Western Alliance Reports Second Quarter 2013 Net Income of $34.0 Million, or $0.39 Per Share

Western Alliance Reports Second Quarter 2013 Net Income of $34.0 Million, or $0.39 Per Share

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

Second Quarter 2013 Highlights:

  • Net income of $34.0 million, compared to $21.0 million for the first quarter 2013 and $14.0 million for the second quarter 2012
  • Net income of $27.7 million for the second quarter 2013, excluding a $10.0 million bargain purchase gain from the acquisition of Centennial Bank, a $3.3 million trust preferred fair value revaluation charge, and a $1.1 million gain on OREO valuation (excluding tax effects)
  • Earnings per share of $0.39, compared to $0.24 per share in the first quarter 2013 and $0.15 per share in the second quarter 2012
  • Earnings per share of $0.30 for the second quarter 2013, excluding $0.10 per share bargain purchase gain from the acquisition of Centennial Bank, $0.02 trust preferred valuation charge, and $0.01 OREO valuation gain
  • Pre-tax, pre-provision operating earnings of $40.1 million, up 14.4% from $35.1 million in first quarter 2013 and from $32.1 million in second quarter 20121
  • Net interest margin of 4.36%, compared to 4.36% in the first quarter 2013 and 4.46% in the second quarter 2012
  • Total loans of $6.41 billion, up $556 million from March 31, 2013, and up $1.25 billion from June 30, 2012, including $343 million increase from the acquisition of Centennial Bank, which closed on April 30, 2013
  • Total deposits of $7.00 billion, up $266 million from March 31, 2013 and up $1.00 billion from June 30, 2012, including $298 million increase from the acquisition of Centennial Bank, which closed on April 30, 2013
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.9% of total assets from 2.1% in first quarter 2013 and from 2.5% in second quarter 2012
  • Net loan charge-offs (annualized) to average loans outstanding decreased to 0.17% from 0.38% in the first quarter 2013 and 1.11% in the second quarter 2012
  • Tier I Leverage capital of 9.9% and Total Risk-Based Capital ratio of 12.0%, compared to 9.7% and 12.3% a year ago
  • Total equity of $800 million, up $128 million from June 30, 2012

Financial Performance

"Our proven business model of exceptional client service, strong credit underwriting, and striving for continued performance improvement has driven our record earnings for the second quarter," said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. "On the revenue side, strong loan growth and disciplined pricing led to record net interest income. Meanwhile, effective cost control and leveraging our infrastructure resulted in improved operating efficiency, as deposits per branch rose over 10% during the past year to $171 million. The acquisition of Centennial Bank augmented our results with a bargain purchase gain and higher earning assets. Continued collection activities and economic recovery resulted in a gain on sale of real estate owned and a lower credit provision as non-performing loans and repossessed assets fell to under 2%. We also invested in our future by recruiting new members to our team and, on July 1st, opened our 42nd office to more effectively serve the vibrant Scottsdale Airpark market."

Western Alliance Bancorporation reported net income of $34.0 million, or $0.39 per share, in the second quarter 2013 (includes an $8.5 million gain from the acquisition of Centennial Bank, net of merger related expenses and tax), more than double the $14.0 million, or $0.15 per share, earned one year ago. Key performance improvement drivers include sustained organic balance sheet growth, prudent expense management, and reduced legacy asset costs against the backdrop of improved economic conditions.

Total loans increased $556 million to $6.41 billion at June 30, 2013 from $5.86 billion on March 31, 2013. Loans increased $1.25 billion, or 24.1%, from June 30, 2012. The increases in each of these periods were primarily driven by growth in commercial and industrial loans and commercial real estate loans.

Total deposits increased $266 million to $7.00 billion at June 30, 2013 from $6.73 billion at March 31, 2013. Deposits increased $1.00 billion from June 30, 2012. The increases in each of these periods were primarily due to growth in certificates of deposits and savings and money market deposits.

Income Statement

Net interest income was $82.2 million in the second quarter 2013, an increase of $6.0 million, or 7.8%, from $76.2 million in the first quarter of 2013 and an increase of $11.3 million, or 16.0%, compared to the second quarter 2012. The Company's net interest margin remained flat in the second quarter 2013 at 4.36% compared to the first quarter 2013 and decreased from 4.46% in the second quarter 2012.

Operating non-interest income was $5.0 million for the second quarter 2013, down from $5.1 million in the first quarter of 2013 and down from $5.8 million for the second quarter of 2012.1

Net revenue was $87.2 million for the second quarter 2013, up from $81.3 million for the first quarter of 2013 and an increase of 13.8% from $76.6 million for the second quarter 2012.1

Operating non-interest expense was $47.0 million for the second quarter 2013, compared to $46.2 million for the first quarter of 2013 and $44.5 million for the second quarter of 2012.1 The Company's operating efficiency ratio1 on a tax equivalent basis was 52.2% for the second quarter 2013, an improvement from 54.6% for the first quarter 2013 and 56.4% for the second quarter 2012 as the growth rate in revenue continued to outpace that of expense.

