Western Alliance Bancorporation Reports Third Quarter 2019 Financial Results

Western Alliance Bancorporation (NYSE:WAL):

THIRD QUARTER 2019 FINANCIAL RESULTS

Net income

Earnings per share

 

Net interest margin²

 

Efficiency ratio

 

Book value per
common share

$127.4 million

 

$1.24

 

4.41%

 

43.1%

 

$28.48

CEO COMMENTARY:

“Western Alliance continues to deliver strong shareholder value and produced another record quarter with third quarter results that generated $127.4 million in net income and earnings per share of $1.24, representing an 18% increase in earnings per share from a year ago,” commented Kenneth Vecchione, Chief Executive Officer. “Thoughtful balance sheet growth continues to be at the forefront of our business plan as demonstrated by our third consecutive quarter of deposit growth of more than $1 billion and loan growth of over $900 million during the quarter. Our asset quality remains stable and we closed out the quarter with $0.6 million of net loan recoveries. Our healthy loan origination volume coupled with a reduction in deposit costs overcame a net interest margin compression of 18 basis points to produce net interest income growth of 18.4%, on a linked quarter annualized basis. Our consistent, broad-based results, combined with our commitment to distribute excess capital to shareholders through stock repurchases and dividends, positions the Company to finish the year with solid shareholder results.”

LINKED-QUARTER BASIS	YEAR-OVER-YEAR
FINANCIAL HIGHLIGHTS:
Net income and earnings per share of $127.4 million and $1.24 compared to $122.9 million and $1.19, respectively	Net income of $127.4 million and earnings per share of $1.24, up 14.6% and 18.1%, from $111.1 million and $1.05, respectively
Net operating revenue1 of $282.5 million, an increase of 5.7%, or $15.2 million, compared to an increase in operating non-interest expenses1 of 6.7%, or $7.7 million	Net operating revenue1 of $282.5 million, an increase of 14.4%, or $35.6 million, compared to an increase in operating non-interest expenses1 of 16.7%, or $17.5 million
Operating pre-provision net revenue1 of $159.9 million, up $7.4 million from $152.5 million	Operating pre-provision net revenue1 of $159.9 million, up $18.1 million from $141.9 million
Effective tax rate of 18.30%, compared to 16.76%	Effective tax rate of 18.30%, compared to 6.32%
FINANCIAL POSITION RESULTS:
Total loans of $20.2 billion, up $903 million, or 18.8% annualized	Increase in total loans of $3.4 billion, or 20.4%
Total deposits of $22.4 billion, up $1.0 billion, or 18.7% annualized	Increase in total deposits of $3.5 billion, or 18.7%
Stockholders' equity of $2.9 billion, up $72 million	Increase in stockholders' equity of $435 million
LOANS AND ASSET QUALITY:
Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.25%, compared to 0.27%	Nonperforming assets to total assets of 0.25%, compared to 0.26%
Annualized net loan (recoveries) charge-offs to average loans outstanding of (0.01)% compared to 0.03%	Annualized net loan (recoveries) charge-offs2 to average loans outstanding of (0.01)%, compared to 0.08%
KEY PERFORMANCE METRICS:
Net interest margin of 4.41% compared to 4.59%	Net interest margin2 of 4.41%, compared to 4.68%
Return on average assets and on tangible common equity1 of 1.94% and 19.41%, compared to 2.05% and 19.72%, respectively	Return on average assets2 and on tangible common equity1,2 of 1.94% and 19.41%, compared to 2.05% and 20.40%, respectively
Tangible common equity ratio1 of 10.1%, compared to 10.2%	Tangible common equity ratio1 of 10.1%, compared to 10.0%
Tangible book value per share1, net of tax, of $25.60, an increase of 3.9% from $24.65	Tangible book value per share1, net of tax, of $25.60, an increase of 23.7% from $20.70
Operating efficiency ratio1 of 42.4%, compared to 42.0%	Operating efficiency ratio1 of 42.4%, compared to 41.5%

1	See reconciliation of Non-GAAP Financial Measures.
2	Beginning in Q1 2019, annualized performance metrics are calculated on an actual/actual basis, from a previous 30/360 basis. Prior period amounts have been restated to conform to the current presentation.

Income Statement

Net interest income was $266.4 million in the third quarter 2019, an increase of $11.7 million from $254.7 million in the second quarter 2019, and an increase of $32.4 million, or 13.8%, compared to the third quarter 2018. As acquired loans are recorded at fair value in an acquisition, purchase discounts on these acquired loans are recorded and accreted into interest income based on expected future cash flows over the life of the loans and may be accelerated upon prepayment of acquired loans. Net interest income in the third quarter 2019 includes $2.7 million of total accretion income from acquired loans, compared to $4.6 million in the second quarter 2019, and $3.3 million in the third quarter 2018.

The Company’s net interest margin in the third quarter 2019 was 4.41%, a decrease from 4.59% in the second quarter 2019 and 4.68% in the third quarter 2018.

Operating non-interest income was $16.1 million for the third quarter 2019, compared to $12.6 million for the second quarter 2019, and $12.9 million for the third quarter 2018.¹ The increase in operating non-interest income from the third quarter 2018 primarily relates to an increase in income from warrants.

Net operating revenue was $282.5 million for the third quarter 2019, an increase of $15.2 million, compared to $267.3 million for the second quarter 2019, and an increase of $35.6 million, or 14.4%, compared to $246.9 million for the third quarter 2018.¹

Operating non-interest expense was $122.6 million for the third quarter 2019, compared to $114.8 million for the second quarter 2019, and $105.0 million for the third quarter 2018.¹ The Company’s operating efficiency ratio¹ was 42.4% for the third quarter 2019, compared to 42.0% in the second quarter 2019, and 41.5% for the third quarter 2018.

Income tax expense was $28.5 million for the third quarter 2019, compared to $24.8 million for the second quarter 2019, and $7.5 million for the third quarter 2018. Income tax expense for the third quarter 2018 includes the effect of a carryback election.

Net income was $127.4 million for the third quarter 2019, an increase of $4.4 million from $122.9 million for the second quarter 2019, and an increase of $16.3 million, or 14.6%, from $111.1 million for the third quarter 2018. Earnings per share was $1.24 for the third quarter 2019, compared to $1.19 for the second quarter 2019, and $1.05 for the third quarter 2018.

The Company views its operating pre-provision net revenue ("PPNR") as a key metric for assessing the Company’s earnings power, which it defines as net operating revenue less operating non-interest expense. For the third quarter 2019, the Company’s operating PPNR was $159.9 million, up $7.4 million from $152.5 million in the second quarter 2019, and up $18.1 million from $141.9 million in the third quarter 2018.¹ Non-operating income¹ for the third quarter 2019 consisted of a net gain on sales of investment securities of $3.2 million and net unrealized gains on assets measured at fair value of $0.2 million. Non-operating expense¹ for the third quarter 2019 consisted of a net loss on sales and valuations of repossessed and other assets of $3.4 million.

The Company had 1,814 full-time equivalent employees and 47 offices at September 30, 2019, compared to 1,806 employees and 47 offices at June 30, 2019 and 1,795 employees and 47 offices at September 30, 2018.

1	See reconciliation of Non-GAAP Financial Measures.

Balance Sheet

Gross loans totaled $20.2 billion at September 30, 2019, an increase of $903 million from $19.3 billion at June 30, 2019, and an increase of $3.4 billion from $16.7 billion at September 30, 2018. The increase from the prior quarter was driven by an increase of $346 million in CRE, non-owner occupied loans, $282 million in residential real estate loans, and $275 million in commercial and industrial loans. These increases were partially offset by a decrease of $55 million in construction and land development loans. From September 30, 2018, loans increased across all loan types, with the largest increases in commercial and industrial loans of $1.2 billion, CRE, non-owner occupied loans of $1.1 billion, and residential real estate loans of $1.0 billion. At September 30, 2019, the allowance for credit losses to gross loans held for investment was 0.82%, compared to 0.83% at June 30, 2019, and 0.90% at September 30, 2018. At September 30, 2019, the allowance for credit losses to total organic loans was 0.85%, compared to 0.87% at June 30, 2019, and 0.97% at September 30, 2018. The Company defines its organic loans as those loans that have not been acquired in a transaction accounted for as a business combination.

Consistent with accounting principles generally accepted in the United States ("GAAP"), the allowance for credit losses is not carried over in an acquisition because acquired loans are recorded at fair value, which discounts the loans based on expected future cash flows. Credit discounts on acquired loans are included as a reduction to gross loans. These discounts totaled $7.5 million at September 30, 2019, compared to $10.6 million at June 30, 2019, and $17.2 million at September 30, 2018.

