Western Alliance Reports Second Quarter 2013 Net Income Of $34.0 Million, Or $0.39 Per Share

Western Alliance Bancorporation (NYSE:WAL) announced today its financial results for the second quarter 2013.

Second Quarter 2013 Highlights:
  • Net income of $34.0 million, compared to $21.0 million for the first quarter 2013 and $14.0 million for the second quarter 2012
  • Net income of $27.7 million for the second quarter 2013, excluding a $10.0 million bargain purchase gain from the acquisition of Centennial Bank, a $3.3 million trust preferred fair value revaluation charge, and a $1.1 million gain on OREO valuation (excluding tax effects)
  • Earnings per share of $0.39, compared to $0.24 per share in the first quarter 2013 and $0.15 per share in the second quarter 2012
  • Earnings per share of $0.30 for the second quarter 2013, excluding $0.10 per share bargain purchase gain from the acquisition of Centennial Bank, $0.02 trust preferred valuation charge, and $0.01 OREO valuation gain
  • Pre-tax, pre-provision operating earnings of $40.1 million, up 14.4% from $35.1 million in first quarter 2013 and from $32.1 million in second quarter 2012 1
  • Net interest margin of 4.36%, compared to 4.36% in the first quarter 2013 and 4.46% in the second quarter 2012
  • Total loans of $6.41 billion, up $556 million from March 31, 2013, and up $1.25 billion from June 30, 2012, including $343 million increase from the acquisition of Centennial Bank, which closed on April 30, 2013
  • Total deposits of $7.00 billion, up $266 million from March 31, 2013 and up $1.00 billion from June 30, 2012, including $298 million increase from the acquisition of Centennial Bank, which closed on April 30, 2013
  • Nonperforming assets (nonaccrual loans and repossessed assets) decreased to 1.9% of total assets from 2.1% in first quarter 2013 and from 2.5% in second quarter 2012
  • Net loan charge-offs (annualized) to average loans outstanding decreased to 0.17% from 0.38% in the first quarter 2013 and 1.11% in the second quarter 2012
  • Tier I Leverage capital of 9.9% and Total Risk-Based Capital ratio of 12.0%, compared to 9.7% and 12.3% a year ago
  • Total equity of $800 million, up $128 million from June 30, 2012

Financial Performance

“Our proven business model of exceptional client service, strong credit underwriting, and striving for continued performance improvement has driven our record earnings for the second quarter,” said Robert Sarver, Chairman and Chief Executive Officer of Western Alliance Bancorporation. “On the revenue side, strong loan growth and disciplined pricing led to record net interest income. Meanwhile, effective cost control and leveraging our infrastructure resulted in improved operating efficiency, as deposits per branch rose over 10% during the past year to $171 million. The acquisition of Centennial Bank augmented our results with a bargain purchase gain and higher earning assets. Continued collection activities and economic recovery resulted in a gain on sale of real estate owned and a lower credit provision as non-performing loans and repossessed assets fell to under 2%. We also invested in our future by recruiting new members to our team and, on July 1 st, opened our 42 nd office to more effectively serve the vibrant Scottsdale Airpark market.”

Western Alliance Bancorporation reported net income of $34.0 million, or $0.39 per share, in the second quarter 2013 (includes an $8.5 million gain from the acquisition of Centennial Bank, net of merger related expenses and tax), more than double the $14.0 million, or $0.15 per share, earned one year ago. Key performance improvement drivers include sustained organic balance sheet growth, prudent expense management, and reduced legacy asset costs against the backdrop of improved economic conditions.

Total loans increased $556 million to $6.41 billion at June 30, 2013 from $5.86 billion on March 31, 2013. Loans increased $1.25 billion, or 24.1%, from June 30, 2012. The increases in each of these periods were primarily driven by growth in commercial and industrial loans and commercial real estate loans.

Total deposits increased $266 million to $7.00 billion at June 30, 2013 from $6.73 billion at March 31, 2013. Deposits increased $1.00 billion from June 30, 2012. The increases in each of these periods were primarily due to growth in certificates of deposits and savings and money market deposits.

Income Statement

Net interest income was $82.2 million in the second quarter 2013, an increase of $6.0 million, or 7.8%, from $76.2 million in the first quarter of 2013 and an increase of $11.3 million, or 16.0%, compared to the second quarter 2012. The Company’s net interest margin remained flat in the second quarter 2013 at 4.36% compared to the first quarter 2013 and decreased from 4.46% in the second quarter 2012.

Operating non-interest income was $5.0 million for the second quarter 2013, down from $5.1 million in the first quarter of 2013 and down from $5.8 million for the second quarter of 2012. 1

Net revenue was $87.2 million for the second quarter 2013, up from $81.3 million for the first quarter of 2013 and an increase of 13.8% from $76.6 million for the second quarter 2012. 1

Operating non-interest expense was $47.0 million for the second quarter 2013, compared to $46.2 million for the first quarter of 2013 and $44.5 million for the second quarter of 2012. 1 The Company’s operating efficiency ratio 1 on a tax equivalent basis was 52.2% for the second quarter 2013, an improvement from 54.6% for the first quarter 2013 and 56.4% for the second quarter 2012 as the growth rate in revenue continued to outpace that of expense.

The Company had 1,015 full-time equivalent employees and 41 offices at June 30, 2013, compared to 953 employees and 39 offices one year ago.

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 2013, the Company’s performance was $40.1 million, up from $35.1 million in the first quarter 2013 and up 25.2% from $32.1 million in the second quarter 2012.

The provision for credit losses was $3.5 million for the second quarter 2013, compared to $5.4 million for the first quarter 2013. The provision for the second quarter of 2012 was $13.3 million. Net loan charge-offs in the second quarter 2013 were $2.7 million, or 0.17% of average loans (annualized), down from 0.38% of average loans (annualized) for the first quarter 2013. Net charge-offs for the second quarter 2012 were $13.9 million or 1.11% of average loans (annualized).

