More annual reports from Western Alliance Bancorporation:
2023 ReportPeers and competitors of Western Alliance Bancorporation:
Heritage Commerce Corp.2021
Annual Report
Succeeding Today,
Innovating for
the Future
Letter from President and Chief Executive Officer,
Kenneth A. Vecchione
Dear Fellow Shareholders,
For Western Alliance Bank, 2021 was a
watershed year. We broke many of our own
records for balance sheet growth, total net
revenue and earnings, while thoughtfully
expanding into new business lines, technologies
and geographies that will make us an even
stronger, more diversified bank.
For the year, total assets ended just shy of $56 billion,
with loans growing 44% year over year to $39.1 billion and
deposits rising 49% to $47.6 billion. This strong balance
sheet momentum propelled record net revenues of $2.0
billion, net income of $899 million, and earnings per share
(EPS) of $8.67 – a 72% increase over EPS for 2020.
01
12 Consecutive Years
of Rising Earnings
Western Alliance’s success over many years – in fact, 2021 marks
our twelfth consecutive year of rising earnings – stems from working
to support our clients as a trusted advisor and banking partner,
however and wherever they do business nationwide.
$382M
Increase in net
interest income
33%
Year-over-year
increase
When a bank can solve problems, streamline pathways to growth and
create noticeable efficiencies, clients tell us we’re an important factor
in their own success. To be “client-obsessed” might sound like an
overstatement, but it’s the core of what we do.
Our results, for our clients and our shareholders, continue to
demonstrate the unique benefits of Western Alliance’s national
commercial business strategy. This targeted and flexible set of
national capabilities positions our company as one of the country’s
premier commercial banks that consistently generates leading
balance sheet and earnings growth with superior asset quality across
economic cycles.
One of the hallmarks of our national commercial business strategy is
the ability to develop focused, specialty banking business lines and
attract qualified, entrepreneurial talent to thoughtfully add scale with
superior risk-adjusted returns.
Within a year of excellent lending performance, loan demand
continued to broaden in Q4 across our business lines, with C&I
loans, residential and CRE making significant contributions. In
terms of deposits, the bank continued in 2021 to post broad-based
core deposit growth across our business channels, with key drivers
ranging from active fundraising among tech and innovation clients
and strength in our homeowner association business to expanded
relationships in warehouse lending and throughout our regional
businesses. As a result of strong core loan and deposit growth, net
interest income grew $382 million during the year to $1.5 billion, an
increase of 33% year over year.
EXEC UTIVE P ER SP ECTIVES
Tim R. Bruckner
Chief Credit Officer
Conservative Approach to Credit Management
Western Alliance Bank prioritizes a conservative credit culture – and building
close ties with our customers – to guide our growth. We approach credit
management with teams of specialists, not generalists, whether within our
geographically managed banking brands or any of our national businesses.
Importantly, we believe that sound portfolio management is as essential as
prudent underwriting. We make a practice of proactively meeting with our
customers about their needs and their opportunities. As a result of our holistic
relationship approach, the ratio of classified assets to total assets is at a
historic low, which is as good a measure as there is to gauge our success.
At Western Alliance, we are proud to be among the industry’s most disciplined
underwriters without having to compromise our robust growth. You’ve seen it in
our results.
02
03
EXECUTIVE PERSPECTIVES
Dale M. Gibbons
Vice Chairman, Chief Financial Officer
Embracing Blockchain
Now is the right time for Western Alliance Bank to fully embrace blockchain and
the many opportunities this important technology offers clients and the bank.
We believe blockchain is essential to the future, and forward-thinking businesses
either adapt and adopt or miss the chance to lead.
Ahead of much of the industry, this spring we are launching a blockchain-based
digital payments platform to enable 24/7/365 e-transfers for our customers.1
Through this efficient technology, clients can make real-time digital payments
that tokenize their U.S. dollar deposits.2 3
We know well that our business clients value speed and responsiveness, which
this next-level platform delivers. Imagine being able to make a digital payment
on a Friday evening that puts your goods on the truck Saturday morning. We are
excited about the many benefits clients in all kinds of industries will realize when
they incorporate blockchain-based banking solutions.
