Press Release

Western Alliance Reports Fourth Quarter and Full Year 2015 Financial Performance

Company Release - 1/21/2016 4:53 PM ET

PHOENIX--(BUSINESS WIRE)-- Western Alliance Bancorporation (NYSE: WAL) (the "Company") announced today its financial results for the fourth quarter 2015.

Fourth Quarter 2015 Highlights:

  • Net income of $58.5 million, compared to $55.9 million for the third quarter 2015, and $40.4 million for the fourth quarter 2014
  • Earnings per share of $0.57, compared to $0.55 per share in the third quarter 2015, and $0.46 per share in the fourth quarter 2014
  • Pre-tax, pre-provision operating earnings of $79.9 million, up 8.4% from $73.7 million in the third quarter 2015, and up 53.7% from $52.0 million in the fourth quarter 20141
  • Net operating revenue of $152.8 million, constituting year-over-year growth of 40.4%, or $44.0 million, compared to an increase in operating expenses of 28.1%, or $16.0 million1
  • Net interest margin of 4.67%, compared to 4.59% in the third quarter 2015, and 4.44% in the fourth quarter 2014
  • Efficiency ratio of 45.2%, compared to 46.8% in the third quarter 2015, and 49.3% in the fourth quarter 20141
  • Total loans of $11.14 billion, up $348 million from September 30, 2015
  • Total deposits of $12.03 billion, up $420 million from September 30, 2015
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 0.65% of total assets, from 0.76% at September 30, 2015
  • Net loan charge-offs (annualized) to average loans outstanding of 0.02%, compared to net loan recoveries (annualized) to average loans outstanding of 0.08% in the third quarter 2015 and 0.04% in the fourth quarter 2014
  • Tangible common equity ratio of 9.2%, compared to 8.9% at September 30, 20151
  • Stockholders' equity of $1.59 billion, an increase of $8 million from September 30, 2015 as the increase from net income and the at-the-market ("ATM") common stock issuances during the quarter was partially offset by the redemption of the Small Business Lending Fund ("SBLF") preferred stock
  • Tangible book value per share, net of tax, of $12.54, an increase of 5.7% from $11.86 at September 30, 20151

Full Year 2015 Highlights:

  • Net income of $194.2 million and earnings per share of $2.03, compared to $148.0 million and $1.67, respectively, for 2014
  • Return on average assets and return on tangible common equity of 1.56% and 17.83%, compared to 1.50% and 18.52%, respectively, in 2014
  • Net interest margin of 4.51%, compared to 4.42% in 2014
  • Total loan and deposit increases, including the June 30, 2015 acquisition of Bridge Capital Holdings ("Bridge"), of $2.74 billion and $3.10 billion, respectively, from December 31, 2014
  • Net loan recoveries to average loans outstanding of 0.06%, compared to 0.07% in 2014, and nonperforming assets to total assets of 0.65%, compared to 1.18% at December 31, 2014
  • Stockholders' equity of $1.59 billion, an increase of $591 million from December 31, 2014
  • Tangible common equity ratio of 9.2% and tangible book value per share, net of tax, of $12.54, compared to 8.6% and $10.21, respectively, at December 31, 20141

Note that due to early adoption of Accounting Standards Update ("ASU") 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, prior period financial statement results in 2015 have been adjusted to recognize unrealized gains and losses on the Company's junior subordinated debt in other comprehensive income rather than in earnings, consistent with accounting guidance. See Early Adoption of Accounting Standards section for further discussion.

Financial Performance

“Western Alliance had another record-setting year and quarter, with strong organic growth augmented by the acquisition of Bridge Capital Holdings, enabling the Company to reach record revenue, earnings, loan, and deposit levels,” remarked Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Net income increased to $194.2 million with earnings per share of $2.03 for the year and increased to $58.5 million with earnings per share of $0.57 for the quarter. We continue to maintain asset quality, with full-year net recoveries of 0.06% and our capital levels remain strong. Credit for our strong performance goes out to all the associates within the Company as we have strong momentum going into 2016.”

Income Statement

Net interest income was $143.3 million in the fourth quarter 2015, an increase of $5.9 million, or 4.3%, from $137.4 million in the third quarter 2015, and an increase of $41.2 million, or 40.3%, compared to the fourth quarter 2014. Net interest income in the fourth quarter 2015 includes $5.0 million of total accretion income from acquired loans, compared to $7.0 million in the third quarter 2015, and $2.8 million in the fourth quarter 2014.

The Company’s net interest margin increased in the fourth quarter 2015 to 4.67%, compared to 4.59% in the third quarter 2015, and 4.44% in the fourth quarter 2014. The increase in net interest margin for the quarter primarily relates to fees related to early loan payoffs and the payoff of the Company's 10% Senior Notes.

Operating non-interest income was $9.4 million for the fourth quarter 2015, compared to $8.5 million for the third quarter 2015, and $6.7 million for the fourth quarter 2014.1

Net operating revenue was $152.8 million for the fourth quarter 2015, an increase of $6.9 million, or 4.7%, compared to $145.9 million for the third quarter 2015, and an increase of $44.0 million, or 40.4%, compared to $108.8 million for the fourth quarter 2014.1

Operating non-interest expense was $72.8 million for the fourth quarter 2015, compared to $72.2 million for the third quarter 2015, and $56.8 million for the fourth quarter 2014.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 45.2% for the fourth quarter 2015, an improvement from 46.8% for the third quarter 2015, and from 49.3% for the fourth quarter 2014.

