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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


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

For the transition period from__________ to __________

Commission file number: 001-32550

WESTERN ALLIANCE BANCORPORATION

(Exact name of registrant as specified in its charter)


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

One E. Washington Street, Suite 1400

Phoenix

Arizona

85004

(Address of principal executive offices)

(Zip Code)

(602) 389-3500

(Registrant’s telephone number, including area code)

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.0001 Par Value

WAL

New York Stock Exchange

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

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

WAL PrA

New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of ~~October 27, 2022,~~May 1, 2023, Western Alliance Bancorporation had ~~108,912,097~~109,501,483 shares of common stock outstanding.

Table of Contents

INDEX

Table of Contents

PART I

GLOSSARY OF ENTITIES AND TERMS

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


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

Table of Contents

Item 1.Financial Statements

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)

		(in millions, except shares and per share amounts)					(in millions, except shares and per share amounts)
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	260	$	166	Cash and due from banks	$	229	$	259

Interest-bearing deposits in other financial institutions	Interest-bearing deposits in other financial institutions	1,350		350		Interest-bearing deposits in other financial institutions	3,410		784

Cash, cash equivalents and restricted cash		1,610		516
Cash and cash equivalents						Cash and cash equivalents	3,639		1,043

Investment securities - AFS, at fair value; amortized cost of $7,944 at September 30, 2022 and $6,167 at December 31, 2021		6,960		6,189
Investment securities - HTM, at amortized cost and net of allowance for credit losses of $4 and $5 (fair value of $1,084 and $1,146) at September 30, 2022 and December 31, 2021, respectively		1,266		1,102
Investment securities - AFS, at fair value; amortized cost of $8,434 at March 31, 2023 and $7,973 at December 31, 2022 (ACL of $2 and $0 at March 31, 2023 and December 31, 2022, respectively)						Investment securities - AFS, at fair value; amortized cost of $8,434 at March 31, 2023 and $7,973 at December 31, 2022 (ACL of $2 and $0 at March 31, 2023 and December 31, 2022, respectively)	7,645		7,092
Investment securities - HTM, at amortized cost and net of allowance for credit losses of $6 and $5 (fair value of $1,185 and $1,112) at March 31, 2023 and December 31, 2022, respectively						Investment securities - HTM, at amortized cost and net of allowance for credit losses of $6 and $5 (fair value of $1,185 and $1,112) at March 31, 2023 and December 31, 2022, respectively	1,319		1,284

Investment securities - equity	Investment securities - equity	165		159		Investment securities - equity	141		160
Investments in restricted stock, at cost	Investments in restricted stock, at cost	212		92		Investments in restricted stock, at cost	388		224
Loans HFS	Loans HFS	2,204		5,635		Loans HFS	7,022		1,184
Loans HFI, net of deferred loan fees and costs	Loans HFI, net of deferred loan fees and costs	52,201		39,075		Loans HFI, net of deferred loan fees and costs	46,435		51,862
Less: allowance for credit losses	Less: allowance for credit losses	(304)		(252)		Less: allowance for credit losses	(305)		(310)
Net loans held for investment	Net loans held for investment	51,897		38,823		Net loans held for investment	46,130		51,552
Mortgage servicing rights	Mortgage servicing rights	1,044		698		Mortgage servicing rights	910		1,148
Premises and equipment, net	Premises and equipment, net	237		182		Premises and equipment, net	293		276
Operating lease right of use asset	Operating lease right of use asset	131		133		Operating lease right of use asset	157		163
Bank owned life insurance	Bank owned life insurance	181		180		Bank owned life insurance	183		182
Goodwill and intangible assets, net	Goodwill and intangible assets, net	682		635		Goodwill and intangible assets, net	677		680
Deferred tax assets, net	Deferred tax assets, net	302		21		Deferred tax assets, net	289		311
Investments in LIHTC and renewable energy	Investments in LIHTC and renewable energy	727		631		Investments in LIHTC and renewable energy	611		624

Other assets	Other assets	1,547		987		Other assets	1,643		1,811
Total assets	Total assets	$	69,165	$	55,983	Total assets	$	71,047	$	67,734
Liabilities:	Liabilities:					Liabilities:
Deposits:	Deposits:					Deposits:
Non-interest-bearing demand	Non-interest-bearing demand	$	24,926	$	21,353	Non-interest-bearing demand	$	16,465	$	19,691
Interest-bearing	Interest-bearing	30,663		26,259		Interest-bearing	31,122		33,953
Total deposits	Total deposits	55,589		47,612		Total deposits	47,587		53,644

Other borrowings	Other borrowings	6,319		1,502		Other borrowings	15,853		6,299
Qualifying debt	Qualifying debt	889		896		Qualifying debt	895		893
Operating lease liability	Operating lease liability	149		143		Operating lease liability	184		185
Other liabilities	Other liabilities	1,198		867		Other liabilities	1,007		1,357
Total liabilities	Total liabilities	64,144		51,020		Total liabilities	65,526		62,378
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)					Commitments and contingencies (Note 14)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at September 30, 2022 and December 31, 2021)		295		295
Common stock (par value $0.0001; 200,000,000 authorized; 111,466,865 shares issued at September 30, 2022 and 108,981,341 at December 31, 2021) and additional paid in capital		2,154		1,966
Treasury stock, at cost (2,549,229 shares at September 30, 2022 and 2,350,021 shares at December 31, 2021)		(105)		(87)
Accumulated other comprehensive (loss) income		(736)		16
Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at March 31, 2023 and December 31, 2022)						Preferred stock (par value $0.0001 and liquidation value per share of $25; 20,000,000 authorized; 12,000,000 issued and outstanding at March 31, 2023 and December 31, 2022)	295		295
Common stock (par value $0.0001; 200,000,000 authorized; 112,209,478 shares issued at March 31, 2023 and 111,465,292 at December 31, 2022) and additional paid in capital						Common stock (par value $0.0001; 200,000,000 authorized; 112,209,478 shares issued at March 31, 2023 and 111,465,292 at December 31, 2022) and additional paid in capital	2,170		2,163
Treasury stock, at cost (2,694,170 shares at March 31, 2023 and 2,550,766 shares at December 31, 2022)						Treasury stock, at cost (2,694,170 shares at March 31, 2023 and 2,550,766 shares at December 31, 2022)	(116)		(105)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(592)		(661)
Retained earnings	Retained earnings	3,413		2,773		Retained earnings	3,764		3,664
Total stockholders’ equity	Total stockholders’ equity	5,021		4,963		Total stockholders’ equity	5,521		5,356
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	69,165	$	55,983	Total liabilities and stockholders’ equity	$	71,047	$	67,734

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in millions, except per share amounts)									(in millions, except per share amounts)
Interest income:	Interest income:									Interest income:
Loans, including fees	Loans, including fees	$	657.0	$	398.0	$	1,608.3	$	1,050.2	Loans, including fees	$	832.7	$	434.7
Investment securities	Investment securities	74.0		42.0		178.3		116.6		Investment securities	94.3		46.7
Dividends and other	Dividends and other	8.4		2.8		16.9		8.6		Dividends and other	41.9		3.1

Total interest income	Total interest income	739.4		442.8		1,803.5		1,175.4		Total interest income	968.9		484.5
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	77.6		12.3		118.8		34.7		Deposits	231.6		14.1
Qualifying debt	Qualifying debt	8.9		10.8		25.9		23.9		Qualifying debt	9.3		8.4
Other borrowings	Other borrowings	50.8		9.3		82.2		18.6		Other borrowings	118.1		12.5
Total interest expense	Total interest expense	137.3		32.4		226.9		77.2		Total interest expense	359.0		35.0
Net interest income	Net interest income	602.1		410.4		1,576.6		1,098.2		Net interest income	609.9		449.5
Provision for (recovery of) credit losses		28.5		12.3		65.0		(34.6)
Net interest income after provision for (recovery of) credit losses		573.6		398.1		1,511.6		1,132.8
Provision for credit losses										Provision for credit losses	19.4		9.0
Net interest income after provision for credit losses										Net interest income after provision for credit losses	590.5		440.5
Non-interest income:	Non-interest income:									Non-interest income:
Net loan servicing revenue (expense)		23.0		2.2		109.5		(18.6)
Net loan servicing revenue										Net loan servicing revenue	41.9		41.1
Net gain on loan origination and sale activities	Net gain on loan origination and sale activities	14.5		121.0		78.6		253.0		Net gain on loan origination and sale activities	31.4		36.9
Service charges and fees	Service charges and fees	6.5		7.1		21.1		21.2		Service charges and fees	9.5		7.0
Commercial banking related income	Commercial banking related income	5.1		4.6		16.0		12.5		Commercial banking related income	6.2		5.1
Gain on recovery from credit guarantees										Gain on recovery from credit guarantees	3.3		2.3
Income from equity investments	Income from equity investments	4.3		2.5		13.6		16.9		Income from equity investments	1.4		4.1
Gain on recovery from credit guarantees		0.4		—		11.7		—
Gain on sales of investment securities		—		—		6.7		0.1
Fair value loss on assets measured at fair value, net		(2.8)		(2.2)		(19.4)		(0.5)
(Loss) gain on sales of investment securities										(Loss) gain on sales of investment securities	(12.5)		6.9
Fair value loss adjustments, net										Fair value loss adjustments, net	(147.8)		(6.6)
Other income	Other income	10.8		2.9		25.3		9.2		Other income	8.6		9.5
Total non-interest income	Total non-interest income	61.8		138.1		263.1		293.8		Total non-interest income	(58.0)		106.3
Non-interest expense:	Non-interest expense:									Non-interest expense:
Salaries and employee benefits	Salaries and employee benefits	136.5		133.5		413.8		346.1		Salaries and employee benefits	148.9		138.3
Deposit costs	Deposit costs	56.2		7.3		83.6		20.7		Deposit costs	86.9		9.3
Data processing										Data processing	26.4		17.6
Legal, professional, and directors' fees	Legal, professional, and directors' fees	24.8		13.7		73.9		37.8		Legal, professional, and directors' fees	23.1		24.0
Data processing		21.8		15.4		59.1		40.3
Loan servicing expenses		15.2		15.6		40.7		37.9
Occupancy	Occupancy	13.9		12.4		39.7		31.4		Occupancy	16.5		12.8
Insurance	Insurance	8.1		6.2		22.2		15.9		Insurance	15.7		7.2
Loan servicing expenses										Loan servicing expenses	13.8		10.8
Business development and marketing										Business development and marketing	5.2		4.4
Loan acquisition and origination expenses	Loan acquisition and origination expenses	5.8		9.7		18.7		20.2		Loan acquisition and origination expenses	4.4		6.5
Business development and marketing		5.0		2.8		14.8		7.4
Net gain on sales and valuations of repossessed and other assets		(0.2)		(1.3)		(0.4)		(3.1)
Acquisition and restructure expenses		—		2.4		0.4		18.5
Gain on extinguishment of debt										Gain on extinguishment of debt	(12.7)		—

Other expense	Other expense	18.7		16.1		56.8		40.5		Other expense	19.7		17.7
Total non-interest expense	Total non-interest expense	305.8		233.8		823.3		613.6		Total non-interest expense	347.9		248.6
Income before provision for income taxes	Income before provision for income taxes	329.6		302.4		951.4		813.0		Income before provision for income taxes	184.6		298.2
Income tax expense	Income tax expense	65.6		65.5		187.1		159.8		Income tax expense	42.4		58.1
Net income	Net income	264.0		236.9		764.3		653.2		Net income	142.2		240.1
Dividends on preferred stock	Dividends on preferred stock	3.2		—		9.6		—		Dividends on preferred stock	3.2		3.2

Net income available to common stockholders	Net income available to common stockholders	$	260.8	$	236.9	$	754.7	$	653.2	Net income available to common stockholders	$	139.0	$	236.9

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	2.43	$	2.29	$	7.06	$	6.39	Basic	$	1.29	$	2.23
Diluted	Diluted	2.42		2.28		7.03		6.35		Diluted	1.28		2.22
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:									Weighted average number of common shares outstanding:
Basic	Basic	107.5		103.3		107.0		102.3		Basic	108.1		106.0
Diluted	Diluted	107.9		103.9		107.4		102.9		Diluted	108.3		106.6
Dividends declared per common share	Dividends declared per common share	$	0.36	$	0.35	$	1.06	$	0.85	Dividends declared per common share	$	0.36	$	0.35

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(in millions)
Net income $ 264.0 $ 236.9 $ 764.3 $ 653.2
Other comprehensive income (loss), net:
Unrealized loss on AFS securities, net of tax effect of $74.2, $7.1, $248.2, and $16.0 respectively (219.9) (21.8) (752.3) (49.0)
Unrealized gain (loss) on junior subordinated debt, net of tax effect of $(0.5), $0.1, $(1.9), and $0.2 respectively 1.6 (0.1) 5.8 (0.6)
Realized gain on sale of AFS securities included in income, net of tax effect of $0.0, $0.0, $1.8, and $0.0 respectively — — (5.4) (0.1)
Net other comprehensive loss (218.3) (21.9) (751.9) (49.7)
Comprehensive income $ 45.7 $ 215.0 $ 12.4 $ 603.5


	Three Months Ended March 31,
	2023		2022
	(in millions)
Net income	$	142.2	$	240.1
Other comprehensive income (loss), net:
Unrealized gain (loss) on AFS securities, net of tax effect of $(20.7) and $80.8, respectively	60.1		(247.9)

Unrealized (loss) gain on junior subordinated debt, net of tax effect of $0.4 and $(0.7), respectively	(1.1)		2.2
Realized loss (gain) on sale of AFS securities included in income, net of tax effect of $(3.2) and $1.8, respectively	9.3		(5.1)
Realized loss on impairment of AFS securities included in income, net of tax effect of $(0.4) and $—, respectively	1.2		—
Net other comprehensive income (loss)	69.5		(250.8)
Comprehensive income (loss)	$	211.7	$	(10.7)

See accompanying Notes to Unaudited Consolidated Financial Statements.

Table of Contents

WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30,
Preferred Stock Common Stock Additional Paid in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity
Shares Amount Shares Amount
(in millions)
Balance, June 30, 2021 — $ — 104.2 $ — $ 1,687.6 $ (84.2) $ 64.5 $ 2,366.6 $ 4,034.5
Net income — — — — — — — 236.9 236.9
Restricted stock, performance stock units, and other grants, net — — — — 8.2 — — — 8.2
Restricted stock surrendered (1) — — — — — (1.7) — — (1.7)
Preferred stock issuance, net 12.0 294.5 — — — — — — 294.5
Dividends paid to common stockholders — — — — — — — (36.5) (36.5)
Other comprehensive loss, net — — — — — — (21.9) — (21.9)
Balance, September 30, 2021 12.0 $ 294.5 104.2 $ — $ 1,695.8 $ (85.9) $ 42.6 $ 2,567.0 $ 4,514.0
Balance, June 30, 2022 12.0 $ 294.5 108.3 $ — $ 2,094.8 $ (104.3) $ (517.9) $ 3,191.7 $ 4,958.8
Net income — — — — — — — 264.0 264.0
Restricted stock, performance stock units, and other grants, net — — — — 9.4 — — — 9.4
Restricted stock surrendered (1) — — — — — (0.9) — — (0.9)
Common stock issuance, net — — 0.6 — 50.0 — — — 50.0
Dividends paid to preferred stockholders — — — — — — — (3.2) (3.2)
Dividends paid to common stockholders — — — — — — — (39.0) (39.0)
Other comprehensive loss, net — — — — — — (218.3) — (218.3)
Balance, September 30, 2022 12.0 $ 294.5 108.9 $ — $ 2,154.2 $ (105.2) $ (736.2) $ 3,413.5 $ 5,020.8

~~Table of Contents~~


		Nine Months Ended September 30,																							Three Months Ended March 31,
		Preferred Stock			Common Stock			Additional Paid in Capital				Treasury Stock		Accumulated Other Comprehensive Income (Loss)			Retained Earnings				Total Stockholders’ Equity				Preferred Stock						Common Stock			Additional Paid in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount		Shares	Amount										Shares								Amount			Shares			Amount
		(in millions)																							(in millions)
Balance, December 31, 2020		—	$	—	100.8	$	—			$	1,390.9			$	(71.1)				$	92.3			$	2,001.4		$	3,413.5
Net income		—	—		—	—		—				—		—			653.2				653.2
Restricted stock, performance stock units, and other grants, net		—	—		0.6	—		25.9				—		—			—				25.9
Restricted stock surrendered (1)		—	—		(0.2)	—		—				(14.8)		—			—				(14.8)
Preferred stock issuance, net		12.0	294.5		—	—		—				—		—			—				294.5
Common stock issuance, net		—	—		3.0	—		279.0				—		—			—				279.0

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

Balance, December 31, 2021	Balance, December 31, 2021	12.0	$	294.5	106.6	$	—	$	1,966.2			$	(86.8)	$	15.7		$	2,773.0			$	4,962.6		Balance, December 31, 2021	12.0			$	294.5		106.6	$	—	$	1,966.2	$	(86.8)	$	15.7	$	2,773.0	$	4,962.6
Net income	Net income	—	—		—	—		—				—		—			764.3				764.3			Net income	—			—			—	—		—		—		—		240.1		240.1
Restricted stock, performance stock units, and other grants, net	Restricted stock, performance stock units, and other grants, net	—	—		0.6	—		30.3				—		—			—				30.3			Restricted stock, performance stock units, and other grants, net	—			—			0.6	—		9.8		—		—		—		9.8
Restricted stock surrendered (1)	Restricted stock surrendered (1)	—	—		(0.2)	—		—				(18.4)		—			—				(18.4)			Restricted stock surrendered (1)	—			—			(0.2)	—		—		(17.3)		—		—		(17.3)
Common stock issuance, net																								Common stock issuance, net	—			—			1.3	—		107.7		—		—		—		107.7

