Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - WESTERN ALLIANCE BANCORPORATION | pressrelease-3312018.htm |
| 8-K - 8-K - WESTERN ALLIANCE BANCORPORATION | coverpage-pressrelease3312.htm |
EARNINGS CALL
1st QUARTER 2018
April 20, 2018
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1st Quarter 2018 | Financial Highlights
▪ Net income of $100.9 million ($0.96 per share), compared to $89.3 million ($0.85 per share) for
Q4 2017, and $73.3 million ($0.70 per share) for Q1 2017
▪ Net interest margin of 4.60%, compared to 4.73% in Q4 2017, and 4.63% in Q1 2017
▪ Operating efficiency ratio of 42.7%, compared to 40.7% in Q4 2017, and 44.4% in Q1 2017
▪ Effective tax rate of 17.10%, compared to 28.13% in Q4 2017 due to the effect of the Tax Cuts
and Jobs Act ("TCJA") and the cyclical excess tax benefits on share-based payment awards
▪ Total loans of $15.56 billion, up $466 million from prior quarter and total deposits of $17.35
billion, up $382 million from prior quarter
▪ Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.33%,
compared to 0.36% at December 31, 2017, and 0.44% at March 31, 2017
▪ Net loan charge-offs to average loans outstanding of 0.04%, compared to 0.04% in Q4 2017,
and 0.04% in Q1 2017
▪ Tangible common equity ratio of 9.8% and tangible book value per share, net of tax, of $18.86,
compared to 9.6% and $18.31, respectively, at December 31, 2017
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$ in millions, except EPS
Q1 2018 Highlights
▪ Net Interest Income increased
$3.2 million as a result of loan
growth, offset by higher rates on
MMDA and interest expense on
FHLB advances
▪ Operating Non-Interest Expense
increased $3.9 million primarily
from increased seasonal
compensation costs
▪ Income tax expense decreased
as a result of the effects from the
TCJA and cyclical excess tax
benefits on share-based
payment awards.
Q1-18 Q4-17 Q1-17
Net Interest Income $ 214.2 $ 211.0 $ 179.3
Operating Non-Interest Income 12.7 12.3 10.0
Net Operating Revenue $ 226.9 $ 223.3 $ 189.3
Operating Non-Interest Expense (99.4) (95.4) (88.4)
Operating Pre-Provision Net Revenue $ 127.6 $ 127.8 $ 100.9
Provision for Credit Losses (6.0) (5.0) (4.3)
Gains on OREO and Other Assets 1.2 — 0.5
Fair Market Value Adjustments (1.1) — —
Other — 1.4 0.7
Pre-tax Income $ 121.7 $ 124.3 $ 97.8
Income Tax (20.8) (35.0) (24.5)
Net Income $ 100.9 $ 89.3 $ 73.3
Average Diluted Shares Outstanding 105.3 105.2 104.8
Earnings Per Share $ 0.96 $ 0.85 $ 0.70
Quarterly Consolidated Financial Results
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Interest Bearing Deposits and
Cost of Funds
Loans and Yield
Deposits, Borrowings, and
Cost of Liability Funding
Q1 2018 Highlights
▪ Loan yield decreased 13 basis
points largely due to a decrease in
the tax equivalent adjustment
("TEA") and acquired loan accretion
▪ Cost of interest-bearing deposits
increased 7 basis points due to
higher rates across all deposit
accounts
▪ Cost of funds for total deposits and
borrowings increased 6 basis points
to 0.46%
Total Investments and Yield
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
3.08% 3.05% 3.10% 3.15% 3.07%
$2.9 $3.3
$3.8 $3.8 $3.7
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
5.47%
5.60% 5.68%
5.72%
5.59%
$13.7 $14.0 $14.5 $15.1
$15.6
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
0.37% 0.42%
0.49% 0.53%
0.60%
$9.2 $9.2 $9.3 $9.5 $9.9
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$9.2 $9.2 $9.3 $9.5 $9.9
$6.1 $6.9 $7.6 $7.4 $7.5
0.34% 0.35% 0.38%
0.40%
0.46%
Investments
Loans
Interest Bearing Deposits
Non-Interest Bearing Deposits
Total Borrowings
$0.4 $0.4 $0.4
$0.8 $0.7
$ in billions, unless otherwise indicated
Net Interest Drivers
© Excluding the effects of the decrease in the TEA from the TCJA, adjusted yield on investments and
loans would be 3.28% and 5.70%, respectively.
