Western Alliance Bancorporation (NYSE:WAL):
SECOND QUARTER 2018 FINANCIAL
RESULTS
Net
income Earnings per share Net interest margin
Efficiency ratio Book value percommon share
$104.7 million $0.99 4.70% 42.1%
$22.59
CEO COMMENTARY:
“The success of our constructive partnership with customers –
helping them succeed helps us succeed – led Western Alliance to
another solid quarter of performance,” said Chief Executive
Officer, Kenneth Vecchione.
“Deposit growth of $733 million paired with loan growth of $578
million, together drove net interest income to a new high and
boosted the interest margin 10 basis points to 4.70 percent.
Operating leverage improved as the $11.3 million increase in net
operating revenue1 from the first quarter was more than triple the
$3.3 million increase in operating expense1. Asset quality remained
strong with net loan losses of only 0.07 percent of total loans
during the quarter and non-performing assets of 0.29 percent of
total assets. Net income of $104.7 million and earnings per share
of $0.99 were each 30 percent higher than the year ago period.
Return on assets exceeded 2 percent for the first time in company
history and return on tangible equity1 was again above 20 percent.
Tangible book value per share1 now stands at $19.78.”
LINKED-QUARTER BASIS
YEAR-OVER-YEAR FINANCIAL HIGHLIGHTS:
- Net income and earnings per share of
$104.7 million and $0.99 compared to $100.9 million and $0.96,
respectively
- Net income of $104.7 million and
earnings per share of $0.99, compared to $80.0 million and $0.76,
respectively
- Net operating revenue of $238.2 million
constituting growth of 5.0%, or $11.3 million, compared to an
increase in operating non-interest expenses of 3.4%, or $3.4
million1
- Net operating revenue of $238.2 million
constituting year-over-year growth of 17.1%, or $34.8 million,
compared to an increase in operating non-interest expenses of
16.5%, or $14.5 million1
- Operating pre-provision net revenue of
$135.5 million, up $7.9 million from $127.6 million1
- Operating pre-provision net revenue of
$135.5 million, up $20.3 million from $115.2 million 1
- Effective tax rate of 19.48%, compared
to 17.10%, due the cyclical excess tax benefits on share-based
payment awards in Q1
- Effective tax rate of 19.48%, compared
to 28.56%, due to the effect of the Tax Cuts and Jobs Act.
FINANCIAL POSITION RESULTS:
- Total loans of $16.14 billion, up $578
million, or 14.3% annualized
- Increase in total loans of $2.15
billion, or 15.4%
- Total deposits of $18.09 billion, up
$733 million, or 16.9% annualized
- Increase in total deposits of $2.06
billion, or 12.8%
- Stockholders' equity of $2.39 billion,
up $98 million
- Increase in stockholders' equity of
$333 million
LOANS AND ASSET QUALITY:
- Nonperforming assets (nonaccrual loans
and repossessed assets) to total assets of 0.29%, compared to
0.33%
- Nonperforming assets to total assets of
0.29%, compared to 0.32%
- Annualized net loan charge-offs to
average loans outstanding of 0.07%, compared to 0.04%
- Annualized net loan charge-offs
(recoveries) to average loans outstanding of 0.07%, compared to
(0.03)%
KEY PERFORMANCE METRICS:
- Net interest margin of 4.70%, compared
to 4.60%
- Return on average assets and return on
tangible common equity1 of 2.02% and 20.41%, compared to 1.99% and
20.46%, respectively
- Tangible common equity ratio of 9.9%,
compared to 9.8% 1
- Net interest margin of 4.70%, compared
to 4.61%
- Tangible book value per share, net of
tax, of $19.78, an increase from $18.86 1
- Return on average assets and return on
tangible common equity1 of 2.02% and 20.41%, compared to 1.71% and
18.42%, respectively
- Operating efficiency ratio of 42.1%,
compared to 42.7% 1
- Tangible common equity ratio of 9.9%,
compared to 9.5% 1
- Tangible book value per share, net of
tax, of $19.78, an increase of 18.4% from $16.71 1
- Operating efficiency ratio of 42.1%,
compared to 41.2% 1
1 See reconciliation of Non-GAAP Financial
Measures.
Income Statement
Net interest income was $224.1 million in the second quarter
2018, an increase of $9.9 million from $214.2 million in the first
quarter 2018, and an increase of $31.4 million, or 16.3%, compared
to the second quarter 2017. As acquired loans are recorded at fair
value in an acquisition, purchase discounts on these acquired loans
are recorded and accreted into interest income based on expected
future cash flows or over the life of the loans and may be
accelerated upon prepayment of acquired loans. Net interest income
in the second quarter 2018 includes $5.1 million of total accretion
income from acquired loans, compared to $5.7 million in the first
quarter 2018, and $7.1 million in the second quarter 2017.
The Company’s net interest margin in the second quarter 2018 was
4.70%, an increase from 4.60% in the first quarter 2018, and from
4.61% in the second quarter 2017. Adjusting net interest margin to
include the effects of the Tax Cuts and Jobs Act ("TCJA"), which
reduced the tax equivalent adjustment from tax-exempt securities
and loans, results in adjusted net interest margin1 of 4.49% for
the second quarter 2017.
Operating non-interest income was $14.1 million for the second
quarter 2018, compared to $12.7 million for the first quarter 2018,
and $10.6 million for the second quarter 2017.1 The increase in
operating non-interest income for the second quarter 2018 compared
to the same quarter in the prior year is due primarily to increases
in income from equity securities of $1.2 million, lending related
income of $0.8 million, and card income of $0.5 million.
Net operating revenue was $238.2 million for the second quarter
2018, an increase of $11.3 million, compared to $226.9 million for
the first quarter 2018, and an increase of $34.8 million, or 17.1%,
compared to $203.4 million for the second quarter 2017.1
Operating non-interest expense was $102.7 million for the second
quarter 2018, compared to $99.4 million for the first quarter 2018,
and $88.2 million for the second quarter 2017.1 The Company’s
operating efficiency ratio1 on a tax equivalent basis was 42.1% for
the second quarter 2018, compared to 42.7% for the first quarter
2018, and 41.2% for the second quarter 2017. Adjusting the
operating efficiency ratio1 to include the effects of the lower
statutory corporate federal tax rate would result in an operating
efficiency ratio of 42.3% for the second quarter 2017.
Income tax expense was $25.3 million for the second quarter
2018, compared to $20.8 million for the first quarter 2018, and
$32.0 million for the second quarter 2017. Income tax expense for
the first and second quarters of 2018 includes the effect of the
TCJA, which lowered the statutory corporate tax rate from 35% to
21%.
Net income was $104.7 million for the second quarter 2018, an
increase of $3.8 million from $100.9 million for the first quarter
2018, and an increase of $24.7 million, or 30.9%, from $80.0
million for the second quarter 2017. Earnings per share was $0.99
for the second quarter 2018, compared to $0.96 for the first
quarter 2018, and $0.76 for the second quarter 2017.
The Company views its operating pre-provision net revenue
("PPNR") as a key metric for assessing the Company’s earnings
power, which it defines as net operating revenue less operating
non-interest expense. For the second quarter 2018, the Company’s
operating PPNR was $135.5 million, up from $127.6 million in the
first quarter 2018, and up 17.6% from $115.2 million in the second
quarter 2017.1 The non-operating items1 for the second quarter 2018
consisted of a net gain on sales and valuations of repossessed and
other assets of $0.2 million, offset by net unrealized losses on
assets measured at fair value of $0.7 million.
The Company had 1,773 full-time equivalent employees and 47
offices at June 30, 2018, compared to 1,713 employees and 47
offices at March 31, 2018, and 1,628 employees and 46 offices at
June 30, 2017.
1 See reconciliation of Non-GAAP Financial Measures.
Balance Sheet
Gross loans totaled $16.14 billion at June 30, 2018, an increase
of $578 million from $15.56 billion at March 31, 2018, and an
increase of $2.15 billion from $13.99 billion at June 30, 2017. The
increase from the prior quarter was driven by an increase of $334
million in commercial and industrial loans and $127 million in
residential real estate loans. From June 30, 2017, loans increased
across all loan types, with the largest increase in commercial and
industrial loans of $957 million. At June 30, 2018, the allowance
for credit losses to gross loans held for investment was 0.91%,
compared to 0.93% at March 31, 2018, and 0.94% at June 30, 2017. At
June 30, 2018, the allowance for credit losses to total organic
loans was 0.99%, compared to 1.02% at March 31, 2018, and 1.08% at
June 30, 2017. The Company defines its organic loans as those loans
that have not been acquired in a transaction accounted for as a
business combination.
Consistent with accounting principles generally accepted in the
United States ("GAAP"), the allowance for credit losses is not
carried over in an acquisition because acquired loans are recorded
at fair value, which discounts the loans based on expected future
cash flows. Credit discounts on acquired loans are included as a
reduction to gross loans. These discounts totaled $19.7 million at
June 30, 2018, compared to $23.1 million at March 31, 2018, and
$37.8 million at June 30, 2017.
