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    WAL
    Earnings call· Mar 2026(Q1 FY26)

    WESTERN ALLIANCE BANCORPORATION Q1 FY26 earnings call WAL

    Apr 22, 2026 Source

    Executive summary

    Western Alliance Bancorporation Q1 FY26 — Strong Deposit Growth and NIM Expansion Amidst Fraud-Related Charge-Offs

    Western Alliance delivered robust Q1 FY26 results, marked by exceptional deposit growth and net interest margin expansion, despite navigating significant fraud-related charge-offs. The company is actively optimizing its deposit base to further reduce funding costs and support NIM, while maintaining a strong capital position and pursuing its loan growth targets. Management expressed confidence in core asset quality and operating leverage, with a focus on long-term shareholder value creation.

    Highlights

    5

    • Exceptional deposit growth of $5.6 billion in Q1, putting the company ahead of its $8 billion target for 2026.

    • Net interest margin expanded 3 basis points sequentially to 3.54% due to lower funding costs.

    • Adjusted EPS of $2.22, up 24% year-over-year, reflecting strong core business performance.

    • Total loans grew $903 million, split nearly evenly between HFI and HFS portfolios.

    • Tangible book value per share increased 13% year-over-year, growing at an 18% CAGR since 2015.

    Concerns

    4

    • Fully charged off the remaining $126.4 million balance of a loan to Leucadia Asset Management.

    • Charged off $26 million of the Cantor Group Vibe loan, with a total specific reserve of $29.6 million.

    • Noninterest expense increased $22 million quarter-over-quarter, primarily due to seasonally elevated compensation and higher Juris banking fee-related expenses.

    • Mortgage banking revenue declined $18 million from the prior quarter due to sharp backup in interest rates in March.

    Guidance & targets

    12
    CategoryTargetConfidence
    HFI Loan Growth
    $6 billion
    high materiality
    High
    Deposit Growth Target
    $8 billion
    high materiality
    High
    Deposit Balances
    flat
    medium materiality
    Medium
    CET1 Ratio
    11%
    high materiality
    High
    Net Interest Income Growth
    11% to 14%
    high materiality
    High
    Net Interest Margin
    modest expansion
    high materiality
    Medium
    Noninterest Income Growth (ex-security sales)
    13% to 17%
    medium materiality
    High
    Total Noninterest Expense Growth
    7% to 11%
    medium materiality
    High
    Deposit Costs
    $650 million to $700 million
    medium materiality
    High
    Operating Expenses
    $1.6 billion to $1.65 billion
    medium materiality
    High
    Core Net Charge-Off Rate
    25 to 35 basis points
    high materiality
    High
    Effective Tax Rate
    approximately 19%
    low materiality
    High

    Operational metrics

    48
    Adjusted EPS
    $2.22up 24% compared to reported EPS in the prior year period
    Q1 FY26

    Adjusting for security sales gains and fraud-related charge-offs, EPS was $2.22.

    Adjusted Return on Average Assets
    1.07%
    Q1 FY26

    Supported by strong capital generation.

    Adjusted Return on Average Tangible Common Equity
    14.2%
    Q1 FY26

    Supported by strong capital generation.

    Pretax Gains from Security Sales
    $50.5 million
    Q1 FY26

    Generated from executing security sales, partially offset fraud-related charge-offs.

    Net Income Impact from Adjustments
    -$62.1 million
    Q1 FY26

    Net impact on net income after security sales gains partially offset fraud-related charge-offs.

    Noninterest Income Growth
    18%QoQ
    Q1 FY26

    Increased to approximately $253 million.

    Noninterest Income (ex-securities gains)
    modestly declined by $5 millionQoQ
    Q1 FY26

    Largely due to lower mortgage activity.

    Service Charges and Fees
    increased $15 millionsequentially
    Q1 FY26

    Primarily reflecting strong performance in tourist banking business.

    Mortgage Banking Revenue
    declined $18 millionfrom prior quarter
    Q1 FY26

    Impacted by sharp backup in interest rates in March.

    Mortgage Gain on Sale Margin
    37 basis pointsup 18 basis points year-over-year
    Q1 FY26

    Margin improvement driven by increased retail recapture volume at AmeriHome.

    Mortgage Loan Production Volume Growth
    18%YoY
    Q1 FY26

    Despite Q1 mortgage revenue decline, underlying volumes were strong.

    Noninterest Expense
    increased $22 millionfrom prior quarter
    Q1 FY26

    Primarily due to seasonally elevated compensation costs and incremental expenses for Juris banking fee revenue.

    Adjusted Pre-Provision Net Revenue
    $394 millionup 42% from same quarter a year ago
    Q1 FY26
    Cash and Securities to Total Assets
    return to more normalized levelsseen in Q4
    Future

    Expected as deposit optimization strategy is executed.

    Loan-to-Deposit Ratio
    returns to the mid-70s
    Future

    Expected as deposit optimization strategy is executed.

    Total Assets
    just shy of $99 billionexpanded by $6.1 billion from year-end
    Q1 FY26 end
    Share Repurchases
    $50 million
    Q1 FY26

    Opportunistically repurchased shares, bringing program-to-date repurchases to 1.6 million shares for $120.4 million at an average price of $76.5.

