Press Release

Western Alliance Reports Third Quarter 2014 Net Income of $40.9 million, or $0.46 Per Share

Company Release - 10/16/2014 4:49 PM ET

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

Third Quarter 2014 Highlights:

  • Net income of $40.9 million, compared to $35.5 million for the second quarter 2014 and $28.6 million for the third quarter 2013
  • Earnings per share of $0.46, compared to $0.40 per share in the second quarter 2014 and $0.33 per share in the third quarter 2013
  • Pre-tax, pre-provision operating earnings of $51.8 million, up from $47.4 million in the second quarter 2014 and up $42.1 million from the third quarter 20131
  • Net interest margin of 4.43%, compared to 4.39% in the second quarter 2014 and 4.41% in the third quarter 2013
  • Total loans of $7.93 billion, up $385 million from June 30, 2014 and up $1.41 billion from September 30, 2013
  • Total deposits of $8.70 billion, up $228 million from June 30, 2014 and up $1.42 billion from September 30, 2013
  • Nonperforming assets (nonaccrual loans and repossessed assets) remained flat at 1.23% of total assets compared to the second quarter 2014 and decreased from 1.72% in the third quarter 2013
  • Net loan recoveries (annualized) to average loans outstanding of 0.15%, compared to 0.09% in the second quarter 2014 and 0.10% in the third quarter 2013
  • Tier I Leverage Capital of 10.1% and Total Risk-Based Capital ratio of 12.2%, compared to 10.0% and 12.5% at June 30, 2014 and September 30, 2013, respectively
  • Total equity of $1.00 billion, up $45 million from June 30, 2014 and up $177 million from September 30, 2013
  • Tangible book value per share, net of tax, of $9.53, up from $9.02 at June 30, 2014 and up from $7.57 at September 30, 20131

Financial Performance

"Through the hard work and dedication of our team, we again delivered very strong financial performance, with record revenue, efficiency, net income, and earnings per share," said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. "Our balance sheet momentum continued with double digit growth rates in loans and deposits, while maintaining a tight focus on expense control as operating costs were flat from the second quarter."

Sarver added, "Asset quality remains strong as we have experienced net recoveries in four of the last five quarters. And, despite our strong asset growth, tangible common equity climbed to 8.2% of tangible assets from 7.9% last quarter."

Income Statement

Net interest income was $98.1 million in the third quarter 2014, an increase of $4.2 million, or 4.4%, from $93.9 million in the second quarter of 2014 and an increase of $13.5 million, or 16.0%, compared to the third quarter 2013. The Company’s net interest margin increased in the third quarter 2014 to 4.43%, compared to 4.39% in the second quarter 2014 and 4.41% in the third quarter 2013. Interest income on the disposition of purchased credit impaired loans was $2.5 million in the third quarter of 2014, compared to $3.1 million for the second quarter 2014 and $1.3 million for the third quarter 2013.

Operating non-interest income was $5.7 million for the third quarter 2014, compared to $5.7 million in the second quarter of 2014 and $5.8 million for the third quarter of 2013.1

Net operating revenue was $103.7 million for the third quarter 2014, an increase of 4.1% compared to $99.6 million for the second quarter of 2014 and an increase of 14.8% compared to $90.4 million for the third quarter 2013.1

Operating non-interest expense was $52.0 million for the third quarter 2014, compared to $52.2 million for the second quarter of 2014 and $48.3 million for the third quarter of 2013.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 47.2% for the third quarter 2014, compared to 49.4% for the second quarter 2014 and 51.6% for the third quarter 2013.

Non-operating items for the third quarter 2014 consisted of a net gain on sales and valuations of repossessed and other assets of $2.0 million, unrealized gains on assets and liabilities measured at fair value of $0.9 million, and loss on extinguishment of debt of $0.5 million due to the Company's repurchase of $6.5 million in outstanding 10% senior note principal, due in 2015, whose carrying value is included in borrowings. Prior to the repurchase, the outstanding senior note principal balance was $64.9 million.

The Company had 1,120 full-time equivalent employees and 39 offices at September 30, 2014, compared to 1,023 full-time equivalent employees and 41 offices at September 30, 2013.

The Company views its pre-tax, pre-provision operating earnings as a key metric for assessing the Company’s earning power, which it defines as net operating revenue less operating non-interest expense. For the third quarter 2014, the Company’s pre-tax, pre-provision operating earnings were $51.8 million, up from $47.4 million in the second quarter 2014 and up from $42.1 million in the third quarter 2013.1

Balance Sheet

Gross loans totaled $7.93 billion at September 30, 2014, an increase of $385 million from June 30, 2014 and an increase of $1.41 billion from September 30, 2013. At September 30, 2014, the allowance for credit losses was 1.38% of total loans, compared to 1.40% at June 30, 2014 and 1.50% at September 30, 2013, reflecting an improvement in the Company’s asset quality profile and historical losses.

