Western Alliance Bancorporation Q1 Earnings Call Highlights

Key Points

• Fraud-related charge-offs: The bank charged off a $126.4 million LAM loan and $26 million on the Cantor loan but realized $50.5 million of pretax gains from securities sales and identified expense savings that largely offset the hit, producing an adjusted EPS of $2.22 excluding those items.
• Balance-sheet momentum and NII outlook: Deposits grew $5.6 billion (assets near $99 billion), net interest income was stable at $766 million with NIM up to 3.54%, and management reiterated targets of $8 billion deposit growth and $6 billion HFI loan growth while forecasting NII growth of 11–14% (trending toward the high end).
• Capital and asset-quality posture: Core asset quality was steady excluding fraud items, allowance for loan losses was 78 bps of funded HFI loans (ACL 87 bps), CET1 remained at the 11% target, the bank repurchased 1.6 million shares (~$120.4 million to date), and it reaffirmed guidance of core net charge-offs of 25–35 bps (ex-fraud) with expense growth of 7–11% expected for 2026.

Western Alliance Bancorporation NYSE: WAL reported first-quarter 2026 results that management said reflected “strong core business performance” alongside actions taken on two previously disclosed fraud-related credits. President and CEO Kenneth Vecchione said the company generated adjusted earnings per share of $2.22 after excluding the impact of the items, adding that “these matters are now largely behind us” and the bank can refocus on underlying operating performance.

Fraud-related credits and offsets

Vecchione said the company fully charged off the remaining $126.4 million balance of a loan to a fund of Leucadia Asset Management (LAM) and has initiated legal action in pursuit of recoveries. The bank also executed securities sales that generated $50.5 million of pre-tax gains, which management said, along with identified expense savings and other revenue initiatives, “substantially offset the impact of this charge.”

In addition, management provided an update on the Cantor Group Five loan. Vecchione said the $29.6 million specific reserve established in the third quarter has been validated by current “as-is” appraisal values and updated lien positions. Due to the complexity and potential duration of the resolution process, the bank charged off $26 million of the loan during the quarter, while indicating expected recoveries from multiple sources, including springing guarantees from ultra-high net worth guarantors and a mortgage fraud policy.

On the Q&A, Vecchione told analysts the $26.5 million charge-off “is reflective of the strategies we’re going to put forward to collect the remaining equity value that sits behind all the properties.” He added that the bank has not incorporated the ultra-high net worth guarantees in that calculation and has also not “captured the mortgage bond,” which he described as up to $20 million after a $5 million deductible.

Income statement: stable NII, higher fee revenue, expense growth

Chief Financial Officer Vishal Idnani said two earnings adjustments affected the quarter: the securities sales generated $50.5 million of pretax gains that partially offset the LAM provision, and together “reduced net income by $62.1 million or $0.57 per share on a net basis.” He said management’s discussion of “adjusted performance” excludes those items.

Idnani reported net interest income of $766 million, in line with the fourth quarter and up about 18% year-over-year. He attributed the stability to lower funding costs—driven by declines in interest-bearing deposit costs—offsetting pressure from lower loan yields, along with higher average earning assets.

Non-interest income rose 18% sequentially to about $253 million. Excluding securities gains realized in both the first and fourth quarters, Idnani said non-interest income would have declined modestly by $5 million, largely due to lower mortgage activity. Service charges and fees increased $15 million from the prior quarter, which he said primarily reflected strong performance in the bank’s Juris banking business, with a corresponding but smaller offset in non-interest expense.

Mortgage banking revenue was stable year-over-year but declined $18 million from the fourth quarter. Idnani said fundamentals improved, citing an 18-basis-point year-over-year expansion in gain-on-sale margin to 37 basis points and an 18% increase in production volume. However, he said the quarter was affected by March rate volatility, noting the 10-year Treasury yield rose 33 basis points during the month, creating headwinds for hedging performance and servicing income. “Early April results indicate mortgage banking is reverting to levels seen in January and February,” he said.

Non-interest expense increased $22 million to $574 million. Excluding an FDIC special assessment rebate recognized last quarter, Idnani said non-interest expense increased about $15 million, driven by annual merit increases and other typical first-quarter costs, as well as expenses tied to higher Juris fee revenue.

