Western Alliance Ban Corp. (WAL, Financial) filed Quarterly Report for the period ended 2009-03-31.
Western Alliance Bancorporation is the parent company of BankWest of Nevada Alliance Bank of Arizona Torrey Pines Bank Miller/Russell & Associates and Premier Trust. These dynamic companies provide a broad array of banking leasing trust investment and mortgage services to clients in Nevada Arizona and California. Staffed with experienced financial professionals these organizations deliver a broader product array and larger credit capacity than community banks yet are empowered to be more responsive to customers' needs than larger institutions. Western Alliance Ban Corp. has a market cap of $339.7 million; its shares were traded at around $8.73 with and P/S ratio of 1.
Return on Average Equity and Average Tangible Equity. For the three months ended March 31, 2009 we suffered a net loss of $86.4 million compared to net income of $4.1 million for the three months ended March 31, 2008. The net loss was primarily due to securities impairment charges of $38.4 million, a non-cash goodwill impairment charge of $45.0 million and an $11.9 million increase to the provision for loan losses caused by challenging economic conditions, which was partially offset by a $10.5 million decrease in interest expense due to lower costs of funds. Basic and diluted loss per share was $2.33 for the three months ended March 31, 2009 compared to basic and diluted earnings per share of $0.14 for the same period in 2008. Stockholders equity decreased $68.6 million from the quarter ended December 31, 2008 due to a net loss available to common stockholders of $88.9 million (which includes $2.4 million in preferred stock dividends and accretion), partially offset by a $12.8 million decrease in accumulated other comprehensive loss for the quarter ended March 31, 2009. The decrease in net income and equity resulted in an ROE of (70.21)% for the three months ended March 31, 2009 compared to 3.28% for the three months ended March 31, 2008 and an ROTE of (87.70)% for the three months ended March 31, 2009 compared to 6.25% for the three months ended March 31, 2008.
Asset Quality. For all banks and bank holding companies, asset quality plays a significant role in the overall financial condition of the institution and results of operations. We measure asset quality in terms of nonaccrual loans as a percentage of gross loans, and net charge-offs as a percentage of average loans. Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on previously charged-off loans. As of March 31, 2009, impaired loans, including nonaccrual loans, were $196.6 million compared to $51.3 million at March 31, 2008. Nonaccrual loans as a percentage of gross loans as of March 31, 2009 were 2.42% compared to 0.26% as of March 31, 2008. For the three months ended March 31, 2009 and March 31, 2008, annualized net charge-offs as a percentage of average loans were 1.72% and 0.70%, respectively.
Asset and Deposit Growth. The ability to produce loans and generate deposits is fundamental to our asset growth. Our assets and liabilities are comprised primarily of loans and deposits, respectively. Total assets increased 1.3% to $5.3 billion as of March 31, 2009 from $5.2 billion as of March 31, 2008. Gross loans grew 9.5% to $4.1 billion as of March 31, 2009 from $3.7 billion as of March 31, 2008. Total deposits increased 11.9% (8.6% organic) to $4.1 billion ($3.9 billion organic) as of March 31, 2009 from $3.6 billion as of March 31, 2008.
Our Bank of Nevada subsidiary recently received a notice from the holder of $60 million in subordinated debt issued by the Bank asserting an event of default based on the Banks receipt of a notice from banking regulators regarding additional informal supervisory oversight of the Bank, which notice was previously disclosed in our Annual Report on Form 10-K. The asserted event of default would convert the interest rate on this debt from a LIBOR-based rate to Prime Rate-based rate, effective July 1, 2009. As asserted, the new interest rate would be the holders Prime Rate + 0.13%, on a blended basis. Although the relationship between LIBOR and the Prime Rate fluctuates, we estimate that the after tax increase in interest payments due to this conversion would be approximately $75,000 per quarter. The notice further asserts that the Bank may not, during the continuance of the asserted default, pay any dividends or make any loans to Western Alliance Bancorporation. The notice reserves all of the holders other rights and remedies, but does not specify or assert any such rights or remedies, which could include, among other things, the acceleration of the subordinated debt subject to FDIC approval and a further increased interest rate. We do not believe that the additional oversight is material and intend to contest the holders assertion that an event of default has occurred. We also do not believe that the asserted increase in interest rate or restriction on dividends and loans will have any material effect on our financial condition or operations. An event of default under this subordinated debt will not result in a cross-default under any other outstanding indebtedness of either the Company or the Bank.
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Western Alliance Bancorporation is the parent company of BankWest of Nevada Alliance Bank of Arizona Torrey Pines Bank Miller/Russell & Associates and Premier Trust. These dynamic companies provide a broad array of banking leasing trust investment and mortgage services to clients in Nevada Arizona and California. Staffed with experienced financial professionals these organizations deliver a broader product array and larger credit capacity than community banks yet are empowered to be more responsive to customers' needs than larger institutions. Western Alliance Ban Corp. has a market cap of $339.7 million; its shares were traded at around $8.73 with and P/S ratio of 1.