Deposits totaled $8.70 billion at September 30, 2014, an increase of $228 million from $8.47 billion at June 30, 2014 and an increase of $1.42 billion from $7.28 billion at September 30, 2013. Non-interest bearing deposits were $2.25 billion at September 30, 2014, compared to $2.28 billion at June 30, 2014 and $1.97 billion at September 30, 2013. Non-interest bearing deposits comprised 25.8% of total deposits at September 30, 2014, compared to 26.9% at June 30, 2014 and 27.1% at September 30, 2013. The proportion of savings and money market accounts decreased to 42.4% from 42.9% at June 30, 2014 and increased from 41.9% at September 30, 2013. Certificates of deposit as a percent of total deposits increased to 22.5% from 20.8% at June 30, 2014 and from 21.7% at September 30, 2013. The Company’s ratio of loans to deposits was 91.2% at September 30, 2014, compared to 89.1% at June 30, 2014 and 89.6% at September 30, 2013.

Stockholders’ equity at September 30, 2014 increased to $1.00 billion from $958 million at June 30, 2014 and increased $177 million from $827 million at September 30, 2013. In the second quarter 2014, the Company began issuing common stock under a $100 million at-the-market (ATM) public offering. However, no shares were sold in the third quarter 2014, compared to $2.6 million in net proceeds from the issuance of 115,866 shares of common stock in the second quarter 2014.

At September 30, 2014, tangible common equity, net of tax, was 8.2% of tangible assets1 and total risk-based capital was 12.2% of risk-weighted assets. The Company’s tangible book value per share1 was $9.53 at September 30, 2014, up 25.9% from September 30, 2013.

Total assets increased 2.6% to $10.29 billion at September 30, 2014 from $10.02 billion at June 30, 2014 and increased 15.3% from $8.92 billion at September 30, 2013.

Asset Quality

The provision for credit losses was $0.4 million for the third quarter 2014, compared to $0.5 million for the second quarter 2014 and zero for the third quarter 2013. Net loan recoveries in the third quarter 2014 were $2.8 million, or 0.15% of average loans (annualized), compared to$1.5 million, or 0.09% for the second quarter 2014. Net loan recoveries for the third quarter 2013 were $1.5 million, or 0.10% of average loans (annualized).

Nonaccrual loans increased $10.7 million to $75.1 million during the third quarter 2014, compared to the second quarter 2014. Loans past due 90 days and still accruing interest totaled $3.6 million at September 30, 2014, up from $3.0 million at June 30, 2014 and down from $5.5 million at September 30, 2013. Loans past due 30-89 days, still accruing interest totaled $16.5 million at quarter end, up from $5.1 million at June 30, 2014 and $8.7 million at September 30, 2013. Other assets acquired through foreclosure decreased to $51.8 million for the third quarter 2014, compared to $59.3 million for the second quarter 2014 and $76.5 million for the third quarter 2013.

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, improved to 21% at September 30, 2014 from 31% at September 30, 2013.1

Segment Highlights

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

The Company's reportable segments are aggregated primarily based on geographic location, services offered, and markets served. The Arizona, Nevada, and California segments provide full service banking and related services to their respective regions. The Company's Central Business Lines (CBL) segment provides banking services to niche markets. These CBLs are managed centrally and are broader in geographic scope, though still predominately within our core market areas. Corporate & Other consists of corporate-related items, income and expense items not allocated to our other reportable segments, and inter-segment eliminations.

Key management metrics for evaluating the performance of the Company's Arizona, Nevada, California and Central Business Lines segments include loan and deposit growth, asset quality, and pre-tax income.

Arizona reported a gross loan balance of $2.20 billion at September 30, 2014, an increase of $74 million during the quarter, and an increase of $180 million during the nine months ended September 30, 2014. Deposits were $2.08 billion at September 30, 2014, a decrease of $38 million during the quarter, and an increase of $77 million during the nine months ended September 30, 2014. Pre-tax income was $14.8 million and $44.7 million for the three and nine months ended September 30, 2014, respectively.

Nevada reported a gross loan balance of $1.68 billion at September 30, 2014, a decrease of $3 million during the quarter, and a decrease of $74 million during the nine months ended September 30, 2014. Deposits were $3.19 billion at September 30, 2014, an increase of $6 million during the quarter, and an increase of $271 million during the nine months ended September 30, 2014. Pre-tax income was $21.2 million and $55.4 million for the three and nine months ended September 30, 2014, respectively.

California reported a gross loan balance of $1.73 billion at September 30, 2014, an increase of $31 million during the quarter, and an increase of $110 million during the nine months ended September 30, 2014. Deposits were $2.35 billion at September 30, 2014, an increase of $289 million during the quarter, and an increase of $405 million during the nine months ended September 30, 2014. Pre-tax income was $13.4 million and $37.8 million for the three and nine months ended September 30, 2014, respectively.

Central Business Lines reported a gross loan balance of $2.26 billion at September 30, 2014, an increase of $313 million during the quarter, and an increase of $914 million during the nine months ended September 30, 2014. Deposits were $906 million at September 30, 2014, an increase of $20 million during the quarter, and an increase of $138 million during the nine months ended September 30, 2014. Pre-tax income was $9.6 million and $21.7 million for the three and nine months ended September 30, 2014, respectively.

