| FOR IMMEDIATE RELEASE | CONTACT: | Dale Gibbons |
| July 22, 2010 | | CFO |
| | | 702-252-6236 |
Western Alliance Reports Results for the Second Quarter 2010
| ● | Breakeven Performance, Improving Credit Trends |
| ● | Loan Growth: $71 million, Deposit Growth: $40 million |
Las Vegas – July 22, 2010 -- Western Alliance Bancorporation (NYSE:WAL) announced today its financial results for the second quarter 2010.
Second Quarter 2010 Highlights:
| ● | Pre-tax, pre-provision operating earnings rise 19.0% to $22.7 million compared to first quarter 20101 |
| ● | Record net interest income of $57.5 million, up 5% compared to prior quarter |
| ● | Net interest margin of 4.16% compared to 4.17% in first quarter |
| ● | Non-accrual loans and repossessed assets decline 6% to $239 million from the first quarter |
| ● | Classified assets and watch loans declined 9.6% and 13.9%, respectively, during the quarter |
| ● | Provision for credit losses declined to $23.1 million from $28.7 million for the first quarter |
| ● | Net loan charge-offs of $25.8 million, up slightly from $24.6 million for the first quarter |
| ● | Net income of $1.2 million, including net gains of $15.4 million, net loss on repossessed asset valuations/sales of $12 million, and loss on discontinued operations of $0.8 million |
| ● | Diluted net loss per common share of $0.02 compared to net loss of $0.03 for the first quarter of 2010 and $0.31 net loss for the second quarter 2009 |
| ● | Tangible common equity of $405 million, or 6.8% of tangible assets1 |
| ● | Tier I Leverage capital of 9.1% and Total Risk-Based Capital ratio of 13%, both significantly above “Well Capitalized” thresholds |
1 See Reconciliation of Non-GAAP Financial Measures beginning on page 16
Financial Performance
“The second quarter of 2010 continues the corporation’s focus on improving our stated 2010 financial objectives. Namely, increase pre-tax pre-provision income, increase our local market share, and improve our asset quality. Nearly all business and financial metrics for the quarter showed considerable improvement,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Growth in deposits and loans, along with improving asset quality, will continue to increase WAL’s franchise value in the quarters to come. In the near term, however, we may continue to see volatility in our business and financial metrics due to the uneven pace of improving market conditions in each region.”
Ken Vecchione, President and Chief Operating Officer, added, “The WAL team continues to execute upon our corporate objectives while improving enterprise risk management systems and removing regulatory issues that will restore the company to profitability and increase shareholder value. During the last year we eliminated our reliance on wholesale funding and reduced the risk in our balance sheet.”
Western Alliance Bancorporation reported net income of $1.2 million in the second quarter 2010, including a net loss from sales/valuation of repossessed assets of $12.0 million, a loss on discontinued operations net of tax of $0.8 million, net gain from securities sales of $6.1 million, net gain on fair value measurements of $6.3 million and gain on debt extinguishment of $3.0 million.
Net of preferred dividends and accretion of discount on preferred stock, the Company reported net loss per common share of $0.02 in the second quarter 2010, including $0.11 loss from sales/valuations of repossessed assets, loss from discontinued affinity credit card operations held for sale net of tax of $0.01, net gain from securities activities of $0.04, net gain on fair value measurements of $0.06 and gain on debt extinguishment of $0.03.
Net gains for the second quarter consisted of $6.1 million net gains primarily from sales of adjustable rate preferred stock, $6.3 million from fair value changes related to the Company’s junior subordinated debt as a result of interest rate spreads widening and a $3.0 million gain from repayment of the $60.0 million in subordinated debt at a discount.
Total loans increased $71 million to $4.13 billion at June 30, 2010 from $4.06 billion on March 31, 2010. This increase was primarily driven by growth in loans to businesses including commercial and industrial and owner occupied commercial real estate loans. Geographically, loans in Nevada decreased by $29 million and increased by $100 million in Arizona and California during the second quarter 2010.
Total deposits increased $40 million to $5.23 billion at June 30, 2010 from $5.19 billion at March 31, 2010, with significant growth in interest bearing demand and money market accounts, partially offset by a decline in certificates of deposit. Deposits increased $838 million from June 30, 2009.