Common stock issuance, net		—	—		1.9	—		157.7				—		—			—				157.7

Dividends paid to preferred stockholders	Dividends paid to preferred stockholders	—	—		—	—		—				—		—			(9.6)				(9.6)			Dividends paid to preferred stockholders	—			—			—	—		—		—		—		(3.2)		(3.2)
Dividends paid to common stockholders	Dividends paid to common stockholders	—	—		—	—		—				—		—			(114.2)				(114.2)			Dividends paid to common stockholders	—			—			—	—		—		—		—		(37.3)		(37.3)
Other comprehensive loss, net	Other comprehensive loss, net	—	—		—	—		—				—		(751.9)			—				(751.9)			Other comprehensive loss, net	—			—			—	—		—		—		(250.8)		—		(250.8)
Balance, September 30, 2022		12.0	$	294.5	108.9	$	—	$	2,154.2			$	(105.2)	$	(736.2)		$	3,413.5			$	5,020.8
Balance, March 31, 2022																								Balance, March 31, 2022	12.0			$	294.5		108.3	$	—	$	2,083.7	$	(104.1)	$	(235.1)	$	2,972.6	$	5,011.6

Balance, December 31, 2022																								Balance, December 31, 2022	12.0			$	294.5		108.9	$	—	$	2,163.7	$	(105.3)	$	(661.0)	$	3,664.1	$	5,356.0
Net income																								Net income	—			—			—	—		—		—		—		142.2		142.2

Restricted stock, performance stock units, and other grants, net																								Restricted stock, performance stock units, and other grants, net	—			—			0.7	—		6.1		—		—		—		6.1
Restricted stock surrendered (1)																								Restricted stock surrendered (1)	—			—			(0.1)	—		—		(10.7)		—		—		(10.7)

Dividends paid to preferred stockholders																								Dividends paid to preferred stockholders	—			—			—	—		—		—		—		(3.2)		(3.2)
Dividends paid to common stockholders																								Dividends paid to common stockholders	—			—			—	—		—		—		—		(39.4)		(39.4)
Other comprehensive income, net																								Other comprehensive income, net	—			—			—	—		—		—		69.5		—		69.5
Balance, March 31, 2023																								Balance, March 31, 2023	12.0			$	294.5		109.5	$	—	$	2,169.8	$	(116.0)	$	(591.5)	$	3,763.7	$	5,520.5

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

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WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(in millions)					(in millions)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	764.3	$	653.2	Net income	$	142.2	$	240.1
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Provision for (recovery of) credit losses		65.0		(34.6)
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses						Provision for credit losses	19.4		9.0
Depreciation and amortization	Depreciation and amortization	36.1		25.6		Depreciation and amortization	16.5		11.1
Stock-based compensation	Stock-based compensation	30.3		25.6		Stock-based compensation	6.1		9.8
Deferred income taxes	Deferred income taxes	47.7		43.6		Deferred income taxes	(5.5)		35.1
Amortization of net premiums for investment securities	Amortization of net premiums for investment securities	17.1		30.8		Amortization of net premiums for investment securities	2.0		6.9
Amortization of tax credit investments	Amortization of tax credit investments	45.6		36.6		Amortization of tax credit investments	11.3		13.4
Amortization of operating lease right of use asset	Amortization of operating lease right of use asset	16.4		11.5		Amortization of operating lease right of use asset	6.0		5.4
Amortization of net deferred loan fees and net purchase premiums	Amortization of net deferred loan fees and net purchase premiums	(50.6)		(53.2)		Amortization of net deferred loan fees and net purchase premiums	(22.6)		(12.5)
Purchases and originations of loans HFS	Purchases and originations of loans HFS	(37,064.4)		(41,336.4)		Purchases and originations of loans HFS	(8,067.2)		(13,060.0)

Proceeds from sales and payments on loans held for sale	Proceeds from sales and payments on loans held for sale	38,294.5		37,810.5		Proceeds from sales and payments on loans held for sale	8,265.4		13,663.0
Mortgage servicing rights capitalized upon sale of mortgage loans	Mortgage servicing rights capitalized upon sale of mortgage loans	(578.1)		(512.7)		Mortgage servicing rights capitalized upon sale of mortgage loans	(142.4)		(204.1)
Net (gains) losses on:
Net losses (gains) on:						Net losses (gains) on:
Change in fair value of loans HFS, mortgage servicing rights, and related derivatives	Change in fair value of loans HFS, mortgage servicing rights, and related derivatives	(139.3)		49.5		Change in fair value of loans HFS, mortgage servicing rights, and related derivatives	43.5		(55.4)
Fair value adjustments						Fair value adjustments	149.8		6.7
Sale of investment securities						Sale of investment securities	12.5		(6.9)
Extinguishment of debt						Extinguishment of debt	(12.7)		—
Other	Other	10.1		2.4		Other	(3.6)		0.7
Changes in other assets and liabilities, net		(43.8)		(21.4)
Net cash provided by (used in) operating activities		$	1,450.9	$	(3,269.0)
Other assets and liabilities, net						Other assets and liabilities, net	(63.4)		(39.4)
Net cash provided by operating activities						Net cash provided by operating activities	$	357.3	$	622.9
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Investment securities - AFS	Investment securities - AFS					Investment securities - AFS
Purchases	Purchases	$	(2,286.4)	$	(3,100.7)	Purchases	$	(931.3)	$	(830.6)
Principal pay downs and maturities	Principal pay downs and maturities	511.8		1,293.2		Principal pay downs and maturities	61.1		257.1
Proceeds from sales	Proceeds from sales	124.6		49.8		Proceeds from sales	429.3		114.2
Investment securities - HTM	Investment securities - HTM					Investment securities - HTM
Purchases	Purchases	(230.3)		(494.7)		Purchases	(44.0)		(60.5)
Principal pay downs and maturities	Principal pay downs and maturities	68.1		14.2		Principal pay downs and maturities	7.7		6.7
Equity securities carried at fair value	Equity securities carried at fair value					Equity securities carried at fair value
Purchases	Purchases	(35.2)		(36.1)		Purchases	(0.5)		(4.7)
Redemptions	Redemptions	1.1		21.4		Redemptions	—		0.1
Proceeds from sales		14.1		2.8

Proceeds from sale of mortgage servicing rights and related holdbacks, net	Proceeds from sale of mortgage servicing rights and related holdbacks, net	382.2		1,112.1		Proceeds from sale of mortgage servicing rights and related holdbacks, net	335.2		24.1
Purchase of other investments	Purchase of other investments	(300.3)		(99.4)		Purchase of other investments	(172.6)		(66.1)

Net increase in loans HFI	Net increase in loans HFI	(11,736.5)		(8,385.4)		Net increase in loans HFI	(1,003.5)		(1,961.7)
Purchase of premises, equipment, and other assets, net	Purchase of premises, equipment, and other assets, net	(84.2)		(31.8)		Purchase of premises, equipment, and other assets, net	(28.5)		(26.2)

Cash consideration paid for acquisitions, net of cash acquired	Cash consideration paid for acquisitions, net of cash acquired	(50.0)		(1,013.4)		Cash consideration paid for acquisitions, net of cash acquired	—		(50.0)
Net cash used in investing activities	Net cash used in investing activities	$	(13,621.0)	$	(10,668.0)	Net cash used in investing activities	$	(1,347.1)	$	(2,597.6)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in deposits		$	7,976.7	$	13,352.1
Net proceeds from issuance of long-term debt		485.5		831.4
Net (decrease) increase in deposits						Net (decrease) increase in deposits	$	(6,056.6)	$	4,547.5

Payments on long-term debt	Payments on long-term debt	(24.8)		(75.0)		Payments on long-term debt	(257.3)		(9.5)
Net increase (decrease) in short-term borrowings	Net increase (decrease) in short-term borrowings	4,810.3		(2,396.6)		Net increase (decrease) in short-term borrowings	9,952.9		(514.5)

Cash paid for tax withholding on vested restricted stock and other	Cash paid for tax withholding on vested restricted stock and other	(18.4)		(14.6)		Cash paid for tax withholding on vested restricted stock and other	(10.7)		(17.3)

Cash dividends paid on common stock and preferred stock	Cash dividends paid on common stock and preferred stock	(123.8)		(87.6)		Cash dividends paid on common stock and preferred stock	(42.6)		(40.5)
Proceeds from issuance of common stock in offerings, net	Proceeds from issuance of common stock in offerings, net	157.7		279.0		Proceeds from issuance of common stock in offerings, net	—		94.9
Proceeds from issuance of preferred stock, net		—		294.5

Net cash provided by financing activities	Net cash provided by financing activities	$	13,263.2	$	12,183.2	Net cash provided by financing activities	$	3,585.7	$	4,060.6
Net increase (decrease) in cash, cash equivalents, and restricted cash		1,093.1		(1,753.8)
Cash, cash equivalents, and restricted cash at beginning of period		516.4		2,671.7
Cash, cash equivalents, and restricted cash at end of period		$	1,609.5	$	917.9

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		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(in millions)					(in millions)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	2,595.9		2,085.9
Cash, cash equivalents, and restricted cash at beginning of period						Cash, cash equivalents, and restricted cash at beginning of period	1,043.4		516.4
Cash, cash equivalents, and restricted cash at end of period						Cash, cash equivalents, and restricted cash at end of period	$	3,639.3	$	2,602.3

Supplemental disclosure:	Supplemental disclosure:					Supplemental disclosure:
Cash paid during the period for:
Cash paid (refunded) during the period for:						Cash paid (refunded) during the period for:
Interest	Interest	$	211.4	$	70.4	Interest	$	329.5	$	25.9
Income taxes, net	Income taxes, net	190.7		160.2		Income taxes, net	(7.5)		24.2
Non-cash operating, investing, and financing activity:
Transfer of EBO loans previously classified as HFS to HFI		$	1,505.7	$	—
Non-cash activities:						Non-cash activities:

Transfers of mortgage-backed securities in settlement of secured borrowings	Transfers of mortgage-backed securities in settlement of secured borrowings	452.9		495.2		Transfers of mortgage-backed securities in settlement of secured borrowings	125.2		146.7
Net increase in unfunded commitments and obligations		281.1		152.6
Net (decrease) increase in unsettled loans HFI and investment securities purchased		(33.4)		104.3
Net (decrease) increase in unfunded commitments and obligations						Net (decrease) increase in unfunded commitments and obligations	(5.5)		157.4
Net increase in unsettled loans HFI and investment securities purchased						Net increase in unsettled loans HFI and investment securities purchased	31.8		569.1
Transfers of securitized loans HFS to AFS securities	Transfers of securitized loans HFS to AFS securities	131.0		—		Transfers of securitized loans HFS to AFS securities	43.9		40.4

Transfers of loans HFI to HFS unsold at period end, net of fair value loss adjustment						Transfers of loans HFI to HFS unsold at period end, net of fair value loss adjustment	5,910.4		—

See accompanying Notes to Unaudited Consolidated Financial Statements.

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WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of ~~operation~~operations

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 customized loan, deposit, and treasury management capabilities, including 24/7 funds transfer and other ~~blockchain-based~~digital payment offerings 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, including mortgage banking services through AmeriHome, and ~~has added to its capabilities with the acquisition of DST on January 25, 2022, which provides~~ digital payment services for the class action legal ~~industry.~~industry through DST. In addition, the Company has ~~two~~the following non-bank ~~subsidiaries, which are LVSP, which held and managed certain OREO properties, and~~subsidiaries: CSI, a captive insurance company formed and licensed under the laws of the State of Arizona and established as part of the Company's overall enterprise risk management ~~strategy.~~strategy, and WATC, which provides corporate trust services and levered loan administration solutions.

Basis of presentation

The ~~accounting~~accompanying Unaudited Consolidated Financial Statements as of March 31, 2023 and ~~reporting policies of~~for the ~~Company are~~three months ended March 31, 2023 and 2022 have been prepared in accordance with GAAP for interim financial information and ~~conform to practices within~~Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by GAAP for complete financial ~~services industry.~~statements. Accordingly, these statements should be read in conjunction with the Company's audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The accounts of the Company and its consolidated subsidiaries are included in the Consolidated Financial Statements.

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

Recent accounting pronouncements

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

In March 2023, the FASB issued guidance within ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323). The amendments in this update permit entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Previously this option was only permitted for LIHTC investments. Additionally, the amendments in this update require that all tax equity investments accounted for using the proportional amortization method apply the delayed equity contribution guidance in Subtopic 323-740 and disclosure of the nature of an entity's tax equity investments and their effect on an entity's financial position and results of operations.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and are applied on a modified retrospective or a retrospective basis. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.

Recently adopted accounting guidance

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued guidance within ASU 2022-02, Financial Instruments—Credit Losses (Topic 326). The amendments in this update eliminate the accounting guidance and related disclosures for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.

The ~~amendments in~~Company adopted this ~~update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and are applied~~accounting guidance prospectively except with respect to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method. Early adoption of the amendments in this update is permitted. An entity may elect to early adopt the amendments regarding TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.on January 1, 2023. The adoption of this ~~accounting guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.~~

~~Recently adopted accounting guidance~~

~~Reference Rate Reform~~

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

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

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~~Derivatives;~~ and 4) for other ASC Topics or Industry Subtopics in the Codification, the amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination.

~~In January 2021, the FASB issued ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848): Scope~~ in order to clarify that certain optional expedients and exceptions in ASC Topic 848 apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in ASC Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discount, or contract price alignment that is modified as a result of reference rate reform.

~~Due to the prospective nature of the revised guidance, the adoption of this accounting~~ guidance did not have a material impact on the Company's Consolidated Financial Statements.

~~Convertible Debt and Derivatives and Hedging~~

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

Use of estimates

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

Principles of consolidation

As of ~~September 30, 2022,~~March 31, 2023, WAL has the following significant wholly-owned subsidiaries: WAB and eight unconsolidated subsidiaries used as business trusts in connection with the issuance of trust-preferred securities.

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

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

Reclassifications

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

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~~Interim financial information~~

The accompanying Unaudited Consolidated Financial Statements as of and for the three and nine months ended September 30, 2022 and 2021 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, 2021.

~~Business combinations~~

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

~~Investment securities~~

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

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

~~Equity securities are carried at their estimated fair value, with changes in fair value required to be reported in earnings as non-interest income.~~

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

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

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~~Allowance for credit losses on investment securities~~

The credit loss model under ASC 326-20, applicable to HTM debt securities, requires recognition of lifetime expected credit losses through an allowance account at the time the security is purchased. The Company measures expected credit losses on its HTM debt securities on a collective basis by major security type. The Company's HTM securities portfolio consists of low income housing tax-exempt bonds and private label residential MBS. Low income housing tax-exempt bonds share similar risk characteristics with the Company's CRE, non-owner occupied or construction and land loan pools, given the similarity in underlying assets or collateral. Accordingly, expected credit losses on HTM securities are estimated using the same models and approaches as these loan pools, which utilize risk parameters (probability of default, loss given default, and exposure at default) in the measurement of expected credit losses. The historical data used to estimate probability of default and severity of loss in the event of default is derived or obtained from internal and external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical losses. Accrued interest receivable on HTM securities, which is included in other assets on the Consolidated Balance Sheet, is excluded from the estimate of expected credit losses.

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

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

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

~~Restricted stock~~

WAB is a member of the Federal Reserve System and, as part of its membership, is required to maintain stock in the FRB in a specified ratio to its capital. In addition, WAB is a member of the FHLB system and, accordingly, maintains an investment in the capital stock of the FHLB based on the borrowing capacity used. These investments are considered equity securities with no actively traded market. Therefore, the shares are considered restricted investment securities. These investments are carried at cost, which is equal to the value at which they may be redeemed. 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.

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~~Loans held for sale~~

The Company began regularly carrying loans HFS in connection with the AmeriHome acquisition and continues to purchase and originate loans to be sold or securitized through its mortgage banking business. Loans HFS are reported at fair value or the lower of cost or fair value, depending on the acquisition source. The Company has elected to record loans purchased from correspondent sellers or originated directly to consumers at fair value to more timely reflect the Company's performance. Changes in fair value of loans HFS are reported in current period income as a component of Net gain on loan origination and sale activities in the Consolidated Income Statement. Alternatively, delinquent loans repurchased under the terms of the GNMA MBS program, referred to as EBO loans, and which are classified as HFS, are reported at the lower of cost or fair value. For EBO loans, the amount by which cost exceeds fair value is accounted for as a valuation allowance and any changes in the valuation allowance are included in Net gain on loan origination and sale activities in the Consolidated Income Statement.

The Company recognizes a transfer of loans as a sale when it surrenders control over the transferred loans. Control is considered to be surrendered when the transferred loans have been legally isolated from the Company, the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred loans, and the Company does not maintain effective control over the transferred loans through either an agreement that entitles or obligates the Company to repurchase or redeem the loans before their maturity or the ability to unilaterally cause the holder to return loans. If the transfer of loans qualifies as a sale, the Company derecognizes such loans. If the transfer of loans does not qualify as a sale, the proceeds from the transfer are accounted for as secured borrowings.

