Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - WESTERN ALLIANCE BANCORPORATION | pressrelease-6302017.htm |
| 8-K - 8-K - WESTERN ALLIANCE BANCORPORATION | coverpage-pressrelease6302.htm |
Earnings Call
2nd Quarter 2017
July 21, 2017
2
Financial Highlights
▪ Net income of $80.0 million and earnings per share of $0.76, compared to $73.4 million and
$0.70 per share for Q1 2017, and $61.6 million and $0.60 per share, inclusive of $0.02 in
acquisition / restructure expense for Q2 2016
▪ Net interest margin of 4.61%, compared to 4.63% in Q1 2017, and 4.63% in Q2 2016
▪ Operating efficiency ratio of 41.2%, compared to 44.4% in Q1 2017, and 43.0% in Q2 2016
▪ Total loans of $13.99 billion, up $327 million from prior quarter and total deposits of $16.03 billion,
up $675 million from prior quarter
▪ Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 0.32% of total
assets, from 0.44% at March 31, 2017
▪ Net loan (recoveries) charge-offs to average loans outstanding of (0.03)%, compared to 0.04% in
Q1 2017, and (0.01)% in Q2 2016
▪ Tangible common equity ratio of 9.5% and tangible book value per share, net of tax, of $16.71,
compared to 9.4% and $15.86, respectively, at March 31, 2017
Q2 2017
Highlights
2
3
Quarterly Consolidated Financial Results
$ in millions, except EPS
Q2 2017 Highlights
▪ Net Interest Income increased
primarily as a result of higher yields on
loans from rising interest rates and
continued loan growth
▪ Operating Non-Interest Expense was
flat from Q1 2017
▪ Provision for Credit Losses
commensurate with loan growth, offset
by recoveries during the quarter
▪ Income Tax increased primarily as a
result of cyclical excess tax benefits on
share-based payment awards
recognized in Q1 2017, not repeating
in the current quarter
Q2-17 Q1-17 Q2-16
Net Interest Income $ 192.7 $ 179.3 $ 163.7
Operating Non-Interest Income 10.5 9.9 8.6
Net Operating Revenue $ 203.2 $ 189.2 $ 172.3
Operating Non-Interest Expense (88.0) (88.3) (77.8)
Operating Pre-Provision Net Revenue $ 115.2 $ 100.9 $ 94.5
Provision for Credit Losses (3.0) (4.3) (2.5)
(Losses) Gains on OREO and Other Assets (0.2) 0.5 (0.4)
Acquisition / Restructure Expense — — (3.7)
Other (0.1) 0.7 —
Pre-tax Income $ 111.9 $ 97.8 $ 87.9
Income Tax (32.0) (24.5) (26.3)
Net Income Available to Common $ 80.0 $ 73.4 $ 61.6
Average Diluted Shares Outstanding 105.0 104.8 103.5
Earnings Per Share $ 0.76 $ 0.70 $ 0.60
3
4
Net Interest Drivers
$ in billions, unless otherwise indicated
Interest Bearing Deposits and Cost of Funds
Loans and Yield
Deposits, Borrowings, and Cost of Liability Funding
Q2 2017 Highlights
▪ Loan yield increased due to higher yields
on C&I, CRE, and Construction loans,
reflecting rising interest rates
▪ Cost of funds increased 5 basis points
due to volume and rate mix across all
interest-bearing deposit categories
▪ Cost of funds for total deposits and
borrowings increased 1 basis point to
0.35%
Total Investments and Yield
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
2.95% 2.90% 2.81%
3.08% 3.05%
$2.3 $2.8 $2.8
$2.9 $3.3
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
5.43% 5.44% 5.41% 5.47%
5.60%
$12.9 $13.0 $13.2 $13.7 $14.0
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
0.35% 0.36% 0.35% 0.37%
0.42%
$8.9 $8.8 $8.9 $9.2 $9.2
Investments
Loans
Interest Bearing Deposits
Non-Interest Bearing Deposits
Total Borrowings
4
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$8.9 $8.8 $8.9 $9.2 $9.2
$5.3 $5.6 $5.6 $6.1 $6.9
0.30% 0.33% 0.32% 0.34% 0.35%
$0.4 $0.4 $0.4 $0.4 $0.4
5
Net Interest Income and Accretion
$ in millions
Q2 2017 Highlights
