News Details

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. ETJanuary 22nd through 9:00 a.m. ETFebruary 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.