Loan Review Confirms Stability At Western Alliance

Western Alliance reviewed all large loans and found no additional irregularities after recent high-profile defaults.
The bank reverified loans over $10M and will now examine smaller ones in its $2B note finance book.
It confirmed lien positions on loans tied to Cantor Group, which it sued for fraud, and holds $25M in insurance coverage.
Western Alliance has $168M in exposure to First Brands Group, but says the loans are well-backed by receivables from major retailers.

Key Takeaways

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Western Alliance Bancorp says it has wrapped up a key review of its loan portfolio and found no further problems, per Bloomberg. The Phoenix-based lender had faced scrutiny after ties to the collapse of First Brands Group and a fraud case involving Cantor Group.

CEO Kenneth Vecchione told analysts the bank reviewed every loan above $10M in its $2B note finance portfolio. The review didn’t uncover any new issues.

“We feel comfortable with our asset quality,” Vecchione said. “We think it remains stable from here.”

The bank now plans to assess smaller loans but does not expect any surprises. The review aimed to ease investor concerns after several high-risk borrowers triggered volatility across regional banks.

Tackling the Cantor Case

Western Alliance had $98M in financing tied to Cantor Group, a Southern California investment firm. The bank filed a lawsuit in August, accusing Cantor of creating fake title policies that gave other lenders priority claims.

Zions Bancorp, which also loaned money to Cantor, wrote down its exposure. Western Alliance did not. Vecchione said his bank confirmed it still holds senior lien positions and believes its loans remain well-secured.

He also noted that Western Alliance holds $25M in mortgage fraud insurance, which could offset any future losses.

“While incredibly frustrating, we believe this is a one-off issue in our note finance business,” Vecchione said.

First Brands Exposure Backed by Receivables

The bank also has $168M in exposure to First Brands Group, which filed for bankruptcy. The loans are part of a leveraged facility tied to a Jefferies Financial Group fund.

Vecchione said the loan-to-value ratio is under 20%, and the debt is backed by $890M in receivables from major retailers like Walmart, AutoZone, and O’Reilly Auto Parts.

“Jefferies remains confident, and so do we,” he added.

Why It Matters

Recent collapses and fraud cases have rattled confidence in regional banks. Many lenders saw billions wiped from their market value last week.

Western Alliance hopes its clean review and solid collateral positions will calm investors. Its stock rose more than 4% after the earnings call.

What’s Next

The bank plans to finish its review of smaller loans and has tightened oversight procedures to prevent future issues. Despite ongoing risks in commercial real estate and leveraged lending, Western Alliance aims to position itself as a stable player among regional banks.