Home Banking Western Alliance Bank splashes $1bn on mortgage firm AmeriHome – FinTech Futures

Western Alliance Bank splashes $1bn on mortgage firm AmeriHome – FinTech Futures

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Arizona-based Western Alliance Bank is set to acquire AmeriHome Mortgage Company in a deal worth $1 billion.

AmeriHome is the third-largest correspondent mortgage acquirer in the US. It purchased $65 billion in conventional conforming and government insured originations during 2020. The firm also manages a $99 billion mortgage servicing portfolio.

Western Alliance HQ image

Western Alliance expects an earnings increase of 30% after the deal

Western Alliance believes the addition of AmeriHome extends its national commercial businesses with “a complementary, low-risk national mortgage franchise”.

AmeriHome originates mortgage loans to consumers, and purchases loans from sellers to pool and sell in secondary markets. The firm had been mulling over the idea of going public before this deal.

After the deal, Western Alliance’s revenue mix changes from 95% net interest income and 5% fee income to 70% net interest income and 30% fee income.

The bank expects its earnings following the completion of the deal to rise by as much as 30%.

“Acquiring this differentiated, high-performing mortgage platform provides a powerful growth engine,” says Ken Vecchione, CEO of Western Alliance.

“This move meaningfully enhances our baseline and growth, diversifies our revenue mix, and mitigates business cycle volatility.”

AmeriHome will become a wholly owned subsidiary of Western Alliance Bank. The bank is paying a cash consideration of $275 million, plus an adjusted tangible book value which brings the total to the $1 billion figure.

“Joining Western Alliance Bank is a terrific opportunity to accelerate our own strategic objectives and pathway to growth,” says Jim Furash, AmeriHome CEO.

“AmeriHome’s successful results and unique business model proved to be highly attractive for Western Alliance Bank, which has a history of growing by adding specialised financing groups.”

Related: HSBC explores options for loss-making US arm as profits dip 34%