Income Statement
Net interest income increased 5 percent to $57.5 million in the second quarter 2010 from $54.7 in the first quarter 2010 and 13.1 percent compared to the second quarter 2009 propelled by both reductions in cost of funds and increases in interest income. The net interest margin in the second quarter 2010 was 4.16 percent compared to 4.17 percent in the first quarter 2010 and 4.12 percent in the second quarter of last year.
The provision for credit losses was $23.1 million for the second quarter 2010 compared to $28.7 million for the first quarter 2010 and $37.6 million for the second quarter 2009. Nonaccrual loans and repossessed assets were $239 million or 4 percent of total assets at June 30, 2010, compared with $254 million or 4.17 percent of total assets at March 31, 2010 and $159 million or 2.78 percent of total assets at June 30, 2009. Net loan charge-offs in the second quarter 2010 were $25.8 million or 2.53 percent of average loans (annualized), compared to net charge-offs of $24.6 million or 2.43 percent of average loans (annualized) for the first quarter 2010 and $30.6 million or 3 percent of average loans (annualized) for the second quarter 2009. Loans past due 90 days and still accruing totaled $8.2 million at June 30, 2010, flat t o $8.4 million at March 31, 2010 and down from $36.1 million at June 30, 2009. Loans past due 30-89 days totaled $20.3 million at quarter end, down from $38.6 million at March 31, 2010 and down from $75.5 million at June 30, 2009.
Operating non-interest income was $6.5 million for the second quarter 2010.1 This performance was a slight decrease from $6.7 million for the same period in 2009 and slight increase from $6.2 million for the first quarter of 2010.
Net revenue was $64.0 million for the second quarter 2010, an increase of 5 percent from $60.9 million for the first quarter of 2010 and 11.2 percent from net revenue of $57.5 million for the second quarter 2009.1
Operating non-interest expense was $41.3 million for the second quarter 2010, down 10.7 percent from operating non-interest expense of $46.2 million for the same period in 2009.1 For the first quarter 2010, operating non-interest expense was $41.9 million. The Company had 961 full-time equivalent employees at June 30, 2010, compared to 948 at March 31, 2010 and 1,076 one year ago.
A key performance metric for the Company is its pre-tax, pre-provision operating earning power, which it defines as net revenue less its operating non-interest expense.1 For the second quarter 2010, the Company’s performance was $22.7 million, compared to $19.1 million in the first quarter 2010 and $11.3 million in the second quarter 2009.
Balance Sheet
Gross loans totaled $4.13 billion at June 30, 2010, an increase of $71 million from March 31, 2010 and an increase of $101 million from $4.03 billion at June 30, 2009. At June 30, 2010 the allowance for credit losses was 2.66 percent of total loans down from 2.78 percent at March 31, 2010 and up from 2.09 percent at June 30, 2009.
Deposits totaled $5.23 billion at June 30, 2010, an increase of $40 million from $5.19 billion at March 31, 2010 and an increase of $838 million from $4.39 billion at June 30, 2009.
Non-interest bearing deposits decreased by $18 million to $1.33 billion at June 30, 2010 from March 31, 2010 and increased $222 million from $1.11 billion at June 30, 2009. Non-interest bearing deposits comprised 25.4 percent of total deposits at June 30, 2010.
At June 30, 2010 the Company’s loans were 79 percent of deposits, compared to 91.7 percent one year earlier and 78.2 percent at March 31, 2010. Borrowings, including junior debt totaled $36 million at June 30, 2010, down $320 million from $356 million one year earlier, and down $86 million from $122 million at March 31, 2010.
Stockholders’ equity decreased to $576 million at June 30, 2010 essentially flat from March 31, 2010. Accumulated other comprehensive income totaled $3.3 million at June 30, 2010, compared to $4.7 million at March 31, 2010. At June 30, 2010 tangible common equity was 6.8 percent of tangible assets and total risk-based capital was 13.0 percent of risk-weighted assets.
Total assets increased 4.5 percent to $5.96 billion at June 30, 2010 from $5.70 billion at June 30, 2009 and decreased 2.2 percent from $6.10 billion at March 31, 2010.
