News Column

Western Alliance Reports First Quarter 2014 Net Income of $31.1 Million, or $0.35 Per Share

May 9, 2014



By a News Reporter-Staff News Editor at Economics Week -- Western Alliance Bancorporation (NYSE:WAL) announced its financial results for the first quarter 2014. First Quarter 2014 Highlights: Net income of $31.1 million, compared to $31.4 million for the fourth quarter 2013 and $20.9 million for the first quarter 2013

Net income of $30.1 million for the first quarter 2014, excluding the following, net of tax effect: $1.6 million net gain on repossessed and other assets and $0.6 million net loss from debt valuation adjustments and securities gains

Earnings per share of $0.35, compared to $0.36 per share in the fourth quarter 2013 and $0.24 per share in the first quarter 2013

Earnings per share of $0.34 for the first quarter 2014, excluding the following, net of tax effect: $0.02 net gain on repossessed and other assets and $0.01 net loss from debt valuation adjustments and securities gains

Pre-tax, pre-provision operating earnings of $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 20131 Net interest margin of 4.41%, compared to 4.44% in the fourth quarter 2013 and 4.36% in the first quarter 2013

Total loans of $7.11 billion, up $307 million from December 31, 2013 and up $1.25 billion from March 31, 2013

Total deposits of $8.15 billion, up $311 million from December 31, 2013 and up $1.41 billion from March 31, 2013

Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.30% of total assets from 1.53% in the fourth quarter 2013 and from 2.10% in the first quarter 2013

Net loan recoveries (annualized) to average loans outstanding of 0.02%, compared to net loan charge-offs to average loans of 0.13% in the fourth quarter 2013 and 0.38% in the first quarter 2013

Tier I Leverage Capital of 9.9% and Total Risk-Based Capital ratio of 12.4%, compared to 10.1% and 12.6%, respectively, at March 31, 2013

Total equity of $895 million, up $39 million from December 31, 2013 Financial Performance "Our company is off to a strong start for 2014," said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. "Loans and deposits each grew over $300 million during the first quarter, driving record net interest income. Asset quality continued to improve with net loan recoveries and a reduction in non-performing assets during the period. For the past four quarters, net loan losses have averaged less than five basis points of total loans."

Sarver continued, "With WAL's revenue growth rate again exceeding our operating expense growth rate, our efficiency ratio improved by 90 basis points to 51%. The legal merger of our subsidiary banks at the end of last year should enable us make business practice improvements to drive this key metric to under 50% in the near future." Income Statement Net interest income was $90.8 million in the first quarter 2014, an increase of $0.8 million, or 0.9%, from $90.0 million in the fourth quarter of 2013 and an increase of $14.6 million, or 19.1%, compared to the first quarter 2013. The Company's net interest margin decreased in the first quarter 2014 to 4.41%, compared to 4.44% in the fourth quarter 2013, and increased compared to 4.36% in the first quarter 2013.

Operating non-interest income was $5.7 million for the first quarter 2014, compared to $5.2 million in the fourth quarter of 2013 and $5.1 million for the first quarter of 2013.1 Net operating revenue was $96.5 million for the first quarter 2014, an increase of 1.4% compared to $95.2 million for the fourth quarter of 2013 and an increase of 18.7% compared to $81.3 million for the first quarter 2013.1 Operating non-interest expense was $52.1 million for the first quarter 2014, compared to $51.4 million for the fourth quarter of 2013 and $46.2 million for the first quarter of 2013.1 The Company's operating efficiency ratio1 on a tax equivalent basis was 51.0% for the first quarter 2014, compared to 51.9% for the fourth quarter 2013 and 54.6% for the first quarter 2013.

The Company had 1,105 full-time equivalent employees and 39 offices at March 31, 2014, compared to 992 full-time equivalent employees and 40 offices at March 31, 2013.

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 first quarter 2014, the Company's pre-tax, pre-provision operating earnings were $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 2013.1 The following are non-core items, which are discussed below on a pre-tax basis.

Net gain on repossessed and other assets (primarily other real estate) was $2.5 million for the first quarter 2014, which resulted primarily from the sale of two properties, compared to a net gain of $2.2 million in the fourth quarter 2013 and a net loss of $0.5 million in the first quarter 2013. At March 31, 2014, other repossessed assets totaled $56 million, compared to $67 million at December 31, 2013 and $78 million at March 31, 2013.

