Good day, everyone. Welcome to Western Alliance Bancorporation's update call. You may also view the presentation today via webcast through the company's website at www.westernalliancebancorporation.com. I would now like to turn the call over to Miles Pondelik, Director of Investor Relations and Corporate Development. Please go ahead. Thank you for joining us today. Our speaker today is Ken Vecchione, President and Chief Executive Officer. Before I hand the call over to Ken, please note that today's discussion may include forward-looking statements, which are subject to risks, uncertainties, and assumptions. Except as required by law, the company does not undertake any obligation to updating forward-looking statements. For more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please refer to the company's SEC filings, including the Form 8-K file this morning, which are available on the company's website. I'd like to now turn the call over to Ken Vecchione. Good morning. I regret that it has become necessary to convene this call. Integrity, honesty, consistency, dependability, and adherence to contractual obligations are not aspirational values at Western Alliance Bank. They are foundational requirements, and Jefferies has breached these requirements. As you're aware, Western Alliance Bank extended a loan to a Point Bonita Capital fund managed by Leucadia Asset Management, which is a subsidiary of Jefferies. A forbearance agreement associated with the loan was entered into in October 2025. Up until last week, this loan had performed as expected. In fact, it was paying down at an accelerated pace. Since August 2025, it has been reduced from $337 million to $126 million, which is currently outstanding. Last week, however, Jefferies informed us that it directed Leucadia Asset Management to cease making payments on this remaining balance. As a result of this non-payment, Western Alliance will be required to charge off the full remaining balance in the quarter and reestablish a corresponding provision. Thanks to our strong capital position and growth prospects, the bank can absorb this loss with minimal disruption. In a moment, I will outline how we intend to offset most of this impact through actions already taken, including realized and expected securities gains and expense reductions throughout the year. This action by Jefferies was unforeseen and represents a highly unusual breach of contract by counterparties with the capacity to perform. I will state plainly, in my entire banking career, I have never witnessed a breach of contract that so deliberately places the reputation and operating integrity of a counterparty at risk, forcing future banks, clients, and counterparties to seriously reevaluate the dependability of that organization's commitments. This morning, Western Alliance filed a formal complaint in New York Supreme Court to hold Jefferies, Leucadia Asset Management, and PointBenita accountable for their obligations to the bank. We believe we will prevail on multiple claims and recover all damages caused by this breach. As detailed in the complaint, our confidence is supported by the representations made by Jefferies, Leucadia Asset Management, and Point Bonita Capital, both publicly and privately. Let me provide some additional color. At origination, the loan we made was secured by receivables at Leucadia Asset Management's LAM Trade Finance Group or LAM TFG purchased from First Brand, and for which LAM TFG provided representations and warranties and had servicing obligations. In September of 2025, the bank learned LAM TFG allowed the UCC filings on the receivables to lapse. Western Alliance quickly protected its right to full repayment by entering into a forbearance agreement, pursuant to which LAM TFG acknowledged breaches of representations and warranties, admitted to failing to file required UCC statements and agreed to an accelerated payment schedule regardless of the collection of First Brand's receivables. I think that's important. Regardless of the collection of First Brand's receivables. That structure appropriately prioritized debt repayment ahead of equity, consistent with the applicable waterfall provisions. The forbearance agreement required five payments. First payment of $84.5 million was made on October 3, 2025. Second payment of $84.25 million made on October 17, 2025, four days before the Q3 earnings call. Third payment of $42.125 million made on January 15, 2026, ahead of the Q4 earnings release. The fourth payment of $42.125 million scheduled for February 27th, and the final payment of $84.25 million scheduled for March 31st, obviously are not gonna be made. Western Alliance entered into this agreement based on our working history and explicit assurances from Jefferies and Leucadia Asset Management that all Point Bonita debt would be repaid in full. We possess correspondence edited by Leucadia Asset Management and reviewed by Jefferies legal counsel, stating that Point Bonita had the ability to pay off all of its debts to the bank. They further acknowledged that LAM Trade Finance Group was performing as agreed and that Point Bonita generates sufficient cash flow to amortize the loan. Based on the facts, we made claims including fraud. Excuse me. Based on the facts, we have made claims including fraud, breach of fiduciary duty, and fraudulent conveyance. We also assert the court must pierce the corporate veil to hold Jefferies, LAM and Point Bonita directly responsible. I encourage