Western Alliance Reports Third Quarter 2020 Financial Results

Western Alliance Bancorporation (NYSE:WAL):

THIRD QUARTER 2020 FINANCIAL RESULTS

Net income

Earnings per share

 

PPNR¹

 

Net interest margin

 

Efficiency ratio¹

 

Book value per
common share

$135.8 million

 

$1.36

 

$181.3 million

 

3.71%

 

39.7%

 

$31.98

 

 

 

 

 

$29.03¹, excluding

goodwill and intangibles

CEO COMMENTARY

“The flexibility of Western Alliance’s diversified business model drove the Company’s record third quarter performance,” said Kenneth A. Vecchione, President and Chief Executive Officer. “Our deep segment and product expertise enables us to pivot our business in response to a changing external environment and we continue to prove that we can achieve industry-leading profitability and growth, while maintaining prudent credit risk management. Net income of $135.8 million and earnings per share of $1.36 are each up over 45% from the prior quarter, benefiting from a decline in the provision for credit losses of $77.3 million as the macroeconomic outlook improved and the Company grew loans in low-risk asset classes. In addition, return on average tangible common equity¹ of 18.7% for the quarter continues to be among the highest in the industry.”

"The Company produced another quarter of sizable loan and deposit growth of $985 million and $1.3 billion, respectively. While deposit growth ($314 million over loan growth) provides a stable base for asset expansion in future quarters, it added transitory pressure on net interest margin, which declined 48 basis points from the prior quarter to 3.71%, largely as a result of excess liquidity that had not been fully deployed at quarter-end. Nonperforming assets to total assets remained stable at 0.47%, attributable to the Company’s timely credit mitigation actions that also resulted in a decline in loan deferrals to 5.0% of total loans. Capital levels also remain strong with a tangible common equity ratio¹ of 8.9% and a total ACL to funded loans ratio of 1.46%, excluding PPP loans.”

LINKED-QUARTER BASIS	YEAR-OVER-YEAR
FINANCIAL HIGHLIGHTS:
Net income of $135.8 million and earnings per share of $1.36, compared to $93.3 million and $0.93, respectively	Net income of $135.8 million and earnings per share of $1.36, up 6.6% and 9.7%, from $127.4 million and $1.24, respectively
Net revenue of $305.3 million, a decrease of 4.5%, or $14.3 million, compared to an increase in non-interest expenses of 8.1%, or $9.3 million	Net revenue of $305.3 million, an increase of 6.8%, or $19.5 million, compared to a decrease in non-interest expenses of $2.1 million
Pre-provision net revenue1 of $181.3 million, down $23.6 million from $204.9 million	Pre-provision net revenue1 of $181.3 million, up $21.5 million from $159.7 million
Effective tax rate of 18.50%, compared to 17.36%	Effective tax rate of 18.50%, compared to 18.30%
FINANCIAL POSITION RESULTS:
Total loans of $26.0 billion, up $985 million, or 15.6% annualized	Increase in total loans of $5.9 billion, or 29.1%
Total deposits of $28.8 billion, up $1.3 billion, or 18.8% annualized	Increase in total deposits of $6.4 billion, or 28.5%
Stockholders' equity of $3.2 billion, up $122 million	Increase in stockholders' equity of $301 million
LOANS AND ASSET QUALITY
Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.47%, flat from the prior quarter	Nonperforming assets to total assets of 0.47%, compared to 0.25%
Annualized net loan charge-offs to average loans outstanding of 0.13%, compared to 0.09%	Annualized net loan charge-offs (recoveries) to average loans outstanding of 0.13%, compared to (0.01)%
KEY PERFORMANCE METRICS
Net interest margin of 3.71%, compared to 4.19%	Net interest margin of 3.71%, compared to 4.41%
Return on average assets and on tangible common equity 1 of 1.66% and 18.73%, compared to 1.22% and 13.60%, respectively	Return on average assets and on tangible common equity 1 of 1.66% and 18.73%, compared to 1.94% and 19.41%, respectively
Tangible common equity ratio 1 of 8.9%, flat from the prior quarter	Tangible common equity ratio 1 of 8.9%, compared to 10.1%
Tangible book value per share 1, net of tax, of $29.03, an increase of 4.3% from $27.84	Tangible book value per share 1, net of tax, of $29.03, an increase of 13.4% from $25.60
Efficiency ratio1 of 39.7%, compared to 35.1%	Efficiency ratio 1 of 39.7%, compared to 43.2%

¹ See reconciliation of Non-GAAP Financial Measures.

Income Statement

Net interest income was $284.7 million in the third quarter 2020, a decrease of $13.7 million from $298.4 million in the second quarter 2020, and an increase of $18.3 million, or 6.9%, compared to the third quarter 2019. Net interest income was impacted by changes in prepayment assumptions on PPP loans, which resulted in reversal of $6.4 million of net deferred loan fee accretion on PPP loans recognized in the prior quarter and a decrease of $4.2 million in current quarter accretion.

Provision for credit losses² was $14.7 million in the third quarter 2020, a decrease of $77.3 million from $92.0 million in the second quarter 2020, and an increase of $10.9 million from $3.8 million in the third quarter 2019. The significant decrease in the provision for credit losses during the third quarter 2020 is due to improvement in economic forecasts relative to June 30, 2020 and concentration of loan growth in portfolio segments with lower expected loss rates. The CECL standard, adopted by the Company in the first quarter of 2020, changes the methodology for estimating credit losses on financial instruments from an incurred loss model to an expected total loss model. This results in the recognition of expected losses over the life of a loan at the time that the loan is originated, rather than after a loss has been incurred, which results in an acceleration in the timing of loss recognition. Further, as the Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses, the current uncertainty in the overall economy contributed to an increased provision for credit losses for 2020.

The Company’s net interest margin in the third quarter 2020 was 3.71%, a decrease from 4.19% in the second quarter 2020 and from 4.41% in the third quarter 2019. The decrease in net interest margin from the prior periods is largely a result of excess liquidity from deposit growth that has outpaced loan growth as well as a decrease in net deferred loan fee accretion on PPP loans from the prior quarter, as discussed above. These drivers of net interest margin compression during the quarter are expected to be temporary in nature and will taper off over time.

Non-interest income was $20.6 million for the third quarter 2020, compared to $21.3 million for the second quarter 2020, and $19.4 million for the third quarter 2019.

Net revenue was $305.3 million for the third quarter 2020, a decrease of $14.3 million, compared to $319.7 million for the second quarter 2020, and an increase of $19.5 million, or 6.8%, compared to $285.9 million for the third quarter 2019.

Non-interest expense was $124.1 million for the third quarter 2020, compared to $114.8 million for the second quarter 2020, and $126.2 million for the third quarter 2019. The Company’s efficiency ratio¹ was 39.7% for the third quarter 2020, compared to 35.1% in the second quarter 2020, and 43.2% for the third quarter 2019.

Income tax expense was $30.8 million for the third quarter 2020, compared to $19.6 million for the second quarter 2020, and $28.5 million for the third quarter 2019. The increase in income tax expense from the prior quarter is primarily the result of an increase in pre-tax income during the third quarter 2020 in conjunction with a marginal increase in the effective tax rate.

Net income was $135.8 million for the third quarter 2020, an increase of $42.5 million from $93.3 million for the second quarter 2020, and an increase of $8.4 million, or 6.6%, from $127.4 million for the third quarter 2019. Earnings per share was $1.36 for the third quarter 2020, compared to $0.93 for the second quarter 2020, and $1.24 for the third quarter 2019. As discussed above, the increase in net income and earnings per share for the third quarter 2020 compared to the prior quarter was driven by the decrease in the provision for credit losses.

The Company views its pre-provision net revenue¹ ("PPNR") as a key metric for assessing the Company’s earnings power, which it defines as net revenue less non-interest expense. For the third quarter 2020, the Company’s PPNR¹ was $181.3 million, down $23.6 million from $204.9 million in the second quarter 2020, and up $21.5 million from $159.7 million in the third quarter 2019. PPNR for the second quarter 2020 benefited from a $5.6 million gain related to restructuring of the Company's bank owned life insurance as well as recognition of $13.9 million in net deferred fee accretion and $5.6 million in cost deferrals related to PPP loans.

The Company had 1,885 full-time equivalent employees and 49 offices at September 30, 2020, compared to 1,851 employees and 47 offices at June 30, 2020, and 1,814 employees and 47 offices at September 30, 2019.

1		See reconciliation of Non-GAAP Financial Measures.
2		Upon adoption of CECL on January 1, 2020, Provision for credit losses has been modified to also include amounts related to unfunded loan commitments and investment securities. Prior period amounts have been restated to conform to the current presentation.

Balance Sheet

Gross loans totaled $26.0 billion at September 30, 2020, an increase of $985 million from $25.0 billion at June 30, 2020, and an increase of $5.9 billion from $20.2 billion at September 30, 2019. By loan type, the largest increases from the prior quarter include $892 million in commercial and industrial loans and $103 million in construction and land development loans. From September 30, 2019, the largest increases in the loan balance were driven by commercial and industrial loans of $4.9 billion (includes $1.7 billion of PPP loans), residential real estate loans of $525 million, and CRE non-owner occupied loans of $376 million. The Company's allowance for credit losses on loans consists of an allowance for funded loans and an allowance for unfunded loan commitments. At September 30, 2020, the allowance for loan losses to loans held for investment was 1.19%, compared to 1.24% at June 30, 2020, and 0.82% at September 30, 2019. The allowance for credit losses, which includes the allowance for unfunded loan commitments, to loans held for investment was 1.37% at September 30, 2020, compared to 1.39% at June 30, 2020, and 0.86% at September 30, 2019.

Deposits totaled $28.8 billion at September 30, 2020, an increase of $1.3 billion from $27.5 billion at June 30, 2020, and an increase of $6.4 billion from $22.4 billion at September 30, 2019. By deposit type, the largest increases from the prior quarter include $777 million from non-interest bearing demand deposits and $752 million from savings and money market accounts. These increases were offset by a decrease in certificates of deposit of $276 million. From September 30, 2019, deposits increased across most deposit types, with increases in non-interest bearing demand deposits of $4.3 billion, savings and money market accounts of $1.5 billion, and interest-bearing demand deposits of $1.0 billion. These increases were partially offset by a decrease in certificates of deposit of $416 million. Non-interest bearing deposits were $13.0 billion at September 30, 2020, compared to $12.2 billion at June 30, 2020, and $8.8 billion at September 30, 2019.

The table below shows the Company's deposit types as a percentage of total deposits:

		Sep 30, 2020			Jun 30, 2020			Sep 30, 2019
Non-interest bearing		45.1	%		44.4	%		39.0	%
Savings and money market		36.7			35.7			40.4
Interest-bearing demand		12.3			12.7			11.2
Certificates of deposit		5.9			7.2			9.4

The Company’s ratio of loans to deposits was 90.2% at September 30, 2020, compared to 90.9% at June 30, 2020, and 89.8% at September 30, 2019.

Borrowings were $10 million at September 30, 2020 and June 30, 2020, and zero at September 30, 2019. The increase in borrowings from September 30, 2019 is due to an increase in short-term borrowings from the FHLB.

Qualifying debt totaled $619 million at September 30, 2020, compared to $618 million at June 30, 2020, and $389 million at September 30, 2019. The increase in qualifying debt from September 30, 2019 is primarily due to the issuance of $225 million in subordinated debt in May 2020.

Stockholders’ equity was $3.2 billion at September 30, 2020, compared to $3.1 billion at June 30, 2020, and $2.9 billion at September 30, 2019. The increase in stockholders' equity from September 30, 2019 is primarily a function of net income, partially offset by share repurchases and dividends to shareholders as well as the adoption impact of CECL. During the third quarter 2020, the Company's Board of Directors approved a cash dividend of $0.25 per share. The dividend payment to shareholders totaled $25.2 million, and was paid on August 27, 2020.

At September 30, 2020, tangible common equity, net of tax, was 8.9% of tangible assets¹ and total capital was 13.0% of risk-weighted assets. The Company’s tangible book value per share¹ was $29.03 at September 30, 2020, up 13.4% from September 30, 2019.

Total assets increased 4.5% to $33.3 billion at September 30, 2020, from $31.9 billion at June 30, 2020, and increased 26.6% from $26.3 billion at September 30, 2019. The increase in total assets from the prior year was driven by organic loan and deposit growth.

Asset Quality

The provision for credit losses totaled $14.7 million for the third quarter 2020, compared to $92.0 million for the second quarter 2020, and $3.8 million for the third quarter 2019. Net loan charge-offs (recoveries) in the third quarter 2020 were $8.2 million, or 0.13% of average loans (annualized), compared to $5.5 million, or 0.09%, in the second quarter 2020, and $(0.6) million, or (0.01)%, in the third quarter 2019.

Nonaccrual loans increased $6.8 million to $146.5 million during the quarter and increased $96.1 million from September 30, 2019. Loans past due 90 days and still accruing interest were $28.1 million at September 30, 2020, compared to zero at June 30, 2020 and September 30, 2019. Loans past due 30-89 days and still accruing interest totaled $24.3 million at September 30, 2020, an increase from $9.3 million at June 30, 2020, and a decrease from $29.5 million at September 30, 2019.

Repossessed assets totaled $8.6 million at September 30, 2020, a decrease of $0.8 million from $9.4 million at June 30, 2020, and a decrease of $6.9 million from $15.5 million at September 30, 2019. Classified assets totaled $325.7 million at September 30, 2020, an increase of $27.2 million from $298.5 million at June 30, 2020, and an increase of $105.2 million from $220.4 million at September 30, 2019.

The ratio of classified assets to Tier 1 capital plus the allowance for credit losses, a common regulatory measure of asset quality, was 9.9% at September 30, 2020, compared to 9.5% at June 30, 2020, and 7.8% at September 30, 2019.

¹ See reconciliation of Non-GAAP Financial Measures.

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") segments provide 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 $11.2 billion at September 30, 2020, a decrease of $33 million during the quarter, and an increase of $1.5 billion during the last twelve months. The decline in loans during the quarter was driven by decreases in the Nevada and Southern California segments of $76 million and $46 million, respectively. These decreases were partially offset by increases in the Arizona and Northern California segments of $51 million and $38 million, respectively. During the last twelve months, each of the regional segments reported loan growth, with increases in the Northern California, Nevada, Arizona, and Southern California segments of $560 million, $433 million, $420 million, and $70 million, respectively. Total deposits for the regional segments were $19.5 billion, an increase of $1.5 billion during the quarter, and an increase of $4.3 billion during the last twelve months. The increase in deposits during the quarter was spread across all regional segments, with the largest increases in the Arizona and Southern California segments of $913 million and $478 million, respectively. The growth in deposits over the last twelve months was spread across all regional segments with increases in the Arizona, Southern California, Northern California, and Nevada segments of $2.6 billion, $749 million, $470 million, and $465 million, respectively.

Pre-tax income for the regional segments was $116.1 million for the three months ended September 30, 2020, an increase of $33.3 million from the three months ended June 30, 2020, and an increase of $12.1 million from the three months ended September 30, 2019. The increase in pre-tax income during the quarter was primarily attributable to increases in the Arizona and Southern California segments of $22.9 million and $9.5 million, respectively. These increases were partially offset by a decrease in the Nevada segment of $0.7 million. Pre-tax income from the three months ended September 30, 2019 was driven by increases in the Arizona and Northern California segments of $14.5 million and $3.2 million, respectively, which were partially offset by decreases in the Nevada and Southern California segments of $3.4 million and $2.1 million, respectively. For the nine months ended September 30, 2020, the regional segments reported total pre-tax income of $287.9 million, a decrease of $1.2 million compared to the nine months ended September 30, 2019. The decrease was driven by decreases in the Southern California and Nevada segments of $12.7 million and $4.6 million, respectively. These decreases were partially offset by increases in the Arizona and Northern California segments of $14.4 million and $1.6 million, respectively.

The NBL segments reported gross loan balances of $14.8 billion at September 30, 2020, an increase of $1.0 billion during the quarter, and an increase of $4.4 billion during the last twelve months. Each of the NBL segments reported loan growth during the quarter, with the largest increases in the Other NBLs and Technology & Innovation segments of $829 million and $123 million, respectively. During the last twelve months, each of the NBL segments reported loan growth, with the Other NBLs, Technology & Innovation, HFF, and Public & Nonprofit Finance segments contributing the largest increases of $3.1 billion, $952 million, $203 million, and $104 million, respectively. Total deposits for the NBL segments were $8.4 billion, an increase of $247 million during the quarter, and an increase of $2.0 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 $230 million. The increase in deposits of $2.0 billion during the last twelve months is attributable to growth in the Technology & Innovation and HOA Services segments of $1.4 billion and $646 million, respectively.

Pre-tax income for the NBL segments was $109.1 million for the three months ended September 30, 2020, an increase of $34.3 million from the three months ended June 30, 2020, and an increase of $38.0 million from the three months ended September 30, 2019. The increase in pre-tax income from the prior quarter was driven by increases in the Technology & Innovation and HFF segments of $25.4 million and $16.1 million, respectively. These increases were partially offset by decreases in the Other NBLs and HOA Services segments of $4.7 million and $3.6 million, respectively. The drivers of the increase in pre-tax income from the same period in the prior year were the Technology & Innovation and Other NBLs segments, which had increases of $22.3 million and $17.8 million, respectively. Pre-tax income for the NBL segments for the nine months ended September 30, 2020 totaled $231.9 million, an increase of $41.2 million compared to the nine months ended September 30, 2019. The Other NBLs, Technology & Innovation, and HOA Services segments each reported an increase in pre-tax income of $47.4 million, $18.8 million, and $3.3 million, respectively. These increases in pre-tax income were offset by decreases in the HFF and Public & Nonprofit Finance segments of $24.4 million and $4.0 million, respectively.

Conference Call and Webcast

Western Alliance Bancorporation will host a conference call and live webcast to discuss its third quarter 2020 financial results at 12:00 p.m. ET on Friday, October 23, 2020. Participants may access the call by dialing 1-888-317-6003 and using passcode 4467607 or via live audio webcast using the website link https://services.choruscall.com/links/wal201016.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 23rd through 9:00 a.m. ET November 23rd by dialing 1-877-344-7529 passcode: 10148637.

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 of 2020, the Company adopted the Accounting Standards Updates ("ASU") related to credit losses, which include ASU 2016-13, Measurement of Credit Losses on Financial Instruments, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments - Credit Losses, and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses.

The new standards significantly change the impairment model for most financial assets that are measured at amortized cost, including off-balance sheet credit exposures, from an incurred loss model to an expected loss model. The amendments in ASU 2016-13 require that an organization measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted the amendments within ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company recorded a cumulative effect adjustment to retained earnings, which resulted in a total decrease to retained earnings of $24.9 million as of January 1, 2020. This adjustment was due primarily to expected total losses under the new model in the Company's loan portfolio and its off-balance sheet credit exposures.

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, and the impact of the COVID-19 pandemic and related economic conditions. 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, 2019 as filed with the Securities and Exchange Commission; the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, or other unusual and infrequently occurring events; 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 including in response to the COVID-19 pandemic such as the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and the rules and regulations that may be promulgated thereunder; or changes in accounting principles, policies or guidelines (including changes related to CECL); 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 $30 billion in assets, Western Alliance Bancorporation (NYSE:WAL) is one of the country’s top-performing banking companies. The company has ranked in the top 10 on the Forbes “Best Banks in America” list for five consecutive years, 2016-2020, and was named #1 best-performing of the 50 largest public U.S. banks for 2019 by S&P Global Market Intelligence. Its primary subsidiary, Western Alliance Bank, Member FDIC, helps business clients realize their 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,
													2020				2019				Change %
													(in millions)
Total assets													$	33,335.5			$	26,324.2			26.6	%
Gross loans, net of deferred fees													26,014.0				20,152.8				29.1
Investment securities													4,701.1				4,148.1				13.3
Total deposits													28,843.4				22,440.8				28.5
Qualifying debt													618.8				388.9				59.1
Stockholders' equity													3,224.0				2,923.0				10.3
Tangible common equity, net of tax (1)													2,926.7				2,627.1				11.4
Selected Income Statement Data:
		For the Three Months Ended September 30,											For the Nine Months Ended September 30,
		2020				2019				Change %			2020				2019				Change %
		(in thousands, except per share data)											(in thousands, except per share data)
Interest income		$	304,843			$	315,608			(3.4)	%		$	930,297			$	909,624			2.3	%
Interest expense		20,105				49,186				(59.1)			78,139				141,185				(44.7)
Net interest income		284,738				266,422				6.9			852,158				768,439				10.9
Provision for credit losses		14,661				3,803				NM			157,837				15,303				NM
Net interest income after provision for credit losses		270,077				262,619				2.8			694,321				753,136				(7.8)
Non-interest income		20,606				19,441				6.0			46,985				49,069				(4.2)
Non-interest expense		124,092				126,152				(1.6)			359,372				352,279				2.0
Income before income taxes		166,591				155,908				6.9			381,934				449,926				(15.1)
Income tax expense		30,822				28,533				8.0			68,929				78,819				(12.5)
Net income		$	135,769			$	127,375			6.6			$	313,005			$	371,107			(15.7)
Diluted earnings per share		$	1.36			$	1.24			9.7			$	3.11			$	3.59			(13.4)

(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,
		2020				2019					Change %					2020				2019				Change %
Diluted earnings per share		$	1.36			$	1.24				9.7		%			$	3.11			$	3.59			(13.4	)	%
Book value per common share		31.98				28.48					12.3
Tangible book value per share, net of tax (1)		29.03				25.60					13.4
Average shares outstanding (in thousands):
Basic		99,850				102,041					(2.1	)				100,322				103,024				(2.6	)
Diluted		100,059				102,451					(2.3	)				100,574				103,468				(2.8	)
Common shares outstanding		100,825				102,639					(1.8	)
Selected Performance Ratios:
Return on average assets (2)		1.66		%		1.94			%		(14.4	)	%			1.38		%		2.03		%		(32.0	)	%
Return on average tangible common equity (1, 2)		18.73				19.41					(3.5	)				14.90				19.86				(25.0	)
Net interest margin (2)		3.71				4.41					(15.9	)				4.03				4.56				(11.6	)
Efficiency ratio - tax equivalent basis (1)		39.71				43.16					(8.0	)				39.07				42.13				(7.3	)
Loan to deposit ratio		90.19				89.80					0.4
Asset Quality Ratios:
Net charge-offs (recoveries) to average loans outstanding (2)		0.13		%		(0.01		)	%		(1,400.0	)				0.06		%		0.02		%		NM
Nonaccrual loans to funded loans		0.56				0.25					NM
Nonaccrual loans and repossessed assets to total assets		0.47				0.25					88.0
Allowance for loan losses to funded loans		1.19				0.82					45.1
Allowance for loan losses to nonaccrual loans		212.03				327.83					(35.3	)

Capital Ratios:
		Sep 30, 2020			Jun 30, 2020			Sep 30, 2019
Tangible common equity (1)		8.9	%		8.9	%		10.1	%
Common Equity Tier 1 (3)		10.0			10.2			10.3
Tier 1 Leverage ratio (3)		9.3			9.5			10.4
Tier 1 Capital (3)		10.3			10.5			10.6
Total Capital (3)		13.0			13.4			12.6

(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, 2020 are preliminary.
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,
		2020				2019				2020				2019
		(dollars in thousands, except per share data)
Interest income:
Loans		$	276,623			$	278,932			$	843,085			$	808,099
Investment securities		27,403				29,660				83,024				87,694
Other		817				7,016				4,188				13,831
Total interest income		304,843				315,608				930,297				909,624
Interest expense:
Deposits		12,215				43,354				59,736				121,030
Qualifying debt		7,872				5,785				17,833				17,898
Borrowings		18				47				570				2,257
Total interest expense		20,105				49,186				78,139				141,185
Net interest income		284,738				266,422				852,158				768,439
Provision for credit losses (1)		14,661				3,803				157,837				15,303
Net interest income after provision for credit losses		270,077				262,619				694,321				753,136
Non-interest income:
Service charges and fees		5,913				5,888				17,447				17,121
Card income		1,873				1,729				4,768				5,195
Foreign currency income		1,755				1,321				4,242				3,564
Income from bank owned life insurance		1,345				979				8,977				2,938
Income from equity investments		1,186				3,742				6,263				6,619
Lending related income and gains (losses) on sale of loans, net		705				539				2,072				1,343
Gain (loss) on sales of investment securities		—				3,152				230				3,152
Fair value gain (loss) adjustments on assets measured at fair value, net		5,882				222				(986)				4,628
Other		1,947				1,869				3,972				4,509
Total non-interest income		20,606				19,441				46,985				49,069
Non-interest expenses:
Salaries and employee benefits		78,757				70,978				220,455				205,328
Legal, professional, and directors' fees		10,034				8,248				31,105				26,885
Occupancy		9,426				8,263				25,752				24,251
Data processing		8,864				7,095				26,044				20,563
Deposit costs		3,246				11,537				14,098				24,930
Insurance		3,064				3,071				9,506				8,691
Loan and repossessed asset expenses		1,771				1,953				5,280				5,419
Business development		950				1,443				4,062				4,972
Marketing		848				842				2,621				2,640
Card expense		505				548				1,631				1,892
Intangible amortization		373				387				1,120				1,161
Net loss (gain) on sales and valuations of repossessed and other assets		123				3,379				(1,335)				2,856
Other		6,131				8,408				19,033				22,691
Total non-interest expense		124,092				126,152				359,372				352,279
Income before income taxes		166,591				155,908				381,934				449,926
Income tax expense		30,822				28,533				68,929				78,819
Net income		$	135,769			$	127,375			$	313,005			$	371,107
Earnings per share:
Diluted shares		100,059				102,451				100,574				103,468
Diluted earnings per share		$	1.36			$	1.24			$	3.11			$	3.59

(1)

Upon adoption of CECL on January 1, 2020, provision for credit losses has been modified to also include amounts related to unfunded loan commitments and investment securities. Prior period amounts have been restated to conform to the current presentation.

Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Income Statements
Unaudited
		Three Months Ended
		Sep 30, 2020				Jun 30, 2020					Mar 31, 2020					Dec 31, 2019				Sep 30, 2019
		(in thousands, except per share data)
Interest income:
Loans		$	276,623			$	289,576				$	276,886				$	284,971			$	278,932
Investment securities		27,403				28,254					27,367					28,194				29,660
Other		817				408					2,963					2,255				7,016
Total interest income		304,843				318,238					307,216					315,420				315,608
Interest expense:
Deposits		12,215				15,005					32,516					37,374				43,354
Qualifying debt		7,872				4,712					5,249					5,492				5,785
Borrowings		18				121					431					581				47
Total interest expense		20,105				19,838					38,196					43,447				49,186
Net interest income		284,738				298,400					269,020					271,973				266,422
Provision for credit losses (1)		14,661				92,000					51,176					3,964				3,803
Net interest income after provision for credit losses		270,077				206,400					217,844					268,009				262,619
Non-interest income:
Service charges and fees		5,913				5,130					6,404					6,233				5,888
Card income		1,873				1,178					1,717					1,784				1,729
Foreign currency income		1,755				1,159					1,328					1,423				1,321
Income from bank owned life insurance		1,345				6,670					962					963				979
Income from equity investments		1,186				1,311					3,766					1,671				3,742
Lending related income and gains (losses) on sale of loans, net		705				719					648					1,815				539
Gain (loss) on sales of investment securities		—				158					72					—				3,152
Fair value gain (loss) adjustments on assets measured at fair value, net		5,882				4,432					(11,300		)			491				222
Other		1,947				513					1,512					1,647				1,869
Total non-interest income		20,606				21,270					5,109					16,027				19,441
Non-interest expenses:
Salaries and employee benefits		78,757				69,634					72,064					73,946				70,978
Legal, professional, and directors' fees		10,034				10,669					10,402					10,124				8,248
Occupancy		9,426				8,101					8,225					8,256				8,263
Data processing		8,864				8,577					8,603					10,014				7,095
Deposit costs		3,246				3,514					7,338					6,789				11,537
Insurance		3,064				3,444					2,998					3,233				3,071
Loan and repossessed asset expenses		1,771				2,047					1,462					2,152				1,953
Business development		950				831					2,281					2,071				1,443
Marketing		848				869					904					1,559				842
Card expense		505				383					743					454				548
Intangible amortization		373				374					373					386				387
Net loss (gain) on sales and valuations of repossessed and other assets		123				(6		)			(1,452		)			962				3,379
Other		6,131				6,362					6,540					9,789				8,408
Total non-interest expense		124,092				114,799					120,481					129,735				126,152
Income before income taxes		166,591				112,871					102,472					154,301				155,908
Income tax expense		30,822				19,599					18,508					26,236				28,533
Net income		$	135,769			$	93,272				$	83,964				$	128,065			$	127,375
Earnings per share:
Diluted shares		100,059				99,993					101,675					102,138				102,451
Diluted earnings per share		$	1.36			$	0.93				$	0.83				$	1.25			$	1.24

(1)

Upon adoption of CECL on January 1, 2020, provision for credit losses has been modified to also include amounts related to unfunded loan commitments and investment securities. Prior period amounts have been restated to conform to the current presentation.

Western Alliance Bancorporation and Subsidiaries
Five Quarter Condensed Consolidated Balance Sheets
Unaudited
		Sep 30, 2020					Jun 30, 2020					Mar 31, 2020					Dec 31, 2019					Sep 30, 2019
		(in millions)
Assets:
Cash and due from banks		$	1,418.7				$	1,518.5				$	415.7				$	434.6				$	872.1
Investment securities		4,701.1					4,193.8					4,355.3					4,036.6					4,148.1
Loans held for sale		20.8					20.2					20.9					21.8					21.8
Loans held for investment:
Commercial and industrial		13,648.6					12,756.8					11,204.3					9,382.0					8,707.8
Commercial real estate - non-owner occupied		5,407.4					5,344.3					5,292.7					5,245.6					5,031.3
Commercial real estate - owner occupied		2,213.5					2,257.1					2,289.0					2,316.9					2,299.8
Construction and land development		2,300.5					2,197.5					2,059.4					1,952.2					2,155.6
Residential real estate		2,387.1					2,404.8					2,239.7					2,147.7					1,862.5
Consumer		36.1					48.7					60.2					57.1					74.0
Gross loans, net of deferred fees		25,993.2					25,009.2					23,145.3					21,101.5					20,131.0
Allowance for credit losses		(310.5		)			(310.5		)			(235.3		)			(167.8		)			(165.0		)
Loans, net		25,682.7					24,698.7					22,910.0					20,933.7					19,966.0
Premises and equipment, net		128.3					127.8					125.9					125.8					125.0
Operating lease right-of-use asset		71.4					70.3					72.3					72.6					74.5
Other assets acquired through foreclosure, net		8.6					9.4					10.6					13.9					15.5
Bank owned life insurance		175.5					174.9					175.0					174.0					173.1
Goodwill and other intangibles, net		299.0					296.9					297.2					297.6					298.0
Other assets		829.4					795.9					775.3					711.3					630.1
Total assets		$	33,335.5				$	31,906.4				$	29,158.2				$	26,821.9				$	26,324.2
Liabilities and Stockholders' Equity:
Liabilities:
Deposits
Non-interest bearing demand deposits		$	13,013.0				$	12,236.0				$	9,886.5				$	8,537.9				$	8,755.7
Interest bearing:
Demand		3,554.6					3,508.1					3,578.8					2,760.9					2,509.4
Savings and money market		10,574.9					9,823.2					8,978.1					9,120.7					9,058.4
Certificates of deposit		1,700.9					1,977.3					2,387.3					2,377.0					2,117.3
Total deposits		28,843.4					27,544.6					24,830.7					22,796.5					22,440.8
Customer repurchase agreements		19.7					25.4					23.0					16.7					15.0
Total customer funds		28,863.1					27,570.0					24,853.7					22,813.2					22,455.8
Borrowings		10.0					10.0					308.0					—					—
Qualifying debt		618.8					617.7					389.9					393.6					388.9
Operating lease liability		78.6					76.9					78.7					78.1					79.8
Accrued interest payable and other liabilities		541.0					529.4					528.3					520.3					476.7
Total liabilities		30,111.5					28,804.0					26,158.6					23,805.2					23,401.2
Stockholders' Equity:
Common stock and additional paid-in capital		1,312.4					1,306.3					1,300.3					1,311.4					1,305.5
Retained earnings		1,833.0					1,722.4					1,661.8					1,680.3					1,581.9
Accumulated other comprehensive income		78.6					73.7					37.5					25.0					35.6
Total stockholders' equity		3,224.0					3,102.4					2,999.6					3,016.7					2,923.0
Total liabilities and stockholders' equity		$	33,335.5				$	31,906.4				$	29,158.2				$	26,821.9				$	26,324.2

Western Alliance Bancorporation and Subsidiaries
Changes in the Allowance For Credit Losses on Loans
Unaudited
		Three Months Ended
		Sep 30, 2020				Jun 30, 2020					Mar 31, 2020					Dec 31, 2019					Sep 30, 2019
		(in thousands)
Allowance for loan losses
Balance, beginning of period		$	310,550			$	235,329				$	167,797				$	165,021				$	160,409
Beginning balance adjustment from adoption of CECL		—				—					19,128					—					—
Provision for credit losses (1)		8,204				80,685					45,241					4,000					4,000
Recoveries of loans previously charged-off:
Commercial and industrial		212				586					1,299					744					2,549
Commercial real estate - non-owner occupied		—				(365		)			1,931					4					—
Commercial real estate - owner occupied		5				3					4					5					8
Construction and land development		6				7					10					10					17
Residential real estate		355				18					12					161					131
Consumer		1				10					4					6					6
Total recoveries		579				259					3,260					930					2,711
Loans charged-off:
Commercial and industrial		7,137				4,795					97					2,028					1,950
Commercial real estate - non-owner occupied		1,246				885					—					—					—
Commercial real estate - owner occupied		83				43					—					—					139
Construction and land development		—				—					—					—					—
Residential real estate		307				—					—					—					9
Consumer		—				—					—					126					1
Total loans charged-off		8,773				5,723					97					2,154					2,099
Net loan charge-offs (recoveries)		8,194				5,464					(3,163		)			1,224					(612		)
Balance, end of period		$	310,560			$	310,550				$	235,329				$	167,797				$	165,021
Allowance for unfunded loan commitments
Balance, beginning of period		$	36,292			$	29,644				$	8,955				$	8,991				$	9,188
Beginning balance adjustment from adoption of CECL		—				—					15,089					—					—
Provision for credit losses (1)		8,142				6,648					5,600					(36		)			(197		)
Balance, end of period (2)		$	44,434			$	36,292				$	29,644				$	8,955				$	8,991
Components of the allowance for credit losses on loans
Allowance for loan losses		$	310,560			$	310,550				$	235,329				$	167,797				$	165,021
Allowance for unfunded loan commitments		44,434				36,292					29,644					8,955					8,991
Total allowance for credit losses on loans		$	354,994			$	346,842				$	264,973				$	176,752				$	174,012
Net charge-offs (recoveries) to average loans - annualized		0.13		%		0.09			%		(0.06		)	%		0.02			%		(0.01		)	%
Allowance for loan losses to funded loans		1.19		%		1.24			%		1.02			%		0.80			%		0.82			%
Allowance for credit losses to funded loans		1.37				1.39					1.14					0.84					0.86
Allowance for loan losses to nonaccrual loans		212.03				222.26					271.83					299.81					327.83
Allowance for credit losses to nonaccrual loans		242.36				248.24					306.07					315.81					345.69

(1)		Upon adoption of CECL on January 1, 2020, the provision for credit losses presented in the income statement has been modified to include amounts related to unfunded loan commitments and investment securities. The above tables reflect the provision for credit losses on funded and unfunded loans. A recovery of credit losses on investment securities totaled $1.7 million, resulting in an ending allowance for credit losses on investment securities of $6.0 million.
(2)		The allowance for unfunded loan commitments is included as part of accrued interest payable and other liabilities on the balance sheet.

Western Alliance Bancorporation and Subsidiaries
Asset Quality Metrics
Unaudited
		Three Months Ended
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
		(in thousands)
Nonaccrual loans		$	146,472			$	139,721			$	86,573			$	55,968			$	50,338
Nonaccrual loans to funded loans		0.56		%		0.56		%		0.37		%		0.27		%		0.25		%
Repossessed assets		$	8,591			$	9,424			$	10,647			$	13,850			$	15,483
Nonaccrual loans and repossessed assets to total assets		0.47		%		0.47		%		0.33		%		0.26		%		0.25		%
Loans past due 90 days, still accruing		$	28,129			$	—			$	—			$	—			$	—
Loans past due 90 days and still accruing to funded loans		0.11		%		—		%		—		%		—		%		—		%
Loans past due 30 to 89 days, still accruing		$	24,259			$	9,267			$	38,461			$	14,479			$	29,502
Loans past due 30 to 89 days, still accruing to funded loans		0.09		%		0.04		%		0.17		%		0.07		%		0.15		%
Special mention loans		$	476,839			$	395,537			$	104,220			$	180,479			$	233,835
Special mention loans to funded loans		1.83		%		1.58		%		0.45		%		0.86		%		1.16		%
Classified loans on accrual		$	170,546			$	149,298			$	149,812			$	91,286			$	139,576
Classified loans on accrual to funded loans		0.66		%		0.60		%		0.65		%		0.43		%		0.69		%
Classified assets		$	325,659			$	298,493			$	247,082			$	171,246			$	220,423
Classified assets to total assets		0.98		%		0.94		%		0.85		%		0.64		%		0.84		%

Western Alliance Bancorporation and Subsidiaries
Analysis of Average Balances, Yields and Rates
Unaudited
		Three Months Ended
		September 30, 2020												June 30, 2020
		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		$	12,687.9				$	130,041			4.17	%		12,318.3					$	141,885			4.73	%
CRE - non-owner occupied		5,393.1					63,813				4.72			5,345.0					65,609				4.95
CRE - owner occupied		2,232.7					26,645				4.85			2,273.7					27,517				4.97
Construction and land development		2,209.3					32,293				5.83			2,128.5					30,900				5.86
Residential real estate		2,396.0					23,358				3.88			2,329.4					22,970				3.97
Consumer		38.5					473				4.89			53.7					695				5.21
Loans held for sale		20.3					—				—			21.7					—				—
Total loans (1), (2), (3)		24,977.8					276,623				4.47			24,470.3					289,576				4.82
Securities:
Securities - taxable		2,811.6					14,769				2.09			2,781.3					16,254				2.35
Securities - tax-exempt		1,556.4					12,634				4.07			1,403.3					12,000				4.34
Total securities (1)		4,368.0					27,403				2.79			4,184.6					28,254				3.02
Cash and other		1,926.4					817				0.17			671.4					408				0.24
Total interest earning assets		31,272.2					304,843				3.97			29,326.3					318,238				4.46
Non-interest earning assets
Cash and due from banks		163.8												162.0
Allowance for credit losses		(325.0		)										(271.2		)
Bank owned life insurance		175.0												186.6
Other assets		1,237.4												1,221.8
Total assets		$	32,523.4											$	30,625.5
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	3,636.3				$	1,463			0.16	%		$	3,495.4				$	1,565			0.18	%
Savings and money market		10,170.1					5,661				0.22			9,428.4					5,564				0.24
Certificates of deposit		1,845.5					5,091				1.10			2,150.5					7,876				1.47
Total interest-bearing deposits		15,651.9					12,215				0.31			15,074.3					15,005				0.40
Short-term borrowings		36.0					18				0.20			267.4					121				0.18
Qualifying debt		616.2					7,872				5.08			489.0					4,712				3.88
Total interest-bearing liabilities		16,304.1					20,105				0.49			15,830.7					19,838				0.50
Interest cost of funding earning assets											0.26												0.27
Non-interest-bearing liabilities
Non-interest-bearing demand deposits		12,422.2												11,130.0
Other liabilities		617.0												608.7
Stockholders’ equity		3,180.1												3,056.1
Total liabilities and stockholders' equity		$	32,523.4											$	30,625.5
Net interest income and margin (4)							$	284,738			3.71	%							$	298,400			4.19	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $7.2 million and $7.0 million for the three months ended September 30, 2020 and June 30, 2020, respectively.
(2)		Included in the yield computation are net loan fees of $18.2 million and $27.8 million for the three months ended September 30, 2020 and June 30, 2020, respectively.
(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, 2020												September 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		$	12,687.9				$	130,041			4.17	%		$	8,423.0				$	118,332			5.72	%
CRE - non-owner occupied		5,393.1					63,813				4.72			4,722.2					69,421				5.85
CRE - owner occupied		2,232.7					26,645				4.85			2,259.6					30,099				5.38
Construction and land development		2,209.3					32,293				5.83			2,226.3					39,177				7.00
Residential real estate		2,396.0					23,358				3.88			1,701.6					20,913				4.88
Consumer		38.5					473				4.89			69.5					990				5.65
Loans held for sale		20.3					—				—			0.2					—				—
Total loans (1), (2), (3)		24,977.8					276,623				4.47			19,402.4					278,932				5.79
Securities:
Securities - taxable		2,811.6					14,769				2.09			3,073.1					20,575				2.66
Securities - tax-exempt		1,556.4					12,634				4.07			1,062.1					9,085				4.30
Total securities (1)		4,368.0					27,403				2.79			4,135.2					29,660				3.08
Cash and other		1,926.4					817				0.17			1,009.9					7,016				2.76
Total interest earning assets		31,272.2					304,843				3.97			24,547.5					315,608				5.20
Non-interest earning assets
Cash and due from banks		163.8												346.8
Allowance for credit losses		(325.0		)										(162.6		)
Bank owned life insurance		175.0												172.5
Other assets		1,237.4												1,094.2
Total assets		$	32,523.4											$	25,998.4
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	3,636.3				$	1,463			0.16	%		$	2,488.6				$	5,061			0.81	%
Savings and money market		10,170.1					5,661				0.22			8,456.5					26,608				1.25
Certificates of deposit		1,845.5					5,091				1.10			2,250.4					11,685				2.06
Total interest-bearing deposits		15,651.9					12,215				0.31			13,195.5					43,354				1.30
Short-term borrowings		36.0					18				0.20			17.5					47				1.07
Qualifying debt		616.2					7,872				5.08			387.8					5,785				5.92
Total interest-bearing liabilities		16,304.1					20,105				0.49			13,600.8					49,186				1.43
Interest cost of funding earning assets											0.26												0.79
Non-interest-bearing liabilities
Non-interest-bearing demand deposits		12,422.2												8,916.6
Other liabilities		617.0												579.6
Stockholders’ equity		3,180.1												2,901.4
Total liabilities and stockholders' equity		$	32,523.4											$	25,998.4
Net interest income and margin (4)							$	284,738			3.71	%							$	266,422			4.41	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $7.2 million and $6.4 million for the three months ended September 30, 2020 and 2019, respectively.
(2)		Included in the yield computation are net loan fees of $18.2 million and $13.4 million for the three months ended September 30, 2020 and 2019, respectively.
(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, 2020												September 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		$	11,556.5				$	396,578			4.69	%		$	7,955.6				$	340,808			5.88	%
CRE - non-owner occupied		5,325.6					198,335				4.99			4,468.4					199,372				5.98
CRE - owner occupied		2,262.4					83,353				5.02			2,279.9					90,113				5.39
Construction and land development		2,115.0					95,451				6.05			2,210.2					118,687				7.20
Residential real estate		2,294.9					67,122				3.91			1,535.9					56,275				4.90
Consumer		49.2					1,922				5.22			64.5					2,844				5.90
Loans held for sale		21.3					324				2.03			0.1					—				—
Total loans (1), (2), (3)		23,624.9					843,085				4.83			18,514.6					808,099				5.92
Securities:
Securities - taxable		2,826.0					48,271				2.28			2,865.6					60,641				2.83
Securities - tax-exempt		1,376.6					34,753				4.25			979.7					27,053				4.62
Total securities (1)		4,202.6					83,024				2.93			3,845.3					87,694				3.29
Cash and other		1,136.2					4,188				0.49			700.7					13,831				2.64
Total interest earning assets		28,963.7					930,297				4.39			23,060.6					909,624				5.38
Non-interest earning assets
Cash and due from banks		173.9												225.9
Allowance for credit losses		(263.2		)										(157.8		)
Bank owned life insurance		178.7												171.4
Other assets		1,206.1												1,098.6
Total assets		$	30,259.2											$	24,398.7
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	3,410.9				$	7,530			0.29	%		$	2,511.9				$	16,194			0.86	%
Savings and money market		9,546.3					28,875				0.40			7,854.9					73,283				1.25
Certificates of deposit		2,113.0					23,331				1.47			2,114.6					31,553				1.99
Total interest-bearing deposits		15,070.2					59,736				0.53			12,481.4					121,030				1.30
Short-term borrowings		150.1					570				0.51			129.4					2,257				2.33
Qualifying debt		500.5					17,833				4.76			376.2					17,898				6.36
Total interest-bearing liabilities		15,720.8					78,139				0.66			12,987.0					141,185				1.45
Interest cost of funding earning assets											0.36												0.82
Non-interest-bearing liabilities
Non-interest-bearing demand deposits		10,813.2												8,118.8
Other liabilities		622.9												495.6
Stockholders’ equity		3,102.3												2,797.3
Total liabilities and stockholders' equity		$	30,259.2											$	24,398.7
Net interest income and margin (4)							$	852,158			4.03	%							$	768,439			4.56	%

(1)		Yields on loans and securities have been adjusted to a tax equivalent basis. The tax equivalent adjustment was $20.6 million and $18.7 million for the nine months ended September 30, 2020 and 2019, respectively.
(2)		Included in the yield computation are net loan fees of $61.5 million and $37.9 million for the nine months ended September 30, 2020 and 2019, respectively.
(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, 2020:		(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities		$	6,119.8				$	1.5				$	8.8				$	1.8				$	2.3
Loans, net of deferred loan fees and costs		26,014.0					4,388.1					2,612.2					2,376.7					1,785.8
Less: allowance for credit losses		(310.5		)			(57.0		)			(36.4		)			(31.5		)			(19.3		)
Total loans		25,703.5					4,331.1					2,575.8					2,345.2					1,766.5
Other assets acquired through foreclosure, net		8.6					—					8.5					—					—
Goodwill and other intangible assets, net		299.0					—					23.2					—					153.9
Other assets		1,204.6					47.8					60.1					16.2					20.1
Total assets		$	33,335.5				$	4,380.4				$	2,676.4				$	2,363.2				$	1,942.8
Liabilities:
Deposits		$	28,843.4				$	8,541.5				$	4,733.9				$	3,502.0				$	2,741.1
Borrowings and qualifying debt		628.8					—					—					—					—
Other liabilities		639.3					28.7					18.8					8.6					20.0
Total liabilities		30,111.5					8,570.2					4,752.7					3,510.6					2,761.1
Allocated equity:		3,224.0					576.4					343.7					281.2					361.5
Total liabilities and stockholders' equity		$	33,335.5				$	9,146.6				$	5,096.4				$	3,791.8				$	3,122.6
Excess funds provided (used)		—					4,766.2					2,420.0					1,428.6					1,179.8
No. of offices		49					10					16					9					3
No. of full-time equivalent employees		1,885					114					88					122					119
Income Statement:
Three Months Ended September 30, 2020:		(in thousands)
Net interest income		$	284,738				$	83,492				$	46,625				$	35,656				$	28,353
Provision for (recovery of) credit losses		14,661					9,830					8,548					5,213					1,856
Net interest income after provision for credit losses		270,077					73,662					38,077					30,443					26,497
Non-interest income		20,606					1,771					2,391					1,186					2,381
Non-interest expense		(124,092		)			(17,644		)			(15,800		)			(14,020		)			(12,885		)
Income (loss) before income taxes		166,591					57,789					24,668					17,609					15,993
Income tax expense (benefit)		30,822					14,447					5,180					4,930					4,478
Net income		$	135,769				$	43,342				$	19,488				$	12,679				$	11,515
Nine Months Ended September 30, 2020:		(in thousands)
Net interest income		$	852,158				$	229,701				$	139,328				$	104,348				$	85,345
Provision for (recovery of) credit losses		157,837					46,623					25,015					23,750					12,680
Net interest income after provision for credit losses		694,321					183,078					114,313					80,598					72,665
Non-interest income		46,985					4,943					7,355					3,269					6,450
Non-interest expense		(359,372		)			(58,674		)			(44,414		)			(43,216		)			(38,460		)
Income (loss) before income taxes		381,934					129,347					77,254					40,651					40,655
Income tax expense (benefit)		68,929					32,207					16,164					11,241					11,340
Net income		$	313,005				$	97,140				$	61,090				$	29,410				$	29,315

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, 2020:		(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities		$	—				$	—				$	—				$	—				$	26.6				$	6,078.8
Loans, net of deferred loan fees and costs		280.0					1,686.7					2,329.3					2,099.3					8,451.8					4.1
Less: allowance for credit losses		(2.3		)			(17.9		)			(41.5		)			(40.7		)			(63.9		)			—
Total loans		277.7					1,668.8					2,287.8					2,058.6					8,387.9					4.1
Other assets acquired through foreclosure, net		—					—					—					—					0.1					—
Goodwill and other intangible assets, net		—					—					119.3					0.1					2.5					—
Other assets		5.4					11.9					9.2					33.4					110.3					890.2
Total assets		$	283.1				$	1,680.7				$	2,416.3				$	2,092.1				$	8,527.4				$	6,973.1
Liabilities:
Deposits		$	3,697.9				$	—				$	4,646.4				$	—				$	61.4				$	919.2
Borrowings and qualifying debt		—					—					—					—					—					628.8
Other liabilities		(2.7		)			91.8					5.4					0.9					56.8					411.0
Total liabilities		3,695.2					91.8					4,651.8					0.9					118.2					1,959.0
Allocated equity:		104.9					130.3					397.5					167.5					673.2					187.8
Total liabilities and stockholders' equity		$	3,800.1				$	222.1				$	5,049.3				$	168.4				$	791.4				$	2,146.8
Excess funds provided (used)		3,517.0					(1,458.6		)			2,633.0					(1,923.7		)			(7,736.0		)			(4,826.3		)
No. of offices		1					1					10					1					5					(7		)
No. of full-time equivalent employees		73					11					79					16					93					1,170
Income Statement:
Three Months Ended September 30, 2020:		(in thousands)
Net interest income		$	22,184				$	2,800				$	48,013				$	12,536				$	46,582				$	(41,503	)
Provision for (recovery of) credit losses		(138		)			781					(9,048		)			2,200					(2,706		)			(1,875		)
Net interest income after provision for credit losses		22,322					2,019					57,061					10,336					49,288					(39,628		)
Non-interest income		134					—					3,126					—					2,924					6,693
Non-interest expense		(9,896		)			(1,724		)			(11,530		)			(2,596		)			(12,335		)			(25,662		)
Income (loss) before income taxes		12,560					295					48,657					7,740					39,877					(58,597		)
Income tax expense (benefit)		2,889					68					11,191					1,780					9,172					(23,313		)
Net income		$	9,671				$	227				$	37,466				$	5,960				$	30,705				$	(35,284	)
Nine Months Ended September 30, 2020:		(in thousands)
Net interest income		$	67,740				$	6,351				$	137,436				$	39,442				$	128,096				$	(85,629	)
Provision for (recovery of) credit losses		(2,198		)			553					25,471					27,530					(4,737		)			3,150
Net interest income after provision for credit losses		69,938					5,798					111,965					11,912					132,833					(88,779		)
Non-interest income		350					—					9,247					—					4,108					11,263
Non-interest expense		(29,965		)			(5,114		)			(36,188		)			(7,353		)			(35,674		)			(60,314		)
Income (loss) before income taxes		40,323					684					85,024					4,559					101,267					(137,830		)
Income tax expense (benefit)		9,361					380					19,461					893					23,083					(55,201		)
Net income		$	30,962				$	304				$	65,563				$	3,666				$	78,184				$	(82,629	)

