Western Alliance Reports First Quarter 2014 Net Income of $31.1 Million, or $0.35 Per Share

Western Alliance Bancorporation (NYSE:WAL) announced today its financial results for the first quarter 2014.

First Quarter 2014 Highlights:

• Net income of $31.1 million, compared to $31.4 million for the fourth quarter 2013 and $20.9 million for the first quarter 2013
• Net income of $30.1 million for the first quarter 2014, excluding the following, net of tax effect: $1.6 million net gain on repossessed and other assets and $0.6 million net loss from debt valuation adjustments and securities gains
• Earnings per share of $0.35, compared to $0.36 per share in the fourth quarter 2013 and $0.24 per share in the first quarter 2013
• Earnings per share of $0.34 for the first quarter 2014, excluding the following, net of tax effect: $0.02 net gain on repossessed and other assets and $0.01 net loss from debt valuation adjustments and securities gains
• Pre-tax, pre-provision operating earnings of $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 20131
• Net interest margin of 4.41%, compared to 4.44% in the fourth quarter 2013 and 4.36% in the first quarter 2013
• Total loans of $7.11 billion, up $307 million from December 31, 2013 and up $1.25 billion from March 31, 2013
• Total deposits of $8.15 billion, up $311 million from December 31, 2013 and up $1.41 billion from March 31, 2013
• Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.30% of total assets from 1.53% in the fourth quarter 2013 and from 2.10% in the first quarter 2013
• Net loan recoveries (annualized) to average loans outstanding of 0.02%, compared to net loan charge-offs to average loans of 0.13% in the fourth quarter 2013 and 0.38% in the first quarter 2013
• Tier I Leverage Capital of 9.9% and Total Risk-Based Capital ratio of 12.4%, compared to 10.1% and 12.6%, respectively, at March 31, 2013
• Total equity of $895 million, up $39 million from December 31, 2013

Financial Performance

“Our company is off to a strong start for 2014,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Loans and deposits each grew over $300 million during the first quarter, driving record net interest income. Asset quality continued to improve with net loan recoveries and a reduction in non-performing assets during the period. For the past four quarters, net loan losses have averaged less than five basis points of total loans.”

Sarver continued, “With WAL's revenue growth rate again exceeding our operating expense growth rate, our efficiency ratio improved by 90 basis points to 51%. The legal merger of our subsidiary banks at the end of last year should enable us make business practice improvements to drive this key metric to under 50% in the near future.”

Income Statement

Net interest income was $90.8 million in the first quarter 2014, an increase of $0.8 million, or 0.9%, from $90.0 million in the fourth quarter of 2013 and an increase of $14.6 million, or 19.1%, compared to the first quarter 2013. The Company’s net interest margin decreased in the first quarter 2014 to 4.41%, compared to 4.44% in the fourth quarter 2013, and increased compared to 4.36% in the first quarter 2013.

Operating non-interest income was $5.7 million for the first quarter 2014, compared to $5.2 million in the fourth quarter of 2013 and $5.1 million for the first quarter of 2013.1

Net operating revenue was $96.5 million for the first quarter 2014, an increase of 1.4% compared to $95.2 million for the fourth quarter of 2013 and an increase of 18.7% compared to $81.3 million for the first quarter 2013.1

Operating non-interest expense was $52.1 million for the first quarter 2014, compared to $51.4 million for the fourth quarter of 2013 and $46.2 million for the first quarter of 2013.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 51.0% for the first quarter 2014, compared to 51.9% for the fourth quarter 2013 and 54.6% for the first quarter 2013.

The Company had 1,105 full-time equivalent employees and 39 offices at March 31, 2014, compared to 992 full-time equivalent employees and 40 offices at March 31, 2013.

The Company views its pre-tax, pre-provision operating earnings as a key metric for assessing the Company’s earning power, which it defines as net operating revenue less operating non-interest expense. For the first quarter 2014, the Company’s pre-tax, pre-provision operating earnings were $44.4 million, up from $43.8 million in the fourth quarter 2013 and up 26.5% from $35.1 million in the first quarter 2013.1

The following are non-core items, which are discussed below on a pre-tax basis.