The Company views its pre-tax, pre-provision operating earnings 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 fourth quarter 2015, the Company’s pre-tax, pre-provision operating earnings were $79.9 million, up 8.4% from $73.7 million in the third quarter 2015, and up 53.7% from $52.0 million in the fourth quarter 2014.1

The non-operating items1 for the fourth quarter 2015 consisted primarily of a $0.4 million net gain on sales and valuations of repossessed and other assets.

The Company had 1,446 full-time equivalent employees and 47 offices at December 31, 2015, compared to 1,131 employees and 40 offices at December 31, 2014.

Balance Sheet

Gross loans totaled $11.14 billion at December 31, 2015, an increase of $348 million from $10.79 billion at September 30, 2015, and an increase of $2.74 billion from $8.40 billion at December 31, 2014. The year-over-year increase is comprised of $1.44 billion from the Bridge acquisition and $1.30 billion from organic loan growth. At December 31, 2015, the allowance for credit losses was 1.07% of total loans, compared to 1.09% at September 30, 2015, and 1.31% at December 31, 2014, reflecting an improvement in the Company’s asset quality profile and historical losses. Consistent with 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. The allowance for credit losses as a percent of total loans, adjusted to include credit discounts on acquired loans, was 1.25% at December 31, 2015, compared to 1.32% at September 30, 2015, and 1.45% at December 31, 2014.

Deposits totaled $12.03 billion at December 31, 2015, an increase of $420 million from $11.61 billion at September 30, 2015, and an increase of $3.10 billion from $8.93 billion at December 31, 2014. The year-over-year increase is comprised of $1.74 billion from the Bridge acquisition and $1.36 from organic deposit growth. Non-interest bearing deposits were $4.09 billion at December 31, 2015, compared to $4.08 billion at September 30, 2015, and $2.29 billion at December 31, 2014. Non-interest bearing deposits comprised 34.0% of total deposits at December 31, 2015, compared to 35.1% at September 30, 2015, and 25.6% at December 31, 2014. The increase in the proportion of the Company's non-interest bearing deposits from the prior year is due to Bridge's higher proportion of non-interest bearing deposits. The proportion of savings and money market balances to total deposits increased to 44.0% from 40.2% at September 30, 2015, and from 43.3% at December 31, 2014. Certificates of deposit as a percentage of total deposits were 13.4% at December 31, 2015, compared to 15.8% at September 30, 2015, and 21.5% at December 31, 2014. The Company’s ratio of loans to deposits was 92.6% at December 31, 2015, compared to 92.9% at September 30, 2015, and 94.0% at December 31, 2014.

Borrowings totaled $150 million at December 31, 2015, a decrease of $150 million from $300 million at September 30, 2015, and a decrease of $240 million from $390 million at December 31, 2014. The decrease from the prior quarter relates to a reduction in FHLB overnight advances. The decrease from the prior year is due primarily to the payoff of the 10% Senior Notes of $58.2 million and a reduction in FHLB advances of $157.1 million. Qualifying debt totaled $210 million at December 31, 2015, compared to $207 million at September 30, 2015, and increased $170 million from $40 million at December 31, 2014. The year-over-year increase is primarily due to the issuance of $150 million of subordinated debt and the assumption of $11 million in junior subordinated debt from Bridge in the second quarter 2015.

Stockholders’ equity at December 31, 2015 was $1.59 billion, compared to $1.58 billion at September 30, 2015, and $1.00 billion at December 31, 2014. There were several significant items that had offsetting effects on stockholders' equity during the fourth quarter 2015, which include: a reduction for the redemption of preferred stock, and increases related to ATM common stock issuances and net income for the quarter. In December 2015, the Company redeemed its remaining 70,500 outstanding shares of Non-Cumulative Perpetual Preferred Stock, Series B. The shares were redeemed at their liquidation value of $1,000 per share plus accrued dividends for a total redemption price of $70.7 million. During 2014, the Company began issuing common stock under a $100 million ATM public offering. During the fourth quarter 2015, we raised $28.3 million in net proceeds from the issuance of 760,376 shares of common stock under the ATM program.

At December 31, 2015, tangible common equity, net of tax, was 9.2% of tangible assets1 and total capital under the Basel III federal regulatory standards was 12.1% of risk-weighted assets. The Company’s tangible book value per share1 was $12.54 at December 31, 2015, up 22.8% from December 31, 2014.

Total assets increased 2.3% to $14.28 billion at December 31, 2015, from $13.96 billion at September 30, 2015, and increased 34.7% from $10.60 billion at December 31, 2014. The increase in total assets from the prior year relates primarily to the Bridge acquisition, which increased total assets by $2.23 billion and organic loan growth during the year of $1.30 billion.