©
©
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Q1 2018 Highlights
▪ NIM decreased 13 basis points to 4.60% quarter-
over-quarter due to a decrease in the tax
equivalent adjustment and higher rates on deposit
accounts, partially offset by the favorable impacts
of rising short-term interest rates
Net Interest Income, NIM, and
Average Interest Earnings Assets
Non-PCI Accretion PCI Accretion
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$4.1 $4.4 $4.3 $4.4 $4.2
$2.3 $2.7 $3.2 $2.7 $1.5
Acquired Loan Accretion
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
4.63% 4.61%
4.65% 4.73% 4.60%$179.3
$192.7 $201.6
$211.0 $214.2
Q2-18 Q3-18 Q4-18 Q1-19
$1.8 $1.8 $1.8 $1.8
$0.3 $0.3 $0.3 $0.3
Scheduled Acquisition Loan Accretion *
PCI Accretion
Non-PCI Accretion
PCI Rate Accretion
Non-PCI Rate and Credit Accretion
$16,318 $17,648 $18,291 $18,792 $19,144
NIM Net Interest Income
Avg Interest Earning Assets
$ in millions
Net Interest Income and Accretion
* Amounts do not include early loan payoffsEnding rate and credit marks on all acquired loans at 3/31/2018 is $41 million
© Excluding the effects of the decrease in the TEA from the
TCJA, adjusted NIM would be 4.72%.
©
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Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$51.6 $52.3 $52.7 $57.7 $62.1
$10.1 $10.5 $11.0 $10.2
$10.7$14.1 $12.9 $10.6 $11.6
$11.2$12.6 $12.5 $14.7
$16.0 $15.3
Breakdown of Operating Expenses
Operating Expenses and Efficiency
Q1 2018 Highlights
▪ The operating efficiency ratio increased from
40.7% in Q4 2017 to 42.7% primarily due to a
decrease in the TEA
▪ Operating expenses increased from the prior
quarter primarily due to an increase in
compensation costs
Other
Professional Fees + Data Processing
Occupancy + Insurance
Compensation
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
44.4%
41.2%
40.0% 40.7%
42.7%
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$ in millions
Operating Expenses and Efficiency Ratio
$88.4 $88.2 $89.0 $95.4 $99.4
Efficiency Ratio Operating Expenses
© Excluding the effects of the decrease in the TEA from the TCJA,
the adjusted operating efficiency ratio would be 41.7%.
©
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Net Income and ROA
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$73.3
$80.0 $82.8
$89.3
$100.91.69% 1.71% 1.71%
1.79%
1.99%
Operating Pre-Provision Net Revenue and
Operating PPNR ROA
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$100.9
$115.2
$122.7 $127.8 $127.6
2.32%
2.46%
2.53%
2.57%
2.51%
$ in millions
Operating Pre-Provision Net Revenue, Net Income, and ROA
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▪ Loans increased $466 million (3.1%)
over prior quarter and $1.90 billion
(13.9%) over prior year
▪ Deposits increased $382 million (2.3%)
over prior quarter and $2.00 billion
(12.9%) over prior year
▪ Shareholders' Equity increased
$64 million over prior quarter and $325
million over prior year as a function of
Net Income
▪ Tangible Book Value/Share increased
$0.55 over prior quarter and $3.00
(18.9%) over prior year
Q1 2018 HighlightsQ1-18 Q4-17 Q1-17
Investments & Cash $ 4,174 $ 4,237 $ 3,516
Loans 15,560 15,094 13,663
Allowance for Credit Losses (145) (140) (128)
Other Assets 1,172 1,138 1,071
Total Assets $ 20,761 $ 20,329 $ 18,122
Deposits $ 17,355 $ 16,972 $ 15,356
Borrowings 685 793 402
Other Liabilities 427 334 395
Total Liabilities $ 18,467 $ 18,099 $ 16,153
Shareholders' Equity 2,294 2,230 1,969
Total Liabilities and Equity $ 20,761 $ 20,329 $ 18,122
Tangible Book Value Per Share $ 18.86 $ 18.31 $ 15.86
$ in millions
Consolidated Balance Sheet
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Highlights$1.90 Billion Year Over Year Growth
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$6,057 $6,321 $6,738 $6,841 $6,944
$2,043 $2,035
$2,062 $2,242 $2,265
$3,608 $3,649
$3,628 $3,904
