Western Alliance Bancorporation

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Western Alliance Reports First Quarter 2013 Net Income of $21.0 Million, or $0.24 Per Share, Receives Final Regulatory Approval for Acquisition of Centennial Bank

PHOENIX--(BUSINESS WIRE)-- Western Alliance Bancorporation (NYSE:WAL) announced today its financial results for the first quarter 2013.

First Quarter 2013 Highlights:

  • Net income of $21.0 million, up $9.7 million compared to $11.3 million for the first quarter 2012. The fourth quarter of 2012 was $32.1 million, or $17.3 million excluding $14.8 million net effect from acquisition and disposition transactions
  • Earnings per share of $0.24, compared to $0.12 per share in the first quarter 2012. The fourth quarter of 2012 was $0.37 per share, or $0.22 per share excluding $0.15 per share gain net of effect from acquisition and disposition transactions
  • Pre-tax, pre-provision operating earnings of $35.1 million, up 10.7% from $31.7 million in first quarter 2012 and down from $36.8 million in fourth quarter 20121
  • Net interest margin of 4.36%, compared to 4.53% in the first quarter 2012 and 4.55% in the fourth quarter of 2012
  • Total loans of $5.86 billion, up $146 million from December 31, 2012, and up $929 million from March 31, 2012
  • Total deposits of $6.73 billion, up $280 million from December 31, 2012 and up $836 million from March 31, 2012
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 2.1% of total assets from 2.4% in fourth quarter 2012 and from 2.7% in first quarter 2012
  • Net loan charge-offs (annualized) to average loans outstanding decreased to 0.38% from 0.99% in the fourth quarter 2012 and 1.18% in the first quarter 2012
  • Tier I Leverage capital of 10.1% and Total Risk-Based Capital ratio of 12.6%, compared to 9.8% and 12.5% a year ago
  • Total equity of $781.3 million, up $21.7 million from December 31, 2012

Financial Performance

“We are off to a strong start to 2013 with success on multiple fronts,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “During the first quarter, we again achieved strong growth in loans and deposits continuing our momentum from 2012. Credit quality trends were also favorable, with declining net charge-offs, reduced levels of nonaccrual loans, and an improved classified asset ratio.”

Continuing, Sarver stated, “Another recent opportunity for us has been in the area of acquisitions. The acquisition of Western Liberty Bancorp and its subsidiary ServiceFirst Bank of Nevada were integrated into the Company’s operating platform in the fourth quarter with minimal customer impact. The transaction added $0.15 to earnings per share. Now I am pleased to report that our acquisition of Centennial Bank in California has received all legal and regulatory approvals, with a planned closing date at the end of April. This transaction is also expected to be accretive to capital and earnings per share.”

Western Alliance Bancorporation reported net income of $21.0 million, or $0.24 per share, in the first quarter 2013, about double the $11.3 million, or $0.12 per share, earned one year ago. Key performance improvement drivers include sustained organic balance sheet growth, prudent expense management, and reduced legacy asset costs against the backdrop of improved economic conditions.

Total loans increased $146 million to $5.86 billion at March 31, 2013 from $5.71 billion on December 31, 2012. This increase was primarily driven by growth in commercial and industrial loans and commercial real estate loans. Loans increased $929 million, or 18.9 percent, from March 31, 2012. Two thirds of the Company’s loan growth during the past year has been in the commercial category, which includes municipal loans.

Total deposits increased $280 million to $6.73 billion at March 31, 2013 from $6.46 billion at December 31, 2012, with growth primarily in money market and interest-bearing demand deposits. Growth in money market deposits drove our 14.2 percent ($836 million) deposit growth from March 31, 2012.

Income Statement

Net interest income was $76.2 million in the first quarter 2013, an increase of 8.7 percent from $70.1 million in the first quarter of 2012 and a decrease of $1.3 million, or 1.7 percent compared to the fourth quarter 2012 which included a $1.2 million non-recurring gain and two additional days in the quarter. The Company’s net interest margin declined in the first quarter 2013 to 4.36 percent compared to 4.53 percent in the first quarter 2012, and 4.55 percent in the fourth quarter 2012 as the Company extended the duration of its fixed rate funding which should mitigate our margin contraction prospectively.

Operating non-interest income was $5.1 million for the first quarter 2013, flat from the fourth quarter of 2012 and down from $5.9 million for the first quarter of 2012.1

Net revenue was $81.3 million for the first quarter 2013, down from $82.5 million for the fourth quarter of 2012 and an increase of 7.1 percent from $75.9 million for the first quarter 2012.1

Operating non-interest expense was $46.2 million for the first quarter 2013, compared to $45.8 million for the fourth quarter of 2012 and $44.2 million for the first quarter of 2012.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 54.6 percent for the first quarter 2013, an improvement from 57.0 percent for the first quarter 2012 as the growth rate in revenue continued to outpace that of expense.

The Company had 992 full-time equivalent employees and 40 offices at March 31, 2013, compared to 951 employees and 39 offices one year ago. Deposits per office increased 11.3 percent to $168 million during the past year.