Attached to this press release is summarized financial information for the quarter ended September 30, 2014.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its third quarter 2014 financial results at 12:00 p.m. ET on Friday, October 17, 2014. Participants may access the call by dialing 1-888-317-6003 and using passcode: 2466045 or via live audio webcast using the website link: http://services.choruscall.com/links/wal141017.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 October 17th through November 18th at 9:00 a.m. ET by dialing 1-877-344-7529 passcode: 10052772.

Use of Non-GAAP Financial Information

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

Early Adoption of Accounting Standards

Effective as of the first quarter 2014, the Company elected early adoption of Accounting Standards Codification 323-740, an amended Financial Accounting Standards Board standard related to accounting for low income housing tax credit investments. Under this amended standard, the amortization of the investment may now be calculated under the proportional amortization method and is included in income tax expense rather than as a separate line item in non-interest income. Prior period amounts have been adjusted to reflect the adoption of this new accounting guidance, which has resulted in an increase in non-interest income and income tax expense. See the supplemental schedule at the end of the Q1 2014 press release for additional detail on the impact that adoption of this standard has had on prior period financial information.

Cautionary Note Regarding Forward-Looking Statements

This release contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding guidance, outlook or expectations relating to our business, financial and operating results, and future economic performance. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include, among others: the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; inflation, interest rate, market and monetary fluctuations; increases in competitive pressures among financial institutions and businesses offering similar products and services; higher defaults on our loan portfolio than we expect; changes in management’s estimate of the adequacy of the allowance for credit losses; legislative or regulatory changes or changes in accounting principles, policies or guidelines; supervisory actions by regulatory agencies which may limit our ability to pursue certain growth opportunities; management’s estimates and projections of interest rates and interest rate policy; the execution of our business plan; and other factors affecting the financial services industry generally or the banking industry in particular.

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

About Western Alliance Bancorporation

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

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
September 30,

At or for the Nine Months Ended
September 30,

2014 2013

Change %

2014 2013

Change %

 
Selected Balance Sheet Data:
(dollars in millions)
Total assets $ 10,288.8 $ 8,920.5 15.3 %
Loans, net of deferred fees 7,929.5 6,516.3 21.7
Securities and money market investments 1,597.3 1,370.8 16.5
Securities purchased under agreement to resell 128.1 (100.0 )
Total deposits 8,697.6 7,275.3 19.5
Borrowings 330.8 394.1 (16.1 )
Junior subordinated debt 41.8 39.4 6.1
Stockholders' equity 1,003.1 826.5 21.4
 
Selected Income Statement Data:
(dollars in thousands)
Interest income $ 105,554 $ 92,680 13.9 % $ 306,228 $ 265,073 15.5 %
Interest expense 7,481   8,121   (7.9 ) 23,480   22,159   6.0
Net interest income 98,073 84,559 16.0 282,748 242,914 16.4
Provision for loan losses 419     100.0 4,426   8,920   (50.4 )
Net interest income after provision for credit losses 97,654 84,559 15.5 278,322 233,994 18.9
Non-interest income 6,226 4,129 50.8 16,834 20,690 (18.6 )
Non-interest expense 50,012   49,675   0.7 152,177   145,135   4.9
Income from continuing operations before income taxes 53,868 39,013 38.1 142,979 109,549 30.5
Income tax expense 12,949   10,390   24.6 34,279   25,838   32.7
Income from continuing operations 40,919 28,623 43.0 108,700 83,711 29.9
Loss from discontinued operations, net of tax   (29 ) (100.0 ) (1,158 ) (160 ) 623.8
Net income $ 40,919   $ 28,594   43.1 % $ 107,542   $ 83,551   28.7 %
Diluted net income per common share from continuing operations $ 0.46   $ 0.33   39.4 % $ 1.23   $ 0.96   28.1 %
Diluted net loss per common share from discontinued operations, net of tax $   $   $ (0.01 ) $ (0.01 )
Diluted net income per common share $ 0.46   $ 0.33   39.4 % $ 1.22   $ 0.95   28.4 %
 
Common Share Data:
Diluted net income per common share $ 0.46 $ 0.33 39.4 % $ 1.22 $ 0.95 28.4 %
Book value per common share $ 9.81 $ 7.87 24.7 %
Tangible book value per share, net of tax (1) $ 9.53 $ 7.57 25.9 %
Average shares outstanding (in thousands):
Basic 86,723 85,799 1.1 86,495 85,596 1.1
Diluted 87,572 86,769 0.9 87,345 86,428 1.1
Common shares outstanding 87,849 87,099 0.9 87,849 87,099 0.9
 
(1) See Reconciliation of Non-GAAP Financial Measures.
 
