Western Alliance Reports Fourth Quarter 2012 Net Income of $32.1 Million, or $0.37 Per Share; Full Y

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Western Alliance Reports Fourth Quarter 2012 Net Income of $32.1 Million, or $0.37 Per Share; Full Year Net Income of $72.8 Million, or $0.83 Per Share

PHOENIX--(BUSINESS WIRE)-- Western Alliance Bancorporation (NYS: WAL) announced today its financial results for the fourth quarter 2012.

Fourth Quarter 2012 Highlights:

  • Net income of $32.1 million, an increase of 107.1% compared to $15.5 million for the third quarter 2012 and more than quadruple compared to $7.1 million for the fourth quarter 2011
  • Net income of $18.9 million for the fourth quarter 2012, excluding $14.8 million net effect from certain transactions which include the effect of the bargain purchase gain on Western Liberty, $1.9 million of securities gains, $0.9 million net legal settlements, $5.6 million accrued disposition costs related to affinity credit card services, and $1.2 million large loan prepayment fee2
  • Earnings per share of $0.37, compared to $0.18 per share for the third quarter 2012 and $0.07 per share in the fourth quarter 2011
  • Earnings per share of $0.22 for the fourth quarter 2012, excluding $0.15 per share net effect from certain transactions which include the effect of the bargain purchase gain on Western Liberty, $0.02 per share securities gains, $0.01 per share net legal settlements, $0.04 per share accrued disposition cost related to affinity credit card services and $0.01 per share for loan prepayment fee2
  • Pre-tax, pre-provision operating earnings of $36.8 million, up from $33.4 million in third quarter 2012 and up 16.8% from $31.5 million in fourth quarter 20111
  • Net interest margin of 4.55% compared to 4.41% in the third quarter of 2012 and 4.51% in the fourth quarter 2011
  • Total loans of $5.71 billion, up $376 million from September 30, 2012, and up $929 million from December 31, 2011, including $91 million increase from acquisition of Western Liberty Bancorp in October 2012
  • Total deposits of $6.46 billion, up $293 million from September 30, 2012, and up $797 million from December 31, 2011, including $117 million increase from acquisition of Western Liberty Bancorp
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 2.4% of total assets from 2.7% in third quarter 2012 and from 2.6% in fourth quarter 2011
  • Net loan charge-offs (annualized) to average loans outstanding increased to 0.99% from 0.70% in the third quarter 2012, including 0.19% percent for the write down of the affinity credit card portfolio to fair value
  • Tier I Leverage capital of 10.1% and Total Risk-Based Capital ratio of 12.6%, compared to 9.8% and 12.6% a year ago
  • Total equity of $759.6 million, up $61.6 million from September 30, 2012, and up $122.9 million from December 31, 2011
  • Acquisition of Western Liberty Bancorp increased total assets by $195.5 million and bargain purchase gain of $17.6 million. Pursuant to accounting guidance acquired net assets are reflected at estimated fair value. The estimated fair value of certain net assets are preliminary and subject to a measurement period adjustment.

Financial Performance

"2012 was a great year for our Company," said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. "Quarter after quarter, we achieved high quality loan growth, consistently funded by low-cost core deposits. Meanwhile, our asset quality ratios and operating efficiency improved as well. This strong performance culminated in an exceptional fourth quarter in which we augmented our strong organic growth with the successful acquisition of Western Liberty Bancorp, helping to propel our earnings to $32 million."

Sarver continued, "This strong finish to 2012, delivered by our team at Western Alliance, has given us powerful momentum as we head into 2013."

Ken Vecchione, President and Chief Operating Officer, added, "In 2012, our Company again executed its growth strategy by reporting double-digit top line revenue growth for the third consecutive year, and growth in operating revenue as it has every year since it went public in 2005. This rising revenue, when coupled with our lower credit costs and increased efficiency, has given us considerable leverage to drive earnings per share higher, as we did to 83 cents last year."

Western Alliance Bancorporation reported net income of $32.1 million, or $0.37 per share, in the fourth quarter 2012 including a $0.5 million charge from repossessed assets valuations/sales, $2.7 million of merger/restructure charges, a $17.6 million bargain purchase gain from the acquisition of Western Liberty Bancorp, and $1.9 million gains from securities.

Full year net income was $72.8 million compared to $31.5 million in 2011. Full year earnings per share were $0.83 compared to $0.19 for 2011.

Total loans increased $376 million to $5.71 billion at December 31, 2012 from $5.33 billion on September 30, 2012. This increase was primarily driven by growth in commercial and industrial loans and commercial real estate loans. Loans increased $929 million, 19.4 percent from December 31, 2011.

Total deposits increased $293 million to $6.46 billion at December 31, 2012 from $6.16 billion at September 30, 2012, with growth in all account types primarily in certificates of deposits and non-interest-bearing demand. Deposits increased $797 million, or 14.1 percent from December 31, 2011.

