Workflow
Western Alliance Bancorporation(WAL) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements for Western Alliance Bancorporation as of March 31, 2024, show significant asset and deposit growth, alongside increased net income Consolidated Balance Sheets As of March 31, 2024, total assets and deposits significantly increased, accompanied by growth in investment securities and a modest rise in net loans Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $76,989 | $70,862 | | Cash and cash equivalents | $3,550 | $1,576 | | Investment securities (AFS & HTM) | $15,962 | $12,586 | | Net loans held for investment | $50,360 | $49,960 | | Total Liabilities | $70,817 | $64,784 | | Total deposits | $62,228 | $55,333 | | Other borrowings | $6,221 | $7,230 | | Total Stockholders' Equity | $6,172 | $6,078 | Consolidated Income Statements For Q1 2024, net income available to common stockholders significantly increased, driven by a substantial recovery in non-interest income despite higher expenses Consolidated Income Statement Highlights (in millions, except per share data) | Account | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net interest income | $598.9 | $609.9 | | Provision for credit losses | $15.2 | $19.4 | | Total non-interest income | $129.9 | $(58.0) | | Total non-interest expense | $481.8 | $347.9 | | Net income | $177.4 | $142.2 | | Net income available to common stockholders | $174.2 | $139.0 | | Diluted EPS | $1.60 | $1.28 | Notes to Unaudited Consolidated Financial Statements These notes provide detailed disclosures on the company's accounting policies and financial items, essential for understanding the primary financial statements Note 2. Investment Securities As of March 31, 2024, total investment securities increased, with a portfolio shift towards high-quality liquid assets and significant unrealized losses on AFS securities Investment Securities Portfolio (Amortized Cost, in millions) | Security Type | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Available-for-Sale (AFS) | | | | U.S. Treasury securities | $7,019 | $4,853 | | Residential MBS issued by GSEs | $4,928 | $2,328 | | Private label residential MBS | $1,301 | $1,320 | | CLO | $0 | $1,407 | | Total AFS Debt Securities | $15,251 | $11,849 | | Held-to-Maturity (HTM) | | | | Tax-exempt | $1,278 | $1,243 | | Total HTM Securities | $1,461 | $1,429 | - The company sold its Collateralized Loan Obligation (CLO) portfolio during Q1 2024 as part of an effort to shift the investment portfolio mix toward high-quality liquid assets68 - At March 31, 2024, there were 770 AFS debt securities in an unrealized loss position, with total gross unrealized losses of $754 million, mainly due to changes in interest rates5052 Note 4. Loans, Leases and Allowance for Credit Losses The HFI loan portfolio grew slightly, with an increase in nonaccrual loans and a stable allowance for credit losses Loan Portfolio Composition (HFI, in millions) | Loan Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Warehouse lending | $6,915 | $6,618 | | Other commercial and industrial | $7,754 | $7,452 | | Other CRE - non-owner occupied | $6,365 | $5,974 | | Residential | $13,078 | $13,287 | | Construction and land development | $4,746 | $4,862 | | Total loans HFI | $50,700 | $50,297 | Asset Quality Metrics | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Nonaccrual Loans | $399 million | $273 million | | Nonaccrual Loans / Total Loans HFI | 0.79% | 0.54% | | Allowance for Credit Losses (ACL) | $340.3 million | $336.7 million | | ACL / Total Loans HFI | 0.67% | 0.67% | Note 6. Deposits Total deposits surged significantly, driven by growth in non-interest-bearing demand deposits and strategic use of reciprocal networks Deposit Composition (in millions) | Deposit Type | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Non-interest-bearing demand | $18,399 | $14,520 | | Interest-bearing transaction | $16,965 | $15,916 | | Savings and money market | $16,194 | $14,791 | | Time deposits | $10,670 | $10,106 | | Total deposits | $62,228 | $55,333 | - The company actively uses deposit placement services to offer expanded FDIC insurance, with reciprocal deposits totaling $14.5 billion at quarter-end, up from $13.3 billion at year-end 2023100 Note 16. Segments The company operates through Commercial, Consumer Related, and Corporate & Other segments, with both Commercial and Consumer Related segments contributing positively to net income - The company's reportable segments are Commercial, Consumer Related, and Corporate & Other, aggregated based on products and services offered200205 Segment Financial Highlights (Three Months Ended March 31, 2024, in millions) | Segment | Total Assets | Total Deposits | Net Income (Loss) | | :--- | :--- | :--- | :--- | | Commercial | $30,080 | $25,146 | $109.9 | | Consumer Related | $25,182 | $30,481 | $71.0 | | Corporate & Other | $21,727 | $6,601 | $(3.5) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported strong Q1 2024 results with increased net income, significant deposit growth, and improved non-interest income, despite net interest margin compression and higher expenses Q1 2024 Financial Highlights vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (common) | $174.2M | $139.0M | | Diluted EPS | $1.60 | $1.28 | | Net Revenue | $728.8M | $551.9M | | PPNR | $247.0M | $204.0M | | Net Interest Margin | 3.60% | 3.79% | - Total deposits grew by $6.9 billion (12.5%) during the quarter, reaching $62.2 billion, driven by a $3.9 billion increase in non-interest bearing demand deposits226 - Non-interest expense rose by $133.9 million YoY, primarily due to a $50.1 million increase in deposit costs and a $43.2 million increase in insurance costs, which includes a $17.6 million FDIC special assessment249 Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk through simulation models, with its balance sheet positioned to benefit from rising rates while remaining within approved limits Sensitivity of Net Interest Income (Next 12 Months) | Parallel Shift Scenario | % Change from Base | | :--- | :--- | | Up 200 bps | +13.6% | | Up 100 bps | +6.8% | | Down 100 bps | -6.9% | | Down 200 bps | -14.1% | Sensitivity of Economic Value of Equity (EVE) | Interest Rate Scenario | % Change from Base | | :--- | :--- | | Up 200 bps | -11.6% | | Up 100 bps | -6.4% | | Down 100 bps | +6.4% | | Down 200 bps | +10.1% | Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and found them to be effective as of March 31, 2024319 - No changes occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting320 PART II. OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings, with any ongoing litigation considered routine and without expected material financial impact - There are no material pending legal proceedings involving the Company or its properties321 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors disclosed in the 2023 Form 10-K have occurred323 Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2024, the company purchased shares from employees to satisfy tax withholding obligations on vested restricted stock awards, without a formal repurchase program - The Company purchased 122,597 shares during Q1 2024 from employees to cover tax withholding on vested restricted stock awards324 - The Company does not have a publicly announced common stock repurchase program325 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and interactive data files (XBRL)