Western Alliance Bancorporation (WAL) traces its roots to 1994 after Boyd Gaming co-founder and CEO, Bill Boyd, met with Don Snyder, recalls Ingrid Hendershot, value-oriented money manager and editor of Hendershot Investments.

Boyd expressed a desire to start a significant Nevada-based bank with Snyder, who had a 22-year banking career prior to entering the tourism and gaming industry. Founded with $8 million in startup capital, the bank had a modest $34 million in assets by the end of 1994. The company now operates six banks located throughout Arizona, Nevada and California.

Western Alliance also lends through its national business lines which include hotel franchise finance, mortgage warehouse, public and nonprofit finance, technology and corporate finance, including blockchain-based offerings. As of June 30, 2022, the company had assets of $66.1 billion.

Western Alliance consistently generates industry leading efficiency and profitability performance. Its accolades include #1 Best Emerging Regional Bank for 2022 by “Bank Director,” #2 best-performing of the 50 largest public U.S. banks in the 2021 S&P Global Market Intelligence listing and consistently high rankings on the Forbes “America’s Best Banks” list.

Western Alliance’s efficiency ratio averaged an impressive 41.9% over the past five years with the bank generating a stellar 16% average return on shareholders’ equity and 1.84% average return on assets.

During the past five years, Western Alliance has banked profitable growth with revenues compounding 24% annually and EPS increasing at a 29% annual pace. Loans held for investment increased at a 27% annual clip to $39.1 billion while deposits have grown 29% annually to $47.6 billion.

During the past five years, net interest margin averaged an industry leading 4.25% owing to the bank’s focus on commercial & industrial loans and loans backed by commercial real estate.

Western Alliance reported second quarter net revenues increased 22% to $620 million with net income advancing 15% to $257 million and EPS up 10% to $2.39. Accelerating year-over-year net interest income growth of $155 million to $525 million propelled record second quarter results as the rising interest rate environment expanded the bank’s net interest margin to 3.54%.

With nearly all Western Alliance’s variable rate loans above their interest rate floors, the bank should continue to benefit from rising rates. Non-interest income declined 30% from last year to $95 million on a drop in mortgage banking income as the mortgage origination market continues to face headwinds.

While leadership does not currently see signs of a notable recession or credit stress, it is prepared with about 56% of loans in low to no-loss categories and 27% of the portfolio credit protected by government guarantees, credit-linked notes and cash secured assets.

Given industry-leading returns on equity and assets, Western Alliance should continue to generate capital to fund organic growth and maintain well capitalized regulatory capital ratios while returning cash to shareholders through growing dividends.

For 2022, the company expects earnings of about $9.80, up 13% from 2021. Long-term investors may want to deposit Western Alliance into their portfolio as it is a high-quality efficient bank with profitable growth. Buy.

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