Western Alliance Bancorporation (NYSE:WAL) announced today its
financial results for the second quarter 2014.
Second Quarter 2014 Highlights:
- Net income of $35.5 million, compared
to $31.1 million for the first quarter 2014 and $34.1 million for
the second quarter 2013
- Earnings per share of $0.40, compared
to $0.35 per share in the first quarter 2014 and $0.39 per share in
the second quarter 2013
- Accretion of interest yield related to
purchased credit impaired loan sales or payoffs increased $1.4
million, net of tax, or $0.02 per share, compared to the first
quarter 2014
- Pre-tax, pre-provision operating
earnings of $47.4 million, up from $44.4 million in the first
quarter 2014 and up 18.1% from $40.1 million in the second quarter
20131
- Net interest margin of 4.39%, compared
to 4.41% in the first quarter 2014 and 4.36% in the second quarter
2013
- Total loans of $7.54 billion, up $436
million from March 31, 2014 and up $1.13 billion from
June 30, 2013
- Total deposits of $8.47 billion, up
$321 million from March 31, 2014 and up $1.47 billion from
June 30, 2013
- Nonperforming assets (nonaccrual loans
and repossessed assets) decreased to 1.23% of total assets from
1.30% in the first quarter 2014 and from 1.86% in the second
quarter 2013
- Net loan recoveries (annualized) to
average loans outstanding of 0.09%, compared to 0.02% in the first
quarter 2014 and net loan charge-offs to average loans of 0.17% in
the second quarter 2013
- Tier I Leverage Capital of 10.0% and
Total Risk-Based Capital ratio of 12.4%, compared to 9.9% and
12.4%, respectively, at March 31, 2014 and 9.9% and 12.0%,
respectively, at June 30, 2013
- Total equity of $958 million, up $63
million from March 31, 2014 and up $159 million from
June 30, 2013
- Tangible book value per share, net of
tax, of $9.02, up from $8.32 at March 31, 2014 and up from
$7.26 at June 30, 20131
Financial Performance
“Our performance momentum continued during the quarter with
record organic loan growth and strong deposit growth driving record
net interest income,” said Robert Sarver, Chairman and Chief
Executive Officer of Western Alliance Bancorporation. “Double digit
revenue growth, which was well in excess of the increase in
expenses, took our efficiency ratio below 50% for the first time.
On the asset quality front, Western Alliance has achieved net loan
recoveries in three of the last four quarters, while gross loan
losses have fallen to only 0.11% of total average loans.”
Sarver continued, “Despite our strong asset growth, our capital
has climbed even faster with tangible common equity rising to 7.9%
of tangible assets at June 30, 2014, and each regulatory capital
ratio is higher than it was a year ago. Our tangible book value per
share, net of tax, is up 24% in the past year to $9.02.”
Income Statement
Net interest income was $93.9 million in the second quarter
2014, an increase of $3.1 million, or 3.4%, from $90.8 million in
the first quarter of 2014 and an increase of $11.7 million, or
14.3%, compared to the second quarter 2013. The Company’s net
interest margin decreased in the second quarter 2014 to 4.39%,
compared to 4.41% in the first quarter 2014, and increased compared
to 4.36% in the second quarter 2013.
Operating non-interest income was $5.7 million for the second
quarter 2014, compared to $5.7 million in the first quarter of 2014
and $5.0 million for the second quarter of 2013.1
Net operating revenue was $99.6 million for the second quarter
2014, an increase of 3.2% compared to $96.5 million for the first
quarter of 2014 and an increase of 14.3% compared to $87.2 million
for the second quarter 2013.1
Operating non-interest expense was $52.2 million for the second
quarter 2014, compared to $52.1 million for the first quarter of
2014 and $47.0 million for the second quarter of 2013.1 The
Company’s operating efficiency ratio1 on a tax equivalent basis was
49.4% for the second quarter 2014, compared to 51.0% for the first
quarter 2014 and 52.2% for the second quarter 2013.
The Company had 1,112 full-time equivalent employees and 39
offices at June 30, 2014, compared to 1,015 full-time
equivalent employees and 41 offices at June 30, 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 second quarter 2014, the Company’s pre-tax,
pre-provision operating earnings were $47.4 million, up from $44.4
million in the first quarter 2014 and up 18.1% from $40.1 million
in the second quarter 2013.1
Balance Sheet
Gross loans totaled $7.54 billion at June 30, 2014, an
increase of $436 million from March 31, 2014 and an increase
of $1.13 billion from $6.41 billion at June 30, 2013. At
June 30, 2014, the allowance for credit losses was 1.40% of
total loans, compared to 1.46% at March 31, 2014 and 1.50% at
June 30, 2013, reflecting an improvement in the Company’s
asset quality profile.
Deposits totaled $8.47 billion at June 30, 2014, an
increase of $321 million from $8.15 billion at March 31, 2014
and an increase of $1.47 billion from $7.00 billion at
June 30, 2013. Non-interest bearing deposits were $2.28
billion at June 30, 2014, compared to $2.09 billion at
March 31, 2014 and $1.92 billion at June 30, 2013.