Strategically, this new focus is not only a fit with our national commercial bank
approach and customers across the economy, but these new digital capabilities
position us well to also serve the innovators in digital assets and fintech markets.
Certainly, blockchain and digital assets are a real and growing part of financial
services, and our new initiative opens the door to significant deposit growth and
other revenue-generating possibilities for the bank.
One of the Most Profitable
Banks in the Industry
In every environment, Western Alliance’s branch-lite, flexible
business model provides us a competitive advantage
to leverage operating efficiencies to enhance financial
performance, while investing in business initiatives to power
future growth. For example, in 2021, we produced an efficiency
ratio of 41.8%, an impressive trend that has persisted over
the last five years. To put this in perspective, over the last
five years, total loans and deposits have grown 2.5 times the
rate of operating expense, excluding AmeriHome. Consistent
productivity improvements across our operations provide us
with the capability to absorb higher labor costs while continuing
to fund critical product and technology investments.
Our organization’s longstanding focus on credit quality
continues to deliver results. For the last several years, Western
Alliance has been able to de-risk the balance sheet while
posting exceptional growth. We concluded 2021 with special
mention loans and classified assets at or below 2019 ratios.
The acquisition of AmeriHome Mortgage Company in April
2021 extended our national commercial bank strategy with a
correspondent mortgage platform that has enhanced growth,
returns and diversification. The combination with our existing
commercial bank franchise creates numerous opportunities
to unlock value throughout economic and rate cycles as a
more broad-based, diversified financial institution. Through
low-cost deposits and attractive commercial loans, we are
able to drive meaningful net interest income and tangible
book value accretion.
I’m pleased to report Western Alliance is one of the most
profitable banks in the industry, with return on average assets
and return on average tangible common equity of 1.83% and
26.2%, respectively, which will continue to support capital
accumulation and strong capital levels.
1.83%
Return on
average assets
26.2%
Return on
average tangible
common equity
04
05
1. At this time, transfers are available only between Western Alliance commercial customers who are enrolled to use the platform. Subject to Bank approval. Settlement of payments may be periodically affected and/or delayed due to system outages or maintenance windows.2. Neither TassatPay® wallets nor Western Alliance Transfer Tokens are “deposits”, as defined in the Federal Deposit Insurance Act (12 U.S.C. §1811, et seq.), and are not insured by the FDIC or any federal government agency.3. Refer to the disclosures provided at account opening, including but not limited to the Deposit Account Agreement and Disclosure, the Privacy Policy and the Schedule of Fees and Charges (collectively, “Account Agreements”) for additional information regarding your deposit accounts at Western Alliance Bank. Transaction limits may apply. Refer to the Treasury Management Services Agreement and the Account Agreements for applicable terms and conditions. $2.0B
In record net revenue
50.5%
Growth in PPNR
Innovating for the Future
Importantly, in 2021 Western Alliance planted a flag in the
growing blockchain-based digital payments arena, working
with TassatPay®4, a digital blockchain payment platform, to
facilitate real-time B2B payments for customers. The platform
will enable clients to make instant payments 24/7/365 with
a range of other benefits, including added simplicity.5 As we
move quickly to be among the leaders in banking digitization,
we envision blockchain-based digital payments and related,
innovative solutions will be valuable offerings for our business.
Rolling out successful new businesses and making targeted
technology investments, while keeping clients at the center of
everything we do, depend on strong leaders at every level of
the company.
Our executives have deep roots and expertise in their
disciplines, which allow them to move quickly and effectively
to maximize opportunities and create competitive advantage.
As well, attracting seasoned, senior teams to Western Alliance
helps us establish new business lines that ramp up rapidly due
to their existing client relationships.
4.
5.
TassatPay® is owned and operated by Tassat Group, Inc. TassatPay® and Tassat® are registered trademarks of Tassat Group, Inc.
At this time, transfers are available only between Western Alliance commercial customers who are enrolled to use the platform. Subject to Bank approval.
