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WESTERN ALLIANCE BANCORPORATION (WAL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered accelerating profitability: net income $237.8M and diluted EPS $2.07, with NIM expanding 6 bps to 3.53% and adjusted efficiency ratio improving 400 bps sequentially to 51.8% as revenue growth outpaced deposit costs .
  • Balance sheet momentum continued: loans +$1.2B QoQ to $55.9B and deposits +$1.8B QoQ to $71.1B; CET1 rose to 11.2% and TBVPS increased to $55.87 .
  • Management raised full‑year outlooks: 2025 NII growth to 8–10% (from 6–8%), non‑interest income to 8–10% (from 6–8%); ECR deposit costs now $550–$590M and Q3 ECR $170–$180M; NIE ex‑deposit costs $1,495–$1,515M .
  • Strategic updates/catalysts: unifying all divisions under Western Alliance Bank by year‑end; planned CFO transition to Vishal Idnani (effective Jan 2, 2026) while current CFO Dale Gibbons leads deposit initiatives—both support deposit mix optimization and brand scale narrative .

What Went Well and What Went Wrong

What Went Well

  • Profitability inflected: “robust net interest income growth… improving profitability,” with PPNR up to $331.2M and ROTCE 14.9% .
  • NIM expansion and operating leverage: NIM 3.53% (+6 bps QoQ) driven by higher securities yields and lower deposit rates; adjusted efficiency ratio improved to 51.8% .
  • Asset quality stabilizing in core metrics: criticized loans fell $118M QoQ to $1.5B; nonaccrual loans/loans improved to 0.76%; management expects criticized assets to be at/near cycle high and “to drift downward” .

What Went Wrong

  • OREO jump: repossessed assets rose to $218M (from $51M) as WAL took possession of several office properties; management says carry is positive and aids resolution, but optics add to headline risk .
  • Provision and charge‑offs ticked up: provision rose to $39.9M (from $31.2M) on loan growth and net charge‑offs ($29.6M; 22 bps), reflecting ongoing normalization .
  • Borrowings increased: borrowings up $1.9B QoQ to $6.1B, used to fund securities and HFS balances in excess of deposits; rate sensitivity remains a watch item, though NII still asset‑sensitive .

Financial Results

Income statement and profitability (chronological: Q4’24 → Q1’25 → Q2’25)

MetricQ4 2024Q1 2025Q2 2025
Net Revenue ($M)838.4 778.0 845.9
Net Interest Income ($M)666.5 650.6 697.6
Non‑Interest Income ($M)171.9 127.4 148.3
Provision for Credit Losses ($M)60.0 31.2 39.9
Net Income ($M)216.9 199.1 237.8
Diluted EPS ($)1.95 1.79 2.07
Net Interest Margin (%)3.48 3.47 3.53
Adjusted Efficiency Ratio (%)51.1 55.8 51.8
ROAA (%)1.04 0.97 1.10
ROTCE (%)14.6 13.4 14.9

Balance sheet and capital (Q4’24 → Q1’25 → Q2’25)

MetricQ4 2024Q1 2025Q2 2025
HFI Loans ($B)53.7 54.8 55.9
Deposits ($B)66.3 69.3 71.1
Loan/Deposit Ratio (%)80.9 79.0 78.7
Borrowings ($B)5.6 4.2 6.1
CET1 (%)11.3 11.1 11.2
TBVPS ($)52.27 54.10 55.87

Asset quality (Q4’24 → Q1’25 → Q2’25)

MetricQ4 2024Q1 2025Q2 2025
Net Charge‑offs / Avg Loans (annualized, %)0.25 0.20 0.22
Provision ($M)60.0 31.2 39.9
Nonaccrual Loans / Funded HFI Loans (%)0.89 0.82 0.76
Criticized Loans ($B)1.2 1.7 1.5
Repossessed Assets ($M)52 51 218

Q2 2025 Actuals vs S&P Global Consensus

MetricS&P ConsensusS&P ActualCompany Reported
Primary EPS ($)2.012*1.987*2.07
Revenue ($M)838.8*806.0*Net revenue: 845.9

*Values retrieved from S&P Global. Note: S&P “Primary EPS” and “Revenue” definitions may differ from reported diluted EPS and “net revenue.”