Nonaccrual loans decreased $11 million to $83 million during the quarter. Loans past due 90 days and still accruing interest totaled $793 thousand at June 30, 2013, compared to $2 million at March 31, 2013 and $795 thousand at June 30, 2012. Loans past due 30-89 days, still accruing interest totaled $7 million at quarter end, down from $15 million at March 31, 2013 and down from $14 million at June 30, 2012.

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 32% at June 30, 2013 from 42% at June 30, 2012. 1

Net gain on sales and valuation of repossessed assets (primarily other real estate) was $1.1 million for the second quarter 2013 compared to a $0.5 million loss from the first quarter 2013 and a $0.9 million loss in the second quarter 2012. At June 30, 2013, other repossessed assets totaled $76.5 million compared to $77.9 million at March 31, 2013 and $77.0 million one year ago. During the second quarter 2013, the Company’s net sales proceeds received from other repossessed real estate dispositions was 116.9% of carrying value.

During the quarter, the Company completed its acquisition of Centennial Bank, which increased assets, loans and deposits at June 30, 2013 by $403 million, $343 million and $298 million, respectively, and recorded a net acquisition gain of $8.5 million. Pursuant to the accounting guidance, acquired net assets are recorded at estimated fair value. The estimated fair value of certain net assets are preliminary and subject to measurement period adjustments.

Balance Sheet

Gross loans totaled $6.41 billion at June 30, 2013, an increase of $556 million from March 31, 2013 and an increase of $1.25 billion from $5.16 billion at June 30, 2012. At June 30, 2013, the allowance for credit losses was 1.50% of total loans, which has declined from 1.63% at March 31, 2013 and 1.89% at June 30, 2012, as the Company’s asset quality has improved.

Deposits totaled $7.00 billion at June 30, 2013, an increase of $266 million from $6.73 billion at March 31, 2013 and an increase of $1.00 billion from $6.00 billion at June 30, 2012. Non-interest bearing deposits were flat at $1.92 billion at June 30, 2013 compared to March 31, 2013 and increased $77 million from $1.84 billion at June 30, 2012. Non-interest bearing deposits comprised 27.4% of total deposits at June 30, 2013, compared to 30.7% a year ago, while the proportion from savings and money market increased to 42.1% from 40.6% during the same period. Certificates of deposit as a percent of total deposits were 21.5% at June 30, 2013. The Company’s ratio of loans to deposits was 91.2% at June 30, 2013 compared to 86.9% at March 31, 2013 and 86.1% at June 30, 2012.

Stockholders’ equity at June 30, 2013 increased to $800 million from $781 million at March 31, 2013. At June 30, 2013, tangible common equity was 7.4% of tangible assets 1 and total risk-based capital was 12.0% of risk-weighted assets. The Company’s tangible book value per share 1 was $7.26 at June 30, 2013, up 20.8% during the past year.

Total assets increased to $8.59 billion at June 30, 2013 from $8.17 billion at March 31, 2013 and increased 20.0% from $7.16 billion at June 30, 2012.

Operating Unit Highlights

Western Alliance Bank (doing business as Alliance Bank of Arizona and First Independent Bank) reported loan growth of $339 million during the second quarter 2013 and $671 million during the last 12 months to $2.45 billion. Second quarter loan growth came primarily from the acquisition of Centennial Bank (which was merged into Western Alliance Bank). Deposits increased $208 million in the second quarter and $651 million during the last 12 months to $2.65 billion. Net income for Western Alliance Bank was $20.5 million during the second quarter 2013 compared with net income of $8.5 million during the first quarter of 2013 and net income of $7.8 million during the second quarter 2012.

Bank of Nevada, which was the recipient of net affiliate loan sales and participations, reported that loans increased by $115 million during the second quarter of 2013 and increased $414 million during the last 12 months to $2.42 billion at June 30, 2013. Second quarter loan growth came primarily from a rise in commercial real estate and construction and land development loans. Deposits increased by $13 million in the second quarter of 2013 and $189 million over the last twelve months to $2.62 billion. Net income for Bank of Nevada was $12.7 million for the second quarter 2013, compared with net income of $10.7 million for the first quarter of 2013 and net income of $3.8 million during the second quarter 2012.

The Torrey Pines Bank segment, which excludes the discontinued operations of PartnersFirst, reported that loans increased $92 million during the second quarter 2013 and increased $100 million during the last 12 months to $1.52 billion. Second quarter increases in loan balances were primarily attributable to an increase in commercial and industrial loans. Deposits increased $51 million in the second quarter 2013 and $157 million over the last 12 months to $1.75 billion. Net income for Torrey Pines Bank was $5.8 million during the second quarter 2013 compared with net income of $6.3 million for the first quarter of 2013 and net income of $5.3 million during the second quarter 2012.

Attached to this press release is summarized financial information for the quarter ended June 30, 2013.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its second quarter 2013 financial results at 12:00 p.m. ET on Friday, July 19, 2013. Participants may access the call by dialing 1-888-317-6003 and using passcode: 2074791 or via live audio webcast using the website link: https://services.choruscall.com/links/wal130719.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 19 th through August 2 nd at 9:00 a.m. ET by dialing 1-877-344-7529 using the conference number 10031032.

About Western Alliance Bancorporation

Western Alliance Bancorporation is the parent company of Bank of Nevada, Western Alliance Bank doing business as Alliance Bank of Arizona and First Independent Bank, and Torrey Pines Bank. These dynamic organizations provide a broad array of deposit and credit 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. 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. 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: factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2012 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.

We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements set forth in this press release to reflect new information, future events or otherwise.

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 reconcilement 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.