Settlement of payments may be periodically affected and/or delayed due to system outages or maintenance window.
EXEC UTIVE P ER SP ECTIVES
Tim Boothe
Chief Operating Officer
Technology That ‘Just Works’
Forward-leaning digital tools are an essential facet of good banking
today – but that’s just what they are, tools. The real measure of
successful technology is the client experience. As we launch
our new blockchain payments platform in 2022, our focus is on
engaging our customers and expanding their options. These new,
always-on capabilities are the foundation for advanced treasury
management offerings and other important solutions that help us
do more for clients.
All of this supports Western Alliance’s key differentiator –
relationship banking. Our customers want digital banking
capabilities with the power to blend into the background and “just
work.” This puts the emphasis on the advisory aspects of our
relationships with business clients across the economy and across
the country. My own background as a lender tells me our approach
is the right one. For us, integrating new technologies is about
facilitating seamless connections with our customers that help
them move toward their goals.
06
07
EXECUTIVE PERSPECTIVES
Barbara Kennedy
Chief Human Resources Officer
Our People-First Culture
This report is all about performance – and at Western Alliance Bank, our
performance starts with our people and their resounding entrepreneurial
spirit. Sustaining an environment where individuals are empowered to do the
right thing for clients and for their teams makes a big difference in terms of
satisfaction. It’s clear that maximizing employee engagement is integral to a
vibrant workplace and to reaching our benchmarks.
Now more than ever, we’re acting on the powerful idea that people want more
than just strong salaries and financial incentives, important as these are. We
work to deliver opportunities for people to collaborate, contribute and build
meaningful careers here. Our position as a top-performing and growing bank
makes Western Alliance a place for possibilities.
Reliability that Leads to Trust
Behind our company’s ongoing record of accomplishment is the
simple idea that, at Western Alliance, we think differently. We act
differently. We are a nationwide commercial bank that prizes our true
connection with customers and our bankers are empowered to make
decisions quickly. We do what we say we are going to do, and this
reliability leads to credibility and trust. And this is something we never
take for granted.
After another year of tremendous demands on people, personally and
professionally, I want to sincerely thank the outstanding people of
Western Alliance Bank, whose unrelenting dedication to customers
makes our shared success happen. What links everything for us is our
culture – People, Performance, Possibilities. This is the backbone of
our business and gives us structure and resilience from year to year.
Board Refreshment and
Succession Planning
I also want to thank our Board of Directors for their helpful guidance
and active support during this eventful year. In particular, I’d like
to acknowledge and thank our departing directors for their years
of service and contributions to our company: Robert Sarver and
Steve Hilton. Robert’s dynamic leadership as the company’s former
Chief Executive Officer (2002-2018) was a catalyst for much of
Western Alliance’s industry-leading growth and strong financial
performance over the past two decades. In navigating some of the
most challenging economic conditions, including the Great Recession,
Robert’s stewardship allowed the company to support tens of
thousands of customers who rely on the bank and our people every
day. We will miss Robert’s keen insights and decades of experience
and we are deeply thankful for his service. Steve’s many contributions
to our Board included, among other things, valuable real estate
insights that helped grow our company in the region and across the
United States. We wish him well as he pursues other ventures.
Our Board recently announced that Bruce Beach has been named
Chairman of the Board of Directors, effective as of our June 2022
08
09
annual meeting of stockholders. As many of you know, Bruce is an
accounting industry leader with nearly 50 years of business and
financial management experience, in addition to being the Board’s
Lead Independent Director since 2010. I believe Bruce is the
ideal Chairman given his sound judgment, integrity and enduring
commitment to Western Alliance. He knows our company well
and I have no doubt he will continue to be a fierce advocate for
shareholders and an unwavering partner in our growth plans.
As part of our ongoing board refreshment and succession planning,
I’m also pleased to share that the company is nominating a new
director for consideration at this year’s annual meeting, Patricia
Arvielo, Co-Founder and President of New American Funding. This
company is one the nation’s largest independent mortgage lenders
and has been a mortgage warehouse client of our bank since 2014.
