Western Alliance Reports Second Quarter 2014 Net Income of $35.5 Million, or $0.40 Per Share

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

Second Quarter 2014 Highlights:

• Net income of $35.5 million, compared to $31.1 million for the first quarter 2014 and $34.1 million for the second quarter 2013
• Earnings per share of $0.40, compared to $0.35 per share in the first quarter 2014 and $0.39 per share in the second quarter 2013
• Accretion of interest yield related to purchased credit impaired loan sales or payoffs increased $1.4 million, net of tax, or $0.02 per share, compared to the first quarter 2014
• Pre-tax, pre-provision operating earnings of $47.4 million, up from $44.4 million in the first quarter 2014 and up 18.1% from $40.1 million in the second quarter 2013¹
• Net interest margin of 4.39%, compared to 4.41% in the first quarter 2014 and 4.36% in the second quarter 2013
• Total loans of $7.54 billion, up $436 million from March 31, 2014 and up $1.13 billion from June 30, 2013
• Total deposits of $8.47 billion, up $321 million from March 31, 2014 and up $1.47 billion from June 30, 2013
• Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.23% of total assets from 1.30% in the first quarter 2014 and from 1.86% in the second quarter 2013
• Net loan recoveries (annualized) to average loans outstanding of 0.09%, compared to 0.02% in the first quarter 2014 and net loan charge-offs to average loans of 0.17% in the second quarter 2013
• Tier I Leverage Capital of 10.0% and Total Risk-Based Capital ratio of 12.4%, compared to 9.9% and 12.4%, respectively, at March 31, 2014 and 9.9% and 12.0%, respectively, at June 30, 2013
• Total equity of $958 million, up $63 million from March 31, 2014 and up $159 million from June 30, 2013
• Tangible book value per share, net of tax, of $9.02, up from $8.32 at March 31, 2014 and up from $7.26 at June 30, 2013¹

Financial Performance

“Our performance momentum continued during the quarter with record organic loan growth and strong deposit growth driving record net interest income,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “Double digit revenue growth, which was well in excess of the increase in expenses, took our efficiency ratio below 50% for the first time. On the asset quality front, Western Alliance has achieved net loan recoveries in three of the last four quarters, while gross loan losses have fallen to only 0.11% of total average loans.”

Sarver continued, “Despite our strong asset growth, our capital has climbed even faster with tangible common equity rising to 7.9% of tangible assets at June 30, 2014, and each regulatory capital ratio is higher than it was a year ago. Our tangible book value per share, net of tax, is up 24% in the past year to $9.02.”

Income Statement

Net interest income was $93.9 million in the second quarter 2014, an increase of $3.1 million, or 3.4%, from $90.8 million in the first quarter of 2014 and an increase of $11.7 million, or 14.3%, compared to the second quarter 2013. The Company’s net interest margin decreased in the second quarter 2014 to 4.39%, compared to 4.41% in the first quarter 2014, and increased compared to 4.36% in the second quarter 2013.

Operating non-interest income was $5.7 million for the second quarter 2014, compared to $5.7 million in the first quarter of 2014 and $5.0 million for the second quarter of 2013.¹

Net operating revenue was $99.6 million for the second quarter 2014, an increase of 3.2% compared to $96.5 million for the first quarter of 2014 and an increase of 14.3% compared to $87.2 million for the second quarter 2013.¹

Operating non-interest expense was $52.2 million for the second quarter 2014, compared to $52.1 million for the first quarter of 2014 and $47.0 million for the second quarter of 2013.¹ The Company’s operating efficiency ratio¹ on a tax equivalent basis was 49.4% for the second quarter 2014, compared to 51.0% for the first quarter 2014 and 52.2% for the second quarter 2013.

The Company had 1,112 full-time equivalent employees and 39 offices at June 30, 2014, compared to 1,015 full-time equivalent employees and 41 offices at June 30, 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 second quarter 2014, the Company’s pre-tax, pre-provision operating earnings were $47.4 million, up from $44.4 million in the first quarter 2014 and up 18.1% from $40.1 million in the second quarter 2013.¹

Balance Sheet

Gross loans totaled $7.54 billion at June 30, 2014, an increase of $436 million from March 31, 2014 and an increase of $1.13 billion from $6.41 billion at June 30, 2013. At June 30, 2014, the allowance for credit losses was 1.40% of total loans, compared to 1.46% at March 31, 2014 and 1.50% at June 30, 2013, reflecting an improvement in the Company’s asset quality profile.