Operating Unit Highlights
Our Nevada banking operations, which are comprised of Bank of Nevada and First Independent Bank of Nevada, reported that loans declined $29 million during the second quarter and declined $219 million during the last 12 months to $2.36 billion at June 30, 2010. Deposits increased $170 million since March 31, 2010 and $361 million over the last twelve months to $2.91 billion. Net loss for our Nevada banks was $9.6 million during the second quarter 2010, compared with a net loss of $2.7 million for the first quarter of 2010 and $3.0 million during the second quarter 2009.
Our California banking operations, which are comprised of Torrey Pines Bank and Alta Alliance Bank, reported that loans increased $46 million during the second quarter 2010 and increased $171 million during the last 12 months to $981 million. Deposits decreased $123 million and increased $46 million to $1.09 billion during the same periods, respectively. Net income for our California banks was $2.6 million during the second quarter 2010 compared with a net income of $0.5 million for the first quarter of 2010 and net income of $4.4 million during the second quarter 2009.
1 See Reconciliation of Non-GAAP Financial Measures beginning on page 16
Our Arizona banking operations, which consists of Alliance Bank of Arizona, reported loan growth of $54 million during the second quarter 2010 and an increase of $149 million during the last 12 months to $837 million. Deposits declined $6 million in the second quarter and increased $427 million during the last 12 months to $1.23 billion. Net income for our Arizona bank was $2.7 million during the second quarter 2010 compared with net income of $0.8 million during the first quarter of 2010 and a net loss of $0.6 million during the second quarter 2009.
Our Asset Management business line, which includes Shine Investments Advisory Services and Premier Trust, had assets under management of $903 million at June 30, 2010, compared to $872 million at March 31, 2010. Net income for the Asset Management segment for the second quarter of 2010 was $0.1 million as well as first quarter 2010 and second quarter of 2009.
Attached to this press release is summarized financial information for the quarter and year to date ended June 30, 2010.
Conference Call and Webcast
Western Alliance Bancorporation will host a conference call and live audio webcast to discuss its second quarter 2010 financial results at 11.00 a.m. ET on Friday, July 23, 2010. Participants may access the call by dialing 1-866-843-0890 and using passcode: 8035139 or via live audio webcast using the website link: http://www.talkpoint.com/viewer/starthere.asp?Pres=131646. The webcast is also available via our 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 23 until 9 a.m. ET August 6 th by dialing 1-877-344-7529 using the pass code 442490.
About Western Alliance Bancorporation
Western Alliance Bancorporation is the parent company of Bank of Nevada, First Independent Bank of Nevada, Alliance Bank of Arizona, Torrey Pines Bank, Alta Alliance Bank, and Shine Investment Advisory Services. These dynamic organizations provide a broad array of deposit and credit services to clients in Nevada, Arizona and California, and investment services in Colorado. Staffed with experienced financial professionals, these organizations deliver a broader product array and larger credit capacity than community banks, yet are empowered to be more responsive to customers' needs than larger institutions. Additional investor information can be accessed on the Investor Relations page of the company's website, www.westernalliancebancorp.com.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include: factors listed in the Form 10-K as filed with the Securities and Exchange Commission; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; inflation, interest rate, market and monetary fluctuations; increases in competitive pressures among financial institutions and businesses offering similar products and services; higher defaults on our loan portfolio than we expect; changes in management’s estimate of the adequacy of the allowance for credit losses; legislative or regulatory changes or changes in accounting principles, policies or guidelines; management’s estimates and projections of interest rates and interest rate policy; the execution of our business plan; and other factors affecting the financial services industry generally or the banking industry in particular.
We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements set forth in this press release to reflect new information, future events or otherwise.