Patty is an accomplished entrepreneur and brings more than 40
years of mortgage and real estate experience to our Board, as
well as significant involvement in a wide range of community and
industry groups. Her energy and enthusiasm, combined with her
business acumen, will serve us well in the years to come.
I’m honored to let you know that our Board and I have also agreed
to extend my contract as President and CEO for three years,
through at least 2024. I am grateful for the trust the Board has
placed in me during this important period of growth and innovation
for our company. Our Board recognizes the diversity and expertise
our entire senior management team brings to Western Alliance, in
addition to the value of leadership continuity as we execute on our
strategic plans.
Finally, we extend our sincerest appreciation to our shareholders
for their continuing commitment to Western Alliance. Ultimately,
we recognize that we work for you, and our long track record of
success would not be possible without your ongoing support.
Kenneth A. Vecchione
President and Chief Executive Officer
10
EXEC UTIVE P ER SP ECTIVES
Stephen R. Curley
Division President, Alliance Association Bank
& Other Lending Divisions
Banking on Expertise
Expertise shapes our competitive edge in a growing number of industries where
Western Alliance operates national banking businesses. Our knowledge of key
individual sectors allows us to develop profitable, industry-leading solutions
that perform for clients.
Paired with high-touch service, this expertise makes us trusted resources
in a wide variety of segments. In the businesses that I lead, this includes
municipalities that look to us for smart public finance capabilities, mortgage
companies and brokers seeking sophisticated warehouse lending solutions,
and a tailored banking brand for the expanding homeowner association and
community management industry, Alliance Association Bank.
In other parts of our organization, two notable national banking businesses –
Business Escrow Services and Settlement Services – both deposit-focused,
also made sizable contributions to our balance sheet in 2021. A resource
for M&A attorneys, private equity firms and strategic acquirers nationwide,
Business Escrow Services has built sophisticated offerings for the legal sector.
Western Alliance recently acquired Digital Disbursements, a leading digital
payments platform for the class action legal industry, to heighten capabilities
for our productive Settlement Services group.
11
FACTS AND FIGURES
$5B
Total Equity
$56B
In Assets
3,139
Employees
58
Offices
LONG-TERM DEPOSIT RATING
A2
Moody’s
Investor Service
A
Kroll Bond
Rating Agency
LONG-TERM DEBT RATING
A-
Kroll Bond
Rating Agency
Baa2
Moody’s
Investor
Service
IDC FIN ANCI AL PL ANN ING
The Standard in Financial Rating
Institutions, Rated 300 Superior*
*Report dated 02/24/2022
IND USTRY ACCOL ADES
One of Forbes’
“America’s Best Banks”
Year After Year
#1 Best Emerging Regional
Bank & Top 10 U.S. Banks
for Growth Strategy
BANK DIRECTOR’S 2022
RANKINGBANKING STUDY
#2 Best-Performing
of the 50 Largest
Public U.S. Banks
S&P GLOBAL MARKET
INTELLIGENCE 2021
2022 All-America
Executive Team
Best CEO: Ken Vecchione ranked #1
Best CFO: Dale Gibbons ranked #1
INSTITUTIONAL INVESTOR
MAGAZINE
12
Financial Highlights
Balance Sheet ($ in millions)
Total Assets
2019
2020
2021
26,822
36,461
55,983
HFI Loans, net of deferred fees
21,101
27,053
39,075
Total Deposits
Total Equity
Profitability ($ in millions)
Net Interest Income
PPNR6
Net Income
ROAA (%)
ROATCE6 (%)
Net Interest Margin (%)
Efficiency Ratio6 (%)
Tangible Common Equity / Tangible Assets6 (%)
Asset Quality (%)
Non-Performing Assets7 / Total Assets
Loan Loss Reserves / Funded Loans
Common Equity Tier 1 (CET1) Ratio
Per Share Information ($)
Common Dividends Declared per Share 8
Earnings Per Share
22,796
31,930
47,612
3,017
3,413
4,963
1,040.4
1,166.9
1,548.8
623.5
499.2
2.00
19.6
4.52
42.7
10.3
0.26
0.84
10.6
0.50
4.84
746.1
1,122.8
506.6
899.2
1.61
17.7
3.97
38.8
8.6
0.32
1.17
9.9
1.00
5.04
1.83
26.2
3.41
41.8
7.3
0.15
0.74
9.1
1.20
8.67
6. 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission.