 
Western Alliance Bancorporation and Subsidiaries                
Summary Consolidated Financial Data (continued)
Unaudited
 

At or for the Three Months Ended
September 30,

At or for the Nine Months Ended
September 30,

2014   2013   Change % 2014   2013   Change %
 
Selected Performance Ratios:
Return on average assets (1) 1.63 % 1.33 % 22.6 % 1.47 % 1.34 % 9.7 %
Return on average tangible common equity (2) 19.91 17.50 13.8 18.66 17.61 6.0
Net interest margin (1) 4.43 4.41 0.5 4.41 4.38 0.7
Net interest spread 4.30 4.25 1.2 4.27 4.22 1.2
Efficiency ratio - tax equivalent basis (2) 47.20 51.56 (8.5 ) 49.16 52.73 (6.8 )
Loan to deposit ratio 91.17 89.57 1.8
 
Capital Ratios:
Tangible equity (2) 9.5 % 9.0 % 5.6 %
Tangible common equity (2) 8.2 7.4 10.8
Tier 1 common equity (2) 9.0 8.8 2.3
Tier 1 Leverage ratio (3) 10.1 10.0 1.0
Tier 1 Risk Based Capital (3) 11.0 11.2 (1.8 )
Total Risk Based Capital (3) 12.2 12.5 (2.4 )
 
Asset Quality Ratios:
Net (recoveries) charge-offs to average loans outstanding (1) (0.15 )% (0.10 )% 50.0 % (0.09 )% 0.14 % (164.3 )%
Nonaccrual loans to gross loans 0.95 1.18 (19.5 )
Nonaccrual loans and repossessed assets to total assets 1.23 1.72 (28.5 )
Loans past due 90 days and still accruing to total loans 0.04 0.08 (50.0 )
Allowance for credit losses to gross loans 1.38 1.50 (8.0 )
Allowance for credit losses to nonaccrual loans 145.37 127.67 13.9
 
(1) Annualized for the three- and nine-month periods ended September 30, 2014 and 2013.
(2) See Reconciliation of Non-GAAP Financial Measures.
(3) Capital ratios are preliminary until the Call Reports are filed.
 
 
Western Alliance Bancorporation and Subsidiaries            
Condensed Consolidated Income Statements
Unaudited

Three Months Ended September 30,

Nine Months Ended September 30,
2014 2013 2014 2013
Interest income: (dollars in thousands)
Loans $ 94,436 $ 83,994 $ 271,823 $ 239,812
Investment securities 10,535 8,286 32,754 24,266
Federal funds sold and other 583   400   1,651   995  
Total interest income 105,554   92,680   306,228   265,073  
Interest expense:
Deposits 5,172 4,232 14,767 11,893
Borrowings 1,866 3,429 7,406 8,885
Junior subordinated debt 443   460   1,307   1,381  
Total interest expense 7,481   8,121   23,480   22,159  
Net interest income 98,073 84,559 282,748 242,914
Provision for credit losses 419     4,426   8,920  
Net interest income after provision for credit losses 97,654   84,559   278,322   233,994  
Non-interest income:

Service charges

2,434 2,425 7,701 7,408
Bank owned life insurance 1,136 1,832 3,044 3,904
Gains (losses) on sales of investment securities, net 181 (1,679 ) 384 (1,537 )
Unrealized gains (losses) on assets and liabilities measured at fair value, net 896 (7 ) (145 ) (3,865 )
Loss on extinguishment of debt (502 ) (502 )
Bargain purchase gain from acquisition 10,044
Other 2,081   1,558   6,352   4,736  
Total non-interest income 6,226   4,129   16,834   20,690  
Non-interest expenses:
Salaries and employee benefits 32,230 28,689 93,536 83,363
Occupancy 4,500 4,901 13,510 14,500
Legal, professional and directors' fees 3,022 3,438 10,853 9,010
Data processing 2,109 1,872 7,184 5,912
Insurance 1,996 1,884 6,476 6,350
Loan and repossessed asset expenses 1,007 1,136 3,168 3,453
Customer service 888 677 2,216 2,037
Marketing 378 585 1,443 1,962
Intangible amortization 281 597 1,180 1,791
Net (gain) loss on sales and valuations of repossessed and other assets (1,956 ) 371 (4,319 ) (234 )
Merger / restructure expense 15 1,018 198 3,833
Other 5,542   4,507   16,732   13,158  
Total non-interest expense 50,012   49,675   152,177   145,135  
Income from continuing operations before income taxes 53,868 39,013 142,979 109,549
Income tax expense 12,949   10,390   34,279   25,838  
Income from continuing operations $ 40,919 $ 28,623 $ 108,700 $ 83,711
Loss from discontinued operations, net of tax   (29 ) (1,158 ) (160 )
Net income $ 40,919 $ 28,594 $ 107,542 $ 83,551
Preferred stock dividends 353   352   1,058   1,058  
Net income available to common stockholders $ 40,566   $ 28,242   $ 106,484   $ 82,493  
Diluted net income per share $ 0.46   $ 0.33   $ 1.22   $ 0.95  
 