The Company believes its pre-tax, pre-provision operating earnings is a key metric for assessing the Company’s earning power, which it defines as net operating revenue less operating non-interest expense. For the first quarter 2013, the Company’s performance was $35.1 million, down from $36.8 million in the fourth quarter 2012 and up 10.7 percent from $31.7 million in the first quarter 2012.1

The provision for credit losses was $5.4 million for the first quarter 2013, compared to $11.5 million for the fourth quarter 2012. The provision for the first quarter of 2012 was $13.1 million. Net loan charge-offs in the first quarter 2013 were $5.4 million, or 0.38 percent of average loans (annualized), down from 0.99 percent of average loans (annualized) for the fourth quarter 2012, including 0.19 percent charge on its affinity credit card loans now held for sale. Net charge-offs for the first quarter 2012 were $14.1 million or 1.18% of average loans (annualized).

Nonaccrual loans decreased $11.0 million to $93.7 million during the quarter. Loans past due 90 days and still accruing interest totaled $1.6 million at March 31, 2013, compared to $1.4 million at December 31, 2012 and $1.0 million at March 31, 2012. Loans past due 30-89 days, still accruing interest totaled $14.8 million at quarter end, down from $16.6 million at December 31, 2012 and up from $12.0 million at March 31, 2012.

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 30 percent at March 31, 2013 from 37 percent at March 31, 2012.1

Net loss on sales and valuation of repossessed assets (primarily other real estate) was flat at $0.5 million for the first quarter from the fourth quarter 2012 and down from $2.7 million in the first quarter 2012. At March 31, 2013, other repossessed assets were valued at $78 million compared to $77 million at December 31, 2012 and $81 million one year ago. During the first quarter 2013, the Company’s net sales proceeds received from other real estate dispositions was 102 percent of carrying value.

Balance Sheet

Gross loans totaled $5.86 billion at March 31, 2013, an increase of $146 million from December 31, 2012 and an increase of $929 million from $4.93 billion at March 31, 2012. At March 31, 2013, the allowance for credit losses was 1.63 percent of total loans, which has declined from 1.67 percent at December 31, 2012 and 1.99 percent at March 31, 2012, as the Company’s asset quality has improved.

Deposits totaled $6.73 billion at March 31, 2013, an increase of $280 million from $6.46 billion at December 31, 2012 and an increase of $836 million from $5.90 billion at March 31, 2012. Non-interest bearing deposits were unchanged at $1.93 billion at March 31, 2013 compared to December 31, 2012 and increased $173 million from $1.76 billion at March 31, 2012. Non-interest bearing deposits comprised 28.7 percent of total deposits at March 31, 2013, compared to 29.8 percent a year ago, while the proportion from savings and money market increased to 42.0 percent from 37.7 percent during the same period. The Company’s reliance on certificates of deposit fell to 20.2 percent at March 31, 2013. The Company’s loans were 86.9 percent of deposits at March 31, 2013 compared to 88.5 percent at December 31, 2012 and 83.5 percent at March 31, 2012.

Stockholders’ equity at March 31, 2013 increased to $781.3 million from $759.6 million at December 31, 2012. At March 31, 2013, tangible common equity was 7.5 percent of tangible assets1 and total risk-based capital was 12.6 percent of risk-weighted assets. The Company’s tangible book value per share1 was $7.04 at March 31, 2013, up 21.6 percent during the past year.

Total assets increased to $8.17 billion at March 31, 2013 from $7.62 billion at December 31, 2012 and increased 17.9 percent from $6.93 billion at March 31, 2012.

Operating Unit Highlights

Western Alliance Bank (doing business as Alliance Bank of Arizona and First Independent Bank) reported loan growth of $79 million during the first quarter 2013 and $406 million during the last 12 months to $2.12 billion. First quarter loan growth came primarily from a rise in commercial and industrial loans. Deposits increased $217 million in the first quarter and $488 million during the last 12 months to $2.44 billion. Net income for Western Alliance Bank was $8.5 million during the first quarter 2013 compared with net income of $10.4 million during the fourth quarter of 2012 and net income of $9.8 million during the first quarter 2012.

The Torrey Pines Bank segment, which excludes the discontinued operations of PartnersFirst, reported that loans decreased $78 million during the first quarter 2013 and increased $97 million during the last 12 months to $1.43 billion. First quarter changes in loan balances were primarily attributable to a decrease in commercial real estate loans. Deposits increased $19 million in the first quarter 2013 and $168 million over the last 12 months to $1.70 billion. Net income for Torrey Pines Bank was $6.3 million during the first quarter 2013 compared with net income of $5.2 million for the fourth quarter of 2012 and net income of $5.8 million during the first quarter 2012.

