WESTERN ALLIANCE BANCORPORATION [WAL] Filings

10-Q 1 wal-20220630.htm 10-Q wal-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒						Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022


☐						Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from__________ to __________

Commission file number: 001-32550

WESTERN ALLIANCE BANCORPORATION

(Exact name of registrant as specified in its charter)


Delaware						88-0365922
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One E. Washington Street, Suite 1400

Phoenix

Arizona

85004

(Address of principal executive offices)

(Zip Code)

(602) 389-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.0001 Par Value

WAL

New York Stock Exchange

Depositary Shares, Each Representing a 1/400th Interest in a Share of

4.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A

WAL PrA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 25, 2022, Western Alliance Bancorporation had 108,280,237 shares of common stock outstanding.

Table of Contents

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Glossary of Entities and Terms	3
	Financial Statements (Unaudited)
	Consolidated Balance Sheets	4
	Consolidated Income Statements	4
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	9
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	73
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	96
Item 4.	Controls and Procedures	98

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	98
Item 1A.	Risk Factors	99
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	99
Item 5.	Other Information	99
Item 6.	Exhibits	100

SIGNATURES		101

Table of Contents

PART I

GLOSSARY OF ENTITIES AND TERMS

The acronyms and abbreviations identified below are used in various sections of this Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Item 2 and the Consolidated Financial Statements and the Notes to Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q.


ENTITIES / DIVISIONS:
ABA	Alliance Bank of Arizona	FIB	First Independent Bank
AmeriHome	AmeriHome Mortgage Company, LLC	LVSP	Las Vegas Sunset Properties
Aris	Aris Mortgage Holding Company, LLC	TPB	Torrey Pines Bank
BON	Bank of Nevada	WA PWI	Western Alliance Public Welfare Investments, LLC
Bridge	Bridge Bank	WAB or Bank	Western Alliance Bank
Company	Western Alliance Bancorporation and subsidiaries	WABT	Western Alliance Business Trust
CSI	CS Insurance Company	WAL or Parent	Western Alliance Bancorporation
DST	Digital Settlement Technologies LLC
TERMS:
AFS	Available-for-Sale	HELOC	Home Equity Line of Credit
ALCO	Asset and Liability Management Committee	HFI	Held for Investment
AOCI	Accumulated Other Comprehensive Income	HFS	Held for Sale
APIC	Additional paid in capital	HTM	Held-to-Maturity
ASC	Accounting Standards Codification	HUD	U.S. Department of Housing and Urban Development
ASU	Accounting Standards Update	ICS	Insured Cash Sweep Service
Basel III	Banking Supervision's December 2010 final capital framework	IRC	Internal Revenue Code
BOD	Board of Directors	IRLC	Interest Rate Lock Commitment
Capital Rules	The FRB, the OCC, and the FDIC 2013 Approved Final Rules	ISDA	International Swaps and Derivatives Association
CARES Act	Coronavirus Aid, Relief and Economic Security Act	LGD	Loss Given Default
CBOE	Chicago Board Options Exchange	LIBOR	London Interbank Offered Rate
CDARS	Certificate Deposit Account Registry Service	LIHTC	Low-Income Housing Tax Credit
CECL	Current Expected Credit Losses	MBS	Mortgage-Backed Securities
CEO	Chief Executive Officer	MSA	Metropolitan Statistical Area
CET1	Common Equity Tier 1	MSR	Mortgage Servicing Right
CFO	Chief Financial Officer	NOL	Net Operating Loss
CFPB	Consumer Financial Protection Bureau	NPV	Net Present Value
CLO	Collateralized Loan Obligation	NYSE	New York Stock Exchange
COVID-19	Coronavirus Disease 2019	OCI	Other Comprehensive Income
CRA	Community Reinvestment Act	OREO	Other Real Estate Owned
CRE	Commercial Real Estate	OTTI	Other-than-Temporary Impairment
DTA	Deferred Tax Asset	PCD	Purchased Credit Deteriorated
EAD	Exposure at Default	PD	Probability of Default
EBO	Early buyout	PPNR	Pre-Provision Net Revenue
EPS	Earnings per share	PPP	Paycheck Protection Program
EVE	Economic Value of Equity	ROU	Right of use
Exchange Act	Securities Exchange Act of 1934, as amended	SBA	Small Business Administration
FASB	Financial Accounting Standards Board	SBIC	Small Business Investment Company
FDIC	Federal Deposit Insurance Corporation	SEC	Securities and Exchange Commission
FHA	Federal Housing Administration	SERP	Supplemental Executive Retirement Plan
FHLB	Federal Home Loan Bank	SOFR	Secured Overnight Financing Rate
FHLMC	Federal Home Loan Mortgage Corporation	SR	Supervision and Regulation Letters
FICO	The Financing Corporation	TDR	Troubled Debt Restructuring
FNMA	Federal National Mortgage Association	TEB	Tax Equivalent Basis
FOMC	Federal Open Market Committee	TSR	Total Shareholder Return
FRB	Federal Reserve Bank	UPB	Unpaid Principal Balance
FTC	Federal Trade Commission	USDA	United States Department of Agriculture
FVO	Fair Value Option	VA	Veterans Affairs
GAAP	U.S. Generally Accepted Accounting Principles	VIE	Variable Interest Entity
GNMA	Government National Mortgage Association	XBRL	eXtensible Business Reporting Language
GSE	Government-Sponsored Enterprise

Table of Contents

Item 1.Financial Statements

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30, 2022		December 31, 2021
	(Unaudited)

	(in millions, except shares and per share amounts)
Assets:
Cash and due from banks	$	233	$	166

