Western Alliance Bancorporation Reports Third Quarter 2025 Financial Results

Western Alliance Bancorporation (NYSE:WAL):

Income Statement

Net interest income totaled $750.4 million in the third quarter 2025, an increase of $52.8 million, or 7.6%, from $697.6 million in the second quarter 2025, and an increase of $53.5 million, or 7.7%, compared to the third quarter 2024. The increase in net interest income from the second quarter 2025 was primarily due to higher average interest earning asset balances, partially offset by an increase in average deposit balances. The increase in net interest income from the third quarter 2024 was driven by 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 $80.0 million in the third quarter 2025, an increase of $40.1 million from $39.9 million in the second quarter 2025, and an increase of $46.4 million from $33.6 million in the third quarter 2024. The provision for credit losses during the third quarter 2025 was primarily reflective of net charge-offs of $31.1 million, establishment of an approximate $30 million reserve related to the Cantor Group V loan, and qualitative overlays.

The Company's net interest margin was 3.53% in the third quarter 2025, flat from the second quarter 2025, and a decrease from 3.61% in the third quarter 2024. Net interest margin was flat from the second quarter 2025 due to higher yields on HFI loans and lower rates on debt, offset by lower yields on investment securities. The decrease in net interest margin from the third quarter 2024 was primarily driven by the impact of a lower rate environment on interest earning asset yields, partially offset by lower rates on interest bearing liabilities.

Non-interest income was $187.8 million for the third quarter 2025, compared to $148.3 million for the second quarter 2025, and $126.2 million for the third quarter 2024. The increase in non-interest income of $39.5 million from the second quarter 2025 was primarily due to increases in net gain on mortgage loan origination and sale activities of $36.1 million, fair value gain adjustments of $8.2 million, and other non-interest income of $13.1 million, primarily driven by an increase in rental income from OREO properties. These increases were partially offset by a decrease in net loan servicing revenue of $19.2 million. The increase in non-interest income of $61.6 million from the third quarter 2024 was primarily driven by increases in net gain on mortgage loan origination and sale activities and other non-interest income, primarily due to an increase in rental income from OREO properties.

Net revenue totaled $938.2 million for the third quarter 2025, an increase of $92.3 million, or 10.9%, compared to $845.9 million for the second quarter 2025, and an increase of $115.1 million, or 14.0%, compared to $823.1 million for the third quarter 2024.

Non-interest expense was $544.4 million for the third quarter 2025, compared to $514.7 million for the second quarter 2025, and $537.4 million for the third quarter 2024. The increase in non-interest expense of $29.7 million from the second quarter 2025 was primarily due to an increase of $27.7 million in deposit costs driven by higher average ECR-related deposit balances and $13.6 million in salaries and employee benefits, partially offset by a decrease of $12.9 million in insurance costs. The increase in non-interest expense of $7.0 million from the third quarter 2024 was primarily attributable to increased salaries and employee benefits of $35.7 million, data processing costs of $9.4 million, and other non-interest expense of $9.6 million, primarily related to increased costs from operating OREO properties. These increases were partially offset by decreased deposit costs of $32.9 million driven by lower interest rates and insurance costs of $10.9 million. The Company's efficiency ratio, adjusted for deposit costs¹, was 47.8% for the third quarter 2025, compared to 51.8% in the second quarter 2025, and 52.7% for the third quarter 2024.

Income tax expense was $53.3 million for the third quarter 2025, compared to $53.5 million for the second quarter 2025, and $52.3 million for the third quarter 2024.

Net income was $260.5 million for the third quarter 2025, an increase of $22.7 million from $237.8 million for the second quarter 2025, and an increase of $60.7 million from $199.8 million for the third quarter 2024. Earnings per share totaled $2.28 for the third quarter 2025, compared to $2.07 for the second quarter 2025, and $1.80 for the third quarter 2024.