Asset Quality

The provision for credit losses was $2.5 million for the fourth quarter 2015, compared to zero for the third quarter 2015, and $0.3 million for the fourth quarter 2014. Net loan charge-offs in the fourth quarter 2015 were $0.5 million, or 0.02% of average loans (annualized), compared to net loan recoveries of $2.0 million, or 0.08%, in the third quarter 2015, and $0.8 million, or 0.04%, for the fourth quarter 2014.

Nonaccrual loans increased $0.7 million to $48.4 million during the quarter. Loans past due 90 days and still accruing interest totaled $3.0 million at December 31, 2015, compared to $5.6 million at September 30, 2015, and $5.1 million at December 31, 2014. Loans past due 30-89 days and still accruing interest totaled $34.5 million at quarter end, an increase from $19.6 million at September 30, 2015, and an increase from $9.8 million at December 31, 2014.

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 15.9% at December 31, 2015, from 17.2% at September 30, 2015, and from 20.2% at December 31, 2014.1

Segment Highlights

The Company's reportable segments are aggregated primarily based on geographic location, services offered, and markets served. As a result of the acquisition of Bridge on June 30, 2015, former Bridge activities were allocated between the newly formed Northern California segment and the Central Business Lines ("CBL") segment. As a substantial portion of Bridge's balance sheet is generated from nationally-focused business lines, the operations of these business lines are included in the CBL segment. Substantially all of the remaining assets and liabilities are included in the Northern California segment. The Southern California segment represents legacy Western Alliance operations in California, excluding two branches located in northern California, which are now included in the Northern California segment.

The Arizona, Nevada, Southern California, and Northern California segments provide full service banking and related services to their respective markets. The Company's CBL segment provides specialized banking services to niche markets and, as of June 30, 2015, includes the operations of Bridge. These CBLs 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 CBL segments include loan and deposit growth, asset quality, and pre-tax income.

Arizona reported a gross loan balance of $2.81 billion at December 31, 2015, an increase of $106 million during the quarter, and an increase of $470 million during the last 12 months. Deposits were $2.88 billion at December 31, 2015, an increase of $417 million during the quarter, and an increase of $703 million during the last 12 months. Pre-tax income was $20.8 million and $14.1 million for the three months ended December 31, 2015 and 2014, respectively, and $71.1 million and $58.8 million for the years ended December 31, 2015 and 2014, respectively.

Nevada reported a gross loan balance of $1.74 billion at December 31, 2015, a decrease of $42 million during the quarter, and an increase of $69 million during the last 12 months. Deposits were $3.38 billion at December 31, 2015, an increase of $53 million during the quarter, and an increase of $152 million during the last 12 months. Pre-tax income was $21.6 million and $18.9 million for the three months ended December 31, 2015 and 2014, respectively, and $78.6 million and $74.3 million for the years ended December 31, 2015 and 2014, respectively.

Southern California reported a gross loan balance of $1.76 billion at December 31, 2015, an increase of $54 million during the quarter, and an increase of $209 million during the last 12 months. Deposits were $1.90 billion at December 31, 2015, a decrease of $36 million during the quarter, and an increase of $158 million during the last 12 months. Pre-tax income was $12.0 million and $13.1 million for the three months ended December 31, 2015 and 2014, respectively, and $49.6 million and $46.9 million for the years ended December 31, 2015 and 2014, respectively.

Northern California reported a gross loan balance of $1.19 billion at December 31, 2015, an increase of $23 million during the quarter, and an increase of $990 million during the last 12 months. Deposits were $1.54 billion at December 31, 2015, an increase of $71 million during the quarter, and an increase of $957 million during the last 12 months. Results of operations for Northern California include the Company's two previously existing northern California branch operations and the results of operations of Bridge (excluding certain business lines reflected in the CBL segment) beginning on July 1, 2015. Pre-tax income was $10.8 million and $1.4 million for the three months ended December 31, 2015 and 2014, respectively, and $28.7 million and $5.5 million for the years ended December 31, 2015 and 2014, respectively.

CBL reported a gross loan balance of $3.60 billion at December 31, 2015, an increase of $208 million from the prior quarter, and an increase of $1.01 billion during the last 12 months. Deposits were $2.13 billion at December 31, 2015, an increase of $104 million during the quarter, and an increase of $1.19 billion during the last 12 months. Pre-tax income was $25.1 million and $11.9 million for the three months ended December 31, 2015 and 2014, respectively, and $78.6 million and $33.6 million for the years ended December 31, 2015 and 2014, respectively.

Acquisition of Bridge Capital Holdings

The balance sheet of Bridge was consolidated into the Company on June 30, 2015 and the results of Bridge's operations are reflected in the Company's results beginning on July 1, 2015. Goodwill related to the acquisition of Bridge totaled $266.4 million as of December 31, 2015, inclusive of a $6.8 million increase for measurement period adjustments since June 30, 2015. The estimated fair values of certain net assets are still preliminary and are subject to additional measurement period adjustments.