Adjusted pre-provision net revenue was $394 million, up 42% year-over-year, according to Idnani. Provision expense was $87 million excluding the LAM charge-off. Adjusted net income available to common stockholders was $241 million, producing adjusted EPS of $2.22.

Balance sheet growth, deposits, and net interest margin

Vecchione highlighted deposit growth of $5.6 billion in the quarter, which he said put the bank “ahead of pace” toward its 2026 target of $8 billion. He said the outperformance positions Western Alliance to accelerate deposit optimization programs intended to reduce funding costs and support net interest margin even if rates do not decline this year. Interest-bearing deposit costs declined 21 basis points in the quarter, which contributed to a 3-basis-point increase in net interest margin to 3.54%.

Total loans grew $903 million, split nearly evenly between held-for-investment (HFI) and held-for-sale (HFS), Vecchione said. He said the bank “deliberately grew the HFS portfolio with lower risk-adjusted weighting” to support share repurchases or staying at its targeted CET1 ratio of 11%, and to provide flexibility to delay some loan growth into the second quarter while reevaluating the credit and macro environment.

Idnani said the balance sheet expanded by $6.1 billion from year-end to nearly $99 billion in assets, with cash and securities rising toward quarter end due to strong deposit growth. He said the bank expects cash and securities as a share of assets to return to more normalized levels and the loan-to-deposit ratio to return to the mid-70s as deposit optimization progresses.

On the Q&A, Idnani said the mid-70% loan-to-deposit ratio target is “by the end of the year,” adding that the timing depends on deposit optimization and that the bank “might actually see deposits in the second quarter” that are not typical given the effort to push down costs on the highest-cost deposits.

Asset quality, reserves, capital, and 2026 outlook

Vecchione said core asset quality remained steady, excluding the fraud-related credits, while classified assets to total assets declined 9 basis points from the prior quarter to 1.08%. He said the bank believes it is “past peak stress,” particularly in office commercial real estate, and is positioning non-performing loans to decline in the back half of the year.

Idnani said criticized assets increased modestly by $60 million to about $1.47 billion, while non-performing loans and OREO declined 7 basis points quarter-over-quarter as a percentage of total assets. He said the allowance for loan losses remained $461 million, or 78 basis points of funded HFI loans, and total ACL to funded loans remained 87 basis points. Management said it expects the allowance to trend into the low 80-basis-point range over the medium term as a higher proportion of C&I loans drive growth.

On capital, Vecchione said the bank repurchased 700,000 shares at a weighted average price in the low $70s during the quarter. Idnani said program-to-date repurchases reached 1.6 million shares for $120.4 million at an average price of $76.55. Management said CET1 remained at its targeted level of 11%.

Looking ahead, Vecchione reiterated expectations for $6 billion of HFI loan growth and $8 billion of deposit growth in 2026. He said deposit balances could be flat in the second quarter as the bank “remix[es]” deposit concentrations to lower costs, with performance returning to more normalized levels beginning in the third quarter. He also said net interest income growth is still projected at 11% to 14% for the year, but the bank now expects results to trend toward the upper end of that range, reflecting an outlook that assumes no rate cuts this year, unchanged loan growth, and optimization of deposit composition.

Management projected non-interest income growth of 13% to 17% excluding security sales, citing expected growth in Juris banking and a return to mortgage banking activity levels seen before March’s rate volatility. Total non-interest expense is now expected to increase 7% to 11%, with operating expenses projected between $1.6 billion and $1.65 billion. Vecchione said the outlook incorporates $50 million of projected expense savings identified in early March.

The bank reaffirmed core net charge-off guidance of 25 to 35 basis points, excluding the two fraud-related charge-offs recognized in the first quarter, and maintained a full-year effective tax rate outlook of about 19%. Management also said it plans to host its inaugural Investor Day on May 12 in New York.

About Western Alliance Bancorporation NYSE: WAL

Western Alliance Bancorporation is a bank holding company headquartered in Phoenix, Arizona. Through its principal subsidiary, Western Alliance Bank, the company provides a range of banking services to commercial clients, entrepreneurs and real estate developers. As one of the largest regional banks in the western United States, it focuses on relationship-driven banking solutions tailored to niche industries and growing businesses.

The company's core offerings include deposit products, treasury management and a variety of lending services.

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