Western Alliance Bancorporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. Western Alliance is a bank holding company with commercial banking, mortgage banking through AmeriHome, and digital payments activities.
Key financial results
| Metric | Q1 2022 | Comparable period / change |
|---|---|---|
| Net interest income | $449.5 million | Up 41.7% from $317.3 million |
| Net interest margin | 3.32% | Down 5 basis points from 3.37% |
| Non-interest income | $106.3 million | Up from $19.7 million |
| Non-interest expense | $248.6 million | Up 84.1% from $135.0 million |
| Net income / common earnings | $240.1 million / $236.9 million | Common earnings up from $192.5 million |
| Diluted earnings per share | $2.22 | Up from $1.90 |
| Pre-provision net revenue | $307.2 million | Up 52.1% from $202.0 million |
| Efficiency ratio | 44.1% | Up from 39.1% |
Mortgage banking contributed $41.1 million of net loan servicing revenue and $36.9 million of loan origination and sale gains. Higher expenses reflected AmeriHome operations, including added employees and mortgage servicing and origination costs. The year-over-year comparison is not fully like-for-like: AmeriHome was acquired in April 2021 and was not included in Q1 2021 results.
Balance sheet, credit, liquidity and capital
- Assets and lending: Total assets were $60.6 billion, up 8.2% from year-end 2021. Held-for-investment loans were $41.1 billion, up $2.0 billion; residential loans accounted for most of the increase. Held-for-sale loans were $4.8 billion, down $873.5 million.
- Deposits and funding: Deposits were $52.2 billion, up $4.5 billion from year-end. Non-interest-bearing demand deposits were $23.5 billion. Other borrowings were $833.3 million and qualifying debt was $893.3 million.
- Cash flow: Operating activities provided $622.9 million; investing activities used $2.6 billion; financing activities provided $4.1 billion. Cash, cash equivalents and restricted cash ended at $2.6 billion.
- Liquidity: Management reported $10.5 billion in liquid assets and said liquidity was adequate for expected needs over the next 90–120 days. Available credit included approximately $9.9 billion from the FHLB, $4.1 billion from the FRB and $3.5 billion in unsecured federal-funds lines; none was drawn at quarter-end. Wholesale brokered deposits were $2.5 billion.
- Credit quality: Nonaccrual loans were $91.0 million, or 0.22% of funded loans, versus $72.6 million and 0.19% at year-end. The allowance for funded HFI loans was $257.6 million; the reserve for unfunded commitments was $43.3 million. Annualized net charge-offs were approximately 0.00%.
- Capital: Western Alliance Bancorporation reported a 9.0% CET1 ratio, 12.0% total capital ratio and 8.0% tier 1 leverage ratio. The company and bank exceeded regulatory well-capitalized thresholds. The tangible common equity ratio was 6.7%.
- Shareholder equity and AOCI: Stockholders’ equity was $5.0 billion. A $250.8 million net-of-tax quarterly OCI loss, primarily from unrealized AFS securities losses, moved AOCI from positive $15.7 million at year-end to negative $235.1 million.
Changes, outlook and risks
- On January 25, 2022, the company acquired Digital Settlement Technologies (Digital Disbursements) for $67.8 million, including $17.2 million of estimated contingent consideration. The acquisition added $40.0 million of goodwill; results are included from the acquisition date.
- Management attributed higher net interest income chiefly to loan and asset growth, partly offset by increased funding costs. It said margin declined because of lower loan yields as the portfolio shifted toward residential mortgages and higher borrowing costs.
- The filing provides no formal earnings or revenue guidance. Its interest-rate sensitivity analysis projected next-12-month net interest income changes of +6.8% for an immediate 100-basis-point increase, +15.4% for a 200-basis-point increase, and -4.9% for a 100-basis-point decrease. Management said modeled exposure was within its limits and cautioned that actual results may differ because the analysis depends on assumptions.
- Material risk exposures include interest-rate changes and AOCI volatility; commercial real estate, residential mortgage and commercial and industrial lending concentrations; reliance on deposits, including brokered deposits; credit and liquidity risks; mortgage servicing valuation and prepayment assumptions; and integration and execution risks for acquisitions and digital-payment initiatives. The company reported no material change to previously disclosed risk factors and no material pending legal proceedings.
- Common stock sales under the ATM program raised $108.4 million gross during the quarter. AFS securities’ unrealized losses were attributed primarily to interest rates and market conditions; the company reported no AFS credit-loss allowance at quarter-end.
Important facts for investors to verify
- Whether deposit growth remains stable and how brokered, uninsured, and other rate-sensitive funding evolves.
- Whether loan growth—particularly residential and commercial real estate—changes nonaccruals, criticized loans, provisions or charge-offs.
- How rising rates and securities marks affect AOCI, regulatory capital and tangible common equity.
- Whether mortgage banking earnings and MSR valuations remain resilient as rates, prepayments and loan-sale volumes change.
- How the DST acquisition performs against its strategic and financial rationale, including the contingent consideration and integration costs.
- Whether the reported interest-rate sensitivity assumptions remain representative as the balance sheet and deposit pricing change.