Western Alliance Bancorporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request metadata labels the period “2023 Q4,” this filing reports full-year results and year-end balances; it does not provide a clear standalone fourth-quarter results summary in the supplied text. Western Alliance is a Phoenix-based bank holding company with commercial banking, mortgage banking, and digital-payment businesses.
Financial results and position
- Earnings: Net income was $722.4 million, down from $1.057 billion in 2022. Net income available to common shareholders was $709.6 million; diluted EPS was $6.54, versus $9.70.
- Revenue and margins: Net revenue was $2.620 billion, up 3.1%. Net interest income rose to $2.339 billion from $2.216 billion, but net interest margin narrowed to 3.63% from 3.67% as funding costs increased. Net interest income was supported by higher loan and securities yields; interest expense rose sharply alongside deposit rates and borrowing costs.
- Expenses and profitability: Non-interest expense increased 40.3% to $1.623 billion, including higher deposit costs and insurance expense. PPNR fell to $996.2 million from $1.384 billion; the efficiency ratio rose to 61.1% from 44.9%. Return on average assets declined to 1.03% from 1.62%.
- Credit: Provision for credit losses was $62.6 million, compared with $68.1 million. Funded-loan allowance was $336.7 million, or 0.67% of funded loans; allowance including off-balance-sheet commitments was $368.3 million. Net charge-offs were 0.06% of average loans. Nonaccrual loans increased to $273 million from $85 million; total nonperforming loans, including accruing past-due and restructured loans, rose to $410 million from $87 million.
- Loans and deposits: Year-end loans held for investment were $50.3 billion, down $1.6 billion; deposits were $55.3 billion, up $1.7 billion. The loan-to-deposit ratio improved to 90.9% from 96.7%. Non-interest-bearing deposits declined to $14.5 billion from $19.7 billion and represented 26.2% of deposits. Reciprocal deposits rose to $13.3 billion; wholesale brokered deposits were $6.6 billion.
- Liquidity and funding: Cash and cash equivalents were $1.576 billion. Management reported $7.4 billion of high-quality liquid assets and $6.9 billion of liquid assets under its stated liquidity measure. Year-end short-term borrowings were $6.8 billion, including $6.2 billion of FHLB advances; total other borrowings were $7.23 billion, plus $895 million of qualifying debt. The company had $16.7 billion of available FRB borrowing capacity and $6.1 billion available from the FHLB, subject to collateral and program availability.
- Capital: WAL’s CET1 ratio was 10.8%, up from 9.3%; WAB’s was 11.9%. Management said WAL’s CET1 remained below its target, while both WAL and WAB exceeded stated well-capitalized thresholds. Tangible common equity ratio improved to 7.3% from 6.5%.
- Cash flow: Operating activities used $328.6 million, versus providing $2.245 billion in 2022. Investing activities used $2.159 billion; financing activities provided $3.020 billion. Cash and cash equivalents increased $532.7 million during the year.
Material changes and unusual items
- Following 2023 banking-industry disruption and deposit withdrawals, the company repositioned its balance sheet, sold selected assets, increased liquid assets, and repaid its $1.3 billion Bank Term Funding Program borrowing by year-end.
- Repositioning contributed to $116.0 million of pre-tax fair-value loss adjustments and a $40.8 million net loss on investment-security sales. A $52.7 million gain on debt extinguishment partly offset these items. The company also recorded a $66.3 million FDIC special assessment. Management’s adjusted diluted EPS, excluding specified items, was $7.76; this non-GAAP measure is not a substitute for GAAP results.
- Gross unrealized losses were $702 million on available-for-sale securities and $179 million on held-to-maturity securities at year-end. Management attributed most losses to interest-rate and market changes rather than credit deterioration; a sale of securities in an unrealized-loss position could realize losses.
- Stockholders’ equity increased to $6.1 billion from $5.4 billion, supported by earnings and improvement in accumulated other comprehensive loss.
Outlook, management commentary, and risks
The filing provides no specific numerical earnings or balance-sheet guidance. Management cautions that persistent industry volatility, higher funding costs, deposit competition, or elevated borrowing could pressure liquidity, net interest margin, and profitability. It also notes that a prolonged deterioration in economic conditions could make credit-loss estimates insufficient.
- Credit and real estate: CRE-related loans were approximately 33% of total loans, including $2.4 billion of non-owner-occupied office loans (4.7% of HFI loans). Management enhanced CRE monitoring and limited portfolio growth. It described the office book as primarily suburban, shorter-term value-add loans with sponsor support and covenants, but acknowledged conditions could worsen.
- Deposits and liquidity: Uninsured deposits were $15.2 billion, down from $29.5 billion. The company’s insured-and-collateralized deposit ratio was 80%. Deposit stability, competition, brokered funding costs, and access to secured borrowing facilities remain important risks.
- Interest rates and securities: The filing presents modeled 12-month net interest income sensitivity of +6.4% for an immediate 200-basis-point increase and −7.1% for a 200-basis-point decline; modeled EVE changes were −13.2% and +15.3%, respectively. These are scenario estimates, not forecasts.
- Other risks and contingencies: Risks include regional economic and natural-disaster exposure, technology and cybersecurity threats, regulation, and mortgage-servicing valuation assumptions. The filing reports no material pending legal proceedings. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting; management also assessed controls as effective.
Important facts for investors to verify
- Whether deposit growth and the lower uninsured-deposit balance persist, and how reciprocal and brokered deposits affect funding costs and stability.
- Subsequent trends in CRE, office, hotel, construction, criticized, nonaccrual, and modified loans, as well as allowance adequacy and realized charge-offs.
- Whether reported earnings improve after the 2023 repositioning and assessment items, while tracking recurring expense growth and net interest margin.
- Available liquidity under stress, collateral-dependent borrowing capacity, and any effect of elevated borrowings on earnings or capital.
- The sensitivity of securities values and mortgage-servicing rights to interest rates, prepayments, and market assumptions; also distinguish GAAP results from management’s adjusted measures.
- Any updated management outlook: the filing itself provides no numerical guidance.