7.
8.
Non-performing assets include nonaccrual loans and repossessed assets.
Quarterly cash dividend initiated in 3Q 2019.
13
Financial Highlights
Continued
Growth in TBV
per Share
WAL
WAL with Dividends Added Back
Peer Average9
Peer Average9 with Dividends
Added Back
221%
202%
87%
72%
2015
2016
2017
2018
2019
2020
2021
Net Interest Income, NIM
and Average Interest on
Earning Assets
4.58%
4.51%
$1.5B
4.65%
4.68%
$1.2B
3.97%
4.52%
$1.0B
$916M
3.41%
$785M
$657M
Net Interest Income
$493M
Average Interest Earning Assets
NIM
$11.6B
$15.1B
$17.8B
$20.1B
$23.6B
$30.1B
$46.4B
Deposits, Borrowings,
and Cost of Funds
Dollars in Billions
31.7% CAGR
22.1% CAGR
Total Borrowings
Non-interest Bearing Deposits
Interest Bearing Deposits
Cost of Funds
0.30%
0.31%
0.37%
$0.5
$5.6
$8.9
$0.4
$4.1
$7.9
$0.8
$7.4
$9.5
$2.4
$21.3
$26.3
.25%
0.34%
$0.6
$13.4
0.86%
$0.4
$8.5
$14.3
$18.5
0.64%
$0.9
$7.5
$11.7
2015
2016
2017
2018
2019
2020
2021
Loans and HFI Yields
Dollars in Billions
5.62%
5.82%
5.83%
5.40%
5.18%
$39.1
4.79%
$27.1
4.32%
$21.1
$17.7
$15.1
$13.2
$11.1
Loans
Loans, HFS
Yield
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
9.
Peers consist of 29 major exchange traded U.S. banks with total assets between $25B and $150B as of December 31, 2021, excluding target banks of
pending acquisitions; S&P Global Market Intelligence.
14
15
Our Executive Team
SENIOR OP ERATING C OMMIT TEE
BOARD OF DIRECTORS
Kenneth A. Vecchione
President and CEO
Dale M. Gibbons
Vice Chairman
and CFO
Tim Boothe
Chief Operating
Officer
Tim R. Buckner
Chief Credit Officer
Robert G. Sarver
Outgoing Chairman
Bruce Beach
Lead Director &
Incoming Chairman
Juan R. Figuereo
Member
Howard N. Gould
Member
Stephen R. Curley
Division President, Alliance
Association Bank & Other
Lending Divisions
Jim Furash
CEO and Founder,
AmeriHome
Don H. Garner
Division CEO, Alliance
Bank of Arizona
John Guedry
Division CEO,
Bank of Nevada & First
Independent Bank
Steven J. Hilton
Outgoing Member
Marianne
Boyd Johnson
Member
Robert P. Latta
Member
Adriane C.
McFetridge
Member
Jessica Jarvi
General Counsel WAB
Barbara Kennedy
Chief Human
Resources Officer
John Maguire
Division CEO,
Torrey Pines Bank
Robert R. McAuslan
Executive
Vice President
Michael Patriarca
Member
Bryan K. Segedi
Member
Donald D. Snyder
Member
Sung Won Sohn, Ph.D.
Member
Daniel P. Myers
Division CEO,
Bridge Bank
Emily Nachlas
Chief Risk Officer
Jeff Semonovich
Chief Information
Officer
Randall S. Theisen
General Counsel WAL
Kenneth A. Vecchione
President and CEO
William S. Boyd
Director Emeritus
Patricia Arvielo
Member Nominee
Nick Wanat
Chief Audit Executive
16
17
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