Western Alliance (WAL) Q3 2024 Earnings Transcript

Core Insights - The company reported a solid third quarter with earnings per share of $1.80, demonstrating its ability to sustain diversified loan and deposit momentum despite a changing rate environment [4][5] - Non-interest income increased by $11 million or 10% quarter-over-quarter, although this was offset by a decline in mortgage banking income [1][5] - The tangible book value per share rose 19% year-over-year to $51.98, reflecting strong earnings growth and an improvement in the company's AOCI position [1][18] Financial Performance - Pre-provision net revenue for the quarter was $286 million, with net income of $200 million [5] - Net interest income increased by $40 million from Q2 to $697 million, representing nearly 25% annualized growth due to higher average earning asset balances [5][12] - Non-interest expense for the quarter was $537 million, with deposit costs rising to $208 million due to strong demand in mortgage warehouse [6][10] Loan and Deposit Growth - Loans held for investment grew by $916 million to over $53 billion, while deposits increased by $1.8 billion to $68 billion at quarter-end [8][10] - The company experienced a 21% increase in mortgage loan production from Q2 and a 10% year-over-year increase [6] - The company anticipates loan growth of approximately $1.25 billion in Q4, supported by a strong pipeline in various lending segments [20][40] Asset Quality and Risk Management - Asset quality remained stable, with non-performing assets as a percentage of total assets declining by 6 basis points to 45 basis points [1][14] - The company reported net charge-offs of 20 basis points, which fell within the expected range [1][14] - The allowance for credit losses (ACL) for funded loans rose to $357 million, covering 113% of non-performing loans [15][16] Outlook and Guidance - The company expects a decline in net interest income of approximately 3% in Q4 due to market-tied variable loans repricing ahead of funding costs [21] - ECR-related deposit costs are projected to decline by approximately 25% quarter-over-quarter in Q4, which is expected to outpace the decline in net interest income [21][22] - Non-interest income is anticipated to increase by 8% to 12% in Q4, driven by commercial banking fee opportunities and improved mortgage banking income [21][35]