Western Alliance Bancorporation (WAL) was cut to Neutral from Overweight at J.P. Morgan on an upside risk to ECR (earnings credit rate) deposit costs. "For 2026, although the newly provided outlook for 2026 ECR deposit costs calls for a range of $535M-$585M, we ...

Core Insights - The company reported record financial results for 2025, including net interest income of $2.9 billion, net revenue of $3.5 billion, and pre-provision net revenue (PP&R) of $1.4 billion, with net income available to common shareholders at $956 million and EPS at $8.73, reflecting a 12% increase in net revenue and a 26% increase in PP&R year-over-year [1][6][4] Financial Performance - For Q4, the company achieved an EPS of $2.59, a 33% increase from the same period last year, with a return on average assets of 1.23% and a return on average tangible common equity of 16.9% [2] - The company ended 2025 with strong momentum, citing robust loan growth, reduced seasonal deposit outflows, and stable net interest margin (NIM) [3][4] Balance Sheet and Growth - Total assets reached approximately $93 billion, with deposits increasing by 16% year-over-year, amounting to an additional $10.8 billion, and held-for-investment (HFI) loan growth of $5 billion for 2025 [5][7] - The company expects to achieve $6 billion in loan growth and $8 billion in deposit growth for 2026, with net interest income projected to rise by 11-14% [6][24] Income and Expense Trends - Non-interest income increased by 25%, primarily driven by commercial banking and disbursement fees, while non-interest expense growth moderated to 4% due to lower deposit costs [1][8] - In Q4, net interest income was $766 million, up from the previous quarter, while net interest margin slightly compressed to 3.51% [11] Credit Quality and Capital - Asset quality remained stable, with net charge-offs at $44.6 million, or 31 basis points of average loans, and the allowance for funded loans fully covering non-performing loans at 102% [14][17] - The company reported a tangible common equity to tangible assets ratio of 7.3% and a CET1 ratio of 11%, consistent with management's targets [17][19] Strategic Outlook - The company plans to de-emphasize certain areas, such as residential loan growth, while focusing on specialized commercial and lower-cost deposit initiatives [20] - Management expressed confidence in the bank's organic growth strategy and earnings momentum heading into 2026 [21]

Financial Data and Key Metrics Changes - In Q4 2025, EPS was $2.59, up 33% year-over-year, with a return on average assets of 1.23% and a return on average tangible common equity of 16.9% [5] - For the full year, net interest income reached a record $2.9 billion, net revenue was $3.5 billion, and pre-provision net revenue was $1.4 billion, with net revenue and pre-provision net revenue increasing 12% and 26% respectively from the prior year [10][11] - Non-interest income rose 25%, primarily driven by stronger commercial banking and disbursement fees [10] Business Line Data and Key Metrics Changes - HFI loan growth was $5 billion, or 9%, across regional banking and specialized C&I verticals, with deposits increasing by $10.8 billion, or 16% [6][14] - Mortgage banking revenues were relatively stable, only down $5 million compared to the prior quarter, with expectations for stronger results in 2026 due to favorable regulatory changes and mortgage rate reductions [7] - Operating leverage was significant, with net revenue growth outpacing non-interest expense growth by four times [8] Market Data and Key Metrics Changes - Total deposits were essentially flat for Q4, but exceeded expectations for the full year, increasing by $10.8 billion, which was nearly $2.5 billion above revised guidance [13] - Regional Banking deposits grew by $1.4 billion in Q4, with notable contributions from Innovation Banking and Specialty Escrow Services [15] Company Strategy and Development Direction - The company is focused on organic growth, with expectations for loan growth of $6 billion and deposit growth of $8 billion in 2026, supported by a healthier macro backdrop and accommodative regulatory environment [24] - Continued investments in preparing for large financial institution status are expected to yield benefits without a notable increase in expenses [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong earnings momentum for 2026, citing macroeconomic tailwinds and a constructive sentiment among commercial clients [24] - The company anticipates net charge-offs to remain elevated in the first half of the year as it works through non-accrual loans, with a proactive approach to managing asset quality [8][26] Other Important Information - The company issued $400 million of subordinated debt to bolster its total capital ratio, which now stands at 14.5% [21] - Tangible book value per share increased by 17.3% year-over-year to $61.29, reflecting strong growth in organic retained earnings [21] Q&A Session Summary Question: Balance sheet growth guidance - Management indicated that the projected loan growth of $6 billion and deposit growth of $8 billion is leading the peer group and reflects organic growth, with adjustments possible if projections prove conservative [31] Question: Charge-off expectations - Charge-offs are expected to be slightly higher in the first half of the year as the company addresses non-accrual loans, with a target midpoint for modeling purposes set at 30 basis points [34] Question: Non-interest income sustainability - The strength in non-interest income is attributed to treasury management and digital disbursements, with expectations for continued growth in these areas [39] Question: ECR deposit expectations - ECR deposits currently make up about 37% of total deposits, with expectations for the mix to hold constant while aiming to push more towards non-ECR deposits [52] Question: Provisioning and allowance updates - The allowance for funded loans is expected to drift up into the low 80s basis points, driven by C&I loan growth and non-accrual loan management [65]