Bank of Nevada, which was the recipient of net affiliate loan sales and participatations, reported that loans increased by $118 million during the first quarter of 2013 and increased $376 million during the last 12 months to $2.30 billion at March 31, 2013. First quarter loan growth came primarily from a rise in commercial real estate and commercial and industrial loans. Deposits increased by $37 million in the first quarter of 2013 and $171 million over the last twelve months to $2.61 billion. Net income for Bank of Nevada was $10.7 million for the first quarter 2013, compared with net income of $7.6 million for the fourth quarter of 2012 and net income of $1.0 million during the first quarter 2012.

The Other segment reported loans increased during the first quarter 2013 by $27 million and increased $51 million during the last 12 months. The increase in loans is primarily related to the purchases of certain loans from Bank of Nevada.

Attached to this press release is summarized financial information for the quarter ended March 31, 2013.

Subsequent Event

On April 10, 2013, the Company received final regulatory approval for its acquisition of Centennial Bank in California. The transaction is scheduled to close by month-end, and immediately thereafter Centennial Bank will be merged into Western Alliance Bank. As of March 31, 2013, Centennial Bank had $529.3 million in assets, $340.7 million in deposits, and $103.5 million of tangible equity before fair value adjustments.

Centennial Bank’s loan portfolio has a balance of $412.9 million offset by an $11.5 million, or 2.8 percent allowance for loan and lease losses, for a net carrying value of $401.4 million. Substantially all of the portfolio is comprised of commercial real estate loans with a very small investment in consumer loans. Geographically, approximately 80 percent of all loans are in California, with the remainder originated in Arizona and Nevada.

Loans totaling $12.7 million will be retained by the seller. Total consideration paid for 100% of Centennial Bank’s common shares is $57.5 million in an all cash transaction, which represents a $33 million discount to tangible book value adjusted for loans to be retained by the seller. The assets and liabilities of Centennial Bank will be recorded at fair value and will be measured as of the closing date. The Company is presently undertaking a valuation of the portfolio.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its first quarter 2013 financial results at 12:00 p.m. ET on Friday, April 19, 2013. Participants may access the call by dialing 1-888-317-6003 and using passcode: 3497030 or via live audio webcast using the website link: https://services.choruscall.com/links/wal130419.html. The webcast is also available via the Company’s website at www.westernalliancebancorp.com. Participants should log in at least 15 minutes early to receive instructions. The call will be recorded and made available for replay after 2:00 p.m. ET April 19th through May 17th at 9:00 a.m. ET by dialing 1-877-344-7529 using the conference number 10027205.

About Western Alliance Bancorporation

Western Alliance Bancorporation is the parent company of Bank of Nevada, Western Alliance Bank doing business as Alliance Bank of Arizona and First Independent Bank, and Torrey Pines Bank. These dynamic organizations provide a broad array of deposit and credit services to clients in Nevada, Arizona and California. Staffed with experienced financial professionals, these organizations deliver a broader product array and larger credit capacity than community banks, yet are empowered to be more responsive to customers' needs than larger institutions. 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. 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: factors listed in the Form 10-K 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; 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.

We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements set forth in this press release to reflect new information, future events or otherwise.

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

1 See Reconciliation of Non-GAAP Financial Measures beginning on page 15

             
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
At or for the Three Months
Ended March 31,
2013 2012

Change %

 
Selected Balance Sheet Data:
(dollars in millions)
Total assets $ 8,174.1 $ 6,925.3 18.0 %
Loans, net of deferred fees 5,855.3 4,926.2 18.9
Securities and money market investments 1,302.4 1,423.2 (8.5 )

Securities purchased under agreement to resell

134.0 - -
Total deposits 6,734.9 5,899.1 14.2
Borrowings 358.5 307.8 16.5
Junior subordinated debt 36.7 37.3 (1.6 )
Stockholders' equity 781.3 654.1 19.4
 
Selected Income Statement Data:
(dollars in thousands)
Interest income $ 83,108 $ 77,437 7.3 %
Interest expense   6,905   7,380   (6.4 )
Net interest income 76,203 70,057 8.8
Provision for loan losses   5,439   13,081   (58.4 )
Net interest income after provision for credit losses 70,764 56,976 24.2
Non-interest income 3,899 5,884 (33.7 )
Non-interest expense   46,929   46,897   0.1

Income from continuing operations before income taxes

27,734 15,963 73.7
Income tax expense   6,808   4,441   53.3
Income from continuing operations 20,926 11,522 81.6
Income (loss) on discontinued operations, net   38   (222 ) 117.1
Net income $ 20,964 $ 11,300   85.5 %
Diluted net income per common share from continuing operations $ 0.24 $ 0.12  
Diluted net loss per common share from discontinued operations, net of tax $ 0.00 $ (0.00 )
Diluted net income per common share $ 0.24 $ 0.12   100.0 %
 
Common Share Data:
Diluted net income per common share $ 0.24 $ 0.12 100.0 %
Book value per common share $ 7.35 $ 6.17 19.1 %
Tangible book value per share, net of tax (1) $ 7.04 $ 5.79 21.6 %
Average shares outstanding (in thousands):
Basic 85,324 81,359 4.9
Diluted 85,980 82,227 4.6
Common shares outstanding 87,079 83,145 4.7
 