This press release contains both financial measures based on accounting principles generally accepted in the United States (“GAAP”) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Western Alliance Bancorporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconcilement to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
| Western Alliance Bancorporation and Subsidiaries | | | | | | | | | | | | | | | |
| Summary Consolidated Financial Data | | | | | | | | | | | | | | | |
| Unaudited | | At or for the Three Months Ended June 30, | | | For the Six Months Ended June 30, | |
| | | 2010 | | 2009 | | Change | % | | 2010 | | 2009 | | Change | % |
| | | (in thousands, except per share data) |
| Selected Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 5,959.5 | | | $ | 5,701.5 | | | | 4.5 | | % | | | | | | | | | | |
| Loans, net of deferred fees | | | 4,130.0 | | | | 4,028.9 | | | | 2.5 | | | | | | | | | | | | |
| Securities and money market investments | | | 848.6 | | | | 725.7 | | | | 16.9 | | | | | | | | | | | | |
| Federal funds sold and other | | | - | | | | 20.3 | | | | (100.0 | ) | | | | | | | | | | | |
| Customer funds | | | 5,317.3 | | | | 4,692.6 | | | | 13.3 | | | | | | | | | | | | |
| Borrowings | | | - | | | | 254.4 | | | | (100.0 | ) | | | | | | | | | | | |
| Junior subordinated and subordinated debt | | | 36.3 | | | | 102.3 | | | | (64.5 | ) | | | | | | | | | | | |
| Stockholders' equity | | | 575.9 | | | | 621.6 | | | | (7.4 | ) | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Selected Income Statement Data: | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | |
| Interest income | | $ | 70,000 | | | $ | 70,296 | | | | (0.4 | ) | % | | $ | 138,734 | | | $ | 140,464 | | | | (1.2 | ) | % |
| Interest expense | | | 12,544 | | | | 19,495 | | | | (35.7 | ) | | | | 26,560 | | | | 38,933 | | | | (31.8 | ) | |
| Net interest income | | | 57,456 | | | | 50,801 | | | | 13.1 | | | | | 112,174 | | | | 101,531 | | | | 10.5 | | |
| Provision for loan losses | | | 23,115 | | | | 37,573 | | | | (38.5 | ) | | | | 51,862 | | | | 57,557 | | | | (9.9 | ) | |
| Net interest income after provision for credit losses | | | 34,341 | | | | 13,228 | | | | 159.6 | | | | | 60,312 | | | | 43,974 | | | | 37.2 | | |
| Non-interest income | | | 20,760 | | | | 15,447 | | | | 34.4 | | | | | 35,389 | | | | (12,381 | ) | | | (385.8 | ) | |
| Non-interest expense | | | 53,262 | | | | 50,173 | | | | 6.2 | | | | | 94,103 | | | | 141,209 | | | | (33.4 | ) | |
| Income (loss) from continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | |
| before income taxes | | | 1,839 | | | | (21,498 | ) | | | (108.6 | ) | | | | 1,598 | | | | (109,616 | ) | | | (101.5 | ) | |
| Income tax benefit | | | (190 | ) | | | (8,427 | ) | | | (97.7 | ) | | | | (1,751 | ) | | | (11,471 | ) | | | (84.7 | ) | |
| Income (loss) from continuing operations | | | 2,029 | | | | (13,071 | ) | | | (115.5 | ) | | | | 3,349 | | | | (98,145 | ) | | | (103.4 | ) | % |
| Loss on discontinued operations, net | | | (802 | ) | | | (1,066 | ) | | | (24.8 | ) | | | | (1,737 | ) | | | (2,434 | ) | | | | | |
| Net income (loss) | | $ | 1,227 | | | $ | (14,137 | ) | | | (108.7 | ) | % | | $ | 1,612 | | | $ | (100,579 | ) | | | | | |
| Intangible asset amortization, net of tax | | $ | 590 | | | $ | 614 | | | | (4.0 | ) | % | | $ | 1,178 | | | $ | 1,229 | | | | (4.1 | ) | % |
| Diluted net loss from continuing operations | | $ | (0.01 | ) | | $ | (0.29 | ) | | | | | | | $ | (0.02 | ) | | $ | (2.25 | ) | | | | | |
| Diluted net loss from discontinued operations, net of tax | | $ | (0.01 | ) | | $ | (0.02 | ) | | | | | | | $ | (0.02 | ) | | $ | (0.05 | ) | | | | | |
