Western Alliance Bancorporation executed a definitive agreement to acquire Aris Mortgage Holding Company, LLC, the parent company of AmeriHome Mortgage Company, LLC. The purchase price of the acquisition is $1 billion in cash, subject to adjustments at closing, according to a press release.
AmeriHome brings a business-to-business approach to the mortgage industry through its relationships with over 700 independent correspondent mortgage originator clients, including independent mortgage bankers, community and regional banks, and credit unions of all sizes. It is the nation’s third-largest correspondent mortgage acquirer, purchasing approximately $65 billion in conventional conforming and government-insured originations during 2020 from its network of independent mortgage originators and managing a $99 billion mortgage servicing portfolio, as of Dec. 31, 2020, according to the release.
Western Alliance's addition of AmeriHome extends its national commercial businesses with a complimentary, low-risk national mortgage franchise. AmeriHome’s combination of business model, diversified and complementary channels, and sophisticated portfolio management strategies has successfully generated consistent and profitable returns throughout rate environments and economic cycles. The transaction also markedly increases the contribution from non-interest income sources. From a financial perspective, the transaction is estimated to produce accretion of over 30% to EPS and over 500 basis points to return on average tangible common equity in 2020.
"Acquiring this differentiated, high-performing mortgage platform provides a powerful growth engine and expands mortgage offerings to existing clients that give us flexible levers to drive consistent returns throughout market cycles," said Ken Vecchione, president and chief executive officer of Western Alliance. "AmeriHome’s effective business model and exceptional leadership team will leverage Western Alliance’s liquidity and capital strength, market reach, complementary businesses and commercial customers."
Post-closing, AmeriHome will operate under its current brand, AmeriHome, a Western Alliance Bank company, and will continue to be led by Jim Furash, its current president and chief executive officer.
"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 specialized financing groups that excel through differentiated B2B expertise and strong client service," said Jim Furash.
Under the terms of the agreement, AmeriHome will become a subsidiary of Western Alliance Bank. Western Alliance will pay cash consideration of $275 million-plus adjusted tangible book value at closing for an estimated aggregate consideration of $1.0 billion (based on AmeriHome’s December 31, 2020 results). Western Alliance expects to achieve annual after-tax funding cost synergies of approximately $50 million with total estimated after-tax merger and integration costs of approximately $27 million. The purchase price represents approximately 1.4x adjusted tangible book value based on Dec. 31, 2020 financials and is estimated to create modest dilution to Western Alliance’s tangible book value per share that we expect to earn back in less than one year. Before the end of the second quarter of 2021, Western Alliance intends to raise approximately $275 million of primary capital through a registered public offering of common stock to support the transaction and future growth. The acquisition is expected to close in the second quarter of 2021, subject to customary closing terms and conditions. After closing of the transaction, Western Alliance plans to optimize the acquired mortgage servicing rights assets for both ongoing operations and regulatory capital treatment.