Non-interest bearing deposits comprised 26.9% of total deposits at
June 30, 2014, compared to 25.7% at March 31, 2014 and
27.4% at June 30, 2013, while the proportion of savings and
money market accounts decreased to 42.9% from approximately 45.1%
at March 31, 2014 and increased from 42.1% at June 30,
2013. Certificates of deposit as a percent of total deposits
increased to 20.8% from 20.0% at June 30, 2014 and decreased
from 21.5% at June 30, 2013. The Company’s ratio of loans to
deposits was 89.1% at June 30, 2014, compared to 87.2% at
March 31, 2014 and 91.6% at June 30, 2013.
Stockholders’ equity at June 30, 2014 increased to $958
million from $895 million at March 31, 2014 and increased $159
million from $799 million at June 30, 2013. To support the
Company's continued growth, we raised $2.6 million in net proceeds
from the issuance of 115,866 shares of common stock through our
at-the-market (ATM) public offering. This was the first issuance of
common stock under the $100 million ATM program. In order to
increase management's flexibility regarding the Company's
investment portfolio, during the quarter, the Company transferred
all of its held-to-maturity securities to available-for-sale, which
resulted in an increase of $7.3 million to accumulated other
comprehensive income at June 30, 2014.
At June 30, 2014, tangible common equity, net of tax, was
7.9% of tangible assets1 and total risk-based capital was 12.4% of
risk-weighted assets. The Company’s tangible book value per share1
was $9.02 at June 30, 2014, up 24.2% from June 30,
2013.
Total assets increased 2.8% to $10.02 billion at June 30,
2014 from $9.75 billion at March 31, 2014, and increased 16.7%
from $8.59 billion at June 30, 2013.
Asset Quality
The provision for credit losses was $0.5 million for the second
quarter 2014, compared to $3.5 million for the first quarter 2014
and second quarter 2013. Net loan recoveries in the second quarter
2014 were $1.5 million, or 0.09% of average loans (annualized),
compared to 0.02% for the first quarter 2014. Net charge-offs for
the second quarter 2013 were $2.7 million, or 0.17% of average
loans (annualized).
Nonaccrual loans decreased $6.1 million to $64.3 million during
the quarter. Loans past due 90 days and still accruing interest
totaled $3.0 million at June 30, 2014, up from $0.2 million at
March 31, 2014 and down from $3.9 million at June 30,
2013. Loans past due 30-89 days, still accruing interest totaled
$5.1 million at quarter end, down from $11.1 million at
March 31, 2014 and $7.3 million at June 30, 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 25% at June 30, 2014 from 32% at
June 30, 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,
National Business Lines, 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 National Business Lines segment provides banking services
to niche markets. These National Business Lines 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 the
Company's Arizona, Nevada, California and National Business Lines
segments include loan and deposit growth, asset quality and pre-tax
income.
Arizona reported a gross loan balance of $2.13 billion at
June 30, 2014, an increase of $99 million during the quarter,
and an increase of $106 million during the year. Deposits were
$2.12 billion at June 30, 2014, an increase of $53 million
during the quarter, and an increase of $115 million during the
year. Pre-tax income was $17.3 million and $29.9 million for the
three and six months ended June 30, 2014, respectively.
Nevada reported a gross loan balance of $1.68 billion at
June 30, 2014, a decrease of $41 million during the quarter,
and a decrease of $72 million during the year. Deposits were $3.19
billion at June 30, 2014, an increase of $136 million during
the quarter, and an increase of $265 million during the year.
Pre-tax income was $17.7 million and $34.2 million for the three
and six months ended June 30, 2014, respectively.
California reported a gross loan balance of $1.69 billion at
June 30, 2014, an increase of $32 million during the quarter,
and an increase of $80 million during the year. Deposits were $2.06
billion at June 30, 2014, an increase of $145 million during
the quarter, and an increase of $116 million during the year.
Pre-tax income was $14.0 million and $24.3 million for the three
and six months ended June 30, 2014, respectively.
National Business Lines reported a gross loan balance of $1.95
billion at June 30, 2014, an increase of $330 million during
the quarter, and an increase of $601 million during the year.
Deposits were $886 million at June 30, 2014, an increase of
$14 million during the quarter, and an increase of $118 million
during the year. Pre-tax income was $6.8 million and $12.1 million
for the three and six months ended June 30, 2014,
respectively.
Attached to this press release is summarized financial
information for the quarter ended June 30, 2014.
Conference Call and Webcast
Western Alliance Bancorporation will host a conference call and
live webcast to discuss its second quarter 2014 financial results
at 12:00 p.m. ET on Friday, July 18, 2014. Participants may access
the call by dialing 1-888-317-6003 and using passcode: 8153733 or
via live audio webcast using the website link:
http://services.choruscall.com/links/wal140718.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 July 18th through
July 31st at 9:00 a.m. ET by dialing 1-877-344-7529 passcode:
10048463.
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 our business,
financial and operating results, and future economic performance.
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.
Use of Non-GAAP Financial Information
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.
Early Adoption of Accounting Standards
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 the Q1 2014
press release for additional detail on the impact that adoption of
this standard has had on prior period financial information.