▪ NIM decreased 2 basis points to 4.61% quarter-over-
quarter as a result of an increase in the average cash
balance and a decrease in the loan-to-deposit ratio
Net Interest Income, NIM, and Average Interest-Earning Assets
Acquired Loan Accretion
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
4.63% 4.55% 4.57% 4.63% 4.61%
$163.7 $172.5 $175.3
$179.3
$192.7
Non-PCI Accretion PCI Accretion
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$4.1 $4.6 $4.9 $4.1 $4.4
$4.1 $4.2 $2.1 $2.3 $2.7
Scheduled Acquisition Loan Accretion *
Q3-17 Q4-17 Q1-18 Q2-18
$3.2 $3.0 $2.6 $2.6
$0.7 $0.7 $0.7 $0.7
* Amounts do not include early loan payoffsEnding rate and credit marks on all acquired loans at 6/30/2017 is $58 million
PCI Accretion
Non-PCI Accretion
PCI Rate Accretion
Non-PCI Rate and Credit Accretion
5
$17,648$16,318$16,150$15,932$14,902
NIM Avg Interest Earning Assets
Net Interest Income
6
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$44.7 $49.5 $49.7 $51.6 $52.2
$10.2 $10.0 $10.4
$10.1 $10.5$10.9
$10.7 $12.1 $14.1 $12.9
$12.0 $12.2 $10.5
$12.5
Operating Expenses and Efficiency
$ in millions
Q2 2017 Highlights
▪ The operating efficiency ratio decreased from 44.4% in
Q1 2017 to 41.2% as revenue increased 7% while
expenses remained flat
Operating Expenses and Efficiency Ratio
Breakdown of Operating Expenses
Other
Professional Fees + Data Processing
Occupancy + Insurance
Compensation
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
43.0% 43.0% 42.4%
44.4%
41.2%
$77.8 $82.4 $82.7
$88.3
6
$88.0
$12.5
7
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$61.6
$67.1 $69.8
$73.4
$80.0
1.55% 1.58%
1.63% 1.69%
1.71%
Operating Pre-Provision Net Revenue, Net Income, and ROA
$ in millions
Operating Pre-Provision Net Revenue and Operating PPNR ROA Net Income and ROA
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$94.5 $100.8
$103.1 $100.9
$115.2
2.37% 2.38% 2.40% 2.32%
2.46%
7
8
Consolidated Balance Sheet
$ in millions
▪ Loans increased 2.4% over prior
quarter and 8.7% over prior year
▪ Deposits increased 4.4% over prior
quarter and 12.9% over prior year
▪ Loan to Deposit Ratio of 87.3%,
compared to 89.0% in prior quarter
and 90.7% in prior year
▪ Shareholders' Equity increased
primarily as a function of Net Income
▪ Tangible Book Value/Share increased
5.4% over prior quarter and 17.3%
over prior year
Q2 2017 HighlightsQ2-17 Q1-17 Q2-16
Investments & Cash $ 3,890 $ 3,516 $ 2,959
Loans 13,990 13,663 12,878
Allowance for Credit Losses (132) (128) (122)
Other Assets 1,097 1,072 1,014
Total Assets $ 18,845 $ 18,123 $ 16,729
Deposits $ 16,031 $ 15,356 $ 14,201
Borrowings 408 403 421
Other Liabilities 347 395 311
Total Liabilities $ 16,786 $ 16,154 $ 14,933
Shareholders' Equity 2,059 1,969 1,796
Total Liabilities and Equity $ 18,845 $ 18,123 $ 16,729
Tangible Book Value Per Share $ 16.71 $ 15.86 $ 14.25
8
9
Loan Growth and Portfolio Composition
$ in millions
Q2 2017 Highlights
▪ Quarter-over-quarter loan growth
driven by:
◦ C&I $264 million
◦ CRE, Non-OO $41 million
◦ Residential $30 million
▪ Year-over-year loan growth
driven by:
◦ C&I $740 million
◦ Construction & Land
$268 million
$1.11 Billion Year Over Year Growth
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$5,581 $5,719 $5,860 $6,057 $6,321
$2,027 $2,002 $2,029
$2,043 $2,035
$3,601 $3,623 $3,544
$3,608 $3,649
$1,334 $1,380 $1,478
$1,602 $1,602$335
$310 $298
$353 $383
2.6%
15.6%
28.0%
43.3%
10.4%
2.7%
14.5%
26.1%
45.2%
11.5%
* Increase in loans includes $1.28 billion from the acquisition of GE's hotel
franchise finance loan portfolio on April 20, 2016.
