WESTERN ALLIANCE BANCORPORATIONWAL
WESTERN ALLIANCE BANCORPORATION Income Taxes Disclosure
17. INCOME TAXES
Beginning with the annual period ending December 31, 2025, the Company adopted the guidance within ASU 2023-09, Income Taxes (Topic 740), which expanded disclosure requirements to increase visibility into various income tax components that affect the reconciliation of the effective tax rate to the statutory rate, as well as the qualitative and quantitative aspects of those components. This guidance was adopted on a prospective basis effective as of and for the year ended December 31, 2025, therefore, disclosures from prior periods remain unchanged.
The Company’s income before provision for income taxes was generated from its operations within the United States. The below table disaggregates current and deferred income tax expense for the year ended December 31, 2025 by federal and state and local jurisdictions:
| (in millions) | ||||||||
| Current tax expense | ||||||||
| Federal | $ | 322.2 | ||||||
| State and local | 25.5 | |||||||
| Total current tax expense | 347.7 | |||||||
| Deferred tax benefit | ||||||||
| Federal | (126.6) | |||||||
| State and local | (4.5) | |||||||
| Total deferred tax benefit | (131.1) | |||||||
| Income tax expense | ||||||||
| Federal | 195.6 | |||||||
| State and local | 21.0 | |||||||
| Total income tax expense | $ | 216.6 | ||||||
The provision for income tax expense consisted of the following components for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Current | $ | 191.1 | $ | 236.1 | ||||||||||
| Deferred | 12.4 | (24.9) | ||||||||||||
| Total income tax expense | $ | 203.5 | $ | 211.2 | ||||||||||
The following tables present a reconciliation between the statutory federal income tax rate and the Company’s effective tax rate:
| Year Ended December 31, 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
| (in millions) | ||||||||||||||
| Income tax at statutory rate | $ | 253.5 | 21.0 | % | ||||||||||
| Increase (decrease) resulting from: | ||||||||||||||
| State income taxes, net of federal benefits (1) | 16.2 | 1.3 | ||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | ||||||||||||
| Tax credits | ||||||||||||||
| Investment tax credits | (37.4) | (3.1) | ||||||||||||
| Other | (3.2) | (0.3) | ||||||||||||
| Change in valuation allowances | — | — | ||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||
| Nondeductible insurance premiums | 25.2 | 2.1 | ||||||||||||
| Tax exempt income | (31.6) | (2.6) | ||||||||||||
| Other | (6.6) | (0.5) | ||||||||||||
| Changes in unrecognized tax benefits | 0.6 | 0.0 | ||||||||||||
| Other adjustments | (0.1) | 0.0 | ||||||||||||
| Total income tax expense | $ | 216.6 | 17.9 | % | ||||||||||
(1)State and local taxes in California, New York State, New York City, and Arizona made up the majority (approximately 64 percent) of the tax effect in this category.
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Income tax at statutory rate | $ | 208.2 | $ | 196.1 | ||||||||||
| Increase (decrease) resulting from: | ||||||||||||||
| Non-deductible insurance premiums | 31.1 | 24.1 | ||||||||||||
| State income taxes, net of federal benefits | 18.3 | 35.0 | ||||||||||||
| Tax-exempt income | (31.3) | (28.3) | ||||||||||||
| Investment tax credits | (19.7) | (13.2) | ||||||||||||
| Other, net | (3.1) | (2.5) | ||||||||||||
| Total income tax expense | $ | 203.5 | $ | 211.2 | ||||||||||
| Effective tax rate | 20.5 | % | 22.6 | % | ||||||||||
The decrease in the effective tax rate for the year ended December 31, 2025 compared to the same period in 2024 was primarily attributable to higher investment tax credit benefits and a reduction in nondeductible insurance premium expenses. The decrease in the effective tax rate for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to higher investment tax credit benefits and tax-exempt income.
The following table presents income taxes paid (net of refunds received) during the year ended December 31, 2025 by jurisdiction:
| (in millions) | ||||||||
| U.S. Federal | $ | 19.4 | ||||||
| U.S. state and local | ||||||||
| California | 7.2 | |||||||
| New York City | 3.6 | |||||||
| New York State | 3.4 | |||||||
| New Jersey | (3.7) | |||||||
| Other (1) | 1.8 | |||||||
| Total income taxes paid | $ | 31.7 | ||||||
(1) The amount of income taxes paid (net of refund received) during the tax year either does not meet the 5% disaggregation threshold or is immaterial.
