UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)




ý		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended ~~September 30, 2018~~March 31, 2019 or

o		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, AZ		85004
(Address of principal executive offices)		(Zip Code)

(602) 389-3500

(Registrant’s telephone number, including area code)

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	ý	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 ý

As of ~~October 26, 2018,~~April 25, 2019, Western Alliance Bancorporation had ~~105,858,808~~104,473,076 shares of common stock outstanding.

INDEX

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 I1 of this Form 10-Q.



ENTITIES / DIVISIONS:
ABA	Alliance Bank of Arizona	HOA Services	Homeowner Associations Services
BON	Bank of Nevada	LVSP	Las Vegas Sunset Properties
Bridge	Bridge Bank	TPB	Torrey Pines Bank
Company	Western Alliance Bancorporation and subsidiaries	WA PWI	Western Alliance Public Welfare Investments, LLC
CSI	CS Insurance Company	WAB or Bank	Western Alliance Bank
FIB	First Independent Bank	WABT	Western Alliance Business Trust
HFF	Hotel Franchise Finance	WAL or Parent	Western Alliance Bancorporation
TERMS:
AFS	Available-for-Sale	~~GNMA~~HFI	~~Government National Mortgage Association~~Held for Investment
ALCO	Asset and Liability Management Committee	~~GSE~~HTM	~~Government-Sponsored Enterprise~~Held-to-Maturity
AOCI	Accumulated Other Comprehensive Income	~~HFI~~ICS	~~Held for Investment~~Insured Cash Sweep Service
ASC	Accounting Standards Codification	~~HTM~~IRC	~~Held-to-Maturity~~Internal Revenue Code
ASU	Accounting Standards Update	~~ICS~~ISDA	~~Insured Cash Sweep Service~~
~~Basel Committee~~	~~Basel Committee on Banking Supervision~~	~~IRC~~	~~Internal Revenue Code~~International Swaps and Derivatives Association
Basel III	Banking Supervision's December 2010 final capital framework	~~ISDA~~LIBOR	~~International Swaps and Derivatives Association~~London Interbank Offered Rate
BOD	Board of Directors	~~LIBOR~~LIHTC	~~London Interbank Offered Rate~~Low-Income Housing Tax Credit
CCO	Chief Credit Officer	MBS	Mortgage-Backed Securities
CDARS	Certificate Deposit Account Registry Service	~~LIHTC~~NBL	~~Low-Income Housing Tax Credit~~National Business Lines
CDO	Collateralized Debt Obligation	~~MBS~~NOL	~~Mortgage-Backed Securities~~Net Operating Loss
CEO	Chief Executive Officer	~~NBL~~NPV	~~National Business Lines~~Net Present Value
CFO	Chief Financial Officer	~~NOL~~	~~Net Operating Loss~~
~~CRA~~	~~Community Reinvestment Act~~	~~NPV~~	~~Net Present Value~~
~~CRE~~	~~Commercial Real Estate~~	~~OCC~~	~~Office of the Comptroller of the Currency~~
~~Dodd-Frank Act~~	~~The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010~~	OCI	Other Comprehensive Income
~~EGRRCPA~~CLO	~~The Economic Growth, Regulatory Relief, and Consumer Protection Act~~Collateralized Loan Obligation	OREO	Other Real Estate Owned
CRA	Community Reinvestment Act	OTTI	Other-than-Temporary Impairment
CRE	Commercial Real Estate	PCI	Purchased Credit Impaired
EPS	Earnings per share	~~OTTI~~PPNR	~~Other-than-Temporary Impairment~~Pre-Provision Net Revenue
EVE	Economic Value of Equity	~~PCI~~ROU	~~Purchased Credit Impaired~~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
FHLB	Federal Home Loan Bank	SERP	Supplemental Executive Retirement Plan
~~FHLMC~~FRB	Federal ~~Home Loan Mortgage Corporation~~	~~TCJA~~	~~Tax Cuts and Jobs Act~~
~~FNMA~~	~~Federal National Mortgage Association~~Reserve Bank	TDR	Troubled Debt Restructuring
~~FRB~~FVO	~~Federal Reserve Bank~~Fair Value Option	TEB	Tax Equivalent Basis
~~FVO~~GAAP	~~Fair Value Option~~U.S. Generally Accepted Accounting Principles	XBRL	eXtensible Business Reporting Language
~~GAAP~~GSE	~~U.S. Generally Accepted Accounting Principles~~Government-Sponsored Enterprise


Item 1.	Financial Statements

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
	(in thousands, except shares and per share amounts)						(in thousands, except shares and per share amounts)
Assets:
Cash and due from banks	$	148,545		$	181,191		$	160,329		$	180,053
Interest-bearing deposits in other financial institutions	482,019			235,577			335,282			318,519
Federal funds sold	70,000			—			290,000			—
Cash, cash equivalents, and restricted cash	700,564			416,768			785,611			498,572
Money market investments	5			—			—			7
Investment securities - AFS, at fair value; amortized cost of $3,211,440 at September 30, 2018 and $3,515,401 at December 31, 2017	3,107,076			3,499,519
Investment securities - HTM, at amortized cost; fair value of $279,033 at September 30, 2018 and $256,314 at December 31, 2017	288,290			255,050
Investment securities - AFS, at fair value; amortized cost of $3,265,546 at March 31, 2019 and $3,339,888 at December 31, 2018							3,244,247			3,276,988
Investment securities - HTM, at amortized cost; fair value of $331,083 at March 31, 2019 and $298,648 at December 31, 2018							310,865			302,905
Investment securities - equity	172,294			—			118,005			115,061
Investments in restricted stock, at cost	65,993			65,785			66,287			66,132
Loans - HFI, net of deferred loan fees and costs	16,732,765			15,093,935
Loans, net of deferred loan fees and costs							18,116,748			17,710,629
Less: allowance for credit losses	(150,011		)	(140,050		)	(154,987		)	(152,717		)
Net loans held for investment	16,582,754			14,953,885			17,961,761			17,557,912
Premises and equipment, net	119,211			118,719			119,827			119,474
Operating lease right of use asset							72,841			—
Other assets acquired through foreclosure, net	20,028			28,540			17,707			17,924
Bank owned life insurance	169,162			167,764			171,126			170,145
Goodwill	289,895			289,895			289,895			289,895
Other intangible assets, net	9,658			10,853			8,873			9,260
Deferred tax assets, net	43,483			5,780			22,309			31,990
Investments in LIHTC	295,116			267,023			331,972			342,381
Other assets	312,618			249,504			271,520			310,840
Total assets	$	22,176,147		$	20,329,085		$	23,792,846		$	23,109,486
Liabilities:
Deposits:
Non-interest-bearing demand	$	8,014,715		$	7,433,962		$	7,679,361		$	7,456,141
Interest-bearing	10,893,865			9,538,570			12,529,379			11,721,306
Total deposits	18,908,580			16,972,532			20,208,740			19,177,447
Customer repurchase agreements	20,969			26,017			15,141			22,411
Other borrowings	—			390,000			—			491,000
Qualifying debt	359,082			376,905			373,996			360,458
Operating lease liability							77,750			—
Other liabilities	399,123			333,933			396,599			444,436
Total liabilities	19,687,754			18,099,387			21,072,226			20,495,752
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock - par value $0.0001; 200,000,000 authorized; 107,633,006 shares issued at September 30, 2018 and 107,057,520 at December 31, 2017	10			10
Treasury stock, at cost (1,771,509 shares at September 30, 2018 and 1,570,155 shares at December 31, 2017)	(52,035		)	(40,173		)
Common stock - par value $0.0001; 200,000,000 authorized; 106,449,184 shares issued at March 31, 2019 and 106,741,870 at December 31, 2018							10			10
Treasury stock, at cost (1,966,238 shares at March 31, 2019 and 1,793,231 shares at December 31, 2018)							(60,983		)	(53,083		)
Additional paid in capital	1,444,555			1,424,540			1,390,569			1,417,724
Accumulated other comprehensive (loss) income	(70,363		)	(3,145		)
Accumulated other comprehensive (loss)							(8,191		)	(33,622		)
Retained earnings	1,166,226			848,466			1,399,215			1,282,705
Total stockholders’ equity	2,488,393			2,229,698			2,720,620			2,613,734
Total liabilities and stockholders’ equity	$	22,176,147		$	20,329,085		$	23,792,846		$	23,109,486

See accompanying Notes to Unaudited Consolidated Financial Statements.

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017		2018			2017			2019		2018
	(in thousands, except per share amounts)											(in thousands, except per share amounts)
Interest income:
Loans, including fees	$	234,709		$	191,096	$	662,703		$	547,306		$	258,818	$	205,959
Investment securities	26,100			22,152		77,847			58,010			28,178		25,772
Dividends	1,831			2,005		5,506			6,154			1,633		1,478
Other	2,576			2,583		5,459			5,584			2,539		1,488
Total interest income	265,216			217,836		751,515			617,054			291,168		234,697
Interest expense:
Deposits	25,266			11,449		59,288			29,506			35,788		14,173
Other borrowings	90			84		3,352			333			1,277		1,326
Qualifying debt	5,794			4,708		16,458			13,539			6,105		4,969
Other	28			12		51			41			662		9
Total interest expense	31,178			16,253		79,149			43,419			43,832		20,477
Net interest income	234,038			201,583		672,366			573,635			247,336		214,220
Provision for credit losses	6,000			5,000		17,000			12,250			3,500		6,000
Net interest income after provision for credit losses	228,038			196,583		655,366			561,385			243,836		208,220
Non-interest income:
Service charges and fees	5,267			5,248		16,684			15,189			5,412		5,745
Income from equity investments												2,009		1,460
Card income	2,138			1,509		6,143			4,517			1,841		1,972
Income from equity investments	1,440			967		5,417			2,977
Lending related income and gains (losses) on sale of loans, net	1,422			97		3,447			746
Foreign currency income	1,092			756		3,475			2,630			1,095		1,202
Income from bank owned life insurance	868			975		2,963			2,896			981		928
(Loss) gain on sales of investment securities, net	(7,232		)	319		(7,232		)	907
Unrealized (losses) gains on assets measured at fair value, net	(1,212		)	—		(2,971		)	(1		)
Lending related income and gains (losses) on sale of loans, net												251		978
Unrealized gains (losses) on assets measured at fair value, net												2,834		(1,074		)
Other income	635			585		1,579			1,795			987		432
Total non-interest income	4,418			10,456		29,505			31,656			15,410		11,643
Non-interest expense:
Salaries and employee benefits	64,762			52,747		188,680			156,640			68,556		62,133
Occupancy												8,227		6,864
Legal, professional, and directors' fees	7,907			6,038		21,856			23,324			7,532		6,003
Occupancy	7,406			7,507		21,671			21,328
Data processing	5,895			4,524		16,688			14,163			6,332		5,207
Deposit costs	4,848			2,904		11,888			6,778			5,724		2,926
Insurance	3,712			3,538		11,466			10,355			2,809		3,869
Business development	1,381			1,439		4,523			4,949			2,085		1,728
Card expense	1,282			966		3,305			2,558
Loan and repossessed asset expenses	1,230			1,263		2,830			3,639			2,006		583
Marketing	687			776		2,429			2,628			741		596
Card expense												634		942
Intangible amortization	398			489		1,195			1,666			387		398
Net (gain) loss on sales / valuations of repossessed and other assets	(67		)	266		(1,474		)	(46		)
Net loss (gain) on sales / valuations of repossessed and other assets												97		(1,228		)
Other expense	14,400			6,839		29,481			17,561			7,784		8,128
Total non-interest expense	113,841			89,296		314,538			265,543			112,914		98,149
Income before provision for income taxes	118,615			117,743		370,333			327,498			146,332		121,714
Income tax expense	7,492			34,899		53,631			91,352			25,536		20,814
Net income	$	111,123		$	82,844	$	316,702		$	236,146		$	120,796	$	100,900

Earnings per share:
Basic	$	1.06		$	0.79	$	3.03		$	2.27		$	1.16	$	0.97
Diluted	1.05			0.79		3.00			2.25			1.16		0.96
Weighted average number of common shares outstanding:
Basic	104,768			104,221		104,664			104,124			104,033		104,530
Diluted	105,448			104,942		105,398			104,941			104,475		105,324

See accompanying Notes to Unaudited Consolidated Financial Statements.

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(in thousands)
Net income $ 111,123
$ 82,844
$ 316,702
$ 236,146
Other comprehensive (loss) income, net:
Unrealized (loss) gain on AFS securities, net of tax effect of $7,337, $(689), $23,438, and $(9,894), respectively (22,462 ) 1,116
(71,765 ) 15,947
Unrealized (loss) gain on SERP, net of tax effect of $4, $(71), $10, and $(93), respectively (12 ) 114
(35 ) 150
Unrealized (loss) gain on junior subordinated debt, net of tax effect of $661, $(394), $(61), and $1,649, respectively (2,028 ) 641
186
(2,677 )
Realized loss (gain) on sale of AFS securities included in income, net of tax effect of $(1,778), $122, $(1,778), and $346, respectively 5,454
(197 ) 5,454
(561 )
Net other comprehensive (loss) income (19,048 ) 1,674
(66,160 ) 12,859
Comprehensive income $ 92,075
$ 84,518
$ 250,542
$ 249,005



	Three Months Ended March 31,
	2019			2018
	(in thousands)
Net income	$	120,796		$	100,900
Other comprehensive income (loss), net:
Unrealized gain (loss) on AFS securities, net of tax effect of $(10,222) and $12,714, respectively	31,377			(38,914		)
Unrealized (loss) gain on SERP, net of tax effect of $6 and $2, respectively	(18		)	(11		)
Unrealized (loss) gain on junior subordinated debt, net of tax effect of $1,934 and $(478), respectively	(5,928		)	1,466
Net other comprehensive income (loss)	25,431			(37,459		)
Comprehensive income	$	146,227		$	63,441

See accompanying Notes to Unaudited Consolidated Financial Statements.

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock				Additional Paid in Capital			Treasury Stock				Accumulated Other Comprehensive (Loss) Income			Retained Earnings				Total Stockholders’ Equity			Common Stock				Additional Paid in Capital			Treasury Stock			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Stockholders’ Equity
	Shares		Amount					Treasury Stock			Shares				Retained Earnings			Amount								Additional Paid in Capital			Treasury Stock			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Stockholders’ Equity
	(in thousands)																					(in thousands)
Balance, December 31, 2016	105,071		$	10	Additional Paid in Capital		$	1,400,140			$	Accumulated Other Comprehensive (Loss) Income	(26,362	)	$	(4,695	)		Total Stockholders’ Equity		$	522,436		$	1,891,529
Balance, January 1, 2017 (1)	105,071		10		1,400,140			(26,362		)		(4,695		)	522,974				1,892,067
Balance, December 31, 2017																						105,487		$	10	$	1,424,540		$	(40,173	)	$	(3,145	)	$	848,466		$	2,229,698
Balance, January 1, 2018 (1)																						105,487		10		1,424,540			(40,173		)	(4,203		)	849,524			2,229,698
Net income	—		—		—			—				—			236,146				236,146			—		—		—			—			—			100,900			100,900
Exercise of stock options	36		—		786			—				—			—				786			9		—		215			—			—			—			215
Restricted stock, performance stock units, and other grants, net	653		—		17,909			—				—			—				17,909			546		—		6,705			—			—			—			6,705
Restricted stock surrendered (2)	(267	)	—		—			(13,642		)		—			—				(13,642		)	(181	)	—		—			(6,296		)	—			—			(6,296		)
Other comprehensive income, net	—		—		—			—				12,859			—				12,859			—		—		—			—			(37,459		)	—			(37,459		)
Balance, September 30, 2017	105,493		$	10	$	1,418,835		$	(40,004	)		$	8,164		$	759,120			$	2,146,125
Balance, March 31, 2018																						105,861		$	10	$	1,431,460		$	(46,469	)	$	(41,662	)	$	950,424		$	2,293,763

Balance, December 31, 2017	105,487		$	10	$	1,424,540		$	(40,173	)		$	(3,145	)	$	848,466			$	2,229,698
Balance, January 1, 2018 (3)	105,487		10		1,424,540			(40,173		)		(4,203		)	849,524				2,229,698
Balance, December 31, 2018																						104,949		$	10	$	1,417,724		$	(53,083	)	$	(33,622	)	$	1,282,705		$	2,613,734
Net income	—		—		—			—				—			316,702				316,702			—		—		—			—			—			120,796			120,796
Exercise of stock options	21		—		534			—				—			—				534			1		—		36			—			—			—			36
Restricted stock, performance stock unit, and other grants, net	554		—		19,481			—				—			—				19,481			647		—		6,472			—			—			—			6,472
Restricted stock surrendered (2)	(201	)	—		—			(11,862		)		—			—				(11,862		)	(173	)	—		—			(7,900		)	—			—			(7,900		)
Other comprehensive loss, net	—		—		—			—				(66,160		)	—				(66,160		)
Balance, September 30, 2018	105,861		$	10	$	1,444,555		$	(52,035	)		$	(70,363	)	$	1,166,226			$	2,488,393
Stock repurchase																						(941	)	—		(33,663		)	—			—			(4,286		)	(37,949		)
Other comprehensive income, net																						—		—		—			—			25,431			—			25,431
Balance, March 31, 2019																						104,483		$	10	$	1,390,569		$	(60,983	)	$	(8,191	)	$	1,399,215		$	2,720,620


(1)	As adjusted for adoption of ASU 2017-12. The cumulative effect of adoption of this guidance at January 1, 2017 resulted in an increase to retained earnings of $0.5 million and a corresponding increase to loans for the fair market value adjustment on the swaps.


~~(2)~~	~~Share amounts represent Treasury Shares, see "Note 1. Summary of Significant Accounting Policies" for further discussion.~~


~~(3)~~	As adjusted for adoption of ASU 2016-01 and ASU 2018-02. The cumulative effect of adoption of this guidance at January 1, 2018 resulted in an increase to retained earnings of $1.1 million and a corresponding decrease to accumulated other comprehensive income. ~~See~~


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

See accompanying Notes to Unaudited Consolidated Financial Statements.

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2019			2018
	(in thousands)						(in thousands)
Cash flows from operating activities:
Net income	$	316,702		$	236,146		$	120,796		$	100,900
Adjustments to reconcile net income to cash provided by operating activities:
Provision for credit losses	17,000			12,250			3,500			6,000
Depreciation and amortization	10,460			9,956			4,209			3,407
Stock-based compensation	19,481			17,909			6,472			6,705
Deferred income taxes	(16,107		)	3,371			1,398			(9,372		)
Amortization of net premiums for investment securities	10,795			14,926			3,004			3,920
Amortization of tax credit investments	26,546			19,524			10,145			8,128
Amortization of operating lease right of use asset							2,601			—
Accretion of fair market value adjustments on loans acquired from business combinations	(14,099		)	(20,994		)	(2,817		)	(5,738		)
Accretion and amortization of fair market value adjustments on other assets and liabilities acquired from business combinations	1,427			1,898			463			475
Income from bank owned life insurance	(2,963		)	(2,896		)	(981		)	(928		)
(Gains) / Losses on:
Sales of investment securities	7,232			(907		)
Losses / (Gains) on:
Assets measured at fair value, net	2,971			1			(2,834		)	1,074
Sale of loans	(2,434		)	117			408			(678		)
Other assets acquired through foreclosure, net	(1,464		)	(233		)	—			(1,242		)
Valuation adjustments of other repossessed assets, net	32			120			99			47
Sale of premises, equipment, and other assets, net	(42		)	67			(2		)	(33		)
Changes in:
Other assets	17,419			(12,958		)	(33,071		)	5,773
Other liabilities	3,324			(7,214		)	37,924			(30,122		)
Net cash provided by operating activities	$	396,280		$	271,083		$	151,314		$	88,316
Cash flows from investing activities:
Investment securities - trading
Proceeds from sales	$	—		$	994
Investment securities - AFS
Purchases	(251,413		)	(1,361,908		)	(26,342		)	(67,949		)
Principal pay downs and maturities	329,958			370,231			97,732			105,242
Proceeds from sales	44,308			87,853
Investment securities - HTM
Purchases	(34,275		)	(62,489		)	(10,825		)	(7,800		)
Principal pay downs and maturities	754			—			2,868			243
Equity securities
Purchases	(71,727		)	—
Equity securities carried at fair value
Reinvestment of dividends	(426		)	—			(151		)	—
Purchase of investment tax credits	(66,456		)	(19,916		)	(24,400		)	(13,376		)
Purchase of SBIC investments	(3,063		)	—			(1,570		)	(263		)
(Purchase) sale of money market investments, net	(5		)	(175		)
Sale (purchase) of money market investments, net							7			(5		)
Proceeds from bank owned life insurance	1,655			607			—			72
(Purchase) liquidation of restricted stock, net	(208		)	(430		)	(155		)	(734		)
Loan fundings and principal collections, net	(1,591,733		)	(1,179,494		)	(385,497		)	(367,437		)
Purchase of premises, equipment, and other assets, net	(8,319		)	(7,644		)	(3,152		)	(576		)
Proceeds from sale of other real estate owned and repossessed assets, net	8,793			20,748			—			5,285
Net cash used in investing activities	$	(1,642,157	)	$	(2,151,623	)	$	(351,485	)	$	(347,298	)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2019			2018
	(in thousands)						(in thousands)
Cash flows from financing activities:
Net increase (decrease) in deposits	$	1,936,048		$	2,354,920		$	1,031,293		$	382,006
Net increase (decrease) in borrowings	(395,047		)	(95,661		)	(498,270		)	(94,340		)
Proceeds from exercise of common stock options	534			786			36			215
Cash paid for tax withholding on vested restricted stock	(11,862		)	(13,642		)	(7,900		)	(6,296		)
Common stock repurchases							(37,949		)	—
Net cash provided by financing activities	$	1,529,673		$	2,246,403		$	487,210		$	281,585
Net increase (decrease) in cash, cash equivalents, and restricted cash	283,796			365,863			287,039			22,603
Cash, cash equivalents, and restricted cash at beginning of period	416,768			284,491			498,572			416,768
Cash, cash equivalents, and restricted cash at end of period	$	700,564		$	650,354		$	785,611		$	439,371
Supplemental disclosure:
Cash paid during the period for:
Cash paid (received) during the period for:
Interest	$	81,247		$	47,815		$	43,832		$	25,303
Income taxes	14,658			79,522
Income taxes, net of refunds							(34,619		)	9,881
Non-cash operating, investing, and financing activity:
Transfers to other assets acquired through foreclosure, net	5,744			1,812			—			5,744
Unfunded commitments originated	65,639			103,012			1,735			30,000
Change in unrealized (loss) gain on AFS securities, net of tax	(66,311		)	15,386
Change in unrealized gain (loss) on junior subordinated debt, net of tax	186			(2,677		)
Change in unfunded obligations	82,270			140,217
Non-cash charitable contribution	6,895			—
Change in unrealized gain (loss) on AFS securities, net of tax							31,377			(38,914		)
Change in unrealized (loss) gain on junior subordinated debt, net of tax							(5,928		)	1,466
Net increase (decrease) in unfunded obligations							12,787			120,512

See accompanying Notes to Unaudited Consolidated Financial Statements.

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operation

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, treasury management, international banking, and online banking products and services through its wholly-owned banking subsidiary, WAB.

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. In addition, the Company has two non-bank subsidiaries, LVSP, which holds and manages certain OREO properties, and a captive insurance company formed and licensed under the laws of the State of Arizona, CSI. CSI was 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.

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 particularly susceptible to significant changes in the near term relate to the determination of the allowance for credit losses; ~~estimated cash flows related to PCI loans; fair value determinations related to acquisitions and~~ certain assets and liabilities carried at fair value; and accounting for income taxes.

Principles of consolidation

As of ~~September 30, 2018,~~March 31, 2019, WAL has the following significant wholly-owned subsidiaries: WAB, LVSP, and eight unconsolidated subsidiaries used as business trusts in connection with the issuance of trust-preferred securities.

The Bank has the following significant wholly-owned subsidiaries: WABT, which holds certain investment securities, municipal and nonprofit loans, and leases; WA PWI, which holds certain limited partnerships invested primarily in low income housing tax credits and small business investment corporations; and BW Real Estate, Inc., which operates as a real estate investment trust and holds certain of WAB's real estate loans and related securities.

The Company does not have any other significant entities that should be considered for consolidation. 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.

Interim financial information

The accompanying Unaudited Consolidated Financial Statements as of and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ 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, ~~2017.~~2018.

The information furnished in these interim statements reflects all adjustments which 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 quarter or for the full year. The interim financial information should be read in conjunction with the Company's audited Consolidated Financial Statements.

Investment securities

Investment securities include debt securities and equity securities. Debt securities may be classified as HTM, AFS, or measured at fair value. 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. These securities are carried at amortized cost. 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 or trading securities are reported as an asset in the Consolidated Balance Sheet at their estimated fair value. As the fair value of AFS debt securities changes, the changes are reported net of income tax as an element of OCI, except for other-than-temporarily-impaired securities. When AFS debt securities are sold, the unrealized gain or loss is reclassified from OCI to non-interest income. The changes in the fair values of trading securities are reported in non-interest income. 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.

For periods prior to January 1, 2018, equity securities were classified as AFS and reported at fair value with unrealized gains and losses included as a separate component of AOCI, net of tax. Upon adoption of ASU 2016-01, the fair value changes in equity securities are recognized as part of non-interest income, see "Recently adopted accounting guidance" below for further discussion.

Interest income is recognized based on the coupon rate and increased by accretion of discounts earned or decreased by the amortization of premiums paid over the contractual life of the security, adjusted for prepayment estimates, using the interest method.

In estimating whether there are any OTTI losses, management considers the 1) length of time and the extent to which the fair value has been less than amortized cost; 2) financial condition and near term prospects of the issuer; 3) impact of changes in market interest rates; and 4) intent and ability of the Company to retain its investment for a period of time sufficient to allow for any anticipated recovery in fair value and whether it is not more likely than not the Company would be required to sell the security.

Declines in the fair value of individual AFS securities that are deemed to be other-than-temporary are reflected in earnings when identified. The fair value of the debt security then becomes the new cost basis. For individual debt securities where the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the other-than-temporary decline in fair value of the debt security related to 1) credit loss is recognized in earnings; and 2) interest rate, market, or other factors is recognized in other comprehensive income or loss.

For individual debt securities where the Company either intends to sell the security or more likely than not will not recover all of its amortized cost, the OTTI is recognized in earnings equal to the entire difference between the security's cost basis and its fair value at the balance sheet date. For individual debt securities for which a credit loss has been recognized in earnings, interest accruals and amortization and accretion of premiums and discounts are suspended when the credit loss is recognized. Interest received after accruals have been suspended is recognized on a cash basis.

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. The Bank also maintains an investment in its primary correspondent bank. All of 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 investment

The Company generally holds loans for investment and has the intent and ability to hold loans until their maturity. Therefore, they are reported at book value. Net loans are stated at the amount of unpaid principal, adjusted for net deferred fees and costs, purchase accounting fair value adjustments, and an allowance for credit losses. In addition, the book values 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 acquire loans through a business combination. These acquired loans are recorded at estimated fair value on the date of purchase, which is comprised of unpaid principal adjusted for estimated credit losses and interest rate fair value adjustments. Loans are evaluated individually at the acquisition date to determine if there has been credit deterioration since origination. Such loans may then be aggregated and accounted for as a pool of loans based on common characteristics. When the Company acquires such loans, the yield that may be accreted (accretable yield) is limited to the excess of the Company’s estimate of undiscounted cash flows expected to be collected over the Company’s initial investment in the loan. The excess of contractual cash flows over the cash flows expected to be collected may not be recognized as an adjustment to yield, loss, or a valuation allowance. Subsequent increases in cash flows expected to be collected generally are recognized prospectively through adjustment of the loan’s yield over the remaining life. Subsequent decreases to cash flows expected to be collected are recognized as impairment. The Company may not carry over or create a valuation allowance in the initial accounting for loans acquired under these circumstances. For purchased loans that are not deemed impaired at the acquisition date, fair value adjustments attributable to both credit and interest rates are accreted (or amortized) over the contractual life of the individual loan. For additional information, see "Note 3. Loans, Leases and Allowance for Credit Losses" of these Notes to Unaudited Consolidated Financial Statements.

Loan fees collected for the origination of loans less direct loan origination costs (net deferred loan fees) 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.

Non-accrual 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. 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 loan types, when a loan is placed on non-accrual 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 recognizes income on a cash basis only for those non-accrual 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.

Impaired loans: A loan is identified as impaired when it is no longer probable that interest and principal will be collected according to the contractual terms of the original loan agreement. Generally, impaired loans are classified as non-accrual. However, in certain instances, impaired loans may continue on an accrual basis, if full repayment of all principal and interest is expected and the loan is both well secured and in the process of collection. Impaired loans are measured for reserve requirements in accordance with ASC 310, Receivables, based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the

collateral less applicable disposition costs if the loan is collateral dependent. The amount of an impairment reserve, if any, and any subsequent changes are recorded as a provision for credit losses. Losses are recorded as a charge-off when losses are confirmed. In addition to management's internal loan review process, regulators may from time to time direct the Company to modify loan grades, loan impairment calculations, or loan impairment methodology.

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. A TDR loan is also considered impaired. 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. However, such loans continue to be considered impaired. 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.

Allowance for credit losses

Credit risk is inherent in the business of extending loans and leases to borrowers, for which the Company must maintain an adequate allowance for credit losses. The allowance for credit losses is established through a provision for credit losses recorded to expense. Loans are charged against the allowance for credit losses when management believes that the contractual principal or interest will not be collected. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount believed adequate to absorb estimated probable losses on existing loans that may become uncollectable, based on evaluation of the collectability of loans and prior credit loss experience, together with other factors. The Company formally re-evaluates and establishes the appropriate level of the allowance for credit losses on a quarterly basis.

The allowance consists of specific and general components. The specific allowance applies to impaired loans. For impaired collateral dependent loans, the reserve is calculated based on the collateral value, net of estimated disposition costs. Generally, the Company obtains independent collateral valuation analysis for each loan every twelve months. Loans not collateral dependent are evaluated based on the expected future cash flows discounted at the original contractual interest rate.

The general allowance covers all non-impaired loans and incorporates several quantitative and qualitative factors, which are used for all of the Company's portfolio segments. Quantitative factors include company-specific, ten-year historical net charge-offs stratified by loans with similar characteristics. Qualitative factors include: 1) levels of and trends in delinquencies and impaired loans; 2) levels of and trends in charge-offs and recoveries; 3) trends in volume and terms of loans; 4) changes in underwriting standards or lending policies; 5) experience, ability, depth of lending staff; 6) national and local economic trends and conditions; 7) changes in credit concentrations; 8) out-of-market exposures; 9) changes in quality of loan review system; and 10) changes in the value of underlying collateral.

Due to the credit concentration of the Company's loan portfolio in real estate secured loans, the value of collateral is heavily dependent on real estate values in Arizona, Nevada, and California. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic or other conditions. In addition, regulators, as an integral part of their examination processes, periodically review the Bank's allowance for credit losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examination. Management regularly reviews the assumptions and formulae used in determining the allowance and makes adjustments if required to reflect the current risk profile of the portfolio.

Leases

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 sheets. 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 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. See “Note 4. Leases” of these Notes to Unaudited Consolidated Financial Statements for further disclosures required under the new standard.

Other assets acquired through foreclosure

Other assets acquired through foreclosure consist primarily of properties acquired as a result of, or in-lieu-of, foreclosure. Properties or other assets (primarily repossessed assets formerly leased) are classified as OREO and other repossessed property and are initially reported at fair value of the asset less estimated selling costs. Subsequent adjustments are based on the lower of carrying value or fair value less estimated costs to sell the property. Costs related to the development or improvement of the assets are capitalized and costs related to holding the assets are charged to non-interest expense. Property is evaluated regularly to ensure the recorded amount is supported by its current fair value and valuation allowances.

Goodwill and other intangible assets

The Company records as goodwill the excess of the purchase price 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 Company’s intangible assets consist primarily of core deposit intangible assets that are amortized over periods ranging from 5 to 10 years. 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 during the three ~~and nine~~ months ended ~~September 30, 2018 and 2017.~~

~~Other assets acquired through foreclosure~~

~~Other assets acquired through foreclosure consist primarily of properties acquired as a result of,~~March 31, 2019 or in-lieu-of, foreclosure. Properties or other assets (primarily repossessed assets formerly leased) are classified as OREO and other repossessed property and are initially reported at fair value of the asset less estimated selling costs. Subsequent adjustments are based on the lower of carrying value or fair value less estimated costs to sell the property. Costs related to the development or improvement of the assets are capitalized and costs related to holding the assets are charged to non-interest expense. Property is evaluated regularly to ensure the recorded amount is supported by its current fair value and valuation allowances.2018.

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

On December 11, 2018, the Company adopted its common stock repurchase program, pursuant to which the Company is authorized to repurchase up to $250 million of its shares of common stock. All shares repurchased under the plan are retired upon settlement. The Company has elected to allocate the excess of the repurchase price over the par value of its common stock between additional paid-in capital and retained earnings. The allocation of the excess repurchase price to additional paid-in capital is limited to the amount of additional paid-in capital that was recorded at the time that the shares were initially issued, which is calculated on a last-in, first-out basis.

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 in 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 continues to be reported at fair value in 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.

Derivative instruments that are not designated as hedges, so called free-standing derivatives, are reported in 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.

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 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 in 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 in the Consolidated Balance Sheet. Losses would 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. 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.

As with outstanding loans, the Company applies qualitative factors and utilization rates to its off-balance sheet obligations in determining an estimate of losses inherent in these contractual obligations. The estimate for credit losses on off-balance sheet instruments is included in other liabilities and the charge to income that establishes this liability is included in non-interest expense.

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 9.10. Derivatives and Hedging Activities" of these Notes to Unaudited Consolidated Financial Statements for further discussion.

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. Changes to estimated fair values from a business combination are recognized as an adjustment to goodwill during the measurement period and are recognized in the proper reporting period in which the adjustment amounts are determined. 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.

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, as well as enhances 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.

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.

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 the Company to make assumptions regarding 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 ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. The estimated fair value amounts for ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ have been measured as of period-end, and have not been re-evaluated or updated for purposes of these 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 ~~13.~~14. Fair Value Accounting" in 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 in the Consolidated Balance Sheets for cash and due from banks approximate their fair value.

Money market investments

The carrying amounts reported in the Consolidated Balance Sheets for money market investments approximate their fair value.

Investment securities

The fair values of CRA investments, ~~and~~ exchange-listed preferred stock, 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 were 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.

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. WAB also maintains an investment in its primary correspondent bank. 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

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 2 in the fair value hierarchy, excluding impaired loans which are categorized as Level 3.

Accrued interest receivable and payable

The carrying amounts reported in the Consolidated Balance Sheets for accrued interest receivable and payable approximate their fair value.

Derivative financial instruments

All derivatives are recognized in 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 in the fair value hierarchy.

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), which the Company believes a market participant would consider in determining fair value. 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.

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 3 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' rated financial index. Junior subordinated debt has been categorized as Level 3 in the fair value hierarchy.

Off-balance sheet instruments

The fair value of the Company’s off-balance sheet instruments (lending commitments and standby 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.

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 in the Consolidated Balance Sheet. See "Note ~~11.~~12. Income Taxes" of these Notes to Unaudited Consolidated Financial Statements for further discussion on income taxes.

Non-interest income

Non-interest income includes service charges and fees, income from equity investments, card income, foreign currency income, income from bank owned life insurance, lending related income, net gain or loss on sales of investment securities, net unrealized gains or losses on assets measured at fair value, and other income. 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, and success fees. 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. Beginning on October 1, 2018, interchange fees are being recorded net of customer rewards earned, which is more in line with current industry practice. 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 840, 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 ~~15.~~16. 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 new standard.

Recent accounting pronouncements

In February 2016, the FASB issued guidance within ASU 2016-02, Leases. The amendments in ASU 2016-02 to Topic 842, Leases, require lessees to recognize the lease assets and lease liabilities arising from operating leases in the statement of financial position, which will result in a gross up of assets and liabilities on the balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. In July 2018, the FASB issued guidance within ASU 2018-10, ~~Codification Improvements to Topic 842, Leases~~ ~~and ASU 2018-11,~~ ~~Leases (Topic 842) Targeted Improvements~~. The amendments within ASU 2018-10 clarify how to apply certain aspects of the new leases standard. The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. The amendments within ASU 2018-11 give entities another option for transition and provide lessors with a practical expedient. The transition option allows entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, under this transition approach, the modified retrospective transition method still applies; however, a cumulative-effect adjustment to the opening balance sheet of retained earnings is recognized in the period of adoption, rather than the earliest period presented. The practical expedient provides lessors with an option to not separate non-lease components from the associated lease components when certain criteria are met and requires them to account for the combined components in accordance with the new revenue standard if the associated non-lease components are the predominant components. The amendments in these ASUs are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Management evaluated several lease software solutions and selected a software solution that it believes will be able to effectively facilitate the application of the new accounting requirements. The population of its leases that are within the scope of the new guidance has been finalized and largely relate to real estate leases. All key lease data has been gathered and input into the new application and management is in the process of validating this data.

In June 2016, the FASB issued guidance within ASU 2016-13, Measurement of Credit Losses on Financial ~~Instruments~~.Instruments. The new standard significantly changes the impairment model for most financial assets that are measured at amortized cost, including off-balance sheet credit exposures, from an incurred loss model to an expected loss model. The amendments in ASU 2016-13 to Topic 326, Financial Instruments - Credit Losses, require that an organization measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also requires enhanced disclosures, including qualitative and quantitative disclosures that provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the accounting for credit losses on AFS debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ~~Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.~~ Management has formed a Steering Committee and established an implementation team made up of subject matter experts across different functions within the Company, including Finance, Risk, Credit, and IT, that will coordinate and facilitate all phases of planning and implementation of the new guidance. ~~Under~~The Company has completed its loan portfolio stratification, with methodologies for measuring expected credit losses that include a combination of third-party vended models, internally-developed models, and simplified approaches. In addition, the ~~direction~~Company has completed substantive pre-production runs and model validation activities, which encompass a majority of the ~~Company's CECL Steering Committee and in partnership with its Enterprise Project Management Office, the~~Company’s loan portfolio. The implementation team is fully engaged with the implementation of its plan. The Company has identified its portfolio segments and made modeling choices that include both internally-developed models as well as vended solutions, with parallel testing of certain models expected to begin in early 2019. The team is also ~~focused on~~ updating ~~its accounting policies and assessing its control framework to identify risks resulting from new processes, judgments and data.~~

~~In March 2017, the FASB issued guidance within ASU 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities~~. The amendments in ASU 2017-08 to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date, which more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a significant impact on the Company's Consolidated Financial Statements.

~~In June 2018, the FASB issued guidance within ASU 2018-07,~~ ~~Improvements to Nonemployee Share-Based Payment Accounting~~. The amendments in ASU 2018-07 to Topic 718, Compensation-Stock Compensation, are intended to align the accounting for share-based payment awards issued to employees and nonemployees. Changes to the accounting for nonemployee awards include: 1) equity classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to remeasure the awards through the performance completion date; 2) for

performance conditions, compensation cost associated with the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the performance condition; and 3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The new guidance also clarifies that any share-based payment awards issued to customers should be evaluated under ASC 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company's share-based payment awards to nonemployees consist only of grants made to the Company's BOD as compensation solely related to the individual's role as a Director. As such, in accordance with ASC 718, the Company accounts for these share-based payment awards to its Directors in the same manner as share-based payment awards for its employees. Accordingly, the amendments in this guidance will not have an effect on the accounting for the Company's share-based payment awards to its Directors.

~~In July 2018, the FASB issued guidance within ASU 2018-09,~~ ~~Codification Improvements~~. The amendments in ASU 2018-09 are intended to clarify or correct unintended guidance in the FASB Codification and affect a wide variety of Topics in the Codification. The topics that are applicable to the Company include: 1) debt modifications and extinguishments; 2) stock compensation; and 3) derivatives and hedging. For debt modifications and extinguishments, the amendment clarifies that, in an early extinguishment of debt for which the fair value option has been elected, the net carrying amount of the extinguished debt is equal to its fair value at the reacquisition date, and upon extinguishment, the cumulative amount of the gain or loss on the extinguished debt that resulted from changes in instrument-specific credit risk should be presented in net income. The Company has junior subordinated debt that is recorded at fair value at each reporting period due to election of the FVO. Accordingly, if in the future, the Company chooses to repay this debt prior to its contractual maturity, this amendment would be applicable. For stock compensation, the amendment clarifies that excess tax benefits or tax deficiencies should be recognized in the period in which the amount of the tax deduction is determined, which is typically when an award is exercised (in the case of share options) or vests (in the case of non-vested stock awards). The Company already records excess tax benefits or tax deficiencies in the periods in which the tax deduction is determined. Therefore, this amendment will not have an effect on the Company's accounting ~~for excess tax benefits or tax deficiencies. For derivatives~~policies, designing key controls, and hedging, previous guidance permits derivatives to be offset only when all four conditions (including the intent to set off) are met. This amendment clarifies that the intent to set off is not required to offset fair value amounts recognized for derivative instrumentsgovernance processes that are ~~executed with the same counterparty under a master netting agreement. This amendment will not have an effect on the offsetting of the Company's derivative assets and liabilities.~~planned for implementation prior to adoption.

In August 2018, the FASB issued guidance within ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments within ASU 2018-13 remove, modify, and supplement the disclosure requirements for fair value measurements. Disclosure requirements that were removed include: the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additional disclosure requirements include: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. With the exception of the above additional disclosure requirements, which will be applied prospectively, all other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company's Consolidated Financial Statements.

In August 2018, the FASB issued guidance within ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments in this Update require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments in this Update also require that the capitalized implementation costs of a hosting arrangement that is a service contract be expensed over the term of the hosting arrangement. Presentation requirements include: expense related to the capitalized implementation costs should be presented in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, payments for capitalized implementation costs in the statement of cash flows should be classified in the same manner as payments made for fees associated with the hosting element, and capitalized implementation costs in the statement of financial position should be presented in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company's Consolidated Financial Statements.

Recently adopted accounting guidance

In ~~May 2014, the FASB issued guidance within ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~. The amendments in ASU 2014-09 to ASC 606, Revenue from Contracts with Customers, creates a common revenue standard and clarifies the principles for recognizing revenue that can be applied consistently across various transactions, industries, and capital markets. The amendments in the ASU clarify that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As part of that principle, the entity should identify the contract(s) with the customer, identify the performance obligation(s) of the contract, determine the transaction price, allocate that transaction price to the performance obligation(s) of the contract, and then recognize revenue when or as the entity satisfies the performance obligation(s). The Company adopted ASU 2014-09 on January 1, 2018 using the modified retrospective method. Substantially all of the Company's revenue is generated from interest income related to loans and investment securities, which are not within the scope of this guidance. The contracts that are within the scope of this guidance include service charges and fees on deposit accounts, certain types of card income, and success fees earned from equity investments. The Company completed its review of contracts and other agreements that are within the scope of this guidance and did not identify any material changes to the timing or amount of revenue recognition. Accordingly, the Company did not recognize an adjustment to retained earnings upon adoption of this guidance. The Company’s accounting policies did not change materially since the principles of revenue recognition in the ASU are largely consistent with current practices applied by the Company. The Company has expanded its qualitative disclosures of performance obligations and disaggregation of significant categories of revenue. See "Note 15. Revenue from Contracts with Customers" for further discussion.

~~In January~~February 2016, the FASB issued guidance within ASU ~~2016-01,~~2016-02, ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~Leases. The amendments in ASU ~~2016-01~~2016-02 to ~~Subtopic 825-10, Financial Instruments, contain~~Topic 842, Leases, require lessees to recognize the ~~following elements: 1) requires equity investments to be measured at fair value with changes~~lease assets and lease liabilities arising from operating leases in ~~fair value recognized in net income; 2) simplifies~~ the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; 4) requires public business entities to use the exit price notion when measuring the fair valuestatement of financial ~~instruments for disclosure purposes; 5) requires an entity~~position. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The Company adopted the amendments to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; 6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements; 7) clarifies that the entity should evaluate the need for a valuation allowance on a deferred tax asset related to AFS securities in combination with the entity's other deferred tax assets. EffectiveTopic 842 on January 1, ~~2015,~~2019 using the modified retrospective approach. The Company elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, which allows entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted. The Company also elected to apply the package of practical expedients permitting entities to forgo reassessment of 1) expired or existing contracts that may contain leases; 2) lease classification of expired or existing

leases; and 3) initial direct costs for any existing leases. The Company established internal controls and implemented lease accounting software to facilitate the preparation of financial information and disclosures related to leases. The most significant impact of the new standard on the Company’s consolidated financial statements was the recognition of a ROU asset and lease liability for operating leases for which the Company ~~adopted~~is the ~~amendment noted in item 5) above as discussed in~~lessee. The accounting for finance and operating leases for which the ~~Company's Annual Report on Form 10-K for~~Company is the ~~year ended December 31, 2015. Effective~~lessor remains substantially unchanged. Upon adoption of this guidance, on January 1, 2018, the Company adopted the other amendments in this guidance. The primary impact on the Company's Consolidated Financial Statements results from the amendments discussed in item 1) above as changes in the fair value of the Company's equity investments are now recognized in net income, rather than in AOCI. As of January 1, 2018,2019, the Company recorded a ~~cumulative-effect~~ROU asset and corresponding lease liability of $42.5 million and $46.1 million, respectively, on the consolidated balance sheet. No cumulative effect adjustment to retained earnings resulted from adoption of ~~$0.4 million to decrease accumulated other comprehensive income with~~this guidance. The new standard did not have a ~~corresponding increase to opening retained earnings. During~~material impact on the ~~nine months ended September 30, 2018, the Company recognized a loss~~Company’s results of ~~$3.0 million related to fair value changes in equity securities, which was recorded in the Consolidated Income Statement.~~operations or cash flows.

In ~~August 2016,~~March 2017, the FASB issued guidance within ASU ~~2016-15,~~2017-08, ~~Classification of Certain Cash Receipts and Cash Payments.~~ Premium Amortization on Purchased Callable Debt Securities. The amendments in ASU ~~2016-15~~2017-08 to ~~Topic 230, Statement~~Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date, which more closely align the amortization period of ~~Cash Flows, provide guidance~~premiums and discounts to expectations incorporated in market pricing on ~~eight specific cash flow classification issues: 1) debt prepayment or debt extinguishment costs; 2) settlement~~the underlying securities. Under current GAAP, entities generally amortize the premium as an adjustment of ~~zero-coupon debt instruments; 3) contingent consideration payments made after a business combination; 4) proceeds from~~yield over the ~~settlement of insurance claims; 5) proceeds from the settlement of corporate-owned~~contractual life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investments; 7) beneficial interest in securitization transactions; and 8) separately identifiable cash flows and the application of the ~~predominance principle.~~instrument. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. As of March 31, 2019, the Company does not hold these types of securities, therefore, adoption of this guidance did not have ~~a significant impact on the Company's Consolidated Statement of Cash Flows.~~

~~In January 2017, the FASB issued guidance within ASU 2017-01,~~ ~~Clarifying the Definition of a Business~~. The amendments in ASU 2017-01 to Topic 805, Business Combinations, clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or

~~businesses. The adoption of this guidance did not have a significant impact on the Company's Consolidated Financial Statements.~~

~~In January 2017, the FASB issued guidance within ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~. The amendments in ASU 2017-04 to Topic 350, Intangibles - Goodwill and Other, modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Accordingly, the amendments eliminate Step 2 from the goodwill impairment test because goodwill impairment will no longer be determined by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The adoption of this guidance did not have a significantan impact on the Company's Consolidated Financial Statements.

In ~~February 2017,~~June 2018, the FASB issued guidance within ASU ~~2017-05,~~2018-07, ~~Clarifying the Scope of Asset Derecognition Guidance and~~Improvements to Nonemployee Share-Based Payment Accounting ~~for Partial Sales of Nonfinancial Assets~~. The amendments in ASU ~~2017-05~~2018-07 to ~~Subtopic 610-20, Other Income-Gains~~Topic 718, Compensation-Stock Compensation, are intended to align the accounting for share-based payment awards issued to employees and ~~Losses from~~nonemployees. Changes to the ~~Derecognition~~accounting for nonemployee awards include: 1) equity classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of ~~Nonfinancial Assets, clarify~~ the ~~scope~~previous requirement to remeasure the awards through the performance completion date; 2) for performance conditions, compensation cost associated with the award will be recognized when achievement of ~~Subtopic 610-20~~the performance condition is probable, rather than upon achievement of the performance condition; and ~~add guidance~~3) the current requirement to reassess the classification (equity or liability) for ~~partial sales~~nonemployee awards upon vesting will be eliminated, except for awards in the form of nonfinancial assets, including partial sales of real estate. Under current GAAP, there are several different accounting models to evaluate whether the transfer of certain assets qualify for sale treatment.convertible instruments. The new ~~standard reduces~~guidance also clarifies that any share-based payment awards issued to customers should be evaluated under ASC 606, Revenue from Contracts with Customers. The Company's share-based payment awards to nonemployees consist only of grants made to the ~~number of potential accounting models that might apply and clarifies which model does apply~~Company's BOD as compensation solely related to the individual's role as a Director. As such, in ~~various circumstances. The~~accordance with ASC 718, the Company accounts for these share-based payment awards to its Directors in the same manner as share-based payment awards for its employees. Accordingly, the adoption of this guidance did not have ~~a significant~~an impact on the accounting for the Company's ~~Consolidated Financial Statements.~~share-based payment awards to its Directors.

In ~~May 2017, the FASB issued guidance within ASU 2017-09,~~ ~~Scope of Modification Accounting~~. The amendments in ASU 2017-09 to Topic 718, Compensation - Stock Compensation, provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following conditions are met: the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The adoption of this guidance did not have a significant impact on the Company's Consolidated Financial Statements.

~~In February~~July 2018, the FASB issued guidance within ASU ~~2018-02,~~2018-09, ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~Codification Improvements. Under current GAAP, the effect of a change in tax laws or rates on deferred tax liabilities and assets are included in income from continuing operations even in situations in which the related income tax effects of items in AOCI were originally recognized in comprehensive income. Accordingly, as the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate is required to be included in income from continuing operations, the tax effects of items within AOCI do not reflect the current tax rate. The amendments in ASU ~~2018-02~~2018-09 are intended to ~~Topic 220, Income Statement - Reporting Comprehensive Income, allow~~clarify or correct unintended guidance in the FASB Codification and affect a ~~reclassification~~wide variety of Topics in the Codification. The topics that are applicable to the Company include: 1) debt modifications and extinguishments; 2) stock compensation; and 3) derivatives and hedging. For debt modifications and extinguishments, the amendment clarifies that, in an early extinguishment of debt for which the fair value option has been elected, the net carrying amount of the extinguished debt is equal to its fair value at the reacquisition date, and upon extinguishment, the cumulative amount of the gain or loss on the extinguished debt that resulted from ~~AOCI to retained earnings from tax effects resulting from the TCJA.~~changes in instrument-specific credit risk should be presented in net income. The Company ~~elected~~has junior subordinated debt that is recorded at fair value at each reporting period due to ~~adopt~~election of the FVO. Accordingly, if in the future, the Company chooses to repay this debt prior to its contractual maturity, this amendment would be applicable. For stock compensation, the amendment clarifies that excess tax benefits or tax deficiencies should be recognized in the period in which the amount of the tax deduction is determined, which is typically when an award is exercised (in the case of share options) or vests (in the case of non-vested stock awards). The Company already records excess tax benefits or tax deficiencies in the periods in which the tax deduction is determined. Therefore, adoption of this amendment did not have an effect on the Company's accounting for excess tax benefits or tax deficiencies. For derivatives and hedging, previous guidance ~~effective January 1, 2018~~permits derivatives to be offset only when all four conditions (including the intent to set off) are met. This amendment clarifies that the intent to set off is not required to offset fair value amounts recognized for derivative instruments that are executed with the same counterparty under a master netting agreement. This amendment did not have an effect on the offsetting of the Company's derivative assets and ~~recorded a cumulative-effect adjustment of $0.7 million to decrease accumulated other comprehensive income with a corresponding increase to opening retained earnings.~~liabilities.

2. INVESTMENT SECURITIES

The carrying amounts and fair values of investment securities at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 are summarized as follows:


	September 30, 2018									March 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
	(in thousands)									(in thousands)
Held-to-maturity debt securities
Tax-exempt	$	288,290	$	773	$	(10,030	)	$	279,033	$	310,865	$	20,218	$	—		$	331,083

Available-for-sale debt securities
CDO	$	50	$	19,098	$	—		$	19,148	$	50	$	14,976	$	—		$	15,026
Commercial MBS issued by GSEs	107,915		42		(7,014		)	100,943		104,227		104		(5,232		)	99,099
Corporate debt securities	105,033		119		(5,768		)	99,384		105,026		116		(8,100		)	97,042
Private label residential MBS	887,581		42		(31,681		)	855,942		946,757		2,861		(14,271		)	935,347
Residential MBS issued by GSEs	1,515,408		167		(65,516		)	1,450,059		1,509,590		2,408		(19,762		)	1,492,236
Tax-exempt	511,957		4,015		(11,065		)	504,907		526,899		11,666		(1,575		)	536,990
Trust preferred securities	32,000		—		(3,383		)	28,617		32,000		—		(3,383		)	28,617
U.S. government sponsored agency securities	49,000		—		(3,399		)	45,601		40,000		—		(1,099		)	38,901
U.S. treasury securities	2,496		—		(21		)	2,475		997		—		(8		)	989
Total AFS debt securities	$	3,211,440	$	23,483	$	(127,847	)	$	3,107,076	$	3,265,546	$	32,131	$	(53,430	)	$	3,244,247

Equity securities ~~(1)~~
CRA investments	$	52,058	$	—	$	(1,314	)	$	50,744	$	52,361	$	—	$	(747	)	$	51,614
Preferred stock	122,699		880		(2,029		)	121,550		65,913		954		(476		)	66,391
Total equity securities	$	174,757	$	880	$	(3,343	)	$	172,294	$	118,274	$	954	$	(1,223	)	$	118,005


	December 31, 2017									December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
	(in thousands)									(in thousands)
Held-to-maturity debt securities
Tax-exempt	$	255,050	$	4,514	$	(3,250	)	$	256,314	$	302,905	$	3,163	$	(7,420	)	$	298,648

Available-for-sale debt securities
CDO	$	50	$	21,807	$	—		$	21,857	$	50	$	15,277	$	—		$	15,327
Commercial MBS issued by GSEs	113,069		46		(4,038		)	109,077		106,385		82		(6,361		)	100,106
Corporate debt securities	105,044		261		(1,822		)	103,483		105,029		—		(5,649		)	99,380
Private label residential MBS	874,261		756		(6,493		)	868,524		948,161		945		(24,512		)	924,594
Residential MBS issued by GSEs	1,719,188		810		(30,703		)	1,689,295		1,564,181		1,415		(35,472		)	1,530,124
Tax-exempt	501,988		10,893		(1,971		)	510,910		542,086		4,335		(7,753		)	538,668
Trust preferred securities	32,000		—		(3,383		)	28,617		32,000		—		(3,383		)	28,617
U.S. government sponsored agency securities	64,000		—		(2,538		)	61,462		40,000		—		(1,812		)	38,188
U.S. treasury securities	2,496		—		(14		)	2,482		1,996		—		(12		)	1,984
Total AFS debt securities										$	3,339,888	$	22,054	$	(84,954	)	$	3,276,988

Available-for-sale equity securities (1)
Equity securities
CRA investments	51,133		—		(517		)	50,616		$	52,210	$	—	$	(1,068	)	$	51,142
Preferred stock	52,172		1,160		(136		)	53,196		65,954		148		(2,183		)	63,919
Total AFS securities	$	3,515,401	$	35,733	$	(51,615	)	$	3,499,519
Total equity securities										$	118,164	$	148	$	(3,251	)	$	115,061

(1)

~~The Company's equity securities consist of CRA investments and preferred stock. Effective January 1, 2018, the Company adopted the amendments within ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities,~~ which requires that fair value changes in equity securities be recognized as part of non-interest income. Prior to January 1, 2018, equity securities were classified as part of AFS securities. On a prospective basis, equity securities will be reported separately.

The Company conducts an OTTI analysis on a quarterly basis. The initial indication of OTTI ~~for both debt and equity securities~~ is a decline in the market value below the amount recorded for an investment, and taking into account the severity and duration of the decline. Another potential indication of OTTI is a downgrade below investment grade. In determining whether an impairment is OTTI, the Company considers the length of time and the extent to which the market value has been below cost, recent events specific to the issuer, including investment downgrades by rating agencies and economic conditions of its industry, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. ~~For marketable equity securities, the Company also considers the issuer’s financial condition, capital strength, and near-term prospects.~~

For debt securities, for the purpose of an OTTI analysis, the Company also considers the cause of the price decline (general level of interest rates, credit spreads, and industry and issuer-specific factors), whether downgrades by bond rating agencies have occurred, the issuer’s financial condition, near-term prospects, and current ability to make future payments in a timely manner, as well as the issuer’s ability to service debt, and any change in agencies’ ratings at the evaluation date from the acquisition date and any likely imminent action.

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company’s unrealized losses relate primarily to market interest rate increases since the securities' original purchase date. The total number of AFS securities in an unrealized loss position at ~~September 30, 2018~~March 31, 2019 is ~~409,~~230, compared to ~~302~~373 at December 31, ~~2017.~~2018. The Company has reviewed securities for which there is an unrealized loss in accordance with its accounting policy for OTTI described above and determined that there are no impairment charges for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. The Company does not consider any securities to be other-than-temporarily impaired as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. No assurance can be made that OTTI will not occur in future periods.

Information pertaining to securities with gross unrealized losses at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:


	September 30, 2018												March 31, 2019
	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 thousands)
Held-to-maturity debt securities
Tax-exempt	$	10,030	$	215,827	$	—	$	—	$	10,030	$	215,827
													(in thousands)
Available-for-sale debt securities
Commercial MBS issued by GSEs	$	—	$	—	$	7,014	$	99,134	$	7,014	$	99,134	$	—	$	—	$	5,232	$	97,264	$	5,232	$	97,264
Corporate debt securities	766		19,234		5,002		74,998		5,768		94,232		—		—		8,100		91,900		8,100		91,900
Private label residential MBS	13,004		463,026		18,677		374,504		31,681		837,530		—		—		14,271		703,525		14,271		703,525
Residential MBS issued by GSEs	16,624		563,642		48,892		878,925		65,516		1,442,567		2		265		19,760		1,184,558		19,762		1,184,823
Tax-exempt	6,337		227,531		4,728		66,047		11,065		293,578		—		—		1,575		80,676		1,575		80,676
Trust preferred securities	—		—		3,383		28,617		3,383		28,617		—		—		3,383		28,617		3,383		28,617
U.S. government sponsored agency securities	151		4,849		3,248		40,752		3,399		45,601		—		—		1,099		33,901		1,099		33,901
U.S. treasury securities	16		978		5		1,497		21		2,475		—		—		8		989		8		989
Total AFS securities	$	36,898	$	1,279,260	$	90,949	$	1,564,474	$	127,847	$	2,843,734	$	2	$	265	$	53,428	$	2,221,430	$	53,430	$	2,221,695

December 31, 2017
Less Than Twelve Months More Than Twelve Months Total
Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value
(in thousands)
Held-to-maturity debt securities
Tax-exempt $ 3,250
$ 107,921
$ —
$ —
$ 3,250
$ 107,921

Available-for-sale debt securities
Commercial MBS issued by GSEs $ 161
$ 13,565
$ 3,877
$ 93,641
$ 4,038
$ 107,206
Corporate debt securities 1,398
78,602
424
19,576
1,822
98,178
Private label residential MBS 3,115
480,885
3,378
188,710
6,493
669,595
Residential MBS issued by GSEs 13,875
999,478
16,828
523,270
30,703
1,522,748
Tax-exempt 17
6,159
1,954
69,674
1,971
75,833
Trust preferred securities —
—
3,383
28,617
3,383
28,617
U.S. government sponsored agency securities 14
4,986
2,524
56,476
2,538
61,462
U.S. treasury securities 14
2,482
—
—
14
2,482

Available-for-sale equity securities
CRA investments —
—
517
50,616
517
50,616
Preferred stock 136
7,357
—
—
136
7,357
Total AFS securities $ 18,730
$ 1,593,514
$ 32,885
$ 1,030,580
$ 51,615
$ 2,624,094

~~The portion of unrealized gains and losses related to equity securities still held at the reporting date is calculated as follows:~~

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
(in thousands)
Net (losses) gains on equity securities $ (1,212 ) $ (2,971 )
Less: Net gains (losses) recognized on equity securities sold —
—
Unrealized (losses) gains on equity securities still held at the reporting date $ (1,212 ) $ (2,971 )



	December 31, 2018
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(in thousands)
Held-to-maturity debt securities
Tax-exempt	$	3,868	$	91,095	$	3,552	$	69,991	$	7,420	$	161,086

Available-for-sale debt securities
Commercial MBS issued by GSEs	$	—	$	—	$	6,361	$	98,275	$	6,361	$	98,275
Corporate debt securities	16		5,013		5,633		94,367		5,649		99,380
Private label residential MBS	5,173		217,982		19,339		537,316		24,512		755,298
Residential MBS issued by GSEs	1,363		141,493		34,109		1,215,490		35,472		1,356,983
Tax-exempt	3,562		209,767		4,191		72,382		7,753		282,149
Trust preferred securities	—		—		3,383		28,617		3,383		28,617
U.S. government sponsored agency securities	—		—		1,812		38,188		1,812		38,188
U.S. treasury securities	—		—		12		1,984		12		1,984
Total AFS securities	$	10,114	$	574,255	$	74,840	$	2,086,619	$	84,954	$	2,660,874

The amortized cost and fair value of securities as of ~~September 30, 2018,~~March 31, 2019, 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.


	September 30, 2018				March 31, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)				(in thousands)
Held-to-maturity
Due in one year or less	$	1,200	$	1,236	$	10,100	$	10,147
After one year through five years	10,100		10,122
After five years through ten years	14,602		14,351		14,386		14,984
After ten years	262,388		253,324		286,379		305,952
Total HTM securities	$	288,290	$	279,033	$	310,865	$	331,083

Available-for-sale
Due in one year or less	$	4,001	$	3,996	$	2,296	$	2,313
After one year through five years	17,355		17,571		12,036		12,206
After five years through ten years	223,060		215,580		211,149		203,258
After ten years	456,120		462,985		479,491		499,788
Mortgage-backed securities	2,510,904		2,406,944		2,560,574		2,526,682
Total AFS securities	$	3,211,440	$	3,107,076	$	3,265,546	$	3,244,247

The following tables summarize the carrying amount of the Company’s investment ratings position as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018																March 31, 2019
	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 thousands)																(in thousands)
Held-to-maturity debt securities
Tax-exempt	$	—	$	—	$	—	$	—	$	—	$	—	$	288,290	$	288,290	$	—	$	—	$	—	$	—	$	—	$	—	$	310,865	$	310,865

Available-for-sale debt securities
CDO	$	—	$	—	$	—	$	—	$	—	$	19,148	$	—	$	19,148	$	—	$	—	$	—	$	—	$	—	$	15,026	$	—	$	15,026
Commercial MBS issued by GSEs	—		100,943		—		—		—		—		—		100,943		—		99,099		—		—		—		—		—		99,099
Corporate debt securities	—		—		—		71,685		27,699		—		—		99,384		—		—		—		64,300		32,742		—		—		97,042
Private label residential MBS	818,046		—		34,957		395		1,019		1,525		—		855,942		911,689		—		21,079		297		898		1,384		—		935,347
Residential MBS issued by GSEs	—		1,450,059		—		—		—		—		—		1,450,059		—		1,492,236		—		—		—		—		—		1,492,236
Tax-exempt	61,443		20,636		244,696		170,409		—		—		7,723		504,907		68,227		8,875		294,830		163,391		—		—		1,667		536,990
Trust preferred securities	—		—		—		—		28,617		—		—		28,617		—		—		—		—		28,617		—		—		28,617
U.S. government sponsored agency securities	—		45,601		—		—		—		—		—		45,601		—		38,901		—		—		—		—		—		38,901
U.S. treasury securities	—		2,475		—		—		—		—		—		2,475		—		989		—		—		—		—		—		989
Total AFS securities ~~(1)~~	$	879,489	$	1,619,714	$	279,653	$	242,489	$	57,335	$	20,673	$	7,723	$	3,107,076	$	979,916	$	1,640,100	$	315,909	$	227,988	$	62,257	$	16,410	$	1,667	$	3,244,247

Equity securities
CRA investments	$	—	$	26,291	$	—	$	—	$	—	$	—	$	24,453	$	50,744	$	—	$	25,375	$	—	$	—	$	—	$	—	$	26,239	$	51,614
Preferred stock	—		—		—		—		72,991		39,032		9,527		121,550		—		—		—		—		47,931		3,925		14,535		66,391
Total equity securities ~~(1)~~	$	—	$	26,291	$	—	$	—	$	72,991	$	39,032	$	33,980	$	172,294	$	—	$	25,375	$	—	$	—	$	47,931	$	3,925	$	40,774	$	118,005

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



	December 31, 2018
	AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals
	(in thousands)
Held-to-maturity debt securities
Tax-exempt	$	—	$	—	$	—	$	—	$	—	$	—	$	302,905	$	302,905

Available-for-sale debt securities
CDO	$	—	$	—	$	—	$	—	$	—	$	15,327	$	—	$	15,327
Commercial MBS issued by GSEs	—		100,106		—		—		—		—		—		100,106
Corporate debt securities	—		—		—		66,515		32,865		—		—		99,380
Private label residential MBS	887,520		—		34,342		343		947		1,442		—		924,594
Residential MBS issued by GSEs	—		1,530,124		—		—		—		—		—		1,530,124
Tax-exempt	66,160		12,146		306,409		152,330		—		—		1,623		538,668
Trust preferred securities	—		—		—		—		28,617		—		—		28,617
U.S. government sponsored agency securities	—		38,188		—		—		—		—		—		38,188
U.S. treasury securities	—		1,984		—		—		—		—		—		1,984
Total AFS securities	$	953,680	$	1,682,548	$	340,751	$	219,188	$	62,429	$	16,769	$	1,623	$	3,276,988

Equity securities
CRA investments	$	—	$	25,375	$	—	$	—	$	—	$	—	$	25,767	$	51,142
Preferred stock	—		—		—		—		45,771		3,693		14,455		63,919
Total equity securities	$	—	$	25,375	$	—	$	—	$	45,771	$	3,693	$	40,222	$	115,061


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

December 31, 2017
AAA Split-rated AAA/AA+ AA+ to AA- A+ to A- BBB+ to BBB- BB+ and below Unrated Totals
(in thousands)
Held-to-maturity debt securities
Tax-exempt $ —
$ —
$ —
$ —
$ —
$ —
$ 255,050
$ 255,050

Available-for-sale debt securities
CDO $ —
$ —
$ —
$ —
$ —
$ 21,857
$ —
$ 21,857
Commercial MBS issued by GSEs —
109,077
—
—
—
—
—
109,077
Corporate debt securities —
—
—
74,293
29,190
—
—
103,483
Private label residential MBS 809,242
—
55,161
1,350
931
1,840
—
868,524
Residential MBS issued by GSEs —
1,689,295
—
—
—
—
—
1,689,295
Tax-exempt 64,893
25,280
249,200
167,994
—
—
3,543
510,910
Trust preferred securities —
—
—
—
28,617
—
—
28,617
U.S. government sponsored agency securities —
61,462
—
—
—
—
—
61,462
U.S. treasury securities —
2,482
—
—
—
—
—
2,482

Available-for-sale equity securities
CRA investments —
25,349
—
—
—
—
25,267
50,616
Preferred stock —
—
—
10,388
23,822
4,104
14,882
53,196
Total AFS securities (1) $ 874,135
$ 1,912,945
$ 304,361
$ 254,025
$ 82,560
$ 27,801
$ 43,692
$ 3,499,519


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

Securities with carrying amounts of approximately ~~$814.1~~$940.0 million and ~~$913.7~~$788.4 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, were pledged for various purposes as required or permitted by law.

~~The following table presents gross~~There were no gains and losses on sales of investment ~~securities:~~

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(in thousands)
Gross gains $ —
$ 468
$ —
$ 1,181
Gross losses (7,232 ) (149 ) (7,232 ) (274 )
Net (losses) gains on sales of investment securities $ (7,232 ) $ 319
$ (7,232 ) $ 907

~~During~~securities during the three months ended ~~September 30, 2018, the Company sold certain available-for-sale securities with a carrying value of $111.9 million~~March 31, 2019 and recognized a net loss on sale of these securities of $7.2 million. The sale resulted from management’s review of its investment portfolio, which led to its decision to sell lower yielding securities and reinvest in securities with higher yields and shorter durations. With the exception of these transactions, management does not intend to sell any of its debt securities in an unrealized loss position in the foreseeable future and it is more-likely-than-not that the Company will not be required to sell these securities prior to recovery.

March 31, 2018.

3. LOANS, LEASES AND ALLOWANCE FOR CREDIT LOSSES

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


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(in thousands)						(in thousands)
Commercial and industrial	$	7,487,725		$	6,841,381		$	7,723,695		$	7,762,642
Commercial real estate - non-owner occupied	3,952,966			3,904,011			4,304,261			4,213,428
Commercial real estate - owner occupied	2,288,156			2,241,613			2,285,340			2,325,380
Construction and land development	2,107,631			1,632,204			2,283,527			2,134,753
Residential real estate	827,073			425,940			1,461,561			1,204,355
Consumer	69,214			48,786			58,364			70,071
Loans, net of deferred loan fees and costs	16,732,765			15,093,935			18,116,748			17,710,629
Allowance for credit losses	(150,011		)	(140,050		)	(154,987		)	(152,717		)
Total loans HFI	$	16,582,754		$	14,953,885		$	17,961,761		$	17,557,912

Net deferred loan fees and costs as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 total ~~$31.0~~$34.8 million and ~~$25.3~~$36.3 million, respectively, which is a reduction in the carrying value of loans. Net unamortized purchase discounts on secondary market loan purchases total ~~$3.3~~$8.2 million and ~~$8.5~~$2.0 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Total loans held for investment are also net of interest rate and credit marks on acquired loans, which are a net reduction in the carrying value of loans. Interest rate marks were ~~$8.7~~$6.1 million and ~~$14.1~~$7.1 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Credit marks were ~~$17.2~~$13.1 million and ~~$27.0~~$14.6 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

The following table presents the contractual aging of the recorded investment in past due loans held for investment by class of loans:


	September 30, 2018												March 31, 2019
	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 thousands)												(in thousands)
Commercial and industrial	$	7,477,017	$	8,870	$	254	$	1,584	$	10,708	$	7,487,725	$	7,711,923	$	193	$	10,638	$	941	$	11,772	$	7,723,695
Commercial real estate
Owner occupied	2,287,826		—		330		—		330		2,288,156		2,281,389		2,630		1,321		—		3,951		2,285,340
Non-owner occupied	3,787,571		—		531		—		531		3,788,102		4,143,704		984		—		—		984		4,144,688
Multi-family	164,864		—		—		—		—		164,864		159,573		—		—		—		—		159,573
Construction and land development
Construction	1,412,161		—		—		—		—		1,412,161		1,497,960		—		—		—		—		1,497,960
Land	695,470		—		—		—		—		695,470		784,146		945		—		476		1,421		785,567
Residential real estate	811,516		5,865		1,338		8,354		15,557		827,073		1,439,763		13,660		2,736		5,402		21,798		1,461,561
Consumer	68,881		—		—		333		333		69,214		58,248		—		—		116		116		58,364
Total loans	$	16,705,306	$	14,735	$	2,453	$	10,271	$	27,459	$	16,732,765	$	18,076,706	$	18,412	$	14,695	$	6,935	$	40,042	$	18,116,748


	December 31, 2017												December 31, 2018
	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 thousands)												(in thousands)
Commercial and industrial	$	6,835,385	$	2,245	$	669	$	3,082	$	5,996	$	6,841,381	$	7,753,111	$	3,187	$	416	$	5,928	$	9,531	$	7,762,642
Commercial real estate
Owner occupied	2,240,457		1,026		—		130		1,156		2,241,613		2,320,321		4,441		—		618		5,059		2,325,380
Non-owner occupied	3,696,729		2,993		—		2,847		5,840		3,702,569		4,051,837		—		—		—		—		4,051,837
Multi-family	201,442		—		—		—		—		201,442		161,591		—		—		—		—		161,591
Construction and land development
Construction	1,090,176		—		—		—		—		1,090,176		1,382,664		—		—		—		—		1,382,664
Land	536,917		—		—		5,111		5,111		542,028		751,613		—		476		—		476		752,089
Residential real estate	411,857		6,874		1,487		5,722		14,083		425,940		1,182,933		9,316		4,010		8,096		21,422		1,204,355
Consumer	48,408		83		213		82		378		48,786		69,830		—		—		241		241		70,071
Total loans	$	15,061,371	$	13,221	$	2,369	$	16,974	$	32,564	$	15,093,935	$	17,673,900	$	16,944	$	4,902	$	14,883	$	36,729	$	17,710,629

The following table presents the recorded investment in non-accrual loans and loans past due ninety days or more and still accruing interest by class of loans:


		September 30, 2018										December 31, 2017															March 31, 2019															December 31, 2018
		Non-accrual loans						Loans past due 90 days or more and still accruing				Non-accrual loans											Loans past due 90 days or more and still accruing				Non-accrual loans											Loans past due 90 days or more and still accruing				Non-accrual loans											Loans past due 90 days or more and still accruing
		Current		Past Due/ Delinquent		Total Non-accrual					Current				Past Due/ Delinquent				Total Non-accrual				Loans past due 90 days or more and still accruing			Current				Past Due/ Delinquent				Total Non-accrual				Loans past due 90 days or more and still accruing			Current				Past Due/ Delinquent				Total Non-accrual				Loans past due 90 days or more and still accruing
		(in thousands)																									(in thousands)
Commercial and industrial		$	14,894	$	9,083	$	23,977	Loans past due 90 days or more and still accruing	$	—			$	17,913			$	4,113			$	22,026		$	43			$	19,438			$	11,636			$	31,074		$	—			$	7,639			$	7,451			$	15,090		$	—
Commercial real estate
Owner occupied		—		—		—		—				1,089				792				1,881			—				420				—				420			—				—				—				—			594
Non-owner occupied		—		—		—		—				—				5,840				5,840			—				—				580				580			—				—				—				—			—
Multi-family		—		—		—		—				—				—				—			—				—				—				—			—				—				—				—			—
Construction and land development	Construction and land development																									Construction and land development
Construction		—		—		—		—				—				—				—			—				3,307				—				3,307			—				—				476				476			—
Land		—		—		—		—				868				5,111				5,979			—				—				476				476			—				—				—				—			—
Residential real estate		4,204		8,354		12,558		—				2,039				6,078				8,117			—				1,168				6,746				7,914			—				552				11,387				11,939			—
Consumer		—		333		333		—				—				82				82			—				—				116				116			—				—				241				241			—
Total		$	19,098	$	17,770	$	36,868	$	—			$	21,909			$	22,016			$	43,925		$	43			$	24,333			$	19,554			$	43,887		$	—			$	8,191			$	19,555			$	27,746		$	594

The reduction in interest income associated with loans on non-accrual status was approximately ~~$0.6~~$0.3 million and ~~$0.7~~$0.6 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. ~~For each of the nine months ended September 30, 2018 and 2017, the reduction in interest income associated with loans on non-accrual status was approximately $1.8 million.~~

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as Special Mention, Substandard, Doubtful, and Loss. Substandard loans include those characterized by well-defined weaknesses and carry the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful, or risk rated nine, 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. The final rating of Loss covers loans considered uncollectible and having such little recoverable value that it is not practical to defer writing off the asset. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that warrant management’s close attention, are deemed to be Special Mention. Risk ratings are updated, at a minimum, quarterly.

The following tables present gross loans by risk rating:


	September 30, 2018												March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(in thousands)												(in thousands)
Commercial and industrial	$	7,273,634	$	83,886	$	129,183	$	1,022	$	—	$	7,487,725	$	7,548,610	$	70,708	$	103,828	$	549	$	—	$	7,723,695
Commercial real estate
Owner occupied	2,214,765		18,713		54,678		—		—		2,288,156		2,206,311		23,044		55,985		—		—		2,285,340
Non-owner occupied	3,765,340		14,666		8,096		—		—		3,788,102		4,095,492		36,114		13,082		—		—		4,144,688
Multi-family	164,864		—		—		—		—		164,864		159,573		—		—		—		—		159,573
Construction and land development
Construction	1,404,619		1,233		6,309		—		—		1,412,161		1,470,710		4,088		23,162		—		—		1,497,960
Land	694,596		266		608		—		—		695,470		785,070		—		497		—		—		785,567
Residential real estate	808,065		5,884		13,124		—		—		827,073		1,452,919		365		8,277		—		—		1,461,561
Consumer	68,599		41		574		—		—		69,214		58,208		29		127		—		—		58,364
Total	$	16,394,482	$	124,689	$	212,572	$	1,022	$	—	$	16,732,765	$	17,776,893	$	134,348	$	204,958	$	549	$	—	$	18,116,748


	September 30, 2018												March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(in thousands)												(in thousands)
Current (up to 29 days past due)	$	16,386,286	$	124,056	$	194,118	$	846	$	—	$	16,705,306	$	17,760,118	$	134,268	$	181,862	$	458	$	—	$	18,076,706
Past due 30 - 59 days	5,991		393		8,351		—		—		14,735		14,947		35		3,339		91		—		18,412
Past due 60 - 89 days	1,870		240		343		—		—		2,453		1,494		45		13,156		—		—		14,695
Past due 90 days or more	335		—		9,760		176		—		10,271		334		—		6,601		—		—		6,935
Total	$	16,394,482	$	124,689	$	212,572	$	1,022	$	—	$	16,732,765	$	17,776,893	$	134,348	$	204,958	$	549	$	—	$	18,116,748


	December 31, 2017												December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(in thousands)												(in thousands)
Commercial and industrial	$	6,675,574	$	85,781	$	76,328	$	3,698	$	—	$	6,841,381	$	7,574,506	$	61,202	$	126,356	$	578	$	—	$	7,762,642
Commercial real estate
Owner occupied	2,149,465		43,122		48,397		629		—		2,241,613		2,255,513		12,860		57,007		—		—		2,325,380
Non-owner occupied	3,676,711		11,166		14,692		—		—		3,702,569		4,030,350		12,982		8,505		—		—		4,051,837
Multi-family	201,442		—		—		—		—		201,442		161,591		—		—		—		—		161,591
Construction and land development
Construction	1,072,342		4,477		13,357		—		—		1,090,176		1,378,624		1,210		2,830		—		—		1,382,664
Land	535,412		637		5,979		—		—		542,028		751,012		—		1,077		—		—		752,089
Residential real estate	408,527		8,971		8,442		—		—		425,940		1,191,571		527		12,257		—		—		1,204,355
Consumer	47,824		878		84		—		—		48,786		69,755		75		241		—		—		70,071
Total	$	14,767,297	$	155,032	$	167,279	$	4,327	$	—	$	15,093,935	$	17,412,922	$	88,856	$	208,273	$	578	$	—	$	17,710,629


	December 31, 2017												December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total		Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(in thousands)												(in thousands)
Current (up to 29 days past due)	$	14,758,149	$	154,295	$	145,934	$	2,993	$	—	$	15,061,371	$	17,400,616	$	87,264	$	186,020	$	—	$	—	$	17,673,900
Past due 30 - 59 days	7,966		518		4,737		—		—		13,221		11,255		1,580		4,109		—		—		16,944
Past due 60 - 89 days	1,182		219		968		—		—		2,369		719		12		3,767		404		—		4,902
Past due 90 days or more	—		—		15,640		1,334		—		16,974		332		—		14,377		174		—		14,883
Total	$	14,767,297	$	155,032	$	167,279	$	4,327	$	—	$	15,093,935	$	17,412,922	$	88,856	$	208,273	$	578	$	—	$	17,710,629

The table below reflects the recorded investment in loans classified as impaired:


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(in thousands)						(in thousands)
Impaired loans with a specific valuation allowance under ASC 310 (1)	$	3,601		$	19,315		$	5,244		$	986
Impaired loans without a specific valuation allowance under ASC 310 (2)	121,968			79,239			138,154			111,266
Total impaired loans	$	125,569		$	98,554		$	143,398		$	112,252
Valuation allowance related to impaired loans ~~(3)~~	$	(1,171	)	$	(5,606	)	$	(1,357	)	$	(681	)


(1)	Includes no TDR loans as of ~~$2.6 million and $3.7 million~~each of the periods ended at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~2018.


(2)	Includes TDR loans of ~~$49.5~~$68.9 million and ~~$48.8~~$44.5 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~


~~(3)~~	~~Includes valuation allowance related to TDR loans of $0.7 million and $1.2 million at September 30,~~ 2018, ~~and December 31, 2017,~~ respectively.

The following table presents impaired loans by class:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Commercial and industrial	$	76,185	$	34,156	$	78,768	$	63,896
Commercial real estate
Owner occupied	6,660		10,430		8,185		6,530
Non-owner occupied	12,544		21,251		12,268		12,407
Multi-family	—		—		—		—
Construction and land development
Construction	—		—		20,329		—
Land	9,128		15,426		8,286		9,403
Residential real estate	20,686		17,170		15,417		19,744
Consumer	366		121		145		272
Total	$	125,569	$	98,554	$	143,398	$	112,252

A valuation allowance is established for an impaired loan when the fair value of the loan is less than the recorded investment. In certain cases, portions of impaired loans are charged-off to realizable value instead of establishing a valuation allowance and are included, when applicable, in the table above as “Impaired loans without a specific valuation allowance under ASC 310.” However, before concluding that an impaired loan needs no associated valuation allowance, an assessment is made to consider all available and relevant information for the method used to evaluate impairment and the type of loan being assessed. The valuation allowance disclosed above is included in the allowance for credit losses reported in the Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~

2018.

The following table presents the average investment in impaired loans and income recognized on impaired loans:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands)								(in thousands)
Average balance on impaired loans	$	104,652	$	108,033	$	100,712	$	106,456	$	126,613	$	93,081
Interest income recognized on impaired loans	1,114		1,040		3,109		3,075		1,493		873
Interest recognized on non-accrual loans, cash basis	569		694		1,443		1,372		309		438

The following table presents the average investment in impaired loans by loan class:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands)								(in thousands)
Commercial and industrial	$	55,026	$	40,074	$	47,083	$	33,358	$	67,144	$	36,849
Commercial real estate
Owner occupied	6,698		17,779		8,053		20,136		7,569		9,043
Non-owner occupied	12,597		20,789		16,349		22,446		12,311		18,925
Multi-family	—		—		—		—		—		—
Construction and land development
Construction	—		—		—		—		12,451		—
Land	9,218		12,503		9,701		13,297		8,632		10,281
Residential real estate	20,746		16,692		19,217		17,011		18,278		17,799
Consumer	367		196		309		208		228		184
Total	$	104,652	$	108,033	$	100,712	$	106,456	$	126,613	$	93,081

The average investment in TDR loans was ~~$52.2~~$51.6 million and ~~$52.0~~$48.3 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $51.9 million and $56.6 million for the nine months ended September 30, 2018 and 2017,~~ respectively.

The following table presents interest income on impaired loans by class:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands)								(in thousands)
Commercial and industrial	$	537	$	307	$	1,276	$	788	$	769	$	250
Commercial real estate
Owner occupied	118		166		376		530		123		127
Non-owner occupied	218		279		744		798		187		262
Multi-family	—		—		—		—		—		—
Construction and land development
Construction	—		—		—		—		180		—
Land	146		163		425		551		129		130
Residential real estate	95		124		287		406		105		104
Consumer	—		1		1		2		—		—
Total	$	1,114	$	1,040	$	3,109	$	3,075	$	1,493	$	873

The Company is not committed to lend significant additional funds on these impaired loans.

The following table summarizes nonperforming assets:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Non-accrual loans (1)	$	36,868	$	43,925	$	43,887	$	27,746
Loans past due 90 days or more on accrual status ~~(2)~~	—		43		—		594
Accruing troubled debt restructured loans	42,567		42,431		52,488		36,458
Total nonperforming loans	79,435		86,399		96,375		64,798
Other assets acquired through foreclosure, net	20,028		28,540		17,707		17,924
Total nonperforming assets	$	99,463	$	114,939	$	114,082	$	82,722


(1)	Includes non-accrual TDR loans of ~~$9.6~~$16.4 million and ~~$10.1~~$8.0 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.


~~(2)~~	~~Includes less than $0.1 million from loans acquired with deteriorated credit quality at December 31, 2017.~~

Loans Acquired with Deteriorated Credit Quality

Changes in the accretable yield for loans acquired with deteriorated credit quality are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(in thousands)												(in thousands)
Balance, at beginning of period	$	4,828		$	14,247		$	9,324		$	15,177		$	3,768		$	9,324
Reclassifications from non-accretable to accretable yield (1)	—			—			683			2,086			—			683
Accretion to interest income	(224		)	(690		)	(801		)	(2,374		)	(161		)	(313		)
Reversal of fair value adjustments upon disposition of loans	(563		)	(2,199		)	(5,165		)	(3,531		)	(470		)	(1,586		)
Balance, at end of period	$	4,041		$	11,358		$	4,041		$	11,358		$	3,137		$	8,108


(1)	The primary drivers of reclassification from non-accretable to accretable yield resulted from changes in estimated cash flows.

Allowance for Credit Losses

The following table summarizes the changes in the allowance for credit losses by portfolio type:

Three Months Ended September 30,
Construction and Land Development Commercial Real Estate Residential Real Estate Commercial and Industrial Consumer Total
(in thousands)
2018
Beginning Balance $ 22,159
$ 31,979
$ 6,849
$ 85,244
$ 852
$ 147,083
Charge-offs —
—
46
4,610
109
4,765
Recoveries (24 ) (856 ) (440 ) (362 ) (11 ) (1,693 )
Provision 473
(1,250 ) 832
5,652
293
6,000
Ending balance $ 22,656
$ 31,585
$ 8,075
$ 86,648
$ 1,047
$ 150,011
2017
Beginning Balance $ 20,852
$ 28,593
$ 4,838
$ 76,734
$ 794
$ 131,811
Charge-offs —
175
—
2,921
61
3,157
Recoveries (226 ) (1,781 ) (108 ) (619 ) (33 ) (2,767 )
Provision (619 ) (1,474 ) (141 ) 7,192
42
5,000
Ending balance $ 20,459
$ 28,725
$ 4,805
$ 81,624
$ 808
$ 136,421


	Nine Months Ended September 30,																		Three Months Ended March 31,
	Construction and Land Development			Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Total			Construction and Land Development			Commercial Real Estate			Residential Real Estate			Commercial and Industrial			Consumer			Total
	(in thousands)																		(in thousands)
2019
Beginning Balance																			$	22,513		$	34,829		$	11,276		$	83,118		$	981		$	152,717
Charge-offs																			—			—			188			2,124			1			2,313
Recoveries																			(55		)	(453		)	(93		)	(477		)	(5		)	(1,083		)
Provision																			3,515			2,585			1,825			(4,217		)	(208		)	3,500
Ending balance																			$	26,083		$	37,867		$	13,006		$	77,254		$	777		$	154,987
2018
Beginning Balance	$	19,511		$	31,495		$	5,478		$	82,793		$	773		$	140,050		$	19,511		$	31,495		$	5,478		$	82,793		$	773		$	140,050
Charge-offs	1			233			1,038			10,904			114			12,290			—			—			107			3,517			—			3,624
Recoveries	(1,420		)	(1,228		)	(831		)	(1,737		)	(35		)	(5,251		)	(1,388		)	(126		)	(250		)	(459		)	(10		)	(2,233		)
Provision	1,726			(905		)	2,804			13,022			353			17,000			1,695			1,247			(102		)	3,143			17			6,000
Ending balance	$	22,656		$	31,585		$	8,075		$	86,648		$	1,047		$	150,011		$	22,594		$	32,868		$	5,519		$	82,878		$	800		$	144,659
2017
Beginning Balance	$	21,175		$	25,673		$	3,851		$	73,333		$	672		$	124,704
Charge-offs	—			1,994			447			6,166			103			8,710
Recoveries	(1,011		)	(2,719		)	(1,659		)	(2,705		)	(83		)	(8,177		)
Provision	(1,727		)	2,327			(258		)	11,752			156			12,250
Ending balance	$	20,459		$	28,725		$	4,805		$	81,624		$	808		$	136,421

The following table presents impairment method information related to loans and allowance for credit losses by loan portfolio segment:


		Commercial Real Estate-Owner Occupied		Commercial Real Estate-Non-Owner Occupied		Commercial and Industrial		Residential Real Estate		Construction and Land Development		Consumer		Total Loans			Commercial Real Estate-Owner Occupied		Commercial Real Estate-Non-Owner Occupied		Commercial and Industrial		Residential Real Estate		Construction and Land Development		Consumer		Total Loans
		(in thousands)															(in thousands)
Loans as of September 30, 2018;
Loans as of March 31, 2019;																Loans as of March 31, 2019;
Recorded Investment
Impaired loans with an allowance recorded		$	—	$	—	$	3,238	$	363	$	—	$	—	$	3,601		$	—	$	—	$	590	$	1,347	$	3,307	$	—	$	5,244
Impaired loans with no allowance recorded		6,660		12,544		72,947		20,323		9,128		366		121,968			8,185		12,268		78,178		14,070		25,308		145		138,154
Total loans individually evaluated for impairment		6,660		12,544		76,185		20,686		9,128		366		125,569			8,185		12,268		78,768		15,417		28,615		145		143,398
Loans collectively evaluated for impairment		2,276,847		3,859,914		7,411,540		805,800		2,098,503		68,848		16,521,452			2,273,235		4,232,710		7,644,927		1,446,125		2,254,912		58,219		17,910,128
Loans acquired with deteriorated credit quality		4,649		80,508		—		587		—		—		85,744			3,920		59,283		—		19		—		—		63,222
Total recorded investment		$	2,288,156	$	3,952,966	$	7,487,725	$	827,073	$	2,107,631	$	69,214	$	16,732,765		$	2,285,340	$	4,304,261	$	7,723,695	$	1,461,561	$	2,283,527	$	58,364	$	18,116,748
Unpaid Principal Balance	Unpaid Principal Balance															Unpaid Principal Balance
Impaired loans with an allowance recorded		$	—	$	—	$	5,520	$	363	$	—	$	—	$	5,883		$	—	$	—	$	1,463	$	1,347	$	3,307	$	—	$	6,117
Impaired loans with no allowance recorded		13,164		18,292		108,469		29,312		25,756		10,726		205,719			13,479		14,398		117,839		22,428		41,528		10,505		220,177
Total loans individually evaluated for impairment		13,164		18,292		113,989		29,675		25,756		10,726		211,602			13,479		14,398		119,302		23,775		44,835		10,505		226,294
Loans collectively evaluated for impairment		2,276,847		3,859,914		7,411,540		805,800		2,098,503		68,848		16,521,452			2,273,235		4,232,710		7,644,927		1,446,125		2,254,912		58,219		17,910,128
Loans acquired with deteriorated credit quality		6,351		96,840		4,357		706		—		—		108,254			5,257		74,453		4,347		72		—		—		84,129
Total unpaid principal balance		$	2,296,362	$	3,975,046	$	7,529,886	$	836,181	$	2,124,259	$	79,574	$	16,841,308		$	2,291,971	$	4,321,561	$	7,768,576	$	1,469,972	$	2,299,747	$	68,724	$	18,220,551
Related Allowance for Credit Losses	Related Allowance for Credit Losses															Related Allowance for Credit Losses
Impaired loans with an allowance recorded		$	—	$	—	$	1,111	$	60	$	—	$	—	$	1,171		$	—	$	—	$	297	$	250	$	810	$	—	$	1,357
Impaired loans with no allowance recorded		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Total loans individually evaluated for impairment		—		—		1,111		60		—		—		1,171			—		—		297		250		810		—		1,357
Loans collectively evaluated for impairment		13,946		17,497		85,528		8,015		22,656		1,047		148,689			14,746		23,020		76,949		12,756		25,273		777		153,521
Loans acquired with deteriorated credit quality		—		142		9		—		—		—		151			—		101		8		—		—		—		109
Total allowance for credit losses		$	13,946	$	17,639	$	86,648	$	8,075	$	22,656	$	1,047	$	150,011		$	14,746	$	23,121	$	77,254	$	13,006	$	26,083	$	777	$	154,987


		Commercial Real Estate-Owner Occupied		Commercial Real Estate-Non-Owner Occupied		Commercial and Industrial		Residential Real Estate		Construction and Land Development		Consumer		Total Loans			Commercial Real Estate-Owner Occupied		Commercial Real Estate-Non-Owner Occupied		Commercial and Industrial		Residential Real Estate		Construction and Land Development		Consumer		Total Loans
		(in thousands)															(in thousands)
Loans as of December 31, 2017;
Loans as of December 31, 2018;																Loans as of December 31, 2018;
Recorded Investment
Impaired loans with an allowance recorded		$	—	$	—	$	19,315	$	—	$	—	$	—	$	19,315		$	—	$	—	$	623	$	363	$	—	$	—	$	986
Impaired loans with no allowance recorded		10,430		21,250		14,842		17,170		15,426		121		79,239			6,530		12,407		63,273		19,381		9,403		272		111,266
Total loans individually evaluated for impairment		10,430		21,250		34,157		17,170		15,426		121		98,554			6,530		12,407		63,896		19,744		9,403		272		112,252
Loans collectively evaluated for impairment		2,221,614		3,777,219		6,807,181		408,169		1,616,778		48,665		14,879,626			2,314,871		4,121,464		7,698,746		1,184,592		2,125,350		69,799		17,514,822
Loans acquired with deteriorated credit quality		9,569		105,542		43		601		—		—		115,755			3,979		79,557		—		19		—		—		83,555
Total recorded investment		$	2,241,613	$	3,904,011	$	6,841,381	$	425,940	$	1,632,204	$	48,786	$	15,093,935		$	2,325,380	$	4,213,428	$	7,762,642	$	1,204,355	$	2,134,753	$	70,071	$	17,710,629
Unpaid Principal Balance
Impaired loans with an allowance recorded		$	—	$	—	$	20,795	$	—	$	—	$	—	$	20,795		$	—	$	—	$	1,482	$	363	$	—	$	—	$	1,845
Impaired loans with no allowance recorded		17,459		28,028		42,261		26,057		32,289		10,695		156,789			11,852		18,155		103,992		27,979		25,624		10,632		198,234
Total loans individually evaluated for impairment		17,459		28,028		63,056		26,057		32,289		10,695		177,584			11,852		18,155		105,474		28,342		25,624		10,632		200,079
Loans collectively evaluated for impairment		2,221,614		3,777,219		6,807,181		408,169		1,616,778		48,665		14,879,626			2,314,871		4,121,464		7,698,746		1,184,592		2,125,350		69,799		17,514,822
Loans acquired with deteriorated credit quality		12,619		128,440		3,146		720		—		—		144,925			5,315		95,680		4,352		72		—		—		105,419
Total unpaid principal balance		$	2,251,692	$	3,933,687	$	6,873,383	$	434,946	$	1,649,067	$	59,360	$	15,202,135		$	2,332,038	$	4,235,299	$	7,808,572	$	1,213,006	$	2,150,974	$	80,431	$	17,820,320
Related Allowance for Credit Losses	Related Allowance for Credit Losses															Related Allowance for Credit Losses
Impaired loans with an allowance recorded		$	—	$	—	$	5,606	$	—	$	—	$	—	$	5,606		$	—	$	—	$	621	$	60	$	—	$	—	$	681
Impaired loans with no allowance recorded		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Total loans individually evaluated for impairment		—		—		5,606		—		—		—		5,606			—		—		621		60		—		—		681
Loans collectively evaluated for impairment		13,884		16,135		76,919		5,500		19,599		776		132,813			14,286		20,456		82,488		11,216		22,513		981		151,940
Loans acquired with deteriorated credit quality		—		1,629		2		—		—		—		1,631			—		87		9		—		—		—		96
Total allowance for credit losses		$	13,884	$	17,764	$	82,527	$	5,500	$	19,599	$	776	$	140,050		$	14,286	$	20,543	$	83,118	$	11,276	$	22,513	$	981	$	152,717

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. A TDR loan is also considered impaired. 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.

During the three months ended ~~September 30, 2018,~~March 31, 2019, the Company had ~~four~~two new TDR loans with a recorded investment of ~~$2.8~~$27.1 million and ~~two~~five new TDR loans during the three months ended ~~September 30, 2017~~March 31, 2018 with a recorded investment of ~~$1.9~~$15.0 million. During the nine months ended September 30, 2018, the Company had eleven new TDR loans with a recorded investment of $34.4 million and three new TDR loans with a recorded investment of $6.8 million during the nine months ended September 30, 2017. No principal amounts were forgiven and there were no waived fees or other expenses resulting from these TDRs.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, there were no TDR loans for which there was a payment default. During the three months ended September 30, 2017, there was one CRE, non-owner occupied TDR loan with a recorded investment of $0.1 million for which there was a payment default. During the nine months ended September 30, 2017, there were three TDR loans with a recorded investment of $0.5 million for which there was a payment default.

A TDR loan is deemed to have a payment default when it becomes past due 90 days, goes on non-accrual, or is restructured again. Payment defaults, along with other qualitative indicators, are considered by management in the determination of the allowance for credit losses.

At ~~September 30,~~March 31, 2019 and December 31, 2018, commitments outstanding on TDR loans totaled ~~$0.3 million. There were no loan commitments outstanding on TDR loans at December 31, 2017.~~$2.1 million and $1.5 million, respectively.

Loan Purchases and Sales

For the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ secondary market loan purchases totaled ~~$482.8~~$530.5 million and ~~$216.8~~$141.5 million, respectively. For ~~the nine months ended September 30, 2018~~2019, these purchased loans consisted of $312.5 million of residential real estate loans, $188.0 million of commercial and ~~2017, secondary market loan purchases totaled $1.01 billion~~industrial loans, and ~~$666.8~~$30.0 million ~~respectively.~~of CRE, non-owner occupied loans. For 2018, these purchased loans consisted of ~~$511.5 million of commercial and industrial loans, $471.7 million of residential real estate loans, and $27.1 million of construction loans. For 2017, these purchased loans consisted of $520.4~~$118.3 million of commercial and industrial loans and ~~$146.4~~$23.2 million of residential real estate loans.

During the three months ended ~~September 30,~~March 31, 2019, the Company sold commercial and industrial loans with carrying value of $15.5 million and recognized a net loss of $0.4 million. During the three months ended March 31, 2018, the Company sold loans which primarily consisted of commercial and industrial loans with a carrying value of ~~$12.4~~$31.0 million and recognized a net gain of ~~$1.0~~$0.7 million. ~~During~~

4. LEASES

Adoption of ASU 2016-02, Leases

On January 1, 2019, the Company adopted the amendments to ASC 842, Leases, which requires lessees to recognize lease assets and liabilities arising from operating leases on the balance sheet. The Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, allowing entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted.

The Company has operating leases under which it leases its branch offices, corporate headquarters, other offices, and data facility centers. Upon adoption of the new lease guidance, on January 1, 2019, the Company recorded a ROU asset and corresponding lease liability of $42.5 million and $46.1 million, respectively, on the consolidated balance sheet. As of March 31, 2019, the Company's operating lease ROU asset and operating lease liability totaled $72.8 million and $77.8 million, respectively. The increase in the operating lease ROU asset and the operating lease liability from the adoption date is due to execution of a major office lease extension subsequent to the adoption date. A weighted average discount rate of 3.06% was used in the measurement of the ROU asset and lease liability as of March 31, 2019.

The Company's leases have remaining lease terms between one to twelve years, with a weighted average lease term of 9.03 years at March 31, 2019. Some leases include multiple five-year renewal options. The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. Currently, the Company has no leases for which the option to renew is reasonably certain and therefore, options to renew were not factored into the calculation of its ROU asset and lease liability as of March 31, 2019.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of March 31, 2019:



	(in thousands)
2019	$	9,099
2020	11,200
2021	9,186
2022	7,992
2023	8,002
Thereafter	45,503
Total lease payments	$	90,982
Less: imputed interest	13,232
Total present value of lease liabilities	$	77,750

The Company also has additional operating leases, primarily related to its branch offices and corporate headquarters, that have not yet commenced as of March 31, 2019. The aggregate future commitment related to these additional leases totals $5.0 million. These operating leases will commence in fiscal year 2019 and have lease terms between six to twelve years.

Total operating lease costs of $3.3 million and other lease costs of $1.1 million, which include common area maintenance, parking, and taxes during the three months ended ~~September 30, 2017,~~March 31, 2019 were included as part of occupancy expense. Short-term lease costs were not material during the ~~Company sold commercial and industrial loans with a carrying value of $41.3 million and did not recognize a significant net gain or loss on the sales. During the nine~~three months ended ~~September 30,~~March 31, 2019. For the three months ended March 31, 2018, rent expense associated with the Company's operating leases totaled $2.5 million.

The below table shows the supplemental cash flow information related to the Company's operating leases for the three months ended March 31, 2019:



	(in thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,039
Right-of-use assets obtained in exchange for new operating lease liabilities	32,905

Lease Obligations as of December 31, 2018

As previously disclosed in the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2018, the ~~Company sold loans which primarily consisted~~following is a schedule of commercial and industrial loans with a carrying value of $46.5 million and recognized a gain of $2.4 million on the sales. During the nine months ended September 30, 2017, the Company sold loans, which consisted primarily of commercial and industrial loans with a carrying value of $50.5 million and recognized a loss of $0.1 million on the sales.future minimum rental payments under its non-cancelable operating leases, expiring through 2030:



	(in thousands)
2019	$	11,370
2020	10,322
2021	7,418
2022	6,294
2023	6,070
Thereafter	15,417
Total future minimum rental payments	$	56,891

4.5. OTHER ASSETS ACQUIRED THROUGH FORECLOSURE

The following table represents the changes in other assets acquired through foreclosure:


	Three Months Ended September 30,									Three Months Ended March 31,
	2018									2019
	Gross Balance			Valuation Allowance			Net Balance			Gross Balance			Valuation Allowance			Net Balance
	(in thousands)									(in thousands)
Balance, beginning of period	$	31,145		$	(3,604	)	$	27,541		$	19,979		$	(2,055	)	$	17,924
Proceeds from sale of other real estate owned and repossessed assets, net	(1,093		)	401			(692		)
Charitable contribution (1)	(6,895		)	—			(6,895		)
Charitable contribution										(232		)	114			(118		)
Valuation adjustments, net	—			—			—			—			(99		)	(99		)
Gains (losses), net (2)	74			—			74
Balance, end of period	$	23,231		$	(3,203	)	$	20,028		$	19,747		$	(2,040	)	$	17,707

	2017									2018
Balance, beginning of period	$	35,037		$	(4,049	)	$	30,988		$	32,552		$	(4,012	)	$	28,540
Transfers to other assets acquired through foreclosure, net	430			—			430			5,744			—			5,744
Proceeds from sale of other real estate owned and repossessed assets, net	(2,491		)	330			(2,161		)	(5,294		)	9			(5,285		)
Valuation adjustments, net	—			(343		)	(343		)	—			(47		)	(47		)
Gains (losses), net (2)	78			—			78
Gains (losses), net (1)										1,242			—			1,242
Balance, end of period	$	33,054		$	(4,062	)	$	28,992		$	34,244		$	(4,050	)	$	30,194

Nine Months Ended September 30,
2018
Gross Balance Valuation Allowance Net Balance
(in thousands)
Balance, beginning of period $ 32,552
$ (4,012 ) $ 28,540
Transfers to other assets acquired through foreclosure, net 5,744
—
5,744
Proceeds from sale of other real estate owned and repossessed assets, net (9,634 ) 841
(8,793 )
Charitable contribution (1) (6,895 ) —
(6,895 )
Valuation adjustments, net —
(32 ) (32 )
Gains (losses), net (3) 1,464
—
1,464
Balance, end of period $ 23,231
$ (3,203 ) $ 20,028

2017
Balance, beginning of period $ 54,138
$ (6,323 ) $ 47,815
Transfers to other assets acquired through foreclosure, net 1,812
—
1,812
Proceeds from sale of other real estate owned and repossessed assets, net (23,129 ) 2,381
(20,748 )
Valuation adjustments, net —
(120 ) (120 )
Gains (losses), net (3) 233
—
233
Balance, end of period $ 33,054
$ (4,062 ) $ 28,992


(1)	~~Represents a contribution of OREO property to the Company's charitable foundation. See Note 16. Related Party Transactions for further discussion.~~


~~(2)~~	There were no zero and $1.0 millioninnet gains related to initial transfers to other assets during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.


~~(3)~~	~~There were $1.0 million and $0.1 million in net gains related to initial transfers to other assets during the nine months ended September 30, 2018 and 2017, respectively.~~

At ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the majority of the Company’s repossessed assets consisted of properties located in Nevada. The Company held 1210 properties at ~~September 30, 2018,~~March 31, 2019, compared to 1911 at December 31, ~~2017,~~2018, and 2018 at ~~September 30, 2017.~~March 31, 2018.

5.6. OTHER BORROWINGS

The following table summarizes the Company’s borrowings as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Short-Term:
Federal funds purchased					$	—	$	256,000
FHLB advances	$	—	$	390,000	—		235,000
Total short-term borrowings	$	—	$	390,000	$	—	$	491,000

The Company maintains ~~other~~federal fund lines of credit ~~with correspondent banks~~ totaling ~~$306.0 million. These lines~~$955.0 million as of ~~credit are unsecured, of~~March 31, 2019, which ~~$45.0 million~~ have ~~a floating interest rate of one-month LIBOR plus 3.25% and $261.0 million have a rate equivalent~~rates comparable to the federal funds effective ~~rate.~~rate plus 0.10% to 0.20%. As of ~~September 30, 2018 and December~~March 31, ~~2017,~~2019, there were no outstanding balances on the Company's lines of credit. As of December 31, 2018, outstanding balances on these federal fund lines of credit totaled $256.0 million.

The Company also maintains 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. At ~~September 30, 2018,~~March 31, 2019, the Company had no ~~short-term~~ FHLB overnight advances. At December 31, ~~2017, short-term~~2018, the Company had $235.0 million of FHLB overnight advances, ~~of $390.0 million had~~with an interest rate of ~~1.41%~~2.56%.

Other short-term borrowing sources available to the Company include ~~Federal funds purchased from correspondent banks and customer repurchase agreements. Federal funds purchased have a rate equivalent to the federal funds effective rate plus 0.10% to 0.20% and~~ customer repurchase agreements, which have an average rate of 0.15%. ~~There were no outstanding balances on Federal funds purchased as of September 30, 2018~~At March 31, 2019 and December 31, ~~2017. At September 30,~~ 2018, ~~and December 31, 2017,~~ customer repurchase agreements totaled ~~$21.0~~$15.1 million and ~~$26.0~~$22.4 million, respectively.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company had additional available credit with the FHLB of approximately ~~$2.84~~$2.97 billion and ~~$1.91~~$2.52 billion, respectively, and with the FRB of approximately ~~$1.40~~$1.32 billion and ~~$1.11~~$1.31 billion, respectively.

6.7. QUALIFYING DEBT

Subordinated Debt

The Parent has $175.0 million of subordinated debentures, which were recorded net of issuance costs of $5.5 million, and mature July 1, 2056. 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.

WAB has $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 has a fixed interest rate of 5.00% through June 30, 2020 and then converts to a variable rate of 3.20% plus three-month LIBOR through maturity.

To hedge the interest rate risk on the Company's 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 ~~$290.8~~$305.0 million and ~~$308.6~~$299.4 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Junior Subordinated Debt

The Company has formed or acquired through acquisition eight 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 ~~$68.3~~$69.0 million ~~at each~~and $61.1 million as of ~~the periods ended September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The weighted average interest rate of all junior subordinated debt as of ~~September 30, 2018~~March 31, 2019 was ~~4.74%~~4.94%, which is three-month LIBOR plus the contractual spread of 2.34%, compared to a weighted average interest rate of ~~4.03%~~5.15% at December 31, ~~2017.~~2018.

7.8. STOCKHOLDERS' EQUITY

Stock-Based Compensation

Restricted Stock Awards

Restricted stock awards granted to employees generally vest over a three-year period. Stock grants made to non-employee WAL directors in ~~2018 became~~2019 will be fully vested ~~at June 30, 2018.~~on July 1, 2019. The Company estimates the compensation expense 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 ~~September 30,~~March 31, 2019 and 2018 was ~~$0.7~~$20.7 million and ~~$23.7~~$21.9 million, respectively. Stock compensation expense related to restricted stock awards and stock options granted to employees are included in Salaries and employee benefits in the Consolidated Income Statement. For restricted stock awards granted to WAL directors, the related stock compensation expense is included in Legal, professional, and directors' fees. For each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, the Company recognized ~~$3.4~~$4.3 million ~~and $12.4 million, respectively,~~ in stock-based compensation expense related to all restricted stock award ~~grants, compared to $2.7 million and $11.3 million for the three and nine months ended September 30, 2017, respectively.~~grants.

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 ~~September 30,~~March 31, 2019 and 2018, however expense is still being recognized for the grants made in ~~2016 and~~ 2017 as they also have a three-year vesting period. For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, the Company recognized ~~$0.6~~$0.5 million ~~and $1.9 million, respectively,~~ in stock-based compensation expense related to these performance-based restricted stock grants, compared to ~~$0.8 million and $1.6~~$0.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2018.

Performance Stock Units

The Company grants members of its executive management performance stock units that do not vest unless the Company achieves a specified cumulative EPS target over a three-year performance period. The number of shares issued will vary based on the cumulative EPS target 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 ~~September 30, 2018,~~March 31, 2019, the Company recognized ~~$1.5~~$1.7 million ~~and $4.8 million, respectively,~~ in stock-based compensation expense related to these performance stock units, compared to ~~$1.9 million and $4.5~~$1.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2018.

The three-year performance period for the ~~2015~~2016 grant ended on December 31, ~~2017,~~2018, and the Company's cumulative EPS for the performance period exceeded the level required for a maximum award under the terms of the grant. As a result, executive management members were entitled to the maximum award of ~~202,074~~202,776 shares, which was paid out in the first quarter of ~~2018.~~2019.

Common Stock Repurchase

On December 12, 2018, the Company announced that it had adopted a common stock repurchase plan, pursuant to which the Company is authorized to repurchase up to $250.0 million of its shares of common stock. During the three months ended March 31, 2019, the Company repurchased 940,915 shares of its common stock, representing approximately 1% of the Company's outstanding shares, pursuant to the repurchase plan. The shares were repurchased at a weighted average price of $40.30, for a total payment of $37.9 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 September 30, 2018, the~~The Company purchased 173,007 treasury shares ~~of 18,402 and 201,354, respectively,~~ at a weighted average price of ~~$57.81 and $58.91~~$45.66 per share ~~respectively. During the three~~ and ~~nine months ended September 30, 2017, the Company purchased~~180,867 treasury shares ~~of 64,705 and 266,883, respectively,~~ at a weighted average price of ~~$51.82~~$59.02 per share during the three months ended March 31, 2019 and ~~$51.10 per share,~~2018, respectively.

8.9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Three Months Ended September 30,
Unrealized holding (losses) gains on AFS Unrealized holding gains (losses) on SERP Unrealized holding gains (losses) on junior subordinated debt Impairment loss on securities Total
(in thousands)
Balance, June 30, 2018 $ (61,859 ) $ 446
$ 9,954
$ 144
$ (51,315 )
Other comprehensive (loss) income before reclassifications (22,462 ) (12 ) (2,028 ) —
(24,502 )
Amounts reclassified from AOCI 5,454
—
—
—
5,454
Net current-period other comprehensive (loss) income (17,008 ) (12 ) (2,028 ) —
(19,048 )
Balance, September 30, 2018 $ (78,867 ) $ 434
$ 7,926
$ 144
$ (70,363 )

Balance, June 30, 2017 $ (449 ) $ 157
$ 6,638
$ 144
$ 6,490
Other comprehensive income (loss) before reclassifications 1,116
114
641
—
1,871
Amounts reclassified from AOCI (197 ) —
—
—
(197 )
Net current-period other comprehensive income (loss) 919
114
641
—
1,674
Balance, September 30, 2017 $ 470
$ 271
$ 7,279
$ 144
$ 8,164


	Nine Months Ended September 30,														Three Months Ended March 31,
	Unrealized holding (losses) gains on AFS			Unrealized holding gains (losses) on SERP			Unrealized holding gains (losses) on junior subordinated debt			Impairment loss on securities		Total			Unrealized holding gains (losses) on AFS			Unrealized holding gains (losses) on SERP			Unrealized holding gains (losses) on junior subordinated debt			Impairment loss on securities		Total
															(in thousands)
Balance, December 31, 2018															$	(47,591	)	$	392		$	13,433		$	144	$	(33,622	)
Other comprehensive income (loss) before reclassifications															31,377			(18		)	(5,928		)	—		25,431
Amounts reclassified from AOCI															—			—			—			—		—
Net current-period other comprehensive income (loss)															31,377			(18		)	(5,928		)	—		25,431
Balance, March 31, 2019															$	(16,214	)	$	374		$	7,505		$	144	$	(8,191	)
	(in thousands)
Balance, December 31, 2017	$	(10,026	)	$	385		$	6,352		$	144	$	(3,145	)	$	(10,026	)	$	385		$	6,352		$	144	$	(3,145	)
Balance, January 1, 2018 (1)	(12,556		)	469			7,740			144		(4,203		)	(12,556		)	469			7,740			144		(4,203		)
Other comprehensive (loss) income before reclassifications	(71,765		)	(35		)	186			—		(71,614		)	(38,914		)	(11		)	1,466			—		(37,459		)
Amounts reclassified from AOCI	5,454			—			—			—		5,454			—			—			—			—		—
Net current-period other comprehensive (loss) income	(66,311		)	(35		)	186			—		(66,160		)	(38,914		)	(11		)	1,466			—		(37,459		)
Balance, September 30, 2018	$	(78,867	)	$	434		$	7,926		$	144	$	(70,363	)

Balance, December 31, 2016	$	(14,916	)	$	121		$	9,956		$	144	$	(4,695	)
Other comprehensive income (loss) before reclassifications	15,947			150			(2,677		)	—		13,420
Amounts reclassified from AOCI	(561		)	—			—			—		(561		)
Net current-period other comprehensive income (loss)	15,386			150			(2,677		)	—		12,859
Balance, September 30, 2017	$	470		$	271		$	7,279		$	144	$	8,164
Balance, March 31, 2018															$	(51,470	)	$	458		$	9,206		$	144	$	(41,662	)


(1)	As adjusted for adoption of ASU 2016-01 and ASU ~~2018-02, see "Note 1. Summary~~2018-02. The cumulative effect of ~~Significant Accounting Policies" for further discussion.~~adoption of this guidance at January 1, 2018 resulted in an increase to retained earnings of $1.1 million and a corresponding decrease to accumulated other comprehensive income.

~~The following table presents reclassifications~~During the three months ended March 31, 2019 and 2018, there were no amounts reclassified out of accumulated other comprehensive ~~income (loss):~~loss.

Three Months Ended September 30, Nine Months Ended September 30,
Income Statement Classification 2018 2017 2018 2017
(in thousands)
(Loss) gain on sales of investment securities, net $ (7,232 ) $ 319
$ (7,232 ) $ 907
Income tax expense (benefit) 1,778
(122 ) 1,778
(346 )
Net of tax $ (5,454 ) $ 197
$ (5,454 ) $ 561

9.10. DERIVATIVES AND HEDGING ACTIVITIES

The Company is a party to various derivative instruments. 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. Generally, these instruments are used to help manage the Company's exposure to interest rate risk and meet client financing and hedging needs.

Derivatives are recorded at fair value in 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.

As of ~~September 30, 2018,~~March 31, 2019, December 31, ~~2017,~~2018, and ~~September 30, 2017,~~March 31, 2018, the Company does not have any outstanding cash flow hedges.

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) to another interest rate index.

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.

The Company has also entered into receive fixed/pay variable interest rate swaps, designated as fair value hedges on its fixed rate 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. For the fair value hedge on the Parent's $175.0 million subordinated debentures issued on June 16, 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, and forward window 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.

As of ~~each of the periods ended September 30, 2018, December~~March 31, ~~2017, and September 30, 2017,~~2019, derivatives not designated as hedging instruments were in a net asset position of $0.2 ~~million.~~million, compared to a net asset position of $0.3 million at December 31, 2018 and March 31, 2018. For the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ net changes in the fair value related to these derivative contracts totaled ~~$1.1~~$1.2 million and ~~$0.8~~$0.5 million, ~~respectively, and $3.5 million and $2.6 million for the nine months ended September 30, 2018 and 2017,~~ respectively, and are included as part of Foreign currency income in the Consolidated Income Statements.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the following amounts are reflected in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:


	September 30, 2018					December 31, 2017					March 31, 2019					December 31, 2018
	Carrying Value of Hedged Assets/(Liabilities)			Cumulative Amount of the Fair Value Hedging Adjustment (1)		Carrying Value of Hedged Assets/(Liabilities)			Cumulative Amount of the 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 thousands)										(in thousands)
Loans - HFI, net of deferred loan fees and costs	$	635,184		$	1,997	$	699,452		$	41,919	$	656,346		$	33,123	$	650,428		$	23,039
Qualifying debt	(290,801		)	28,160		(308,608		)	9,959		(305,002		)	14,222		(299,401		)	19,691


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

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 item is included in interest expense.

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

The following table summarizes the fair values of the Company's derivative instruments on a gross and net basis as of ~~September 30, 2018,~~March 31, 2019, December 31, ~~2017,~~2018, and ~~September 30, 2017.~~March 31, 2018. 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 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. The fair value of derivative contracts, after taking into account the effects of master netting agreements, is included in other assets or other liabilities in the Consolidated Balance Sheets, as indicated in the following table:


	September 30, 2018						December 31, 2017						September 30, 2017						March 31, 2019						December 31, 2018						March 31, 2018
			Fair Value						Fair Value						Fair Value						Fair Value						Fair Value						Fair Value
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
	(in thousands)																		(in thousands)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:																		Derivatives designated as hedging instruments:
Fair value hedges
Interest rate swaps	$	971,408	$	7,883	$	38,040	$	993,432	$	1,703	$	53,581	$	1,016,694	$	1,656	$	59,346	$	961,493	$	987	$	48,332	$	965,705	$	2,162	$	44,892	$	989,379	$	3,533	$	42,789
Total	971,408		7,883		38,040		993,432		1,703		53,581		1,016,694		1,656		59,346		961,493		987		48,332		965,705		2,162		44,892		989,379		3,533		42,789
Netting adjustments (1)	—		6,119		6,119		—		896		896		—		1,588		1,588		—		987		987		—		2,162		2,162		—		3,493		3,493
Net derivatives in the balance sheet	$	971,408	$	1,764	$	31,921	$	993,432	$	807	$	52,685	$	1,016,694	$	68	$	57,758	$	961,493	$	—	$	47,345	$	965,705	$	—	$	42,730	$	989,379	$	40	$	39,296

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																		Derivatives not designated as hedging instruments:
Foreign currency contracts ~~(2)~~	$	47,349	$	1,003	$	841	$	85,335	$	1,232	$	983	$	68,122	$	494	$	291	$	42,113	$	715	$	511	$	49,690	$	454	$	201	$	90,855	$	684	$	394
Interest rate swaps	2,348		92		92		36,969		776		776		35,578		641		641		2,348		12		12		2,378		27		27		36,840		1,170		1,170
Total	$	49,697	$	1,095	$	933	$	122,304	$	2,008	$	1,759	$	103,700	$	1,135	$	932	$	44,461	$	727	$	523	$	52,068	$	481	$	228	$	127,695	$	1,854	$	1,564


(1)	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.


~~(2)~~	~~Prior period derivative asset / liability netting adjustments have been made to conform to current presentation.~~

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected positive replacement value of the contracts. Management generally 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. In general, the Company has a zero credit threshold with regard to derivative exposure with counterparties. 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 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 netted against net derivative liabilities totaled ~~$34.7~~$48.3 million at ~~September 30, 2018, $53.6~~March 31, 2019, $44.9 million at December 31, ~~2017,~~2018, and ~~$59.3~~$40.1 million at ~~September 30, 2017.~~March 31, 2018.

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


	September 30, 2018		December 31, 2017		September 30, 2017		March 31, 2019		December 31, 2018		March 31, 2018
	(in thousands)						(in thousands)
Largest gross exposure (derivative asset) to an individual counterparty	$	5,802	$	893	$	945	$	987	$	1,411	$	2,515
Collateral posted by this counterparty	—		—		—		—		—		—
Derivative liability with this counterparty	9,567		40,340		44,053		32,250		23,906		20,624
Collateral pledged to this counterparty	22,179		60,476		65,051		40,035		25,761		29,719
Net exposure after netting adjustments and collateral	$	—	$	—	$	—	$	—	$	—	$	—

Credit Risk Contingent Features

Management has entered into certain derivative contracts that require the Company to post collateral to the counterparties when these contracts are in a net liability position. Conversely, the counterparties may be required to post collateral when these contracts are in a net asset position. The amount of collateral to be posted is based on the amount of the net liability and exposure thresholds. As of ~~September 30, 2018,~~March 31, 2019, December 31, ~~2017,~~2018, and ~~September 30, 2017~~March 31, 2018 the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting provisions) held by the Company that were in a net liability position totaled ~~$31.9~~$47.3 million, ~~$52.7~~$42.7 million, and ~~$57.8~~$39.3 million, respectively. As of ~~September 30, 2018,~~March 31, 2019, the Company was in an over-collateralized net position of ~~$17.7~~$14.2 million after considering ~~$52.4~~$62.5 million of collateral held in the form of cash and securities. As of December 31, ~~2017~~2018 and ~~September 30, 2017,~~March 31, 2018, the Company was in an over-collateralized position of ~~$25.0~~$7.6 million and ~~$25.1~~$12.1 million, respectively.

~~10.~~11. 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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands, except per share amounts)								(in thousands, except per share amounts)
Weighted average shares - basic	104,768		104,221		104,664		104,124		104,033		104,530
Dilutive effect of stock awards	680		721		734		817		442		794
Weighted average shares - diluted	105,448		104,942		105,398		104,941		104,475		105,324
Net income	$	111,123	$	82,844	$	316,702	$	236,146	$	120,796	$	100,900
Earnings per share - basic	1.06		0.79		3.03		2.27		1.16		0.97
Earnings per share - diluted	1.05		0.79		3.00		2.25		1.16		0.96

The Company had no anti-dilutive stock options outstanding at each of the periods ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

~~11.~~12. INCOME TAXES

The effective tax rate was ~~6.32%~~17.45% and ~~29.64%~~17.10% for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively. For the nine months ended September 30, 2018 and 2017, the Company's effective tax rate was 14.48% and 27.89%,~~ respectively. The ~~decrease~~increase in the effective tax rate from the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 is due primarily to ~~the decrease~~an increase in ~~the Federal statutory rate effective in 2018~~pre-tax book income and ~~management's decision during the quarter to carryback its 2017 federal NOLs. These federal NOLs resulted~~a smaller benefit from the acceleration of deductions into and deferral of revenue from 2017. As the federal income tax rate was higher in the years to which the carryback is applicable, a larger tax benefit results from the decision to carryback the 2017 federal NOLs, rather than carryforward these losses to future taxable years.excess stock compensation deduction.

As of ~~September 30, 2018,~~March 31, 2019, the net deferred tax asset was ~~$43.5~~$22.3 million, ~~an increase~~a decrease of ~~$37.7~~$9.7 million from December 31, ~~2017.~~2018. This overall ~~increase~~decrease in the net deferred tax asset was primarily the result of ~~the deferral of WAB's dividend from the real estate investment trust from 2017 to 2018 and decreases~~an increase in the fair market value of AFS ~~securities, which were not fully offset by the utilization of NOL and credit carryovers.~~securities.

Although realization is not assured, the Company believes that the realization of the recognized deferred tax asset of ~~$43.5~~$22.3 million at ~~September 30, 2018~~March 31, 2019 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company had noa $2.4 million deferred tax valuation ~~allowance.~~allowance related to net capital loss carryovers.

As of ~~September 30, 2018,~~March 31, 2019, 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 ~~$49.8~~$47.4 million for which an ending deferred tax asset of ~~$6.3~~$5.8 million has been recorded, reflecting the expected benefit of these federal NOL carryovers remaining. The Company also has varying gross amounts of state NOL carryovers, ~~primarily~~ with ~~California and~~the most significant in Arizona. The ending gross ~~California and~~ Arizona NOL carryovers totaled approximately ~~$7.3 million and~~ $5.0 million ~~respectively.~~after current year-to-date utilization. A deferred tax asset of ~~$1.1~~$0.3 million has been recorded to reflect the expected benefit of all state NOL carryovers remaining.

Investments in LIHTC

The Company invests in LIHTC funds that are designed to generate a return primarily through the realization of federal tax credits.

Investments in LIHTC total ~~$295.1~~$332.0 million and ~~$267.0~~$342.4 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Unfunded LIHTC obligations are included as part of other liabilities in the Consolidated Balance Sheets and total ~~$139.4~~$147.3 million and ~~$151.3~~$171.7 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. For the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, $9.0~~$10.1 million and $6.8 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense. For the nine months ended September 30, 2018 and 2017, $26.5 million and $19.5$8.1 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense.

~~12.~~13. 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 standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized in 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 standby 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 standby 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.

Standby 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.

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


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Commitments to extend credit, including unsecured loan commitments of $594,074 at September 30, 2018 and $364,638 at December 31, 2017	$	6,798,062	$	5,851,158
Commitments to extend credit, including unsecured loan commitments of $864,740 at March 31, 2019 and $770,114 at December 31, 2018					$	8,197,452	$	7,556,741
Credit card commitments and financial guarantees	218,993		153,752		251,675		237,312
Standby letters of credit, including unsecured letters of credit of $16,940 at September 30, 2018 and $11,664 at December 31, 2017	216,636		161,966
Standby letters of credit, including unsecured letters of credit of $16,336 at March 31, 2019 and $21,879 at December 31, 2018					262,320		390,161
Total	$	7,233,691	$	6,166,876	$	8,711,447	$	8,184,214

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. 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 ~~$7.6~~$9.2 million and ~~$6.2~~$8.2 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Changes to this liability are adjusted through other expense in the Consolidated Income Statement.

Concentrations of Lending Activities

The Company’s lending activities are driven in large part by the customers served in the market areas where the Company has branch offices in the states of Arizona, Nevada, and California. Despite the geographic concentration 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 four broad categories: geography, industry, product, and collateral. The Company's loan portfolio includes significant credit exposure to the CRE market. As of ~~September 30, 2018~~each of the periods ended March 31, 2019 and December 31, ~~2017,~~2018, CRE related loans accounted for approximately ~~50% and 52%~~49% of total ~~loans, respectively.~~loans. Substantially all of these loans are secured by first liens with an initial loan to value ratio of generally not more than 75%. Approximately ~~37%~~35% and 36% of these CRE loans, excluding construction and land loans, were owner-occupied at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, 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 leases the majority of its office locations and many of these leases contain multiple renewal options and provisions for increased rents. Total rent expense of $2.8 million for each of the three months ended September 30, 2018 and 2017 was included in Occupancy expense in these Unaudited Consolidated Financial Statements. For the nine months ended September 30, 2018 and 2017, total rent expense was $8.1 million and $8.2 million, respectively.

~~13.~~14. 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. Transfers between levels in the fair value hierarchy are recognized as of the end of the month following the event or change in circumstances that caused the transfer.

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 ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~unrealized gains and losses from fair value changes on junior subordinated debt ~~and trading securities~~ were as follows:

Changes in Fair Values for Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
Unrealized Gain/(Loss) on Assets and Liabilities Measured at Fair Value, Net Interest Income on Securities Interest Expense on Junior Subordinated Debt Total Changes Included in Current-Period Earnings Changes Included in OCI
(in thousands)
Three Months Ended September 30, 2018
Junior subordinated debt $ (2,689 ) $ —
$ 1,056
$ 1,056
$ (2,028 )
Nine Months Ended September 30, 2018
Junior subordinated debt $ 247
$ —
$ 2,979
$ 2,979
$ 186
Three Months Ended September 30, 2017
Junior subordinated debt $ 1,035
$ —
$ (835 ) $ (835 ) $ 641
Nine Months Ended September 30, 2017
Trading securities $ —
$ 9
$ —
$ 9
$ —
Junior subordinated debt (4,327 ) —
(2,376 ) (2,376 ) (2,677 )
Total $ (4,327 ) $ 9
$ (2,376 ) $ (2,367 ) $ (2,677 )

~~During the year ended December 31, 2017, the Company sold all of its trading securities. No significant gain or loss was recognized upon sale of these securities.~~



	Three Months Ended March 31,
	2019			2018
	(in thousands)
Unrealized gains/(losses)	$	(7,862	)	$	1,944
Changes included in OCI, net of tax	(5,928		)	1,466

Fair value on a recurring basis

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

~~Trading securities:~~ ~~All of the Company’s trading securities, which consisted of MBS, were reported at fair value utilizing Level 2 inputs in the same manner as described above for AFS securities.~~

AFS securities: Securities classified as AFS are reported at fair value utilizing 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 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 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 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 obtains market values from additional sources. The pricing service provides management with observable market data including interest rate curves and mortgage prepayment speed grids, as well as dealer quote sheets, new bond offering sheets, and historical trade documentation. Management reviews the assumptions and decides whether they are reasonable. Management may compare interest rates, credit spreads, and prepayments speeds used as part of the assumptions to those that management believes are reasonable. Management may price securities using the provided assumptions to determine whether they can develop similar prices on like securities. Any discrepancies between management’s review and the prices provided by the vendor are discussed with the vendor and the Company’s other valuation advisors. Lastly, 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 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 rate swaps: Interest rate swaps are reported at fair value utilizing Level 2 inputs. The Company obtains dealer quotations to value its interest rate swaps.

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.

As of September 30, 2018, the Company estimates the discount rate at 6.20%, which represents an implied credit spread of 3.80% plus three-month LIBOR (2.40%). As of December 31, 2017, the Company estimated the discount rate at 5.61%, which was a 3.92% credit spread plus three-month LIBOR (1.69%).

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 thousands)								(in thousands)
September 30, 2018
March 31, 2019
Assets:
Available-for-sale debt securities
CDO	$	—	$	19,148	$	—	$	19,148	$	—	$	15,026	$	—	$	15,026
Commercial MBS issued by GSEs	—		100,943		—		100,943		—		99,099		—		99,099
Corporate debt securities	—		99,384		—		99,384		5,142		91,900		—		97,042
Private label residential MBS	—		855,942		—		855,942		—		935,347		—		935,347
Residential MBS issued by GSEs	—		1,450,059		—		1,450,059		—		1,492,236		—		1,492,236
Tax-exempt	—		504,907		—		504,907		—		536,990		—		536,990
Trust preferred securities	—		28,617		—		28,617		—		28,617		—		28,617
U.S. government sponsored agency securities	—		45,601		—		45,601		—		38,901		—		38,901
U.S. treasury securities	—		2,475		—		2,475		—		989		—		989
Total AFS debt securities	$	—	$	3,107,076	$	—	$	3,107,076	$	5,142	$	3,239,105	$	—	$	3,244,247
Equity securities
CRA investments	50,744		—		—		50,744		$	51,614	$	—	$	—	$	51,614
Preferred stock	121,550		—		—		121,550		66,391		—		—		66,391
Total equity securities	$	172,294	$	—	$	—	$	172,294	$	118,005	$	—	$	—	$	118,005
Derivative assets (1)	$	—	$	8,978	$	—	$	8,978	$	—	$	1,714	$	—	$	1,714
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	55,987	$	55,987	$	—	$	—	$	56,546	$	56,546
Derivative liabilities (1)	—		38,973		—		38,973		—		48,855		—		48,855

(1)

Derivative assets and liabilities relate to interest rate swaps, see "Note 9.10. Derivatives and Hedging Activities." In addition, the carrying value of loans is decreased by ~~$1,997~~$33,123 and the net carrying value of subordinated debt is increased by ~~$28,160~~$14,222 as of ~~September 30, 2018~~March 31, 2019 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.


	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 thousands)								(in thousands)
December 31, 2017
December 31, 2018
Assets:
Available-for-sale debt securities
CDO	$	—	$	21,857	$	—	$	21,857	$	—	$	15,327	$	—	$	15,327
Commercial MBS issued by GSEs	—		109,077		—		109,077		—		100,106		—		100,106
Corporate debt securities	—		103,483		—		103,483		—		99,380		—		99,380
Private label residential MBS	—		868,524		—		868,524		—		924,594		—		924,594
Residential MBS issued by GSEs	—		1,689,295		—		1,689,295		—		1,530,124		—		1,530,124
Tax-exempt	—		510,910		—		510,910		—		538,668		—		538,668
Trust preferred securities	—		28,617		—		28,617		—		28,617		—		28,617
U.S. government sponsored agency securities	—		61,462		—		61,462		—		38,188		—		38,188
U.S. treasury securities	—		2,482		—		2,482		—		1,984		—		1,984
Available-for-sale equity securities
Total AFS debt securities									$	—	$	3,276,988	$	—	$	3,276,988
Equity securities
CRA investments	50,616		—		—		50,616		$	51,142	$	—	$	—	$	51,142
Preferred stock	53,196		—		—		53,196		63,919		—		—		63,919
Total AFS securities	$	103,812	$	3,395,707	$	—	$	3,499,519
Total equity securities									$	115,061	$	—	$	—	$	115,061
Derivative assets (1)	$	—	$	3,711	$	—	$	3,711	$	—	$	2,643	$	—	$	2,643
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	56,234	$	56,234	$	—	$	—	$	48,684	$	48,684
Derivative liabilities (1)	—		55,340		—		55,340		—		45,120		—		45,120

(1)

Derivative assets and liabilities relate to interest rate swaps, see "Note 9.10. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by ~~$41,919~~$23,039 and the net carrying value of subordinated debt is decreased by ~~$9,959~~$19,691 as of December 31, ~~2017~~2018 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 ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the change in Level 3 liabilities measured at fair value on a recurring basis was as follows:

Junior Subordinated Debt
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(in thousands)
Beginning balance $ (53,298 ) $ (55,772 ) $ (56,234 ) $ (50,410 )
Change in fair value (2,689 ) 1,035
247
(4,327 )
Ending balance $ (55,987 ) $ (54,737 ) $ (55,987 ) $ (54,737 )



	Junior Subordinated Debt
	Three Months Ended March 31,
	2019			2018
	(in thousands)
Beginning balance	$	(48,684	)	$	(56,234	)
Change in fair value (1)	(7,862		)	1,944
Ending balance	$	(56,546	)	$	(54,290	)


(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 $(5.9) million and $1.5 million for three months ended March 31, 2019 and 2018, respectively.

For Level 3 liabilities measured at fair value on a recurring basis as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the significant unobservable inputs used in the fair value measurements were as follows:

September 30, 2018 Valuation Technique Significant Unobservable Inputs Input Value
(in thousands)
Junior subordinated debt $ 55,987
Discounted cash flow Implied credit rating of the Company 6.20 %



	March 31, 2019		Valuation Technique	Significant Unobservable Inputs	Input Value
	(in thousands)
Junior subordinated debt	$	56,546	Discounted cash flow	Implied credit rating of the Company	6.65	%

December 31, 2017 Valuation Technique Significant Unobservable Inputs Input Value
(in thousands)
Junior subordinated debt $ 56,234
Discounted cash flow Implied credit rating of the Company 5.61 %



	December 31, 2018		Valuation Technique	Significant Unobservable Inputs	Input Value
	(in thousands)
Junior subordinated debt	$	48,684	Discounted cash flow	Implied credit rating of the Company	7.82	%

The significant unobservable inputs used in the fair value measurement of the Company’s junior subordinated debt as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 was the implied credit risk for the Company, calculated as the difference between the 20-year 'BB' rated financial index over the corresponding swap index.

As of March 31, 2019, the Company estimates the discount rate at 6.65%, which represents an implied credit spread of 4.05% plus three-month LIBOR (2.60%). As of December 31, 2018, the Company estimated the discount rate at 7.82%, which was a 5.01% credit spread plus three-month LIBOR (2.81%).

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 impairment). The following table presents such assets carried on the 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 thousands)								(in thousands)
As of September 30, 2018;
As of March 31, 2019;
Impaired loans with specific valuation allowance	$	2,430	$	—	$	—	$	2,430	$	3,887	$	—	$	—	$	3,887
Impaired loans without specific valuation allowance (1)	81,445		—		—		81,445		122,723		—		—		122,723
Other assets acquired through foreclosure	20,028		—		—		20,028		17,707		—		—		17,707
As of December 31, 2017:
As of December 31, 2018:
Impaired loans with specific valuation allowance	$	13,709	$	—	$	—	$	13,709	$	305	$	—	$	—	$	305
Impaired loans without specific valuation allowance (1)	63,607		—		—		63,607		91,821		—		—		91,821
Other assets acquired through foreclosure	28,540		—		—		28,540		17,924		—		—		17,924


(1)	Net of loan balances with charge-offs of ~~$40.5~~$15.4 million and ~~$15.6~~$19.4 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

For Level 3 assets measured at fair value on a nonrecurring basis as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the significant unobservable inputs used in the fair value measurements were as follows:

September 30, 2018

Valuation Technique(s)

Significant Unobservable Inputs

Range

March 31, 2019

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in thousands)

Impaired loans

83,875

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

126,610

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

4.0% to 7.0%

Discounted cash flow method

Discount rate

Contractual loan rate

4.0% to 7.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Other assets acquired through foreclosure

20,028

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

17,707

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

December 31, 2017

Valuation Technique(s)

Significant Unobservable Inputs

Range

December 31, 2018

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in thousands)

Impaired loans

77,316

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

92,126

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

4.0% to 7.0%

Discounted cash flow method

Discount rate

Contractual loan rate

4.0% to 7.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Other assets acquired through foreclosure

28,540

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

17,924

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

Impaired loans: The specific reserves for collateral dependent impaired 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 impaired loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity.

Total Level 3 impaired loans had an estimated fair value of ~~$83.9~~$126.6 million and ~~$77.3~~$92.1 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Impaired loans with a specific valuation allowance had a gross estimated fair value of ~~$3.6~~$5.2 million and ~~$19.3~~$1.0 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, which was reduced by a specific valuation allowance of ~~$1.2~~$1.4 million and ~~$5.6~~$0.7 million, respectively.

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

~~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 ~~$20.0~~$17.7 million and ~~$28.5~~$17.9 million of such assets at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Credit vs. non-credit losses

Under the provisions of ASC 320, Investments-Debt and Equity Securities, OTTI is separated into the amount of total impairment related to the credit loss and the amount of the total impairment related to all other factors. The amount of the total OTTI related to the credit loss is recognized in earnings. The amount of the total impairment related to all other factors is recognized in OCI.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company determined that no securities experienced credit losses.

There is no OTTI balance recognized in comprehensive income as of ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Fair Value of Financial Instruments

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


	September 30, 2018														March 31, 2019
	Carrying Amount			Fair Value											Carrying Amount			Fair Value
			Level 1			Level 2			Level 3			Total					Level 1			Level 2			Level 3			Total
		(in thousands)														(in thousands)
Financial assets:
Federal funds sold	$	70,000		$	—		$	70,000		$	—		$	70,000	$	290,000		$	—		$	290,000		$	—		$	290,000
Investment securities:
HTM	288,290			—			279,033			—			279,033		310,865			—			331,083			—			331,083
AFS	3,107,076			—			3,107,076			—			3,107,076		3,244,247			5,142			3,239,105			—			3,244,247
Equity	172,294			172,294			—			—			172,294		118,005			118,005			—			—			118,005
Derivative assets	8,978			—			8,978			—			8,978		1,714			—			1,714			—			1,714
Loans, net	16,582,754			—			15,964,980			83,875			16,048,855		17,961,761			—			17,344,300			126,610			17,470,910
Accrued interest receivable	88,847			—			88,847			—			88,847		98,128			—			98,128			—			98,128
Financial liabilities:
Deposits	$	18,908,580		$	—		$	18,918,956		$	—		$	18,918,956	$	20,208,740		$	—		$	20,225,997		$	—		$	20,225,997
Customer repurchase agreements	20,969			—			20,969			—			20,969		15,141			—			15,141			—			15,141
Qualifying debt	359,082			—			328,448			67,013			395,461		373,996			—			332,988			67,730			400,718
Derivative liabilities	38,973			—			38,973			—			38,973		48,855			—			48,855			—			48,855
Accrued interest payable	14,268			—			14,268			—			14,268		15,853			—			15,853			—			15,853


	December 31, 2017														December 31, 2018
	Carrying Amount			Fair Value											Carrying Amount			Fair Value
			Level 1			Level 2			Level 3			Total					Level 1			Level 2			Level 3			Total
		(in thousands)														(in thousands)
Financial assets:
Investment securities:
HTM	$	255,050		$	—		$	256,314		$	—		$	256,314	$	302,905		$	—		$	298,648		$	—		$	298,648
AFS	3,499,519			103,812			3,395,707			—			3,499,519		3,276,988			—			3,276,988			—			3,276,988
Equity securities															115,061			115,061			—			—			115,061
Derivative assets	3,711			—			3,711			—			3,711		2,643			—			2,643			—			2,643
Loans, net	14,953,885			—			14,577,010			77,316			14,654,326		17,557,912			—			16,857,852			92,126			16,949,978
Accrued interest receivable	85,517			—			85,517			—			85,517		101,275			—			101,275			—			101,275
Financial liabilities:
Deposits	$	16,972,532		$	—		$	16,980,066		$	—		$	16,980,066	$	19,177,447		$	—		$	19,188,216		$	—		$	19,188,216
Customer repurchase agreements	26,017			—			26,017			—			26,017		22,411			—			22,411			—			22,411
FHLB advances	390,000			—			390,000			—			390,000
Other borrowings															491,000			—			491,000			—			491,000
Qualifying debt	376,905			—			336,803			67,210			404,013		360,458			—			323,572			57,924			381,496
Derivative liabilities	55,340			—			55,340			—			55,340		45,120			—			45,120			—			45,120
Accrued interest payable	16,366			—			16,366			—			16,366		20,463			—			20,463			—			20,463

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is insignificant. Loan commitments on which the committed interest rates are less than the current market rate are also insignificant at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

~~14.~~15. SEGMENTS

The Company's reportable segments are aggregated based primarily on geographic location, services offered, and markets served. The Company's regional segments, which include Arizona, Nevada, Southern California, and Northern California, provide full service banking and related services to their respective markets. The operations from the regional segments correspond to the following banking divisions: ABA in Arizona, BON and FIB in Nevada, TPB in Southern California, and Bridge in Northern California.

The Company's NBL segments provide specialized banking services to niche markets. The Company's NBL reportable segments include HOA Services, Public & Nonprofit Finance, Technology & Innovation, HFF, and Other NBLs. These NBLs are managed centrally and are broader in geographic scope than the Company's other segments, though still predominately located within the Company's core market areas.

The Corporate & Other segment consists of corporate-related items, income and expense items not allocated to the Company's 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 12% during the year, with a funds credit provided for the use of this equity as a funding source. 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 segment 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.

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, average loan balances, and average 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.

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

Regional Segments
Balance Sheet: Consolidated Company Arizona Nevada Southern California Northern California
At September 30, 2018 (in millions)
Assets:
Cash, cash equivalents, and investment securities $ 4,334.2
$ 2.0
$ 8.5
$ 2.1
$ 1.8
Loans, net of deferred loan fees and costs 16,732.8
3,593.5
1,936.7
2,116.3
1,332.3
Less: allowance for credit losses (150.0 ) (33.1 ) (18.6 ) (20.2 ) (11.3 )
Total loans 16,582.8
3,560.4
1,918.1
2,096.1
1,321.0
Other assets acquired through foreclosure, net 20.0
1.7
14.1
—
—
Goodwill and other intangible assets, net 299.5
—
23.2
—
155.8
Other assets 939.6
46.3
58.0
15.1
18.8
Total assets $ 22,176.1
$ 3,610.4
$ 2,021.9
$ 2,113.3
$ 1,497.4
Liabilities:
Deposits $ 18,908.6
$ 5,331.7
$ 3,847.3
$ 2,550.7
$ 1,951.5
Borrowings and qualifying debt 359.1
—
—
—
—
Other liabilities 420.0
13.5
16.3
1.9
12.3
Total liabilities 19,687.7
5,345.2
3,863.6
2,552.6
1,963.8
Allocated equity: 2,488.4
439.8
270.7
242.4
308.7
Total liabilities and stockholders' equity $ 22,176.1
$ 5,785.0
$ 4,134.3
$ 2,795.0
$ 2,272.5
Excess funds provided (used) —
2,174.6
2,112.4
681.7
775.1

Income Statement:
Three Months Ended September 30, 2018 (in thousands)
Net interest income $ 234,038
$ 56,701
$ 37,933
$ 29,572
$ 23,825
Provision for (recovery of) credit losses 6,000
(297 ) (38 ) 1,467
482
Net interest income after provision for credit losses 228,038
56,998
37,971
28,105
23,343
Non-interest income 4,418
2,230
2,573
931
2,312
Non-interest expense (113,841 ) (23,231 ) (16,471 ) (14,332 ) (13,207 )
Income (loss) before income taxes 118,615
35,997
24,073
14,704
12,448
Income tax expense (benefit) 7,492
8,999
5,055
4,117
3,486
Net income $ 111,123
$ 26,998
$ 19,018
$ 10,587
$ 8,962



				Regional Segments
Balance Sheet:	Consolidated Company			Arizona			Nevada			Southern California			Northern California
At March 31, 2019	(in millions)
Assets:
Cash, cash equivalents, and investment securities	$	4,525.0		$	2.3		$	9.1		$	2.0		$	1.9
Loans, net of deferred loan fees and costs	18,116.7			3,653.9			2,069.4			2,249.8			1,197.2
Less: allowance for credit losses	(155.0		)	(31.9		)	(18.3		)	(20.1		)	(9.4		)
Total loans	17,961.7			3,622.0			2,051.1			2,229.7			1,187.8
Other assets acquired through foreclosure, net	17.7			0.7			13.9			—			—
Goodwill and other intangible assets, net	298.8			—			23.2			—			155.3
Other assets	989.6			47.6			58.4			15.2			24.3
Total assets	$	23,792.8		$	3,672.6		$	2,155.7		$	2,246.9		$	1,369.3
Liabilities:
Deposits	$	20,208.7		$	5,319.9		$	4,006.8		$	2,793.8		$	2,008.7
Borrowings and qualifying debt	374.0			—			—			—			—
Other liabilities	489.5			11.6			12.0			0.5			13.4
Total liabilities	21,072.2			5,331.5			4,018.8			2,794.3			2,022.1
Allocated equity:	2,720.6			447.7			283.1			260.5			298.9
Total liabilities and stockholders' equity	$	23,792.8		$	5,779.2		$	4,301.9		$	3,054.8		$	2,321.0
Excess funds provided (used)	—			2,106.6			2,146.2			807.9			951.7


Nine Months Ended September 30, 2018	(in thousands)
Income Statement:
Three Months Ended March 31, 2019																(in thousands)
Net interest income	$	672,366		$	169,233		$	109,898		$	85,038		$	69,081		$	247,336		$	55,226		$	39,096		$	30,477		$	23,033
Provision for (recovery of) credit losses	17,000			1,655			(2,005		)	1,921			2,043			3,500			161			533			733			(719		)
Net interest income after provision for credit losses	655,366			167,578			111,903			83,117			67,038			243,836			55,065			38,563			29,744			23,752
Non-interest income	29,505			5,902			8,585			2,898			7,281			15,410			1,521			2,573			1,001			2,220
Non-interest expense	(314,538		)	(67,154		)	(46,486		)	(42,470		)	(39,139		)	(112,914		)	(22,248		)	(15,781		)	(14,583		)	(13,490		)
Income (loss) before income taxes	370,333			106,326			74,002			43,545			35,180			146,332			34,338			25,355			16,162			12,482
Income tax expense (benefit)	53,631			26,644			15,634			12,288			9,938			25,536			8,584			5,325			4,525			3,495
Net income	$	316,702		$	79,682		$	58,368		$	31,257		$	25,242		$	120,796		$	25,754		$	20,030		$	11,637		$	8,987


	National Business Lines																		National Business Lines
Balance Sheet:	HOA Services			Public & Nonprofit Finance			Technology & Innovation			Hotel Franchise Finance			Other NBLs			Corporate & Other			HOA Services			Public & Nonprofit Finance			Technology & Innovation			Hotel Franchise Finance			Other NBLs			Corporate & Other
At September 30, 2018
At March 31, 2019
Assets:	(in millions)																		(in millions)
Cash, cash equivalents, and investment securities	$	—		$	—		$	—		$	—		$	—		$	4,319.8		$	—		$	—		$	—		$	—		$	—		$	4,509.7
Loans, net of deferred loan fees and costs	202.1			1,520.2			1,106.5			1,435.4			3,483.2			6.6			209.4			1,561.7			1,057.3			1,564.9			4,549.0			4.1
Less: allowance for credit losses	(1.9		)	(14.4		)	(9.9		)	(7.3		)	(33.2		)	(0.1		)	(1.9		)	(14.8		)	(8.4		)	(9.5		)	(40.7		)	—
Total loans	200.2			1,505.8			1,096.6			1,428.1			3,450.0			6.5			207.5			1,546.9			1,048.9			1,555.4			4,508.3			4.1
Other assets acquired through foreclosure, net	—			—			—			—			—			4.2			—			—			—			—			—			3.1
Goodwill and other intangible assets, net	—			—			120.4			0.1			—			—			—			—			120.2			0.1			—			—
Other assets	1.0			19.2			5.4			6.8			23.8			745.2			0.9			12.5			6.4			7.7			58.8			757.8
Total assets	$	201.2		$	1,525.0		$	1,222.4		$	1,435.0		$	3,473.8		$	5,075.7		$	208.4		$	1,559.4		$	1,175.5		$	1,563.2		$	4,567.1		$	5,274.7
Liabilities:
Deposits	$	2,523.9		$	—		$	2,319.5		$	—		$	—		$	384.0		$	2,963.0		$	—		$	2,404.7		$	—		$	5.3		$	706.5
Borrowings and qualifying debt	—			—			—			—			—			359.1			—			—			—			—			—			374.0
Other liabilities	1.7			10.1			0.1			(0.1		)	85.4			278.8			2.0			34.0			—			(0.3		)	60.9			355.4
Total liabilities	2,525.6			10.1			2,319.6			(0.1		)	85.4			1,021.9			2,965.0			34.0			2,404.7			(0.3		)	66.2			1,435.9
Allocated equity:	68.5			121.4			256.5			119.1			286.0			375.3			77.7			126.0			253.3			130.3			374.3			468.8
Total liabilities and stockholders' equity	$	2,594.1		$	131.5		$	2,576.1		$	119.0		$	371.4		$	1,397.2		$	3,042.7		$	160.0		$	2,658.0		$	130.0		$	440.5		$	1,904.7
Excess funds provided (used)	2,392.9			(1,393.5		)	1,353.7			(1,316.0		)	(3,102.4		)	(3,678.5		)	2,834.3			(1,399.4		)	1,482.5			(1,433.2		)	(4,126.6		)	(3,370.0		)

Income Statement:
Three Months Ended September 30, 2018 (in thousands)
Net interest income $ 17,930
$ 3,683
$ 27,233
$ 13,557
$ 20,329
$ 3,275
Provision for (recovery of) credit losses 103
(553 ) 1,448
223
3,214
(49 )
Net interest income after provision for credit losses 17,827
4,236
25,785
13,334
17,115
3,324
Non-interest income 215
159
2,836
—
549
(7,387 )
Non-interest expense (8,254 ) (2,134 ) (9,933 ) (3,014 ) (7,280 ) (15,985 )
Income (loss) before income taxes 9,788
2,261
18,688
10,320
10,384
(20,048 )
Income tax expense (benefit) 2,251
521
4,298
2,374
2,388
(25,997 )
Net income $ 7,537
$ 1,740
$ 14,390
$ 7,946
$ 7,996
$ 5,949


Nine Months Ended September 30, 2018	(in thousands)
Income Statement:
Three Months Ended March 31, 2019																			(in thousands)
Net interest income	$	49,335		$	11,224		$	74,615		$	41,617		$	58,813		$	3,512		$	20,641		$	3,423		$	29,403		$	12,944		$	25,691		$	7,402
Provision for (recovery of) credit losses	285			(786		)	5,355			2,006			6,573			(47		)	(27		)	(41		)	(917		)	799			2,978			—
Net interest income after provision for credit losses	49,050			12,010			69,260			39,611			52,240			3,559			20,668			3,464			30,320			12,145			22,713			7,402
Non-interest income	543			159			9,518			12			1,182			(6,575		)	96			—			3,362			—			657			3,980
Non-interest expense	(24,090		)	(6,386		)	(29,666		)	(7,419		)	(19,193		)	(32,535		)	(8,460		)	(1,907		)	(11,889		)	(2,398		)	(9,336		)	(12,822		)
Income (loss) before income taxes	25,503			5,783			49,112			32,204			34,229			(35,551		)	12,304			1,557			21,793			9,747			14,034			(1,440		)
Income tax expense (benefit)	5,866			1,329			11,296			7,407			7,873			(44,644		)	2,830			358			5,012			2,242			3,228			(10,063		)
Net income	$	19,637		$	4,454		$	37,816		$	24,797		$	26,356		$	9,093		$	9,474		$	1,199		$	16,781		$	7,505		$	10,806		$	8,623


				Regional Segments															Regional Segments
	Consolidated Company			Arizona			Nevada			Southern California			Northern California			Consolidated Company			Arizona			Nevada			Southern California			Northern California
At December 31, 2017	(in millions)
At December 31, 2018																(in millions)
Assets:
Cash, cash equivalents, and investment securities	$	4,237.1		$	2.1		$	8.2		$	2.1		$	1.7		$	4,259.7		$	2.5		$	10.9		$	2.5		$	3.0
Loans, net of deferred loan fees and costs	15,093.9			3,323.7			1,844.8			1,934.7			1,275.5			17,710.6			3,647.9			2,003.5			2,161.1			1,300.2
Less: allowance for credit losses	(140.0		)	(31.5		)	(18.1		)	(19.5		)	(13.2		)	(152.7		)	(30.7		)	(18.7		)	(19.8		)	(10.7		)
Total loans	14,953.9			3,292.2			1,826.7			1,915.2			1,262.3			17,557.9			3,617.2			1,984.8			2,141.3			1,289.5
Other assets acquired through foreclosure, net	28.5			2.3			13.3			—			0.2			17.9			0.8			13.9			—			—
Goodwill and other intangible assets, net	300.7			—			23.2			—			156.5			299.2			—			23.2			—			155.5
Other assets	808.9			46.3			58.8			14.4			15.1			974.8			46.9			57.8			14.2			23.9
Total assets	$	20,329.1		$	3,342.9		$	1,930.2		$	1,931.7		$	1,435.8		$	23,109.5		$	3,667.4		$	2,090.6		$	2,158.0		$	1,471.9
Liabilities:
Deposits	$	16,972.5		$	4,841.3		$	3,951.4		$	2,461.1		$	1,681.7		$	19,177.4		$	5,090.2		$	3,996.4		$	2,347.5		$	1,839.1
Borrowings and qualifying debt	766.9			—			—			—			—			851.5			—			—			—			—
Other liabilities	360.0			11.6			20.9			3.2			11.9			466.9			10.4			14.5			4.5			12.2
Total liabilities	18,099.4			4,852.9			3,972.3			2,464.3			1,693.6			20,495.8			5,100.6			4,010.9			2,352.0			1,851.3
Allocated equity:	2,229.7			396.5			263.7			221.8			303.1			2,613.7			441.0			277.4			242.9			304.1
Total liabilities and stockholders' equity	$	20,329.1		$	5,249.4		$	4,236.0		$	2,686.1		$	1,996.7		$	23,109.5		$	5,541.6		$	4,288.3		$	2,594.9		$	2,155.4
Excess funds provided (used)	—			1,906.5			2,305.8			754.4			560.9			—			1,874.2			2,197.7			436.9			683.5

Income Statement:
Three Months Ended September 30, 2017 (in thousands)
Net interest income (expense) $ 201,583
$ 52,637
$ 36,310
$ 26,811
$ 21,932
Provision for (recovery of) credit losses 5,000
(289 ) (2,044 ) (58 ) 3,144
Net interest income (expense) after provision for credit losses 196,583
52,926
38,354
26,869
18,788
Non-interest income 10,456
1,265
2,354
971
1,796
Non-interest expense (89,296 ) (18,844 ) (14,748 ) (12,340 ) (11,317 )
Income (loss) before income taxes 117,743
35,347
25,960
15,500
9,267
Income tax expense (benefit) 34,899
13,857
9,086
6,517
3,897
Net income $ 82,844
$ 21,490
$ 16,874
$ 8,983
$ 5,370


Nine Months Ended September 30, 2017	(in thousands)
Income Statement:
Three Months Ended March 31, 2018																(in thousands)
Net interest income (expense)	$	573,635		$	145,839		$	108,028		$	81,087		$	63,686		$	214,220		$	54,555		$	36,690		$	27,802		$	22,255
Provision for (recovery of) credit losses	12,250			109			(5,378		)	(20		)	4,238			6,000			1,434			(1,723		)	729			1,548
Net interest income (expense) after provision for credit losses	561,385			145,730			113,406			81,107			59,448			208,220			53,121			38,413			27,073			20,707
Non-interest income	31,656			3,567			6,800			2,602			5,839			11,643			1,416			3,333			1,001			2,547
Non-interest expense	(265,543		)	(55,388		)	(45,733		)	(38,063		)	(36,188		)	(98,149		)	(21,504		)	(14,084		)	(13,646		)	(12,503		)
Income (loss) before income taxes	327,498			93,909			74,473			45,646			29,099			121,714			33,033			27,662			14,428			10,751
Income tax expense (benefit)	91,352			36,831			26,066			19,194			12,236			20,814			8,321			5,903			4,135			3,098
Net income	$	236,146		$	57,078		$	48,407		$	26,452		$	16,863		$	100,900		$	24,712		$	21,759		$	10,293		$	7,653


	National Business Lines																		National Business Lines
	HOA Services			Public & Nonprofit Finance			Technology & Innovation			Hotel Franchise Finance			Other NBLs			Corporate & Other			HOA Services			Public & Nonprofit Finance			Technology & Innovation			Hotel Franchise Finance			Other NBLs			Corporate & Other
At December 31, 2017
At December 31, 2018
Assets:	(in millions)																		(in millions)
Cash, cash equivalents, and investment securities	$	—		$	—		$	—		$	—		$	—		$	4,223.0		$	—		$	—		$	—		$	—		$	—		$	4,240.8
Loans, net of deferred loan fees and costs	162.1			1,580.4			1,097.9			1,327.7			2,543.0			4.1			210.0			1,547.5			1,200.9			1,479.9			4,154.9			4.7
Less: allowance for credit losses	(1.6		)	(15.6		)	(11.4		)	(4.0		)	(25.0		)	(0.1		)	(1.9		)	(14.2		)	(10.0		)	(8.5		)	(38.2		)	—
Total loans	160.5			1,564.8			1,086.5			1,323.7			2,518.0			4.0			208.1			1,533.3			1,190.9			1,471.4			4,116.7			4.7
Other assets acquired through foreclosure, net	—			—			—			—			—			12.7			—			—			—			—			—			3.2
Goodwill and other intangible assets, net	—			—			120.9			0.1			—			—			—			—			120.4			0.1			—			—
Other assets	0.9			17.9			6.0			5.9			15.5			628.1			0.9			20.1			6.3			7.2			37.1			760.4
Total assets	$	161.4		$	1,582.7		$	1,213.4		$	1,329.7		$	2,533.5		$	4,867.8		$	209.0		$	1,553.4		$	1,317.6		$	1,478.7		$	4,153.8		$	5,009.1
Liabilities:
Deposits	$	2,230.4		$	—		$	1,737.6		$	—		$	—		$	69.0		$	2,607.2		$	—		$	2,559.0		$	—		$	—		$	738.0
Borrowings and qualifying debt	—			—			—			—			—			766.9			—			—			—			—			—			851.5
Other liabilities	1.2			42.4			0.8			0.4			5.5			262.1			2.1			25.2			0.1			0.4			49.6			347.9
Total liabilities	2,231.6			42.4			1,738.4			0.4			5.5			1,098.0			2,609.3			25.2			2,559.1			0.4			49.6			1,937.4
Allocated equity:	59.4			126.5			244.1			108.3			206.0			300.3			70.7			123.9			268.7			122.3			340.0			422.7
Total liabilities and stockholders' equity	$	2,291.0		$	168.9		$	1,982.5		$	108.7		$	211.5		$	1,398.3		$	2,680.0		$	149.1		$	2,827.8		$	122.7		$	389.6		$	2,360.1
Excess funds provided (used)	2,129.6			(1,413.8		)	769.1			(1,221.0		)	(2,322.0		)	(3,469.5		)	2,471.0			(1,404.3		)	1,510.2			(1,356.0		)	(3,764.2		)	(2,649.0		)

Income Statement:
Three Months Ended September 30, 2017 (in thousands)
Net interest income (expense) $ 13,746
$ 7,269
$ 20,415
$ 15,346
$ 16,933
$ (9,816 )
Provision for (recovery of) credit losses 40
91
(83 ) 1,116
4,416
(1,333 )
Net interest income (expense) after provision for credit losses 13,706
7,178
20,498
14,230
12,517
(8,483 )
Non-interest income 136
183
1,855
—
379
1,517
Non-interest expense (7,011 ) (2,053 ) (8,824 ) (1,905 ) (5,286 ) (6,968 )
Income (loss) before income taxes 6,831
5,308
13,529
12,325
7,610
(13,934 )
Income tax expense (benefit) 2,562
1,028
5,075
4,622
2,853
(14,598 )
Net income $ 4,269
$ 4,280
$ 8,454
$ 7,703
$ 4,757
$ 664


Nine Months Ended September 30, 2017	(in thousands)
Income Statement:
Three Months Ended March 31, 2018																			(in thousands)
Net interest income (expense)	$	40,275		$	21,242		$	59,610		$	42,337		$	46,380		$	(34,849	)	$	15,359		$	3,746		$	22,821		$	14,185		$	18,811		$	(2,004	)
Provision for (recovery of) credit losses	332			796			816			2,924			10,265			(1,832		)	47			(207		)	1,651			1,236			1,285			—
Net interest income (expense) after provision for credit losses	39,943			20,446			58,794			39,413			36,115			(33,017		)	15,312			3,953			21,170			12,949			17,526			(2,004		)
Non-interest income	417			415			5,689			—			1,632			4,695			150			—			3,051			13			224			(92		)
Non-interest expense	(21,416		)	(6,522		)	(26,685		)	(7,949		)	(14,573		)	(13,026		)	(7,803		)	(2,174		)	(9,833		)	(2,206		)	(5,662		)	(8,734		)
Income (loss) before income taxes	18,944			14,339			37,798			31,464			23,174			(41,348		)	7,659			1,779			14,388			10,756			12,088			(10,830		)
Income tax expense (benefit)	7,104			4,424			14,175			11,799			8,690			(49,167		)	1,761			409			3,309			2,474			2,780			(11,376		)
Net income	$	11,840		$	9,915		$	23,623		$	19,665		$	14,484		$	7,819		$	5,898		$	1,370		$	11,079		$	8,282		$	9,308		$	546

~~15.~~16. REVENUE FROM CONTRACTS WITH CUSTOMERS

~~Adoption of ASU 2014-09,~~ ~~Revenue from Contracts with Customers, Amendments to ASC 606~~

~~The core principal of~~ ASC 606, Revenue from Contracts with Customers, ~~is that an entity shall recognize~~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 requires entities to exercise more judgment when considering the terms of a contract than under ASC 605, Revenue Recognition.~~ 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, lending related income, and gains and losses on sales of investment securities 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.

On January 1, 2018, the Company adopted the amendments to ASC 606 using the modified retrospective method, and applied the guidance to all contracts in scope that were not completed as of January 1, 2018. Comparative prior periods have not been adjusted and are presented under ASC 605. The Company did not identify any material changes to the timing or amount of revenue recognition as a result of adoption.

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:


				Regional Segments										Regional Segments
Three Months Ended September 30, 2018	Consolidated Company			Arizona		Nevada		Southern California		Northern California
	(in thousands)											Consolidated Company		Arizona		Nevada		Southern California		Northern California
Three Months Ended March 31, 2019												(in thousands)
Revenue from contracts with customers:
Service charges and fees	$	5,267		$	917	$	1,967	$	634	$	905	$	5,412	$	1,079	$	1,915	$	726	$	890
Debit and credit card interchange (1)	1,834			284		381		171		992		1,865		337		376		173		971
Success fees (2)	675			—		—		—		—		435		—		—		—		—
Other income	84			29		34		7		18		119		9		23		9		26
Total revenue from contracts with customers	$	7,860		$	1,230	$	2,382	$	812	$	1,915	$	7,831	$	1,425	$	2,314	$	908	$	1,887
Revenues outside the scope of ASC 606 (3)	(3,442		)	1,000		191		119		397		7,579		96		259		93		333
Total non-interest income	$	4,418		$	2,230	$	2,573	$	931	$	2,312	$	15,410	$	1,521	$	2,573	$	1,001	$	2,220


			Regional Segments								National Business Lines
Nine Months Ended September 30, 2018	Consolidated Company		Arizona		Nevada		Southern California		Northern California
	(in thousands)										HOA Services		Public & Nonprofit Finance		Technology & Innovation		Hotel Franchise Finance		Other NBLs		Corporate & Other
Three Months Ended March 31, 2019											(in thousands)
Revenue from contracts with customers:
Service charges and fees	$	16,684	$	2,826	$	6,143	$	2,053	$	2,945	$	88	$	—	$	713	$	—	$	1	$	—
Debit and credit card interchange (1)	4,990		822		995		471		2,687		8		—		—		—		—		—
Success fees (2)	2,370		—		—		—		21		—		—		435		—		—		—
Other income	497		139		153		51		134		—		—		—		—		38		14
Total revenue from contracts with customers	$	24,541	$	3,787	$	7,291	$	2,575	$	5,787	$	96	$	—	$	1,148	$	—	$	39	$	14
Revenues outside the scope of ASC 606 (3)	4,964		2,115		1,294		323		1,494		—		—		2,214		—		618		3,966
Total non-interest income	$	29,505	$	5,902	$	8,585	$	2,898	$	7,281	$	96	$	—	$	3,362	$	—	$	657	$	3,980



			Regional Segments
	Consolidated Company		Arizona		Nevada		Southern California		Northern California
Three Months Ended March 31, 2018	(in thousands)
Revenue from contracts with customers:
Service charges and fees	$	5,745	$	917	$	2,069	$	738	$	1,059
Debit and credit card interchange (1)	1,508		257		272		139		837
Success fees (2)	781		—		—		—		2
Other income	235		61		69		27		73
Total revenue from contracts with customers	$	8,269	$	1,235	$	2,410	$	904	$	1,971
Revenues outside the scope of ASC 606 (3)	3,374		181		923		97		576
Total non-interest income	$	11,643	$	1,416	$	3,333	$	1,001	$	2,547

National Business Lines
Three Months Ended September 30, 2018 HOA
Services Public & Nonprofit Finance Technology & Innovation Hotel Franchise Finance Other NBLs Corporate & Other
(in thousands)
Revenue from contracts with customers:
Service charges and fees $ 208
$ —
$ 643
$ —
$ —
$ (7 )
Debit and credit card interchange (1) 6
—
—
—
—
—
Success fees (2) —
—
675
—
—
—
Other income 1
—
—
—
—
(5 )
Total revenue from contracts with customers $ 215
$ —
$ 1,318
$ —
$ —
$ (12 )
Revenues outside the scope of ASC 606 (3) —
159
1,518
—
549
(7,375 )
Total non-interest income $ 215
$ 159
$ 2,836
$ —
$ 549
$ (7,387 )

National Business Lines
Nine Months Ended September 30, 2018 HOA
Services Public & Nonprofit Finance Technology & Innovation Hotel Franchise Finance Other NBLs Corporate & Other
(in thousands)
Revenue from contracts with customers:
Service charges and fees $ 525
$ —
$ 2,197
$ —
$ —
$ (5 )
Debit and credit card interchange (1) 15
—
—
—
—
—
Success fees (2) —
—
2,349
—
—
—
Other income 3
—
—
—
1
16
Total revenue from contracts with customers $ 543
$ —
$ 4,546
$ —
$ 1
$ 11
Revenues outside the scope of ASC 606 (3) —
159
4,972
12
1,181
(6,586 )
Total non-interest income $ 543
$ 159
$ 9,518
$ 12
$ 1,182
$ (6,575 )

Regional Segments
Three Months Ended September 30, 2017 Consolidated Company Arizona Nevada Southern California Northern California
(in thousands)
Revenue from contracts with customers:
Service charges and fees $ 5,248
$ 765
$ 1,952
$ 628
$ 1,011
Debit and credit card interchange (1) 1,250
232
246
138
634
Success fees (2) 701
—
—
—
102
Other income 127
61
(4 ) 32
34
Total revenue from contracts with customers $ 7,326
$ 1,058
$ 2,194
$ 798
$ 1,781
Revenues outside the scope of ASC 606 (3) 3,130
207
160
173
15
Total non-interest income $ 10,456
$ 1,265
$ 2,354
$ 971
$ 1,796

Regional Segments
Nine Months Ended September 30, 2017 Consolidated Company Arizona Nevada Southern California Northern California
(in thousands)
Revenue from contracts with customers:
Service charges and fees $ 15,189
$ 2,095
$ 5,544
$ 1,749
$ 3,069
Debit and credit card interchange (1) 3,714
661
723
400
1,930
Success fees (2) 1,162
—
—
—
247
Other income 373
99
(4 ) 43
107
Total revenue from contracts with customers $ 20,438
$ 2,855
$ 6,263
$ 2,192
$ 5,353
Revenues outside the scope of ASC 606 (3) 11,218
712
537
410
486
Total non-interest income $ 31,656
$ 3,567
$ 6,800
$ 2,602
$ 5,839

National Business Lines
Three Months Ended September 30, 2017 HOA
Services Public & Nonprofit Finance Technology & Innovation Hotel Franchise Finance Other NBLs Corporate & Other
(in thousands)
Revenue from contracts with customers:
Service charges and fees $ 136
$ —
$ 762
$ —
$ —
$ (6 )
Debit and credit card interchange (1) —
—
—
—
—
—
Success fees (2) —
—
599
—
—
—
Other income —
—
—
—
—
4
Total revenue from contracts with customers $ 136
$ —
$ 1,361
$ —
$ —
$ (2 )
Revenues outside the scope of ASC 606 (3) —
183
494
—
379
1,519
Total non-interest income $ 136
$ 183
$ 1,855
$ —
$ 379
$ 1,517


	National Business Lines													National Business Lines
Nine Months Ended September 30, 2017	HOA Services		Public & Nonprofit Finance		Technology & Innovation		Hotel Franchise Finance		Other NBLs		Corporate & Other
	(in thousands)													HOA Services		Public & Nonprofit Finance		Technology & Innovation		Hotel Franchise Finance		Other NBLs		Corporate & Other
Three Months Ended March 31, 2018														(in thousands)
Revenue from contracts with customers:
Service charges and fees	$	416	$	—	$	2,319	$	—	$	—	$	(3	)	$	146	$	—	$	815	$	—	$	—	$	1
Debit and credit card interchange (1)	—		—		—		—		—		—			3		—		—		—		—		—
Success fees (2)	—		—		915		—		—		—			—		—		779		—		—		—
Other income	1		—		3		—		113		11			—		—		—		—		—		5
Total revenue from contracts with customers	$	417	$	—	$	3,237	$	—	$	113	$	8		$	149	$	—	$	1,594	$	—	$	—	$	6
Revenues outside the scope of ASC 606 (3)	—		415		2,452		—		1,519		4,687			1		—		1,457		13		224		(98		)
Total non-interest income	$	417	$	415	$	5,689	$	—	$	1,632	$	4,695		$	150	$	—	$	3,051	$	13	$	224	$	(92	)


(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.


(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."

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 ~~September 30, 2018.~~March 31, 2019. 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 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.

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.

~~Practical Expedients~~

The Company has elected to apply the practical expedient allowed in ASC 340-40-25-4, which permits the Company to immediately expense contract acquisition costs, such as commissions, when the asset that would have resulted from capitalizing these costs would be amortized in one year or less. The practical expedient described in ASC 606-10-32-18, which is associated with the determination of whether a significant financing component exists, is not currently applicable to the Company.

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 ~~$1.3~~$1.4 million at each of the periods ended ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 and are presented in Other assets in the Consolidated Balance Sheets.

~~16. RELATED PARTY TRANSACTIONS~~

Principal stockholders, directors, and executive officers of the Company, their immediate family members, and companies they control or own more than a 10% interest in, are considered to be related parties. In the ordinary course of business, the Company engages in various related party transactions, including extending credit and bank service transactions. All related party transactions are subject to review and approval pursuant to the Company's Related Party Transactions policy.

On April 1, 2017, the Company hired an executive officer who was previously the Managing Partner of an external consulting firm that the Company actively uses for risk management services. Prior to joining the Company, the executive officer sold his interest in this external consulting firm and was paid with a combination of cash and a $1.0 million note, which as of September 30, 2018, was paid in full. Donations and other services to related parties, including sponsorships and expenses to this external consulting firm, totaled $8.7 million and $2.1 million for the nine months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018, total related party expenses of $8.7 million includes a donation to the Company's charitable foundation of $7.6 million, which consists of a non-cash donation of OREO property of $6.9 million and a cash donation of $0.7 million.


Item 2.	Management's Discussions 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, ~~2017~~2018 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 ~~September 30, 2018~~March 31, 2019 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) financial market and economic conditions adversely effecting financial performance; 2) dependency on real estate and events that negatively impact the real estate market; 3) high concentration of commercial real estate and commercial and industrial loans; 4) actual credit losses may exceed expected losses in the loan portfolio; 5) recent changes to FASB accounting standards and the impact on the recognition of credit losses; 6) results of any tax audit findings, challenges to the Company's tax positions, or adverse changes or interpretations of tax laws; 7) the geographic concentrations of the Company's assets increase the risks related to local economic conditions; 8) exposure of financial instruments to certain market risks may increase the volatility of earnings and AOCI; 9) dependence on low-cost deposits; 10) ability to borrow from the FHLB or the FRB; 11) perpetration of fraud; 12) information security breaches; 13) reliance on third parties to provide key components of the Company's infrastructure; 14) a change in the Company's creditworthiness; 15) the Company's ability to implement and improve its controls and processes to keep pace with its growth; 16) expansion strategies may not be successful; 17) risks associated with new lines of businesses or new products and services within existing lines of business; 18) the Company's ability to compete in a highly competitive market; 19) 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; 20) inadequate or ineffective risk management practices and internal controls and procedures; 21) the Company's ability to adapt to technological change; 22) exposure to natural and manmade disasters in markets that the Company operates; 23) risk of operating in a highly regulated industry and the Company's ability to remain in compliance; 24) failure to comply with state and federal banking agency laws and regulations; 25) uncertainty about the future of LIBOR, changes in interest rates, and increased rate competition; 26) exposure to environmental liabilities related to the properties to which the Company acquires title; and 27) 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, ~~2017.~~2018.

Financial Overview and Highlights

WAB operates the following full-service banking divisions: ABA, BON and FIB, Bridge, and TPB. The Company also serves business customers through a national platform of specialized financial services.

Financial Results Highlights for the ~~Third~~First Quarter of ~~2018~~2019

Effective for the first quarter 2019, annualized performance metrics are calculated on an actual/actual basis, from a previous 30/360 basis as management believes that this change results in quarterly results that are more comparable. Prior period amounts have been restated to conform to the current presentation.

Net income of ~~$111.1~~$120.8 million, compared to ~~$82.8~~$100.9 million for the ~~third~~first quarter ~~2017~~2018

Diluted earnings per share of ~~$1.05,~~$1.16, compared to ~~$0.79~~$0.96 per share for the ~~third~~first quarter ~~2017~~2018

Total loans of ~~$16.73~~$18.12 billion, up ~~$0.59 billion from June 30, 2018, and $1.64 billion~~$406.1 million from December 31, ~~2017~~

2018

Total deposits of ~~$18.91~~$20.21 billion, up ~~$0.82 billion from June 30, 2018, and $1.94~~$1.03 billion from December 31, ~~2017~~2018

Net interest margin of ~~4.72%~~4.71%, compared to ~~4.65%~~4.66% in the ~~third~~first quarter ~~2017~~2018


•	Net operating revenue of ~~$246.9~~$259.9 million, ~~constituting year-over-year growth~~an increase of ~~16.6%~~14.5%, or ~~$35.2~~$33.0 million, compared to the first quarter 2018, and an increase in operating non-interest expenses of ~~18.0%~~13.5%, or ~~$16.0~~$13.4 million, ~~for~~compared to the ~~third~~first quarter ~~2017~~2018¹


•	Operating PPNR of ~~$141.9~~$147.1 million, up ~~15.6%~~15.3% from ~~$122.7~~$127.6 million in the ~~third~~first quarter ~~2017~~2018¹

Efficiency ratio of ~~46.6%~~42.0% in the ~~third~~first quarter ~~2018,~~2019, compared to ~~40.1%~~42.4% in the ~~third~~first quarter ~~2017~~2018


•	Operating efficiency ratio of ~~41.5%~~42.4% in the ~~third~~first quarter ~~2018,~~2019, compared to ~~40.0%~~42.7% in the ~~third~~first quarter ~~2017~~2018¹

Nonperforming assets (nonaccrual loans and repossessed assets) ~~decreased~~increased to 0.26% of total assets, from ~~0.42%~~0.20% at ~~September 30, 2017~~December 31, 2018

Annualized net loan charge-offs to average loans outstanding of ~~0.08%~~0.03%, compared to ~~0.01%~~0.04% for the ~~third~~first quarter ~~2017~~2018


•	Tangible common equity ratio of ~~10.0%~~10.3%, compared to ~~9.4%~~9.8% at ~~September 30, 2017~~March 31, 2018¹

Stockholders' equity of ~~$2.49~~$2.72 billion, an increase of ~~$96.7 million from June 30, 2018, and $258.7~~$106.9 million from December 31, ~~2017~~

2018

Book value per common share of ~~$23.51,~~$26.04, an increase of ~~15.6%~~20.2% from ~~$20.34~~$21.67 at ~~September 30, 2017~~March 31, 2018


•	Tangible book value per share, net of tax, of ~~$20.70,~~$23.20, an increase of ~~18.1%~~$4.34 from ~~$17.53~~$18.86 at ~~September 30, 2017~~March 31, 2018¹

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 ~~September 30, 2018.~~March 31, 2019.

¹See Non-GAAP Financial Measures section beginning on page ~~68.~~62.

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 September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(in thousands, except per share amounts)												(in thousands, except per share amounts)
Net income	$	111,123		$	82,844		$	316,702		$	236,146		$	120,796		$	100,900
Earnings per share - basic	1.06			0.79			3.03			2.27			1.16			0.97
Earnings per share - diluted	1.05			0.79			3.00			2.25			1.16			0.96
Return on average assets	2.07		%	1.71		%	2.02		%	1.70		%	2.12		%	2.02		%
Return on average tangible common equity (1)	20.57			18.18			20.47			18.15			20.49			20.74
Net interest margin	4.72			4.65			4.67			4.63			4.71			4.66


(1)	See Non-GAAP Financial Measures section beginning on page ~~68.~~62.


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Total assets	$	22,176,147	$	20,329,085	$	23,792,846	$	23,109,486
Total loans, net of deferred loan fees and costs	16,732,765		15,093,935		18,116,748		17,710,629
Total deposits	18,908,580		16,972,532		20,208,740		19,177,447

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 non-accrual 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:


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(in thousands)						(dollars in thousands)
Non-accrual loans	$	36,868		$	43,925		$	43,887		$	27,746
Non-performing assets	99,463			114,939			114,082			82,722
Non-accrual loans to gross loans	0.22		%	0.29		%	0.24		%	0.16		%
Net charge-offs to average loans outstanding (1)	0.08			0.01			0.03			0.06


(1)	Annualized on an actual/actual basis for the three months ended ~~September 30, 2018.~~March 31, 2019. Actual year-to-date for the year ended December 31, ~~2017.~~2018.

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 ~~$22.18~~$23.79 billion at ~~September 30, 2018~~March 31, 2019 from ~~$20.33~~$23.11 billion at December 31, ~~2017.~~2018. The increase in total assets of ~~$1.85 billion,~~$683.4 million, or ~~9.1%~~3.0%, relates primarily to loan ~~growth of $1.64 billion.~~growth. Total loans increased by ~~$1.64 billion,~~$406.1 million, or ~~10.9%~~2.3%, to ~~$16.73~~$18.12 billion as of ~~September 30, 2018,~~March 31, 2019, compared to ~~$15.09~~$17.71 billion as of December 31, ~~2017.~~2018. The increase in loans from December 31, ~~2017~~2018 was driven by ~~increases in commercial and industrial~~residential real estate loans of ~~$646.3~~$257.2 million, construction and land development loans of ~~$475.4~~$148.8 million, and ~~residential real estate~~CRE non-owner occupied loans of ~~$401.1~~$90.8 million. These increases were partially offset by decreases in CRE owner-occupied loans of $40.0 million and commercial and industrial loans of $38.9 million. Total deposits increased ~~$1.94~~$1.03 billion, or ~~11.4%~~5.4%, to ~~$18.91~~$20.21 billion as of ~~September 30, 2018~~March 31, 2019 from ~~$16.97~~$19.18 billion as of December 31, ~~2017.~~2018.

RESULTS OF OPERATIONS

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


		Three Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase				Three Months Ended March 31,				Increase
		2018		2017		(Decrease)			2018		2017		(Decrease)				2019		2018		(Decrease)
		(in thousands, except per share amounts)															(in thousands, except per share amounts)
Consolidated Income Statement Data:	Consolidated Income Statement Data:															Consolidated Income Statement Data:
Interest income		$	265,216	$	217,836	$	47,380		$	751,515	$	617,054	$	134,461			$	291,168	$	234,697	$	56,471
Interest expense		31,178		16,253		14,925			79,149		43,419		35,730				43,832		20,477		23,355
Net interest income		234,038		201,583		32,455			672,366		573,635		98,731				247,336		214,220		33,116
Provision for credit losses		6,000		5,000		1,000			17,000		12,250		4,750				3,500		6,000		(2,500		)
Net interest income after provision for credit losses		228,038		196,583		31,455			655,366		561,385		93,981				243,836		208,220		35,616
Non-interest income		4,418		10,456		(6,038		)	29,505		31,656		(2,151		)		15,410		11,643		3,767
Non-interest expense		113,841		89,296		24,545			314,538		265,543		48,995				112,914		98,149		14,765
Income before provision for income taxes		118,615		117,743		872			370,333		327,498		42,835				146,332		121,714		24,618
Income tax expense		7,492		34,899		(27,407		)	53,631		91,352		(37,721		)		25,536		20,814		4,722
Net income		$	111,123	$	82,844	$	28,279		$	316,702	$	236,146	$	80,556			$	120,796	$	100,900	$	19,896
Earnings per share - basic		$	1.06	$	0.79	$	0.27		$	3.03	$	2.27	$	0.76			$	1.16	$	0.97	$	0.19
Earnings per share - diluted		$	1.05	$	0.79	$	0.26		$	3.00	$	2.25	$	0.75			$	1.16	$	0.96	$	0.20

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. These measurements typically adjust GAAP performance measures to exclude the effects of certain significant activities or transactions that, in management's opinion, do not reflect recurring period-to-period comparisons 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's core businesses. 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.

Operating Pre-Provision Net Revenue

Operating 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 has further adjusted this metric to exclude any non-recurring or non-operational elements of non-interest income or non-interest expense, which are outlined in the table below. Management ~~feels~~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 operating PPNR for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017		2018			2017			2019		2018
	(in thousands)											(in thousands)
Total non-interest income	$	4,418		$	10,456	$	29,505		$	31,656		$	15,410	$	11,643
Less:
(Loss) gain on sales of investment securities, net (1)	(7,232		)	319		(7,232		)	907
Unrealized (losses) gains on assets measured at fair value, net (1)	(1,212		)	—		(2,971		)	(1		)
Unrealized gains (losses) on assets measured at fair value, net (1)												2,834		(1,074		)
Total operating non-interest income	12,862			10,137		39,708			30,750			12,576		12,717
Plus: net interest income	234,038			201,583		672,366			573,635			247,336		214,220
Net operating revenue	$	246,900		$	211,720	$	712,074		$	604,385		$	259,912	$	226,937
Total non-interest expense	$	113,841		$	89,296	$	314,538		$	265,543		$	112,914	$	98,149
Less:
Contribution to charitable foundation (2)	7,645			—		7,645			—
401(k) plan change and other miscellaneous items (2)	1,218			—		1,218			—
Net (gain) loss on sales / valuations of repossessed and other assets (1)	(67		)	266		(1,474		)	(46		)
Net loss (gain) on sales / valuations of repossessed and other assets (1)												97		(1,228		)
Total operating non-interest expense	$	105,045		$	89,030	$	307,149		$	265,589		$	112,817	$	99,377
Operating pre-provision net revenue	$	141,855		$	122,690	$	404,925		$	338,796
Operating pre-provision net revenue (2)												$	147,095	$	127,560
Plus:
Non-operating revenue adjustments	(8,444		)	319		(10,203		)	906
Revenue adjustments												2,834		(1,074		)
Less:
Provision for credit losses	6,000			5,000		17,000			12,250			3,500		6,000
Non-operating expense adjustments	8,796			266		7,389			(46		)
Expense adjustments												97		(1,228		)
Income before provision for income taxes	118,615			117,743		370,333			327,498			146,332		121,714
Income tax expense	7,492			34,899		53,631			91,352			25,536		20,814
Net income	$	111,123		$	82,844	$	316,702		$	236,146		$	120,796	$	100,900


(1)	The operating PPNR non-GAAP performance metric is adjusted to exclude the effects of these non-operational items.


(2)	~~The operating PPNR non-GAAP performance metric is adjusted to exclude~~ There were no adjustments made for non-recurring items during the ~~effects of these non-recurring items. See Note 16. Related Party Transactions for further information regarding the charitable contribution.~~three months ended March 31, 2019 and 2018.

Operating Efficiency Ratio

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



	Three Months Ended March 31,
	2019			2018
	(dollars in thousands)
Total operating non-interest expense	$	112,817		$	99,377

Divided by:
Total net interest income	$	247,336		$	214,220
Plus:
Tax equivalent interest adjustment	6,094			5,727
Operating non-interest income	12,576			12,717
Net operating revenue - TEB	$	266,006		$	232,664

Operating efficiency ratio - TEB	42.4		%	42.7		%

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.


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(dollars and shares in thousands)						(dollars and shares in thousands)
Total stockholders' equity	$	2,488,393		$	2,229,698		$	2,720,620		$	2,613,734
Less: goodwill and intangible assets	299,553			300,748			298,768			299,155
Total tangible stockholders' equity	2,188,840			1,928,950			2,421,852			2,314,579
Plus: deferred tax - attributed to intangible assets	2,462			2,698			2,183			1,885
Total tangible common equity, net of tax	$	2,191,302		$	1,931,648		$	2,424,035		$	2,316,464

Total assets	$	22,176,147		$	20,329,085		$	23,792,846		$	23,109,486
Less: goodwill and intangible assets, net	299,553			300,748			298,768			299,155
Tangible assets	21,876,594			20,028,337			23,494,078			22,810,331
Plus: deferred tax - attributed to intangible assets	2,462			2,698			2,183			1,885
Total tangible assets, net of tax	$	21,879,056		$	20,031,035		$	23,496,261		$	22,812,216

Tangible equity ratio	10.0		%	9.6		%
Tangible common equity ratio	10.0			9.6			10.3		%	10.2		%
Common shares outstanding	105,861			105,487			104,483			104,949
Book value per share	$	23.51		$	21.14		$	26.04		$	24.90
Tangible book value per share, net of tax	20.70			18.31			23.20			22.07

~~Operating Efficiency Ratio~~

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

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(dollars in thousands)
Total operating non-interest expense $ 105,045
$ 89,030
$ 307,149
$ 265,589

Divided by:
Total net interest income $ 234,038
$ 201,583
$ 672,366
$ 573,635
Plus:
Tax equivalent interest adjustment 6,003
10,837
17,668
30,966
Operating non-interest income 12,862
10,137
39,708
30,750
Net operating revenue - TEB $ 252,903
$ 222,557
$ 729,742
$ 635,351

Operating efficiency ratio - TEB 41.5 % 40.0 % 42.1 % 41.8 %
Operating efficiency ratio - TEB adjusted (1) 41.0 % 42.9 %


~~(1)~~	The prior period operating efficiency ratios were adjusted to include the effects from the TCJA of the lower statutory corporate federal tax rate on the calculation of the tax equivalent adjustment in order to be comparable to the current period.

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 Common Equity Tier 1 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 Common Equity Tier 1 plus allowance measure is an important regulatory metric for assessing asset quality.


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(dollars in thousands)						(dollars in thousands)
Common Equity Tier 1:
Common Equity	$	2,488,393		$	2,229,698		$	2,720,620		$	2,613,734
Less:
Non-qualifying goodwill and intangibles	296,980			296,421			296,496			296,769
Disallowed deferred tax asset	984			638			2,134			768
AOCI related adjustments	(78,289		)	(9,496		)	(15,695		)	(47,055		)
Unrealized gain on changes in fair value liabilities	11,872			7,785			7,490			13,432
Common Equity Tier 1	$	2,256,846		$	1,934,350		$	2,430,195		$	2,349,820
Divided by: Risk-weighted assets	$	20,690,767		$	18,569,608		$	22,610,882		$	21,983,976
Common Equity Tier 1 ratio	10.9		%	10.4		%	10.7		%	10.7		%

Common Equity Tier 1	$	2,256,846		$	1,934,350		$	2,430,195		$	2,349,820
Plus:
Trust preferred securities	81,500			81,500			81,500			81,500
Less:
Disallowed deferred tax asset	—			159			—			—
Unrealized gain on changes in fair value liabilities	—			1,947			—			—
Tier 1 capital	$	2,338,346		$	2,013,744		$	2,511,695		$	2,431,320
Divided by: Tangible average assets	$	21,286,259		$	19,624,517		$	22,867,069		$	22,204,799
Tier 1 leverage ratio	11.0		%	10.3		%	11.0		%	10.9		%

Total Capital:
Tier 1 capital	$	2,338,346		$	2,013,744		$	2,511,695		$	2,431,320
Plus:
Subordinated debt	299,151			301,020			304,903			305,131
Qualifying allowance for credit losses	150,011			140,050			154,987			152,717
Other	7,617			6,174			9,224			8,188
Less: Tier 2 qualifying capital deductions	—			—			—			—
Tier 2 capital	$	456,779		$	447,244		$	469,114		$	466,036

Total capital	$	2,795,125		$	2,460,988		$	2,980,809		$	2,897,356

Total capital ratio	13.5		%	13.3		%	13.2		%	13.2		%

Classified assets to Tier 1 capital plus allowance for credit losses:
Classified assets	$	252,770		$	222,004		$	238,241		$	242,101
Divided by:
Tier 1 capital	2,338,346			2,013,744			2,511,695			2,431,320
Plus: Allowance for credit losses	150,011			140,050			154,987			152,717
Total Tier 1 capital plus allowance for credit losses	$	2,488,357		$	2,153,794		$	2,666,682		$	2,584,037

Classified assets to Tier 1 capital plus allowance	10.2		%	10.3		%	8.9		%	9.4		%

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 September 30,														Three Months Ended March 31,
	2018							2017							2019							2018
	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 thousands)														(dollars in thousands)
Interest earning assets
Loans:
Commercial and industrial	$	7,171,099		$	100,312	5.77	%	$	6,330,760		$	80,638	5.48	%	$	7,538,711		$	109,089	6.03	%	$	6,580,935		$	85,547	5.46	%
CRE - non-owner-occupied	4,003,943			59,383		5.95		3,609,484			54,442		6.06		4,211,088			62,441		6.03		3,920,777			56,285		5.84
CRE - owner-occupied	2,259,137			30,407		5.50		2,032,664			25,238		5.24		2,327,495			30,084		5.35		2,241,787			28,551		5.28
Construction and land development	2,023,116			35,959		7.12		1,633,378			25,898		6.36		2,178,312			39,704		7.41		1,789,356			29,619		6.72
Residential real estate	656,492			7,800		4.75		351,517			4,151		4.72		1,391,109			16,567		4.83		425,267			5,280		5.04
Consumer	57,360			848		5.91		52,168			729		5.59		62,367			933		6.07		47,935			677		5.73
Total loans (1), (2), (3)	16,171,147			234,709		5.90		14,009,971			191,096		5.68		17,709,082			258,818		6.02		15,006,057			205,959		5.67
Securities:
Securities - taxable	2,738,621			19,277		2.82		2,778,404			17,399		2.50		2,762,640			20,336		2.99		2,875,345			19,149		2.70
Securities - tax-exempt	875,207			7,962		4.55		657,064			6,185		5.61		895,582			8,798		4.98		836,914			7,472		4.53
Total securities (1)	3,613,828			27,239		3.24		3,435,468			23,584		3.10		3,658,222			29,134		3.47		3,712,259			26,621		3.11
Other	549,499			3,268		2.38		845,852			3,156		1.49		450,837			3,216		2.89		425,667			2,117		2.02
Total interest earning assets	20,334,474			265,216		5.34		18,291,291			217,836		5.00		21,818,141			291,168		5.53		19,143,983			234,697		5.09
Non-interest earning assets
Cash and due from banks	143,996							132,285							162,167							142,356
Allowance for credit losses	(148,162		)					(133,555		)					(154,249		)					(141,030		)
Bank owned life insurance	168,821							166,430							170,480							168,070
Other assets	1,002,468							930,752							1,112,937							990,845
Total assets	$	21,501,597						$	19,387,203						$	23,109,476						$	20,304,224
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	1,938,180		$	3,256	0.67	%	$	1,476,506		$	1,066	0.29	%	$	2,495,848		$	5,583	0.91	%	$	1,654,720		$	1,380	0.34	%
Savings and money market accounts	6,580,274			14,891		0.91		6,282,405			7,135		0.45		7,446,639			22,007		1.20		6,226,611			8,915		0.58
Time certificates of deposit	1,863,747			7,119		1.53		1,585,690			3,248		0.82		1,817,787			8,198		1.83		1,579,940			3,878		1.00
Total interest-bearing deposits	10,382,201			25,266		0.97		9,344,601			11,449		0.49		11,760,274			35,788		1.23		9,461,271			14,173		0.61
Short-term borrowings	28,471			118		1.66		31,671			96		1.21		315,755			1,939		2.49		351,616			1,335		1.54
Qualifying debt	359,133			5,794		6.45		375,276			4,708		5.02		363,044			6,105		6.82		368,849			4,969		5.46
Total interest-bearing liabilities	10,769,805			31,178		1.16		9,751,548			16,253		0.67		12,439,073			43,832		1.43		10,181,736			20,477		0.82
Interest cost of funding earning assets																				0.82							0.43
Non-interest-bearing liabilities
Non-interest-bearing demand deposits	7,910,305							7,174,532							7,555,584							7,510,614
Other liabilities	360,790							336,939							424,998							338,530
Stockholders’ equity	2,460,697							2,124,184							2,689,821							2,273,344
Total liabilities and stockholders' equity	$	21,501,597						$	19,387,203						$	23,109,476						$	20,304,224
Net interest income and margin (4)				$	234,038	4.72	%				$	201,583	4.65	%				$	247,336	4.71	%				$	214,220	4.66	%
TCJA adjusted net interest margin (5)													4.53	%


(1)	Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was ~~$6.0~~$6.1 million and ~~$10.8~~$5.7 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.


(2)	Included in the yield computation are net loan fees of ~~$12.5~~$12.3 million and accretion on acquired loans of ~~$3.3~~$2.8 million for the three months ended ~~September 30, 2018,~~March 31, 2019, compared to ~~$9.4~~$10.0 million and ~~$7.5~~$5.7 million for the three months ended ~~September 30, 2017,~~March 31, 2018, respectively.


(3)	Includes non-accrual loans.


(4)	Net interest margin is computed by dividing net interest income by total average earning ~~assets.~~


~~(5)~~	~~Prior period net interest margin is adjusted to include the effects from the TCJA of the lower statutory corporate federal tax rate~~assets, annualized on ~~the calculation of the taxable-equivalent adjustment, which reduced this adjustment to $5.4 million, in order to be comparable to the current period.~~

Nine Months Ended September 30,
2018 2017
Average
Balance Interest Average
Yield / Cost Average
Balance Interest Average
Yield / Cost
(dollars in thousands)
Interest earning assets
Loans:
Commercial and industrial $ 6,887,005
$ 280,101
5.60 % $ 6,050,380
$ 224,985
5.35 %
CRE - non-owner occupied 3,963,287
175,041
5.90
3,593,903
160,719
5.99
CRE - owner-occupied 2,247,891
87,656
5.31
2,016,840
75,895
5.27
Construction and land development 1,922,353
99,146
6.89
1,583,707
72,965
6.16
Residential real estate 505,908
18,494
4.87
315,488
11,125
4.70
Consumer 52,585
2,265
5.74
45,164
1,617
4.77
Total loans (1), (2), (3) 15,579,029
662,703
5.77
13,605,482
547,306
5.58
Securities:
Securities - taxable 2,805,128
57,700
2.74
2,445,846
44,684
2.44
Securities - tax-exempt 853,748
23,605
4.61
629,968
17,643
5.55
Total securities (1) 3,658,876
81,305
3.18
3,075,814
62,327
3.07
Other 453,031
7,507
2.21
745,049
7,421
1.33
Total interest earning assets 19,690,936
751,515
5.21
17,426,345
617,054
4.96
Non-interest earning assets
Cash and due from banks 143,787
138,395

Allowance for credit losses (144,953 ) (129,782 )
Bank owned life insurance 168,412
165,692

Other assets 1,001,369
917,089

Total assets $ 20,859,551
$ 18,517,739

Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 1,806,921
$ 6,996
0.52 % $ 1,468,163
$ 2,858
0.26 %
Savings and money market accounts 6,312,371
36,130
0.76
6,169,860
18,277
0.39
Time certificates of deposit 1,720,537
16,162
1.25
1,549,212
8,371
0.72
Total interest-bearing deposits 9,839,829
59,288
0.80
9,187,235
29,506
0.43
Short-term borrowings 263,249
3,403
1.72
58,749
374
0.85
Qualifying debt 363,556
16,458
6.04
370,795
13,539
4.87
Total interest-bearing liabilities 10,466,634
79,149
1.01
9,616,779
43,419
0.60
Non-interest-bearing liabilities

Non-interest-bearing demand deposits 7,679,090
6,548,351

Other liabilities 351,193
315,453

Stockholders’ equity 2,362,634
2,037,156

Total liabilities and stockholders' equity $ 20,859,551
$ 18,517,739

Net interest income and margin (4) $ 672,366
4.67 % $ 573,635
4.63 %
TCJA adjusted net interest margin (5)
4.51 %


~~(1)~~	~~Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was $17.7 million and $31.0 million for the nine months ended September 30, 2018 and 2017, respectively.~~


~~(2)~~	Included in the yield computation are net loan fees of $33.4 million and accretion on acquired loans of $14.1 million for the nine months ended September 30, 2018, compared to $26.0 million and $21.0 million for the nine months ended September 30, 2017, respectively.


~~(3)~~	~~Includes non-accrual loans.~~


~~(4)~~	~~Net interest margin is computed by dividing net interest income by total average earning assets.~~


~~(5)~~	Prior period net interest margin is adjusted to include the effects from the TCJA of the lower statutory corporate federal tax rate on the calculation of the taxable-equivalent adjustment, which reduced this adjustment to $15.3 million, in order to be comparable to the current period.an actual/actual basis.


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2018 versus 2017								2018 versus 2017								2019 versus 2018
	Increase (Decrease) Due to Changes in (1)								Increase (Decrease) Due to Changes in (1)								Increase (Decrease) Due to Changes in (1)
	Volume			Rate			Total		Volume			Rate			Total		Volume			Rate			Total
	(in thousands)																(in thousands)
Interest income:
Loans:
Commercial and industrial	$	11,755		$	7,919		$	19,674	$	34,026		$	21,090		$	55,116	$	13,860		$	9,682		$	23,542
CRE - non-owner occupied	5,850			(909		)	4,941		16,314			(1,992		)	14,322		4,305			1,851			6,156
CRE - owner-occupied	3,048			2,121			5,169		9,010			2,751			11,761		1,108			425			1,533
Construction and land development	6,927			3,134			10,061		17,466			8,715			26,181		7,089			2,996			10,085
Residential real estate	3,624			25			3,649		6,961			408			7,369		11,502			(215		)	11,287
Consumer	77			42			119		320			328			648		216			40			256
Total loans	31,281			12,332			43,613		84,097			31,300			115,397		38,080			14,779			52,859
Securities:
Securities - taxable	(280		)	2,158			1,878		7,390			5,626			13,016		(830		)	2,017			1,187
Securities - tax-exempt	1,985			(208		)	1,777		6,187			(225		)	5,962		576			750			1,326
Total securities	1,705			1,950			3,655		13,577			5,401			18,978		(254		)	2,767			2,513
Other	(1,762		)	1,874			112		(4,839		)	4,925			86		180			919			1,099
Total interest income	31,224			16,156			47,380		92,835			41,626			134,461		38,006			18,465			56,471

Interest expense:
Interest bearing transaction accounts	$	776		$	1,414		$	2,190	$	1,312		$	2,826		$	4,138
Interest-bearing transaction accounts																	$	1,882		$	2,321		$	4,203
Savings and money market	674			7,082			7,756		816			17,037			17,853		3,606			9,486			13,092
Time certificates of deposit	1,062			2,809			3,871		1,609			6,182			7,791		1,073			3,247			4,320
Short-term borrowings	(13		)	35			22		2,644			385			3,029		(220		)	824			604
Qualifying debt	(260		)	1,346			1,086		(328		)	3,247			2,919		(98		)	1,234			1,136
Total interest expense	2,239			12,686			14,925		6,053			29,677			35,730		6,243			17,112			23,355

Net increase	$	28,985		$	3,470		$	32,455	$	86,782		$	11,949		$	98,731	$	31,763		$	1,353		$	33,116


(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 ~~September 30, 2018,~~March 31, 2019, interest income was ~~$265.2~~$291.2 million, an increase of ~~$47.4~~$56.5 million, or ~~21.8%~~24.1%, compared to ~~$217.8~~$234.7 million for the three months ended ~~September 30, 2017.~~March 31, 2018. This increase was primarily the result of a ~~$2.16~~$2.70 billion increase in the average loan balance, which, together with the effect of the rising rate environment, drove a ~~$43.6~~$52.9 million increase in loan interest income for the three months ended ~~September 30, 2018.~~March 31, 2019. Interest income from investment securities increased by ~~$3.7~~$2.5 million for the comparable period primarily due to an increase in ~~the average investment balance of $178.4 million from September 30, 2017 as well as an increase in~~ interest rates ~~and mix.~~from March 31, 2018. Average yield on interest earning assets increased to ~~5.34%~~5.53% for the three months ended ~~September 30, 2018,~~March 31, 2019, compared to ~~5.00%~~5.09% for the same period in ~~2017,~~2018, which was primarily the result of loan growth and increased yields on loans and investment securities, attributable to the rising interest rate ~~environment, partially offset by a decrease in the tax equivalent adjustment on tax-exempt loans and investment securities, which resulted from the TCJA.~~

For the nine months ended September 30, 2018, interest income was $751.5 million, an increase of $134.5 million, or 21.8%, compared to $617.1 million for the nine months ended September 30, 2017. This increase was primarily the result of a $1.97 billion increase in the average loan balance compared to the same period in the prior year which, together with the effect of the rising rate environment, drove a $115.4 million increase in loan interest income for the nine months ended September 30, 2018. Interest income from investment securities increased by $19.0 million for the comparable period primarily due to an increase in the average investment balance of $583.1 million from September 30, 2017 as well as an increase in interest rates and mix. Average yield on interest earning assets increased to 5.21% for the nine months ended September 30, 2018, compared to 4.96% for the same period in 2017, which was primarily the result of increased yields on loans and investment securities, attributable to the rising interest rate environment, partially offset by a decrease in the tax equivalent adjustment on tax-exempt loans and investment securities.

environment.

For the three months ended ~~September 30, 2018,~~March 31, 2019, interest expense was ~~$31.2~~$43.8 million, an increase of ~~$14.9~~$23.4 million, or ~~91.8%~~114.1%, compared to ~~$16.3~~$20.5 million for the three months ended ~~September 30, 2017.~~March 31, 2018. Interest expense on deposits increased ~~$13.8~~$21.6 million for the same period as average interest-bearing deposits increased ~~$1.04~~$2.30 billion, resulting in a 4862 basis point increase in average cost of interest-bearing deposits. Interest expense on qualifying debt and short-term borrowings ~~remained consistent~~increased $1.1 million and $0.6 million, respectively, for the three months ended ~~September 30, 2018 and 2017, which is due to decrease of average short-term borrowings of $3.2 million that was offset by 45 basis point increase in average cost of short-term borrowings.~~

For the nine months ended September 30, 2018, interest expense was $79.1 million, an increase of $35.7 million, or 82.3%, compared to $43.4 million for the nine months ended September 30, 2017. Interest expense on deposits increased $29.8 million for the same period as average interest-bearing deposits increased $652.6 million, resulting in a 37 basis point increase in average cost of interest-bearing deposits. Interest expense on short-term borrowings increased by $3.0 million for the nine months ended September 30, 2018March 31, 2019 compared to the ~~same period in 2017. The increase is attributable to an increase in average short-term borrowings of $204.5 million~~three months ended March 31, 2018, due to ~~utilization of FHLB overnight advances.~~higher interest rates.

For the three months ended ~~September 30, 2018,~~March 31, 2019, net interest income was ~~$234.0~~$247.3 million, an increase of ~~$32.5~~$33.1 million, or ~~16.1%~~15.5%, compared to ~~$201.6~~$214.2 million for the three months ended ~~September 30, 2017.~~March 31, 2018. The increase in net interest income reflects a ~~$2.04~~$2.67 billion increase in average interest-earning assets, partially offset by an increase of ~~$1.02~~$2.26 billion in average interest-bearing liabilities. The increase in net interest margin of 75 basis points to ~~4.72%~~4.71% is the result of increased yields on loans and investment securities, partially offset by higher deposit and funding costs ~~and a decrease in the tax equivalent adjustment on tax-exempt loans and securities~~ for the three months ended ~~September 30, 2018,~~March 31, 2019, compared to the same period in ~~2017. Adjusting net interest margin to include the effects of the TCJA results in TCJA adjusted net interest margin of 4.53% for the three months ended September 30, 2017.~~2018.

For the nine months ended September 30, 2018, net interest income was $672.4 million, an increase of $98.7 million, or 17.2%, compared to $573.6 million for the nine months ended September 30, 2017. The increase in net interest income reflects a $2.26 billion increase in average interest-earning assets, offset by an $849.9 million increase in average interest-bearing liabilities. The increase in net interest margin of 4 basis points to 4.67% is the result of increased yields on loans and investment securities, partially offset by higher deposit and funding costs and a decrease in the tax equivalent adjustment on tax-exempt loans and securities for the nine months ended September 30, 2018, compared to the same period in 2017. Adjusting net interest margin to include the effects of the TCJA results in TCJA adjusted net interest margin of 4.51% for the nine months ended September 30, 2017.

Provision for Credit Losses

The provision for credit losses in each period is reflected as a reduction in earnings for that period. The provision is equal to the amount required to maintain the allowance for credit losses at a level that is adequate to absorb probable credit losses inherent in the loan portfolio. For the three months ended ~~September 30, 2018,~~March 31, 2019, the provision for credit losses was ~~$6.0~~$3.5 million compared to ~~$5.0~~$6.0 million for the three months ended ~~September 30, 2017. For the nine months ended September 30, 2018,~~March 31, 2018. The decrease in the provision for credit losses was ~~$17.0 million,~~driven by loan mix. For the three months ended March 31, 2019, loan growth was driven by residential real estate loans, which carry a lower credit risk profile, compared to ~~$12.3 million~~construction and land development and commercial and industrial loans, which were the drivers of loan growth for the ~~nine~~three months ended ~~September 30, 2017. The provision increase was primarily due to organic growth in total loans of $2.21 billionfromSeptember 30, 2017. The Company defines its organic loans as those loans that have not been acquired in a transaction accounted for as a business combination.~~ March 31, 2018.

The Company may establish an additional allowance for credit losses for PCI loans through provision for credit losses when impairment is determined as a result of lower than expected cash flows. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the allowance for credit losses on PCI loans was ~~$0.2 million and $1.6 million, respectively.~~

$0.1 million.

Non-interest Income

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


	Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
	2018			2017		Increase (Decrease)			2018			2017			Increase (Decrease)			2019		2018			Increase (Decrease)
	(in thousands)																	(in thousands)
Service charges and fees	$	5,267		$	5,248	$	19		$	16,684		$	15,189		$	1,495		$	5,412	$	5,745		$	(333	)
Income from equity investments																		2,009		1,460			549
Card income	2,138			1,509		629			6,143			4,517			1,626			1,841		1,972			(131		)
Income from equity investments	1,440			967		473			5,417			2,977			2,440
Lending related income and gains (losses) on sale of loans, net	1,422			97		1,325			3,447			746			2,701
Foreign currency income	1,092			756		336			3,475			2,630			845			1,095		1,202			(107		)
Income from bank owned life insurance	868			975		(107		)	2,963			2,896			67			981		928			53
(Loss) gain on sales of investment securities, net	(7,232		)	319		(7,551		)	(7,232		)	907			(8,139		)
Unrealized (losses) gains on assets measured at fair value, net	(1,212		)	—		(1,212		)	(2,971		)	(1		)	(2,970		)
Lending related income and gains (losses) on sale of loans, net																		251		978			(727		)
Unrealized gains (losses) on assets measured at fair value, net																		2,834		(1,074		)	3,908
Other income	635			585		50			1,579			1,795			(216		)	987		432			555
Total non-interest income	$	4,418		$	10,456	$	(6,038	)	$	29,505		$	31,656		$	(2,151	)	$	15,410	$	11,643		$	3,767

Total non-interest income for the three months ended ~~September 30, 2018~~March 31, 2019 compared to the same period in ~~2017, decreased~~2018, increased by ~~$6.0~~$3.8 million, or ~~57.7%~~32.4%. The ~~decrease~~increase in non-interest income is due primarily to ~~a net loss on sales of investment securities and~~ unrealized losses on assets measured at fair value. The net loss on sales of investment securities of $7.2 million relate to sales of low yielding investment securities, which were replaced with investment securities with shorter durations and higher yields. Unrealized lossesgains on assets measured at fair value of ~~$1.2~~$2.8 million relate to fair value changes in the Company's equity securities. Due to adoption of ASU 2016-01, effective January 1, 2018, changes in the fair value of equity securities are recognized in net income rather than accumulated other comprehensive income. These decreases were partially offset by increases in lending related income of $1.3 million primarily related to a gain on a loan sale and card income of $0.6 million largely resulting from an increase in credit card interchange income.

Total non-interest income for the nine months ended September 30, 2018 compared same period in 2017, decreased by $2.2 million, or 6.8%. The decrease in non-interest income is due primarily to a net loss on sales of investment securities and unrealized losses on assets measured at fair value. The net loss on sales of investment securities of $7.2 million and unrealized losses on assets measured at fair value of $3.0 million are due to the same factors discussed in the above paragraph for the three months ended ~~September 30,~~March 31, 2019, compared to an unrealized loss of $1.1 million for the three months ended March 31, 2018. Income from equity investments also increased $0.5 million from an increase in both warrant and SBIC income. These ~~decreases~~increases were partially offset by ~~increases~~a decrease of $0.7 million in lending related income ~~and~~primarily related to $0.4 million in net losses on loan sales for the three months ended March 31, 2019, compared to net gains on ~~sale~~loan sales of ~~loans of $2.7~~$0.7 million ~~and income from equity investments of $2.4 million resulting from increased warrant income.~~for the three months ended March 31, 2018.

Non-interest Expense

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


	Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
	2018			2017		Increase (Decrease)			2018			2017			Increase (Decrease)			2019		2018			Increase (Decrease)
	(in thousands)																	(in thousands)
Salaries and employee benefits	$	64,762		$	52,747	$	12,015		$	188,680		$	156,640		$	32,040		$	68,556	$	62,133		$	6,423
Occupancy																		8,227		6,864			1,363
Legal, professional, and directors' fees	7,907			6,038		1,869			21,856			23,324			(1,468		)	7,532		6,003			1,529
Occupancy	7,406			7,507		(101		)	21,671			21,328			343
Data processing	5,895			4,524		1,371			16,688			14,163			2,525			6,332		5,207			1,125
Deposit costs	4,848			2,904		1,944			11,888			6,778			5,110			5,724		2,926			2,798
Insurance	3,712			3,538		174			11,466			10,355			1,111			2,809		3,869			(1,060		)
Business development	1,381			1,439		(58		)	4,523			4,949			(426		)	2,085		1,728			357
Card expense	1,282			966		316			3,305			2,558			747
Loan and repossessed asset expenses	1,230			1,263		(33		)	2,830			3,639			(809		)	2,006		583			1,423
Marketing	687			776		(89		)	2,429			2,628			(199		)	741		596			145
Card expense																		634		942			(308		)
Intangible amortization	398			489		(91		)	1,195			1,666			(471		)	387		398			(11		)
Net (gain) loss on sales / valuations of repossessed and other assets	(67		)	266		(333		)	(1,474		)	(46		)	(1,428		)
Net loss (gain) on sales / valuations of repossessed and other assets																		97		(1,228		)	1,325
Other expense	14,400			6,839		7,561			29,481			17,561			11,920			7,784		8,128			(344		)
Total non-interest expense	$	113,841		$	89,296	$	24,545		$	314,538		$	265,543		$	48,995		$	112,914	$	98,149		$	14,765

Total non-interest expense for the three months ended ~~September 30, 2018,~~March 31, 2019, compared to the same period in ~~2017,~~2018, increased ~~$24.5~~$14.8 million, or ~~27.5%~~15.0%. This increase primarily relates to salaries and employee benefits, ~~other non-interest expense,~~ deposit costs, and legal, professional, and directors' ~~fees, and data processing.~~fees. Salaries and employee benefits have increased as the Company supports its continued growth. Full-time equivalent employees increased ~~7.3%~~3.5% from ~~1,673~~1,713 at ~~September 30, 2017,~~March 31, 2018, compared to ~~1,795~~1,773 at September 30, 2018. The increase in other non-interest expense primarily relates to a $7.6 million donation to the Company's charitable foundation, which is further discussed in Note 16. Related Party Transactions.March 31, 2019. Deposits costs consist of fees to Promontory Interfinancial Network and others for reciprocal deposits as well as earnings credits on select non-interest bearing deposits. The increase in deposit costs for the three months ended ~~September 30, 2018,~~March 31, 2019, compared to the same period in ~~2017,~~2018, primarily relates to an increase in deposit earnings credits paid to account holders. The increase in legal, professional, and directors' fees largely relates to an increase in consulting fees. ~~The increase in data processing fees relates to increased software costs.~~

Total non-interest expense for the nine months ended September 30, 2018, compared to the same period in 2017, increased $49.0 million, or 18.5%. This increase primarily relates to salaries and employee benefits, other expense, deposit costs and data processing. The increases in these non-interest expense items for nine months ended September 30, 2018 are due to the same factors discussed in the above paragraph for the three months ended September 30, 2018.

Income Taxes

Business Segment Results

The Company's reportable segments are aggregated primarily based on geographic location, services offered, and markets served. The Company's regional segments, which include Arizona, Nevada, Southern California, and Northern California, provide full service banking and related services to their respective markets. The Company's NBL segments, which include HOA Services, Public & Nonprofit Finance, Technology & Innovation, HFF, and Other NBLs, provide specialized banking services to niche markets. These NBLs are managed centrally and are broader in geographic scope than the Company's other segments, though still predominately located within the Company's core market areas. The Corporate & Other segment consists of corporate-related items, income and expense items not allocated to the Company's other reportable segments, and inter-segment eliminations.

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


			Regional Segments										Regional Segments
	Consolidated Company		Arizona		Nevada		Southern California		Northern California		Consolidated Company		Arizona		Nevada		Southern California		Northern California
At September 30, 2018	(in millions)
At March 31, 2019											(in millions)
Loans, net of deferred loan fees and costs	$	16,732.8	$	3,593.5	$	1,936.7	$	2,116.3	$	1,332.3	$	18,116.7	$	3,653.9	$	2,069.4	$	2,249.8	$	1,197.2
Deposits	18,908.6		5,331.7		3,847.3		2,550.7		1,951.5		20,208.7		5,319.9		4,006.8		2,793.8		2,008.7

At December 31, 2017
At December 31, 2018
Loans, net of deferred loan fees and costs	$	15,093.9	$	3,323.7	$	1,844.8	$	1,934.7	$	1,275.5	$	17,710.6	$	3,647.9	$	2,003.5	$	2,161.1	$	1,300.2
Deposits	16,972.5		4,841.3		3,951.4		2,461.1		1,681.7		19,177.4		5,090.2		3,996.4		2,347.5		1,839.1


	(in thousands)										(in thousands)
Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Pre-tax income	$	118,615	$	35,997	$	24,073	$	14,704	$	12,448	$	146,332	$	34,338	$	25,355	$	16,162	$	12,482

Nine Months Ended September 30, 2018
Three Months Ended March 31, 2018
Pre-tax income	$	370,333	$	106,326	$	74,002	$	43,545	$	35,180	$	121,714	$	33,033	$	27,662	$	14,428	$	10,751

Three Months Ended September 30, 2017
Pre-tax income	$	117,743	$	35,347	$	25,960	$	15,500	$	9,267

Nine Months Ended September 30, 2017
Pre-tax income	$	327,498	$	93,909	$	74,473	$	45,646	$	29,099



	National Business Lines
	HOA Services		Public & Nonprofit Finance		Technology & Innovation		Hotel Franchise Finance		Other NBLs		Corporate & Other
At March 31, 2019	(in millions)
Loans, net of deferred loan fees and costs	$	209.4	$	1,561.7	$	1,057.3	$	1,564.9	$	4,549.0	$	4.1
Deposits	2,963.0		—		2,404.7		—		5.3		706.5

At December 31, 2018
Loans, net of deferred loan fees and costs	$	210.0	$	1,547.5	$	1,200.9	$	1,479.9	$	4,154.9	$	4.7
Deposits	2,607.2		—		2,559.0		—		—		738.0



	(in thousands)
Three Months Ended March 31, 2019
Pre-tax income	$	12,304	$	1,557	$	21,793	$	9,747	$	14,034	$	(1,440	)

Three Months Ended March 31, 2018
Pre-tax income	$	7,659	$	1,779	$	14,388	$	10,756	$	12,088	$	(10,830	)

National Business Lines
HOA
Services Public & Nonprofit Finance Technology & Innovation Hotel Franchise Finance Other NBLs Corporate & Other
At September 30, 2018 (in millions)
Loans, net of deferred loan fees and costs $ 202.1
$ 1,520.2
$ 1,106.5
$ 1,435.4
$ 3,483.2
$ 6.6
Deposits 2,523.9
—
2,319.5
—
—
384.0

At December 31, 2017
Loans, net of deferred loan fees and costs $ 162.1
$ 1,580.4
$ 1,097.9
$ 1,327.7
$ 2,543.0
$ 4.1
Deposits 2,230.4
—
1,737.6
—
—
69.0

(in thousands)
Three Months Ended September 30, 2018
Pre-tax income $ 9,788
$ 2,261
$ 18,688
$ 10,320
$ 10,384
$ (20,048 )

Nine Months Ended September 30, 2018
Pre-tax income $ 25,503
$ 5,783
$ 49,112
$ 32,204
$ 34,229
$ (35,551 )

Three Months Ended September 30, 2017
Pre-tax income $ 6,831
$ 5,308
$ 13,529
$ 12,325
$ 7,610
$ (13,934 )

Nine Months Ended September 30, 2017
Pre-tax income $ 18,944
$ 14,339
$ 37,798
$ 31,464
$ 23,174
$ (41,348 )

BALANCE SHEET ANALYSIS

Total assets increased ~~$1.85 billion,~~$683.4 million, or ~~9.1%~~3.0%, to ~~$22.18~~$23.79 billion at ~~September 30, 2018,~~March 31, 2019, compared to ~~$20.33~~$23.11 billion at December 31, ~~2017.~~2018. The increase in total assets relates primarily to organic loan growth. Loans increased ~~$1.64 billion,~~$406.1 million, or ~~10.9%~~2.3%, to ~~$16.73~~$18.12 billion at ~~September 30, 2018,~~March 31, 2019, compared to ~~$15.09~~$17.71 billion at December 31, ~~2017.~~2018. The increase in loans from December 31, ~~2017~~2018 was driven by ~~commercial and industrial~~residential real estate loans of ~~$646.3~~$257.2 million, construction and land development loans of ~~$475.4~~$148.8 million, and ~~residential real estate~~CRE non-owner occupied loans of ~~$401.1~~$90.8 million. These increases were partially offset by decreases in CRE owner-occupied loans of $40.0 million, commercial and industrial loans of $38.9 million, and consumer loans of $11.7 million.

Total liabilities increased ~~$1.59 billion,~~$576.5 million, or ~~8.8%~~2.8%, to ~~$19.69~~$21.07 billion at ~~September 30, 2018,~~March 31, 2019, compared to ~~$18.10~~$20.50 billion at December 31, ~~2017.~~2018. The increase in liabilities is due primarily to an increase in total deposits of ~~$1.94~~$1.03 billion, or ~~11.4%~~5.4%, to ~~$18.91~~$20.21 billion, all of which is attributable to organic deposit growth. This increase was partially offset by a decrease of $491.0 million in overnight borrowings.

Total stockholders’ equity increased by ~~$258.7~~$106.9 million, or ~~11.6%~~4.1%, to ~~$2.49~~$2.72 billion at ~~September 30, 2018,~~March 31, 2019, compared to ~~$2.23~~$2.61 billion at December 31, ~~2017.~~2018. The increase in stockholders' equity relates primarily to net income for the ~~nine~~three months ended ~~September 30, 2018, partially offset by a decrease~~March 31, 2019 and an increase in the fair value of the Company's AFS portfolio, which is recognized as part of ~~AOCI.~~AOCI, partially offset by share repurchases.

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. 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.

For periods prior to January 1, 2018, equity securities were classified as AFS and reported at fair value with unrealized gains and losses included as a separate component of AOCI, net of tax. Upon adoption of ASU 2016-01, equity securities are no longer reported as part of AFS securities and changes in fair value are recognized as part of non-interest income.

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:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Debt securities
CDO	$	19,148	$	21,857	$	15,026	$	15,327
Commercial MBS issued by GSEs	100,943		109,077		99,099		100,106
Corporate debt securities	99,384		103,483		97,042		99,380
Private label residential MBS	855,942		868,524		935,347		924,594
Residential MBS issued by GSEs	1,450,059		1,689,295		1,492,236		1,530,124
Tax-exempt	793,197		765,960		847,855		841,573
Trust preferred securities	28,617		28,617		28,617		28,617
U.S. government sponsored agency securities	45,601		61,462		38,901		38,188
U.S. treasury securities	2,475		2,482		989		1,984
Total debt securities	3,395,366		3,650,757		$	3,555,112	$	3,579,893

Equity securities
CRA investments	50,744		53,196		$	51,614	$	51,142
Preferred stock	121,550		50,616		66,391		63,919
Total equity securities	172,294		103,812		$	118,005	$	115,061
Total investment securities	$	3,567,660	$	3,754,569

Loans

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


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(in thousands)						(in thousands)
Commercial and industrial	$	7,487,725		$	6,841,381		$	7,723,695		$	7,762,642
Commercial real estate - non-owner occupied	3,952,966			3,904,011			4,304,261			4,213,428
Commercial real estate - owner occupied	2,288,156			2,241,613			2,285,340			2,325,380
Construction and land development	2,107,631			1,632,204			2,283,527			2,134,753
Residential real estate	827,073			425,940			1,461,561			1,204,355
Consumer	69,214			48,786			58,364			70,071
Loans, net of deferred loan fees and costs	16,732,765			15,093,935			18,116,748			17,710,629
Allowance for credit losses	(150,011		)	(140,050		)	(154,987		)	(152,717		)
Total loans HFI	$	16,582,754		$	14,953,885		$	17,961,761		$	17,557,912

Concentrations of Lending Activities

The Company monitors concentrations within four broad categories: geography, industry, product, and collateral. The Company’s loan portfolio includes significant credit exposure to the CRE market. As of ~~September 30, 2018~~each of the periods ended March 31, 2019 and December 31, ~~2017,~~2018, CRE related loans accounted for approximately ~~50% and 52%~~49% of total ~~loans, respectively.~~loans. Substantially all of these loans are secured by first liens with an initial loan to value ratio of generally not more than 75%. Approximately ~~37%~~35% and 36% of these CRE loans, excluding construction and land loans, were owner-occupied at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Impaired loans

A loan is identified as impaired when it is no longer probable that interest and principal will be collected according to the contractual terms of the original loan agreement. Generally, impaired loans are classified as non-accrual. However, in certain instances, impaired loans may continue on an accrual basis if full repayment of all principal and interest is expected and the loan is both well-secured and in the process of collection. Impaired loans are measured for reserve requirements in accordance with ASC 310 based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral less applicable disposition costs if the loan is collateral dependent. The amount of an impairment reserve, if any, and any subsequent changes are charged against the allowance for credit losses.

In addition to the Company's own internal loan review process, regulators may from time to time direct the Company to modify loan grades, loan impairment calculations, or loan impairment methodology.

Total non-performing loans ~~decreased~~increased by ~~$7.0~~$31.6 million, or ~~8.1%~~48.7%, at ~~September 30, 2018~~March 31, 2019 to ~~$79.4~~$96.4 million from ~~$86.4~~$64.8 million at December 31, ~~2017.~~2018.


	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(dollars in thousands)						(dollars in thousands)
Total non-accrual loans (1)	$	36,868		$	43,925		$	43,887		$	27,746
Loans past due 90 days or more on accrual status ~~(2)~~	—			43			—			594
Accruing troubled debt restructured loans	42,567			42,431			52,488			36,458
Total nonperforming loans, excluding loans acquired with deteriorated credit quality	79,435			86,399			96,375			64,798
Other impaired loans	46,134			12,155			47,023			47,454
Total impaired loans	$	125,569		$	98,554		$	143,398		$	112,252
Other assets acquired through foreclosure, net	$	20,028		$	28,540		$	17,707		$	17,924
Non-accrual loans to gross loans held for investment	0.22		%	0.29		%	0.24		%	0.16		%
Loans past due 90 days or more on accrual status to gross loans held for investment	—			0.00			—			0.00


(1)	Includes non-accrual TDR loans of ~~$9.6~~$16.4 million and ~~$10.1~~$8.0 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.


~~(2)~~	~~Includes less than $0.1 million from loans acquired with deteriorated credit quality at December 31, 2017.~~

Interest income received on non-accrual loans was ~~$0.6 million and $0.7 million for the three months ended September 30, 2018 and 2017, respectively, and $1.4~~$0.4 million for each of the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. Interest income that would have been recorded under the original terms of non-accrual loans was ~~$0.6~~$0.3 million and ~~$0.7~~$0.6 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $1.8 million for each of the nine months ended September 30, 2018 and 2017.~~

respectively.

The composition of non-accrual loans by loan type and by segment were as follows:


	September 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
	Non-accrual Balance		Percent of Non-Accrual Balance		Percent of Total HFI Loans		Non-accrual Balance		Percent of Non-Accrual Balance		Percent of Total HFI Loans		Non-accrual Balance		Percent of Non-Accrual Balance		Percent of Total Loans		Non-accrual Balance		Percent of Non-Accrual Balance		Percent of Total Loans
	(dollars in thousands)												(dollars in thousands)
Commercial and industrial	$	23,977	65.03	%	0.14	%	$	22,026	50.14	%	0.15	%	$	31,074	70.81	%	0.17	%	$	15,090	54.39	%	0.09	%
Commercial real estate	—		—		—		7,721		17.58		0.05		1,000		2.28		0.01		—		—		—
Construction and land development	—		—		—		5,979		13.61		0.04		3,783		8.62		0.02		476		1.71		0.00
Residential real estate	12,558		34.06		0.08		8,117		18.48		0.05		7,914		18.03		0.04		11,939		43.03		0.07
Consumer	333		0.90		—		82		0.19		0.00		116		0.26		0.00		241		0.87		0.00
Total non-accrual loans	$	36,868	100.00	%	0.22	%	$	43,925	100.00	%	0.29	%	$	43,887	100.00	%	0.24	%	$	27,746	100.00	%	0.16	%


	September 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Nonaccrual Loans		Percent of Segment's Total HFI Loans		Nonaccrual Loans		Percent of Segment's Total HFI Loans		Nonaccrual Loans		Percent of Segment's Total Loans		Nonaccrual Loans		Percent of Segment's Total Loans
	(dollars in thousands)								(dollars in thousands)
Arizona	$	11,987	0.33	%	$	4,520	0.14	%	$	5,332	0.15	%	$	8,312	0.23	%
Nevada	6,489		0.34		8,189		0.44		5,730		0.28		6,374		0.32
Southern California	8,344		0.39		8,140		0.42		3,768		0.17		8,564		0.40
Northern California	4,417		0.33		14,489		1.14		14,643		1.22		4,255		0.33
Public & Nonprofit Finance									3,307		0.21		—		—
Technology and Innovation	5,149		0.47		7,389		0.67		10,991		1.04		—		—
Other NBLS	482		0.01		51		0.00		116		0.00		241		0.00
Corporate & Other	—		—		1,147		28.09
Total non-accrual loans	$	36,868	0.22	%	$	43,925	0.29	%	$	43,887	0.24	%	$	27,746	0.16	%

Troubled Debt Restructured Loans

A TDR loan is a loan that is granted a concession, for reasons related to a borrower’s financial difficulties, that the lender 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 accrued interest, extensions, deferrals, renewals, and rewrites. A TDR loan is also considered impaired. Generally, a loan that is modified at an effective market rate of interest is no longer disclosed as a TDR in years subsequent to the restructuring if it is performing based on the terms specified by the restructuring agreement. However, such loans continue to be considered impaired.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the aggregate amount of loans classified as impaired was ~~$125.6~~$143.4 million and ~~$98.6~~$112.3 million, respectively. The total specific allowance for credit losses related to these loans was ~~$1.2~~$1.4 million and ~~$5.6~~$0.7 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The Company had ~~$42.6~~$52.5 million and $36.5 million in loans classified as accruing restructured loans at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018, respectively.

Impaired loans by segment at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were as follows:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in thousands)				(in thousands)
Arizona	$	37,156	$	10,468	$	32,217	$	34,899
Nevada	34,682		46,730		48,973		33,860
Southern California	8,664		8,465		4,080		8,576
Northern California	5,088		14,489		15,314		4,928
Public & Nonprofit Finance					3,307		—
Technology & Innovation	39,498		16,449		39,391		29,748
Other NBLs	481		51		116		241
Corporate & Other	—		1,902
Total impaired loans	$	125,569	$	98,554	$	143,398	$	112,252

The following tables present a breakdown of total impaired loans and the related specific reserves for the periods indicated:


	September 30, 2018												March 31, 2019
	Impaired Balance		Percent of Impaired Balance		Percent of Total HFI Loans		Reserve Balance		Percent of Reserve Balance		Percent of Total Allowance		Impaired Balance		Percent of Impaired Balance		Percent of Total Loans		Reserve Balance		Percent of Reserve Balance		Percent of Total Allowance
	(dollars in thousands)												(dollars in thousands)
Commercial and industrial	$	76,185	60.68	%	0.46	%	$	1,111	94.88	%	0.74	%	$	78,768	54.93	%	0.43	%	$	297	21.89	%	0.19	%
Commercial real estate	19,204		15.29		0.11		—		—		—		20,453		14.26		0.11		—		—		—
Construction and land development	9,128		7.27		0.05		—		—		—		28,615		19.96		0.16		810		59.69		0.52
Residential real estate	20,686		16.47		0.12		60		5.12		0.04		15,417		10.75		0.09		250		18.42		0.16
Consumer	366		0.29		—		—		—		—		145		0.10		—		—		—		—
Total impaired loans	$	125,569	100.00	%	0.75	%	$	1,171	100.00	%	0.78	%	$	143,398	100.00	%	0.79	%	$	1,357	100.00	%	0.88	%


	December 31, 2017												December 31, 2018
	Impaired Balance		Percent of Impaired Balance		Percent of Total HFI Loans		Reserve Balance		Percent of Reserve Balance		Percent of Total Allowance		Impaired Balance		Percent of Impaired Balance		Percent of Total Loans		Reserve Balance		Percent of Reserve Balance		Percent of Total Allowance
	(dollars in thousands)												(dollars in thousands)
Commercial and industrial	$	34,156	34.66	%	0.23	%	$	5,606	100.00	%	4.00	%	$	63,896	56.92	%	0.36	%	$	621	91.19	%	0.41	%
Commercial real estate	31,681		32.15		0.21		—		—		—		18,937		16.87		0.11		—		—		—
Construction and land development	15,426		15.65		0.10		—		—		—		9,403		8.38		0.05		—		—		—
Residential real estate	17,170		17.42		0.11		—		—		—		19,744		17.59		0.11		60		8.81		0.04
Consumer	121		0.12		0.00		—		—		—		272		0.24		0.00		—		—		—
Total impaired loans	$	98,554	100.00	%	0.65	%	$	5,606	100.00	%	4.00	%	$	112,252	100.00	%	0.63	%	$	681	100.00	%	0.45	%

Allowance for Credit Losses

The following table summarizes the activity in the Company's allowance for credit losses for the period indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(dollars in thousands)												(dollars in thousands)
Allowance for credit losses:
Balance at beginning of period	$	147,083		$	131,811		$	140,050		$	124,704		$	152,717		$	140,050
Provision charged to operating expense:
Commercial and industrial	5,652			7,192			13,022			11,752			(4,217		)	3,143
Commercial real estate	(1,250		)	(1,474		)	(905		)	2,327			2,585			1,247
Construction and land development	473			(619		)	1,726			(1,727		)	3,515			1,695
Residential real estate	832			(141		)	2,804			(258		)	1,825			(102		)
Consumer	293			42			353			156			(208		)	17
Total Provision	6,000			5,000			17,000			12,250			3,500			6,000
Recoveries of loans previously charged-off:
Commercial and industrial	(362		)	(619		)	(1,737		)	(2,705		)	(477		)	(459		)
Commercial real estate	(856		)	(1,781		)	(1,228		)	(2,719		)	(453		)	(126		)
Construction and land development	(24		)	(226		)	(1,420		)	(1,011		)	(55		)	(1,388		)
Residential real estate	(440		)	(108		)	(831		)	(1,659		)	(93		)	(250		)
Consumer	(11		)	(33		)	(35		)	(83		)	(5		)	(10		)
Total recoveries	(1,693		)	(2,767		)	(5,251		)	(8,177		)	(1,083		)	(2,233		)
Loans charged-off:
Commercial and industrial	4,610			2,921			10,904			6,166			2,124			3,517
Commercial real estate	—			175			233			1,994			—			—
Construction and land development	—			—			1			—			—			—
Residential real estate	46			—			1,038			447			188			107
Consumer	109			61			114			103			1			—
Total charged-off	4,765			3,157			12,290			8,710			2,313			3,624
Net charge-offs	3,072			390			7,039			533			1,230			1,391
Balance at end of period	$	150,011		$	136,421		$	150,011		$	136,421		$	154,987		$	144,659
Net charge-offs to average loans outstanding	0.08		%	0.01		%	0.06		%	0.01		%	0.03		%	0.04		%
Allowance for credit losses to gross loans	0.90			0.94									0.86			0.93
Allowance for credit losses to gross organic loans	0.97			1.06									0.90			1.02

The following table summarizes the allocation of the allowance for credit losses by loan type. However, the allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial and Industrial			Commercial Real Estate			Construction and Land Development			Residential Real Estate			Consumer			Total			Commercial and Industrial			Commercial Real Estate			Construction and Land Development			Residential Real Estate			Consumer			Total
	(dollars in thousands)																		(dollars in thousands)
September 30, 2018
March 31, 2019
Allowance for credit losses	$	86,648		$	31,585		$	22,656		$	8,075		$	1,047		$	150,011		$	77,254		$	37,867		$	26,083		$	13,006		$	777		$	154,987
Percent of total allowance for credit losses	57.8		%	21.1		%	15.0		%	5.4		%	0.7		%	100.0		%	49.9		%	24.4		%	16.8		%	8.4		%	0.5		%	100.0		%
Percent of loan type to total HFI loans	44.8			37.3			12.6			4.9			0.4			100.0
December 31, 2017
Percent of loan type to total loans																			42.6			36.4			12.6			8.1			0.3			100.0
December 31, 2018
Allowance for credit losses	$	82,527		$	31,648		$	19,599		$	5,500		$	776		$	140,050		$	83,118		$	34,829		$	22,513		$	11,276		$	981		$	152,717
Percent of total allowance for credit losses	58.9		%	22.6		%	14.0		%	3.9		%	0.6		%	100.0		%	54.4		%	22.8		%	14.8		%	7.4		%	0.6		%	100.0		%
Percent of loan type to total HFI loans	45.2			40.8			10.9			2.8			0.3			100.0
Percent of loan type to total loans																			43.8			36.9			12.1			6.8			0.4			100.0

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 1. Business” of the Company's Annual Report for the year ended December 31, ~~2017.~~2018. The following table presents information regarding potential and actual problem loans, consisting of loans graded Special Mention, Substandard, Doubtful, and Loss, but still performing, and excluding acquired loans:


	September 30, 2018							March 31, 2019
	Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total HFI Loan Balance		Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total Loans
	(dollars in thousands)							(dollars in thousands)
Commercial and industrial	135	$	133,555	60.86	%	0.80	%	94	$	77,909	40.27	%	0.43	%
Commercial real estate	44	73,415		33.46		0.44		50	108,166		55.92		0.60
Construction and land development	5	7,808		3.56		0.05		5	6,921		3.58		0.04
Residential real estate	4	4,363		1.99		0.03		2	412		0.21		0.00
Consumer	2	281		0.13		0.00		2	40		0.02		0.00
Total	190	$	219,422	100.00	%	1.32	%	153	$	193,448	100.00	%	1.07	%


	December 31, 2017							December 31, 2018
	Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total HFI Loan Balance		Number of Loans	Loan Balance		Percent of Loan Balance		Percent of Total Loans
	(dollars in thousands)							(dollars in thousands)
Commercial and industrial	166	$	127,015	51.63	%	0.84	%	107	$	125,585	62.37	%	0.71	%
Commercial real estate	48	90,653		36.85		0.60		42	71,116		35.32		0.40
Construction and land development	5	18,471		7.51		0.12		3	4,040		2.01		0.02
Residential real estate	3	8,971		3.65		0.06		1	527		0.26		0.00
Consumer	10	880		0.36		0.01		2	75		0.04		0.00
Total	232	$	245,990	100.00	%	1.63	%	155	$	201,343	100.00	%	1.13	%

Other Assets Acquired Through Foreclosure

The following table represents the changes in other assets acquired through foreclosure:


	Three Months Ended September 30,									Three Months Ended March 31,
	2018									2019
	Gross Balance			Valuation Allowance			Net Balance			Gross Balance			Valuation Allowance			Net Balance
	(in thousands)									(in thousands)
Balance, beginning of period	$	31,145		$	(3,604	)	$	27,541		$	19,979		$	(2,055	)	$	17,924
Proceeds from sale of other real estate owned and repossessed assets, net	(1,093		)	401			(692		)
Charitable contribution (1)	(6,895		)	—			(6,895		)
Charitable contribution										(232		)	114			(118		)
Valuation adjustments, net	—			—			—			—			(99		)	(99		)
Gains (losses), net (2)	74			—			74
Balance, end of period	$	23,231		$	(3,203	)	$	20,028		$	19,747		$	(2,040	)	$	17,707

	2017									2018
Balance, beginning of period	$	35,037		$	(4,049	)	$	30,988		$	32,552		$	(4,012	)	$	28,540
Transfers to other assets acquired through foreclosure, net	430			—			430			5,744			—			5,744
Proceeds from sale of other real estate owned and repossessed assets, net	(2,491		)	330			(2,161		)	(5,294		)	9			(5,285		)
Valuation adjustments, net	—			(343		)	(343		)	—			(47		)	(47		)
Gains (losses), net (2)	78			—			78
Gains (losses), net (1)										1,242			—			1,242
Balance, end of period	$	33,054		$	(4,062	)	$	28,992		$	34,244		$	(4,050	)	$	30,194


(1)	~~Represents a contribution of OREO property to the Company's charitable foundation. See Note 16. Related Party Transactions for additional information.~~


~~(2)~~	There were nozero and $1.0 millioninnet gains related to initial transfers to other assets during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.


~~(3)~~	~~There were $1.0 million and $0.1 million in net gains related to initial transfers to other assets during the nine months ended September 30, 2018 and 2017, respectively.~~

Other assets acquired through foreclosure consist primarily of properties acquired as a result of, or in-lieu-of, foreclosure. OREO and other repossessed property are reported at the lower of carrying value or fair value less estimated costs to sell the property. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense. The Company has ~~$20.0~~$17.7 million, ~~$28.5~~$17.9 million, ~~$29.0~~and $30.2 million of such assets at ~~September 30, 2018,~~March 31, 2019, December 31, ~~2017,~~2018, and ~~September 30, 2017,~~March 31, 2018, respectively.

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 of $289.9 million and intangible assets totaling ~~$9.7~~$8.9 million at ~~September 30, 2018,~~March 31, 2019, which have been allocated to the Nevada, Northern California, Technology & Innovation, and HFF operating segments.

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 ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ there were no events or circumstances that indicated an interim impairment test of goodwill or other intangible assets was necessary.

Deferred Tax Assets

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company had noa $2.4 million deferred tax valuation ~~allowance.~~allowance related to net capital loss carryovers.

Deposits

Deposits are the primary source for funding the Company's asset growth. Total deposits increased to ~~$18.91~~$20.21 billion at ~~September 30, 2018,~~March 31, 2019, from ~~$16.97~~$19.18 billion at December 31, ~~2017,~~2018, an increase of ~~$1.94~~$1.03 billion, or ~~11.4%~~5.4%. The increase in deposits is attributable to an increase across ~~all~~most deposit types, with the largest increases in savings and money market deposits of ~~$728.1~~$467.6 million, time deposits of $396.3 million, and non-interest bearing deposits of ~~$580.8~~$223.2 million from December 31, ~~2017.~~2018, partially offset by a decrease in interest-bearing deposits of $55.9 million.

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company also has ~~$395.0~~$710.3 million and ~~$67.3~~$718.2 million, respectively, of wholesale brokered deposits. In addition, non-interest bearing deposits for which the Company provides account holders with earnings credits totaled ~~$2.10~~$2.79 billion and ~~$1.85~~$2.29 billion at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The Company incurred ~~$4.6~~$5.5 million and ~~$2.6~~$2.7 million in deposit related costs during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, and $11.2 million and $6.0 million in deposit related costs during the nine months ended September 30, 2018 and 2017,~~ respectively.

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

Three Months Ended September 30,
2018 2017
Average Balance Rate Average Balance Rate
(dollars in thousands)
Interest-bearing transaction accounts $ 1,938,180
0.67 % $ 1,476,506
0.29 %
Savings and money market accounts 6,580,274
0.91
6,282,405
0.45
Time certificates of deposit 1,863,747
1.53
1,585,690
0.82
Total interest-bearing deposits 10,382,201
0.97
9,344,601
0.49
Non-interest-bearing demand deposits 7,910,305
—
7,174,532
—
Total deposits $ 18,292,506
0.55 % $ 16,519,133
0.28 %


	Nine Months Ended September 30,								Three Months Ended March 31,
	2018				2017				2019				2018
	Average Balance		Rate		Average Balance		Rate		Average Balance		Rate		Average Balance		Rate
	(dollars in thousands)								(dollars in thousands)
Interest-bearing transaction accounts	$	1,806,921	0.52	%	$	1,468,163	0.26	%	$	2,495,848	0.91	%	$	1,654,720	0.34	%
Savings and money market accounts	6,312,371		0.76		6,169,860		0.39		7,446,639		1.20		6,226,611		0.58
Time certificates of deposit	1,720,537		1.25		1,549,212		0.72		1,817,787		1.83		1,579,940		1.00
Total interest-bearing deposits	9,839,829		0.80		9,187,235		0.43		11,760,274		1.23		9,461,271		0.61
Non-interest-bearing demand deposits	7,679,090		—		6,548,351		—		7,555,584		—		7,510,614		—
Total deposits	$	17,518,919	0.45	%	$	15,735,586	0.25	%	$	19,315,858	0.75	%	$	16,971,885	0.34	%

Other 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 ~~September 30, 2018,~~March 31, 2019, total short-term borrowed funds consist of customer repurchase agreements of ~~$21.0~~$15.1 million. At December 31, ~~2017,~~2018, total short-term borrowed funds consisted of federal funds purchased of $256.0 million, FHLB overnight advances of $235.0 million, and customer repurchase agreements of ~~$26.0 million and FHLB advances of $390.0~~$22.4 million.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company did not have any borrowings classified as long-term.

Qualifying Debt

Qualifying debt consists of subordinated debt and junior subordinated debt, inclusive of issuance costs and fair market value adjustments. At ~~September 30, 2018,~~March 31, 2019, the carrying value of qualifying debt was ~~$359.1~~$374.0 million, compared to ~~$376.9~~$360.5 million at December 31, ~~2017.~~2018.

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 ~~12.~~13. 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.

The capital framework under Basel III became effective for the Company on January 1, 2015. Under the Basel III final rules, minimum requirements have increased for both the quantity and quality of capital held by the Company. The capital conservation buffer was established, and began being phased in on January 1, 2016 at 0.625% of risk-weighted assets and ~~will increase~~increased each subsequent year by an additional 0.625% until reaching its final level of 2.5% on January 1, 2019. Strict eligibility requirements for regulatory capital instruments have been implemented under the final rules and the final rules also revise the definitions and calculations of Tier 1 capital, total capital, and risk-weighted assets.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the 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 thousands)																(dollars in thousands)
September 30, 2018
March 31, 2019
WAL	$	2,795,125	$	2,338,346	$	20,690,767	$	21,286,259	13.5	%	11.3	%	11.0	%	10.9	%	$	2,980,809	$	2,511,695	$	22,610,882	$	22,867,069	13.2	%	11.1	%	11.0	%	10.7	%
WAB	2,600,646		2,293,018		20,728,621		21,316,035		12.5		11.1		10.8		11.1		2,708,654		2,394,443		22,666,493		22,901,348		12.0		10.6		10.5		10.6
Well-capitalized ratios									10.0		8.0		5.0		6.5										10.0		8.0		5.0		6.5
Minimum capital ratios									8.0		6.0		4.0		4.5										8.0		6.0		4.0		4.5

December 31, 2017
December 31, 2018
WAL	$	2,460,988	$	2,013,744	$	18,569,608	$	19,624,517	13.3	%	10.8	%	10.3	%	10.4	%	$	2,897,356	$	2,431,320	$	21,983,976	$	22,204,799	13.2	%	11.1	%	10.9	%	10.7	%
WAB	2,299,919		2,003,745		18,664,200		19,541,990		12.3		10.7		10.3		10.7		2,628,650		2,317,745		22,040,765		22,209,700		11.9		1.5		10.4		10.5
Well-capitalized ratios									10.0		8.0		5.0		6.5										10.0		8.0		5.0		6.5
Minimum capital ratios									8.0		6.0		4.0		4.5										8.0		6.0		4.0		4.5

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, ~~2017,~~2018, 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.

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:

September 30, 2018
Available
Balance Outstanding Balance
(in millions)
Unsecured fed funds credit lines at correspondent banks $ 261.0
$ —
Other lines with correspondent banks:
Secured other lines with correspondent banks —
—
Unsecured other lines with correspondent banks 45.0
—
Total other lines with correspondent banks $ 306.0
$ —



	March 31, 2019
	Available Balance		Outstanding Balance
	(in millions)
Unsecured fed funds credit lines at correspondent banks
Committed amounts	$	261.0	$	—
Uncommitted amounts	694.0		—
Total other lines with correspondent banks	$	955.0	$	—

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 ~~September 30, 2018~~March 31, 2019 are presented in the following table:


	September 30, 2018		March 31, 2019
	(in millions)		(in millions)
FHLB:
Borrowing capacity	$	2,957.8	$	3,150.1
Outstanding borrowings	—		—
Letters of credit	120.5		181.0
Total available credit	$	2,837.3	$	2,969.1

FRB:
Borrowing capacity	$	1,400.6	$	1,319.8
Outstanding borrowings	—		—
Total available credit	$	1,400.6	$	1,319.8

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 ~~September 30, 2018,~~March 31, 2019, there was ~~$3.10~~$3.11 billion in liquid assets, comprised of ~~$700.6~~$770.2 million in cash, cash equivalents, and federal funds sold and ~~$2.40~~$2.34 billion in

unpledged marketable securities. At December 31, ~~2017,~~2018, the Company maintained ~~$2.89~~$3.03 billion in liquid assets, comprised of ~~$416.8~~$498.6 million of cash, cash equivalents, and money market investments, and ~~$2.48~~$2.53 billion of unpledged marketable securities.

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, 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 ~~September 30, 2018,~~March 31, 2019, 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 ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ net cash provided by operating activities was ~~$396.3~~$151.3 million and ~~$271.1~~$88.3 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 net increase in loans for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 was $385.5 million and ~~2017 was $1.59 billion and $1.18 billion,~~$367.4 million, respectively. There was a net decrease in investment securities for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 of ~~$17.6~~$63.4 million ~~compared to a net increase of $965.3~~and $29.7 million, ~~for the nine months ended September 30, 2017.~~respectively.

Net cash provided by financing activities has been impacted significantly by increased deposit levels. During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ net deposits increased ~~$1.94~~$1.03 billion and ~~$2.35 billion,~~$382.0 million, 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 $110.0 million, respectively, through one participating financial institution or, a combined total of $150.0 million per individual customer, with the entire amount being covered by FDIC insurance. As of ~~September 30, 2018,~~March 31, 2019, the Company has ~~$335.5~~$323.6 million of CDARS and ~~$689.0~~$660.9 million of ICS deposits.

As of ~~September 30, 2018,~~March 31, 2019, the Company has ~~$395.0~~$710.3 million 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 ~~September 30, 2018,~~March 31, 2019, WAB paid dividends to the Parent of $40.0 million. Subsequent to March 31, 2019, WAB paid dividends to the Parent of $30.0 million. ~~During the nine months ended September 30, 2018, the Parent contributed to $1.1 million to WAB and WAB and LVSP paid dividends to the~~

~~Parent of $50.0 million and $2.1 million, respectively. Subsequent to September 30, 2018, WAB paid dividends to the Parent of $30.0 million.~~

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.

~~Supervision and Regulation~~

~~Recent Regulatory Development~~

On May 24, 2018, the President signed into law the EGRRCPA which, among other things, amended certain provisions of the Dodd-Frank Act. The EGRRCPA provides limited regulatory relief to certain financial institutions while preserving the existing framework under which U.S. financial institutions are regulated. Together with the interagency statement regarding the impact of the EGRRCPA released by the FRB, the FDIC and the OCC on July 6, 2018, the EGRRCPA relieves the Company from the requirement to conduct annual company-run stress testing for the Company and the Bank. In addition to amending the Dodd Frank Act, the EGRRCPA also includes certain additional banking-related provisions, consumer protection provisions and securities law-related provisions. The Company expects to continue to evaluate the potential impact of the Act as it is further implemented by the regulators.


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 the 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 the 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 ~~September 30, 2018,~~March 31, 2019, the Company uses 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 the 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 more slowly, usually changing less than the change in market rates and at the Company's discretion.

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.

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 over a twelve-month period. At ~~September 30, 2018,~~March 31, 2019, the Company's net interest income exposure for the next twelve months related to these hypothetical changes in market interest rates was within the Company's current guidelines for all up-rate scenarios. The Company’s net interest income exposure in the down-rate scenario was not within the Company’s guideline of (5.0)%. The breach is the result of the increase in short-term interest rates over the past two years, resulting from fed funds rate increases. These rate increases have improved yields on floating-rate assets, while the Company’s deposit costs have not increased materially; thus in a current down-rate scenario, the Company will not see the full impact of a rate decrease on its deposit costs while it will see that impact on floating-rate assets. The Board and ALCO have accepted the breach and believe that as deposit costs increase over time, interest expense will be more sensitive in a down-rate scenario, dampening the Company’s overall net interest income sensitivity.

Sensitivity of Net Interest Income


	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			Up 400
	(in thousands)																	(in thousands)
Interest Income	$	1,047,762		$	1,151,814	$	1,266,796		$	1,384,087		$	1,502,000		$	1,620,583		$	1,095,269		$	1,209,475	$	1,334,788		$	1,458,891		$	1,583,245		$	1,708,597
Interest Expense	99,317			141,292		186,936			232,574			278,205			323,830			143,884			191,537		243,275			295,011			346,741			398,465
Net Interest Income	$	948,445		$	1,010,522	$	1,079,860		$	1,151,513		$	1,223,795		$	1,296,753		$	951,385		$	1,017,938	$	1,091,513		$	1,163,880		$	1,236,504		$	1,310,132
% Change	(6.1		)%			6.9		%	14.0		%	21.1		%	28.3		%	(6.5		)%			7.2		%	14.3		%	21.5		%	28.7		%

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 ~~September 30, 2018,~~March 31, 2019, 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 ~~September 30, 2018:~~March 31, 2019:

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			Up 400
	(in thousands)																	(in thousands)
Assets	$	22,493,485		$	22,024,201	$	21,533,514		$	21,093,827		$	20,687,468		$	20,310,242		$	24,364,198		$	23,897,897	$	23,399,623		$	22,921,308		$	22,486,388		$	22,063,822
Liabilities	18,040,521			17,605,935		17,259,400			16,961,757			16,701,599			16,470,932			19,585,436			19,098,672		18,708,135			18,370,937			18,076,868			17,819,255
Net Present Value	$	4,452,964		$	4,418,266	$	4,274,114		$	4,132,070		$	3,985,869		$	3,839,310		$	4,778,762		$	4,799,225	$	4,691,488		$	4,550,371		$	4,409,520		$	4,244,567
% Change	0.8		%			(3.3		)%	(6.5		)%	(9.8		)%	(13.1		)%	(0.4		)%			(2.2		)%	(5.2		)%	(8.1		)%	(11.6		)%

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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Outstanding Derivatives Positions


September 30, 2018					December 31, 2017
March 31, 2019											March 31, 2019					December 31, 2018
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 thousands)
$	1,021,105	$	29,995	16.0	$	1,115,736	$	(51,629	)	16.0	1,005,954	$	(47,141	)	15.7	$	1,017,773	$	(42,477	)	15.8


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 ~~September 30, 2018,~~March 31, 2019, 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.


Item 1A.	Risk Factors.

There have not been any material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.


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:

(a) (b) ( c) (d)
Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (2)
7/1/2018 through 7/31/2018 16,725
$ 57.74
— —
8/1/2018 through 8/31/2018 173
57.12
— —
9/1/2018 through 9/30/2018 1,504
58.67
— —
Total 18,402
$ 57.81
— —



	(a)	(b)		( c)	(d)
	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
1/1/2019 through 1/31/2019	99,757	$	45.15	—	214,339,618
2/1/2019 through 2/28/2019	—	—		—	214,339,618
3/1/2019 through 3/31/2019	1,014,165	40.74		940,915	176,418,392
Total	1,113,922	$	41.13	940,915	176,418,392


(1)	~~All shares~~Shares purchased during the period outside of the publicly announced repurchase program 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~~On December 12, 2018, the Company ~~has not~~ announced that it had adopted a common stock repurchase ~~plan relating~~program, pursuant to which the Company is authorized to repurchase up to $250 million of its shares of common stock. The repurchase program will expire on December 31, 2019.


Item 5.	Other Information

Not applicable.


Item 6.	Exhibits

EXHIBITS



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.

3.2		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		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).

~~3.2~~3.4		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).

~~3.3~~10.1*		~~Certificate of Incorporation, as filed with the Delaware Secretary of State on May 29, 2014 (incorporated~~Employment Letter Agreement, dated February 1, 2018, by ~~reference to Exhibit 3.3 of~~and between Barbara J. Kennedy and Western ~~Alliance’s Form 8-K filed with the SEC on June 3, 2014).~~

~~3.4~~		Certificate of Amendment of Certificate of Incorporation of Western Alliance, effective as of May 19, 2015 (incorporated by reference to Exhibit 3.1 of Western Alliance's Form 8-K filed with the SEC on May 22, 2015).

~~3.5~~		~~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).~~Alliance. ±

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.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.


**	Furnished herewith.


±	Management contract or compensatory arrangement.

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

~~October~~April 30, ~~2018~~2019	By:	/s/ Kenneth A. Vecchione
		Kenneth A. Vecchione
		Chief Executive Officer

~~October~~April 30, ~~2018~~2019	By:	/s/ Dale Gibbons
		Dale Gibbons
		~~Executive~~ Vice ~~President and~~Chairman
		Chief Financial Officer

~~October~~April 30, ~~2018~~2019	By:	/s/ J. Kelly Ardrey Jr.
		J. Kelly Ardrey Jr.
		Senior Vice President and
		Chief Accounting Officer

9787



		Page
PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	4
	Consolidated Income Statements	5
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6559
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9383
Item 4.	Controls and Procedures	9585

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	9585
Item 1A.	Risk Factors	9585
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 5.	Other Information	9585
Item 6.	Exhibits	9686

SIGNATURES		9787



	Three Months Ended September 30,						Nine Months Ended September 30,
Income Statement Classification	2018			2017			2018			2017
	(in thousands)
(Loss) gain on sales of investment securities, net	$	(7,232	)	$	319		$	(7,232	)	$	907
Income tax expense (benefit)	1,778			(122		)	1,778			(346		)
Net of tax	$	(5,454	)	$	197		$	(5,454	)	$	561



	Changes in Fair Values for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Unrealized Gain/(Loss) on Assets and Liabilities Measured at Fair Value, Net			Interest Income on Securities		Interest Expense on Junior Subordinated Debt			Total Changes Included in Current-Period Earnings			Changes Included in OCI
	(in thousands)
Three Months Ended September 30, 2018
Junior subordinated debt	$	(2,689	)	$	—	$	1,056		$	1,056		$	(2,028	)
Nine Months Ended September 30, 2018
Junior subordinated debt	$	247		$	—	$	2,979		$	2,979		$	186
Three Months Ended September 30, 2017
Junior subordinated debt	$	1,035		$	—	$	(835	)	$	(835	)	$	641
Nine Months Ended September 30, 2017
Trading securities	$	—		$	9	$	—		$	9		$	—
Junior subordinated debt	(4,327		)	—		(2,376		)	(2,376		)	(2,677		)
Total	$	(4,327	)	$	9	$	(2,376	)	$	(2,367	)	$	(2,677	)



	(a)	(b)		( c)	(d)
	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (2)
7/1/2018 through 7/31/2018	16,725	$	57.74	—	—
8/1/2018 through 8/31/2018	173	57.12		—	—
9/1/2018 through 9/30/2018	1,504	58.67		—	—
Total	18,402	$	57.81	—	—