Deposits totaled $18.09 billion at June 30, 2018, an increase of
$733 million from $17.35 billion at March 31, 2018, and an increase
of $2.06 billion from $16.03 billion at June 30, 2017. The increase
from the prior quarter was driven by an increase of $446 million in
non-interest bearing demand deposits and $154 million from savings
and money market accounts. From June 30, 2017, deposits increased
across all deposit types, with the largest increase in non-interest
bearing demand deposits of $1.09 billion. Non-interest bearing
deposits were $7.95 billion at June 30, 2018, compared to $7.50
billion at March 31, 2018, and $6.86 billion at June 30, 2017.
Non-interest bearing deposits comprised 43.9% of total deposits at
June 30, 2018, compared to 43.2% at March 31, 2018, and 42.8% at
June 30, 2017. The proportion of savings and money market balances
to total deposits was 35.8%, compared to 36.4% at March 31, 2018,
and 38.1% at June 30, 2017. Certificates of deposit as a percentage
of total deposits were 10.0% at June 30, 2018, compared to 10.1% at
March 31, 2018, and 9.9% at June 30, 2017. The Company’s ratio of
loans to deposits was 89.2% at June 30, 2018, compared to 89.7% at
March 31, 2018, and 87.3% at June 30, 2017.
Borrowings totaled $75 million at June 30, 2018, a decrease of
$225 million from $300 million at March 31, 2018, and an increase
of $75 million from zero at June 30, 2017. The change in borrowings
from both the prior quarter and the prior year is due to
fluctuations in FHLB overnight advances.
Qualifying debt totaled $361 million at June 30, 2018, compared
to $364 million at March 31, 2018, and $375 million at June 30,
2017.
Stockholders’ equity at June 30, 2018 was $2.39 billion,
compared to $2.29 billion at March 31, 2018, and $2.06 billion at
June 30, 2017.
At June 30, 2018, tangible common equity, net of tax, was 9.9%
of tangible assets1 and total capital was 13.4% of risk-weighted
assets. The Company’s tangible book value per share1 was $19.78 at
June 30, 2018, up 18.4% from June 30, 2017.
Total assets increased 2.9% to $21.37 billion at June 30, 2018,
from $20.76 billion at March 31, 2018, and increased 13.4% from
$18.84 billion at June 30, 2017. The increase in total assets from
the prior year relates primarily to organic loan growth and an
increase in investment securities resulting from utilized cash from
increased deposits.
Asset Quality
The provision for credit losses was $5.0 million for the second
quarter 2018, compared to $6.0 million for the first quarter 2018,
and compared to $3.0 million for the second quarter 2017. Net loan
charge-offs (recoveries) in the second quarter 2018 were $2.6
million, or 0.07% of average loans (annualized), compared to $1.4
million, or 0.04%, in the first quarter 2018, and $(1.2) million,
or (0.03)%, in the second quarter 2017.
Nonaccrual loans decreased $3.3 million to $34.0 million during
the quarter and increased $3.9 million during past twelve months.
Loans past due 90 days and still accruing interest totaled zero at
June 30, 2018, compared to $37 thousand at March 31, 2018, and $4.0
million at June 30, 2017. Loans past due 30-89 days and still
accruing interest totaled $1.5 million at quarter end, a decrease
from $6.5 million at March 31, 2018, and a decrease from $4.1
million at June 30, 2017.
Repossessed assets totaled $27.5 million at June 30, 2018, a
decrease of $2.7 million from $30.2 million at March 31, 2018, and
a decrease of $3.5 million from $31.0 million at June 30, 2017.
Adversely graded loans and non-performing assets totaled $368.5
million at June 30, 2018, a decrease of $10.2 million from $378.7
million at March 31, 2018, and an increase of $0.7 million from
$367.8 million at June 30, 2017.
As the Company’s capital increased, the ratio of classified
assets to Tier I capital plus the allowance for credit losses, a
common regulatory measure of asset quality, was 10.1% at June 30,
2018, compared to 9.4% at March 31, 2018, and 12.7% at June 30,
2017.1
1 See reconciliation of Non-GAAP Financial Measures beginning on
page 20.
Segment Highlights
The Company's reportable segments are aggregated primarily based
on geographic location, services offered, and markets served. The
Company's regional segments, which include Arizona, Nevada,
Southern California, and Northern California provide full service
banking and related services to their respective markets. The
operations from the regional segments correspond to the following
banking divisions: Alliance Bank of Arizona, Bank of Nevada and
First Independent Bank, Torrey Pines Bank, and Bridge Bank.
The Company's National Business Lines ("NBL") segment provides
specialized banking services to niche markets. The Company's NBL
reportable segments include Homeowner Associations ("HOA")
Services, Hotel Franchise Finance ("HFF") Public & Nonprofit
Finance, Technology & Innovation, and Other NBLs. These NBLs
are managed centrally and are broader in geographic scope than our
other segments, though still predominately located within our core
market areas.
The Corporate & Other segment 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, Southern California, Northern
California, and NBL segments include loan and deposit growth, asset
quality, and pre-tax income.
The regional segments reported gross loan balances of $8.72
billion at June 30, 2018, an increase of $144 million during
the quarter, and an increase of $891 million during the last twelve
months. The growth in loans during the quarter was driven primarily
by increases of $85 million in Arizona and $31 million in Nevada.
The growth in loans during the last twelve months was driven by
increases in all regional segments. The largest increases were $468
million in Arizona and $189 million in Southern California,
followed by Nevada and Northern California with increases of $121
million and $113 million, respectively. Total deposits for the
regional segments were $13.12 billion, an increase of $212 million
during the quarter, and an increase of $616 million during the last
twelve months. During the quarter, Arizona and Nevada had increases
in deposits of $249 million and $114 million, respectively. These
increases were partially offset by decreases of $121 million and
$30 million in Southern California and Northern California,
respectively. During the last twelve months, Arizona, Northern
California, and Southern California had increased deposits of $491
million, $237 million, and $52 million, respectively. These
increases were partially offset by a decrease in deposits of $163
million in Nevada.
Pre-tax income for the regional segments was $86.0 million for
the three months ended June 30, 2018, an increase of $0.1
million from the three months ended March 31, 2018, and an
increase of $1.3 million from the three months ended June 30,
2017. Arizona and Northern California had increases in pre-tax
income of $4.3 million and $1.2 million, respectively, compared to
the three months ended March 31, 2018. These increases were
partially offset by a decrease of $5.4 million in Nevada. Arizona
and Northern California had increases in pre-tax income from the
three months ended June 30, 2017 of $5.1 million and $3.2
million, respectively. These increases were partially offset by
decreases of $4.5 million and $2.6 million in Nevada and Southern
California, respectively. For the six months ended June 30, 2018,
the regional segments reported total pre-tax income of $171.8
million, an increase of $14.8 million compared to the six months
ended June 30, 2017. Arizona, Northern California, and Nevada each
had increases of $11.8 million, $2.9 million, and $1.4 million,
respectively. These increases were partially offset by a decrease
of $1.3 million in Southern California.
The NBL segments reported gross loan balances of $7.41 billion
at June 30, 2018, an increase of $432 million during the
quarter, and an increase of $1.26 billion during the last twelve
months. There were increases in loans across all of the NBL
segments compared to the prior quarter. The largest increases
relate to the Other NBLs, HFF, and Technology & Innovation
segments, which increased by $297 million, $53 million, and $37
million, respectively. During the last twelve months, each of the
NBL segments have had increases in loans. The largest drivers of
the increase were Other NBLs, HFF, and Technology & Innovation
segments with increases of $849 million, $193 million, and $161
million, respectively. Total deposits for the NBL segments were
$4.51 billion, an increase of $300 million during the quarter, and
an increase of $1.05 billion during the last twelve months. The
Technology & Innovation and HOA services segments each had
increases of $260 million and $40 million, respectively. The
increase of $1.05 billion during the last twelve months is the
result of growth in the Technology & Innovation and HOA
Services of $721 million and $328 million, respectively.
Pre-tax income for the NBL segments was $48.7 million for the
three months ended June 30, 2018, an increase of $2.0 million
from the three months ended March 31, 2018, and an increase of
$6.1 million from the three months ended June 30, 2017. The
increase in pre-tax income from the prior quarter relates primarily
to the Technology & Innovation, HOA Services, and HFF segments,
which increased by $1.6 million, $0.4 million, and $0.4 million,
respectively. These increases were partially offset by a decrease
in pre-tax income from the Other NBLs segment which had a decrease
of $0.3 million. The primary drivers of the increase in pre-tax
income from the same period in the prior year were the Other NBLs,
Technology & Innovation, HFF, and HOA Services segments. These
segments had increases of $2.8 million, $2.7 million, $2.6 million,
and $1.6 million, respectively. These increases were partially
offset by a decrease of $3.6 million in pre-tax income in the
Public & Nonprofit segment. Pre-tax income for the NBL segments
for the six months ended June 30, 2018 totaled $95.4 million, an
increase of $15.3 million compared to the six months ended June 30,
2017. The largest increases in pre-tax income compared to the six
months ended June 30, 2017 were in the Other NBLs, Technology &
Innovation, HOA Services, and HFF segments. These segments had
increases of $8.3 million, $6.2 million, $3.6 million, and $2.7
million, respectively. These increases were partially offset by a
decrease of $5.5 million in the Public & Nonprofit segment.