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 June 30, At or for the Six Months Ended June
30, 2014 2013 Change % 2014
2013 Change % Selected Balance Sheet
Data: (dollars in millions) Total assets $ 10,023.6 $ 8,592.7
16.7 % Loans, net of deferred fees 7,544.5 6,411.5 17.7 Securities
and money market investments 1,606.7 1,313.1 22.4 Securities
purchased under agreement to resell — 134.0 (100.0 ) Total deposits
8,469.5 7,001.3 21.0 Borrowings 337.5 418.6 (19.4 ) Junior
subordinated debt 42.7 39.9 7.0 Stockholders' equity 957.7 799.3
19.8
Selected Income Statement Data: (dollars in
thousands) Interest income $ 101,973 $ 89,285 14.2 % $ 200,674 $
172,393 16.4 % Interest expense 8,075 7,133 13.2
15,999 14,038 14.0 Net interest income 93,898 82,152
14.3 184,675 158,355 16.6 Provision for loan losses 507
3,481 (85.4 ) 4,007 8,920 (55.1 ) Net interest
income after provision for credit losses 93,391 78,671 18.7 180,668
149,435 20.9 Non-interest income 5,773 11,762 (50.9 ) 10,608 16,561
(35.9 ) Non-interest expense 52,416 48,531 8.0
102,165 95,460 7.0 Income from continuing operations,
before income tax expense 46,748 41,902 11.6 89,111 70,536 26.3
Income tax expense 10,706 7,661 39.7 21,330
15,448 38.1 Income from continuing operations 36,042 34,241
5.3 67,781 55,088 23.0 Loss on discontinued operations, net (504 )
(169 ) 198.2 (1,158 ) (131 ) 784.0 Net income $ 35,538 $
34,072 4.3 % $ 66,623 $ 54,957 21.2 %
Diluted net income per common share from
continuing operations
$ 0.41 $ 0.39 5.1 % $ 0.77 $ 0.63 22.2
% Diluted net loss per common share from discontinued operations,
net of tax $ (0.01 ) $ — $ (0.01 ) $ — Diluted net
income per common share $ 0.40 $ 0.39 2.6 % $ 0.76
$ 0.63 20.6 %
Common Share Data:
Diluted net income per common share $ 0.40 $ 0.39 2.6 % $ 0.76 $
0.63 20.6 % Book value per common share $ 9.30 $ 7.57 22.9 %
Tangible book value per share, net of tax (1) $ 9.02 $ 7.26 24.2 %
Average shares outstanding (in thousands): Basic 86,501 85,659 1.0
86,379 85,493 1.0 Diluted 87,333 86,524 0.9 87,229 86,254 1.1
Common shares outstanding 87,774 86,997 0.9 (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 June 30, At or for the Six Months Ended June
30, 2014 2013 Change % 2014
2013 Change % (in thousands, except per share data)
Selected Performance Ratios: Return on average assets (1)
1.46 % 1.62 % (9.9 )% 1.39 % 1.35 % 3.0 % Return on average
tangible common equity (2) 17.41 21.41 (18.7 ) 16.77 17.66 (5.0 )
Net interest margin (1) 4.39 4.36 0.7 4.40 4.36 0.9 Net interest
spread 4.26 4.22 0.9 4.27 4.21 1.4 Efficiency ratio - tax
equivalent basis (2) 49.42 52.21 (5.3 ) Loan to deposit ratio 89.08
91.58 (2.7 )
Capital Ratios: Tangible equity (2) 9.3
% 9.0 % 3.3 % Tangible common equity (2) 7.9 7.4 6.8 Tier 1 common
equity (2) 9.0 8.3 8.4 Tier 1 Leverage ratio (3) 10.0 9.9 1.0 Tier
1 Risk Based Capital (3) 11.2 10.8 3.7 Total Risk Based Capital (3)
12.4 12.0 3.3
Asset Quality Ratios: Net (recoveries)
charge-offs to average loans outstanding (1) (0.09 )% 0.17 % (152.9
)% (0.05 )% 0.27 % (118.5 )% Nonaccrual loans to gross loans 0.85
1.29 (34.1 ) Nonaccrual loans and repossessed assets to total
assets 1.23 1.86 (33.9 ) Loans past due 90 days and still accruing
to total loans 0.04 0.06 (33.3 ) Allowance for credit losses to
loans 1.40 1.50 (6.7 ) Allowance for credit losses to nonaccrual
loans 164.64 116.19 41.7 (1) Annualized for the three and
six month periods ended June 30, 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 June 30, Six Months Ended June 30,
2014 2013 2014
2013 Interest income: (dollars in thousands) Loans $ 90,583
$ 81,093 $ 177,387 $ 155,818 Investment securities 10,894 7,822
22,219 15,980 Federal funds sold and other 496 370
1,068 595
Total interest income 101,973
89,285 200,674 172,393 Interest expense:
Deposits 4,930 3,929 9,595 7,661 Borrowings 2,702 2,749 5,540 5,456
Junior subordinated debt 443 455 864 921
Total interest expense 8,075 7,133
15,999 14,038
Net interest income 93,898
82,152 184,675 158,355 Provision for credit losses 507 3,481
4,007 8,920
Net interest income after