| Diluted net loss per common share | | $ | (0.02 | ) | | $ | (0.31 | ) | | | (93.5 | ) | % | | $ | (0.05 | ) | | $ | (2.31 | ) | | | (98.0 | ) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Share Data: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Diluted net income (loss) per common share | | $ | (0.02 | ) | | $ | (0.31 | ) | | | (93.5 | ) | % | | $ | (0.05 | ) | | $ | (2.31 | ) | | | (98.0 | ) | % |
| Book value per common share | | $ | 6.09 | | | $ | 6.83 | | | | (10.8 | ) | % | | | | | | | | | | | | |
| Tangible book value per share, net of tax (1) | | $ | 5.60 | | | $ | 6.19 | | | | (9.6 | ) | % | | | | | | | | | | | | |
| Average shares outstanding (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 72,160 | | | | 53,252 | | | | 35.5 | | | | | 72,063 | | | | 45,716 | | | | 57.6 | | |
| Diluted | | | 72,931 | | | | 53,252 | | | | 37.0 | | | | | 72,451 | | | | 45,716 | | | | 58.5 | | |
| Common shares outstanding | | | 73,344 | | | | 72,435 | | | | 1.3 | | | | | | | | | | | | | | | |
| (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 | | | For the Six Months | |
| | | Ended June 30, | | | Ended June 30, | |
| | | 2010 | | | 2009 | | | Change | % | | 2010 | | | 2009 | | | Change | % |
| | | (in thousands, except per share data) |
| Selected Performance Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (1) | | | 0.08 | | % | | | (1.07 | ) | % | | | (107.5 | ) | % | | | 0.11 | | % | | | (3.81 | ) | % | | | (102.9 | ) | % |
| Return on average stockholders' equity (1) | | | 0.84 | | | | | (10.94 | ) | | | | (107.7 | ) | | | | 1.15 | | | | | (40.33 | ) | | | | (102.9 | ) | |
| Net interest margin (1) | | | 4.16 | | | | | 4.12 | | | | | 1.0 | | | | | 4.16 | | | | | 4.24 | | | | | (1.9 | ) | |
| Net interest spread | | | 3.84 | | | | | 3.64 | | | | | 5.5 | | | | | 3.84 | | | | | 3.80 | | | | | 1.1 | | |
| Efficiency ratio - tax equivalent basis (2) | | | 64.37 | | | | | 79.94 | | | | | (19.5 | ) | | | | | | | | | | | | | | | | |
| Loan to deposit ratio | | | 78.96 | | | | | 91.73 | | | | | (13.9 | ) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tangible equity (2) | | | 9.0 | | % | | | 10.1 | | % | | | (10.7 | ) | % | | | | | | | | | | | | | |
| Tangible common equity (2) | | | 6.8 | | | | | 7.8 | | | | | (12.3 | ) | | | | | | | | | | | | | | | | |
| Tier 1 Leverage ratio | | | 9.1 | | | | | 11.5 | | | | | (20.9 | ) | | | | | | | | | | | | | | | | |
| Tier 1 Risk Based Capital | | | 11.7 | | | | | 13.2 | | | | | (11.4 | ) | | | | | | | | | | | | | | | | |
| Total Risk Based Capital | | | 13.0 | | | | | 15.8 | | | | | (17.7 | ) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset Quality Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs to average loans outstanding (1) | | | 2.53 | | % | | | 3.00 | | % | | | (15.7 | ) | % | | | 2.86 | | % | | | 2.38 | | % | | | 20.2 | | % |
| Nonaccrual loans to gross loans | | | 3.25 | | | | | 2.89 | | | | | 12.5 | | | | | | | | | | | | | | | | | |
| Nonaccrual loans and repossessed assets to total assets | | | 4.00 | | | | | 2.78 | | | | | 43.9 | | | | | | | | | | | | | | | | | |
| Loans past due 90 days and still accruing to total loans | | | 0.20 | | | | | 0.90 | | | | | (77.8 | ) | | | | | | | | | | | | | | | | |
| Allowance for credit losses to loans | | | 2.66 | | | | | 2.09 | | | | | 27.3 | | | | | | | | | | | | | | | | | |
| Allowance for credit losses to nonaccrual loans | | | 81.94 | | | | | 72.30 | | | | | 13.3 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) Annualized for the three and six month periods ended June 30, 2010 and 2009. | | |
| (2) See Reconciliation of Non-GAAP Financial Measures | | |