1 See Reconciliation of Non-GAAP Financial Measures beginning on page 16
                         
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
  At or for the Three Months For the Six Months
Ended June 30, Ended June 30,
2013 2012

Change %
2013 2012 Change %
 
Selected Balance Sheet Data:
(dollars in millions)
Total assets $ 8,593.7 $ 7,163.6 20.0 %
Loans, net of deferred fees 6,411.5 5,164.8 24.1
Securities and money market investments 1,313.1 1,401.5 (6.3 )
Securities purchased under agreement to resell 134.0 - -
Total deposits 7,001.3 6,001.4 16.7
Borrowings 470.5 390.4 20.5
Junior subordinated debt 39.9 36.7 8.7
Stockholders' equity 799.5 672.1 19.0
 
Selected Income Statement Data:
(dollars in thousands)
Interest income $ 89,285 $ 77,846 14.7 % $ 172,393 $ 155,283 11.0 %
Interest expense   7,133     7,041   1.3   14,038     14,421   (2.7 )
Net interest income 82,152 70,805 16.0 158,355 140,862 12.4
Provision for loan losses   3,481     13,330   (73.9 )   8,920     26,411   (66.2 )
Net interest income after provision for credit losses 78,671 57,475 36.9 149,435 114,451 30.6
Non-interest income 10,862 7,397 46.8 14,761 13,281 11.1
Non-interest expense   48,531     45,431   6.8   95,460     92,328   3.4

Income from continuing operations, before income tax expense

41,002
19,441 110.9 68,736 35,404 94.1
Income tax expense   6,817     5,259   29.6   13,625     9,700   40.5
Income from continuing operations 34,185 14,182 141.0 55,111 25,704 114.4 %
Loss on discontinued operations, net   (169 )   (221 ) 23.5   (131 )   (443 )
Net income $ 34,016   $ 13,961   143.7 % $ 54,980   $ 25,261  

Diluted net income per common share from continuing operations
$ 0.39   $ 0.16   $ 0.63   $ 0.28  

Diluted net loss per common share from discontinued operations, net of tax
$ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
Diluted net income per common share $ 0.39   $ 0.15   160.0 % $ 0.63   $ 0.27   133.0 %
 
Common Share Data:
Diluted net income per common share $ 0.39 $ 0.15 160.0 % $ 0.63 $ 0.27 133.0 %
Book value per common share $ 7.57 $ 6.39 18.5 %
Tangible book value per share, net of tax (1) $ 7.26 $ 6.01 20.8 %
Average shares outstanding (in thousands):
Basic 85,659 81,590 5.0 85,493 81,475 4.9
Diluted 86,524 81,955 5.6 86,254 82,091 5.1
Common shares outstanding 86,997 83,157 4.6
 
(1) See Reconciliation of Non-GAAP Financial Measures
 
 

                         
Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data (continued)
Unaudited
  At or for the Three Months For the Six Months
Ended June 30, Ended June 30,
2013 2012 Change % 2013 2012 Change %
(in thousands, except per share data)
Selected Performance Ratios:
Return on average assets (1) 1.64 % 0.80 % 105.0 % 1.37 % 0.74 % 85.1 %
Return on tangible common equity (2) 21.66 11.26 92.4 17.60 10.25 71.7
Net interest margin (1) 4.36 4.46 (2.2 ) 4.36 4.49 (2.9 )
Net interest spread 4.22 4.27 (1.2 ) 4.21 4.31 (2.3 )
Efficiency ratio - tax equivalent basis (2) 52.21 56.44 (7.5 )
Loan to deposit ratio 91.58 86.06 6.4
 
Capital Ratios:
Tangible equity (2) 9.0 % 8.9 % 0.6 %
Tangible common equity (2) 7.4 7.0 5.5
Tier 1 common equity (2) 8.3 8.0 4.3
Tier 1 Leverage ratio (3) 9.9 9.7 2.1
Tier 1 Risk Based Capital (3) 10.8 11.0 (1.8 )
Total Risk Based Capital (3) 12.0 12.3 (2.4 )
 
Asset Quality Ratios:
Net charge-offs to average loans outstanding (1) 0.17 % 1.11 % (84.7 ) % 0.71 % 1.15 % (38.3 ) %
Nonaccrual loans to gross loans 1.42 2.02 (29.7 )

Nonaccrual loans and repossessed assets to total assets
1.85 2.53 (26.9 )

Loans past due 90 days and still accruing to total loans
0.01 0.02 (50.0 )
Allowance for credit losses to loans 1.50 1.89 (20.6 )
Allowance for credit losses to nonaccrual loans 116.19 93.47 24.3
 

(1) Annualized for the three and six month periods ended June 30, 2013 and 2012.
(2) See Reconciliation of Non-GAAP Financial Measures.
(3) Capital ratios are preliminary until Call Reports are filed.
 
 