Net loss from debt valuation adjustments and securities gains were $0.9 million for the first quarter 2014. Securities gains of $0.4 million were offset by a loss on junior subordinated debt resulting from an increase in their fair value.

Effective as of the first quarter 2014, the Company elected early adoption of Accounting Standards Codification 323-740, an amended Financial Accounting Standards Board standard related to accounting for low income housing tax credit investments. Under this amended standard, the amortization of the investment may now be calculated under the proportional amortization method and is included in income tax expense rather than as a separate line item in non-interest income. Prior period amounts have been adjusted to reflect the adoption of this new accounting guidance, which has resulted in an increase in non-interest income and income tax expense. 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. Balance Sheet Gross loans totaled $7.11 billion at March 31, 2014, an increase of $307 million from December 31, 2013 and an increase of $1.25 billion from $5.86 billion at March 31, 2013. At March 31, 2014, the allowance for credit losses was 1.46% of total loans, compared to 1.47% at December 31, 2013 and 1.63% at March 31, 2013, reflecting an improvement in the Company's asset quality profile.

Deposits totaled $8.15 billion at March 31, 2014, an increase of $311 million from $7.84 billion at December 31, 2013 and an increase of $1.41 billion from $6.73 billion at March 31, 2013. Non-interest bearing deposits were $2.09 billion at March 31, 2014, compared to $2.20 billion at December 31, 2013 and $1.93 billion at March 31, 2013. Non-interest bearing deposits comprised 25.7% of total deposits at March 31, 2014, compared to 28.1% at December 31, 2013 and 28.7% at March 31, 2013, while the proportion of savings and money market accounts increased to 45.1% from approximately 42.0% at December 31, 2013 and March 31, 2013. Certificates of deposit as a percent of total deposits remained consistent at approximately 20.0% at March 31, 2014 and March 31, 2013. The Company's ratio of loans to deposits was 87.2% at March 31, 2014, compared to 86.8% at December 31, 2013 and 86.9% at March 31, 2013.

Stockholders' equity at March 31, 2014 increased to $895 million from $856 million at December 31, 2013 and increased $114 million from $781 million at March 31, 2013. At March 31, 2014, tangible common equity was 7.5% of tangible assets1 and total risk-based capital was 12.4% of risk-weighted assets. The Company's tangible book value per share1 was $8.32 at March 31, 2014, up 18.2% from March 31, 2013.

Total assets increased 4.7% to $9.75 billion at March 31, 2014 from $9.31 billion at December 31, 2013, and increased 19.2% from $8.17 billion at March 31, 2013. Asset Quality The provision for credit losses was $3.5 million for the first quarter 2014, compared to $4.3 million in the fourth quarter 2013 and $5.4 million for the first quarter 2013. Net loan recoveries in the first quarter 2014 were $0.3 million, or 0.02% of average loans (annualized), compared to net loan charge-offs to average loans of 0.13% for the fourth quarter 2013. Net charge-offs for the first quarter 2013 were $5.4 million, or 0.38% of average loans (annualized).

Nonaccrual loans decreased $5.3 million to $70.4 million during the quarter. Loans past due 90 days and still accruing interest totaled $0.2 million at March 31, 2014, down from $1.5 million at December 31, 2013 and $1.6 million at March 31, 2013. Loans past due 30-89 days, still accruing interest totaled $11.1 million at quarter end, down from $13.4 million at December 31, 2013 and $14.8 million at March 31, 2013.

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 24% at March 31, 2014 from 30% at March 31, 2013.1 Segment Highlights On December 31, 2013, the Company consolidated its three bank subsidiaries under one charter, Western Alliance Bank. As a result, the Company has redefined its operating segments to reflect the new organizational and internal reporting structure. Prior year segment information has not been recast to conform to the new segmentation methodology due to the impracticability of restating segments because of the change in legal structure at December 31, 2013. The new operating segments are as follows: Arizona, Nevada, California, Specialty Finance, and Corporate & Other.

Keywords for this news article include: Finance, Economics, Western Alliance Bancorporation.

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Source: Economics Week