Western Alliance Bancorp Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Jared Shaw - Barclays Bank PLC. - Analyst : Hey, good morning, everybody. Ken, it's great to have you back on the call. Looking forward to hearing more as we go through the summer. Maybe just the first, can you give a little color on some of the C&I growth dynamics where you're seeing strength and what was driving at this quarter?

Question: Jared Shaw - Barclays Bank PLC. - Analyst : Okay. And then I guess looking at the capital raise that was an interesting structure. Was the primary goal for that to raise Tier 1 leverage and are you happy with where that is now or could we expect to see some other maybe unique capital moves going forward?

Question: Bernard Von Gizycki - Deutsche Bank AG - Analyst : Just on insurance costs and deposit service charges. So I know you engage your larger depositors about passing over the deposit insurance costs over to them if they want to maintain the level of insurance. I know it just was over about $1 million for the quarter, but service charges increased over $5 million. So I'm just wondering, is this mostly due to the larger depositors maintaining their insurance accounts and you're benefiting from higher service charges? Or was that the increase due to the change in pricing that you previously noticed from Gen 1?

Question: Bernard Von Gizycki - Deutsche Bank AG - Analyst : Okay. And then my follow-up, just on the expenses for ECR-related deposit costs. I know the 2Q $140 million to $150 million is a small uptick versus 1Q. And I think you just raised the guide on that for full year. Could you just break down like is that higher expected ECR-related deposits, higher rate? What's driving that change? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 4:00PM, WAL.N - Q1 2025 Western Alliance Bancorp Earnings Call

Question: Ebrahim Poonawala - Bank of America Corporation - Analyst : I guess maybe, Dan, just following up on the NII and the margin trajectory one. Remind us whether rate cuts, including of ECR costs, are helpful or neutral to the NII outlook. And when we think about the sequential improvement, is this more back half weighted? Is it a big step up in the fourth quarter when you think about just NII and the margin trajectory are going to play out for the remaining three quarters?

Question: Ebrahim Poonawala - Bank of America Corporation - Analyst : Got it. And, Ken, welcome back. I guess another question back to -- I heard deals respond from the reserves. But I think when you think about NII. And I know you spend a lot of time when you think about the stock performance, it's trading at seven times earnings. Like what do you think you can do to improve shareholder returns. I'm not sure if I heard any sort of discussion around buybacks. But how do you get the stock to relate? How do you improve shareholder returns? Like what do you think needs to happen for the stock to react differently as we move forward?

Question: Ebrahim Poonawala - Bank of America Corporation - Analyst : And would you consider some sort of -- like we've talked about bank M&A and maybe the regulatory environment improving, like would some sort of a strategic partnership that better sort of ex tax franchise value? Is that something that you would consider? Like how would you think about that?

Question: Gary Tenner - D.A. Davidson & Co. - Analyst : Good morning and, Ken, welcome back. A bit of a follow-up to that last question. Just in terms of if M&A is not on the docket, the stock's trading at 120% of tangible book and below your out tangible book and you don't have a big dividend payout ratio. So any more openness to use some capital for buyback at this level?

Question: Gary Tenner - D.A. Davidson & Co. - Analyst : Fair enough. Appreciate the thoughts there. And then -- as it relates to the positive second quarter loan growth commentary, I know it's still a little bit early in the quarter, but any visibility as to kind of how that may layer in over the course of the quarter, given the commentary about the first quarter loan growth being pretty late quarter?

Question: Benjamin Gerlinger - Citigroup Inc - Analyst : Good morning and welcome back, Ken. Just a quick question. I want to follow up a little bit on the past couple -- and pay could be a dead horse here, but if you look, as you said, interest-bearing deposit costs, spot rates down 29 bps. So it gets you below three to end or to start April, why is the margin only going up gradually considering loan growth is pretty healthy in the month of March. I'm thinking it's a little bit more than gradual when you look at just the pace of which NII should increase. Am I missing something here?

Question: Benjamin Gerlinger - Citigroup Inc - Analyst : Right. No, that makes sense. It seems like PPNR is going to go higher seemingly every quarter, year or two here, but obviously, great dependent towards the six or seven quarters out. But when you think about just the investment spend associated with PPNR, i.e., non-ECR-related deposits, is there anything incremental to a non-run rate perspective on investment, i.e., to get over the $100 billion that you still need to do? Or if the rules were changed and $100 billion was more like $50 million or something like that, would you be ready today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 4:00PM, WAL.N - Q1 2025 Western Alliance Bancorp Earnings Call

Question: Timur Braziler - Wells Fargo & Company. - Analyst : Going back to the loan yield conversation, just the C&I loans that were put on back end of the quarter. I'm just wondering given rate activity, could you actually see those loan yields increase in 2Q or just some of the pricing pressures that you're talking through the loan production was below the kind of average balance for the first quarter?