                   
Western Alliance Bancorporation and Subsidiaries
Condensed Consolidated Income Statements
Unaudited Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Interest income: (dollars in thousands)
Loans $ 81,093 $ 68,342 $ 155,818 $ 136,102
Investment securities 7,822 9,389 15,980 18,974
Federal funds sold and other   370     115     595     207  
Total interest income   89,285     77,846     172,393     155,283  
Interest expense:
Deposits 3,929 4,168 7,661 8,930
Borrowings 2,749 2,386 5,456 4,520
Junior subordinated debt   455     487     921     971  
Total interest expense   7,133     7,041     14,038     14,421  
Net interest income 82,152 70,805 158,355 140,862
Provision for credit losses   3,481     13,330     8,920     26,411  
Net interest income after provision for credit losses   78,671     57,475     149,435     114,451  
Non-interest income
Service charges 2,449 2,317 4,983 4,602
Bank owned life insurance 1,036 1,120 2,072 2,243
Amortization of affordable housing investments (900 ) (59 ) (1,800 ) (59 )
(Losses) Gains on sales of investment securities, net (5 ) 1,110 142 1,471
Unrealized (losses) gains on assets/liabilities measured at fair value, net (3,290 ) 564 (3,761 ) 232
Bargain purchase gain from acquisition 10,044 - 10,044 -
Other   1,528     2,345     3,081     4,792  
Total non-interest income   10,862     7,397     14,761     13,281  
Non-interest expenses:
Salaries and employee benefits 28,100 25,995 54,674 52,659
Occupancy 4,753 4,669 9,599 9,391
Legal, professional and director's fees 2,227 2,517 5,011 4,089
Insurance 2,096 2,152 4,466 4,202
Data Processing 2,175 1,293 4,040 2,288
Marketing 1,607 1,459 3,371 2,830
Loan and repossessed asset expenses 721 1,653 2,317 3,337
Customer service 717 682 1,360 1,274
Net (gain) loss on sales and valuations of repossessed assets (1,124 ) 901 (605 ) 3,552
Intangible amortization 597 890 1,194 1,779
Merger/restructure expense 2,620 - 2,815 -
Other   4,042     3,220     7,218     6,927  
Total non-interest expense   48,531     45,431     95,460     92,328  
Income from continuing operations before income taxes 41,002 19,441 68,736 35,404
Income tax expense   6,817     5,259     13,625     9,700  
Income from continuing operations 34,185 14,182 55,111 25,704
Loss from discontinued operations net of tax benefit   (169 )   (221 )   (131 )   (443 )
Net income 34,016 13,961 54,980 25,261
Preferred stock dividends   353     1,325     706     3,088  
Net income available to common stockholders $ 33,663   $ 12,636   $ 54,274   $ 22,173  
Diluted net income per share $ 0.39   $ 0.15   $ 0.63   $ 0.27  
 
 

               
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited       Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2013 2013 2012 2012 2012
Interest income: (in thousands, except per share data)
Loans $ 81,093 $ 74,725 $ 75,303 $ 69,580 $ 68,342
Investment securities 7,822 8,158 8,794 9,034 9,389
Federal funds sold and other   370     225     246     55     115  
Total interest income   89,285     83,108     84,343     78,669     77,846  
Interest expense:
Deposits 3,929 3,732 3,890 3,974 4,168
Borrowings 2,749 2,707 2,528 2,262 2,386
Junior subordinated debt   455     466     470     487     487  
Total interest expense   7,133     6,905     6,888     6,723     7,041  
Net interest income 82,152 76,203 77,455 71,946 70,805
Provision for credit losses   3,481     5,439     11,501     8,932     13,330  
Net interest income after provision for credit losses   78,671     70,764     65,954     63,014     57,475  
Non-interest income
Service charges 2,449 2,534 2,438 2,412 2,317
Bank owned life insurance 1,036 1,036 1,080 1,116 1,120
Amortization of affordable housing investments (900 ) (900 ) (1,069 ) (651 ) (59 )
(Losses) Gains on sales of investment securities, net (5 ) 147 1,447 1,031 1,110

Unrealized (losses) gains on assets/liabilities measured at fair value, net
(3,290 ) (471 ) (48 ) 470 564
Bargain purchase gain from acquisition 10,044 - 17,562 - -
Other   1,528     1,553     3,053     2,604     2,345  
Total non-interest income   10,862     3,899     24,463     6,982     7,397  
Non-interest expenses:
Salaries and employee benefits 28,100 26,574 26,885 25,500 25,995
Occupancy 4,753 4,846 4,769 4,655 4,669
Legal, professional and director's fees 2,227 2,784 1,849 2,291 2,517
Data Processing 2,175 1,865 2,071 1,390 1,293
Insurance 2,096 2,370 2,188 2,121 2,152
Marketing 1,607 1,764 1,546 1,231 1,459
Loan and repossessed asset expenses 721 1,596 2,102 1,236 1,653
Customer service 717 643 678 653 682
Net (gain) loss on sales and valuations of repossessed assets (1,124 ) 519 529 126 901
Intangible amortization 597 597 596 880 890
Merger/restructure expense 2,620 195 2,706 113 -
Goodwill and intangible impairment - - - 3,435 -
Other   4,042     3,176     3,070     3,912     3,220  
Total non-interest expense   48,531     46,929     48,989     47,543     45,431  
Income from continuing operations before income taxes 41,002 27,734 41,428 22,453 19,441
Income tax expense   6,817     6,808     7,509     6,752     5,259  
Income from continuing operations $ 34,185 $ 20,926 $ 33,919 $ 15,701 $ 14,182
(Loss) Income from discontinued operations, net of tax   (169 )   38     (1,804 )   (243 )   (221 )
Net income $ 34,016   $ 20,964   $ 32,115   $ 15,458   $ 13,961  
Preferred stock dividends   353     353     353     352     1,325  
Net Income available to common stockholders $ 33,663   $ 20,611   $ 31,762   $ 15,106   $ 12,636  
Diluted net income per share $ 0.39   $ 0.24   $ 0.37   $ 0.18   $ 0.15  
 
 

               
Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
      June 30, March 31, December 31, September 30, June 30,
2013 2013 2012 2012 2012
Assets: (in millions)
Cash and due from banks $ 248.9 $ 422.3 $ 204.6 $ 168.1 $ 178.9
Securities purchased under agreement to resell   134.0     134.0     -     139.8     -  
Cash and cash equivalents 382.9 556.3 204.6 307.9 178.9
 