Conference Call and Webcast
Western Alliance Bancorporation will host a conference call and
live webcast to discuss its second quarter 2018 financial results
at 12:00 p.m. ET on Friday, July 20, 2018. Participants may
access the call by dialing 1-888-317-6003 and using passcode
5174586 or via live audio webcast using the website link
https://services.choruscall.com/links/wal180720.html.
The webcast is also available via the Company’s website at
www.westernalliancebancorporation.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 20th through 9:00 a.m. ET August
20th by dialing 1-877-344-7529 passcode: 10121936.
Reclassifications
Certain amounts in the Consolidated Income Statements for the
prior periods have been reclassified to conform to the current
presentation. The reclassifications have no effect on net income or
stockholders’ equity as previously reported.
Use of Non-GAAP Financial Information
This press release contains both financial measures based on
GAAP and non-GAAP based financial measures, which are used where
management believes them to be helpful in understanding the
Company’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.
Adoption of Accounting Standards
During the first quarter 2018, the Company adopted Accounting
Standards Update ("ASU") 2014-09, Revenue from Contracts with
Customers, ASU 2016-01, Recognition and Measurement of Financial
Assets and Financial Liabilities and ASU 2018-02, Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive
Income.
The amendments in ASU 2014-09 create a common revenue standard
and clarify the principles for recognizing revenue that can be
applied consistently across various transactions, industries, and
capital markets. Although this new accounting guidance brings
considerable changes to how many companies account for revenue and
disclose revenue-related information, the effect on the Company has
not been significant as substantially all of the Company's revenue
is generated from interest income related to loans and investment
securities, which are not within the scope of this guidance. For
the Company's revenue streams that are within the scope of this
guidance, the guidance was adopted on January 1, 2018 using the
modified retrospective method. Upon adoption, the Company's
accounting policies did not change materially as the principles of
revenue recognition in the ASU are largely consistent with current
practices applied by the Company.
The amendments in ASU 2016-01 require that equity investments be
measured at fair value with changes in fair value recognized in net
income, rather than accumulated other comprehensive income. Upon
adoption of the new accounting guidance, on January 1, 2018, the
Company recorded a cumulative-effect adjustment of $0.4 million to
decrease accumulated other comprehensive income with a
corresponding increase to opening retained earnings. During the six
months ended June 30, 2018, the Company recognized a loss of $1.8
million related to fair value changes in equity securities.
The amendments in ASU 2018-02 allow a reclassification from
accumulated other comprehensive income to retained earnings from
tax effects resulting from the TCJA so that tax effects of items
within other comprehensive income reflect the current tax rate.
Previously, the effect of a change in tax laws or rates on deferred
tax liabilities and assets were included in income from continuing
operations even in situations in which the related income tax
effects of items in accumulated other comprehensive income were
originally recognized in comprehensive income. Upon adoption of the
new accounting guidance, on January 1, 2018, the Company recorded a
cumulative-effect adjustment of $0.6 million to decrease
accumulated other comprehensive income with a corresponding
increase to opening retained earnings.
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 our
expectations with regard to our business, financial and operating
results, and future economic performance, including our recent
domestic select-service hotel franchise finance loan portfolio
acquisition. 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, 2017 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, including
expansion through acquisitions; additional regulatory requirements
resulting from our continued growth; 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.
About Western Alliance Bancorporation
With more than $20 billion in assets, Western Alliance
Bancorporation (NYSE:WAL) is one of the country’s top-performing
banking companies and is ranked #2 on the Forbes 2018 “Best Banks
in America” list. Its primary subsidiary, Western Alliance Bank,
Member FDIC, is the go-to bank for business and succeeds with local
teams of experienced bankers who deliver superior service and a
full spectrum of customized loan, deposit and treasury management
capabilities. Business clients also benefit from a powerful array
of specialized financial services that provide strong expertise and
tailored solutions for a wide variety of industries and sectors. A
national presence with a regional footprint, Western Alliance Bank
operates individually branded, full-service banking divisions with
offices in key markets nationwide. For more information, visit
westernalliancebank.com.
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated
Financial Data Unaudited
Selected Balance Sheet Data: As of June 30,
2018 2017 Change % (in millions) Total
assets $ 21,367.5 $ 18,844.7 13.4 % Gross loans, net of deferred
fees 16,138.3 13,989.9 15.4 Securities and money market investments
3,688.7 3,283.0 12.4 Total deposits 18,087.5 16,031.1 12.8
Borrowings 75.0 —
NM
Qualifying debt 361.1 375.4 (3.8 ) Stockholders' equity 2,391.7
2,058.7 16.2 Tangible common equity, net of tax (1)
2,094.3
1,761.6 18.9
Selected Income Statement Data:
For the Three Months Ended June
30,
For the Six Months Ended June 30, 2018
2017 Change % 2018 2017
Change % (in thousands, except per share data) (in
thousands, except per share data) Interest income $ 251,602 $
206,953 21.6 % $ 486,299 $ 399,218 21.8 % Interest expense 27,494
14,210 93.5 47,971 27,166 76.6 Net
interest income 224,108 192,743 16.3 438,328 372,052 17.8 Provision
for credit losses 5,000 3,000 66.7 11,000
7,250 51.7 Net interest income after provision for credit
losses 219,108 189,743 15.5 427,328 364,802 17.1 Non-interest
income 13,444 10,601 26.8 25,087 21,200 18.3 Non-interest expense
102,548 88,420 16.0 200,697 176,247
13.9 Income before income taxes 130,004 111,924 16.2 251,718
209,755 20.0 Income tax expense 25,325 31,964 (20.8 )
46,139 56,453 (18.3 ) Net income $ 104,679 $
79,960 30.9 $ 205,579 $ 153,302 34.1 Diluted
earnings per share $ 0.99 $ 0.76 30.3 $ 1.95 $
1.46 33.6
(1) See Reconciliation of Non-GAAP
Financial Measures.
NM Changes +/- 100% are not
meaningful.
Western Alliance Bancorporation and
Subsidiaries
Summary Consolidated Financial
Data Unaudited
Common Share Data: At or For the Three Months Ended June
30, For the Six Months Ended June 30, 2018
2017
Change %
2018
2017
Change %
Diluted earnings per share
$
0.99
$
0.76
30.3
%
$
1.95
$
1.46
33.6
%
Book value per common share 22.59
19.53
15.7
Tangible book value per share, net of tax (1) 19.78
16.71
18.4
Average shares outstanding (in thousands): Basic 104,691
104,162
0.5
104,611
104,075
0.5
Diluted 105,420
105,045
0.4
105,372
104,941
0.4
Common shares outstanding 105,876
105,429
0.4
Selected Performance Ratios: Return on average assets
(2)
2.02
%
1.71
%
18.1
%
2.00
%
1.70
%
17.6
%
Return on average tangible common equity (1, 2) 20.41
18.42
10.8
20.43
18.14 12.6 Net interest margin (2)
4.70
4.61
2.0
4.65
4.62 0.6 Operating efficiency ratio - tax equivalent basis (1) 42.1
41.2
2.0
42.4
42.8
(0.9
)
Loan to deposit ratio 89.22
87.27
2.2
Asset Quality Ratios: Net charge-offs (recoveries) to
average loans outstanding (2)
0.07
%
(0.03
)%
NM
0.05
%
0.00
%
NM Nonaccrual loans to gross loans 0.21
0.22
(4.5
)
Nonaccrual loans and repossessed assets to total assets 0.29
0.32
(9.4
)
Loans past due 90 days and still accruing to gross loans —
0.03
NM
Allowance for credit losses to gross loans 0.91
0.94
(3.2
)
Allowance for credit losses to nonaccrual loans 432.38
438.33
(1.4
)
Capital Ratios (1):
Jun 30, 2018
Mar 31, 2018
Jun 30, 2017
Tangible common equity (1)
9.9
%
9.8
%
9.5
%
Common Equity Tier 1 (1), (3)
10.7
10.5
10.3
Tier 1 Leverage ratio (1), (3)
10.8
10.5
9.9
Tier 1 Capital (1), (3)
11.1
10.9
10.8
Total Capital (1), (3)
13.4
13.2
13.4
(1) See Reconciliation of Non-GAAP
Financial Measures.
(2) Annualized for the three and six
months ended June 30, 2018 and 2017.
(3) Capital ratios for June 30, 2018 are
preliminary until the Call Report is filed.
NM Changes +/- 100% are not
meaningful.
