Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - WESTERN ALLIANCE BANCORPORATION | pressrelease-6302016.htm |
| 8-K - 8-K - WESTERN ALLIANCE BANCORPORATION | coverpage-pressrelease6302.htm |
2nd Quarter 2016
Earnings Call
July 22, 2016
2
Financial Highlights
▪ Completed Hotel Franchise Finance (HFF) loan portfolio purchase on April 20, 2016, increasing total loans by $1.28 billion as
of the acquisition date
▪ Net income of $61.6 million and earnings per share of $0.60, inclusive of $0.02 in acquisition / restructure expense, compared
to $61.3 million and $0.60 per share for Q1 2016, and $39.5 million and $0.44 per share, inclusive of $0.06 in acquisition /
restructure expense, for Q2 2015
▪ Net interest margin of 4.63%, compared to 4.58% in Q1 2016, and 4.41% in Q2 2015
▪ Efficiency ratio of 43.0%, compared to 45.6% in Q1 2016, and 44.7% in Q2 2015
▪ Total loans of $12.88 billion, up $1.64 billion from prior quarter and total deposits of $14.20 billion, up $1.12 billion from prior
quarter
▪ Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 0.54% of total assets, from 0.57% at
March 31, 2016
▪ Annualized net (recoveries) charge-offs to average loans outstanding of (0.01)%, compared to 0.08% in Q1 2016, and
compared to (0.13)% in Q2 2015
▪ Qualifying debt of $382 million, up $172 million from prior quarter due to issuance of long-term subordinated debt
▪ Stockholders' equity of $1.80 billion, up $136 million from prior quarter as a result of net income and the at-the-market common
stock issuances during the quarter
▪ Tangible common equity ratio of 9.1% and tangible book value per share, net of tax, of $14.25, compared to 9.1% and $13.16,
respectively, at March 31, 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.
Q2 2016
HIGHLIGHTS
2
3
Quarterly Consolidated Financial Results
$ in millions, except EPS
Q2 2016 HIGHLIGHTS
▪ Net Interest Income increased $18.0
million as a result of the inclusion of
Hotel Franchise Finance
▪ Operating Non-Interest Income
decreased $3.5 million (28.9%),
primarily from a reduction in gain on sale
of loans
▪ Operating Non-Interest Expense
increased $2.0 million (2.6%), primarily
driven by higher data processing costs
▪ Acquisition / Restructure and Other
includes costs related to the Hotel
Franchise Finance acquisition and
system termination costs
▪ Provision for Credit Losses steady at
$2.5 million given current credit quality
metrics
▪ Income Tax Expense increased $6.8
million due to increased pre-tax income
and a non-recurring one-time benefit
recognized in Q1 2016 from the early
adoption of ASU 2016-09
Q2-16 Q1-16 Q2-15
Net Interest Income $ 163.7 $ 145.7 $ 108.7
Operating Non-Interest Income 8.6 12.1 5.6
Net Operating Revenue $ 172.3 $ 157.8 $ 114.3
Operating Non-Interest Expense (77.8) (75.8) (54.6)
Operating Pre-Provision Net Revenue $ 94.5 $ 82.1 $ 59.7
Provision for Credit Losses (2.5) (2.5) —
Gains on OREO and Other Assets (0.4) 0.3 1.2
Gain on Sale of Securities — 1.0 0.1
Acquisition / Restructure and Other (3.7) — (7.9)
Pre-tax Income $ 87.9 $ 80.9 $ 53.1
Income Tax (26.3) (19.5) (13.6)
Net Income $ 61.6 $ 61.3 $ 39.5
Preferred Dividend — — (0.2)
Net Income Available to Common $ 61.6 $ 61.3 $ 39.2
Average Diluted Shares Outstanding 103.5 102.5 88.7
Earnings Per Share $ 0.60 $ 0.60 $ 0.44
3
4
Net Interest Drivers
$ in billions
Interest Bearing Deposits and Cost of Funds
Loans and Yield
Interest Earning Assets
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
Q2 2016 HIGHLIGHTS
▪ Loans increased $1.64 billion primarily
due to Hotel Franchise Finance ($1.26
billion), causing a corresponding
increase in yield
▪ Cost of funds increased four basis
points for interest-bearing deposits
due to higher money market rates
▪ Cost of funds for total deposits,
including non-interest bearing
deposits, increased three basis points
