Western Alliance (WAL) Q1 2025 Earnings Transcript

Financial Performance - The company reported a pre-provision net revenue of $278 million, reflecting a 12% year-over-year increase driven by a $52 million growth in net interest income, which also grew by 9% year-over-year [1][7] - Net interest margin remained stable at 3.47%, with an adjusted net interest margin increasing by 17 basis points to 2.75% due to cost reduction efforts [5][11] - Total equity increased by $508 million, with tangible book value per share climbing 14% year-over-year [13][23] Loan and Deposit Growth - The balance sheet expanded by $2.1 billion to $83 billion in total assets, with held-for-investment loan growth of $1.1 billion and deposit growth of $3 billion [12][15] - Mortgage loan production volume increased by 25% annually, although quarterly mortgage banking revenue declined due to lower gains on sale [8][15] - The company experienced strong loan growth in commercial and industrial (C&I) loans, which now account for 44% of the held-for-investment loan portfolio [13][14] Asset Quality - Asset quality remained stable, with net charge-offs declining to 20 basis points of average loans and provisioning for the quarter at $31 million, significantly below prior quarter levels [5][9] - Non-accrual loans decreased by $25 million quarter-over-quarter, indicating improved asset quality [5][16] - The company maintains a conservative allowance for credit losses (ACL) ratio, which is weighted towards more pessimistic economic scenarios [18][21] Capital Management - The CET1 capital ratio decreased to 11.1% due to strong loan growth, while the tangible common equity to total assets ratio remained at 7.2% [22][23] - The company issued $293 million in preferred equity to enhance Tier 1 leverage, which increased from 8.1% to 8.6% [22][31] - The company aims to maintain a CET1 ratio above 11% while focusing on sound loan growth to support capital adequacy [24][44] Outlook and Guidance - The company expects loan growth of $5 billion and deposit growth of $8 billion for the full year, with net interest income projected to increase by 6% to 8% [24][25] - Noninterest income is also anticipated to grow in line with net interest income, supported by deeper client relationships [25][26] - The effective tax rate for 2025 is expected to be approximately 20% [26]