Financial Reports are Key to Consider: Western Alliance Bancorporation (NYSE: WAL)

On Wednesday, Shares of Western Alliance Bancorporation (NYSE: WAL) gained 0.49% to $59.74. The stock opened its trade at $95.11 and after floating in a price range of $92.77 to $95.34; the stock grabbed the investor’s attention and traded 7,441 shares as compared to its average daily volume of 660.58K shares. The stock’s institutional ownership stands at 86.30%.

Western Alliance reports fourth quarter and full year 2017 financial performance.

Income Statement:

Net interest income was $211.00M in the fourth quarter 2017, a boost of $9.40M from $201.60M in the third quarter 2017, and a boost of $35.80M or 20.4%, contrast to the fourth quarter 2016. Net interest income in the fourth quarter 2017 includes $7.10M of total accretion income from attained loans, contrast to $7.50M in the third quarter 2017, and $7.00M in the fourth quarter 2016. For 2017, net interest income was $784.70M a boost of $127.50M or 19.4%, from $657.20M in 2016.

Operating non-interest income was $12.30M for the fourth quarter 2017, contrast to $10.10M for the third quarter 2017, and $10.40M for the fourth quarter 2016.1 Operating non-interest income for the fourth quarter 2017 was elevated as a result of warrant income of $1.40M and net gains on SBA loan sales of $1.20M. For 2017, operating non-interest income was $43.00M a boost of $1.20M or 2.8%, contrast to $41.80M in 2016.

Net operating revenue was $223.30M for the fourth quarter 2017, a boost of $11.60M, and contrast to $211.70 M for the third quarter 2017, and a boost of $37.60M or 20.2%, contrast to $185.70M for the fourth quarter 2016. For 2017, net operating revenue was $827.70M a boost of $128.60M, or 18.4%, contrast to $699.10M in 2016.

Operating non-interest expense was $95.40M for the fourth quarter 2017, contrast to $89.00M for the third quarter 2017, and $82.70M for the fourth quarter 2016.1 The Company’s operating efficiency ratio1 on a tax equivalent basis was 40.7% for the fourth quarter 2017, contrast to 40.0% for the third quarter 2017, and 42.4% for the fourth quarter 2016. For 2017, operating non-interest expense was $361.00M, a boost of $42.30M or 13.3%, contrast to $318.70M in 2016.This increase was mainly driven by a boost in salaries and benefits, counting incentive compensation, to accommodate growth and performance.

Income tax expense was $35.00M for the fourth quarter 2017, contrast to $34.90M for the third quarter 2017, and $26.40M for the fourth quarter 2016. Income tax expense for the fourth quarter 2017 is comparable to the prior quarter because of remeasurement of the Company’s deferred tax assets and liabilities as a result of the Tax Cut and Jobs Act and related actions. This adjustment to the deferred tax asset is management’s best estimate based upon the information available as of this earnings release and is subject to change as final tax related calculations are accomplished in conjunction with the filing of our Form 10-K and the one-year remeasurement period granted by the SEC.

Net income was $89.30M for the fourth quarter 2017, a boost of $6.50M from $82.80M for the third quarter 2017, and a boost of $19.50M or 28.0%, from $69.80M for the fourth quarter 2016. Earnings per share was $0.85 for the fourth quarter 2017, contrast to $0.79 for the third quarter 2017, and $0.67 for the fourth quarter 2016. For 2017, net income was $325.50M a boost of $65.70M or 25.3%, contrast to $259.80M in 2016. Earnings per share for 2017 was $3.10 a boost of 23.9%, contrast to $2.50 in 2016.

Balance Sheet:

Gross loans totaled $15.09B at December 31, 2017, a boost of $572.0M from $14.52B at September 30, 2017, and a boost of $1.89B from $13.21B at December 31, 2016. The year-over-year increase is because of organic loan growth. At December 31, 2017, the allowance for credit losses to gross loans held for investment was 0.93%, contrast to 0.94% at September 30, 2017, and 0.95% at December 31, 2016. At December 31, 2017, the allowance for credit losses to total organic loans was 1.03%, contrast to 1.06% at September 30, 2017, and 1.11% at December 31, 2016. The Company defines its organic loans as those loans that have not been attained in a transaction accounted for as a business combination.