Securities and money market investments 1,313.1 1,302.4 1,236.6 1,338.9 1,401.5
Loans held for sale 27.6 27.9 31.1 - -
Loans held for investment
Commercial 2,174.1 2,084.9 1,947.8 1,756.0 1,573.6
Commercial real estate - non-owner occupied 1,839.7 1,538.4 1,505.6 1,407.1 1,440.4
Commercial real estate - owner occupied 1,550.0 1,414.3 1,396.8 1,331.3 1,310.3
Construction and land development 416.7 381.1 394.3 379.8 360.6
Residential real estate 381.7 388.7 407.9 408.4 430.4
Consumer 28.5 26.0 31.8 56.6 55.8
Deferred fees, net   (6.8 )   (6.0 )   (6.0 )   (6.3 )   (6.3 )
Gross loans and deferred fees, net 6,383.9 5,827.4 5,678.2 5,332.9 5,164.8
Allowance for credit losses   (96.3 )   (95.5 )   (95.4 )   (97.4 )   (97.5 )
Loans, net   6,287.6     5,731.9     5,582.8     5,235.5     5,067.3  
 
Premises and equipment, net 106.1 107.1 107.9 106.9 106.9
Other repossessed assets 76.5 77.9 77.2 78.2 77.0
Bank owned life insurance 140.4 139.4 138.3 137.3 136.1
Goodwill and other intangibles 28.5 29.2 29.8 29.0 34.0
Other assets   231.0     202.0     214.3     169.9     161.9  
Total assets $ 8,593.7   $ 8,174.1   $ 7,622.6   $ 7,403.6   $ 7,163.6  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $ 1,919.6 $ 1,930.4 $ 1,933.2 $ 1,840.8 $ 1,842.1
Interest bearing
Demand 631.3 619.7 582.3 514.7 540.6
Savings and money market 2,945.1 2,826.7 2,573.5 2,541.2 2,438.4
Time certificates   1,505.3     1,358.1     1,366.2     1,265.3     1,180.3  
Total deposits 7,001.3 6,734.9 6,455.2 6,162.0 6,001.4
Customer repurchase agreements   51.9     64.7     79.0     73.1     86.9  
Total customer funds 7,053.2 6,799.6 6,534.2 6,235.1 6,088.3
Securities sold short 129.5 132.6 - 138.3 -
Borrowings 418.6 293.8 193.7 223.6 303.5
Junior subordinated debt 39.9 36.7 36.2 36.2 36.7
Accrued interest payable and other liabilities   153.0     130.1     98.9     72.4     63.0  
Total liabilities   7,794.2     7,392.8     6,863.0     6,705.6     6,491.5  
Stockholders' Equity
Common stock and additional paid-in capital 789.5 786.9 784.9 751.1 748.1
Preferred Stock 141.0 141.0 141.0 141.0 141.0
Accumulated deficit (120.2 ) (153.8 ) (174.5 ) (206.2 ) (221.3 )
Accumulated other comprehensive (loss) income   (10.8 )   7.2     8.2     12.1     4.3  
Total stockholders' equity   799.5     781.3     759.6     698.0     672.1  
Total liabilities and stockholders' equity $ 8,593.7   $ 8,174.1   $ 7,622.6   $ 7,403.6   $ 7,163.6  
 
 

                   
Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses
Unaudited
  Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2013 2013 2012 2012 2012
 
(in thousands)
Balance, beginning of period $ 95,494 $ 95,427 $ 97,410 $ 97,512 $ 98,122
Provision for credit losses 3,481 5,439 11,501 8,932 13,330
Recoveries of loans previously charged-off:
Commercial and industrial 1,757 441 372 501 1,417
Commercial real estate - non-owner occupied 154 440 288 27 368
Commercial real estate - owner occupied 479 502 109 606 193
Construction and land development 120 701 2,033 567 217
Residential real estate 549 569 313 153 274
Consumer   11     14     63     38     214  
Total recoveries 3,070 2,667 3,178 1,892 2,683
Loans charged-off:
Commercial and industrial 1,065 1,770 4,654 4,100 4,933
Commercial real estate - non-owner occupied 1,000 1,908 2,673 998 2,463
Commercial real estate - owner occupied 1,391 979 4,470 472 3,178
Construction and land development 238 614 405 2,315 3,185
Residential real estate 2,010 2,493 1,307 2,242 2,094
Consumer   18     275     3,153     799     770  
Total loans charged-off 5,722 8,039 16,662 10,926 16,623
Net loans charged-off   2,652     5,372     13,484     9,034     13,940  
Balance, end of period $ 96,323   $ 95,494   $ 95,427   $ 97,410   $ 97,512  
 

Net charge-offs (annualized) to average loans outstanding
0.17 % 0.38 % 0.99 % 0.70 % 1.11 %
Allowance for credit losses to gross loans 1.50 1.63 1.67 1.83 1.89
Nonaccrual loans $ 82,899 $ 93,748 $ 104,716 $ 121,238 $ 104,324
Repossessed assets 76,499 77,921 77,247 78,234 76,994
Loans past due 90 days, still accruing 793 1,640 1,388 1,710 795
Loans past due 30 to 89 days, still accruing 7,341 14,795 16,565 10,181 13,848
Classified loans on accrual 140,192 97,351 112,637 116,841 135,913
Special mention loans 115,135 125,660 103,550 97,681 91,924
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
  Three Months Ended June 30,
2013 2012

Average Balance
    Interest

Average Yield/ Cost

Average Balance
Interest

Average Yield/ Cost
Interest earning assets

($ inmillions)

($ inthousands)

($ inmillions)