stakeholders to review the filed complaint to understand Western Alliance's position. Litigation was not our preferred path. I personally met with Richard Handler, Jefferies' CEO, this past Sunday to emphasize that collaboration was preferable, yet litigation is the path that Jefferies left us with and the path we must pursue to serve our stakeholders' interests. I will conclude by saying the obligation to pay is absolute, and we will be aggressive in pursuing that payment and all related fees, expenses, and damages on behalf of our shareholders. The forbearance agreement supersedes reliance on collection of First Brands receivables as the only source of repayment. Issues related to Jefferies' First Brand exposure are not Western Alliance's responsibility. We will seek to claw back payments made to limited partners and fees earned by Jefferies. Turning to the financial impact, which is well managed. The $126 million charge-off and provision will be substantially offset through three actions. First, approximately $50 million of gains from security sales, $45 million of which have already been realized, with the remaining $5 million expected by the end of March. Second, approximately $50 million from expense initiatives throughout the year that do not impair growth or operational capacity. The remaining $26 million is under active review with multiple migration pathways that will be discussed on our first quarter earnings call. Following these actions, we expect to maintain an approximate 11% CET1 ratio. As a management team, we always plan for excess earnings capacity to absorb unexpected events. In summary, we are deeply disappointed by Jefferies' conduct. While the $126 million charge-off is manageable, it is unwelcome. After this call, management will return to remaining fully focused on growing Western Alliance in a safe, sound, and disciplined manner. Joining me today are Vishal, Dale, Tim Bruckner, and our General Counsel, Jess Jarvis. We will now take a few questions, noting that our responses will be appropriately limited given the litigation filed today and only focus on this event. This call is not intended to provide a mid-quarter financial update. Operator, let's proceed with the questions. One clarifying comment. With respect to the complaint that was filed, it includes fraud and breach of contract. We're exploring other claims and may amend the complaint in the future. Thank you, Jess. Thank you. We will now take our first question, which comes from Christopher McGratty at KBW. Chris, please go ahead. Good morning. Ken, I want to focus on the mitigation efforts. You outlined basically the P&L impact is largely contained. Can you just unpack the expense, the expense impact? Like, I guess had expense, you know, rationalization been considered prior to this? I guess, can you elaborate on what exactly is being pulled here? Then two, on the bond sales, like obviously that would have an impact on future NII. Just what are you harvesting in the bond book? I think those are fair questions, Chris. Good morning to you. As I said, we really look at remediating the $126 million charge-off in terms of the earning impact in three buckets. The first were the security gains and $45 million of the $50 million has been realized, and we'll take care of the other $5 million between now and the end of the quarter. The second, we expect to reduce the corporation's expense run rate through operational efficiencies, moderating LFI readiness, slowing the rollout of future expansion projects, and optimizing technology and vendor programs. None of these programs are designed to impact projected full-year balance sheet targets. Okay? Lastly, the third item, which is the remaining $26 million, this should be accomplished either through growth, pricing initiatives, future stock repurchases, and other fee and expense programs. We'll have more to report on the remaining $26 million by Q3. To kind of look at that $26 million for a moment, the $26 million shortfall equates to just one week's worth of 2025's PPNR. We're working on that now. To be honest with you, the programs are in front of me. Given all the things we're working on, I just haven't had time with the rest of the team to tie it out and absolutely confirm that $26 million. You know, I have a high degree of confidence that we're going to get to that $26 million. Chris, really, it's what we do best, which is we optimize tangible book value at this company. We had a few programs that were nice to do if we had the opportunity to do them, and we put them into our numbers this year. We can move them towards the back end of the year or into 2027 without impacting our balance sheet, growth guide that we gave you, just a couple of weeks ago. Thank you. The next question comes from Janet Lee with TD Cowen. Janet, please go ahead. Good morning. Good morning. -share, are you able to provide some context around, based on your conversations, what has changed or triggered Point Bonita or Jefferies to not pay after a series of payments they've obviously been making? Just wanted to get the better context around the situation. Yeah, I can't. First, good morning. I can't tell you what's behind Jefferies' motive. I can just tell you that we were a week out from receiving our next payment. We received a call from their general counsel to our management team saying they just weren't gonna make payment. I'm not gonna speculate as to what's going on at Jefferies as to why they couldn't make