The cumulative tax effects of the temporary differences are shown in the following table:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Allowance for credit losses | $ | 141 | $ | 109 | ||||||||||
| Unrealized loss on AFS securities | 108 | 175 | ||||||||||||
| Tax credit carryovers | 91 | — | ||||||||||||
| Lease liability | 41 | 41 | ||||||||||||
| Accrued expenses | 41 | — | ||||||||||||
| Research and experimentation costs | 35 | 41 | ||||||||||||
| Net operating loss carryovers | 23 | 17 | ||||||||||||
| FDIC special assessment | — | 13 | ||||||||||||
| Other | 56 | 52 | ||||||||||||
| Total gross deferred tax assets | 536 | 448 | ||||||||||||
| Deferred tax asset valuation allowance | — | — | ||||||||||||
| Total deferred tax assets | 536 | 448 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Mortgage servicing rights | (53) | (31) | ||||||||||||
| Right of use asset | (34) | (33) | ||||||||||||
| Premises and equipment | (24) | (30) | ||||||||||||
| Unearned premiums | (20) | (15) | ||||||||||||
| Deferred loan costs | (16) | (12) | ||||||||||||
| Goodwill | (13) | (13) | ||||||||||||
| Leasing basis differences | (7) | (9) | ||||||||||||
| Other | (20) | (24) | ||||||||||||
| Total deferred tax liabilities | (187) | (167) | ||||||||||||
| Deferred tax assets, net | $ | 349 | $ | 281 | ||||||||||
At December 31, 2025, the net DTA balance totaled $349 million, an increase of $68 million from $281 million at December 31, 2024. This overall increase in the net DTA was primarily the result of increases in credit carryovers, the allowance for credit losses, and accrued bonuses that were not fully offset by the increases in the fair market value of AFS securities and the MSR DTL. Although realization is not assured, the Company believes realization of the recognized net DTA of $349 million at December 31, 2025 is more-likely-than-not based on expectations regarding future taxable income and based on available tax planning strategies that could be implemented if necessary to prevent a carryover from expiring.
The Company had no deferred tax valuation allowance as of December 31, 2025 and 2024.
As of December 31, 2025, the Company’s gross federal NOL carryovers, all of which are subject to limitations under Section 382 of the IRC, totaled $34 million, for which a DTA of $3 million has been recorded, which reflects the expected benefit of these federal NOL carryovers after application of the Section 382 limitation. The Company also generated a total of $517 million of gross NOLs in the states of Alabama, Arizona, Florida, Georgia, Maryland, Nebraska, North Carolina, and Tennessee as of December 31, 2025, for which a DTA of $20 million has been recorded. The Company files income tax returns in the U.S. federal jurisdiction and in various states. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years before 2021.
When tax returns are filed, it is highly certain most positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would ultimately be sustained. The benefit of a tax position is recognized in the Consolidated Financial Statements in the period in which, based on all available evidence, management believes it is more-likely-than-not the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits on the accompanying Consolidated Balance Sheet along with any associated interest and penalties payable to the taxing authorities upon examination.
The total gross activity of unrecognized tax benefits related to the Company's uncertain tax positions are shown in the following table:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Beginning balance | $ | 7.7 | $ | 7.9 | |||||||
| Gross increases | |||||||||||
| Tax positions in prior periods | — | — | |||||||||
| Current period tax positions | 0.8 | 0.3 | |||||||||
| Gross decreases | |||||||||||
| Tax positions in prior periods | (0.1) | (0.5) | |||||||||
| Ending balance | $ | 8.4 | $ | 7.7 | |||||||
During the year ended December 31, 2025, the Company added a new position, which resulted in a tax detriment of $0.8 million. In addition, $0.1 million related to prior period tax positions were reversed due to adjustments made to prior periods.
At December 31, 2025 and 2024, unrecognized tax benefits, net of associated deferred tax benefits, totaled $7.2 million and $6.6 million, respectively, that, if recognized, would favorably impact the effective tax rate.
During the years ended December 31, 2025, 2024, and 2023, no amounts were recognized for interest and penalties as it relates to uncertain tax positions and as of December 31, 2025 and 2024, there was no accrual for penalties and interest.
LIHTC and renewable energy projects
The Company holds ownership interests in limited partnerships and limited liability companies that invest in affordable housing and renewable energy projects. These investments are designed to generate a return primarily through the realization of federal tax credits and deductions.
Investments in LIHTC and renewable energy totaled $593 million and $606 million as of December 31, 2025 and 2024, respectively. Unfunded LIHTC and renewable energy obligations are included in Other liabilities on the Consolidated Balance Sheet and totaled $329 million and $320 million as of December 31, 2025 and 2024, respectively.
The Company recognized $89.5 million, $77.6 million, and $64.1 million of tax credits related to LIHTC investments for the years ended December 31, 2025, 2024, and 2023, respectively. For the years ended December 31, 2025, 2024, and 2023, $76.4 million, $75.2 million, and $64.3 million of amortization related to LIHTC investments was recognized as a component of income tax expense, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 16, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.