provision for credit losses 93,391 78,671 180,668
149,435 Non-interest income: Service charges 2,737
2,449 5,267 4,983 Bank owned life insurance 959 1,036 1,908 2,072
(Losses) gains on sales of investment securities, net (163 ) (5 )
203 143 Unrealized gains (losses) on assets/liabilities measured at
fair value, net 235 (3,290 ) (1,041 ) (3,761 ) Bargain purchase
gain from acquisition — 10,044 — 10,044 Other 2,005 1,528
4,271 3,080
Total non-interest income
5,773 11,762 10,608 16,561 Non-interest
expenses: Salaries and employee benefits 31,751 28,100 61,306
54,675 Occupancy 4,328 4,753 9,010 9,599 Legal, professional and
directors' fees 4,192 2,549 7,831 5,572 Insurance 2,087 2,096 4,480
4,466 Data processing 2,401 2,175 5,075 4,040 Marketing 506 710
1,065 1,378 Loan and repossessed asset expenses 927 721 2,161 2,317
Customer service 708 717 1,328 1,360 Net loss (gain) on sales and
valuations of repossessed and other assets 184 (1,124 ) (2,363 )
(605 ) Intangible amortization 302 597 899 1,194 Merger /
restructure expense 26 2,620 183 2,815 Other 5,004 4,617
11,190 8,649
Total non-interest expense
52,416 48,531 102,165 95,460 Income
from continuing operations before income taxes 46,748 41,902 89,111
70,536 Income tax expense 10,706 7,661 21,330
15,448
Income from continuing operations $ 36,042 $
34,241 $ 67,781 $ 55,088 Loss from discontinued operations net of
tax benefit (504 ) (169 ) (1,158 ) (131 )
Net income $
35,538 $ 34,072 $ 66,623 $ 54,957 Preferred stock dividends 352
353 705 705
Net income available to
common stockholders $ 35,186 $ 33,719 $ 65,918
$ 54,252 Diluted net income per share $ 0.40 $
0.39 $ 0.76 $ 0.63
Western Alliance Bancorporation and Subsidiaries Five
Quarter Condensed Consolidated Income Statements
Unaudited Three Months Ended Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun
30, 2013 (in thousands, except per share data) Interest income:
Loans $ 90,583 $ 86,804 $ 86,902 $ 83,994 $ 81,093 Investment
securities 10,894 11,325 10,137 8,286 7,822 Federal funds sold and
other 496 572 543 400 370
Total interest income 101,973 98,701 97,582
92,680 89,285 Interest expense: Deposits 4,930
4,665 4,442 4,232 3,929 Borrowings 2,702 2,838 2,717 3,429 2,749
Junior subordinated debt 443 421 442 460
455
Total interest expense 8,075 7,924
7,601 8,121 7,133
Net interest
income 93,898 90,777 89,981 84,559 82,152 Provision for credit
losses 507 3,500 4,300 — 3,481
Net interest income after provision for credit losses 93,391
87,277 85,681 84,559 78,671
Non-interest income: Service charges 2,737 2,530 2,512 2,425 2,449
Bank owned life insurance 959 949 905 1,832 1,036 (Losses) gains on
sales of investment securities, net (163 ) 366 342 (1,679 ) (5 )
Unrealized gains (losses) on assets/liabilities measured at fair
value, net 235 (1,276 ) (2,618 ) (7 ) (3,290 ) Loss on
extinguishment of debt — — (1,387 ) — — Bargain purchase gain from
acquisition — — — — 10,044 Other 2,005 2,266 1,803
1,558 1,528
Total non-interest income
5,773 4,835 1,557 4,129 11,762
Non-interest expenses: Salaries and employee benefits 31,751 29,555
30,071 28,689 28,100 Occupancy 4,328 4,682 4,626 4,901 4,753 Legal,
professional and directors' fees 4,192 3,639 4,623 3,438 2,549
Insurance 2,087 2,393 1,744 1,884 2,096 Data processing 2,401 2,674
2,040 1,872 2,175 Marketing 506 559 619 585 710 Loan and
repossessed asset expenses 927 1,234 793 1,136 721 Customer service
708 620 860 677 717 Net loss (gain) on sales and valuations of
repossessed and other assets 184 (2,547 ) (2,153 ) 371 (1,124 )
Intangible amortization 302 597 597 597 597 Merger / restructure
expense 26 157 1,919 1,018 2,620 Other 5,004 6,186
5,392 4,507 4,617
Total non-interest
expense 52,416 49,749 51,131 49,675
48,531 Income from continuing operations before income taxes
46,748 42,363 36,107 39,013 41,902 Income tax expense 10,706
10,624 3,992 10,390 7,661
Income
from continuing operations $ 36,042 $ 31,739 $ 32,115 $ 28,623
$ 34,241 Loss from discontinued operations, net of tax (504 ) (654
) (701 ) (29 ) (169 )
Net income $ 35,538 $ 31,085
$ 31,414 $ 28,594 $ 34,072 Preferred
stock dividends 352 353 352 352 353