(1) See Reconciliation of Non-GAAP Financial Measures
 
 

         
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data (continued)
Unaudited
At or for the Three Months
Ended March 31,
2013 2012 Change %
(in thousands, except per share data)

Selected Performance Ratios:

Return on average assets (1) 1.08 % 0.67 % 61.2 %
Return on tangible common equity (2) 13.91 9.50 46.4
Net interest margin (1) 4.36 4.53 (3.8 )
Net interest spread 4.21 4.34 (3.0 )
Efficiency ratio - tax equivalent basis (2) 54.58 56.96 (4.2 )
Loan to deposit ratio 86.94 83.51 4.1
 
Capital Ratios:
Tangible equity (2) 9.2 % 9.0 % 2.8 %
Tangible common equity (2) 7.5 6.9 8.1
Tier one common equity (2) 8.6 8.1 6.7
Tier 1 Leverage ratio (3) 10.1 9.8 3.1
Tier 1 Risk Based Capital (3) 11.3 11.3 0.0
Total Risk Based Capital (3) 12.6 12.5 0.8
 
Asset Quality Ratios:
Net charge-offs to average loans outstanding (1) 0.38 % 1.18 % (67.8 ) %
Nonaccrual loans to gross loans 1.60 2.10 (23.8 )
Nonaccrual loans and repossessed assets to total assets 2.10 2.67 (21.3 )
Loans past due 90 days and still accruing to total loans 0.03 0.02 50.0
Allowance for credit losses to loans 1.63 1.99 (18.1 )
Allowance for credit losses to nonaccrual loans 101.86 94.82 7.4
 
(1) Annualized for the three month periods ended March 31, 2013 and 2012. See table on page 12.
(2) See Reconciliation of Non-GAAP Financial Measures.
(3) Capital ratios are preliminary until Call Reports are filed.
 
 

         
Western Alliance Bancorporation and Subsidiaries
Condensed Consolidated Income Statements
Unaudited Three Months Ended
March 31,
2013 2012
Interest income: (dollars in thousands)
Loans $ 74,725 $ 67,760
Investment securities 8,158 9,585
Federal funds sold and other   225     92  
Total interest income   83,108     77,437  
Interest expense:
Deposits 3,732 4,762
Customer repurchase agreements 35 63
Borrowings 2,672 2,071
Junior subordinated debt   466     484  
Total interest expense   6,905     7,380  
Net interest income 76,203 70,057
Provision for credit losses   5,439     13,081  
Net interest income after provision for credit losses   70,764     56,976  
Non-interest income

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

(471 ) (333 )
Gains on sales of investment securities, net 147 361
Service charges 2,534 2,285
Bank owned life insurance 1,036 1,123
Amortization of affordable housing investments (900 ) -
Other   1,553     2,448  
  3,899     5,884  
Non-interest expenses:
Salaries and employee benefits 26,574 26,664
Occupancy 4,846 4,722
Net loss on sales and valuations of repossessed assets 519 2,651
Insurance 2,370 2,050
Loan and repossessed asset expenses 1,596 1,684
Legal, professional and director's fees 2,784 1,572
Marketing 1,764 1,371
Data Processing 1,865 995
Intangible amortization 597 890
Customer service 643 591
Merger/restructure expense 195 -
Other   3,176     3,707  
  46,929     46,897  
Income from continuing operations before income taxes 27,734 15,963
Income tax expense   6,808     4,441  
Income from continuing operations 20,926 11,522
Income (loss) from discontinued operations net of tax benefit   38     (222 )
Net income 20,964 11,300
Preferred stock dividends   353     1,763  
Net income available to common stockholders $ 20,611   $ 9,537  
Diluted net income per share $ 0.24   $ 0.12  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
Interest income: (in thousands, except per share data)
Loans $ 74,725 $ 75,303 $ 69,580 $ 68,342 $ 67,760
Investment securities 8,158 8,794 9,034 9,389 9,585
Federal funds sold and other   225     246     55     115     92  
Total interest income   83,108     84,343     78,669     77,846     77,437  
Interest expense:
Deposits 3,732 3,890 3,974 4,168 4,762
Borrowings and customer repurchase agreements 2,707 2,528 2,262 2,386 2,134
Junior subordinated debt   466     470     487     487     484  
Total interest expense   6,905     6,888     6,723     7,041     7,380  
Net interest income 76,203 77,455 71,946 70,805 70,057
Provision for credit losses   5,439     11,501     8,932     13,330     13,081  
Net interest income after provision for credit losses   70,764     65,954     63,014     57,475     56,976  
Non-interest income
Mark-to-market gains (losses), net (471 ) (48 ) 470 564 (333 )
Gains on sales of investment securities, net 147 1,447 1,031 1,110 361
Service charges 2,534 2,438 2,412 2,317 2,285
Bank owned life insurance 1,036 1,080 1,116 1,120 1,123
Amortization of affordable housing investments (900 ) (1,069 ) (651 ) (59 ) -
Bargain purchase gain from acquisition - 17,562 - - -
Other   1,553     3,053     2,604     2,345     2,448  
  3,899     24,463     6,982     7,397     5,884  
Non-interest expenses:
Salaries and employee benefits 26,574 26,885 25,500 25,995 26,664
Occupancy 4,846 4,769 4,655 4,669 4,722
Insurance 2,370 2,188 2,121 2,152 2,050
Loan and repossessed asset expenses 1,596 2,102 1,236 1,653 1,684
Net loss on sales and valuations of repossessed assets 519 529 126 901 2,651
Legal, professional and director's fees 2,784 1,849 2,291 2,517 1,572
Marketing 1,764 1,546 1,231 1,459 1,371
Intangible amortization 597 596 880 890 890
Customer service 643 678 653 682 591
Data Processing 1,865 2,071 1,390 1,293 995
Merger/restructure expense 195 2,706 113 - -
Goodwill and intangible impairment - - 3,435 - -
Other   3,176     3,070     3,912     3,220     3,707  
  46,929     48,989     47,543     45,431     46,897  
Income from continuing operations before income taxes 27,734 41,428 22,453 19,441 15,963
Income tax expense   6,808     7,509     6,752     5,259     4,441  
Income from continuing operations $ 20,926 $ 33,919 $ 15,701 $ 14,182 $ 11,522
Income (loss) from discontinued operations, net of tax   38     (1,804 )   (243 )   (221 )   (222 )
Net income $ 20,964   $ 32,115   $ 15,458   $ 13,961   $ 11,300  
Preferred stock dividends   353     353     352     1,325     1,763  
Net Income available to common stockholders $ 20,611   $ 31,762     $ 15,106     $ 12,636     $ 9,537  
Diluted net income per share $ 0.24   $ 0.37   $ 0.18   $ 0.15   $ 0.12  
 