Western Alliance Bancorporation and
Subsidiaries
Condensed Consolidated Income Statements Unaudited
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017 (dollars in
thousands, except per share data) Interest income: Loans $ 222,035
$ 183,657 $ 427,994 $ 356,210 Investment securities 27,445 20,629
54,066 38,743 Other 2,122 2,667 4,239 4,265
Total interest income 251,602 206,953
486,299 399,218 Interest expense: Deposits 19,849
9,645 34,022 18,057 Qualifying debt 5,695 4,493 10,664 8,831
Borrowings 1,950 72 3,285 278
Total
interest expense 27,494 14,210 47,971
27,166
Net interest income 224,108 192,743 438,328
372,052 Provision for credit losses 5,000 3,000
11,000 7,250
Net interest income after provision
for credit losses 219,108 189,743 427,328
364,802 Non-interest income: Service charges and fees 5,672
5,203 11,417 9,941 Income from equity investments 2,517 1,318 3,977
2,010 Card income 2,033 1,516 4,005 3,008 Income from bank owned
life insurance 1,167 973 2,095 1,921 Foreign currency income 1,181
832 2,383 1,874 Lending related income and gains (losses) on sale
of loans, net 1,047 227 2,025 649 Gain (loss) on sales of
investment securities, net — (47 ) — 588 Unrealized (losses) gains
on assets measured at fair value, net (685 ) — (1,759 ) (1 ) Other
512 579 944 1,210
Total non-interest
income 13,444 10,601 25,087 21,200
Non-interest expenses: Salaries and employee benefits 61,785 52,273
123,918 103,893 Legal, professional, and directors' fees 7,946
8,483 13,949 17,286 Occupancy 7,401 6,927 14,265 13,821 Data
processing 5,586 4,375 10,793 9,639 Deposit costs 4,114 2,133 7,040
3,874 Insurance 3,885 3,589 7,754 6,817 Business development 1,414
1,447 3,142 3,510 Marketing 1,146 1,131 1,742 1,852 Card expense
1,081 861 2,023 1,592 Loan and repossessed asset expenses 1,017
1,098 1,600 2,376 Intangible amortization 399 488 797 1,177 Net
(gain) loss on sales and valuations of repossessed and other assets
(179 ) 231 (1,407 ) (312 ) Other 6,953 5,384 15,081
10,722
Total non-interest expense 102,548
88,420 200,697 176,247 Income before
income taxes 130,004 111,924 251,718 209,755 Income tax expense
25,325 31,964 46,139 56,453
Net
income $ 104,679 $ 79,960 $ 205,579 $
153,302
Earnings per share: Diluted shares
105,420 105,045 105,372 104,941 Diluted earnings per share $ 0.99 $
0.76 $ 1.95 $ 1.46
Western Alliance
Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited Three Months Ended Jun 30,
2018 Mar 31, 2018 Dec 31, 2017 Sep 30,
2017 Jun 30, 2017 (in thousands, except per share data)
Interest income: Loans $ 222,035 $ 205,959 $ 200,204 $ 191,096 $
183,657 Investment securities 27,445 26,621 26,312 23,584 20,629
Other 2,122 2,117 1,943 3,156 2,667
Total interest income 251,602 234,697
228,459 217,836 206,953 Interest expense:
Deposits 19,849 14,173 12,459 11,449 9,645 Qualifying debt 5,695
4,969 4,734 4,708 4,493 Borrowings 1,950 1,335 237
96 72
Total interest expense 27,494
20,477 17,430 16,253 14,210
Net interest income 224,108 214,220 211,029 201,583 192,743
Provision for credit losses 5,000 6,000 5,000
5,000 3,000
Net interest income after provision
for credit losses 219,108 208,220 206,029
196,583 189,743 Non-interest income: Service charges
and fees 5,672 5,745 5,157 5,248 5,203 Income from equity
investments 2,517 1,460 1,519 967 1,318 Card income 2,033 1,972
1,796 1,509 1,516 Income from bank owned life insurance 1,167 928
965 975 973 Foreign currency income 1,181 1,202 906 756 832 Lending
related income and gains (losses) on sale of loans, net 1,047 978
1,466 97 227 Gain (loss) on sales of investment securities, net — —
1,436 319 (47 ) Unrealized (losses) gains on assets measured at
fair value, net (685 ) (1,074 ) — — — Other 512 432
443 585 579
Total non-interest income
13,444 11,643 13,688 10,456 10,601
Non-interest expenses: Salaries and employee benefits 61,785
62,133 57,704 52,747 52,273 Legal, professional, and directors'
fees 7,946 6,003 6,490 6,038 8,483 Occupancy 7,401 6,864 6,532
7,507 6,927 Data processing 5,586 5,207 5,062 4,524 4,375 Deposit
costs 4,114 2,926 2,953 2,904 2,133 Insurance 3,885 3,869 3,687
3,538 3,589 Business development 1,414 1,728 1,179 1,439 1,447
Marketing 1,146 596 1,176 776 1,131 Card expense 1,081 942 855 966
861 Loan and repossessed asset expenses 1,017 583 978 1,263 1,098
Intangible amortization 399 398 408 489 488 Net (gain) loss on
sales and valuations of repossessed and other assets (179 ) (1,228
) (34 ) 266 231 Other 6,953 8,128 8,408 6,839
5,384
Total non-interest expense 102,548
98,149 95,398 89,296 88,420
Income before income taxes 130,004 121,714 124,319 117,743 111,924
Income tax expense 25,325 20,814 34,973 34,899
31,964
Net income $ 104,679 $ 100,900
$ 89,346 $ 82,844 $ 79,960
Earnings per share: Diluted shares 105,420 105,324 105,164
104,942 105,045 Diluted earnings per share $ 0.99 $ 0.96 $ 0.85 $
0.79 $ 0.76
Western Alliance Bancorporation
and Subsidiaries Five Quarter
Condensed Consolidated Balance Sheets Unaudited
Jun 30, 2018 Mar 31, 2018 Dec 31, 2017
Sep 30, 2017 Jun 30, 2017 (in millions, except per
share data)
Assets: Cash and due from banks $ 506.8 $ 439.4
$ 416.8 $ 650.4 $ 606.7 Securities and money market investments
3,688.7 3,734.3 3,820.4 3,773.6 3,283.0 Loans held for sale — — —
16.3 16.7 Loans held for investment: Commercial 7,278.4 6,944.4
6,841.4 6,735.9 6,318.5 Commercial real estate - non-owner occupied
4,010.6 3,925.3 3,904.0 3,628.4 3,649.1 Commercial real estate -
owner occupied 2,270.5 2,264.6 2,241.6 2,047.5 2,021.2 Construction
and land development 1,978.3 1,957.5 1,632.2 1,666.4 1,601.7
Residential real estate 545.3 418.1 425.9 376.7 334.8 Consumer 55.2
50.5 48.8 50.7 47.9
Gross
loans, net of deferred fees 16,138.3 15,560.4 15,093.9 14,505.6
13,973.2 Allowance for credit losses (147.1 ) (144.7 ) (140.0 )
(136.4 ) (131.8 )
Loans, net 15,991.2 15,415.7
14,953.9 14,369.2 13,841.4 Premises and
equipment, net 115.4 116.7 118.7 120.1 120.5 Other assets acquired
through foreclosure, net 27.5 30.2 28.5 29.0 31.0 Bank owned life
insurance 168.7 168.6 167.8 166.8 166.4 Goodwill and other
intangibles, net 300.0 300.4 300.7 301.2 301.6 Other assets 569.2
555.4 522.3 495.6 477.4
Total
assets $ 21,367.5 $ 20,760.7 $ 20,329.1 $
19,922.2 $ 18,844.7
Liabilities and Stockholders'
Equity: Liabilities: Deposits Non-interest bearing demand
deposits $ 7,947.9 $ 7,502.0 $ 7,434.0 $ 7,608.7 $ 6,859.4 Interest
bearing: Demand 1,864.6 1,776.3 1,586.2 1,406.4 1,480.8 Savings and
money market 6,468.8 6,314.9 6,330.9 6,300.2 6,104.0 Time
certificates 1,806.2 1,761.3 1,621.4 1,589.5
1,586.9
Total deposits 18,087.5 17,354.5
16,972.5 16,904.8 16,031.1 Customer repurchase agreements 18.0
21.7 26.0 26.1 32.7
Total
customer funds 18,105.5 17,376.2 16,998.5 16,930.9 16,063.8
Borrowings 75.0 300.0 390.0 — — Qualifying debt 361.1 363.9 376.9
372.9 375.4 Accrued interest payable and other liabilities 434.2
426.9 333.9 472.8 346.8
Total
liabilities 18,975.8 18,467.0 18,099.3
17,776.6 16,786.0 Stockholders' Equity: Common stock
and additional paid-in capital 1,387.9 1,385.0 1,384.4 1,378.8
1,376.4 Retained earnings 1,055.1 950.4 848.5 758.6 675.8
Accumulated other comprehensive (loss) income (51.3 ) (41.7 ) (3.1
) 8.2 6.5
Total stockholders' equity 2,391.7
2,293.7 2,229.8 2,145.6 2,058.7
Total liabilities and stockholders' equity $ 21,367.5
$ 20,760.7 $ 20,329.1 $ 19,922.2 $ 18,844.7
Western Alliance Bancorporation and
Subsidiaries Changes in the
Allowance For Credit Losses Unaudited
Three Months Ended Jun 30, 2018 Mar 31, 2018
Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 (in
thousands) Balance, beginning of period $ 144,659 $ 140,050 $
136,421 $ 131,811 $ 127,649 Provision for credit losses 5,000 6,000
5,000 5,000 3,000 Recoveries of loans previously charged-off:
Commercial and industrial 916 459 406 619 1,759 Commercial real
