Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - WESTERN ALLIANCE BANCORPORATION | pressrelease-9302016.htm |
| 8-K - 8-K - WESTERN ALLIANCE BANCORPORATION | coverpage-pressrelease9302.htm |
3rd Quarter 2016
Earnings Call
October 24, 2016
2
Financial Highlights
▪ Net income of $67.1 million and earnings per share of $0.64 (inclusive of $0.02 in acquisition /
restructure expense), compared to $61.6 million and $0.60 per share for Q2 2016 (inclusive of $0.02 in
acquisition / restructure expense), and $55.9 million and $0.55 per share for Q3 2015
▪ Total loans of $13.03 billion, up $156 million from prior quarter and total deposits of $14.44 billion, up
$242 million from prior quarter
▪ Net interest margin of 4.55%, compared to 4.63% in Q2 2016, and 4.59% in Q3 2015
▪ Efficiency ratio of 43.0%, flat from Q2 2016, and an improvement from 46.8% in Q3 2015
▪ Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 0.53% of total assets,
from 0.54% at June 30, 2016
▪ Annualized net charge-offs (recoveries) to average loans outstanding of 0.04%, compared to (0.01)% in
Q2 2016, and (0.08)% in Q3 2015
▪ Tangible common equity ratio of 9.3% and tangible book value per share, net of tax, of $14.84,
compared to 9.1% and $14.25, respectively, at June 30, 2016
Note: Prior period financial results for 2015 have been adjusted to reflect the adoption of the accounting guidance in ASU 2016-01, Recognition and Measurement of Financial
Assets and Financial Liabilities. See the supplemental schedule at the end of the 12/31/2015 press release for the impact that adoption had on prior period financial results.
Q3 2016
HIGHLIGHTS
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3
Quarterly Consolidated Financial Results
$ in millions, except EPS
Q3 2016 HIGHLIGHTS
▪ Net Interest Income increased
$8.8 million as a result of an increase in
investment securities, a full quarter of
HFF results, loan growth, and one
additional day in the quarter
▪ Operating Non-Interest Income
increased $2.1 million (24.4%), primarily
from warrant income
▪ Operating Non-Interest Expense
increased $4.6 million (5.9%), primarily
driven by increased variable incentive
compensation linked to business
performance
▪ Acquisition / Restructure and Other
includes costs related to the Hotel
Franchise Finance acquisition and core
conversion costs
▪ Income Tax Expense increased
$2.9 million based on higher net income
and a marginally higher tax rate
Q3-16 Q2-16 Q3-15
Net Interest Income $ 172.5 $ 163.7 $ 137.4
Operating Non-Interest Income 10.7 8.6 8.5
Net Operating Revenue $ 183.2 $ 172.3 $ 145.9
Operating Non-Interest Expense (82.4) (77.8) (72.2)
Operating Pre-Provision Net Revenue $ 100.8 $ 94.5 $ 73.7
Provision for Credit Losses (2.0) (2.5) —
Gains on OREO and Other Assets 0.1 (0.4) 0.1
Gain on Sale of Securities — — (0.1)
Acquisition / Restructure and Other (2.7) (3.7) (0.7)
Pre-tax Income $ 96.2 $ 87.9 $ 73.0
Income Tax (29.2) (26.3) (17.1)
Net Income $ 67.1 $ 61.6 $ 55.9
Preferred Dividend — — (0.2)
Net Income Available to Common $ 67.1 $ 61.6 $ 55.7
Average Diluted Shares Outstanding 104.6 103.5 101.5
Earnings Per Share $ 0.64 $ 0.60 $ 0.55
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Net Interest Drivers
$ in billions
Interest Bearing Deposits and Cost of Funds
Loans and Yield
Borrowings and Cost of Borrowings
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
2.73% 2.94%
3.65%
2.84%
4.05%
$506.8
$360.3