Early Adoption of Accounting Standards

Effective as of the first quarter 2015, the Company elected early adoption of an element of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, related to the accounting for changes in the fair value of a liability when the fair value option for financial instruments has been elected. Under this portion of this amended standard, the portion of the total change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value is presented separately in other comprehensive income rather than being recognized in the income statement at each reporting period. The amendments in this Update are applied through a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. See the supplemental schedule at the end of this press release for additional detail on the impact that adoption of this standard has had on prior period financial information.

Effective as of the third quarter 2015, the Company elected early adoption of ASU 2015-16, related to the accounting for measurement period adjustments resulting from business combinations. Under the amended standard, adjustments to provisional amounts that are identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined rather than retrospectively adjusting the provisional amounts at the acquisition date and revising comparative information for prior periods presented in the financial statements. Accordingly, all measurement period adjustments identified during the quarter have been recognized in the current reporting period.

Attached to this press release is summarized financial information for the quarter ended December 31, 2015.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its fourth quarter 2015 financial results at 12:00 p.m. ET on Friday, January 22, 2016. Participants may access the call by dialing 1-888-317-6003 and using passcode 3254694 or via live audio webcast using the website link http://services.choruscall.com/links/wal160122. 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 January 22nd through 9:00 a.m. ET February 22nd by dialing 1-877-344-7529 passcode: 10078440.

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 accounting principles generally accepted in the United States (“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.

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 Bridge Capital Holdings, the performance of the combined company following the acquisition of Bridge, and any 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, 2014 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; 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 $14 billion in assets, top-performing Western Alliance Bancorporation (NYSE:WAL) is one of the fastest-growing bank holding companies in the U.S. Its primary subsidiary, Western Alliance Bank, is the go-to bank for business and succeeds with local teams of experienced bankers who deliver superior service and a full spectrum of deposit, lending, treasury management, international banking and online banking products and services. Western Alliance Bank operates full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank. The bank also serves business customers through a robust national platform of specialized financial services including Corporate Finance, Equity Fund Resources, Life Sciences Group, Mortgage Warehouse Lending, Public Finance, Renewable Energy Group, Resort Finance, Technology Finance and Alliance Association Bank. For more information visit westernalliancebancorporation.com.

1 See Reconciliation of Non-GAAP Financial Measures.

Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
           
 
Selected Balance Sheet Data:
December 31,    
2015 2014 Change %  
(in millions)
Total assets $ 14,275.1 $ 10,600.5 34.7 %
Total loans, net of deferred fees 11,136.7 8,398.3 32.6
Securities and money market investments 2,042.2 1,547.8 31.9
Total deposits 12,030.6 8,931.0 34.7
Borrowings 150.0 390.3 (61.6 )
Qualifying debt 210.3 40.4 NM
Stockholders' equity 1,591.5 1,000.9 59.0
Tangible common equity, net of tax (1) 1,292.2 905.5 42.7
 
Selected Income Statement Data:
For the Three Months Ended December 31,   For the Year Ended December 31,
2015 2014 Change %   2015 2014 Change %
(in thousands) (in thousands)
Interest income $ 151,331 $ 110,151 37.4 % $ 525,144 $ 416,379 26.1 %
Interest expense 7,988   8,006   (0.2 ) 32,568   31,486   3.4
Net interest income 143,343 102,145 40.3 492,576 384,893 28.0
Provision for credit losses 2,500   300   NM 3,200   4,726   (32.3 )
Net interest income after provision for credit losses 140,843 101,845 38.3 489,376 380,167 28.7
Non-interest income 9,479 8,417 12.6 29,768 24,651 20.8
Non-interest expense 72,448   55,742   30.0 260,606   207,319   25.7
Income from continuing operations before income taxes 77,874 54,520 42.8 258,538 197,499 30.9
Income tax expense 19,348   14,111   37.1 64,294   48,390   32.9
Income from continuing operations 58,526 40,409 44.8 194,244 149,109 30.3
Loss on discontinued operations, net of tax       (1,158 ) (100.0 )
Net income $ 58,526   $ 40,409   44.8 $ 194,244   $ 147,951   31.3
Diluted earnings per share from continuing operations $ 0.57   $ 0.46   23.9 $ 2.03   $ 1.69   20.1
Diluted loss per share from discontinued operations       (0.02 )
Diluted earnings per share available to common stockholders $ 0.57   $ 0.46   23.9 $ 2.03   $ 1.67   21.6
 
 
(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 December 31, For the Year Ended December 31,
2015 2014 Change % 2015 2014 Change %
Diluted earnings per share available to common stockholders $ 0.57 $ 0.46 23.9 % $ 2.03 $ 1.67 21.6 %
Book value per common share $ 15.44 $ 10.49 47.2
Tangible book value per share, net of tax (1) $ 12.54 $ 10.21 22.8
Average shares outstanding (in thousands):
Basic 101,174 87,279 15.9 94,570 86,693 9.1 %
Diluted 102,006 87,987 15.9 95,219 87,506 8.8
Common shares outstanding 103,087 88,691 16.2
 

Selected Performance Ratios:

Return on average assets (2) 1.67 % 1.56 % 7.1 % 1.56 % 1.50 % 4.0 %
Return on average tangible common equity (1, 2) 18.64 18.15 2.7 17.83 18.52 (3.7 )
Net interest margin (2) 4.67 4.44 5.2 4.51 4.42 2.0
Net interest spread 4.52 4.31 4.9 4.36 4.29 1.6
Efficiency ratio - tax equivalent basis (1) 45.19 49.29 (8.3 ) 45.85 49.11 (6.6 )
Loan to deposit ratio 92.57 94.04 (1.6 )
 
Asset Quality Ratios:
Net charge-offs (recoveries) to average loans outstanding (2) 0.02 % (0.04 )% (150.0 )% (0.06 )% (0.07 )% (14.3 )%
Nonaccrual loans to gross loans 0.44 0.81 (45.7 )
Nonaccrual loans and repossessed assets to total assets 0.65 1.18 (44.9 )
Loans past due 90 days and still accruing to total loans 0.03 0.06 (50.0 )
Allowance for credit losses to gross loans 1.07 1.31 (18.3 )
Allowance for credit losses to nonaccrual loans 246.10 162.90 51.1
   
Capital Ratios (1):
Basel III Basel I
December 31, 2015 September 30, 2015 December 31, 2014
Tangible common equity 9.2 % 8.9 % 8.6 %
Common Equity Tier 1 (3) 9.5 9.1 9.3
Tier 1 Leverage ratio (3) 9.8 9.9 9.7
Tier 1 Capital (3) 10.1 10.1 10.5
Total Capital (3) 12.1 12.1 11.7
 
(1)   See Reconciliation of Non-GAAP Financial Measures.
(2) Annualized for the three month periods ended December 31, 2015 and 2014.
(3) Capital ratios for December 31, 2015 are preliminary until the Call Report is filed.
       
Western Alliance Bancorporation and Subsidiaries
Condensed Consolidated Income Statements
Unaudited
Three Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014
(dollars in thousands)
Interest income:
Loans $ 137,471 $ 99,099 $ 476,417 $ 370,922
Investment securities 12,454 10,455 43,557 43,209
Other 1,406   597   5,170   2,248  
Total interest income 151,331   110,151   525,144   416,379  
Interest expense:
Deposits 5,737 5,245 21,795 20,012
Borrowings 144 2,314 5,766 9,720
Qualifying debt 2,107   447   5,007   1,754  
Total interest expense 7,988   8,006   32,568   31,486  
Net interest income 143,343 102,145 492,576 384,893
Provision for credit losses 2,500   300   3,200   4,726  
Net interest income after provision for credit losses 140,843   101,845   489,376   380,167  
Non-interest income:
Service charges 4,295 2,791 14,639 10,567
Bank owned life insurance 1,166 1,464 3,899 4,508
Lending related fees 1,097 6 1,948 71
Gains on sales of investment securities, net 33 373 615 757
Unrealized gains on assets and liabilities measured at fair value, net 10 1,357 47 1,212
Loss on extinguishment of debt (81 ) (502 )
Other 2,878   2,426   8,701   8,038  
Total non-interest income 9,479   8,417   29,768   24,651  
Non-interest expenses:
Salaries and employee benefits 41,221 33,094 149,828 126,630
Occupancy 6,503 4,698 22,180 18,155
Legal, professional and directors' fees 5,890 3,425 18,548 14,278
Data processing 4,629 2,345 14,776 10,057
Insurance 3,264 2,386 11,003 8,862
Loan and repossessed asset expenses 904 1,486 4,377 4,423
Card expense 920 678 2,764 2,417
Marketing 1,298 857 2,885 2,300
Intangible amortization 704 281 1,970 1,461
Net (gain) loss on sales and valuations of repossessed and other assets (397 ) (1,102 ) (2,070 ) (5,350 )
Acquisition / restructure expense 8,836 198
Other 7,512   7,594   25,509   23,888  
Total non-interest expense 72,448   55,742   260,606   207,319  
Income from continuing operations before income taxes 77,874 54,520 258,538 197,499
Income tax expense 19,348   14,111   64,294   48,390  
Income from continuing operations $ 58,526 $ 40,409 $ 194,244 $ 149,109
Loss from discontinued operations, net of tax       (1,158 )
Net income $ 58,526   $ 40,409   $ 194,244   $ 147,951  
Preferred stock dividends 151   329   750   1,387  
Net income available to common stockholders $ 58,375   $ 40,080   $ 193,494   $ 146,564  
Diluted net income per share $ 0.57   $ 0.46   $ 2.03   $ 1.67  
 
