Q3 2024 Western Alliance Bancorp Earnings Call

Miles Pondelik; Director of Investor Relations and Corporate Development; Western Alliance Bancorp

Kenneth Vecchione; President, Chief Executive Officer, Director; Western Alliance Bancorp

Dale Gibbons; Vice Chairman, Chief Financial Officer; Western Alliance Bancorp

Tim Bruckner; Chief Credit Officer; Western Alliance Bancorp

Ebrahim Poonawala; Analyst; BofA Global Research

Chris McGratty; Analyst; Keefe, Bruyette & Woods North America

Jared Shaw; Analyst; Barclays

Matthew Clark; Analyst; Piper Sandler Companies

Bernard Von Gizycki; Analyst; Deutsche Bank AG

Timur Braziler; Analyst; Wells Fargo Securities LLC

Anthony Elian; Analyst; JPMorgan Chase & Co

Gary Tenner; Analyst; D. A. Davidson & Co

Samuel Varga; Analyst; UBS

Jon Arfstrom; Analyst; RBC Capital Markets

Brandon King; Analyst; Truist Securities Inc

Operator

Hello, everyone, and a warm welcome to the Western Alliance Bancorporation Q3 2024 earnings call. My name is Emily, and I'll be coordinating your call today. (Operator Instructions) I will now turn the call over to our host, Miles Pondelik, Head of Investor Relations. Please go ahead, Miles.

Miles Pondelik

Thank you, and welcome to Western Alliance Bank's third-quarter 2024 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer; and Dale Gibbons, Chief Financial Officer; and Tim Bruckner, our Chief Banking Officer for Regional Banking will join for Q&A.
Before I hand the call over to Ken, please note that today's presentation contains forward-looking statements, which are subject to risks, uncertainties and assumptions. Except as required by law, the company does not undertake any obligation to update any forward-looking statements.
For a more polite discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please refer to the company's SEC files, including the Form 8-K filed yesterday, which are available on the company's website.
Now for opening remarks, I'd like to turn the call over to Ken Vecchione.

Kenneth Vecchione

Good morning. As always, I'll make some brief comments about our third quarter earnings before turning the call over to Dale who will review our financial results in more detail. After I discuss our outlook for the remainder of 2024, Tim Bruckner will join us for Q&A. Western Alliance delivered solid third-quarter results and earned $1.80 per share. These results demonstrated the bank's ability to sustain diversified loan and deposit momentum as well as grow earnings during a changing rate environment.
We produced healthy deposit growth of $1.8 billion or 11% annualized and HFI loan growth of $916 million or 7% annualized despite sluggish demand for overall credit in the economy. Our national diversified credit origination and deposit platforms uniquely position us to sustain strong deposit growth and then deploy this liquidity into attractive commercial loans where we can provide deep segment and product expertise. During a transitional period for the rate cycle that began in Q3, net interest income grew 25% annualized due to higher average earning assets.
Net interest margin compressed 2 basis points because of lower yields on variable rate loans. Continued interest rate cuts will enable Western Alliance to realize significant funding cost savings in both interest-bearing and ECR-related deposits going forward. We anticipate a more meaningful benefit from lower rates in Q4 from a full-quarter impact of lower rates.
Q3 results were modestly impacted by $4 billion of mortgage warehouse deposit growth driven by elevated mortgage refinance volumes, validating our operational excellence as we continue to win market share following several competitors retreating from the market. After the [Central Bank] Western Alliance is now the largest bank operating in this space.
This excess deposit growth somewhat impacted Q3 earnings from elevated deposit costs, but these deposits have helped cement core customer relationships, which will continue to drive strong risk-adjusted loan volume and spread income. Typical seasonal declines in mortgage warehouse deposit balances are poised to push Q4 ECR-related deposit costs materially lower.
Non-interest income increased $11 million or 10% quarter-over-quarter, but this growth was tempered by a decline in mortgage banking income. Our franchise remains poised specifically benefit from a resumption of stronger mortgage volume. Pre-provision net revenue grew marginally from Q2, while tangible book value per share climbed 19% year-over-year. Lastly, asset quality remains stable as non-performing assets to total assets declined 6 basis points to 45 basis points. Net charge-offs of 20 basis points landed within our Street guidance range.
Dale will now take you through the results in more detail.