The Company believes its pre-provision net revenue¹ ("PPNR") is a key metric for assessing the Company's earnings power, which it defines as net revenue less non-interest expense. For the third quarter 2025, the Company's PPNR¹ was $393.8 million, up $62.6 million from $331.2 million in the second quarter 2025, and up $108.1 million from $285.7 million in the third quarter 2024.

The Company had 3,701 full-time equivalent employees and 57 offices at September 30, 2025, compared to 3,655 full-time equivalent employees and 56 offices at June 30, 2025, and 3,426 full-time equivalent employees and 56 offices at September 30, 2024.

Balance Sheet

HFI loans, net of deferred fees, totaled $56.6 billion at September 30, 2025, compared to $55.9 billion at June 30, 2025, and $53.3 billion at September 30, 2024. The increase in HFI loans of $707 million from the prior quarter was primarily driven by increases of $814 million, $232 million, and $186 million in commercial and industrial, commercial real estate non-owner occupied, and residential real estate loans, respectively, partially offset by a decrease in construction and land development loans of $461 million. The increase in HFI loans of $3.3 billion from September 30, 2024 was primarily driven by increases of $3.2 billion, $686 million, and $256 million in commercial and industrial, commercial real estate non-owner occupied, and residential real estate loans, respectively, partially offset by decreases of $662 million and $135 million in construction and land development and commercial real estate owner occupied loans, respectively. HFS loans totaled $3.5 billion at September 30, 2025, compared to $3.0 billion at June 30, 2025, and $2.3 billion at September 30, 2024. The increase in HFS loans of $480 million from the prior quarter was primarily driven by increases of $359 million and $69 million in government-insured or guaranteed and agency-conforming mortgage loans, respectively. The increase in HFS loans of $1.2 billion from September 30, 2024 was primarily driven by increases of $914 million and $200 million in government-insured or guaranteed and agency-conforming mortgage loans, respectively.

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 0.78%, 0.71%, and 0.67% at September 30, 2025, June 30, 2025, and September 30, 2024, respectively. The allowance for credit losses, which includes the allowance for unfunded loan commitments, to funded HFI loans ratio was 0.85% at September 30, 2025, 0.78% at June 30, 2025, and 0.74% at September 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 $8.2 billion, $8.4 billion, and $8.8 billion as of September 30, 2025, June 30, 2025, and September 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 September 30, 2025, June 30, 2025, and September 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 1.00% at September 30, 2025, 0.91% at June 30, 2025, and 0.88% at September 30, 2024.

Deposits totaled $77.2 billion at September 30, 2025, an increase of $6.1 billion from $71.1 billion at June 30, 2025, and an increase of $9.2 billion from $68.0 billion at September 30, 2024. By deposit type, the increase from the prior quarter is attributable to increases of $3.6 billion, $2.4 billion, and $748 million from non-interest bearing, savings and money market, and interest-bearing demand deposits, respectively, partially offset by a decrease of $635 million in certificates of deposit. From September 30, 2024, savings and money market, interest-bearing demand, and non-interest bearing deposits increased $5.1 billion, $2.6 billion, and $1.7 billion, respectively. Non-interest bearing deposits were $26.6 billion at September 30, 2025, compared to $23.0 billion at June 30, 2025, and $25.0 billion at September 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 73.3% at September 30, 2025, compared to 78.7% at June 30, 2025, and 78.4% at September 30, 2024.

Borrowings totaled $3.9 billion at September 30, 2025, $6.1 billion at June 30, 2025, and $3.0 billion at September 30, 2024. Borrowings decreased $2.2 billion from June 30, 2025 driven by a decrease in short-term borrowings. Borrowings increased $867 million from September 30, 2024, reflecting a $1.5 billion increase in long-term borrowings, partially offset by a decrease in short-term borrowings of $600 million.

Qualifying debt totaled $681 million at September 30, 2025, compared to $678 million and $898 million at June 30, 2025 and September 30, 2024, respectively. The decrease in qualifying debt from September 30, 2024 was primarily due to the repayment of $225 million of subordinated debt during the quarter ended June 30, 2025.

