Western Alliance Bancorporation · NYSE:WAL
Western Alliance Bancorporation — Q2 2011 Earnings Presentation
27 slides from Western Alliance Bancorporation's earnings presentation, Jul 21, 2011
Slide 1: 2nd Quarter 2011 Earnings Call
Robert Sarver Chairman & CEO Ken Vecchione President & COO Dale Gibbons Executive Vice President & CFO 2nd Quarter 2011 Earnings Call Western Alliance Bancorporation (NYSE: WAL) July 22, 2011
Slide 2: Forward-Looking Information
Forward-Looking Information 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. The forward-looking statements cont
Slide 3: 2nd Quarter 2011 Highlights
2nd Quarter 2011 Highlights Increasing Earning PowerNet income of $6.2 million, up $5.0 million or 407% from last yearNet interest income of $63.3 million, up $5.8 million or 10.1% from last yearNet interest margin of 4.34%, up 0.18% from 4.16% last yearPre-tax, pre-credit income of $27.6 million up
Slide 4: Key Financial Metrics
Key Financial Metrics (1) Operating expenses exclude goodwill impairment, merger related expenses and gains/losses on sale of repossessed assets. (2) Pre-tax, pre-credit income is a non-GAAP number, for definition, see table on page 5. (in millions) Net Interest Income $57.5 Q2-10 $59.5 Q3-10 $60.9
Slide 5: Record Pre-Tax, Pre Credit Income Growth
Record Pre-Tax, Pre Credit Income Growth(1) Eighth consecutive quarterly increase (1) Pre-tax, pre-credit income is a non-GAAP number. (2) Excludes securities and goodwill impairment, mark-to-market gains/losses, gains/losses on sale of investment securities and repossessed assets, merger related ex
Slide 6: PTPC-ROAA
PTPC-ROAA(1) Steadily climbing toward interim goal of 2% PTPC-ROAA 2.0% 1.8% 1.5% 1.3% 1.0% Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 1.50% 1.62% 1.59% 1.63% 1.72% (1) Pre-tax, pre-credit income is a non-GAAP number, for definition see table on page 5.
Slide 7: 2nd Quarter Net Income Comparison
(in millions) 2nd Quarter Net Income Comparison Pre-Tax, Pre-Credit Income(1) Q2-2011 Q2-2010 $ Change Provision for loan and lease losses $27.6 $22.7 $4.9 Income Net of Provision Expense (11.9) (23.1) 11.2 $15.7 ($0.4) $16.2 Securities gains/ losses and valuation 2.8 14.3 (11.5) Repossessed and oth
Slide 8: Net Interest Margin Summary
Net Interest Margin Summary Yield on earning assets (1) 5.50% 5.00% 4.50% 4.00% 3.50% 5.06% 5.13% 5.11% 5.05% Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Cost of funding 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.81% 0.77% 0.71% Net interest margin 4.40% 4.30% 4.20% 4.10% 4.16% 4.32% 4.26% 4.35% 4.34% Reported on a ta
Slide 9: Improvement in Efficiency
Improvement in Efficiency(1) Net interest income drivers: Strong loan/deposit growthImproving asset qualityLower funding costStable cost base:Lower FDIC assessmentsNon-structural volatility in Legal & Other expense efficiency ratio 66% 63% 60% 57% 64.4% 62.4% 62.2% 61.9% 60.2% Q2-10 Q3-10 Q4-10 Q1-1
Slide 10: Expanding Gap of Earning Power Over Credit Costs
Expanding Gap of Earning Power Over Credit Costs(1) Pre-tax, pre-credit income surpassed provision expense by $15.7 million in Q2-2011. Fourth and largest consecutive quarterly surplus. (in millions) PTPC Income vs. Provision Expense $11.9 Million $27.6 Million Charge-Offs vs. Reserves Loan loss res
Slide 11: Summary of Deposits
Summary of Deposits(1) 38% 27% 8% Total deposits grew by $91 million or 1.7% since Q1-2011 Over $358 million total deposit growth since Q2-2010 Non-interest bearing DDAs: Up $62 million or 4.2% since Q1-2011 Up $186 million or 14% since Q2-2010 27% $5,230 $5,497 $5,588 38% 26% 9% 26% 35% 28% 12% 25%
Slide 12: Loan Portfolio Composition
Loan Portfolio Composition (in millions) $4,130 30% 22% 13% 20% 13% 2% $4,278 30% 25% 22% 9% 12% 29% 27% 23% 9% 11% Continued loan growth: Total loan growth of $134 million or 3.1% from Q1-2011 Total loan growth of $282 million or 6.8% since Q2-2010 Continued improvement in loan concentrations: Comm
Slide 13: 2nd Quarter Change in Total Loans by Grade
2nd Quarter Change in Total Loans by Grade (Gp:) Pass Increases $602 million Decreases $468 million 2nd Quarter net increase in Total Loans of $134 million (Gp:) Pass Gross Change(1) Net Change(1) $0 (in millions) (in millions)
Slide 14: Change in Portfolio Composition by Loan Grade
Change in Portfolio Composition by Loan Grade $1.3 Billion total loan portfolio as of 6/30/10 $4.1 billion 6/30/11 $4.4 billion 6% 7% 11% 76% 5% 4% 18% 73% Grades 1-3: pass 4-5 6 watch 7-9: classified