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

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

If management determines that it no longer intends to sell loans classified as HFS, such loans will be transferred to loans HFI. Loans transferred from HFS to HFI are transferred at amortized cost, and any valuation allowance previously recorded is reversed through the Consolidated Income Statement at the time of the transfer. The loans are then evaluated to determine the allowance for credit losses in accordance with the Company's policy as described in the Allowance for credit losses on HFI loans section within this note.

~~Loans held for investment~~

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

The Company may also purchase loans or acquire loans through a business combination. At the purchase or acquisition date, loans are evaluated to determine whether there has been more than insignificant credit deterioration since origination. Loans that have experienced more than insignificant credit deterioration since origination are referred to as PCD loans. In its evaluation of whether a loan has experienced more than insignificant deterioration in credit quality since origination, the Company takes into consideration loan grades, past due and nonaccrual status, and TDR loans. The Company may also consider external credit rating agency ratings for borrowers and for non-commercial loans, FICO score or band, probability of default levels, and number of times past due.

At the purchase or acquisition date, the amortized cost basis of PCD loans is equal to the purchase price and an initial estimate of credit losses. The initial recognition of expected credit losses on PCD loans has no impact on net income. When the initial measurement of expected credit losses on PCD loans is calculated on a pooled loan basis, the expected credit losses are allocated to each loan within the pool. Any difference between the initial amortized cost basis and the unpaid principal balance of the loan represents a noncredit discount or premium, which is accreted (or amortized) into interest income over the life of the loan. Subsequent changes to the allowance for credit losses on PCD loans are recorded through the provision for credit losses. For purchased loans that are not deemed to have experienced more than insignificant credit deterioration since origination and are therefore not deemed PCD, any discounts or premiums included in the purchase price are accreted (or amortized) over the

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~~contractual life of the individual loan. For additional information, see "Note 5. Loans, Leases and Allowance for Credit Losses" of these Notes to Unaudited Consolidated Financial Statements.~~

In applying the effective yield method to loans, the Company generally applies the contractual method whereby loan fees collected for the origination of loans less direct loan origination costs (net of deferred loan fees), as well as premiums and discounts and certain purchase accounting adjustments, are amortized over the contractual life of the loan through interest income. If a loan has scheduled payments, the amortization of the net deferred 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.

~~Nonaccrual loans~~

When a borrower discontinues making payments as contractually required by the note, the Company must determine whether it is appropriate to continue to accrue interest. The Company ceases accruing interest income when a loan becomes delinquent by more than 90 days or when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely. Past due status is based on the contractual terms of the loan. The Company may decide to continue to accrue interest on certain loans more than 90 days delinquent if the loans are well secured by collateral and in the process of collection. For government guaranteed or insured loans that are 90 days delinquent, the Company continues to recognize interest income at a rate between the debenture rate and note rates, as adjusted for probability of default for FHA loans, and at the note rate for VA and USDA loans.

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

~~Troubled Debt Restructured Loans~~

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

~~Reference Rate Reform~~

On March 5, 2021, the United Kingdom administrator of LIBOR announced that the 1-month, 3-month, 6-month and 12-month US dollar LIBOR settings would cease to exist after June 30, 2023. The US federal banking agencies issued a statement in November 2020 encouraging banks to transition away from US dollar LIBOR as soon as practicable and to stop entering into new contracts that use US dollar LIBOR by December 31, 2021. The Bank began offering three alternative rate indices (Ameribor, SOFR, and BSBY) on its loans in the second half of 2021, with Ameribor as its preferred rate index. The Bank ceased offering loans indexed to US dollar LIBOR on December 31, 2021. Loans indexed to US dollar LIBOR will be converted to Ameribor, SOFR, or BSBY. The Company applied the optional expedient in Topic 848 for such conversions by prospectively adjusting the effective interest rate. For the Company's borrowing arrangements currently indexed to LIBOR, the paying agent is responsible for choosing the alternate rate index.

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~~Credit quality indicators~~

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

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

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

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

~~Low risk.~~ ~~Consist of loans with a high investment grade rating equivalent.~~

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

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

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

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

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

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

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

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~~Allowance for credit losses on HFI loans~~

Credit risk is inherent in the business of extending loans and leases to borrowers and is continuously monitored by management and reflected within the allowance for credit losses. The allowance for credit losses is an estimate of life-of-loan losses for the Company's HFI loans. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of a loan to present the net amount expected to be collected on the loan. The estimate of expected credit losses excludes accrued interest receivable on these loans, except for accrued interest related to the Residential-EBO loan pool. Accrued interest receivable, net of an allowance for credit losses on the Residential-EBO loan pool, is included in Other assets on the Consolidated Balance Sheet. The allowance for credit losses on HFI loans includes an estimate of future charge-offs, offset by expected recoveries of amounts previously charged-off and shall not exceed the aggregate of prior and expected charge-offs. The Company formally re-evaluates and establishes the appropriate level of the allowance for credit losses on a quarterly basis.

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

~~Loans that do not share risk characteristics with other loans~~

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

~~Loans that share similar risk characteristics with other loans~~

In estimating the component of the allowance for credit losses for loans that share similar risk characteristics, loans are segregated into loan segments with shared risk characteristics. The Company's primary portfolio segments align with the methodology applied in estimating the allowance for credit losses under CECL. Loans are designated into loan segments based on loans pooled by product types, business lines, and other risk characteristics.

In determining the allowance for credit losses, the Company derives an estimate of expected credit losses primarily using an expected loss methodology that incorporates risk parameters (probability of default, loss given default, and exposure at default), which are derived from various vendor models, internally-developed statistical models, or non-statistical estimation approaches. Probability of default is projected in these models or estimation approaches using a single economic scenario and were developed to incorporate relevant information about past events, current conditions, and reasonable and supportable forecasts. With the exception of the Company's residential loan segment, the Company's PD models define default as loans that are 90 days past due, on nonaccrual status, have a charge-off, or obligor bankruptcy. Input reversion is used for all loan segment models, except for the commercial and industrial and CRE, owner-occupied loan segments. Output reversion is used for the commercial and industrial and CRE, owner-occupied loan segments by incorporating, after the forecast period, a one-year linear reversion to the long-term reversion rate in year three through the remaining life of the loans within the respective segments. LGDs are typically derived from the Company's historical loss experience. However, for the residential, warehouse lending, and municipal and nonprofit loan segments, where the Company has either zero (or near zero) losses, or has a limited loss history through the last economic downturn, certain non-modeled methodologies are employed to estimate LGD. Factors utilized in calculating average LGD vary for each loan segment and are further described below. Exposure at default refers to the Company's exposure to loss at the time of borrower default. For revolving lines of credit, the Company incorporates an expectation of increased line utilization for a higher EAD on defaulted loans based on historical experience. For term loans, EAD is calculated using an amortization schedule based on contractual loan terms, adjusted for a prepayment rate assumption. Prepayment trends are sensitive to interest rates and the macroeconomic environment. Fixed rate loans are more influenced by interest rates, whereas variable rate loans are more influenced by the macroeconomic environment. After the quantitative expected loss estimates are calculated, management then adjusts these estimates to incorporate consideration of different

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~~probability weighted economic scenarios, current trends and conditions that are not captured in the quantitative loss estimates, through the use of qualitative and/or environmental factors.~~

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

~~Warehouse lending~~

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

~~Municipal and nonprofit~~

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

~~Tech & innovation~~

The tech & innovation portfolio segment is comprised of commercial loans that are originated within this business line and are not collateralized by real estate. The source of repayment of these loans is generally expected to be the income that is generated from the business or contributions from ownership to sustain the business's growth model. Expected credit losses for this loan segment are estimated using internally-developed models. These models incorporate market level and company-specific factors such as financial statement variables, adjusted for the current stage of the credit cycle and for the Company's loan performance data such as delinquency, utilization, maturity, and size of the loan commitment under specific macroeconomic scenarios to produce a probability of default. Macroeconomic variables include average investment to GDP and treasury yields. LGD and the prepayment rate assumption for EAD for this loan segment are driven by unemployment levels.

~~Equity fund resources~~

The equity fund resources portfolio segment is comprised of commercial loans to private equity and venture capital funds. The primary source of repayment of these loans is typically uncalled capital commitments from institutional investors and high net worth individuals. The Company uses a non-modeled approach to estimate expected credit losses for this portfolio segment, leveraging loan grade information.

~~Other commercial and industrial~~

The other commercial and industrial segment is comprised primarily of commercial and industrial loans to middle market companies and large corporations that are not collateralized by real estate. The models used to estimate expected credit losses for middle market companies are the same as those used for the tech & innovation portfolio segment, whereas a vendor model is used to estimate expected credit losses for loans to large corporations.

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~~Commercial real estate, owner-occupied~~

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

~~Hotel franchise finance~~

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

~~Other commercial real estate, non-owner occupied~~

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

~~Residential~~

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

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

~~Residential - EBO~~

The residential EBO loan portfolio segment is comprised of government guaranteed or insured loans collateralized primarily by first liens on 1-4 residential family properties purchased from the FHA, VA, or USDA, which were at least three months delinquent at the time of purchase. These loans differ from the residential loans included in the Company's Residential loan portfolio segment as the principal balance of these loans are government guaranteed or insured. The Company has not recognized an allowance for credit losses on this portfolio segment as management's expectation of nonpayment of the amortized cost basis, based on historical losses, adjusted for current and forecasted conditions, is zero.

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~~Construction and land development~~

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

~~Other~~

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

~~Off-balance sheet credit exposures, including unfunded loan commitments~~

The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, financial guarantees, and letters of credit, which is classified in Other liabilities on the Consolidated Balance Sheet. The allowance for credit losses on off-balance sheet credit exposures is adjusted through increases or decreases to the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, an estimate of exposure at default that is derived from utilization rate assumptions using a non-modeled approach, and PD and LGD estimates that are derived from the same models and approaches for the Company's other loan portfolio segments described in the Allowance for credit losses on HFI loans section within this note. The Company does not record a credit loss estimate for off-balance sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

~~Mortgage servicing rights~~

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

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

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~~Leases (lessee)~~

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

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

The Company also made an accounting policy election to not separate non-lease components from the associated lease component, and instead account for them together as part of the applicable lease component. The majority of the Company’s non-lease components such as common area maintenance, parking, and taxes are variable, and are expensed as incurred. Variable payment amounts are determined in arrears by the landlord depending on actual costs incurred.

Goodwill and other intangible assets

The Company ~~records as~~evaluated whether the recent events in the banking sector may give rise to a triggering event and elected to perform a Step 0 goodwill impairment assessment, which included analyzing qualitative factors applicable to the ~~excess~~Company, the financial performance of the ~~purchase price in a business combination over~~Company, and valuation metrics of publicly traded companies comparable to the ~~fair value~~Company and its reporting units. As of March 31, 2023, 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~~does not believe that these events or circumstances ~~indicate~~have significantly altered the long-term financial performance of the Company. Accordingly, it was determined that ~~the carrying value may not be recoverable. The Company may 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 performed. 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 of correspondent relationships, operating licenses, tradenames, core deposit intangibles, customer relationships, and developed technology assets that are being amortized over periods of five to 40 years, with the exception of the Bridge Bank tradename which has an indefinite life. See "Note 2. Mergers, Acquisitions and Dispositions" of these Notes to Unaudited Consolidated Financial Statements for discussion of the intangible assets acquired in the AmeriHome and Digital Disbursements acquisitions.

~~The Company considers the remaining useful lives of its 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 intangible assets during the three and nine months ended September 30, 2022 or 2021.

~~Stock compensation plans~~

The Company has an incentive plan that gives the BOD the authority to grant stock awards, consisting of unrestricted stock, stock units, dividend equivalent rights, stock options (incentive and non-qualified), stock appreciation rights, restricted stock, and performance and annual incentive awards. Compensation expense on non-vested restricted stock awards is based on the fair value of the ~~award on the measurement date which, for the~~ Company ~~is the date~~and its reporting units exceeds their respective carrying values as of the grant and is recognized ratably over the service period of the award. Forfeitures are estimated at the time of the award grant and revised in subsequent periods if actual forfeitures differ from those estimates. The fair value of non-vested restricted stock awards is the market price of the Company’s stock on the date of grant.

March 31, 2023. The Company's performance stock units have a cumulative EPS target and a TSR performance measure component. The TSR component is a market-based performance condition that is separately valued as of the date of the grant. A Monte Carlo valuation model is used to determine the fair value of the TSR performance metric, which simulates potential TSR outcomes

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over the performance period and determines the payouts that would occur in each scenario. The resulting fair value of the TSR component is based on the average of these results. Compensation expense related to the TSR component is based on the fair value determination on the date of the grant and is not subsequently revised based on actual performance. Compensation expense related to the EPS component for these awards is based on the fair value (market price of the Company's stock on the date of the grant) of the award. Compensation expense related to both the TSR and EPS components is recognized ratably over the service period of the award.

~~See "Note 9. Stockholders' Equity" of these Notes to Unaudited Consolidated Financial Statements for further discussion of stock awards.~~

~~Dividends~~

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

~~Preferred stock~~

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

~~Treasury shares~~

The Company separately presents treasury shares, which represent shares surrendered to the Company equal in value to the statutory payroll tax withholding obligations arising from the vesting of employee restricted stock awards. Treasury shares are carriedgoodwill totaled $527 million at ~~cost.~~

~~Sales of common stock under ATM program~~

The Company has a distribution agency agreement with J.P. Morgan Securities LLC and Piper Sandler & Co., under which the Company may sell up to 6,132,670 shares of its common stock on the NYSE. The Company pays the distribution agents a mutually agreed rate, not to exceed 2% of the gross offering proceeds of the shares sold pursuant to the distribution agency agreement. The common stock is sold at prevailing market prices at the time of the sale or at negotiated prices and, as a result, prices will vary. Any sales under the ATM program are made pursuant to a prospectus dated May 14, 2021 and prospectus supplements filed with the SEC in an offering of shares from the Company's shelf registration statement on Form S-3 (No. 333-256120). See "Note 9. Stockholders' Equity" of these Notes to Unaudited Consolidated Financial Statements for further discussion of this program.

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

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

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). 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 the same line item as the offsetting loss or gain on the related interest rate swaps during the period of change. For loans, the gain or loss on the hedged item is included in interest income and for subordinated debt, the gain or loss on the hedged items is included in interest expense.

Derivative instruments that are not designated as hedges, so called free-standing derivatives, are reported on the Consolidated Balance Sheet at fair value and the changes in fair value are recognized in earnings as non-interest income during the period of change. With the acquisition of AmeriHome, the Company's economic hedging volume has substantially increased. The Company enters into commitments to purchase mortgage loans that will be held for sale. These loan commitments, described as IRLCs, qualify as derivative instruments, except those that are originated rather than purchased, and intended for HFI classification. As of September 30, 2022, all IRLCs qualify as derivative instruments. Changes in fair value associated with changes in interest rates are economically hedged by utilizing forward sale commitments and interest rate futures. These hedging instruments are typically entered into contemporaneously with IRLCs. Loans that have been or will be purchased or originated may be used to satisfy the Company's forward sale commitments. In addition, derivative financial instruments are also used to economically hedge the Company's MSR portfolio. Changes in the fair value of derivative financial instruments that hedge IRLCs and loans HFS are included in Net gain on loan origination and sale activities in the Consolidated Income Statement. Changes in the fair value of derivative financial instruments that hedge MSRs are included in Net loan servicing revenue in the Consolidated Income Statement.

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

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~~Off-balance sheet instruments~~

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

The Company also has off-balance sheet arrangements related to its derivative instruments. Derivative instruments are recognized in the Consolidated Balance Sheets at fair value and their notional values are carried off-balance sheet. See "Note 11. Derivatives and Hedging Activities" of these Notes to Unaudited Consolidated Financial Statements for further discussion.

~~Fair values of financial instruments~~

~~The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities. ASC 820,~~ ~~Fair Value Measurement~~, establishes a framework for measuring fair value and a three-level valuation hierarchy for disclosure of fair value measurement, and also sets forth disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The Company uses various valuation approaches, including market, income, and/or cost approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability and are 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 and are 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. For disclosure purposes, the lowest level input that is significant to the fair value measurement determines the level in the fair value hierarchy within which the fair value measurement falls in its entirety.

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

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~~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, 2022March 31, 2023 and December 31, ~~2021. The estimated fair value amounts for September 30,~~ 2022, with $290 million and December 31, 2021 have been measured as of period-end, and have not been re-evaluated or updated for purposes of these Unaudited Consolidated Financial Statements subsequent to those dates. As such, the estimated fair values of these financial instruments subsequent$237 million allocated to the ~~reporting date may be different than the amounts reported at period-end.~~

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

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

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

~~Cash, cash equivalents, and restricted cash~~

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

~~Investment securities~~

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

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

~~Restricted stock~~

Restricted stock consists of investments in the capital stock of the FRB and the FHLB. As no ready market exists for them, and they have no quoted market value, the fair values of these investments have been categorized as Level 2 in the fair value hierarchy.

~~Loans HFS~~

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

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

~~Loans HFI~~

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

~~Mortgage servicing rights~~

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

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~~Accrued interest receivable and payable~~

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

~~Derivative financial instruments~~

All derivatives are recognized on the Consolidated Balance Sheets at fair value. The valuation methodologies used to estimate the fair value of derivative instruments varies by type. Treasury futures and options, Eurodollar futures, and swap futures are measured based on valuation techniques using Level 1 Inputs from exchange-provided daily settlement quotes. Interest rate swaps and forward purchase and sales contracts are measured based on valuation techniques using Level 2 inputs, such as quoted market price, contracted selling price, or market price equivalent. IRLCs are measured based on valuation techniques that consider loan type, underlying loan amount, maturity date, note rate, loan program, and expected settlement date, with Level 3 inputs for the servicing release premium and pull-through rate. These measurements are adjusted at the loan level to consider the servicing release premium and loan pricing adjustment specific to each loan. The base value is then adjusted for the pull-through rate. The pull-through rate and servicing fee multiple are unobservable inputs based on historical experience.