to 0.23%
Total Investments and Yield
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
3.06%
2.98% 2.98% 3.02% 2.95%
$1.5
$2.0 $2.0 $2.1
$2.3
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
5.06%
5.31% 5.35% 5.31%
5.43%
$10.4 $10.8 $11.1 $11.2
$12.9
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
0.31% 0.30% 0.30% 0.31%
0.35%
$7.5 $7.5 $7.9 $8.4 $8.9 83.3% 83.3% 83.9% 78.9% 82.1%
12.3%
$12.4
Cash
Investments
Loans
Interest Bearing Deposits
15.4% 15.4%
$14.2
14.4%
$12.9 $13.3
6.3%
$15.7
4
4.4% 1.3% 0.7% 14.8%
3.5%
5
Net Interest Income and Accretion
$ in millions
Q2 2016 HIGHLIGHTS
▪ NIM increased 5 bps largely due to the addition of Hotel
Franchise Finance
▪ NIM adjusted for acquired loan accretion was 4.41% for
the quarter, compared to reported NIM of 4.63%
Net Interest Income and NIM
Acquired Loan Accretion and Adjusted NIM
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
4.41%
4.59%
4.67%
4.58%
$108.7
$137.4 $143.3 $145.7
$163.7
Non-PCI Accretion
PCI Accretion
Adjusted Net Interest Margin, excluding accretion
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$4.7 $3.6 $2.8 $4.1$3.1
$2.3
$1.4 $2.5
$4.1
4.28% 4.37%
4.52% 4.42%
Scheduled Acquisition Loan Accretion
Non-PCI Rate and Credit Accretion
PCI Rate Accretion
Q3-16 Q4-16 Q1-17 Q2-17
$4.2 $3.9 $3.7 $3.5
$0.9 $0.9 $0.9 $0.8
$0.1
Ending rate and credit marks on all acquired loans at 6/30/2016 is $84.7 million
PCI Accretion
Non-PCI Accretion
PCI Rate Accretion
Non-PCI Rate and Credit Accretion
Adjusted NIM
5
4.63%
4.41%
6
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$32.4 $43.7 $41.2
$44.9 $44.7
$7.2
$9.3 $9.8 $9.6 $10.2$7.3
$8.4 $10.5 $10.1 $11.6$7.7
$10.8 $11.3 $11.2 $11.3
Operating Expenses and Efficiency
$ in millions
Q2 2016 HIGHLIGHTS
▪ The Efficiency Ratio decreased to 43.0% as revenue
growth outpaced expense growth
▪ Data Processing expenses increased due to interim
servicing costs related to Hotel Franchise Finance and
to support growth in customer base
Operating Expenses and Efficiency Ratio
Breakdown of Operating Expenses
Other
Professional Fees + Data Processing
Occupancy + Insurance
Compensation
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
44.7%
46.8%
45.2% 45.6%
43.0%
$54.6
$72.2 $72.8 $75.8 $77.8
6
7
Operating Pre-Provision Net Revenue, Net Income, and ROA
$ in millions
Operating Pre-Provision Net Revenue and ROA
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$59.7
$73.7 $79.9
$82.1
$94.5
2.14% 2.16%
2.28% 2.27%
2.37%
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$39.5
$55.9 $58.5 $61.3 $61.6
1.41%
1.64% 1.67% 1.70%
1.55%
▪ Operating Pre-Provision Net Revenue and ROA rose from the prior quarter due to an increase in income from Hotel
Franchise Finance
▪ ROA decreased from the prior quarter due to Acquisition / Restructure Expense and an increase in Income Tax Expense
Net Income and ROA
7
8
Consolidated Balance Sheet
$ in millions, except per share data
▪ Total Loans increased $1.64 billion
(14.6%) over prior quarter and $2.52
billion (24.3%) over prior year with $1.26
billion attributable to Hotel Franchise
Finance and the remainder due to
organic growth
▪ Deposits increased $1.12 billion (8.6%)
over prior quarter and $2.79 billion
(24.5%) over prior year
▪ Borrowings increased $174 million due
to issuance of long-term sub debt
▪ Shareholders' Equity increased $136
million as a result of net income and
ATM common stock issuances
▪ Tangible Book Value/Share increased
$1.09 (8.3%) over prior quarter and
$3.00 (26.7%) over prior year
Q2 2016 HIGHLIGHTSQ2-16 Q1-16 Q2-15
Cash & Investments $ 2,959 $ 3,131 $ 2,290
Total Loans 12,878 11,241 10,361
Allowance for Credit Losses (122) (119) (115)
Other Assets 1,014 995 934
Total Assets $ 16,729 $ 15,248 $ 13,470
Deposits $ 14,201 $ 13,082 $ 11,407
Borrowings 421 247 378
Other Liabilities 311 259 170