Deposits totaled $16.97B at December 31, 2017, a boost of $68.0M from $16.90B at September 30, 2017, and a boost of $2.42B from $14.55B at December 31, 2016. The increase from both the prior quarter and from December 31, 2016 is the result of organic deposit growth. Non-interest bearing deposits were $7.43B at December 31, 2017, contrast to $7.61B at September 30, 2017, and $5.63B at December 31, 2016. Non-interest bearing deposits comprised 43.8% of total deposits at December 31, 2017, contrast to 45.0% at September 30, 2017, and 38.7% at December 31, 2016. The proportion of savings and money market balances to total deposits was 37.3%, contrast to 37.3% at September 30, 2017, and 42.1% at December 31, 2016. Certificates of deposit as a percentage of total deposits were 9.6% at December 31, 2017, contrast to 9.4% at September 30, 2017, and 10.0% at December 31, 2016. The Company’s ratio of loans to deposits was 88.9% at December 31, 2017, contrast to 85.9% at September 30, 2017, and 90.8% at December 31, 2016.

Borrowings totaled $390.0M at December 31, 2017, a boost from zero at September 30, 2017, and a boost of $310.0M from $80.0M at December 31, 2016. The increase in borrowings from both the prior quarter and the prior year is because of a boost in FHLB overnight advances.

Qualifying debt totaled $377.0M at December 31, 2017, contrast to $373.0M at September 30, 2017, and $368.0M at December 31, 2016.

Stockholders’ equity at December 31, 2017 was $2.23B, contrast to $2.15B at September 30, 2017, and $1.89B at December 31, 2016.

Total assets increased 2.0% to $20.33B at December 31, 2017, from $19.92B at September 30, 2017, and increased 18.2% from $17.20B at December 31, 2016. The increase in total assets from the prior year relates mainly to organic loan growth and a boost in investment securities resulting from utilized cash from increased deposits.

Asset Quality:

The provision for credit losses was $5.00M for the fourth quarter 2017, consistent with $5.00M for the third quarter 2017, and contrast to $1.00M for the fourth quarter 2016. Net loan charge-offs (recoveries) in the fourth quarter 2017 were $1.40M or 0.04% of average loans (annualized), contrast to $0.40M, or 0.01%, in the third quarter 2017, and $(0.8)0M, or (0.03)%, in the fourth quarter 2016.

Nonaccrual loans reduced $11.10M to $43.90M during the quarter and increased $3.70M during the year. Loans past due 90 days and still accruing interest totaled $43 thousand at December 31, 2017, contrast to $44 thousand at September 30, 2017, and $1.10M at December 31, 2016. Loans past due 30-89 days and still accruing interest totaled $10.10M at quarter end, a boost from $5.20M at September 30, 2017, and a boost from $6.30M at December 31, 2016.

Repossessed assets totaled $28.50M at December 31, 2017, a decrease of $0.50M from $29.00M at September 30, 2017, and a decrease of $19.30M from $47.80M at December 31, 2016. Adversely graded loans and non-performing assets totaled $355.20M at December 31, 2017, a decrease of $51.00M from $406.20M at September 30, 2017, and a decrease of $12.30M from $342.90M at December 31, 2016.

WAL has a market value of $6.19B while its EPS was booked as $3.10 in the last 12 months. The stock has 104.08M shares outstanding. In the profitability analysis, the company has net profit margin of 34.30%. Beta value of the company was 1.56; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 1.50.

 I am Wayne Parsons and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

Email: wayne.parsons@nasdaqexpress.com

Wayne Parsons

 I am Wayne Parsons and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.Email: wayne.parsons@nasdaqexpress.com