The Company had 1,015 full-time equivalent employees and 41 offices at June 30, 2013, compared to 953 employees and 39 offices one year ago.

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 second quarter 2013, the Company's performance was $40.1 million, up from $35.1 million in the first quarter 2013 and up 25.2% from $32.1 million in the second quarter 2012.

The provision for credit losses was $3.5 million for the second quarter 2013, compared to $5.4 million for the first quarter 2013. The provision for the second quarter of 2012 was $13.3 million. Net loan charge-offs in the second quarter 2013 were $2.7 million, or 0.17% of average loans (annualized), down from 0.38% of average loans (annualized) for the first quarter 2013. Net charge-offs for the second quarter 2012 were $13.9 million or 1.11% of average loans (annualized).

Nonaccrual loans decreased $11 million to $83 million during the quarter. Loans past due 90 days and still accruing interest totaled $793 thousand at June 30, 2013, compared to $2 million at March 31, 2013 and $795 thousand at June 30, 2012. Loans past due 30-89 days, still accruing interest totaled $7 million at quarter end, down from $15 million at March 31, 2013 and down from $14 million at June 30, 2012.

As the Company's asset quality improved and its capital increased, the ratio of classified assets to Tier I capital plus the allowance for credit losses, a common regulatory measure of asset quality, improved to 32% at June 30, 2013 from 42% at June 30, 2012.1

Net gain on sales and valuation of repossessed assets (primarily other real estate) was $1.1 million for the second quarter 2013 compared to a $0.5 million loss from the first quarter 2013 and a $0.9 million loss in the second quarter 2012. At June 30, 2013, other repossessed assets totaled $76.5 million compared to $77.9 million at March 31, 2013 and $77.0 million one year ago. During the second quarter 2013, the Company's net sales proceeds received from other repossessed real estate dispositions was 116.9% of carrying value.

During the quarter, the Company completed its acquisition of Centennial Bank, which increased assets, loans and deposits at June 30, 2013 by $403 million, $343 million and $298 million, respectively, and recorded a net acquisition gain of $8.5 million. Pursuant to the accounting guidance, acquired net assets are recorded at estimated fair value. The estimated fair value of certain net assets are preliminary and subject to measurement period adjustments.

Balance Sheet

Gross loans totaled $6.41 billion at June 30, 2013, an increase of $556 million from March 31, 2013 and an increase of $1.25 billion from $5.16 billion at June 30, 2012. At June 30, 2013, the allowance for credit losses was 1.50% of total loans, which has declined from 1.63% at March 31, 2013 and 1.89% at June 30, 2012, as the Company's asset quality has improved.

Deposits totaled $7.00 billion at June 30, 2013, an increase of $266 million from $6.73 billion at March 31, 2013 and an increase of $1.00 billion from $6.00 billion at June 30, 2012. Non-interest bearing deposits were flat at $1.92 billion at June 30, 2013 compared to March 31, 2013 and increased $77 million from $1.84 billion at June 30, 2012. Non-interest bearing deposits comprised 27.4% of total deposits at June 30, 2013, compared to 30.7% a year ago, while the proportion from savings and money market increased to 42.1% from 40.6% during the same period. Certificates of deposit as a percent of total deposits were 21.5% at June 30, 2013. The Company's ratio of loans to deposits was 91.2% at June 30, 2013 compared to 86.9% at March 31, 2013 and 86.1% at June 30, 2012.

Stockholders' equity at June 30, 2013 increased to $800 million from $781 million at March 31, 2013. At June 30, 2013, tangible common equity was 7.4% of tangible assets1 and total risk-based capital was 12.0% of risk-weighted assets. The Company's tangible book value per share1 was $7.26 at June 30, 2013, up 20.8% during the past year.

Total assets increased to $8.59 billion at June 30, 2013 from $8.17 billion at March 31, 2013 and increased 20.0% from $7.16 billion at June 30, 2012.

Operating Unit Highlights

Western Alliance Bank (doing business as Alliance Bank of Arizona and First Independent Bank) reported loan growth of $339 million during the second quarter 2013 and $671 million during the last 12 months to $2.45 billion. Second quarter loan growth came primarily from the acquisition of Centennial Bank (which was merged into Western Alliance Bank). Deposits increased $208 million in the second quarter and $651 million during the last 12 months to $2.65 billion. Net income for Western Alliance Bank was $20.5 million during the second quarter 2013 compared with net income of $8.5 million during the first quarter of 2013 and net income of $7.8 million during the second quarter 2012.

