Western Alliance Bancorp. Q1 FY2025 earnings call

• Ken thanked the team and discussed the bank's ability to serve clients through different economic cycles, balance sheet growth, net interest income, and asset quality.
• Dale detailed income statement items, net interest drivers, noninterest income/expense, asset quality, deposits, and capital levels.
• Tim Bruckner joined to discuss asset quality migration and strategies related to office secured loans and remediation efforts.

Loan Growth: Held for investment loans ended $1.1 billion higher quarter-over-quarter. C&I loans drove most growth, with residential loans decreasing. Regional Banking had over $900 million loan growth led by homebuilder finance and end market relationship banking; National Business Lines saw growth in lender finance. Deposits: Grew $3 billion in Q1, mostly noninterest-bearing, with HOA deposits surpassing $10 billion. Net Interest Income: Grew 9% year-over-year to $651 million but declined quarter-over-quarter due to fewer days. Net interest margin held steady at 3.47%, adjusted NIM expanded 17 basis points. Asset Quality: Criticized assets rose, nonperforming assets as a percent of total assets eased, net charge-offs were $26 million or 20 basis points of average loans.

• Balance sheet: $5 billion loan growth and $8 billion deposit growth expected for full year.
• Net interest income: Expected to increase 6%-8% in 2025.
• Noninterest income: Expected 6%-8% growth due to deeper client relationships.
• Noninterest expense: Between 0% growth and 5% decline, aided by declining ECR costs.
• Asset quality: Full year net charge-offs around 20 basis points.
• Effective tax rate: Approximately 20%.

• Asset quality risks: Criticized assets rose, nonperforming assets discussed, reserve methodology and adequacy debated.
• Macro risks: Concerns around unemployment, CRE valuations, and GDP growth influencing reserve levels.
• Rate risks: Impact on loan and deposit yields, with expectations of rate cuts affecting NII outlook.

Q: Concern about the ACL being low and potential for qualitative reserves.

A: Dale stated the reserve is adequate, with no immediate charge coming and a rigorous allowance methodology.

Q: Loan growth and margin outlook.

A: Ken and Dale discussed sequential net interest income growth, PPNR focus, and the impact of rate cuts on margins.

Q: Shareholder returns and buybacks.

A: Ken said the bank focuses on loan growth and capital preservation rather than immediate buybacks, emphasizing the use of capital for sound loan growth.