Western Alliance Bancorporation Reports Second Quarter 2025 Financial Results

Western Alliance Bancorporation (NYSE:WAL):

Income Statement

Net interest income totaled $697.6 million in the second quarter 2025, an increase of $47.0 million, or 7.2%, from $650.6 million in the first quarter 2025, and an increase of $41.0 million, or 6.2%, compared to the second quarter 2024. The increase in net interest income from the first quarter 2025 is primarily due to higher average interest earning asset balances in the second quarter 2025, partially offset by an increase in short-term borrowings. The increase in net interest income from the second quarter 2024 was driven by both an increase in average interest earning asset balances and lower rates on deposits, partially offset by decreased yields on interest earning assets.

The Company recorded a provision for credit losses of $39.9 million in the second quarter 2025, an increase of $8.7 million from $31.2 million in the first quarter 2025, and an increase of $2.8 million from $37.1 million in the second quarter 2024. The provision for credit losses during the second quarter 2025 is primarily reflective of net charge-offs of $29.6 million and loan growth.

The Company’s net interest margin in the second quarter 2025 was 3.53%, an increase from 3.47% in the first quarter 2025, and a decrease from 3.63% in the second quarter 2024. The increase in net interest margin from the first quarter 2025 was driven by higher yields on investment securities coupled with lower rates on deposits. The decrease in net interest margin from the second quarter 2024 was driven primarily by a lower rate environment that reduced interest earning asset yields.

Non-interest income was $148.3 million for the second quarter 2025, compared to $127.4 million for the first quarter 2025, and $115.2 million for the second quarter 2024. The $20.9 million increase in non-interest income from the first quarter 2025 was primarily due to increases in net loan servicing revenue of $16.5 million and net gain on sales of investment securities of $9.3 million, partially offset by decreases in net gain on loan origination and sale activities of $10.1 million. The increase in non-interest income of $33.1 million from the second quarter 2024 was primarily driven by increases in service charges and loan fees, income from bank owned life insurance, and gain on sales of investment securities, partially offset by decreases in net gain on loan origination and sale activities.

Net revenue totaled $845.9 million for the second quarter 2025, an increase of $67.9 million, or 8.7%, compared to $778.0 million for the first quarter 2025, and an increase of $74.1 million, or 9.6%, compared to $771.8 million for the second quarter 2024.

Non-interest expense was $514.7 million for the second quarter 2025, compared to $500.4 million for the first quarter 2025, and $486.8 million for the second quarter 2024. The $14.3 million increase in non-interest expense from the first quarter 2025 is due primarily to an increase of $10.6 million in deposit costs driven by higher average ECR-related deposit balances. The increase in non-interest expense of $27.9 million from the second quarter 2024 is primarily attributable to increased salaries and employee benefits of $26.9 million and data processing costs of $9.3 million. These increases were partially offset by decreased deposit costs of $26.3 million driven by lower interest rates. The Company’s efficiency ratio, adjusted for deposit costs¹, was 51.8% for the second quarter 2025, compared to 55.8% in the first quarter 2025, and 51.5% for the second quarter 2024.

Income tax expense was $53.5 million for the second quarter 2025, compared to $47.3 million for the first quarter 2025, and $54.3 million for the second quarter 2024. The increase in income tax expense from the first quarter 2025 is primarily related to an increase in pre-tax income, partially offset by increased investment tax credit benefits. The decrease in income tax expense from the second quarter 2024 is primarily related to a lower effective tax rate driven by increased investment tax credit benefits and a lower state blended tax rate.

Net income was $237.8 million for the second quarter 2025, an increase of $38.7 million from $199.1 million for the first quarter 2025, and an increase of $44.2 million from $193.6 million for the second quarter 2024. Earnings per share totaled $2.07 for the second quarter 2025, compared to $1.79 for the first quarter 2025, and $1.75 for the second quarter 2024.

The Company views its pre-provision net revenue¹ ("PPNR") as a key metric for assessing the Company’s earnings power, which it defines as net revenue less non-interest expense. For the second quarter 2025, the Company’s PPNR¹ was $331.2 million, up $53.6 million from $277.6 million in the first quarter 2025, and up $46.2 million from $285.0 million in the second quarter 2024.

The Company had 3,655 full-time equivalent employees and 56 offices at June 30, 2025, compared to 3,562 full-time equivalent employees and 56 offices at March 31, 2025, and 3,310 full-time equivalent employees and 56 offices at June 30, 2024.

Balance Sheet

HFI loans, net of deferred fees, totaled $55.9 billion at June 30, 2025, compared to $54.8 billion at March 31, 2025, and $52.4 billion at June 30, 2024. The increase in HFI loans of $1.2 billion from the prior quarter was primarily driven by increases of $803 million, $215 million, and $190 million in commercial and industrial, commercial real estate non-owner occupied, and residential real estate loans, respectively. The increase in HFI loans of $3.5 billion from June 30, 2024 was primarily driven by increases of $3.2 billion and $608 million in commercial and industrial and commercial real estate non-owner occupied loans, respectively, partially offset by decreases of $186 million and $137 million in construction and land development and commercial real estate owner occupied loans, respectively. HFS loans totaled $3.0 billion at June 30, 2025, compared to $3.2 billion at March 31, 2025, and $2.0 billion at June 30, 2024.