Interest-bearing deposits in other financial institutions	1,653		350

Cash, cash equivalents and restricted cash	1,886		516

Investment securities - AFS, at fair value; amortized cost of $7,960 at June 30, 2022 and $6,167 at December 31, 2021	7,268		6,189
Investment securities - HTM, at amortized cost and net of allowance for credit losses of $3 and $5 (fair value of $1,122 and $1,146) at June 30, 2022 and December 31, 2021, respectively	1,215		1,102


Investment securities - equity	170		159
Investments in restricted stock, at cost	149		92
Loans HFS	2,803		5,635
Loans HFI, net of deferred loan fees and costs	48,572		39,075
Less: allowance for credit losses	(273)		(252)
Net loans held for investment	48,299		38,823
Mortgage servicing rights	826		698
Premises and equipment, net	210		182
Operating lease right of use asset	136		133
Bank owned life insurance	180		180
Goodwill and intangible assets, net	695		635
Deferred tax assets, net	223		21
Investments in LIHTC and renewable energy	722		631

Other assets	1,273		987
Total assets	$	66,055	$	55,983
Liabilities:
Deposits:
Non-interest-bearing demand	$	23,721	$	21,353
Interest-bearing	29,991		26,259
Total deposits	53,712		47,612


Other borrowings	5,210		1,502
Qualifying debt	891		896
Operating lease liability	151		143
Other liabilities	1,132		867
Total liabilities	61,096		51,020
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at June 30, 2022 and December 31, 2021)	295		295
Common stock (par value $0.0001; 200,000,000 authorized; 110,820,001 shares issued at June 30, 2022 and 108,981,341 at December 31, 2021) and additional paid in capital	2,095		1,966
Treasury stock, at cost (2,538,190 shares at June 30, 2022 and 2,350,021 shares at December 31, 2021)	(104)		(87)
Accumulated other comprehensive (loss) income	(518)		16
Retained earnings	3,191		2,773
Total stockholders’ equity	4,959		4,963
Total liabilities and stockholders’ equity	$	66,055	$	55,983

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in millions, except per share amounts)
Interest income:
Loans, including fees	$	516.6	$	353.8	$	951.3	$	652.2
Investment securities	57.6		41.8		104.3		74.6
Dividends and other	5.4		2.9		8.5		5.8

Total interest income	579.6		398.5		1,064.1		732.6
Interest expense:
Deposits	27.1		11.6		41.2		22.4
Qualifying debt	8.6		7.2		17.0		13.1
Other borrowings	18.9		9.2		31.4		9.3
Total interest expense	54.6		28.0		89.6		44.8
Net interest income	525.0		370.5		974.5		687.8
Provision for (recovery of) credit losses	27.5		(14.5)		36.5		(46.9)
Net interest income after provision for (recovery of) credit losses	497.5		385.0		938.0		734.7
Non-interest income:
Net loan servicing revenue (expense)	45.4		(20.8)		86.5		(20.8)
Net gain on loan origination and sale activities	27.2		132.0		64.1		132.0
Gain on recovery from credit guarantees	9.0		—		11.3		—
Service charges and fees	7.6		7.4		14.6		14.1
Commercial banking related income	5.8		4.5		10.9		7.9
Income from equity investments	5.2		6.8		9.3		14.4
(Loss) gain on sales of investment securities	(0.2)		—		6.7		0.1
Fair value (loss) gain on assets measured at fair value, net	(10.0)		3.2		(16.6)		1.7
Other income	5.0		2.9		14.5		6.3
Total non-interest income	95.0		136.0		201.3		155.7
Non-interest expense:
Salaries and employee benefits	139.0		128.9		277.3		212.6
Legal, professional, and directors' fees	25.1		14.0		49.1		24.1
Data processing	19.7		15.0		37.3		24.9
Deposit costs	18.1		7.1		27.4		13.4
Loan servicing expenses	14.7		22.3		25.5		22.3
Occupancy	13.0		10.4		25.8		19.0
Insurance	6.9		5.5		14.1		9.7
Loan acquisition and origination expenses	6.4		10.5		12.9		10.5
Business development and marketing	5.4		3.2		9.8		4.6
Net gain on sales and valuations of repossessed and other assets	(0.3)		(1.5)		(0.2)		(1.8)
Acquisition and restructure expenses	—		15.7		0.4		16.1

Other expense	20.9		13.7		38.1		24.4
Total non-interest expense	268.9		244.8		517.5		379.8
Income before provision for income taxes	323.6		276.2		621.8		510.6
Income tax expense	63.4		52.4		121.5		94.3
Net income	260.2		223.8		500.3		416.3
Dividends on preferred stock	3.2		—		6.4		—


Net income available to common stockholders	$	257.0	$	223.8	$	493.9	$	416.3

Earnings per share:
Basic	$	2.40	$	2.18	$	4.63	$	4.09
Diluted	2.39		2.17		4.61		4.07
Weighted average number of common shares outstanding:
Basic	107.3		102.7		106.7		101.8
Diluted	107.7		103.4		107.1		102.4
Dividends declared per common share	$	0.35	$	0.25	$	0.70	$	0.50

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in millions)
Net income	$	260.2	$	223.8	$	500.3	$	416.3
Other comprehensive income (loss), net:
Unrealized (loss) gain on AFS securities, net of tax effect of $93.3, $(14.6), $174.1, and $8.9 respectively	(284.5)		44.8		(532.4)		(27.2)

Unrealized gain (loss) on junior subordinated debt, net of tax effect of $(0.7), $0.0, $(1.4), and $0.1 respectively	2.0		(0.2)		4.2		(0.5)
Realized gain on sale of AFS securities included in income, net of tax effect of $0.1, $0.0, $1.9, and $0.0 respectively	(0.3)		—		(5.4)		(0.1)
Net other comprehensive (loss) gain	(282.8)		44.6		(533.6)		(27.8)
Comprehensive (loss) income

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