estate - non-owner occupied 15 105 58 1,168 360 Commercial real
estate - owner occupied 231 21 119 613 46 Construction and land
development 8 1,388 218 226 508 Residential real estate 141 250 120
108 1,299 Consumer 14 10 3 33 —
Total recoveries 1,325 2,233 924 2,767 3,972 Loans charged-off:
Commercial and industrial 2,778 3,517 2,019 2,921 651 Commercial
real estate - non-owner occupied 232 — 275 175 1,808 Commercial
real estate - owner occupied — — — — 11 Construction and land
development 1 — — — — Residential real estate 885 107 — — 332
Consumer 5 — 1 61 8 Total loans
charged-off 3,901 3,624 2,295 3,157 2,810 Net loan charge-offs
(recoveries) 2,576 1,391 1,371 390
(1,162 ) Balance, end of period $ 147,083 $ 144,659 $
140,050 $ 136,421 $ 131,811
Net charge-offs (recoveries) to average
loans-annualized
0.07 % 0.04 % 0.04 % 0.01 % (0.03 )% Allowance for credit
losses to gross loans 0.91 % 0.93 % 0.93 % 0.94 % 0.94 % Allowance
for credit losses to gross organic loans 0.99 1.02 1.03 1.06 1.08
Allowance for credit losses to nonaccrual loans 432.38 387.86
318.84 248.07 438.33 Nonaccrual loans $ 34,017 $ 37,297 $
43,925 $ 54,994 $ 30,071 Nonaccrual loans to gross loans 0.21 %
0.24 % 0.29 % 0.38 % 0.22 % Repossessed assets $ 27,541 $ 30,194 $
28,540 $ 28,973 $ 30,988 Nonaccrual loans and repossessed assets to
total assets 0.29 % 0.33 % 0.36 % 0.42 % 0.32 % Loans past
due 90 days, still accruing $ — $ 37 $ 43 $ 44 $ 4,021 Loans past
due 90 days and still accruing to gross loans — % 0.00 % 0.00 %
0.00 % 0.03 % Loans past due 30 to 89 days, still accruing $ 1,545
$ 6,479 $ 10,142 $ 5,179 $ 4,071 Loans past due 30 to 89 days,
still accruing to gross loans 0.01 % 0.04 % 0.07 % 0.04 % 0.03 %
Special mention loans $ 150,278 $ 184,702 $ 155,032 $
199,965 $ 141,036 Special mention loans to gross loans 0.93 % 1.19
% 1.03 % 1.38 % 1.01 % Classified loans on accrual $ 156,659
$ 126,538 $ 127,681 $ 122,264 $ 165,715 Classified loans on accrual
to gross loans 0.97 % 0.81 % 0.85 % 0.84 % 1.19 % Classified assets
$ 240,063 $ 213,482 $ 222,004 $ 221,803 $ 249,491 Classified assets
to total assets 1.12 % 1.03 % 1.09 % 1.11 % 1.32 %
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances,
Yields and Rates Unaudited Three Months
Ended June 30, 2018 March 31, 2018
AverageBalance Interest Average Yield
/Cost AverageBalance Interest
Average Yield /Cost
($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets Loans: Commercial $ 6,902.5 $ 94,243
5.64 % $ 6,580.9 $ 85,547 5.38 % CRE - non-owner occupied 3,964.2
59,373 6.01 3,920.8 56,285 5.76 CRE - owner occupied 2,242.6 28,698
5.23 2,241.8 28,551 5.21 Construction and land development 1,952.0
33,567 6.89 1,789.4 29,619 6.63 Residential real estate 433.4 5,414
5.00 425.3 5,280 4.97 Consumer 52.4 740 5.65
47.9 677 5.65
Total loans (1), (2), (3)
15,547.1 222,035 5.81 15,006.1 205,959 5.59 Securities: Securities
- taxable 2,802.9 19,274 2.75 2,875.3 19,149 2.66 Securities -
tax-exempt 848.7 8,171 4.81 836.9 7,472
4.47
Total securities (1) 3,651.6 27,445 3.23
3,712.2 26,621 3.07 Cash and other 382.5 2,122 2.22
425.7 2,117 1.99
Total interest
earning assets 19,581.2 251,602 5.26 19,144.0 234,697 5.02
Non-interest earning assets Cash and due from banks 145.0
142.3 Allowance for credit losses (145.6 ) (141.0 ) Bank owned life
insurance 168.3 168.1 Other assets 1,010.7 990.8
Total assets $ 20,759.6 $ 20,304.2
Interest-bearing liabilities Interest-bearing deposits:
Interest-bearing transaction accounts $ 1,824.7 $ 2,360 0.52 % $
1,654.7 $ 1,380 0.33 % Savings and money market 6,126.3 12,324 0.80
6,226.7 8,915 0.57 Time certificates of deposit 1,714.8
5,165 1.20 1,579.9 3,878 0.98
Total interest-bearing deposits 9,665.8 19,849 0.82 9,461.3
14,173 0.60 Short-term borrowings 413.2 1,950 1.89 351.6 1,335 1.52
Qualifying debt 362.8 5,695 6.28 368.8
4,969 5.39
Total interest-bearing liabilities
10,441.8 27,494 1.05 10,181.7 20,477 0.80
Non-interest-bearing
liabilities Non-interest-bearing demand deposits 7,612.0
7,510.6 Other liabilities 354.0 338.5 Stockholders’ equity 2,351.8
2,273.4
Total liabilities and stockholders'
equity $ 20,759.6 $ 20,304.2 Net interest income
and margin (4) $ 224,108 4.70 % $ 214,220 4.60 % (1)
Yields on loans and securities have been adjusted to a tax
equivalent basis. The tax equivalent adjustment was $5.9 million
and $5.7 million for the three months ended June 30, 2018 and March
31, 2018, respectively. (2) Included in the yield computation are
net loan fees of $11.0 million and accretion on acquired loans of
$5.1 million for the three months ended June 30, 2018, compared to
$10.0 million and $5.7 million for the three months ended March 31,
2018, respectively. (3) Includes non-accrual loans. (4) Net
interest margin is computed by dividing net interest income by
total average earning assets.
Western Alliance
Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited Three Months Ended June
30, 2018 2017
AverageBalance
Interest
Average Yield /Cost
AverageBalance Interest Average Yield
/Cost ($ in millions) ($ in thousands) ($ in millions)
($ in thousands)
Interest earning assets Loans: Commercial $
6,902.5 $ 94,243 5.64 % $ 6,071.6 $ 76,000 5.39
%
CRE - non-owner occupied 3,964.2 59,373 6.01 3,606.8 52,416 5.84
CRE - owner occupied 2,242.6 28,698 5.23 2,019.5 25,931 5.43
Construction and land development 1,952.0 33,567 6.89 1,605.6
24,965 6.24 Residential real estate 433.4 5,414 5.00 322.2 3,950
4.90 Consumer 52.4 740 5.65 44.7 395
3.53
Total loans (1), (2), (3) 15,547.1
222,035 5.81 13,670.4 183,657 5.60 Securities: Securities - taxable
2,802.9 19,274 2.75 2,446.5 14,847 2.43 Securities - tax-exempt
848.7 8,171 4.81 628.0 5,782
5.48
Total securities (1) 3,651.6 27,445 3.23 3,074.5
20,629 3.05 Cash and other 382.6 2,122 2.22
903.3 2,667 1.18
Total interest earning
assets 19,581.3 251,602 5.26 17,648.2 206,953 4.93
Non-interest earning assets Cash and due from banks 145.0
140.3 Allowance for credit losses (145.6 ) (130.0 ) Bank owned life
insurance 168.3 165.8 Other assets 1,010.6 919.6
Total assets $ 20,759.6 $ 18,743.9
Interest-bearing liabilities Interest-bearing deposits:
Interest-bearing transaction accounts $ 1,824.7 $ 2,360 0.52 % $
1,492.7 $ 986 0.26 % Savings and money market 6,126.3 12,324 0.80
6,155.8 5,831 0.38 Time certificates of deposit 1,714.8
5,165 1.20 1,576.0 2,828 0.72
Total interest-bearing deposits 9,665.8 19,849 0.82 9,224.5
9,645 0.42 Short-term borrowings 413.2 1,950 1.89 34.6 72 0.83
Qualifying debt 362.8 5,695 6.28 359.3
4,493 5.00
Total interest-bearing liabilities
10,441.8 27,494 1.05 9,618.4 14,210 0.59
Non-interest-bearing
liabilities Non-interest-bearing demand deposits 7,612.0
6,735.3 Other liabilities 354.0 351.7 Stockholders’ equity 2,351.8
2,038.5
Total liabilities and stockholders'
equity $ 20,759.6 $ 18,743.9 Net interest income
and margin (4) $ 224,108 4.70 % $ 192,743 4.61 % Net
interest margin, adjusted (5) 4.49 % (1) Yields on loans and
securities have been adjusted to a tax equivalent basis. The tax
equivalent adjustment was $5.9 million and $10.4 million for the
three months ended June 30, 2018 and 2017, respectively. (2)
Included in the yield computation are net loan fees of $11.0
million and accretion on acquired loans of $5.1 million for the
three months ended June 30, 2018, compared to $10.0 million and
$7.1 million for the three months ended June 30, 2017,
respectively. (3) Includes non-accrual loans. (4) Net interest
margin is computed by dividing net interest income by total average
earning assets. (5) Prior period net interest margin is adjusted to
include the effects from the TCJA of the lower statutory corporate
federal tax rate on the calculation of the tax equivalent
adjustment in order to be comparable to the current period.