payment. As I said, they were making payments. Those payments were bringing down the loan in an accelerated fashion. We relied on their private and public conversations we've had with them. We were very surprised that they decided to pull back. To me, it's quite shocking. Thank you. The next question comes from Jared Shaw with Barclays Capital. Jared, please go ahead. Hey, good morning. Thanks for the question. I guess just going back to the, to the $50 million of savings, and, you know, calling out some of the, you know, impact to future growth. Is there an impact there to, you know, some of the initiatives that Dale is working on the digital deposit front? No. Dale, do you wanna add anything to that or? No, sure. Yeah. I perceive our opportunities as strong as they've ever been. We are moving headlong into several initiatives that we haven't really given color on at this point in time that I think are gonna move the needle for the company. I look forward to it. Let me just go back to the first question that came from Chris McGratty. I don't think I fully answered it. It just dawned on me now. The last part of Chris McGratty's question is, how will you make up the shortfall in interest income from the sale of these securities? I should have said that we sold some of these securities and generated gains when spreads were tighter. I actually think the backup in spreads are gonna help us mitigate some of the shortfall in interest income. We'll either make up that shortfall in interest income the same way as we're looking to close the gap on the $26 million, which is either through fee income initiatives or programs and incremental expense reduction programs as well. Quite possibly, you know, we'll push to see if we can bring up our average earning assets as deposits flow into the bank. If that could happen, then we'll be able to put that money to work. That was the last part, to Chris's question that I'm sorry I missed. Thank you. The next question comes from David Smith with Truist Securities. David, please go ahead. Hi. Good morning. Good morning. Could you give us, I guess some more detail about how, you know, if you expect to prevail in court, why you still needed to take the charge just for accounting purposes? I know you had a, an issue last fall where, you know, you didn't charge off the full loan because of expected. You know, you expected to prevail as you went through the legal process. Any color you can provide there? I'll give you my best legal answer, my general counsel will stop me if I'm going down the wrong path. In this particular case, we had a counterparty that absolutely said they weren't gonna pay. All right? We have collateral behind their commitment to pay, which is the First Brand's receivables that do not have value. We thought it's appropriate to take this charge now. Anything that we will recover will come down, will come down the road from today. It will be some time as this claim runs through the court system. Versus the other transaction, we have tangible property that had appraisals, we could view those properties. We have appraisals. By the way, we are having them reappraised as we talk right now, and that's what gave us the confidence level to put a reserve on that rather than take a charge off. Thank you. The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead. Hey, good morning, Ken. Two questions. I guess we're just taking one at a time. One, just remind us what's the total exposure of Western Alliance to similar type of loans to funds and where loans might have been backed by accounts receivable? Understand the situation here, I'm just wondering what is the total exposure if you don't see good faith reciprocation in events where there's a credit issue, number one? Second, why the expense mitigation action? Means we've seen a lot of one-off credit issues over the years. I'm just wondering why is that leading to a knee-jerk reaction on how you invest longer term for the business? Thank you. Okay. Yeah, great. The first answer is we have about $450 million, of which $126 million was from Lamb Fund one in terms of ABL. We really won't have much after this. $330 million ish will be all that will be in our asset-based lending book after this write-down. The second is, you know, we're able to do several things here. I don't think any of the expense programs that we're putting into place is going to impair our future growth ambition and take away from the trajectory of where this company is going through in 2026 and in 2027. We were looking to do these programs, some of these programs anyway in terms of getting continuously to bring down our efficiency ratio. This just accelerated it. Again, you know, Western Alliance has had a history of being a very strong, tangible book value growing organic bank, and we want to keep that same reputation in the market. We felt that shareholders would be better served by taking out expenses that were not needed. Thank you. The next question comes from Casey Haire with Jefferies. Casey, please go ahead. Yeah, great. Thanks. Good morning, guys. Two-parter. One, apologies if I missed this, but the charge-off guide for 26 ex this credit, any updated thoughts there? Two, how do we think about reserve going forward? I know this is an isolated incident, but it did, you know, it represents 25% of the, of the reserve. You guys have been talking about building it a little bit stronger going forward. Just wondering any learnings from this or that would impact