Financial Data and Key Metrics Changes - In Q4 2025, EPS was $2.59, up 33% year-over-year, with a return on average assets of 1.23% and return on average tangible common equity at 16.9% [5] - For the full year, net interest income reached a record $2.9 billion, net revenue was $3.5 billion, and pre-provision net revenue was $1.4 billion, with net revenue and pre-provision net revenue increasing 12% and 26% respectively from the prior year [10] - Non-interest income rose 25%, primarily driven by stronger commercial banking and disbursement fees [10] Business Line Data and Key Metrics Changes - HFI loan growth for the full year was $5 billion, or 9%, with deposits increasing by $10.8 billion, or 16% [6] - Mortgage banking revenues were relatively stable, only down $5 million compared to the prior quarter, with expectations for stronger results in 2026 due to favorable regulatory changes and mortgage rate reductions [7] - Regional Banking posted about $1 billion of loan growth, with significant contributions from Innovation Banking and hotel franchise finance [14] Market Data and Key Metrics Changes - Total deposits were essentially flat for the quarter, with notable growth in Regional Banking deposits, which increased by $1.4 billion [15] - The mix of ECR deposits is expected to hold constant, with around 37% of total deposits being ECR on an average basis [52] - The bank's total assets expanded to approximately $93 billion, with total equity ending the year at $8 billion [14] Company Strategy and Development Direction - The company aims to cross $100 billion in assets by year-end 2026 while maintaining steady expense growth [8] - The focus is on organic growth, with loan growth projected at $6 billion and deposit growth at $8 billion for 2026 [24] - The company is investing in new business lines and technology to support future growth, with a strong emphasis on operational efficiency [79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong earnings momentum for 2026, supported by a healthier macro backdrop and accommodative regulatory environment [24] - The outlook includes expectations for net interest income growth of 11%-14% and non-interest income growth of 2%-4% [25] - Management anticipates net charge-offs to be between 25 and 35 basis points as they work through non-accrual balances [26] Other Important Information - The company issued $400 million of subordinated debt to bolster its total capital ratio [21] - Tangible book value per share increased by 17.3% year-over-year to $61.29, reflecting strong organic earnings [21] - The efficiency ratio improved, with a Q4 efficiency ratio of 55.7% [11] Q&A Session Summary Question: Balance sheet growth guidance - Management indicated that the projected loan growth of $6 billion and deposit growth of $8 billion leads the peer group and reflects organic growth [31] Question: Charge-off expectations - Charge-offs are expected to be slightly higher in the first half of the year as the company works to reduce non-accrual loans [34] Question: Non-interest income sustainability - The strength in non-interest income is driven by treasury management and digital disbursements, with expectations for continued growth [39] Question: ECR deposit expectations - ECR deposits are expected to hold constant in mix, with a beta of 65%-70% on ECR deposits [54] Question: Loan origination spreads - The company is experiencing competitive pressures but maintains a focus on quality and operational efficiency [57]