Western Alliance Bancorporation and Subsidiaries
Analysis of Average
Balances, Yields and Rates Unaudited
Six Months Ended June 30, 2018 2017
AverageBalance Interest Average Yield
/Cost AverageBalance Interest
Average Yield /Cost ($ in millions) ($ in thousands)
($ in millions) ($ in thousands)
Interest earning assets
Loans: Commercial $ 6,742.6 $ 179,789 5.51 % $ 5,908.0 $ 144,346
5.28 % CRE - non-owner occupied 3,942.6 115,659 5.88 3,585.9
106,277 5.95 CRE - owner occupied 2,242.2 57,249 5.22 2,008.8
50,658 5.28 Construction and land development 1,871.1 63,186 6.76
1,558.5 47,067 6.05 Residential real estate 429.4 10,694 4.98 297.2
6,974 4.69 Consumer 50.2 1,417 5.65 41.6
888 4.27
Total loans (1), (2), (3)
15,278.1 427,994 5.70 13,400.0 356,210 5.53 Securities: Securities
- taxable 2,838.9 38,423 2.71 2,276.8 27,285 2.40 Securities -
tax-exempt 842.8 15,643 4.64 616.2
11,458 5.52
Total securities (1) 3,681.7
54,066 3.15 2,893.0 38,743 3.06 Cash and other 404.0 4,239
2.10 693.8 4,265 1.23
Total
interest earning assets 19,363.8 486,299 5.14 16,986.8 399,218
4.94
Non-interest earning assets Cash and due from banks
143.7 141.5 Allowance for credit losses (143.3 ) (127.9 ) Bank
owned life insurance 168.2 165.3 Other assets 1,000.8 910.1
Total assets $ 20,533.2 $ 18,075.8
Interest-bearing liabilities Interest-bearing deposits:
Interest-bearing transaction accounts $ 1,740.2 $ 3,741 0.43 % $
1,463.9 $ 1,791 0.24 % Savings and money market 6,176.2 21,238 0.69
6,112.7 11,143 0.36 Time certificates of deposit 1,647.7
9,043 1.10 1,530.7 5,123 0.67
Total interest-bearing deposits 9,564.1 34,022 0.71 9,107.3
18,057 0.40 Short-term borrowings 382.6 3,285 1.72 72.5 278 0.77
Qualifying debt 365.8 10,664 5.83 356.6
8,831 4.95
Total interest-bearing liabilities
10,312.5 47,971 0.93 9,536.4 27,166 0.57
Non-interest-bearing
liabilities Non-interest-bearing demand deposits 7,561.6
6,230.1 Other liabilities 346.3 316.4 Stockholders’ equity 2,312.8
1,992.9
Total liabilities and stockholders'
equity $ 20,533.2 $ 18,075.8 Net interest income
and margin (4) $ 438,328 4.65 % $ 372,052 4.62 % Net
interest margin, adjusted (5) 4.50 % (1) Yields on loans and
securities have been adjusted to a tax equivalent basis. The tax
equivalent adjustment was $11.7 million and $20.1 million for the
six months ended June 30, 2018 and 2017, respectively. (2) Included
in the yield computation are net loan fees of $20.9 million and
accretion on acquired loans of $10.8 million for the six months
ended June 30, 2018, compared to $16.6 million and $13.5 million
for the six months ended June 30, 2017, respectively. (3) Includes
non-accrual loans. (4) Net interest margin is computed by dividing
net interest income by total average earning assets. (5) Prior
period net interest margin is adjusted to include the effects from
the TCJA of the lower statutory corporate federal tax rate on the
calculation of the tax equivalent adjustment in order to be
comparable to the current period.
Western Alliance
Bancorporation and Subsidiaries
Operating Segment Results Unaudited
Balance Sheet: Regional Segments
Consolidated Company Arizona Nevada
Southern California Northern California At June
30, 2018: (dollars in millions)
Assets: Cash, cash
equivalents, and investment securities $ 4,195.5 $ 1.8 $ 8.3 $ 2.2
$ 2.0 Loans, net of deferred loan fees and costs 16,138.3 3,557.6
1,850.7 2,027.8 1,285.4 Less: allowance for credit losses (147.1 )
(33.4 ) (17.8 ) (20.4 ) (10.9 ) Total loans 15,991.2 3,524.2
1,832.9 2,007.4 1,274.5 Other assets
acquired through foreclosure, net 27.5 2.3 14.1 — — Goodwill and
other intangible assets, net 300.0 — 23.2 — 156.1 Other assets
853.3 45.8 58.0 14.5 18.2 Total
assets $ 21,367.5 $ 3,574.1 $ 1,936.5 $
2,024.1 $ 1,450.8
Liabilities: Deposits $
18,087.5 $ 5,269.3 $ 3,762.3 $ 2,303.2 $ 1,784.3 Borrowings and
qualifying debt 436.1 — — — — Other liabilities 452.2 9.0
14.8 1.7 11.6 Total liabilities
18,975.8 5,278.3 3,777.1 2,304.9
1,795.9
Allocated equity: 2,391.7 434.7
261.3 228.8 301.7
Total liabilities and
stockholders' equity $ 21,367.5 $ 5,713.0 $
4,038.4 $ 2,533.7 $ 2,097.6 Excess funds
provided (used) — 2,138.9 2,101.9 509.6 646.8 No. of offices
47 10 16 9 3 No. of full-time equivalent employees 1,773 124 98 116
130
Income Statement: Three Months Ended
June 30, 2018: (in thousands) Net interest income $ 224,108 $
57,977 $ 35,276 $ 27,664 $ 23,001 Provision for (recovery) credit
losses 5,000 518 (243 ) (276 ) 13 Net interest
income after provision for credit losses 219,108 57,459 35,519
27,940 22,988 Non-interest income 13,444 2,256 2,679 966 2,421
Non-interest expense (102,548 ) (22,419 ) (15,931 ) (14,491 )
(13,429 ) Income (loss) before income taxes 130,004 37,296 22,267
14,415 11,980 Income tax expense (benefit) 25,325 9,324
4,676 4,036 3,355
Net income $
104,679 $ 27,972 $ 17,591 $ 10,379 $
8,625
Six Months Ended June 30, 2018:
(in thousands) Net interest income $ 438,328 $ 112,532 $ 71,966 $
55,466 $ 45,256 Provision for (recovery of) credit losses 11,000
1,952 (1,967 ) 454 1,561 Net interest
income after provision for credit losses 427,328 110,580 73,933
55,012 43,695 Non-interest income 25,087 3,672 6,012 1,967 4,969
Non-interest expense (200,697 ) (43,923 ) (30,015 ) (28,137 )
(25,932 ) Income (loss) before income taxes 251,718 70,329 49,930
28,842 22,732 Income tax expense (benefit) 46,139 17,645
10,579 8,171 6,452
Net income $
205,579 $ 52,684 $ 39,351 $ 20,671 $
16,280
Western Alliance Bancorporation and
Subsidiaries Operating Segment
Results Unaudited Balance
Sheet: National Business Lines
HOAServices
Public
&NonprofitFinance
Technology
&Innovation
HotelFranchiseFinance
Other NBLs
Corporate &Other
At June 30, 2018: (dollars in millions)
Assets: Cash,
cash equivalents, and investment securities $ — $ — $ — $ — $ — $
4,181.2 Loans, net of deferred loan fees and costs 186.5 1,566.1
1,205.4 1,431.9 3,022.1 4.8 Less: allowance for credit losses (1.8
) (15.2 ) (11.2 ) (7.1 ) (29.2 ) (0.1 ) Total loans 184.7
1,550.9 1,194.2 1,424.8 2,992.9 4.7
Other assets acquired through foreclosure, net — — — — —
11.1 Goodwill and other intangible assets, net — — 120.6 0.1 — —
Other assets 0.9 21.0 5.3 6.5 13.8
669.3 Total assets $ 185.6 $ 1,571.9 $
1,320.1 $ 1,431.4 $ 3,006.7 $ 4,866.3
Liabilities: Deposits $ 2,514.9 $ — $ 1,993.5 $ — $ — $
460.0 Borrowings and qualifying debt — — — — — 436.1 Other
liabilities 2.1 17.7 0.1 (0.4 ) 103.0
292.6 Total liabilities 2,517.0 17.7 1,993.6
(0.4 ) 103.0 1,188.7
Allocated equity:
67.1 125.3 257.8 117.8 248.0
349.2
Total liabilities and stockholders' equity $
2,584.1 $ 143.0 $ 2,251.4 $ 117.4 $
351.0 $ 1,537.9 Excess funds provided (used) 2,398.5
(1,428.9 ) 931.3 (1,314.0 ) (2,655.7 ) (3,328.4 ) No. of
offices 1 1 9 1 4 (7 ) No. of full-time equivalent employees 65 11
56 17 42 1,114
Income Statement: Three
Months Ended June 30, 2018: (in thousands) Net interest income
$ 16,046 $ 3,794 $ 24,562 $ 13,874 $ 19,672 $ 2,242 Provision for
(recovery) credit losses 135 (27 ) 2,256 548
2,074 2 Net interest income after provision for
credit losses 15,911 3,821 22,306 13,326 17,598 2,240 Non-interest
income 179 — 3,630 — 409 904 Non-interest expense (8,033 ) (2,080 )
(9,899 ) (2,200 ) (6,250 ) (7,816 ) Income (loss) before income
taxes 8,057 1,741 16,037 11,126 11,757 (4,672 ) Income tax expense