Net income available to common stockholders $ 35,186
$ 30,732 $ 31,062 $ 28,242 $ 33,719
Diluted net income per share $ 0.40 $ 0.35
$ 0.36 $ 0.33 $ 0.39
Western Alliance Bancorporation and
Subsidiaries Five Quarter Condensed Consolidated Balance
Sheets Unaudited Jun 30, 2014 Mar 31, 2014
Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 (in
millions)
Assets: Cash and due from banks $ 379.3 $ 354.8 $
305.5 $ 380.9 $ 248.9 Securities purchased under agreement to
resell — 111.1 — 128.1 134.0
Cash and cash equivalents 379.3 465.9 305.5 509.0 382.9
Securities and money market investments 1,606.7 1,671.2
1,689.6 1,370.8 1,313.1 Loans held for sale — — — 25.4 27.6 Loans
held for investment: Commercial 3,027.7 2,723.4 2,478.2 2,234.9
2,174.1 Commercial real estate - non-owner occupied 1,940.0 1,849.2
1,841.1 1,864.3 1,839.7 Commercial real estate - owner occupied
1,605.0 1,606.2 1,561.9 1,551.2 1,550.0 Construction and land
development 612.4 553.7 535.7 459.8 416.7 Residential real estate
328.1 344.9 350.3 359.0 381.7 Consumer 40.9 38.3 43.1 29.8 28.5
Deferred fees, net (9.6 ) (7.1 ) (8.9 ) (8.1 ) (6.8 )
Gross
loans and deferred fees, net 7,544.5 7,108.6
6,801.4 6,490.9 6,383.9 Allowance for credit
losses (105.9 ) (103.9 ) (100.1 ) (97.9 ) (96.3 )
Loans, net
7,438.6 7,004.7 6,701.3 6,393.0 6,287.6
Premises and equipment, net 109.6 106.6 105.6 105.9
106.1 Other repossessed assets 59.3 56.5 66.7 76.5 76.5 Bank owned
life insurance 142.5 141.5 140.6 139.7 140.4
Goodwill and other intangibles, net
26.5 26.8 27.4 28.0 28.6 Other assets 261.1 273.4
270.7 272.2 229.9
Total assets $
10,023.6 $ 9,746.6 $ 9,307.4 $ 8,920.5
$ 8,592.7
Liabilities and Stockholders' Equity:
Liabilities: Deposits: Non-interest bearing demand deposits $
2,278.8 $ 2,093.6 $ 2,200.0 $ 1,972.5 $ 1,919.6 Interest bearing:
Demand 794.8 750.4 709.8 673.7 631.3 Savings and money market
3,637.4 3,672.3 3,310.4 3,050.0 2,945.1 Time certificates 1,758.5
1,632.7 1,618.0 1,579.1 1,505.3
Total deposits 8,469.5 8,149.0 7,838.2 7,275.3 7,001.3
Customer repurchase agreements 53.7 57.4 71.2
55.5 51.9
Total customer funds 8,523.2 8,206.4
7,909.4 7,330.8 7,053.2 Securities sold short — 109.8 — 126.6 129.5
Borrowings 337.5 342.8 341.1 394.1 418.6 Junior subordinated debt
42.7 42.8 41.9 39.4 39.9 Accrued interest payable and other
liabilities 162.5 150.0 159.5 203.1
152.2
Total liabilities 9,065.9 8,851.8
8,451.9 8,094.0 7,793.4 Stockholders' Equity
Common stock and additional paid-in capital 803.4 795.3 797.2 792.2
789.5 Preferred stock 141.0 141.0 141.0 141.0 141.0 Retained
earnings (accumulated deficit) 4.8 (30.4 ) (61.2 ) (92.2 ) (120.4 )
Accumulated other comprehensive income (loss) 8.5 (11.1 )
(21.5 ) (14.5 ) (10.8 )
Total stockholders' equity 957.7
894.8 855.5 826.5 799.3
Total
liabilities and stockholders' equity $ 10,023.6 $
9,746.6 $ 9,307.4 $ 8,920.5 $ 8,592.7
Western Alliance Bancorporation and
Subsidiaries Changes in the Allowance For Credit Losses
Unaudited Three Months Ended Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun
30, 2013 (in thousands) Balance, beginning of period $ 103,899
$ 100,050 $ 97,851 $ 96,323 $ 95,494 Provision for credit losses
507 3,500 4,300 — 3,481 Recoveries of loans previously charged-off:
Commercial and industrial 1,254 922 666 2,242 1,757 Commercial real
estate - non-owner occupied 1,052 83 395 273 154 Commercial real
estate - owner occupied 196 477 297 149 479 Construction and land
development 498 211 273 966 120 Residential real estate 314 553 549
430 549 Consumer 191 170 179 726 11
Total recoveries 3,505 2,416 2,359 4,786 3,070 Loans
charged-off: Commercial and industrial 1,039 1,478 621 544 1,065
Commercial real estate - non-owner occupied 99 160 2,268 466 1,000
Commercial real estate - owner occupied 230 11 238 398 1,391
Construction and land development 78 — 686 — 238 Residential real
estate 523 406 281 1,138 2,010 Consumer 5 12 366
712 18 Total loans charged-off 1,974 2,067
4,460 3,258 5,722 Net loan (recoveries) charge-offs (1,531 ) (349 )
2,101 (1,528 ) 2,652 Balance, end of period $ 105,937