The Company's allowance for credit losses on HFI loans consists of an allowance for funded HFI loans and an allowance for unfunded loan commitments. The allowance for loan losses to funded HFI loans ratio was 0.71%, 0.71%, and 0.67% at June 30, 2025, March 31, 2025, and June 30, 2024, respectively. The allowance for credit losses, which includes the allowance for unfunded loan commitments, to funded HFI loans ratio was 0.78% at June 30, 2025, 0.77% at March 31, 2025, and 0.74% at June 30, 2024. The Company is a party to credit linked note transactions which effectively transfer a portion of the risk of losses on reference pools of loans to the purchasers of the notes. The Company is protected from first credit losses on reference pools of loans totaling $8.4 billion, $8.5 billion, and $8.9 billion as of June 30, 2025, March 31, 2025, and June 30, 2024, respectively, under these transactions. However, as these note transactions are considered to be free standing credit enhancements, the allowance for credit losses cannot be reduced by the expected credit losses that may be mitigated by these notes. Accordingly, the allowance for loan and credit losses ratios include an allowance related to these pools of loans of $11.8 million as of June 30, 2025, $11.9 million as of March 31, 2025, and $11.7 million as of June 30, 2024. The allowance for credit losses to funded HFI loans ratio, adjusted to reduce the HFI loan balance by the amount of loans in covered reference pools, was 0.91% at June 30, 2025, 0.92% at March 31, 2025, and 0.89% at June 30, 2024.

Deposits totaled $71.1 billion at June 30, 2025, an increase of $1.8 billion from $69.3 billion at March 31, 2025, and an increase of $4.9 billion from $66.2 billion at June 30, 2024. By deposit type, the increase from the prior quarter is attributable to increases of $988 million, $503 million, $167 million, and $127 million from non-interest bearing deposits, savings and money market deposits, interest-bearing demand deposits, and certificates of deposit, respectively. From June 30, 2024, savings and money market deposits increased $5.1 billion and non-interest bearing deposits increased $1.5 billion, while interest-bearing demand deposits decreased $1.6 billion and certificates of deposit decreased $163 million. Non-interest bearing deposits were $23.0 billion at June 30, 2025, compared to $22.0 billion at March 31, 2025, and $21.5 billion at June 30, 2024.

The table below shows the Company's deposit types as a percentage of total deposits:

The Company’s ratio of HFI loans to deposits was 78.7% at June 30, 2025, compared to 79.0% at March 31, 2025, and 79.1% at June 30, 2024.

Borrowings totaled $6.1 billion at June 30, 2025, $4.2 billion at March 31, 2025, and $5.6 billion at June 30, 2024. Borrowings increased $1.9 billion from March 31, 2025 primarily due to increases of $1.3 billion and $608 million in long-term and short-term borrowings, respectively, driven by higher average HFS loans and investment securities balances, which exceeded deposits.. The increase in borrowings from June 30, 2024 is primarily due to an increase in long-term borrowings of $2.5 billion, partially offset by a decrease in short-term borrowings of $2.0 billion.

Qualifying debt totaled $678 million at June 30, 2025, compared to $898 million and $897 million at March 31, 2025 and June 30, 2024, respectively. The decrease in qualifying debt from March 31, 2025 and June 30, 2024 is primarily due to repayment of $225 million of subordinated debt during the quarter ended June 30, 2025.

Total equity was $7.4 billion at June 30, 2025, compared to $7.2 billion at March 31, 2025, and $6.3 billion at June 30, 2024. The increase in total equity from the prior quarter was due primarily to net income of $237.8 million. This increase was offset in part by cash dividends paid to common and preferred shareholders of $42.3 million ($0.38 per common share) and $3.2 million ($0.27 per depository share), respectively, coupled with $7.4 million of cash dividends paid on preferred stock of the Company's REIT subsidiary during the second quarter 2025. The increase in equity from June 30, 2024 was primarily driven by the issuance of preferred stock from the Company's REIT subsidiary, net income, and net unrealized fair value gains on available-for-sale securities recorded in other comprehensive loss, net of tax, partially offset by dividends to stockholders.

The Company's common equity tier 1 capital ratio was 11.2% at June 30, 2025, compared to 11.1%, and 11.0% at March 31, 2025 and June 30, 2024, respectively. At June 30, 2025, tangible common equity, net of tax¹, was 7.2% of tangible assets¹ and total capital was 14.1% of risk-weighted assets. The Company’s tangible book value per share¹ was $55.87 at June 30, 2025, an increase of 3.3% from $54.10 at March 31, 2025, and an increase of 14.5% from $48.79 at June 30, 2024. The increase in tangible book value per share from March 31, 2025 and June 30, 2024 is primarily attributable to net income.