$3,925
$1,602 $1,602
$1,666
$1,632 $1,950$353 $383
$428
$475 $469
2.6%
15.0%
26.4%
44.3%
11.7%
3.0%
14.6%
25.2%
44.6%
12.5% Residential and
Consumer
Construction &
Land
CRE, Non-Owner
Occupied
CRE, Owner
Occupied
Commercial &
Industrial
$13,663
+$454
$13,990
+$327
$14,522 +
$532
$15,094
+$572
$15,553
+$459
$ in millions
5 Quarter Loan Growth and Portfolio Composition
Quarter-over-quarter loan growth
driven by:
¡ Construction and Land $ 318 million
¡ C&I 103 million
Year-over-year loan growth across all
loan types:
¡ C&I $ 887 million
¡ Construction & Land 348 million
¡ CRE, Non-OO 317 million
¡ CRE, OO 222 million
¡ Residential & Consumer 116 million
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Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$6,114 $6,859
$7,609 $7,434 $7,502
$1,449
$1,481
$1,406 $1,586 $1,776
$6,254
$6,104
$6,300 $6,331 $6,315
$1,539
$1,587
$1,590 $1,622 $1,762
9.4%
10.0%
39.8%
40.7%
10.2%
10.2%
43.2%
36.4%
$2.00 Billion Year Over Year Growth
CDs
Savings and
MMDA
Interest Bearing
DDA
Non-Interest
Bearing DDA
$16,905
+874 $16,031
+675 $15,356
+806
$16,973
+68
$17,355
+382
$ in millions
5 Quarter Deposit Growth and Composition
Highlights
Quarter-over-quarter deposit growth
driven by:
¡ Interest Bearing DDA $ 190 million
¡ CDs 140 million
Year-over-year deposit growth across
all deposit types:
¡ Non-interest bearing
DDA $ 1.39 billion
¡ Interest-Bearing DDA 327 million
¡ CDs 223 million
¡ Savings and MMDA 61 million
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Adversely Graded Assets to Total Assets
NPAs to Total Assets
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
2.25%
2.04% 2.12%
1.85% 1.83%
0.44% 0.32% 0.42% 0.36% 0.33%
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$45 $31 $29 $28 $30
$34 $30 $55 $44 $37
$133 $166 $122 $128 $127
$175 $141 $200
$155 $185
NPAs
Adversely
Graded
Loans
$355
$387
$368
$406
$379
* Amounts are net of total PCI credit and interest rate discounts of $13.9 million as of 3/31/2018
Special Mention Loans
$ in millions
Adversely Graded Loans and Non-Performing Assets *
Classified Accruing Loans
Non-Performing Loans
OREO
Accruing TDRs total $43.8 million as of 3/31/2018
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Gross Charge-Offs Recoveries
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
Credit Discounts CD/Acquired Loans
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$45.1
$37.8 $32.7 $27.0 $23.1
2.46% 2.19% 2.02% 1.86% 1.73%
Provision for Credit Losses
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
$4.3
$3.0
$5.0 $5.0 $6.0
ALLL ALLL/Total Organic Loans
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
1.08% 1.08% 1.06% 1.03% 1.02%
$2.7 $2.8 $2.3 $3.2
$(4.0)
$(0.9) $(1.4) $(2.8)
$3.6
$(2.2)
$128 $132 $140 $136
$145
$ in millions
Charge-Offs, Recoveries, ALLL, and Provision
Gross Charge-Offs, Recoveries and Rate
Provision for Credit Losses Credit Discounts and Credit Discounts to
Acquired Loans Ratio
ALLL and ALLL to Organic Loans Ratio
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ROTCE and TBV/ShareCapital Ratios
ROTCE TBV/Share
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
17.8%
18.4% 18.2%
18.8%
20.5%
$15.86
$16.71
$17.53 $18.31
$18.86
Total Capital Common Equity Tier 1
Tier 1 Leverage Tangible Common Equity
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18
13.1% 13.3% 13.3% 13.3% 13.2%
10.0%
10.3% 10.4% 10.4% 10.5%
10.2%
10.1% 10.3%
10.5%
9.4% 9.5% 9.4% 9.6%
9.8%
Capital
9.9%
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▪ Financial Position
▪ Margin
▪ Operating Leverage
▪ Asset Quality
▪ Tax Rate
Management Outlook
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Questions and Answers
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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, 2017 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.
Forward-Looking Statements