~~Deposits~~

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

~~Credit linked notes~~

~~The fair value of credit linked notes is based on observable inputs, when available, and as such credit linked notes are categorized as Level 2 liabilities.~~

~~Subordinated debt~~

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

~~Junior subordinated debt~~

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

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

~~Non-interest income~~

Non-interest income includes revenue associated with mortgage banking and commercial banking activities, investment securities, equity investments, and bank owned life insurance. These non-interest income streams are primarily generated by different types of financial instruments, held by the Company for which there is specific accounting guidance and therefore, are not within the scope of ASC 606, ~~Revenue from Contracts with Customers~~.

Non-interest income amounts within the scope of ASC 606 include service charges and fees, success fees related to equity investments, debit and credit card interchange fees, and legal settlement services fees. Service charges and fees consist of fees earned from performance of account analysis, general account services, and other deposit account services. These fees are recognized as the related services are provided. Success fees are one-time fees detailed as part of certain loan agreements and are earned immediately upon occurrence of a triggering event. Card income includes fees earned from customer use of debit and credit cards, interchange income from merchants, and international charges. Card income is generally within the scope of ASC 310, ~~Receivables~~; however, certain processing transactions for merchants, such as interchange fees, are within the scope of ASC 606. The Company generally receives payment for its services during the period or at the time services are provided and, therefore, does not have material contract asset or liability balances at period end. Legal settlement service fees relate to payment services provided for the distribution of funds from legal settlements and are recognized upon transfer of funds to a claimant. See "Note 17. Revenue from Contracts with Customers" of these Notes to Unaudited Consolidated Financial Statements for further details related to the nature and timing of revenue recognition for non-interest income revenue streams within the scope of this standard.Consumer Related segments, respectively.

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2. ~~MERGERS, ACQUISITIONS AND DISPOSITIONS~~

~~Acquisition of Digital Disbursements~~

On January 25, 2022, the Company completed its acquisition of Digital Settlement Technologies LLC, doing business as Digital Disbursements, a digital payments platform for the class action legal industry. The acquisition of DST is expected to extend the Company's digital payment efforts by providing a digital payments platform for the class action market and broader legal industry.

This transaction was accounted for as a business combination under the acquisition method of accounting. Assets purchased and liabilities assumed were recorded at their respective acquisition date estimated fair values. During the measurement period (not to exceed one year from the acquisition date), the fair values of assets acquired and liabilities assumed are subject to adjustment if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability. During the quarter ended September 30, 2022, the Company adjusted its initial provisional estimates for identified intangible assets based on new available information regarding conditions that existed as of the acquisition date, and recognized a decrease of $7.4 million to the fair value of identified intangible assets as a result of adjustments to certain valuation inputs. This measurement period adjustment resulted in a $0.5 million reduction in previously recorded amortization expense which is a component of Other expense in the Consolidated income statement. As the Company is still in the process of reviewing the fair value methodology and assumptions used in the valuation of identifiable intangible assets, the fair values of these intangible assets are considered provisional. The Company is also assessing the value of any associated DTAs, which are also provisional.

Total consideration of $57.0 million, comprised of cash paid at closing of $50.6 million and contingent consideration with an estimated fair value of $6.4 million, was exchanged for all of the issued and outstanding membership interests of DST. The terms of the acquisition include a contingent consideration arrangement that is based on performance for the three year period subsequent to the acquisition. There is no required minimum or maximum payment amount specified under the terms of the contingent consideration agreement. During the quarter ended September 30, 2022, the Company adjusted its initial provisional estimate of the fair value of the contingent consideration and recognized a decrease of $10.8 million due to new available information regarding conditions that existed as of the acquisition date and adjustments to certain valuation inputs. The fair value of the contingent consideration recognized on the acquisition date was estimated using a discounted cash flow approach, and is considered provisional, as the Company is still in the process of reviewing the fair value methodology and assumptions associated with the contingent consideration.

DST’s results of operations have been included in the Company's results beginning January 25, 2022 and are reported as part of the Consumer Related segment. Acquisition and restructure expenses related to the DST acquisition of $0.4 million for the nine months ended September 30, 2022, were included as a component of non-interest expense in the Consolidated Income Statement, all of which are acquisition related costs as defined by ASC 805. There were no acquisition and restructure expenses incurred during the three months ended September 30, 2022.

~~The fair value amounts of identifiable assets acquired and liabilities assumed in the DST acquisition are as follows:~~


	~~January 25, 2022~~
	~~(in millions)~~
~~Assets acquired:~~
~~Cash and cash equivalents~~	$	~~0.6~~
~~Identified intangible assets~~	~~20.1~~
~~Other assets~~	~~0.1~~
~~Total assets~~	$	~~20.8~~
~~Liabilities assumed:~~
~~Other liabilities~~	$	~~0.4~~
~~Total liabilities~~	~~0.4~~
~~Net assets acquired~~	$	~~20.4~~
~~Consideration paid~~
~~Cash~~	$	~~50.6~~
~~Contingent consideration~~	~~6.4~~
~~Total consideration~~	$	~~57.0~~
~~Goodwill~~	$	~~36.6~~

~~Table of Contents~~

~~In connection with the acquisition, the Company acquired identifiable intangible assets totaling $20.1 million, as detailed in the table below:~~

Acquisition Date Fair Value Estimated Useful Life
(in millions) (in years)
Customer relationships $ 15.7 7
Developed technology 4.1 5
Trade name 0.3 10
Total $ 20.1

Goodwill in the amount of $36.6 million was recognized and is expected to be fully deductible for tax purposes. Goodwill was allocated entirely to the Consumer Related segment and represents the strategic, operational, and financial benefits expected from the acquisition, including expansion of the Company's settlement services offerings, diversification of its revenue sources, and post-acquisition synergies from integrating Digital Disbursements, as well as the value of the acquired workforce.

~~Acquisition of AmeriHome~~

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

Total cash consideration of $1.2 billion was paid in exchange for all of the issued and outstanding membership interests of Aris. AmeriHome's results of operations have been included in the Company's results beginning April 7, 2021 and are reported as part of the Consumer Related segment. There were no acquisition and restructure expenses related to the AmeriHome acquisition recognized during the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recognized $2.4 million and $18.5 million, respectively, in acquisition and restructure expenses related to the AmeriHome acquisition. Approximately $3.4 million was recorded as acquisition related costs, as defined by ASC 805, for the nine months ended September 30, 2021. There were no acquisition related costs incurred for the three months ended September 30, 2021.

~~Table of Contents~~

~~The fair value amounts of identifiable assets acquired and liabilities assumed in the AmeriHome acquisition are as follows:~~


	~~April 7, 2021~~
	~~(in millions)~~
~~Assets acquired:~~
~~Cash and cash equivalents~~	$	~~207.2~~
~~Loans held for sale~~	~~3,552.9~~
~~Mortgage servicing rights~~	~~1,347.0~~
~~Premises and equipment, net~~	~~11.3~~
~~Operating right of use asset~~	~~18.9~~
~~Identified intangible assets~~	~~141.0~~
~~Loans eligible for repurchase~~	~~2,744.7~~
~~Deferred tax asset~~	~~6.6~~
~~Other assets~~	~~236.0~~
~~Total assets~~	$	~~8,265.6~~
~~Liabilities assumed:~~
~~Other borrowings~~	$	~~3,633.9~~
~~Operating lease liability~~	~~18.9~~
~~Liability for loans eligible for repurchase~~	~~2,744.7~~
~~Other liabilities~~	~~149.5~~
~~Total liabilities~~	~~6,547.0~~
~~Net assets acquired~~	$	~~1,718.6~~
~~Consideration paid~~
~~Cash~~	$	~~1,231.6~~
~~Elimination of pre-existing debt~~	~~686.8~~
~~Total consideration~~	$	~~1,918.4~~
~~Goodwill~~	$	~~199.8~~

~~In connection with the acquisition, the Company acquired identifiable intangible assets totaling $141.0 million, as detailed in the table below:~~

Acquisition Date Fair Value Estimated Useful Life
(in millions) (in years)
Correspondent customer relationships $ 76.0 20
Operating licenses 55.5 40
Trade name 9.5 20
Total $ 141.0

Goodwill in the amount of $199.8 million was recognized and allocated entirely to the Consumer Related segment. Goodwill represents the strategic, operational, and financial benefits expected from the acquisition, including expansion of the Company's mortgage offerings, diversification of its revenue sources, and post-acquisition synergies from integrating AmeriHome’s operating platform, as well as the value of the acquired workforce. Approximately $185.0 million of goodwill is expected to be deductible for tax purposes.

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
(in millions)
Interest income $ 442.8 $ 1,196.6
Non-interest income 122.8 344.8
Net income 236.9 660.9

~~Table of Contents~~

3. INVESTMENT SECURITIES

The carrying amounts and fair values of investment securities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized as follows:


		September 30, 2022									March 31, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
		(in millions)									(in millions)
Held-to-maturity	Held-to-maturity									Held-to-maturity
Private label residential MBS	Private label residential MBS	$	201	$	—	$	(44)	$	157	Private label residential MBS	$	195	$	—	$	(38)	$	157
Tax-exempt	Tax-exempt	1,069		—		(142)		927		Tax-exempt	1,130		2		(104)		1,028
Total HTM securities	Total HTM securities	$	1,270	$	—	$	(186)	$	1,084	Total HTM securities	$	1,325	$	2	$	(142)	$	1,185

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	2,786	$	—	$	(145)	$	2,641	CLO	$	2,499	$	—	$	(63)	$	2,436
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	70		—		(8)		62		Commercial MBS issued by GSEs	70		—		(8)		62
Corporate debt securities	Corporate debt securities	429		—		(38)		391		Corporate debt securities	411		—		(53)		358

Private label residential MBS	Private label residential MBS	1,473		—		(245)		1,228		Private label residential MBS	1,399		—		(224)		1,175
Residential MBS issued by GSEs	Residential MBS issued by GSEs	2,085		—		(391)		1,694		Residential MBS issued by GSEs	2,136		1		(349)		1,788
Tax-exempt	Tax-exempt	1,026		—		(152)		874		Tax-exempt	945		1		(86)		860

U.S. Treasury securities										U.S. Treasury securities	900		—		—		900
Other	Other	75		7		(12)		70		Other	74		3		(11)		66
Total AFS debt securities	Total AFS debt securities	$	7,944	$	7	$	(991)	$	6,960	Total AFS debt securities	$	8,434	$	5	$	(794)	$	7,645

Equity securities
CRA investments		$	53	$	—	$	(4)	$	49
Preferred stock		124		—		(8)		116
Total equity securities		$	177	$	—	$	(12)	$	165


		December 31, 2021									December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
		(in millions)									(in millions)
Held-to-maturity	Held-to-maturity									Held-to-maturity
Private label residential MBS	Private label residential MBS	$	217	$	—	$	(2)	$	215	Private label residential MBS	$	198	$	—	$	(39)	$	159
Tax-exempt	Tax-exempt	890		43		(2)		931		Tax-exempt	1,091		—		(138)		953
Total HTM securities	Total HTM securities	$	1,107	$	43	$	(4)	$	1,146	Total HTM securities	$	1,289	$	—	$	(177)	$	1,112

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	926	$	1	$	(1)	$	926	CLO	$	2,796	$	—	$	(90)	$	2,706
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	68		1		—		69		Commercial MBS issued by GSEs	104		1		(8)		97
Corporate debt securities	Corporate debt securities	383		9		(9)		383		Corporate debt securities	429		—		(39)		390

Private label residential MBS	Private label residential MBS	1,529		3		(24)		1,508		Private label residential MBS	1,442		—		(243)		1,199
Residential MBS issued by GSEs	Residential MBS issued by GSEs	2,028		7		(42)		1,993		Residential MBS issued by GSEs	2,123		—		(383)		1,740
Tax-exempt	Tax-exempt	1,145		71		(1)		1,215		Tax-exempt	1,004		2		(115)		891

U.S. treasury securities		13		—		—		13

Other	Other	75		11		(4)		82		Other	75		6		(12)		69
Total AFS debt securities	Total AFS debt securities	$	6,167	$	103	$	(81)	$	6,189	Total AFS debt securities	$	7,973	$	9	$	(890)	$	7,092

Equity securities
CRA investments		$	45	$	—	$	—	$	45
Preferred stock		107		8		(1)		114
Total equity securities		$	152	$	8	$	(1)	$	159

In addition, the Company held equity securities, which primarily consisted of preferred stock and CRA investments, with a fair value of $141 million and $160 million at March 31, 2023 and December 31, 2022, respectively. Unrealized losses on equity securities of $8.5 million and $6.7 million for the three months ended March 31, 2023 and 2022, respectively, were recognized in earnings as a component of fair value loss adjustments.

Securities with carrying amounts of approximately $~~1.7~~6.5 billion and $~~2.2~~1.7 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were pledged for various purposes as required or permitted by law.

3212

Table of Contents

The following tables summarize the Company's AFS debt securities in an unrealized loss position at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, aggregated by major security type and length of time in a continuous unrealized loss position:


		September 30, 2022													March 31, 2023
		Less Than Twelve Months				More Than Twelve Months				Total					Less Than Twelve Months				More Than Twelve Months				Total
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value			Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
		(in millions)													(in millions)

Available-for-sale debt securities	Available-for-sale debt securities													Available-for-sale debt securities
CLO	CLO	$	138	$	2,460	$	7	$	123	$	145	$	2,583	CLO	$	39	$	1,613	$	24	$	813	$	63	$	2,426
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	4		48		4		14		8		62		Commercial MBS issued by GSEs	1		23		8		37		9		60
Corporate debt securities(1)	Corporate debt securities(1)	32		295		6		94		38		389		Corporate debt securities(1)	6		61		47		290		53		351
Private label residential MBS	Private label residential MBS	135		796		110		424		245		1,220		Private label residential MBS	8		97		216		1,064		224		1,161
Residential MBS issued by GSEs	Residential MBS issued by GSEs	164		946		227		746		391		1,692		Residential MBS issued by GSEs	7		222		342		1,525		349		1,747
Tax-exempt	Tax-exempt	125		758		27		73		152		831		Tax-exempt	8		249		78		588		86		837

U.S. Treasury securities														U.S. Treasury securities	—		892		—		—		—		892
Other	Other	5		27		7		25		12		52		Other	2		18		8		36		10		54
Total AFS securities	Total AFS securities	$	603	$	5,330	$	388	$	1,499	$	991	$	6,829	Total AFS securities	$	71	$	3,175	$	723	$	4,353	$	794	$	7,528

December 31, 2021
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 millions)
Available-for-sale debt securities
CLO $ 1 $ 171 $ — $ — $ 1 $ 171
Commercial MBS issued by GSEs 1 19 — — 1 19
Corporate debt securities 9 107 — — 9 107
Private label residential MBS 24 1,250 — — 24 1,250
Residential MBS issued by GSEs 32 1,356 9 142 41 1,498
Tax-exempt 1 141 — — 1 141
Other — 2 4 28 4 30
Total AFS securities $ 68 $ 3,046 $ 13 $ 170 $ 81 $ 3,216
(1)Includes securities with an ACL that have a fair value of $87 million and unrealized losses of $20 million.


	December 31, 2022
	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 millions)




Available-for-sale debt securities
CLO	$	81	$	2,467	$	9	$	216	$	90	$	2,683
Commercial MBS issued by GSEs	4		46		4		14		8		60
Corporate debt securities	28		263		11		120		39		383
Private label residential MBS	27		279		216		912		243		1,191
Residential MBS issued by GSEs	82		600		301		1,101		383		1,701
Tax-exempt	93		752		22		78		115		830


Other	4		26		8		26		12		52
Total AFS securities	$	319	$	4,433	$	571	$	2,467	$	890	$	6,900

The total number of AFS debt securities in an unrealized loss position at ~~September 30, 2022 is 766,~~March 31, 2023 was 811, compared to ~~179~~832 at December 31, ~~2021.~~2022.

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

Qualitative considerations made by the Company in its impairment analysis are further discussed below.

Government Issued Securities

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

Table of Contents

Non-Government Issued Securities

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

For the Company's corporate debt and tax-exempt securities, the Company also considers various metrics of the issuer including days of cash on hand, the ratio of long-term debt to total assets, the net change in cash between reporting periods, and consideration of any breach in covenant requirements. The Company's corporate debt securities are investment grade, issuers continue to make timely principal and interest payments, and the unrealized losses on these security portfolios primarily relate to changes in interest rates and other market conditions that are not considered to be credit-related issues. The Company

~~Table of Contents~~

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

In consideration of recent events related to the banking sector, the Company performed a targeted impairment analysis on its AFS debt securities issued by regional banks held in its corporate debt securities portfolio. The Company considered the issuer's credit ratings, probability of default, and other factors. As a result of the analysis, a $19.3 million provision for credit losses was recognized during the three months ended March 31, 2023, which included recognition of a $17.1 million charge-off for one debt security issued by a regional bank that was sold during the period. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell the remainder of these regional bank debt securities prior to their anticipated recovery, therefore, no credit losses on the Company's remaining AFS securities portfolio have not been recognized during the three months ended March 31, 2023.