    HFI Loan Growth
    3.2%linked quarter annualized
    Q1 FY26

    8% compared to prior year.

    HFI Loan Growth
    8%YoY
    Q1 FY26

    3.2% on a linked quarter annualized basis.

    C&I Loan Growth
    Nearly 2/3
    Q1 FY26

    The remainder concentrated in residential loans.

    Average Deposits Growth
    $1.8 billion
    Q1 FY26
    Interest-Bearing Deposit Costs
    declined 21 basis pointsQoQ
    Q1 FY26

    From sustained cost reduction despite growth in average balances.

    Overall Liability Funding Costs
    moved 12 basis points lowerfrom Q4
    Q1 FY26

    Mostly from lower deposit costs and reduced borrowing costs.

    Securities Yield
    $4.59rose 5 basis points from prior quarter
    Q1 FY26

    Due to a shorter day count and reinvestment at slightly higher rates.

    HFI Loan Yield
    compressed 16 basis pointsQoQ
    Q1 FY26

    Following a full quarter impact of rate cuts in late October and December.

    Average Earning Asset Growth
    $1.1 billion
    Q1 FY26

    Supported stable NII, driven by C&I loan growth and higher held-for-sale balances.

    Interest Cost of Earning Assets
    declined 12 basis pointsQoQ
    Q1 FY26
    Earning Asset Yield
    compressed 8 basis pointsQoQ
    Q1 FY26
    Efficiency Ratio
    56%improved by approximately 8 percentage points year-over-year
    Q1 FY26
    Adjusted Efficiency Ratio
    48%improved by approximately 8 percentage points year-over-year
    Q1 FY26
    Operating Leverage
    3xYoY
    Q1 FY26

    Year-over-year revenue growth outpaced noninterest expense growth by approximately 3x.

    Deposit Costs
    declined $8 millionQoQ
    Q1 FY26

    Due to lower rates, partially offset by higher balances in HOA and Juris.

    Earnings at Risk (Down 100 bps scenario)
    rise 1.7%
    Future

    Mostly from improved forecast in mortgage banking, when factoring in potential impact on earnings from mortgage banking revenue growth and reduced deposit fees.

    Classified Assets to Total Assets
    1.08%declined 9 basis points from prior quarter; declined 36 basis points year-over-year
    Q1 FY26

    Continued to improve.

    Criticized Assets
    approximately $1.47 billionincreased modestly by $60 million sequentially
    Q1 FY26

    Largely stable sequentially.

    Special Mention Loans
    increased $78 millionquarter-over-quarter
    Q1 FY26

    Change was not thematic, balance remains $57 million below Q1 2025 levels.

    Non-Performing Loans and OREO to Total Assets
    declined 7 basis pointsquarter-over-quarter
    Q1 FY26
    Allowance for Loan Losses to Funded HFI Loans
    78 basis pointsremained constant
    Q1 FY26

    Expected to trend into the low 80 basis point range over medium term, reflecting higher proportion of C&I loan growth.

    Total Loan ACL to Funded Loans
    87 basis pointsremained constant
    Q1 FY26

    Expected to trend into the low 90s.

    ACL Coverage of Nonperforming Loans
    105%compared to 102% a quarter ago
    Q1 FY26 end

    Still fully covers nonperforming loans.

    Tangible Common Equity to Tangible Assets Ratio
    6.8%declined approximately 50 basis points from year-end
    Q1 FY26

    Due to asset growth, increased share repurchases, and AOCI change.

    Basel III Endgame CET1 Impact
    increase by 81 basis points
    Future

    Based on current rules, expected to be very positive.

    ECR Deposit Beta (Overall)
    65% to 70%
    Current

    Blended beta across the three businesses with ECRs.

    Private Credit Book Exposure to Technology and Software
    under 5%
    Current

    Very limited exposure with granular approach; no credit migration observed.

    Private Credit Portfolio Largest Commitment
    $60 million
    Current

    The largest credit in the private credit portfolio is very granular.

    Lender Finance Book
    $2.3 billion
    Current

    Part of the NBFI bucket, with the company serving as trustee on a significant portion for oversight.

    Expense Savings Identified
    $50 million
    FY26

    Incorporated into total noninterest expense projections, will not impact LFI readiness or strategic growth initiatives.

    Mortgage Banking Revenue Growth
    about 15%over last year's level
    FY26

    Very constructive on the trajectory, especially given focus on home affordability.

    Industry KPIs

    13
    MetricValueDetails
    Loans$903 millionUSD
    Deposits$5.6 billionUSD
    Rotce ROE14.2%%
    Cet1 ratio11%%
    Capital returns$50 millionUSD
    Fee income lines$253 millionUSD
    Allowance reserves$461 millionUSD
    Net interest income$766 millionUSD
    Net interest margin3.54%%
    Net charge offs nplsmarginally higher than upper end of guidancebps
    Total operating expenses$574 millionUSD
    Provision for credit losses$87 millionUSD
    Efficiency ratio operating leverage56%%

    Risks & headwinds

    4
    Resolution of fraud-related creditsOngoing, outcome may take time to resolve

    Leucadia loan: $126.4 million fully charged off; Cantor Group Vibe loan: $26 million charged off (from $29.6 million specific reserve)

    Mitigation: Initiated legal action for Leucadia loan; pursuing recoveries from springing guarantees and mortgage fraud policy for Cantor loan.