 
Western Alliance Bancorporation and Subsidiaries            
Five Quarter Condensed Consolidated Income Statements
Unaudited
Three Months Ended
Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013
(in thousands, except per share data)
Interest income:
Loans $ 94,436 $ 90,583 $ 86,804 $ 86,902 $ 83,994
Investment securities 10,535 10,894 11,325 10,137 8,286
Federal funds sold and other 583   496   572   543   400  
Total interest income 105,554   101,973   98,701   97,582   92,680  
Interest expense:
Deposits 5,172 4,930 4,665 4,442 4,232
Borrowings 1,866 2,702 2,838 2,717 3,429
Junior subordinated debt 443   443   421   442   460  
Total interest expense 7,481   8,075   7,924   7,601   8,121  
Net interest income 98,073 93,898 90,777 89,981 84,559
Provision for credit losses 419   507   3,500   4,300    
Net interest income after provision for credit losses 97,654   93,391   87,277   85,681   84,559  
Non-interest income:
Service charges 2,434 2,737 2,530 2,512 2,425
Bank owned life insurance 1,136 959 949 905 1,832
Gains (losses) on sales of investment securities, net 181 (163 ) 366 342 (1,679 )
Unrealized gains (losses) on assets and liabilities measured at fair value, net 896 235 (1,276 ) (2,618 ) (7 )
Loss on extinguishment of debt (502 ) (1,387 )
Other 2,081   2,005   2,266   1,803   1,558  

Total non-interest income

6,226   5,773   4,835   1,557   4,129  
Non-interest expenses:
Salaries and employee benefits 32,230 31,751 29,555 30,071 28,689
Occupancy 4,500 4,328 4,682 4,626 4,901
Legal, professional and directors' fees 3,022 4,192 3,639 4,623 3,438
Data processing 2,109 2,401 2,674 2,040 1,872
Insurance 1,996 2,087 2,393 1,744 1,884
Loan and repossessed asset expenses 1,007 927 1,234 793 1,136
Customer service 888 708 620 860 677
Marketing 378 506 559 619 585
Intangible amortization 281 302 597 597 597
Net (gain) loss on sales and valuations of repossessed and other assets (1,956 ) 184 (2,547 ) (2,153 ) 371
Merger / restructure expense 15 26 157 1,919 1,018
Other 5,542   5,004   6,186   5,392   4,507  

Total non-interest expense

50,012   52,416   49,749   51,131   49,675  
Income from continuing operations before income taxes 53,868 46,748 42,363 36,107 39,013
Income tax expense 12,949   10,706   10,624   3,992   10,390  
Income from continuing operations $ 40,919 $ 36,042 $ 31,739 $ 32,115 $ 28,623
Loss from discontinued operations, net of tax   (504 ) (654 ) (701 ) (29 )
Net income $ 40,919   $ 35,538   $ 31,085   $ 31,414   $ 28,594  
Preferred stock dividends 353   352   353   352   352  
Net income available to common stockholders $ 40,566   $ 35,186   $ 30,732   $ 31,062   $ 28,242  
 
Diluted net income per share $ 0.46   $ 0.40   $ 0.35   $ 0.36   $ 0.33  
 
 
Western Alliance Bancorporation and Subsidiaries            
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013
(in millions)
Assets:
Cash and due from banks $ 258.8 $ 379.3 $ 354.8 $ 305.5 $ 380.9
Securities purchased under agreement to resell     111.1     128.1  
Cash and cash equivalents 258.8 379.3 465.9 305.5 509.0
 
Securities and money market investments 1,597.3 1,606.7 1,671.2 1,689.6 1,370.8
Loans held for sale 25.4
Loans held for investment:
Commercial 3,292.2 3,027.7 2,723.4 2,478.2 2,234.9
Commercial real estate - non-owner occupied 1,998.9 1,940.0 1,849.2 1,841.1 1,864.3
Commercial real estate - owner occupied 1,621.9 1,605.0 1,606.2 1,561.9 1,551.2
Construction and land development 677.1 612.4 553.7 535.7 459.8
Residential real estate 316.9 328.1 344.9 350.3 359.0
Consumer 33.0 40.9 38.3 43.1 29.8
Deferred fees, net (10.5 ) (9.6 ) (7.1 ) (8.9 ) (8.1 )
Gross loans and deferred fees, net 7,929.5   7,544.5   7,108.6   6,801.4   6,490.9  
Allowance for credit losses (109.2 ) (105.9 ) (103.9 ) (100.1 ) (97.9 )
Loans, net 7,820.3   7,438.6   7,004.7   6,701.3   6,393.0  
 