($ inthousands)
Loans (1) $ 6,100.8 $ 81,093 5.40 % $ 5,014.1 $ 68,342 5.50 %
Investment securities (1) 1,295.9 7,822 2.92 % 1,417.1 9,389 3.15 %
Federal funds sold and other   407.6         370     0.36 %   133.1         115     0.35 %
Total interest earning assets 7,804.4 89,285 4.73 % 6,564.3 77,846 4.88 %
Non-interest earning assets
Cash and due from banks 119.2 113.1
Allowance for credit losses (96.6 ) (97.5 )
Bank owned life insurance 139.7 135.4
Other assets   432.7     346.9  
Total assets $ 8,399.4   $ 7,062.2  
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 626.8 $ 370 0.24 % $ 518.4 $ 310 0.24 %
Savings and money market 2,768.7 2,007 0.29 % 2,296.0 1,956 0.34 %
Time certificates of deposit   1,584.0         1,552     0.39 %   1,320.7         1,902     0.58 %
Total interest-bearing deposits 4,979.5 3,929 0.32 % 4,135.1 4,168 0.40 %
Borrowings 554.0 2,749 1.98 % 425.7 2,386 2.24 %
Junior subordinated debt   36.7         455     4.96 %   37.3         487     5.22 %
Total interest-bearing liabilities 5,570.1 7,133 0.51 % 4,598.1 7,041 0.61 %
Noninterest-bearing liabilities
Noninterest-bearing demand deposits 1,898.2 1,744.1
Other liabilities 124.6 52.1
Stockholders’ equity   806.4     667.9  
Total liabilities and stockholders' equity $ 8,399.4   $ 7,062.2  
Net interest income and margin $ 82,152 4.36 % $ 70,805 4.46 %
Net interest spread 4.22 % 4.27 %
 

(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $2,929 and $2,310 for the second quarter ended 2013 and 2012, respectively.
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
     
Six Months Ended June 30,
2013 2012
 

Average Balance
Interest

Average Yield/ Cost

Average Balance
Interest

Average Yield/ Cost
Interest earning Assets

($ inmillions)

($ inthousands)

($ inmillions)

($ inthousands)
Loans (1) $ 5,857.0 $ 155,818 5.41 % $ 4,898.5 $ 136,102 5.59 %
Investment securities (1) 1,289.7 15,980 3.06 % 1,420.2 18,974 3.14 %
Federal funds sold & other   406.2         595     0.29 %   132.2         207     0.31 %
Total interest earnings assets 7,552.9 172,393 4.73 % 6,450.9 155,283 4.94 %
Non-interest earning assets
Cash and due from banks 122.9 113.3
Allowance for credit losses (96.8 ) (99.1 )
Bank owned life insurance 139.2 134.8
Other assets   427.3     352.5  
Total assets $ 8,145.5   $ 6,952.4  
Interest-bearing liabilities
Interest-bearing deposits:
Interest bearing transaction accounts $ 617.8 $ 671 0.22 % $ 511.3 $ 624 0.24 %
Savings and money market 2,695.2 3,918 0.29 % 2,264.8 4,124 0.36 %
Time certificates of deposits   1,517.2         3,072     0.40 %   1,372.5         4,182     0.61 %
Total interest-bearing deposits 4,830.2 7,661 0.32 % 4,148.6 8,930 0.44 %
Borrowings 501.3 5,456 2.18 % 360.3 4,520 2.51 %
Junior subordinated debt   36.5         921     5.05 %   37.1         971     5.23 %
Total interest-bearing liabilities $ 5,368.0 14,038 0.52 % $ 4,546.0 14,421 0.63 %
Noninterest-bearing liabilities
Noninterest-bearing demand deposits 1,876.8 1,694.9
Other liabilities 108.2 48.7
Stockholders’ equity   792.5     662.8  
Total liabilities and stockholders' equity $ 8,145.5   $ 6,952.4  
Net interest income and margin $ 158,355 4.36 % $ 140,862 4.49 %
Net interest spread 4.21 % 4.31 %
 

(1) Yields on loans and securities have been adjusted to a tax equivalent basis. The taxable-equivalent adjustment was $6,311 and $4,017 for the six months June 30, 2013 and 2012, respectively.
 
 

           
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited               Inter-
segment Consoli-
Western Bank Torrey elimi- dated
Alliance Bank of Nevada Pines Bank* Other nations Company
At June 30, 2013 (dollars in millions)
Assets $ 3,053.0 $ 3,319.2 $ 2,030.7 $ 1,124.8 $ (934.0 ) $ 8,593.7
Held for sale loans - - 27.6 - - 27.6
Gross loans and deferred fees, net 2,454.4 2,416.3 1,494.0 62.1 (43.0 ) 6,383.9
Less: Allowance for credit losses   (22.3 )       (55.8 )       (15.6 )       (2.6 )       -         (96.3 )
Loans, net   2,432.1         2,360.5         1,478.5         59.5         (43.0 )       6,287.6  
Goodwill and intangible assets 3.0 25.6 - - - 28.6
Deposits 2,648.9 2,619.9 1,749.4 - (16.9 ) 7,001.3
Borrowings 74.7 200.0 45.0 123.9 (25.0 ) 418.6
Stockholders' equity 262.4 393.1 170.1 817.8 (843.9 ) 799.5
 
No. of branches 17 12 12 - - 41
No. of FTE 293 388 229 105 - 1,015
 
Three Months Ended June 30, 2013: (in thousands)
Net interest income $ 32,530 $ 30,679 $ 20,603 (1,660 ) $ - $ 82,152
Provision for credit losses   1,009         999         740         733         -         3,481  

Net interest income (loss) after provision for credit losses
31,521 29,680 19,863 (2,393 ) - 78,671
Non-interest income 11,300 3,732 606 (294 ) (4,482 ) 10,862
Non-interest expense   (17,100 )       (16,034 )       (11,958 )       (7,921 )       4,482         (48,531 )

Income (loss) from continuing operations before income taxes
25,721 17,378 8,511 (10,608 ) - 41,002
Income tax expense (benefit)   5,247         4,672         2,669         (5,771 )       -         6,817  
Income (loss) from continuing operations 20,474 12,706 5,842 (4,837 ) - 34,185
Loss from discontinued operations, net   -               -         (169 )       -         (169 )
Net income (loss) $ 20,474       $ 12,706       $ 5,842       $ (5,006 )     $ -       $ 34,016  
 
