assets (regulatory) (7) (9)

$ 8,336,821   $ 7,011,489  
Tier 1 common equity ratio (7) (9) 8.8 % 8.6 %
 
Tier 1 Capital
March 31,
2014 2013
(in thousands)
Classified assets $ 251,851 $ 269,434
Divide:
Tier 1 capital (regulatory) (6) (9) 926,497 791,800
Plus: Allowance for credit losses 103,899   95,494  
Total Tier 1 capital plus allowance for credit losses $ 1,030,396   $ 887,294  
Classified assets to Tier 1 capital plus allowance (8) (9) 24 % 30 %
 
(1) We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(2) We believe this non-GAAP ratio improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

(3) We believe these non-GAAP measurements provide a useful indication of the cash generating capacity of the Company.
(4) We believe this non-GAAP measurement is a key indicator of the earnings power of the Company.
(5) We believe this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company.

(6) Under the guidelines of the Federal Reserve and the Federal Deposit Insurance Corporation in effect, Tier 1 capital consisted of common stock, retained earnings, non-cumulative perpetual preferred stock, trust preferred securities up to a certain limit, and minority interests in certain subsidiaries, less most other intangible assets.

(7) Tier 1 common equity is often expressed as a percentage of risk-weighted assets. Under the risk-based capital framework, a bank's balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of four broad risk categories. The aggregated dollar amount in each category is then multiplied by the risk weighting assigned to that category. The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that, as adjusted, comprises the denominator (risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity. Tier 1 common equity is divided by the risk-weighted assets to determine the Tier 1 common equity ratio. We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(8) We believe this non-GAAP ratio provides a critical regulatory metric in which to analyze asset quality.
(9) Current quarter is preliminary until Call Reports are filed.
 
 

Supplemental Schedule

The following table presents the impact of the Company's adoption of an amended accounting standard related to low income housing tax credit investments issued by the FASB on January 15, 2014 and its retrospective application for the periods indicated:

                             
Dec 2013     Sep 2013     Jun 2013     Mar 2013     Dec 2012     Sep 2012     Jun 2012
(in millions)
Consolidated Balance Sheet:
Other assets
As previously reported 270.4 273.1 230.8 202.1 214.2 169.9 161.7
As reported under new guidance 270.7 272.2 229.9 201.7 214.0 169.4 161.5
Accrued interest payable and other liabilities
As previously reported 159.5 204.1 153.0 130.1 98.9 72.4 62.9
As reported under new guidance 159.5 203.1 152.2 130.0 98.9 71.8 62.8
Stockholders' equity
As previously reported 855.3 826.3 799.5 781.3 759.6 698.0 672.1
As reported under new guidance 855.5 826.5 799.3 781.1 759.4 698.1 672.1
 
                                     

Dec 31, 2013

   

Sep 30, 2013

   

Jun 30, 2013

   

Mar 31, 2013

   

Dec 31, 2012

   

Sep 30, 2012

   

Jun 30, 2012

(in thousands, except per share data)
Consolidated Income Statement:
Non-interest income
As previously reported (157 ) 2,625 10,862 3,899 24,463 6,982 7,397
As reported under new guidance 1,557 4,129 11,762 4,799 25,532 7,692 7,397
Income tax expense
As previously reported 2,341 9,288 6,817 6,808 7,509 6,752 5,259
As reported under new guidance 3,992 10,390 7,661 7,787 8,866 7,323 5,305
 
Income from continuing operations
As previously reported 32,052 28,221 34,185 20,926 33,919 15,701 14,182
As reported under new guidance 32,115 28,623 34,241 20,847 33,631 15,840 14,136
Net income
As previously reported 31,351 28,192 34,016 20,964 32,115 15,458 13,961
As reported under new guidance 31,414 28,594 34,072 20,885 31,827 15,597 13,915
Net income available to common shareholders
As previously reported 30,999 27,840 33,663 20,611 31,762 15,106 12,636
As reported under new guidance 31,062 28,242 33,719 20,532 31,474 15,245 12,590
Earnings per share applicable to common shareholders--basic
As previously reported 0.36 0.32 0.39 0.24 0.38 0.18 0.15
As reported under new guidance 0.36 0.33 0.39 0.24 0.38 0.19 0.15
Earnings per share applicable to common shareholders--diluted
As previously reported 0.36 0.32 0.39 0.24 0.38 0.18 0.15
As reported under new guidance 0.36 0.33 0.39 0.24 0.38 0.19 0.15

Contacts

Western Alliance Bancorporation
Dale Gibbons, 602-952-5476

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Contacts

Western Alliance Bancorporation
Dale Gibbons, 602-952-5476