Income Statement

Net interest income of $77.5 million in the fourth quarter 2012, an increase of 7.8 percent compared to the third quarter 2012 and 12.7 percent compared to the fourth quarter 2011. The Company's net interest margin in the fourth quarter 2012 was 4.55 percent compared to 4.41 percent in the third quarter 2012 and 4.51 percent in the fourth quarter 2011.

Operating non-interest income was $5.1 million for the fourth quarter 2012, a decrease from $5.4 million for the third quarter of 2012 and $5.6 million for the fourth quarter of 2011.1

Net revenue was $82.5 million for the fourth quarter 2012, up from $77.3 million for the third quarter of 2012 and an increase of 11.0 percent from $74.3 million for the fourth quarter 2011.1

Operating non-interest expense was $45.8 million for the fourth quarter 2012, compared to $43.9 million for the third quarter of 2012 and $42.8 million for the fourth quarter of 2011.1 The Company's operating efficiency ratio on a tax equivalent basis was 53.5 percent for the fourth quarter 2012, improved from 56.5 percent for the fourth quarter 2011.1

The Company had 982 full-time equivalent employees December 31, 2012, compared to 942 one year ago.

A key performance metric for the Company is its pre-tax, pre-provision operating earnings, which it defines as net operating revenue less its operating non-interest expense. For the fourth quarter 2012, the Company's performance on this metric was $36.8 million, up from $33.4 million in the third quarter 2012 and $31.5 million in the fourth quarter 2011.1

The provision for credit losses was $11.5 million for the fourth quarter 2012, compared to $8.9 million for the third quarter 2012. The provision for the fourth quarter of 2011 was $13.1 million. Net loan charge-offs in the fourth quarter 2012 were $13.5 million, or 0.99 percent of average loans (annualized), up from 0.70 percent of average loans (annualized) for the third quarter 2012. Net charge-offs for the fourth quarter 2011 were $14.1 million, or 1.24% of average loans (annualized).

Nonaccrual loans decreased $16.5 million to $104.7 million during the quarter. Loans past due 90 days and still accruing interest totaled $1.4 million at December 31, 2012, down from $1.7 million at September 30, 2012 and from $2.6 million at December 31, 2011. Loans past due 30-89 days, still accruing interest totaled $16.6 million at quarter end, up from $10.2 million at September 30, 2012 and from $13.7 million at December 31, 2011.

Classified assets to Tier I capital plus allowance for credit losses, a common regulatory measure of asset quality, improved to 34 percent at December 31, 2012 from 39 percent at December 31, 2011.1

Net loss on sales and valuation of repossessed assets (primarily other real estate) was $0.5 million for the fourth quarter of 2012 compared to $0.1 million for the third quarter 2012 and $7.7 million in the fourth quarter 2011. At December 31, 2012, other repossessed assets were valued at $77 million compared to $78 million at September 30, 2012 and $89 million one year ago.

During the quarter, the Company completed its acquisition of Western Liberty Bancorp, which increased assets, loans and deposits by $195 million, $91 million, and $117 million, respectively, and recorded a gain on bargain purchase of $17.6 million. The Company issued 3.0 million shares in conjunction with closing this transaction.

The Company transferred its remaining $34 million in affinity credit card receivables to loans held for sale during the quarter and recognized a loan charge-off of $2.6 million in a markdown to fair value. Disposition costs of $1.6 million (net of tax) were also recognized in discontinued operations.

Balance Sheet

Gross loans totaled $5.71 billion at December 31, 2012, an increase of $376 million from September 30, 2012 and an increase of $929 million from $4.78 billion at December 31, 2011. At December 31, 2012, the allowance for credit losses was 1.67 percent of total loans down from 1.83 percent at September 30, 2012 and 2.07 percent at December 31, 2011.

Deposits totaled $6.46 billion at December 31, 2012, an increase of $293 million from $6.16 billion at September 30, 2012 and an increase of $797 million from $5.66 billion at December 31, 2011.

Non-interest bearing deposits increased $92 million to $1.93 billion at December 31, 2012 from September 30, 2012 and increased $375 million from $1.56 billion at December 31, 2011. Non-interest bearing deposits comprised 29.9 percent of total deposits at December 31, 2012, compared to 27.5 percent a year ago. At December 31, 2012, the Company's loans were 88.5 percent of deposits compared to 86.5 percent at September 30, 2012 and 84.5 percent at December 31, 2011.

Stockholders' equity at December 31, 2012 increased to $759.6 million from $698.0 million at September 30, 2012, of which $32 million was due to the issuance of shares to complete the Western Liberty Bancorp acquisition. At December 31, 2012, tangible common equity was 7.8 percent of tangible assets1 and total risk-based capital was 12.6 percent of risk-weighted assets.

Total assets increased to $7.62 billion at December 31, 2012 from $7.40 billion at September 30, 2012 and increased 11.4 percent from $6.84 billion at December 31, 2011.