Question: Timur Braziler - Wells Fargo & Company. - Analyst : Great. And then my follow-up, just on credit. Maybe can you talk through the increase in C&I classified this quarter? And then as you look at the office portfolio, just the reappraisal rates, when I'm looking at Page 22 of the deck, just over the last couple of quarters, that's grown from 7% over 80% LTV in 3Q, that's over 25% of the portfolio today. I granted much of that did occur last quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 4:00PM, WAL.N - Q1 2025 Western Alliance Bancorp Earnings Call I'm just wondering how granular with some of those reappraisals, now over 80%. And just with 40% of the office book maturing in '25, 75% maturing through '26 the current uncertainty in the macro change the way you potentially think about the risk profile of these upcoming maturities?

Question: Christopher McGratty - Keefe, Bruyette, & Woods, Inc - Analyst : Great. Thanks. Welcome back, Ken. If I'm looking at slide 18, the guide, is there any reason why you would gear us away from the midpoint across PPNR? Are you leaning in any direction for any of the NII fees or expenses?

Question: Christopher McGratty - Keefe, Bruyette, & Woods, Inc - Analyst : Okay. And then that point, Dale, if the revenue either mortgage or the growth doesn't come through, but can you speak to the degree to flex the expenses a little harder?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Thanks. Hello, everyone. A question for you guys on the mortgage banking outlook. I think, Ken, you mentioned earlier, flat mortgage revenues year-over-year. Can you talk a little bit about your rate assumptions around those expectations? And is there a 10-year level where the volumes start to increase and there's upside to that outlook?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Yes. Okay. That makes sense. Any thoughts on the gain on the outlook. Would you -- do you think 19 basis points is nearly low? Or any thoughts on that outlook?

Question: Andrew Terrell - Stephens Inc - Analyst : Good morning, and again, welcome back. If I could ask on just Dale, you mentioned in the prepared remarks the Moody's rating change back in February. I was hoping you could maybe just discuss a bit more any incremental traction you're gaining in the Corporate Trust business following that news. I know it's been a point you guys have talked about for a couple of years now.

Question: Andrew Terrell - Stephens Inc - Analyst : Great. I appreciate the color. If I can go back to just some of the commentary on loan yields. I don't know if you guys have it, but could you share the weighted average yield on the new production for the first quarter? I'm just trying to get a sense of I hear you on the competitive front. Just trying to get a sense for how different new loans being put on or from the, call it, 620 or so book yield today?

Question: Matthew Clark - Piper Sandler & Co - Analyst : Thanks and good morning. Welcome back, Ken. Just on the kind of round out the discussion on margin and NII, it looks like you've got some pretty good visibility going into 2Q with the end-of-period loan growth, call it 617 and the drop in the spot rate. You would argue for a margin over 360 on a reported basis. But any sense for kind of where that margin ended at the end of the quarter, if you normalize it for any unusual fees?

Question: Matthew Clark - Piper Sandler & Co - Analyst : Yes, end of the month. End of the month, yes.

Question: Matthew Clark - Piper Sandler & Co - Analyst : Okay. Fair enough. And then just on the criticized increase this quarter. Any thoughts on the outlook and migration in general, whether or not we might see some improvement? Or is this kind of environment makes a little more skeptical?

Question: Anthony Elian - JPMorgan Chase & Co - Analyst : Ken, good to hear you're feeling much better and welcome back. I want to start on loan growth. I know you mentioned that second quarter should talk. I know you mentioned that second quarter loan growth should top first quarter growth. But can you just share with us anecdotally anything you've heard since Liberation Day on what you've heard from your customers in terms of business investment, CapEx they may be thinking about, but that's on pause now. And if they're making any adjustments now given the elevated uncertainty from tariffs?

Question: Matthew Clark - Piper Sandler & Co - Analyst : And then my follow-up on credit. If I think back to the early days of COVID, you guys were early in terms of proactiveness diving deeper into potential problem portfolios. Ken, it sounds like you did that again based on your prepared remarks and you don't see a significant number of borrowers or meaningful exposures to China or Canada. But are there any segments now within national business lines that you're just paying a little bit more attention to given the outsized uncertainty?