Total equity was $7.7 billion at September 30, 2025, compared to $7.4 billion at June 30, 2025, and $6.7 billion at September 30, 2024. The increase in total equity from the prior quarter was due primarily to net income of $260.5 million and net AOCI gains of $73 million, partially offset by cash dividends paid during the third quarter ($41.9 million or $0.38 per common share, $3.2 million or $0.27 per depositary share, and $7.1 million on preferred stock of the Company's REIT subsidiary). In addition, under the $300 million share repurchase program announced last month, the Company repurchased 300,833 shares for $25.0 million through October 17, 2025. The increase in equity from September 30, 2024 was primarily driven by net income and the issuance of preferred stock from the Company's REIT subsidiary, partially offset by dividends to stockholders.

The Company's common equity tier 1 capital ratio was 11.3% at September 30, 2025, compared to 11.2% at June 30, 2025 and September 30, 2024. At September 30, 2025, tangible common equity, net of tax¹, was 7.1% of tangible assets¹ and total capital was 14.2% of risk-weighted assets. The Company's tangible book value per share¹ was $58.56 at September 30, 2025, an increase of 4.8% from $55.87 at June 30, 2025, and an increase of 12.7% from $51.98 at September 30, 2024. The increase in tangible book value per share from June 30, 2025 and September 30, 2024 was primarily attributable to net income.

Total assets increased $4.2 billion, or 4.9%, to $91.0 billion at September 30, 2025 from $86.7 billion at June 30, 2025, and increased 13.6% from $80.1 billion at September 30, 2024. The increase in total assets from June 30, 2025 was primarily driven by deposit growth, which contributed to increases in cash and HFI and HFS loans. The increase in total assets from September 30, 2024 was primarily driven by increases in HFI and HFS loans, cash, and investment securities.

Asset Quality

Provision for credit losses totaled $80.0 million for the third quarter 2025, compared to $39.9 million for the second quarter 2025, and $33.6 million for the third quarter 2024. Net loan charge-offs in the third quarter 2025 totaled $31.1 million, or 0.22% of average loans (annualized), compared to $29.6 million, or 0.22%, in the second quarter 2025, and $26.6 million, or 0.20%, in the third quarter 2024.

Nonaccrual loans increased $95 million to $522 million during the quarter, primarily driven by migration of the Cantor Group V loan, and $173 million from September 30, 2024. Loans past due 90 days and still accruing interest totaled $49 million at September 30, 2025, $51 million at June 30, 2025, and $4 million at September 30, 2024 (excluding government guaranteed loans of $282 million, $326 million, and $313 million, respectively). Loans past due 30-89 days and still accruing interest totaled $196 million at September 30, 2025, an increase from $175 million at June 30, 2025, and from $110 million at September 30, 2024 (excluding government guaranteed loans of $149 million, $168 million, and $203 million, respectively). Criticized loans decreased $196 million to $1.3 billion during the quarter and decreased $40 million from September 30, 2024.

Repossessed assets totaled $130 million at September 30, 2025, compared to $218 million at June 30, 2025, and $8 million at September 30, 2024. Classified assets totaled $1.1 billion at September 30, 2025, a decrease of $132 million from $1.3 billion at June 30, 2025, and an increase of $291 million from $838 million at September 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 14.3% at September 30, 2025, compared to 16.4% at June 30, 2025, and 12.2% at September 30, 2024.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its third quarter 2025 financial results at 12:00 p.m. ET on Wednesday, October 22, 2025. Participants may access the call by dialing 1-833-470-1428 and using access code 834092 or via live audio webcast using the website link https://events.q4inc.com/attendee/887299674. 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 October 22nd through 1:00 p.m. ET October 29th by dialing 1-866-813-9403, using access code 978496.

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; any adverse determination by a court regarding the Cantor Group V loan and any adverse economic or other events impacting the collateral, borrower or guarantors with respect to such loan; 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 $90 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.