    Interest rate volatility impacting mortgage banking revenueQ1 FY26, with early April showing recovery

    Q1 mortgage earnings impacted by 33 basis point rise in 10-year treasury yield in March, leading to $18 million sequential decline in revenue.

    Mitigation: Fundamentals improving, with gain on sale margin expanding and loan production volume increasing; early April results indicate reversion to pre-March levels.

    Difficulty in forecasting and executing deposit optimization to lower funding costsQ2 FY26, with expected flat deposit balances

    Q1 deposit growth of $5.6 billion was outsized, with some higher-cost deposits.

    Mitigation: Actively working with clients to remix and reprice higher-cost deposits; accelerating optimization programs to reduce interest expense and support NIM.

    Potential for credit migration, particularly in commercial real estate (CRE) or specific loan categoriesOngoing monitoring

    Special mention loans increased $78 million quarter-over-quarter, though not thematic.

    Mitigation: Early identification, escalation, and resolution process for problem loans; conservative credit process; portfolio past peak stress in office CRE.

    What to watch in Q2 FY26

    5

    Deposit Balances

    Q2 FY26
    Current$5.6 billion growth in Q1 FY26
    TargetFlat

    Why it matters

    Management is actively trying to remix and reprice deposits to lower funding costs and improve NIM, with Q2 expected to be flat. Verification will show effectiveness of this strategy.

    As a result, it is reasonable to assume deposit balances should be flat Q2 with performance returning to more normalized levels beginning in the third quarter.

    Q&A highlights

    6

    Clarification on the remaining $70 million exposure after the $26 million charge-off and whether personal guarantees are relied upon.

    Management confirmed that appraisal values held, and liens were less than expected. The $26.5 million charge-off reflects resolution strategies, and does not incorporate ultra-high net worth individual guarantees or a $20 million mortgage bond (after a $5 million deductible). They expect recoveries later and no further charge-offs from this loan.

    “We have not incorporated any of the ultra-high net or individual -- high net worth individuals guarantees in coming up with the $26.5 million, nor have we captured mortgage bond, which is up to $20 million after a $5 million deductible.”

    asked by Matthew Clark · answered by Kenneth Vecchione

    2 min read6 chapters

    Detailed Narrative

    01

    Fraud-Related Credit Resolutions

    The company took decisive actions on two previously disclosed fraud-related credits. This included fully charging off the remaining $126.4 million balance of a loan to Leucadia Asset Management, with legal action initiated for recovery. Additionally, $26 million of the Cantor Group Vibe loan was charged off, following a $29.6 million specific reserve established in Q3, validated by current appraisal values and updated lien positions. Management expects future recoveries from springing guarantees and a mortgage fraud policy for the Cantor loan.

    02

    Balance Sheet Optimization

    Western Alliance achieved exceptional deposit growth of $5.6 billion in Q1, significantly exceeding expectations and putting it ahead of its $8 billion target for 2026. This outperformance provides flexibility to accelerate deposit optimization programs, aiming to reduce funding costs and support net interest margin. The strategy involves actively working with clients to remix and reprice higher-cost deposits, with an expectation for Q2 deposit balances to be flat as a result of these efforts.

    03

    Capital Management and Share Repurchases

    The company maintained a stable CET1 ratio of 11% while opportunistically repurchasing 700,000 shares for $50 million at a weighted average price in the low $70s during the quarter. This reflects management's conviction in the intrinsic value of the franchise and its commitment to dynamic capital management. The company views maintaining strong capital levels as crucial for sustaining investment-grade ratings and supporting long-term growth.

    04

    Asset Quality Trends

    Core asset quality remained stable, with net charge-offs (excluding fraud-related credits) marginally higher than the upper end of guidance. Classified assets to total assets declined 9 basis points quarter-over-quarter to 1.08%, and non-performing loans are expected to decline in the back half of the year. Management believes the portfolio is past peak stress, particularly in office CRE, with increasing migration towards resolution.

    05

    Mortgage Banking Recovery

    Q1 mortgage earnings were impacted by a sharp backup in interest rates in March, leading to an $18 million sequential decline in revenue. However, fundamentals across the mortgage business continued to improve, with gain on sale margin expanding 18 basis points year-over-year to 37 basis points and loan production volume increasing 18%. Early April results indicate mortgage banking activity is reverting to levels seen in January and February, before the rate volatility.

    06

    Basel III Endgame Impact

    Management anticipates a positive impact from the Basel III Endgame proposals, expecting an increase in CET1 by 81 basis points based on current rules. This regulatory development is viewed favorably for the bank's capital position.

    AI-generated summary of the company’s earnings call. Not investment advice.