Bullish Stock to Watch: Western Alliance Bancorporation (NYSE: WAL)

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Western Alliance Bancorporation (NYSE: WAL) stock fell 1.24% though the company posted better than expected results for the first quarter of FY 21. On April 7, 2021, the company had completed its previously announced acquisition of Aris Mortgage Holding Company, LLC, the parent company of AmeriHome Mortgage Company, LLC. Based on AmeriHome’s closing balance sheet and a $275 million premium, the total consideration was approximately $1.22 billion. The company has reported net income of $192.5 million, up 129.4% from $83.9 million.

Moreover, the company delivered the net interest income of $317.3 million in the first quarter 2021, an increase of $2.5 million from $314.8 million in the fourth quarter 2020, and an increase of 18.0%, compared to the first quarter 2020. Continued loan growth, net deferred loan fee accretion on PPP loans (which totaled $11.9 million for the first quarter 2021), and lower interest costs drove the increase in net interest income from the first quarter 2020. The Company has recorded a reversal of credit loss provisions totaling $32.4 million in the first quarter 2021, a decrease of $1.8 million from the $34.2 million reversal in the fourth quarter 2020, compared to a provision for credit losses of $51.2 million in the first quarter 2020. The Company’s net interest margin in the first quarter 2021 was 3.37%, a decline from 3.84% in the fourth quarter 2020 and a decline from 4.22% in the first quarter 2020. The contraction in net interest margin from the prior period is mainly due to excess liquidity and a shift in loan mix to a higher proportion of residential loans. The decrease in net interest margin from the first quarter 2020 was on back of the lower rate environment, which lowered loan and investment security yields, but also decreased deposit and funding costs.

Additionally, gross loans were of total $28.7 billion at March 31, 2021, which is an increase of $1.7 billion from $27.1 billion at December 31, 2020, and an increase of $5.5 billion from $23.2 billion at March 31, 2020. By loan type, the largest increases from the prior quarter include $746 million in commercial and industrial loans, $675 million in residential real estate loans, and $337 million in construction and land development loans.

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