Premises and equipment, net 112.1 109.6 106.6 105.6 105.9
Other assets acquired through foreclosure, net 51.8 59.3 56.5 66.7 76.5
Bank owned life insurance 143.2 142.5 141.5 140.6 139.7
Goodwill and other intangibles, net 26.2 26.5 26.8 27.4 28.0
Other assets 279.1   261.1   273.4   270.7   272.2  
Total assets $ 10,288.8   $ 10,023.6   $ 9,746.6   $ 9,307.4   $ 8,920.5  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $ 2,246.7 $ 2,278.8 $ 2,093.6 $ 2,200.0 $ 1,972.5
Interest bearing:
Demand 809.4 794.8 750.4 709.8 673.7
Savings and money market 3,685.0 3,637.4 3,672.3 3,310.4 3,050.0
Time certificates 1,956.5   1,758.5   1,632.7   1,618.0   1,579.1  
Total deposits 8,697.6 8,469.5 8,149.0 7,838.2 7,275.3
Customer repurchase agreements 53.0   53.7   57.4   71.2   55.5  
Total customer funds 8,750.6 8,523.2 8,206.4 7,909.4 7,330.8
Securities sold short 109.8 126.6
Borrowings 330.8 337.5 342.8 341.1 394.1
Junior subordinated debt 41.8 42.7 42.8 41.9 39.4
Accrued interest payable and other liabilities 162.5   162.5   150.0   159.5   203.1  
Total liabilities 9,285.7   9,065.9   8,851.8   8,451.9   8,094.0  
Stockholders' Equity
Common stock and additional paid-in capital 807.2 803.4 795.3 797.2 792.2
Preferred stock 141.0 141.0 141.0 141.0 141.0
Retained earnings (accumulated deficit) 45.4 4.8 (30.4 ) (61.2 ) (92.2 )
Accumulated other comprehensive income (loss) 9.5   8.5   (11.1 ) (21.5 ) (14.5 )
Total stockholders' equity 1,003.1   957.7   894.8   855.5   826.5  
Total liabilities and stockholders' equity $ 10,288.8   $ 10,023.6   $ 9,746.6   $ 9,307.4   $ 8,920.5  
 
 
Western Alliance Bancorporation and Subsidiaries            
Changes in the Allowance For Credit Losses
Unaudited
Three Months Ended
Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013
(in thousands)
Balance, beginning of period $ 105,937 $ 103,899 $ 100,050 $ 97,851 $ 96,323
Provision for credit losses 419 507 3,500 4,300
Recoveries of loans previously charged-off:
Commercial and industrial 1,053 1,254 922 666 2,242
Commercial real estate - non-owner occupied 1,226 1,052 83 395 273
Commercial real estate - owner occupied 553 196 477 297 149
Construction and land development 182 498 211 273 966
Residential real estate 768 314 553 549 430
Consumer 34   191   170   179   726  
Total recoveries 3,816 3,505 2,416 2,359 4,786
Loans charged-off:
Commercial and industrial 110 1,039 1,478 621 544
Commercial real estate - non-owner occupied 158 99 160 2,268 466
Commercial real estate - owner occupied 35 230 11 238 398
Construction and land development 78 686
Residential real estate 423 523 406 281 1,138
Consumer 285   5   12   366   712  

Total loans charged-off

1,011 1,974 2,067 4,460 3,258
Net loan (recoveries) charge-offs (2,805 ) (1,531 ) (349 ) 2,101   (1,528 )
Balance, end of period $ 109,161   $ 105,937   $ 103,899   $ 100,050   $ 97,851  
 
Net (recoveries) charge-offs to average loans outstanding - annualized (0.15 )% (0.09 )% (0.02 )% 0.13 % (0.10

)%

Allowance for credit losses to gross loans 1.38 1.40 1.46 1.47 1.50
Nonaccrual loans $ 75,092 $ 64,345 $ 70,401 $ 75,681 $ 76,641
Repossessed assets 51,787 59,292 56,450 66,719 76,475
Loans past due 90 days, still accruing 3,558 3,001 167 1,534 5,456
Loans past due 30 to 89 days, still accruing 16,500 5,123 11,087 13,425 8,689
Classified loans on accrual 107,776 133,220 125,903 128,586 144,041
Special mention loans 98,265 90,534 117,540 129,965 137,247
 
 
Western Alliance Bancorporation and Subsidiaries          
Analysis of Average Balances, Yields and Rates
Unaudited    
Three Months Ended September 30,
2014 2013

Average
Balance

Interest

Average
Yield / Cost

Average
Balance

Interest

Average
Yield / Cost

($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets
Loans (1) $ 7,644.9 $ 94,436 5.18 % $ 6,306.4 $ 83,994 5.44 %
Securities (1) 1,575.7 10,535 3.11 1,303.4 8,286 3.01
Federal funds sold and other 203.1   583   1.15   364.6   400   0.44  