Net gain on repossessed and other assets (primarily other real estate) was $2.5 million for the first quarter 2014, which resulted primarily from the sale of two properties, compared to a net gain of $2.2 million in the fourth quarter 2013 and a net loss of $0.5 million in the first quarter 2013. At March 31, 2014, other repossessed assets totaled $56 million, compared to $67 million at December 31, 2013 and $78 million at March 31, 2013.

Net loss from debt valuation adjustments and securities gains were $0.9 million for the first quarter 2014. Securities gains of $0.4 million were offset by a loss on junior subordinated debt resulting from an increase in their fair value.

Effective as of the first quarter 2014, the Company elected early adoption of Accounting Standards Codification 323-740, an amended Financial Accounting Standards Board standard related to accounting for low income housing tax credit investments. Under this amended standard, the amortization of the investment may now be calculated under the proportional amortization method and is included in income tax expense rather than as a separate line item in non-interest income. Prior period amounts have been adjusted to reflect the adoption of this new accounting guidance, which has resulted in an increase in non-interest income and income tax expense. See the supplemental schedule at the end of this press release for additional detail on the impact that adoption of this standard has had on prior period financial information.

Balance Sheet

Gross loans totaled $7.11 billion at March 31, 2014, an increase of $307 million from December 31, 2013 and an increase of $1.25 billion from $5.86 billion at March 31, 2013. At March 31, 2014, the allowance for credit losses was 1.46% of total loans, compared to 1.47% at December 31, 2013 and 1.63% at March 31, 2013, reflecting an improvement in the Company’s asset quality profile.

Deposits totaled $8.15 billion at March 31, 2014, an increase of $311 million from $7.84 billion at December 31, 2013 and an increase of $1.41 billion from $6.73 billion at March 31, 2013. Non-interest bearing deposits were $2.09 billion at March 31, 2014, compared to $2.20 billion at December 31, 2013 and $1.93 billion at March 31, 2013. Non-interest bearing deposits comprised 25.7% of total deposits at March 31, 2014, compared to 28.1% at December 31, 2013 and 28.7% at March 31, 2013, while the proportion of savings and money market accounts increased to 45.1% from approximately 42.0% at December 31, 2013 and March 31, 2013. Certificates of deposit as a percent of total deposits remained consistent at approximately 20.0% at March 31, 2014 and March 31, 2013. The Company’s ratio of loans to deposits was 87.2% at March 31, 2014, compared to 86.8% at December 31, 2013 and 86.9% at March 31, 2013.

Stockholders’ equity at March 31, 2014 increased to $895 million from $856 million at December 31, 2013 and increased $114 million from $781 million at March 31, 2013. At March 31, 2014, tangible common equity was 7.5% of tangible assets1 and total risk-based capital was 12.4% of risk-weighted assets. The Company’s tangible book value per share1 was $8.32 at March 31, 2014, up 18.2% from March 31, 2013.

Total assets increased 4.7% to $9.75 billion at March 31, 2014 from $9.31 billion at December 31, 2013, and increased 19.2% from $8.17 billion at March 31, 2013.

Asset Quality

The provision for credit losses was $3.5 million for the first quarter 2014, compared to $4.3 million in the fourth quarter 2013 and $5.4 million for the first quarter 2013. Net loan recoveries in the first quarter 2014 were $0.3 million, or 0.02% of average loans (annualized), compared to net loan charge-offs to average loans of 0.13% for the fourth quarter 2013. Net charge-offs for the first quarter 2013 were $5.4 million, or 0.38% of average loans (annualized).

Nonaccrual loans decreased $5.3 million to $70.4 million during the quarter. Loans past due 90 days and still accruing interest totaled $0.2 million at March 31, 2014, down from $1.5 million at December 31, 2013 and $1.6 million at March 31, 2013. Loans past due 30-89 days, still accruing interest totaled $11.1 million at quarter end, down from $13.4 million at December 31, 2013 and $14.8 million at March 31, 2013.

As the Company’s asset quality improved and its capital increased, the ratio of classified assets to Tier I capital plus the allowance for credit losses, a common regulatory measure of asset quality, improved to 24% at March 31, 2014 from 30% at March 31, 2013.1

Segment Highlights

On December 31, 2013, the Company consolidated its three bank subsidiaries under one charter, Western Alliance Bank. As a result, the Company has redefined its operating segments to reflect the new organizational and internal reporting structure. Prior year segment information has not been recast to conform to the new segmentation methodology due to the impracticability of restating segments because of the change in legal structure at December 31, 2013. The new operating segments are as follows: Arizona, Nevada, California, Specialty Finance, and Corporate & Other.

The Company's reportable segments are aggregated primarily based on geographic location, services offered and markets served. The Arizona, Nevada and California segments provide full service banking and related services to their respective regions. The Company's Specialty Finance segment provides banking services to niche markets. These Specialty Finance businesses are broader in geographic scope and are managed centrally. Corporate & Other consists of corporate-related items, income and expense items not allocated to our other reportable segments and inter-segment eliminations.

Key management metrics for evaluating the performance of its Arizona, Nevada, California and Specialty Finance segments include loan and deposit growth, asset quality, total revenues1 and pre-tax, pre-provision operating earnings.1

Arizona reported a gross loan balance of $2.03 billion at March 31, 2014, an increase of $8 million during the quarter. Deposits were $2.17 billion at March 31, 2014, an increase of $78 million during the quarter. Net operating revenues were $27.4 million and pre-tax, pre-provision operating earnings were $14.1 million for the first quarter 2014.

Nevada reported a gross loan balance of $1.72 billion at March 31, 2014, a decrease of $31 million during the quarter. Deposits were $3.02 billion at March 31, 2014, an increase of $127 million during the quarter. Net operating revenues were $30.9 million and pre-tax, pre-provision operating earnings were $14.8 million during the first quarter 2014.

California reported a gross loan balance of $1.66 billion at March 31, 2014, an increase of $48 million during the quarter. Deposits were $1.87 billion at March 31, 2014, a decrease of $30 million during the quarter. Net operating revenues were $24.0 million and pre-tax, pre-provision operating earnings were $11.0 million during the first quarter 2014.

Specialty Finance reported a gross loan balance of $1.62 billion at March 31, 2014, an increase of $271 million during the quarter. Deposits were $845 million at March 31, 2014, an increase of $93 million during the quarter. Net operating revenues were $14.4 million and pre-tax, pre-provision operating earnings were $7.9 million during the first quarter 2014.

Attached to this press release is summarized financial information for the quarter ended March 31, 2014.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its first quarter 2014 financial results at 12:00 p.m. ET on Tuesday, April 22, 2014. Participants may access the call by dialing 1-888-317-6003 and using passcode: 4395570 or via live audio webcast using the website link: http://services.choruscall.com/links/wal140422.html. The webcast is also available via the Company’s website at www.westernalliancebancorp.com. Participants should log in at least 15 minutes early to receive instructions. The call will be recorded and made available for replay after 2:00 p.m. ET April 22nd through May 6th at 9:00 a.m. ET by dialing 1-877-344-7529 passcode: 10044322.

About Western Alliance Bancorporation

Western Alliance Bancorporation (NYSE:WAL) is a leading bank holding company providing comprehensive business banking and related financial services through its wholly-owned banking subsidiary, Western Alliance Bank (the "Bank"). With local teams of experienced bankers, the Bank provides a superior level of capabilities, products and services, to assist the growth of local businesses and the quality of life in the markets it serves. In addition to a national platform of specialized financial service units, the Bank operates full service banking divisions in its local markets as Alliance Bank of Arizona, Bank of Nevada, First Independent Bank and Torrey Pines Bank. Western Alliance Bancorporation is publicly traded on the New York Stock Exchange. Additional investor information can be accessed on the Investor Relations page of the Company's website, www.westernalliancebancorp.com.

Cautionary Note Regarding Forward-Looking Statements

This release 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 guidance, outlook or expectations relating to loan and deposit growth, interest margin, operating efficiency and asset quality. 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, 2013 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; 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 release 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 press release to reflect new information, future events or otherwise.

This press release contains both financial measures based on accounting principles generally accepted in the United States (“GAAP”) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Western Alliance Bancorporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

1 See Reconciliation of Non-GAAP Financial Measures