Western Alliance Bancorp. Q4 FY2024 earnings call

• Western Alliance completed a significant liquidity build in 2024, growing deposits in excess of loans and deploying excess liquidity into high quality liquid assets, resulting in a 31% marginal loan-to-deposit ratio for the year.
• Financial performance: Ended 2024 with $1.95 per share in Q4 and $7.09 for the year. Pre-provision net revenue grew 12% linked-quarter unannualized. Net interest income increased, while deposit costs were managed.
• Asset quality: Criticized assets rose, but special mention loans declined. Net charge-offs expected to be comparable to 2024 in 2025. CRE migration to classified is behind us.
• Mortgage banking revenue grew $34 million quarterly to $93 million,受益于CRA合格贷款的季节性强劲需求和抵押服务权.
• Non-interest expense declined $18 million in Q4 as deposit costs fell, with adjusted efficiency ratio improving to 51%.

Western Alliance ended 2024 with solid earnings, generating $1.95 per share in the fourth quarter and $7.09 for the full year. Net revenue was $3.2 billion, net income $788 million. The bank completed a liquidity build in 2024, growing deposits in excess of loans and deploying excess liquidity into high quality liquid assets, resulting in a 31% marginal loan-to-deposit ratio for the year. Loan growth was $330 million, deposits declined $1.7 billion but grew 20% year-over-year. C&I loans now account for 43% of the held for investment loan portfolio, up from 38% a year ago. Deposits grew $11 billion in 2024, primarily in money market accounts and ECR-related non-interest bearing.

• 2025 loan growth expected to be ~$5 billion, holding loan-to-deposit ratio around 80%. Deposits expected to grow $8 billion.
• Net interest income expected to increase 6%-8% due to loan growth and margin expansion.
• Non-interest income expected to grow 6%-8% from commercial banking fees and stable mortgage banking revenue.
• Non-interest expense expected to decline 1%-6%, with ECR-related deposit costs between $475M-$525M.
• Adjusted efficiency ratio expected below 50% by end of 2025, return on tangible common equity toward upper teens.

• Interest rate fluctuations could impact net interest margin and funding costs.
• Potential credit risks in CRE, although exposure to wildfire-affected properties was negligible.
• Regulatory changes, particularly related to LFI readiness, could impact costs and operations.

Q: On capital, any consideration of buybacks?

A: Generating enough capital for balance sheet growth, but buybacks could be considered if market conditions allow.

Q: On ECR related costs and average earning assets?

A: Expect broader deposit base growth in 2025, with diversification in escrow and other businesses.

Q: On fee income guidance and equity gains?

A: Fee income growth not including equity gains, with focus on PPNR growth from regions and digital payments.

Q: On earnings at risk disclosure?

A: Interest rate neutral on earnings at risk basis, with ability to adjust loan and securities mixes based on rate trajectory.