$ 103,899 $ 100,050 $ 97,851 $ 96,323
Net (recoveries) charge-offs to average loans
outstanding - annualized (0.09 )% (0.02 )% 0.13 % (0.10 )% 0.17 %
Allowance for credit losses to gross loans 1.40 1.46 1.47 1.50 1.50
Nonaccrual loans $ 64,343 $ 70,401 $ 75,681 $ 76,641 $ 82,899
Repossessed assets 59,292 56,450 66,719 76,475 76,499 Loans past
due 90 days, still accruing 3,001 167 1,534 5,456 3,893 Loans past
due 30 to 89 days, still accruing 5,123 11,087 13,425 8,689 7,341
Classified loans on accrual 133,220 125,903 128,586 144,041 140,192
Special mention loans 90,534 117,540 129,965 137,247 162,482
Western Alliance Bancorporation and
Subsidiaries Analysis of Average Balances, Yields and
Rates Unaudited Three Months
Ended June 30, 2014 2013
AverageBalance
Interest
Average Yield/Cost
AverageBalance
Interest
Average Yield/Cost
($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets
Loans (1) $ 7,178.3 $ 90,583 5.29 % $ 6,100.8 $ 81,093 5.40 %
Securities (1) 1,629.9 10,894 3.08 1,295.9 7,822 2.92 Federal funds
sold and other 292.4 496 0.68 407.7 370
0.36 Total interest earning assets 9,100.6 101,973
4.75 7,804.4 89,285 4.73
Non-interest earning assets Cash
and due from banks 138.7 119.2 Allowance for credit losses (105.0 )
(96.6 ) Bank owned life insurance 141.8 139.7 Other assets 462.0
432.7
Total assets $ 9,738.1 $ 8,399.4
Interest-bearing liabilities Interest-bearing
deposits: Interest-bearing transaction accounts $ 791.5 $ 385 0.19
% $ 626.8 $ 370 0.24 % Savings and money market 3,583.5 2,691 0.30
2,768.7 2,007 0.29 Time certificates of deposit 1,700.4
1,854 0.44 1,584.0 1,552 0.39
Total interest-bearing deposits 6,075.4 4,930 0.32 4,979.5
3,929 0.32 Short-term borrowings 236.2 216 0.37 188.8 214 0.45
Long-term debt 280.4 2,486 3.55 365.2 2,535 2.78 Junior
subordinated debt 42.8 443 4.14 36.7
455 4.96
Total interest-bearing liabilities
6,634.8 8,075 0.49 5,570.2 7,133 0.51
Non-interest-bearing
liabilities Non-interest-bearing demand deposits 2,045.5
1,898.2 Other liabilities 126.7 124.6 Stockholders’ equity 931.1
806.4
Total liabilities and stockholders'
equity $ 9,738.1 $ 8,399.4 Net interest income
and margin $ 93,898 4.39 % $ 82,152 4.36 % Net
interest spread 4.26 % 4.22 % (1) Yields on loans and
securities have been adjusted to a tax equivalent basis. The
taxable-equivalent adjustment was $6,029 and $2,929 for the three
months ended June 30, 2014 and 2013, respectively.
Western Alliance Bancorporation and
Subsidiaries Analysis of Average Balances, Yields and
Rates Unaudited Six Months Ended
June 30, 2014 2013
AverageBalance
Interest
Average Yield/Cost
AverageBalance
Interest
Average Yield/Cost
($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets Loans (1) $ 7,036.5 $ 177,387 5.28 %
$ 5,857.0 $ 155,818 5.41 % Securities (1) 1,640.8 22,219 3.11
1,289.7 15,980 3.06 Federal funds sold & other 251.6
1,068 0.85 406.2 595 0.29 Total
interest earnings assets 8,928.9 200,674 4.76 7,552.9 172,393 4.73
Non-interest earning assets Cash and due from banks 138.1
122.9 Allowance for credit losses (103.1 ) (96.8 ) Bank owned life
insurance 141.4 139.2 Other assets 447.6 427.3
Total assets $ 9,552.9 $ 8,145.5
Interest-bearing liabilities Interest-bearing deposits:
Interest bearing transaction accounts $ 778.3 $ 768 0.20 % $ 617.8
$ 671 0.22 % Savings and money market 3,518.3 5,254 0.30 2,695.2
3,918 0.29 Time certificates of deposits 1,660.2 3,573
0.43 1,517.1 3,072 0.40
Total
interest-bearing deposits 5,956.8 9,595 0.32 4,830.1 7,661 0.32
Short-term borrowings 201.8 345 0.34 183.0 428 0.47 Long-term debt
291.0 5,195 3.57 319.2 5,028 3.15 Junior subordinated debt 42.4
864 4.08 36.5 921 5.05
Total interest-bearing liabilities 6,492.0 15,999 0.49
5,368.8 14,038 0.52
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 2,049.8 1,876.8 Other
liabilities 102.3 107.4 Stockholders’ equity 908.8 792.5
Total liabilities and stockholders' equity $ 9,552.9
$ 8,145.5 Net interest income and margin $ 184,675
4.40 % $ 158,355 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
$11,734 and $6,311 for the six months ended June 30, 2014 and 2013,
respectively.