Bank of Nevada, which was the recipient of net affiliate loan sales and participations, reported that loans increased by $115 million during the second quarter of 2013 and increased $414 million during the last 12 months to $2.42 billion at June 30, 2013. Second quarter loan growth came primarily from a rise in commercial real estate and construction and land development loans. Deposits increased by $13 million in the second quarter of 2013 and $189 million over the last twelve months to $2.62 billion. Net income for Bank of Nevada was $12.7 million for the second quarter 2013, compared with net income of $10.7 million for the first quarter of 2013 and net income of $3.8 million during the second quarter 2012.

The Torrey Pines Bank segment, which excludes the discontinued operations of PartnersFirst, reported that loans increased $92 million during the second quarter 2013 and increased $100 million during the last 12 months to $1.52 billion. Second quarter increases in loan balances were primarily attributable to an increase in commercial and industrial loans. Deposits increased $51 million in the second quarter 2013 and $157 million over the last 12 months to $1.75 billion. Net income for Torrey Pines Bank was $5.8 million during the second quarter 2013 compared with net income of $6.3 million for the first quarter of 2013 and net income of $5.3 million during the second quarter 2012.

Attached to this press release is summarized financial information for the quarter ended June 30, 2013.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its second quarter 2013 financial results at 12:00 p.m. ET on Friday, July 19, 2013. Participants may access the call by dialing 1-888-317-6003 and using passcode: 2074791 or via live audio webcast using the website link: https://services.choruscall.com/links/wal130719.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 July 19th through August 2nd at 9:00 a.m. ET by dialing 1-877-344-7529 using the conference number 10031032.

About Western Alliance Bancorporation

Western Alliance Bancorporation is the parent company of Bank of Nevada, Western Alliance Bank doing business as Alliance Bank of Arizona and First Independent Bank, and Torrey Pines Bank. These dynamic organizations provide a broad array of deposit and credit services to clients in Nevada, Arizona and California. Staffed with experienced financial professionals, these organizations deliver a broader product array and larger credit capacity than community banks, yet are empowered to be more responsive to customers' needs than larger institutions. Additional investor information can be accessed on the Investor Relations page of the Company's website, www.westernalliancebancorp.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include: factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2012 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.

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

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

1 See Reconciliation of Non-GAAP Financial Measures beginning on page 16

                         
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
  At or for the Three Months For the Six Months
Ended June 30, Ended June 30,
2013 2012

Change %

2013 2012 Change %
 
Selected Balance Sheet Data:
(dollars in millions)
Total assets $ 8,593.7 $ 7,163.6 20.0 %
Loans, net of deferred fees 6,411.5 5,164.8 24.1
Securities and money market investments 1,313.1 1,401.5 (6.3 )
Securities purchased under agreement to resell 134.0 - -
Total deposits 7,001.3 6,001.4 16.7
Borrowings 470.5 390.4 20.5
Junior subordinated debt 39.9 36.7 8.7
Stockholders' equity 799.5 672.1 19.0
 
Selected Income Statement Data:
(dollars in thousands)
Interest income $ 89,285 $ 77,846 14.7 % $ 172,393 $ 155,283 11.0 %
Interest expense   7,133     7,041   1.3   14,038     14,421   (2.7 )
Net interest income 82,152 70,805 16.0 158,355 140,862 12.4
Provision for loan losses   3,481     13,330   (73.9 )   8,920     26,411   (66.2 )
Net interest income after provision for credit losses 78,671 57,475 36.9 149,435 114,451 30.6
Non-interest income 10,862 7,397 46.8 14,761 13,281 11.1
Non-interest expense   48,531     45,431   6.8   95,460     92,328   3.4

Income from continuing operations, before income tax expense

41,002

19,441 110.9 68,736 35,404 94.1
Income tax expense   6,817     5,259   29.6   13,625     9,700   40.5
Income from continuing operations 34,185 14,182 141.0 55,111 25,704 114.4 %
Loss on discontinued operations, net   (169 )   (221 ) 23.5   (131 )   (443 )
Net income $ 34,016   $ 13,961   143.7 % $ 54,980   $ 25,261  

Diluted net income per common share from continuing operations

$ 0.39   $ 0.16   $ 0.63   $ 0.28  

Diluted net loss per common share from discontinued operations, net of tax

$ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
Diluted net income per common share $ 0.39   $ 0.15   160.0 % $ 0.63   $ 0.27   133.0 %
 
Common Share Data:
Diluted net income per common share $ 0.39 $ 0.15 160.0 % $ 0.63 $ 0.27 133.0 %
Book value per common share $ 7.57 $ 6.39 18.5 %
Tangible book value per share, net of tax (1) $ 7.26 $ 6.01 20.8 %
Average shares outstanding (in thousands):
Basic 85,659 81,590 5.0 85,493 81,475 4.9
Diluted 86,524 81,955 5.6 86,254 82,091 5.1
Common shares outstanding 86,997 83,157 4.6
 
(1) See Reconciliation of Non-GAAP Financial Measures
 
 

                         
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data (continued)
Unaudited

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