         
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited
Three Months Ended
Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014
(in thousands, except per share data)
Interest income:
Loans $ 137,471 $ 133,087 $ 105,468 $ 100,391 $ 99,099
Investment securities 12,454 12,039 9,276 9,788 10,455
Other 1,406   1,107   1,874   783   597  
Total interest income 151,331   146,233   116,618   110,962   110,151  
Interest expense:
Deposits 5,737 5,550 5,362 5,146 5,245
Borrowings 144 1,268 2,087 2,267 2,314
Qualifying debt 2,107   2,008   451   441   447  
Total interest expense 7,988   8,826   7,900   7,854   8,006  
Net interest income 143,343 137,407 108,718 103,108 102,145
Provision for credit losses 2,500       700   300  
Net interest income after provision for credit losses 140,843   137,407   108,718   102,408   101,845  
Non-interest income:
Service charges 4,295 4,327 3,128 2,889 2,791
Bank owned life insurance 1,166 984 772 977 1,464
Lending related fees 1,097 532 118 201 6
Gains (losses) on sales of investment securities, net 33 (62 ) 55 589 373
Unrealized gains (losses) on assets and liabilities measured at fair value, net 10 47 (10 ) 1,357
Loss on extinguishment of debt (81 )
Other 2,878   2,674   1,563   1,586   2,426  
Total non-interest income 9,479   8,502   5,545   6,242   8,417  
Non-interest expenses:
Salaries and employee benefits 41,221 43,660 32,406 32,541 33,094
Occupancy 6,503 5,915 4,949 4,813 4,698
Legal, professional, and directors' fees 5,890 4,052 4,611 3,995 3,425
Data processing 4,629 4,338 2,683 3,126 2,345
Insurance 3,264 3,375 2,274 2,090 2,386
Loan and repossessed asset expenses 904 1,099 1,284 1,090 1,486
Card expense 920 757 613 474 678
Marketing 1,298 747 463 377 857
Intangible amortization 704 704 281 281 281
Net (gain) loss on sales and valuations of repossessed and other assets (397 ) (104 ) (1,218 ) (351 ) (1,102 )
Acquisition / restructure expense 835 7,842 159
Other 7,512   7,538   5,021   5,438   7,594  
Total non-interest expense 72,448   72,916   61,209   54,033   55,742  
Income from continuing operations before income taxes 77,874 72,993 53,054 54,617 54,520
Income tax expense 19,348   17,133   13,579   14,234   14,111  
Net income $ 58,526   $ 55,860   $ 39,475   $ 40,383   $ 40,409  
Preferred stock dividends 151   176   247   176   329  
Net Income available to common stockholders $ 58,375   $ 55,684   $ 39,228   $ 40,207   $ 40,080  
Diluted net income per share $ 0.57   $ 0.55   $ 0.44   $ 0.45   $ 0.46  
 
         
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014
(in millions)
Assets:
Cash and due from banks $ 224.6 $ 325.4 $ 700.2 $ 492.4 $ 164.4
Securities purchased under agreement to resell     58.1      
Cash and cash equivalents 224.6 325.4 758.3 492.4 164.4
Securities and money market investments 2,042.2 1,993.6 1,531.9 1,453.7 1,547.8
Loans held for sale 23.8 24.4 39.4
Loans held for investment:
Commercial 5,262.8 4,960.4 4,759.7 3,725.2 3,532.3
Commercial real estate - non-owner occupied 2,283.5 2,210.7 2,195.0 2,113.8 2,052.6
Commercial real estate - owner occupied 2,083.3 2,123.6 2,019.3 1,818.0 1,732.9
Construction and land development 1,133.4 1,121.9 1,002.7 842.9 748.1
Residential real estate 323.0 320.7 320.6 292.2 299.4
Consumer 26.9   26.6   24.0   26.5   33.0  
Gross loans and deferred fees, net 11,112.9 10,763.9 10,321.3 8,818.6 8,398.3
Allowance for credit losses (119.1 ) (117.1 ) (115.1 ) (112.1 ) (110.2 )
Loans, net 10,993.8   10,646.8   10,206.2   8,706.5   8,288.1  
Premises and equipment, net 118.5 121.7 116.0 114.3 113.8
Other assets acquired through foreclosure, net 43.9 57.7 59.3 63.8 57.1
Bank owned life insurance 162.5 161.7 161.1 142.9 142.0
Goodwill and other intangibles, net 305.4 305.8 300.0 25.6 25.9
Other assets 360.4   318.4   297.9   252.7   261.4  
Total assets $ 14,275.1   $ 13,955.5   $ 13,470.1   $ 11,251.9   $ 10,600.5  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits
Non-interest bearing demand deposits $ 4,094.0 $ 4,077.5 $ 3,924.4 $ 2,657.4 $ 2,288.0
Interest bearing:
Demand 1,028.1 1,024.5 1,001.3 936.5 854.9
Savings and money market 5,296.9 4,672.6 4,733.9 4,121.0 3,869.7
Time certificates 1,611.6   1,835.8   1,747.1   1,947.4   1,918.4  
Total deposits 12,030.6 11,610.4 11,406.7 9,662.3 8,931.0
Customer repurchase agreements 38.2   53.2   42.2   47.2   54.9  
Total customer funds 12,068.8 11,663.6 11,448.9 9,709.5 8,985.9
Securities sold short 57.6
Borrowings 150.0 300.0 69.5 275.2 390.3
Qualifying debt 210.3 206.8 208.4 40.7 40.4
Accrued interest payable and other liabilities 254.5   201.4   171.0   175.2   183.0  
Total liabilities 12,683.6   12,371.8   11,955.4   10,200.6   9,599.6  
Stockholders' Equity:
Preferred stock 70.5 70.5 70.5 70.5
Common stock and additional paid-in capital 1,306.6 1,273.7 1,269.0 831.9 828.3
Retained earnings 262.6 204.2 148.5 109.4 85.5
Accumulated other comprehensive income 22.3   35.3   26.7   39.5   16.6  
Total stockholders' equity 1,591.5   1,583.7   1,514.7   1,051.3   1,000.9  
 