Western Alliance
Bancorporation and Subsidiaries Operating Segment
Results Unaudited Arizona
Nevada California
NationalBusiness Lines
Corporate &Other
ConsolidatedCompany
(dollars in millions)
As of June 30, 2014: Assets:
Cash, cash equivalents and investment securities $ 3.0 $ 7.0 $ 2.4
$ — $ 1,973.6 $ 1,986.0 Gross loans and deferred fees, net 2,131.0
1,682.6 1,694.8 1,951.5 84.6 7,544.5 Less: allowance for credit
losses (29.9 ) (23.6 ) (23.8 ) (27.4 ) (1.2 ) (105.9 ) Loans, net
2,101.1 1,659.0 1,671.0 1,924.1 83.4
7,438.6 Other repossessed assets 13.1 24.1 — — 22.1
59.3 Goodwill and intangible assets, net — 26.5 — — — 26.5 Other
assets 42.2 62.7 26.2 21.1 361.0
513.2 Total assets $ 2,159.4 $ 1,779.3 $
1,699.6 $ 1,945.2 $ 2,440.1 $ 10,023.6
Liabilities: Deposits (1) $ 2,115.4 $ 3,187.8 $ 2,061.1 $
886.3 $ 218.9 $ 8,469.5 Borrowings — — — — 337.5 337.5 Other
liabilities 20.9 46.8 4.8 24.7 161.7
258.9 Total liabilities 2,136.3 3,234.6
2,065.9 911.0 718.1 9,065.9
Allocated equity 233.7 212.5 188.7
152.3 170.5 957.7
Liabilities and
stockholders' equity $ 2,370.0 $ 3,447.1 $
2,254.6 $ 1,063.3 $ 888.6 $ 10,023.6
Excess funds provided (used) 208.6 1,670.0 555.1 (882.2 ) (1,551.5
) — No. of branches 10 18 11 — — 39 No. of full-time
equivalent employees 212 305 218 92 285 1,112 (in thousands)
Three Months Ended June 30, 2014: Net interest income
(expense) $ 29,211 $ 29,359 $ 24,702 $ 16,226 $ (5,600 ) $ 93,898
Provision for (recovery of) credit losses 3 (2,011 ) (1,672
) 3,467 720 507 Net interest income (expense)
after provision for credit losses 29,208 31,370 26,374 12,759
(6,320 ) 93,391 Non-interest income 934 2,352 970 643 874 5,773
Non-interest expense (12,793 ) (16,026 ) (13,342 ) (6,640 ) (3,615
) (52,416 ) Income (loss) from continuing operations before income
taxes 17,349 17,696 14,002 6,762 (9,061 ) 46,748 Income tax expense
(benefit) 6,805 6,194 5,887 2,536
(10,716 ) 10,706 Income from continuing operations 10,544
11,502 8,115 4,226 1,655 36,042 Loss from discontinued operations,
net — — — — (504 ) (504 )
Net
income $ 10,544 $ 11,502 $ 8,115 $ 4,226
$ 1,151 $ 35,538 (in thousands)
Six
Months Ended June 30, 2014: Net interest income (expense) $
55,819 $ 57,954 $ 47,494 $ 30,190 $ (6,782 ) $ 184,675 Provision
for (recovery of) credit losses 1,561 (2,895 ) (1,017 )
5,637 721 4,007 Net interest income (expense)
after provision for credit losses 54,258 60,849 48,511 24,553
(7,503 ) 180,668 Non-interest income 1,754 4,641 2,220 725 1,268
10,608 Non-interest expense (26,097 ) (31,262 ) (26,385 ) (13,148 )
(5,273 ) (102,165 ) Income (loss) from continuing operations before
income taxes 29,915 34,228 24,346 12,130 (11,508 ) 89,111 Income
tax expense (benefit) 11,734 11,981 10,237
4,549 (17,171 ) 21,330 Income from continuing
operations 18,181 22,247 14,109 7,581 5,663 67,781 Loss from
discontinued operations, net — — — —
(1,158 ) (1,158 )
Net income $ 18,181 $ 22,247
$ 14,109 $ 7,581 $ 4,505 $ 66,623
(1) Certain centrally-managed deposits from prior periods
were re-allocated to specific regions to conform to current
presentation.