Total assets increased $3.7 billion, or 4.4%, to $86.7 billion at June 30, 2025 from $83.0 billion at March 31, 2025, and increased 7.6% from $80.6 billion at June 30, 2024. The increase in total assets from March 31, 2025 was primarily driven by increases in HFI loans and investment securities, partially offset by a decrease in cash and due from banks. The increase in total assets from June 30, 2024 was primarily driven by increases in HFI and HFS loans and bank owned life insurance.

Asset Quality

Provision for credit losses totaled $39.9 million for the second quarter 2025, compared to $31.2 million for the first quarter 2025, and $37.1 million for the second quarter 2024. Net loan charge-offs in the second quarter 2025 totaled $29.6 million, or 0.22% of average loans (annualized), compared to $25.8 million, or 0.20%, in the first quarter 2025, and $22.8 million, or 0.18%, in the second quarter 2024.

Nonaccrual loans decreased $24 million to $427 million during the quarter and increased $26 million from June 30, 2024. Loans past due 90 days and still accruing interest totaled $51 million at June 30, 2025, $44 million at March 31, 2025, and zero at June 30, 2024 (excluding government guaranteed loans of $326 million, $275 million, and $330 million, respectively). Loans past due 30-89 days and still accruing interest totaled $175 million at June 30, 2025, a decrease from $182 million at March 31, 2025, and an increase from $83 million at June 30, 2024 (excluding government guaranteed loans of $168 million, $161 million, and $221 million, respectively). Criticized loans decreased $118 million to $1.5 billion during the quarter and increased $225 million from June 30, 2024.

Repossessed assets totaled $218 million at June 30, 2025, compared to $51 million at March 31, 2025, and $8 million at June 30, 2024. Classified assets totaled $1.3 billion at June 30, 2025, an increase of $66 million from $1.2 billion at March 31, 2025, and an increase of $513 million from $748 million at June 30, 2024.

The ratio of classified assets to Tier 1 capital plus the allowance for credit losses², a common regulatory measure of asset quality, was 16.4% at June 30, 2025, compared to 15.9% at March 31, 2025, and 11.2% at June 30, 2024.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its second quarter 2025 financial results at 12:00 p.m. ET on Friday, July 18, 2025. Participants may access the call by dialing 1-833-470-1428 and using access code 863006 or via live audio webcast using the website link https://events.q4inc.com/attendee/646018783. The webcast is also available via the Company’s website at www.westernalliancebancorporation.com. Participants should log in at least 15 minutes early to receive instructions. The call will be recorded and made available for replay after 3:00 p.m. ET July 18th through 11:59 p.m. ET July 25th by dialing 1-866-813-9403, using access code 760564.

Reclassifications

Certain amounts in the Consolidated Income Statements for the prior periods have been reclassified to conform to the current presentation. The reclassifications have no effect on net income or stockholders’ equity as previously reported.

Use of Non-GAAP Financial Information

This press release contains both financial measures based on GAAP and non-GAAP based financial measures, which are used where management believes them to be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Cautionary Note Regarding Forward-Looking Statements

This release 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, future economic performance and dividends. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include, among others: the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and the Company's subsequent Quarterly Reports on Form 10-Q, each as filed with the Securities and Exchange Commission; adverse developments in the financial services industry generally and any related impact on depositor behavior; risks related to the sufficiency of liquidity; changes in international trade policies, tariffs and treaties affecting imports and exports, trade disputes, barriers to trade or the emergence of other trade restrictions, and their related impacts on macroeconomic conditions and customer behavior; the potential adverse effects of unusual and infrequently occurring events and any governmental or societal responses thereto; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; the impact on financial markets from geopolitical conflicts such as the wars in Ukraine and the Middle East; inflation, interest rate, market and monetary fluctuations; increases in competitive pressures among financial institutions and businesses offering similar products and services; higher defaults on our loan portfolio than we expect; increased foreclosures and ownership of real property; changes in management’s estimate of the adequacy of the allowance for credit losses; legislative or regulatory changes or changes in accounting principles, policies or guidelines; supervisory actions by regulatory agencies which may limit our ability to pursue certain growth opportunities, including expansion through acquisitions; additional regulatory requirements resulting from our continued growth; management’s estimates and projections of interest rates and interest rate policy; the execution of our business plan; and other factors affecting the financial services industry generally or the banking industry in particular.

Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements, whether written or oral, that may be made from time to time, set forth in this press release to reflect new information, future events or otherwise, except to the extent required by federal securities laws. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur, and you should not put undue reliance on any forward-looking statements.

About Western Alliance Bancorporation

With more than $80 billion in assets, Western Alliance Bancorporation (NYSE:WAL) is one of the country’s top-performing banking companies. Through its primary subsidiary, Western Alliance Bank, Member FDIC, clients benefit from a full spectrum of tailored commercial banking solutions and consumer products, all delivered with outstanding service by industry experts who put customers first. Major accolades include being ranked as a top U.S. bank in 2024 by American Banker and Bank Director and receiving #1 rankings on Extel’s (formerly Institutional Investor’s) All-America Executive Team Midcap Banks 2024 for Best CEO, Best CFO and Best Company Board of Directors. Serving clients across the country wherever business happens, Western Alliance Bank operates individual, full-service banking and financial brands with offices in key markets nationwide. For more information, visit westernalliancebank.com.