Deposits totaled $22.4 billion at September 30, 2019, an increase of $1.0 billion from $21.4 billion at June 30, 2019, and an increase of $3.5 billion from $18.9 billion at September 30, 2018. The increase from the prior quarter was driven by an increase of $1.2 billion from savings and money market accounts and $78 million in non-interest bearing demand deposits. These increases were offset by a decrease of $221 million from certificates of deposit. From September 30, 2018, deposits increased across all deposit types, with the largest increases in savings and money market accounts of $2.0 billion, non-interest bearing demand deposits of $741 million, interest-bearing demand deposits of $531 million, and certificates of deposit of $261 million. Non-interest bearing deposits were $8.8 billion at September 30, 2019, compared to $8.7 billion at June 30, 2019, and $8.0 billion at September 30, 2018. Non-interest bearing deposits comprised 39.0% of total deposits at September 30, 2019, compared to 40.5% at June 30, 2019, and 42.4% at September 30, 2018. The proportion of savings and money market balances to total deposits was 40.4%, compared to 36.8% at June 30, 2019, and 37.3% at September 30, 2018. Interest-bearing demand deposits as a percentage of total deposits were 11.2% at September 30, 2019, compared to 11.8% at June 30, 2019, and 10.5% at September 30, 2018. Certificates of deposit as a percentage of total deposits were 9.4% at September 30, 2019, compared to 10.9% at June 30, 2019, and 9.8% at September 30, 2018. The Company’s ratio of loans to deposits was 89.8% at September 30, 2019, compared to 89.8% at June 30, 2019, and 88.5% at September 30, 2018.

Qualifying debt totaled $389 million at September 30, 2019, compared to $387 million at June 30, 2019, and $359 million at September 30, 2018.

Stockholders’ equity was $2.9 billion at September 30, 2019 and June 30, 2019, compared to $2.5 billion at September 30, 2018. The increase in stockholders' equity from September 30, 2018 is primarily a function of net income, partially offset by share repurchases and dividends to shareholders. Under the Company's common stock repurchase program, the Company is authorized to repurchase up to $250 million of its shares of common stock. During the third quarter 2019, the Company repurchased 1.0 million shares of its common stock at a weighted average price of $43.63, for a total of $43.6 million. During the nine months ended September 30, 2019, the Company repurchased a total of 2.7 million shares of its common stock, representing approximately 3% of the Company's outstanding shares. Shares were repurchased at a weighted average price of $42.25, for a total of $115.5 million. During the third quarter 2019, the Company's Board of Directors approved a quarterly cash dividend of $0.25 per share. The Company made its first dividend payment to shareholders totaling $25.7 million on August 30, 2019.

At September 30, 2019, tangible common equity, net of tax, was 10.1% of tangible assets¹ and total capital was 12.6% of risk-weighted assets. The Company’s tangible book value per share¹ was $25.60 at September 30, 2019, up 23.7% from September 30, 2018.

Total assets increased 4.0% to $26.3 billion at September 30, 2019, from $25.3 billion at June 30, 2019, and increased 18.7% from $22.2 billion at September 30, 2018. The increase in total assets from the prior year relates primarily to organic loan growth.

Asset Quality

The provision for credit losses was $4.0 million for the third quarter 2019, compared to $7.0 million for the second quarter 2019, and compared to $6.0 million for the third quarter 2018. Net loan (recoveries)² in the third quarter 2019 were $(0.6) million, or (0.01)% of average loans (annualized), compared to net charge-offs of $1.6 million, or 0.03%, in the second quarter 2019, and $3.1 million, or 0.08%, in the third quarter 2018.

Nonaccrual loans decreased $1.5 million to $50.3 million during the quarter and increased $13.5 million from September 30, 2018. Loans past due 90 days and still accruing were zero at September 30, 2019, June 30, 2019, and September 30, 2018. Loans past due 30-89 days and still accruing interest totaled $29.5 million at September 30, 2019, an increase from $9.7 million at June 30, 2019, and an increase from $9.4 million at September 30, 2018.

Repossessed assets totaled $15.5 million at September 30, 2019, compared to $17.7 million at June 30, 2019, and a decrease of $4.5 million from $20.0 million at September 30, 2018. Adversely graded loans and non-performing assets totaled $439.2 million at September 30, 2019, an increase of $40.3 million from $399.0 million at June 30, 2019, and an increase of $80.9 million from $358.3 million at September 30, 2018.

The ratio of classified assets to Tier 1 capital plus the allowance for credit losses, a common regulatory measure of asset quality, was 7.8% at September 30, 2019, compared to 7.8% at June 30, 2019, and 10.2% at September 30, 2018.¹

1	See reconciliation of Non GAAP Financial Measures.
2	Beginning in Q1 2019, annualized performance metrics are calculated on an actual/actual basis, from a previous 30/360 basis. Prior period amounts have been restated to conform to the current presentation.

Segment Highlights

The Company's reportable segments are aggregated primarily based on geographic location, services offered, and markets served. The Company's regional segments, which include Arizona, Nevada, Southern California, and Northern California, provide full service banking and related services to their respective markets. The operations from the regional segments correspond to the following banking divisions: Alliance Bank of Arizona, Bank of Nevada and First Independent Bank, Torrey Pines Bank, and Bridge Bank.

The Company's National Business Lines ("NBL") segment provides specialized banking services to niche markets. The Company's NBL reportable segments include Homeowner Associations ("HOA") Services, Hotel Franchise Finance ("HFF"), Public & Nonprofit Finance, Technology & Innovation, and Other NBLs. These NBLs are managed centrally and are broader in geographic scope than our other segments, though still predominately located within our core market areas.

The Corporate & Other segment consists of the Company's investment portfolio, Corporate borrowings and other related items, income and expense items not allocated to our other reportable segments, and inter-segment eliminations.

Key management metrics for evaluating the performance of the Company's Arizona, Nevada, Southern California, Northern California, and NBL segments include loan and deposit growth, asset quality, and pre-tax income.

The regional segments reported gross loan balances of $9.7 billion at September 30, 2019, an increase of $196 million during the quarter, and an increase of $701 million during the last twelve months. The growth in loans during the quarter was spread across all regional segments with increases in the Nevada, Southern California, Arizona, and Northern California segments of $85 million, $50 million, $31 million, and $30 million, respectively. The growth in loans during the last twelve months was driven by increases in the Arizona, Nevada, and Southern California segments, with loan growth of $375 million, $243 million, and $190 million, respectively. These increases were partially offset by a decrease of $107 million in the Northern California segment. Total deposits for the regional segments were $15.3 billion, an increase of $423 million during the quarter, and an increase of $1.6 billion during the last twelve months. The increase in deposits during the quarter was driven by the Northern California, Southern California, and Nevada segments, with deposit growth of $262 million, $217 million, and $81 million, respectively. These increases were partially offset by a decrease of $137 million in the Arizona segment. During the last twelve months, each of the regional segments had growth in deposits. Deposit growth over the last twelve months in the Arizona, Nevada, Northern California, and Southern California segments totaled $639 million, $422 million, $319 million, and $202 million, respectively.

Pre-tax income for the regional segments was $103.9 million for the three months ended September 30, 2019, an increase of $7.1 million from the three months ended June 30, 2019, and an increase of $16.7 million from the three months ended September 30, 2018. The growth in pre-tax income during the quarter was driven by increases in the Arizona and Southern California segments, with pre-tax income growth of $6.0 million and $2.3 million, respectively. These increases were partially offset by decreases of $0.9 million and $0.3 million in the Northern California and Nevada segments, respectively. The Arizona, Southern California, and Nevada segments had the largest increases in pre-tax income from the three months ended September 30, 2018 of $7.3 million, $5.0 million, and $4.0 million, respectively. For the nine months ended September 30, 2019, the regional segments reported total pre-tax income of $289.2 million, an increase of $30.1 million compared to the nine months ended September 30, 2018 with increases across all regional segments. Southern California, Arizona, Nevada, and Northern California had increases in pre-tax income of $9.8 million, $8.6 million, $7.9 million, and $3.9 million, respectively.

The NBL segments reported gross loan balances of $10.5 billion at September 30, 2019, an increase of $709 million during the quarter, and an increase of $2.7 billion during the last twelve months. The increase in loans from the prior quarter was driven by the Other NBLs, HFF, and Technology & Innovation segments, which had loan growth of $369 million, $240 million, and $131 million, respectively. These increases were partially offset by a decrease of $44 million in the Public & Nonprofit Finance segment. During the last twelve months, the largest drivers of loan growth were the Other NBLs, HFF, and Technology & Innovation segments, with increases of $1.9 billion, $461 million, and $271 million, respectively. Total deposits for the NBL segments were $6.4 billion, an increase of $440 million during the quarter, and an increase of $1.5 billion during the last twelve months. The increase in deposits from the prior quarter is primarily attributable to the Technology & Innovation segment, which increased deposits by $436 million. The increase of $1.5 billion during the last twelve months is a result of growth in the Technology & Innovation and HOA Services segments of $970 million and $528 million, respectively.

