Western Alliance sees non-cash impairment 1Q charge $126.4M

Western Alliance sees non-cash impairment 1Q charge $126.4M

Western Alliance Bancorporation (NYSE: WAL) reported a non-cash impairment charge of $92.2 million in the first quarter of 2023, primarily due to balance sheet repositioning efforts, including the reclassification of $6 billion in held-for-investment (HFI) loans to held-for-sale (HFS) and targeted asset sales according to financial reports. The charge, recognized after-tax, was part of strategic actions to strengthen liquidity and regulatory capital while prioritizing core client relationships. Despite this, the bank achieved net income of $142 million and earnings per share (EPS) of $1.28 for the quarter.

The reclassification of HFI loans included a 2% fair value adjustment, which was immediately accretive to regulatory capital as the loans are liquidated. These actions, combined with $920 million in loan sales executed by quarter-end and $3 billion in contracted sales, contributed to a 6 basis point increase in the bank's common equity tier 1 (CET1) ratio to 9.38%. Management emphasized that the remaining $3 billion of HFS loans would further boost CET1, with a target of exceeding 10% by June 30, 2023.

Deposit outflows of $6 billion in March, driven by market volatility and client concerns post-SVB's collapse, stabilized by late April, with deposits recovering to $49.6 billion by April 14. The bank also increased insured deposits to 73% of total deposits, positioning itself in the top decile among U.S. banks.

Western Alliance's first-quarter results reflect its focus on capital preservation, liquidity enhancement, and aligning with a deposit-led growth strategy amid a challenging macroeconomic environment.