What happened

Shares of Western Alliance Bancorp (WAL 0.08%) traded nearly 11% lower as of 10:04 a.m. ET today after the bank provided an update on its financials for the first quarter earlier Wednesday morning.

So what

Western Alliance is a bank that the market has been watching closely because it had exposure to the tech and venture-capital communities and formerly had a lot of uninsured deposits.

In its update this morning, the bank said that total insured deposits now equaled roughly 68% of total deposits. The bank also noted that it has enough liquidity to cover 140% of uninsured deposits and that its capital ratios are pretty consistent with where they were at the end of 2022.

Furthermore, Western Alliance noted that unrealized losses in its bond and loan portfolios have come down in the first quarter, which makes sense because bond yields fell in the first quarter due to elevated fears over a recession.

"Western Alliance's uniquely flexible, diversified business model positioned us to weather the liquidity tightness that enveloped the industry over the past month," CEO Kenneth A. Vecchione said.

Now what

On its face, this update looks good, and there are certainly positive aspects to it. But I think what's worrying investors is actually the rise in insured deposits to 68%. On Western Alliance's last update in mid-March, only 55% of deposits were insured.

While it's better to have more insured deposits, the number could be rising because uninsured deposits are funneling out of the bank. Analysts from Wedbush called the update "mixed" in a note today and said deposits might have fallen more than they expected in the fist quarter.

"Investors are likely to come to the conclusion that management didn't provide a deposit balance because it's not good news," Jefferies analyst Casey Haire wrote in a research note.

Western Alliance had been my preferred choice out of the three banks that have seen some of the most intense selling pressure since the banking crisis started (First Republic and PacWest are the other two). But that had largely been on the grounds that its deposit levels would hold up better.

Now, I am less certain until I know where the bank stands with deposits. I wouldn't recommend anything more than a small speculative position until there is more clarity from the earnings report on April 19.