Western Alliance Hit by Accounting, M&A Costs

Fair-value accounting and merger costs took big bites out of Western Alliance Bancorp. in Phoenix last quarter.

The $13.5 billion-asset company's net income available to common shareholders slipped 2% from the year-earlier period, to $34.5 million. Earnings per share of 39 cents missed the average estimate of analysts polled by Bloomberg by 6 cents.

Noninterest income swung to a $2.2 million loss last from a $5.6 million gain a year earlier. A new subordinated debt issuance forced Western Alliance to reassess the fair value of its outstanding issuance junior subordinated debt, leading it to take a $7.9 million unrealized loss on the junior debt, according to a press release Monday.

A 13% uptick in income from service charges, to $3.1 million, help dull the pain of the accounting charge.

At the same time noninterest expenses rose 17% year over year, to $61.2 million, largely on $7.8 million in expenses related to the company's purchase of Bridge Capital Holdings on June 30.

However that deal created some bright spots on the balance sheet. The addition of $1.45 billion of loans from Bridge Capital contributed to a 37% in increase in loans, to $10.4 billion. Net interest income jumped 16 % year over year, to $108.7 million, thanks to the increase in loans and a 2-basis point increase in net interest margin, to 4.41%.

Western Alliance said pretax, preprovision operating earnings — which excluded the debt-valuation adjustments, merger costs and other special factors — were $60 million, up 26% from a year earlier.