(benefit) 1,853 401 3,688 2,559 2,704
(7,271 )
Net income $ 6,204 $ 1,340 $
12,349 $ 8,567 $ 9,053 $ 2,599
Six Months Ended June 30, 2018: (in thousands) Net
interest income $ 31,405 $ 7,539 $ 47,383 $ 28,060 $ 38,484 $ 237
Provision for (recovery of) credit losses 182 (233 ) 3,907
1,783 3,359 2 Net interest income after
provision for credit losses 31,223 7,772 43,476 26,277 35,125 235
Non-interest income 328 — 6,681 13 633 812 Non-interest expense
(15,836 ) (4,254 ) (19,733 ) (4,405 ) (11,912 ) (16,550 ) Income
(loss) before income taxes 15,715 3,518 30,424 21,885 23,846
(15,503 ) Income tax expense (benefit) 3,615 809
6,998 5,033 5,484 (18,647 )
Net income
$ 12,100 $ 2,709 $ 23,426 $ 16,852 $
18,362 $ 3,144
Western Alliance
Bancorporation and Subsidiaries
Operating Segment Results Unaudited
Balance Sheet:
Regional Segments
ConsolidatedCompany
Arizona
Nevada
SouthernCalifornia
NorthernCalifornia
At December 31, 2017:
(dollars in millions)
Assets: Cash, cash equivalents, and investment securities $
4,237.1 $ 2.1 $ 8.2 $ 2.1 $ 1.7 Loans, net of deferred loan fees
and costs 15,093.9 3,323.7 1,844.8 1,934.7
1,275.5 Less: allowance for credit losses (140.0 ) (31.5
)
(18.1 ) (19.5 )
(13.2 ) Total loans 14,953.9 3,292.2 1,826.7
1,915.2
1,262.3 Other assets acquired through foreclosure, net 28.5
2.3 13.3 —
0.2 Goodwill and other intangible assets, net 300.7 — 23.2 —
156.5 Other assets 808.9 46.3 58.8 14.4
15.1 Total assets $ 20,329.1 $ 3,342.9 $
1,930.2 $ 1,931.7 $ 1,435.8
Liabilities: Deposits $ 16,972.5 $ 4,841.3 $ 3,951.4 $
2,461.1 $ 1,681.7 Borrowings and qualifying debt 766.9 — — —
— Other liabilities 360.0 11.6 20.9 3.2
11.9 Total liabilities 18,099.4 4,852.9
3,972.3 2,464.3
1,693.6
Allocated equity: 2,229.7 396.5
263.7 221.8
303.1
Total liabilities and stockholders' equity $
20,329.1 $ 5,249.4 $ 4,236.0 $ 2,686.1
$ 1,996.7 Excess funds provided (used) —
1,906.5
2,305.8 754.4
560.9 No. of offices 47 10 16 9
3 No. of full-time equivalent employees 1,725 110 91 111
123
Income Statements: Three Months Ended
June 30, 2017: (in thousands) Net interest income (expense) $
192,743 $ 49,295 $ 36,422 $ 29,058 $ 19,719 Provision for (recovery
of) credit losses 3,000 384 (3,123 ) (53 )
698 Net interest income (expense) after provision for credit
losses 189,743 48,911 39,545 29,111
19,021 Non-interest income 10,601 1,189 2,313 888
1,930 Non-interest expense (88,420 ) (17,922
)
(15,115 ) (13,020 )
(12,162 ) Income (loss) before income taxes 111,924 32,178 26,743
16,979
8,789 Income tax expense (benefit) 31,964 12,624
9,360 7,140
3,696
Net income $ 79,960 $ 19,554 $
17,383 $ 9,839 $ 5,093
Six
Months Ended June 30, 2017: (in thousands) Net interest income
(expense) $ 372,052 $ 93,202 $ 71,718 $ 54,276 $ 41,754 Provision
for (recovery of) credit losses 7,250 398 (3,334 ) 38
1,094 Net interest income (expense) after provision for
credit losses 364,802 92,804 75,052 54,238
40,660 Non-interest income 21,200 2,302 4,446 1,631
4,043 Non-interest expense (176,247 ) (36,544
)
(30,985 ) (25,723 )
(24,871 ) Income (loss) before income taxes 209,755 58,562 48,513
30,146
19,832 Income tax expense (benefit) 56,453 22,974
16,980 12,677
8,339
Net income $ 153,302 $ 35,588 $
31,533 $ 17,469 $ 11,493
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited Balance Sheet: National
Business Lines
HOAServices
Public & Nonprofit
Finance
Technology
&Innovation
HotelFranchiseFinance
Other NBLs
Corporate &Other
At December 31, 2017: (dollars in millions)
Assets:
Cash, cash equivalents, and investment securities $ — $ — $ — $ —
$
— $ 4,223.0 Loans, net of deferred loan fees and costs 162.1
1,580.4 1,097.9 1,327.7 2,543.0 4.1 Less: allowance for credit
losses (1.6 ) (15.6 ) (11.4 ) (4.0 ) (25.0 ) (0.1 ) Total loans
160.5 1,564.8 1,086.5 1,323.7 2,518.0
4.0 Other assets acquired through foreclosure, net —
— — — — 12.7 Goodwill and other intangible assets, net — — 120.9
0.1 — — Other assets 0.9 17.9 6.0 5.9
15.5 628.1 Total assets $ 161.4 $ 1,582.7
$ 1,213.4 $ 1,329.7 $ 2,533.5 $ 4,867.8
Liabilities: Deposits $ 2,230.4 $ — $ 1,737.6 $ — $ —
$ 69.0 Borrowings and qualifying debt — — — — — 766.9 Other
liabilities 1.2 42.4 0.8 0.4 5.5
262.1 Total liabilities 2,231.6 42.4 1,738.4
0.4 5.5 1,098.0
Allocated
equity: 59.4 126.5 244.1 108.3
206.0 300.3
Total liabilities and stockholders'
equity $ 2,291.0 $ 168.9 $ 1,982.5 $ 108.7
$ 211.5 $ 1,398.3 Excess funds provided (used)
2,129.6 (1,413.8 ) 769.1 (1,221.0 ) (2,322.0 ) (3,469.5 )
No. of offices 1 1 9 1 4 (7 ) No. of full-time equivalent employees
65 10 62 12 38 1,103
Income Statement:
Three Months Ended June 30, 2017: (in thousands) Net
interest income (expense) $ 13,781 $ 7,488 $ 21,029 $ 13,410 $
15,304 $ (12,763 ) Provision for (recovery of) credit losses 165
196 603 1,808 2,322 — Net
interest income (expense) after provision for credit losses 13,616
7,292 20,426 11,602 12,982 (12,763 ) Non-interest income 140 162
1,961 — 532 1,486 Non-interest expense (7,258 ) (2,146 ) (9,082 )
(3,056 ) (4,566 ) (4,093 ) Income (loss) before income taxes 6,498
5,308 13,305 8,546 8,948 (15,370 ) Income tax expense (benefit)
2,436 1,994 4,989 3,205 3,356
(16,836 )
Net income $ 4,062 $ 3,314 $ 8,316
$ 5,341 $ 5,592 $ 1,466
Six Months Ended June 30, 2017: (in thousands) Net interest
income (expense) $ 26,529 $ 13,973 $ 39,195 $ 26,991 $ 29,447 $
(25,033 ) Provision for (recovery of) credit losses 292 705
899 1,808 5,849 (499 ) Net interest
income (expense) after provision for credit losses 26,237 13,268
38,296 25,183 23,598 (24,534 ) Non-interest income 281 232 3,834 —
1,253 3,178 Non-interest expense (14,405 ) (4,469 ) (17,861 )
(6,044 ) (9,287 ) (6,058 ) Income (loss) before income taxes 12,113
9,031 24,269 19,139 15,564 (27,414 ) Income tax expense (benefit)
4,542 3,396 9,100 7,177 5,837
(34,569 )
Net income $ 7,571 $ 5,635 $ 15,169
$ 11,962 $ 9,727 $ 7,155
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP
Financial Measures Unaudited Operating
Pre-Provision Net Revenue by Quarter: Three Months Ended
Jun 30, 2018 Mar 31, 2018 Dec 31, 2017
Sep 30, 2017
Jun 30, 2017
(in thousands) Total non-interest income $ 13,444 $ 11,643 $ 13,688
$
10,456
$ 10,601 Less: Gains (losses) on sales of investment securities,
net — — 1,436
319
(47 ) Unrealized (losses) gains on assets measured at fair value,
net (685 ) (1,074 ) — — —
Total operating
non-interest income 14,129 12,717 12,252 10,137 10,648 Plus:
net interest income 224,108 214,220 211,029
201,583 192,743
Net operating revenue
(1) $ 238,237 $ 226,937 $ 223,281 $
211,720 $ 203,391 Total non-interest expense $
102,548 $ 98,149 $ 95,398 $ 89,296 $ 88,420 Less: Net (gain) loss
on sales and valuations of repossessed and other assets (179 )
(1,228 ) (34 ) 266 231
Total operating
non-interest expense (1) $ 102,727 $ 99,377
$ 95,432 $ 89,030 $ 88,189
Operating pre-provision net revenue
(2) $ 135,510 $ 127,560 $ 127,849 $
122,690 $ 115,202 Plus: Non-operating revenue
adjustments (685 ) (1,074 ) 1,436 319 (47 ) Less: Provision for
credit losses 5,000 6,000 5,000 5,000 3,000 Non-operating expense
adjustments (179 ) (1,228 ) (34 ) 266 231 Income tax expense 25,325
20,814 34,973 34,899 31,964 Net
income $ 104,679 $ 100,900 $ 89,346 $ 82,844 $
79,960 (1), (2) See Non-GAAP Financial Measures
footnotes.