Highlight of Business Operations:
Loans for the quarter ended March 31, 2009 declined $20.0 million, or 0.5%, as compared to loan growth of $89.6 million, or 2.5% for the same period in 2008. Deposit growth was $409.2 million ($291.3 million organic), or 11.2% for the three months ended March 31, 2009, compared to growth of $83.3 million, or 2.3% for the same period in 2008. We reported a net loss of $86.4 million, or $2.33 loss per diluted share, for the quarter ended March 31, 2009, as compared to net income of $4.1 million, or $0.14 per diluted share, for the same period in 2008. The net loss is primarily due to securities impairment charges of $38.4 million, a non-cash goodwill impairment charge of $45.0 million and an $11.9 million increase to the provision for loan losses caused by challenging economic conditions, which was partially offset by a $10.5 million decrease in interest expense due to lower costs of funds compared to the same period in the prior year. Noninterest income, excluding securities impairment charges, increases in fair value of financial instruments measured at fair value and gains and losses on OREO for the quarter ended March 31, 2009 decreased 14.7% from the same period in the prior year due to decreases in investment advisory revenues, income from bank owned life insurance and other fee revenue. Noninterest expense for the quarter ended March 31, 2009 increased $50.5 million, or 132.9%, from the same period in 2008, due primarily to a $45.0 million non-cash goodwill impairment charge. Branch expansion is expected to be nominal in 2009.Return on Average Equity and Average Tangible Equity. For the three months ended March 31, 2009 we suffered a net loss of $86.4 million compared to net income of $4.1 million for the three months ended March 31, 2008. The net loss was primarily due to securities impairment charges of $38.4 million, a non-cash goodwill impairment charge of $45.0 million and an $11.9 million increase to the provision for loan losses caused by challenging economic conditions, which was partially offset by a $10.5 million decrease in interest expense due to lower costs of funds. Basic and diluted loss per share was $2.33 for the three months ended March 31, 2009 compared to basic and diluted earnings per share of $0.14 for the same period in 2008. Stockholders equity decreased $68.6 million from the quarter ended December 31, 2008 due to a net loss available to common stockholders of $88.9 million (which includes $2.4 million in preferred stock dividends and accretion), partially offset by a $12.8 million decrease in accumulated other comprehensive loss for the quarter ended March 31, 2009. The decrease in net income and equity resulted in an ROE of (70.21)% for the three months ended March 31, 2009 compared to 3.28% for the three months ended March 31, 2008 and an ROTE of (87.70)% for the three months ended March 31, 2009 compared to 6.25% for the three months ended March 31, 2008.
Asset Quality. For all banks and bank holding companies, asset quality plays a significant role in the overall financial condition of the institution and results of operations. We measure asset quality in terms of nonaccrual loans as a percentage of gross loans, and net charge-offs as a percentage of average loans. Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on previously charged-off loans. As of March 31, 2009, impaired loans, including nonaccrual loans, were $196.6 million compared to $51.3 million at March 31, 2008. Nonaccrual loans as a percentage of gross loans as of March 31, 2009 were 2.42% compared to 0.26% as of March 31, 2008. For the three months ended March 31, 2009 and March 31, 2008, annualized net charge-offs as a percentage of average loans were 1.72% and 0.70%, respectively.
Asset and Deposit Growth. The ability to produce loans and generate deposits is fundamental to our asset growth. Our assets and liabilities are comprised primarily of loans and deposits, respectively. Total assets increased 1.3% to $5.3 billion as of March 31, 2009 from $5.2 billion as of March 31, 2008. Gross loans grew 9.5% to $4.1 billion as of March 31, 2009 from $3.7 billion as of March 31, 2008. Total deposits increased 11.9% (8.6% organic) to $4.1 billion ($3.9 billion organic) as of March 31, 2009 from $3.6 billion as of March 31, 2008.
Our Bank of Nevada subsidiary recently received a notice from the holder of $60 million in subordinated debt issued by the Bank asserting an event of default based on the Banks receipt of a notice from banking regulators regarding additional informal supervisory oversight of the Bank, which notice was previously disclosed in our Annual Report on Form 10-K. The asserted event of default would convert the interest rate on this debt from a LIBOR-based rate to Prime Rate-based rate, effective July 1, 2009. As asserted, the new interest rate would be the holders Prime Rate + 0.13%, on a blended basis. Although the relationship between LIBOR and the Prime Rate fluctuates, we estimate that the after tax increase in interest payments due to this conversion would be approximately $75,000 per quarter. The notice further asserts that the Bank may not, during the continuance of the asserted default, pay any dividends or make any loans to Western Alliance Bancorporation. The notice reserves all of the holders other rights and remedies, but does not specify or assert any such rights or remedies, which could include, among other things, the acceleration of the subordinated debt subject to FDIC approval and a further increased interest rate. We do not believe that the additional oversight is material and intend to contest the holders assertion that an event of default has occurred. We also do not believe that the asserted increase in interest rate or restriction on dividends and loans will have any material effect on our financial condition or operations. An event of default under this subordinated debt will not result in a cross-default under any other outstanding indebtedness of either the Company or the Bank.
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