Six Months Ended June 30, 2013: (in thousands)
Net interest income $ 59,165 $ 59,933 $ 41,380 $ (2,123 ) $ - $ 158,355
Provision for credit losses   3,644         1,404         832         3,040         -         8,920  

Net interest income (loss) after provision for credit losses
55,521 58,529 40,548 (5,163 ) - 149,435
Non-interest income 12,704 7,069 1,204 1,411 (7,627 ) 14,761
Non-interest expense   (30,168 )       (33,925 )       (23,927 )       (15,067 )       7,627         (95,460 )

Income (loss) from continuing operations before income taxes
38,057 31,673 17,825 (18,819 ) - 68,736
Income tax expense (benefit)   9,089         8,265         5,668         (9,397 )       -         13,625  
Income (loss) from continuing operations 28,968 23,408 12,157 (9,422 ) - 55,111
Loss from discontinued operations, net   -         -         -         (131 )       -         (131 )
Net income (loss) $ 28,968       $ 23,408       $ 12,157       $ (9,553 )     $ -       $ 54,980  
 
* Excludes discontinued operations
 
 

           
Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited               Inter-
segment Consoli-
Western Bank Torrey elimi- dated
Alliance Bank of Nevada Pines Bank* Other nations Company
At June 30, 2012 (dollars in millions)
Assets $ 2,349.6 $ 2,920.2 $ 1,895.9 $ 800.7 $ (802.8 ) $ 7,163.6
Gross loans and deferred fees, net 1,783.6 2,002.1 1,422.0 - (42.9 ) 5,164.8
Less: Allowance for credit losses   (20.3 )       (60.5 )       (16.7 )       -         -         (97.5 )
Loans, net   1,763.3         1,941.6         1,405.3         -         (42.9 )       5,067.3  
Goodwill and intangible assets 3.8 25.8 0.2 4.1 - 33.9
Deposits 1,998.2 2,430.9 1,592.5 - (20.2 ) 6,001.4
Borrowings 70.0 100.0 72.0 74 (12.0 ) 303.5
Stockholders' equity 208.7 329.5 161.6 680.4 (708.1 ) 672.1
 
No. of branches 16 11 12 - - 39
No. of FTE 239 386 228 100 - 953
 
Three Months Ended June 30, 2012: (in thousands)
Net interest income $ 24,060 $ 27,498 $ 21,374 $ (2,127 ) $ - $ 70,805
Provision for credit losses   2,100         8,747         2,483         -         -         13,330  

Net interest income (loss) after provision for credit losses
21,960 18,751 18,891 (2,127 ) - 57,475
Non-interest income 1,994 4,291 1,079 1,929 (1,896 ) 7,397
Non-interest expense   (12,086 )       (18,140 )       (11,338 )       (5,763 )       1,896         (45,431 )

Income (loss) from continuing operations before income taxes
11,868 4,902 8,632 (5,961 ) - 19,441
Income tax expense (benefit)   4,091         1,137         3,340         (3,309 )       -         5,259  
Income (loss) from continuing operations 7,777 3,765 5,292 (2,652 ) - 14,182
Loss from discontinued operations, net   -         -         -         (221 )       -         (221 )
Net income (loss) $ 7,777       $ 3,765       $ 5,292       $ (2,873 )     $ -       $ 13,961  
 
Six Months Ended June 30, 2012:
Net interest income $ 47,116 $ 55,337 $ 42,610 $ (4,201 ) $ - $ 140,862
Provision for credit losses   103         22,229         4,079         -         -         26,411  

Net interest income (loss) after provision for credit losses
47,013 33,108 38,531 (4,201 ) - 114,451
Non-interest income 3,847 7,874 2,256 3,893 (4,589 ) 13,281
Noninterest expense   (24,005 )       (36,970 )       (22,410 )       (13,532 )       4,589         (92,328 )

Income (loss) from continuing operations before income taxes
26,855 4,012 18,377 (13,840 ) - 35,404
Income tax expense (benefit)   9,263         (714 )       7,297         (6,146 )       -         9,700  
Income (loss) from continuing operations 17,592 4,726 11,080 (7,694 ) - 25,704
Loss from discontinued operations, net   -         -         -         (443 )       -         (443 )
Net income (loss) $ 17,592       $ 4,726       $ 11,080       $ (8,137 )     $ -       $ 25,261  
 
* Excludes discontinued operations
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
June 30, March 31, December 31, September 30, June 30,
2013 2013 2012 2012 2012
(dollars in thousands)
Total stockholders' equity $ 799,524 $ 781,294 $ 759,616 $ 698,011 $ 672,120
Less:
Goodwill and intangible assets   28,568     29,166     29,763     28,989     33,953  
Total tangible stockholders' equity 770,956 752,128 729,853 669,022 638,167
Less:
Preferred stock   141,000     141,000     141,000     141,000     141,000  
Total tangible common equity 629,956 611,128 588,853 528,022 497,167
Add:
Deferred tax   1,870     2,080     2,289     2,033     2,896  
Total tangible common equity, net of tax $ 631,826   $ 613,208   $ 591,142   $ 530,055   $ 500,063  
Total assets $ 8,593,684 $ 8,174,103 $ 7,622,637 $ 7,403,603 $ 7,163,572
Less:
Goodwill and intangible assets   28,568     29,166     29,763     28,989     33,953  
Tangible assets 8,565,116 8,144,937 7,592,874 7,374,614 7,129,619
Add:
Deferred tax   1,870     2,080     2,289     2,033     2,896  
Total tangible assets, net of tax $ 8,566,986   $ 8,147,017   $ 7,595,163   $ 7,376,647   $ 7,132,515  
Tangible equity ratio (1) 9.0 % 9.2 % 9.6 % 9.1 % 8.9 %
Tangible common equity ratio (2) 7.4 % 7.5 % 7.8 % 7.2 % 7.0 %
Common shares outstanding 86,997 87,079 86,465 83,455 83,157
Tangible book value per share, net of tax (3) $ 7.26 $ 7.04 $ 6.84 $ 6.35 $ 6.01
 