 

               
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
      March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
Assets: (in millions)
Cash and due from banks $ 422.3 $ 204.6 $ 168.1 $ 178.9 $ 179.8
Securities purchased under agreement to resell   134.0     -     139.8     -     -  
Cash and cash equivalents 556.3 204.6 307.9 178.9 179.8
 
Securities and money market investments 1,302.4 1,236.6 1,338.9 1,401.5 1,423.2
Loans held for sale 27.9 31.1 - - -
Loans held for investment
Commercial 2,084.9 1,947.8 1,756.0 1,573.6 1,436.5
Commercial real estate - owner occupied 1,414.3 1,396.8 1,331.3 1,310.3 1,289.9
Construction and land development 381.1 394.3 379.8 360.6 347.7
Commercial real estate - non-owner occupied 1,538.4 1,505.6 1,407.1 1,440.4 1,365.6
Residential real estate 388.7 407.9 408.4 430.4 434.5
Consumer 26.0 31.8 56.6 55.8 58.7
Deferred fees, net   (6.0 )   (6.0 )   (6.3 )   (6.3 )   (6.7 )
5,827.4 5,678.2 5,332.9 5,164.8 4,926.2
Allowance for credit losses   (95.5 )   (95.4 )   (97.4 )   (97.5 )   (98.1 )
Loans, net   5,731.9     5,582.8     5,235.5     5,067.3     4,828.1  
 
Premises and equipment, net 107.1 107.9 106.9 106.9 105.1
Other repossessed assets 77.9 77.2 78.2 77.0 81.4
Bank owned life insurance 139.4 138.3 137.3 136.1 135.0
Goodwill and other intangibles 29.2 29.8 29.0 34.0 34.8
Other assets   202.0     214.3     169.9     161.9     137.9  
Total assets $ 8,174.1   $ 7,622.6   $ 7,403.6   $ 7,163.6   $ 6,925.3  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $ 1,930.4 $ 1,933.2 $ 1,840.8 $ 1,842.1 $ 1,757.7
Interest bearing
Demand 619.7 582.3 514.7 540.6 527.2
Savings and money market 2,826.7 2,573.5 2,541.2 2,438.4 2,224.1
Time certificates   1,358.1     1,366.2     1,265.3     1,180.3     1,390.1  
Total deposits 6,734.9 6,455.2 6,162.0 6,001.4 5,899.1
Customer repurchase agreements   64.7     79.0     73.1     86.9     114.4  
Total customer funds 6,799.6 6,534.2 6,235.1 6,088.3 6,013.5
Securities sold short 132.6 - 138.3 - -
Borrowings 293.8 193.7 223.6 303.5 193.4
Junior subordinated debt 36.7 36.2 36.2 36.7 37.3
Accrued interest payable and other liabilities   130.1     98.9     72.4     63.0     27.0  
Total liabilities   7,392.8     6,863.0     6,705.6     6,491.5     6,271.2  
Stockholders' Equity
Common stock and additional paid-in capital 786.9 784.9 751.1 748.1 746.2
Preferred Stock 141.0 141.0 141.0 141.0 141.0
Accumulated deficit (153.8 ) (174.5 ) (206.2 ) (221.3 ) (234.0 )
Accumulated other comprehensive income   7.2     8.2     12.1     4.3     0.9  
Total stockholders' equity   781.3     759.6     698.0     672.1     654.1  
Total liabilities and stockholders' equity $ 8,174.1   $ 7,622.6   $ 7,403.6   $ 7,163.6   $ 6,925.3  
 