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

The Company's CLO portfolio consists of highly rated securitization tranches, containing pools of medium to large-sized corporate, high yield ~~bank~~ loans. These are variable rate securities that have an investment grade rating of Single-A or better. ~~The Company has increased its investment in these securities over the past year and unrealized~~Unrealized losses on these securities are primarily a function of the differential from the offer price and the valuation mid-market price as well as changes in interest rates.

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

~~Based~~The following table presents a rollforward by major security type of the ACL on the qualitative factors noted above and as the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities prior to their anticipated recovery,Company's AFS debt securities:


	Three Months Ended March 31, 2023
	Balance, December 31, 2022		Provision for Credit Losses		Charge-offs		Recoveries		Balance, March 31, 2023
	(in millions)
Available for sale securities
Corporate debt securities	$	—	$	19.3	$	(17.1)	$	—	$	2.2

There were no credit losses ~~have been~~ recognized on ~~these~~AFS securities during the three ~~and nine~~ months ended ~~September 30, 2022 and 2021. In addition, as~~March 31, 2022.

Table of ~~September 30, 2022 and December 31, 2021, no allowance for credit losses on the Company's AFS securities has been recognized.~~Contents

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

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


		Three Months Ended September 30, 2022										Three Months Ended March 31, 2023
		Balance, June 30, 2022		Provision for Credit Losses		Charge-offs		Recoveries		Balance, September 30, 2022				Balance, December 31, 2022		Provision for Credit Losses		Charge-offs		Recoveries		Balance, March 31, 2023
		(in millions)										(in millions)
Held-to-maturity debt securities	Held-to-maturity debt securities												Held-to-maturity debt securities
Tax-exempt	Tax-exempt	$	3.2	$	1.2	$	—	$	—	$	4.4		Tax-exempt	$	5.2	$	1.3	$	—	$	—	$	6.5

Nine Months Ended September 30, 2022
Balance,
December 31, 2021 Recovery of Credit Losses Charge-offs Recoveries Balance,
September 30, 2022
(in millions)
Held-to-maturity debt securities
Tax-exempt $ 5.2 $ (0.8) $ — $ — $ 4.4

Three Months Ended September 30, 2021:
Balance,
June 30, 2021 Recovery of Credit Losses Charge-offs Recoveries Balance
September 30, 2021
(in millions)
Held-to-maturity debt securities
Tax-exempt $ 6.0 $ (1.5) $ — $ — $ 4.5

Nine Months Ended September 30, 2021:
Balance,
December 31, 2020 Recovery of Credit Losses Charge-offs Recoveries Balance
September 30, 2021
(in millions)
Held-to-maturity debt securities
Tax-exempt $ 6.8 $ (2.3) $ — $ — $ 4.5

~~Table of Contents~~


	Three Months Ended March 31, 2022:
	Balance, December 31, 2021		Provision for Credit Losses		Charge-offs		Recoveries		Balance March 31, 2022
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	5.2	$	(2.0)	$	—	$	—	$	3.2

No allowance has been recognized on the Company's HTM private label residential MBS as losses are not expected due to the Company holding a senior position in these securities.

Accrued interest receivable on HTM securities totaled $4 million ~~and $3 million~~ at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively,~~2022, and is excluded from the estimate of expected credit losses.

The following tables summarize the carrying amount of the Company’s investment ratings position as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, which are updated quarterly and used to monitor the credit quality of the Company's securities:

September 30, 2022
AAA Split-rated AAA/AA+ AA+ to AA- A+ to A- BBB+ to BBB- BB+ and below Unrated Totals
(in millions)
Held-to-maturity
Private label residential MBS $ — $ — $ — $ — $ — $ — $ 201 $ 201
Tax-exempt — — — — — — 1,069 1,069
Total HTM securities (1) $ — $ — $ — $ — $ — $ — $ 1,270 $ 1,270
Available-for-sale debt securities
CLO $ 277 $ — $ 2,096 $ 268 $ — $ — $ — $ 2,641
Commercial MBS issued by GSEs — 62 — — — — — 62
Corporate debt securities — — — 75 316 — — 391
Private label residential MBS 1,136 — 91 — 1 — — 1,228
Residential MBS issued by GSEs — 1,694 — — — — — 1,694
Tax-exempt 15 15 392 417 — — 35 874
Other — — 9 9 27 7 18 70
Total AFS securities (1) $ 1,428 $ 1,771 $ 2,588 $ 769 $ 344 $ 7 $ 53 $ 6,960
Equity securities
CRA investments $ — $ 24 $ — $ — $ — $ — $ 25 $ 49
Preferred stock — — — — 89 17 10 116
Total equity securities (1) $ — $ 24 $ — $ — $ 89 $ 17 $ 35 $ 165

~~(1)For rated securities, if ratings differ, the Company uses an average of the available ratings by major credit agencies.~~


		December 31, 2021																	March 31, 2023
		AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals			AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals
		(in millions)																	(in millions)
Held-to-maturity	Held-to-maturity																	Held-to-maturity
Private label residential MBS	Private label residential MBS	$	—	$	—	$	—	$	—	$	—	$	—	$	217	$	217	Private label residential MBS	$	—	$	—	$	—	$	—	$	—	$	—	$	195	$	195
Tax-exempt	Tax-exempt	—		—		—		—		—		—		890		890		Tax-exempt	—		—		—		—		—		—		1,130		1,130
Total HTM securities (1)	Total HTM securities (1)	$	—	$	—	$	—	$	—	$	—	$	—	$	1,107	$	1,107	Total HTM securities (1)	$	—	$	—	$	—	$	—	$	—	$	—	$	1,325	$	1,325

Available-for-sale debt securities	Available-for-sale debt securities																	Available-for-sale debt securities
CLO	CLO	$	45	$	—	$	636	$	245	$	—	$	—	$	—	$	926	CLO	$	205	$	—	$	2,138	$	93	$	—	$	—	$	—	$	2,436
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	—		69		—		—		—		—		—		69		Commercial MBS issued by GSEs	—		62		—		—		—		—		—		62
Corporate debt securities	Corporate debt securities	—		—		—		45		319		19		—		383		Corporate debt securities	—		—		—		72		227		59		—		358
Private label residential MBS	Private label residential MBS	1,420		—��		87		—		1		—		—		1,508		Private label residential MBS	1,133		—		42		—		—		—		—		1,175
Residential MBS issued by GSEs	Residential MBS issued by GSEs	—		1,993		—		—		—		—		—		1,993		Residential MBS issued by GSEs	—		1,788		—		—		—		—		—		1,788
Tax-exempt	Tax-exempt	43		40		469		629		—		—		34		1,215		Tax-exempt	11		16		380		392		—		—		61		860

U.S. treasury securities		—		13		—		—		—		—		—		13
U.S. Treasury securities																		U.S. Treasury securities	—		900		—		—		—		—		—		900
Other	Other	—		—		12		10		30		10		20		82		Other	—		—		9		9		29		3		16		66
Total AFS securities (1)	Total AFS securities (1)	$	1,508	$	2,115	$	1,204	$	929	$	350	$	29	$	54	$	6,189	Total AFS securities (1)	$	1,349	$	2,766	$	2,569	$	566	$	256	$	62	$	77	$	7,645

Equity securities	Equity securities																	Equity securities
Common stock																		Common stock	$	—	$	—	$	—	$	—	$	—	$	—	$	3	$	3
CRA investments	CRA investments	$	—	$	28	$	—	$	—	$	—	$	—	$	17	$	45	CRA investments	—		25		—		—		—		—		14		39
Preferred stock	Preferred stock	—		—		—		—		79		20		15		114		Preferred stock	—		—		—		—		71		18		10		99
Total equity securities (1)	Total equity securities (1)	$	—	$	28	$	—	$	—	$	79	$	20	$	32	$	159	Total equity securities (1)	$	—	$	25	$	—	$	—	$	71	$	18	$	27	$	141

(1)For rated securities, if ratings differ, the Company uses an average of the available ratings by major credit agencies.

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	December 31, 2022
	AAA		Split-rated AAA/AA+		AA+ to AA-		A+ to A-		BBB+ to BBB-		BB+ and below		Unrated		Totals
	(in millions)
Held-to-maturity
Private label residential MBS	$	—	$	—	$	—	$	—	$	—	$	—	$	198	$	198
Tax-exempt	—		—		—		—		—		—		1,091		1,091
Total HTM securities (1)	$	—	$	—	$	—	$	—	$	—	$	—	$	1,289	$	1,289

Available-for-sale debt securities
CLO	$	310	$	—	$	2,121	$	275	$	—	$	—	$	—	$	2,706
Commercial MBS issued by GSEs	—		97		—		—		—		—		—		97
Corporate debt securities	—		—		—		74		316		—		—		390
Private label residential MBS	1,158		—		41		—		—		—		—		1,199
Residential MBS issued by GSEs	—		1,740		—		—		—		—		—		1,740
Tax-exempt	11		15		392		425		—		—		48		891


Other	—		—		9		9		27		6		18		69
Total AFS securities (1)	$	1,479	$	1,852	$	2,563	$	783	$	343	$	6	$	66	$	7,092

Equity securities
Common stock	$	—	$	—	$	—	$	—	$	—	$	—	$	3	$	3
CRA investments	—		24		—		—		—		—		25		49
Preferred stock	—		—		—		—		82		17		9		108
Total equity securities (1)	$	—	$	24	$	—	$	—	$	82	$	17	$	37	$	160

(1)For rated securities, if ratings differ, the Company uses an average of the available ratings by major credit agencies.

A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement. As of ~~September 30, 2022,~~March 31, 2023, the Company did not have a significant amount of investment securities that were past due or on nonaccrual status.

The amortized cost and fair value of the Company's debt securities as of ~~September 30, 2022,~~March 31, 2023, 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, 2022					March 31, 2023
		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
		(in millions)					(in millions)
Held-to-maturity	Held-to-maturity					Held-to-maturity
Due in one year or less	Due in one year or less	$	3	$	3	Due in one year or less	$	9	$	8
After one year through five years	After one year through five years	23		22		After one year through five years	18		18
After five years through ten years	After five years through ten years	29		28		After five years through ten years	33		32
After ten years	After ten years	1,013		874		After ten years	1,070		969
Mortgage-backed securities	Mortgage-backed securities	201		157		Mortgage-backed securities	195		158
Total HTM securities	Total HTM securities	$	1,270	$	1,084	Total HTM securities	$	1,325	$	1,185

Available-for-sale	Available-for-sale					Available-for-sale
Due in one year or less	Due in one year or less	$	1	$	1	Due in one year or less	$	910	$	910
After one year through five years	After one year through five years	172		159		After one year through five years	166		151
After five years through ten years	After five years through ten years	1,147		1,083		After five years through ten years	879		828
After ten years	After ten years	2,997		2,733		After ten years	2,874		2,731
Mortgage-backed securities	Mortgage-backed securities	3,627		2,984		Mortgage-backed securities	3,605		3,025
Total AFS securities	Total AFS securities	$	7,944	$	6,960	Total AFS securities	$	8,434	$	7,645

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The following table presents gross gains and losses on sales of investment securities:


	Three Months Ended March 31,
	2023		2022
	(in millions)
Available-for-sale securities
Gross gains	$	3.4	$	6.9
Gross losses	(15.9)		—
Net (losses) gains on AFS securities	$	(12.5)	$	6.9

During the three months ended ~~September 30, 2022,~~March 31, 2023, the Company sold securities with a carrying value of $5$459 million and recognized a ~~gain~~net loss of ~~zero.~~$12.5 million. The sale of CLOs was executed as part of the Company's balance sheet repositioning strategy and resulted in the gross losses above. Sales of MBS and tax-exempt municipal securities were completed to secure gains. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company sold certain AFS securities with a carrying value of ~~$132~~$107 million ~~and recognized~~for a gain of ~~$6.7~~$6.9 million ~~which was largely related to~~as part of the Company's interest rate management actions to secure gains on securities, primarily tax-exempt municipal securities that were purchased at a discount at the onset of the COVID-19 pandemic. ~~During the three and nine months ended September 30, 2021, the Company did not have significant sales of investment securities.~~

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4.3. LOANS HELD FOR SALE

The Company purchases and originates residential mortgage loans to be sold or securitized through its AmeriHome mortgage banking business channel. In addition, the Company transferred $5.9 billion of loans (primarily commercial and industrial loans) to HFS as of March 31, 2023, net of a fair value loss adjustment of $123.5 million.

The following is a summary of loans HFS by type:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
Government-insured or guaranteed:	Government-insured or guaranteed:					Government-insured or guaranteed:
EBO (1)	EBO (1)	$	141	$	1,693	EBO (1)	$	5	$	—
Non-EBO	Non-EBO	872		1,396		Non-EBO	551		591
Total government-insured or guaranteed	Total government-insured or guaranteed	1,013		3,089		Total government-insured or guaranteed	$	556	$	591
Agency-conforming	Agency-conforming	1,191		2,483		Agency-conforming	556		593
Non-agency		—		63
Total government-insured and agency-conforming						Total government-insured and agency-conforming	$	1,112	$	1,184
Transferred to HFS:						Transferred to HFS:

Commercial and industrial						Commercial and industrial	$	5,326	$	—
CRE-investor						CRE-investor	107		—
Residential						Residential	477		—
Total transferred to HFS						Total transferred to HFS	$	5,910	$	—
Total loans HFS	Total loans HFS	$	2,204	$	5,635	Total loans HFS	$	7,022	$	1,184

(1) EBO loans are delinquent FHA, VA, or USDA loans repurchased under the terms of the ~~Ginnie Mae~~GNMA MBS program that can be repooled or resold when loans are brought current either through the borrower's reperformance or through completion of a loan modification.

During the nine months ended September 30, 2022, the Company transferred $1.5 billion of EBO loans previously classified as HFS to HFI and purchased $481 million in EBO loans that were designated as HFI. There were no such transfers or purchases during the three months ended September 30, 2022.

The following is a summary of the net gain on loan purchase, origination, and sale ~~activities:~~activities on residential mortgage loans to be sold or securitized:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021 (2)			2023		2022
		(in millions)									(in millions)
Mortgage servicing rights capitalized upon sale of loans	Mortgage servicing rights capitalized upon sale of loans	$	180.6	$	230.4	$	578.1	$	512.7	Mortgage servicing rights capitalized upon sale of loans	$	142.4	$	204.1
Net proceeds from sale of loans (1)	Net proceeds from sale of loans (1)	(207.1)		(107.4)		(905.7)		(251.0)		Net proceeds from sale of loans (1)	(107.4)		(336.9)
Provision for and change in estimate of liability for losses under representations and warranties, net	Provision for and change in estimate of liability for losses under representations and warranties, net	0.7		1.1		2.3		0.4		Provision for and change in estimate of liability for losses under representations and warranties, net	2.4		0.8
Change in fair value of loans held for sale		(75.1)		(18.4)		(82.0)		(5.2)
Change in fair value										Change in fair value	6.6		(66.2)

Change in fair value of derivatives related to loans HFS:
Unrealized gain (loss) on derivatives		80.7		24.0		112.1		(31.2)
Realized gain (loss) on derivatives		18.3		(35.9)		321.8		(26.5)
Change in fair value of derivatives:										Change in fair value of derivatives:
Unrealized (loss) gain on derivatives										Unrealized (loss) gain on derivatives	(22.2)		81.2
Realized (loss) gain on derivatives										Realized (loss) gain on derivatives	(2.4)		135.6
Total change in fair value of derivatives	Total change in fair value of derivatives	99.0		(11.9)		433.9		(57.7)		Total change in fair value of derivatives	(24.6)		216.8
Net (loss) gain on loans held for sale		$	(1.9)	$	93.8	$	26.6	$	199.2
Net gain on residential mortgage loans HFS										Net gain on residential mortgage loans HFS	$	19.4	$	18.6
Loan acquisition and origination fees	Loan acquisition and origination fees	16.4		27.2		52.0		53.8		Loan acquisition and origination fees	12.0		18.3
Net gain on loan origination and sale activities	Net gain on loan origination and sale activities	$	14.5	$	121.0	$	78.6	$	253.0	Net gain on loan origination and sale activities	$	31.4	$	36.9

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

~~(2) Period from April 7, 2021, the acquisition date of AmeriHome, through September 30, 2021.~~

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5.4. LOANS, LEASES AND ALLOWANCE FOR CREDIT LOSSES

The composition of the Company's HFI loan portfolio is as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
Warehouse lending	Warehouse lending	$	5,525	$	5,156	Warehouse lending	$	4,788	$	5,561
Municipal & nonprofit	Municipal & nonprofit	1,522		1,579		Municipal & nonprofit	1,543		1,524
Tech & innovation	Tech & innovation	2,175		1,418		Tech & innovation	2,471		2,293
Equity fund resources	Equity fund resources	5,107		3,830		Equity fund resources	971		3,717
Other commercial and industrial	Other commercial and industrial	8,182		6,465		Other commercial and industrial	5,912		7,793
CRE - owner occupied	CRE - owner occupied	1,686		1,723		CRE - owner occupied	1,645		1,656
Hotel franchise finance	Hotel franchise finance	3,602		2,534		Hotel franchise finance	3,900		3,807
Other CRE - non-owner occupied	Other CRE - non-owner occupied	5,021		3,952		Other CRE - non-owner occupied	5,650		5,457
Residential	Residential	13,810		9,243		Residential	13,435		13,996
Residential - EBO	Residential - EBO	1,815		—		Residential - EBO	1,538		1,884
Construction and land development	Construction and land development	3,579		3,006		Construction and land development	4,388		3,995
Other	Other	177		169		Other	194		179
Total loans HFI	Total loans HFI	52,201		39,075		Total loans HFI	46,435		51,862
Allowance for credit losses	Allowance for credit losses	(304)		(252)		Allowance for credit losses	(305)		(310)
Total loans HFI, net of allowance	Total loans HFI, net of allowance	$	51,897	$	38,823	Total loans HFI, net of allowance	$	46,130	$	51,552

Loans classified as HFI are stated at the amount of unpaid principal, adjusted for net deferred fees and costs, premiums and discounts on acquired and purchased loans, and an ~~allowance for credit losses.~~ACL. Net deferred loan fees of ~~$141~~$126 million and ~~$86~~$141 million reduced the carrying value of loans as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Net unamortized purchase premiums on acquired and purchased loans of ~~$197~~$191 million and ~~$185~~$195 million increased the carrying value of loans as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Nonaccrual and Past Due Loans

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

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


		September 30, 2022									March 31, 2023
		Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing			Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing
		(in millions)									(in millions)

Municipal & nonprofit	Municipal & nonprofit	$	—	$	7	$	7	$	—	Municipal & nonprofit	$	—	$	13	$	13	$	—
Tech & innovation	Tech & innovation	—		4		4		—		Tech & innovation	—		9		9		—

Other commercial and industrial	Other commercial and industrial	12		6		18		—		Other commercial and industrial	20		9		29		—
CRE - owner occupied	CRE - owner occupied	9		2		11		—		CRE - owner occupied	19		2		21		—
Hotel franchise finance		—		10		10		—

Other CRE - non-owner occupied	Other CRE - non-owner occupied	17		2		19		—		Other CRE - non-owner occupied	3		2		5		—
Residential	Residential	—		20		20		—		Residential	—		28		28		1
Residential - EBO	Residential - EBO	—		—		—		644		Residential - EBO	—		—		—		495
Construction and land development	Construction and land development	1		—		1		—		Construction and land development	2		—		2		—

Total	Total	$	39	$	51	$	90	$	644	Total	$	44	$	63	$	107	$	496

Loans contractually delinquent by 90 days or more and still accruing totaled ~~$644~~$496 million at ~~September 30, 2022~~March 31, 2023 and ~~consist entirely~~consisted of primarily government guaranteed EBO residential loans.