Total interest earning assets

9,423.7 105,554 4.75 7,974.4 92,680 4.81
Non-interest earning assets
Cash and due from banks 137.6 119.2
Allowance for credit losses (107.0 ) (96.7 )
Bank owned life insurance 142.7 139.7
Other assets 458.3   492.0  
Total assets $ 10,055.3   $ 8,628.6  
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 810.3 $ 400 0.20 % $ 641.7 $ 376 0.23 %
Savings and money market 3,659.9 2,809 0.31 2,828.1 2,172 0.31
Time certificates of deposit 1,763.8   1,963   0.45   1,675.5   1,684   0.40  
Total interest-bearing deposits 6,234.0 5,172 0.33 5,145.3 4,232 0.33
Short-term borrowings 119.9 219 0.73 182.7 2,420 5.30
Long-term debt 272.0 1,647 2.42 392.1 1,009 1.03
Junior subordinated debt 42.7   443   4.15   39.9   460   4.61  
Total interest-bearing liabilities 6,668.6 7,481 0.45 5,760.0 8,121 0.56
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 2,241.4 1,931.1
Other liabilities 155.8 114.7
Stockholders’ equity 989.5   822.8  
Total liabilities and stockholders' equity $ 10,055.3   $ 8,628.6  
Net interest income and margin $ 98,073   4.43 % $ 84,559   4.41 %
Net interest spread 4.30 % 4.25 %
 
(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $6,348 and $3,272 for the three months ended September 30, 2014 and 2013, respectively.
 
 
Western Alliance Bancorporation and Subsidiaries          
Analysis of Average Balances, Yields and Rates
Unaudited    
 
Nine Months Ended September 30,
2014 2013

Average
Balance

Interest

Average
Yield / Cost

Average
Balance

Interest

Average
Yield / Cost

($ in millions) ($ in thousands) ($ in millions) ($ in thousands)
Interest earning assets
Loans (1) $ 7,241.6 $ 271,823 5.24 % $ 6,008.4 $ 239,812 5.42 %
Securities (1) 1,618.8 32,754 3.11 1,294.3 24,266 3.05
Federal funds sold & other 235.2   1,651   0.94   392.2   995   0.34  

Total interest earnings assets

9,095.6 306,228 4.75 7,694.9 265,073 4.76
Non-interest earning assets
Cash and due from banks 138.9 130.3
Allowance for credit losses (104.4 ) (97.2 )
Bank owned life insurance 141.8 139.7
Other assets 450.3   440.6  
Total assets $ 9,722.2   $ 8,308.3  
Interest-bearing liabilities
Interest-bearing deposits:
Interest bearing transaction accounts $ 789.1 $ 1,169 0.20 % $ 625.8 $ 1,047 0.22 %
Savings and money market 3,566.0 8,063 0.30 2,740.0 6,090 0.30
Time certificates of deposits 1,695.1   5,535   0.44   1,570.5   4,756   0.40  
Total interest-bearing deposits 6,050.2 14,767 0.33 4,936.3 11,893 0.32
Short-term borrowings 174.2 565 0.43 182.3 2,848 2.08
Long-term debt 284.6 6,841 3.20 343.8 6,037 2.34
Junior subordinated debt 42.5   1,307   4.10   37.6   1,381   4.90  
Total interest-bearing liabilities 6,551.5 23,480 0.48 5,500.0 22,159 0.54
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 2,114.4 1,895.1
Other liabilities 120.3 110.7
Stockholders’ equity 936.0   802.5  
Total liabilities and stockholders' equity $ 9,722.2   $ 8,308.3  
Net interest income and margin $ 282,748   4.41 % $ 242,914   4.38 %
Net interest spread 4.27 % 4.22 %
 
(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $18,081 and $9,583 for the nine months ended September 30, 2014 and 2013, respectively.
 
 
Western Alliance Bancorporation and Subsidiaries          
Operating Segment Results    
Unaudited
Arizona Nevada California

Central
Business Lines

Corporate &
Other

Consolidated
Company

(dollars in millions)
As of September 30, 2014:
Assets:
Cash, cash equivalents and investment securities $ 2.1 $ 5.3 $ 2.3 $ $ 1,846.4 $ 1,856.1
Gross loans and deferred fees, net 2,204.9 1,680.1 1,725.7 2,264.9 53.9 7,929.5
Less: allowance for credit losses (30.4 ) (23.1 ) (23.8 ) (31.2 ) (0.7 ) (109.2 )
Loans, net 2,174.5 1,657.0 1,701.9 2,233.7 53.2 7,820.3
Other assets acquired through foreclosure, net 13.5 19.2 19.1 51.8
Goodwill and other intangibles, net 26.2 26.2
Other assets 44.6   69.2   41.0   20.5   359.1   534.4  
Total assets $ 2,234.7   $ 1,776.9   $ 1,745.2   $ 2,254.2   $ 2,277.8   $ 10,288.8  
Liabilities:
Deposits (1) $ 2,077.4 $ 3,193.8 $ 2,349.9 $ 906.0 $ 170.5 $ 8,697.6
Borrowings 330.8 330.8
Other liabilities 21.2   41.7   10.8   42.1   141.5   257.3  
Total liabilities 2,098.6 3,235.5 2,360.7 948.1 642.8 9,285.7
Allocated equity 236.9   209.0   197.0   203.9   156.3   1,003.1  
Liabilities and stockholders' equity $ 2,335.5   $ 3,444.5   $ 2,557.7   $ 1,152.0   $ 799.1   $ 10,288.8  
Excess funds provided (used) 100.8 1,667.6 812.5 (1,102.2 ) (1,478.7 )
 
No. of branches 10 18 11 39
No. of full-time equivalent employees 216 301 223 93 287 1,120
 
