Western Alliance Expands Asset Base as NIM Holds Steady
Net interest income rose 4.0% sequentially to $796.9 million as average earning assets grew by $2.7 billion.
Western Alliance Bancorporation (WAL), a commercial bank focused on business banking, saw net interest income rise 4.0% sequentially to $796.9 million. The growth followed a $2.7 billion increase in average earning assets, though the gain was partially offset by higher interest-bearing liabilities and declining asset yields.
Net interest margin compressed 1 bp sequentially to 3.53% from 3.54%. The slight decline reflected the combined impact of higher average interest-bearing liabilities and lower yields on interest-earning assets.
Loan growth was concentrated in the held-for-investment portfolio, which grew 3.1% sequentially to $60.9 billion. This $1.8 billion increase was primarily driven by $1.5 billion in commercial and industrial loans and $283 million in residential real estate loans.
Total deposits decreased 1.0% sequentially to $81.9 billion. The $849 million decline followed a deposit optimization strategy to reduce higher-cost balances, which included reductions in savings and money market accounts of $528 million, non-interest bearing deposits of $258 million, and interest-bearing demand deposits of $126 million.
Non-interest income fell $53.8 million sequentially to $198.8 million. The decrease resulted from lower gains on sales of investment securities, which fell $47.5 million, lower service charges and fees of $25.4 million, and lower mortgage loan origination and sale gains of $19.3 million. Higher net loan servicing revenue of $32.6 million partially offset these declines.
The efficiency ratio increased 220 bps sequentially to 58.0% from 55.8%. This move was driven by a $15.9 million increase in deposit costs related to mortgage warehouse balances.
Credit provisions decreased $132.8 million sequentially to $80.4 million. The prior quarter's provision of $213.2 million had included a $126.4 million charge-off of the LAM loan. Adjusted annualized net loan charge-offs declined 2 bps sequentially to 0.37% from 0.39%, though they rose from 0.22% a year ago. The allowance for credit losses relative to funded HFI loans increased 2 bps sequentially to 0.89%.
The CET1 ratio remained stable sequentially at 11.0%, representing a 20 bps decrease from 11.2% a year ago.