Heat oven to 350 degrees F. Coat a 13 x 9 x 2-inch baking dish with nonstick cooking spray. Place half the bread into prepared dish. Top with bananas and 1/2 cup walnuts, then remaining half of bread pieces.
In a large bowl, whisk eggs. Gradually add light brown sugar until combined. Whisk in half-and-half, butter, vanilla, cinnamon and nutmeg. Pour over bread; press bread down gently to absorb liquid. Cover dish with plastic wrap and refrigerate 1 hour.
Heat oven to 350 degrees F. Remove dish from refrigerator and sprinkle evenly with remaining 1/4 cup walnuts and granulated sugar. Bake at 350 degrees F for 1 hour or until top is browned. Let cool 15 minutes. Drizzle each serving with butterscotch sauce, if desired.