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Western Alliance (WAL) Concludes AmeriHome Acquisition Deal

Western Alliance Bancorporation WAL has closed the deal to acquire Aris Mortgage Holding Company, LLC — the parent company of AmeriHome Mortgage Company, LLC, from Apollo Global Management APO and Athene Holding ATH. The deal, worth $1.22 billion, was based on AmeriHome’s closing balance sheet, and reflected a premium of $275 million.

AmeriHome Mortgage is the country’s third largest correspondent mortgage acquirer, which bought nearly $65 billion of general and government-insured originations during 2020 and handled a mortgage servicing portfolio worth $99 billion, as of Dec 31, 2020.

The addition of AmeriHome is expected to help Western Alliance expand its national commercial business with a less risky, complementary national mortgage franchise. Further, AmeriHome Mortgage will function under its current brand — AmeriHome Mortgage — a Western Alliance Bank company, and will continue being headed by Jim Furash, its founding president and chief executive officer.

The president and CEO of Western Alliance, Ken Vecchione, said, “Additionally, we have signed an agreement for the sale of approximately $750 million of mortgage servicing rights to strong counterparties that will allow Western Alliance to retain substantially all of the custodial deposits, which is expected to be completed in May.Both Western Alliance and AmeriHome have already begun to recognize the meaningful synergies of this partnership and we are enthused by this strong momentum to date.”

Our Take

The acquisition will likely help diversify Western Alliance’s revenues and potentially, its loan composition, too. Since commercial loans tend to be more beneficial in a rising-rate environment, and the higher demand for mortgages during a falling-rate environment aids profits, this deal might help the bank generate consistent earnings throughout the interest rate cycle.

Shares of Western Alliance have gained 147.1% over the past six months compared with 66.5% growth recorded by the industry.

 

Currently, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Similar to Western Alliance, other finance companies including JPMorgan Chase & Co. JPM  closed the deal to acquire the Global Loyalty division of cxLoyalty Group Holdings in January. The deal included cxLoyalty’s leading technology platforms, full-service travel agency, gift card, merchandise and points bank businesses. However, the transaction excludes cxLoyalty’s Global Customer Engagement division and other ongoing businesses.

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