$210.6
$382.1 $382.9
Q3 2016 HIGHLIGHTS
▪ Investments increased $516 million as
a result of deployment of excess cash
held in prior periods
▪ Loans increased $156 million causing
a one basis point increase in yield
▪ Cost of funds increased one basis
point for interest-bearing deposits due
to higher rates on CDs
▪ Cost of funds for total deposits,
including non-interest bearing
deposits, decreased one basis point to
0.22% due to relative increase in the
proportion of non-interest bearing
deposits
Total Investments and Yield
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
2.98% 2.98% 3.02% 2.95% 2.90%
$2.0 $2.0 $2.1
$2.3
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
5.31% 5.35% 5.31%
5.43% 5.44%
$10.8 $11.1 $11.2 $12.9
$13.0
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
0.30% 0.30% 0.31%
0.35% 0.36%
$7.5 $7.9 $8.4 $8.9 $8.8
Investments
Loans
Interest Bearing Deposits
Borrowings
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$2.8
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Net Interest Income and Accretion
$ in millions
Q3 2016 HIGHLIGHTS
▪ NIM decreased 8 bps largely due to increased interest
expense from the issuance of long-term subordinated
debt in Q2 2016 and growth in lower yielding investment
portfolio
▪ NIM adjusted for acquired loan accretion was 4.33% for
the quarter, compared to reported NIM of 4.55%
Net Interest Income and NIM
Acquired Loan Accretion and Adjusted NIM
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
4.59%
4.67%
4.58%
4.63%
$137.4 $143.3 $145.7
$163.7 $172.5
Non-PCI Accretion
PCI Accretion
Adjusted Net Interest Margin, excluding accretion
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$3.6 $2.8 $4.1 $4.6
$2.3
$1.4 $2.5
$4.1 $4.2
4.37% 4.52% 4.42% 4.41%
Scheduled Acquisition Loan Accretion
Non-PCI Rate and Credit Accretion
PCI Rate Accretion
Q4-16 Q1-17 Q2-17 Q3-17
$3.9 $3.6 $3.6 $3.4
$0.9 $0.8 $0.8 $0.8
$4.7
Ending rate and credit marks on all acquired loans at 9/30/2016 are $77 million
PCI Accretion
Non-PCI Accretion
PCI Rate Accretion
Non-PCI Rate and Credit Accretion
Adjusted NIM
5
4.55%
4.33%
6
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$43.7 $41.2 $44.9 $44.7 $49.5
$9.3 $9.8 $9.6 $10.2
$10.0$8.4 $10.5 $10.1
$11.6 $11.8
$10.8 $11.3 $11.2 $11.3
$11.1
Operating Expenses and Efficiency
$ in millions
Q3 2016 HIGHLIGHTS
▪ The efficiency ratio remained steady at 43.0%
▪ Compensation expense increased due to increased
headcount and variable incentive compensation linked
to business performance
Operating Expenses and Efficiency Ratio
Breakdown of Operating Expenses
Other
Professional Fees + Data Processing
Occupancy + Insurance
Compensation
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
46.8%
45.2% 45.6%
43.0% 43.0%
$72.2 $72.8 $75.8 $77.8
6
$82.4
7
Operating Pre-Provision Net Revenue, Net Income, and ROA
$ in millions
Operating Pre-Provision Net Revenue and ROA
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$73.7 $79.9
$82.1
$94.5 $100.8
2.16%
2.28% 2.27%
2.37% 2.38%
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$55.9 $58.5 $61.3 $61.6
$67.1
1.64% 1.67% 1.70%
1.55% 1.58%
▪ ROA increased from the prior quarter due to an increase in net interest income resulting from the deployment of excess
cash into the purchase of securities, loan growth, and one additional day in the quarter
Net Income and ROA
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Consolidated Balance Sheet