(in thousands)
Three Months Ended September 30, 2014:
Net interest income (expense) $ 28,417 $ 29,880 $ 25,830 $ 18,861 $ (4,915 ) $ 98,073
Provision for (recovery of) credit losses 330   (3,040 ) 96   3,294   (261 ) 419  
Net interest income (expense) after provision for credit losses 28,087 32,920 25,734 15,567 (4,654 ) 97,654
Non-interest income 840 2,239 957 513 1,677 6,226
Non-interest expense (14,174 ) (13,986 ) (13,254 ) (6,477 ) (2,121 ) (50,012 )
Income (loss) from continuing operations before income taxes 14,753   21,173   13,437   9,603   (5,098 ) 53,868  
Income tax expense (benefit) 5,787   7,411   5,649   3,601   (9,499 ) 12,949  
Net income $ 8,966   $ 13,762   $ 7,788   $ 6,002   $ 4,401   $ 40,919  
 
(in thousands)
Nine Months Ended September 30, 2014:
Net interest income (expense) $ 84,236 $ 87,834 $ 73,324 $ 49,051 $ (11,697 ) $ 282,748
Provision for (recovery of) credit losses 1,891   (5,935 ) (921 ) 8,931   460   4,426  
Net interest income (expense) after provision for credit losses 82,345 93,769 74,245 40,120 (12,157 ) 278,322
Non-interest income 2,594 6,880 3,177 1,238 2,945 16,834
Non-interest expense (40,271 ) (45,248 ) (39,639 ) (19,625 ) (7,394 ) (152,177 )
Income (loss) from continuing operations before income taxes 44,668 55,401 37,783 21,733 (16,606 ) 142,979
Income tax expense (benefit) 17,521   19,392   15,886   8,150   (26,670 ) 34,279  
Income from continuing operations 27,147 36,009 21,897 13,583 10,064 108,700
Loss from discontinued operations, net of tax         (1,158 ) (1,158 )
Net income $ 27,147   $ 36,009   $ 21,897   $ 13,583   $ 8,906   $ 107,542  
 
(1) Certain centrally-managed deposits from prior periods were re-allocated to specific regions to conform to current presentation.
 
 
Western Alliance Bancorporation and Subsidiaries            
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
Pre-Tax, Pre-Provision Operating Earnings by Quarter
Three Months Ended
Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013
(in thousands)
Total non-interest income $ 6,226 $ 5,773 $ 4,835 $ 1,557 $ 4,129
Less:
Gains (losses) on sales of investment securities, net 181 (163 ) 366 342 (1,679 )
Unrealized gains (losses) on assets and liabilities measured at fair value, net 896 235 (1,276 ) (2,618 ) (7 )
Loss on extinguishment of debt (502 )     (1,387 )  
Total operating non-interest income 5,651 5,701 5,745 5,220 5,815
Add: net interest income 98,073   93,898   90,777   89,981   84,559  
Net operating revenue (1) $ 103,724 $ 99,599 $ 96,522 $ 95,201 $ 90,374
 
Total non-interest expense $ 50,012 $ 52,416 $ 49,749 $ 51,131 $ 49,675
Less:
Net (gain) loss on sales and valuations of repossessed and other assets (1,956 ) 184 (2,547 ) (2,153 ) 371
Merger / restructure expense 15   26   157   1,919   1,018  
Total operating non-interest expense (1) $ 51,953 $ 52,206 $ 52,139 $ 51,365 $ 48,286
                   
Pre-tax, pre-provision operating earnings (2) $ 51,771   $ 47,393   $ 44,383   $ 43,836   $ 42,088  
 
Tangible Common Equity            
Sep 30, 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013
(dollars and shares in thousands)
Total stockholders' equity $ 1,003,122 $ 957,664 $ 894,804 $ 855,498 $ 826,472
Less:
Goodwill and intangible assets, net 26,194   26,475   26,777   27,374   27,970  
Total tangible stockholders' equity 976,928 931,189 868,027 828,124 798,502
Less:
Preferred stock 141,000   141,000   141,000   141,000   141,000  
Total tangible common equity 835,928 790,189 727,027 687,124 657,502
Add:
Deferred tax - attributed to intangible assets 1,138   1,138   1,243   1,452   1,661  
Total tangible common equity, net of tax $ 837,066   $ 791,327   $ 728,270   $ 688,576   $ 659,163  
Total assets $ 10,288,824 $ 10,023,587 $ 9,746,623 $ 9,307,342 $ 8,920,449
Less:
Goodwill and intangible assets, net 26,194   26,475   26,777   27,374   27,970  
Tangible assets 10,262,630 9,997,112 9,719,846 9,279,968 8,892,479
Add:
Deferred tax - attributed to intangible assets 1,138   1,138   1,243   1,452   1,661  
Total tangible assets, net of tax $ 10,263,768   $ 9,998,250   $ 9,721,089   $ 9,281,420   $ 8,894,140  
Tangible equity ratio (3) 9.5 % 9.3 %