Financial Data and Key Metrics Changes - In Q4 2025, EPS was $2.59, up 33% year-over-year, with a return on average assets of 1.23% and return on average tangible common equity at 16.9% [4] - For the full year, net interest income reached a record $2.9 billion, net revenue was $3.5 billion, and pre-provision net revenue was $1.4 billion, with net revenue and pre-provision net revenue increasing 12% and 26% respectively from the prior year [8] - Non-interest income rose 25%, primarily driven by stronger commercial banking and disbursement fees, while non-interest expense growth slowed to 4% [8][9] Business Line Data and Key Metrics Changes - HFI loan growth for the full year was $5 billion, or 9%, with regional banking and specialized C&I verticals contributing significantly [4][10] - In Q4, mortgage banking revenues only declined by $5 million compared to the prior quarter, indicating stability despite seasonal trends [5] - The Juris Banking team completed over 17 million digital payments related to a major settlement, showcasing the effectiveness of the disbursement platform [5] Market Data and Key Metrics Changes - Total deposits increased by $10.8 billion, or 16%, driven by strong inflows in regional banking and a 40% growth in specialty escrow businesses [4][10] - Regional Banking deposits grew by $1.4 billion in Q4, with notable contributions from Innovation Banking and Specialty Escrow Services [12] - The mix of ECR deposits is expected to remain consistent, with around 37% of total deposits being ECR on an average basis [33] Company Strategy and Development Direction - The company aims to cross $100 billion in assets by year-end 2026 while maintaining a stable expense structure [6] - There is a focus on organic growth opportunities, with expectations of $6 billion in loan growth and $8 billion in deposit growth for 2026 [19][20] - The company is emphasizing the growth of lower-cost deposit channels and higher-yielding C&I loans to enhance net interest margin [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong earnings momentum for 2026, supported by a pro-growth regulatory environment and improving visibility on rate normalization [19] - The outlook for net interest income growth is projected at 11%-14%, assuming two rate cuts during the year [20] - Asset quality remains stable, with expectations for net charge-offs to be between 25 and 35 basis points as non-accrual balances are proactively reduced [21] Other Important Information - The company issued $400 million of subordinated debt to bolster its capital ratio, and tangible book value per share rose 17% year-over-year to $61.29 [11][17] - The efficiency ratio improved, with a Q4 efficiency ratio of 55.7% and an adjusted efficiency ratio of 46.5% [14] - The company has been a leader in creating shareholder value, with EPS growth and tangible book value accumulation ranking in the top quartile relative to peers over the last decade [18] Q&A Session Summary Question: Balance sheet growth guidance - Management indicated that the projected loan growth of $6 billion and deposit growth of $8 billion is leading the peer group and reflects organic growth [23] Question: Charge-off expectations - Charge-offs are expected to be higher in the first half of the year as the company works through non-accrual loans, with a normalization expected in the latter half [25] Question: Non-interest income sustainability - The strength in non-interest income is driven by treasury management and digital disbursements, with expectations for continued growth in these areas [27] Question: ECR deposit expectations - ECR deposits are expected to maintain a consistent mix, with a beta of 65%-70% on ECR deposits, and efforts are being made to shift towards lower-cost deposits [33][34]

EARNINGS CALL 4th Quarter 2025 January 27, 2026 Forward-Looking Statements This presentation contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding our expectations with regard to our business, financial and operating results, including our deposits, liquid ...

Shares of Western Alliance Bancorporation ( WAL ) have been a poor performer over the past year, losing 7% and missing out on a market rally. While the company has generated strong deposit growth, investors have been cautious about potential credit losses, given its fairly lightOver fifteen years of experience making contrarian bets based on my macro view and stock-specific turnaround stories to garner outsized returns with a favorable risk/reward profile. If you want me to cover a specific stock or have a ...

Core Insights - Western Alliance Bancorporation reported strong financial results for Q4 and full year 2025, with record net interest income, revenues, and pre-provision net revenue (PPNR) [1][2] - The company achieved a net income of $293.2 million for Q4 2025, a 12.6% increase from Q3 2025, and a 32.8% increase year-over-year [1][2] - Full year net income reached $990.6 million, up 25.8% from the previous year, with earnings per share increasing by 23.1% to $8.73 [1][2] Financial Highlights - Q4 2025 net income was $293.2 million, with earnings per share of $2.59, compared to $260.5 million and $2.28 in Q3 2025 [1][2] - Full year net revenue was $3.5 billion, a 12.0% increase from the previous year, while non-interest expenses rose by 4.3% [1][2] - The efficiency ratio for Q4 2025 was 55.7%, improved from 58.9% in Q4 2024 [1][2] Loan and Deposit Growth - HFI loans increased by $2.0 billion in Q4 2025, totaling $58.7 billion, with a loan-to-deposit ratio of 76.0% [1][3] - Total deposits were $77.2 billion, a decrease of $88 million from Q3 2025, but an increase of $10.8 billion year-over-year [1][3] - The company reported impressive quarterly loan growth, contributing to a total asset increase to approximately $93 billion [1][2] Asset Quality - Nonperforming loans to funded HFI loans decreased to 0.85% in Q4 2025 from 0.92% in Q3 2025 [1][3] - The provision for credit losses was $73.0 million for Q4 2025, down from $80.0 million in Q3 2025 [2][3] - Criticized loans decreased by $15 million during the quarter, totaling $1.3 billion [4] Capital Position - Total equity increased to $7.9 billion at December 31, 2025, up from $7.7 billion at September 30, 2025 [3][4] - The common equity tier 1 capital ratio was 11.0% at December 31, 2025, compared to 11.3% at September 30, 2025 [3][4] - Tangible book value per share rose to $61.29, a 17.3% increase year-over-year [1][3] Performance Metrics - The net interest margin for Q4 2025 was 3.51%, slightly down from 3.53% in Q3 2025 [2][3] - Return on average assets was 1.23% for Q4 2025, compared to 1.12% in Q4 2024 [1][2] - The company repurchased 0.7 million shares for $57.5 million during Q4 2025 [3][4]