$ in millions, except per share data
▪ Total loans increased $156 million over
prior quarter and $2.25 billion (20.8%)
over prior year with $1.28 billion
attributable to Hotel Franchise Finance
and the remainder due to organic growth
▪ Deposits increased $242 million over
prior quarter and $2.83 billion (24.4%)
over prior year
▪ Shareholders' Equity increased
$61 million primarily as a function of net
income
▪ Tangible Book Value/Share increased
$0.59 (4.1%) over prior quarter and
$2.98 (25.1%) over prior year
Q3 2016 HIGHLIGHTSQ3-16 Q2-16 Q3-15
Cash & Investments $ 3,134 $ 2,959 $ 2,319
Total Loans 13,034 12,878 10,788
Allowance for Credit Losses (123) (122) (117)
Other Assets 998 1,014 966
Total Assets $ 17,043 $ 16,729 $ 13,956
Deposits $ 14,443 $ 14,201 $ 11,610
Borrowings 427 421 560
Other Liabilities 316 311 202
Total Liabilities $ 15,186 $ 14,933 $ 12,372
Shareholders' Equity 1,857 1,796 1,584
Total Liabilities and Equity $ 17,043 $ 16,729 $ 13,956
Tangible Book Value Per Share $ 14.84 $ 14.25 $ 11.86
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Loan Growth and Portfolio Composition
$ in millions
Q3 2016 HIGHLIGHTS
▪ Quarter-over-quarter loan
growth driven by two loan
categories:
- C&I $137 million
- Construction & Land
$46 million
▪ Year-over-year loan growth
driven by three loan categories:
- CRE, Non-OO $1.41 billion*
- C&I $755 million
- Construction & Land
$258 million*
$2.25 BILLION YEAR-OVER-YEAR GROWTH
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$4,964 $5,267 $5,383 $5,582 $5,719
$2,144 $2,103 $2,052
$2,027 $2,002
$2,211 $2,283 $2,291
$3,601 $3,623
$1,122 $1,133
$1,180
$1,334 $1,380
$347 $350
$336
$335 $310
3.2%
19.9%
20.5%
46.0%
10.4%
2.4%
15.3%
27.8%
43.9%
10.6%
Growth
Residential and
Consumer
Construction &
Land
CRE, Non-Owner
Occupied
CRE, Owner
Occupied
Commercial &
Industrial
$10,788
+427
$11,136
+348
$11,241
+105
$12,878
+1,637*
$13,034
+156
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* Includes purchase of $1.28 billion HFF loan portfolio on April 20, 2016
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Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$4,077 $4,094 $4,635
$5,275 $5,625
$1,024 $1,028
$1,088
$1,278 $1,257
$4,673 $5,297
$5,651
$6,006 $5,969
$1,836
$1,611
$1,708
$1,642 $1,592
Deposit Growth and Composition
$ in millions
Q3 2016 HIGHLIGHTS
▪ Quarter-over-quarter deposit
growth primarily driven by Non-
Int Bearing DDA $350 million
▪ Year-over-year deposit growth
driven by two deposit
categories:
- Non-Int Bearing DDA
$1.55 billion
- Savings & MMDA
$1.30 billion
8.8%
15.9%
35.1%
40.2%
8.7%
11.0%
38.9%
41.4%
$2.83 BILLION YEAR-OVER-YEAR GROWTH
CDs
Savings &
MMDA
Interest Bearing
DDA
Non-Interest
Bearing DDA
Growth
$13,082
+1,052
$12,030
+420 $11,610
+203
$14,201
+1,119
$14,443
+242
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Loans and Deposits by Client or Collateral Domicile
$ in millions
Deposits Loans
38.0%
17.6%
14.6%
30.7%
25.4%
16.0%
16.4%
State Amount %
California $ 4,947 38.0%
Arizona 2,300 17.6%
Nevada 1,900 14.6%
Texas 421 3.2%
New York 314 2.4%
New Jersey 248 1.9%
South Carolina 240 1.8%
Georgia 227 1.7%
Washington 196 1.5%
Colorado 191 1.5%
Florida 186 1.4%
Indiana 142 1.1%
Massachusetts 136 1.0%
Ohio 128 1.0%
North Carolina 126 1.0%
Other (less than 1%) 1,332 10.3%
Totals $ 13,034 100.0%
State Amount %
California $ 4,436 30.7%
Nevada 3,665 25.4%
Arizona 2,307 16.0%
Florida 417 2.9%