Total Liabilities $ 14,933 $ 13,588 $ 11,955
Shareholders' Equity 1,796 1,660 1,515
Total Liabilities and Equity $ 16,729 $ 15,248 $ 13,470
Tangible Book Value Per Share $ 14.25 $ 13.16 $ 11.25
8
9
Loan Growth and Portfolio Composition
$ in millions
Q2 2016 HIGHLIGHTS
▪ Quarter-over-quarter loan
growth driven by two loan
categories:
- CRE, Non-OO $1.31 billion
(HFF $1.22 billion)
- C&I $199 million
- Construction & Land $154
million (HFF $42 million)
▪ Year-over-year loan growth
driven by three loan categories:
- CRE, Non-OO $1.39 billion
(HFF $1.22 billion)
- C&I $817 million
- Construction & Land $331
million (HFF $42 million)
$2.52 BILLION YEAR-OVER-YEAR GROWTH
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$4,765 $4,964 $5,267 $5,383
$5,582
$2,039 $2,144
$2,103 $2,052 $2,027
$2,209 $2,211
$2,283 $2,291
$3,601$1,003
$1,122 $1,133
$1,180
$1,334
$345
$347
$350 $336
$335
3.3%
19.7%
21.3%
46.0%
9.7%
2.6%
15.7%
28.0%
43.3%
10.4%
Growth
Residential and
Consumer
Construction &
Land
CRE, Non-Owner
Occupied
CRE, Owner
Occupied
Commercial &
Industrial
$10,361
$10,788
+427
$11,136
+348
$11,241
+105
$12,878
+1,637
9
10
AZ: 18%
CA: 39%NV: 15%
Other: 28%
AZ: 18%
CA: 14%
NV: 68%
Ten Year Change in Geographic Loan Diversification
6/30/2006 6/30/2016
10
$2.77 BILLION $12.88 BILLION
▪ Although over the past 10 years, on a
dollar basis, loans in Nevada have
increased moderately, loan growth in
other markets has reduced the
Nevada portion of total loans from
68% to 15%
▪ California loan mix has increased both
organically and through the Bridge
Bank acquisition
▪ Increase in Other relates to NBLs
grown organically and acquired
HIGHLIGHTS
11
Ten Year Change in Loan Product Diversification
6/30/2006 6/30/2016
11
▪ Mix decreases:
- Construction & Land 62%
- Residential 82%
- Total Real Estate 31%
▪ Mix increases:
- Public Finance grown multiples
from 2006 balances, much of
which is rated investment grade
- C&I growth of 65% primarily
related to NBLs grown organically
and acquired
HIGHLIGHTS
Construction & Land Public Finance
CRE, Non-Owner Occupied Residential
CRE, Owner Occupied Consumer
Commercial & Industrial
27.7%
20.6% 17.7%
20.3%
12.6%
1.0%
10.4%
27.7%
14.2%
33.6%
11.5%
2.3%
0.3%
$2.77 BILLION $12.88 BILLION
12
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$3,924 $4,077 $4,094 $4,635
$5,275
$1,001 $1,024 $1,028
$1,088
$1,278
$4,734 $4,673
$5,297
$5,651
$6,006
$1,747 $1,836
$1,611
$1,708
$1,642
Deposit Growth and Composition
$ in millions
Q2 2016 HIGHLIGHTS
▪ Quarter-over-quarter deposit
growth driven by two deposit
categories:
- Non-Int Bearing DDA $640
million
- Savings & MMDA $355
million
▪ Year-over-year deposit growth
driven by two deposit
categories:
- Non-Int Bearing DDA $1.35
billion
- Savings & MMDA $1.27
billion
8.8%
15.3%
34.4%
41.5%
9.0%
11.6%
37.1%
42.3%
$2.79 BILLION YEAR-OVER-YEAR GROWTH
CDs
Savings &
MMDA
NOW
Non-Interest
Bearing DDA
Growth $12,030
+420$11,610
+203 $11,407
$13,082
+1,052
$14,201
+1,119
12
13
Adversely Graded Assets to Total Assets
NPA's to Total Assets
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
2.69% 2.70%
2.54%
2.11% 2.24%
0.88% 0.76% 0.65% 0.57% 0.54%
OREO Non-Performing Loans
Classified Accruing Loans Special Mention Loans
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$59 $58 $44 $53 $50
$60 $48 $48 $34 $40
$101 $108 $119
$92 $120
$132 $153 $142
$133
$154
Adversely Graded Loans and Non-Performing Assets *
$ in millions
NPA’s
Adversely
Graded
Loans
$312
Accruing TDRs total $68 million as of 6/30/2016
$352 $367 $353 $364
* Amounts are net of total PCI credit and interest rate discounts of $32.3 million as of 6/30/2016
13
Special Mention Loans
OREO
14
Hotel Franchise Finance Purchase
$ in millions
* Purchase accounting adjustments are preliminary as of 6/30/2016 and
are subject to measurement period adjustments.