Residential and
Consumer
Construction &
Land
CRE, Non-OO
CRE, Owner
Occupied
Commercial &
Industrial
$12,878
+1,637*
$13,034
+156
$13,209
+175
$13,663
+454
$13,990
+327
9
10
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$5,275 $5,625 $5,633 $6,114
$6,859
$1,278 $1,257 $1,347
$1,449
$1,481
$6,006 $5,969
$6,121
$6,254
$6,104
$1,642 $1,592
$1,449
$1,539
$1,587
Deposit Growth and Composition
$ in millions
Q2 2017 Highlights
▪ Quarter-over-quarter deposit
growth driven by:
◦ Non-Interest bearing DDA
of $745 million
◦ CDs of $48 million
◦ Interest Bearing DDA of
$32 million
◦ Offset by Savings and
MMDA decrease of
$150 million
▪ Year-over-year deposit growth
driven by:
◦ Non-Interest bearing DDA
growth of $1.58 billion
◦ Interest Bearing DDA of
$203 million
◦ Savings and MMDA of
$98 million
◦ Offset by CDs decrease of
$55 million
9.0%
11.6%
37.1%
42.3%
9.2%
9.9%
42.8%
38.1%
$1.83 Billion Year Over Year Growth
CDs
Savings and
MMDA
Interest-Bearing
DDA
Non-Interest
Bearing DDA
$14,550
+107
$14,443
+242 $14,201 +1,119
$15,356
+806
$16,031
+675
10
11
Adversely Graded Assets to Total Assets
NPAs to Total Assets
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
2.24%
2.03% 2.07%
2.25%
2.06%
0.54% 0.53% 0.51% 0.44% 0.32%
OREO Non-Performing Loans
Classified Accruing Loans Special Mention Loans
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$50 $50 $48 $45 $31
$40 $41 $40 $34 $30
$120 $110 $107 $133 $166
$154
$134 $148
$175 $141
Adversely Graded Loans and Non-Performing Assets *
$ in millions
NPAs
Adversely
Graded
Loans
$387
Accruing TDRs total $48 million as of 6/30/2017
$364
$335 $343
$368
* Amounts are net of total PCI credit and interest rate discounts of $24 million as of 6/30/2017
11
Special Mention Loans
OREO
12
Gross Charge-Offs Recoveries
Net Charge-Off (Recovery) Rate
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
Charge-Offs, Recoveries, ALLL, and Provision
$ in millions
Gross Charge-Offs, Recoveries and Rate
Provision for Credit Losses
ALLL
ALLL/Total Organic Loans
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$122 $123 $125 $128 $132
1.15% 1.13% 1.11% 1.08% 1.08%
ALLL and ALLL to Organic Loans Ratio
12
$2.7
$1.4
$(1.5) $(1.4) $(1.8)
$(2.2)
$2.8
million
$(4.0)
0.04%
(0.01)%
(0.03)%
(0.03)%
0.04%
Credit Discounts CD/Acquired Loans
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$61.7 $56.1
$47.3 $45.1 $37.8
2.79% 2.66% 2.45% 2.46% 2.19%
Credit Discounts (CD) and CD to Acquired Loans Ratio
$2.7
$1.5
Provision for Credit Losses
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
$2.5 $2.0 $1.0
$4.3
$3.0
13
ROTCE TBV/Share
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
17.4% 17.5%
17.6%
17.8%
18.4%
$14.25 $14.84
$15.17 $15.86
$16.71
Capital
Total Capital Common Equity Tier 1
Tier 1 Leverage Tangible Common Equity
Q2-16 Q3-16 Q4-16 Q1-17 Q2-17
12.9% 13.1%
13.2% 13.1% 13.3%
9.6%
9.8% 10.0%
10.0%
10.3%
9.8%
9.9%
10.2%
9.9%
9.1% 9.3%
9.4% 9.4% 9.5%
Capital Ratios ROTCE and TBV/Share
13
9.6%
14
Management Outlook
14
▪ Financial Position
▪ Revenue
▪ Expense
▪ Asset Quality
Questions
&
Answers
16
Forward-Looking Statements
16
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. 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, 2016 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 to have 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.