 

                   
Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses
Unaudited
  Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
 
(in thousands)
Balance, beginning of period $ 95,427 $ 97,410 $ 97,512 $ 98,122 $ 99,170
Provision for credit losses 5,439 11,501 8,932 13,330 13,081
Recoveries of loans previously charged-off:
Construction and land development 701 2,033 567 217 86
Commercial real estate 942 397 633 561 1,703
Residential real estate 569 313 153 274 338
Commercial and industrial 441 372 501 1,417 777
Consumer   14     63     38     214     42  
Total recoveries 2,667 3,178 1,892 2,683 2,946
Loans charged-off:
Construction and land development 614 405 2,315 3,185 5,087
Commercial real estate 2,887 7,143 1,470 5,641 4,912
Residential real estate 2,493 1,307 2,242 2,094 1,420
Commercial and industrial 1,770 4,654 4,100 4,933 3,654
Consumer   275     3,153     799     770     2,002  
Total loans charged-off 8,039 16,662 10,926 16,623 17,075
Net loans charged-off   5,372     13,484     9,034     13,940     14,129  
Balance, end of period $ 95,494   $ 95,427   $ 97,410   $ 97,512   $ 98,122  
 
Net charge-offs (annualized) to average loans outstanding 0.38 % 0.99 % 0.70 % 1.11 % 1.18 %
Allowance for credit losses to gross loans 1.63 1.67 1.83 1.89 1.99
Nonaccrual loans $ 93,748 $ 104,716 $ 121,238 $ 104,324 $ 103,486
Repossessed assets 77,921 77,247 78,234 76,994 81,445
Loans past due 90 days, still accruing 1,640 1,388 1,710 795 1,011
Loans past due 30 to 89 days, still accruing 14,795 16,565 10,181 13,848 12,040
Classified loans on accrual 97,351 112,637 116,841 135,913 98,170
Watch loans 125,660 103,550 97,681 91,924 132,829
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
  Three Months Ended March 31,
2013 2012

Average
Balance

    Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

Interest earning assets

($ in
millions)

($ in
thousands)

($ in
millions)

($ in
thousands)

Investment securities (1) $ 1,283.4 $ 8,158 3.21 % $ 1,423.3 $ 9,585 3.13 %
Federal funds sold and other - - 0.2 - 0.00 %
Loans (1) 5,610.4 74,725 5.42 % 4,782.8 67,760 5.68 %
Short term investments   404.8         225     0.22 %   130.1         92     0.28 %
Total interest earning assets 7,298.6 83,108 4.74 % 6,336.4 77,437 5.00 %
Non-interest earning assets
Cash and due from banks 126.4 114.8
Allowance for credit losses (96.9 ) (100.7 )
Bank owned life insurance 138.7 134.3
Other assets   421.9     358.0  
Total assets $ 7,888.7   $ 6,842.8  
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 608.7 $ 301 0.20 % $ 504.3 $ 315 0.25 %
Savings and money market 2,620.9 1,911 0.29 % 2,233.6 2,168 0.39 %
Time certificates of deposit   1,449.4         1,520     0.42 %   1,424.3         2,279     0.64 %
Total interest-bearing deposits 4,679.0 3,732 0.32 % 4,162.2 4,762 0.46 %
Borrowings 449.3 2,707 2.41 % 294.9 2,134 2.89 %
Junior subordinated debt   36.2         466     5.15 %   37.0         484     5.23 %
Total interest-bearing liabilities 5,164.5 6,905 0.53 % 4,494.1 7,380 0.66 %
Noninterest-bearing liabilities
Noninterest-bearing demand deposits 1,855.1 1,645.7
Other liabilities 90.7 45.6
Stockholders’ equity   778.4     657.4  
Total liabilities and stockholders' equity $ 7,888.7   $ 6,842.8  
Net interest income and margin $ 76,203 4.36 % $ 70,057 4.53 %
Net interest spread 4.21 % 4.34 %
 

(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $3,382 and $1,761 for the first quarter ended 2013 and 2012, respectively.