HFF Purchase Accounting Adjustments *
$36.0
$3.6
$11.9 $6.1
14
Non-PCI PCI
Rate Credit Rate Credit Unfunded
Reserve
$3.2
$0.5
$3.7
$0.9
$0.7
$0.7
▪ The purchase of GE's domestic select-service Hotel Franchise
Finance (HFF) loan portfolio closed on April 20, 2016
▪ At acquisition, HFF portfolio consisted of loans with an
outstanding principal balance of $1.34 billion
- Portfolio consisted of CRE Non-OO loans (94%) and
Construction loans (6%)
- All loans are performing
- 96% of loans rated pass, 4% ($54 million) rated special
mention or classified accruing
▪ Loans were recorded net of rate and credit marks totaling $60
million
- Non-PCI rate and credit marks will be accreted over a
weighted avg term of approximately 3.75 years
- PCI rate marks will be accreted over a weighted avg
term of approximately 4.25 years
- An reserve for unfunded commitments of $7.0 million
was also recorded
▪ Total purchase price was $1.27 billion, representing a 5%
discount ($67 million) to outstanding balances
▪ Preliminary fair value adjustments total $67 million, resulting in
preliminary goodwill of $0.2 million
▪ Loans expected to be integrated into our platform by end of Q3
Construction
CRE, Non-Owner Occupied
15
Gross Charge-Offs Recoveries
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$8.0
$(5.0) $(3.1) $(5.7)
Charge-Offs, Recoveries, ALLL, and Provision
$ in millions
Gross Charge-Offs and (Recoveries)
Net (Recoveries) / Charge-Offs and Rate
ALLL+CD/Total Loans Loan Loss Provision
ALLL/Total Loans
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
1.35% 1.32% 1.25% 1.21%
1.42%
$0.0 $0.0 $2.5 $2.5 $2.5
1.11% 1.09% 1.07% 1.06% 0.95%
Net Charge-Offs (Recoveries)
Net Charge-Off (Recovery) Rate
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$2.3
(0.13)% (0.08)%
0.08%
(0.01)%
ALLL and Credit Discounts
ALLL Credit Discounts
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
$115 $117 $119 $119 $122
$25 $26 $21 $16
$62
Provision for Credit Losses and ALLL Ratios
15
Credit Discounts
(CD)
ALLL
$(2.0)
$0.5
$(3.0)
$(0.4)
0.02%
$2.0 $1.1 $2.5 $1.5
$(2.0) $(1.8)
16
ROTCE TBV/Share
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
16.0%
19.0% 18.6% 18.4%
17.4%
$11.25
$11.86
$12.54
$13.16
$14.25
Capital
Total Capital Common Equity Tier 1
Tier 1 Leverage Tangible Common Equity
Q2-15 Q3-15 Q4-15 Q1-16 Q2-16
12.2% 12.1% 12.1%
12.3%
12.9%
9.1% 9.1%
9.5%
9.9%
9.6%
10.0% 9.9% 9.8% 9.9% 9.8%
8.7%
8.9%
9.2% 9.1%
9.1%
Capital Ratios ROTCE and TBV/Share
16
17
Outlook 3rd Quarter 2016
▪ Loan and Deposit Growth
▪ Interest Margin
▪ Operating Efficiency
▪ Asset Quality
17
18
Forward-Looking Statements
This presentation contains 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.
18