Slide 15: Recent Asset Quality Trends
Recent Asset Quality Trends (in millions) Continued improvement in asset quality: NPAs were 3.1% of total assets compared to 3.3% last quarter and 4.1% a year ago Classified loans were 5.4% of total loans, down from 5.6% last quarter and 7.4% a year ago Watch loans were 4.3% of total loans, down fro
Slide 16: Annualized Net Charge-Offs / Average Total Loans
Annualized Net Charge-Offs / Average Total Loans Western Alliance Bancorporation Bank of Nevada Torrey Pines Bank 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 3.00% 3.68% 2.53% 1.26% 3.80% 5.37% 4.40% 1.94% 1.92% 2.97% 0.44% 0.65% 1.97% 1.07% 0.81%
Slide 17: Classified Assets / Tier 1 Capital + ALLL
Classified Assets/ Tier 1 Capital + ALLL Total classified assets (1) declined by $16 million or 4.7% in Q2-2011 Western Alliance Bancorporation 65% 60% 55% 50% 45% Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 63.6% 57.0% 52.2 48.5% 46.0% Bank of Nevada 89.8% 70.0% 64.9% 56.6% 58.3% Western Alliance 62.2% 48.8% 42.
Slide 18: Charge-Offs by Vintage and Loan Type
Charge-Offs by Vintage and Loan Type 75% of cumulative charge-offs during the period were from loans originated between 2005 and 2007, the “Bubble Years” (in 000s)
Slide 19: Reduction in Bubble Loan Balances by Type
Reduction in Bubble Loan Balances by Type (in millions) The total outstanding balance of Bubble Years loans has declined by $1.6 billion since 12/31/07. Construction & land commercial residential RE CRE: owner occupied Non-owner consumer $800 $700 $600 $500 $400 $300 $200 $100 $0 $750 $105 $655 $144
Slide 20: Status of Remaining Bubble Years Loans
Status of Remaining “Bubble Years” Loans $1.3 Billion There were no Bubble Years loans graded as Doubtful or Loss as of 6/30/11. Total Loan Portfolio as of 6/30/11 $4.4 billion Bubble Years Loans as of 6/30/11 $1.4 billion 60% 9% 31% 8% 10% 82% originated before 2005 bubble years loans 2005-2007 aft
Slide 21: Composition of OREO
Composition of OREO (in millions) land office other industrial retail single family home 9% 15% 4% 5% 62% current oreo portfolio original appraised amount $396.2 loan $164.9 valuation as of 6/30/11 $84.9 current as a % of appraisal 21% Q2-2011 sales prior to sale $14.5 net proceeds $13.6 book value
Slide 22: 2nd Quarter OREO Valuation
2nd Quarter OREO Valuation (1) (in millions) 24% 12% 64% new added during q2-11 appraised to be q3-11 reconciliation of at 3/31/11 $97.2 q2-2011 changes additions 9.9 sales -13.6 valuation adjustments -8.6 at 6/30/11 $84.9 Excludes other repossessed assets of $0.8 million and loss on sale of other r
Slide 23: Strong Capital Ratios
Strong Capital Ratios (1) Capital ratios are considered estimates until Call Reports are filed. (2) Tier 1 Common is a non-GAAP ratio. Tier 1 leverage Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 bank of Nevada 8.1% 9.1% 9.3% 9.5% western alliance bank 6.8% 8.3% 8.7% 9.0% torrey pines bank 9.4% 9.7% bancorporation
Slide 24: Dividend Capacity by Affiliate
Dividend Capacity by Affiliate (1) Tier 1 Capital is considered an estimate until Call Reports are filed. (2) Dividend capacity is the lesser of the previous four quarters net income or capital surplus and is subject to regulatory approval.
Slide 25: Performance Focus: Increase Earning Power
Performance Focus: Increase Earning Power Strong capital and ability to redeploy securities into loansContinuing deployment of excess liquidityDiversifying into municipal bondsMaximizing return on new deposit growth with real-time acquisition of securitiesStable/expanding interest marginNormalizatio
Slide 26: Performance Focus: Improve Asset Quality
Performance Focus: Improve Asset Quality Growing portfolio while reducing risk profileMoving up market and attracting stronger creditsLoan grades on new loan relationships exceed the current portfolio averageGrowth coming from stronger economic marketsReducing classified assetsIncentivizing loan wor
Slide 27: Performance Focus: Grow Market Share
Performance Focus: Grow Market Share Five consecutive quarters of loan growth Targeting larger higher quality relationships Attracting and recruiting established, high performing business development teams from competitors Six consecutive quarters of deposit growth Leveraging off reduced competition
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