Operating Unit Highlights

Bank of Nevada reported that loans increased by $122 million during the fourth quarter of 2012, and increased $324 million during the last 12 months to $2.18 billion at December 31, 2012. Deposits increased by $161 million in the fourth quarter of 2012 and $192 million over the last twelve months to $2.57 billion. This growth was mostly due to the acquisition of Service 1st Bank of Nevada (former subsidiary of Western Liberty merged into Bank of Nevada). Net income for Bank of Nevada was $7.6 million for the fourth quarter 2012, compared with net income of $5.8 million for the third quarter of 2012 and net income of $1.2 million during the fourth quarter 2011.

Western Alliance Bank (doing business as Alliance Bank of Arizona and First Independent Bank) reported loan growth of $166 million during the fourth quarter 2012 and $392 million during the last 12 months to $2.04 billion. Deposits increased $74 million in the fourth quarter and $347 million during the last 12 months to $2.22 billion. Net income for Western Alliance Bank was $10.4 million during the fourth quarter 2012 compared with net income of $8.8 million during the third quarter of 2012 and net income of $5.6 million during the fourth quarter 2011.

The Torrey Pines Bank segment, which excludes discontinued operations, reported that loans increased $78 million during the fourth quarter 2012 and $189 million during the last 12 months to $1.51 billion. Deposits increased $65 million in the fourth quarter 2012 and $263 million over the last 12 months to $1.68 billion. Net income for Torrey Pines Bank was $5.2 million during the fourth quarter 2012 compared with net income of $6.4 million for the third quarter of 2012 and net income of $5.9 million during the fourth quarter 2011.

The other segment reported loans increased during the fourth quarter 2012 by $11 million as the result of the acquisition of Las Vegas Sunset Properties (former subsidiary of Western Liberty, now a subsidiary of Western Alliance Bancorporation) and increased $24 million during the last 12 months.

Attached to this press release is summarized financial information for the quarter ended December 31, 2012.

Subsequent Event

On January 18, 2013, the Company's Western Alliance Bank subsidiary executed a definitive agreement to acquire Centennial Bank, located in Fountain Valley, California, for $57.5 million in cash, distribution of specified loans and assumption of Centennial Bank's transactional expenses up to $1.0 million. Subject to bankruptcy court and regulatory approval, the transaction is expected to close in the late first quarter 2013. The Company expects the acquisition to be accretive to its earnings per share.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its fourth quarter 2012 financial results at 12:00 p.m. ET on Friday, January 25, 2013. Participants may access the call by dialing 1-888-317-6003 and using passcode: 7853474 or via live audio webcast using the website link: https://services.choruscall.com/links/wal130125.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, January 25th through February 25th at 9:00 a.m. ET by dialing 1-877-344-7529 using the conference number 10023314.

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 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.

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

            
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
 
At or for the Three MonthsFor the Twelve Months
Ended December 31,Ended December 31,
20122011Change%20122011Change%
Selected Balance Sheet Data:
(dollars in millions)
Total assets$7,622.6$6,844.511.4%
Loans, net of deferred fees

5,709.3

4,780.1

19.4

Securities and money market investments1,236.61,490.5(17.0)
Total deposits6,455.25,658.514.1
Borrowings272.7476.9(42.8)
Junior subordinated debt36.237.0(2.2)
Stockholders' equity759.6636.719.3
 
Selected Income Statement Data:
(dollars in thousands)
Interest income$84,343$76,8469.8%$318,295$296,5917.3%
Interest expense 6,888  8,147 (15.5) 28,032  38,923 (28.0)
Net interest income77,45568,69912.7290,263257,66812.6
Provision for loan losses 11,501  13,076 (12.0) 46,844  46,188 1.4
Net interest income after provision for credit losses65,95455,62318.6243,419211,48015.1
Non-interest income24,4634,948394.444,72634,45729.8
Non-interest expense 48,989  50,963 (3.9) 188,860  195,598 (3.4)

Income from continuing operations before income taxes

41,4289,608331.299,28550,33997.2
Income tax expense 7,509  2,011 273.4 23,961  16,849 42.2
Income from continuing operations33,9197,597346.575,32433,490124.9%
Loss on discontinued operations, net (1,804) (496)(263.7) (2,490) (1,996)
Net income$32,115 $7,101 352.3%$72,834 $31,494 
Diluted net income per common share from continuing operations$0.39 $0.07 $0.86 $0.21 
Diluted net loss per common share from discontinued operations, net of tax$(0.02)$(0.01)$(0.03)$(0.02)
Diluted net income per common share$0.37 $0.07 428.6%$0.83 $0.19 342.2%
 
Common Share Data:
Diluted net income per common share$0.37$0.07428.6%$0.83$0.19342.2%
Book value per common share$7.15$6.0218.8%

Tangible book value per share, net of tax (1)

$6.84$5.6321.4%
Average shares outstanding (in thousands):
Basic84,41681,0264.282,28580,9091.7
Diluted85,15281,3684.782,91281,1832.1
Common shares outstanding86,46582,3625.0
 

(1)

  

See Reconciliation of Non-GAAP Financial Measures

 
 

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Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data (continued)
Unaudited
 
At or for the Three MonthsFor the Twelve Months
Ended December 31,Ended December 31,
20122011