Massachusetts 332 2.3%
Colorado 329 2.3
Texas 305 2.1%
Minnesota 288 2.0%
Pennsylvania 250 1.7%
Virginia 242 1.7%
New York 220 1.5%
Illinois 199 1.4%
Washington 179 1.2%
New Jersey 176 1.2%
Other (less than 1%) 1,098 7.6%
Totals $ 14,443 100.0%
} }70.2% 72.1%
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Adversely Graded Assets to Total Assets
NPA's to Total Assets
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
2.70%
2.54%
2.11% 2.24% 1.97%
0.76% 0.65% 0.57% 0.54% 0.53%
OREO Non-Performing Loans
Classified Accruing Loans Special Mention Loans
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$58 $44 $53 $50 $50
$48 $48 $34 $40 $41
$108 $119
$92 $120 $110
$153 $142
$133
$154
$134
Adversely Graded Loans and Non-Performing Assets *
$ in millions
NPA’s
Adversely
Graded
Loans
$364
Accruing TDRs total $55 million as of 9/30/2016
$367 $353
$312
$335
* Amounts are net of total PCI credit and interest rate discounts of $30 million as of 9/30/2016
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Special Mention Loans
OREO
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Gross Charge-Offs Recoveries
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Charge-Offs, Recoveries, ALLL, and Provision
$ in millions
Gross Charge-Offs and (Recoveries)
Net Charge-Offs (Recoveries) and Rate
ALLL+CD/Total Loans Loan Loss Provision
ALLL/Total Loans
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
1.32% 1.25% 1.21%
1.42% 1.37%
$0.0 $2.5 $2.5 $2.5 $2.0
1.09% 1.07% 1.06%
0.95%
0.94%
Net Charge-Offs (Recoveries)
Annualized Net Charge-Off (Recovery) Rate
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
(0.08)%
0.02% (0.01)% 0.04%
ALLL and Credit Discounts
ALLL Credit Discounts
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
$117 $119 $119 $122 $123
$26 $21 $16
$62 $56
Provision for Credit Losses and ALLL Ratios
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Credit Discounts ALLL
$0.5
$2.3
$(2.0)
$1.2
0.08%
$1.1 $2.5
$8.0
$2.7
$(5.7)
$(1.5)
$1.4
$(2.0) $(1.8) $(3.1)
$(0.4)
$143 $140 $135
$184 $179
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ROTCE TBV/Share
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
19.0% 18.6% 18.4%
17.4% 17.5%
$11.86
$12.54
$13.16
$14.25
$14.84
Capital
Total Capital Common Equity Tier 1
Tier 1 Leverage Tangible Common Equity
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
12.1% 12.2%
12.3%
12.9%
13.1%
9.1% 9.7%
9.9%
9.6%
9.8%9.9% 9.8% 9.9% 9.8%
9.6%
8.9%
9.2% 9.1% 9.1%
9.3%
Capital Ratios ROTCE and TBV/Share
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Outlook 4th Quarter 2016
▪ Loan and Deposit Growth
▪ Interest Margin
▪ Operating Efficiency
▪ Asset Quality
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Forward-Looking Statements
This presentation 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 our business, financial and operating
results, and future economic performance, including our recent domestic select-service hotel franchise finance loan portfolio acquisition.
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, 2015 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; additional
regulatory requirements resulting from our continued growth; 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 presentation 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 presentation to reflect new
information, future events or otherwise.
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