KPIs and Mix (Q2 2025)

  • Deposit mix (% of total): NIB 32.3%; IBDDA 22.0%; Savings/MMA 31.3%; CDs 14.4% .
  • Loan growth drivers QoQ: C&I +$803M; CRE non‑OO +$215M; Residential +$190M .
  • Average yields/costs (Q2): Loan yield 6.17%; Securities 4.81%; Cost of interest‑bearing deposits 3.19% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income growthFY 2025Up 6–8% Up 8–10% Raised
Non‑Interest Income growthFY 2025Up 6–8% Up 8–10% Raised
ECR Deposit Costs ($M)FY 2025485–535 550–590; Q3: 170–180 Raised
NIE ex‑Deposit Costs ($M)FY 20251,450–1,500 1,495–1,515 Raised
Loans (HFI) growthFY 2025+$5.0B +$5.0B (reiterated) Maintained
Deposits growthFY 2025+$8.0B +$8.0B (reiterated) Maintained
CET1FY 2025>11% ≥11% (reiterated) Maintained
Net charge‑offsFY 2025~20 bps ~20 bps (reiterated) Maintained
Effective tax rateFY 2025~20–21% ~20% (reiterated) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
NIM/Net interest driversNIM compressed on lower asset yields; deposit costs easing; asset‑sensitive NII NIM +6 bps to 3.53% on higher securities yields and lower deposit rates; NII up 7.2% QoQ Improving
Deposit mix & ECRECR costs fell in Q4; Q1 ECR balances $24.2B; managing rates lower ECR costs rose sequentially with seasonal balances; FY ECR raised; mix optimization continues Mixed near‑term, improving mix
Mortgage bankingQ4/Q1 mortgage revenue solid; gain‑on‑sale ~19–21 bps Mortgage production up YoY; revenue ~flat YoY outlook; potential upside if rates fall Stable with optionality
CRE/Office & OREOElevated classifications; early office stress noted Took 5 office assets into OREO; positive carry, faster lease‑up; expect decline in criticized assets Actively managed toward resolution
Regulatory/LFI thresholdPreparation for LFI; baseline spend in outlook Would welcome higher Cat 4 threshold (~$250B); continue preparing regardless Potential tailwind
Digital assets/technologyNot a major focus in Q4; initial commentary in Q1 Digital asset deposits +$400M QoQ; long‑term cap at ~4% of deposits; brand unification by YE Growing within limits

Management Commentary

  • “Western Alliance delivered strong second quarter results featuring robust net interest income growth, continued loan and deposit momentum, and healthy earnings generated by improving profitability.” — CEO Ken Vecchione .
  • “Net interest income… grew 7.2% QoQ… securities portfolio yield increased 18 bps… cost of interest‑bearing deposits declined 7 bps to 3.19%.” — CFO Dale Gibbons .
  • “We elected to repossess office properties… we see value creation potential… we expect to begin dispositions this year.” — CFO .
  • “We reiterate our loan and deposit growth outlooks of $5B and $8B… NII growth to 8–10%… NIM ~upper 3.5% level for the year.” — CEO .

Q&A Highlights

  • Deposit cost cadence: Q3 ECR $170–$180M; FY ECR $550–$590M with mix shifts toward lower‑ECR segments (HOA/escrow) and expected deposit rate relief if cuts arrive .
  • OREO strategy: took in five office properties; positive net carry; taking control accelerates leasing and value recovery; no ACL impact since OREO is carried at as‑is values less disposition costs .
  • Digital asset banking: +$400M QoQ deposits; internal cap ~4% of deposits with potential to increase over time while preserving diversification .
  • LFI threshold: management would welcome increase to ~$250B; continue LFI readiness spend irrespective of timing .
  • Margin outlook: spot rates support further NIM improvement with rising securities yields and declining deposit/borrrowing costs .

Estimates Context

  • Per S&P Global, Q2 2025 Primary EPS was 1.987 vs consensus 2.012 (slight miss on S&P “Primary EPS” basis)*; company‑reported diluted EPS was $2.07, reflecting definition differences .
  • Per S&P Global, “Revenue” was $806M vs consensus $838.8M (miss)*, while company‑reported net revenue was $845.9M (definitions differ) .
  • Given raised NII and non‑interest income guidance, estimate revisions should bias upward for revenue/NII and potentially margins, with expense bands updated for ECR/NIE ex‑deposit costs .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • NIM is expanding and should remain resilient with delayed rate cuts and continued securities yield uplift; management raised NII growth to 8–10% for 2025 .
  • Deposit growth and mix optimization (lower CD costs, ECR mix management) are key levers; watch Q3 ECR spend and deposit beta trajectory as catalysts .
  • Credit normalization remains manageable; criticized loans declined QoQ and nonaccrual ratio improved; OREO strategy is proactive with positive carry and targeted dispositions in 2H25 .
  • Borrowings rose to fund securities/HFS; while asset‑sensitive NII supports earnings, funding strategy will be a focal point if deposit growth lags .
  • Strategic branding and leadership changes (brand unification, CFO transition) should enhance commercial momentum and deposit initiatives—potential multiple re‑rating catalysts as execution continues .
  • Tangible book compounding remains strong (+14.5% YoY TBVPS); CET1 11.2% gives capacity to grow while absorbing normalization .
  • Near‑term stock drivers: sustained NIM expansion, deposit cost trajectory in Q3, progress on OREO sales/criticized assets decline, and any regulatory clarity on LFI threshold .