Three Months Ended
June 30, March 31, December 31, September 30, June 30,
2013 2013 2012 2012 2012
(in thousands)
Total non-interest income $ 10,862 $ 3,899 $ 24,463 $ 6,982 $ 7,397
Less:

Unrealized (losses) gains on assets/liabilities measured at fair value, net
(3,290 ) (471 ) (48 ) 470 564
Gain on sale of subsidiary/non-controlling interest - - 116 776 -
Bargain purchase gain from acquisition 10,044 - 17,562 - -
Legal settlements - 38 879 - -
Mutual fund gains - - 483 - -
Amortization of affordable housing investments (900 ) (900 ) (1,069 ) (651 ) (59 )
(Losses) Gains on sales of investment securities, net   (5 )   147     1,447     1,031     1,110  
Total operating non-interest income 5,013 5,085 5,093 5,356 5,782
Add: net interest income   82,152     76,203     77,455     71,946     70,805  
Net operating revenue (4) $ 87,165   $ 81,288   $ 82,548   $ 77,302   $ 76,587  
 
Total non-interest expense $ 48,531 $ 46,929 $ 48,989 $ 47,543 $ 45,431
Less:
Net (gain) loss on sales and valuations of repossessed assets (1,124 ) 519 529 126 901
Merger/restructure expense 2,620 195 2,706 113 -
Goodwill impairment   -     -     -     3,435     -  
Total operating non-interest expense (4) $ 47,035   $ 46,215   $ 45,754   $ 43,869   $ 44,530  
 
Net operating revenue $ 87,165 $ 81,288 $ 82,548 $ 77,302 $ 76,587
Less:
Operating non-interest expense   47,035     46,215     45,754     43,869     44,530  
Pre-tax, pre-provision operating earnings (5) $ 40,130   $ 35,073   $ 36,794   $ 33,433   $ 32,057  
 
 

                     
Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
Three Months Ended
June 30, March 31,

December 31,
September 30, June 30,
2013 2013 2012 2012 2012
(in thousands)
Total operating non-interest expense $ 47,035   $ 46,215   $ 45,754   $ 43,869   $ 44,530  
Divided by:
Total net interest income $ 82,152 $ 76,203 $ 77,455 $ 71,946 $ 70,805
Add:
Tax equivalent interest adjustment 2,929 3,382 3,012 2,655 2,310
Operating non-interest income   5,013     5,085     5,093     5,356     5,782  
$ 90,094   $ 84,670   $ 85,560   $ 79,957   $ 78,897  
Efficiency ratio - tax equivalent basis (6) 52.2 % 54.6 % 53.5 % 54.9 % 56.4 %
 
Three Months Ended
June 30, June 30,
2013 2012
(in thousands)
Stockholders' equity $ 799,524 $ 672,120
Less:
Accumulated other comprehensive (loss) income (10,646 ) 4,291
Non-qualifying goodwill and intangibles 26,756 31,748
Other non-qualifying assets 2 3
Disallowed unrealized losses on equity securities 103 -
Add:
Qualifying trust preferred securities 47,228 45,123
Tier 1 capital (regulatory) (7) (10) 830,537 681,201
Less:
Qualifying non-controlling interests - 423
Qualifying trust preferred securities 47,228 45,123
Preferred stock   141,000     141,000  
Estimated Tier 1 common equity (8) (10) $ 642,309 $ 494,655
Divided by:

Estimated risk-weighted assets (regulatory) (8) (10)
$ 7,698,091   $ 6,181,246  
Tier 1 common equity ratio (8) (10) 8.3 % 8.0 %
 
June 30, June 30,
2013 2012
(in thousands)
Classified assets $ 298,887 $ 325,165
Divide:
Tier 1 capital (regulatory) (7) (10) 830,537 681,201
Plus: Allowance for credit losses   96,323     97,512  
Total Tier 1 capital plus allowance for credit losses $ 926,860   $ 778,713  
Classified assets to Tier 1 capital plus allowance (9) (10) 32 % 42 %
 

(1)
 

We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(2)

We believe this non-GAAP ratio provides a critical metric with which to analyze and evaluate financial condition and capital strength.

(3)

We believe this non-GAAP ratio improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

(4)

We believe these non-GAAP measurements provide a useful indication of the cash generating capacity of the Company.

(5)

We believe this non-GAAP measurement is a key indicator of the earnings power of the Company, which is otherwise obscured by the asset quality issues.

(6)

We believe this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company.

(7)

Under the guidelines of the Federal Reserve and the FDIC in effect, Tier 1 capital consisted of common stock, retained earnings, non-cumulative perpetual preferred stock, trust preferred securities up to a certain limit, and minority interests in certain subsidiaries, less most other intangible assets.

(8)

Tier 1 common equity is often expressed as a percentage of risk-weighted assets. Under the risk-based capital framework, a bank's balance sheet assets and credit equivalent amounts of off-balance sheet items, are assigned to one of four broad risk categories. The aggregated dollar amount in each category is then multiplied by the risk weighting assigned to that category. The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that, as adjusted, comprises the denominator (risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity. Tier 1 common equity is divided by the risk-weighted assets to determine the Tier 1 common equity ratio. We believe this non-GAAP ratio with which to analyze and evaluate financial condition and capital strength.

(9)

We believe this non-GAAP ratio provides a critical regulatory metric in which to analyze asset quality.

(10)

Preliminary until Call Reports are filed.

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