Western Alliance
Bancorporation and Subsidiaries Reconciliation of Non-GAAP
Financial Measures (Unaudited) Pre-Tax, Pre-Provision
Operating Earnings by Quarter Three Months Ended Jun
30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30,
2013 Jun 30, 2013 (in thousands) Total non-interest
income $ 5,773 $ 4,835 $ 1,557 $ 4,129 $ 11,762 Less: (Losses)
gains on sales of investment securities, net (163 ) 366 342 (1,679
) (5 ) Unrealized losses on assets/liabilities measured at fair
value, net 235 (1,276 ) (2,618 ) (7 ) (3,290 ) Loss on
extinguishment of debt — — (1,387 ) — — Bargain purchase gain from
acquisition — — — — 10,044
Total operating non-interest income 5,701 5,745 5,220 5,815
5,013 Add: net interest income 93,898 90,777 89,981
84,559 82,152
Net operating revenue (1)
$ 99,599 $ 96,522 $ 95,201 $ 90,374 $ 87,165 Total
non-interest expense $ 52,416 $ 49,749 $ 51,131 $ 49,675 $ 48,531
Less: Net loss (gain) on sales and valuations of repossessed and
other assets 184 (2,547 ) (2,153 ) 371 (1,124 ) Merger /
restructure expense 26 157 1,919 1,018
2,620
Total operating non-interest expense (1) $
52,206 $ 52,139 $ 51,365 $ 48,286 $ 47,035
Pre-tax,
pre-provision operating earnings (2) $ 47,393 $ 44,383
$ 43,836 $ 42,088 $ 40,130
Tangible Common Equity Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun
30, 2013 (dollars and shares in thousands) Total stockholders'
equity $ 957,664 $ 894,804 $ 855,498 $ 826,472 $ 799,307 Less:
Goodwill and intangible assets, net
26,475 26,777 27,374 27,970 28,568
Total tangible stockholders' equity 931,189 868,027
828,124 798,502 770,739 Less: Preferred stock 141,000
141,000 141,000 141,000 141,000 Total
tangible common equity 790,189 727,027 687,124 657,502 629,739 Add:
Deferred tax - attributed to intangible assets 1,138 1,243
1,452 1,661 1,870
Total tangible
common equity, net of tax $ 791,327 $ 728,270 $
688,576 $ 659,163 $ 631,609 Total assets $
10,023,587 $ 9,746,623 $ 9,307,342 $ 8,920,449 $ 8,592,692 Less:
Goodwill and intangible assets, net
26,475 26,777 27,374 27,970 28,568
Tangible assets 9,997,112 9,719,846 9,279,968 8,892,479
8,564,124 Add: Deferred tax - attributed to intangible assets 1,138
1,243 1,452 1,661 1,870
Total
tangible assets, net of tax $ 9,998,250 $ 9,721,089
$ 9,281,420 $ 8,894,140 $ 8,565,994
Tangible equity ratio (3) 9.3 % 8.9 % 8.9 % 9.0 % 9.0 % Tangible
common equity ratio (3) 7.9 % 7.5 % 7.4 % 7.4 % 7.4 % Common shares
outstanding 87,774 87,554 87,186 87,099 86,997 Tangible book value
per share, net of tax (4) $ 9.02 $ 8.32 $ 7.90 $ 7.57 $ 7.26
Western Alliance Bancorporation and
Subsidiaries Reconciliation of Non-GAAP Financial Measures
(Unaudited) Efficiency Ratio Three Months
Ended Jun 30, 2014 Mar 31, 2014 Dec 31,
2013 Sep 30, 2013 Jun 30, 2013 (in thousands)
Total operating non-interest expense $ 52,206 $ 52,139
$ 51,365 $ 48,286 $ 47,035 Divided by:
Total net interest income $ 93,898 $ 90,777 $ 89,981 $ 84,559 $
82,152 Add:
Tax equivalent adjustment
6,029 5,705 3,728 3,272 2,929 Operating non-interest income 5,701
5,745 5,220 5,815 5,013 $
105,628 $ 102,227 $ 98,929 $ 93,646 $
90,094
Efficiency ratio - tax equivalent basis (5)
49.4 % 51.0 % 51.9 % 51.6 % 52.2 %
Tier 1 Common
Equity June 30, 2014 2013 (in thousands)
Stockholders' equity $ 957,664 $ 799,307 Less:
Accumulated other comprehensive income
(loss)
8,472 (10,750 ) Non-qualifying goodwill and intangibles 25,707
26,756 Other non-qualifying assets — 2 Disallowed unrealized losses
on equity securities — 103 Add: Qualifying trust preferred
securities 49,039 47,228
Tier 1 capital
(regulatory) (6) (9) 972,524 830,424 Less: Qualifying trust
preferred securities 49,039 47,228 Preferred stock 141,000
141,000
Estimated Tier 1 common equity (7) (9) $
782,485 $ 642,196 Divided by:
Estimated risk-weighted assets
(regulatory) (7) (9) $
8,684,802
$ 7,698,091
Tier 1 common equity ratio (7) (9)
9.0 % 8.3 %
Tier 1 Capital June 30,
2014 2013 (in thousands) Classified assets $ 264,766
$ 298,887 Divide:
Tier 1 capital (regulatory) (6) (9)
972,524 830,424 Plus: Allowance for credit losses 105,937
96,323 Total Tier 1 capital plus allowance for credit losses
$ 1,078,461 $ 926,747
Classified assets to Tier 1
capital plus allowance (8) (9) 25 % 32 % (1) We believe
these non-GAAP measurements provide a useful indication of the cash
generating capacity of the Company. (2) We believe this non-GAAP
measurement is a key indicator of the earnings power of the
Company. (3) We believe this non-GAAP ratio provides a critical
metric with which to analyze and evaluate financial condition and
capital strength. (4) 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. (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.
Western Alliance BancorporationDale Gibbons, 602-952-5476
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