reserve going forward? Thank you. Okay. yeah, Case. The way I look at it, well, I'm going to break your question down into a couple of components. First, the credit outlook for the year can be divided into three key categories. First, consistent with our last earnings call, the bank continues to expect net charge-offs to land in the high end of the 25-35 basis point guidance for the first half of the year. This trajectory should position us to reduce non-performing loans and bring that balance below funded ACL by the end of the second quarter. That is consistent with what we said previously. Second, of course, this charge-off is $126 million, and we've talked about it. Third is regarding the Cantor Fund Five fraud. We've now received nearly two-thirds of the property appraisals and expect the remainder by the end of the quarter. As of today, I could tell you the reserve established when we first reported that fraud still appears appropriate. We will revisit both the reserve and any related charge-offs based on the remaining appraisals and foreclosure strategy during the third quarter call. I also will remind people that we have a $25 million fraud insurance policy against that reserve. We took a reserve for $30 million, if you recall. We have a $25 million fraud insurance policy with a $5 million deductible against any future charge-offs. Vishal, you want to say anything about the loan loss reserve? Yeah, sure. Happy to. I think on this one, right, the $126 million charge-off, we're going to reprovision for that. That'll keep the allowance and replace that. Going forward, I just repeat the comments we made, you know, on the earnings call, which is we can expect the reserve to continue to trend up. I think the guidance we gave is, you know, in the near term, we're going to try to move that to the low 80s. That's still where we're thinking. Thank you. Our final question today comes from Anthony Elian with JPMorgan. Please go ahead. Hi, everyone. Ken, on the $50 million expense savings, is this something you could recognize in 2Q or is this a second half event? Following up on EB's question, how will you guys ensure that the $50 million expense savings actually don't impede your balance sheet growth for this year? Right? If I just think about companies that introduce expense savings or operational efficiency programs, they're not usually the ones that are leading the industry on growth like you guys. Thank you. Yeah. The $50 million expense savings, they'll build through the course of the year. We probably have about $5 million coming in Q1, then they build up from the end of Q1 going forward. Part of what we're saving here is, I'll tell you, is the LFI readiness program. You know, there's been a lot of indication that that readiness, that threshold is going to be a much higher number. We're pushing out some of those program development, which I'll say is just further enhancements to what we already have into 2027. That won't impede our growth at all. Then, you know, what we do here is, you know, when we think about growth, we think about growth in 3 horizons. It starts in horizon three, which is interesting things, interesting businesses that we like, that we review. We try to develop a viewpoint on, and then if we like one of those businesses, we then move it into horizon two, which is, you know, take 12 to 18 or plus months to build and develop and test it, and then we move it into horizon one, which is beta testing for 12 months and roll out before we go live. That process is still intact, okay? I don't think these expense reductions are going to impact the way we continue to roll out our growth. One of the things that you'll hear, when we get to Investor Day, maybe this is just a little bit of a prelude, what makes Western Alliance so special and the way we are able to grow is that we have a number of specialty related businesses that have these S-curve growth aspects to them. Our S-curves are these businesses are built on one S-curve on top of the other. The good news is, the businesses that we've rolled out, none of them are beginning to flatten out. Even businesses that we began 14 years ago, like our homeowners association, still has a very strong S-curve attached to it in terms of growth. We have a lot of growth in the existing businesses that we've rolled out and the businesses that we may have slightly delayed and moved into 2027 will not impact our future growth because of the growth that we have coming from all the prior businesses that we have rolled out to the marketplace. Thank you for your question. Thank you. Those are all the questions we have time for today, and so I'll turn the call back over to Ken Vecchione for closing remarks. I'll just end by saying, highly disappointed in the actions of Jefferies. We thought it was very important to be as transparent as we always are and as clear and concise as to what we're gonna do about this loss. I hope that today's 8-K demonstrates that. I hope this call demonstrates that. For our shareholders listening, they should know that after this call, it's back to business as usual. This loss has been contained. We'll see what happens through the court system, but we're back to growth as we normally know it here, and we're gonna be focused on that. I look forward to talking to you in Q1 with a further update. Thank you all for attending the call today. Thank you everyone for joining us today. Goodbye. This concludes our call, and you may now disconnect your lines.