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Article Excerpt
OPERATOR: Good day, everyone. Welcome to the earnings call for Western Alliance Bancorp for the third quarter 2008. Our speakers today are Robert Sarver, Chairman, President and Chief Executive Officer, and Dale Gibbons, Chief Financial Officer. Today's call is being recorded and will be available for replay after 2:00 p.m. Eastern time today until 9:00 a.m. Eastern time October 31 by dialing 1-877-344-7529, using the pass code 424247.
The discussion during this call may contain forward-looking statements that relate to expectations, beliefs, predictions, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. 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 statements.
Some factors that could cause actual results to differ materially from historical or expected results include factors listed in the initial public offering registration statement as filed with the Securities and Exchange Commission. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements.
Now for the opening remarks, I would now like to turn the call over to management.
ROBERT SARVER, CHAIRMAN, PRESIDENT AND CEO, WESTERN ALLIANCE BANCORPORATION: Thank you for joining our third quarter call. This is Robert speaking. I'd like to share with you some operating highlights and overview of our loan portfolio, and an insight into our current strategy.
Dale will follow with more detail third quarter operating numbers. And then myself, Dale and Hal Erskine, President of Partners First, will be available to answer any question.
The Company's net operating income of $5.5 million was erased by $20.9 million in non-cash securities impairment charge net of tax. In addition, we wrote off the goodwill received recorded of $79.2 million from our acquisition of First Independent Bank. That purchase was mainly financed through the issuance of our stock, when our stock was trading at $33 a share. The goodwill write-off is non-cash, has no effect on intangible equity or our regulatory capital.
As a response to our poor investment portfolio results, we've turned over the portfolio and its management to [Pimfel]. In addition, a newly formed investment committee of the Board of Directors was established to create a new investment policy statement, participate in the management selection that resulted in the hiring of [Pimfel], and provide ongoing oversight of the portfolio and its management.
The third quarter was a challenging period for customer funds. Retentions for all banks, except maybe the country's three or four largest from the American public is deemed too big to fail. In spite of these pressures, I feel we performed pretty well. Our customer funds were only down $35 million for the quarter, with our off balance sheet sweep accounts up by a like amount.
Our total number of deposit accounts were up 2.5% for the quarter, but average balances declined. I feel when the markets do stabilize fully and people's confidence in the system returns, many of those balances will return that were put in treasuries and other type securities. We didn't lose customers; we just lost some of their money.
The increase in FDIC insurance to unlimited and on non-interesting bearing demand accounts, as well as a $250,000 limit on all other accounts, in the TARP has had a partially settling effect on depositors' fears. A month ago, we created a new product, which we call WALTree. This enables a customer to go into any Western Alliance banking office and in short time, with one form, open up separately-insured CDs in each of our five chartered banks. We had a good reception to that product, but we recently tweaked it and enhanced our IT systems to now accommodate checking and money market accounts on the WALtree program.
In a short order of time, we now have $100 million in deposits in this program. It's simple and easy to work. A customer can look on one page online and manage $1,250,000 of insured money market accounts, checking accounts, CDs, et cetera, within the Western Alliance family of banks.
Beginning six months ago, we started to aggressively seek additional capital to bolster our base and be able to play offense during these challenging times. On top of our second quarter raise, in the third quarter, we raised $50 million in common equity from eight investor groups led by a large institutional investor that acquired two-thirds of the deal. They won't let me use their name, but they're pretty good at what they do.
During these troubled times for financial institutions, the market continues to differentiate between the haves and the have-nots. I spend a lot of time on the road, meeting with various investor groups over the last six months, and while they had differing views on when we'll see the bottom of the market or what markets will recover first, unanimously, they saw Western Alliance as a survivor in the West as well as a franchise that will ultimately be able to gain market share as a result of these times.
At September 30, our total regulatory capital was $536 million, up from $509 million at June 30 and $457 million a year go. Total risk-based capital as a percentage of risk-based assets was 11.4% at September 30, up from 11% at June 30 and 10.3% a year ago.
At our Board meeting we had this week, we approved applying for $140 million of the perpetual preferred stock from the US treasury. If funded, our pro forma risk-based capital percentage would go to 14.43%, and our Tier 1 leverage ratio would increase from 8.25% to 11%.
Looking at another key credit quality matrix, which would be non-performing assets to Tier 1 capital plus allowance for loan loss reserves, that percentage would improve from an already low 8.65% to 6.69%.
Our recently raised capital of $80 million this year, as well as our...
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