Western Alliance Bancorporation and
Subsidiaries
Reconciliation of Non-GAAP Financial
Measures
Unaudited
Tangible Common Equity:
Jun 30, 2018
Mar 31, 2018
Dec 31, 2017
Sep 30, 2017
Jun 30, 2017
(dollars and shares in thousands) Total stockholders' equity $
2,391,684 $ 2,293,763 $ 2,229,698 $ 2,145,627 $ 2,058,674 Less:
goodwill and intangible assets 299,951 300,350
300,748 301,157 301,645
Total tangible
common equity 2,091,733 1,993,413 1,928,950 1,844,470 1,757,029
Plus: deferred tax - attributed to intangible assets
2,555
2,773 2,698 4,341 4,550
Total
tangible common equity, net of tax $
2,094,288
$ 1,996,186 $ 1,931,648 $ 1,848,811 $
1,761,579 Total assets $ 21,367,452 $ 20,760,731 $
20,329,085 $ 19,922,221 $ 18,844,745 Less: goodwill and intangible
assets, net 299,951 300,350 300,748 301,157
301,645 Tangible assets 21,067,501 20,460,381
20,028,337 19,621,064 18,543,100 Plus: deferred tax - attributed to
intangible assets
2,555
2,773 2,698 4,341 4,550
Total
tangible assets, net of tax $
21,070,056
$ 20,463,154 $ 20,031,035 $ 19,625,405
$ 18,547,650 Tangible common equity ratio (3) 9.9 % 9.8 %
9.6 % 9.4 % 9.5 % Common shares outstanding 105,876 105,861 105,487
105,493 105,429 Tangible book value per share, net of tax (4) $
19.78 $ 18.86 $ 18.31 $ 17.53 $ 16.71
(1), (2), (3), (4) See Non-GAAP Financial
Measures footnotes.
Western Alliance Bancorporation and
Subsidiaries
Reconciliation of Non-GAAP Financial
Measures
Unaudited
Operating Efficiency Ratio by Quarter:
Three Months Ended
Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep
30, 2017 Jun 30, 2017 (in thousands) Total operating
non-interest expense $ 102,727 $ 99,377 $ 95,432 $ 89,030 $ 88,189
Divided by: Total net interest income 224,108 214,220 211,029
201,583 192,743 Plus: Tax equivalent interest adjustment 5,939
5,727 11,023 10,837 10,453 Operating non-interest income 14,129
12,717 12,252 10,137 10,648 $
244,176 $ 232,664 $ 234,304 $ 222,557 $
213,844
Operating efficiency ratio - tax equivalent
basis (5) 42.1 % 42.7 % 40.7 % 40.0 % 41.2 % Operating
efficiency ratio - adjusted * 41.7 % 41.0 % 42.3 % (5)
See Non-GAAP Financial Measures
footnotes.
* The prior period operating efficiency ratios are adjusted to
include the effects from the TCJA of the lower statutory corporate
federal tax rate on the calculation of the tax equivalent
adjustment in order to be comparable to the current reporting
periods.
Western Alliance Bancorporation and
Subsidiaries
Reconciliation of Non-GAAP Financial
Measures
Unaudited
Regulatory Capital:
Jun 30, 2018
Dec 31, 2017
(in thousands)
Common Equity Tier 1: Common equity $ 2,391,684 $ 2,229,698
Less: Non-qualifying goodwill and intangibles
297,281
296,421 Disallowed deferred tax asset
845
638 AOCI related adjustments
(61,268 )
(9,496 ) Unrealized gain on changes in fair value liabilities
13,958
7,785
Common equity Tier 1 (6) (9) $ 2,140,868
$ 1,934,350
Divided by: estimated risk-weighted
assets (7) (9) $
19,976,546
$ 18,569,608
Common equity Tier 1 ratio (7) (9)
10.7 %
10.4 % Common equity Tier 1 (6)(9)
2,140,868
1,934,350 Plus: Trust preferred securities
81,500
81,500 Less: Disallowed deferred tax asset
—
159 Unrealized gain on changes in fair value of liabilities
—
1,947
Tier 1 capital (7) (9) $ 2,222,368
$ 2,013,744
Divided by: Tangible average
assets $ 20,540,076 $ 19,624,517
Tier 1 leverage ratio
10.8 %
10.3 %
Total Capital: Tier 1 capital (6)
(9) $ 2,222,368 $ 2,013,744 Plus: Subordinated debt
299,447
301,020 Qualifying allowance for credit losses
147,083
140,050 Other
7,567
6,174 Less: Tier 2 qualifying capital deductions
—
—
Tier 2 capital $
454,097
$ 447,244
Total capital $
2,676,465
$ 2,460,988
Total capital ratio
13.4 %
13.3 %
Classified assets to Tier 1 capital plus allowance
for credit losses: Classified assets $ 240,063 $ 222,004
Divided by:
Tier 1 capital (7) (9)
2,222,368
2,013,744 Plus: Allowance for credit losses
147,083
140,050
Total Tier 1 capital plus allowance for credit
losses $ 2,369,451 $ 2,153,794
Classified assets to Tier 1 capital plus allowance (8)
(9)
10.1 %
10.3 %
(6), (7), (8), (9) See Non-GAAP Financial
Measures footnotes.
Non-GAAP Financial Measures Footnotes
(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 an important metric with which to analyze and evaluate
financial condition and capital strength. (4) We believe this
non-GAAP measurement 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 current guidelines of the
Federal Reserve and the Federal Deposit Insurance Corporation,
common equity Tier 1 capital consists of common stock, retained
earnings, and minority interests in certain subsidiaries, less most
other intangible assets. (7) Common equity Tier 1 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 the risk categories defined under new capital guidelines.
The aggregated dollar amount in each category is then multiplied by
the risk weighting assigned to that category. The resulting
weighted values from each category are added together and this sum
is the risk-weighted assets total that, as adjusted, comprises the
denominator (risk-weighted assets) of the common equity Tier 1
ratio. Common equity Tier 1 is divided by the risk-weighted assets
to determine the common equity Tier 1 ratio. We believe this
non-GAAP ratio provides an important metric with which to analyze
and evaluate financial condition and capital strength. (8) We
believe this non-GAAP ratio provides an important regulatory metric
to analyze asset quality. (9) Current quarter is preliminary until
Call Report is filed.
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Western Alliance BancorporationDale Gibbons, 602-952-5476
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