Western Alliance Bancorporation and Subsidiaries
Operating Segment Results
Unaudited
Balance Sheet:							Regional Segments
		Consolidated Company					Arizona					Nevada					Southern California					Northern California
At December 31, 2019:		(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities		$	4,471.2				$	1.8				$	9.0				$	2.3				$	2.2
Loans, net of deferred loan fees and costs		21,123.3					3,847.9					2,252.5					2,253.9					1,311.2
Less: allowance for credit losses		(167.8		)			(31.6		)			(18.0		)			(18.3		)			(9.7		)
Total loans		20,955.5					3,816.3					2,234.5					2,235.6					1,301.5
Other assets acquired through foreclosure, net		13.9					—					13.0					0.9					—
Goodwill and other intangible assets, net		297.6					—					23.2					—					154.6
Other assets		1,083.7					48.6					59.4					15.0					19.8
Total assets		$	26,821.9				$	3,866.7				$	2,339.1				$	2,253.8				$	1,478.1
Liabilities:
Deposits		$	22,796.5				$	5,384.7				$	4,350.1				$	2,585.3				$	2,373.6
Borrowings and qualifying debt		393.6					—					—					—					—
Other liabilities		615.1					17.8					11.9					1.2					15.9
Total liabilities		23,805.2					5,402.5					4,362.0					2,586.5					2,389.5
Allocated equity:		3,016.7					453.6					301.0					253.3					312.5
Total liabilities and stockholders' equity		$	26,821.9				$	5,856.1				$	4,663.0				$	2,839.8				$	2,702.0
Excess funds provided (used)		—					1,989.4					2,323.9					586.0					1,223.9
No. of offices		47					10					16					9					3
No. of full-time equivalent employees		1,835					108					89					120					112
Income Statements:
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		3,803					103					(62		)			(189		)			218
Net interest income (expense) after provision for credit losses		262,619					68,725					40,627					33,819					23,286
Non-interest income		19,441					1,821					2,677					1,079					1,917
Non-interest expense		(126,152		)			(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
No. of offices		47					10					16					9					3
No. of full-time equivalent employees		1,814					106					89					121					116
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		15,303					1,705					166					611					(653		)
Net interest income (expense) after provision for credit losses		753,136					182,067					119,025					95,140					71,186
Non-interest income		49,069					5,050					7,926					3,054					6,299
Non-interest expense		(352,279		)			(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 December 31, 2019:		(dollars in millions)
Assets:
Cash, cash equivalents, and investment securities		$	—				$	—				$	—				$	—				$	10.1				$	4,445.8
Loans, net of deferred loan fees and costs		237.2					1,635.6					1,552.0					1,930.8					6,098.7					3.5
Less: allowance for credit losses		(2.0		)			(13.7		)			(12.6		)			(12.6		)			(49.3		)			—
Total loans		235.2					1,621.9					1,539.4					1,918.2					6,049.4					3.5
Other assets acquired through foreclosure, net		—					—					—					—					—					—
Goodwill and other intangible assets, net		—					—					119.7					0.1					—					—
Other assets		1.2					18.3					7.3					8.8					64.3					841.0
Total assets		$	236.4				$	1,640.2				$	1,666.4				$	1,927.1				$	6,123.8				$	5,290.3
Liabilities:
Deposits		$	3,210.1				$	0.1				$	3,771.5				$	—				$	36.9				$	1,084.2
Borrowings and qualifying debt		—					—					—					—					—					393.6
Other liabilities		1.8					52.9					0.1					—					2.8					510.7
Total liabilities		3,211.9					53.0					3,771.6					—					39.7					1,988.5
Allocated equity:		84.5					131.6					317.5					158.5					494.3					509.9
Total liabilities and stockholders' equity		$	3,296.4				$	184.6				$	4,089.1				$	158.5				$	534.0				$	2,498.4
Excess funds provided (used)		3,060.0					(1,455.6		)			2,422.7					(1,768.6		)			(5,589.8		)			(2,791.9		)
No. of offices		1					1					9					1					4					(7		)
No. of full-time equivalent employees		75					12					76					16					75					1,152
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					(197		)
Net interest income (expense) after provision for credit losses		21,914					3,585					33,037					10,889					31,725					(4,988		)
Non-interest income		84					—					5,422					—					1,708					4,733
Non-interest expense		(9,769		)			(1,845		)			(12,068		)			(2,197		)			(11,320		)			(18,937		)
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	)
No. of offices		1					1					9					1					4					(7		)
No. of full-time equivalent employees		76					12					73					15					69					1,137
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					803
Net interest income (expense) after provision for credit losses		64,493					10,414					89,236					35,692					81,654					4,229
Non-interest income		268					—					10,946					—					3,915					11,611
Non-interest expense		(27,777		)			(5,683		)			(33,971		)			(6,757		)			(31,729		)			(45,771		)
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
Reconciliation of Non-GAAP Financial Measures
Unaudited
Pre-Provision Net Revenue by Quarter:
		Three Months Ended
		9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
		(in thousands)
Total non-interest income		$	20,606			$	21,270			$	5,109			$	16,027			$	19,441
Net interest income		284,738				298,400				269,020				271,973				266,422
Net revenue		$	305,344			$	319,670			$	274,129			$	288,000			$	285,863
Total non-interest expense		124,092				114,799				120,481				129,735				126,152
Pre-provision net revenue (1)		$	181,252			$	204,871			$	153,648			$	158,265			$	159,711
Less:
Provision for credit losses		14,661				92,000				51,176				3,964				3,803
Income tax expense		30,822				19,599				18,508				26,236				28,533
Net income		$	135,769			$	93,272			$	83,964			$	128,065			$	127,375

Efficiency Ratio by Quarter:
Total non-interest expense		$	124,092			$	114,799			$	120,481			$	129,735			$	126,152
Divided by:
Total net interest income		284,738				298,400				269,020				271,973				266,422
Plus:
Tax equivalent interest adjustment		7,188				6,997				6,453				6,359				6,423
Total non-interest income		20,606				21,270				5,109				16,027				19,441
		$	312,532			$	326,667			$	280,582			$	294,359			$	292,286
Efficiency ratio - tax equivalent basis (2)		39.7		%		35.1		%		42.9		%		44.1		%		43.2		%

Tangible Common Equity:
		9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
		(dollars and shares in thousands)
Total stockholders' equity		$	3,224,046			$	3,102,414			$	2,999,633			$	3,016,748			$	2,923,063
Less: goodwill and intangible assets		298,987				296,860				297,234				297,607				297,994
Total tangible common equity		2,925,059				2,805,554				2,702,399				2,719,141				2,625,069
Plus: deferred tax - attributed to intangible assets		1,689				1,796				1,861				1,921				2,005
Total tangible common equity, net of tax		$	2,926,748			$	2,807,350			$	2,704,260			$	2,721,062			$	2,627,074
Total assets		$	33,335,506			$	31,906,396			$	29,158,227			$	26,821,948			$	26,324,245
Less: goodwill and intangible assets, net		298,987				296,860				297,234				297,607				297,994
Tangible assets		33,036,519				31,609,536				28,860,993				26,524,341				26,026,251
Plus: deferred tax - attributed to intangible assets		1,689				1,796				1,861				1,921				2,005
Total tangible assets, net of tax		$	33,038,208			$	31,611,332			$	28,862,854			$	26,526,262			$	26,028,256
Tangible common equity ratio (3)		8.9		%		8.9		%		9.4		%		10.3		%		10.1		%
Common shares outstanding		100,825				100,849				101,153				102,524				102,639
Tangible book value per share, net of tax (3)		$	29.03			$	27.84			$	26.73			$	26.54			$	25.60

Non-GAAP Financial Measures Footnotes
(1)		We believe this non-GAAP measurement is a key indicator of the earnings power of the Company.
(2)		We believe this non-GAAP ratio provides a useful metric to measure the efficiency of the Company.
(3)		We believe this non-GAAP metric provides an important metric with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

 

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