Western Alliance Bancorporation Q2 FY2025 earnings call

• CFO Succession: Dale Gibbons to transition to Chief Banking Officer of Deposit Initiatives and Innovation, Vishal to assume CFO role after 90-day transition. - Financial Highlights: Strong loan ($1B sequential growth for 2nd quarter) and deposit ($2B quarterly growth) growth, net interest margin up 6bps to 3.53%, return on average tangible common equity 14.9%, return on average assets 1.1%. - Brand Unification: Legacy division bank brands to be unified under Weston Bank by year-end. - Deposit & Loan Growth: Reiterate $5B loan and $8B deposit growth outlook for 2025; net interest income revised to 8%-10% growth, noninterest income 8%-10% growth, noninterest expense 1%-4% for the year.

Western Alliance delivered strong financial results in Q2 2025. Net interest income was nearly $700 million, growing 7.2% quarter-over-quarter. Noninterest income was $148 million, up 16.4% QoQ. HFI loans grew $1.2 billion quarterly, with C&I contributing over 2/3 of the growth. Deposits increased $1.8 billion in Q2, including $400 million from digital asset banking. Asset quality saw criticized loans decline $118 million, but OREO increased by $167 million with properties generating positive cash flow. Revenue contribution: Net interest income was a significant driver, with HFI loans and deposits contributing to growth.

• Loan and Deposit Growth: Maintain $5B loan growth and $8B deposit growth outlook. - Capital: Expect CET1 ratio to hold above 11%. - Net Interest Income: Revised to 8%-10% growth due to delayed rate cuts and strong loan growth. - Noninterest Income: Revised to 8%-10% growth, driven by mortgage banking and commercial banking. - Noninterest Expense: Expected $1.495B-$1.515B for full year, 1%-4% growth. - Asset Quality: Full year net charge-offs ~20bps, criticized assets to decline. - Tax Rate: Maintain effective tax rate forecast ~20%.

• Interest Rate Risk: Delayed rate cuts could impact net interest income. - Regulatory Risk: Changes in LFI thresholds and digital asset regulations may affect growth. - Credit Risk: Potential deterioration in OREO property market conditions could impact financials.

Q: On CFO transition, what are your thoughts?

A: Dale Gibbons is excited about focusing on deposit services with inflection points in growth; Ken emphasizes transition doesn't change bank's focus on organic growth to $100B.

Q: How is deposit growth tracking?

A: Deposit growth is on track for $8B target, with muted seasonal dips in mortgage warehouse deposits due to pricing adjustments.

Q: What's the outlook for margin?

A: Margin expected to inflect positively, with securities yield higher and deposit mix shifting to lower cost deposits.

Q: Color on OREO properties?

A: 5 properties taken in, generating positive cash flow, not impacting charge-offs as revenues exceed expenses.

Q: Thoughts on LFI threshold?

A: Favorable to move LFI Category 4 threshold higher to $250B or indexed to inflation to support organic growth and AI development.