Total liabilities and stockholders' equity $ 14,275.1   $ 13,955.5   $ 13,470.1   $ 11,251.9   $ 10,600.5  
 
         
Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses
Unaudited
Three Months Ended
Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014
(in thousands)
Balance, beginning of period $ 117,072 $ 115,056 $ 112,098 $ 110,216 $ 109,161
Provision for credit losses 2,500 700 300
Recoveries of loans previously charged-off:
Commercial and industrial 1,009 1,147 681 916 1,499
Commercial real estate - non-owner occupied 482 968 335 277 229
Commercial real estate - owner occupied 135 433 1,403 106 43
Construction and land development 13 329 1,373 157 1,268
Residential real estate 232 232 1,184 533 261
Consumer 115   24   24   40   64  
Total recoveries 1,986 3,133 5,000 2,029 3,364
Loans charged-off:
Commercial and industrial 2,277 1,109 1,771 393 1,743
Commercial real estate - non-owner occupied
Commercial real estate - owner occupied 270
Construction and land development 8
Residential real estate 194 8 218 400 377
Consumer 19     53   54   211  
Total loans charged-off 2,490 1,117 2,042 847 2,609
Net loan charge-offs (recoveries) 504   (2,016 ) (2,958 ) (1,182 ) (755 )
Balance, end of period $ 119,068   $ 117,072   $ 115,056   $ 112,098   $ 110,216  
 
Net charge-offs (recoveries) to average loans outstanding - annualized 0.02 % (0.08 )% (0.13 )% (0.06 )% (0.04 )%
Allowance for credit losses to gross loans 1.07 1.09 1.11 1.27 1.31
Nonaccrual loans $ 48,381 $ 47,692 $ 59,425 $ 60,742 $ 67,659
Repossessed assets 43,942 57,719 59,335 63,759 57,150
Loans past due 90 days, still accruing 3,028 5,550 8,284 3,730 5,132
Loans past due 30 to 89 days, still accruing 34,541 19,630 4,006 14,137 9,804
Classified loans on accrual 118,635 108,341 101,165 76,090 90,393
Special mention loans 141,819 153,431 132,313 100,345 97,504
 
         
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
  Three Months Ended December 31,
2015 2014

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) $ 10,757.3 $ 137,471 5.35 % $ 7,997.5 $ 99,099 5.20 %
Securities (1) 1,930.1 12,454 2.98 1,574.7 10,455 3.07
Other 313.6   1,406   1.79   217.2   597   1.10  
Total interest earning assets 13,001.0 151,331 4.92 9,789.4 110,151 4.77
Non-interest earning assets
Cash and due from banks 155.7 121.3
Allowance for credit losses (118.0 ) (111.1 )
Bank owned life insurance 162.0 142.1
Other assets 809.1   450.8  
Total assets $ 14,009.8   $ 10,392.5  
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 1,037.6 $ 480 0.19 % $ 805.0 $ 354 0.18 %
Savings and money market 5,014.1 3,548 0.28 3,767.7 2,789 0.30
Time certificates of deposit 1,701.9   1,709   0.40   1,945.9   2,102   0.43  
Total interest-bearing deposits 7,753.6 5,737 0.30 6,518.6 5,245 0.32
Short-term borrowings 103.1 144 0.56 170.3 1,772 4.16
Long-term debt 210.1 542 1.03
Qualifying debt 195.9   2,107   4.30   41.8   447   4.28  
Total interest-bearing liabilities 8,052.6 7,988 0.40 6,940.8 8,006 0.46
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 4,127.9 2,270.4
Other liabilities 208.5 133.6
Stockholders’ equity 1,620.8   1,047.7  
Total liabilities and stockholders' equity $ 14,009.8   $ 10,392.5  
Net interest income and margin $ 143,343   4.67 % $ 102,145   4.44 %
Net interest spread 4.52 % 4.31 %
 
(1)   Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $8,433 and $6,489 for the three months ended December 31, 2015 and 2014, respectively.
         
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
  Year Ended December 31,
2015 2014