 
 

                   
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited       Inter-
segment Consoli-
Bank Western Torrey elimi- dated
of Nevada Alliance Bank Pines Bank* Other nations Company
At March 31, 2013 (dollars in millions)
Assets $ 3,277.5 $ 2,738.9 $ 1,956.4 $ 1,065.4 $ (864.1 ) $ 8,174.1
Held for sale loans - - 27.9 - - 27.9
Gross loans and deferred fees, net 2,301.3 2,116.0 1,402.0 50.9 (42.8 ) 5,827.4
Less: Allowance for credit losses   (55.7 )       (22.4 )       (14.8 )       (2.6 )       -         (95.5 )
Net loans   2,245.6         2,093.6         1,387.2         48.3         (42.8 )       5,731.9  
Goodwill 23.2 - - - - 23.2
Deposits 2,606.5 2,441.2 1,698.5 - (11.3 ) 6,734.9
FHLB advances 200.0 - - - - 200.0
Stockholders' equity 387.8 228.8 172.4 799.0 (806.7 ) 781.3
 
No. of branches 12 16 12 - - 40
No. of FTE 390 266 235 101 - 992
 
Three Months Ended March 31, 2013: (in thousands)
Net interest income $ 29,254 $ 26,635 $ 20,777 $ (463 ) $ - $ 76,203
Provision for credit losses   405         2,635         92         2,307         -         5,439  

Net interest income (loss) after provision for credit losses

28,849 24,000 20,685 (2,770 ) - 70,764
Non-interest income 3,337 1,404 598 1,705 (3,145 ) 3,899
Non-interest expense   (17,891 )       (13,068 )       (11,969 )       (7,146 )       3,145         (46,929 )

Income (loss) from continuing operations before income taxes

14,295 12,336 9,314 (8,211 ) - 27,734
Income tax expense (benefit)   3,593         3,842         2,999         (3,626 )       -         6,808  
Income (loss) from continuing operations 10,702 8,494 6,315 (4,585 ) - 20,926
Income (loss) from discontinued operations, net   -         -         -         38         -         38  
Net income (loss) $ 10,702       $ 8,494       $ 6,315       $ (4,547 )     $ -       $ 20,964  
 
* Excludes discontinued operations
 
 

                   
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited       Inter-
segment Consoli-
Bank Western Torrey elimi- dated
of Nevada Alliance Bank Pines Bank* Other nations Company
At March 31, 2012 (dollars in millions)
Assets $ 2,890.9 $ 2,271.1 $ 1,785.1 $ 779.3 $ (801.1 ) $ 6,925.3
Gross loans and deferred fees, net 1,925.7 1,710.0 1,333.3 - (42.8 ) 4,926.2
Less: Allowance for credit losses   (62.6 )       (19.5 )       (16.0 )       -         -         (98.1 )
Net loans   1,863.1         1,690.5         1,317.3         -         (42.8 )       4,828.1  
Goodwill 23.2 - - 2.7 - 25.9
Deposits 2,435.2 1,953.7 1,530.6 - (20.4 ) 5,899.1
FHLB advances and other 70.0 20.0 60.0 - (30.0 ) 120.0
Stockholders' equity 324.3 202.0 157.7 661.5 (691.4 ) 654.1
 
No. of branches 11 16 12 - - 39
No. of FTE 394 237 223 97 - 951
 
Three Months Ended March 31, 2012: (in thousands)
Net interest income $ 27,839 $ 23,055 $ 21,236 $ (2,073 ) $ - $ 70,057
Provision for credit losses   13,481         (1,997 )       1,597         -         -         13,081  

Net interest income (loss) after provision for credit losses

14,358 25,052 19,639 (2,073 ) - 56,976
Non-interest income 3,583 1,853 1,178 1,991 (2,721 ) 5,884
Non-interest expense   (18,831 )       (11,918 )       (11,072 )       (7,797 )       2,721         (46,897 )

Income (loss) from continuing operations before income taxes

(890 ) 14,987 9,745 (7,879 ) - 15,963
Income tax expense (benefit)   (1,851 )       5,172         3,958         (2,838 )       -         4,441  
Income (loss) from continuing
operations 961 9,815 5,787 (5,041 ) - 11,522
Loss from discontinued operations, net   -         -         -         (222 )       -         (222 )
Net income (loss) $ 961       $ 9,815       $ 5,787       $ (5,263 )     $ -       $ 11,300  
 
* Excludes discontinued operations
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
(dollars in thousands)
Total stockholder's equity $ 781,294 $ 759,616 $ 698,011 $ 672,120 $ 654,045
Less:
Goodwill and intangible assets   29,166     29,763     28,989     33,953     34,843  
Total tangible stockholders' equity 752,128 729,853 669,022 638,167 619,202
Less:
Preferred stock   141,000     141,000     141,000     141,000     141,000  
Total tangible common equity 611,128 588,853 528,022 497,167 478,202
Add:
Deferred tax   2,080     2,289     2,033     2,896     3,209  
Total tangible common equity, net of tax $ 613,208   $ 591,142   $ 530,055   $ 500,063   $ 481,411  
Total assets $ 8,174,103 $ 7,622,637 $ 7,403,603 $ 7,163,572 $ 6,925,292
Less:
Goodwill and intangible assets   29,166     29,763     28,989     33,953     34,843  
Tangible assets 8,144,937 7,592,874 7,374,614 7,129,619 6,890,449
Add:
Deferred tax   2,080     2,289     2,033     2,896     3,209  
Total tangible assets, net of tax $ 8,147,017   $ 7,595,163   $ 7,376,647   $ 7,132,515   $ 6,893,658  
Tangible equity ratio (1) 9.2 % 9.6 % 9.1 % 8.9 % 9.0 %
Tangible common equity ratio (2) 7.5 % 7.8 % 7.2 % 7.0 % 6.9 %
Common shares outstanding 87,079 86,465 83,455 83,157 83,145
Tangible book value per share, net of tax (3) $ 7.04 $ 6.84 $ 6.35 $ 6.01 $ 5.79
 