Pre-tax income for the NBL segments was $71.2 million for the three months ended September 30, 2019, an increase of $11.1 million from the three months ended June 30, 2019, and an increase of $19.7 million from the three months ended September 30, 2018. The increase in pre-tax income from the prior quarter primarily relates to the Technology & Innovation and Other NBLs segments, which increased by $8.4 million and $4.4 million, respectively. These increases were partially offset by decreases in pre-tax income from the HFF segments, which had decreases of $1.8 million. The drivers of the increase in pre-tax income from the same period in the prior year were the Other NBLs, Technology & Innovation, and HOA Services segments, which had increases of $11.7 million, $7.7 million, and $2.4 million, respectively. These increases were partially offset by decreases in pre-tax income for the HFF and Public & Nonprofit Finance segments, which decreased by $1.6 million and $0.5 million, respectively. Pre-tax income for the NBL segments for the nine months ended September 30, 2019 totaled $190.7 million, an increase of $43.9 million compared to the nine months ended September 30, 2018. The largest increases in pre-tax income compared to the nine months ended September 30, 2018 were in the Other NBLs, Technology & Innovation, and HOA Services segments. These segments had increases of $19.6 million, $17.1 million, and $11.5 million, respectively. These increases were partially offset by decreases of $3.3 million and $1.1 million in the HFF and Public & Nonprofit segments.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its third quarter 2019 financial results at 12:00 p.m. ET on Friday, October 18, 2019. Participants may access the call by dialing 1-888-317-6003 and using passcode 1909804 or via live audio webcast using the website link https://services.choruscall.com/links/wal191018_1200.html. The webcast is also available via the Company’s website at www.westernalliancebancorporation.com. Participants should log in at least 15 minutes early to receive instructions. The call will be recorded and made available for replay after 2:00 p.m. ET October 18th through 9:00 a.m. ET November 18th by dialing 1-877-344-7529 passcode: 10134684.

Reclassifications

Certain amounts in the Consolidated Income Statements for the prior periods have been reclassified to conform to the current presentation. The reclassifications have no effect on net income or stockholders’ equity as previously reported.

Use of Non-GAAP Financial Information

This press release contains both financial measures based on GAAP and non-GAAP based financial measures, which are used where management believes them to be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Adoption of Accounting Standards

During the first quarter 2019, the Company adopted the Accounting Standards Updates ("ASU") related to leases, which include ASU 2016-02, Leases, ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842) Targeted Improvements.

The amendments in ASU 2016-02 require lessees to recognize the lease assets and lease liabilities arising from operating leases in the statement of financial position, resulting in a gross up of assets and liabilities on the balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The Company elected to apply the package of practical expedients, which permitted the Company to forgo reassessment of 1) expired or existing contracts that may contain leases; 2) lease classification of expired or existing leases; and 3) initial direct costs for any existing leases. Upon adoption of this standard on January 1, 2019, the Company recorded a right-of-use asset and corresponding lease liability of $42.5 million and $46.1 million, respectively. No cumulative effect adjustment to retained earnings was recorded as of January 1, 2019. The new standard does not have a material impact on the Company's results of operations or cash flow.

Cautionary Note Regarding Forward-Looking Statements

This release contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Examples of forward-looking statements include, among others, statements we make regarding our expectations with regard to our business, financial and operating results, future economic performance, and dividends, including our recent domestic select-service hotel franchise finance loan portfolio acquisition. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include, among others: the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; inflation, interest rate, market and monetary fluctuations; increases in competitive pressures among financial institutions and businesses offering similar products and services; higher defaults on our loan portfolio than we expect; changes in management’s estimate of the adequacy of the allowance for credit losses; legislative or regulatory changes or changes in accounting principles, policies or guidelines; supervisory actions by regulatory agencies which may limit our ability to pursue certain growth opportunities, including expansion through acquisitions; additional regulatory requirements resulting from our continued growth; management’s estimates and projections of interest rates and interest rate policy; the execution of our business plan; and other factors affecting the financial services industry generally or the banking industry in particular.

Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements, whether written or oral, that may be made from time to time, set forth in this press release to reflect new information, future events or otherwise.

About Western Alliance Bancorporation

With more than $25 billion in assets, Western Alliance Bancorporation (NYSE:WAL) is one of the country’s top-performing banking companies. Western Alliance is ranked #1 regional bank by S&P Global Market Intelligence for 2018 and in the top 10 on the Forbes “Best Banks in America” list for four consecutive years, 2016-2019. Its primary subsidiary, Western Alliance Bank, Member FDIC, helps business clients realize their growth ambitions with local teams of experienced bankers who deliver superior service and a full spectrum of customized loan, deposit and treasury management capabilities. Business clients also benefit from a powerful array of specialized financial services that provide strong expertise and tailored solutions for a wide variety of industries and sectors. A national presence with a regional footprint, Western Alliance Bank operates individually branded, full-service banking divisions and has offices in key markets nationwide. For more information, visit westernalliancebank.com.

Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
Selected Balance Sheet Data:
													As of September 30,
													2019				2018				Change %
													(in millions)
Total assets													$	26,324.2			$	22,176.1			18.7	%
Gross loans, net of deferred fees													20,152.8				16,732.8				20.4
Securities and money market investments													4,148.1				3,633.7				14.2
Total deposits													22,440.8				18,908.6				18.7
Qualifying debt													388.9				359.1				8.3
Stockholders' equity													2,923.0				2,488.4				17.5
Tangible common equity, net of tax (1)													2,627.1				2,191.3				19.9
Selected Income Statement Data:
		For the Three Months Ended September 30,											For the Nine Months Ended September 30,
		2019				2018				Change %			2019				2018				Change %
		(in thousands, except per share data)											(in thousands, except per share data)
Interest income		$	315,608			$	265,216			19.0	%		$	909,624			$	751,515			21.0	%
Interest expense		49,186				31,178				57.8			141,185				79,149				78.4
Net interest income		266,422				234,038				13.8			768,439				672,366				14.3
Provision for credit losses		4,000				6,000				(33.3	)		14,500				17,000				(14.7	)
Net interest income after provision for credit losses		262,422				228,038				15.1			753,939				655,366				15.0
Non-interest income		19,441				4,418				NM			49,069				29,505				66.3
Non-interest expense		125,955				113,841				10.6			353,082				314,538				12.3
Income before income taxes		155,908				118,615				31.4			449,926				370,333				21.5
Income tax expense		28,533				7,492				NM			78,819				53,631				47.0
Net income		$	127,375			$	111,123			14.6			$	371,107			$	316,702			17.2
Diluted earnings per share		$	1.24			$	1.05			18.1			$	3.59			$	3.00			19.7

(1)		See Reconciliation of Non-GAAP Financial Measures.
NM		Changes +/- 100% are not meaningful.

Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited
Common Share Data:
	At or For the Three Months Ended September 30,											For the Nine Months Ended September 30,
	2019				2018				Change %			2019				2018				Change %
Diluted earnings per share	$	1.24			$	1.05			18.1	%		$	3.59			$	3.00			19.7	%
Book value per common share	28.48				23.51				21.1
Tangible book value per share, net of tax (1)	25.60				20.70				23.7
Average shares outstanding (in thousands):
Basic	102,041				104,768				(2.6	)		103,024				104,664				(1.6	)
Diluted	102,451				105,448				(2.8	)		103,468				105,398				(1.8	)
Common shares outstanding	102,639				105,861				(3.0	)
Selected Performance Ratios:
Return on average assets (2)	1.94		%		2.05		%		(5.4	)%		2.03		%		2.03		%		—	%
Return on average tangible common equity (1, 2)	19.41				20.40				(4.9	)		19.86				20.53				(3.3	)
Net interest margin (2)	4.41				4.68				(5.8	)		4.56				4.69				(2.8	)
Operating efficiency ratio - tax equivalent basis (1)	42.4				41.5				2.1			42.3				42.1				0.4
Loan to deposit ratio	89.80				88.49				1.5
Asset Quality Ratios:
Net (recoveries) charge-offs to average loans outstanding (2)	(0.01		)%		0.08		%		NM			0.02		%		0.06		%		(66.7	)%
Nonaccrual loans to gross loans	0.25				0.22				13.6
Nonaccrual loans and repossessed assets to total assets	0.25				0.26				(3.8	)
Allowance for credit losses to gross loans	0.82				0.90				(8.9	)
Allowance for credit losses to nonaccrual loans	327.83				406.89				(19.4	)
Capital Ratios (1):
												Sep 30, 2019				Jun 30, 2019				Sep 30, 2018
Tangible common equity (1)												10.1		%		10.2		%		10.0	%
Common Equity Tier 1 (1), (3)												10.3				10.6				10.9
Tier 1 Leverage ratio (1), (3)												10.4				11.0				11.0
Tier 1 Capital (1), (3)												10.6				10.9				11.3
Total Capital (1), (3)												12.6				12.9				13.5

(1)		See Reconciliation of Non-GAAP Financial Measures.
(2)		Annualized on an actual/actual basis for periods less than 12 months.
(3)		Capital ratios for September 30, 2019 are preliminary until the Call Report is filed.
NM		Changes +/- 100% are not meaningful.

Western Alliance Bancorporation and Subsidiaries
Condensed Consolidated Income Statements
Unaudited
	Three Months Ended September 30,							Nine Months Ended September 30,
	2019			2018				2019			2018
	(dollars in thousands, except per share data)
Interest income:
Loans	$	278,932		$	234,709			$	808,099		$	662,703
Investment securities	29,660			27,239				87,694			81,305
Other	7,016			3,268				13,831			7,507
Total interest income	315,608			265,216				909,624			751,515
Interest expense:
Deposits	43,354			25,266				121,030			59,288
Qualifying debt	5,785			5,794				17,898			16,458
Borrowings	47			118				2,257			3,403
Total interest expense	49,186			31,178				141,185			79,149
Net interest income	266,422			234,038				768,439			672,366
Provision for credit losses	4,000			6,000				14,500			17,000
Net interest income after provision for credit losses	262,422			228,038				753,939			655,366
Non-interest income:
Service charges and fees	5,888			5,267				17,121			16,684
Income from equity investments	3,742			1,440				6,619			5,417
Card income	1,729			2,138				5,195			6,143
Foreign currency income	1,321			1,092				3,564			3,475
Income from bank owned life insurance	979			868				2,938			2,963
Lending related income and gains (losses) on sale of loans, net	539			1,422				1,343			3,447
Gain (loss) on sales of investment securities	3,152			(7,232		)		3,152			(7,232
Unrealized gains (losses) on assets measured at fair value, net	222			(1,212		)		4,628			(2,971
Other	1,869			635				4,509			1,579
Total non-interest income	19,441			4,418				49,069			29,505
Non-interest expenses:
Salaries and employee benefits	70,978			64,762				205,328			188,680
Deposit costs	11,537			4,848				24,930			11,888
Occupancy	8,263			7,406				24,251			21,671
Legal, professional, and directors' fees	8,248			7,907				26,885			21,856
Data processing	7,095			5,895				20,563			16,688
Insurance	3,071			3,712				8,691			11,466
Loan and repossessed asset expenses	1,953			1,230				5,419			2,830
Business development	1,443			1,381				4,972			4,523
Marketing	842			687				2,640			2,429
Card expense	548			1,282				1,892			3,305
Intangible amortization	387			398				1,161			1,195
Net loss (gain) on sales and valuations of repossessed and other assets	3,379			(67		)		2,856			(1,474
Other	8,211			14,400				23,494			29,481
Total non-interest expense	125,955			113,841				353,082			314,538
Income before income taxes	155,908			118,615				449,926			370,333
Income tax expense	28,533			7,492				78,819			53,631
Net income	$	127,375		$	111,123			$	371,107		$	316,702
Earnings per share:
Diluted shares	102,451			105,448				103,468			105,398
Diluted earnings per share	$	1.24		$	1.05			$	3.59		$	3.00

Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited
	Three Months Ended
	Sep 30, 2019			Jun 30, 2019				Mar 31, 2019			Dec 31, 2018				Sep 30, 2018
	(in thousands, except per share data)
Interest income:
Loans	$	278,932		$	270,349			$	258,818		$	247,874			$	234,709
Investment securities	29,660			28,900				29,134			30,367				27,239
Other	7,016			3,599				3,216			3,727				3,268
Total interest income	315,608			302,848				291,168			281,968				265,216
Interest expense:
Deposits	43,354			41,888				35,788			31,176				25,266
Qualifying debt	5,785			6,008				6,105			5,829				5,794
Borrowings	47			271				1,939			1,450				118
Total interest expense	49,186			48,167				43,832			38,455				31,178
Net interest income	266,422			254,681				247,336			243,513				234,038
Provision for credit losses	4,000			7,000				3,500			6,000				6,000
Net interest income after provision for credit losses	262,422			247,681				243,836			237,513				228,038
Non-interest income:
Service charges and fees	5,888			5,821				5,412			5,611				5,267
Income from equity investments	3,742			868				2,009			3,178				1,440
Card income	1,729			1,625				1,841			1,866				2,138
Foreign currency income	1,321			1,148				1,095			1,285				1,092
Income from bank owned life insurance	979			978				981			983				868
Lending related income and gains (losses) on sale of loans, net	539			553				251			893				1,422
Gain (loss) on sales of investment securities	3,152			—				—			(424		)		(7,232		)
Unrealized gains (losses) on assets measured at fair value, net	222			1,572				2,834			(640		)		(1,212		)
Other	1,869			1,653				987			859				635
Total non-interest income	19,441			14,218				15,410			13,611				4,418
Non-interest expenses:
Salaries and employee benefits	70,978			65,794				68,556			64,558				64,762
Deposit costs	11,537			7,669				5,724			7,012				4,848
Occupancy	8,263			7,761				8,227			7,733				7,406
Legal, professional, and directors' fees	8,248			11,105				7,532			6,866				7,907
Data processing	7,095			6,793				6,675			6,028				5,895
Insurance	3,071			2,811				2,809			2,539				3,712
Loan and repossessed asset expenses	1,953			1,460				2,006			1,748				1,230
Business development	1,443			1,444				2,085			1,437				1,381
Marketing	842			1,057				741			1,341				687
Card expense	548			710				634			996				1,282
Intangible amortization	387			387				387			399				398
Net loss (gain) on sales and valuations of repossessed and other assets	3,379			(620		)		97			1,483				(67		)
Other	8,211			7,842				7,441			8,989				14,400
Total non-interest expense	125,955			114,213				112,914			111,129				113,841
Income before income taxes	155,908			147,686				146,332			139,995				118,615
Income tax expense	28,533			24,750				25,536			20,909				7,492
Net income	$	127,375		$	122,936			$	120,796		$	119,086			$	111,123
Earnings per share:
Diluted shares	102,451			103,501				104,475			105,286				105,448
Diluted earnings per share	$	1.24		$	1.19			$	1.16		$	1.13			$	1.05

Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
	(in millions)
Assets:
Cash and due from banks	$	872.1			$	1,067.7			$	785.6			$	498.6			$	700.5
Securities and money market investments	4,148.1				3,870.1				3,739.4				3,761.1				3,633.7
Loans held for sale	21.8				—				—				—				—
Loans held for investment:
Commercial and industrial	8,707.8				8,454.2				7,723.7				7,762.6				7,487.7
Commercial real estate - non-owner occupied	5,031.3				4,685.5				4,304.3				4,213.4				3,953.0
Commercial real estate - owner occupied	2,299.8				2,254.1				2,285.3				2,325.4				2,288.2
Construction and land development	2,155.6				2,210.4				2,283.5				2,134.7				2,107.6
Residential real estate	1,862.5				1,580.1				1,461.5				1,204.4				827.1
Consumer	74.0				66.0				58.4				70.1				69.2
Gross loans, net of deferred fees	20,131.0				19,250.3				18,116.7				17,710.6				16,732.8
Allowance for credit losses	(165.0		)		(160.4		)		(155.0		)		(152.7		)		(150.0		)
Loans, net	19,966.0				19,089.9				17,961.7				17,557.9				16,582.8
Premises and equipment, net	125.0				123.1				119.8				119.5				119.2
Operating lease right-of-use asset	74.5				71.1				72.8				—				—
Other assets acquired through foreclosure, net	15.5				17.7				17.7				17.9				20.0
Bank owned life insurance	173.1				172.1				171.1				170.1				169.2
Goodwill and other intangibles, net	298.0				298.4				298.8				299.2				299.5
Other assets	630.1				604.7				625.9				685.2				651.2
Total assets	$	26,324.2			$	25,314.8			$	23,792.8			$	23,109.5			$	22,176.1
Liabilities and Stockholders' Equity:
Liabilities:
Deposits
Non-interest bearing demand deposits	$	8,755.7			$	8,677.3			$	7,679.3			$	7,456.1			$	8,014.7
Interest bearing:
Demand	2,509.4				2,525.6				2,499.8				2,555.6				1,978.4
Savings and money market	9,058.4				7,898.3				7,798.3				7,330.7				7,059.1
Certificates of deposit	2,117.3				2,338.7				2,231.3				1,835.0				1,856.4
Total deposits	22,440.8				21,439.9				20,208.7				19,177.4				18,908.6
Customer repurchase agreements	15.0				13.9				15.1				22.4				20.9
Total customer funds	22,455.8				21,453.8				20,223.8				19,199.8				18,929.5
Borrowings	—				—				—				491.0				—
Qualifying debt	388.9				387.2				374.0				360.5				359.1
Operating lease liability	79.8				76.2				77.8				—				—
Accrued interest payable and other liabilities	476.7				546.3				396.6				444.5				399.1
Total liabilities	23,401.2				22,463.5				21,072.2				20,495.8				19,687.7
Stockholders' Equity:
Common stock and additional paid-in capital	1,305.5				1,310.9				1,329.6				1,364.6				1,392.6
Retained earnings	1,581.9				1,514.0				1,399.2				1,282.7				1,166.2
Accumulated other comprehensive income (loss)	35.6				26.4				(8.2		)		(33.6		)		(70.4		)
Total stockholders' equity	2,923.0				2,851.3				2,720.6				2,613.7				2,488.4
Total liabilities and stockholders' equity	$	26,324.2			$	25,314.8			$	23,792.8			$	23,109.5			$	22,176.1

Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses
Unaudited
	Three Months Ended
	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
	(in thousands)
Balance, beginning of period	$	160,409			$	154,987			$	152,717			$	150,011			$	147,083
Provision for credit losses	4,000				7,000				3,500				6,000				6,000
Recoveries of loans previously charged-off:
Commercial and industrial	2,549				495				477				690				362
Commercial real estate - non-owner occupied	—				53				—				—				804
Commercial real estate - owner occupied	8				386				453				9				52
Construction and land development	17				9				55				13				24
Residential real estate	131				27				93				116				440
Consumer	6				8				5				8				11
Total recoveries	2,711				978				1,083				836				1,693
Loans charged-off:
Commercial and industrial	1,950				2,018				2,124				4,130				4,610
Commercial real estate - non-owner occupied	—				—				—				—				—
Commercial real estate - owner occupied	139				—				—				—				—
Construction and land development	—				141				—				—				—
Residential real estate	9				397				188				—				46
Consumer	1				—				1				—				109
Total loans charged-off	2,099				2,556				2,313				4,130				4,765
Net loan (recoveries) charge-offs	(612		)		1,578				1,230				3,294				3,072
Balance, end of period	$	165,021			$	160,409			$	154,987			$	152,717			$	150,011
Net (recoveries) charge-offs to average loans - annualized	(0.01		)%		0.03		%		0.03		%		0.08		%		0.08		%
Allowance for credit losses to gross loans	0.82		%		0.83		%		0.86		%		0.86		%		0.90		%
Allowance for credit losses to gross organic loans	0.85				0.87				0.90				0.92				0.97
Allowance for credit losses to nonaccrual loans	327.83				309.52				353.15				550.41				406.89
Nonaccrual loans	$	50,338			$	51,825			$	43,887			$	27,746			$	36,868
Nonaccrual loans to gross loans	0.25		%		0.27		%		0.24		%		0.16		%		0.22		%
Repossessed assets	$	15,483			$	17,707			$	17,707			$	17,924			$	20,028
Nonaccrual loans and repossessed assets to total assets	0.25		%		0.27		%		0.26		%		0.20		%		0.26		%
Loans past due 90 days, still accruing	$	—			$	—			$	—			$	594			$	—
Loans past due 90 days and still accruing to gross loans	—		%		—		%		—		%		0.00		%		—		%
Loans past due 30 to 89 days, still accruing	$	29,502			$	9,681			$	20,480			$	16,557			$	9,360
Loans past due 30 to 89 days, still accruing to gross loans	0.15		%		0.05		%		0.11		%		0.09		%		0.06		%
Special mention loans	$	233,835			$	197,996			$	134,348			$	88,856			$	124,689
Special mention loans to gross loans	1.16		%		1.03		%		0.74		%		0.50		%		0.75		%
Classified loans on accrual	$	139,576			$	131,442			$	161,620			$	181,105			$	176,727
Classified loans on accrual to gross loans	0.69		%		0.68		%		0.89		%		1.02		%		1.06		%
Classified assets	$	220,423			$	216,000			$	238,241			$	242,101			$	252,770
Classified assets to total assets	0.84		%		0.85		%		1.00		%		1.05		%		1.14		%

Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
	Three Months Ended
	September 30, 2019										June 30, 2019
	Average Balance				Interest			Average Yield / Cost			Average Balance				Interest			Average Yield / Cost
	($ in millions)				($ in thousands)						($ in millions)				($ in thousands)
Interest earning assets
Loans:
Commercial and industrial	$	8,423.0			$	118,332		5.72	%		$	7,895.3			$	113,387		5.92	%
CRE - non-owner occupied	4,722.2				69,421			5.85			4,466.2				67,510			6.08
CRE - owner occupied	2,259.6				30,099			5.38			2,253.3				29,931			5.43
Construction and land development	2,226.3				39,177			7.00			2,225.5				39,806			7.20
Residential real estate	1,701.6				20,913			4.88			1,511.8				18,794			4.99
Consumer	69.5				990			5.65			61.5				921			6.01
Loans held for sale	0.2				—			—			—				—			—
Total loans (1), (2), (3)	19,402.4				278,932			5.79			18,413.6				270,349			5.98
Securities:
Securities - taxable	3,073.1				20,575			2.66			2,757.6				19,730			2.87
Securities - tax-exempt	1,062.1				9,085			4.30			979.5				9,170			4.66
Total securities (1)	4,135.2				29,660			3.08			3,737.1				28,900			3.34
Cash and other	1,009.9				7,016			2.76			635.2				3,599			2.27
Total interest earning assets	24,547.5				315,608			5.20			22,785.9				302,848			5.44
Non-interest earning assets
Cash and due from banks	346.8										166.7
Allowance for credit losses	(162.6		)								(156.4		)
Bank owned life insurance	172.5										171.5
Other assets	1,094.2										1,088.8
Total assets	$	25,998.4									$	24,056.5
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	2,488.6			$	5,061		0.81	%		$	2,551.2			$	5,550		0.87	%
Savings and money market	8,456.5				26,608			1.25			7,650.5				24,668			1.29
Certificates of deposit	2,250.4				11,685			2.06			2,271.1				11,670			2.06
Total interest-bearing deposits	13,195.5				43,354			1.30			12,472.8				41,888			1.35
Short-term borrowings	17.5				47			1.07			58.2				271			1.87
Qualifying debt	387.8				5,785			5.92			377.3				6,008			6.39
Total interest-bearing liabilities	13,600.8				49,186			1.43			12,908.3				48,167			1.50
Interest cost of funding earning assets								0.79										0.85
Non-interest-bearing liabilities
Non-interest-bearing demand deposits	8,916.6										7,869.2
Other liabilities	579.6										480.5
Stockholders’ equity	2,901.4										2,798.5
Total liabilities and stockholders' equity	$	25,998.4									$	24,056.5
Net interest income and margin (4)					$	266,422		4.41	%						$	254,681		4.59	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $6.4 million and $6.2 million for the three months ended September 30, 2019 and June 30, 2019, respectively.
(2)		Included in the yield computation are net loan fees of $13.4 million and accretion on acquired loans of $2.7 million for the three months ended September 30, 2019, compared to $12.2 million and $4.6 million for the three months ended June 30, 2019.
(3)		Includes non-accrual loans.
(4)		Net interest margin is computed by dividing net interest income by total average earning assets, annualized on an actual/actual basis.

Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
	Three Months Ended
	September 30, 2019										September 30, 2018
	Average Balance				Interest			Average Yield / Cost			Average Balance				Interest			Average Yield / Cost
	($ in millions)				($ in thousands)						($ in millions)				($ in thousands)
Interest earning assets
Loans:
Commercial and industrial	$	8,423.0			$	118,332		5.72	%		$	7,171.1			$	100,312		5.73	%
CRE - non-owner occupied	4,722.2				69,421			5.85			4,004.0				59,383			5.90
CRE - owner occupied	2,259.6				30,099			5.38			2,259.1				30,407			5.45
Construction and land development	2,226.3				39,177			7.00			2,023.1				35,959			7.06
Residential real estate	1,701.6				20,913			4.88			656.5				7,800			4.71
Consumer	69.5				990			5.65			57.4				848			5.87
Loans held for sale	0.2				—			—			—				—			—
Total loans (1), (2), (3)	19,402.4				278,932			5.79			16,171.2				234,709			5.86
Securities:
Securities - taxable	3,073.1				20,575			2.66			2,738.6				19,277			2.79
Securities - tax-exempt	1,062.1				9,085			4.30			875.2				7,962			4.51
Total securities (1)	4,135.2				29,660			3.08			3,613.8				27,239			3.21
Cash and other	1,009.9				7,016			2.76			549.5				3,268			2.36
Total interest earning assets	24,547.5				315,608			5.20			20,334.5				265,216			5.29
Non-interest earning assets
Cash and due from banks	346.8										144.0
Allowance for credit losses	(162.6		)								(148.2		)
Bank owned life insurance	172.5										168.8
Other assets	1,094.2										1,002.5
Total assets	$	25,998.4									$	21,501.6
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	2,488.6			$	5,061		0.81	%		$	1,938.2			$	3,256		0.67	%
Savings and money market	8,456.5				26,608			1.25			6,580.3				14,891			0.90
Certificates of deposit	2,250.4				11,685			2.06			1,863.7				7,119			1.52
Total interest-bearing deposits	13,195.5				43,354			1.30			10,382.2				25,266			0.97
Short-term borrowings	17.5				47			1.07			28.5				118			1.64
Qualifying debt	387.8				5,785			5.92			359.1				5,794			6.40
Total interest-bearing liabilities	13,600.8				49,186			1.43			10,769.8				31,178			1.15
Interest cost of funding earning assets								0.79										0.61
Non-interest-bearing liabilities
Non-interest-bearing demand deposits	8,916.6										7,910.3
Other liabilities	579.6										360.8
Stockholders’ equity	2,901.4										2,460.7
Total liabilities and stockholders' equity	$	25,998.4									$	21,501.6
Net interest income and margin (4)					$	266,422		4.41	%						$	234,038		4.68	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $6.4 million and $6.0 million for the three months ended September 30, 2019 and 2018, respectively.
(2)		Included in the yield computation are net loan fees of $13.4 million and accretion on acquired loans of $2.7 million for the three months ended September 30, 2019, compared to $12.5 million and $3.3 million for the three months ended September 30, 2018.
(3)		Includes non-accrual loans.
(4)		Net interest margin is computed by dividing net interest income by total average earning assets, annualized on an actual/actual basis.

Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
	Nine Months Ended September 30,
	2019										2018
	Average Balance				Interest			Average Yield / Cost			Average Balance				Interest			Average Yield / Cost
	($ in millions)				($ in thousands)						($ in millions)				($ in thousands)
Interest earning assets
Loans:
Commercial and industrial	$	7,955.6			$	340,808		5.88	%		$	6,887.0			$	280,101		5.62	%
CRE - non-owner occupied	4,468.4				199,372			5.98			3,963.3				175,041			5.92
CRE - owner occupied	2,279.9				90,113			5.39			2,247.9				87,656			5.33
Construction and land development	2,210.2				118,687			7.20			1,922.3				99,146			6.91
Residential real estate	1,535.9				56,275			4.90			505.9				18,494			4.89
Consumer	64.5				2,844			5.90			52.6				2,265			5.76
Loans held for sale	0.1				—			—			—				—			—
Total loans (1), (2), (3)	18,514.6				808,099			5.92			15,579.0				662,703			5.79
Securities:
Securities - taxable	2,865.6				60,641			2.83			2,805.2				57,700			2.75
Securities - tax-exempt	979.7				27,053			4.62			853.7				23,605			4.62
Total securities (1)	3,845.3				87,694			3.29			3,658.9				81,305			3.19
Cash and other	700.7				13,831			2.64			453.0				7,507			2.22
Total interest earning assets	23,060.6				909,624			5.38			19,690.9				751,515			5.22
Non-interest earning assets
Cash and due from banks	225.9										143.8
Allowance for credit losses	(157.8		)								(145.0		)
Bank owned life insurance	171.4										168.4
Other assets	1,098.6										1,001.4
Total assets	$	24,398.7									$	20,859.5
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	2,511.9			$	16,194		0.86	%		$	1,806.9			$	6,996		0.52	%
Savings and money market	7,854.9				73,283			1.25			6,312.4				36,130			0.77
Certificates of deposit	2,114.6				31,553			1.99			1,720.5				16,162			1.26
Total interest-bearing deposits	12,481.4				121,030			1.30			9,839.8				59,288			0.81
Short-term borrowings	129.4				2,257			2.33			263.2				3,403			1.73
Qualifying debt	376.2				17,898			6.36			363.6				16,458			6.05
Total interest-bearing liabilities	12,987.0				141,185			1.45			10,466.6				79,149			1.01
Interest cost of funding earning assets								0.82										0.54
Non-interest-bearing liabilities
Non-interest-bearing demand deposits	8,118.8										7,679.1
Other liabilities	495.6										351.2
Stockholders’ equity	2,797.3										2,362.6
Total liabilities and stockholders' equity	$	24,398.7									$	20,859.5
Net interest income and margin (4)					$	768,439		4.56	%						$	672,366		4.69	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $18.7 million and $17.7 million for the nine months ended September 30, 2019 and 2018, respectively.
(2)		Included in the yield computation are net loan fees of $37.9 million and accretion on acquired loans of $10.1 million for the nine months ended September 30, 2019, compared to $33.4 million and $14.1 million for the nine months ended September 30, 2018.
(3)		Includes non-accrual loans.
(4)		Net interest margin is computed by dividing net interest income by total average earning assets.

Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
Balance Sheet:					Regional Segments
	Consolidated Company				Arizona				Nevada				Southern California				Northern California
At September 30, 2019:	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	5,020.2			$	1.7			$	9.7			$	1.7			$	1.9
Loans, net of deferred loan fees and costs	20,152.8				3,968.2				2,179.7				2,306.6				1,225.5
Less: allowance for credit losses	(165.0		)		(33.5		)		(18.1		)		(19.5		)		(9.6		)
Total loans	19,987.8				3,934.7				2,161.6				2,287.1				1,215.9
Other assets acquired through foreclosure, net	15.5				0.7				13.9				0.9				—
Goodwill and other intangible assets, net	298.0				—				23.2				—				154.9
Other assets	1,002.7				45.7				58.1				15.1				15.8
Total assets	$	26,324.2			$	3,982.8			$	2,266.5			$	2,304.8			$	1,388.5
Liabilities:
Deposits	$	22,440.8			$	5,970.3			$	4,269.2			$	2,753.0			$	2,270.9
Borrowings and qualifying debt	388.9				—				—				—				—
Other liabilities	571.5				19.1				10.7				0.8				14.9
Total liabilities	23,401.2				5,989.4				4,279.9				2,753.8				2,285.8
Allocated equity:	2,923.0				487.3				298.5				265.0				306.4
Total liabilities and stockholders' equity	$	26,324.2			$	6,476.7			$	4,578.4			$	3,018.8			$	2,592.2
Excess funds provided (used)	—				2,493.9				2,311.9				714.0				1,203.7
No. of offices	47				10				16				9				3
No. of full-time equivalent employees	1,814				106				89				121				116
Income Statement:
Three Months Ended September 30, 2019:	(in thousands)
Net interest income	$	266,422			$	68,828			$	40,565			$	33,630			$	23,504
Provision for (recovery of) credit losses	4,000				103				(62		)		(189		)		218
Net interest income after provision for credit losses	262,422				68,725				40,627				33,819				23,286
Non-interest income	19,441				1,821				2,677				1,079				1,917
Non-interest expense	(125,955		)		(27,241		)		(15,211		)		(15,185		)		(12,379		)
Income (loss) before income taxes	155,908				43,305				28,093				19,713				12,824
Income tax expense (benefit)	28,533				10,826				5,899				5,520				3,591
Net income	$	127,375			$	32,479			$	22,194			$	14,193			$	9,233
Nine Months Ended September 30, 2019:	(in thousands)
Net interest income	$	768,439			$	183,772			$	119,191			$	95,751			$	70,533
Provision for (recovery of) credit losses	14,500				1,705				166				611				(653		)
Net interest income after provision for credit losses	753,939				182,067				119,025				95,140				71,186
Non-interest income	49,069				5,050				7,926				3,054				6,299
Non-interest expense	(353,082		)		(72,183		)		(45,099		)		(44,890		)		(38,419		)
Income (loss) before income taxes	449,926				114,934				81,852				53,304				39,066
Income tax expense (benefit)	78,819				28,733				17,189				14,925				10,939
Net income	$	371,107			$	86,201			$	64,663			$	38,379			$	28,127

Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
Balance Sheet:	National Business Lines
	HOA Services				Public & Nonprofit Finance				Technology & Innovation				Hotel Franchise Finance				Other NBLs				Corporate & Other
At September 30, 2019:	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	—			$	—			$	—			$	—			$	24.0			$	4,981.2
Loans, net of deferred loan fees and costs	227.9				1,582.5				1,377.2				1,896.1				5,384.2				4.9
Less: allowance for credit losses	(1.9		)		(13.9		)		(11.4		)		(12.5		)		(44.6		)		—
Total loans	226.0				1,568.6				1,365.8				1,883.6				5,339.6				4.9
Other assets acquired through foreclosure, net	—				—				—				—				—				—
Goodwill and other intangible assets, net	—				—				119.8				0.1				—				—
Other assets	1.2				10.8				7.7				7.9				70.0				770.4
Total assets	$	227.2			$	1,579.4			$	1,493.3			$	1,891.6			$	5,433.6			$	5,756.5
Liabilities:
Deposits	$	3,052.1			$	—			$	3,289.3			$	0.3			$	31.3			$	804.4
Borrowings and qualifying debt	—				—				—				—				—				388.9
Other liabilities	1.3				62.9				—				(0.2		)		15.1				446.9
Total liabilities	3,053.4				62.9				3,289.3				0.1				46.4				1,640.2
Allocated equity:	88.0				122.2				300.5				152.6				426.2				476.3
Total liabilities and stockholders' equity	$	3,141.4			$	185.1			$	3,589.8			$	152.7			$	472.6			$	2,116.5
Excess funds provided (used)	2,914.2				(1,394.3		)		2,096.5				(1,738.9		)		(4,961.0		)		(3,640.0		)
No. of offices	1				1				9				1				4				(7		)
No. of full-time equivalent employees	76				12				73				15				69				1,137
Income Statement:
Three Months Ended September 30, 2019:	(in thousands)
Net interest income	$	21,974			$	3,394			$	33,932			$	12,845			$	32,935			$	(5,185	)
Provision for (recovery of) credit losses	60				(191		)		895				1,956				1,210				—
Net interest income after provision for credit losses	21,914				3,585				33,037				10,889				31,725				(5,185		)
Non-interest income	84				—				5,422				—				1,708				4,733
Non-interest expense	(9,769		)		(1,845		)		(12,068		)		(2,197		)		(11,320		)		(18,740		)
Income (loss) before income taxes	12,229				1,740				26,391				8,692				22,113				(19,192		)
Income tax expense (benefit)	2,813				400				6,070				1,999				5,086				(13,671		)
Net income	$	9,416			$	1,340			$	20,321			$	6,693			$	17,027			$	(5,521	)
Nine Months Ended September 30, 2019:	(in thousands)
Net interest income	$	64,520			$	10,278			$	91,871			$	39,279			$	88,212			$	5,032
Provision for (recovery of) credit losses	27				(136		)		2,635				3,587				6,558				—
Net interest income after provision for credit losses	64,493				10,414				89,236				35,692				81,654				5,032
Non-interest income	268				—				10,946				—				3,915				11,611
Non-interest expense	(27,777		)		(5,683		)		(33,971		)		(6,757		)		(31,729		)		(46,574		)
Income (loss) before income taxes	36,984				4,731				66,211				28,935				53,840				(29,931		)
Income tax expense (benefit)	8,506				1,088				15,229				6,655				12,383				(36,828		)
Net income	$	28,478			$	3,643			$	50,982			$	22,280			$	41,457			$	6,897

Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
Balance Sheet:					Regional Segments
	Consolidated Company				Arizona				Nevada				Southern California				Northern California
At December 31, 2018:	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	4,259.7			$	2.5			$	10.9			$	2.5			$	3.0
Loans, net of deferred loan fees and costs	17,710.6				3,647.9				2,003.5				2,161.1				1,300.2
Less: allowance for credit losses	(152.7		)		(30.7		)		(18.7		)		(19.8		)		(10.7		)
Total loans	17,557.9				3,617.2				1,984.8				2,141.3				1,289.5
Other assets acquired through foreclosure, net	17.9				0.8				13.9				—				—
Goodwill and other intangible assets, net	299.2				—				23.2				—				155.5
Other assets	974.8				46.9				57.8				14.2				23.9
Total assets	$	23,109.5			$	3,667.4			$	2,090.6			$	2,158.0			$	1,471.9
Liabilities:
Deposits	$	19,177.4			$	5,090.2			$	3,996.4			$	2,347.5			$	1,839.1
Borrowings and qualifying debt	851.5				—				—				—				—
Other liabilities	466.9				10.4				14.5				4.5				12.2
Total liabilities	20,495.8				5,100.6				4,010.9				2,352.0				1,851.3
Allocated equity:	2,613.7				441.0				277.4				242.9				304.1
Total liabilities and stockholders' equity	$	23,109.5			$	5,541.6			$	4,288.3			$	2,594.9			$	2,155.4
Excess funds provided (used)	—				1,874.2				2,197.7				436.9				683.5
No. of offices	47				10				16				9				3
No. of full-time equivalent employees	1,787				119				94				116				123
Income Statements:
Three Months Ended September 30, 2018:	(in thousands)
Net interest income	$	234,038			$	56,701			$	37,933			$	29,572			$	23,825
Provision for (recovery of) credit losses	6,000				(297		)		(38		)		1,467				482
Net interest income (expense) after provision for credit losses	228,038				56,998				37,971				28,105				23,343
Non-interest income	4,418				2,230				2,573				931				2,312
Non-interest expense	(113,841		)		(23,231		)		(16,471		)		(14,332		)		(13,207		)
Income (loss) before income taxes	118,615				35,997				24,073				14,704				12,448
Income tax expense (benefit)	7,492				8,999				5,055				4,117				3,486
Net income	$	111,123			$	26,998			$	19,018			$	10,587			$	8,962
Nine Months Ended September 30, 2018:	(in thousands)
Net interest income	$	672,366			$	169,233			$	109,898			$	85,038			$	69,081
Provision for (recovery of) credit losses	17,000				1,655				(2,005		)		1,921				2,043
Net interest income (expense) after provision for credit losses	655,366				167,578				111,903				83,117				67,038
Non-interest income	29,505				5,902				8,585				2,898				7,281
Non-interest expense	(314,538		)		(67,154		)		(46,486		)		(42,470		)		(39,139		)
Income (loss) before income taxes	370,333				106,326				74,002				43,545				35,180
Income tax expense (benefit)	53,631				26,644				15,634				12,288				9,938
Net income	$	316,702			$	79,682			$	58,368			$	31,257			$	25,242
No. of offices	47				10				16				9				3
No. of full-time equivalent employees	1,795				120				94				118				122

Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
Balance Sheet:	National Business Lines
	HOA Services				Public & Nonprofit Finance				Technology & Innovation				Hotel Franchise Finance				Other NBLs				Corporate & Other
At December 31, 2018:	(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities	$	—			$	—			$	—			$	—			$	—			$	4,240.8
Loans, net of deferred loan fees and costs	210.0				1,547.5				1,200.9				1,479.9				4,154.9				4.7
Less: allowance for credit losses	(1.9		)		(14.2		)		(10.0		)		(8.5		)		(38.2		)		—
Total loans	208.1				1,533.3				1,190.9				1,471.4				4,116.7				4.7
Other assets acquired through foreclosure, net	—				—				—				—				—				3.2
Goodwill and other intangible assets, net	—				—				120.4				0.1				—				—
Other assets	0.9				20.1				6.3				7.2				37.1				760.4
Total assets	$	209.0			$	1,553.4			$	1,317.6			$	1,478.7			$	4,153.8			$	5,009.1
Liabilities:
Deposits	$	2,607.2			$	—			$	2,559.0			$	—			$	—			$	738.0
Borrowings and qualifying debt	—				—				—				—				—				851.5
Other liabilities	2.1				25.2				0.1				0.4				49.6				347.9
Total liabilities	2,609.3				25.2				2,559.1				0.4				49.6				1,937.4
Allocated equity:	70.7				123.9				268.7				122.3				340.0				422.7
Total liabilities and stockholders' equity	$	2,680.0			$	149.1			$	2,827.8			$	122.7			$	389.6			$	2,360.1
Excess funds provided (used)	2,471.0				(1,404.3		)		1,510.2				(1,356.0		)		(3,764.2		)		(2,649.0		)
No. of offices	1				1				9				1				4				(7		)
No. of full-time equivalent employees	68				10				61				16				53				1,127
Income Statement:
Three Months Ended September 30, 2018:	(in thousands)
Net interest income	$	17,930			$	3,683			$	27,233			$	13,557			$	20,329			$	3,275
Provision for (recovery of) credit losses	103				(553		)		1,448				223				3,214				(49		)
Net interest income (expense) after provision for credit losses	17,827				4,236				25,785				13,334				17,115				3,324
Non-interest income	215				159				2,836				—				549				(7,387		)
Non-interest expense	(8,254		)		(2,134		)		(9,933		)		(3,014		)		(7,280		)		(15,985		)
Income (loss) before income taxes	9,788				2,261				18,688				10,320				10,384				(20,048		)
Income tax expense (benefit)	2,251				521				4,298				2,374				2,388				(25,997		)
Net income	$	7,537			$	1,740			$	14,390			$	7,946			$	7,996			$	5,949
Nine Months Ended September 30, 2018:	(in thousands)
Net interest income	$	49,335			$	11,224			$	74,615			$	41,617			$	58,813			$	3,512
Provision for (recovery of) credit losses	285				(786		)		5,355				2,006				6,573				(47		)
Net interest income (expense) after provision for credit losses	49,050				12,010				69,260				39,611				52,240				3,559
Non-interest income	543				159				9,518				12				1,182				(6,575		)
Non-interest expense	(24,090		)		(6,386		)		(29,666		)		(7,419		)		(19,193		)		(32,535		)
Income (loss) before income taxes	25,503				5,783				49,112				32,204				34,229				(35,551		)
Income tax expense (benefit)	5,866				1,329				11,296				7,407				7,873				(44,644		)
Net income	$	19,637			$	4,454			$	37,816			$	24,797			$	26,356			$	9,093
No. of offices	1				1				9				1				4				(7		)
No. of full-time equivalent employees	69				11				62				16				52				1,131

Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Unaudited
Operating Pre-Provision Net Revenue by Quarter:
	Three Months Ended
	Sep 30, 2019			Jun 30, 2019				Mar 31, 2019			Dec 31, 2018				Sep 30, 2018
	(in thousands)
Total non-interest income	$	19,441		$	14,218			$	15,410		$	13,611			$	4,418
Less:
Gain (loss) on sales of investment securities, net	3,152			—				—			(424		)		(7,232		)
Unrealized gains (losses) on assets measured at fair value, net	222			1,572				2,834			(640		)		(1,212		)
Total operating non-interest income (1)	16,067			12,646				12,576			14,675				12,862
Plus: net interest income	266,422			254,681				247,336			243,513				234,038
Net operating revenue (1)	$	282,489		$	267,327			$	259,912		$	258,188			$	246,900
Total non-interest expense	$	125,955		$	114,213			$	112,914		$	111,129			$	113,841
Less:
Advance funding to charitable foundation	—			—				—			—				7,645
401(k) plan change and other miscellaneous items	—			—				—			—				1,218
Net loss (gain) on sales and valuations of repossessed and other assets	3,379			(620		)		97			1,483				(67		)
Total operating non-interest expense (1)	$	122,576		$	114,833			$	112,817		$	109,646			$	105,045
Operating pre-provision net revenue (2)	$	159,913		$	152,494			$	147,095		$	148,542			$	141,855
Plus:
Non-operating revenue adjustments	3,374			1,572				2,834			(1,064		)		(8,444		)
Less:
Provision for credit losses	4,000			7,000				3,500			6,000				6,000
Non-operating expense adjustments	3,379			(620		)		97			1,483				8,796
Income tax expense	28,533			24,750				25,536			20,909				7,492
Net income	$	127,375		$	122,936			$	120,796		$	119,086			$	111,123

(1), (2)

See Non-GAAP Financial Measures footnotes.

Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Unaudited
Operating Efficiency Ratio by Quarter:
	Three Months Ended
	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
	(in thousands)
Total operating non-interest expense	$	122,576			$	114,833			$	112,817			$	109,646			$	105,045
Divided by:
Total net interest income	266,422				254,681				247,336				243,513				234,038
Plus:
Tax equivalent interest adjustment	6,423				6,218				6,094				6,140				6,003
Operating non-interest income	16,067				12,646				12,576				14,675				12,862
	$	288,912			$	273,545			$	266,006			$	264,328			$	252,903
Operating efficiency ratio - tax equivalent basis (3)	42.4		%		42.0		%		42.4		%		41.5		%		41.5		%
Tangible Common Equity:
	Sep 30, 2019				Jun 30, 2019				Mar 31, 2019				Dec 31, 2018				Sep 30, 2018
	(dollars and shares in thousands)
Total stockholders' equity	$	2,923,063			$	2,851,264			$	2,720,620			$	2,613,734			$	2,488,393
Less: goodwill and intangible assets	297,994				298,381				298,768				299,155				299,553
Total tangible common equity	2,625,069				2,552,883				2,421,852				2,314,579				2,188,840
Plus: deferred tax - attributed to intangible assets	2,005				2,105				2,183				1,885				2,462
Total tangible common equity, net of tax	$	2,627,074			$	2,554,988			$	2,424,035			$	2,316,464			$	2,191,302
Total assets	$	26,324,245			$	25,314,785			$	23,792,846			$	23,109,486			$	22,176,147
Less: goodwill and intangible assets, net	297,994				298,381				298,768				299,155				299,553
Tangible assets	26,026,251				25,016,404				23,494,078				22,810,331				21,876,594
Plus: deferred tax - attributed to intangible assets	2,005				2,105				2,183				1,885				2,462
Total tangible assets, net of tax	$	26,028,256			$	25,018,509			$	23,496,261			$	22,812,216			$	21,879,056
Tangible common equity ratio (4)	10.1		%		10.2		%		10.3		%		10.2		%		10.0		%
Common shares outstanding	102,639				103,654				104,483				104,949				105,861
Tangible book value per share, net of tax (5)	$	25.60			$	24.65			$	23.20			$	22.07			$	20.70

(3), (4), (5)

See Non-GAAP Financial Measures footnotes.

Western Alliance Bancorporation and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Unaudited
Regulatory Capital
	Sept 30, 2019				Dec 31, 2018
	(in thousands)
Common Equity Tier 1:
Common equity	$	2,923,063			$	2,613,734
Less:
Non-qualifying goodwill and intangibles	295,908				296,769
Disallowed deferred tax asset	1,310				768
AOCI related adjustments	28,830				(47,055		)
Unrealized gain on changes in fair value liabilities	6,769				13,432
Common equity Tier 1 (6) (9)	$	2,590,246			$	2,349,820
Divided by: estimated risk-weighted assets (7) (9)	$	25,124,185			$	21,983,976
Common equity Tier 1 ratio (7) (9)	10.3		%		10.7		%
Common equity Tier 1 (6)(9)	2,590,246				2,349,820
Plus:
Trust preferred securities	81,500				81,500
Less:
Disallowed deferred tax asset	—				—
Unrealized gain on changes in fair value of liabilities	—				—
Tier 1 capital (6) (9)	$	2,671,746			$	2,431,320
Divided by: Tangible average assets	$	25,665,827			$	22,204,799
Tier 1 leverage ratio	10.4		%		10.9		%
Total Capital:
Tier 1 capital (6) (9)	$	2,671,746			$	2,431,320
Plus:
Subordinated debt	309,143				305,131
Qualifying allowance for credit losses	165,021				152,717
Other	8,991				8,188
Less: Tier 2 qualifying capital deductions	—				—
Tier 2 capital	$	483,155			$	466,036
Total capital	$	3,154,901			$	2,897,356
Total capital ratio	12.6		%		13.2		%
Classified assets to Tier 1 capital plus allowance for credit losses:
Classified assets	$	220,423			$	242,101
Divided by:
Tier 1 capital (6) (9)	2,671,746				2,431,320
Plus: Allowance for credit losses	165,021				152,717
Total Tier 1 capital plus allowance for credit losses	$	2,836,767			$	2,584,037
Classified assets to Tier 1 capital plus allowance (8) (9)	7.8		%		9.4		%

(6), (7), (8), (9)

See Non-GAAP Financial Measures footnotes.

Non-GAAP Financial Measures Footnotes
(1)		We believe these non-GAAP measurements provide a useful indication of the cash generating capacity of the Company.
(2)		We believe this non-GAAP measurement is a key indicator of the earnings power of the Company.
(3)		We believe this non-GAAP ratio provides a useful metric to measure the operating efficiency of the Company.
(4)		We believe this non-GAAP ratio provides an important metric with which to analyze and evaluate financial condition and capital strength.
(5)		We believe this non-GAAP measurement improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.
(6)		Under the current guidelines of the Federal Reserve and the Federal Deposit Insurance Corporation, common equity Tier 1 capital consists of common stock, retained earnings, and minority interests in certain subsidiaries, less most other intangible assets.
(7)		Common equity Tier 1 is often expressed as a percentage of risk-weighted assets. Under the risk-based capital framework, a bank's balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of the risk categories defined under new capital guidelines. The aggregated dollar amount in each category is then multiplied by the risk weighting assigned to that category. The resulting weighted values from each category are added together and this sum is the risk-weighted assets total that, as adjusted, comprises the denominator (risk-weighted assets) of the common equity Tier 1 ratio. Common equity Tier 1 is divided by the risk-weighted assets to determine the common equity Tier 1 ratio. We believe this non-GAAP ratio provides an important metric with which to analyze and evaluate financial condition and capital strength.
(8)		We believe this non-GAAP ratio provides an important regulatory metric to analyze asset quality.
(9)		Current quarter is preliminary until Call Report is filed.

 

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