Western Alliance Reports Record First Quarter 2016 Financial Performance and Closing of Asset Purchase

Western Alliance Bancorporation (NYSE:WAL) (the "Company") announced today its financial results for the first quarter 2016, as well as the closing of the asset purchase transaction with GE Capital US Holdings, Inc. ("GE").

First Quarter 2016 Highlights:

• Net income of $61.3 million, compared to $58.5 million for the fourth quarter 2015, and $40.4 million for the first quarter 2015
• Earnings per share of $0.60, compared to $0.57 per share in the fourth quarter 2015, and $0.45 per share in the first quarter 2015
• Operating pre-provision net revenue of $82.1 million, up 2.7% from $79.9 million in the fourth quarter 2015, and up 50.5% from $54.5 million in the first quarter 20151
• Net interest margin of 4.58%, compared to 4.67% in the fourth quarter 2015, and 4.35% in the first quarter 2015
• Net operating revenue of $157.8 million constituted quarter-over-quarter growth of $5.0 million, and year-over-year growth of 45.1%, or $49.0 million. Operating non-interest expense of $75.8 million resulted in quarter-over-quarter growth of $3.0 million, and year-over-year growth of 39.8%, or $21.6 million1
• Efficiency ratio of 45.6%, compared to 45.2% in the fourth quarter 2015, and 46.7% in the first quarter 20151
• Total loans of $11.24 billion, up $105 million from December 31, 2015, and up $2.42 billion (includes $1.44 billion acquired from Bridge) from March 31, 2015
• Total deposits of $13.08 billion, up $1.05 billion from December 31, 2015, and up $3.42 billion (includes $1.74 billion acquired from Bridge) from March 31, 2015
• Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 0.57% of total assets, from 0.65% at December 31, 2015, and 1.11% at March 31, 2015
• Net loan charge-offs (annualized) to average loans outstanding of 0.08%, compared to 0.02% in the fourth quarter 2015, and compared to net loan recoveries (annualized) to average loans outstanding of 0.06% in the first quarter 2015
• Tangible common equity ratio of 9.1%, compared to 9.2% at December 31, 2015, and 8.5% at March 31, 2015 1
• Stockholders' equity of $1.66 billion, an increase of $69 million from December 31, 2015, and an increase of $609 million from March 31, 2015
• Tangible book value per share, net of tax, of $13.16, an increase of 4.9% from $12.54 at December 31, 2015, and an increase of 22.8% from $10.72 at March 31, 2015 1

GE Asset Purchase:

• On April 20, 2016, Western Alliance Bank ("WAB"), a wholly owned subsidiary of the Company, completed its previously announced asset purchase with GE, pursuant to the Asset Purchase Agreement dated March 29, 2016. Under the terms of the Asset Purchase Agreement, WAB acquired the GE domestic select-service hotel franchise finance loan portfolio, which has an aggregate outstanding principal loan balance of approximately $1.34 billion, and assumed certain related assets and liabilities.
• For these assets, WAB's purchase price was $1.28 billion, a discount of $67.1 million to the aggregate unpaid principal balance. The portfolio does not contain any non-performing loans and has a yield of 4.8%.

Financial Performance

“Western Alliance had a great start to the year with another record quarter of results,” remarked Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Net income increased to $61.3 million, with earnings per share of $0.60 for the quarter. Asset quality continued to improve as nonaccrual loans to gross loans and total nonperforming assets to total assets fell by nearly half since March 31, 2015. In the quarter, we also had exceptional deposit growth of more than $1 billion, which will support the GE loan portfolio purchase. The profitable and well-run hotel franchise lending portfolio adds a team of experienced bankers to Western Alliance and expands our national reach and loan diversification. The transaction closed on April 20th and we expect the acquisition to be immediately accretive to earnings in the second quarter 2016.”

Income Statement

Net interest income was $145.7 million in the first quarter 2016, an increase of $2.4 million from $143.3 million in the fourth quarter 2015, and an increase of $42.6 million, or 41.3%, compared to the first quarter 2015. The Company’s net interest margin decreased in the first quarter 2016 to 4.58%, compared to 4.67% in the fourth quarter 2015, and increased from 4.35% in the first quarter 2015. The decrease in net interest margin for the current quarter compared to the fourth quarter 2015 primarily relates to one less day in the current quarter and the Company's non-deployment of cash in anticipation of the GE Asset Purchase. The increase in net interest margin in the current quarter from the first quarter 2015 primarily relates to additional income resulting from the acquisition of Bridge, which is primarily reflected in commercial loan interest income. Net interest income in the first quarter 2016 includes $5.3 million of total accretion income from acquired loans, compared to $5.0 million in the fourth quarter 2015, and $1.9 million in the first quarter 2015.

Operating non-interest income was $12.1 million for the first quarter 2016, compared to $9.4 million for the fourth quarter 2015, and $5.7 million for the first quarter 2015.1 This increase in the first quarter 2016 from the fourth quarter 2015 is the result of a non-recurring gain on sale of loans of $2.5 million. Growth in the first quarter 2016 compared to the first quarter 2015 also includes $4.0 million related to Bridge operations, which generated deposit service charges, foreign currency income and SBA loan income. The change in first quarter 2016 from the first quarter 2015 for non-Bridge operations was due to an increase in deposit service charges corresponding to growth in deposit balances, which was offset by a decrease in interchange income related to the Durbin amendment that reduced income starting in the second half of 2015.

Net operating revenue was $157.8 million for the first quarter 2016, an increase of $5.0 million, compared to $152.8 million for the fourth quarter 2015, and an increase of $49.0 million, or 45.1%, compared to $108.8 million for the first quarter 2015.1

Operating non-interest expense was $75.8 million for the first quarter 2016, compared to $72.8 million for the fourth quarter 2015, and $54.2 million for the first quarter 2015.1 The primary driver of the increase in operating non-interest expense in the first quarter 2016 compared to the fourth quarter 2015 was compensation expense, driven by the seasonal FICA expenses incurred in the first part of the year and reduced salary loan origination cost deferrals due to lower loan originations. The increase year-over-year relates to $13.9 million generated from Bridge operations, as well as increased headcount and operating costs to support the growth in the business. The Company’s operating efficiency ratio1 on a tax equivalent basis was 45.6% for the first quarter 2016, compared to 45.2% for the fourth quarter 2015, and 46.7% for the first quarter 2015.

The Company views its operating pre-provision net revenue ("PPNR") as a key metric for assessing the Company’s earnings power, which it defines as net operating revenue less operating non-interest expense. For the first quarter 2016, the Company’s operating PPNR was $82.1 million, up from $79.9 million in the fourth quarter 2015, and up 50.5% from $54.5 million in the first quarter 2015.1 The non-operating items1 for the first quarter 2016 consisted primarily of a $1.0 million net gain on sales of securities.

During the first quarter 2016, the Company elected to early adopt Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require that all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement, rather than as additional paid-in capital as required under previous generally accepted accounting principles. Due to the early adoption of ASU 2016-09, during the first quarter 2016, the Company recognized a $3.9 million tax benefit as a reduction of income tax expense (that previously would have been reflected as additional paid-in capital).

The Company had 1,464 full-time equivalent employees and 47 offices at March 31, 2016, compared to 1,131 employees and 40 offices at March 31, 2015.

Balance Sheet

Gross loans totaled $11.24 billion at March 31, 2016, an increase of $105 million from $11.14 billion at December 31, 2015, and an increase of $2.42 billion from $8.82 billion at March 31, 2015. The year-over-year increase is comprised of $1.44 billion from the Bridge acquisition and $1.12 billion from organic loan growth. At March 31, 2016, the allowance for credit losses was 1.06% of total loans, compared to 1.07% at December 31, 2015, and 1.27% at March 31, 2015, reflecting an improvement in the Company’s asset quality profile. Consistent with GAAP, the allowance for credit losses is not carried over in an acquisition because acquired loans are recorded at fair value, which discounts the loans based on expected future cash flows. The allowance for credit losses as a percent of total loans, adjusted to include credit discounts on acquired loans, was 1.21% at March 31, 2016, compared to 1.25% at December 31, 2015, and 1.39% at March 31, 2015.

Deposits totaled $13.08 billion at March 31, 2016, an increase of $1.05 billion from $12.03 billion at December 31, 2015, and an increase of $3.42 billion from $9.66 billion at March 31, 2015. The year-over-year increase is comprised of $1.74 billion from the Bridge acquisition and $1.68 billion from organic deposit growth. Non-interest bearing deposits were $4.64 billion at March 31, 2016, compared to $4.09 billion at December 31, 2015, and $2.66 billion at March 31, 2015. Non-interest bearing deposits comprised 35.4% of total deposits at March 31, 2016, compared to 34.0% at December 31, 2015, and 27.5% at March 31, 2015. The increase in the proportion of the Company's non-interest bearing deposits from the prior year is due to Bridge's higher proportion of non-interest bearing deposits. The proportion of savings and money market balances to total deposits decreased to 43.2% at March 31, 2016 from 44.0% at December 31, 2015, and increased from 42.6% at March 31, 2015. Certificates of deposit as a percentage of total deposits were 13.1% at March 31, 2016, compared to 13.4% at December 31, 2015, and 20.2% at March 31, 2015. The Company’s ratio of loans to deposits was 85.9% at March 31, 2016, compared to 92.6% at December 31, 2015, and 91.3% at March 31, 2015.

Borrowings decreased from $150 million at December 31, 2015 and from $275 million at March 31, 2015 to $0.2 million at March 31, 2016. The decrease from the prior quarter relates to a reduction in FHLB overnight advances. The decrease from the prior year is due primarily to the payoff of the 10% Senior Notes of $58.2 million and a reduction in FHLB advances of $157.1 million. Qualifying debt remained consistent at $210 million at March 31, 2016 compared to December 31, 2015, and increased $170 million from $41 million at March 31, 2015. The year-over-year increase is primarily due to the issuance of $150 million of subordinated debt and the assumption of $12 million in junior subordinated debt from Bridge in the second quarter 2015.

Stockholders’ equity at March 31, 2016 was $1.66 billion, compared to $1.59 billion at December 31, 2015, and $1.05 billion at March 31, 2015.

At March 31, 2016, tangible common equity, net of tax, was 9.1% of tangible assets1 and total capital was 12.3% of risk-weighted assets. The Company’s tangible book value per share1 was $13.16 at March 31, 2016, up 22.8% from March 31, 2015.

Total assets increased 6.8% to $15.25 billion at March 31, 2016 from $14.28 billion at December 31, 2015, and increased 35.5% from $11.25 billion at March 31, 2015. The increase in total assets from March 31, 2015 relates primarily to the Bridge acquisition, which increased total assets by $2.23 billion, and organic loan growth during the year of $1.12 billion.

Asset Quality

The provision for credit losses was $2.5 million for both the first quarter 2016 and the fourth quarter 2015, and was $0.7 million for the first quarter 2015. Net loan charge-offs in the first quarter 2016 were $2.3 million, or 0.08%, of average loans (annualized), compared to $0.5 million, or 0.02%, in the fourth quarter 2015, and compared to net loan recoveries of $1.2 million, or 0.06%, for the first quarter 2015.

Nonaccrual loans decreased $14.6 million to $33.8 million during the quarter and decreased $26.9 million from March 31, 2015. Loans past due 90 days and still accruing interest totaled $4.5 million at March 31, 2016, compared to $3.0 million at December 31, 2015, and $3.7 million at March 31, 2015. Loans past due 30-89 days and still accruing interest totaled $9.2 million at quarter end, a decrease from $34.5 million at December 31, 2015, and a decrease from $14.1 million at March 31, 2015.

Repossessed assets totaled $52.8 million at quarter end, an increase of $8.9 million from $43.9 million at December 31, 2015, and a decrease of $11.0 million from $63.8 million at March 31, 2015. Total adversely graded loans totaled $312.0 million at quarter end, a decrease of $40.8 million from $352.8 million at December 31, 2015, and an increase of $11.1 million from $300.9 million at March 31, 2015.

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 13.0% at March 31, 2016, from 15.8% at December 31, 2015, and from 20.3% at March 31, 2015.1

1 See Reconciliation of Non-GAAP Financial Measures.

Segment Highlights

The Company's reportable segments are aggregated primarily based on geographic location, services offered and markets served. In anticipation of the purchase of GE's hotel franchise loan portfolio, which expands the size and scope of the Company's National Business Lines ("NBL") reportable segment, management has reassessed the organization and management of its operating segments included in the NBL reportable segment. Accordingly, four reportable NBL segments are now presented separately.

The Company's regional segments, which include Arizona, Nevada, Southern California and Northern California, provide full service banking and related services to their respective markets. The operations from the regional segments correspond to the following banking divisions: Alliance Bank of Arizona in Arizona, Bank of Nevada and First Independent Bank in Nevada, Torrey Pines Bank in Southern California and Bridge Bank in Northern California.

The Company's NBL segments, which include Homeowner Associations ("HOA") Services, Public & Nonprofit Finance, Technology & Innovation, and Other NBLs, provide specialized banking services to niche markets. These NBLs are managed centrally and are broader in geographic scope than our other segments, though still predominately located within our core market areas. The operations from the HOA Services NBL correspond to the Alliance Association Bank division. Public & Nonprofit Finance consists of the operations of Public and Nonprofit Finance. The Technology & Innovation NBL includes the operations of Equity Fund Resources, Life Sciences Group, Renewable Resource Group, and Technology Finance. The Other NBLs segment consists of the operations of Corporate Finance, Mortgage Warehouse Lending, and Resort Finance.

The Corporate & Other segment 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 the Company's operating segments include loan and deposit growth, asset quality and pre-tax income.

Note that the acquisition of Bridge on June 30, 2015 increased total loans and total deposits by $1.44 billion and $1.74 billion, respectively, and beginning July 1, 2015, the activities of Bridge have been included in the Company's consolidated results of operations. Bridge activities have been allocated to the Northern California and Technology & Innovation segments. Of the total $1.44 billion in loans acquired from Bridge, $595 million was allocated to the Northern California segment and $845 million was allocated to the Technology & Innovation segment. Of the total $1.74 billion in deposits acquired from Bridge, $938 million was allocated to the Northern California segment and $804 million was allocated to the Technology & Innovation segment. Accordingly, the increases in the performance metrics in these segments from March 31, 2015 is primarily the result of the Bridge acquisition.

The regional segments reported a gross loan balance of $7.47 billion at March 31, 2016, a decrease of $27 million during the quarter, and an increase of $1.48 billion during the last 12 months. Southern California had the largest growth in loans during the quarter of $37 million, which was offset by decreases of $40 million and $28 million in the Northern California and Nevada segments, respectively. The $1.48 billion growth in loans during the last 12 months was driven by an increase of $946 million in Northern California, an increase of $432 million in Arizona and an increase of $203 million in Southern California. Total deposits for the regional segments were $10.47 billion, an increase of $765 million during the quarter, and an increase of $2.25 billion during the last 12 months. All regional segments generated increased deposits during the quarter, with Arizona contributing the largest increase of $303 million. All regional segments also generated increased deposits during the last 12 months, with the Northern California and Arizona segments contributing the largest increases of $941 million and $840 million, respectively. Pre-tax income for the regional segments was $66.0 million for the three months ended March 31, 2016, an increase of $0.8 million from the three months ended December 31, 2015, and an increase of $19.1 million from the three months ended March 31, 2015. Southern California had the largest increase in pre-tax income of $1.8 million from the three months ended December 31, 2015, offset by decreases of $0.9 million and $0.2 million in the Nevada and Northern California segments, respectively. Northern California had the largest increase in pre-tax income of $8.1 million from the three months ended March 31, 2015, which is primarily the result of Bridge operations, which has been included in the Company's operating results since July 1, 2015. Pre-tax income for the Arizona and Nevada regions also increased $5.1 million and $4.0 million, respectively.

The NBL segments reported a gross loan balance of $3.74 billion at March 31, 2016, an increase of $142 million during the quarter, and an increase of $952 million during the last 12 months. The Technology & Innovation and Other NBLs segments had the largest growth in loans during the quarter of $75 million and $58 million, respectively. During the last 12 months, the $952 million loan growth in the NBL segments was driven by the Technology & Innovation and Public & Nonprofit segments, which increased loans by $845 million and $201 million, respectively, which was slightly offset by the decrease of $120 million in the Other NBLs segment. Total deposits for the NBL segments were $2.33 billion, an increase of $197 million during the quarter, and an increase of $1.22 billion during the last 12 months. HOA Services increased deposits by $236 million during the quarter, which was offset by a decrease in deposits of $39 million from the Technology & Innovation segment. The increase of $1.22 billion during the last 12 months is primarily the result of growth in the Technology & Innovation and HOA Services segments of $804 million and $414 million, respectively. Pre-tax income for the NBL segments was $26.5 million for the three months ended March 31, 2016, an increase of $1.3 million from the three months ended December 31, 2015, and an increase of $13.1 million from the three months ended March 31, 2015. HOA services had the largest increase in pre-tax income of $1.2 million from the three months ended December 31, 2015, which was partially offset by a $0.2 million decrease in the Public & Nonprofit Finance segment. The Technology & Innovation segment had the largest increase in pre-tax income of $12.2 million from the three months ended March 31, 2015, which reflects Bridge operations.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its first quarter 2016 financial results at 12:00 p.m. ET on Friday, April 22, 2016. Participants may access the call by dialing 1-888-317-6003 and using passcode 6428460 or via live audio webcast using the website link http://services.choruscall.com/links/wal160422. The webcast is also available via the Company’s website at www.westernalliancebancorporation.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 9:00 a.m. ET May 22nd by dialing 1-877-344-7529 passcode: 10083308.

Reclassifications

Certain amounts in the Consolidated Income Statements for the prior periods have been reclassified to conform to the current presentation. The reclassifications have no effect on net income or stockholders’ equity as previously reported.

Use of Non-GAAP Financial Information

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 them to be helpful in understanding the Company’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.

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 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 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.

About Western Alliance Bancorporation

With more than $15 billion in assets, top-performing Western Alliance Bancorporation (NYSE:WAL) is one of the fastest-growing bank holding companies in the U.S. and recognized as #10 on the Forbes 2016 “Best Banks in America” list. Its primary subsidiary, Western Alliance Bank, is the go-to bank for business and succeeds with local teams of experienced bankers who deliver superior service and a full spectrum of deposit, lending, treasury management, international banking, and online banking products and services. Western Alliance Bank operates full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank. The bank also serves business customers through a robust national platform of specialized financial services, including Corporate Finance, Equity Fund Resources, Hotel Franchise Finance, Life Sciences Group, Mortgage Warehouse Lending, Public and Nonprofit Finance, Renewable Resource Group, Resort Finance, Technology Finance and Alliance Association Bank. For more information, visit westernalliancebancorporation.com.