Financial Performance - Net income for Q4 2025 was $293.2 million, up 12.6% from $260.5 million in Q3 2025, and up 35.2% from $216.9 million in Q4 2024[10] - Earnings per share for Q4 2025 reached $2.59, a 13.6% increase from $2.28 in Q3 2025 and a 32.8% increase from $1.95 in Q4 2024[10] - Net income for the year ended December 31, 2025, was $990.6 million, a 25.8% increase from $787.7 million in 2024[34] - Net income attributable to Western Alliance was $286.1 million in Q4 2025, compared to $253.4 million in Q3 2025, reflecting a 12.5% increase[40] Revenue and Income - Pre-provision net revenue (PPNR) for Q4 2025 was $428.7 million, up 8.9% from $393.8 million in Q3 2025 and up 33.2% from $319.4 million in Q4 2024[11] - Non-interest income for Q4 2025 was $214.7 million, an increase of 14.3% from $187.8 million in Q3 2025 and up 24.9% from $171.9 million in Q4 2024[7] - Interest income for Q4 2025 reached $1,217.4 million, a 6.9% increase from $1,138.6 million in Q4 2024[34] - Net interest income after provision for credit losses was $693.2 million for Q4 2025, up 14.3% from $606.5 million in Q4 2024[34] Asset and Deposit Management - Total deposits decreased by $88 million to $77.2 billion in Q4 2025, while total deposits increased by $10.8 billion, or 16.3%, year-over-year[2] - Total assets rose by $1.8 billion, or 2.0%, to $92.8 billion at December 31, 2025, compared to $91.0 billion at September 30, 2025, and increased 14.6% from $80.9 billion at December 31, 2024[21] - Total deposits amounted to $77.2 billion as of December 31, 2025, reflecting a decrease of $88 million from the previous quarter but an increase of $10.8 billion from $66.3 billion at December 31, 2024[15] Loan Performance - HFI loans totaled $58.7 billion in Q4 2025, an increase of $2.0 billion, or 3.6%, from Q3 2025, and up $5.0 billion, or 9.3%, year-over-year[13] - The ratio of HFI loans to deposits was 76.0% at December 31, 2025, up from 73.3% at September 30, 2025, but down from 80.9% at December 31, 2024[16] - Nonaccrual loans decreased by $22 million to $500 million during the quarter, but increased by $24 million from December 31, 2024[23] Efficiency and Ratios - The efficiency ratio, adjusted for deposit costs, improved to 46.5% in Q4 2025 from 47.8% in Q3 2025 and 51.1% in Q4 2024[9] - The common equity tier 1 capital ratio was 11.0% at December 31, 2025, down from 11.3% at September 30, 2025, and December 31, 2024[20] - The tangible common equity ratio improved to 7.3% as of December 31, 2025, compared to 7.2% in the previous year[37] Credit Losses and Provisions - The company recorded a provision for credit losses of $73.0 million in Q4 2025, a decrease from $80.0 million in Q3 2025 but an increase from $60.0 million in Q4 2024[5] - The provision for credit losses increased by 21.7% to $73.0 million in Q4 2025, up from $60.0 million in Q4 2024[34] - Total allowance for credit losses on loans reached $510.2 million, compared to $482.7 million in the previous quarter[42] Equity and Capital - Total equity increased by $256 million, or 3.3%, to $7.9 billion in Q4 2025, with a year-over-year increase of $1.2 billion, or 18.5%[2] - Total tangible common equity increased to $6,709 million as of December 31, 2025, up from $6,451 million in September 2025, representing a growth of 4.0%[57] - Tangible book value per share was $61.29 at December 31, 2025, an increase of 4.7% from $58.56 at September 30, 2025, and 17.3% from $52.27 at December 31, 2024[20] Other Financial Metrics - The average cost of interest-bearing liabilities decreased to 3.34% in 2025 from 3.90% in 2024, reflecting a reduction in funding costs[52] - Total non-interest expense increased to $552.2 million in Q4 2025, compared to $544.4 million in Q3 2025[40] - Loans charged-off totaled $48.3 million for the quarter ended December 31, 2025, an increase from $31.8 million in the prior quarter[42]

Looking back on the first quarter, we are pleased with our execution that delivered financial results in line with expectations as we continue to prudently grow the balance sheet and maintain asset quality. Western Alliance's balance sheet growth supported solid pre-provision net revenue of $278 million, which equates to a $31 million or 12% year-over-year increase. Driving this increase was net interest income, which grew $52 million year-over-year or 9%. Net interest income, inclusive of deposit costs, al ...