Deposits totaled $8.47 billion at June 30, 2014, an increase of $321 million from $8.15 billion at March 31, 2014 and an increase of $1.47 billion from $7.00 billion at June 30, 2013. Non-interest bearing deposits were $2.28 billion at June 30, 2014, compared to $2.09 billion at March 31, 2014 and $1.92 billion at June 30, 2013. Non-interest bearing deposits comprised 26.9% of total deposits at June 30, 2014, compared to 25.7% at March 31, 2014 and 27.4% at June 30, 2013, while the proportion of savings and money market accounts decreased to 42.9% from approximately 45.1% at March 31, 2014 and increased from 42.1% at June 30, 2013. Certificates of deposit as a percent of total deposits increased to 20.8% from 20.0% at June 30, 2014 and decreased from 21.5% at June 30, 2013. The Company’s ratio of loans to deposits was 89.1% at June 30, 2014, compared to 87.2% at March 31, 2014 and 91.6% at June 30, 2013.

Stockholders’ equity at June 30, 2014 increased to $958 million from $895 million at March 31, 2014 and increased $159 million from $799 million at June 30, 2013. To support the Company's continued growth, we raised $2.6 million in net proceeds from the issuance of 115,866 shares of common stock through our at-the-market (ATM) public offering. This was the first issuance of common stock under the $100 million ATM program. In order to increase management's flexibility regarding the Company's investment portfolio, during the quarter, the Company transferred all of its held-to-maturity securities to available-for-sale, which resulted in an increase of $7.3 million to accumulated other comprehensive income at June 30, 2014.

At June 30, 2014, tangible common equity, net of tax, was 7.9% of tangible assets¹ and total risk-based capital was 12.4% of risk-weighted assets. The Company’s tangible book value per share¹ was $9.02 at June 30, 2014, up 24.2% from June 30, 2013.

Total assets increased 2.8% to $10.02 billion at June 30, 2014 from $9.75 billion at March 31, 2014, and increased 16.7% from $8.59 billion at June 30, 2013.

Asset Quality

The provision for credit losses was $0.5 million for the second quarter 2014, compared to $3.5 million for the first quarter 2014 and second quarter 2013. Net loan recoveries in the second quarter 2014 were $1.5 million, or 0.09% of average loans (annualized), compared to 0.02% for the first quarter 2014. Net charge-offs for the second quarter 2013 were $2.7 million, or 0.17% of average loans (annualized).

Nonaccrual loans decreased $6.1 million to $64.3 million during the quarter. Loans past due 90 days and still accruing interest totaled $3.0 million at June 30, 2014, up from $0.2 million at March 31, 2014 and down from $3.9 million at June 30, 2013. Loans past due 30-89 days, still accruing interest totaled $5.1 million at quarter end, down from $11.1 million at March 31, 2014 and $7.3 million at June 30, 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 25% at June 30, 2014 from 32% at June 30, 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, National Business Lines, 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 National Business Lines segment provides banking services to niche markets. These National Business Lines 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 the Company's Arizona, Nevada, California and National Business Lines segments include loan and deposit growth, asset quality and pre-tax income.

Arizona reported a gross loan balance of $2.13 billion at June 30, 2014, an increase of $99 million during the quarter, and an increase of $106 million during the year. Deposits were $2.12 billion at June 30, 2014, an increase of $53 million during the quarter, and an increase of $115 million during the year. Pre-tax income was $17.3 million and $29.9 million for the three and six months ended June 30, 2014, respectively.

Nevada reported a gross loan balance of $1.68 billion at June 30, 2014, a decrease of $41 million during the quarter, and a decrease of $72 million during the year. Deposits were $3.19 billion at June 30, 2014, an increase of $136 million during the quarter, and an increase of $265 million during the year. Pre-tax income was $17.7 million and $34.2 million for the three and six months ended June 30, 2014, respectively.

California reported a gross loan balance of $1.69 billion at June 30, 2014, an increase of $32 million during the quarter, and an increase of $80 million during the year. Deposits were $2.06 billion at June 30, 2014, an increase of $145 million during the quarter, and an increase of $116 million during the year. Pre-tax income was $14.0 million and $24.3 million for the three and six months ended June 30, 2014, respectively.

National Business Lines reported a gross loan balance of $1.95 billion at June 30, 2014, an increase of $330 million during the quarter, and an increase of $601 million during the year. Deposits were $886 million at June 30, 2014, an increase of $14 million during the quarter, and an increase of $118 million during the year. Pre-tax income was $6.8 million and $12.1 million for the three and six months ended June 30, 2014, respectively.

Attached to this press release is summarized financial information for the quarter ended June 30, 2014.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its second quarter 2014 financial results at 12:00 p.m. ET on Friday, July 18, 2014. Participants may access the call by dialing 1-888-317-6003 and using passcode: 8153733 or via live audio webcast using the website link: http://services.choruscall.com/links/wal140718.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 July 18th through July 31st at 9:00 a.m. ET by dialing 1-877-344-7529 passcode: 10048463.

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 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, 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.

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 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.

Early Adoption of Accounting Standards

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 the Q1 2014 press release for additional detail on the impact that adoption of this standard has had on prior period financial information.

¹ See Reconciliation of Non-GAAP Financial Measures