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) $ 9,674.2 $ 476,417 5.18 % $ 7,432.1 $ 370,922 5.23 %
Securities (1) 1,675.8 43,557 3.02 1,607.7 43,209 3.10
Other 272.0   5,170   1.90   230.7   2,248   0.97  
Total interest earnings assets 11,622.0 525,144 4.79 9,270.5 416,379 4.76
Non-interest earning assets
Cash and due from banks 137.9 133.7
Allowance for credit losses (115.0 ) (106.1 )
Bank owned life insurance 152.3 141.9
Other assets 623.6   451.1  
Total assets $ 12,420.8   $ 9,891.1  
Interest-bearing liabilities
Interest-bearing deposits:
Interest bearing transaction accounts $ 983.9 $ 1,736 0.18 % $ 793.1 $ 1,522 0.19 %
Savings and money market 4,470.2 12,544 0.28 3,616.8 10,852 0.30
Time certificates of deposits 1,808.1   7,515   0.42   1,758.3   7,638   0.43  
Total interest-bearing deposits 7,262.2 21,795 0.30 6,168.2 20,012 0.32
Short-term borrowings 185.2 4,965 2.68 173.2 2,336 1.35
Long-term debt 76.6 801 1.05 265.8 7,384 2.78
Qualifying debt 120.2   5,007   4.17   42.3   1,754   4.15  
Total interest-bearing liabilities 7,644.2 32,568 0.43 6,649.5 31,486 0.47
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 3,273.1 2,153.7
Other liabilities 179.5 123.8
Stockholders’ equity 1,324.0   964.1  
Total liabilities and stockholders' equity $ 12,420.8   $ 9,891.1  
Net interest income and margin $ 492,576   4.51 % $ 384,893   4.42 %
Net interest spread 4.36 % 4.29 %
 
(1)   Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $31,883 and $24,571 for the years ended December 31, 2015 and 2014, respectively.
           
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
 
Balance Sheets:
Arizona Nevada

Southern
California

Northern
California

Central
Business
Lines

Corporate
& Other

Consolidated
Company

At December 31, 2015

(dollars in millions)

Assets:
Cash, cash equivalents, and investment securities $ 2.3 $ 9.5 $ 2.4 $ 2.4 $ $ 2,250.2 $ 2,266.8
Loans, net of deferred loan fees and costs 2,811.7 1,737.2 1,761.9 1,188.4 3,597.9 39.6 11,136.7
Less: allowance for credit losses (30.1 ) (18.6 ) (18.8 ) (12.7 ) (38.5 ) (0.4 ) (119.1 )
Total loans 2,781.6   1,718.6   1,743.1   1,175.7   3,559.4   39.2   11,017.6  
Other assets acquired through foreclosure, net 8.4 20.8 0.3 14.4 43.9
Goodwill and other intangible assets, net 24.8 158.2 122.4 305.4
Other assets 43.9   62.3   15.7   16.1   28.4   475.0   641.4  
Total assets $ 2,836.2   $ 1,836.0   $ 1,761.2   $ 1,352.7   $ 3,710.2   $ 2,778.8   $ 14,275.1  
Liabilities:
Deposits $ 2,880.7 $ 3,382.8 $ 1,902.5 $ 1,541.1 $ 2,134.4 $ 189.1 $ 12,030.6
Borrowings and qualifying debt 360.3 360.3
Other liabilities 12.2   29.0   7.8   11.2   105.1   127.4   292.7  
Total liabilities 2,892.9   3,411.8   1,910.3   1,552.3   2,239.5   676.8   12,683.6  
Allocated equity: 309.2   244.4   191.3   293.2   428.6   124.8   1,591.5  
Total liabilities and stockholders' equity $ 3,202.1   $ 3,656.2   $ 2,101.6   $ 1,845.5   $ 2,668.1   $ 801.6   $ 14,275.1  
Excess funds provided (used) 365.9 1,820.2 340.4 492.8 (1,042.1 ) (1,977.2 )
 
No. of offices 11 18 9 2 7 47
No. of full-time equivalent employees 180 228 161 171 123 583 1,446
 
At December 31, 2014
Assets:
Cash, cash equivalents, and investment securities $ 2.3 $ 5.0 $ 2.2 $ 0.3 $ $ 1,702.4 $ 1,712.2
Loans, net of deferred loan fees and costs 2,341.9 1,668.7 1,553.1 198.6 2,590.0 46.0 8,398.3
Less: allowance for credit losses (30.7 ) (21.9 ) (17.9 ) (5.1 ) (34.0 ) (0.6 ) (110.2 )
Total loans 2,311.2   1,646.8   1,535.2   193.5   2,556.0   45.4   8,288.1  
Other assets acquired through foreclosure, net 15.5 21.0 20.6 57.1
Goodwill and other intangible assets, net 25.9 25.9
Other assets 34.8   64.2   6.2   15.3   22.9   373.8   517.2  
Total assets $ 2,363.8   $ 1,762.9   $ 1,543.6   $ 209.1   $ 2,578.9   $ 2,142.2   $ 10,600.5  
Liabilities:
Deposits $ 2,178.0 $ 3,230.6 $ 1,744.5 $ 584.0 $ 946.6 $ 247.3 $ 8,931.0
Other borrowings 390.3 390.3
Other liabilities 17.4   40.8   8.9   0.2   72.4   138.6   278.3  
Total liabilities 2,195.4   3,271.4   1,753.4   584.2   1,019.0   776.2   9,599.6  
Allocated equity: 250.8   209.0   70.9   126.8   232.9   110.5   1,000.9  
Total liabilities and stockholders' equity $ 2,446.2   $ 3,480.4   $ 1,824.3   $ 711.0   $ 1,251.9   $ 886.7   $ 10,600.5  
Excess funds provided (used) 82.4 1,717.5 280.7 501.9 (1,327.0 ) (1,255.5 )
 
No. of offices 11 18 9 2 40
No. of full-time equivalent employees 215 295 198 29 99 295 1,131
 
           
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited