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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 ~~March 31,~~September 30, 2021


☐						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

6.25% Subordinated Debentures due 2056

WALA

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 ~~April 26,~~October 27, 2021, Western Alliance Bancorporation had ~~103,474,792~~104,201,673 shares of common stock outstanding.

Table of Contents

INDEX

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
~~AHM~~AMH or 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
TERMS:
AFS	Available-for-Sale	~~GSE~~HFI	~~Government-Sponsored Enterprise~~Held for Investment
ALCO	Asset and Liability Management Committee	~~HELOC~~HFS	~~Home Equity Line of Credit~~Held for Sale
AOCI	Accumulated Other Comprehensive Income	~~HFI~~HTM	~~Held for Investment~~Held-to-Maturity
APIC	Additional paid in capital	~~HTM~~	~~Held-to-Maturity~~
~~ASC~~	~~Accounting Standards Codification~~	HUD	U.S. Department of Housing and Urban Development
~~ASU~~ASC	Accounting Standards ~~Update~~Codification	ICS	Insured Cash Sweep Service
ASU	Accounting Standards Update	IRC	Internal Revenue Code
Basel III	Banking Supervision's December 2010 final capital framework	~~IRC~~IRLC	~~Internal Revenue Code~~Interest Rate Lock Commitment
BOD	Board of Directors	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
~~CFO~~CLO	~~Chief Financial Officer~~Collateralized Loan Obligation	OCI	Other Comprehensive Income
~~CLO~~COVID-19	~~Collateralized Loan Obligation~~Coronavirus Disease 2019	OREO	Other Real Estate Owned
~~COVID-19~~CRA	~~Coronavirus Disease 2019~~Community Reinvestment Act	OSHA	Occupational Safety and Health Administration
CRE	Commercial Real Estate	OTTI	Other-than-Temporary Impairment
~~CRA~~EAD	~~Community Reinvestment Act~~Exposure at Default	PCD	Purchased Credit Deteriorated
~~CRE~~EBO	~~Commercial Real Estate~~Early buyout	PD	Probability of Default
~~EAD~~EPS	~~Exposure at Default~~Earnings per share	PPNR	Pre-Provision Net Revenue
~~EPS~~ETS	~~Earnings per share~~Emergency Temporary Standard	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	~~SERP~~SOFR	~~Supplemental Executive Retirement Plan~~Secured Overnight Financing Rate
FHLMC	Federal Home Loan Mortgage Corporation	~~SOFR~~SR	~~Secured Overnight Financing Rate~~Supervision and Regulation Letters
FICO	The Financing Corporation	SRTDR	~~Supervision and Regulation Letters~~Troubled Debt Restructuring
FNMA	Federal National Mortgage Association	~~TDR~~TEB	~~Troubled Debt Restructuring~~Tax Equivalent Basis
FRB	Federal Reserve Bank	~~TEB~~TSR	~~Tax Equivalent Basis~~Total Shareholder Return
FTC	Federal Trade Commission	~~TSR~~UPB	~~Total Shareholder Return~~Unpaid Principal Balance
FVO	Fair Value Option	~~VIE~~USDA	~~Variable Interest Entity~~United States Department of Agriculture
GAAP	U.S. Generally Accepted Accounting Principles	~~XBRL~~VA	~~eXtensible Business Reporting Language~~Veterans Affairs
GNMA	Government National Mortgage Association	VIE	Variable Interest Entity
GSE	Government-Sponsored Enterprise	XBRL	eXtensible Business Reporting Language
HELOC	Home Equity Line of Credit

Table of Contents

Item 1.Financial Statements

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)

		(in millions, except shares and per share amounts)					(in millions, except shares and per share amounts)
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	215.3	$	174.2	Cash and due from banks	$	297.9	$	174.2

Interest-bearing deposits in other financial institutions	Interest-bearing deposits in other financial institutions	5,131.2		2,497.5		Interest-bearing deposits in other financial institutions	620.0		2,497.5

Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	5,346.5		2,671.7		Cash, cash equivalents and restricted cash	917.9		2,671.7

Investment securities - AFS, at fair value; amortized cost of $6,913.3 at March 31, 2021 and $4,586.4 at December 31, 2020		6,939.9		4,708.5
Investment securities - HTM, at amortized cost and net of allowance for credit losses of $9.2 and $6.8 (fair value of $740.4 and $611.8) at March 31, 2021 and December 31, 2020, respectively		688.8		562.0
Investment securities - AFS, at fair value; amortized cost of $6,326.5 at September 30, 2021 and $4,586.4 at December 31, 2020						Investment securities - AFS, at fair value; amortized cost of $6,326.5 at September 30, 2021 and $4,586.4 at December 31, 2020	6,383.6		4,708.5
Investment securities - HTM, at amortized cost and net of allowance for credit losses of $4.5 and $6.8 (fair value of $1,092.0 and $611.8) at September 30, 2021 and December 31, 2020, respectively						Investment securities - HTM, at amortized cost and net of allowance for credit losses of $4.5 and $6.8 (fair value of $1,092.0 and $611.8) at September 30, 2021 and December 31, 2020, respectively	1,042.4		562.0

Investment securities - equity	Investment securities - equity	192.9		167.3		Investment securities - equity	178.4		167.3
Investments in restricted stock, at cost	Investments in restricted stock, at cost	67.2		67.0		Investments in restricted stock, at cost	91.5		67.0

Loans, net of deferred loan fees and costs		28,711.0		27,053.0
Loans HFS						Loans HFS	6,534.3		—
Loans HFI, net of deferred loan fees and costs						Loans HFI, net of deferred loan fees and costs	34,801.9		27,053.0
Less: allowance for credit losses	Less: allowance for credit losses	(247.1)		(278.9)		Less: allowance for credit losses	(246.9)		(278.9)
Net loans held for investment	Net loans held for investment	28,463.9		26,774.1		Net loans held for investment	34,555.0		26,774.1
Mortgage servicing rights						Mortgage servicing rights	604.8		—
Premises and equipment, net	Premises and equipment, net	138.4		134.1		Premises and equipment, net	161.2		134.1
Operating lease right of use asset	Operating lease right of use asset	77.0		72.5		Operating lease right of use asset	106.0		72.5
Bank owned life insurance	Bank owned life insurance	177.3		176.3		Bank owned life insurance	179.2		176.3
Goodwill and intangible assets, net	Goodwill and intangible assets, net	298.0		298.5		Goodwill and intangible assets, net	608.4		298.5
Deferred tax assets, net	Deferred tax assets, net	49.8		31.3		Deferred tax assets, net	10.5		31.3
Investments in LIHTC and renewable energy	Investments in LIHTC and renewable energy	487.9		405.6		Investments in LIHTC and renewable energy	508.8		405.6

Other assets	Other assets	469.4		392.1		Other assets	893.1		392.1
Total assets	Total assets	$	43,397.0	$	36,461.0	Total assets	$	52,775.1	$	36,461.0
Liabilities:	Liabilities:					Liabilities:
Deposits:	Deposits:					Deposits:
Non-interest-bearing demand	Non-interest-bearing demand	$	17,542.8	$	13,463.3	Non-interest-bearing demand	$	21,058.2	$	13,463.3
Interest-bearing	Interest-bearing	20,850.3		18,467.2		Interest-bearing	24,224.4		18,467.2
Total deposits	Total deposits	38,393.1		31,930.5		Total deposits	45,282.6		31,930.5
Customer repurchase agreements		15.9		16.0

Other borrowings	Other borrowings	5.0		5.0		Other borrowings	1,003.5		21.0
Qualifying debt	Qualifying debt	543.7		548.7		Qualifying debt	1,064.9		548.7
Operating lease liability	Operating lease liability	84.6		79.9		Operating lease liability	115.0		79.9
Other liabilities	Other liabilities	642.0		467.4		Other liabilities	795.1		467.4
Total liabilities	Total liabilities	39,684.3		33,047.5		Total liabilities	48,261.1		33,047.5
Commitments and contingencies (Note 11)		0		0
Commitments and contingencies (Note 14)						Commitments and contingencies (Note 14)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock (par value $0.0001; 200,000,000 authorized; 105,771,103 shares issued at March 31, 2021 and 103,013,290 at December 31, 2020) and additional paid in capital		1,608.2		1,390.9
Treasury stock, at cost (2,323,560 shares at March 31, 2021 and 2,169,397 shares at December 31, 2020)		(84.0)		(71.1)
Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at September 30, 2021)						Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at September 30, 2021)	294.5		—
Common stock (par value $0.0001; 200,000,000 authorized; 106,556,001 shares issued at September 30, 2021 and 103,013,290 at December 31, 2020) and additional paid in capital						Common stock (par value $0.0001; 200,000,000 authorized; 106,556,001 shares issued at September 30, 2021 and 103,013,290 at December 31, 2020) and additional paid in capital	1,695.8		1,390.9
Treasury stock, at cost (2,342,674 shares at September 30, 2021 and 2,169,397 shares at December 31, 2020)						Treasury stock, at cost (2,342,674 shares at September 30, 2021 and 2,169,397 shares at December 31, 2020)	(85.9)		(71.1)
Accumulated other comprehensive income	Accumulated other comprehensive income	19.9		92.3		Accumulated other comprehensive income	42.6		92.3
Retained earnings	Retained earnings	2,168.6		2,001.4		Retained earnings	2,567.0		2,001.4
Total stockholders’ equity	Total stockholders’ equity	3,712.7		3,413.5		Total stockholders’ equity	4,514.0		3,413.5
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	43,397.0	$	36,461.0	Total liabilities and stockholders’ equity	$	52,775.1	$	36,461.0

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

Three Months Ended March 31,
2021 2020
(in millions, except per share amounts)
Interest income:
Loans, including fees $ 298.4 $ 276.9
Investment securities 32.8 26.3
Dividends and other 2.9 4.0
Total interest income 334.1 307.2
Interest expense:
Deposits 10.8 32.5
Qualifying debt 5.9 5.3
Other short-term borrowings 0.1 0.4
Total interest expense 16.8 38.2
Net interest income 317.3 269.0
(Recovery of) provision for credit losses (32.4) 51.2
Net interest income after (recovery of) provision for credit losses 349.7 217.8
Non-interest income:
Income from equity investments 7.6 3.8
Service charges and fees 6.7 6.4
Foreign currency income 2.2 1.3
Card income 1.6 1.7
Income from bank owned life insurance 1.0 1.0
Lending related income and gains (losses) on sale of loans, net (0.1) 0.6
Fair value losses on assets measured at fair value, net (1.5) (11.3)
Other income 2.2 1.6
Total non-interest income 19.7 5.1
Non-interest expense:
Salaries and employee benefits 83.7 72.1
Legal, professional, and directors' fees 10.1 10.4
Data processing 9.9 8.6
Occupancy 8.6 8.2
Deposit costs 6.3 7.3
Insurance 4.2 3.0
Loan and repossessed asset expenses 2.2 1.5
Business development 0.8 2.3
Marketing 0.6 0.9
Card expense 0.6 0.7
Intangible amortization 0.5 0.4
Net gain on sales / valuations of repossessed and other assets (0.3) (1.4)
Acquisition related expense 0.4 0
Other expense 7.4 6.5
Total non-interest expense 135.0 120.5
Income before provision for income taxes 234.4 102.4
Income tax expense 41.9 18.5
Net income $ 192.5 $ 83.9
Earnings per share:
Basic $ 1.91 $ 0.83
Diluted 1.90 0.83
Weighted average number of common shares outstanding:
Basic 100.8 101.3
Diluted 101.4 101.7

~~See accompanying Notes to Unaudited Consolidated Financial Statements.~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Interest income:
Loans, including fees	$	398.0	$	276.6	$	1,050.2	$	843.1
Investment securities	42.0		26.3		116.6		79.7
Dividends and other	2.8		1.9		8.6		7.4

Total interest income	442.8		304.8		1,175.4		930.2
Interest expense:
Deposits	12.3		12.2		34.7		59.7
Qualifying debt	10.8		7.9		23.9		17.9
Other borrowings	9.3		—		18.6		0.5
Total interest expense	32.4		20.1		77.2		78.1
Net interest income	410.4		284.7		1,098.2		852.1
Provision for (recovery of) credit losses	12.3		14.6		(34.6)		157.8
Net interest income after provision for (recovery of) credit losses	398.1		270.1		1,132.8		694.3
Non-interest income:
Net gain on loan purchase, origination, and sale activities	121.0		—		253.0		—
Service charges and fees	7.1		5.9		21.2		17.4
Commercial banking related income	4.6		4.5		12.5		10.7
Income from equity investments	2.5		1.2		16.9		6.3
Net loan servicing revenue	2.2		—		(18.6)		—
Foreign currency income	1.9		1.8		5.6		4.3
Income from bank owned life insurance	1.0		1.3		2.9		9.0


Fair value (loss) gain on assets measured at fair value, net	(2.2)		5.9		(0.5)		(1.0)
Other income	—		—		0.8		0.3
Total non-interest income	138.1		20.6		293.8		47.0
Non-interest expense:
Salaries and employee benefits	133.5		78.8		346.1		220.5
Loan servicing expenses	15.6		—		37.9		—
Data processing	15.4		8.9		40.3		26.1
Legal, professional, and directors' fees	13.7		10.0		37.8		31.1
Occupancy	12.4		9.4		31.4		25.7
Loan acquisition and origination expenses	9.7		—		20.2		—
Deposit costs	7.3		3.2		20.7		14.0
Insurance	6.2		3.1		15.9		9.5
Loan and repossessed asset expenses	2.5		1.8		7.2		5.3
Intangible amortization	1.9		0.4		4.2		1.2
Business development	1.9		1.0		4.2		4.1
Marketing	0.9		0.8		3.2		2.6
Card expense	0.6		0.5		1.8		1.6
Net (gain) loss on sales / valuations of repossessed and other assets	(1.3)		0.1		(3.1)		(1.3)
Acquisition and restructure expenses	2.4		—		18.5		—

Other expense	11.1		6.1		27.3		19.0
Total non-interest expense	233.8		124.1		613.6		359.4
Income before provision for income taxes	302.4		166.6		813.0		381.9
Income tax expense	65.5		30.8		159.8		68.9


Net income available to common stockholders	$	236.9	$	135.8	$	653.2	$	313.0

Table of Contents

~~WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

Three Months Ended March 31,
2021 2020
(in millions)
Net income $ 192.5 $ 83.9
Other comprehensive (loss) income, net:
Unrealized (loss) gain on AFS securities, net of tax effect of $23.5 and $(2.0), respectively (72.0) 6.3
Unrealized (loss) on SERP, net of tax effect of $0.0 and $0.1, respectively 0 (0.3)
Unrealized (loss) gain on junior subordinated debt, net of tax effect of $0.1 and $(2.1), respectively (0.3) 6.6
Realized (gain) on sale of AFS securities included in income, net of tax effect of $0.0 and $0.0, respectively (0.1) (0.1)
Net other comprehensive (loss) income (72.4) 12.5
Comprehensive income $ 120.1 $ 96.4


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)

Earnings per share:
Basic	$	2.29	$	1.36	$	6.39	$	3.12
Diluted	2.28		1.36		6.35		3.11
Weighted average number of common shares outstanding:
Basic	103.3		99.9		102.3		100.3
Diluted	103.9		100.1		102.9		100.6
Dividends declared per common share	$	0.35	$	0.25	$	0.85	$	0.75

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)
Net income	$	236.9	$	135.8	$	653.2	$	313.0
Other comprehensive income (loss), net:
Unrealized gain (loss) on AFS securities, net of tax effect of $7.1, $(2.5), $16.0, and $(17.3), respectively	(21.8)		7.6		(49.0)		53.2
Unrealized (loss) on SERP, net of tax effect of $0.0, $0.0, $0.0, and $0.1, respectively	—		—		—		(0.3)
Unrealized (loss) gain on junior subordinated debt, net of tax effect of $0.1, $0.9, $0.2, and $(0.3), respectively	(0.1)		(2.7)		(0.6)		0.9
Realized (gain) on sale of AFS securities included in income, net of tax effect of $0.0, $0.0, $0.0, and $0.1, respectively	—		—		(0.1)		(0.2)
Net other comprehensive (loss) income	(21.9)		4.9		(49.7)		53.6
Comprehensive income	$	215.0	$	140.7	$	603.5	$	366.6

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Additional Paid in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity
Shares Amount
(in millions)
Balance, December 31, 2019 102.5 $ 0 $ 1,374.1 $ (62.7) $ 25.0 $ 1,680.3 $ 3,016.7
Balance, January 1, 2020 (2) 102.5 $ 0 $ 1,374.1 $ (62.7) $ 25.0 $ 1,655.4 $ 2,991.8
Net income — — — — — 83.9 83.9
Restricted stock, performance stock unit, and other grants, net 0.5 — 7.0 — — — 7.0
Restricted stock surrendered (1) (0.1) — — (7.5) — — (7.5)
Stock repurchase (1.8) — (10.6) — — (51.9) (62.5)
Dividends paid — — — — — (25.6) (25.6)
Other comprehensive income, net — — — — 12.5 — 12.5
Balance, March 31, 2020 101.1 $ 0 $ 1,370.5 $ (70.2) $ 37.5 $ 1,661.8 $ 2,999.6
Balance, December 31, 2020 100.8 $ 0 $ 1,390.9 $ (71.1) $ 92.3 $ 2,001.4 $ 3,413.5
Net income — — — — — 192.5 192.5
Restricted stock, performance stock unit, and other grants, net 0.5 — 8.1 — — — 8.1
Restricted stock surrendered (1) (0.2) — — (12.9) — — (12.9)
Issuance from registered direct common stock offering, net 2.3 — 209.2 — — — 209.2
Dividends paid — — — — — (25.3) (25.3)
Other comprehensive income, net — — — — (72.4) — (72.4)
Balance, March 31, 2021 103.4 $ 0 $ 1,608.2 $ (84.0) $ 19.9 $ 2,168.6 $ 3,712.7


	Three Months Ended September 30,
	Preferred Stock			Common Stock			Additional Paid in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
	(in millions)
Balance, June 30, 2020	—	$	—	100.8	$	—	$	1,376.8	$	(70.6)	$	73.7	$	1,722.5	$	3,102.4
Net income	—	—		—	—		—		—		—		135.8		135.8
Restricted stock, performance stock units, and other grants, net	—	—		—	—		6.7		—		—		—		6.7
Restricted stock surrendered (1)	—	—		—	—		—		(0.5)		—		—		(0.5)

Dividends paid	—	—		—	—		—		—		—		(25.3)		(25.3)
Other comprehensive income, net	—	—		—	—		—		—		4.9		—		4.9
Balance, September 30, 2020	—	$	—	100.8	$	—	$	1,383.5	$	(71.1)	$	78.6	$	1,833.0	$	3,224.0

Balance, June 30, 2021	—	$	—	104.2	$	—	$	1,687.6	$	(84.2)	$	64.5	$	2,366.6	$	4,034.5
Net income	—	—		—	—		—		—		—		236.9		236.9
Restricted stock, performance stock units, and other grants, net	—	—		—	—		8.2		—		—		—		8.2
Restricted stock surrendered (1)	—	—		—	—		—		(1.7)		—		—		(1.7)
Preferred stock issuance, net	12.0	294.5		—	—		—		—		—		—		294.5


Dividends paid	—	—		—	—		—		—		—		(36.5)		(36.5)
Other comprehensive income, net	—	—		—	—		—		—		(21.9)		—		(21.9)
Balance, September 30, 2021	12.0	$	294.5	104.2	$	—	$	1,695.8	$	(85.9)	$	42.6	$	2,567.0	$	4,514.0

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	Nine Months Ended September 30,
	Preferred Stock			Common Stock			Additional Paid in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
	(in millions)
Balance, December 31, 2019	—	$	—	102.5	$	—	$	1,374.1	$	(62.7)	$	25.0	$	1,680.3	$	3,016.7
Balance, January 1, 2020 (2)	—	—		102.5	—		1,374.1		(62.7)		25.0		1,655.4		2,991.8
Net income	—	—		—	—		—		—		—		313.0		313.0
Restricted stock, performance stock units, and other grants, net	—	—		0.5	—		21.7		—		—		—		21.7
Restricted stock surrendered (1)	—	—		(0.1)	—		—		(8.4)		—		—		(8.4)
Stock repurchase	—	—		(2.1)	—		(12.3)		—		—		(59.3)		(71.6)
Dividends paid	—	—		—	—		—		—		—		(76.1)		(76.1)
Other comprehensive income, net	—	—		—	—		—		—		53.6		—		53.6
Balance, September 30, 2020	—	$	—	100.8	$	—	$	1,383.5	$	(71.1)	$	78.6	$	1,833.0	$	3,224.0

Balance, December 31, 2020	—	$	—	100.8	$	—	$	1,390.9	$	(71.1)	$	92.3	$	2,001.4	$	3,413.5
Net income	—	—		—	—		—		—		—		653.2		653.2
Restricted stock, performance stock units, and other grants, net	—	—		0.6	—		25.9		—		—		—		25.9
Restricted stock surrendered (1)	—	—		(0.2)	—		—		(14.8)		—		—		(14.8)
Preferred stock issuance, net	12.0	294.5		—	—		—		—		—		—		294.5
Common stock issuance, net	—	—		3.0	—		279.0		—		—		—		279.0

Dividends paid	—	—		—	—		—		—		—		(87.6)		(87.6)
Other comprehensive loss, net	—	—		—	—		—		—		(49.7)		—		(49.7)
Balance, September 30, 2021	12.0	$	294.5	104.2	$	—	$	1,695.8	$	(85.9)	$	42.6	$	2,567.0	$	4,514.0

(1)Share amounts represent Treasury Shares, see "Note 1. Summary of Significant Accounting Policies" for further discussion.

(2)As adjusted for adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The cumulative effect of adoption of this guidance at January 1, 2020 resulted in a decrease to retained earnings of $24.9 million due to an increase in the allowance for credit losses. See "Note 1. Summary of Significant Accounting Policies for further discussion."

See accompanying Notes to Unaudited Consolidated Financial Statements.

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WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
		(in millions)					(in millions)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	192.5	$	83.9	Net income	$	653.2	$	313.0
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
(Recovery of) provision for credit losses	(Recovery of) provision for credit losses	(32.4)		51.2		(Recovery of) provision for credit losses	(34.6)		157.8
Depreciation and amortization	Depreciation and amortization	6.0		5.4		Depreciation and amortization	25.6		17.1
Stock-based compensation	Stock-based compensation	8.0		6.9		Stock-based compensation	25.6		21.6
Deferred income taxes	Deferred income taxes	5.1		(4.8)		Deferred income taxes	43.6		(37.4)
Amortization of net premiums for investment securities	Amortization of net premiums for investment securities	10.7		5.6		Amortization of net premiums for investment securities	30.8		19.0
Amortization of tax credit investments	Amortization of tax credit investments	15.5		7.4		Amortization of tax credit investments	36.6		34.2
Amortization of operating lease right of use asset	Amortization of operating lease right of use asset	3.0		2.8		Amortization of operating lease right of use asset	11.5		8.9
Amortization of net deferred loan fees and net purchase premiums	Amortization of net deferred loan fees and net purchase premiums	(19.2)		(4.1)		Amortization of net deferred loan fees and net purchase premiums	(53.2)		(34.1)
Income from bank owned life insurance	Income from bank owned life insurance	(1.0)		(1.0)		Income from bank owned life insurance	(2.9)		(3.4)
Purchases and originations of loans held for sale						Purchases and originations of loans held for sale	(41,336.4)		—

Proceeds from sales and payments on loans held for sale						Proceeds from sales and payments on loans held for sale	37,810.5		—
Mortgage servicing rights capitalized upon sale of mortgage loans						Mortgage servicing rights capitalized upon sale of mortgage loans	(512.7)		—
Net (gains) losses on:	Net (gains) losses on:					Net (gains) losses on:
Change in fair value of loans held for sale						Change in fair value of loans held for sale	5.2		—
Change in fair value of mortgage servicing rights						Change in fair value of mortgage servicing rights	85.2		—
Change in fair value of derivatives						Change in fair value of derivatives	(40.9)		—
Sale and valuation of investment securities and other assets	Sale and valuation of investment securities and other assets	1.1		9.7		Sale and valuation of investment securities and other assets	5.3		(0.6)
Sale of loans		0.7		0

BOLI						BOLI	—		(5.6)
Changes in other assets and liabilities, net	Changes in other assets and liabilities, net	(89.9)		(39.0)		Changes in other assets and liabilities, net	(21.4)		(40.4)
Net cash provided by operating activities		$	100.1	$	124.0
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	$	(3,269.0)	$	450.1
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Investment securities - AFS	Investment securities - AFS					Investment securities - AFS
Purchases	Purchases	$	(2,748.5)	$	(654.5)	Purchases	$	(3,100.7)	$	(1,720.6)
Principal pay downs and maturities	Principal pay downs and maturities	493.6		264.6		Principal pay downs and maturities	1,293.2		1,014.4
Proceeds from sales	Proceeds from sales	0		62.3		Proceeds from sales	49.8		156.6
Investment securities - HTM	Investment securities - HTM					Investment securities - HTM
Purchases	Purchases	(131.6)		(24.2)		Purchases	(494.7)		(106.8)
Principal pay downs and maturities	Principal pay downs and maturities	0.7		1.3		Principal pay downs and maturities	14.2		16.9
Equity securities carried at fair value	Equity securities carried at fair value					Equity securities carried at fair value
Purchases	Purchases	(28.3)		(7.5)		Purchases	(36.1)		(31.1)
Redemptions	Redemptions	0.4		4.2		Redemptions	21.4		7.0
Proceeds from sales	Proceeds from sales	0.6		0		Proceeds from sales	2.8		—
Purchase of investment tax credits	Purchase of investment tax credits	(22.6)		(37.4)		Purchase of investment tax credits	(69.0)		(103.4)
Purchase of other investments		(1.7)		(2.1)
Proceeds from sale of mortgage servicing rights						Proceeds from sale of mortgage servicing rights	1,112.1		—
(Purchase) sale of other investments						(Purchase) sale of other investments	(30.4)		1.2
Proceeds from bank owned life insurance, net						Proceeds from bank owned life insurance, net	—		6.0

Net increase in loans		(1,611.1)		(1,991.1)
Net increase in loans held for investment						Net increase in loans held for investment	(8,385.4)		(4,806.1)
Purchase of premises, equipment, and other assets, net	Purchase of premises, equipment, and other assets, net	(10.4)		(11.5)		Purchase of premises, equipment, and other assets, net	(31.8)		(26.0)

Cash consideration paid for AMH acquisition, net of cash acquired						Cash consideration paid for AMH acquisition, net of cash acquired	(1,013.4)		—
Net cash (used in) investing activities						Net cash (used in) investing activities	$	(10,668.0)	$	(5,591.9)

Net cash used in investing activities		$	(4,058.9)	$	(2,395.9)
Cash flows from financing activities:
Net increase in deposits		$	6,462.6	$	2,034.2

Net (decrease) increase in other borrowings		(0.1)		314.3

Cash paid for tax withholding on vested restricted stock and other		(12.8)		(7.4)
Common stock repurchases		0		(62.5)
Cash dividends paid on common stock		(25.3)		(25.6)
Proceeds from issuance of stock in offerings, net		209.2		0
Net cash provided by financing activities		$	6,633.6	$	2,253.0
Net increase (decrease) in cash, cash equivalents, and restricted cash		2,674.8		(18.9)
Cash, cash equivalents, and restricted cash at beginning of period		2,671.7		434.6
Cash, cash equivalents, and restricted cash at end of period		$	5,346.5	$	415.7
Supplemental disclosure:
Cash paid during the period for:
Interest		$	15.0	$	46.3
Income taxes, net		30.8		1.3

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	Nine Months Ended September 30,
	2021		2020
	(in millions)
Cash flows from financing activities:
Net increase in deposits	$	13,352.1	$	6,046.9
Net proceeds from issuance of subordinated debt	591.9		221.9
Redemption of subordinated debt	(75.0)		—
Net (decrease) increase in other borrowings	(2,157.1)		13.0

Cash paid for tax withholding on vested restricted stock and other	(14.6)		(8.2)
Common stock repurchases	—		(71.6)
Cash dividends paid on common stock	(87.6)		(76.1)
Proceeds from issuance of stock in offerings, net	279.0		—
Proceeds from issuance of preferred stock, net	294.5		—
Net cash provided by financing activities	$	12,183.2	$	6,125.9
Net (decrease) increase in cash, cash equivalents, and restricted cash	(1,753.8)		984.1
Cash, cash equivalents, and restricted cash at beginning of period	2,671.7		434.6
Cash, cash equivalents, and restricted cash at end of period	$	917.9	$	1,418.7
Supplemental disclosure:
Cash paid during the period for:
Interest	$	70.4	$	87.1
Income taxes, net	160.2		37.1

See accompanying Notes to Unaudited Consolidated Financial Statements.

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WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operation

WAB operates the following full-service banking divisions: ABA, BON, FIB, Bridge, and TPB. The Company also serves business customers through a national platform of specialized financial services. Most recently, the Company added to these capabilities with the acquisition of AmeriHome on April 7, 2021, a leading national business-to-business mortgage platform. In addition, the Company has 2 non-bank subsidiaries, which are LVSP, which held and managed certain OREO properties, and CSI, a captive insurance company formed and licensed under the laws of the State of Arizona and established as part of the Company's overall enterprise risk management strategy.

Basis of presentation

The accounting and reporting policies of the Company are in accordance with GAAP and conform to practices within the financial services industry. The accounts of the Company and its consolidated subsidiaries are included in the Consolidated Financial Statements.

Recent accounting pronouncements

Convertible Debt and Derivatives and Hedging

In August 2020, the FASB issued guidance within ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update affect entities that issue convertible instruments and/or contracts indexed to and potentially settled in an entity’s own equity. The new ASU simplifies the convertible accounting framework through elimination of the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments to Subtopics 470 and 815 are effective for interim and annual reporting periods beginning after December 15, 2021 and are not expected to have a material impact on the Company’s Consolidated Financial Statements.

Reference Rate Reform

In March 2020, the FASB issued guidance within ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, in response to the scheduled discontinuation of LIBOR on December 31, 2021. Since the issuance of this guidance, the publication cessation of U.S. dollar LIBOR has been extended to June 30, 2023. The amendments in this Update provide optional guidance designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by reference rate reform.

The following optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification are permitted for contracts that are modified because of reference rate reform and that meet certain scope guidance: 1) modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; 2) modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required under this Topic for modifications not accounted for as separate contracts; 3) modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging- Embedded Derivatives; and 4) for other Topics or Industry Subtopics in the Codification, the amendments in this Update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.

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In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope in order to clarify that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition.

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Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discount, or contract price alignment that is modified as a result of reference rate reform.

The amendments in these ~~Updates~~updates are effective immediately for all entities and apply to contract modifications through December 31, 2022. The adoption of this accounting guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.

Recently adopted accounting guidance

Income Taxes

In December 2019, the FASB issued guidance within ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 are intended to reduce the cost and complexity of applying ASC 740. The amendments that are applicable to the Company address: 1) franchise and other taxes partially based on income; 2) step-up in basis of goodwill in a business combination; 3) allocation of tax expense in separate entity financial statements; and 4) interim recognition of enactment of tax laws or rate changes. The adoption of this guidance did not have a significant impact on the Company’s Consolidated Financial Statements.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates and judgments are ongoing and are based on experience, current and expected future conditions, third-party evaluations and various other assumptions that management believes are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities, as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from those estimates and assumptions used in the Consolidated Financial Statements and related notes. Material estimates that are susceptible to significant changes in the near term, particularly to the extent that economic conditions worsen or persist longer than expected in an adverse state, relate to: 1) the determination of the allowance for credit losses; 2) certain assets and liabilities carried at fair value; and 3) accounting for income taxes.

Principles of consolidation

As of ~~March 31,~~September 30, 2021, WAL has the following significant wholly-owned subsidiaries: WAB and 8 unconsolidated subsidiaries used as business trusts in connection with the issuance of trust-preferred securities.

WAB has the following significant wholly-owned subsidiaries: 1) WABT, which holds certain investment securities, municipal and nonprofit loans, and leases; 1)2) WA PWI, which holds interests in certain limited partnerships invested primarily in low income housing tax credits and small business investment corporations; 2)3) Helios Prime, which holds interests in certain limited partnerships invested in renewable energy projects; ~~and 3)~~4) BW Real Estate, Inc., which operates as a real estate investment trust and holds certain of WAB's real estate loans and related ~~securities.~~securities; and 5) Western Finance Company (formerly Western Alliance Equipment Finance), which purchases and originates equipment finance leases and, as of April 7, 2021, provides mortgage banking services through its wholly-owned subsidiary, AmeriHome Mortgage.

The Company does not have any other significant entities that should be consolidated. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts reported in prior periods may have been reclassified in the Consolidated Financial Statements to conform to the current presentation. The reclassifications have no effect on net income or stockholders’ equity as previously reported. Certain amounts previously reported in the Company’s June 30, 2021 Statement of Cash Flows have been adjusted in the current period. This adjustment, totaling $837.7 million, relates to classification between operating and investing activities. The cash outflow for residential loans originated through AmeriHome that were originally treated as held for sale in the Statement of Cash Flows should have been treated as held for investment. As a result of this change, purchases and originations of loans held for sale and the net increase in loans held for investment line items for the six months ended June 30, 2021, as adjusted, would have been $21.8 billion and $3.5 billion, respectively, and net cash used in operating and investing activities, as adjusted, would have been $1.1 billion and $6.2 billion, respectively.

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Interim financial information

The accompanying Unaudited Consolidated Financial Statements as of and for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 have been prepared in condensed format and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to the Company's audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal, recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other

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quarter or for the full year. The interim financial information should be read in conjunction with the Company's audited Consolidated Financial Statements.

Business combinations

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes all of the acquired assets and assumed liabilities at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including identified intangible assets, exceeds the purchase price, a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies are also recognized at fair value if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the Consolidated Income Statement from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred.

Investment securities

Investment securities include debt and equity securities. Debt securities may be classified as HTM, AFS, or trading. The appropriate classification is initially decided at the time of purchase. Securities classified as HTM are those debt securities that the Company has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or general economic conditions. The sale of an HTM security within three months of its maturity date or after the majority of the principal outstanding has been collected is considered a maturity for purposes of classification and disclosure. Securities classified as AFS are securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, decline in credit quality, and regulatory capital considerations.

HTM securities are carried at amortized cost. AFS securities are carried at their estimated fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. When AFS debt securities are sold, the unrealized gains or losses are reclassified from OCI to non-interest income. Trading securities are carried at their estimated fair value, with changes in fair value reported in earnings as part of non-interest income.

Equity securities are carried at their estimated fair value, with changes in fair value reported in earnings as part of non-interest income.

Interest income is recognized based on the coupon rate and includes the amortization of purchase premiums and the accretion of purchase discounts. Premiums and discounts on investment securities are generally amortized or accreted over the contractual life of the security using the interest method. For the Company's mortgage-backed securities, amortization or accretion of premiums or discounts are adjusted for anticipated prepayments. Gains and losses on the sale of investment securities are recorded on the trade date and determined using the specific identification method.

A debt security is placed on nonaccrual status at the time its principal or interest payments become 90 days past due. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

Allowance for credit losses on investment securities

On January 1, 2020, the Company adopted the amendments within ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which replaces the legacy US GAAP OTTI model with a credit loss model. The credit loss model under ASC 326-20, applicable to HTM debt securities, requires recognition of lifetime expected credit losses through an allowance account at the time the security is purchased. The Company measures expected credit losses on its HTM debt securities on a collective basis by major security type. The Company's HTM securities portfolio consists of low income housing tax-exempt bonds ~~which~~and

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private label residential MBS. Low income housing tax-exempt bonds share similar risk characteristics with the Company's CRE, non-owner occupied or construction and land loan pools, given the similarity in underlying assets or collateral. Accordingly, expected credit losses on HTM securities are estimated using the same models and approaches as these loan pools, which utilize risk parameters (probability of default, loss given default, and exposure at default) in the measurement of expected credit losses. The historical data used to estimate probability of default and severity of loss in the event of default is derived or obtained from internal and external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical losses. Accrued interest receivable on the HTM securities, which is included in other assets on the Consolidated Balance Sheet, is excluded from the estimate of expected credit losses.

The credit loss model under ASC 326-30, applicable to AFS debt securities, requires recognition of credit losses through an allowance account, but retains the concept from the OTTI model that credit losses are recognized once securities become impaired. For AFS debt securities, a decline in fair value due to credit loss results in recognition of an allowance for credit losses. Impairment may result from credit deterioration of the issuer or collateral underlying the security. The assessment of determining if a decline in fair value resulted from a credit loss is performed at the individual security level. Among other factors, the Company considers: 1) the extent to which the fair value is less than the amortized cost basis; 2) the financial condition and near term prospects of the issuer, including consideration of relevant financial metrics or ratios of the issuer; 3) any adverse conditions related to an industry or geographic area of an issuer; 4) any changes to the rating of the security by a rating agency; and 5) any past due principal or interest payments from the issuer. If an assessment of the above factors indicates that a credit loss exists, the Company records an allowance for credit losses for the excess of the amortized cost basis over the present value of cash flows expected to be collected, limited to the amount that the security's fair value is less than its amortized cost basis. Subsequent changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Interest accruals and amortization and accretion of premiums and discounts are suspended when the credit loss is recognized in earnings. Any interest received after the security has been placed on nonaccrual status is recognized on a cash

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basis. Accrued interest receivable on AFS securities, which is included in other assets on the Consolidated Balance Sheet, is excluded from the estimate of expected credit losses.

For each AFS security in an unrealized loss position, the Company also considers: 1) its intent to retain the security until anticipated recovery of the security's fair value; and 2) whether it is more-likely-than not that the Company would be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the debt security is written down to its fair value and the write-down is charged against the allowance for credit losses with any incremental impairment recorded in earnings.

Write-offs are made through reversal of the allowance for credit losses and direct write-off of the amortized cost basis of the AFS security. The Company considers the following events to be indicators that a write-off should be taken: 1) bankruptcy of the issuer; 2) significant adverse event(s) affecting the issuer in which it is improbable for the issuer to make its remaining payments on the security; and 3) significant loss of value of the underlying collateral behind a security. Recoveries on debt securities, if any, are recorded in the period received.

Restricted stock

WAB is a member of the Federal Reserve System and, as part of its membership, is required to maintain stock in the FRB in a specified ratio to its capital. In addition, WAB is a member of the FHLB system and, accordingly, maintains an investment in capital stock of the FHLB based on the borrowing capacity used. These investments are considered equity securities with no actively traded market. Therefore, the shares are considered restricted investment securities. These investments are carried at cost, which is equal to the value at which they may be redeemed. The dividend income received from the stock is reported in interest income. The Company conducts a periodic review and evaluation of its restricted stock to determine if any impairment exists. No impairment has been recorded to date.

Loans held for sale

The Company acquired loans HFS as part of the AMH acquisition and continues to purchase loans as part of its mortgage banking business. Loans held for sale are reported at fair value or the lower of cost or fair value, depending on the acquisition source. The Company has elected to record loans purchased from correspondent sellers or originated directly to consumers at fair value to more timely reflect the Company's performance. Changes in fair value of loans HFS are reported in current period income as a component of Net gain on loan origination and sale activities in the Consolidated Income Statement. Delinquent loans repurchased under the terms of the Ginnie Mae MBS program, referred to as EBO loans, are reported at the lower of cost or fair value. For EBO loans, the amount by which cost exceeds fair value is accounted for as a valuation allowance. Changes in the valuation allowance are included in Net gain on loan origination and sale activities in the Consolidated Income Statement.

The Company recognizes a transfer of loans as a sale when it surrenders control over the transferred loans. Control is considered to be surrendered when the transferred loans have been legally isolated from the Company, the transferee has the

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right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred loans, and the Company does not maintain effective control over the transferred loans through either an agreement that entitles or obligates the Company to repurchase or redeem the loans before their maturity or the ability to unilaterally cause the holder to return loans. If the transfer of loans qualifies as a sale, the Company derecognizes such loans and records the gain or loss as a component of Net gain on loan origination and sale activities in the Consolidated Income Statement. If the transfer of loans does not qualify as a sale, the proceeds from the transfer are accounted for as secured borrowings.

Loan acquisition and origination fees on loans HFS consist of fees earned by the Company for purchasing and originating loans and are recognized at the time the loans are purchased or originated. These fees generally represent flat, per loan fee amounts and are included as part of Net gain on loan origination and sale activities in the Consolidated Income Statement.

Recognition of interest income on non-government guaranteed or insured loans HFS is suspended and accrued unpaid interest receivable is reversed against interest income when loans become 90 days delinquent or when recovery of income and principal becomes doubtful. Loans return to accrual status when the principal and interest become current and it is probable that the amounts are fully collectible. For government guaranteed or insured loans HFS that are 90 days delinquent, the Company continues to recognize interest income at the debenture rate for FHA loans and at the note rate for VA and USDA loans, adjusted for probability of default.

Loans held for investment

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the amount of unpaid principal, adjusted for unamortized net deferred fees and costs, premiums and discounts, and write-offs. In addition, the amortized cost of loans subject to a fair value hedge are adjusted for changes in value attributable to the effective portion of the hedged benchmark interest rate risk.

The Company may also purchase loans or acquire loans through a business combination. At the purchase or acquisition date, loans are evaluated to determine if there has been more than insignificant credit deterioration since origination. Loans that have experienced more than insignificant credit deterioration since origination are referred to as PCD loans. In its evaluation of whether a loan has experienced more than insignificant deterioration in credit quality since origination, the Company takes into consideration loan grades, loan-to-values greater than policy limits, past due and nonaccrual status, and TDR loans. The Company may also consider external credit rating agency ratings for borrowers and for non-commercial loans, FICO score or band, probability of default levels, and number of times past ~~due, and standard deviations corresponding to FICO score or band.~~due. The initial estimate of credit losses on PCD loans is added to the purchase price on the acquisition date to establish the initial amortized cost basis of the loan; accordingly, the initial recognition of expected credit losses has no impact on net income. When the initial measurement of expected credit losses on PCD loans are calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool. Any difference between the initial amortized cost basis and the unpaid principal balance of the loan represents a noncredit discount or premium, which is accreted (or amortized) into interest income over the life of the loan. Subsequent changes to the allowance for credit losses on PCD loans are recorded through the provision for credit losses. For purchased loans that are not deemed to have experienced more than insignificant credit deterioration since origination, any discounts or premiums included in the purchase price are accreted (or amortized) over the contractual life of the individual loan. For additional information, see "Note 3.5. Loans, Leases and Allowance for Credit Losses" of these Notes to Unaudited Consolidated Financial Statements.

In applying the effective yield method to loans, the Company generally applies the contractual method whereby loan fees collected for the origination of loans less direct loan origination costs (net of deferred loan fees), as well as premiums and discounts and certain purchase accounting adjustments, are amortized over the contractual life of the loan through interest income. If a loan has scheduled payments, the amortization of the net deferred loan fee is calculated using the interest method over the contractual life of the loan. If a loan does not have scheduled payments, such as a line of credit, the net deferred loan fee is recognized as interest income on a straight-line basis over the contractual life of the loan commitment. Commitment fees based on a percentage of a customer’s unused line of credit and fees related to standby letters of credit are recognized over the commitment period. When loans are repaid, any remaining unamortized balances of premiums, discounts, or net deferred fees are recognized as interest income.

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Conversely, with respect to loans originated under the PPP, the Company incorporates projected prepayments in calculating effective yield. As a result, net deferred fees are accreted into interest income faster than would be the case when applying the contractual method based upon the timing and amount of estimated forgiven loan balances. The Company expects that a majority of PPP loans will qualify for forgiveness under the SBA program, based on requested loan amounts largely representing qualifying expenses at the time of application.

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Nonaccrual loans

When a borrower discontinues making payments as contractually required by the note, the Company must determine whether it is appropriate to continue to accrue interest. The Company ceases accruing interest income when the loan has become delinquent by more than 90 days or when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely. Past due status is based on the contractual terms of the loan. The Company may decide to continue to accrue interest on certain loans more than 90 days delinquent if the loans are well secured by collateral and in the process of collection.

For all HFI loan types, when a loan is placed on nonaccrual status, all interest accrued but uncollected is reversed against interest income in the period in which the status is changed, and the Company makes a loan-level decision to apply either the cash basis or cost recovery method. The Company may recognize income on a cash basis when a payment is received and only for those nonaccrual loans for which the collection of the remaining principal balance is not in doubt. Under the cost recovery method, subsequent payments received from the customer are applied to principal and generally no further interest income is recognized until the principal has been paid in full or until circumstances have changed such that payments are again consistently received as contractually required. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Troubled Debt Restructured Loans

A TDR loan is a loan on which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The evaluation is performed under the Company's internal underwriting policy. The loan terms that may be modified or restructured due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, an extension of the maturity or renewal of the loan at an interest rate below current market, a reduction in the face amount of the debt, a reduction in the accrued interest, or deferral of interest payments. A TDR loan may be returned to accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a reasonable period of time (generally six months), and the ultimate collectability of the total contractual restructured principal and interest is no longer in doubt. Consistent with regulatory guidance, a TDR loan that is subsequently modified in another restructuring agreement but has shown sustained performance and classification as a TDR, will be removed from TDR status provided that the modified terms were market-based at the time of modification.

The CARES Act, signed into law on March 27, 2020, permitted financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification was made between March 1, 2020 and December 31, 2020 and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, extends these provisions through January 1, 2022. In addition, federal bank regulatory authorities issued guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID-19 and assured financial institutions that they will neither receive supervisory criticism for such prudent loan modifications, nor be required by examiners to automatically categorize COVID-19-related loan modifications as TDRs. The Company is applying this guidance to qualifying loan modifications.

Credit quality indicators

Loans are regularly reviewed to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company’s risk rating methodology assigns risk ratings ranging from 1 to 9, where a higher rating represents higher risk. The Company differentiates its loan segments based on shared risk characteristics for which expected credit loss is measured on a pool basis.

The nine risk rating categories can be generally described by the following groupings for loans:

"Pass" (grades 1 through 5): The Company has five pass risk ratings, which represent a level of credit quality that ranges from no well-defined deficiency or weakness to some noted weakness; however, the risk of default on any loan classified as pass is expected to be remote. The five pass risk ratings are described below:

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Minimal risk. These consist of loans that are fully secured either with cash held in a deposit account at the Bank or by readily marketable securities with an acceptable margin based on the type of security pledged.

Low risk. These consist of loans with a high investment grade rating equivalent.

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Modest risk. These consist of loans where the credit facility greatly exceeds all policy requirements or with policy exceptions that are appropriately mitigated. A secondary source of repayment is verified and considered sustainable. Collateral coverage on these loans is sufficient to fully cover the debt as a tertiary source of repayment. Debt of the borrower is low relative to borrower’s financial strength and ability to pay.

Average risk. These consist of loans where the credit facility meets or exceeds all policy requirements or with policy exceptions that are appropriately mitigated. A secondary source of repayment is available to service the debt. Collateral coverage is more than adequate to cover the debt. The borrower exhibits acceptable cash flow and moderate leverage.

Acceptable risk. These consist of loans with an acceptable primary source of repayment, but a less than preferable secondary source of repayment. Cash flow is adequate to service debt, but there is minimal excess cash flow. Leverage is moderate or high.

"Special mention" (grade 6): Generally these are assets that possess potential weaknesses that warrant management's close attention. These loans may involve borrowers with adverse financial trends, higher debt-to-equity ratios, or weaker liquidity positions, but not to the degree of being considered a “problem loan” where risk of loss may be apparent. Loans in this category are usually performing as agreed, although there may be non-compliance with financial covenants.

"Substandard" (grade 7): These assets are characterized by well-defined credit weaknesses and carry the distinct possibility that the Company will sustain some loss if such weakness or deficiency is not corrected. All loans 90 days or more past due and all loans on nonaccrual status are considered at least "Substandard," unless extraordinary circumstances would suggest otherwise.

"Doubtful" (grade 8): These assets have all the weaknesses inherent in those classified as "Substandard" with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable, but because of certain known factors that may work to the advantage and strengthening of the asset (for example, capital injection, perfecting liens on additional collateral and refinancing plans), classification as an estimated loss is deferred until a more precise status may be determined. Due to the high probability of loss, loans classified as "Doubtful" are placed on nonaccrual status.

"Loss" (grade 9): These assets are considered uncollectible and having such little recoverable value that it is not practical to defer writing off the asset. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practicable or desirable to defer writing off the asset, even though partial recovery may be achieved in the future.

Allowance for credit losses on HFI loans

On January 1, 2020, the Company adopted the amendments within ASU 2016-13,~~Measurement of Credit Losses on Financial Instruments~~, which changes the impairment model for most financial assets carried at amortized cost from an incurred loss model to an expected loss model. The discussion below reflects the current expected credit loss model methodology. Credit risk is inherent in the business of extending loans and leases to borrowers and is continuously monitored by management and reflected within the allowance for credit losses for loans. The allowance for credit losses is an estimate of life-of-loan losses for the Company's loans held for investment. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of a loan to present the net amount expected to be collected on the loan. Accrued interest receivable on loans, which is included in other assets on the Consolidated Balance Sheet, is excluded from the estimate of expected credit losses. Expected recoveries of amounts previously written off and expected to be written off are included in the valuation account and may not exceed the aggregate of amounts previously written off and expected to be written off. The Company formally re-evaluates and establishes the appropriate level of the allowance for credit losses on a quarterly basis.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio or particular segments of the loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance for credit losses and credit loss expense in those future periods. The allowance level is influenced by loan volumes, mix, loan performance metrics, asset quality characteristics, delinquency status, historical credit loss experience, and the inputs and assumptions in economic forecasts, such as macroeconomic inputs, length of reasonable and supportable forecast periods, and reversion methods. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, an asset-specific component involving individual loans that do not share similar risk characteristics with

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other loans and the measurement of expected credit losses for such individual loans and; second, a pooled component for estimated expected credit losses for ~~pools of~~ loans that share similar risk characteristics.

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Loans that do not share risk characteristics with other loans

Loans that do not share risk characteristics with other loans are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. These loans consist of loans with unique features or loans that no longer share risk characteristics with other pooled loans. The process for determining whether a loan should be evaluated on an individual basis begins with determination of credit rating. ~~All~~With the exception of residential loans, all accruing loans graded substandard or worse ~~and all PCD loans, irrespective~~with a total commitment of ~~credit rating,~~$1.0 million or more are assigned a reserve based on an individual evaluation. For these loans, the allowance is based primarily on the fair value of the underlying collateral, utilizing independent third-party appraisals.

Loans that share similar risk characteristics with other loans

In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segregated into loan segments. The Company's primary portfolio segments ~~have changed due to adoption of the amendments within ASU 2016-13 to~~ align with the methodology applied in estimating the allowance for credit losses under CECL. Loans are designated into loan segments based on loans pooled by product types, business lines, and similar risk characteristics or areas of risk concentration. Accordingly, the loan portfolio segments discussed below are based upon CECL-defined shared risk characteristics and are not comparable to the segments reported prior to adoption of the new accounting guidance.

In determining the allowance for credit losses, the Company derives an estimate of expected credit losses primarily using an expected loss methodology that incorporates risk parameters (probability of default, loss given default, and exposure at default), which are derived from various vendor models, internally-developed statistical models, or non-statistical estimation approaches. Probability of default is projected in these models or estimation approaches using ~~multiple~~a single economic ~~scenarios, whose outcomes are weighted based on the Company's economic outlook~~scenario and were developed to incorporate relevant information about past events, current conditions, and reasonable and supportable forecasts. With the exception of the Company's residential loan segment, the Company's PD models share a common definition of default, which include loans that are 90 days past due, on nonaccrual status, have a charge-off, or obligor bankruptcy. Input reversion is used for all loan segment models, except for the commercial and industrial and CRE, owner-occupied loan segments. Output reversion is used for the commercial and industrial and CRE, owner-occupied segments by incorporating, after the forecast period, a one-year linear reversion to the long-term reversion rate in year three through the remaining life of the loans within the respective segments. LGDs are typically derived from the Company's historical loss experience. However, for the residential, warehouse lending, and municipal and nonprofit loan segments, where the Company has either zero (or near zero) losses, or has a limited loss history through the last economic downturn, certain non-modeled methodologies are ~~employed.~~employed to estimate LGD. Factors utilized in calculating average LGD vary for each loan segment and are further described below. Exposure at default refers to the Company's exposure to loss at the time of borrower default. For revolving lines of credit, the Company incorporates an expectation of increased line utilization for a higher EAD on defaulted loans based on historical experience. For term loans, EAD is calculated using an amortization schedule based on contractual loan terms, adjusted for a prepayment rate assumption. Prepayment trends are sensitive to interest rates and the macroeconomic environment. Fixed rate loans are more influenced by interest rates, whereas variable rate loans are more influenced by the macroeconomic environment. After the quantitative expected loss estimates are calculated, management then adjusts these estimates to incorporate considerations of current trends and conditions that are not captured in the quantitative loss estimates, through the use of qualitative and/or environmental factors.

The following provides credit quality indicators and risk elements most relevant in monitoring and measuring the allowance for credit losses on loans for each of the loan portfolio segments identified:

Warehouse lending

The warehouse lending portfolio segment consists of mortgage warehouse lines, ~~mortgage servicing rights~~MSR financing facilities, and note finance loans, which have a monitored borrowing base to mortgage companies and similar lenders and are primarily structured as commercial and industrial loans. ~~These~~The collateral for these loans ~~are collateralized by real estate notes~~is primarily comprised of residential whole loans and ~~mortgages or mortgage servicing rights and~~MSRs, with the borrowing base of these loans is tightly monitored and controlled by the Company. The primary support for the loan takes the form of pledged collateral, with secondary support provided by the capacity of the financial institution. The collateral-driven nature of these loans distinguish them from traditional commercial and industrial loans. These loans are impacted by interest rate shocks, residential lending rates, prepayment assumptions, and general real estate stress. As a result of the unique loan characteristics, limited historical default and loss experience, and the collateral nature of this loan portfolio segment, the Company uses a non-modeled approach to estimate expected credit losses, leveraging grade information, grade migration history, and management judgment.

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Municipal and nonprofit

The municipal and nonprofit portfolio segment consists of loans to local governments, government-operated utilities, special assessment districts, hospitals, schools and other nonprofits. These loans are generally, but not exclusively, entered into for the purpose of financing real estate investment or for refinancing existing debt and are primarily structured as commercial and industrial loans. Loans are supported by taxes or utility fees, and in some cases tax liens on real estate, operating revenue of the institution, or other collateral support the loans. Unemployment rates and the market valuation of residential properties have an effect on the tax revenues supporting these loans; however, these loans tend to be less cyclical in comparison to similar commercial loans as these loans rely on diversified tax bases. The Company uses a non-modeled approach to estimate expected credit losses, leveraging grade information and historical municipal default rates.

Tech & innovation

The ~~Tech~~tech & innovation portfolio segment is comprised of commercial loans that are originated within this business line and not collateralized by real estate. The source of repayment of these loans is generally expected to be the income that is generated from the business. The models used to estimate expected credit losses for this loan segment include a combination of a vendor model and an internally-developed model. These models incorporate both market level and company-specific factors such as financial statement variables, adjusted for the current stage of the credit cycle and for the Company's loan performance data such as delinquency, utilization, maturity, and size of the loan commitment under specific macroeconomic scenarios to produce a probability of default. Macroeconomic variables include the Dow Jones Index, credit spread between the BBB Bond Yield and 10-Year Treasury Bond Yield, unemployment rate, and CBOE VIX Index quarterly high. LGD and the prepayment rate assumption for EAD for this loan segment are driven by unemployment levels.

Equity fund resources

The equity fund resources portfolio segment is comprised of commercial loans to private equity and venture capital funds. The primary source of repayment of these loans is typically uncalled capital commitments from institutional investors and high net worth individuals. The models used to estimate expected credit losses for this loan segment are the same as those used for the Tech & Innovation portfolio segment.

Other commercial and industrial

The other commercial and industrial segment is comprised of commercial and industrial loans that are not originated within the Company's specialty business lines and are not collateralized by real estate. The models used to estimate expected credit losses for this loan segment isare the same as those used for the Tech & Innovation portfolio segment.

Commercial real estate, owner-occupied

The CRE, owner-occupied portfolio segment is comprised of commercial loans that are collateralized by real estate, where the primary source of repayment is the business that occupies the property. These loans are typically entered into for the purpose of providing real estate finance or improvement. The primary source of repayment of these loans is the income generated by the business and where rental or sale of the property may provide secondary support for the loan. These loans are sensitive to general economic conditions as well as the market valuation of CRE properties. The probability of default estimate for this loan segment is modeled using the same model as the commercial and industrial loan segment. LGD for this loan segment is driven by property appreciation and the prepayment rate assumption for EAD is driven by unemployment levels.

Hotel franchise finance

The Hotel franchise finance segment is comprised of loans that are originated within this business line and are collateralized by real estate, where the owner is not the primary tenant. These loans are typically entered into for the purpose of financing or the improvement of commercial investment properties. The primary source of repayment of these loans are the rents paid by tenants and where the sale of the property may provide secondary support for the loan. These loans are sensitive to the market valuation of CRE properties, rental rates, and general economic conditions. The vendor model used to estimate expected credit losses for this loan segment projects probabilities of default and exposure at default based on multiple macroeconomic scenarios by modeling how macroeconomic conditions affect the commercial real estate market. Real estate market factors utilized in this model include vacancy rate, rental growth rate, net operating income growth rate, and commercial property price changes for each specific property type. The model then incorporates loan and property-level characteristics including debt coverage, leverage, collateral size, seasoning, and property type. LGD for this loan segment is derived from a non-modeled approach that is driven by property appreciation and the prepayment rate assumption for EAD is driven by the property appreciation for fixed rate loans and unemployment levels for variable rate loans.

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Other commercial real estate, non-owner occupied

The other commercial real estate, non-owner occupied segment is comprised of loans that are not originated within the Company's specialty business lines and are collateralized by real estate, where the owner is not the primary tenant. The model used to estimate expected credit losses for this loan segment is the same as the model used for the Hotel ~~Franchise Finance~~franchise finance portfolio segment.

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Residential

The residential loan portfolio segment is comprised of loans collateralized primarily by first liens on 1-4 residential family properties and home equity lines of credit that are collateralized by either first liens or junior liens on residential properties. The primary source of repayment of these loans is the value of the property and the capacity of the owner to make payments on the loan. Unemployment rates and the market valuation of residential properties will impact the ultimate repayment of these loans. The residential mortgage loan model is a vendor model that projects probability of default, loss given default severity, prepayment rate, and exposure at default to calculate expected losses. The model is intended to capture the borrower's payment behavior during the lifetime of the residential loan by incorporating loan level characteristics such as loan type, coupon, age, loan-to-value, and credit score and economic conditions such as Home Price Index, interest rate, and unemployment rate. A default event for residential loans is defined as 60 days or more past due, with property appreciation as the driver for LGD results. The prepayment rate assumption for exposure at default for residential loans is based on industry prepayment history.

Probability of default for HELOCs is derived from an internally-developed model that projects PD by incorporating loan level information such as FICO score, lien position, balloon payments, and macroeconomic conditions such as property appreciation. LGD for this loan segment is driven by property appreciation and lien position. Exposure at default for HELOCs is calculated based on utilization rate assumptions using a non-modeled approach and incorporates management judgment.

Construction and land development

The construction and land portfolio segment is comprised of loans collateralized by land or real estate, which are entered into for the purpose of real estate development. The primary source of repayment of loans is the eventual sale or refinance of the completed project and where claims on the property provide secondary support for the loan. These loans are impacted by the market valuation of CRE and residential properties and general economic conditions that have a higher sensitivity to real estate markets compared to other real estate loans. Default risk of a property is driven by loan-specific drivers, including loan-to-value, maturity, origination date, and the MSA in which the property is located, among other items. The variables used in the internally-developed model include loan level drivers such as origination loan-to-value, loan maturity, and macroeconomic drivers such as property appreciation, MSA level unemployment rate, and national GDP growth. LGD for this loan segment is driven by property appreciation. The prepayment rate assumption for EAD is driven by the property appreciation for fixed rate loans and unemployment levels for variable rate loans.

Other

This portfolio consists of those loans not already captured in one of the aforementioned loan portfolio segments, which include, but may not be limited to, overdraft lines for treasury services, credit cards, consumer loans not collateralized by real estate, and small business loans collateralized by residential real estate. The consumer and small business loans are supported by the capacity of the borrower and the valuation of any collateral. General economic factors such as unemployment will have an effect on these loans. The Company uses a non-modeled approach to estimate expected credit losses, leveraging average historical default rates. LGD for this loan segment is driven by unemployment levels and lien position. The prepayment rate assumption for EAD is driven by the BBB corporate spread for fixed rate loans and unemployment levels for variable rate loans.

Off-balance sheet credit exposures, including unfunded loan commitments

The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, financial guarantees, and letters of credit, which is classified in other liabilities on the Consolidated Balance Sheet. The allowance for credit losses on off-balance sheet credit exposures is adjusted through increases or decreases to the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, an estimate of exposure at default that is derived from utilization rate assumptions using a non-modeled approach, and PD and LGD estimates that are derived from the same models and approaches for the Company's other loan portfolio segments described above as these unfunded commitments share similar risk characteristics with these loan portfolio segments. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

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Mortgage servicing rights

The Company acquired MSRs as part of the AMH acquisition and continues to generate new MSRs from its mortgage banking business. When AMH sells mortgage loans in the secondary market and retains the right to service these loans, a servicing right asset is capitalized at the time of sale when the benefits of servicing are deemed to be greater than adequate compensation for performing the servicing activities. MSRs represent the then-current fair value of future net cash flows expected to be realized from performing servicing activities. The Company has elected to subsequently measure MSRs at fair value and report changes in fair value in current period income as a component of Net loan servicing revenue in the Consolidated Income Statement.

The Company may from time to time sell MSRs and will recognize, as of the trade date, a gain or loss on the sale equal to the difference between the carrying value of the transferred MSRs and the value of the assets received as consideration. The Company subsequently derecognizes MSRs when substantially all of the risks and rewards of ownership are irrevocably passed to the transferee and any protection provisions retained by the Company are minor and can be reasonably estimated, which typically occurs on the settlement date. Protection provisions are considered to be minor if the obligation created by such provisions is estimated to be no more than 10 percent of the sales price and the Company retains the risk of prepayment for no more than 120 days. The Company records an estimated liability for retained protection provisions as of the trade date and continues to remeasure this liability until settlement, with any changes in the estimated liability recorded in earnings. In addition, fees to transfer loans associated with the sold MSRs to a new servicer are also incurred on the settlement date. Gains or losses on sales of MSRs, net of retained protection provisions, and transfer fees are included in Net loan servicing revenue in the Consolidated Income Statement.

Leases (lessee)

At inception, contracts are evaluated to determine whether the contract constitutes a lease agreement. For contracts that are determined to be an operating lease, a corresponding ROU asset and operating lease liability are recorded in separate line items on the Consolidated Balance Sheet. A ROU asset represents the Company’s right to use an underlying asset during the lease term and a lease liability represents the Company’s commitment to make contractually obligated lease payments. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease and are based on the present value of lease payments over the lease term. The measurement of the operating lease ROU asset includes any lease payments made and is reduced by lease incentives that are paid or are payable to the Company. Variable lease payments that depend on an index or rate such as the Consumer Price Index are included in lease payments based on the rate in effect at the commencement date of the lease. Lease payments are recognized on a straight-line basis as part of occupancy expense over the lease term.

As the rate implicit in the lease is not readily determinable, the Company's incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable FHLB collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s Consolidated Balance Sheet, but rather, lease expense is recognized over the lease term on a straight-line basis. The Company’s lease agreements may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the options will be exercised.

In addition to the package of practical expedients, the Company also elected the practical expedient that allows lessees to make an accounting policy election to not separate non-lease components from the associated lease component, and instead account for them all together as part of the applicable lease component. This practical expedient can be elected separately for each underlying class of asset. The majority of the Company’s non-lease components such as common area maintenance, parking, and taxes are variable, and are expensed as incurred. Variable payment amounts are determined in arrears by the landlord depending on actual costs incurred.

Goodwill and other intangible assets

The Company records as goodwill the excess of the purchase price in a business combination over the fair value of the identifiable net assets acquired in accordance with applicable guidance. The Company performs its annual goodwill and intangibles impairment tests as of October 1 each year, or more often if events or circumstances indicate that the carrying value may not be recoverable. The Company can first elect to assess, through qualitative factors, whether it is more likely than not that goodwill is impaired. If the qualitative assessment indicates potential impairment, a quantitative impairment test is necessary. If, based on the quantitative test, a reporting unit's carrying amount exceeds its fair value, a goodwill impairment charge for this difference is recorded to current period earnings as non-interest expense.

~~The~~Prior to the acquisition of AmeriHome, the Company’s intangible assets ~~consist~~consisted primarily of core deposit intangible assets that are amortized over periods ranging from five to 10 years. See "Note 2. Mergers, Acquisitions and Dispositions" of these

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Notes to Unaudited Consolidated Financial Statements for discussion of the intangible assets acquired as part of the AmeriHome acquisition.

The Company considers the remaining useful lives of its ~~core deposit~~ intangible assets each reporting period, as required by ASC 350, Intangibles—Goodwill and Other, to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company has not revised its estimates of the useful lives of its ~~core deposit intangibles~~intangible assets during the three and nine months ended ~~March 31,~~September 30, 2021 or 2020.

Stock compensation plans

The Company has the Incentive Plan, as amended, which is described more fully in "Note 6.9. Stockholders' Equity" of these Notes to Unaudited Consolidated Financial Statements. Compensation expense on non-vested restricted stock awards is based on the fair value of the award on the measurement date which, for the Company, is the date of the grant and is recognized ratably over the service period of the award. Forfeitures are estimated at the time of the award grant and revised in subsequent periods if actual forfeitures differ from those estimates. The fair value of non-vested restricted stock awards is the market price of the Company’s stock on the date of grant.

The Company's performance stock units have a cumulative EPS target and a TSR performance measure component. The TSR component is a market-based performance condition that is separately valued as of the date of the grant. A Monte Carlo valuation model is used to determine the fair value of the TSR performance metric, which simulates potential TSR outcomes over the performance period and determines the payouts that would occur in each scenario. The resulting fair value of the TSR component is based on the average of these results. Compensation expense related to the TSR component is based on the fair value determination on the date of the grant and is not subsequently revised based on actual performance. Compensation expense on the EPS component for these awards is based on the fair value (market price of the Company's stock on the date of

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the grant) of the award. Compensation expense related to both the TSR and EPS components is recognized ratably over the service period of the award.

See "Note 6.9. Stockholders' Equity" of these Notes to Unaudited Consolidated Financial Statements for further discussion of stock awards.

Dividends

WAL is a legal entity separate and distinct from its subsidiaries. As a holding company with limited significant assets other than the capital stock of its subsidiaries, WAL's ability to pay dividends depends primarily upon the receipt of dividends or other capital distributions from its subsidiaries. The Company's subsidiaries' ability to pay dividends to WAL is subject to, among other things, their individual earnings, financial condition, and need for funds, as well as federal and state governmental policies and regulations applicable to WAL and each of those subsidiaries, which limit the amount that may be paid as dividends without prior approval. In addition, the terms and conditions of other securities the Company issues may restrict its ability to pay dividends to holders of the Company's common stock. For example, if any required payments on outstanding trust preferred securities are not made, WAL would be prohibited from paying cash dividends on its common stock.

Preferred Stock

On September 22, 2021, the Company issued an aggregate of 12,000,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company’s 4.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Shares, Series A, par value $0.0001 per share, with a liquidation preference of $25 per Depositary Share (equivalent to $10,000 per share of Series A preferred stock). The Company's Series A preferred stock is perpetual preferred stock that is not subject to any mandatory redemption, resulting in classification as permanent equity. Dividends on preferred stock are recognized on the declaration date and are recorded as a reduction of retained earnings.

Treasury shares

The Company separately presents treasury shares, which represent shares surrendered to the Company equal in value to the statutory payroll tax withholding obligations arising from the vesting of employee restricted stock awards. Treasury shares are carried at cost.

Common stock repurchases

The Company has previously adopted common stock repurchase programs pursuant to which the Company has repurchased shares of its outstanding common stock, the most recent of which expired in December 2020. All shares repurchased under the plan were retired upon settlement. The Company has elected to allocate the excess of the repurchase price over the par value of

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its common stock between APIC and retained earnings, with the portion allocated to APIC limited to the amount of APIC that was recorded at the time that the shares were initially issued, which was calculated on a last-in, first-out basis.

Sales of Common Stock Under ATM Program

On June 3, 2021, the Company entered into a distribution agency agreement with J.P. Morgan Securities LLC, under which the Company may sell up to 4,000,000 shares of its common stock on the New York Stock Exchange. The Company pays J.P. Morgan Securities LLC a mutually agreed rate, not to exceed 2% of the gross offering proceeds of the shares sold pursuant to the distribution agency agreement. The common stock will be sold at prevailing market prices at the time of the sale or at negotiated prices and, as a result, prices will vary. Any sales under the ATM program are made pursuant to a prospectus dated May 14, 2021 and a prospectus supplement filed with the SEC on June 3, 2021, in connection with one or more offerings of shares from the Company's shelf registration statement on Form S-3 (No. 333-256120). See "Note 13. Stockholders' Equity" of these Notes to Unaudited Consolidated Financial Statements for further discussion of this program.

Derivative financial instruments

The Company uses interest rate swaps to mitigate interest-rate risk associated with changes to the fair value of certain fixed-rate financial instruments (fair value hedges).

The Company recognizes derivatives as assets or liabilities on the Consolidated Balance Sheet at their fair value in accordance with ASC 815, Derivatives and Hedging. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset or liability attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of derivatives not considered to be highly effective in hedging the change in fair value of the hedged item are recognized in earnings as non-interest income during the period of the change.

The Company documents its hedge relationships, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction after the derivative contract is executed. At inception, the Company performs a quantitative assessment to determine whether the derivatives used in hedging transactions are highly effective (as defined in the guidance) in offsetting changes in the fair value of the hedged item. Retroactive effectiveness is assessed, as well as the continued expectation that the hedge will remain effective prospectively. After the initial quantitative assessment is performed, on a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty's risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. The Company discontinues hedge accounting prospectively when it is determined that a hedge is no longer highly effective. When hedge accounting is discontinued on a fair value hedge that no longer qualifies as an effective hedge, the derivative instrument continues to be reported at fair value on the Consolidated Balance Sheet, but the carrying amount of the hedged item is no longer adjusted for future changes in fair value. The adjustment to the carrying amount of the hedged item that existed at the date hedge accounting is discontinued is amortized over the remaining life of the hedged item into earnings.

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Derivative instruments that are not designated as hedges, so called free-standing derivatives, are reported on the Consolidated Balance Sheet at fair value and the changes in fair value are recognized in earnings as non-interest income during the period of change. With the acquisition of AmeriHome, the Company's economic hedging volume has substantially increased. AmeriHome enters into commitments to purchase mortgage loans that will be held for sale. These loan commitments, described as IRLCs, qualify as derivative instruments, except those that are originated and intended for HFI classification. As of September 30, 2021, all IRLCs qualify as derivative instruments. Changes in fair value associated with changes in interest rates are economically hedged by utilizing forward sale commitments and interest rate futures. These hedging instruments are typically entered into contemporaneously with IRLCs. Loans that have been or will be purchased or originated may be used to satisfy the Company's forward sale commitments. In addition, derivative financial instruments are also used to economically hedge the Company's MSR portfolio. Changes in the fair value of derivative financial instruments that hedge IRLCs and loans HFS are included in Net gain on loan origination and sale activities in the Consolidated Income Statement. Changes in the fair value of derivative financial instruments that hedge MSRs are included in Net loan servicing revenue in the Consolidated Income Statement.

The Company may in the normal course of business purchase a financial instrument or originate a loan that contains an embedded derivative instrument. Upon purchasing the instrument or originating the loan, the Company assesses whether the

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economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where the host contract is measured at fair value, with changes in fair value reported in current earnings, or the Company is unable to reliably identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the Consolidated Balance Sheet at fair value and is not designated as a hedging instrument.

Off-balance sheet instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instrument arrangements consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the Consolidated Financial Statements when they are funded. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the Consolidated Balance Sheet. Losses could be experienced when the Company is contractually obligated to make a payment under these instruments and must seek repayment from the borrower, which may not be as financially sound in the current period as they were when the commitment was originally made. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and, in certain instances, may be unconditionally cancelable. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. The commitments are collateralized by the same types of assets used as loan collateral.

The Company also has off-balance sheet arrangements related to its derivative instruments. Derivative instruments are recognized in the Consolidated Financial Statements at fair value and their notional values are carried off-balance sheet. See "Note 8.11. Derivatives and Hedging Activities" of these Notes to Unaudited Consolidated Financial Statements for further discussion.

Fair values of financial instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities. ASC 820, Fair Value Measurement, establishes a framework for measuring fair value and a three-level valuation hierarchy for disclosure of fair value measurement, and also sets forth disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The Company uses various valuation approaches, including market, income, and/or cost approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would consider in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs, as follows:

•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, volatilities, etc.) or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market.

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•Level 3 - Valuation is generated from model-based techniques where one or more significant inputs are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, discounted cash flow models, and similar techniques.

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The availability of observable inputs varies based on the nature of the specific financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant who may purchase the asset or assume the liability, rather than an entity-specific measure. When market assumptions are available, ASC 820 requires that the Company consider the assumptions that market participants would use to estimate the fair value of the financial instrument at the measurement date.

ASC 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at ~~March 31,~~September 30, 2021 and December 31, 2020. The estimated fair value amounts for ~~March 31,~~September 30, 2021 and December 31, 2020 have been measured as of period-end, and have not been re-evaluated or updated for purposes of these Unaudited Consolidated Financial Statements subsequent to those dates. As such, the estimated fair values of these financial instruments subsequent to the reporting date may be different than the amounts reported at period-end.

The information in "Note ~~12.~~15. Fair Value Accounting" of these Notes to Unaudited Consolidated Financial Statements should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities.

Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company’s disclosures and those of other companies or banks may not be meaningful.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash, cash equivalents, and restricted cash

The carrying amounts reported on the Consolidated Balance Sheet for cash and due from banks approximate their fair value.

~~Money market investments~~

~~The carrying amounts reported on the Consolidated Balance Sheet for money market investments approximate their fair value.~~

Investment securities

The fair values of U.S. treasury and certain other debt securities as well as publicly-traded CRA investments and exchange-listed preferred stock ~~trust preferred securities, and certain corporate debt securities~~ are based on quoted market prices and are categorized as Level 1 in the fair value hierarchy.

The fair values of debt securities are primarily determined based on matrix pricing. Matrix pricing is a mathematical technique that utilizes observable market inputs including, for example, yield curves, credit ratings, and prepayment speeds. Fair values determined using matrix pricing are generally categorized as Level 2 in the fair value hierarchy. In addition to matrix pricing, the Company uses other pricing sources, including observed prices on publicly traded securities and dealer quotes, to estimate the fair value of debt securities, which are also categorized as Level 2 in the fair value hierarchy.

Restricted stock

WAB is a member of the Federal Reserve System and the FHLB and, accordingly, maintains investments in the capital stock of the FRB and the FHLB. These investments are carried at cost since no ready market exists for them, and they have no quoted market value. The Company conducts a periodic review and evaluation of its restricted stock to determine if any impairment exists. The fair values of these investments have been categorized as Level 2 in the fair value hierarchy.

Loans HFS

Government-insured or guaranteed and agency-conforming loans HFS are salable into active markets. Accordingly, the fair value of these loans is based on quoted market or contracted selling prices or a market price equivalent, which are categorized as Level 2 in the fair value hierarchy.

The fair value of non-agency loans HFS as well as certain loans that become nonsalable into active markets due to the identification of a defect is determined based on valuation techniques that utilize Level 3 inputs.

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Loans HFI

The fair value of loans is estimated based on discounted cash flows using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality and adjustments that the Company believes a market participant would consider in determining fair value based on a third-party independent valuation. As a result, the fair value for loans is categorized as Level 3 in the fair value hierarchy.

Mortgage servicing rights

The fair value of MSRs is estimated based on a discounted cash flow model that incorporates assumptions that a market participant would use in estimating the fair value of servicing rights, including, but not limited to, option adjusted spread, conditional prepayment rate, servicing fee rate, and cost to service. As a result, the fair value for MSRs is categorized as Level 3 in the fair value hierarchy.

Accrued interest receivable and payable

The carrying amounts reported on the Consolidated Balance Sheet for accrued interest receivable and payable approximate their fair values.

Derivative financial instruments

All derivatives are recognized on the Consolidated Balance Sheets at their fair value. The fair value for derivatives is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters. As a result, the fair values have been categorized as Level 2 invaluation methodologies used to estimate the fair value ~~hierarchy.~~of derivative instruments varies by type. Treasury futures and options, Eurodollar futures, and swap futures are measured based on valuation techniques using Level 1 Inputs from exchange-provided daily settlement quotes. Interest rate swaps and forward purchase and sales contracts are measured based on valuation techniques using Level 2 inputs, such as quoted market price, contracted selling price, or market price equivalent. IRLCs are measured based on valuation techniques using Level 3 inputs, such as loan type, underlying loan amount, note rate, loan program, and expected settlement date. These measurements are adjusted at the loan level to consider the servicing release premium and loan pricing adjustment specific to each loan. The base value is then adjusted for the pull-through rate. The pull-through rate and servicing fee multiple are unobservable inputs based on historical experience.

Deposits

The fair value disclosed for demand and savings deposits is by definition equal to the amount payable on demand at their reporting date (that is, their carrying amount), as these deposits do not have a contractual term. The carrying amount for variable rate deposit accounts approximates their fair value. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on these deposits. The fair value measurement of the deposit liabilities is categorized as Level 2 in the fair value hierarchy.

FHLB advances and customer repurchase agreements

The fair values of the Company’s borrowings are estimated using discounted cash flow analyses, based on the market rates for similar types of borrowing arrangements. The FHLB advances and customer repurchase agreements have been categorized as Level 2 in the fair value hierarchy due to their short durations.

Credit linked notes

The fair value of credit linked notes is based on observable inputs, when available, and as such credit linked notes are categorized as Level 2 liabilities. Because the notes are variable rate debt, the fair value approximates carrying value.

Subordinated debt

The fair value of subordinated debt is based on the market rate for the respective subordinated debt security. Subordinated debt has been categorized as Level 2 in the fair value hierarchy.

Junior subordinated debt

Junior subordinated debt is valued based on a discounted cash flow model which uses as inputs Treasury Bond rates and the 'BB' and 'BBB' rated financial indexes. Junior subordinated debt has been categorized as Level 3 in the fair value hierarchy.

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Off-balance sheet instruments

The fair value of the Company’s off-balance sheet instruments (lending commitments and letters of credit) is based on quoted fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, and the counterparties’ credit standing.

Income taxes

The Company is subject to income taxes in the United States and files a consolidated federal income tax return with all of its subsidiaries, with the exception of BW Real Estate, Inc. Deferred income taxes are recorded to reflect the effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and their income tax bases using enacted tax rates that are expected to be in effect when the taxes are actually paid or recovered. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Net deferred tax assets are recorded to the extent that these assets will more-likely-than-not be realized. In making these determinations, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, tax planning strategies, projected future taxable income, and recent operating results. If it is determined that deferred income tax assets to be realized in the future are in excess of their net recorded amount, an adjustment to the valuation allowance will be recorded, which will reduce the Company's provision for income taxes.

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A tax benefit from an unrecognized tax benefit may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including related appeals or litigation, based on technical merits. Income tax benefits must meet a more-likely-than-not recognition threshold at the effective date to be recognized.

Interest and penalties related to unrecognized tax benefits are recognized as part of the provision for income taxes in the Consolidated Income Statement. Accrued interest and penalties are included in the related tax liability line with other liabilities on the Consolidated Balance Sheet. See "Note ~~10.~~13. Income Taxes" of these Notes to Unaudited Consolidated Financial Statements for further discussion on income taxes.

Non-interest income

Non-interest income includes revenue associated with mortgage banking and commercial banking activities, investment securities, equity investments, and bank owned life insurance. As there is specific accounting guidance applicable to income generated by different types of financial instruments, most of the Company's non-interest income is not within the scope of ASC 606, Revenue from Contracts with Customers.

Non-interest income amounts within the scope of ASC 606 include service charges and fees, ~~income from~~success fees related to equity investments, and debit and credit card income, foreign currency income, income from bank owned life insurance, lending related income, net gain or loss on sales of investment securities, net fair value gain or loss adjustments on assets measured at fair value, and other income.interchange fees. Service charges and fees consist of fees earned from performance of account analysis, general account services, and other deposit account services. These fees are recognized as the related services are ~~provided in accordance with ASC 606,~~ ~~Revenue from Contracts with Customers. Income from equity investments includes gains on equity warrant assets, SBIC equity income,~~provided. Success fees are one-time fees detailed as part of certain loan agreements and ~~success fees.~~are earned immediately upon occurrence of a triggering event. Card income includes fees earned from customer use of debit and credit cards, interchange income from merchants, and international charges. Card income is generally within the scope of ASC 310, Receivables; however, certain processing transactions for merchants, such as interchange fees, are within the scope of ASC 606. Foreign currency income represents fees earned on the differential between purchases and sales of foreign currency on behalf of the Company’s clients. Income from bank owned life insurance is accounted for in accordance with ASC 325, ~~Investments - Other~~. Lending related income includes fees earned from gains or losses on the sale of loans, SBA income, and letter of credit fees. Gains and losses on the sale of loans and SBA income are recognized pursuant to ASC 860, ~~Transfers and Servicing. Net unrealized gains or losses on assets measured at fair value represent fair value changes in equity securities and are accounted for in accordance with ASC 321,~~ ~~Investments - Equity Securities. Fees related to standby letters of credit are accounted for in accordance with ASC 440,~~ ~~Commitments. Other income includes operating lease income, which is recognized on a straight-line basis over the lease term in accordance with ASC 842,~~ ~~Leases~~. Net gain or loss on sales/valuations of repossessed and other assets is presented as a component of non-interest expense, but may also be presented as a component of non-interest income in the event that a net gain is recognized. Net gain or loss on sales of repossessed and other assets are accounted for in accordance with ASC 610, ~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets~~. See "Note ~~14.~~17. Revenue from Contracts with Customers" of these Notes to Unaudited Consolidated Financial Statements for further details related to the nature and timing of revenue recognition for non-interest income revenue streams within the scope of the standard.

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2. MERGERS, ACQUISITIONS AND DISPOSITIONS

On April 7, 2021, the Company completed its acquisition of Aris, the parent company of AMH, and certain other parties, pursuant to which, Aris merged with and into an indirect subsidiary of WAB. As a result of the merger, AMH is now a wholly-owned indirect subsidiary of the Company and will continue to operate as AmeriHome Mortgage, a Western Alliance Bank company. AMH is a leading national business-to-business mortgage acquirer and servicer. The acquisition of AMH complements the Company’s national commercial businesses with a national mortgage franchise that allows the Company to expand mortgage-related offerings to existing clients and diversifies the Company’s revenue profile by expanding sources of non-interest income.

Based on AMH's closing balance sheet and a $275.0 million premium, total cash consideration of $1.2 billion was paid in exchange for all of the issued and outstanding membership interests of Aris. AMH's results of operations have been included in the Company's results beginning April 7, 2021 and are reported as part of its Consumer Related segment. Acquisition/restructure expenses related to the AMH acquisition of $18.5 million for the nine months ended September 30, 2021 were included as a component of non-interest expense in the consolidated income statement, of which approximately $3.4 million are acquisition related costs as defined by ASC 805.

This transaction is accounted for as a business combination under the acquisition method of accounting. Assets purchased and liabilities assumed were recorded at their respective acquisition date estimated fair values. The fair values of assets acquired and liabilities assumed are subject to adjustment during the first twelve months after the acquisition date if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability. During the three months ended September 30, 2021, the Company adjusted its initial provisional estimates for certain identified assets and liabilities based on new information regarding facts and circumstances that existed as of the acquisition date. Insignificant measurement period adjustments were recorded related to the operating right-of-use asset and operating lease liability, intangible assets, the deferred tax asset, and other assets. These measurement period adjustments did not have a significant impact on the income statement. As the Company is still finalizing the fair value methodology associated with acquired assets and assumed liabilities, the fair values are considered provisional.

The Company merged AMH into WAB effective April 7, 2021. The provisional estimated fair value amounts of identifiable assets acquired and liabilities assumed are as follows:


	April 7, 2021
	($ in millions)
Assets acquired:
Cash and cash equivalents	$	207.2
Loans held for sale	3,553.7
Mortgage servicing rights	1,376.3
Premises and equipment, net	11.3
Operating right of use asset	18.9
Identified intangible assets	141.0
Loans eligible for repurchase	2,744.7
Deferred tax asset	6.6
Other assets	240.9
Total assets	$	8,300.6
Liabilities assumed:
Other borrowings	$	3,633.9
Operating lease liability	18.9
Liability for loans eligible for repurchase	2,744.7
Other liabilities	157.4
Total liabilities	6,554.9
Net assets acquired	$	1,745.7
Consideration paid
Cash	$	1,220.6
Elimination of pre-existing debt and other	698.2
Total consideration	$	1,918.8
Goodwill	$	173.1

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Loans acquired in the AMH acquisition consist of loans held for sale that were recorded at fair value. In contemplation of the acquisition and the regulatory capital impact of MSRs on the Company's capital ratios, in March 2021, AMH entered into commitments to sell certain MSRs and related servicing advances. See "Note 6. Mortgage Servicing Rights" for further discussion of these sales. The sale of these MSRs also reduced the balance of loans eligible for repurchase as the Company no longer has the right to repurchase these loans when it is not the servicer. Subsequent to the acquisition, the Company repurchased substantially all of the remaining loans eligible for repurchase and as of September 30, 2021, these repurchased loans were included as part of the loans held for sale balance. See "Note 4. Loans Held for Sale" of these Notes to Unaudited Consolidated Financial Statements for additional detail related to acquired loans.

In connection with the AMH acquisition, the Company acquired identifiable intangible assets totaling $141.0 million, consisting of correspondent relationships, operating licenses, and trade name. The correspondent relationships and trade name intangibles will be amortized over a 20-year estimated useful life. The operating licenses intangible asset will be amortized over a 40-year estimated useful life.

Goodwill in the amount of $173.1 million was recognized and allocated entirely to the Consumer Related segment. Goodwill represents the strategic, operational, and financial benefits expected from the AMH acquisition, including expansion of the Company's mortgage offerings, diversification of its revenue sources, and post-acquisition synergies from integrating AMH’s operating platform, as well as the value of the workforce. Approximately $150.0 million of goodwill is expected to be deductible for tax purposes.

The following table presents pro forma information as if the AMH acquisition was completed on January 1, 2020. The pro forma information includes adjustments for interest income and interest expense on existing loan agreements between WAL and AMH prior to acquisition, the impact of MSR sales contemplated in connection with the acquisition, amortization of intangible assets arising from the acquisition, recognition of stock compensation expense for awards issued to certain AMH executives, transaction costs, and related income tax effects. The pro forma information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed dates.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	($ in millions, except per share amounts)
Interest income	$	442.8	$	315.1	$	1,196.6	$	976.9
Non-interest income	122.8		269.0		344.8		694.9
Net income	236.9		271.5		660.9		661.3

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2.3. INVESTMENT SECURITIES

The carrying amounts and fair values of investment securities at ~~March 31,~~September 30, 2021 and December 31, 2020 are summarized as follows:


		March 31, 2021									September 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
		(in millions)									(in millions)
Held-to-maturity	Held-to-maturity									Held-to-maturity
Private label residential MBS										Private label residential MBS	$	225.9	$	—	$	(0.3)	$	225.6
Tax-exempt	Tax-exempt	$	698.0	$	43.8	$	(1.4)	$	740.4	Tax-exempt	821.0		47.5		(2.1)		866.4
Total HTM securities										Total HTM securities	$	1,046.9	$	47.5	$	(2.4)	$	1,092.0

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	980.3	$	0.8	$	(0.4)	$	980.7	CLO	$	963.6	$	0.6	$	(0.3)	$	963.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	88.0		1.6		(1.8)		87.8		Commercial MBS issued by GSEs	75.1		1.8		(1.4)		75.5
Corporate debt securities	Corporate debt securities	286.0		5.0		(5.9)		285.1		Corporate debt securities	361.8		10.1		(7.4)		364.5

Private label residential MBS	Private label residential MBS	1,905.7		9.8		(14.9)		1,900.6		Private label residential MBS	1,612.3		7.0		(9.1)		1,610.2
Residential MBS issued by GSEs	Residential MBS issued by GSEs	2,277.8		18.5		(46.7)		2,249.6		Residential MBS issued by GSEs	1,989.7		14.7		(35.4)		1,969.0
Tax-exempt	Tax-exempt	1,271.4		62.0		(3.7)		1,329.7		Tax-exempt	1,259.9		72.1		(2.5)		1,329.5

U.S. treasury securities	U.S. treasury securities	50.0		0		0		50.0		U.S. treasury securities	10.0		—		—		10.0
Other	Other	54.1		7.4		(5.1)		56.4		Other	54.1		10.6		(3.7)		61.0
Total AFS debt securities	Total AFS debt securities	$	6,913.3	$	105.1	$	(78.5)	$	6,939.9	Total AFS debt securities	$	6,326.5	$	116.9	$	(59.8)	$	6,383.6

Equity securities	Equity securities									Equity securities
CRA investments	CRA investments	$	57.6	$	0	$	(0.2)	$	57.4	CRA investments	$	62.3	$	—	$	(0.2)	$	62.1
Preferred stock	Preferred stock	129.5		6.2		(0.2)		135.5		Preferred stock	109.0		7.9		(0.6)		116.3
Total equity securities	Total equity securities	$	187.1	$	6.2	$	(0.4)	$	192.9	Total equity securities	$	171.3	$	7.9	$	(0.8)	$	178.4


		December 31, 2020									December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
		(in millions)									(in millions)
Held-to-maturity	Held-to-maturity									Held-to-maturity
Tax-exempt	Tax-exempt	$	568.8	$	43.0	$	0	$	611.8	Tax-exempt	$	568.8	$	43.0	$	—	$	611.8

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	146.9	$	0	$	0	$	146.9	CLO	$	146.9	$	—	$	—	$	146.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	80.8		3.8		0		84.6		Commercial MBS issued by GSEs	80.8		3.8		—		84.6
Corporate debt securities	Corporate debt securities	271.1		4.8		(5.7)		270.2		Corporate debt securities	271.1		4.8		(5.7)		270.2

Private label residential MBS	Private label residential MBS	1,461.7		15.7		(0.5)		1,476.9		Private label residential MBS	1,461.7		15.7		(0.5)		1,476.9
Residential MBS issued by GSEs	Residential MBS issued by GSEs	1,462.5		27.9		(3.8)		1,486.6		Residential MBS issued by GSEs	1,462.5		27.9		(3.8)		1,486.6
Tax-exempt	Tax-exempt	1,109.3		78.1		0		1,187.4		Tax-exempt	1,109.3		78.1		—		1,187.4

Other	Other	54.1		7.3		(5.5)		55.9		Other	54.1		7.3		(5.5)		55.9
Total AFS debt securities	Total AFS debt securities	$	4,586.4	$	137.6	$	(15.5)	$	4,708.5	Total AFS debt securities	$	4,586.4	$	137.6	$	(15.5)	$	4,708.5

Equity securities	Equity securities									Equity securities
CRA investments	CRA investments	$	53.1	$	0.3	$	0	$	53.4	CRA investments	$	53.1	$	0.3	$	—	$	53.4
Preferred stock	Preferred stock	107.0		7.3		(0.4)		113.9		Preferred stock	107.0		7.3		(0.4)		113.9
Total equity securities	Total equity securities	$	160.1	$	7.6	$	(0.4)	$	167.3	Total equity securities	$	160.1	$	7.6	$	(0.4)	$	167.3

Securities with carrying amounts of approximately ~~$693.2 million~~$2.3 billion and $778.0 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, were pledged for various purposes as required or permitted by law.

2431

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The following tables summarize the Company's ~~AFS~~ debt securities in an unrealized loss position at ~~March 31,~~September 30, 2021 and December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position:


		March 31, 2021													September 30, 2021
		Less Than Twelve Months				More Than Twelve Months				Total					Less Than Twelve Months				More Than Twelve Months				Total
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value			Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
		(in millions)													(in millions)
Held-to-maturity	Held-to-maturity													Held-to-maturity
Private label residential MBS														Private label residential MBS	$	0.3	$	225.6	$	—	$	—	$	0.3	$	225.6
Tax-exempt	Tax-exempt	$	1.4	$	48.0	$	0	$	0	$	1.4	$	48.0	Tax-exempt	2.1		89.3		—		—		2.1		89.3
Total HTM securities														Total HTM securities	$	2.4	$	314.9	$	—	$	—	$	2.4	$	314.9
Available-for-sale debt securities	Available-for-sale debt securities													Available-for-sale debt securities
CLO	CLO	$	0.4	$	638.6	$	0	$	0	$	0.4	$	638.6	CLO	$	0.3	$	128.4	$	—	$	—	$	0.3	$	128.4
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	1.8		48.0		0		0		1.8		48.0		Commercial MBS issued by GSEs	1.4		41.4		—		—		1.4		41.4
Corporate debt securities	Corporate debt securities	0.2		32.0		5.7		94.3		5.9		126.3		Corporate debt securities	7.4		92.5		—		—		7.4		92.5
Private label residential MBS	Private label residential MBS	14.5		810.2		0.4		9.6		14.9		819.8		Private label residential MBS	9.1		712.1		—		—		9.1		712.1
Residential MBS issued by GSEs	Residential MBS issued by GSEs	46.7		1,225.7		0		0		46.7		1,225.7		Residential MBS issued by GSEs	33.9		1,016.3		1.5		42.5		35.4		1,058.8
Tax-exempt	Tax-exempt	3.7		158.0		0		0		3.7		158.0		Tax-exempt	2.5		163.9		—		—		2.5		163.9

Other	Other	0.4		11.6		4.7		27.3		5.1		38.9		Other	0.1		1.9		3.6		28.3		3.7		30.2
Total AFS securities	Total AFS securities	$	67.7	$	2,924.1	$	10.8	$	131.2	$	78.5	$	3,055.3	Total AFS securities	$	54.7	$	2,156.5	$	5.1	$	70.8	$	59.8	$	2,227.3


		December 31, 2020													December 31, 2020
		Less Than Twelve Months				More Than Twelve Months				Total					Less Than Twelve Months				More Than Twelve Months				Total
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value			Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
		(in millions)													(in millions)

Available-for-sale debt securities	Available-for-sale debt securities													Available-for-sale debt securities

Corporate debt securities	Corporate debt securities	$	0.1	$	17.3	$	5.6	$	94.3	$	5.7	$	111.6	Corporate debt securities	$	0.1	$	17.3	$	5.6	$	94.3	$	5.7	$	111.6
Private label residential MBS	Private label residential MBS	0.5		149.7		0		0		0.5		149.7		Private label residential MBS	0.5		149.7		—		—		0.5		149.7
Residential MBS issued by GSEs	Residential MBS issued by GSEs	3.8		231.9		0		0		3.8		231.9		Residential MBS issued by GSEs	3.8		231.9		—		—		3.8		231.9

Other	Other	0		0		5.5		26.5		5.5		26.5		Other	—		—		5.5		26.5		5.5		26.5
Total AFS securities	Total AFS securities	$	4.4	$	398.9	$	11.1	$	120.8	$	15.5	$	519.7	Total AFS securities	$	4.4	$	398.9	$	11.1	$	120.8	$	15.5	$	519.7

The total number of ~~AFS~~debt securities in an unrealized loss position at ~~March 31,~~September 30, 2021 is ~~187,~~130, compared to 49 at December 31, 2020.

On a quarterly basis, the Company performs an impairment analysis on its AFS debt securities that are in an unrealized loss position at the end of the period to determine whether credit losses should be recognized on these securities. Qualitative considerations made by the Company in its impairment analysis are further discussed below.

Government Issued Securities

~~Residential~~Commercial and residential MBS ~~issued by GSEs held by the Company~~ are issued by ~~U.S.~~either government ~~entities and agencies.~~agencies or GSEs. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Further, principal and interest payments on these securities continue to be made on a timely basis.

Non-Government Issued Securities

Qualitative factors used in the Company's credit loss assessment of its securities that are not issued and guaranteed by the U.S. government include consideration of any adverse conditions related to a specific security, industry, or geographic region of its securities, any credit ratings below investment grade, the payment structure of the security and the likelihood of the issuer to be able to make payments that increase in the future, and failure of the issuer to make any scheduled principal or interest payments.

For the Company's corporate debt and tax-exempt securities, the Company also considers various metrics of the issuer including days of cash on hand, the ratio of long-term debt to total assets, the net change in cash between reporting periods, and consideration of any breach in covenant requirements. The Company's corporate debt securities continue to be highly rated, issuers continue to make timely principal and interest payments, and the unrealized losses on these security portfolios primarily

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relate to changes in interest rates and other market conditions that are not considered to be credit-related issues. The Company

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continues to receive timely principal and interest payments on its tax-exempt securities and the majority of these issuers have revenues pledged for payment of debt service prior to payment of other types of expenses.

For the Company's private label residential MBS, which consist of non-agency collateralized mortgage obligations that are secured by pools of residential mortgage loans, the Company also considers metrics such as securitization risk weight factor, current credit support, whether there were any mortgage principal losses resulting from defaults in payments on the underlying mortgage collateral, and the credit default rate over the last twelve months. These securities primarily carry investment grade credit ratings, principal and interest payments on these securities continue to be made on a timely basis, and credit support for these securities is considered adequate.

The Company's CLO portfolio consists of highly rated securitization tranches, containing pools of medium to large-sized corporate, high yield bank loans. These are floating rate securities that have an investment grade rating of Single-A or better. The Company has been increasing its investment in these securities over the past several months and unrealized losses on these securities is primarily a function of the differential from the offer price and the valuation mid-market price.

Unrealized losses on the Company's ~~Other~~other securities portfolio relate to taxable municipal and trust preferred securities. The Company is continuing to receive timely principal and interest payments on its taxable municipal securities, these securities continue to be highly rated and the number of days of cash on hand is strong. The Company's trust preferred securities are investment grade and the issuers continue to make timely principal and interest payments.

Based on the qualitative factors noted above and as the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities prior to their anticipated recovery, no credit losses have been recognized on these securities during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020. In addition, as of ~~March 31,~~September 30, 2021 and December 31, 2020, no allowance for credit losses on the Company's AFS securities has been recognized.

The credit loss model under ASC 326-20, applicable to HTM debt securities, requires recognition of lifetime expected credit losses through an allowance account at the time the security is purchased.

The following table presents a rollforward by major security type of the allowance for credit losses on the Company's HTM debt securities:


		Three Months Ended March 31, 2021										Three Months Ended September 30, 2021
		Balance, December 31, 2020		Provision for Credit Losses		Write-offs		Recoveries		Balance, March 31, 2021				Balance, June 30, 2021		Recovery of Credit Losses		Write-offs		Recoveries		Balance, September 30, 2021
		(in millions)										(in millions)
Held-to-maturity debt securities	Held-to-maturity debt securities												Held-to-maturity debt securities
Tax-exempt	Tax-exempt	$	6.8	$	2.4	$	0	$	0	$	9.2		Tax-exempt	$	6.0	$	(1.5)	$	—	$	—	$	4.5


		Three Months Ended March 31, 2020:										Nine Months Ended September 30, 2021
		Balance, January 1, 2020		Provision for Credit Losses		Write-offs		Recoveries		Balance March 31, 2020				Balance, December 31, 2020		Recovery of Credit Losses		Write-offs		Recoveries		Balance, September 30, 2021
		(in millions)										(in millions)
Held-to-maturity debt securities	Held-to-maturity debt securities												Held-to-maturity debt securities
Tax-exempt	Tax-exempt	$	2.6	$	0.3	$	0	$	0	$	2.9		Tax-exempt	$	6.8	$	(2.3)	$	—	$	—	$	4.5


	Three Months Ended September 30, 2020:
	Balance, June 30, 2020		Provision for Credit Losses		Write-offs		Recoveries		Balance September 30, 2020
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	7.6	$	(1.6)	$	—	$	—	$	6.0


	Nine Months Ended September 30, 2020:
	Balance, January 1, 2020		Provision for Credit Losses		Write-offs		Recoveries		Balance September 30, 2020
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	2.6	$	3.4	$	—	$	—	$	6.0

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No allowance has been recognized on the Company's HTM private label residential MBS as the Company holds a senior position, whereby a subordinated tranche assumes up to 5% of any losses, and losses in excess of 5% are not expected.

Accrued interest receivable on HTM securities totaled ~~$2.4~~$3.0 million and $2.0 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses.

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The following tables summarize the carrying amount of the Company’s investment ratings position as of ~~March 31,~~September 30, 2021 and December 31, 2020, which are updated quarterly and used to monitor the credit quality of the Company's securities:


		March 31, 2021																	September 30, 2021
		AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals			AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals
		(in millions)																	(in millions)
Held-to-maturity	Held-to-maturity																	Held-to-maturity
Private label residential MBS																		Private label residential MBS	$	—	$	—	$	—	$	—	$	—	$	—	$	225.9	$	225.9
Tax-exempt	Tax-exempt	$	0	$	0	$	0	$	0	$	0	$	0	$	698.0	$	698.0	Tax-exempt	—		—		—		—		—		—		821.0		821.0
Total HTM securities																		Total HTM securities	$	—	$	—	$	—	$	—	$	—	$	—	$	1,046.9	$	1,046.9

Available-for-sale debt securities	Available-for-sale debt securities																	Available-for-sale debt securities
CLO	CLO	$	25.0	$	0	$	649.8	$	305.9	$	0	$	0	$	0	$	980.7	CLO	$	55.0	$	—	$	655.2	$	253.7	$	—	$	—	$	—	$	963.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	0		87.8		0		0		0		0		0		87.8		Commercial MBS issued by GSEs	—		75.5		—		—		—		—		—		75.5
Corporate debt securities	Corporate debt securities	0		0		19.2		28.1		219.6		18.2		0		285.1		Corporate debt securities	—		—		—		46.1		289.5		18.9		10.0		364.5
Private label residential MBS	Private label residential MBS	1,812.8		0		86.5		0.1		0.3		0.9		0		1,900.6		Private label residential MBS	1,520.5		—		88.7		—		0.9		—		0.1		1,610.2
Residential MBS issued by GSEs	Residential MBS issued by GSEs	0		2,249.6		0		0		0		0		0		2,249.6		Residential MBS issued by GSEs	—		1,969.0		—		—		—		—		—		1,969.0
Tax-exempt	Tax-exempt	43.2		56.5		519.1		679.1		0		0		31.8		1,329.7		Tax-exempt	42.8		58.2		518.4		677.2		—		—		32.9		1,329.5

U.S. treasury securities	U.S. treasury securities	50.0		0		0		0		0		0		0		50.0		U.S. treasury securities	—		10.0		—		—		—		—		—		10.0
Other	Other	0		0		11.6		0		29.8		6.9		8.1		56.4		Other	—		—		12.0		—		31.1		9.3		8.6		61.0
Total AFS securities (1)	Total AFS securities (1)	$	1,931.0	$	2,393.9	$	1,286.2	$	1,013.2	$	249.7	$	26.0	$	39.9	$	6,939.9	Total AFS securities (1)	$	1,618.3	$	2,112.7	$	1,274.3	$	977.0	$	321.5	$	28.2	$	51.6	$	6,383.6

Equity securities	Equity securities																	Equity securities
CRA investments	CRA investments	$	0	$	27.4	$	0	$	0	$	0	$	0	$	30.0	$	57.4	CRA investments	$	—	$	27.6	$	—	$	—	$	—	$	—	$	34.5	$	62.1
Preferred stock	Preferred stock	0		0		0		0		81.3		39.1		15.1		135.5		Preferred stock	—		—		—		—		80.3		20.6		15.4		116.3
Total equity securities (1)	Total equity securities (1)	$	0	$	27.4	$	0	$	0	$	81.3	$	39.1	$	45.1	$	192.9	Total equity securities (1)	$	—	$	27.6	$	—	$	—	$	80.3	$	20.6	$	49.9	$	178.4

(1)Where ratings differ, the Company uses an average of the available ratings by major credit agencies.


		December 31, 2020																	December 31, 2020
		AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals			AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals
		(in millions)																	(in millions)
Held-to-maturity	Held-to-maturity																	Held-to-maturity
Tax-exempt	Tax-exempt	$	0	$	0	$	0	$	0	$	0	$	0	$	568.8	$	568.8	Tax-exempt	$	—	$	—	$	—	$	—	$	—	$	—	$	568.8	$	568.8

Available-for-sale debt securities	Available-for-sale debt securities																	Available-for-sale debt securities
CLO	CLO	$	0	$	0	$	139.6	$	7.3	$	0	$	0	$	0	$	146.9	CLO	$	—	$	—	$	139.6	$	7.3	$	—	$	—	$	—	$	146.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	0		84.6		0		0		0		0		0		84.6		Commercial MBS issued by GSEs	—		84.6		—		—		—		—		—		84.6
Corporate debt securities	Corporate debt securities	0		0		19.2		28.1		194.5		28.4		0		270.2		Corporate debt securities	—		—		19.2		28.1		194.5		28.4		—		270.2
Private label residential MBS	Private label residential MBS	1,385.5		0		90.1		0.1		0.3		0.9		0		1,476.9		Private label residential MBS	1,385.5		—		90.1		0.1		0.3		0.9		—		1,476.9
Residential MBS issued by GSEs	Residential MBS issued by GSEs	0		1,486.6		0		0		0		0		0		1,486.6		Residential MBS issued by GSEs	—		1,486.6		—		—		—		—		—		1,486.6
Tax-exempt	Tax-exempt	44.3		57.3		454.7		599.3		0		0		31.8		1,187.4		Tax-exempt	44.3		57.3		454.7		599.3		—		—		31.8		1,187.4

Other	Other	0		0		12.3		0		29.1		6.9		7.6		55.9		Other	—		—		12.3		—		29.1		6.9		7.6		55.9
Total AFS securities (1)	Total AFS securities (1)	$	1,429.8	$	1,628.5	$	715.9	$	634.8	$	223.9	$	36.2	$	39.4	$	4,708.5	Total AFS securities (1)	$	1,429.8	$	1,628.5	$	715.9	$	634.8	$	223.9	$	36.2	$	39.4	$	4,708.5

Equity securities	Equity securities																	Equity securities
CRA investments	CRA investments	$	0	$	27.8	$	0	$	0	$	0	$	0	$	25.6	$	53.4	CRA investments	$	—	$	27.8	$	—	$	—	$	—	$	—	$	25.6	$	53.4
Preferred stock	Preferred stock	0		0		0		0		73.2		39.0		1.7		113.9		Preferred stock	—		—		—		—		73.2		39.0		1.7		113.9
Total equity securities (1)	Total equity securities (1)	$	0	$	27.8	$	0	$	0	$	73.2	$	39.0	$	27.3	$	167.3	Total equity securities (1)	$	—	$	27.8	$	—	$	—	$	73.2	$	39.0	$	27.3	$	167.3

(1)Where ratings differ, the Company uses an average of the available ratings by major credit agencies.

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A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement. As of ~~March 31,~~September 30, 2021, there were no investment securities that were past due. In addition, the Company does not have a significant amount of investment securities on nonaccrual status as of ~~March 31,~~September 30, 2021.

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The amortized cost and fair value of the Company's debt securities as of ~~March 31,~~September 30, 2021, by contractual maturities, are shown below. MBS are shown separately as individual MBS are comprised of pools of loans with varying maturities. Therefore, these securities are listed separately in the maturity summary.


		March 31, 2021					September 30, 2021
		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(in millions)					(in millions)
Held-to-maturity	Held-to-maturity					Held-to-maturity
Due in one year or less	Due in one year or less	$	10.7	$	10.7	Due in one year or less	$	45.4	$	45.4
After one year through five years	After one year through five years	31.3		31.8		After one year through five years	17.8		17.7

After ten years	After ten years	656.0		697.9		After ten years	757.8		803.3
Mortgage-backed securities						Mortgage-backed securities	225.9		225.6
Total HTM securities	Total HTM securities	$	698.0	$	740.4	Total HTM securities	$	1,046.9	$	1,092.0

Available-for-sale	Available-for-sale					Available-for-sale
Due in one year or less	Due in one year or less	$	50.0	$	50.0	Due in one year or less	$	10.0	$	10.0
After one year through five years	After one year through five years	38.0		38.5		After one year through five years	58.0		57.9
After five years through ten years	After five years through ten years	780.5		780.8		After five years through ten years	791.9		795.9
After ten years	After ten years	1,773.3		1,832.6		After ten years	1,789.5		1,865.1
Mortgage-backed securities	Mortgage-backed securities	4,271.5		4,238.0		Mortgage-backed securities	3,677.1		3,654.7
Total AFS securities	Total AFS securities	$	6,913.3	$	6,939.9	Total AFS securities	$	6,326.5	$	6,383.6

During the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, the Company did not have significant sales of investments securities.

2835

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3.4. LOANS HELD FOR SALE

The Company acquired loans held for sale as part of the AMH acquisition. The following is a summary of loans held for sale by type:


	September 30, 2021
	(in millions)
Government-insured or guaranteed:
EBO (1)	$	1,937.9
Non-EBO	1,166.7
Total government-insured or guaranteed	3,104.6
Agency-conforming	3,427.1
Non-agency	2.6
Total loans HFS	$	6,534.3

(1) EBO loans are delinquent loans repurchased under the terms of the Ginnie Mae MBS program that can be resold when loans are brought current.

As of September 30, 2021, there were no loans held for sale that were pledged to secure warehouse borrowings.

The following is a summary of the Net gain on loan purchase, origination, and sale activities:


	Three Months Ended September 30, 2021		April 7, 2021 through September 30,2021

	(in millions)
Mortgage servicing rights capitalized upon sale of loans	$	230.4		$	512.7
Net proceeds from sale of loans (1)	(107.4)			(251.0)
Provision for and change in estimate of liability for losses under representations and warranties, net	1.1			0.4
Change in fair value of loans held for sale	(18.4)			(5.2)
Change in fair value of derivatives related to loans HFS:
Unrealized gain (loss) on derivatives	24.0			(31.2)
Realized (loss) gain on derivatives	(35.9)			(26.5)
Total change in fair value of derivatives	(11.9)			(57.7)
Net gain on loans held for sale	$	93.8		$	199.2
Loan acquisition and origination fees	27.2			53.8
Net gain on loan origination and sale activities	$	121.0		$	253.0

(1) Represents the difference between cash proceeds received upon settlement and loan basis.

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5. LOANS, LEASES AND ALLOWANCE FOR CREDIT LOSSES

The composition of the Company's held for investment loan portfolio is as follows:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Warehouse lending	Warehouse lending	$	4,901.8	$	4,340.2	Warehouse lending	$	4,759.9	$	4,340.2
Municipal & nonprofit	Municipal & nonprofit	1,676.9		1,728.8		Municipal & nonprofit	1,638.2		1,728.8
Tech & innovation	Tech & innovation	2,514.2		2,548.3		Tech & innovation	1,306.3		1,403.0
Equity fund resources						Equity fund resources	3,194.0		1,145.3
Other commercial and industrial	Other commercial and industrial	6,174.3		5,911.2		Other commercial and industrial	5,807.4		5,911.2
CRE - owner occupied	CRE - owner occupied	1,814.5		1,909.3		CRE - owner occupied	1,797.8		1,909.3
Hotel franchise finance	Hotel franchise finance	2,038.8		1,983.9		Hotel franchise finance	2,117.9		1,983.9
Other CRE - non-owned occupied		3,613.0		3,640.2
Other CRE - non-owner occupied						Other CRE - non-owner occupied	3,684.8		3,640.2
Residential	Residential	3,055.8		2,378.5		Residential	7,412.7		2,378.5
Construction and land development	Construction and land development	2,767.6		2,429.4		Construction and land development	2,927.5		2,429.4
Other	Other	154.1		183.2		Other	155.4		183.2
Total loans HFI	Total loans HFI	28,711.0		27,053.0		Total loans HFI	34,801.9		27,053.0
Allowance for credit losses	Allowance for credit losses	(247.1)		(278.9)		Allowance for credit losses	(246.9)		(278.9)
Total loans HFI, net of allowance	Total loans HFI, net of allowance	$	28,463.9	$	26,774.1	Total loans HFI, net of allowance	$	34,555.0	$	26,774.1

Loans that are held for investment are stated at the amount of unpaid principal, adjusted for net deferred fees and costs, premiums and discounts on acquired and purchased loans, and an allowance for credit losses. Net deferred loan fees of ~~$88.6~~$78.9 million and $75.4 million reduced the carrying value of loans as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Net unamortized purchase premiums on acquired and purchased loans of ~~$45.0~~$135.1 million and $26.0 million increased the carrying value of loans as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

~~Table of Contents~~

Nonaccrual and Past Due Loans

Loans are placed on nonaccrual status when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely, generally when the loan becomes 90 days or more past due.

The following tables present nonperforming loan balances by loan portfolio segment:


		March 31, 2021									September 30, 2021
		Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing			Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing
		(in millions)									(in millions)
Warehouse lending	Warehouse lending	$	0	$	0	$	0	$	0	Warehouse lending	$	—	$	—	$	—	$	—
Municipal & nonprofit	Municipal & nonprofit	0		0		0		0		Municipal & nonprofit	—		—		—		—
Tech & innovation	Tech & innovation	9.3		3.4		12.7		0		Tech & innovation	—		17.3		17.3		—
Equity fund resources										Equity fund resources	—		—		—		—
Other commercial and industrial	Other commercial and industrial	8.6		6.4		15.0		0		Other commercial and industrial	6.3		9.8		16.1		—
CRE - owner occupied	CRE - owner occupied	32.1		0		32.1		0		CRE - owner occupied	18.2		—		18.2		—
Hotel franchise finance	Hotel franchise finance	0		0		0		0		Hotel franchise finance	—		—		—		—
Other CRE - non-owned occupied		41.5		0		41.5		0
Other CRE - non-owner occupied										Other CRE - non-owner occupied	14.1		—		14.1		—
Residential	Residential	9.0		0		9.0		0		Residential	9.7		—		9.7		—
Construction and land development	Construction and land development	0		0		0		0		Construction and land development	—		—		—		—
Other	Other	0.3		3.0		3.3		0		Other	0.3		2.4		2.7		—
Total	Total	$	100.8	$	12.8	$	113.6	$	0	Total	$	48.6	$	29.5	$	78.1	$	—

December 31, 2020
Nonaccrual with No Allowance for Credit Loss Nonaccrual with an Allowance for Credit Loss Total Nonaccrual Loans Past Due 90 Days or More and Still Accruing
(in millions)
Warehouse lending $ 0 $ 0 $ 0 $ 0
Municipal & nonprofit 1.9 0 1.9 0
Tech & innovation 9.6 3.9 13.5 0
Other commercial and industrial 10.9 6.3 17.2 0
CRE - owner occupied 34.5 0 34.5 0
Hotel franchise finance 0 0 0 0
Other CRE - non-owned occupied 36.5 0 36.5 0
Residential 11.4 0 11.4 0
Construction and land development 0 0 0 0
Other 0.1 0.1 0.2 0
Total $ 104.9 $ 10.3 $ 115.2 $ 0

Table of Contents


	December 31, 2020
	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing
	(in millions)
Warehouse lending	$	—	$	—	$	—	$	—
Municipal & nonprofit	1.9		—		1.9		—
Tech & innovation	9.6		3.9		13.5		—
Equity fund resources	—		—		—		—
Other commercial and industrial	10.9		6.3		17.2		—
CRE - owner occupied	34.5		—		34.5		—
Hotel franchise finance	—		—		—		—
Other CRE - non-owner occupied	36.5		—		36.5		—
Residential	11.4		—		11.4		—
Construction and land development	—		—		—		—
Other	0.1		0.1		0.2		—
Total	$	104.9	$	10.3	$	115.2	$	—

The reduction in interest income associated with loans on nonaccrual status was approximately ~~$1.5~~$1.4 million and ~~$0.7~~$1.7 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $4.4 million and $4.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The following table presents an aging analysis of past due loans by loan portfolio segment:


		March 31, 2021													September 30, 2021
		Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total			Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total
		(in millions)													(in millions)
Warehouse lending	Warehouse lending	$	4,901.8	$	0	$	0	$	0	$	0	$	4,901.8	Warehouse lending	$	4,759.9	$	—	$	—	$	—	$	—	$	4,759.9
Municipal & nonprofit	Municipal & nonprofit	1,676.9		0		0		0		0		1,676.9		Municipal & nonprofit	1,638.2		—		—		—		—		1,638.2
Tech & innovation	Tech & innovation	2,514.2		0		0		0		0		2,514.2		Tech & innovation	1,306.3		—		—		—		—		1,306.3
Equity fund resources														Equity fund resources	3,194.0		—		—		—		—		3,194.0
Other commercial and industrial	Other commercial and industrial	6,174.2		0.1		0		0		0.1		6,174.3		Other commercial and industrial	5,801.1		5.5		0.8		—		6.3		5,807.4
CRE - owner occupied	CRE - owner occupied	1,814.5		0		0		0		0		1,814.5		CRE - owner occupied	1,797.8		—		—		—		—		1,797.8
Hotel franchise finance	Hotel franchise finance	2,038.8		0		0		0		0		2,038.8		Hotel franchise finance	2,117.9		—		—		—		—		2,117.9
Other CRE - non-owned occupied		3,612.3		0.7		0		0		0.7		3,613.0
Other CRE - non-owner occupied														Other CRE - non-owner occupied	3,684.2		0.6		—		—		0.6		3,684.8
Residential	Residential	3,049.4		6.4		0		0		6.4		3,055.8		Residential	7,396.5		14.3		1.9		—		16.2		7,412.7
Construction and land development	Construction and land development	2,767.6		0		0		0		0		2,767.6		Construction and land development	2,927.5		—		—		—		—		2,927.5
Other	Other	154.0		0		0.1		0		0.1		154.1		Other	154.9		0.2		0.3		—		0.5		155.4
Total loans	Total loans	$	28,703.7	$	7.2	$	0.1	$	0	$	7.3	$	28,711.0	Total loans	$	34,778.3	$	20.6	$	3.0	$	—	$	23.6	$	34,801.9


	December 31, 2020
	Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total
	(in millions)
Warehouse lending	$	4,340.2	$	—	$	—	$	—	$	—	$	4,340.2
Municipal & nonprofit	1,728.8		—		—		—		—		1,728.8
Tech & innovation	1,403.0		—		—		—		—		1,403.0
Equity fund resources	1,145.3		—		—		—		—		1,145.3
Other commercial and industrial	5,911.0		0.2		—		—		0.2		5,911.2
CRE - owner occupied	1,909.3		—		—		—		—		1,909.3
Hotel franchise finance	1,983.9		—		—		—		—		1,983.9
Other CRE - non-owner occupied	3,640.2		—		—		—		—		3,640.2
Residential	2,368.0		9.1		1.4		—		10.5		2,378.5
Construction and land development	2,429.4		—		—		—		—		2,429.4
Other	182.7		0.4		0.1		—		0.5		183.2
Total loans	$	27,041.8	$	9.7	$	1.5	$	—	$	11.2	$	27,053.0

~~Table of Contents~~

December 31, 2020
Current 30-59 Days
Past Due 60-89 Days
Past Due Over 90 days
Past Due Total
Past Due Total
(in millions)
Warehouse lending $ 4,340.2 $ 0 $ 0 $ 0 $ 0 $ 4,340.2
Municipal & nonprofit 1,728.8 0 0 0 0 1,728.8
Tech & innovation 2,548.3 0 0 0 0 2,548.3
Other commercial and industrial 5,911.0 0.2 0 0 0.2 5,911.2
CRE - owner occupied 1,909.3 0 0 0 0 1,909.3
Hotel franchise finance 1,983.9 0 0 0 0 1,983.9
Other CRE - non-owned occupied 3,640.2 0 0 0 0 3,640.2
Residential 2,368.0 9.1 1.4 0 10.5 2,378.5
Construction and land development 2,429.4 0 0 0 0 2,429.4
Other 182.7 0.4 0.1 0 0.5 183.2
Total loans $ 27,041.8 $ 9.7 $ 1.5 $ 0 $ 11.2 $ 27,053.0

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Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. This analysis is performed on a quarterly basis. The risk rating categories are described in "Note 1. Summary of Significant Accounting Policies." of these Notes to Unaudited Consolidated Financial Statements. The following tables present risk ratings by loan portfolio segment and origination year. The origination year is the year of origination or renewal.


		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total			Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis				Total
March 31, 2021		2021		2020		2019		2018		2017		Prior
September 30, 2021																				September 30, 2021	2021				2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis				Total
		(in millions)																			(in millions)

Warehouse lending	Warehouse lending																			Warehouse lending
Pass	Pass	$	91.6	$	63.2	$	0	$	0.8	$	1.5	$	0			$	4,744.7					$	4,901.8	Pass	$	216.0	$	18.3	$	—	$	0.7	$	1.3			$	—			$	4,523.6	$	4,759.9
Special mention	Special mention	0		0		0		0		0		0		0				0		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	0		0		0		0		0		0		0				0		Classified	—				—		—		—		—		—		—				—
Total	Total	$	91.6	$	63.2	$	0	$	0.8	$	1.5	$	0	$	4,744.7			$	4,901.8	Total	$	216.0			$	18.3	$	—	$	0.7	$	1.3	$	—	$	4,523.6			$	4,759.9

Municipal & nonprofit	Municipal & nonprofit																			Municipal & nonprofit
Pass	Pass	$	10.7	$	222.1	$	133.6	$	81.4	$	227.7	$	997.9	$	3.5			$	1,676.9	Pass	$	88.7			$	212.8	$	127.3	$	58.3	$	220.3	$	926.9	$	3.9			$	1,638.2
Special mention	Special mention	0		0		0		0		0		0		0				0		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	0		0		0		0		0		0		0				0		Classified	—				—		—		—		—		—		—				—
Total	Total	$	10.7	$	222.1	$	133.6	$	81.4	$	227.7	$	997.9	$	3.5			$	1,676.9	Total	$	88.7			$	212.8	$	127.3	$	58.3	$	220.3	$	926.9	$	3.9			$	1,638.2

Tech & innovation	Tech & innovation																			Tech & innovation
Pass																				Pass	$	540.4			$	202.0	$	134.8	$	35.6	$	—	$	0.4	$	336.9			$	1,250.1
Special mention																				Special mention	—				5.4		6.0		—		—		—		12.5				23.9
Classified																				Classified	12.8				17.3		1.8		—		—		—		0.4				32.3
Total																				Total	$	553.2			$	224.7	$	142.6	$	35.6	$	—	$	0.4	$	349.8			$	1,306.3

Equity fund resources																				Equity fund resources
Pass	Pass	$	124.9	$	549.2	$	150.7	$	45.1	$	2.3	$	0.4	$	1,590.9			$	2,463.5	Pass	$	9.0			$	2.6	$	—	$	0.3	$	2.6	$	—	$	3,179.5			$	3,194.0
Special mention	Special mention	4.0		14.4		0		0		0		0		0				18.4		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	18.7		5.6		6.7		1.3		0		0		0				32.3		Classified	—				—		—		—		—		—		—				—
Total	Total	$	147.6	$	569.2	$	157.4	$	46.4	$	2.3	$	0.4	$	1,590.9			$	2,514.2	Total	$	9.0			$	2.6	$	—	$	0.3	$	2.6	$	—	$	3,179.5			$	3,194.0

Other commercial and industrial	Other commercial and industrial																			Other commercial and industrial
Pass	Pass	$	1,025.9	$	1,553.9	$	736.5	$	384.4	$	204.8	$	200.0	$	1,907.1			$	6,012.6	Pass	$	2,362.1			$	499.5	$	508.2	$	264.5	$	131.1	$	100.4	$	1,812.9			$	5,678.7
Special mention	Special mention	0.2		2.8		43.1		17.8		29.9		4.8		5.2				103.8		Special mention	0.5				30.4		28.1		14.2		28.4		0.1		6.8				108.5
Classified	Classified	0		0.9		19.7		3.7		16.2		10.6		6.8				57.9		Classified	—				0.5		5.3		2.3		1.8		0.5		9.8				20.2
Total	Total	$	1,026.1	$	1,557.6	$	799.3	$	405.9	$	250.9	$	215.4	$	1,919.1			$	6,174.3	Total	$	2,362.6			$	530.4	$	541.6	$	281.0	$	161.3	$	101.0	$	1,829.5			$	5,807.4

CRE - owner occupied	CRE - owner occupied																			CRE - owner occupied
Pass	Pass	$	88.3	$	245.1	$	291.8	$	235.9	$	370.8	$	420.0	$	32.6			$	1,684.5	Pass	$	313.9			$	232.3	$	246.8	$	215.7	$	328.3	$	352.9	$	40.7			$	1,730.6
Special mention	Special mention	2.3		0.9		11.5		9.2		22.5		13.8		24.4				84.6		Special mention	—				—		1.9		10.2		13.4		1.8		0.5				27.8
Classified	Classified	0		1.4		6.8		4.7		5.2		27.3		0				45.4		Classified	2.4				3.5		1.0		4.6		8.1		19.6		0.2				39.4
Total	Total	$	90.6	$	247.4	$	310.1	$	249.8	$	398.5	$	461.1	$	57.0			$	1,814.5	Total	$	316.3			$	235.8	$	249.7	$	230.5	$	349.8	$	374.3	$	41.4			$	1,797.8

Hotel franchise finance	Hotel franchise finance																			Hotel franchise finance
Pass	Pass	$	102.8	$	166.2	$	684.7	$	448.3	$	139.0	$	70.5	$	158.8			$	1,770.3	Pass	$	232.3			$	186.5	$	687.7	$	391.3	$	149.6	$	64.0	$	123.1			$	1,834.5
Special mention	Special mention	0		6.1		82.8		56.7		27.4		11.9		0				184.9		Special mention	—				—		102.1		70.3		8.8		—		—				181.2
Classified	Classified	0		11.0		56.8		0		12.5		3.3		0				83.6		Classified	20.3				—		56.7		—		12.1		13.1		—				102.2
Total	Total	$	102.8	$	183.3	$	824.3	$	505.0	$	178.9	$	85.7	$	158.8			$	2,038.8	Total	$	252.6			$	186.5	$	846.5	$	461.6	$	170.5	$	77.1	$	123.1			$	2,117.9

Other CRE - non-owned occupied
Other CRE - non-owner occupied																				Other CRE - non-owner occupied
Pass	Pass	$	167.1	$	1,069.3	$	857.6	$	527.1	$	317.5	$	337.4	$	271.8			$	3,547.8	Pass	$	851.2			$	904.3	$	757.7	$	326.2	$	211.8	$	344.4	$	244.0			$	3,639.6
Special mention	Special mention	0		1.4		0		8.3		1.4		11.2		0				22.3		Special mention	—				—		—		—		1.0		3.0		—				4.0
Classified	Classified	0		0.4		23.8		0		1.6		17.1		0				42.9		Classified	—				0.4		4.4		5.9		1.7		18.0		10.8				41.2
Total	Total	$	167.1	$	1,071.1	$	881.4	$	535.4	$	320.5	$	365.7	$	271.8			$	3,613.0	Total	$	851.2			$	904.7	$	762.1	$	332.1	$	214.5	$	365.4	$	254.8			$	3,684.8

Residential
Pass		$	599.9	$	1,116.5	$	715.6	$	338.4	$	92.8	$	145.5	$	38.3			$	3,047.0
Special mention		0		0		0		0		0		0		0				0
Classified		0		0		4.9		3.2		0		0.7		0				8.8
Total		$	599.9	$	1,116.5	$	720.5	$	341.6	$	92.8	$	146.2	$	38.3			$	3,055.8

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		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total			Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis				Total
March 31, 2021		2021		2020		2019		2018		2017		Prior
September 30, 2021																				September 30, 2021	2021				2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis				Total
																					(in millions)
Residential																				Residential
Pass																				Pass	$	5,224.2			$	1,183.7	$	511.5	$	249.9	$	68.1	$	126.6			$	39.0			$	7,403.0
Special mention																				Special mention	—				—		—		—		—		—		—				—
Classified																				Classified	3.0				2.2		3.6		0.8		—		0.1		—				9.7
Total																				Total	$	5,227.2			$	1,185.9	$	515.1	$	250.7	$	68.1	$	126.7	$	39.0			$	7,412.7
		(in millions)
Construction and land development	Construction and land development																			Construction and land development
Pass	Pass	$	219.6	$	673.7	$	668.9	$	375.3	$	8.9	$	1.1			$	758.0					$	2,705.5	Pass	$	644.1	$	651.6	$	482.1	$	190.6	$	2.8	$	0.2			$	932.0			$	2,903.4
Special mention	Special mention	1.0		8.2		6.3		44.5		0		0		0				60.0		Special mention	—				13.2		—		—		5.6		—		—				18.8
Classified	Classified	0		1.5		0.6		0		0		0		0				2.1		Classified	1.0				1.4		0.6		—		—		—		2.3				5.3
Total	Total	$	220.6	$	683.4	$	675.8	$	419.8	$	8.9	$	1.1	$	758.0			$	2,767.6	Total	$	645.1			$	666.2	$	482.7	$	190.6	$	8.4	$	0.2	$	934.3			$	2,927.5

Other	Other																			Other
Pass	Pass	$	8.5	$	19.6	$	13.5	$	5.9	$	4.8	$	72.7	$	25.2			$	150.2	Pass	$	15.2			$	15.5	$	3.8	$	5.1	$	4.5	$	75.6	$	32.3			$	152.0
Special mention	Special mention	0		0		0		0.1		0		0.1		0				0.2		Special mention	—				—		—		—		—		0.3		—				0.3
Classified	Classified	3.0		0		0.1		0.2		0		0.4		0				3.7		Classified	2.4				—		0.1		0.2		—		0.4		—				3.1
Total	Total	$	11.5	$	19.6	$	13.6	$	6.2	$	4.8	$	73.2	$	25.2			$	154.1	Total	$	17.6			$	15.5	$	3.9	$	5.3	$	4.5	$	76.3	$	32.3			$	155.4

Total by Risk Category	Total by Risk Category																			Total by Risk Category
Pass	Pass	$	2,439.3	$	5,678.8	$	4,252.9	$	2,442.6	$	1,370.1	$	2,245.5	$	9,530.9			$	27,960.1	Pass	$	10,497.1			$	4,109.1	$	3,459.9	$	1,738.2	$	1,120.4	$	1,991.4	$	11,267.9			$	34,184.0
Special mention	Special mention	7.5		33.8		143.7		136.6		81.2		41.8		29.6				474.2		Special mention	0.5				49.0		138.1		94.7		57.2		5.2		19.8				364.5
Classified	Classified	21.7		20.8		119.4		13.1		35.5		59.4		6.8				276.7		Classified	41.9				25.3		73.5		13.8		23.7		51.7		23.5				253.4
Total	Total	$	2,468.5	$	5,733.4	$	4,516.0	$	2,592.3	$	1,486.8	$	2,346.7	$	9,567.3			$	28,711.0	Total	$	10,539.5			$	4,183.4	$	3,671.5	$	1,846.7	$	1,201.3	$	2,048.3	$	11,311.2			$	34,801.9


		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis					Total			Term Loan Amortized Cost Basis by Origination Year																			Revolving Loans Amortized Cost Basis			Total
December 31, 2020	December 31, 2020	2020		2019		2018		2017		2016		Prior				December 31, 2020		2020					2019				2018			2017			2016			Prior
		(in millions)																				(in millions)

Warehouse lending	Warehouse lending																				Warehouse lending
Pass	Pass	$	135.2	$	0	$	0.9	$	1.6	$	0.1	$	0			$	4,202.4					$	4,340.2	Pass	$	135.2		$	—		$	0.9		$	1.6		$	0.1		$	—		$	4,202.4		$	4,340.2
Special mention	Special mention	0		0		0		0		0		0		0					0		Special mention	—				—			—			—			—			—			—			—
Classified	Classified	0		0		0		0		0		0		0					0		Classified	—				—			—			—			—			—			—			—
Total	Total	$	135.2	$	0	$	0.9	$	1.6	$	0.1	$	0	$	4,202.4				$	4,340.2	Total	$	135.2			$	—		$	0.9		$	1.6		$	0.1		$	—		$	4,202.4		$	4,340.2

Municipal & nonprofit	Municipal & nonprofit																				Municipal & nonprofit
Pass	Pass	$	219.3	$	156.6	$	81.6	$	231.2	$	129.1	$	905.6	$	3.5				$	1,726.9	Pass	$	219.3			$	156.6		$	81.6		$	231.2		$	129.1		$	905.6		$	3.5		$	1,726.9
Special mention	Special mention	0		0		0		0		0		0		0					0		Special mention	—				—			—			—			—			—			—			—
Classified	Classified	0		0		0		1.9		0		0		0					1.9		Classified	—				—			—			1.9			—			—			—			1.9
Total	Total	$	219.3	$	156.6	$	81.6	$	233.1	$	129.1	$	905.6	$	3.5				$	1,728.8	Total	$	219.3			$	156.6		$	81.6		$	233.1		$	129.1		$	905.6		$	3.5		$	1,728.8

Tech & innovation	Tech & innovation																				Tech & innovation
Pass	Pass	$	609.7	$	207.4	$	76.9	$	2.0	$	0.9	$	0	$	1,608.8				$	2,505.7	Pass	$	595.5			$	205.9		$	76.4		$	—		$	0.9		$	—		$	481.7		$	1,360.4
Special mention	Special mention	10.7		4.6		0		0		0		0		0					15.3		Special mention	10.7				4.6			—			—			—			—			—			15.3
Classified	Classified	25.2		2.0		0		0		0		0		0.1					27.3		Classified	25.2				2.0			—			—			—			—			0.1			27.3
Total	Total	$	645.6	$	214.0	$	76.9	$	2.0	$	0.9	$	0	$	1,608.9				$	2,548.3	Total	$	631.4			$	212.5		$	76.4		$	—		$	0.9		$	—		$	481.8		$	1,403.0

Equity fund resources																					Equity fund resources
Pass																					Pass	$	14.2			$	1.5		$	0.5		$	2.0		$	—		$	—		$	1,127.1		$	1,145.3
Special mention																					Special mention	—				—			—			—			—			—			—			—
Classified																					Classified	—				—			—			—			—			—			—			—
Total																					Total	$	14.2			$	1.5		$	0.5		$	2.0		$	—		$	—		$	1,127.1		$	1,145.3

Other commercial and industrial	Other commercial and industrial																				Other commercial and industrial
Pass	Pass	$	2,069.5	$	819.8	$	447.7	$	250.7	$	99.7	$	114.6	$	1,935.7				$	5,737.7	Pass	$	2,069.5			$	819.8		$	447.7		$	250.7		$	99.7		$	114.6		$	1,935.7		$	5,737.7
Special mention	Special mention	2.2		52.1		32.1		22.1		1.7		0.2		34.3					144.7		Special mention	2.2				52.1			32.1			22.1			1.7			0.2			34.3			144.7
Classified	Classified	0.9		8.4		3.2		1.6		9.7		0.8		4.2					28.8		Classified	0.9				8.4			3.2			1.6			9.7			0.8			4.2			28.8
Total	Total	$	2,072.6	$	880.3	$	483.0	$	274.4	$	111.1	$	115.6	$	1,974.2				$	5,911.2	Total	$	2,072.6			$	880.3		$	483.0		$	274.4		$	111.1		$	115.6		$	1,974.2		$	5,911.2

CRE - owner occupied
Pass		$	252.2	$	307.1	$	302.1	$	402.4	$	148.4	$	323.5	$	39.5				$	1,775.2
Special mention		0.9		12.4		9.3		24.3		4.4		10.5		22.4					84.2
Classified		1.4		7.5		4.8		8.5		6.2		19.5		2.0					49.9
Total		$	254.5	$	327.0	$	316.2	$	435.2	$	159.0	$	353.5	$	63.9				$	1,909.3

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																					Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis				Total
December 31, 2020																				December 31, 2020	2020				2019		2018		2017		2016		Prior
																					(in millions)
CRE - owner occupied																				CRE - owner occupied
Pass																				Pass	$	252.2			$	307.1	$	302.1	$	402.4	$	148.4	$	323.5			$	39.5			$	1,775.2
Special mention																				Special mention	0.9				12.4		9.3		24.3		4.4		10.5		22.4				84.2
Classified																				Classified	1.4				7.5		4.8		8.5		6.2		19.5		2.0				49.9
Total																				Total	$	254.5			$	327.0	$	316.2	$	435.2	$	159.0	$	353.5	$	63.9			$	1,909.3

		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total
December 31, 2020		2020		2019		2018		2017		2016		Prior
		(in millions)
Hotel franchise finance	Hotel franchise finance																			Hotel franchise finance
Pass	Pass	$	161.6	$	792.0	$	464.1	$	139.9	$	0	$	101.5			$	162.6					$	1,821.7	Pass	$	161.6	$	792.0	$	464.1	$	139.9	$	—	$	101.5			$	162.6			$	1,821.7
Special mention	Special mention	0		32.7		56.9		27.3		0		18.2		0				135.1		Special mention	—				32.7		56.9		27.3		—		18.2		—				135.1
Classified	Classified	8.9		0		0		12.6		2.1		3.5		0				27.1		Classified	8.9				—		—		12.6		2.1		3.5		—				27.1
Total	Total	$	170.5	$	824.7	$	521.0	$	179.8	$	2.1	$	123.2	$	162.6			$	1,983.9	Total	$	170.5			$	824.7	$	521.0	$	179.8	$	2.1	$	123.2	$	162.6			$	1,983.9

Other CRE - non-owned occupied
Other CRE - non-owner occupied																				Other CRE - non-owner occupied
Pass	Pass	$	1,032.6	$	912.5	$	560.8	$	384.3	$	164.7	$	208.4	$	281.0			$	3,544.3	Pass	$	1,032.6			$	912.5	$	560.8	$	384.3	$	164.7	$	208.4	$	281.0			$	3,544.3
Special mention	Special mention	1.4		0		7.0		5.4		1.0		7.4		0				22.2		Special mention	1.4				—		7.0		5.4		1.0		7.4		—				22.2
Classified	Classified	7.4		26.4		0		20.3		6.5		13.1		0				73.7		Classified	7.4				26.4		—		20.3		6.5		13.1		—				73.7
Total	Total	$	1,041.4	$	938.9	$	567.8	$	410.0	$	172.2	$	228.9	$	281.0			$	3,640.2	Total	$	1,041.4			$	938.9	$	567.8	$	410.0	$	172.2	$	228.9	$	281.0			$	3,640.2

Residential	Residential																			Residential
Pass	Pass	$	759.5	$	869.3	$	402.0	$	108.9	$	113.8	$	74.1	$	39.5			$	2,367.1	Pass	$	759.5			$	869.3	$	402.0	$	108.9	$	113.8	$	74.1	$	39.5			$	2,367.1
Special mention	Special mention	0		0		0		0		0		0		0				0		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	0		4.4		5.9		1.1		0		0		0				11.4		Classified	—				4.4		5.9		1.1		—		—		—				11.4
Total	Total	$	759.5	$	873.7	$	407.9	$	110.0	$	113.8	$	74.1	$	39.5			$	2,378.5	Total	$	759.5			$	873.7	$	407.9	$	110.0	$	113.8	$	74.1	$	39.5			$	2,378.5

Construction and land development	Construction and land development																			Construction and land development
Pass	Pass	$	677.8	$	704.2	$	429.6	$	15.4	$	1.2	$	15.0	$	537.4			$	2,380.6	Pass	$	677.8			$	704.2	$	429.6	$	15.4	$	1.2	$	15.0	$	537.4			$	2,380.6
Special mention	Special mention	8.5		0.4		38.0		0		0		0		0.4				47.3		Special mention	8.5				0.4		38.0		—		—		—		0.4				47.3
Classified	Classified	0		0		1.5		0		0		0		0				1.5		Classified	—				—		1.5		—		—		—		—				1.5
Total	Total	$	686.3	$	704.6	$	469.1	$	15.4	$	1.2	$	15.0	$	537.8			$	2,429.4	Total	$	686.3			$	704.6	$	469.1	$	15.4	$	1.2	$	15.0	$	537.8			$	2,429.4

Other	Other																			Other
Pass	Pass	$	21.1	$	15.6	$	14.5	$	5.8	$	1.8	$	75.8	$	45.7			$	180.3	Pass	$	21.1			$	15.6	$	14.5	$	5.8	$	1.8	$	75.8	$	45.7			$	180.3
Special mention	Special mention	0		0		0.1		1.7		0		0.5		0				2.3		Special mention	—				—		0.1		1.7		—		0.5		—				2.3
Classified	Classified	0		0.1		0.2		0		0.1		0.2		0				0.6		Classified	—				0.1		0.2		—		0.1		0.2		—				0.6
Total	Total	$	21.1	$	15.7	$	14.8	$	7.5	$	1.9	$	76.5	$	45.7			$	183.2	Total	$	21.1			$	15.7	$	14.8	$	7.5	$	1.9	$	76.5	$	45.7			$	183.2

Total by Risk Category	Total by Risk Category																			Total by Risk Category
Pass	Pass	$	5,938.5	$	4,784.5	$	2,780.2	$	1,542.2	$	659.7	$	1,818.5	$	8,856.1			$	26,379.7	Pass	$	5,938.5			$	4,784.5	$	2,780.2	$	1,542.2	$	659.7	$	1,818.5	$	8,856.1			$	26,379.7
Special mention	Special mention	23.7		102.2		143.4		80.8		7.1		36.8		57.1				451.1		Special mention	23.7				102.2		143.4		80.8		7.1		36.8		57.1				451.1
Classified	Classified	43.8		48.8		15.6		46.0		24.6		37.1		6.3				222.2		Classified	43.8				48.8		15.6		46.0		24.6		37.1		6.3				222.2
Total	Total	$	6,006.0	$	4,935.5	$	2,939.2	$	1,669.0	$	691.4	$	1,892.4	$	8,919.5			$	27,053.0	Total	$	6,006.0			$	4,935.5	$	2,939.2	$	1,669.0	$	691.4	$	1,892.4	$	8,919.5			$	27,053.0

Troubled Debt Restructurings

A TDR loan is a loan on which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. The loan terms that have been modified or restructured due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, an extension of the maturity or renewal of the loan at an interest rate below current market, a reduction in the face amount of the debt, a reduction in the accrued interest, or deferral of interest payments. The majority of the Company's modifications are extensions in terms or deferral of payments which result in no lost principal or interest followed by reductions in interest rates or accrued interest. Consistent with regulatory guidance, a TDR loan that is subsequently modified in another restructuring agreement but has shown sustained performance and classification as a TDR, will be removed from TDR status provided that the modified terms were market-based at the time of modification.

The Company's TDR loans totaled ~~$60.2~~$55.1 million and $61.6 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, and had an allowance for credit losses on these loans of ~~$3.1~~$10.6 million and $2.7 million, respectively. As of ~~March 31,~~September 30, 2021, ~~and~~there were no commitments outstanding on TDR loans. As of December 31, 2020, commitments outstanding on TDR loans totaled ~~$0.3 million and~~ $0.6 ~~million, respectively.~~million.

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The following table presents TDR loans as of ~~March 31,~~September 30, 2021:


		March 31, 2021				September 30, 2021
		Number of Loans	Recorded Investment					Number of Loans	Recorded Investment
		(dollars in millions)			(dollars in millions)

Tech & innovation	Tech & innovation	4	$	19.8			Tech & innovation	3	$	15.0
Other commercial and industrial	Other commercial and industrial	10	24.3				Other commercial and industrial	10	23.6
CRE - owner occupied	CRE - owner occupied	3	1.9				CRE - owner occupied	1	0.5
Hotel franchise finance	Hotel franchise finance	2	5.3				Hotel franchise finance	2	4.7
Other CRE - non-owned occupied		3	8.9
Other CRE - non-owner occupied							Other CRE - non-owner occupied	5	11.3

Total	Total	22	$	60.2			Total	21	$	55.1

During the three months ended ~~March 31,~~September 30, 2021, the Company had 3no new TDR loans. During the nine months ended September 30, 2021, the Company had 9 new TDR loans with a recorded investment of ~~$4.7~~$13.2 million. No principal amounts were forgiven and there were no waived fees or other expenses resulting from these TDR loans. As of ~~March 31,~~September 30, 2020, the Company's TDR loans totaled ~~$26.5 million, none of which were new TDR loans that were modified during~~$60.8 million. During the three months ended ~~March 31, 2020.~~September 30, 2020, the Company had 20 new TDR loans with a recorded investment of $25.0 million. During the nine months ended September 30, 2020, the Company had 22 new TDR loans with a recorded investment of $35.7 million.

A TDR loan is deemed to have a payment default when it becomes past due 90 days under the modified terms, goes on nonaccrual status, or is restructured again. Payment defaults, along with other qualitative indicators, are considered by management in the determination of the allowance for credit losses. During the three months ended ~~March 31,~~September 30, 2021, there were 0no loans for which there was a payment default within 12 months following the modification. During the ~~three~~nine months ended ~~March 31, 2020,~~September 30, 2021, there was 1 commercial and industrial loan with a recorded investment of ~~$0.7~~$4.1 million for which there was a payment default within 12 months following the modification, which resulted in a charge-off of $2.0 million. During the three months ended September 30, 2020, there was 1 CRE, owner occupied loan with a recorded investment of $0.8 million for which there was a payment default within 12 months following the modification. During the nine months ended September 30, 2020, there were 2 CRE, owner occupied loans with a recorded investment of $1.5 million for which there was a payment default. There was no increase to the allowance for credit losses or a ~~writeoff~~charge-off that resulted from ~~this~~these TDR ~~redefault~~redefaults during the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Table of Contents

Collateral-Dependent Loans

The following table presents the amortized cost basis of collateral-dependent ~~loans as of March 31, 2021:~~loans:


		March 31, 2021							September 30, 2021						December 31, 2020
		Real Estate Collateral		Other Collateral		Total			Real Estate Collateral		Other Collateral		Total		Real Estate Collateral		Other Collateral		Total
		(in millions)							(in millions)
Warehouse lending	Warehouse lending	$	0	$	0	$	0	Warehouse lending	$	—	$	—	$	—	$	—	$	—	$	—
Municipal & nonprofit	Municipal & nonprofit	0		0		0		Municipal & nonprofit	—		—		—		—		—		—
Tech & innovation	Tech & innovation	0		32.3		32.3		Tech & innovation	—		4.9		4.9		—		27.3		27.3
Equity fund resources								Equity fund resources	—		—		—		—		—		—
Other commercial and industrial	Other commercial and industrial	0		13.1		13.1		Other commercial and industrial	—		12.8		12.8		—		23.6		23.6
CRE - owner occupied	CRE - owner occupied	37.6		0		37.6		CRE - owner occupied	33.5		—		33.5		42.6		—		42.6
Hotel franchise finance	Hotel franchise finance	83.5		0		83.5		Hotel franchise finance	102.2		—		102.2		27.1		—		27.1
Other CRE - non-owned occupied		23.6		0		23.6
Other CRE - non-owner occupied								Other CRE - non-owner occupied	37.1		—		37.1		73.7		—		73.7
Residential	Residential	0		0		0		Residential	—		—		—		—		—		—
Construction and land development	Construction and land development	2.0		0		2.0		Construction and land development	5.3		—		5.3		1.5		—		1.5
Other	Other	0		0.4		0.4		Other	—		0.1		0.1		—		0.4		0.4
Total	Total	$	146.7	$	45.8	$	192.5	Total	$	178.1	$	17.8	$	195.9	$	144.9	$	51.3	$	196.2

The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended ~~March 31,~~September 30, 2021.

~~Table of Contents~~

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for credit losses on loans and an allowance for credit losses on unfunded loan commitments. The allowance for credit losses on HTM securities is estimated separately from loans, see "Note 2.3. Investment Securities" of these Notes to Unaudited Consolidated Financial Statements for further discussion. Management considers the level of allowance for credit losses to be a reasonable and supportable estimate of expected credit losses inherent within the Company's loans held for investment portfolio as of ~~March 31,~~September 30, 2021.

The below tables reflect the activity in the allowance for credit losses on loans held for investment by loan portfolio ~~segment:~~

Three Months Ended March 31, 2021
Balance,
December 31, 2020 Provision for (Recovery of) Credit Losses Write-offs Recoveries Balance,
March 31, 2021
(1) (1)
(in millions)
Warehouse lending $ 3.4 $ 0.2 $ 0 $ 0 $ 3.6
Municipal & nonprofit 15.9 (0.7) 0 0 15.2
Tech & innovation 35.3 (11.6) 0 (0.2) 23.9
Other commercial and industrial 94.7 (16.5) 0.1 (0.3) 78.4
CRE - owner occupied 18.6 (8.9) 0 0 9.7
Hotel franchise finance 43.3 6.1 0 0 49.4
Other CRE - non-owned occupied 39.9 (5.4) 2.0 (0.2) 32.7
Residential 0.8 2.4 0 0 3.2
Construction and land development 22.0 3.9 0 0 25.9
Other 5.0 0.1 0 0 5.1
Total $ 278.9 $ (30.4) $ 2.1 $ (0.7) $ 247.1

~~(1)Includes~~segment, which includes an estimate of future ~~recoveries.~~recoveries:


	Three Months Ended September 30, 2021
	Balance, June 30, 2021		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries		Balance, September 30, 2021
	(in millions)
Warehouse lending	$	3.2	$	(0.6)	$	—	$	—	$	2.6
Municipal & nonprofit	15.9		(0.7)		—		—		15.2
Tech & innovation	20.5		8.6		—		(0.1)		29.2
Equity fund resources	1.1		6.1		—		—		7.2
Other commercial and industrial	76.4		18.3		3.3		(0.2)		91.6
CRE - owner occupied	9.3		0.1		—		—		9.4
Hotel franchise finance	49.4		0.2		—		—		49.6
Other CRE - non-owner occupied	29.8		(9.7)		—		—		20.1
Residential	8.1		(2.0)		—		—		6.1
Construction and land development	14.1		(2.6)		—		—		11.5
Other	5.1		(0.7)		—		—		4.4
Total	$	232.9	$	17.0	$	3.3	$	(0.3)	$	246.9

Table of Contents


		Three Months Ended March 31, 2020
		Balance, January 1, 2020		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries				Balance, March 31, 2020							Nine Months Ended September 30, 2021
		(1)								(1)							Balance, December 31, 2020				Provision for (Recovery of) Credit Losses						Write-offs			Recoveries				Balance, September 30, 2021
		(in millions)												(in millions)
Warehouse lending	Warehouse lending	$	0.2	$	0.2	$	0			$	0				$	0.4		Warehouse lending			$	3.4			$	(0.8)				$	—			$	—			$	2.6
Municipal & nonprofit	Municipal & nonprofit	17.4		(1.2)		0		0				16.2			Municipal & nonprofit				15.9				(0.7)					—				—				15.2
Tech & innovation	Tech & innovation	22.4		17.4		0		0				39.8			Tech & innovation				33.4				(2.6)					2.0				(0.4)				29.2
Equity fund resources															Equity fund resources				1.9				5.3					—				—				7.2
Other commercial and industrial	Other commercial and industrial	95.8		23.3		0.1		(1.3)				120.3			Other commercial and industrial				94.7				(0.2)					3.7				(0.8)				91.6
CRE - owner occupied	CRE - owner occupied	10.4		0.1		0		0				10.5			CRE - owner occupied				18.6				(9.2)					—				—				9.4
Hotel franchise finance	Hotel franchise finance	14.1		4.7		0		0				18.8			Hotel franchise finance				43.3				6.3					—				—				49.6
Other CRE - non-owned occupied		10.5		1.7		0		(2.0)				14.2
Other CRE - non-owner occupied															Other CRE - non-owner occupied				39.9				(19.2)					2.0				(1.4)				20.1
Residential	Residential	3.8		(2.5)		0		0				1.3			Residential				0.8				5.2					—				(0.1)				6.1
Construction and land development	Construction and land development	6.2		0.9		0		0				7.1			Construction and land development				22.0				(10.5)					—				—				11.5
Other	Other	6.1		0.6		0		0				6.7			Other				5.0				(1.1)					—				(0.5)				4.4
Total	Total	$	186.9	$	45.2	$	0.1	$	(3.3)			$	235.3		Total				$	278.9			$	(27.5)				$	7.7			$	(3.2)			$	246.9

~~(1)Includes an estimate of future recoveries.~~


	Three Months Ended September 30, 2020
	Balance, June 30, 2020		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries		Balance, September 30, 2020
	(in millions)
Warehouse lending	$	0.7	$	0.1	$	—	$	—	$	0.8
Municipal & nonprofit	17.1		0.8		—		—		17.9
Tech & innovation	53.6		(10.0)		6.4		—		37.2
Equity fund resources	1.0		0.7		—		—		1.7
Other commercial and industrial	109.9		(0.7)		0.7		(0.2)		108.7
CRE - owner occupied	15.6		3.9		0.1		—		19.4
Hotel franchise finance	35.8		2.2		—		—		38.0
Other CRE - non-owner occupied	32.7		9.2		1.2		—		40.7
Residential	1.7		—		0.3		(0.4)		1.8
Construction and land development	35.8		2.9		—		—		38.7
Other	6.6		(0.9)		0.1		—		5.6
Total	$	310.5	$	8.2	$	8.8	$	(0.6)	$	310.5


	Nine Months Ended September 30, 2020
	Balance, January 1, 2020		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries		Balance, September 30, 2020
	(in millions)
Warehouse lending	$	0.2	$	0.6	$	—	$	—	$	0.8
Municipal & nonprofit	17.4		0.5		—		—		17.9
Tech & innovation	21.0		25.4		9.2		—		37.2
Equity fund resources	1.4		0.3		—		—		1.7
Other commercial and industrial	95.8		13.6		2.7		(2.0)		108.7
CRE - owner occupied	10.4		9.1		0.1		—		19.4
Hotel franchise finance	14.1		23.9		—		—		38.0
Other CRE - non-owner occupied	10.5		30.7		2.1		(1.6)		40.7
Residential	3.8		(2.1)		0.3		(0.4)		1.8
Construction and land development	6.2		32.5		—		—		38.7
Other	6.1		(0.4)		0.2		(0.1)		5.6
Total	$	186.9	$	134.1	$	14.6	$	(4.1)	$	310.5

Accrued interest receivable on loans totaled ~~$138.1~~$196.4 million and $142.1 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses.

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In addition to the allowance for credit losses on loans held for investment, the Company maintains a separate allowance for credit losses related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance is included in other liabilities on the consolidated balance sheets.

The below tables reflect the activity in the allowance for credit losses on unfunded loan commitments:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
		(in millions)					(in millions)
Balance, beginning of period	Balance, beginning of period		$	37.0	$	9.0		Balance, beginning of period	$	31.3	$	36.3	$	37.0	$	9.0
Beginning balance adjustment from adoption of CECL	Beginning balance adjustment from adoption of CECL		—		15.1			Beginning balance adjustment from adoption of CECL	—		—		—		15.1
(Recovery of) provision for credit losses			(4.4)		5.5
Provision for (recovery of) credit losses								Provision for (recovery of) credit losses	0.8		8.1		(4.9)		20.3
Balance, end of period	Balance, end of period		$	32.6	$	29.6		Balance, end of period	$	32.1	$	44.4	$	32.1	$	44.4

The following tables disaggregate the Company's allowance for credit losses on loans held for investment and loan balances by measurement methodology:


		March 31, 2021													September 30, 2021
		Loans						Allowance							Loans						Allowance
		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total			Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total
		(in millions)													(in millions)
Warehouse lending	Warehouse lending	$	4,901.8	$	0	$	4,901.8	$	3.6	$	0	$	3.6	Warehouse lending	$	4,759.9	$	—	$	4,759.9	$	2.6	$	—	$	2.6
Municipal & nonprofit	Municipal & nonprofit	1,676.9		0		1,676.9		15.2		0		15.2		Municipal & nonprofit	1,638.2		—		1,638.2		15.2		—		15.2
Tech & innovation	Tech & innovation	2,481.9		32.3		2,514.2		21.9		2.0		23.9		Tech & innovation	1,274.5		31.8		1,306.3		19.1		10.1		29.2
Equity fund resources														Equity fund resources	3,194.0		—		3,194.0		7.2		—		7.2
Other commercial and industrial	Other commercial and industrial	6,117.6		56.7		6,174.3		74.9		3.5		78.4		Other commercial and industrial	5,789.1		18.3		5,807.4		88.7		2.9		91.6
CRE - owner occupied	CRE - owner occupied	1,767.8		46.7		1,814.5		9.7		0		9.7		CRE - owner occupied	1,761.9		35.9		1,797.8		9.4		—		9.4
Hotel franchise finance	Hotel franchise finance	1,925.4		113.4		2,038.8		43.2		6.2		49.4		Hotel franchise finance	2,015.7		102.2		2,117.9		35.6		14.0		49.6
Other CRE - non-owned occupied		3,558.7		54.3		3,613.0		32.7		0		32.7
Other CRE - non-owner occupied														Other CRE - non-owner occupied	3,643.6		41.2		3,684.8		20.1		—		20.1
Residential	Residential	3,046.9		8.9		3,055.8		3.2		0		3.2		Residential	7,403.0		9.7		7,412.7		6.1		—		6.1
Construction and land development	Construction and land development	2,765.6		2.0		2,767.6		25.9		0		25.9		Construction and land development	2,922.2		5.3		2,927.5		11.5		—		11.5
Other	Other	150.4		3.7		154.1		3.6		1.5		5.1		Other	152.6		2.8		155.4		3.2		1.2		4.4
Total	Total	$	28,393.0	$	318.0	$	28,711.0	$	233.9	$	13.2	$	247.1	Total	$	34,554.7	$	247.2	$	34,801.9	$	218.7	$	28.2	$	246.9


		December 31, 2020													December 31, 2020
		Loans						Allowance							Loans						Allowance
		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total			Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total
		(in millions)													(in millions)
Warehouse lending	Warehouse lending	$	4,340.2	$	0	$	4,340.2	$	3.4	$	0	$	3.4	Warehouse lending	$	4,340.2	$	—	$	4,340.2	$	3.4	$	—	$	3.4
Municipal & nonprofit	Municipal & nonprofit	1,726.9		1.9		1,728.8		15.9		0		15.9		Municipal & nonprofit	1,726.9		1.9		1,728.8		15.9		—		15.9
Tech & innovation	Tech & innovation	2,521.1		27.2		2,548.3		31.4		3.9		35.3		Tech & innovation	1,375.8		27.2		1,403.0		29.5		3.9		33.4
Equity fund resources														Equity fund resources	1,145.3		—		1,145.3		1.9		—		1.9
Other commercial and industrial	Other commercial and industrial	5,883.1		28.1		5,911.2		90.3		4.4		94.7		Other commercial and industrial	5,883.1		28.1		5,911.2		90.3		4.4		94.7
CRE - owner occupied	CRE - owner occupied	1,857.9		51.4		1,909.3		18.6		0		18.6		CRE - owner occupied	1,857.9		51.4		1,909.3		18.6		—		18.6
Hotel franchise finance	Hotel franchise finance	1,927.0		56.9		1,983.9		40.4		2.9		43.3		Hotel franchise finance	1,927.0		56.9		1,983.9		40.4		2.9		43.3
Other CRE - non-owned occupied		3,553.6		86.6		3,640.2		39.9		0		39.9
Other CRE - non-owner occupied														Other CRE - non-owner occupied	3,553.6		86.6		3,640.2		39.9		—		39.9
Residential	Residential	2,367.1		11.4		2,378.5		0.8		0		0.8		Residential	2,367.1		11.4		2,378.5		0.8		—		0.8
Construction and land development	Construction and land development	2,427.9		1.5		2,429.4		22.0		0		22.0		Construction and land development	2,427.9		1.5		2,429.4		22.0		—		22.0
Other	Other	182.6		0.6		183.2		5.0		0		5.0		Other	182.6		0.6		183.2		5.0		—		5.0
Total	Total	$	26,787.4	$	265.6	$	27,053.0	$	267.7	$	11.2	$	278.9	Total	$	26,787.4	$	265.6	$	27,053.0	$	267.7	$	11.2	$	278.9

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Loan Purchases and Sales

The following table presents loan purchases by portfolio segment:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021			2020				2021		2020		2021		2020
		(in millions)		(in millions)
Warehouse lending	Warehouse lending	$	0		$	99.4		Warehouse lending	$	—	$	—	$	—	$	99.4

Municipal & nonprofit								Municipal & nonprofit	—		—		—		1.6
Tech & innovation	Tech & innovation	34.9			177.2			Tech & innovation	55.2		219.2		193.1		480.0
Equity fund resources								Equity fund resources	1,393.7		—		1,393.7		—
Other commercial and industrial	Other commercial and industrial	217.6			91.5			Other commercial and industrial	402.8		51.9		877.2		183.2

Other CRE - non-owner occupied								Other CRE - non-owner occupied	—		—		14.9		—
Residential	Residential	1,016.6			279.5			Residential	2,682.6		243.3		6,002.8		919.5

Construction and land development								Construction and land development	—		—		—		—
Other	Other	32.0			0			Other	99.1		—		137.2		—
Total	Total	$	1,301.1		$	667.6		Total	$	4,633.4	$	514.4	$	8,618.9	$	1,683.7

There were no loans purchased with more-than-insignificant deterioration in credit quality during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

The Company did not have significant sales of HFI loans during the three and nine months ended September 30, 2021 and 2020.

Table of Contents

6. MORTGAGE SERVICING RIGHTS

The Company acquired MSRs as part of the AMH acquisition. MSRs result from the sale of loans to the secondary market for which AMH retains the right to service the loans. The following table presents the changes in fair value of the Company's MSR assets and other information related to its servicing portfolio:


	Three Months Ended September 30, 2021		Nine Months Ended September 30,2021
	(in millions)
Beginning balance	$	726.2	$	—
Acquired in AMH acquisition	—		1,376.3
Additions from loans sold with servicing rights retained	230.4		512.7
Reductions from sales	(327.5)		(1,199.0)
Change in fair value	14.9		21.5
Realization of cash flows	(39.2)		(106.7)
Balance, September 30, 2021	$	604.8	$	604.8

Unpaid principal balance of mortgage loans serviced for others	$	47,211.4

Due to the regulatory capital impact of MSRs on the Company's capital ratios, AMH continues to routinely sell certain MSRs and related servicing advances. During the three months ended September 30, 2021, the Company completed sales of MSRs and related servicing advances with an aggregate net sales price of $328.6 million and UPB of loans underlying these sales of $23.3 billion. During the period from the acquisition date through September 30, 2021, the Company completed sales of MSRs and related servicing advances with an aggregate net sales price of $1.2 billion and UPB of loans underlying these sales of $88.6 billion. As of September 30, 2021, the Company has a remaining receivable balance related to holdbacks on these sales for pending servicing transfers of $90.0 million, which was recorded as part of Other assets on the Consolidated Balance Sheet.

The Company receives loan ~~sales:~~servicing fees, net of subservicing costs, based on the UPB of the underlying loans. Loan servicing fees are collected from payments made by borrowers. The Company may receive other remuneration from rights to various borrower contracted fees, such as late charges, collateral reconveyance charges, and non-sufficient funds fees. Contractually specified servicing fees, late fees, and ancillary income associated with the Company's MSR portfolio totaled $41.5 million three months ended September 30, 2021 and $102.4 million for the period from the acquisition date through September 30, 2021, which are recorded as part of Net loan servicing revenue in the Consolidated Income Statement.

Three Months Ended March 31,
2021 2020
(in millions)
Carrying value $ 100.1 $ 0
Gain on sale 0.7 0
In accordance with its contractual loan servicing obligations, the Company is required to advance funds to or on behalf of investors when borrowers do not make payments. The Company advances property taxes and insurance premiums for borrowers who have insufficient funds in escrow accounts, plus any other costs to preserve real estate properties. The Company may also advance funds to maintain, repair, and market foreclosed real estate properties. The Company is entitled to recover all or a portion of the advances from borrowers of reinstated and performing loans, from the proceeds of liquidated properties or from the investors of charged-off loans. Servicing advances are charged-off when they are deemed to be uncollectible. As of September 30, 2021, net servicing advances totaled $54.8 million, which is recorded as part of Other assets on the Consolidated Balance Sheet.

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The following presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate changes in interest rates, discount rates, and prepayment speeds that are used to determine fair value:

September 30, 2021

(in millions)

Fair value of mortgage servicing rights

604.8

Increase (decrease) in fair value resulting from:

Interest rate change of 50 basis points

Adverse change

(48.2)

Favorable change

31.5

Discount rate change of 50 basis points

Increase

(10.0)

Decrease

10.4

Conditional prepayment rate change of 1%

Increase

(17.7)

Decrease

19.7

Cost to service change of 10%

Increase

(7.3)

Decrease

7.3

Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. In addition, the offsetting effect of hedging activities are not contemplated in these results and further, the effect of a variation in a particular assumption is calculated without changing any other assumptions, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in MSR values may differ significantly from those reported.

Table of Contents

4.7. OTHER BORROWINGS

The following table summarizes the Company’s short-term and long-term borrowings as of ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Short-Term:	Short-Term:					Short-Term:

Federal funds purchased	Federal funds purchased	$	0	$	0	Federal funds purchased	$	400.0	$	—
FHLB advances	FHLB advances	5.0		5.0		FHLB advances	—		5.0

Customer repurchase agreements						Customer repurchase agreements	16.1		16.0
Other short-term borrowings						Other short-term borrowings	29.8		—
Total short-term borrowings	Total short-term borrowings	$	5.0	$	5.0	Total short-term borrowings	$	445.9	$	21.0
Long-Term:						Long-Term:

AmeriHome senior notes, net of fair value adjustment						AmeriHome senior notes, net of fair value adjustment	$	318.3	$	—
Credit linked notes, net of debt issuance costs						Credit linked notes, net of debt issuance costs	239.3		—
Total long-term borrowings						Total long-term borrowings	$	557.6	$	—

Total other borrowings						Total other borrowings	$	1,003.5	$	21.0

Short-Term Borrowings

Federal Funds Lines of Credit

The Company maintains federal fund lines of credit totaling ~~$2.5~~$2.9 billion as of ~~March 31,~~September 30, 2021, which have rates comparable to the federal funds effective rate plus 0.10% to 0.20%. As of ~~March 31,~~September 30, 2021 ~~and December 31, 2020, there were 0~~ outstanding balances on the Company's federal fund lines of credit totaled $400.0 million. As of December 31, 2020, there were no outstanding balances on the Company's federal fund lines of credit.

FHLB Advances

The Company also maintains secured lines of credit with the FHLB and the FRB. The Company’s borrowing capacity is determined based on collateral pledged, generally consisting of investment securities and loans, at the time of the borrowing. The Company has a PPP lending facility with the FRB that allows the Company to pledge loans originated under the PPP in return for dollar for dollar funding from the FRB, which would provide up to ~~$1.5 billion~~approximately $630.0 million in additional credit. The amount of available credit under the PPP lending facility will decline each period as these loans are paid down. At ~~March 31,~~September 30, 2021, the Company had no amounts outstanding under its line of credit or its PPP lending facility with the FRB and had ~~$5.0 million in~~no borrowings under its lines of credit with the FHLB. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had additional available credit with the FHLB of approximately $4.2 billion and $4.0 billion, respectively, and with the FRB of approximately $3.2 billion and $2.7 ~~billion.~~billion, respectively.

Secured Borrowings

Transfers of AMH loans HFS, not qualifying for sales accounting treatment, resulted in recognition of secured borrowings of $29.8 million at September 30, 2021.

Warehouse Borrowings

The Company assumed warehouse borrowings as part of the AMH acquisition, which are used to finance the acquisition of loans through the use of repurchase agreements. Repurchase agreements operate as financings under which the Company transfers loans to secure borrowings. The borrowing amounts are based on the attributes of the collateralized loans and are defined in the repurchase agreement of each warehouse lender. The Company retains beneficial ownership of the transferred loans and will receive the loans from the lender upon full repayment of the borrowing. The repurchase agreements may require the Company to transfer additional assets to the lender in the event the estimated fair value of the existing transferred loans declines.

As of September 30, 2021, the Company had access to approximately $1.0 billion in uncommitted warehouse funding, of which no amounts were drawn.

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Repurchase Agreements

Other short-term borrowing sources available to the Company include customer repurchase agreements, which totaled ~~$15.9~~$16.1 million and $16.0 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The weighted average rate on customer repurchase agreements was 0.16% and 0.15% as of ~~March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively.

Long-Term Borrowings

AmeriHome Senior Notes

Prior to the Company's acquisition of AmeriHome, in October 2020, AmeriHome issued senior notes with an aggregate principal amount of $300.0 million, maturing on October 26, 2028. The senior notes accrue interest at a rate of 6.50% per annum, paid semiannually. The senior notes contain provisions that allow for redemption of up to 40% of the original aggregate principal amount of the notes during the first three years after issuance at a price equal to 106.50%, plus accrued and unpaid interest. After this three-year period, AmeriHome may redeem some or all of the senior notes at a price equal to 103.25% of the outstanding principal amount, plus accrued and unpaid interest. In 2025, the redemption price of these senior notes declines to 100% of the outstanding principal balance. The carrying amount of the senior notes includes a fair value adjustment (premium) of $19.3 million recognized as of the acquisition date that is being amortized over the term of the notes. As of September 30, 2021, the carrying value of these notes totaled $318.3 million.

Credit Linked Notes

On June 28, 2021, the Company issued $242.0 million aggregate principal amount of senior unsecured credit linked notes, which were recorded net of $2.9 million in debt issuance costs. The notes mature on December 30, 2024 and accrue interest at a rate equal to three-month LIBOR plus 5.50%, payable quarterly. The notes effectively transfer the risk of first losses on a $1.9 billion reference pool of the Company's warehouse loans to the purchasers of the notes. In the event of a failure to pay by the relevant mortgage originator, insolvency of the relevant mortgage originator, or restructuring of such loans that results in a loss on a loan included in the reference pool, the principal balance of the notes will be reduced to the extent of such loss and recognized as a debt extinguishment gain within non-interest income in the Consolidated Income Statement. The purchasers of the notes have the option to acquire the underlying mortgage loan collateralizing the reference warehouse line of credit in the event of obligor default. Losses on the warehouse lines of credit have not generally been significant. As of September 30, 2021, the carrying value of these notes totaled $239.3 million.

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5.8. QUALIFYING DEBT

Subordinated Debt

The Company's subordinated debt consists of ~~three~~four separate ~~issuances. The Parent issued $175.0 million of subordinated debentures~~issuances, as detailed in ~~June 2016, which were recorded net of issuance costs of $5.5 million, and mature July 1, 2056. Beginning~~the tables below:


September 30, 2021
Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs at Origination
					(in millions)
WAL fixed-rate (1)	June 2016	July 1, 2056	6.25	%	$	175.0	$	5.5
WAL fixed-to-floating-rate (2)	June 2021	June 15, 2031	3.00	%	600.0		8.1
WAB fixed-to-floating-rate (4)	May 2020	June 1, 2030	5.25	%	225.0		3.1
Total					$	1,000.0	$	16.7


December 31, 2020
Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs at Origination
					(in millions)
WAL fixed-rate (1)	June 2016	July 1, 2056	6.25	%	$	175.0	$	5.5
WAB fixed-to-variable-rate (3)	June 2015	July 15, 2025	3.44	%	75.0		1.8
WAB fixed-to-floating-rate (4)	May 2020	June 1, 2030	5.25	%	225.0		3.1
Total					$	475.0	$	10.4

(1) Debentures are redeemable, in whole or in part, beginning on or after July 1, 2021 ~~the Company may redeem the debentures, in whole or in part,~~ at their principal amount plus any accrued and unpaid interest. ~~The debentures have a fixed interest rate of 6.25% per annum.~~

~~In June 2015, WAB issued $150.0 million of subordinated debt, which was recorded net of debt issuance costs of $1.8 million, and matures July 15, 2025. The subordinated debt is~~(2) Notes are redeemable, ~~by WAB,~~ in whole or in part, ~~for a price equal to the~~beginning on June 15, 2026 at their principal amount plus accrued and unpaid interest. The ~~subordinated debt had~~notes also convert to a ~~fixed~~floating rate on this date, which is expected to be three-month SOFR plus 225 basis points.

(3) Debt became redeemable, in whole or in part on July 15, 2020, at its principal amount plus accrued and unpaid interest ~~rate of 5.00% through June 30, 2020, which then~~and has converted to a variable rate of 3.20% plus three-month LIBOR through maturity. ~~On October 15, 2020, WAB redeemed~~During the three months ended September 30, 2021, the remaining $75 million ~~of this subordinated debt issuance.~~was redeemed in full.

~~In May 2020, WAB issued $225.0 million of subordinated debt, which was recorded net of debt issuance costs of $3.1 million, and matures June 1, 2030. The subordinated debt~~(4) Debt is redeemable, ~~by WAB,~~ in whole or in part, on or after June 1, 2025 ~~and on every interest payment date thereafter,~~ at ~~a redemption price equal to the~~its principal amount plus accrued and unpaid ~~interest. The subordinated debt~~interest and has a fixed interest rate of 5.25% through June 1, 2025 and then converts to a floating rate per annum equal to ~~the~~ three-month SOFR plus 512 basis ~~points for each quarterly interest period during the floating rate period.~~points.

To hedge the interest rate risk on the Company's 2015 and 2016 subordinated debt issuances, the Company entered into fair value interest rate hedges with receive fixed/pay variable swaps.

The carrying value of all subordinated debt issuances, which includes the fair value of the related hedges, totals ~~$464.4~~$985.0 million and $469.8 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Junior Subordinated Debt

The Company has formed or acquired through acquisition 8 statutory business trusts, which exist for the exclusive purpose of issuing Cumulative Trust Preferred Securities.

With the exception of debt issued by Bridge Capital Trust I and Bridge Capital Trust II, junior subordinated debt is recorded at fair value at each reporting date due to the FVO election made by the Company under ASC 825. The Company did not make the FVO election for the junior subordinated debt acquired as part of the Bridge acquisition. Accordingly, the carrying value of these trusts does not reflect the current fair value of the debt and includes a fair market value adjustment established at acquisition that is being accreted over the remaining life of the trusts.

The carrying value of junior subordinated debt was ~~$79.3~~$79.9 million and $78.9 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The weighted average interest rate of all junior subordinated debt as of ~~March 31,~~September 30, 2021 was ~~2.53%~~2.47%, which is three-month LIBOR plus the contractual spread of 2.34%, compared to a weighted average interest rate of 2.58% at December 31, 2020.

In the event of certain changes or amendments to regulatory requirements or federal tax rules, the debt is redeemable in whole. The obligations under these instruments are fully and unconditionally guaranteed by the Company and rank subordinate and junior in right of payment to all other liabilities of the Company. Based on guidance issued by the FRB, the Company's securities continue to qualify as Tier 1 Capital.

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6.9. STOCKHOLDERS' EQUITY

Stock-Based Compensation

Restricted Stock Awards

Restricted stock awards granted to employees generally vest over a 3-year period. Stock grants made to non-employee WAL directors in 2021 ~~will be~~were fully vested on July 1, 2021. The Company estimates the compensation cost for stock grants based upon the grant date fair value. Stock compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. The aggregate grant date fair value for the restricted stock awards granted during the three and nine months ended ~~March 31,~~September 30, 2021 ~~and 2020~~ was ~~$23.7~~$0.1 million and ~~$21.7~~$34.9 million, respectively. Stock compensation expense related to restricted stock awards granted to employees are included in Salaries and employee benefits in the Consolidated Income Statement. For restricted stock awards granted to WAL directors, related stock compensation expense is included in Legal, professional, and directors' fees. For the three and nine months ended ~~March 31,~~September 30, 2021, the Company recognized ~~$5.6~~$5.0 million and $17.2 million respectively, in stock-based compensation expense related to these stock grants, compared to ~~$4.9~~$4.5 million and $15.3 million for the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively.

In addition, the Company previously granted shares of restricted stock to certain members of executive management that had both performance and service conditions that affect vesting. There were no such grants made during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, however expense iswas still being recognized through June 30, 2021 for a grant made in 2017 with a four-year vesting period. ~~For the three months ended March 31, 2021 and 2020, the~~The Company recognized ~~$0.3~~$0.6 million in stock-based compensation expense related to these performance-based restricted stock ~~grant.~~grants through June 30, 2021, the end of the vesting period. For the three and nine months ended September 30, 2020, stock-based compensation expense for these awards totaled $0.3 million and $0.9 million, respectively.

Performance Stock Units

The Company grants performance stock units to members of its executive management that do not vest unless the Company achieves a specified cumulative EPS target and a TSR performance measure over a three-year performance period. The number of shares issued will vary based on the cumulative EPS target and relative TSR performance factor that is achieved. The Company estimates the cost of performance stock units based upon the grant date fair value and expected vesting percentage over the three-year performance period. For the three and nine months ended ~~March 31,~~September 30, 2021, the Company recognized ~~$2.1~~$3.1 million and $7.7 million, respectively, in stock-based compensation expense related to these performance stock units, compared to ~~$1.7~~$1.8 million and $5.3 million for the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively.

The three-year performance period for the 2018 grant ended on December 31, 2020, and the Company's cumulative EPS and TSR performance measure for the performance period exceeded the level required for a maximum award under the terms of the grant. As a result, 152,418 shares became fully vested and were distributed to executive management in the first quarter of 2021.

Preferred Stock Issuance

On September 15, 2021, the Company entered into an underwriting agreement, pursuant to which the Company agreed to issue and sell an aggregate of 12,000,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company’s 4.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Shares, Series A, par value $0.0001 per share, with a liquidation preference of $25 per Depositary Share (equivalent to $10,000 per share of Series A preferred stock). During the three and nine months ended September 30, 2021, the Company received net proceeds of $294.5 million from the issuance of preferred stock.

Common Stock ~~Sale~~Issuances

Pursuant to ATM Distribution Agreement

On June 3, 2021, the Company entered into a distribution agency agreement with J.P. Morgan Securities LLC, under which the Company may sell up to 4,000,000 shares of its common stock on the New York Stock Exchange. The Company pays J.P. Morgan Securities LLC a mutually agreed rate, not to exceed 2% of the gross offering proceeds of the shares sold pursuant to the distribution agency agreement. The common stock will be sold at prevailing market prices at the time of the sale or at negotiated prices and, as a result, prices will vary. Sales under the ATM program are being made pursuant to a prospectus dated May 14, 2021 and a prospectus supplement filed with the SEC on June 3, 2021, in an offering of shares from the Company's shelf registration statement on Form S-3 (No. 333-256120). There were no sales under the ATM program during the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company sold 700,000 shares under

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the ATM program at a weighted-average selling price of $100.59 per share for gross proceeds of $70.4 million. Total related offering costs were $0.6 million, of which $0.4 million relates to compensation costs paid to J.P. Morgan Securities LLC.

Registered Direct Offering

The Company sold 2.3 million shares of its common stock in a registered direct offering during the three months ended March 31, 2021. The shares were sold for $91.00 per share for aggregate net proceeds of $209.2 million.

Common Stock Repurchase

The Company's common stock repurchase program, which expired on December 31, 2020, authorized the Company to repurchase up to $250.0 million of its outstanding common stock. ~~During the three months ended March 31,~~Effective April 17, 2020, the Company temporarily suspended its stock repurchase program. Prior to this decision and pursuant to the repurchase plan, the Company repurchased ~~1,769,479~~2,066,479 shares of its common stock at a weighted average price of ~~$35.30~~$34.65 for a total payment of ~~$62.5 million.~~$71.6 million during the nine months ended September 30, 2020.

Cash Dividend

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company declared and paid aquarterly cash ~~dividend~~dividends of $0.25 per share for the first two quarters of the year and increased the quarterly cash dividend to $0.35 per share in the third quarter, for a total dividend payment to shareholders of ~~$25.3~~$87.6 million. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, the Company declared and paid athree quarterly cash ~~dividend~~dividends of $0.25 per share, for a total payment to shareholders of ~~$25.6~~$76.1 million.

Treasury Shares

Treasury share purchases represent shares surrendered to the Company equal in value to the statutory payroll tax withholding obligations arising from the vesting of employee restricted stock awards. During the three and nine months ended ~~March 31,~~September 30, 2021, the Company purchased treasury shares of ~~154,163~~16,858 and 173,277, respectively, at a weighted average price of ~~$83.56~~$96.90 and $85.15 per share. During the three and nine months ended ~~March 31,~~September 30, 2020, the Company purchased treasury shares of ~~139,111~~14,398 and 164,564 at a weighted average price of ~~$53.61~~$35.73 and $50.86 per ~~share.~~share, respectively.

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7.10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated other comprehensive income by component, net of tax, for the periods indicated:

Three Months Ended March 31,
Unrealized holding gains (losses) on AFS Unrealized holding gains (losses) on SERP Unrealized holding gains (losses) on junior subordinated debt Total
(in millions)
Balance, December 31, 2020 $ 92.1 $ (0.3) $ 0.5 $ 92.3
Other comprehensive loss before reclassifications (72.0) 0 (0.3) (72.3)
Amounts reclassified from AOCI (0.1) 0 0 (0.1)
Net current-period other comprehensive loss (72.1) 0 (0.3) (72.4)
Balance, March 31, 2021 $ 20.0 $ (0.3) $ 0.2 $ 19.9
Balance, December 31, 2019 $ 21.4 $ 0.0 $ 3.6 $ 25.0
Other comprehensive income (loss) before reclassifications 6.3 (0.3) 6.6 12.6
Amounts reclassified from AOCI (0.1) 0 0 (0.1)
Net current-period other comprehensive income (loss) 6.2 (0.3) 6.6 12.5
Balance, March 31, 2020 $ 27.6 $ (0.3) $ 10.2 $ 37.5


	Three Months Ended September 30,
	Unrealized holding gains (losses) on AFS		Unrealized holding gains (losses) on SERP		Unrealized holding gains (losses) on junior subordinated debt		Total
	(in millions)
Balance, June 30, 2021	$	64.8	$	(0.3)	$	—	$	64.5
Other comprehensive (loss) income before reclassifications	(21.8)		—		(0.1)		(21.9)
Amounts reclassified from AOCI	—		—		—		—
Net current-period other comprehensive (loss) income	(21.8)		—		(0.1)		(21.9)
Balance, September 30, 2021	$	43.0	$	(0.3)	$	(0.1)	$	42.6

Balance, June 30, 2020	$	66.8	$	(0.3)	$	7.2	$	73.7
Other comprehensive income (loss) before reclassifications	7.6		—		(2.7)		4.9
Amounts reclassified from AOCI	—		—		—		—
Net current-period other comprehensive income (loss)	7.6		—		(2.7)		4.9
Balance, September 30, 2020	$	74.4	$	(0.3)	$	4.5	$	78.6

~~The following table presents reclassifications out of accumulated other comprehensive income:~~

Three Months Ended March 31,
Income Statement Classification 2021 2020
(in millions)
Gain on sales of investment securities, net $ 0.1 $ 0.1
Income tax expense 0.0 0.0
Net of tax $ 0.1 $ 0.1


	Nine Months Ended September 30,
	Unrealized holding gains (losses) on AFS		Unrealized holding gains (losses) on SERP		Unrealized holding gains (losses) on junior subordinated debt		Total
	(in millions)
Balance, December 31, 2020	$	92.1	$	(0.3)	$	0.5	$	92.3
Other comprehensive (loss) income before reclassifications	(49.0)		—		(0.6)		(49.6)
Amounts reclassified from AOCI	(0.1)		—		—		(0.1)
Net current-period other comprehensive (loss) income	(49.1)		—		(0.6)		(49.7)
Balance, September 30, 2021	$	43.0	$	(0.3)	$	(0.1)	$	42.6

Balance, December 31, 2019	$	21.4	$	0.0	$	3.6	$	25.0
Other comprehensive income (loss) before reclassifications	53.2		(0.3)		0.9		53.8
Amounts reclassified from AOCI	(0.2)		—		—		(0.2)
Net current-period other comprehensive income (loss)	53.0		(0.3)		0.9		53.6
Balance, September 30, 2020	$	74.4	$	(0.3)	$	4.5	$	78.6

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8.11. DERIVATIVES AND HEDGING ACTIVITIES

The Company is a party to various derivative ~~instruments.~~instruments, including those derivative instruments assumed from the AmeriHome acquisition. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require a small or no initial investment, and allow for the net settlement of positions. A derivative’s notional amount serves as the basis for the payment provision of the contract and takes the form of units, such as shares or dollars. A derivative’s underlying variable is a specified interest rate, security price, commodity price, foreign exchange rate, index, or other variable. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the fair value of the derivative contract.

The primary type of derivatives that the Company uses are interest rate ~~swaps.~~swaps, forward purchase and sale commitments, and interest rate futures. Generally, these instruments are used to help manage the Company's exposure to interest rate risk related to IRLCs and its inventory of loans HFS and MSRs and also to meet client financing and hedging needs.

Derivatives are recorded at fair value on the Consolidated Balance Sheets, after taking into account the effects of bilateral collateral and master netting agreements. These agreements allow the Company to settle all derivative contracts held with the same counterparty on a net basis, and to offset net derivative positions with related cash collateral, where applicable.

Derivatives Designated in Hedge Relationships

The Company utilizes derivatives that have been designated as part of a hedge relationship in accordance with the applicable accounting guidance to minimize the exposure to changes in benchmark interest rates and volatility of net interest income and EVE to interest rate fluctuations. The primary derivative instruments used to manage interest rate risk are interest rate swaps, which convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) from either a fixed rate to a floating rate, or from a floating rate to a fixed rate.

The Company has ~~entered into~~ pay fixed/receive variable interest rate swaps designated as fair value hedges of certain fixed rate loans. As a result, the Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts.

~~During the year ended December 31, 2020, the~~The Company ~~entered into~~also has interest rate swap contracts, designated as fair value hedges using the last-of-layer method to manage the exposure to changes in fair value associated with fixed rate loans, resulting from changes in the designated benchmark interest rate (Federal Funds rate). These last-of-layer hedges provide the Company the ability to execute a fair value hedge of the interest rate risk associated with a portfolio of similar prepayable assets whereby the last dollar amount estimated to remain in the portfolio of assets is identified as the hedged item. Under these interest rate swap contracts, the Company receives a floating rate and pays a fixed rate on the outstanding notional amount. During the three months ended September 30, 2021, the Company completed a partial discontinuation of one of its last-of-layer hedges, which reduced the total hedged amount on these hedges from $1.0 billion to $880.0 million. The $1.2 million cumulative basis adjustment on the discontinued portion was allocated across the remaining pool upon termination of the hedge and is being amortized over the remaining loan term.

The Company has ~~also entered into~~a receive fixed/pay variable interest rate ~~swaps,~~swap, designated as a fair value ~~hedges~~hedge on its fixed rate 2015 and 2016 subordinated debt offerings. As a result, the Company is paying a floating rate of three-month LIBOR plus 3.16% and is receiving semi-annual fixed payments of 5.00% to match the payments on the $150.0 million subordinated debt. In July 2020, the interest payment on this subordinated debt issuance converted from a fixed rate to a floating rate, at which time the Company unwound this swap. For the fair value hedge on the Parent's $175.0 million subordinated debentures issued on June 16, ~~2016, the~~2016. The Company is paying a floating rate of three-month LIBOR plus 3.25% and is receiving quarterly fixed payments of 6.25% to match the payments on the debt.

Derivatives Not Designated in Hedge Relationships

Management ~~also~~ enters into certain foreign exchange derivative contracts and back-to-back interest rate swaps which are not designated as accounting hedges. Foreign exchange derivative contracts include spot, forward, forward window, and swap contracts. The purpose of these derivative contracts is to mitigate foreign currency risk on transactions entered into, or on behalf of customers. Contracts with customers, along with the related derivative trades that the Company places, are both remeasured at fair value, and are referred to as economic hedges since they economically offset the Company's exposure. The Company's back-to-back interest rate swaps are used to manage long-term interest rate risk.

With the acquisition of AmeriHome, the Company uses derivative financial instruments to manage exposure to interest rate risk related to IRLCs, and its inventory of loans HFS and MSRs. The Company economically hedges the changes in fair value associated with changes in interest rates generally by utilizing forward sale commitments and interest rate futures.

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Fair Value Hedges

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the following amounts are reflected on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)		Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)			Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)		Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)
		(in millions)									(in millions)
Loans - HFI, net of deferred loan fees and costs (2)		$	1,543.4	$	46.8	$	1,587.1	$	85.5
Loans HFI, net of deferred loan fees and costs (2)										Loans HFI, net of deferred loan fees and costs (2)	$	1,407.3	$	48.7	$	1,587.1	$	85.5
Qualifying debt	Qualifying debt	(242.0)		3.0		(247.6)		(2.7)		Qualifying debt	(170.3)		(0.2)		(247.6)		(2.7)

(1)Included in the carrying value of the hedged assets/(liabilities).

(2)~~The Company~~Includes last-of-layer derivative instruments, with $880 million designated ~~$1.0 billion~~ as the hedged amount (from a closed portfolio of prepayable fixed rate loans with a carrying value of ~~$1.8~~$1.4 billion and $1.9 billion as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively) ~~in this last-of-layer hedging relationship, which commenced in the fourth quarter of 2020.~~. The cumulative basis adjustment ~~included in the carrying value of these hedged items~~on open last-of-layer hedges totaled ~~$7.9~~$6.4 million and $0.6 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

The basis adjustment related to the discontinued portion was $1.1 million as of September 30, 2021.

For the Company's derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings in the same line item as the offsetting loss or gain on the related interest rate swaps. For loans, the gain or loss on the hedged item is included in interest income and for subordinated debt, the gain or loss on the hedged items is included in interest expense, as shown in the table below.


		Three Months Ended March 31,									Three Months Ended September 30,
		2021				2020					2021				2020
Income Statement Classification	Income Statement Classification	Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Income Statement Classification	Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item
		(in millions)									(in millions)
Interest income	Interest income	$	38.7	$	(38.7)	$	(41.8)	$	41.8	Interest income	$	7.5	$	(7.4)	$	9.0	$	(8.9)
Interest expense	Interest expense	(5.7)		5.7		4.8		(4.8)		Interest expense	(0.5)		0.5		(2.5)		2.5

											Nine Months Ended September 30,
											2021				2020
Income Statement Classification										Income Statement Classification	Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item
											(in millions)
Interest income										Interest income	$	35.4	$	(35.3)	$	(39.1)	$	39.1
Interest expense										Interest expense	(2.4)		2.4		3.8		(3.8)

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Fair Values, Volume of Activity, and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair ~~values~~value of the Company's derivative instruments on a gross ~~and net~~ basis as of ~~March 31,~~September 30, 2021, December 31, 2020, and ~~March 31,~~September 30, 2020. The change in the notional amounts of these derivatives from ~~March 31,~~September 30, 2020 to ~~March 31,~~September 30, 2021 indicates the volume of the Company's derivative transaction activity during these periods. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow the Company to settle all derivative contracts with the same counterparty on a net basis and to offset the net derivative position with the related cash collateral. Where master netting agreements are not in effect or are not enforceable under bankruptcy laws, the Company does not adjust those derivative amounts with counterparties.


	September 30, 2021						December 31, 2020						September 30, 2020
			Fair Value						Fair Value						Fair Value
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Fair value hedges
Interest rate swaps (1)	$	1,546.5	$	6.6	$	56.5	$	1,689.9	$	3.3	$	86.1	$	692.3	$	3.4	$	92.4
Total	1,546.5		6.6		56.5		1,689.9		3.3		86.1		692.3		3.4		92.4

Derivatives not designated as hedging instruments (2):
Foreign currency contracts	$	117.8	$	1.8	$	0.1	$	119.2	$	0.7	$	1.2	$	38.9	$	0.5	$	0.4
Forward purchase contracts	6,551.0		0.7		37.2		—		—		—		—		—		—
Forward sales contracts	13,984.4		70.8		4.0		—		—		—		—		—		—
Futures purchase contracts (3)	224,325.4		—		—		—		—		—		—		—		—
Futures sales contracts (3)	232,527.0		—		—		—		—		—		—		—		—
Interest rate lock commitments	3,575.7		15.2		5.9		—		—		—		—		—		—
Interest rate swaps	4.1		0.1		0.1		3.5		0.2		0.2		3.5		0.2		0.2
Options contracts	50.0		—		—		—		—		—		—		—		—
Margin			1.3		37.2		—		—		—		—		—		—
Total	$	481,135.4	$	89.9	$	84.5	$	122.7	$	0.9	$	1.4	$	42.4	$	0.7	$	0.6

(1)Interest rate swap amounts include a notional amount of $880 million and $1.0 billion related to the last-of-layer hedges at September 30, 2021 and December 31, 2020, respectively.

(2)Relate to economic hedging arrangements.

(3)The Company enters into forward purchase and sales contracts, almost all of which, are based on three-month LIBOR to hedge against its MSR valuation exposure. The notional amount on these contracts is substantial as these contracts have a duration of only 0.25 years and are intended to cover the longer duration of MSR hedges.

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The fair value of derivative contracts, after taking into account the effects of master netting agreements, is included in other assets or other liabilities on the Consolidated Balance Sheets, as ~~indicated~~summarized in the ~~following table:~~table below:


	September 30, 2021						December 31, 2020						September 30, 2020
	Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)
	($ in millions)
Derivatives subject to master netting arrangements:
Assets
Forward purchase contracts	$	0.6	$	—	$	0.6	$	—	$	—	$	—	$	—	$	—	$	—
Forward sales contracts	69.4		—		69.4		—		—		—		—		—		—
Interest rate swaps	6.6		—		6.6		3.3		0		3.3		3.4		—		3.4
Margin	1.3		—		1.3		—		—		—		—		—		—
Netting (1)	—		(66.4)		(66.4)		—		(0.6)		(0.6)		—		—		—
	77.9		(66.4)		11.5		3.3		(0.6)		2.7		3.4		—		3.4
Liabilities
Forward purchase contracts	$	(37.0)	$	—	$	(37.0)	$	—	$	—	$	—	$	—	$	—	$	—
Forward sales contracts	(4.0)		—		(4.0)		—		—		—		—		—		—
Interest rate swaps	(56.5)		—		(56.5)		(86.1)		—		(86.1)		(92.4)		—		(92.4)
Margin	(37.2)		—		(37.2)		—		—		—		—		—		—
Netting (1)	—		66.4		66.4		—		0.6		0.6		—		—		—
	(134.7)		66.4		(68.3)		(86.1)		0.6		(85.5)		(92.4)		—		(92.4)
Derivatives not subject to master netting arrangements:
Assets
Foreign currency contracts	$	1.8	$	—	$	1.8	$	0.7	$	—	$	0.7	$	0.5	$	—	$	0.5
Forward purchase contracts	0.1		—		0.1		—		—		—		—		—		—
Forward sales contracts	1.4		—		1.4		—		—		—		—		—		—
Interest rate lock commitments	15.2		—		15.2		—		—		—		—		—		—
Interest rate swaps	0.1		—		0.1		0.2		—		0.2		0.2		—		0.2

	18.6		—		18.6		0.9		—		0.9		0.7		—		0.7
Liabilities
Foreign currency contracts	$	(0.1)	$	—	$	(0.1)	$	(1.2)	$	—	$	(1.2)	$	(0.4)	$	—	$	(0.4)
Forward purchase contracts	(0.2)		—		(0.2)		—		—		—		—		—		—

Interest rate lock commitments	(5.9)		—		(5.9)		—		—		—		—		—		—
Interest rate swaps	(0.1)		—		(0.1)		(0.2)		—		(0.2)		(0.2)		—		(0.2)
	(6.3)		—		(6.3)		(1.4)		—		(1.4)		(0.6)		—		(0.6)
Total derivatives
Assets	$	96.5	$	(66.4)	$	30.1	$	4.2	$	(0.6)	$	3.6	$	4.1	$	—	$	4.1
Liabilities	$	(141.0)	$	66.4	$	(74.6)	$	(87.5)	$	0.6	$	(86.9)	$	(93.0)	$	—	$	(93.0)

(1) Includes net cash collateral of $36.0 million as of September 30, 2021.

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March 31, 2021 December 31, 2020 March 31, 2020
Fair Value Fair Value Fair Value
Notional
Amount Derivative Assets Derivative Liabilities Notional
Amount Derivative Assets Derivative Liabilities Notional
Amount Derivative Assets Derivative Liabilities
(in millions)
Derivatives designated as hedging instruments:
Fair value hedges
Interest rate swaps (1) $ 1,685.9 $ 7.9 $ 57.7 $ 1,689.9 $ 3.3 $ 86.1 $ 859.1 $ 4.4 $ 95.1
Total 1,685.9 7.9 57.7 1,689.9 3.3 86.1 859.1 4.4 95.1
Netting adjustments (2) 0 5.4 5.4 0 0.6 0.6 0 0 0
Net $ 1,685.9 $ 2.5 $ 52.3 $ 1,689.9 $ 2.7 $ 85.5 $ 859.1 $ 4.4 $ 95.1
Derivatives not designated as hedging instruments:
Foreign currency contracts $ 119.3 $ 1.0 $ 0.7 $ 119.2 $ 0.7 $ 1.2 $ 9.3 $ 0.3 $ 0.2
Interest rate swaps 3.5 0.2 0.2 3.5 0.2 0.2 2.9 0.2 0.2
Total $ 122.8 $ 1.2 $ 0.9 $ 122.7 $ 0.9 $ 1.4 $ 12.2 $ 0.5 $ 0.4
The following table summarizes net gains (losses) on derivatives included in income for the three and nine months ended September 30, 2021:

~~(1)Interest rate swap amounts include a notional amount of $1.0 billion related to the last-of-layer hedges.~~

~~(2)Netting adjustments represent the amounts recorded to convert the Company's derivative balances from a gross basis to a net basis in accordance with the applicable accounting guidance.~~


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
	($ in millions)
Net gain (loss) on loan origination and sale activities:
Interest rate lock commitments	$	(26.6)	$	(7.0)
Forward contracts	17.1		(50.6)

Other contracts	(2.4)		(0.1)
Total loss	$	(11.9)	$	(57.7)
Net loan servicing revenue:
Forward contracts	$	(2.6)	$	10.1
Options contracts	1.4		0.4
Futures contracts	(8.9)		15.7
Total (loss) gain	$	(10.1)	$	26.2

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected replacement value of the contracts. Management enters into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with the same counterparty. Additionally, management monitors counterparty credit risk exposure on each contract to determine appropriate limits on the Company's total credit exposure across all product types, which may require the Company to post collateral to counterparties when these contracts are in a net liability position and conversely, for counterparties to post collateral to the Company when these contracts are in a net asset position. Management reviews the Company's collateral positions on a daily basis and exchanges collateral with counterparties in accordance with standard ISDA documentation and other related agreements. The Company generally posts or holds collateral in the form of cash deposits or highly rated securities issued by the U.S. Treasury or government-sponsored enterprises, such as GNMA, FNMA, and FHLMC. The total collateral pledged by the Company to counterparties ~~exceeded~~for its ~~net derivative liabilities~~derivatives designated as hedging instruments totaled $97.6 million, $117.8 million, and $107.0 million as of ~~March 31,~~September 30, 2021, December 31, 2020, and ~~March 31,~~September 30, 2020, ~~resulting in excess collateral postings of $36.4 million, $31.7 million and $22.4 million,~~ respectively.

~~The following table summarizes the Company's largest exposure to an individual counterparty at the dates indicated:~~

March 31, 2021 December 31, 2020 March 31, 2020
(in millions)
Largest gross exposure (derivative asset) to an individual counterparty $ 7.9 $ 2.7 $ 4.3
Collateral posted by this counterparty 0 0 0
Derivative liability with this counterparty 5.4 0 0
Collateral pledged to this counterparty 18.1 0 0
Net exposure after netting adjustments and collateral $ 7.9 $ 2.7 $ 4.3

9.12. EARNINGS PER SHARE

Diluted EPS is based on the weighted average outstanding common shares during each period, including common stock equivalents. Basic EPS is based on the weighted average outstanding common shares during the period.

The following table presents the calculation of basic and diluted EPS:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020					2021		2020		2021		2020
		(in millions, except per share amounts)				(in millions, except per share amounts)
Weighted average shares - basic	Weighted average shares - basic	100.8		101.3				Weighted average shares - basic	103.3		99.9		102.3		100.3
Dilutive effect of stock awards	Dilutive effect of stock awards	0.6		0.4				Dilutive effect of stock awards	0.6		0.2		0.6		0.3
Weighted average shares - diluted	Weighted average shares - diluted	101.4		101.7				Weighted average shares - diluted	103.9		100.1		102.9		100.6
Net income		$	192.5	$	83.9
Net income available to common stockholders								Net income available to common stockholders	$	236.9	$	135.8	$	653.2	$	313.0
Earnings per share - basic	Earnings per share - basic	1.91		0.83				Earnings per share - basic	2.29		1.36		6.39		3.12
Earnings per share - diluted	Earnings per share - diluted	1.90		0.83				Earnings per share - diluted	2.28		1.36		6.35		3.11

The Company had 0no anti-dilutive stock options outstanding at each of the periods ended ~~March 31,~~September 30, 2021 and 2020.

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~~10.~~13. INCOME TAXES

The Company's effective tax rate was ~~17.9%~~21.7% and ~~18.1%~~18.5% for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. ~~There is not a significant difference~~For the nine months ended September 30, 2021 and 2020, the Company's effective tax rate was 19.7% and 18.1%, respectively. The increase in the three and nine month effective tax ~~rate.~~rate is primarily due to projected pretax book income growth outpacing growth in permanent tax benefit items for the year.

As of ~~March 31,~~September 30, 2021, the net DTA balance totaled ~~$49.8~~$10.5 million, ~~an increase~~a decrease of ~~$18.5~~$20.8 million from the year end 2020 DTA balance of $31.3 ~~million.~~million and includes adjustments related to the AmeriHome acquisition. This overall ~~increase~~decrease in the net deferred tax asset was primarily the result of increases to mortgage servicing rights and decreases in deferred insurance premiums. These items were not fully offset by increases to the net deferred tax asset from expected tax credit carryforwards, decreases in the fair market value of AFS securities and ~~tax credit carryforwards. These items were not fully offset by decreases in deferred insurance premiums and increases to premises and equipment.~~other accruals.

Although realization is not assured, the Company believes that the realization of the recognized deferred tax asset of ~~$49.8~~$10.5 million at ~~March 31,~~September 30, 2021 is more-likely-than-not based on expectations as to future taxable income and based on available tax planning strategies that could be implemented if necessary to prevent a carryover from expiring.

At ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had 0no deferred tax valuation allowance.

As of March 31, 2021, the Company’s gross federal NOL carryovers after current year-to-date utilization, all of which are subject to limitations under Section 382 of the IRC, totaled approximately $42.4 million for which a deferred tax asset of $4.7 million has been recorded, reflecting the expected benefit of these remaining federal NOL carryovers. The Company does not have any significant state NOL carryovers.

LIHTC and renewable energy projects

The Company holds ownership interests in limited partnerships and limited liability companies that invest in affordable housing and renewable energy projects. These investments are designed to generate a return primarily through the realization of federal tax credits and deductions. The limited liability entities are considered to be VIEs; however, as a limited partner, the Company is not the primary beneficiary and is not required to consolidate these entities.

Investments in LIHTC and renewable energy total ~~$487.9~~$508.8 million and $405.6 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Unfunded LIHTC and renewable energy obligations are included as part of other liabilities on the Consolidated Balance Sheets and total ~~$228.9~~$230.3 million and $151.7 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. For the three months ended ~~March 31,~~September 30, 2021 and 2020, ~~$15.5~~$12.9 million and ~~$7.4~~$14.5 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense. For the nine months ended September 30, 2021 and 2020, $36.6 million and $34.2 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense.

~~11.~~14. COMMITMENTS AND CONTINGENCIES

Unfunded Commitments and Letters of Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the Consolidated Balance Sheets.

Lines of credit are obligations to lend money to a borrower. Credit risk arises when the borrower's current financial condition may indicate less ability to pay than when the commitment was originally made. In the case of letters of credit, the risk arises from the potential failure of the customer to perform according to the terms of a contract. In such a situation, the third party might draw on the letter of credit to pay for completion of the contract and the Company would look to its customer to repay these funds with interest. To minimize the risk, the Company uses the same credit policies in making commitments and conditional obligations as it would for a loan to that customer.

Letters of credit and financial guarantees are commitments issued by the Company to guarantee the performance of a customer to a third party in borrowing arrangements. The Company generally has recourse to recover from the customer any amounts paid under the guarantees. Typically, letters of credit issued have expiration dates within one year.

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A summary of the contractual amounts for unfunded commitments and letters of credit are as follows:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Commitments to extend credit, including unsecured loan commitments of $1,134.0 at March 31, 2021 and $1,077.2 at December 31, 2020		$	9,577.3	$	9,425.2
Commitments to extend credit, including unsecured loan commitments of $1,162.8 at September 30, 2021 and $1,077.2 at December 31, 2020						Commitments to extend credit, including unsecured loan commitments of $1,162.8 at September 30, 2021 and $1,077.2 at December 31, 2020	$	11,162.3	$	9,425.2
Credit card commitments and financial guarantees	Credit card commitments and financial guarantees	289.9		291.5		Credit card commitments and financial guarantees	296.6		291.5
Letters of credit, including unsecured letters of credit of $7.4 at March 31, 2021 and $9.9 at December 31, 2020		158.8		186.9
Letters of credit, including unsecured letters of credit of $5.4 at September 30, 2021 and $9.9 at December 31, 2020						Letters of credit, including unsecured letters of credit of $5.4 at September 30, 2021 and $9.9 at December 31, 2020	167.0		186.9
Total	Total	$	10,026.0	$	9,903.6	Total	$	11,625.9	$	9,903.6

Commitments to extend credit are agreements to lend to a customer provided that there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company enters into credit arrangements that generally provide for the termination of advances in the event of a covenant violation or other event of default. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. The commitments are collateralized by the same types of assets used as loan collateral.

The Company has exposure to credit losses from unfunded commitments and letters of credit. As funds have not been disbursed on these commitments, they are not reported as loans outstanding. Credit losses related to these commitments are included in other liabilities as a separate loss contingency and are not included in the allowance for credit losses reported in "Note 3.5. Loans, Leases and Allowance for Credit Losses" of these Unaudited Consolidated Financial Statements. This loss contingency for unfunded loan commitments and letters of credit was ~~$32.6~~$32.1 million and $37.0 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Changes to this liability are adjusted through the provision for credit losses in the Consolidated Income Statement.

Concentrations of Lending Activities

The Company does not have a single external customer from which it derives 10% or more of its revenues. The Company monitors concentrations within three broad categories: industry, product, and collateral. The Company's loan portfolio includes significant credit exposure to the CRE market. As of each of the periods ended ~~March 31,~~September 30, 2021 and December 31, 2020, CRE related loans accounted for approximately ~~37%~~31% and 38% of total loans, respectively. Substantially all of these loans are secured by first liens with an initial loan-to-value ratio of generally not more than 75%. Approximately ~~27%~~25% and 28% of these CRE loans, excluding construction and land loans, were owner-occupied at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Contingencies

The Company is involved in various lawsuits of a routine nature that are being handled and defended in the ordinary course of the Company’s business. Expenses are being incurred in connection with these lawsuits, but in the opinion of management, based in part on consultation with outside legal counsel, the resolution of these lawsuits and associated defense costs will not have a material impact on the Company’s financial position, results of operations, or cash flows.

Lease Commitments

The Company has operating leases under which it leases its branch offices, corporate headquarters, other offices, and data facility centers. Operating lease costs totaled ~~$3.7~~$5.8 million and ~~$3.4~~$13.9 million during the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to $3.9 million and $10.9 million for the three and nine months ended September 30, 2020 respectively. Other lease costs, which include common area maintenance, parking, and taxes, and were included as part of occupancy expense, totaled ~~$1.0~~$0.9 million and ~~$1.1~~$2.8 million during the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to $1.0 million and $2.9 million for the three and nine months ended September 30, 2020, respectively.

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~~12.~~15. FAIR VALUE ACCOUNTING

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC 825 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 825 are described in "Note 1. Summary of Significant Accounting Policies" of these Notes to Unaudited Consolidated Financial Statements.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally-developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below.

Under ASC 825, the Company elected the FVO treatment for junior subordinated debt issued by WAL. This election is irrevocable and results in the recognition of unrealized gains and losses on these items at each reporting date. These unrealized gains and losses are recognized as part of other comprehensive income rather than earnings. The Company did not elect FVO treatment for the junior subordinated debt assumed in the Bridge Capital Holdings acquisition.

For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, unrealized gains and losses from fair value changes on junior subordinated debt were as follows:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020					2021		2020		2021		2020
		(in millions)				(in millions)
Unrealized (losses) gains	Unrealized (losses) gains	$	(0.4)	$	8.7			Unrealized (losses) gains	$	(0.2)	$	(3.6)	$	(0.8)	$	1.2
Changes included in OCI, net of tax	Changes included in OCI, net of tax	(0.3)		6.6				Changes included in OCI, net of tax	(0.1)		(2.7)		(0.6)		0.9

Fair value on a recurring basis

Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

AFS securities: Securities classified as AFS are reported at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include quoted prices in active markets, dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things.

Equity securities: Preferred stock and CRA investments are reported at fair value primarily utilizing Level 1 inputs.

Independent pricing service: The Company's independent pricing service provides pricing information on the majority of the Company's Level 1 and Level 2 AFS securities. For a small subset of securities, other pricing sources are used, including observed prices on publicly traded securities and dealer quotes. Management independently evaluates the fair value measurements received from the Company's third-party pricing service through multiple review steps. First, management reviews what has transpired in the marketplace with respect to interest rates, credit spreads, volatility, and mortgage rates, among other things, and develops an expectation of changes to the securities' valuations from the previous quarter. Then, management selects a sample of investment securities and compares the values provided by its primary third-party pricing service to the market values obtained from secondary sources, including other pricing services and safekeeping statements, and evaluates those with notable variances. In instances where there are discrepancies in pricing from various sources and

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management expectations, management may manually price securities using currently observed market data to determine whether they can develop similar prices or may utilize bid information from broker dealers. Any remaining discrepancies between management’s review and the prices provided by the vendor are discussed with the vendor and/or the Company’s other valuation advisors.

~~Interest~~Loans held for sale: Government-insured or guaranteed and agency-conforming loans HFS are salable into active markets. Accordingly, the fair value of these loans is based on quoted market or contracted selling prices or a market price equivalent, which are categorized as Level 2 in the fair value hierarchy.

Mortgage servicing rights: MSRs are measured based on valuation techniques using Level 3 inputs. The Company uses a discounted cash flow model that incorporates assumptions that market participants would use in estimating the fair value of servicing rights, including, but not limited to, option adjusted spread, conditional prepayment rate, ~~swaps:~~servicing fee rate, recapture rate, and cost to service.

Derivative financial instruments: Treasury futures and options, Eurodollar futures, and swap futures are measured based on valuation techniques using Level 1 inputs from exchange-provided daily settlement quotes. Forward purchase and sales contracts are measured based on valuation techniques using Level 2 inputs, such as quoted market price, contracted selling price, or market price equivalent. Interest rate swaps are reported at fair value utilizing Level 2 inputs. The Company obtains dealer quotations to value its interest rate swaps. IRLCs are measured based on valuation techniques using Level 3 inputs, such as loan type, underlying loan amount, note rate, loan program, and expected settlement date. These measurements are adjusted at the loan level to consider the servicing release premium and loan pricing adjustment specific to each loan. The base value is then adjusted for the pull-through rate. The pull-through rate and servicing fee multiple are unobservable inputs based on historical experience.

Junior subordinated debt: The Company estimates the fair value of its junior subordinated debt using a discounted cash flow model which incorporates the effect of the Company’s own credit risk in the fair value of the liabilities (Level 3). The Company’s cash flow assumptions are based on contractual cash flows as the Company anticipates that it will pay the debt according to its contractual terms.

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The fair value of assets and liabilities measured at fair value on a recurring basis was determined using the following inputs as of the periods presented:


		Fair Value Measurements at the End of the Reporting Period Using:									Fair Value Measurements at the End of the Reporting Period Using:
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
		(in millions)									(in millions)
March 31, 2021
September 30, 2021										September 30, 2021
Assets:	Assets:									Assets:

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	0	$	980.7	$	0	$	980.7	CLO	$	—	$	963.9	$	—	$	963.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	0		87.8		0		87.8		Commercial MBS issued by GSEs	—		75.5		—		75.5
Corporate debt securities	Corporate debt securities	0		285.1		0		285.1		Corporate debt securities	—		364.5		—		364.5
Private label residential MBS	Private label residential MBS	0		1,900.6		0		1,900.6		Private label residential MBS	—		1,610.2		—		1,610.2
Residential MBS issued by GSEs	Residential MBS issued by GSEs	0		2,249.6		0		2,249.6		Residential MBS issued by GSEs	—		1,969.0		—		1,969.0
Tax-exempt	Tax-exempt	0		1,329.7		0		1,329.7		Tax-exempt	—		1,329.5		—		1,329.5

U.S. treasury securities	U.S. treasury securities	50.0		0		0		50.0		U.S. treasury securities	10.0		—		—		10.0
Other	Other	27.3		29.1		0		56.4		Other	28.4		32.6		—		61.0
Total AFS debt securities	Total AFS debt securities	$	77.3	$	6,862.6	$	0	$	6,939.9	Total AFS debt securities	$	38.4	$	6,345.2	$	—	$	6,383.6
Equity securities	Equity securities									Equity securities
CRA investments	CRA investments	$	27.4	$	30.0	$	0	$	57.4	CRA investments	$	27.6	$	34.5	$	—	$	62.1
Preferred stock	Preferred stock	135.5		0		0		135.5		Preferred stock	116.3		—		—		116.3
Total equity securities	Total equity securities	$	162.9	$	30.0	$	0	$	192.9	Total equity securities	$	143.9	$	34.5	$	—	$	178.4

Loans HFS										Loans HFS	$	—	$	4,589.3	$	4.8	$	4,594.1
Mortgage servicing rights										Mortgage servicing rights	—		—		604.8		604.8
Derivative assets (1)	Derivative assets (1)	$	0	$	9.1	$	0	$	9.1	Derivative assets (1)	—		81.3		15.2		96.5
Liabilities:	Liabilities:									Liabilities:
Junior subordinated debt (2)	Junior subordinated debt (2)	$	0	$	0	$	66.3	$	66.3	Junior subordinated debt (2)	$	—	$	—	$	66.7	$	66.7
Derivative liabilities (1)	Derivative liabilities (1)	0		58.6		0		58.6		Derivative liabilities (1)	—		135.1		5.9		141.0

(1)~~Derivative assets and liabilities relate primarily to interest rate swaps, see~~See "Note 8.11. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by ~~$46.8~~$48.7 million and the net carrying value of subordinated debt is increased by ~~$3.0~~$0.2 million as of ~~March 31,~~September 30, 2021 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

(2)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

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		Fair Value Measurements at the End of the Reporting Period Using:									Fair Value Measurements at the End of the Reporting Period Using:
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
		(in millions)									(in millions)
December 31, 2020	December 31, 2020									December 31, 2020
Assets:	Assets:									Assets:

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	0	$	146.9	$	0	$	146.9	CLO	$	—	$	146.9	$	—	$	146.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	0		84.6		0		84.6		Commercial MBS issued by GSEs	—		84.6		—		84.6
Corporate debt securities	Corporate debt securities	0		270.2		0		270.2		Corporate debt securities	—		270.2		—		270.2
Private label residential MBS	Private label residential MBS	0		1,476.9		0		1,476.9		Private label residential MBS	—		1,476.9		—		1,476.9
Residential MBS issued by GSEs	Residential MBS issued by GSEs	0		1,486.6		0		1,486.6		Residential MBS issued by GSEs	—		1,486.6		—		1,486.6
Tax-exempt	Tax-exempt	0		1,187.4		0		1,187.4		Tax-exempt	—		1,187.4		—		1,187.4

Other	Other	26.5		29.4		0		55.9		Other	26.5		29.4		—		55.9
Total AFS debt securities	Total AFS debt securities	$	26.5	$	4,682.0	$	0	$	4,708.5	Total AFS debt securities	$	26.5	$	4,682.0	$	—	$	4,708.5
Equity securities	Equity securities									Equity securities
CRA investments	CRA investments	$	27.8	$	25.6	$	0	$	53.4	CRA investments	$	27.8	$	25.6	$	—	$	53.4
Preferred stock	Preferred stock	113.9		0		0		113.9		Preferred stock	113.9		—		—		113.9
Total equity securities	Total equity securities	$	141.7	$	25.6	$	0	$	167.3	Total equity securities	$	141.7	$	25.6	$	—	$	167.3

Derivative assets (1)	Derivative assets (1)	$	0	$	4.2	$	0	$	4.2	Derivative assets (1)	$	—	$	4.2	$	—	$	4.2
Liabilities:	Liabilities:									Liabilities:
Junior subordinated debt (2)	Junior subordinated debt (2)	$	0	$	0	$	65.9	$	65.9	Junior subordinated debt (2)	$	—	$	—	$	65.9	$	65.9
Derivative liabilities (1)	Derivative liabilities (1)	0		87.5		0		87.5		Derivative liabilities (1)	—		87.5		—		87.5

(1)~~Derivative assets and liabilities relate primarily to interest rate swaps, see~~See "Note 8.11. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by $85.5 million and the net carrying value of subordinated debt is increased by $2.7 million as of December 31, 2020 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

(2)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, the change in Level 3 liabilities measured at fair value on a recurring basis included in OCI was as follows:


		Junior Subordinated Debt				Junior Subordinated Debt
		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020					2021		2020		2021		2020
		(in millions)				(in millions)
Beginning balance	Beginning balance	$	(65.9)	$	(61.7)			Beginning balance	$	(66.5)	$	(57.0)	$	(65.9)	$	(61.7)
Change in fair value (1)	Change in fair value (1)	(0.4)		8.7				Change in fair value (1)	(0.2)		(3.5)		(0.8)		1.2
Ending balance	Ending balance	$	(66.3)	$	(53.0)			Ending balance	$	(66.7)	$	(60.5)	$	(66.7)	$	(60.5)

(1)Unrealized gains (losses) attributable to changes in the fair value of junior subordinated debt are recorded as part of OCI, net of tax, and totaled ~~$(0.3)~~$(0.1) million and ~~$6.6~~$(2.7) million for three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $(0.6) million and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively.

~~For Level 3 liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, the~~The significant unobservable inputs used in the fair value measurements of these Level 3 liabilities were as follows:

March 31, 2021 Valuation Technique Significant Unobservable Inputs Input Value
(in millions)
Junior subordinated debt $ 66.3 Discounted cash flow Implied credit rating of the Company 2.78 %

September 30, 2021

Valuation Technique

Significant Unobservable Inputs

Input Value

(in millions)

Junior subordinated debt

66.7

Discounted cash flow

Implied credit rating of the Company

2.66

December 31, 2020

Valuation Technique

Significant Unobservable Inputs

Input Value

(in millions)

Junior subordinated debt

65.9

Discounted cash flow

Implied credit rating of the Company

2.87

The significant unobservable inputs used in the fair value measurement of the Company’s junior subordinated debt as of ~~March 31,~~September 30, 2021 and December 31, 2020 was the implied credit risk for the Company. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the implied credit risk spread was calculated as the difference between the average of the 15-year 'BB' and 'BBB' rated financial indexes over the corresponding swap index.

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As of ~~March 31,~~September 30, 2021, the Company estimates the discount rate at ~~2.78%~~2.66%, which represents an implied credit spread of ~~2.59%~~2.53% plus three-month LIBOR ~~(0.19%~~(0.13%). As of December 31, 2020, the Company estimated the discount rate at 2.87%, which was a 2.64% credit spread plus three-month LIBOR (0.24%).

The change in Level 3 assets and liabilities measured at fair value on a recurring basis included in income was as follows:


	Three Months Ended September 30, 2021
	Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)
	(in millions)
Balance, June 30, 2021	$	0.7	$	726.2	$	30.9

Purchases and additions	2.6		230.4		8,331.1
Sales and payments	(2.7)		(327.5)		—
Transfers from Level 2 to Level 3	4.4		—		—
Transfers from Level 3 to Level 2	—		—		—
Settlement of interest rate lock commitments upon acquisition or origination of loans HFS	—		—		(8,356.5)
Change in fair value	(0.2)		14.9		3.8
Realization of cash flows	—		(39.2)		—
Balance, September 30, 2021	$	4.8	$	604.8	$	9.3
Unrealized (losses) gains included in income related to assets held at period end	$	(0.3)	$	5.9	$	9.3

(1) Interest rate lock commitment asset and liability positions are presented net.


	Nine Months Ended September 30, 2021
	Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)
	(in millions)
Balance, December 31, 2020	$	—	$	—	$	—
Acquired in AMH acquisition	0.7		1,376.3		23.7
Purchases and additions	2.6		512.7		14,669.4
Sales and payments	(3.8)		(1,199.0)		—
Transfers from Level 2 to Level 3	5.5		—		—
Transfers from Level 3 to Level 2	—		—		—
Settlement of interest rate lock commitments upon acquisition or origination of loans HFS	—		—		(14,680.9)
Change in fair value	(0.2)		21.5		(2.9)
Realization of cash flows	—		(106.7)		—
Balance, September 30, 2021	$	4.8	$	604.8	$	9.3
Unrealized (losses) gains included in income related to assets held at period end	$	(0.3)	$	(9.2)	$	9.3

(1) Interest rate lock commitment asset and liability positions are presented net.

The significant unobservable inputs used in the fair value measurements of these Level 3 assets and liabilities were as follows:


		September 30, 2021
Asset/liability	Key inputs	Range	Weighted average
Mortgage servicing rights:	Option adjusted spread (in basis points)	476 - 571	506
	Conditional prepayment rate (1)	9.6% - 21.5%	15.2%
	Recapture rate	20.0% - 20.0%	20.0%
	Servicing fee rate (in basis points)	25.0 - 44.0	28.9
	Cost to service	$84 - $91	$86
Loans held for sale:	Whole loan spread to TBA price (in basis points)	(3.3) - (1.9)	(2.6)
Interest rate lock commitments:	Servicing fee multiple	4.0 - 5.9	5.1
	Pull-through rate	80% - 100%	93%

(1) Lifetime total prepayment speed annualized.

Table of Contents

The following is a summary of the difference between the aggregate fair value and the aggregate UPB of loans HFS for which the fair value option has been elected:


	September 30, 2021
	Fair value		Unpaid principal balance		Difference
	(in millions)
Loans held for sale:
Current through 89 days delinquent	$	4,593.4	$	4,422.9	$	170.5
90 days or more delinquent	0.7		0.8		(0.1)
Total	$	4,594.1	$	4,423.7	$	170.4

Fair value on a nonrecurring basis

Certain assets are measured at fair value on a nonrecurring basis. That is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of credit deterioration). The following table presents such assets carried on the Consolidated Balance Sheet by caption and by level within the ASC 825 hierarchy:


		Fair Value Measurements at the End of the Reporting Period Using									Fair Value Measurements at the End of the Reporting Period Using
		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)
		(in millions)									(in millions)
As of March 31, 2021:
Loans		$	183.0	$	0	$	0	$	183.0
As of September 30, 2021:										As of September 30, 2021:
Loans HFI										Loans HFI	$	178.5	$	—	$	—	$	178.5

Other assets acquired through foreclosure	Other assets acquired through foreclosure	4.2		0		0		4.2		Other assets acquired through foreclosure	11.5		—		—		11.5
As of December 31, 2020:	As of December 31, 2020:									As of December 31, 2020:
Loans		$	187.3	$	0	$	0	$	187.3
Loans HFI										Loans HFI	$	187.3	$	—	$	—	$	187.3

Other assets acquired through foreclosure	Other assets acquired through foreclosure	1.4		0		0		1.4		Other assets acquired through foreclosure	1.4		—		—		1.4

For Level 3 assets measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

~~March 31,~~September 30, 2021

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in millions)

Loans HFI

~~183.0~~178.5

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

2.0% to 7.0%

Other assets acquired through foreclosure

~~4.2~~11.5

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

December 31, 2020

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in millions)

Loans HFI

187.3

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

2.0% to 7.0%

Other assets acquired through foreclosure

1.4

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Table of Contents

Loans: ~~Loans~~HFI loans measured at fair value on a nonrecurring basis include collateral dependent loans held for investment. The specific reserves for these loans are based on collateral value, net of estimated disposition costs and other identified quantitative inputs. Collateral value is determined based on independent third-party appraisals or internally-developed discounted cash flow analyses. Appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2. However, certain assumptions and unobservable inputs are often used by the appraiser, therefore qualifying the assets as Level 3 in the fair value hierarchy. In addition, when adjustments are made to an appraised value to reflect various factors such as the age of the appraisal or known changes in the market or the collateral, such valuation inputs are considered unobservable and the fair value measurement is categorized as a Level 3 measurement. Internal discounted cash flow analyses are also utilized to estimate the fair value of these loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity.

Total Level 3 collateral dependent loans had an estimated fair value of ~~$183.0~~$178.5 million and $187.3 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, net of a specific valuation allowance of ~~$9.5~~$17.4 million and $8.9 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

~~Table of Contents~~

Other assets acquired through foreclosure: Other assets acquired through foreclosure consist of properties acquired as a result of, or in-lieu-of, foreclosure. These assets are initially reported at the fair value determined by independent appraisals using appraised value less estimated cost to sell. Such properties are generally re-appraised every twelve months. There is risk for subsequent volatility. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense.

Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2. However, certain assumptions and unobservable inputs are often used by the appraiser, therefore qualifying the assets as Level 3 in the fair value hierarchy. When significant adjustments are based on unobservable inputs, such as when a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the resulting fair value measurement has been categorized as a Level 3 measurement. The Company had ~~$4.2~~$11.5 million and $1.4 million of such assets at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Fair Value of Financial Instruments

The estimated fair value of the Company’s financial instruments is as follows:

March 31, 2021
Carrying Amount Fair Value
Level 1 Level 2 Level 3 Total
(in millions)
Financial assets:
Investment securities:
HTM $ 698.0 $ 0 $ 740.4 $ 0 $ 740.4
AFS 6,939.9 77.3 6,862.6 0 6,939.9
Equity 192.9 162.9 30.0 0 192.9
Derivative assets 9.1 0 9.1 0 9.1
Loans, net 28,463.9 0 0 29,244.8 29,244.8
Accrued interest receivable 169.9 0 169.9 0 169.9
Financial liabilities:
Deposits $ 38,393.1 $ 0 $ 38,397.4 $ 0 $ 38,397.4
Customer repurchase agreements 15.9 0 15.9 0 15.9
Other borrowings 5.0 0 5.0 0 5.0
Qualifying debt 543.7 0 492.6 79.8 572.4
Derivative liabilities 58.6 0 58.6 0 58.6
Accrued interest payable 12.7 0 12.7 0 12.7


		December 31, 2020															September 30, 2021
		Carrying Amount			Fair Value												Carrying Amount			Fair Value
				Level 1			Level 2			Level 3			Total						Level 1			Level 2			Level 3			Total
				(in millions)															(in millions)
Financial assets:	Financial assets:															Financial assets:

Investment securities:	Investment securities:															Investment securities:
HTM	HTM	$	568.8		$	0		$	611.8		$	0		$	611.8	HTM	$	1,046.9		$	—		$	1,092.0		$	—		$	1,092.0
AFS	AFS	4,708.5			26.5			4,682.0			0			4,708.5		AFS	6,383.6			38.4			6,345.2			—			6,383.6
Equity securities		167.3			141.7			25.6			0			167.3

Equity																Equity	178.4			143.9			34.5			—			178.4
Derivative assets	Derivative assets	4.2			0			4.2			0			4.2		Derivative assets	96.5			—			81.3			15.2			96.5
Loans, net		26,774.1			0			0			27,231.0			27,231.0
Loans HFS																Loans HFS	6,534.3			—			4,589.3			1,976.5			6,565.8
Loans HFI, net																Loans HFI, net	34,555.0			—			—			34,979.9			34,979.9
Mortgage servicing rights																Mortgage servicing rights	604.8			—			—			604.8			604.8
Accrued interest receivable	Accrued interest receivable	166.1			0			166.1			0			166.1		Accrued interest receivable	229.5			—			229.5			—			229.5
Financial liabilities:	Financial liabilities:															Financial liabilities:
Deposits	Deposits	$	31,930.5		$	0		$	31,935.9		$	0		$	31,935.9	Deposits	$	45,282.6		$	—		$	45,286.1		$	—		$	45,286.1
Customer repurchase agreements		16.0			0			16.0			0			16.0

Other borrowings	Other borrowings	5.0			0			5.0			0			5.0		Other borrowings	1,003.5			—			1,004.4			—			1,004.4
Qualifying debt	Qualifying debt	548.7			0			488.1			79.3			567.4		Qualifying debt	1,064.9			—			1,043.5			80.4			1,123.9
Derivative liabilities	Derivative liabilities	87.5			0			87.5			0			87.5		Derivative liabilities	141.0			—			135.1			5.9			141.0
Accrued interest payable	Accrued interest payable	11.0			0			11.0			0			11.0		Accrued interest payable	17.8			—			17.8			—			17.8

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	December 31, 2020
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial assets:
Investment securities:
HTM	$	568.8	$	—	$	611.8	$	—	$	611.8
AFS	4,708.5		26.5		4,682.0		—		4,708.5
Equity securities	167.3		141.7		25.6		—		167.3

Derivative assets	4.2		—		4.2		—		4.2
Loans HFI, net	26,774.1		—		—		27,231.0		27,231.0
Accrued interest receivable	166.1		—		166.1		—		166.1
Financial liabilities:
Deposits	$	31,930.5	$	—	$	31,935.9	$	—	$	31,935.9

Other borrowings	21.0		—		21.0		—		21.0
Qualifying debt	548.7		—		488.1		79.3		567.4
Derivative liabilities	87.5		—		87.5		—		87.5
Accrued interest payable	11.0		—		11.0		—		11.0

Interest rate risk

The Company assumes interest rate risk (the risk to the Company’s earnings and capital from changes in interest rate levels) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments, as well as its future net interest income, will change when interest rate levels change and that change may be either favorable or unfavorable to the Company.

Interest rate risk exposure is measured using interest rate sensitivity analysis to determine the Company's change in EVE and net interest income resulting from hypothetical changes in interest rates. If potential changes to EVE and net interest income resulting from hypothetical interest rate changes are not within the limits established by the BOD, the BOD may direct management to adjust the asset and liability mix to bring interest rate risk within BOD-approved limits.

WAB has an ALCO charged with managing interest rate risk within the BOD-approved limits. Limits are structured to preclude an interest rate risk profile that does not conform to both management and BOD risk tolerances without ALCO approval. There is also ALCO reporting at the Parent level for reviewing interest rate risk for the Company, which gets reported to the BOD and its Finance and Investment Committee.

Fair value of commitments

The estimated fair value of standby letters of credit outstanding at ~~March 31,~~September 30, 2021 and December 31, 2020 approximates zero as there have been no significant changes in borrower creditworthiness. Loan commitments on which the committed interest rates are less than the current market rate are insignificant at ~~March 31,~~September 30, 2021 and December 31, 2020.

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~~13.~~16. SEGMENTS

The Company's reportable segments are aggregated with a focus on products and services offered and consist of three reportable segments:

•Commercial segment: provides commercial banking and treasury management products and services to small and middle-market businesses, specialized banking services to sophisticated commercial institutions and investors within niche industries, as well as financial services to the real estate industry.

•Consumer Related segment: offers ~~both~~consumer banking services, such as residential mortgage banking, and commercial banking services to enterprises in consumer-related ~~sectors and consumer banking services, such as residential mortgage banking.~~sectors.

•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.

The Company's segment reporting process begins with the assignment of all loan and deposit accounts directly to the segments where these products are originated and/or serviced. Equity capital is assigned to each segment based on the risk profile of their assets and liabilities. With the exception of goodwill, which is assigned a 100% weighting, equity capital allocations ranged from 0% to 8%20% during the year. Any excess or deficient equity not allocated to segments based on risk is assigned to the Corporate & Other segment.

Net interest income, provision for credit losses, and non-interest expense amounts are recorded in their respective segments to the extent that the amounts are directly attributable to those segments. Net interest income is recorded in each segment on a TEB with a corresponding increase in income tax expense, which is eliminated in the Corporate & Other segment.

Further, net interest income of a reportable segment includes a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Using this funds transfer pricing methodology, liquidity is transferred between users and providers. A net user of funds has lending/investing in excess of deposits/borrowings and a net provider of funds has deposits/borrowings in excess of lending/investing. A segment that is a user of funds is charged for the use of funds, while a provider of funds is credited through funds transfer pricing, which is determined based on the average life of the assets or liabilities in the portfolio. Residual funds transfer pricing mismatches are allocable to the Corporate & Other segment and presented as part of net interest income.

The net income amount for each reportable segment is further derived by the use of expense allocations. Certain expenses not directly attributable to a specific segment are allocated across all segments based on key metrics, such as number of employees, number of transactions processed for loans and deposits, and average loan and deposit balances. These types of expenses include information technology, operations, human resources, finance, risk management, credit administration, legal, and marketing.

Income taxes are applied to each segment based on the effective tax rate for the geographic location of the segment. Any difference in the corporate tax rate and the aggregate effective tax rates in the segments are adjusted in the Corporate & Other segment.

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The following is a summary of operating segment information for the periods indicated:


Balance Sheet:	Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate & Other		Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate & Other
At March 31, 2021:		(in millions)
At September 30, 2021:										At September 30, 2021:	(in millions)
Assets:	Assets:									Assets:
Cash, cash equivalents, and investment securities	Cash, cash equivalents, and investment securities	$	13,235.3	$	13.4	$	33.1	$	13,188.8	Cash, cash equivalents, and investment securities	$	8,613.8	$	11.9	$	70.8	$	8,531.1
Loans held for sale										Loans held for sale	6,534.3		—		6,534.3		—
Loans, net of deferred loan fees and costs	Loans, net of deferred loan fees and costs	28,711.0		20,660.4		8,048.9		1.7		Loans, net of deferred loan fees and costs	34,801.9		22,823.9		11,978.0		—
Less: allowance for credit losses	Less: allowance for credit losses	(247.1)		(229.8)		(17.3)		0		Less: allowance for credit losses	(246.9)		(227.8)		(19.1)		—
Total loans	Total loans	28,463.9		20,430.6		8,031.6		1.7		Total loans	34,555.0		22,596.1		11,958.9		—
Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	4.2		4.2		0		0		Other assets acquired through foreclosure, net	11.5		11.5		—		—
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	298.0		295.7		2.3		0		Goodwill and other intangible assets, net	608.4		295.0		313.4		—
Other assets	Other assets	1,395.6		251.5		113.1		1,031.0		Other assets	2,452.1		249.5		1,086.0		1,116.6
Total assets	Total assets	$	43,397.0	$	20,995.4	$	8,180.1	$	14,221.5	Total assets	$	52,775.1	$	23,164.0	$	19,963.4	$	9,647.7
Liabilities:	Liabilities:									Liabilities:
Deposits	Deposits	$	38,393.1	$	24,126.0	$	13,286.5	$	980.6	Deposits	$	45,282.6	$	28,409.9	$	15,751.2	$	1,121.5
Borrowings and qualifying debt	Borrowings and qualifying debt	548.7		0		0		548.7		Borrowings and qualifying debt	2,052.3		—		348.1		1,704.2
Other liabilities	Other liabilities	742.5		226.4		6.0		510.1		Other liabilities	926.2		255.9		148.1		522.2
Total liabilities	Total liabilities	39,684.3		24,352.4		13,292.5		2,039.4		Total liabilities	48,261.1		28,665.8		16,247.4		3,347.9
Allocated equity:	Allocated equity:	3,712.7		2,100.3		702.9		909.5		Allocated equity:	4,514.0		2,369.2		1,483.4		661.4
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	43,397.0	$	26,452.7	$	13,995.4	$	2,948.9	Total liabilities and stockholders' equity	$	52,775.1	$	31,035.0	$	17,730.8	$	4,009.3
Excess funds provided (used)	Excess funds provided (used)	0		5,457.3		5,815.3		(11,272.6)		Excess funds provided (used)	—		7,871.0		(2,232.6)		(5,638.4)

Income Statement:	Income Statement:									Income Statement:
Three Months Ended September 30, 2021:										Three Months Ended September 30, 2021:	(in millions)
Net interest income										Net interest income	$	410.4	$	304.4	$	170.3	$	(64.3)
Provision for (recovery of) credit losses										Provision for (recovery of) credit losses	12.3		19.3		(5.5)		(1.5)
Net interest income (expense) after provision for credit losses										Net interest income (expense) after provision for credit losses	398.1		285.1		175.8		(62.8)
Non-interest income										Non-interest income	138.1		15.1		123.8		(0.8)
Non-interest expense										Non-interest expense	233.8		107.0		123.6		3.2
Income (loss) before income taxes										Income (loss) before income taxes	302.4		193.2		176.0		(66.8)
Income tax expense (benefit)										Income tax expense (benefit)	65.5		46.5		42.6		(23.6)
Net income (loss) available to common stockholders										Net income (loss) available to common stockholders	$	236.9	$	146.7	$	133.4	$	(43.2)

Three Months Ended March 31, 2021:		(in millions)
Nine Months Ended September 30, 2021:										Nine Months Ended September 30, 2021:	(in millions)
Net interest income	Net interest income	$	317.3	$	263.7	$	107.9	$	(54.3)	Net interest income	$	1,098.2	$	848.8	$	417.8	$	(168.4)
(Recovery of) provision for credit losses	(Recovery of) provision for credit losses	(32.4)		(36.3)		1.7		2.2		(Recovery of) provision for credit losses	(34.6)		(35.5)		3.4		(2.5)
Net interest income (expense) after provision for credit losses	Net interest income (expense) after provision for credit losses	349.7		300.0		106.2		(56.5)		Net interest income (expense) after provision for credit losses	1,132.8		884.3		414.4		(165.9)
Non-interest income	Non-interest income	19.7		19.2		0.5		0		Non-interest income	293.8		48.2		241.1		4.5
Non-interest expense	Non-interest expense	135.0		98.3		35.2		1.5		Non-interest expense	613.6		309.4		294.4		9.8
Income (loss) before income taxes	Income (loss) before income taxes	234.4		220.9		71.5		(58.0)		Income (loss) before income taxes	813.0		623.1		361.1		(171.2)
Income tax expense (benefit)	Income tax expense (benefit)	41.9		52.7		17.5		(28.3)		Income tax expense (benefit)	159.8		149.8		87.5		(77.5)
Net income		$	192.5	$	168.2	$	54.0	$	(29.7)
Net income (loss) available to common stockholders										Net income (loss) available to common stockholders	$	653.2	$	473.3	$	273.6	$	(93.7)

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Balance Sheet:	Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate		Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate
At December 31, 2020:	At December 31, 2020:	(in millions)								At December 31, 2020:	(in millions)
Assets:	Assets:									Assets:
Cash, cash equivalents, and investment securities	Cash, cash equivalents, and investment securities	$	8,176.5	$	12.0	$	45.6	$	8,118.9	Cash, cash equivalents, and investment securities	$	8,176.5	$	12.0	$	45.6	$	8,118.9
Loans, net of deferred loan fees and costs	Loans, net of deferred loan fees and costs	27,053.0		20,245.8		6,798.2		9.0		Loans, net of deferred loan fees and costs	27,053.0		20,245.8		6,798.2		9.0
Less: allowance for loan losses	Less: allowance for loan losses	(278.9)		(263.4)		(15.4)		(0.1)		Less: allowance for loan losses	(278.9)		(263.4)		(15.4)		(0.1)
Total loans	Total loans	26,774.1		19,982.4		6,782.8		8.9		Total loans	26,774.1		19,982.4		6,782.8		8.9
Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	1.4		1.4		0		0		Other assets acquired through foreclosure, net	1.4		1.4		—		—
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	298.5		296.1		2.4		0		Goodwill and other intangible assets, net	298.5		296.1		2.4		—
Other assets	Other assets	1,210.5		257.0		96.6		856.9		Other assets	1,210.5		257.0		96.6		856.9
Total assets	Total assets	$	36,461.0	$	20,548.9	$	6,927.4	$	8,984.7	Total assets	$	36,461.0	$	20,548.9	$	6,927.4	$	8,984.7
Liabilities:	Liabilities:									Liabilities:
Deposits	Deposits	$	31,930.5	$	21,448.0	$	9,936.8	$	545.7	Deposits	$	31,930.5	$	21,448.0	$	9,936.8	$	545.7
Borrowings and qualifying debt	Borrowings and qualifying debt	553.7		0		0		553.7		Borrowings and qualifying debt	553.7		—		—		553.7
Other liabilities	Other liabilities	563.3		170.4		3.3		389.6		Other liabilities	563.3		170.4		3.3		389.6
Total liabilities	Total liabilities	33,047.5		21,618.4		9,940.1		1,489.0		Total liabilities	33,047.5		21,618.4		9,940.1		1,489.0
Allocated equity:	Allocated equity:	3,413.5		1,992.2		579.1		842.2		Allocated equity:	3,413.5		1,992.2		579.1		842.2
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	36,461.0	$	23,610.6	$	10,519.2	$	2,331.2	Total liabilities and stockholders' equity	$	36,461.0	$	23,610.6	$	10,519.2	$	2,331.2
Excess funds provided (used)	Excess funds provided (used)	0		3,061.7		3,591.8		(6,653.5)		Excess funds provided (used)	—		3,061.7		3,591.8		(6,653.5)

Three Months Ended March 31, 2020:		(in millions)
Income Statements:										Income Statements:
Three Months Ended September 30, 2020:										Three Months Ended September 30, 2020:	(in millions)
Net interest income	Net interest income	$	269.0	$	228.5	$	55.7	$	(15.2)	Net interest income	$	284.7	$	245.4	$	80.8	$	(41.5)
Provision for credit losses		51.2		47.9		3.0		0.3
Provision for (recovery of) credit losses										Provision for (recovery of) credit losses	14.6		20.1		(3.7)		(1.8)
Net interest income (expense) after provision for credit losses	Net interest income (expense) after provision for credit losses	217.8		180.6		52.7		(15.5)		Net interest income (expense) after provision for credit losses	270.1		225.3		84.5		(39.7)
Non-interest income	Non-interest income	5.1		11.4		0.4		(6.7)		Non-interest income	20.6		13.3		0.6		6.7
Non-interest expense	Non-interest expense	120.5		82.4		25.8		12.3		Non-interest expense	124.1		77.3		21.2		25.6
Income (loss) before income taxes	Income (loss) before income taxes	102.4		109.6		27.3		(34.5)		Income (loss) before income taxes	166.6		161.3		63.9		(58.6)
Income tax expense (benefit)	Income tax expense (benefit)	18.5		26.0		6.4		(13.9)		Income tax expense (benefit)	30.8		38.9		15.2		(23.3)
Net income		$	83.9	$	83.6	$	20.9	$	(20.6)
Net income (loss)										Net income (loss)	$	135.8	$	122.4	$	48.7	$	(35.3)

Nine Months Ended September 30, 2020:										Nine Months Ended September 30, 2020:	(in millions)
Net interest income										Net interest income	$	852.1	$	728.8	$	208.9	$	(85.6)
Provision for (recovery of) credit losses										Provision for (recovery of) credit losses	157.8		165.9		(11.2)		3.1
Net interest income (expense) after provision for credit losses										Net interest income (expense) after provision for credit losses	694.3		562.9		220.1		(88.7)
Non-interest income										Non-interest income	47.0		34.3		1.4		11.3
Non-interest expense										Non-interest expense	359.4		230.9		68.2		60.3
Income (loss) before income taxes										Income (loss) before income taxes	381.9		366.3		153.3		(137.7)
Income tax expense (benefit)										Income tax expense (benefit)	68.9		87.8		36.3		(55.2)
Net income (loss)										Net income (loss)	$	313.0	$	278.5	$	117.0	$	(82.5)

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~~14.~~17. REVENUE FROM CONTRACTS WITH CUSTOMERS

ASC 606, Revenue from Contracts with Customers, requires revenue to be recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. ASC 606 applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope. The majority of the Company’s revenue streams including interest income, credit and debit card fees, income from equity investments including warrants and SBIC equity income, income from bank owned life insurance, foreign currency income, and lending related income are outside the scope of ASC 606. Revenue streams including service charges and fees, interchange fees on credit and debit cards, and success fees are within the scope of ASC 606.

Disaggregation of Revenue

The following table represents a disaggregation of revenue from contracts with customers for the periods indicated along with the reportable segment for each revenue category:


	Consolidated Company		Commercial		Consumer Related		Corporate & Other
Three Months Ended September 30, 2021	(in millions)
Revenue from contracts with customers:
Service charges and fees	$	7.1	$	6.6	$	0.5	$	—
Debit and credit card interchange (1)	1.7		1.7		—		—
Success fees (2)	—		—		—		—
Other income	0.2		0.2		—		—
Total revenue from contracts with customers	$	9.0	$	8.5	$	0.5	$	—
Revenues outside the scope of ASC 606 (3)	129.1		6.6		123.3		(0.8)
Total non-interest income	$	138.1	$	15.1	$	123.8	$	(0.8)


	Consolidated Company		Commercial		Consumer Related		Corporate & Other
Nine Months Ended September 30, 2021	(in millions)
Revenue from contracts with customers:
Service charges and fees	$	21.2	$	19.7	$	1.5	$	—
Debit and credit card interchange (1)	4.8		4.7		0.1		—
Success fees (2)	1.0		1.0		—		—
Other income	0.6		0.6		—		—
Total revenue from contracts with customers	$	27.6	$	26.0	$	1.6	$	—
Revenues outside the scope of ASC 606 (3)	266.2		22.2		239.5		4.5
Total non-interest income	$	293.8	$	48.2	$	241.1	$	4.5

(1)Included as part of Commercial banking related income in the Consolidated Income Statement.

(2)Included as part of Income from equity investments in the Consolidated Income Statement.

(3)Amounts are accounted for under separate guidance. Refer to discussion of revenue sources not subject to ASC 606 under the Non-interest income section in "Note 1. Summary of Significant Accounting Policies."

Consolidated Company Commercial Consumer Related Corporate & Other
Three Months Ended March 31, 2021 (in millions)
Revenue from contracts with customers:
Service charges and fees $ 6.7 $ 6.2 $ 0.5 $ 0
Debit and credit card interchange (1) 1.3 1.3 0 0
Success fees (2) 1.0 1.0 0 0
Other income 0.2 0.2 0 0
Total revenue from contracts with customers $ 9.2 $ 8.7 $ 0.5 $ 0
Revenues outside the scope of ASC 606 (3) 10.5 10.5 0 0
Total non-interest income $ 19.7 $ 19.2 $ 0.5 $ 0

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Consolidated Company Commercial Consumer Related Corporate & Other
Three Months Ended March 31, 2020 (in millions)
Revenue from contracts with customers:
Service charges and fees $ 6.4 $ 6.0 $ 0.4 $ 0
Debit and credit card interchange (1) 1.4 1.4 0 0
Success fees (2) 0.1 0.1 0 0
Other income 0.1 0.1 0 0
Total revenue from contracts with customers $ 8.0 $ 7.6 $ 0.4 $ 0
Revenues outside the scope of ASC 606 (3) (2.9) 3.8 0 (6.7)
Total non-interest income $ 5.1 $ 11.4 $ 0.4 $ (6.7)


	Consolidated Company		Commercial		Consumer Related		Corporate & Other
Three Months Ended September 30, 2020	(in millions)
Revenue from contracts with customers:
Service charges and fees	$	5.9	$	5.5	$	0.4	$	—
Debit and credit card interchange (1)	1.6		1.6		—		—
Success fees (2)	—		—		—		—
Other income	0.1		0.1		—		—
Total revenue from contracts with customers	$	7.6	$	7.2	$	0.4	$	—
Revenues outside the scope of ASC 606 (3)	13.0		6.1		0.2		6.7
Total non-interest income	$	20.6	$	13.3	$	0.6	$	6.7


	Consolidated Company		Commercial		Consumer Related		Corporate & Other
Nine Months Ended September 30, 2020	(in millions)
Revenue from contracts with customers:
Service charges and fees	$	17.4	$	16.4	$	1.0	$	—
Debit and credit card interchange (1)	4.0		3.9		0.1		—
Success fees (2)	0.4		0.4		—		—
Other income	0.2		0.2		—		—
Total revenue from contracts with customers	$	22.0	$	20.9	$	1.1	$	—
Revenues outside the scope of ASC 606 (3)	25.0		13.4		0.3		11.3
Total non-interest income	$	47.0	$	34.3	$	1.4	$	11.3

(1)Included as part of Card income in the Consolidated Income Statement.

(2)Included as part of Income from equity investments in the Consolidated Income Statement.

Performance Obligations

Many of the services the Company performs for its customers are ongoing, and either party may cancel at any time. The fees for these contracts are dependent upon various underlying factors, such as customer deposit balances, and as such may be considered variable. The Company’s performance obligations for these services are satisfied as the services are rendered and payment is collected on a monthly, quarterly, or semi-annual basis. Other contracts with customers are for services to be provided at a point in time, and fees are recognized at the time such services are rendered. The Company had no material unsatisfied performance obligations as of ~~March 31,~~September 30, 2021. The revenue streams within the scope of ASC 606 are described in further detail below.

Service Charges and Fees

The Company performs deposit account services for its customers, which include analysis and treasury management services, use of safe deposit boxes, check upcharges, and other ancillary services. The depository arrangements the Company holds with its customers are considered day-to-day contracts with ongoing renewals and optional purchases, and as such, the contract duration does not extend beyond the services performed. Due to the short-term nature of such contracts, the Company generally recognizes revenue for deposit related fees as services are rendered. From time to time, the Company may waive certain fees for

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its customers. The Company considers historical experience when recognizing revenue from contracts with customers, and may reduce the transaction price to account for fee waivers or refunds.

Debit and Credit Card Interchange

When a credit or debit card issued by the Company is used to purchase goods or services from a merchant, the Company earns an interchange fee. The Company considers the merchant its customer in these transactions as the Company provides the merchant with the service of enabling the cardholder to purchase the merchant’s goods or services with increased convenience, and it enables the merchants to transact with a class of customer that may not have access to sufficient funds at the time of purchase. The Company acts as an agent to the payment network by providing nightly settlement services between the network and the merchant. This transmission of data and funds represents the Company’s performance obligation and is performed nightly. As the payment network is in direct control of setting the rates and the Company is acting as an agent, the interchange fee is recorded net of expenses as the services are provided.

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Success Fees

Success fees are one-time fees detailed as part of certain loan agreements and are earned immediately upon occurrence of a triggering event. Examples of triggering events include: a borrower obtaining its next round of funding, an acquisition, or completion of a public offering. Success fees are variable consideration as the transaction price can vary and is contingent on the occurrence or non-occurrence of a future event. As the consideration is highly susceptible to factors outside of the Company’s influence and uncertainty about the amount of consideration is not expected to be resolved for an extended period of time, the variable consideration is constrained and is not recognized until the achievement of the triggering event.

Principal versus Agent Considerations

When more than one party is involved in providing goods or services to a customer, ASC 606 requires the Company to determine whether it is the principal or an agent in these transactions by evaluating the nature of its promise to the customer. An entity is a principal and therefore records revenue on a gross basis, if it controls a promised good or service before transferring that good or service to the customer. An entity is an agent and records as revenue the net amount it retains for its agency services if its role is to arrange for another entity to provide the goods or services. The Company most commonly acts as a principal and records revenue on a gross basis, except in certain circumstances. As an example, revenues earned from interchange fees, in which the Company acts as an agent, are recorded as non-interest income, net of the related expenses paid to the principal.

Contract Balances

The timing of revenue recognition may differ from the timing of cash settlements or invoicing to customers. The Company records contract liabilities, or deferred revenue, when payments from customers are received or due in advance of providing services to customers. The Company generally receives payments for its services during the period or at the time services are provided, therefore, does not have material contract liability balances at period-end. The Company records contract assets or receivables when revenue is recognized prior to receipt of cash from the customer. Accounts receivable totals ~~$1.7~~$2.0 million and $1.6 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, and are presented in Other assets on the Consolidated Balance Sheets.

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~~15. SUBSEQUENT EVENTS~~

On April 7, 2021, the Company completed its previously announced acquisition of Aris, the parent company of AHM, and certain other parties, pursuant to which, Aris merged with and into an indirect subsidiary of WAB. As a result of the Merger, AHM is now a wholly-owned indirect subsidiary of the Company and will continue to operate as AmeriHome Mortgage, a Western Alliance Bank company. AHM is a leading national business to business mortgage acquirer and servicer. The acquisition of AHM is expected to extend the Company’s national commercial businesses with a complementary national mortgage franchise that will allow the Company to expand mortgage offerings to existing clients. In addition, this acquisition positions the Company for continued growth, increased returns, and diversifies the Company’s revenue profile by expanding sources of fee revenue.

Based on AHM's closing balance sheet and a $275 million cash premium, total consideration was approximately $1.22 billion. This transaction will be accounted for as a business combination under the acquisition method of accounting. The Company will record the assets acquired and liabilities assumed at their fair values as of the acquisition date. Due to the limited time since the closing of the acquisition, the valuation efforts and related acquisition accounting are incomplete at the time of filing of these consolidated financial statements. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired, including goodwill and other intangible assets. In addition, because the acquisition accounting is incomplete, the Company is also unable to provide the supplemental pro forma revenue and earnings for the combined entity. The Company expects to file all required financial statements of AHM and related pro forma financial information through an amendment to its Form 8-K filed with the SEC on April 7, 2021 no later than 71 days following the date that such 8-K was required to be filed.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

This discussion is designed to provide insight into management's assessment of significant trends related to the Company's consolidated financial condition, results of operations, liquidity, capital resources, and interest rate sensitivity. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and the interim Unaudited Consolidated Financial Statements and Notes to Unaudited Consolidated Financial Statements hereto and financial information appearing elsewhere in this report. Unless the context requires otherwise, the terms "Company," "we," and "our" refer to Western Alliance Bancorporation and its wholly-owned subsidiaries on a consolidated basis.

Forward-Looking Information

Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2021 are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including statements that are related to or are dependent on estimates or assumptions relating to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.

The forward-looking statements contained in this Form 10-Q reflect the Company's current views about future events and financial performance and involve certain risks, uncertainties, assumptions, and changes in circumstances that may cause the Company's actual results to differ significantly from historical results and those expressed in any forward-looking statement, including those risks discussed under the heading “Risk Factors” in this Form 10-Q. Risks and uncertainties include those set forth in the Company's filings with the SEC and the following factors that could cause actual results to differ materially from those presented: 1) ability to successfully integrate and operate ~~AHM;~~AMH; 2) the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto, ~~including legislative or regulatory changes such as the CARES Act~~ as well as the distribution and effectiveness of COVID-19 vaccines; 3) other financial market and economic conditions adversely effecting financial ~~performance;~~performance, including the potential impact on borrowers of supply chain disruptions; 4) dependency on real estate and events that negatively impact the real estate market; 5) high concentration of commercial real estate and commercial and industrial loans; 6) the inherent risk associated with accounting estimates, including the impact to the Company's allowance, provision for credit losses, and capital levels under the CECL accounting standard; 7) results of any tax audit findings, challenges to the Company's tax positions, or adverse changes or interpretations of tax laws; 8) the geographic concentrations of the Company's assets increase the risks related to local economic conditions; 9) the Company's ability to compete in a highly competitive market; 10) dependence on low-cost deposits; 11) ability to borrow from the FHLB or the FRB; 12) exposure to environmental liabilities related to the properties to which the Company acquires title; 13) perpetration of fraud; 14) information security breaches; 15) reliance on third parties to provide key components of the Company's infrastructure; 16) a change in the Company's creditworthiness; 17) the Company's ability to implement and improve its controls and processes to keep pace with its growth; 18) expansion strategies may not be successful; 19) risks associated with new lines of businesses or new products and services within existing lines of business; 20) the Company's ability to recruit and retain qualified employees and implement adequate succession planning to mitigate the loss of key members of its senior management team; 21) inadequate or ineffective risk management practices and internal controls and procedures; 22) the Company's ability to adapt to technological change; 23) exposure to natural and man-made disasters in markets that the Company operates; 24) risk of operating in a highly regulated industry and the Company's ability to remain in compliance; 25) failure to comply with state and federal banking agency laws and regulations; 26) exposure of financial instruments to certain market risks may increase the volatility of earnings and AOCI; 27) uncertainty about the future of LIBOR, changes in interest rates, and increased rate competition; and 28) risks related to ownership and price of the Company's common stock.

For more information regarding risks that may cause the Company's actual results to differ materially from any forward-looking statements, see “Risk Factors” in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

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Recent Developments: Closing of ~~AHM~~AMH Acquisition

On April 7, 2021, the Company completed its ~~previously announced~~ acquisition of Aris, the parent company of ~~AHM,~~AMH, pursuant to which, Aris merged with and into an indirect subsidiary of WAB. Based on ~~AHM's~~AMH's closing balance sheet and a $275 million cash premium, total preliminary cash consideration was approximately $1.22 billion. As a result of the Merger, ~~AHM~~AMH is now a wholly-owned indirect subsidiary of the Company and will continue to operate as AmeriHome Mortgage, a Western Alliance Bank company. ~~AHM~~AMH is a leading national business to business mortgage acquirer and servicer. The acquisition of ~~AHM is expected to extend~~AMH complements the Company’s national commercial businesses with a ~~complementary~~ national mortgage franchise that ~~will allow~~allows the Company to expand ~~mortgage~~mortgage-related offerings to existing ~~clients. In addition, this acquisition positions the Company for continued growth, increased returns,~~clients and diversifies the Company’s revenue profile by expanding sources of ~~fee revenue.~~non-interest income.

AMH's results of operations have been included in the Company's results beginning April 7, 2021.

Recent Developments: COVID-19 and the CARES Act

The COVID-19 pandemic and certain provisions of the CARES Act and other recent legislative and regulatory relief efforts have had and are expected to continue to have a material impact on the Company's operations, as further discussed below. On September 9, 2021, in an effort to prevent the spread of COVID-19 and the highly contagious Delta variant, President Biden announced executive orders that included a mandate for private-sector businesses with 100 or more employees to require COVID-19 vaccination or weekly testing as soon as the OSHA issues its ETS. As of the date of filing of this Quarterly Reporting on Form 10-Q, the OSHA has yet to deliver its ETS. The Company is monitoring the status of the ETS and will review it upon release to understand and comply with any legal obligations. Current health and safety protocols in place across the Company’s offices and banking centers remain in compliance with applicable state and federal guidelines.

Financial position and results of operations

The Company recorded a credit loss provision of $12.3 million and a release of credit provisions of $34.6 million during the three and nine months ended September 30, 2021, respectively, compared to credit loss provisions of $14.6 million and $157.8 million during the three and nine months ended September 30, 2020, respectively. The decrease in credit loss provision compared to the same periods in the prior year is attributable to the continued improved outlook for the overall ~~economy from December 31, 2020 resulted in a release of $32.4 million in credit loss provisions during the three months ended March 31, 2021.~~economy. While the Company has not to date experienced significant write-offs related to the COVID-19 pandemic, the Company is continuing to closely monitor its loans with borrowers in COVID-19 impacted industries.

The below table details the Company's exposure to borrowers in industries generally considered to be the most impacted by the COVID-19 pandemic:


		March 31, 2021					September 30, 2021
		Loan Balance		Percent of Total Loan Portfolio			Loan Balance		Percent of Total Loan Portfolio
		(dollars in millions)					(dollars in millions)
Industry (1):	Industry (1):					Industry (1):
Hotel	Hotel	$	2,282.6	7.9	%	Hotel	$	2,364.2	5.7	%
Investor dependent	Investor dependent	1,141.1		4.0		Investor dependent	967.3		2.3
Retail (2)	Retail (2)	697.5		2.4		Retail (2)	723.4		1.8
Gaming	Gaming	569.9		2.0		Gaming	587.8		1.4
Total	Total	$	4,691.1	16.3	%	Total	$	4,642.7	11.2	%

(1)Balances capture credit exposures in the business segments that manage the significant majority of industry relationships.

(2)Consists of real estate secured loan amounts that have significant retail dependency.

Although the Company has not experienced disproportionate impacts among its business segments to date, borrowers in the industries detailed in the table above could have greater sensitivity to the economic downturn with potentially longer recovery periods than other business lines.

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Lending operations and accommodations to borrowers

The original PPP terminated on August 8, 2020, but was reopened in January 2021, with $284 billion in additional funding. As part of the resumption of the program, significant clarifications and modifications were made related to the scope of businesses eligible, expansion of the scope of expenses eligible for forgiveness, and simplification of forgiveness mechanisms for loans of $150,000 or less. Eligible businesses were able to apply for and receive PPP loans through May 31, 2021 and certain small businesses that previously received a loan under the original program were eligible to obtain an additional loan. These loans have a five-year term and earn interest at a rate of 1%. During the three months ended ~~March 31,~~September 30, 2021, there were no additional loans funded by the Company under the second round of the PPP and the Company received $192.1 million and $44.2 million in loan payoffs on the first and second rounds of PPP loans, respectively. During the nine months ended September 30, 2021, the Company funded ~~$560~~$602.5 million in loans under the second round of the PPP and received ~~$478.7~~$1.4 billion and $44.5 million in loan payoffs on the first ~~round~~and second rounds of PPP ~~loans.~~loans, respectively. As of ~~March 31,~~September 30, 2021, the ~~outstanding balance~~carrying value of loans originated under the first and second round of the PPP totaled ~~$1.5 billion.~~$623.5 million.

The CARES Act permitted financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 and provided interpretive guidance as to conditions that would constitute a short-term modification that would not meet the definition of a TDR. This included the following (i) the loan modification was made between March 1, 2020 and December 31, 2020, and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, extends these provisions through January 1, 2022. The Company is applying this guidance to qualifying loan modifications. The types of loan modifications granted to borrowers included extensions of loan maturity dates, covenant waivers, interest only payments for a specified period of time,

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and loan payment deferrals. As of ~~March 31,~~September 30, 2021, the Company has outstanding modifications on HFI commercial loans that met these conditions with a net balance of ~~$271.4~~$189.7 million, none of which ~~modifications involving~~involve loan payment ~~deferrals total $68.5 million.~~deferrals. Further, residential HFI mortgage loans in forbearance have a net balance of ~~$65.0~~$39.1 million as of ~~March 31,~~September 30, 2021.

Included at the end of this section are updates to the Supervision and Regulation discussion disclosed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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Financial Overview and Highlights

WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated under the laws of the state of Delaware. WAL provides a full spectrum of deposit, lending, mortgage banking, treasury management, international banking, and online banking products and services through its wholly-owned banking subsidiary, WAB. Most recently, the Company added to these capabilities with the acquisition of AmeriHome on April 7, 2021, a leading national business-to-business mortgage platform.

WAB operates the following full-service banking divisions: ABA, BON and FIB, Bridge, and TPB. The Company also provides an array of specialized financial services to its business customers across the country.

Financial Results Highlights for the ~~First~~Third Quarter of 2021

•Net income of ~~$192.5~~$236.9 million, compared to ~~$83.9~~$135.8 million for the ~~first~~third quarter 2020

•Diluted earnings per share of ~~$1.90,~~$2.28, compared to ~~$0.83~~$1.36 per share for the ~~first~~third quarter 2020

•Total HFI loans of ~~$28.7~~$34.8 billion, up ~~$1.7~~$4.8 billion from June 30, 2021, and $7.7 billion from December 31, 2020

•Total deposits of ~~$38.4~~$45.3 billion, up ~~$6.5~~$3.4 billion from June 30, 2021, and $13.4 billion from December 31, 2020

•Net interest margin of ~~3.37%~~3.43%, compared to ~~4.22%~~3.71% in the ~~first~~third quarter 2020

•Net revenue of ~~$337.0~~$548.5 million, an increase of ~~22.9%~~79.7%, or ~~$62.9~~$243.2 million, compared to the ~~first~~third quarter 2020, with non-interest expense increase of ~~12.0%~~88.4%, or ~~$14.5~~$109.7 million, compared to the ~~first~~third quarter 2020

•PPNR of ~~$202.0~~$317.1 million, up ~~31.5%~~75.0% from ~~$153.6~~$181.2 million in the ~~first~~third quarter 20201

•Efficiency ratio of ~~39.1%~~41.5% in the ~~first~~third quarter 2021, compared to ~~42.9%~~39.7% in the ~~first~~third quarter 20201

•Nonperforming assets (nonaccrual loans and repossessed assets) decreased to ~~0.27%~~0.17% of total assets, from ~~0.33%~~0.47% at ~~March 31,~~September 30, 2020

•Annualized net loan charge-offs to average loans outstanding of ~~0.02%~~0.04%, compared to ~~net loan recoveries to average loans outstanding of (0.06)%~~0.13% for the ~~first~~third quarter 2020

•Tangible common equity ratio of ~~7.9%~~6.9%, compared to ~~9.4%~~8.9% at ~~March 31,~~September 30, 20201

•Stockholders' equity of ~~$3.7~~$4.5 billion, an increase of ~~$299.2~~$479.5 million from June 30, 2021 and $1.1 billion from December 31, 2020

•Book value per common share of ~~$35.89,~~$40.49, an increase of ~~21.0%~~26.6% from ~~$29.65~~$31.98 at ~~March 31,~~September 30, 2020

•Tangible book value per share, net of tax, of ~~$33.02,~~$34.67, an increase of ~~$6.29~~$5.64, or 19.4%, from ~~$26.73~~$29.03 at ~~March 31,~~September 30, 20201

The impact to the Company from these items, and others of both a positive and negative nature, are discussed in more detail below as they pertain to the Company’s overall comparative performance for the three and nine months ended ~~March 31,~~September 30, 2021.

1 See Non-GAAP Financial Measures section beginning on page ~~65.~~81.

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As a bank holding company, management focuses on key ratios in evaluating the Company's financial condition and results of operations.

Results of Operations and Financial Condition

A summary of the Company's results of operations, financial condition, and selected metrics are included in the following tables:


		Three Months Ended March 31,							Three Months Ended September 30,					Nine Months Ended September 30,
		2021			2020						2021			2020			2021			2020
		(in millions, except per share amounts)						(in millions, except per share amounts)
Net income	Net income	$	192.5		$	83.9				Net income	$	236.9		$	135.8		$	653.2		$	313.0
Earnings per share - basic	Earnings per share - basic	1.91			0.83					Earnings per share - basic	2.29			1.36			6.39			3.12
Earnings per share - diluted	Earnings per share - diluted	1.90			0.83					Earnings per share - diluted	2.28			1.36			6.35			3.11
Return on average assets	Return on average assets	1.93		%	1.22		%			Return on average assets	1.83		%	1.66		%	1.89		%	1.38		%
Return on average equity										Return on average equity	22.5			17.0			22.8			13.5
Return on average tangible common equity (1)	Return on average tangible common equity (1)	24.2			12.2					Return on average tangible common equity (1)	26.6			18.7			26.3			14.9
Net interest margin	Net interest margin	3.37			4.22					Net interest margin	3.43			3.71			3.44			4.03

(1) See Non-GAAP Financial Measures section beginning on page ~~65.~~81.


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Total assets	Total assets	$	43,397.0	$	36,461.0	Total assets	$	52,775.1	$	36,461.0
Total loans, net of deferred loan fees and costs		28,711.0		27,053.0
HFI loans, net of deferred loan fees and costs						HFI loans, net of deferred loan fees and costs	34,801.9		27,053.0
Total deposits	Total deposits	38,393.1		31,930.5		Total deposits	45,282.6		31,930.5

Asset Quality

For all banks and bank holding companies, asset quality plays a significant role in the overall financial condition of the institution and results of operations. The Company measures asset quality in terms of nonaccrual loans as a percentage of gross loans and net charge-offs as a percentage of average loans. Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on previously charged-off loans. The following table summarizes the Company's key asset quality metrics:


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
		(dollars in millions)							(dollars in millions)
Nonaccrual loans	Nonaccrual loans	$	113.6		$	115.2		Nonaccrual loans	$	78.1		$	115.2
Non-performing assets	Non-performing assets	150.6			149.8			Non-performing assets	116.4			149.8
Nonaccrual loans to funded loans		0.40		%	0.43		%
Nonaccrual loans to funded HFI loans								Nonaccrual loans to funded HFI loans	0.22		%	0.43		%
Net charge-offs to average loans outstanding (1)	Net charge-offs to average loans outstanding (1)	0.02			0.06			Net charge-offs to average loans outstanding (1)	0.04			0.06

(1)Annualized on an actual/actual basis for the three months ended ~~March 31,~~September 30, 2021. Actual year-to-date for the year ended December 31, 2020.

Asset and Deposit Growth

The Company’s assets and liabilities are comprised primarily of loans and deposits. Therefore, the ability to originate new loans and attract new deposits is fundamental to the Company’s growth.

Total assets increased to ~~$43.4~~$52.8 billion at ~~March 31,~~September 30, 2021 from $36.5 billion at December 31, 2020. The increase in total assets of ~~$6.9~~$16.3 billion, or ~~19.0%~~44.7%, ~~relates primarily to an increase in cash~~was driven by continued organic loan and ~~investment securities from continued~~ deposit growth ~~in addition to continued loan growth. Total~~and the acquisition of AmeriHome. HFI loans increased by ~~$1.7~~$7.7 billion, or ~~6.1%~~28.6%, to ~~$28.7~~$34.8 billion as of ~~March 31,~~September 30, 2021, compared to $27.1 billion as of December 31, 2020. The increase in HFI loans from December 31, 2020 was driven by increases in residential real estate loans of $5.0 billion, commercial and industrial loans of ~~$746.3 million, residential real estate loans of $674.5 million, and~~$2.2 billion, construction and land development loans of ~~$336.5~~$512.0 million, and CRE, non-owner occupied loans of $189.0 million. These increases were partially offset by a decrease in CRE, owner occupied loans of ~~$104.8~~$160.2 million. Additionally, HFS loans rose by $6.5 billion, up from zero as of December 31, 2020 related to the acquisition of AmeriHome.

Total deposits increased ~~$6.5~~$13.4 billion, or ~~20.2%~~41.8%, to ~~$38.4~~$45.3 billion as of ~~March 31,~~September 30, 2021 from $31.9 billion as of December 31, 2020. The increase in deposits from December 31, 2020 was driven by ~~an increase~~increases of ~~$4.1~~$7.6 billion in non-interest bearing demand deposits, ~~and $2.9~~$5.0 billion in savings and money market ~~accounts. These increases were offset in part by a decrease in~~accounts, and interest bearing demand deposits of ~~$503.0~~$557.9 million.

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RESULTS OF OPERATIONS

The following table sets forth a summary financial overview for the comparable periods:


		Three Months Ended March 31,				Increase				Three Months Ended September 30,				Increase		Nine Months Ended September 30,				Increase
		2021		2020		(Decrease)						2021		2020		(Decrease)		2021		2020		(Decrease)
		(in millions, except per share amounts)						(in millions, except per share amounts)
Consolidated Income Statement Data:	Consolidated Income Statement Data:								Consolidated Income Statement Data:
Interest income	Interest income	$	334.1	$	307.2	$	26.9				Interest income	$	442.8	$	304.8	$	138.0	$	1,175.4	$	930.2	$	245.2
Interest expense	Interest expense	16.8		38.2		(21.4)					Interest expense	32.4		20.1		12.3		77.2		78.1		(0.9)
Net interest income	Net interest income	317.3		269.0		48.3					Net interest income	410.4		284.7		125.7		1,098.2		852.1		246.1
(Recovery of) provision for credit losses		(32.4)		51.2		(83.6)
Net interest income after (recovery of) provision for credit losses		349.7		217.8		131.9
Provision for (recovery of) credit losses											Provision for (recovery of) credit losses	12.3		14.6		(2.3)		(34.6)		157.8		(192.4)
Net interest income after provision for (recovery of) credit losses											Net interest income after provision for (recovery of) credit losses	398.1		270.1		128.0		1,132.8		694.3		438.5
Non-interest income	Non-interest income	19.7		5.1		14.6					Non-interest income	138.1		20.6		117.5		293.8		47.0		246.8
Non-interest expense	Non-interest expense	135.0		120.5		14.5					Non-interest expense	233.8		124.1		109.7		613.6		359.4		254.2
Income before provision for income taxes	Income before provision for income taxes	234.4		102.4		132.0					Income before provision for income taxes	302.4		166.6		135.8		813.0		381.9		431.1
Income tax expense	Income tax expense	41.9		18.5		23.4					Income tax expense	65.5		30.8		34.7		159.8		68.9		90.9
Net income		$	192.5	$	83.9	$	108.6
Net income available to common stockholders											Net income available to common stockholders	$	236.9	$	135.8	$	101.1	$	653.2	$	313.0	$	340.2
Earnings per share - basic	Earnings per share - basic	$	1.91	$	0.83	$	1.08				Earnings per share - basic	$	2.29	$	1.36	$	0.93	$	6.39	$	3.12	$	3.27
Earnings per share - diluted	Earnings per share - diluted	$	1.90	$	0.83	$	1.07				Earnings per share - diluted	$	2.28	$	1.36	$	0.92	$	6.35	$	3.11	$	3.24

Non-GAAP Financial Measures

The following discussion and analysis contains financial information determined by methods other than those prescribed by GAAP. The Company's management uses these non-GAAP financial measures in their analysis of the Company's performance. Management believes presentation of these non-GAAP financial measures provides useful supplemental information that is essential to a complete understanding of the operating results of the Company. Since the presentation of these non-GAAP performance measures and their impact differ between companies, these non-GAAP 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.

Pre-Provision Net Revenue

PPNR is defined by the Federal Reserve in SR 14-3, which requires companies subject to the rule to project PPNR over the planning horizon for each of the economic scenarios defined annually by the regulators. Banking regulations define PPNR as net interest income plus non-interest income less non-interest expense. Management believes that this is an important metric as it illustrates the underlying performance of the Company, it enables investors and others to assess the Company's ability to generate capital to cover credit losses through the credit cycle, and provides consistent reporting with a key metric used by bank regulatory agencies.

The following table shows the components of PPNR for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020					2021		2020		2021		2020
		(in millions)				(in millions)
Net interest income	Net interest income	$	317.3	$	269.0			Net interest income	$	410.4	$	284.7	$	1,098.2	$	852.1
Total non-interest income	Total non-interest income	19.7		5.1				Total non-interest income	138.1		20.6		293.8		47.0
Net revenue	Net revenue	$	337.0	$	274.1			Net revenue	$	548.5	$	305.3	$	1,392.0	$	899.1
Total non-interest expense	Total non-interest expense	135.0		120.5				Total non-interest expense	233.8		124.1		613.6		359.4
Pre-provision net revenue		$	202.0	$	153.6
Less: Acquisition and restructure expense								Less: Acquisition and restructure expense	2.4		—		18.5		—
Total non-interest expense, adjusted								Total non-interest expense, adjusted	$	231.4	$	124.1	$	595.1	$	359.4
Pre-provision net revenue(1)								Pre-provision net revenue(1)	$	317.1	$	181.2	$	796.9	$	539.7
Less:	Less:							Less:
(Recovery of) provision for credit losses		(32.4)		51.2
Acquisition and restructure expense								Acquisition and restructure expense	2.4		—		18.5		—
Provision for (recovery of) credit losses								Provision for (recovery of) credit losses	12.3		14.6		(34.6)		157.8
Income tax expense	Income tax expense	41.9		18.5				Income tax expense	65.5		30.8		159.8		68.9
Net income	Net income	$	192.5	$	83.9			Net income	$	236.9	$	135.8	$	653.2	$	313.0

(1) We believe this non-GAAP measurement is a key indicator of the earnings power of the Company.

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Efficiency Ratio

The following table shows the components used in the calculation of the efficiency ratio, which management uses as a metric for assessing cost efficiency:


		Three Months Ended March 31,							Three Months Ended September 30,					Nine Months Ended September 30,
		2021			2020						2021			2020			2021			2020
		(dollars in millions)						(dollars in millions)
Total non-interest expense		$	135.0		$	120.5
Total non-interest expense, adjusted										Total non-interest expense, adjusted	$	231.4		$	124.1		$	595.1		$	359.4
Divided by:	Divided by:									Divided by:
Total net interest income	Total net interest income	$	317.3		$	269.0				Total net interest income	$	410.4		$	284.7		$	1,098.2		$	852.1
Plus:	Plus:									Plus:
Tax equivalent interest adjustment	Tax equivalent interest adjustment	8.0			6.5					Tax equivalent interest adjustment	8.5			7.2			24.9			20.6
Total non-interest income	Total non-interest income	19.7			5.1					Total non-interest income	138.1			20.6			293.8			47.0
		$	345.0		$	280.6					$	557.0		$	312.5		$	1,416.9		$	919.7
Efficiency ratio - tax equivalent basis	Efficiency ratio - tax equivalent basis	39.1		%	42.9		%			Efficiency ratio - tax equivalent basis	41.5		%	39.7		%	42.0		%	39.1		%

Tangible Common Equity

The following table presents financial measures related to tangible common equity. Tangible common equity represents total stockholders' equity, less identifiable intangible assets and goodwill. Management believes that tangible common equity financial measures are useful in evaluating the Company's capital strength, financial condition, and ability to manage potential losses. In addition, management believes that these measures improve comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangible assets.


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
		(dollars and shares in millions)							(dollars and shares in millions)
Total stockholders' equity	Total stockholders' equity	$	3,712.7		$	3,413.5		Total stockholders' equity	$	4,514.0		$	3,413.5
Less: goodwill and intangible assets	Less: goodwill and intangible assets	298.0			298.5			Less: goodwill and intangible assets	608.4			298.5
Less: preferred stock								Less: preferred stock	294.5			—
Total tangible stockholders' equity	Total tangible stockholders' equity	3,414.7			3,115.0			Total tangible stockholders' equity	3,611.1			3,115.0
Plus: deferred tax - attributed to intangible assets	Plus: deferred tax - attributed to intangible assets	1.4			1.6			Plus: deferred tax - attributed to intangible assets	1.8			1.6
Total tangible common equity, net of tax	Total tangible common equity, net of tax	$	3,416.1		$	3,116.6		Total tangible common equity, net of tax	$	3,612.9		$	3,116.6

Total assets	Total assets	$	43,397.0		$	36,461.0		Total assets	$	52,775.1		$	36,461.0
Less: goodwill and intangible assets, net	Less: goodwill and intangible assets, net	298.0			298.5			Less: goodwill and intangible assets, net	608.4			298.5
Tangible assets	Tangible assets	43,099.0			36,162.5			Tangible assets	52,166.7			36,162.5
Plus: deferred tax - attributed to intangible assets	Plus: deferred tax - attributed to intangible assets	1.4			1.6			Plus: deferred tax - attributed to intangible assets	1.8			1.6
Total tangible assets, net of tax	Total tangible assets, net of tax	$	43,100.4		$	36,164.1		Total tangible assets, net of tax	$	52,168.5		$	36,164.1

Tangible common equity ratio	Tangible common equity ratio	7.9		%	8.6		%	Tangible common equity ratio	6.9		%	8.6		%
Common shares outstanding	Common shares outstanding	103.4			100.8			Common shares outstanding	104.2			100.8
Book value per share		$	35.89		$	33.85
Tangible book value per share, net of tax		33.02			30.90
Book value per common share								Book value per common share	$	40.49		$	33.85
Tangible book value per common share, net of tax								Tangible book value per common share, net of tax	34.67			30.90

6682

Table of Contents

Regulatory Capital

The following table presents certain financial measures related to regulatory capital under Basel III, which includes common equity tier 1 and total capital. The FRB and other banking regulators use CET1 and total capital as a basis for assessing a bank's capital adequacy; therefore, management believes it is useful to assess financial condition and capital adequacy using this same basis. Specifically, the total capital ratio takes into consideration the risk levels of assets and off-balance sheet financial instruments. In addition, management believes that the classified assets to CET1 plus allowance measure is an important regulatory metric for assessing asset quality.

As permitted by the regulatory capital rules, the Company elected to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending December 31, 2024. As a result, capital ratios and amounts as of ~~March 31,~~September 30, 2021 exclude the impact of the increased allowance for credit losses related to the adoption of ASC 326.


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
		(dollars in millions)							(dollars in millions)
Common equity tier 1:	Common equity tier 1:							Common equity tier 1:
Common equity	Common equity	$	3,756.6		$	3,465.9		Common equity	$	4,263.0		$	3,465.9
Less:	Less:							Less:
Non-qualifying goodwill and intangibles	Non-qualifying goodwill and intangibles	296.6			296.9			Non-qualifying goodwill and intangibles	605.1			296.9

Disallowed deferred tax asset	Disallowed deferred tax asset	2.7			—			Disallowed deferred tax asset	4.4			—
AOCI related adjustments	AOCI related adjustments	19.7			91.8			AOCI related adjustments	42.7			91.8
Unrealized gain on changes in fair value liabilities	Unrealized gain on changes in fair value liabilities	0.2			0.5			Unrealized gain on changes in fair value liabilities	(0.1)			0.5
Common equity tier 1	Common equity tier 1	$	3,437.4		$	3,076.7		Common equity tier 1	$	3,610.9		$	3,076.7
Divided by: Risk-weighted assets	Divided by: Risk-weighted assets	$	33,326.1		$	31,015.4		Divided by: Risk-weighted assets	$	41,400.2		$	31,015.4
Common equity tier 1 ratio	Common equity tier 1 ratio	10.3		%	9.9		%	Common equity tier 1 ratio	8.7		%	9.9		%

Common equity tier 1	Common equity tier 1	$	3,437.4		$	3,076.7		Common equity tier 1	$	3,610.9		$	3,076.7

Plus: Trust preferred securities		81.5			81.5
Plus: Preferred stock and trust preferred securities								Plus: Preferred stock and trust preferred securities	376.0			81.5

Tier 1 capital	Tier 1 capital	$	3,518.9		$	3,158.2		Tier 1 capital	$	3,986.9		$	3,158.2
Divided by: Tangible average assets	Divided by: Tangible average assets	$	40,072.7		$	34,349.3		Divided by: Tangible average assets	$	50,668.8		$	34,349.3
Tier 1 leverage ratio	Tier 1 leverage ratio	8.8		%	9.2		%	Tier 1 leverage ratio	7.9		%	9.2		%

Total capital:	Total capital:							Total capital:
Tier 1 capital	Tier 1 capital	$	3,518.9		$	3,158.2		Tier 1 capital	$	3,986.9		$	3,158.2
Plus:	Plus:							Plus:
Subordinated debt	Subordinated debt	449.3			454.8			Subordinated debt	985.1			454.8
Adjusted allowances for credit losses	Adjusted allowances for credit losses	233.3			259.0			Adjusted allowances for credit losses	228.3			259.0

Tier 2 capital	Tier 2 capital	$	682.6		$	713.8		Tier 2 capital	$	1,213.4		$	713.8

Total capital	Total capital	$	4,201.5		$	3,872.0		Total capital	$	5,200.3		$	3,872.0
Total capital ratio	Total capital ratio	12.6		%	12.5		%	Total capital ratio	12.6		%	12.5		%

Classified assets to tier 1 capital plus allowance:	Classified assets to tier 1 capital plus allowance:							Classified assets to tier 1 capital plus allowance:
Classified assets	Classified assets	$	280.9		$	223.7		Classified assets	$	264.9		$	223.7

Divided by: Tier 1 capital	Divided by: Tier 1 capital	3,518.9			3,158.2			Divided by: Tier 1 capital	3,986.9			3,158.2
Plus: Adjusted allowances for credit losses	Plus: Adjusted allowances for credit losses	233.3			259.0			Plus: Adjusted allowances for credit losses	228.3			259.0
Total Tier 1 capital plus adjusted allowances for credit losses	Total Tier 1 capital plus adjusted allowances for credit losses	$	3,752.2		$	3,417.2		Total Tier 1 capital plus adjusted allowances for credit losses	$	4,215.2		$	3,417.2
Classified assets to tier 1 capital plus allowance	Classified assets to tier 1 capital plus allowance	7.5		%	6.5		%	Classified assets to tier 1 capital plus allowance	6.3		%	6.5		%

6783

Table of Contents

Net Interest Margin

The net interest margin is reported on a TEB. A tax equivalent adjustment is added to reflect interest earned on certain securities and loans that are exempt from federal and state income tax. The following tables set forth the average balances, interest income, interest expense, and average yield (on a fully TEB) for the periods indicated:


		Three Months Ended March 31,													Three Months Ended September 30,
		2021						2020							2021						2020
		Average Balance		Interest		Average Yield / Cost		Average Balance		Interest		Average Yield / Cost			Average Balance		Interest		Average Yield / Cost		Average Balance		Interest		Average Yield / Cost
		(dollars in millions)													(dollars in millions)
Interest earning assets	Interest earning assets													Interest earning assets
Loans:
Loans held for sale														Loans held for sale	$	7,254.2	$	61.3	3.35	%	$	20.3	$	—	—	%
Loans held for investment:														Loans held for investment:
Commercial and industrial	Commercial and industrial	$	13,951.6	$	151.0	4.48	%	$	9,651.1	$	124.7	5.32	%	Commercial and industrial	14,943.0		156.1		4.23		12,687.9		130.0		4.17
CRE - non-owner-occupied	CRE - non-owner-occupied	5,649.7		65.1		4.68		5,238.0		68.9		5.30		CRE - non-owner-occupied	5,754.5		68.5		4.73		5,393.1		63.8		4.72
CRE - owner-occupied	CRE - owner-occupied	2,094.2		24.4		4.83		2,281.3		29.2		5.24		CRE - owner-occupied	2,030.5		25.1		5.00		2,232.7		26.6		4.85
Construction and land development	Construction and land development	2,484.8		35.6		5.81		2,006.0		32.2		6.50		Construction and land development	2,862.7		40.6		5.63		2,209.3		32.3		5.83
Residential real estate	Residential real estate	2,507.7		21.9		3.55		2,158.2		20.8		3.88		Residential real estate	5,906.7		46.0		3.09		2,396.0		23.4		3.88
Consumer	Consumer	34.5		0.4		5.39		55.4		0.8		5.47		Consumer	43.6		0.4		4.18		38.5		0.5		4.88
Loans held for sale		—		—		—		21.8		0.3		5.98
Total loans (1), (2), (3)		26,722.5		298.4		4.59		21,411.8		276.9		5.27
Total HFI loans (1), (2), (3)														Total HFI loans (1), (2), (3)	31,541.0		336.7		4.28		24,957.5		276.6		4.47
Securities:	Securities:													Securities:
Securities - taxable	Securities - taxable	4,531.4		18.5		1.66		2,889.2		17.3		2.40		Securities - taxable	5,521.4		25.6		1.84		2,811.6		14.8		2.09
Securities - tax-exempt	Securities - tax-exempt	1,980.9		15.5		3.99		1,164.3		10.1		4.40		Securities - tax-exempt	2,223.3		17.9		4.00		1,556.4		12.6		4.07
Total securities (1)	Total securities (1)	6,512.3		34.0		2.37		4,053.5		27.4		2.98		Total securities (1)	7,744.7		43.5		2.46		4,368.0		27.4		2.79
Other	Other	5,864.0		1.7		0.12		802.0		2.9		1.49		Other	1,882.9		1.3		0.27		1,926.4		0.8		0.17
Total interest earning assets	Total interest earning assets	39,098.8		334.1		3.55		26,267.3		307.2		4.80		Total interest earning assets	48,422.8		442.8		3.70		31,272.2		304.8		3.97
Non-interest earning assets	Non-interest earning assets													Non-interest earning assets
Cash and due from banks	Cash and due from banks	166.1						196.0						Cash and due from banks	291.1						163.8
Allowance for credit losses	Allowance for credit losses	(289.1)						(192.7)						Allowance for credit losses	(242.1)						(325.0)
Bank owned life insurance	Bank owned life insurance	176.6						174.4						Bank owned life insurance	178.6						175.0
Other assets	Other assets	1,271.2						1,158.9						Other assets	2,683.7						1,237.4
Total assets	Total assets	$	40,423.6					$	27,603.9					Total assets	$	51,334.1					$	32,523.4
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	3,905.4	$	1.3	0.13	%	$	3,098.5	$	4.5	0.58	%	Interest-bearing transaction accounts	$	4,786.5	$	1.4	0.12	%	$	3,636.3	$	1.4	0.16	%
Savings and money market accounts	Savings and money market accounts	13,994.4		7.1		0.21		9,033.4		17.6		0.79		Savings and money market accounts	16,833.0		8.9		0.21		10,170.1		5.7		0.22
Certificates of deposit	Certificates of deposit	1,681.1		2.4		0.59		2,346.0		10.4		1.78		Certificates of deposit	1,902.2		2.0		0.41		1,845.5		5.1		1.10
Total interest-bearing deposits	Total interest-bearing deposits	19,580.9		10.8		0.22		14,477.9		32.5		0.90		Total interest-bearing deposits	23,521.7		12.3		0.21		15,651.9		12.2		0.31
Short-term borrowings	Short-term borrowings	24.8		0.1		1.13		148.2		0.4		1.17		Short-term borrowings	417.9		1.1		1.07		36.0		—		0.20

Long-term debt														Long-term debt	557.9		8.2		5.79		—		—		—
Qualifying debt	Qualifying debt	547.2		5.9		4.39		395.1		5.3		5.34		Qualifying debt	1,076.5		10.8		3.98		616.2		7.9		5.08
Total interest-bearing liabilities	Total interest-bearing liabilities	20,152.9		16.8		0.34		15,021.2		38.2		1.02		Total interest-bearing liabilities	25,574.0		32.4		0.50		16,304.1		20.1		0.49
Interest cost of funding earning assets	Interest cost of funding earning assets					0.18						0.58		Interest cost of funding earning assets					0.27						0.26
Non-interest-bearing liabilities	Non-interest-bearing liabilities													Non-interest-bearing liabilities
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	15,972.6						8,869.7						Non-interest-bearing demand deposits	20,731.6						12,422.2
Other liabilities	Other liabilities	772.3						643.0						Other liabilities	855.3						617.0
Stockholders’ equity	Stockholders’ equity	3,525.8						3,070.0						Stockholders’ equity	4,173.2						3,180.1
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	40,423.6					$	27,603.9					Total liabilities and stockholders' equity	$	51,334.1					$	32,523.4
Net interest income and margin (4)	Net interest income and margin (4)			$	317.3	3.37	%			$	269.0	4.22	%	Net interest income and margin (4)			$	410.4	3.43	%			$	284.7	3.71	%

(1)Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was ~~$8.0~~$8.5 million and ~~$6.5~~$7.2 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

(2)Included in the yield computation are net loan fees of ~~$32.9~~$30.4 million and ~~$15.5~~$18.2 million for the three months ended ~~March 31,~~September 30, 2021 and 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.

Table of Contents

Three Months Ended March 31,
2021 versus 2020
Increase (Decrease) Due to Changes in (1)
Volume Rate Total
(in millions)
Interest income:
Loans:
Commercial and industrial $ 46.5 $ (20.2) $ 26.3
CRE - non-owner occupied 4.7 (8.5) (3.8)
CRE - owner-occupied (2.2) (2.6) (4.8)
Construction and land development 6.9 (3.5) 3.4
Residential real estate 3.1 (2.0) 1.1
Consumer (0.2) (0.2) (0.4)
Loans held for sale — (0.3) (0.3)
Total loans 58.8 (37.3) 21.5
Securities:
Securities - taxable 6.7 (5.5) 1.2
Securities - tax-exempt 6.4 (1.0) 5.4
Total securities 13.1 (6.5) 6.6
Other 1.5 (2.7) (1.2)
Total interest income 73.4 (46.5) 26.9
Interest expense:
Interest-bearing transaction accounts 0.3 (3.5) (3.2)
Savings and money market 2.5 (13.0) (10.5)
Certificates of deposit (0.9) (7.1) (8.0)
Short-term borrowings (0.5) 0.2 (0.3)
Qualifying debt 1.6 (1.0) 0.6
Total interest expense 3.0 (24.4) (21.4)
Net change $ 70.4 $ (22.1) $ 48.3


	Nine Months Ended September 30,
	2021						2020
	Average Balance		Interest		Average Yield / Cost		Average Balance		Interest		Average Yield / Cost
	(dollars in millions)
Interest earning assets
Loans held for sale	$	4,234.6	$	104.1	3.29	%	$	21.3	$	0.3	2.04	%
Loans held for investment:
Commercial and industrial	14,267.6		455.3		4.36		11,556.5		396.6		4.69
CRE - non-owner occupied	5,701.1		201.3		4.73		5,325.6		198.3		4.99
CRE - owner occupied	2,049.7		73.5		4.91		2,262.4		83.4		5.02
Construction and land development	2,714.5		116.1		5.72		2,115.0		95.5		6.05
Residential real estate	4,066.6		98.6		3.24		2,294.9		67.1		3.91
Consumer	37.4		1.3		4.65		49.2		1.9		5.22
Total HFI loans (1), (2), (3)	28,836.9		946.1		4.44		23,603.6		842.8		4.83
Securities:
Securities - taxable	5,231.1		70.2		1.79		2,826.0		48.3		2.28
Securities - tax-exempt	2,124.2		50.8		4.02		1,376.6		34.7		4.25
Total securities (1)	7,355.3		121.0		2.44		4,202.6		83.0		2.93
Other	3,204.8		4.2		0.17		1,136.2		4.1		0.49
Total interest earning assets	43,631.6		1,175.4		3.68		28,963.7		930.2		4.39
Non-interest earning assets
Cash and due from banks	306.2						173.9
Allowance for credit losses	(262.7)						(263.2)
Bank owned life insurance	177.6						178.7
Other assets	2,392.4						1,206.1
Total assets	$	46,245.1					$	30,259.2
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	4,357.2	$	4.2	0.13	%	$	3,410.9	$	7.5	0.29	%
Savings and money market accounts	15,342.3		24.0		0.21		9,546.3		28.9		0.40
Certificates of deposit	1,774.0		6.5		0.49		2,113.0		23.3		1.47
Total interest-bearing deposits	21,473.5		34.7		0.22		15,070.2		59.7		0.53
Short-term borrowings	663.6		5.8		1.16		150.1		0.5		0.51
Long-term debt	308.6		12.8		5.55		—		—		—
Qualifying debt	776.7		23.9		4.12		500.5		17.9		4.76
Total interest-bearing liabilities	23,222.4		77.2		0.44		15,720.8		78.1		0.66
Interest cost of funding earning assets					0.24						0.35
Non-interest-bearing liabilities
Non-interest-bearing demand deposits	18,380.5						10,813.2
Other liabilities	811.9						622.9
Stockholders’ equity	3,830.3						3,102.3
Total liabilities and stockholders' equity	$	46,245.1					$	30,259.2
Net interest income and margin (4)			$	1,098.2	3.44	%			$	852.1	4.03	%

(1)Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was $24.9 million and $20.6 million for the nine months ended September 30, 2021 and 2020, respectively.

(2)Included in the yield computation are net loan fees of $95.9 million and $61.5 million for the nine months ended September 30, 2021 and 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.

Table of Contents


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021 versus 2020						2021 versus 2020
	Increase (Decrease) Due to Changes in (1)						Increase (Decrease) Due to Changes in (1)
	Volume		Rate		Total		Volume		Rate		Total
	(in millions)
Interest income:
Loans held for sale	$	61.1	$	0.2	$	61.3	$	103.6	$	0.2	$	103.8
Loans:
Commercial and industrial	23.6		2.5		26.1		86.5		(27.8)		58.7
CRE - non-owner occupied	4.3		0.4		4.7		13.3		(10.3)		3.0
CRE - owner-occupied	(2.5)		1.0		(1.5)		(7.6)		(2.3)		(9.9)
Construction and land development	9.3		(1.0)		8.3		25.6		(5.0)		20.6
Residential real estate	27.3		(4.7)		22.6		43.0		(11.5)		31.5
Consumer	—		(0.1)		(0.1)		(0.4)		(0.2)		(0.6)
Total HFI loans	62.0		(1.9)		60.1		160.4		(57.1)		103.3
Securities:
Securities - taxable	12.6		(1.8)		10.8		32.3		(10.4)		21.9
Securities - tax-exempt	5.4		(0.1)		5.3		17.9		(1.8)		16.1
Total securities	18.0		(1.9)		16.1		50.2		(12.2)		38.0
Other	—		0.5		0.5		2.7		(2.6)		0.1
Total interest income	141.1		(3.1)		138.0		316.9		(71.7)		245.2

Interest expense:
Interest-bearing transaction accounts	0.3		(0.3)		—		0.9		(4.2)		(3.3)
Savings and money market	3.5		(0.3)		3.2		9.1		(14.0)		(4.9)
Certificates of deposit	0.1		(3.2)		(3.1)		(1.2)		(15.6)		(16.8)
Short-term borrowings	1.0		0.1		1.1		4.5		0.8		5.3
Long-term debt	8.2		—		8.2		12.8		—		12.8
Qualifying debt	4.6		(1.7)		2.9		8.5		(2.5)		6.0
Total interest expense	17.7		(5.4)		12.3		34.6		(35.5)		(0.9)

Net change	$	123.4	$	2.3	$	125.7	$	282.3	$	(36.2)	$	246.1

(1) Changes attributable to both volume and rate are designated as volume changes.

Comparison of interest income, interest expense and net interest margin

The Company's primary source of revenue is interest income. For the three months ended ~~March 31,~~September 30, 2021, interest income was ~~$334.1~~$442.8 million, an increase of ~~$26.9~~$138.0 million, or ~~8.8%~~45.3%, compared to ~~$307.2~~$304.8 million for the three months ended ~~March 31,~~September 30, 2020. This increase was primarily the result of interest income from AmeriHome's HFS loans of $61.3 million, coupled with a ~~$5.3 billion increase in the average loan balance that drove a $21.5~~$60.1 million increase in interest income from HFI loans ~~from~~that was driven by a $6.6 billion increase in the ~~three months ended March 31, 2020.~~average HFI loan balance. Interest income from investment securities also increased by ~~$6.6~~$16.1 million for the comparable period due to an increase in the average investment balance of ~~$2.5~~$3.4 billion. ~~These increases were partially offset by a decrease in other~~

For the nine months ended September 30, 2021, interest income was $1.2 billion, an increase of $245.2 million, or 26.4%, compared to $930.2 million for the nine months ended September 30, 2020. This increase was primarily the result of interest income from AmeriHome's HFS loans of $104.1 million and a $5.2 billion increase in the average HFI loan balance that drove a $103.3 million increase in interest ~~bearing cash accounts and federal funds sold~~income from HFI loans. Interest income from investment securities also increased by $38.0 million for the comparable period due to an increase in the average investment balance of ~~$1.2 million.~~$3.2 billion.

For the three months ended ~~March 31,~~September 30, 2021, interest expense was ~~$16.8~~$32.4 million, ~~a decrease~~an increase of ~~$21.4~~$12.3 million, or ~~56.0%~~61.2%, compared to ~~$38.2~~$20.1 million for the three months ended ~~March 31,~~September 30, 2020. This increase was primarily the result of an increase in borrowings resulting from the AmeriHome acquisition, combined with the issuance of $600.0 million in subordinated debt and $242.0 million in credit linked notes in June 2021.

For the nine months ended September 30, 2021, interest expense was $77.2 million, a decrease of $0.9 million, or 1.2%, compared to $78.1 million for the nine months ended September 30, 2020. Interest expense on deposits decreased ~~$21.7~~$25.0 million for the same period despite an increase in average interest-bearing deposits of ~~$5.1~~$6.4 billion as the Company benefited from repricing efforts in a lower rate environment, resulting in a 6831 basis point reduction in the average cost of interest-bearing deposits. This decrease was offset in part by an increase in interest expense due to an increase in borrowings resulting from the

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AmeriHome acquisition, combined with the issuance of $600.0 million in subordinated debt and $242.0 million in credit linked notes in June 2021.

For the three months ended ~~March 31,~~September 30, 2021, net interest income was ~~$317.3~~$410.4 million, an increase of ~~$48.3~~$125.7 million, or ~~18.0%~~44.2%, compared to ~~$269.0~~$284.7 million for the three months ended ~~March 31,~~September 30, 2020. The increase in net interest income reflects a ~~$12.8~~$17.2 billion increase in average interest-earning assets, partially offset by an increase of ~~$5.1~~$9.3 billion in average interest-bearing liabilities. The decrease in net interest margin of 8528 basis points to ~~3.37%~~3.43% is largely the result of ~~excess liquidity from deposit growth that has outpaced loan growth as well as~~ a decrease in loan and investment security yields due to a lower rate environment and increased funding costs on AmeriHome's borrowings. The decrease to net interest margin was partially offset by lower deposit costs compared to the same period in 2020.

For the nine months ended September 30, 2021, net interest income was $1.1 billion, an increase of $246.1 million, or 28.9%, compared to $852.1 million for the nine months ended September 30, 2020. The increase in net interest income reflects a $14.7 billion increase in average interest-earning assets, partially offset by an increase of $7.5 billion in average interest-bearing liabilities. The decrease in net interest margin of 59 basis points to 3.44% is largely the result of a decrease in loan and investment security yields due to a lower rate environment and higher funding costs during the ~~three~~nine months ended ~~March 31,~~September 30, 2021. These decreases to net interest margin were offset in part by lower deposit ~~and funding~~ costs ~~for the three months ended March 31, 2021~~ compared to the same period in 2020.

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Provision for Credit Losses

The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans, unfunded loan commitments, and investment securities. The provision is equal to the amount required to maintain the allowance for credit losses at a level that is adequate to absorb estimated lifetime credit losses inherent in the loan and investment securities portfolios at the time that the loan is originated or the security is purchased. The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the three months ended ~~March 31,~~September 30, 2021, the Company recorded a provision for credit losses of $12.3 million and a release of credit loss provisions of ~~$32.4~~$34.6 million ~~was~~for the nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, the Company recognized ~~compared to~~ a provision for credit losses of ~~$51.2~~$14.6 million ~~for the three months ended March 31, 2020.~~and $157.8 million, respectively. The ~~significant~~ decrease in the provision for credit losses from the three and nine months ended ~~March 31,~~September 30, 2020 is primarily related to the current improved economic outlook.

Non-interest Income

The following table presents a summary of non-interest income for the periods presented:


		Three Months Ended March 31,							Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		Increase (Decrease)					2021		2020		Increase (Decrease)		2021		2020		Increase (Decrease)
		(in millions)						(in millions)
Net gain on loan purchase, origination, and sale activities										Net gain on loan purchase, origination, and sale activities	$	121.0	$	—	$	121.0	$	253.0	$	—	$	253.0
Service charges and fees										Service charges and fees	7.1		5.9		1.2		21.2		17.4		3.8
Commercial banking related income										Commercial banking related income	4.6		4.5		0.1		12.5		10.7		1.8
Income from equity investments	Income from equity investments	$	7.6	$	3.8	$	3.8			Income from equity investments	2.5		1.2		1.3		16.9		6.3		10.6
Service charges and fees		6.7		6.4		0.3
Net loan servicing revenue										Net loan servicing revenue	2.2		—		2.2		(18.6)		—		(18.6)
Foreign currency income	Foreign currency income	2.2		1.3		0.9				Foreign currency income	1.9		1.8		0.1		5.6		4.3		1.3
Card income		1.6		1.7		(0.1)
Income from bank owned life insurance	Income from bank owned life insurance	1.0		1.0		—				Income from bank owned life insurance	1.0		1.3		(0.3)		2.9		9.0		(6.1)
Lending related income and gains (losses) on sale of loans, net		(0.1)		0.6		(0.7)
Fair value losses on assets measured at fair value, net		(1.5)		(11.3)		9.8
Fair value (loss) gain on assets measured at fair value, net										Fair value (loss) gain on assets measured at fair value, net	(2.2)		5.9		(8.1)		(0.5)		(1.0)		0.5

Other income	Other income	2.2		1.6		0.6				Other income	—		—		—		0.8		0.3		0.5
Total non-interest income	Total non-interest income	$	19.7	$	5.1	$	14.6			Total non-interest income	$	138.1	$	20.6	$	117.5	$	293.8	$	47.0	$	246.8

Total non-interest income for the three months ended ~~March 31,~~September 30, 2021 compared to the same period in 2020 increased $117.5 million. The increase in non-interest income was driven by AmeriHome mortgage banking revenue as net gain on loan purchase, origination, and sale activities totaled $121.0 million for the three months ended September 30, 2021. The increase in non-interest income was partially offset by a decrease in fair value adjustments of $8.1 million.

Total non-interest income for the nine months ended September 30, 2021 compared to the same period in 2020 increased by ~~$14.6~~$246.8 million. The primary driver of the increase in non-interest income relates to net fair value loss adjustments on assets measured at fair value of $1.5 million for the three months ended March 31, 2021, compared to $11.3 million for the same period in 2020. This change is predominantly related to a decrease in the fair value of equity securities, consisting primarily of preferred stock of other financial institutions. Further contributing to the increase in non-interest income is primarily attributable to net gain on loan origination and sale activities of $253.0 million from AmeriHome and an increase of $10.6 million in income from equity ~~investments. During the three months ended March 31, 2021, income from equity~~ investments, ~~increased $3.8 million~~ due to an increase in warrant activity. These increases in non-interest income were partially offset by a loss of $18.6 million from ~~the three months ended March 31, 2020.~~

AmeriHome loan

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servicing activities and a decrease in income from bank-owned life insurance of $6.1 million, as the prior year period included a one-time enhancement fee of $5.6 million from the surrender and replacement of certain policies.

Non-interest Expense

The following table presents a summary of non-interest expense for the periods presented:


		Three Months Ended March 31,							Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		Increase (Decrease)					2021		2020		Increase (Decrease)		2021		2020		Increase (Decrease)
		(in millions)						(in millions)
Salaries and employee benefits	Salaries and employee benefits	$	83.7	$	72.1	$	11.6			Salaries and employee benefits	$	133.5	$	78.8	$	54.7	$	346.1	$	220.5	$	125.6
Loan servicing expenses										Loan servicing expenses	15.6		—		15.6		37.9		—		37.9
Data processing										Data processing	15.4		8.9		6.5		40.3		26.1		14.2
Legal, professional, and directors' fees	Legal, professional, and directors' fees	10.1		10.4		(0.3)				Legal, professional, and directors' fees	13.7		10.0		3.7		37.8		31.1		6.7
Data processing		9.9		8.6		1.3
Occupancy	Occupancy	8.6		8.2		0.4				Occupancy	12.4		9.4		3.0		31.4		25.7		5.7
Loan acquisition and origination expenses										Loan acquisition and origination expenses	9.7		—		9.7		20.2		—		20.2
Deposit costs	Deposit costs	6.3		7.3		(1.0)				Deposit costs	7.3		3.2		4.1		20.7		14.0		6.7
Insurance	Insurance	4.2		3.0		1.2				Insurance	6.2		3.1		3.1		15.9		9.5		6.4
Loan and repossessed asset expenses	Loan and repossessed asset expenses	2.2		1.5		0.7				Loan and repossessed asset expenses	2.5		1.8		0.7		7.2		5.3		1.9
Intangible amortization										Intangible amortization	1.9		0.4		1.5		4.2		1.2		3.0
Business development	Business development	0.8		2.3		(1.5)				Business development	1.9		1.0		0.9		4.2		4.1		0.1
Marketing	Marketing	0.6		0.9		(0.3)				Marketing	0.9		0.8		0.1		3.2		2.6		0.6
Card expense	Card expense	0.6		0.7		(0.1)				Card expense	0.6		0.5		0.1		1.8		1.6		0.2
Intangible amortization		0.5		0.4		0.1
Net gain on sales / valuations of repossessed and other assets		(0.3)		(1.4)		1.1
Acquisition related expense		0.4		—		0.4
Net (gain) loss on sales / valuations of repossessed and other assets										Net (gain) loss on sales / valuations of repossessed and other assets	(1.3)		0.1		(1.4)		(3.1)		(1.3)		(1.8)
Acquisition and restructure expenses										Acquisition and restructure expenses	2.4		—		2.4		18.5		—		18.5

Other expense	Other expense	7.4		6.5		0.9				Other expense	11.1		6.1		5.0		27.3		19.0		8.3
Total non-interest expense	Total non-interest expense	$	135.0	$	120.5	$	14.5			Total non-interest expense	$	233.8	$	124.1	$	109.7	$	613.6	$	359.4	$	254.2

Total non-interest expense for the three months ended ~~March 31,~~September 30, 2021 increased ~~$14.5~~$109.7 million compared to the same period in 2020. The increase in non-interest expense was driven by anthe AmeriHome acquisition, which contributed to the increase in salaries and employee benefits asof $54.7 million from the ~~Company continues~~addition of approximately 1,000 employees and also created new types of expenses related to ~~support its growth, which also increased data processing, insurance,~~mortgage banking activities, including loan servicing expenses of $15.6 million and ~~occupancy expense to a lesser degree.~~loan acquisition and origination expenses of $9.7 million. In addition, the Company ~~recognized a $1.4~~incurred acquisition and restructure expenses related to AmeriHome of $2.4 million, ~~gain on~~which includes costs related to efforts to optimize the ~~sale~~Company's balance sheet, including the disposition of ~~an OREO property during~~MSRs and repurchase of loans.

Total non-interest expense for the ~~three~~nine months ended ~~March 31, 2020,~~September 30, 2021 increased $254.2 million compared to ~~minimal activity~~the same period in 2020. As explained above, the ~~current quarter.~~increase in non-interest expense over the prior year was driven by the AmeriHome acquisition, which increased employee headcount, added expenses specific to mortgage banking activities, and resulted in recognition of $18.5 million in acquisition and restructure expenses for the nine months ended September 30, 2021.

Income Taxes

rate is primarily due to projected pretax book income growth outpacing growth in permanent tax benefit items for the year.

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Business Segment Results

The Company's reportable segments are aggregated with a focus on products and services offered and consist of three reportable segments:

The following tables present selected operating segment information for the periods presented:


		Consolidated Company		Commercial		Consumer Related		Corporate & Other			Consolidated Company		Commercial		Consumer Related		Corporate & Other
At March 31, 2021		(in millions)
Loans, net of deferred loan fees and costs		$	28,711.0	$	20,660.4	$	8,048.9	$	1.7
At September 30, 2021										At September 30, 2021	(in millions)
HFI loans, net of deferred loan fees and costs										HFI loans, net of deferred loan fees and costs	$	34,801.9	$	22,823.9	$	11,978.0	$	—
Deposits	Deposits	38,393.1		24,126.0		13,286.5		980.6		Deposits	45,282.6		28,409.9		15,751.2		1,121.5

At December 31, 2020	At December 31, 2020									At December 31, 2020
Loans, net of deferred loan fees and costs		$	27,053.0	$	20,245.8	$	6,798.2	$	9.0
HFI loans, net of deferred loan fees and costs										HFI loans, net of deferred loan fees and costs	$	27,053.0	$	20,245.8	$	6,798.2	$	9.0
Deposits	Deposits	31,930.5		21,448.0		9,936.8		545.7		Deposits	31,930.5		21,448.0		9,936.8		545.7

Three Months Ended March 31, 2021 (in millions)
Pre-tax income $ 234.4 $ 220.9 $ 71.5 $ (58.0)
Three Months Ended March 31, 2020
Pre-tax income $ 102.4 $ 109.6 $ 27.3 $ (34.5)


Three Months Ended September 30, 2021	(in millions)
Pre-tax income (loss)	$	302.4	$	193.2	$	176.0	$	(66.8)

Nine Months Ended September 30, 2021
Pre-tax income (loss)	$	813.0	$	623.1	$	361.1	$	(171.2)

Three Months Ended September 30, 2020
Pre-tax income (loss)	$	166.6	$	161.3	$	63.9	$	(58.6)

Nine Months Ended September 30, 2020
Pre-tax income (loss)	$	381.9	$	366.3	$	153.3	$	(137.7)

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BALANCE SHEET ANALYSIS

Total assets increased ~~$6.9~~$16.3 billion, or ~~19.0%~~44.7%, to ~~$43.4~~$52.8 billion at ~~March 31,~~September 30, 2021, compared to $36.5 billion at December 31, 2020. The increase in total assets ~~relates primarily to an increase in cash~~was driven by continued organic loan and ~~investment securities from continued~~ deposit growth ~~in addition to continued loan growth. Loans~~and the acquisition of AmeriHome. HFI loans increased ~~$1.7~~by $7.7 billion, or ~~6.1%~~28.6%, to ~~$28.7~~$34.8 billion ~~at March 31,~~as of September 30, 2021, compared to $27.1 billion atas of December 31, 2020. The increase in HFI loans from December 31, 2020 was driven by increases in residential real estate loans of $5.0 billion, commercial and industrial loans of ~~$746.3 million, residential real estate loans of $674.5 million, and~~$2.2 billion, construction and land development loans of ~~$336.5~~$512.0 million, and CRE, non-owner occupied loans of $189.0 million. These increases were partially offset by a decrease in CRE, owner occupied loans of ~~$104.8~~$160.2 million. Additionally, HFS loans rose by $6.5 billion, up from zero as of December 31, 2020 related to the acquisition of AmeriHome.

Total liabilities increased ~~$6.6~~$15.2 billion, or ~~20.1%~~46.0%, to ~~$39.7~~$48.3 billion at ~~March 31,~~September 30, 2021, compared to $33.0 billion at December 31, 2020. The increase in liabilities is due primarily to an increase in total deposits of ~~$6.5~~$13.4 billion, or ~~20.2%~~41.8%, to ~~$38.4~~$45.3 billion. The increase in deposits from December 31, 2020 was driven by ~~an increase~~increases of ~~$4.1~~$7.6 billion in non-interest bearing demand deposits, ~~and $2.9~~$5.0 billion in savings and money market ~~accounts. These increases were offset in part by a decrease in~~accounts, and interest bearing demand deposits of ~~$503.0~~$557.9 million. Other borrowings also increased $982.5 million due to an increase in overnight borrowings, AmeriHome senior notes, and issuance of credit linked notes. Qualified debt also increased $516.2 million primarily related to issuance of $600.0 million in subordinated debt in June 2021, partially offset by redemption of $75.0 million in subordinated debt in July 2021.

Total stockholders’ equity increased by ~~$299.2 million,~~$1.1 billion, or ~~8.8%~~32.2%, to ~~$3.7~~$4.5 billion at ~~March 31,~~September 30, 2021 from $3.4 billion at December 31, 2020. The increase in stockholders' equity is primarily a function of net income and ~~the sale~~net proceeds of ~~2.3~~$573.5 million ~~shares~~from issuances of preferred and common stock ~~in a registered direct offering~~ during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, partially offset by ~~share repurchases in 2020 and~~ quarterly dividends to shareholders.

Investment securities

Debt securities are classified at the time of acquisition as either HTM, AFS, or trading based upon various factors, including asset/liability management strategies, liquidity and profitability objectives, and regulatory requirements. HTM securities are carried at amortized cost, adjusted for amortization of premiums or accretion of discounts. AFS securities are securities that may be sold prior to maturity based upon asset/liability management decisions. Investment securities classified as AFS are carried at fair value. Unrealized gains or losses on AFS debt securities are recorded as part of AOCI in stockholders’ equity, net of tax. Amortization of premiums or accretion of discounts on MBS is periodically adjusted for estimated prepayments. Trading securities are reported at fair value, with unrealized gains and losses included in current period earnings.

The Company's investment securities portfolio is utilized as collateral for borrowings, required collateral for public deposits and customer repurchase agreements, and to manage liquidity, capital, and interest rate risk.

The following table summarizes the carrying value of the investment securities portfolio for each of the periods below:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Debt securities	Debt securities					Debt securities
CLO	CLO	$	980.7	$	146.9	CLO	$	963.9	$	146.9
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	87.8		84.6		Commercial MBS issued by GSEs	75.5		84.6
Corporate debt securities	Corporate debt securities	285.1		270.2		Corporate debt securities	364.5		270.2

Private label residential MBS	Private label residential MBS	1,900.6		1,476.9		Private label residential MBS	1,836.1		1,476.9
Residential MBS issued by GSEs	Residential MBS issued by GSEs	2,249.6		1,486.6		Residential MBS issued by GSEs	1,969.0		1,486.6
Tax-exempt	Tax-exempt	2,027.7		1,756.2		Tax-exempt	2,150.5		1,756.2

U.S. treasury securities	U.S. treasury securities	50.0		—		U.S. treasury securities	10.0		—
Other	Other	56.4		55.9		Other	61.0		55.9
Total debt securities	Total debt securities	$	7,637.9	$	5,277.3	Total debt securities	$	7,430.5	$	5,277.3

Equity securities	Equity securities					Equity securities
CRA investments	CRA investments	$	57.4	$	53.4	CRA investments	$	62.1	$	53.4
Preferred stock	Preferred stock	135.5		113.9		Preferred stock	116.3		113.9
Total equity securities	Total equity securities	$	192.9	$	167.3	Total equity securities	$	178.4	$	167.3

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Loans HFS

The Company acquired loans held for sale as part of the AMH acquisition. The following is a summary of loans held for sale by type:


	September 30, 2021
	(in millions)
Government-insured or guaranteed:
EBO (1)	$	1,937.9
Non-EBO	1,166.7
Total government-insured or guaranteed	3,104.6
Agency-conforming	3,427.1
Non-agency	2.6
Total loans HFS	$	6,534.3

(1) EBO loans are delinquent loans repurchased under the terms of the Ginnie Mae MBS program that can be resold when loans are brought current.

Loans HFI

The table below summarizes the distribution of the Company’s held for investment loan portfolio:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(in millions)					(in millions)
Warehouse lending	Warehouse lending	$	4,901.8	$	4,340.2	Warehouse lending	$	4,759.9	$	4,340.2
Municipal & nonprofit	Municipal & nonprofit	1,676.9		1,728.8		Municipal & nonprofit	1,638.2		1,728.8
Tech & innovation	Tech & innovation	2,514.2		2,548.3		Tech & innovation	1,306.3		1,403.0
Equity fund resources						Equity fund resources	3,194.0		1,145.3
Other commercial and industrial	Other commercial and industrial	6,174.3		5,911.2		Other commercial and industrial	5,807.4		5,911.2
CRE - owner occupied	CRE - owner occupied	1,814.5		1,909.3		CRE - owner occupied	1,797.8		1,909.3
Hotel franchise finance	Hotel franchise finance	2,038.8		1,983.9		Hotel franchise finance	2,117.9		1,983.9
Other CRE - non-owned occupied		3,613.0		3,640.2
Other CRE - non-owner occupied						Other CRE - non-owner occupied	3,684.8		3,640.2
Residential	Residential	3,055.8		2,378.5		Residential	7,412.7		2,378.5
Construction and land development	Construction and land development	2,767.6		2,429.4		Construction and land development	2,927.5		2,429.4
Other	Other	154.1		183.2		Other	155.4		183.2
Total loans HFI	Total loans HFI	28,711.0		27,053.0		Total loans HFI	34,801.9		27,053.0
Allowance for credit losses	Allowance for credit losses	(247.1)		(278.9)		Allowance for credit losses	(246.9)		(278.9)
Total loans HFI, net of allowance	Total loans HFI, net of allowance	$	28,463.9	$	26,774.1	Total loans HFI, net of allowance	$	34,555.0	$	26,774.1

Concentrations of Lending Activities

The Company monitors concentrations within three broad categories: industry, product, and collateral. The Company’s loan portfolio includes significant credit exposure to the CRE market. As of each of the periods ended ~~March 31,~~September 30, 2021 and December 31, 2020, CRE related loans accounted for approximately ~~37%~~31% and 38% of total loans, respectively. Substantially all of these loans are secured by first liens with an initial loan to value ratio of generally not more than 75%. Approximately ~~27%~~25% and 28% of these CRE loans, excluding construction and land loans, were owner-occupied at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

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Non-performing Assets

Total non-performing loans decreased by ~~$2.0~~$43.5 million at ~~March 31,~~September 30, 2021 to ~~$146.4~~$104.9 million from $148.4 million at December 31, 2020.


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
		(dollars in millions)							(dollars in millions)
Total nonaccrual loans (1)	Total nonaccrual loans (1)	$	113.6		$	115.2		Total nonaccrual loans (1)	$	78.1		$	115.2
Loans past due 90 days or more on accrual status	Loans past due 90 days or more on accrual status	—			—			Loans past due 90 days or more on accrual status	—			—
Accruing troubled debt restructured loans	Accruing troubled debt restructured loans	32.8			33.2			Accruing troubled debt restructured loans	26.8			33.2
Total nonperforming loans	Total nonperforming loans	$	146.4		$	148.4		Total nonperforming loans	$	104.9		$	148.4

Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	$	4.2		$	1.4		Other assets acquired through foreclosure, net	$	11.5		$	1.4

Nonaccrual HFI loans to funded HFI loans	Nonaccrual HFI loans to funded HFI loans	0.40		%	0.43		%	Nonaccrual HFI loans to funded HFI loans	0.22		%	0.43		%
Loans past due 90 days or more on accrual status to funded HFI loans	Loans past due 90 days or more on accrual status to funded HFI loans	—			—			Loans past due 90 days or more on accrual status to funded HFI loans	—			—

(1)Includes non-accrual TDR loans of ~~$27.4~~$28.3 million and $28.4 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Interest income that would have been recorded under the original terms of non-accrual loans was ~~$1.5~~$1.4 million and ~~$0.7~~$1.7 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $4.4 million and $4.1 million for the nine months ended September 30, 2021 and 2020, respectively.

~~Table of Contents~~

The composition of nonaccrual HFI loans by loan type and by segment were as follows:


		March 31, 2021							September 30, 2021
		Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans					Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans
		(dollars in millions)						(dollars in millions)
Warehouse lending	Warehouse lending	$	—	—	%	—	%			Warehouse lending	$	—	—	%	—	%
Municipal & nonprofit	Municipal & nonprofit	—		—		—				Municipal & nonprofit	—		—		—
Tech & innovation	Tech & innovation	12.7		11.2		0.05				Tech & innovation	17.3		22.1		0.04
Equity fund resources										Equity fund resources	—		—		—
Other commercial and industrial	Other commercial and industrial	15.0		13.2		0.05				Other commercial and industrial	16.1		20.6		0.05
CRE - owner occupied	CRE - owner occupied	32.1		28.3		0.11				CRE - owner occupied	18.2		23.3		0.05
Hotel franchise finance	Hotel franchise finance	—		—		—				Hotel franchise finance	—		—		—
Other CRE - non-owned occupied		41.5		36.5		0.15
Other CRE - non-owner occupied										Other CRE - non-owner occupied	14.1		18.1		0.04
Residential	Residential	9.0		7.9		0.03				Residential	9.7		12.4		0.03
Construction and land development	Construction and land development	—		—		—				Construction and land development	—		—		—
Other	Other	3.3		2.9		0.01				Other	2.7		3.5		0.01
Total non-accrual loans	Total non-accrual loans	$	113.6	100.0	%	0.40	%			Total non-accrual loans	$	78.1	100.0	%	0.22	%


		December 31, 2020							December 31, 2020
		Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans					Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans
		(dollars in millions)						(dollars in millions)
Warehouse lending	Warehouse lending	$	—	—	%	—	%			Warehouse lending	$	—	—	%	—	%
Municipal & nonprofit	Municipal & nonprofit	1.9		1.7		0.01				Municipal & nonprofit	1.9		1.7		0.01
Tech & innovation	Tech & innovation	13.5		11.7		0.05				Tech & innovation	13.5		11.7		0.05
Equity fund resources										Equity fund resources	—		—		—
Other commercial and industrial	Other commercial and industrial	17.2		14.9		0.06				Other commercial and industrial	17.2		14.9		0.06
CRE - owner occupied	CRE - owner occupied	34.5		29.9		0.13				CRE - owner occupied	34.5		29.9		0.13
Hotel franchise finance	Hotel franchise finance	—		—		—				Hotel franchise finance	—		—		—
Other CRE - non-owned occupied		36.5		31.7		0.14
Other CRE - non-owner occupied										Other CRE - non-owner occupied	36.5		31.7		0.14
Residential	Residential	11.4		9.9		0.04				Residential	11.4		9.9		0.04
Construction and land development	Construction and land development	—		—		—				Construction and land development	—		—		—
Other	Other	0.2		0.2		—				Other	0.2		0.2		—
Total non-accrual loans	Total non-accrual loans	$	115.2	100.0	%	0.43	%			Total non-accrual loans	$	115.2	100.0	%	0.43	%

Table of Contents

Troubled Debt Restructured Loans

A TDR loan is a loan on which the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. The loan terms that have been modified or restructured due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, an extension of the maturity or renewal of the loan at an interest rate below current market, a reduction in the face amount of the debt, a reduction in the accrued interest, or deferral of interest payments. The majority of the Company's modifications are extensions in terms or deferral of payments which result in no lost principal or interest followed by reductions in interest rates or accrued interest. Consistent with regulatory guidance, a TDR loan that is subsequently modified in another restructuring agreement but has shown sustained performance and classification as a TDR, will be removed from TDR status provided that the modified terms were market-based at the time of modification.

~~Table of Contents~~

Allowance for Credit Losses on HFI Loans

The allowance for credit losses consists of the allowance for credit losses on loans and an allowance for credit losses on unfunded loan commitments. The allowance for credit losses on HTM securities is estimated separately from loans. The following table summarizes the activity in the Company's allowance for credit losses on loans held for investment for the period ~~indicated:~~indicated, which includes an estimate of future recoveries:


		Three Months Ended March 31, 2021
		Balance, December 31, 2020		Provision for (Recovery of) Credit Losses				Write-offs				Recoveries				Balance, March 31, 2021						Three Months Ended September 30, 2021
		(1)								(1)								Balance, June 30, 2021				Provision for (Recovery of) Credit Losses								Write-offs	Recoveries				Balance, September 30, 2021
		(in millions)																(in millions)
Warehouse lending	Warehouse lending	$	3.4			$	0.2			$	—			$	—				$	3.6	Warehouse lending			$	3.2			$	(0.6)				$	—			$	—			$	2.6
Municipal & nonprofit	Municipal & nonprofit	15.9		(0.7)						—				—					15.2		Municipal & nonprofit			15.9				(0.7)					—				—				15.2
Tech & innovation	Tech & innovation	35.3		(11.6)				—				(0.2)				23.9			Tech & innovation			20.5				8.6					—				(0.1)				29.2
Equity fund resources																			Equity fund resources			1.1				6.1					—				—				7.2
Other commercial and industrial	Other commercial and industrial	94.7		(16.5)				0.1				(0.3)				78.4			Other commercial and industrial			76.4				18.3					3.3				(0.2)				91.6
CRE - owner occupied	CRE - owner occupied	18.6		(8.9)				—				—				9.7			CRE - owner occupied			9.3				0.1					—				—				9.4
Hotel franchise finance	Hotel franchise finance	43.3		6.1				—				—				49.4			Hotel franchise finance			49.4				0.2					—				—				49.6
Other CRE - non-owned occupied		39.9		(5.4)				2.0				(0.2)				32.7
Other CRE - non-owner occupied																			Other CRE - non-owner occupied			29.8				(9.7)					—				—				20.1
Residential	Residential	0.8		2.4				—				—				3.2			Residential			8.1				(2.0)					—				—				6.1
Construction and land development	Construction and land development	22.0		3.9				—				—				25.9			Construction and land development			14.1				(2.6)					—				—				11.5
Other	Other	5.0		0.1				—				—				5.1			Other			5.1				(0.7)					—				—				4.4
Total	Total	$	278.9	$	(30.4)			$	2.1			$	(0.7)			$	247.1		Total			$	232.9			$	17.0				$	3.3			$	(0.3)			$	246.9


Net charge-offs to average loans outstanding	0.04	%
Allowance for credit losses on loans to funded HFI loans	0.71


	Nine Months Ended September 30, 2021
	Balance, December 31, 2020		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries		Balance, September 30, 2021
	(in millions)
Warehouse lending	$	3.4	$	(0.8)	$	—	$	—	$	2.6
Municipal & nonprofit	15.9		(0.7)		—		—		15.2
Tech & innovation	33.4		(2.6)		2.0		(0.4)		29.2
Equity fund resources	1.9		5.3		—		—		7.2
Other commercial and industrial	94.7		(0.2)		3.7		(0.8)		91.6
CRE - owner occupied	18.6		(9.2)		—		—		9.4
Hotel franchise finance	43.3		6.3		—		—		49.6
Other CRE - non-owner occupied	39.9		(19.2)		2.0		(1.4)		20.1
Residential	0.8		5.2		—		(0.1)		6.1
Construction and land development	22.0		(10.5)		—		—		11.5
Other	5.0		(1.1)		—		(0.5)		4.4
Total	$	278.9	$	(27.5)	$	7.7	$	(3.2)	$	246.9


Net charge-offs to average loans outstanding	0.02	%
~~Allowance for credit losses on loans to funded HFI loans~~	~~0.86~~

~~(1)Includes an estimate~~Table of ~~future recoveries.~~Contents


		Three Months Ended March 31, 2020
		Balance, January 1, 2020		Provision for (Recovery of) Credit Losses				Write-offs				Recoveries				Balance, March 31, 2020						Three Months Ended September 30, 2020
		(1)								(1)								Balance, June 30, 2020				Provision for (Recovery of) Credit Losses								Write-offs	Recoveries				Balance, September 30, 2020
		(in millions)																(in millions)
Warehouse lending	Warehouse lending	$	0.2			$	0.2			$	—			$	—				$	0.4	Warehouse lending			$	0.7			$	0.1				$	—			$	—			$	0.8
Municipal & nonprofit	Municipal & nonprofit	17.4		(1.2)						—				—					16.2		Municipal & nonprofit			17.1				0.8					—				—				17.9
Tech & innovation	Tech & innovation	22.4		17.4				—				—				39.8			Tech & innovation			53.6				(10.0)					6.4				—				37.2
Equity fund resources																			Equity fund resources			1.0				0.7					—				—				1.7
Other commercial and industrial	Other commercial and industrial	95.8		23.3				0.1				(1.3)				120.3			Other commercial and industrial			109.9				(0.7)					0.7				(0.2)				108.7
CRE - owner occupied	CRE - owner occupied	10.4		0.1				—				—				10.5			CRE - owner occupied			15.6				3.9					0.1				—				19.4
Hotel franchise finance	Hotel franchise finance	14.1		4.7				—				—				18.8			Hotel franchise finance			35.8				2.2					—				—				38.0
Other CRE - non-owned occupied		10.5		1.7				—				(2.0)				14.2
Other CRE - non-owner occupied																			Other CRE - non-owner occupied			32.7				9.2					1.2				—				40.7
Residential	Residential	3.8		(2.5)				—				—				1.3			Residential			1.7				—					0.3				(0.4)				1.8
Construction and land development	Construction and land development	6.2		0.9				—				—				7.1			Construction and land development			35.8				2.9					—				—				38.7
Other	Other	6.1		0.6				—				—				6.7			Other			6.6				(0.9)					0.1				—				5.6
Total	Total	$	186.9	$	45.2			$	0.1			$	(3.3)			$	235.3		Total			$	310.5			$	8.2				$	8.8			$	(0.6)			$	310.5

Net ~~recoveries~~charge-offs to average loans outstanding

~~(0.06)~~0.13

Allowance for credit losses on loans to funded HFI loans

~~1.02~~1.19


	Nine Months Ended September 30, 2020
	Balance, January 1, 2020		Provision for (Recovery of) Credit Losses		Write-offs		Recoveries		Balance, September 30, 2020
	(in millions)
Warehouse lending	$	0.2	$	0.6	$	—	$	—	$	0.8
Municipal & nonprofit	17.4		0.5		—		—		17.9
Tech & innovation	21.0		25.4		9.2		—		37.2
Equity fund resources	1.4		0.3		—		—		1.7
Other commercial and industrial	95.8		13.6		2.7		(2.0)		108.7
CRE - owner occupied	10.4		9.1		0.1		—		19.4
Hotel franchise finance	14.1		23.9		—		—		38.0
Other CRE - non-owner occupied	10.5		30.7		2.1		(1.6)		40.7
Residential	3.8		(2.1)		0.3		(0.4)		1.8
Construction and land development	6.2		32.5		—		—		38.7
Other	6.1		(0.4)		0.2		(0.1)		5.6
Total	$	186.9	$	134.1	$	14.6	$	(4.1)	$	310.5

Net charge-offs to average loans outstanding

0.06

7694

Table of Contents

The following table summarizes the allocation of the allowance for credit losses on loans held for investment by loan type.