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		December 31, 2021									December 31, 2022
		Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing			Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual		Loans Past Due 90 Days or More and Still Accruing
		(in millions)									(in millions)

Municipal & nonprofit										Municipal & nonprofit	$	—	$	7	$	7	$	—
Tech & innovation										Tech & innovation	—		1		1		—

Tech & innovation		$	2	$	11	$	13	$	—
Equity fund resources		—		1		1		—
Other commercial and industrial	Other commercial and industrial	13		3		16		—		Other commercial and industrial	1		23		24		—
CRE - owner occupied	CRE - owner occupied	12		1		13		—		CRE - owner occupied	10		2		12		—

Hotel franchise finance										Hotel franchise finance	—		10		10		—
Other CRE - non-owner occupied	Other CRE - non-owner occupied	11		2		13		—		Other CRE - non-owner occupied	5		3		8		—
Residential	Residential	—		15		15		—		Residential	—		19		19		—
Residential - EBO										Residential - EBO	—		—		—		582
Construction and land development	Construction and land development	1		—		1		—		Construction and land development	4		—		4		—
Other		—		1		1		—

Total	Total	$	39	$	34	$	73	$	—	Total	$	20	$	65	$	85	$	582

The reduction in interest income associated with loans on nonaccrual status was approximately ~~$1.3~~$0.8 million and ~~$1.4~~$1.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $3.6 million and $4.4 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

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


		September 30, 2022													March 31, 2023
		Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total			Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total
		(in millions)													(in millions)
Warehouse lending	Warehouse lending	$	5,525	$	—	$	—	$	—	$	—	$	5,525	Warehouse lending	$	4,788	$	—	$	—	$	—	$	—	$	4,788
Municipal & nonprofit	Municipal & nonprofit	1,522		—		—		—		—		1,522		Municipal & nonprofit	1,523		20		—		—		20		1,543
Tech & innovation	Tech & innovation	2,175		—		—		—		—		2,175		Tech & innovation	2,471		—		—		—		—		2,471
Equity fund resources	Equity fund resources	5,107		—		—		—		—		5,107		Equity fund resources	971		—		—		—		—		971
Other commercial and industrial	Other commercial and industrial	8,181		1		—		—		1		8,182		Other commercial and industrial	5,912		—		—		—		—		5,912
CRE - owner occupied	CRE - owner occupied	1,686		—		—		—		—		1,686		CRE - owner occupied	1,645		—		—		—		—		1,645
Hotel franchise finance	Hotel franchise finance	3,593		—		9		—		9		3,602		Hotel franchise finance	3,900		—		—		—		—		3,900
Other CRE - non-owner occupied	Other CRE - non-owner occupied	5,021		—		—		—		—		5,021		Other CRE - non-owner occupied	5,650		—		—		—		—		5,650
Residential	Residential	13,764		42		4		—		46		13,810		Residential	13,394		32		5		4		41		13,435
Residential - EBO	Residential - EBO	926		166		79		644		889		1,815		Residential - EBO	720		178		108		532		818		1,538
Construction and land development	Construction and land development	3,579		—		—		—		—		3,579		Construction and land development	4,388		—		—		—		—		4,388
Other	Other	177		—		—		—		—		177		Other	194		—		—		—		—		194
Total loans	Total loans	$	51,256	$	209	$	92	$	644	$	945	$	52,201	Total loans	$	45,556	$	230	$	113	$	536	$	879	$	46,435


		December 31, 2021													December 31, 2022
		Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total			Current		30-59 Days Past Due		60-89 Days Past Due		Over 90 days Past Due		Total Past Due		Total
		(in millions)													(in millions)
Warehouse lending	Warehouse lending	$	5,156	$	—	$	—	$	—	$	—	$	5,156	Warehouse lending	$	5,561	$	—	$	—	$	—	$	—	$	5,561
Municipal & nonprofit	Municipal & nonprofit	1,579		—		—		—		—		1,579		Municipal & nonprofit	1,524		—		—		—		—		1,524
Tech & innovation	Tech & innovation	1,418		—		—		—		—		1,418		Tech & innovation	2,270		23		—		—		23		2,293
Equity fund resources	Equity fund resources	3,830		—		—		—		—		3,830		Equity fund resources	3,717		—		—		—		—		3,717
Other commercial and industrial	Other commercial and industrial	6,465		—		—		—		—		6,465		Other commercial and industrial	7,791		2		—		—		2		7,793
CRE - owner occupied	CRE - owner occupied	1,723		—		—		—		—		1,723		CRE - owner occupied	1,656		—		—		—		—		1,656
Hotel franchise finance	Hotel franchise finance	2,534		—		—		—		—		2,534		Hotel franchise finance	3,807		—		—		—		—		3,807
Other CRE - non-owner occupied	Other CRE - non-owner occupied	3,952		—		—		—		—		3,952		Other CRE - non-owner occupied	5,454		3		—		—		3		5,457
Residential	Residential	9,191		51		1		—		52		9,243		Residential	13,955		37		4		—		41		13,996
Residential - EBO														Residential - EBO	969		217		116		582		915		1,884
Construction and land development	Construction and land development	3,006		—		—		—		—		3,006		Construction and land development	3,995		—		—		—		—		3,995
Other	Other	169		—		—		—		—		169		Other	178		1		—		—		1		179
Total loans	Total loans	$	39,023	$	51	$	1	$	—	$	52	$	39,075	Total loans	$	50,877	$	283	$	120	$	582	$	985	$	51,862

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Credit Quality Indicators

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


		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total			Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis				Total
September 30, 2022		2022		2021		2020		2019		2018		Prior
		(in millions)

March 31, 2023																				March 31, 2023	2023				2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis				Total
																					(in millions)
Warehouse lending	Warehouse lending																			Warehouse lending
Pass	Pass	$	429	$	43	$	140	$	—	$	—	$	—			$	4,913					$	5,525	Pass	$	555	$	566	$	53	$	156	$	—			$	—			$	3,458	$	4,788
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	—		—		—		—		—		—		—				—		Classified	—				—		—		—		—		—		—				—
Total	Total	$	429	$	43	$	140	$	—	$	—	$	—	$	4,913			$	5,525	Total	$	555			$	566	$	53	$	156	$	—	$	—	$	3,458			$	4,788
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—			$	—

Municipal & nonprofit	Municipal & nonprofit																			Municipal & nonprofit
Pass	Pass	$	101	$	179	$	189	$	72	$	43	$	925	$	—			$	1,509	Pass	$	2			$	114	$	196	$	187	$	71	$	953	$	—			$	1,523
Special mention	Special mention	—		—		—		6		—		—		—				6		Special mention	—				7		—		—		—		—		—				7
Classified	Classified	—		—		—		—		—		7		—				7		Classified	—				—		—		—		6		7		—				13
Total	Total	$	101	$	179	$	189	$	78	$	43	$	932	$	—			$	1,522	Total	$	2			$	121	$	196	$	187	$	77	$	960	$	—			$	1,543
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—			$	—

Tech & innovation	Tech & innovation																			Tech & innovation
Pass	Pass	$	639	$	510	$	86	$	71	$	5	$	1	$	779			$	2,091	Pass	$	127			$	812	$	324	$	85	$	56	$	5	$	978			$	2,387
Special mention	Special mention	20		17		3		—		—		—		21				61		Special mention	3				27		8		6		—		—		10				54
Classified	Classified	4		8		—		9		—		—		2				23		Classified	4				5		16		3		—		—		2				30
Total	Total	$	663	$	535	$	89	$	80	$	5	$	1	$	802			$	2,175	Total	$	134			$	844	$	348	$	94	$	56	$	5	$	990			$	2,471
Current period gross charge-offs																				Current period gross charge-offs	$	2			$	—	$	—	$	—	$	—	$	—	$	—			$	2

Equity fund resources	Equity fund resources																			Equity fund resources
Pass	Pass	$	1,617	$	1,585	$	214	$	45	$	—	$	—	$	1,646			$	5,107	Pass	$	93			$	105	$	133	$	11	$	12	$	3	$	614			$	971
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	—		—		—		—		—		—		—				—		Classified	—				—		—		—		—		—		—				—
Total	Total	$	1,617	$	1,585	$	214	$	45	$	—	$	—	$	1,646			$	5,107	Total	$	93			$	105	$	133	$	11	$	12	$	3	$	614			$	971
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—			$	—

Other commercial and industrial	Other commercial and industrial																			Other commercial and industrial
Pass	Pass	$	2,676	$	1,817	$	259	$	393	$	339	$	251	$	2,353			$	8,088	Pass	$	520			$	1,773	$	579	$	237	$	158	$	281	$	2,300			$	5,848
Special mention	Special mention	1		32		20		3		—		—		3				59		Special mention	14				1		—		—		—		—		—				15
Classified	Classified	5		3		5		6		3		1		12				35		Classified	—				2		35		7		2		3		—				49
Total	Total	$	2,682	$	1,852	$	284	$	402	$	342	$	252	$	2,368			$	8,182	Total	$	534			$	1,776	$	614	$	244	$	160	$	284	$	2,300			$	5,912
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	6	$	1	$	—	$	—	$	—			$	7

CRE - owner occupied	CRE - owner occupied																			CRE - owner occupied
Pass	Pass	$	322	$	359	$	184	$	168	$	214	$	359	$	32			$	1,638	Pass	$	30			$	357	$	350	$	169	$	146	$	527	$	25			$	1,604
Special mention	Special mention	—		2		—		—		—		1		11				14		Special mention	—				—		—		—		—		1		—				1
Classified	Classified	8		10		1		—		5		10		—				34		Classified	—				—		14		7		5		8		6				40
Total	Total	$	330	$	371	$	185	$	168	$	219	$	370	$	43			$	1,686	Total	$	30			$	357	$	364	$	176	$	151	$	536	$	31			$	1,645

Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—			$	—

Hotel franchise finance	Hotel franchise finance																			Hotel franchise finance
Pass	Pass	$	1,386	$	727	$	54	$	559	$	321	$	164	$	118			$	3,329	Pass	$	345			$	1,696	$	660	$	53	$	527	$	281	$	118			$	3,680
Special mention	Special mention	—		—		26		51		—		—		—				77		Special mention	—				—		—		—		—		8		—				8
Classified	Classified	18		20		—		113		45		—		—				196		Classified	19				9		20		26		114		24		—				212
Total	Total	$	1,404	$	747	$	80	$	723	$	366	$	164	$	118			$	3,602	Total	$	364			$	1,705	$	680	$	79	$	641	$	313	$	118			$	3,900

Other CRE - non-owner occupied
Pass		$	1,950	$	1,187	$	874	$	268	$	166	$	233	$	259			$	4,937
Special mention		6		27		—		19		—		—		—				52
Classified		—		—		—		3		10		19		—				32
Total		$	1,956	$	1,214	$	874	$	290	$	176	$	252	$	259			$	5,021

Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—			$	—

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		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total			Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis		Total
September 30, 2022		2022		2021		2020		2019		2018		Prior
March 31, 2023																				March 31, 2023	2023				2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
																					(in millions)

Other CRE - non-owner occupied																				Other CRE - non-owner occupied
Pass																				Pass	$	429			$	2,339	$	1,093	$	871	$	260	$	294	$	199	$	5,485
Special mention																				Special mention	—				45		38		28		2		1		21		135
Classified																				Classified	—				—		5		—		20		5		—		30
Total																				Total	$	429			$	2,384	$	1,136	$	899	$	282	$	300	$	220	$	5,650
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—	$	—
		(in millions)
Residential	Residential																			Residential
Pass	Pass	$	3,714	$	8,581	$	891	$	318	$	156	$	91			$	39					$	13,790	Pass	$	81	$	3,645	$	8,312	$	837	$	282	$	221	$	29	$	13,407
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		—		—		—
Classified	Classified	1		13		—		3		1		2		—				20		Classified	—				12		12		—		3		1		—		28
Total	Total	$	3,715	$	8,594	$	891	$	321	$	157	$	93	$	39			$	13,810	Total	$	81			$	3,657	$	8,324	$	837	$	285	$	222	$	29	$	13,435
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential - EBO	Residential - EBO																			Residential - EBO
Pass	Pass	$	—	$	262	$	719	$	428	$	167	$	239	$	—			$	1,815	Pass	$	—			$	3	$	252	$	618	$	329	$	336	$	—	$	1,538
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		—		—		—
Classified	Classified	—		—		—		—		—		—		—				—		Classified	—				—		—		—		—		—		—		—
Total	Total	$	—	$	262	$	719	$	428	$	167	$	239	$	—			$	1,815	Total	$	—			$	3	$	252	$	618	$	329	$	336	$	—	$	1,538
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction and land development	Construction and land development																			Construction and land development
Pass	Pass	$	1,034	$	978	$	385	$	28	$	—	$	2	$	1,099			$	3,526	Pass	$	339			$	1,653	$	755	$	249	$	6	$	2	$	1,255	$	4,259
Special mention	Special mention	—		2		41		—		—		—		—				43		Special mention	—				—		—		99		—		—		—		99
Classified	Classified	—		1		8		1		—		—		—				10		Classified	—				2		28		—		—		—		—		30
Total	Total	$	1,034	$	981	$	434	$	29	$	—	$	2	$	1,099			$	3,579	Total	$	339			$	1,655	$	783	$	348	$	6	$	2	$	1,255	$	4,388
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other	Other																			Other
Pass	Pass	$	18	$	12	$	13	$	6	$	3	$	62	$	63			$	177	Pass	$	10			$	18	$	9	$	14	$	5	$	66	$	71	$	193
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		1		—		1
Classified	Classified	—		—		—		—		—		—		—				—		Classified	—				—		—		—		—		—		—		—
Total	Total	$	18	$	12	$	13	$	6	$	3	$	62	$	63			$	177	Total	$	10			$	18	$	9	$	14	$	5	$	67	$	71	$	194
Current period gross charge-offs																				Current period gross charge-offs	$	—			$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total by Risk Category	Total by Risk Category																			Total by Risk Category
Pass	Pass	$	13,886	$	16,240	$	4,008	$	2,356	$	1,414	$	2,327	$	11,301			$	51,532	Pass	$	2,531			$	13,081	$	12,716	$	3,487	$	1,852	$	2,969	$	9,047	$	45,683
Special mention	Special mention	27		80		90		79		—		1		35				312		Special mention	17				80		46		133		2		11		31		320
Classified	Classified	36		55		14		135		64		39		14				357		Classified	23				30		130		43		150		48		8		432
Total	Total	$	13,949	$	16,375	$	4,112	$	2,570	$	1,478	$	2,367	$	11,350			$	52,201	Total	$	2,571			$	13,191	$	12,892	$	3,663	$	2,004	$	3,028	$	9,086	$	46,435

Term Loan Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Total
December 31, 2021 2021 2020 2019 2018 2017 Prior
(in millions)
Warehouse lending
Pass $ 243 $ 12 $ — $ — $ — $ — $ 4,901 $ 5,156
Special mention — — — — — — — —
Classified — — — — — — — —
Total $ 243 $ 12 $ — $ — $ — $ — $ 4,901 $ 5,156
Municipal & nonprofit
Pass $ 129 $ 195 $ 101 $ 53 $ 219 $ 878 $ 4 $ 1,579
Special mention — — — — — — — —
Classified — — — — — — — —
Total $ 129 $ 195 $ 101 $ 53 $ 219 $ 878 $ 4 $ 1,579
Tech & innovation
Pass $ 763 $ 157 $ 101 $ 6 $ — $ 1 $ 334 $ 1,362
Special mention 26 5 — — — — 8 39
Classified 3 5 7 — — — 2 17
Total $ 792 $ 167 $ 108 $ 6 $ — $ 1 $ 344 $ 1,418
Equity fund resources
Pass $ 9 $ 2 $ — $ — $ 2 $ — $ 3,817 $ 3,830
Special mention — — — — — — — —
Classified — — — — — — — —
Total $ 9 $ 2 $ — $ — $ 2 $ — $ 3,817 $ 3,830

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		Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis				Total			Term Loan Amortized Cost Basis by Origination Year														Revolving Loans Amortized Cost Basis				Total
December 31, 2021		2021		2020		2019		2018		2017		Prior
December 31, 2022																				December 31, 2022	2022				2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis				Total
																					(in millions)

Warehouse lending																				Warehouse lending
Pass																				Pass	$	397			$	41	$	152	$	—	$	—	$	—			$	4,928			$	5,518
Special mention																				Special mention	43				—		—		—		—		—		—				43
Classified																				Classified	—				—		—		—		—		—		—				—
Total																				Total	$	440			$	41	$	152	$	—	$	—	$	—	$	4,928			$	5,561

Municipal & nonprofit																				Municipal & nonprofit
Pass																				Pass	$	107			$	185	$	187	$	78	$	43	$	917	$	—			$	1,517
Special mention																				Special mention	—				—		—		—		—		—		—				—
Classified																				Classified	—				—		—		—		—		7		—				7
Total																				Total	$	107			$	185	$	187	$	78	$	43	$	924	$	—			$	1,524

Tech & innovation																				Tech & innovation
Pass																				Pass	$	813			$	374	$	87	$	66	$	4	$	1	$	853			$	2,198
Special mention																				Special mention	36				22		3		—		—		—		20				81
Classified																				Classified	2				12		—		—		—		—		—				14
Total																				Total	$	851			$	408	$	90	$	66	$	4	$	1	$	873			$	2,293

Equity fund resources																				Equity fund resources
Pass																				Pass	$	1,020			$	1,189	$	191	$	16	$	—	$	—	$	1,301			$	3,717
Special mention																				Special mention	—				—		—		—		—		—		—				—
Classified																				Classified	—				—		—		—		—		—		—				—
Total																				Total	$	1,020			$	1,189	$	191	$	16	$	—	$	—	$	1,301			$	3,717
		(in millions)
Other commercial and industrial	Other commercial and industrial																			Other commercial and industrial
Pass	Pass	$	2,911	$	360	$	387	$	210	$	80	$	98			$	2,306					$	6,352	Pass	$	2,968	$	1,272	$	262	$	277	$	312	$	206			$	2,406			$	7,703
Special mention	Special mention	5		27		22		18		—		—		15				87		Special mention	—				44		—		—		—		—		3				47
Classified	Classified	—		10		6		2		1		—		7				26		Classified	3				21		10		3		3		1		2				43
Total	Total	$	2,916	$	397	$	415	$	230	$	81	$	98	$	2,328			$	6,465	Total	$	2,971			$	1,337	$	272	$	280	$	315	$	207	$	2,411			$	7,793

CRE - owner occupied	CRE - owner occupied																			CRE - owner occupied
Pass	Pass	$	417	$	199	$	220	$	190	$	278	$	322	$	56			$	1,682	Pass	$	338			$	359	$	174	$	157	$	211	$	339	$	29			$	1,607
Special mention	Special mention	—		—		—		10		—		2		—				12		Special mention	—				—		—		—		—		1		—				1
Classified	Classified	2		2		1		5		8		11		—				29		Classified	—				14		7		1		5		10		11				48
Total	Total	$	419	$	201	$	221	$	205	$	286	$	335	$	56			$	1,723	Total	$	338			$	373	$	181	$	158	$	216	$	350	$	40			$	1,656

Hotel franchise finance	Hotel franchise finance																			Hotel franchise finance
Pass	Pass	$	721	$	205	$	659	$	332	$	135	$	64	$	123			$	2,239	Pass	$	1,762			$	726	$	54	$	528	$	290	$	103	$	118			$	3,581
Special mention	Special mention	—		—		88		51		—		—		—				139		Special mention	—				—		26		—		—		—		—				26
Classified	Classified	30		—		99		16		11		—		—				156		Classified	18				20		—		117		45		—		—				200
Total	Total	$	751	$	205	$	846	$	399	$	146	$	64	$	123			$	2,534	Total	$	1,780			$	746	$	80	$	645	$	335	$	103	$	118			$	3,807

Other CRE - non-owner occupied	Other CRE - non-owner occupied																			Other CRE - non-owner occupied
Pass	Pass	$	1,398	$	755	$	673	$	279	$	186	$	283	$	315			$	3,889	Pass	$	2,344			$	1,201	$	870	$	264	$	160	$	218	$	315			$	5,372
Special mention	Special mention	15		—		10		—		—		1		—				26		Special mention	3				38		—		12		—		—		1				54
Classified	Classified	—		—		4		5		—		17		11				37		Classified	—				4		—		12		10		5		—				31
Total	Total	$	1,413	$	755	$	687	$	284	$	186	$	301	$	326			$	3,952	Total	$	2,347			$	1,243	$	870	$	288	$	170	$	223	$	316			$	5,457

Residential	Residential																			Residential
Pass	Pass	$	7,459	$	1,019	$	396	$	201	$	42	$	75	$	36			$	9,228	Pass	$	4,041			$	8,474	$	878	$	308	$	150	$	90	$	36			$	13,977
Special mention	Special mention	—		—		—		—		—		—		—				—		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	9		1		3		1		—		1		—				15		Classified	6				9		—		3		1		—		—				19
Total	Total	$	7,468	$	1,020	$	399	$	202	$	42	$	76	$	36			$	9,243	Total	$	4,047			$	8,483	$	878	$	311	$	151	$	90	$	36			$	13,996

Construction and land development
Residential - EBO																				Residential - EBO
Pass	Pass	$	958	$	632	$	394	$	112	$	4	$	—	$	870			$	2,970	Pass	$	3			$	268	$	712	$	454	$	191	$	256	$	—			$	1,884
Special mention	Special mention	—		22		—		—		6		—		—				28		Special mention	—				—		—		—		—		—		—				—
Classified	Classified	1		4		1		—		—		—		2				8		Classified	—				—		—		—		—		—		—				—
Total	Total	$	959	$	658	$	395	$	112	$	10	$	—	$	872			$	3,006	Total	$	3			$	268	$	712	$	454	$	191	$	256	$	—			$	1,884

Other
Pass		$	16	$	12	$	4	$	4	$	4	$	82	$	46			$	168
Special mention		—		—		—		—		—		—		—				—
Classified		—		—		—		—		—		1		—				1
Total		$	16	$	12	$	4	$	4	$	4	$	83	$	46			$	169

Total by Risk Category
Pass		$	15,024	$	3,548	$	2,935	$	1,387	$	950	$	1,803	$	12,808			$	38,455
Special mention		46		54		120		79		6		3		23				331
Classified		45		22		121		29		20		30		22				289
Total		$	15,115	$	3,624	$	3,176	$	1,495	$	976	$	1,836	$	12,853			$	39,075

Table of Contents


	Term Loan Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Total
December 31, 2022	2022		2021		2020		2019		2018		Prior
	(in millions)
Construction and land development
Pass	$	1,533	$	815	$	273	$	14	$	—	$	—	$	1,258	$	3,893
Special mention	—		—		98		—		—		—		—		98
Classified	—		—		—		4		—		—		—		4
Total	$	1,533	$	815	$	371	$	18	$	—	$	—	$	1,258	$	3,995

Other
Pass	$	23	$	10	$	13	$	5	$	2	$	61	$	64	$	178
Special mention	—		—		—		—		—		1		—		1
Classified	—		—		—		—		—		—		—		—
Total	$	23	$	10	$	13	$	5	$	2	$	62	$	64	$	179

Total by Risk Category
Pass	$	15,349	$	14,914	$	3,853	$	2,167	$	1,363	$	2,191	$	11,308	$	51,145
Special mention	82		104		127		12		—		2		24		351
Classified	29		80		17		140		64		23		13		366
Total	$	15,460	$	15,098	$	3,997	$	2,319	$	1,427	$	2,216	$	11,345	$	51,862

Restructurings for Borrowers Experiencing Financial Difficulty

The Company adopted the amendments in ASU 2022-02, which eliminated accounting guidance on TDR loans for creditors and requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty that were made on or after January 1, 2023. See “Note 1. Summary of Significant Accounting Policies” of these Notes to Unaudited Financial Statements for further discussion of the amendments in this update.

The following table presents the amortized cost of loans HFI that were modified during the period by loan portfolio segment:


	March 31, 2023
	Payment Delay and Term Extension		Term Extension		Payment Delay		Total		% of Total Class of Financing Receivable
	(in millions)


Tech & innovation	$	2	$	—	$	5	$	7	0.3	%



Hotel franchise finance	—		18		—		18		0.5

Residential	—		—		1		1		0.0



Total	$	2	$	18	$	6	$	26	0.1	%

None of the loans that were modified were in payment default and the loans remain current with contractual payments as of March 31, 2023.

In the normal course of business, the Company also modifies EBO loans, which are delinquent FHA, VA, or USDA insured or guaranteed loans repurchased under the terms of the GNMA MBS program and can be repooled or resold when loans are brought current. During the three months ended March 31, 2023, the Company completed modifications of EBO loans with an amortized cost of $57 million. These modifications were largely payment delays and term extensions, or both.

Troubled Debt Restructurings

~~A TDR loan is~~Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan ~~on which the Company, for reasons related to a borrower’s financial difficulties, grants~~that resulted in granting a concession to ~~the~~a borrower ~~that the Company would not otherwise consider.~~experiencing financial difficulties as a TDR. The loan terms that ~~have been~~were modified or restructured due to a borrower’s financial situation ~~include,~~included, but ~~are~~were 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~~were extensions in terms or deferral of payments which ~~result~~resulted in no lost principal or interest. Consistent with regulatory guidance, a TDR loan that iswas subsequently modified in another restructuring agreement but ~~has~~had shown sustained performance and classification as a TDR, ~~will be~~was removed from TDR status provided that the modified terms were market-based at the time of modification.

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The following table presents TDR ~~loans:~~loans by loan portfolio segment:


		September 30, 2022			December 31, 2021				December 31, 2022
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment
		(dollars in millions)

Tech & innovation		1	$	3	2	$	2

Other commercial and industrial	Other commercial and industrial	7	8		7	6		Other commercial and industrial	4	$	2
CRE - owner occupied	CRE - owner occupied	1	1		1	1		CRE - owner occupied	1	1
Hotel franchise finance	Hotel franchise finance	1	10		—	—		Hotel franchise finance	1	10
Other CRE - non-owner occupied	Other CRE - non-owner occupied	3	8		5	11		Other CRE - non-owner occupied	1	1

Construction and land development		1	1		1	1

Total	Total	14	$	31	16	$	21	Total	7	$	14

~~The allowance for credit losses~~As of December 31, 2022, the ACL on TDR loans totaled $5$4 million and ~~zero as of September 30, 2022 and December 31, 2021, respectively. There~~there were ~~$1 million and zero~~no outstanding commitments on TDR ~~loans as of September 30, 2022 and December 31, 2021, respectively.~~loans.

During the three months ended ~~September 30,~~March 31, 2022, the Company had ~~two~~one new TDR ~~loans~~loan with a recorded investment of ~~$14 million. During the nine months ended September 30, 2022, the Company had four new TDR loans with a recorded investment of $17~~$4 million. No principal amounts were forgiven and there were no waived fees or other expenses resulting from these TDR loans. During the three months ended September 30, 2021, the Company had no new TDR loans. During the nine months ended September 30, 2021, the Company had 9 new TDR loans with a recorded investment of $13 million. No principal amounts were forgiven and there were no waived fees or other expenses resulting from these TDR loans.this TDR.

A TDR loan iswas deemed to have a payment default when it ~~becomes~~became past due 90 days under the modified terms, ~~goes~~went on nonaccrual status, or iswas restructured again. Payment defaults, along with other qualitative indicators, ~~are~~were considered by management in the determination of the ~~allowance for credit losses.~~ACL. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, there were no loans for which there was a payment default within 12 months following the modification. During the three months ended September 30, 2021, there were no loans for which there was a payment default within 12 months following the modification. During the nine months ended September 30, 2021, there was one commercial and industrial loan with a recorded investment of $4 million for which there was a payment default within 12 months following the modification, which resulted in a charge-off of $2 million.

Collateral-Dependent Loans

The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment:


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Real Estate Collateral		Other Collateral		Total		Real Estate Collateral		Other Collateral		Total			Real Estate Collateral		Other Collateral		Total		Real Estate Collateral		Other Collateral		Total
		(in millions)													(in millions)

Municipal & nonprofit	Municipal & nonprofit	$	—	$	8	$	8	$	—	$	—	$	—	Municipal & nonprofit	$	—	$	7	$	7	$	—	$	7	$	7

Tech & innovation														Tech & innovation	—		—		—		—		6		6

Other commercial and industrial	Other commercial and industrial	—		16		16		—		13		13		Other commercial and industrial	—		10		10		—		30		30
CRE - owner occupied	CRE - owner occupied	24		—		24		23		—		23		CRE - owner occupied	35		—		35		42		—		42
Hotel franchise finance	Hotel franchise finance	182		—		182		156		—		156		Hotel franchise finance	169		—		169		186		—		186
Other CRE - non-owner occupied	Other CRE - non-owner occupied	28		—		28		31		—		31		Other CRE - non-owner occupied	27		—		27		27		—		27

Construction and land development	Construction and land development	10		—		10		4		—		4		Construction and land development	30		—		30		4		—		4

Total	Total	$	244	$	24	$	268	$	214	$	13	$	227	Total	$	261	$	17	$	278	$	259	$	43	$	302

The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended ~~September 30, 2022.~~March 31, 2023.

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Allowance for Credit Losses

The ~~allowance for credit losses~~ACL consists of the ~~allowance for credit losses~~ACL on funded loans HFI ~~loans~~ and an ~~allowance for credit losses~~ACL on unfunded loan commitments. The ~~allowance for credit losses~~ACL on HTM securities is estimated separately from loans, see "Note 3. Investment Securities" of these Notes to Unaudited Consolidated Financial Statements for further discussion. Management considers the level of ~~allowance for credit losses~~ACL to be a reasonable and supportable estimate of expected credit losses inherent within the Company's HFI loan portfolio as of ~~September 30, 2022.~~March 31, 2023.

The below tables reflect the activity in the ~~allowance for credit losses~~ACL on loans HFI ~~loans~~ by loan portfolio segment, which includes an estimate of future recoveries:


		Three Months Ended September 30, 2022										Three Months Ended March 31, 2023
		Balance, June 30, 2022		Provision for (Recovery of) Credit Losses		Charge-offs		Recoveries		Balance, September 30, 2022				Balance, December 31, 2022		Provision for (Recovery of) Credit Losses		Charge-offs		Recoveries		Balance, March 31, 2023
		(in millions)										(in millions)
Warehouse lending	Warehouse lending	$	3.7	$	0.7	$	—	$	—	$	4.4		Warehouse lending	$	8.4	$	(1.8)	$	—	$	—	$	6.6
Municipal & nonprofit	Municipal & nonprofit	13.6		1.6		—		—		15.2			Municipal & nonprofit	15.9		2.5		—		—		18.4
Tech & innovation	Tech & innovation	25.4		(0.2)		—		—		25.2			Tech & innovation	30.8		7.4		1.8		—		36.4
Equity fund resources	Equity fund resources	14.0		(3.1)		—		—		10.9			Equity fund resources	6.4		(3.1)		—		—		3.3
Other commercial and industrial	Other commercial and industrial	119.2		(14.7)		2.1		(3.8)		106.2			Other commercial and industrial	85.9		(30.7)		7.3		(3.2)		51.1
CRE - owner occupied	CRE - owner occupied	7.5		(0.8)		—		—		6.7			CRE - owner occupied	7.1		1.5		—		—		8.6
Hotel franchise finance	Hotel franchise finance	33.8		17.2		—		—		51.0			Hotel franchise finance	46.9		0.8		—		—		47.7
Other CRE - non-owner occupied	Other CRE - non-owner occupied	22.1		11.2		—		(0.1)		33.4			Other CRE - non-owner occupied	47.4		19.0		—		—		66.4
Residential	Residential	18.8		6.8		—		—		25.6			Residential	30.4		1.3		—		—		31.7
Residential - EBO	Residential - EBO	—		—		—		—		—			Residential - EBO	—		—		—		—		—
Construction and land development	Construction and land development	12.2		10.1		—		(0.1)		22.4			Construction and land development	27.4		4.1		—		—		31.5
Other	Other	2.9		0.2		—		—		3.1			Other	3.1		—		0.1		—		3.0
Total	Total	$	273.2	$	29.0	$	2.1	$	(4.0)	$	304.1		Total	$	309.7	$	1.0	$	9.2	$	(3.2)	$	304.7


		Nine Months Ended September 30, 2022										Three Months Ended March 31, 2022
		Balance, December 31, 2021		Provision for (Recovery of) Credit Losses		Charge-offs		Recoveries		Balance, September 30, 2022				Balance, December 31, 2021		Provision for (Recovery of) Credit Losses		Charge-offs		Recoveries		Balance, March 31, 2022
		(in millions)										(in millions)
Warehouse lending	Warehouse lending	$	3.0	$	1.4	$	—	$	—	$	4.4		Warehouse lending	$	3.0	$	(0.1)	$	—	$	—	$	2.9
Municipal & nonprofit	Municipal & nonprofit	13.7		1.5		—		—		15.2			Municipal & nonprofit	13.7		(0.3)		—		—		13.4
Tech & innovation	Tech & innovation	25.7		(2.5)		—		(2.0)		25.2			Tech & innovation	25.7		0.3		—		(2.0)		28.0
Equity fund resources	Equity fund resources	9.6		1.3		—		—		10.9			Equity fund resources	9.6		(3.0)		—		—		6.6
Other commercial and industrial	Other commercial and industrial	103.6		4.7		7.0		(4.9)		106.2			Other commercial and industrial	103.6		14.3		2.6		(0.4)		115.7
CRE - owner occupied	CRE - owner occupied	10.6		(4.0)		—		(0.1)		6.7			CRE - owner occupied	10.6		(2.5)		—		—		8.1
Hotel franchise finance	Hotel franchise finance	41.5		9.5		—		—		51.0			Hotel franchise finance	41.5		(10.9)		—		—		30.6
Other CRE - non-owner occupied	Other CRE - non-owner occupied	16.9		16.4		—		(0.1)		33.4			Other CRE - non-owner occupied	16.9		(1.6)		—		—		15.3
Residential	Residential	12.5		13.1		—		—		25.6			Residential	12.5		11.3		—		—		23.8
Residential - EBO		—		—		—		—		—
Construction and land development	Construction and land development	12.5		9.8		—		(0.1)		22.4			Construction and land development	12.5		(1.8)		—		—		10.7
Other	Other	2.9		0.1		0.1		(0.2)		3.1			Other	2.9		(0.4)		—		—		2.5
Total	Total	$	252.5	$	51.3	$	7.1	$	(7.4)	$	304.1		Total	$	252.5	$	5.3	$	2.6	$	(2.4)	$	257.6

Accrued interest receivable of $297 million and $304 million at March 31, 2023 and December 31, 2022, respectively, was excluded from the estimate of credit losses. Whereas, accrued interest receivable related to the Company's Residential-EBO loan portfolio segment was included in the estimate of credit losses and had an allowance of $8 million and $9 million, as of March 31, 2023 and December 31, 2022, respectively.