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
(in thousands)
Total non-interest income $ 3,899 $ 24,463 $ 6,982 $ 7,397 $ 5,884
Less:
Mark-to-market (losses) gains, net (471 ) (48 ) 470 564 (333 )
Gain on sale of subsidiary/non-controlling interest - 116 776 - -
Bargain purchase gain from acquisition - 17,562 - - -
Legal settlements 38 879 - - -
Mutual fund gains - 483 - - -
Loss on LIHTC investments (900 ) (1,069 ) (651 ) (59 ) -
Gains on sales of investment securities, net   147     1,447     1,031     1,110     361  
Total operating non-interest income 5,085 5,093 5,356 5,782 5,856
Add: net interest income   76,203     77,455     71,946     70,805     70,057  
Net operating revenue (4) $ 81,288   $ 82,548   $ 77,302   $ 76,587   $ 75,913  
 
Total non-interest expense $ 46,929 $ 48,989 $ 47,543 $ 45,431 $ 46,897
Less:

Net loss (gain) on sales/valuations of repossessed assets

519 529 126 901 2,651
Merger/restructure expense 195 2,706 113 - -
Goodwill impairment   -     -     3,435     -     -  
Total operating non-interest expense (4) $ 46,215   $ 45,754   $ 43,869   $ 44,530   $ 44,246  
 
Net operating revenue $ 81,288 $ 82,548 $ 77,302 $ 76,587 $ 75,913
Less:
Operating non-interest expense   46,215     45,754     43,869     44,530     44,246  
Pre-tax, pre-provision operating earnings (5) $ 35,073   $ 36,794   $ 33,433   $ 32,057   $ 31,667  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
Three Months Ended
March 31,

December 31,

September 30, June 30, March 31,
2013 2012 2012 2012 2012
(in thousands)
Total operating non-interest expense $ 46,215   $ 45,754   $ 43,869   $ 44,530   $ 44,246  
Divided by:
Total net interest income $ 76,203 $ 77,455 $ 71,946 $ 70,805 $ 70,057
Add:
Tax equivalent interest adjustment 3,382 3,012 2,655 2,310 1,761
Operating non-interest income   5,085     5,093     5,356     5,782     5,856  
$ 84,670   $ 85,560   $ 79,957   $ 78,897   $ 77,674  
Efficiency ratio - tax equivalent basis (6) 54.6 % 53.5 % 54.9 % 56.4 % 57.0 %
 
Three Months Ended
March 31, March 31,
2013 2012
(in thousands)
Stockholder's equity $ 781,294 $ 654,045
Less:
Accumulated other comprehensive income 7,205 868
Non-qualifying goodwill and intangibles 27,138 32,331
Other non-qualifying assets 2 3
Disallowed unrealized losses on equity securities - -
Add:
Qualifying trust preferred securities 45,124 45,506
Tier 1 capital (regulatory) (7) (10) 792,073 666,349
Less:
Qualifying non-controlling interests - 343
Qualifying trust preferred securities 45,124 45,506
Preferred stock   141,000     141,000  
Estimated Tier 1 common equity (8) (10) $ 605,949 $ 479,500
Divided by:
Estimated risk-weighted assets (regulatory (8) (10) $ 7,011,489   $ 5,902,377  
Tier 1 common equity ratio (8) (10) 8.6 % 8.1 %
 
March 31, March 31,
2013 2012
(in thousands)
Classified assets $ 269,434 $ 284,140
Divide:
Tier 1 capital (regulatory) (7) (10) 792,073 666,349
Plus: Allowance for credit losses   95,494     98,122  
Total Tier 1 capital plus allowance for credit losses $ 887,567   $ 764,471  
Classified assets to Tier 1 capital plus allowance (9) (10) 30 % 37 %
 

(1)

 

We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(2)

We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(3)

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.

(4)

We believe these non-GAAP measurements provide a useful indication of the cash generating capacity of the Company.

(5)

We believe this non-GAAP measurement is a key indicator of the earnings power of the Company, which is otherwise obscured by the asset quality issues.

(6)

We believe this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company.

(7)

Under the guidelines of the Federal Reserve and the FDIC 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.

(8)

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 with which to analyze and evaluate financial condition and capital strength.

(9)

We believe this non-GAAP ratio provides a critical regulatory metric in which to analyze asset quality.

(10)

Preliminary until Call Reports are filed.

Western Alliance Bancorporation
Dale Gibbons, 602-952-5476

Source: Western Alliance Bancorporation

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