		March 31, 2021							September 30, 2021
		Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans			Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans
		(dollars in millions)							(dollars in millions)
Warehouse lending	Warehouse lending	$	3.6	1.5	%	17.1	%	Warehouse lending	$	2.6	1.0	%	13.7	%
Municipal & nonprofit	Municipal & nonprofit	15.2		6.2		5.8		Municipal & nonprofit	15.2		6.2		4.7
Tech & innovation	Tech & innovation	23.9		9.6		8.8		Tech & innovation	29.2		11.8		3.7
Equity fund resources								Equity fund resources	7.2		2.9		9.2
Other commercial and industrial	Other commercial and industrial	78.4		31.7		21.5		Other commercial and industrial	91.6		37.1		16.7
CRE - owner occupied	CRE - owner occupied	9.7		3.9		6.4		CRE - owner occupied	9.4		3.8		5.2
Hotel franchise finance	Hotel franchise finance	49.4		20.0		7.1		Hotel franchise finance	49.6		20.1		6.1
Other CRE - non-owned occupied		32.7		13.2		12.6
Other CRE - non-owner occupied								Other CRE - non-owner occupied	20.1		8.1		10.6
Residential	Residential	3.2		1.3		10.6		Residential	6.1		2.5		21.3
Construction and land development	Construction and land development	25.9		10.5		9.6		Construction and land development	11.5		4.7		8.4
Other	Other	5.1		2.1		0.5		Other	4.4		1.8		0.4
Total	Total	$	247.1	100.0	%	100.0	%	Total	$	246.9	100.0	%	100.0	%


		December 31, 2020							December 31, 2020
		Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans			Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans
		(dollars in millions)							(dollars in millions)
Warehouse lending	Warehouse lending	$	3.4	1.2	%	16.0	%	Warehouse lending	$	3.4	1.2	%	16.0	%
Municipal & nonprofit	Municipal & nonprofit	15.9		5.7		6.4		Municipal & nonprofit	15.9		5.7		6.4
Tech & innovation	Tech & innovation	35.3		12.7		9.4		Tech & innovation	33.4		12.0		5.2
Equity fund resources								Equity fund resources	1.9		0.7		4.2
Other commercial and industrial	Other commercial and industrial	94.7		33.9		21.8		Other commercial and industrial	94.7		33.9		21.8
CRE - owner occupied	CRE - owner occupied	18.6		6.7		7.1		CRE - owner occupied	18.6		6.7		7.1
Hotel franchise finance	Hotel franchise finance	43.3		15.5		7.3		Hotel franchise finance	43.3		15.5		7.3
Other CRE - non-owned occupied		39.9		14.3		13.5
Other CRE - non-owner occupied								Other CRE - non-owner occupied	39.9		14.3		13.5
Residential	Residential	0.8		0.3		8.8		Residential	0.8		0.3		8.8
Construction and land development	Construction and land development	22.0		7.9		9.0		Construction and land development	22.0		7.9		9.0
Other	Other	5.0		1.8		0.7		Other	5.0		1.8		0.7
Total	Total	$	278.9	100.0	%	100.0	%	Total	$	278.9	100.0	%	100.0	%

In addition to the allowance for loan losses, the Company maintains a separate allowance for credit losses related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance is included in other liabilities on the consolidated balance sheets.

The below tables reflect the activity in the allowance for credit losses on unfunded loan commitments:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
		(in millions)					(in millions)
Balance, beginning of period	Balance, beginning of period		$	37.0	$	9.0		Balance, beginning of period	$	31.3	$	36.3	$	37.0	$	9.0
Beginning balance adjustment from adoption of CECL	Beginning balance adjustment from adoption of CECL		—		15.1			Beginning balance adjustment from adoption of CECL	—		—		—		15.1
(Recovery of) provision for credit losses			(4.4)		5.5
Provision for (recovery of) credit losses								Provision for (recovery of) credit losses	0.8		8.1		(4.9)		20.3
Balance, end of period	Balance, end of period		$	32.6	$	29.6		Balance, end of period	$	32.1	$	44.4	$	32.1	$	44.4

7795

Table of Contents

Problem Loans

The Company classifies loans consistent with federal banking regulations using a nine category grading system. These loan grades are described in further detail in ~~"Item~~"Note 1. ~~Business”~~Summary of Significant Accounting Policies" in the ~~Company's Annual Report for the year ended December 31, 2020.~~Notes to Unaudited Consolidated Financial Statements" of this report. The following table presents information regarding potential and actual problem loans, consisting of loans graded as Special Mention, Substandard, Doubtful, and Loss, but which are still performing:


		March 31, 2021								September 30, 2021
		Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total HFI Loans			Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total HFI Loans
		(dollars in millions)								(dollars in millions)
Warehouse lending	Warehouse lending	—	$	—	—	%	—	%	Warehouse lending	—	$	—	—	%	—	%
Municipal & nonprofit	Municipal & nonprofit	—	—		—		—		Municipal & nonprofit	—	—		—		—
Tech & innovation	Tech & innovation	5	18.3		4.4		0.06		Tech & innovation	7	24.4		6.7		0.07
Equity fund resources									Equity fund resources	—	—		—		—
Other commercial and industrial	Other commercial and industrial	75	62.7		14.9		0.22		Other commercial and industrial	42	51.6		14.1		0.15
CRE - owner occupied	CRE - owner occupied	37	80.3		19.1		0.28		CRE - owner occupied	18	31.0		8.5		0.09
Hotel franchise finance	Hotel franchise finance	10	144.9		34.4		0.50		Hotel franchise finance	14	181.2		49.5		0.52
Other CRE - non-owned occupied		7	12.0		2.8		0.04
Other CRE - non-owner occupied									Other CRE - non-owner occupied	—	—		—		—
Residential	Residential	—	—		—		—		Residential	—	—		—		—
Construction and land development	Construction and land development	8	60.0		14.3		0.21		Construction and land development	5	18.9		5.2		0.05
Other	Other	16	42.4		10.1		0.15		Other	20	58.6		16.0		0.17
Total	Total	158	$	420.6	100.0	%	1.46	%	Total	106	$	365.7	100.0	%	1.05	%


	December 31, 2020
	Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total HFI Loans
	(dollars in millions)
Warehouse lending	—	$	—	—	%	—	%
Municipal & nonprofit	—	—		—		—
Tech & innovation	4	15.3		3.6		0.06
Equity fund resources	—	—		—		—
Other commercial and industrial	71	74.3		17.6		0.27
CRE - owner occupied	37	79.8		18.9		0.30
Hotel franchise finance	9	116.9		27.6		0.43
Other CRE - non-owner occupied	9	15.8		3.7		0.06
Residential	—	—		—		—
Construction and land development	7	47.3		11.2		0.17
Other	21	73.4		17.4		0.27
Total	158	$	422.8	100.0	%	1.56	%

December 31, 2020
Number of Loans Loan Balance Percent of Loan Balance Percent of Total HFI Loans
(dollars in millions)
Tech & innovation 4 $ 15.3 3.6 % 0.06 %
Other commercial and industrial 71 74.3 17.6 0.27
CRE - owner occupied 37 79.8 18.9 0.30
Hotel franchise finance 9 116.9 27.6 0.43
Other CRE - non-owned occupied 9 15.8 3.7 0.06
Construction and land development 7 47.3 11.2 0.17
Other 21 73.4 17.4 0.27
Total 158 $ 422.8 100.0 % 1.56 %
Mortgage Servicing Rights

As of September 30, 2021 the fair value of the Company's MSRs totaled $604.8 million.

The following is a summary of the UPB of loans included in the Company's MSR portfolio by investor:


	September 30, 2021
	(in millions)
Fannie Mae and Freddie Mac	$	35,716.5
Ginnie Mae	10,451.4
Private investors	1,043.5
Total unpaid principal balance of loans	$	47,211.4

Table of Contents

Goodwill and Other Intangible Assets

Goodwill represents the excess consideration paid for net assets acquired in a business combination over their fair value. Goodwill and other intangible assets acquired in a business combination that are determined to have an indefinite useful life are not subject to amortization, but are subsequently evaluated for impairment at least annually. The Company has goodwill and intangible assets totaling ~~$298.0~~$608.4 million at ~~March~~September 30, 2021. The increase from $298.5 million at December 31, 2020 is due to goodwill and other intangible assets acquired in the AMH acquisition in April 2021. See "Note 2. Mergers, Acquisitions and Dispositions" for further discussion of the acquisition.

The Company performs its annual goodwill and intangibles impairment tests as of October 1 each year, or more often if events or circumstances indicate that the carrying value may not be recoverable. During the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, there were no events or circumstances that indicated an interim impairment test of goodwill or other intangible assets was necessary.

Deferred Tax Assets

At ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had no deferred tax valuation allowance.

~~Table of Contents~~

Deposits

Deposits are the primary source for funding the Company's asset growth. Total deposits increased to ~~$38.4~~$45.3 billion at ~~March 31,~~September 30, 2021, from $31.9 billion at December 31, 2020, an increase of ~~$6.5~~$13.4 billion, or ~~20.2%~~41.8%. ~~The~~By deposit type, the increase in deposits is ~~largely~~primarily attributable to increases in non-interest bearing demand deposits of ~~$4.1~~$7.6 billion, ~~and~~ savings and money market accounts of ~~$2.9 billion. These increases were partially offset by a decrease in~~$5.0 billion, and interest bearing demand deposits of ~~$503.0~~$557.9 million.

WAB is a participant in the Promontory Interfinancial Network, a network that offers deposit placement services such as CDARS and ICS, which offer products that qualify large deposits for FDIC insurance. At ~~March 31,~~September 30, 2021 and December 31, 2020, the Company also has ~~$976.2 million~~$1.1 billion and $554.8 million, respectively, of ~~wholesale~~wholesale brokered deposits. In addition, deposits for which the Company provides account holders with earnings credits and referral fees totaled ~~$8.6~~$10.3 billion and $5.9 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The Company incurred ~~$5.8~~$6.7 million and ~~$7.0~~$2.9 million in deposit related costs during the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

The Company incurred $19.0 million and $13.0 million in deposit related costs during the nine months ended September 30, 2021 and 2020, respectively.

The average balances and weighted average rates paid on deposits are presented below:


		Three Months Ended March 31,									Three Months Ended September 30,
		2021				2020					2021				2020
		Average Balance		Rate		Average Balance		Rate			Average Balance		Rate		Average Balance		Rate
		(dollars in millions)									(dollars in millions)
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	3,905.4	0.13	%	$	3,098.5	0.58	%	Interest-bearing transaction accounts	$	4,786.5	0.12	%	$	3,636.3	0.16	%
Savings and money market accounts	Savings and money market accounts	13,994.4		0.21		9,033.4		0.79		Savings and money market accounts	16,833.0		0.21		10,170.1		0.22
Certificates of deposit	Certificates of deposit	1,681.1		0.59		2,346.0		1.78		Certificates of deposit	1,902.2		0.41		1,845.5		1.10
Total interest-bearing deposits	Total interest-bearing deposits	19,580.9		0.22		14,477.9		0.90		Total interest-bearing deposits	23,521.7		0.21		15,651.9		0.31
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	15,972.6		—		8,869.7		—		Non-interest-bearing demand deposits	20,731.6		—		12,422.2		—
Total deposits	Total deposits	$	35,553.5	0.12	%	$	23,347.6	0.56	%	Total deposits	$	44,253.3	0.11	%	$	28,074.1	0.17	%

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	Nine Months Ended September 30,
	2021				2020
	Average Balance		Rate		Average Balance		Rate
	(dollars in millions)
Interest-bearing transaction accounts	$	4,357.2	0.13	%	$	3,410.9	0.29	%
Savings and money market accounts	15,342.3		0.21		9,546.3		0.40
Certificates of deposit	1,774.0		0.49		2,113.0		1.47
Total interest-bearing deposits	21,473.5		0.22		15,070.2		0.53
Non-interest-bearing demand deposits	18,380.5		—		10,813.2		—
Total deposits	$	39,854.0	0.12	%	$	25,883.4	0.31	%

Other Borrowings

Short-Term Borrowings

The Company from time to time utilizes short-term borrowed funds to support short-term liquidity needs generally created by increased loan demand. The majority of these short-term borrowed funds consist of advances from the FHLB and ~~customer~~ repurchase agreements. The Company’s borrowing capacity with the FHLB is determined based on collateral pledged, generally consisting of securities and loans. In addition, the Company has borrowing capacity from other sources, collateralized by securities, including securities sold under agreements to repurchase, which are reflected at the amount of cash received in connection with the transaction, and may require additional collateral based on the fair value of the underlying securities. At ~~March 31,~~September 30, 2021, total short-term borrowed funds consist ~~of FHLB advances of $5.0 million and~~ customer repurchase agreements of ~~$15.9~~$16.1 million, secured borrowings of $29.8 million, and federal funds purchased of $400.0 million. At December 31, 2020, total short-term borrowed funds consisted of FHLB advances of $5.0 million and customer repurchase agreements of $16.0 million.

Long-Term Borrowings

The Company's long-term borrowings consist of AMH senior notes from the acquisition on April 7, 2021 and credit linked notes that were issued in June 2021, inclusive of issuance costs and fair market value adjustments. At September 30, 2021, the carrying value of long-term borrowings was $557.6 million. At December 31, 2020, the Company did not have long-term borrowings.

Qualifying Debt

Qualifying debt consists of subordinated debt and junior subordinated debt, inclusive of issuance costs and fair market value adjustments. At ~~March 31,~~September 30, 2021, the carrying value of qualifying debt was ~~$543.7 million,~~$1.1 billion, compared to $548.7 million at December 31, 2020. The increase in qualifying debt from December 31, 2020 is primarily related to issuance of $600.0 million of subordinated debt in June 2021, recorded net of issue costs of $8.1 million. This issuance was partially offset by the redemption of $75.0 million of subordinated debt in July 2021.

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Capital Resources

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements could trigger certain mandatory or discretionary actions that, if undertaken, could have a direct material effect on the Company’s business and financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items (discussed in "Note ~~11.~~14. Commitments and Contingencies" to the Unaudited Consolidated Financial Statements) as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

In March 2020, the federal bank regulatory authorities issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. The Company has elected the five-year CECL transition option in connection with its adoption of CECL on January 1, 2020. As a result, capital ratios and amounts as of ~~March 31,~~September 30, 2021 exclude the impact of the increased allowance for credit losses related to the adoption of ASC 326.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the various banking agencies. The actual capital amounts and ratios for the Company and the Bank are presented in the following tables as of the periods indicated:


		Total Capital		Tier 1 Capital		Risk-Weighted Assets		Tangible Average Assets		Total Capital Ratio		Tier 1 Capital Ratio		Tier 1 Leverage Ratio		Common Equity Tier 1			Total Capital		Tier 1 Capital		Risk-Weighted Assets		Tangible Average Assets		Total Capital Ratio		Tier 1 Capital Ratio		Tier 1 Leverage Ratio		Common Equity Tier 1
		(dollars in millions)																	(dollars in millions)
March 31, 2021
September 30, 2021																		September 30, 2021
WAL	WAL	$	4,201.5	$	3,518.9	$	33,326.1	$	40,072.7	12.6	%	10.6	%	8.8	%	10.3	%	WAL	$	5,200.3	$	3,986.9	$	41,400.2	$	50,668.8	12.6	%	9.6	%	7.9	%	8.7	%
WAB	WAB	3,938.5		3,442.8		33,390.1		40,171.9		11.8		10.3		8.5		10.3		WAB	4,537.9		4,086.9		41,495.3		50,681.7		10.9		9.8		8.1		9.8
Well-capitalized ratios	Well-capitalized ratios									10.0		8.0		5.0		6.5		Well-capitalized ratios									10.0		8.0		5.0		6.5
Minimum capital ratios	Minimum capital ratios									8.0		6.0		4.0		4.5		Minimum capital ratios									8.0		6.0		4.0		4.5

December 31, 2020	December 31, 2020																	December 31, 2020
WAL	WAL	$	3,872.0	$	3,158.2	$	31,015.4	$	34,349.3	12.5	%	10.2	%	9.2	%	9.9	%	WAL	$	3,872.0	$	3,158.2	$	31,015.4	$	34,349.3	12.5	%	10.2	%	9.2	%	9.9	%
WAB	WAB	3,619.4		3,078.2		31,140.6		34,367.0		11.6		9.9		9.0		9.9		WAB	3,619.4		3,078.2		31,140.6		34,367.0		11.6		9.9		9.0		9.9
Well-capitalized ratios	Well-capitalized ratios									10.0		8.0		5.0		6.5		Well-capitalized ratios									10.0		8.0		5.0		6.5
Minimum capital ratios	Minimum capital ratios									8.0		6.0		4.0		4.5		Minimum capital ratios									8.0		6.0		4.0		4.5

With the acquisition of AmeriHome, the Company is also required to maintain specified levels of capital to remain in good standing with certain federal government agencies, including Fannie Mae, Freddie Mac, Ginnie Mae, and HUD. These capital requirements are generally tied to the unpaid balances of loans included in the Company's servicing portfolio or loan production volume. Noncompliance with these capital requirements can result in various remedial actions up to, and including, removing the Company's ability to sell loans to and service loans on behalf of the respective agency. The Company believes that it is in compliance with these requirements as of September 30, 2021.

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Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions. The critical accounting policies upon which the Company's financial condition and results of operations depend, and which involve the most complex subjective decisions or assessments, are included in the discussion entitled "Critical Accounting Policies" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and all amendments thereto, as filed with the SEC. There were no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K.

Liquidity

Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in the Company's business operations or unanticipated events, including the ongoing COVID-19 pandemic.

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors, and regulators. The Company's liquidity, represented by cash and amounts due from banks, federal funds sold, and non-pledged marketable securities, is a result of the Company's operating, investing, and financing activities and related cash flows. In order to ensure funds are available when necessary, on at least a quarterly basis, the Company projects the amount of funds that will be required over a twelve-month period and it also strives to maintain relationships with a diversified customer base. Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets.

The following table presents the available and outstanding balances on the Company's lines of credit:

~~March 31,~~September 30, 2021

Available
Balance

Outstanding Balance

(in millions)

Unsecured fed funds credit lines at correspondent banks

~~2,452.0~~2,923.4

—

In addition to lines of credit, the Company has borrowing capacity with the FHLB and FRB from pledged loans and securities. The borrowing capacity, outstanding borrowings, and available credit as of ~~March 31,~~September 30, 2021 are presented in the following table:


	~~March 31,~~September 30, 2021
	(in millions)
FHLB:
Borrowing capacity	$	~~4,220.5~~4,233.6
Outstanding borrowings	~~5.0~~—
Letters of credit	21.0
Total available credit	$	~~4,194.5~~4,212.6

FRB:
Borrowing capacity	$	~~2,733.5~~3,231.0
Outstanding borrowings	—
Total available credit	$	~~2,733.5~~3,231.0

The Company also has a separate PPP lending facility with the FRB that allows the Company to pledge loans originated under the PPP in return for dollar for dollar funding from the FRB, which would provide up to ~~$1.5 billion~~approximately $630 million in additional credit. The amount of available credit under the PPP lending facility will decline each period as these loans are paid down.

The Company has a formal liquidity policy and, in the opinion of management, its liquid assets are considered adequate to meet cash flow needs for loan funding and deposit cash withdrawals for the next 90-120 days. At ~~March 31,~~September 30, 2021, there was ~~$11.5~~$5.4 billion in liquid assets, comprised of ~~$5.3 billion~~$917.9 million in cash and cash equivalents and ~~$6.2~~$4.5 billion in unpledged marketable securities. At December 31, 2020, the Company maintained $6.6 billion in liquid assets, comprised of $2.7 billion of cash and cash equivalents and $3.9 billion of unpledged marketable securities.

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The Parent maintains liquidity that would be sufficient to fund its operations and certain non-bank affiliate operations for an extended period should funding from normal sources be disrupted. Since deposits are taken by WAB and not by the Parent,

~~Table of Contents~~

Parent liquidity is not dependent on the Bank's deposit balances. In the Company's analysis of Parent liquidity, it is assumed that the Parent is unable to generate funds from additional debt or equity issuances, receives no dividend income from subsidiaries and does not pay dividends to stockholders, while continuing to make non-discretionary payments needed to maintain operations and repayment of contractual principal and interest payments owed by the Parent and affiliated companies. Under this scenario, the amount of time the Parent and its non-bank subsidiary can operate and meet all obligations before the current liquid assets are exhausted is considered as part of the Parent liquidity analysis. Management believes the Parent maintains adequate liquidity capacity to operate without additional funding from new sources for over twelve months.

WAB maintains sufficient funding capacity to address large increases in funding requirements, such as deposit outflows. This capacity is comprised of liquidity derived from a reduction in asset levels and various secured funding sources. On a long-term basis, the Company’s liquidity will be met by changing the relative distribution of its asset portfolios (for example, by reducing investment or loan volumes, or selling or encumbering assets). Further, the Company can increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from correspondent banks, the FHLB of San Francisco, and the FRB. At ~~March 31,~~September 30, 2021, the Company's long-term liquidity needs primarily relate to funds required to support loan originations, commitments, and deposit withdrawals, which can be met by cash flows from investment payments and maturities, and investment sales, if necessary.

The Company’s liquidity is comprised of three primary classifications: 1) cash flows provided by operating activities; 2) cash flows used in investing activities; and 3) cash flows provided by financing activities. Net cash provided by or used in operating activities consists primarily of net income, adjusted for changes in certain other asset and liability accounts and certain non-cash income and expense items, such as the provision for credit losses, investment and other amortization and depreciation. For the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, net cash (used in) provided by operating activities was ~~$100.1 million~~$(3.3) billion and ~~$124.0~~$450.1 million, respectively.

The Company's primary investing activities are the origination of real estate and commercial loans, the collection of repayments of these loans, and the purchase and sale of securities. The Company's net cash provided by and used in investing activities has been primarily influenced by its loan and securities activities. The Company's cash balance during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 was reduced by ~~$1.6~~$8.4 billion and ~~$2.0~~$4.8 billion, respectively, as a result of a net increase in loans as well as a net increase in investment securities of ~~$2.4~~$2.3 billion and ~~$353.7~~$663.5 million, respectively.

Net cash provided by financing activities has been impacted significantly by increased deposit levels. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, net deposits increased ~~$6.5~~$13.4 billion and ~~$2.0~~$6.0 billion, respectively.

Fluctuations in core deposit levels may increase the Company's need for liquidity as certificates of deposit mature or are withdrawn before maturity, and as non-maturity deposits, such as checking and savings account balances, are withdrawn. Additionally, the Company is exposed to the risk that customers with large deposit balances will withdraw all or a portion of such deposits, due in part to the FDIC limitations on the amount of insurance coverage provided to depositors. To mitigate the uninsured deposit risk, the Company participates in the CDARS and ICS programs, which allow an individual customer to invest up to $50.0 million and $150.0 million, respectively, through one participating financial institution or, a combined total of $200.0 million per individual customer, with the entire amount being covered by FDIC insurance. As of ~~March 31,~~September 30, 2021, the Company has ~~$546.0~~$641.6 million of CDARS and ~~$1.5~~$1.9 billion of ICS deposits.

As of ~~March 31,~~September 30, 2021, the Company has ~~$976.2 million~~$1.1 billion of wholesale brokered deposits outstanding. Brokered deposits are generally considered to be deposits that have been received from a third party who is engaged in the business of placing deposits on behalf of others. A traditional deposit broker will direct deposits to the banking institution offering the highest interest rate available. Federal banking laws and regulations place restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are not relationship based and are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts.

Federal and state banking regulations place certain restrictions on dividends paid. The total amount of dividends which may be paid at any date is generally limited to the retained earnings of the bank. Dividends paid by WAB to the Parent would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three months ended ~~March 31,~~September 30, 2021, WAB did not pay dividends to the Parent. During the nine months ended September 30, 2021, WAB paid dividends to the Parent of ~~$15.0~~$50.0 million. ~~Subsequent to March 31, 2021, WAB paid dividends to the Parent~~

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Recent accounting pronouncements

See "Note 1. Summary of Significant Accounting Policies," of the Notes to Unaudited Consolidated Financial Statements contained in Item 1. Financial Statements for information on recent and recently adopted accounting pronouncements and their expected impact, if any, on the Company's Consolidated Financial Statements.

~~Table of Contents~~

Supervision and Regulation

The following information is intended to update, and should be read in conjunction with, the information contained under the caption “Supervision and Regulation” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, based on completion of the Company's acquisition of ~~AHM~~AMH on April 7, 2021.

Supervision, Regulation and Licensing of ~~AHM~~AMH

~~AHM~~AMH is a residential mortgage producer and servicer that operates in a heavily regulated industry. In addition to supervision by the federal banking agencies with primary jurisdiction over the Company and WAB, ~~AHM~~AMH is subject to the rules, regulations and oversight of certain federal, state and local governmental authorities, including the CFPB, HUD, and government-sponsored enterprises in the mortgage industry such as FHLMC, FNMA, and GNMA.

Further, ~~AHM~~AMH must comply with a large number of federal consumer protection laws and regulations including, among others:

•the Real Estate Settlement Procedures Act and Regulation X, which require lenders, mortgage brokers, or servicers to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the settlement process and prohibit specific practices related thereto;

•the Truth In Lending Act and Regulation Z, which require disclosures and timely information on the nature and costs of the residential mortgages and the real estate settlement process;

•the Secure and Fair Enforcement for Mortgage Licensing Act, which applies to businesses and individuals engaging in the residential mortgage loan business;

•the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, and the rules and regulations of the FTC and CFPB that prohibit unfair, abusive or deceptive acts or practices;

•the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act) and Regulation V, which address the accuracy, fairness, and privacy of information in the files of consumer reporting agencies; and

•the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Homeowners Protection Act, and the Home Mortgage Disclosure Act and Regulation C, which generally ~~prohibit~~disallow discrimination ~~and~~on a prohibited basis, provide applicants and borrowers rights with respect to credit decisioning and the residential mortgage process, and require disclosures and impose obligations on financial businesses conducting residential lending and mortgage servicing.

The CFPB as well as the FTC have rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, and their rulemaking and regulatory agendas relating to the residential mortgage industry continues to evolve. In particular, as part of its enforcement authority, the CFPB can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, remediation of practices, external compliance monitoring and civil money penalties.

~~AHM~~AMH is also subject to state and local laws, rules and regulations and oversight by various state agencies that license and oversee consumer protection, loan servicing, origination and collection activities of mortgage industry participants. Despite the fact that ~~AHM~~AMH is the operating subsidiary of a depository institution, it must comply with ~~certain~~ regulatory and licensing requirements ~~of multiple~~in certain states in order to conduct its business, and does (and will continue to) incur significant costs to comply with these requirements. These laws, rules and regulations may change as statutes and regulations are enacted, promulgated, amended, interpreted and enforced.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices, and equity prices. The Company's market risk arises primarily from interest rate risk inherent in its lending, investing, and deposit taking activities. To that end, management actively monitors and manages the Company's interest rate risk exposure. The Company generally manages its interest rate sensitivity by evaluating re-pricing opportunities on its earning assets to those on its funding liabilities.

Management uses various asset/liability strategies to manage the re-pricing characteristics of the Company's assets and liabilities, all of which are designed to ensure that exposure to interest rate fluctuations is limited to within the Company's guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits and management of the deployment of its securities, are used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Interest rate risk is addressed by ALCO, which includes members of executive management, finance, and operations. ALCO monitors interest rate risk by analyzing the potential impact on the net EVE and net interest income from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure. The Company manages its balance sheet in part to maintain the potential impact on EVE and net interest income within acceptable ranges despite changes in interest rates.

The Company's exposure to interest rate risk is reviewed at least quarterly by ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine its change in both EVE and net interest income in the event of hypothetical changes in interest rates. If potential changes to EVE and net interest income resulting from hypothetical interest rate changes are not within the limits established by the BOD, the BOD may direct management to adjust the asset and liability mix to bring interest rate risk within Board-approved limits.

Net Interest Income Simulation. In order to measure interest rate risk at ~~March 31,~~September 30, 2021, the Company used a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between a baseline net interest income forecast using current yield curves that do not take into consideration any future anticipated rate hikes, compared to forecasted net income resulting from an immediate parallel shift in rates upward or downward, along with other scenarios directed by ALCO. The income simulation model includes various assumptions regarding re-pricing relationships for each of the Company's products. Many of the Company's assets are floating rate loans, which are assumed to re-price immediately and, proportional to the change in market rates, depending on their contracted index, including the impact of caps or floors. Some loans and investments contain contractual prepayment features (embedded options) and, accordingly, the simulation model incorporates prepayment assumptions. The Company's non-term deposit products re-price concurrently with interest rate changes taken by the Federal Open Market Committee.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet remains static and that its structure does not change over the course of the year. It does not account for all factors that could impact the Company's results, including changes by management to mitigate interest rate changes or secondary factors, such as changes to the Company's credit risk profile as interest rates change.

Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment speeds that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the modeled assumptions may have significant effects on the Company's actual net interest income.

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This simulation model assesses the changes in net interest income that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates. At ~~March 31,~~September 30, 2021, our net interest income exposure for the next twelve months related to these hypothetical changes in market interest rates was within our current guidelines.

Sensitivity of Net Interest Income


		Parallel Shift Rate Scenario (change in basis points from Base)												Parallel Shift Rate Scenario (change in basis points from Base)
		Down 100			Base		Up 100			Up 200				Down 100			Base		Up 100			Up 200
		(in millions)												(in millions)
Interest Income	Interest Income	$	1,411.0		$	1,464.1	$	1,644.8		$	1,895.5		Interest Income	$	1,542.1		$	1,620.7	$	1,808.7		$	2,051.1
Interest Expense	Interest Expense	32.6			63.5		159.1			254.8			Interest Expense	85.3			122.5		232.8			343.1
Net Interest Income	Net Interest Income	$	1,378.4		$	1,400.6	$	1,485.7		$	1,640.7		Net Interest Income	$	1,456.8		$	1,498.2	$	1,575.9		$	1,708.0
% Change	% Change	(1.6)		%			6.1		%	17.1		%	% Change	(2.8)		%			5.2		%	14.0		%


		Interest Rate Ramp Scenario (change in basis points from Base)												Interest Rate Ramp Scenario (change in basis points from Base)
		Down 100			Base		Up 100			Up 200				Down 100			Base		Up 100			Up 200
		(in millions)												(in millions)
Interest Income	Interest Income	$	1,431.4		$	1,464.1	$	1,540.4		$	1,636.5		Interest Income	$	1,585.3		$	1,620.7	$	1,688.8		$	1,776.3
Interest Expense	Interest Expense	43.5			63.5		85.7			106.8			Interest Expense	96.0			122.5		145.2			170.8
Net Interest Income	Net Interest Income	$	1,387.9		$	1,400.6	$	1,454.7		$	1,529.7		Net Interest Income	$	1,489.3		$	1,498.2	$	1,543.6		$	1,605.5
% Change	% Change	(0.9)		%			3.9		%	9.2		%	% Change	(0.6)		%			3.0		%	7.2		%

Economic Value of Equity. The Company measures the impact of market interest rate changes on the NPV of estimated cash flows from its assets, liabilities, and off-balance sheet items, defined as EVE, using a simulation model. This simulation model assesses the changes in the market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates.

At ~~March 31,~~September 30, 2021, the Company's EVE exposure related to these hypothetical changes in market interest rates was within the Company's current guidelines. The following table shows the Company's projected change in EVE for this set of rate shocks at ~~March 31,~~September 30, 2021:

Economic Value of Equity


		Interest Rate Scenario (change in basis points from Base)																		Interest Rate Scenario (change in basis points from Base)
		Down 100			Base		Up 100			Up 200			Up 300			Up 400					Down 100			Base		Up 100			Up 200			Up 300
		(in millions)																		(in millions)
Assets	Assets	$	44,657.2		$	43,789.9	$	42,899.6		$	42,051.6		$	41,292.2		$	40,586.6		Assets		$	54,617.9		$	53,433.6	$	52,210.8		$	51,095.7		$	50,099.2
Liabilities	Liabilities	38,891.0			37,571.1		36,414.6			35,285.1			34,157.1			33,138.3			Liabilities		47,223.8			45,480.0		44,040.0			42,630.7			41,216.9
Net Present Value	Net Present Value	$	5,766.2		$	6,218.8	$	6,485.0		$	6,766.5		$	7,135.1		$	7,448.3		Net Present Value		$	7,394.1		$	7,953.6	$	8,170.8		$	8,465.0		$	8,882.3
% Change	% Change	(7.3)		%			4.3		%	8.8		%	14.7		%	19.8		%	% Change		(7.0)		%			2.7		%	6.4		%	11.7		%

The computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, asset prepayments, and deposit decay, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates. Actual amounts may differ from the projections set forth above should market conditions vary from the underlying assumptions.

Derivative Contracts. In the normal course of business, the Company uses derivative instruments to meet the needs of its customers and manage exposure to fluctuations in interest rates. The following table summarizes the aggregate notional amounts, market values, and terms of the Company’s derivative positions as of ~~March 31,~~September 30, 2021 and December 31, 2020:

Outstanding Derivatives Positions


March 31, 2021					December 31, 2020
September 30, 2021										September 30, 2021				December 31, 2020
Notional	Notional	Net Value		Weighted Average Term (Years)	Notional		Net Value		Weighted Average Term (Years)	Notional	Net Value		Weighted Average Term (Years)	Notional		Net Value		Weighted Average Term (Years)
(dollars in millions)	(dollars in millions)									(dollars in millions)
$	1,808.7	$	(49.5)	15.8	$	1,812.6	$	(83.3)	16.0	482,681.9	$	(44.5)	1.6	$	1,812.6	$	(83.3)	16.0

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Item 4.Controls and Procedures.

Evaluation of Disclosure Controls

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the CEO and CFO have concluded that the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Additionally, the Company's disclosure controls and procedures were also effective in ensuring that information required to be disclosed by the Company in the reports it files or is subject to under the Exchange Act is accumulated and communicated to the Company's management, including the CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting during the quarter ended ~~March 31,~~September 30, 2021, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

There are no material pending legal proceedings to which the Company is a party or to which any of its properties are subject. There are no material proceedings known to the Company to be contemplated by any governmental authority. From time to time, the Company is involved in a variety of litigation matters in the ordinary course of its business and anticipates that it will become involved in new litigation matters in the future.

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Item 1A.Risk Factors.

The Company has updated the risk factors contained in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2020 based on the completion of the Company’s acquisition of ~~AHM~~AMH on April 7, 2021. Other than as set forth below, there were no material changes to the risk factors disclosed in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2020.

The risk factor captioned “The Company’s proposed acquisition of ~~AHM~~AMH is subject to regulatory approvals and other closing conditions and may be more difficult, costly or time-consuming to complete than the Company expects” is no longer applicable.

The risk factor captioned “If the Merger is completed, the addition of ~~AHM’s~~AMH’s national mortgage franchise would present risks that could cause the Company to not realize the strategic and financial goals contemplated at the time it entered into the agreement to acquire ~~AHM~~AMH or otherwise adversely affect the Company’s results of operations” has been updated as follows:

The recent addition of ~~AHM’s~~AMH’s national mortgage franchise presents risks that could cause the Company to not realize the strategic and financial goals of the ~~AHM~~AMH acquisition or could otherwise adversely affect the Company’s results of operations.

Risks the Company faces with respect to its recently completed acquisition of ~~AHM~~AMH include:

•Management’s estimates regarding ~~AHM’s~~AMH’s future earnings potential may not be achievable, because ~~AHM’s~~AMH’s performance could be adversely impacted by a rising rate environment, changes in the mix of purchase versus refinancing volumes, competition, or other factors not known or anticipated by the Company;

•The integration of ~~AHM~~AMH into WAB may be more costly or time-consuming than expected despite the fact that ~~AHM~~AMH continues to operate under its existing brand and management team;

•The Company may not realize the benefits it expects to achieve from the acquisition of ~~AHM~~AMH such as those anticipated from funding, cross-selling, and other integration synergies;

•The Company is subject to increased compliance costs and risks with respect to aspects of ~~AHM’s~~AMH’s business that differ from or are larger in scope than WAB’s previously existing similar operations, including:

◦The need to maintain various state licenses and federal and government-sponsored agency approvals required to conduct ~~AHM’s~~AMH’s business, and the risk of adverse consequences resulting from periodic examinations by such state and federal agencies or from changes in laws or regulations that may be promulgated in the future;

◦Increased compliance risk and cost associated with federal, state and local laws, regulations and judicial and administrative decisions relating to mortgage loans and consumer protection, including those designed to discourage predatory lending, collections and servicing practices with respect to mortgage loans; and

◦Increased compliance risk and costs associated with federal, state and local laws related to data privacy and the handling of non-public personal financial information of ~~AHM’s~~AMH’s customers, including the California Consumer Protection Act and similar regulations that have been or may be enacted by other states;

•The Company may have difficulties retaining key personnel from ~~AHM~~AMH or managing ~~AHM’s~~AMH’s technology platform;

•The Company’s operating results may be adversely impacted by claims or liabilities related to ~~AHM’s~~AMH’s business including, among others, (i) claims from government agencies, current or former customers or employees, consumers, financing providers, vendors and other business partners or third parties; (ii) repurchase and indemnification obligations with respect to sold loans or any failure to be able to enforce repurchase and indemnification obligations of counterparties with respect to purchased loans; and (iii) counterparty and interest rate risk with respect to derivative and hedging instruments;

•~~AHM’s~~AMH’s business may be further affected by the continuation or worsening of the COVID-19 pandemic; and

•~~AHM’s~~AMH’s business may be adversely impacted by changes in the competitive or regulatory landscape.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table provides information about the Company's purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act for the periods indicated:

Total Number of Shares Purchased (1)(2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
January 2021 43,152 $ 68.16 — $ —
February 2021 111,011 89.55 — —
March 2021 — — — —
Total 154,163 $ 83.56 — $ —


	Total Number of Shares Purchased (1)(2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
July 2021	15,491	$	96.51	—	$	—
August 2021	268	94.18		—	—
September 2021	1,099	103.07		—	—
Total	16,858	$	96.90	—	$	—

(1) Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period.

(2) The Company currently does not have a common stock repurchase program.

Item 5.Other Information

~~Not applicable.~~

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Item 6.Exhibits

EXHIBITS


~~2.1~~						Agreement and Plan of Merger, dated February 16, 2021, by and among Western Alliance Bank, Western Alliance Equipment Finance, Inc., WAB Mortgage Sub, LLC, Aris Mortgage Holding Company, LLC, A-A Mortgage Opportunities, LP, and the individual members set forth on the signature page thereto (incorporated by reference to Exhibit 2.1 of Western Alliance's Form 8-K filed with the SEC on February 16, 2021).^

3.1						Amended and Restated Certificate of Incorporation, effective as of May 19, 2015 (incorporated by reference to Exhibit 3.1 of Western Alliance's Form 10-K filed with the SEC on March 1, ~~2019~~)2019).

3.2						Certificate of Amendment designating the 4.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, effective September 22, 2021 (incorporat ed by reference to Exhibit 3.1 of Wes tern Alliance's Form 8-K filed with the SEC on September 22, 20 21).

3.3						Amended and Restated Bylaws of Western Alliance, effective as of May 19, 2015 (incorporated by reference to Exhibit 3.2 of Western Alliance's Form 8-K filed with the SEC on May 22, 2015).

~~3.3~~3.4						Articles of Conversion, as filed with the Nevada Secretary of State on May 29, 2014 (incorporated by reference to Exhibit 3.1 of Western Alliance’s Form 8-K filed with the SEC on June 3, 2014).

~~3.4~~3.5						Certificate of Conversion, as filed with the Delaware Secretary of State on May 29, 2014 (incorporated by reference to Exhibit 3.2 of Western Alliance’s Form 8-K filed with the SEC on June 3, 2014).

~~10.1~~4.1						~~Form of Securities Purchased~~Deposit Agreement, dated ~~February 28,~~September 22, 2021, ~~(incorporated~~by and among Western Alliance Bancorporation, Computershare Inc. and Computershare Trust Company, N.A., and the holders from time to time of Depositary Receipts (incorporated by reference to Exhibit ~~10.1~~4 .1 of Western Alliance's Form 8-K filed with the SEC on ~~March 4,~~September 22, 2021).#.

4.2						Form of Depositary Receipt representing Depositary Shares (included as Exhibit A to Exhibit 4.1)(incorporated by reference to Exhibit 4.2 of Western Alliance's Form 8-K filed with the SEC on September 22, 2021).

31.1*						CEO Certification Pursuant Rule 13a-14(a)/15d-14(a).

31.2*						CFO Certification Pursuant Rule 13a-14(a)/15d-14(a).

32**						CEO and CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002.

101						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020, (ii) the Consolidated Income Statements for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 and ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, (iii) the Consolidated Statements of Comprehensive Income for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 and ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, (iv) the Consolidated Statements of Stockholders’ Equity for the three months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 and the ~~three~~nine months ~~March 31,~~September 30, 2021 and 2020, (v) the Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, and (vi) the Notes to unaudited Consolidated Financial Statements. (Pursuant to Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.) (Filed herewith).

104						The cover page of Western Alliance Bancorporation’s Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2021, formatted in Inline XBRL (contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

± Management contract or compensatory arrangement.

^ Certain schedules and attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request.

# Certain schedules and attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule or attachment to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTERN ALLIANCE BANCORPORATION

~~April 30,~~November 2, 2021

By:

/s/ Kenneth A. Vecchione

Kenneth A. Vecchione

President and Chief Executive Officer

~~April 30,~~November 2, 2021

By:

/s/ Dale Gibbons

Dale Gibbons

Vice Chairman and Chief Financial Officer

~~April 30,~~November 2, 2021

By:

/s/ J. Kelly Ardrey Jr.

J. Kelly Ardrey Jr.

Chief Accounting Officer

90109


		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	67
	Consolidated Statements of Stockholders’ Equity	78
	Consolidated Statements of Cash Flows	810
	Notes to Unaudited Consolidated Financial Statements	912
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6176
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	84103
Item 4.	Controls and Procedures	86105

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	86105
Item 1A.	Risk Factors	87106
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88107
Item 5.	Other Information	88107
Item 6.	Exhibits	89108

SIGNATURES		90109


	March 31, 2021						December 31, 2020						March 31, 2020
			Fair Value						Fair Value						Fair Value
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Fair value hedges
Interest rate swaps (1)	$	1,685.9	$	7.9	$	57.7	$	1,689.9	$	3.3	$	86.1	$	859.1	$	4.4	$	95.1
Total	1,685.9		7.9		57.7		1,689.9		3.3		86.1		859.1		4.4		95.1
Netting adjustments (2)	0		5.4		5.4		0		0.6		0.6		0		0		0
Net	$	1,685.9	$	2.5	$	52.3	$	1,689.9	$	2.7	$	85.5	$	859.1	$	4.4	$	95.1

Derivatives not designated as hedging instruments:
Foreign currency contracts	$	119.3	$	1.0	$	0.7	$	119.2	$	0.7	$	1.2	$	9.3	$	0.3	$	0.2
Interest rate swaps	3.5		0.2		0.2		3.5		0.2		0.2		2.9		0.2		0.2
Total	$	122.8	$	1.2	$	0.9	$	122.7	$	0.9	$	1.4	$	12.2	$	0.5	$	0.4


Three Months Ended March 31, 2021	(in millions)
Pre-tax income	$	234.4	$	220.9	$	71.5	$	(58.0)

Three Months Ended March 31, 2020
Pre-tax income	$	102.4	$	109.6	$	27.3	$	(34.5)