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

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

Accrued interest receivable on loans totaled $263 million and $198 million at September 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses, except for accrued interest related to the Residential-EBO loan portfolio segment, which has an allowance of $7 million as of September 30, 2022.

The below table reflects the activity in the ~~allowance for credit losses~~ACL on unfunded loan commitments:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in millions)									(in millions)
Balance, beginning of period	Balance, beginning of period	$	53.8	$	31.3	$	37.6	$	37.0	Balance, beginning of period	$	47.0	$	37.6
(Recovery of) provision for credit losses		(1.7)		0.8		14.5		(4.9)
Provision for credit losses										Provision for credit losses	(2.2)		5.7
Balance, end of period	Balance, end of period	$	52.1	$	32.1	$	52.1	$	32.1	Balance, end of period	$	44.8	$	43.3

The following tables disaggregate the Company's ACL on funded loans HFI and loan balances by measurement methodology:


	March 31, 2023
	Loans						Allowance
	Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total
	(in millions)
Warehouse lending	$	4,788	$	—	$	4,788	$	6.6	$	—	$	6.6
Municipal & nonprofit	1,536		7		1,543		15.9		2.5		18.4
Tech & innovation	2,441		30		2,471		33.0		3.4		36.4
Equity fund resources	971		—		971		3.3		—		3.3
Other commercial and industrial	5,866		46		5,912		44.7		6.4		51.1
CRE - owner occupied	1,608		37		1,645		8.6		—		8.6
Hotel franchise finance	3,689		211		3,900		47.7		—		47.7
Other CRE - non-owner occupied	5,623		27		5,650		66.4		—		66.4
Residential	13,435		—		13,435		31.7		—		31.7
Residential EBO	1,538		—		1,538		—		—		—
Construction and land development	4,358		30		4,388		31.5		—		31.5
Other	194		—		194		3.0		—		3.0
Total	$	46,047	$	388	$	46,435	$	292.4	$	12.3	$	304.7


	December 31, 2022
	Loans						Allowance
	Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total		Collectively Evaluated for Credit Loss		Individually Evaluated for Credit Loss		Total
	(in millions)
Warehouse lending	$	5,561	$	—	$	5,561	$	8.4	$	—	$	8.4
Municipal & nonprofit	1,517		7		1,524		13.4		2.5		15.9
Tech & innovation	2,280		13		2,293		30.3		0.5		30.8
Equity fund resources	3,717		—		3,717		6.4		—		6.4
Other commercial and industrial	7,754		39		7,793		80.4		5.5		85.9
CRE - owner occupied	1,612		44		1,656		7.1		—		7.1
Hotel franchise finance	3,607		200		3,807		44.7		2.2		46.9
Other CRE - non-owner occupied	5,428		29		5,457		47.4		—		47.4
Residential	13,996		—		13,996		30.4		—		30.4
Residential EBO	1,884		—		1,884		—		—		—
Construction and land development	3,991		4		3,995		27.4		—		27.4
Other	179		—		179		3.1		—		3.1
Total	$	51,526	$	336	$	51,862	$	299.0	$	10.7	$	309.7

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

September 30, 2022
Loans Allowance
Collectively Evaluated for Credit Loss Individually Evaluated for Credit Loss Total Collectively Evaluated for Credit Loss Individually Evaluated for Credit Loss Total
(in millions)
Warehouse lending $ 5,525 $ — $ 5,525 $ 4.4 $ — $ 4.4
Municipal & nonprofit 1,515 7 1,522 12.7 2.5 15.2
Tech & innovation 2,152 23 2,175 21.9 3.3 25.2
Equity fund resources 5,107 — 5,107 10.9 — 10.9
Other commercial and industrial 8,149 33 8,182 99.6 6.6 106.2
CRE - owner occupied 1,655 31 1,686 6.7 — 6.7
Hotel franchise finance 3,406 196 3,602 44.6 6.4 51.0
Other CRE - non-owner occupied 4,991 30 5,021 33.4 — 33.4
Residential 13,810 — 13,810 25.6 — 25.6
Residential EBO 1,815 — 1,815 — — —
Construction and land development 3,569 10 3,579 22.4 — 22.4
Other 177 — 177 3.1 — 3.1
Total $ 51,871 $ 330 $ 52,201 $ 285.3 $ 18.8 $ 304.1

December 31, 2021
Loans Allowance
Collectively Evaluated for Credit Loss Individually Evaluated for Credit Loss Total Collectively Evaluated for Credit Loss Individually Evaluated for Credit Loss Total
(in millions)
Warehouse lending $ 5,156 $ — $ 5,156 $ 3.0 $ — $ 3.0
Municipal & nonprofit 1,579 — 1,579 13.7 — 13.7
Tech & innovation 1,401 17 1,418 22.9 2.8 25.7
Equity fund resources 3,830 — 3,830 9.6 — 9.6
Other commercial and industrial 6,442 23 6,465 101.1 2.5 103.6
CRE - owner occupied 1,699 24 1,723 10.6 — 10.6
Hotel franchise finance 2,378 156 2,534 30.7 10.8 41.5
Other CRE - non-owner occupied 3,917 35 3,952 16.9 — 16.9
Residential 9,243 — 9,243 12.5 — 12.5
Construction and land development 2,998 8 3,006 12.5 — 12.5
Other 169 — 169 2.9 — 2.9
Total $ 38,812 $ 263 $ 39,075 $ 236.4 $ 16.1 $ 252.5

Loan Purchases and Sales

Loan purchases, which consisted primarily of commercial and industrial and residential loans, during the three months ended March 31, 2023 totaled $511 million. Loan purchases during the three months ended ~~September 30,~~March 31, 2022 ~~and 2021~~ totaled ~~$2.7~~$2.4 billion and $2.9 billion, respectively, which primarily consisted of residential loan purchases. Loan purchases during the nine months ended September 30, 2022 and 2021 totaled $8.2 billion and $6.3 billion, respectively, and also primarily consisted of residential loan purchases. There were no loans purchased with more-than-insignificant deterioration in credit quality during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company ~~had loan sales~~sold loans with a carrying value of ~~$210 million and $226~~approximately $915 million and recognized a net loss of ~~$0.5~~$17.3 million ~~and $0.8 million, respectively.~~on these loan sales. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the Company did not have significant sales of ~~HFI loans.~~loans HFI.

~~Table of Contents~~

6.5. MORTGAGE SERVICING RIGHTS

~~The Company acquired MSRs initially as part of the AmeriHome acquisition and continues to generate new MSRs from its mortgage banking business.~~ The following table presents the changes in fair value of the Company's MSR ~~assets~~portfolio related to its mortgage banking business and other information related to its servicing portfolio:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 (1) 2022 2021 (1) (2)
(in millions)
Balance, beginning of period $ 826 $ 726 $ 698 $ —
Acquired in AmeriHome acquisition — — — 1,376
Additions from loans sold with servicing rights retained 180 230 578 513
MSRs sold — (327) (350) (1,199)
Change in fair value 63 15 206 22
Realization of cash flows (25) (39) (88) (107)
Balance, end of period $ 1,044 $ 605 $ 1,044 $ 605
Unpaid principal balance of mortgage loans serviced for others $ 62,841 $ 47,211

~~(1)Does not include the effect of acquisition measurement period adjustments recorded during the fourth quarter of 2021, as disclosed in the Company's audited Consolidated Financial Statements.~~

~~(2)Period from April 7, 2021, the acquisition date of AmeriHome, through September 30, 2021.~~


	Three Months Ended March 31,
	2023		2022
	(in millions)
Balance, beginning of period	$	1,148	$	698

Additions from loans sold with servicing rights retained	142		204
MSRs sold	(350)		—
Change in fair value	(8)		81
Mark to market adjustments	3		—
Realization of cash flows	(25)		(33)
Balance, end of period	$	910	$	950

Unpaid principal balance of mortgage loans serviced for others	$	58,466	$	65,547

Changes in the fair value of MSRs are recorded as Net loan servicing revenue in the Consolidated Income Statement. Due to the regulatory capital impact of MSRs on capital ratios, the Company sells certain MSRs and related servicing advances in the normal course of business. During the three months ended ~~September 30, 2022, the Company did not have MSR sales. During the nine months ended September 30, 2022,~~March 31, 2023, MSR sales had an aggregate net sales price of $350 million and the UPB of loans underlying these sales totaled ~~$24.1~~$19.5 billion. During the three months ended September 30, 2021, these sales had an aggregate net sales price of $329 million and the UPB of loans underlying these sales totaled $23.3 billion. During the period from the AmeriHome acquisition date through September 30, 2021,March 31, 2022, the Company ~~completed sales of MSRs and related servicing advances with an aggregate net sales price of $1.2 billion and UPB of loans underlying these sales of $88.6 billion.~~did not have MSR sales. As of ~~September 30,~~March 31, 2023 and December 31, 2022, the Company had a remaining receivable balance of ~~$49~~$54 million and $39 million, respectively, related to holdbacks on MSR sales for ~~pending~~ servicing ~~transfer,~~transfers, which ~~was~~were recorded in Other assets on the Consolidated Balance Sheet.

The Company receives loan servicing fees, net of subservicing costs, based on the UPB of the underlying loans. Loan servicing fees are collected from payments made by borrowers. The Company may receive other remuneration from rights to various borrower contracted fees, such as late charges, collateral reconveyance charges, and non-sufficient funds fees. Contractually specified servicing fees, late fees, and ancillary income associated with the Company's MSR portfolio totaled ~~$48.9 million and $140.7 million for the three and nine months ended September 30, 2022, respectively, and $41.5 million and $102.4~~$62.9 million for the three months ended March 31, 2023 and ~~period from~~$42.9 million for the ~~AmeriHome acquisition on April 7, 2021 through September 30, 2021, respectively,~~three months ended March 31, 2022, which are recorded as Net loan servicing revenue in the Consolidated Income Statement.

In accordance with its contractual loan servicing obligations, the Company is required to advance funds to or on behalf of investors when borrowers do not make payments. The Company advances property taxes and insurance premiums for borrowers who have insufficient funds in escrow accounts, plus any other costs to preserve real estate properties. The Company may also advance funds to maintain, repair, and market foreclosed real estate properties. The Company is entitled to recover all or a portion of the advances from borrowers of reinstated and performing loans, from the proceeds of liquidated properties or from the government agency or GSE guarantor of charged-off loans. Servicing advances are charged-off when they are deemed to be uncollectible. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, net servicing advances totaled ~~$76~~$87 million and ~~$82~~$102 million, respectively, which are recorded as Other assets on the Consolidated Balance Sheet.

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

~~September 30, 2022~~March 31, 2023

(in millions)

Fair value of mortgage servicing rights

~~1,044~~910

Increase (decrease) in fair value resulting from:

Interest rate change of 50 basis points

Adverse change

~~(36)~~(52)

Favorable change

2848

Discount rate change of 50 basis points

Increase

~~(21)~~(18)

Decrease

2219

Conditional prepayment rate change of 1%

Increase

~~(26)~~(22)

Decrease

2924

Cost to service change of 10%

Increase

(13)

Decrease

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

6. DEPOSITS

The table below summarizes deposits by type:


	March 31, 2023		December 31, 2022
	(in millions)
Non-interest-bearing demand deposits	$	16,465	$	19,691
Interest-bearing transaction accounts	10,719		9,507
Savings and money market accounts	13,845		19,397
Time certificates of deposit ($250,000 or more)	4,998		3,815
Other time deposits	1,560		1,234
Total deposits	$	47,587	$	53,644

WAB is a participant in the IntraFi Network, a network that offers deposit placement services such as CDARS and ICS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance. At March 31, 2023, the Company had $8.0 billion of reciprocal deposits, compared to $2.8 billion at December 31, 2022.

Brokered deposits provide an additional source of deposits and are placed with the Bank through third-party brokers. At March 31, 2023 and December 31, 2022, the Company reported wholesale brokered deposits of $8.1 billion and $4.8 billion, respectively. Brokered deposits of $8.1 billion at March 31, 2023 include $3.0 billion of reciprocal deposits that exceeded the $5.0 billion reciprocal deposits reporting exclusion threshold.

In addition, deposits for which the Company provides account holders with earnings credits or referral fees totaled $13.4 billion and $12.9 billion at March 31, 2023 and December 31, 2022, respectively. The Company incurred $85.6 million and $8.7 million in deposit related costs on these deposits during the three months ended March 31, 2023 and 2022, respectively. These costs are reported as Deposit costs in non-interest expense. The increase in these costs from the prior year is due to an increase in earnings credit rates as well as an increase in average deposit balances eligible for earnings credits or referral fees.

Table of Contents

7. OTHER BORROWINGS

The following table summarizes the Company’s borrowings as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
Short-Term:	Short-Term:					Short-Term:
Federal funds purchased	Federal funds purchased	$	1,010	$	675	Federal funds purchased	$	400	$	640
BTFP advances						BTFP advances	1,300		—
FHLB advances	FHLB advances	4,000		—		FHLB advances	11,000		4,300

Warehouse borrowings						Warehouse borrowings	566		—
Repurchase agreements	Repurchase agreements	26		17		Repurchase agreements	1,508		27
Secured borrowings	Secured borrowings	60		35		Secured borrowings	46		25
Total short-term borrowings	Total short-term borrowings	$	5,096	$	727	Total short-term borrowings	$	14,820	$	4,992
Long-Term:	Long-Term:					Long-Term:

AmeriHome senior notes, net of fair value adjustment	AmeriHome senior notes, net of fair value adjustment	$	316	$	318	AmeriHome senior notes, net of fair value adjustment	$	314	$	315
Credit linked notes, net of debt issuance costs	Credit linked notes, net of debt issuance costs	907		457		Credit linked notes, net of debt issuance costs	719		992
Total long-term borrowings	Total long-term borrowings	$	1,223	$	775	Total long-term borrowings	$	1,033	$	1,307

Total other borrowings	Total other borrowings	$	6,319	$	1,502	Total other borrowings	$	15,853	$	6,299

Short-Term Borrowings

Federal Funds Lines of Credit

The Company maintains overnight federal fund lines of credit totaling ~~$4.7~~$1.1 billion as of ~~September 30, 2022,~~March 31, 2023, which have rates comparable to the federal funds effective rate plus 0.10% to 0.20%.

FHLB and FRB Advances

The Company also maintains secured overnight 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. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had additional available credit with the FHLB of approximately ~~$7.1 billion~~$676 million and ~~$7.8 billion respectively, and with the FRB of approximately $5.0 billion and $3.4~~$6.8 billion respectively. The weighted average rate on FHLB advances was ~~3.22%~~5.06% and 4.70% as of ~~September 30,~~March 31, 2023 and December 31, 2022, respectively.

The FRB established the BTFP in March 2023, which offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral valued at par. The rate for BTFP advances is the one-year overnight index swap rate plus 10 basis points and is fixed for the term of the advance. The weighted average rate on BTFP advances was 4.76% as of March 31, 2023. The Company had additional available credit of $54 million under the BTFP as of March 31, 2023. Other available credit with the FRB totaled $16.6 billion and $5.2 billion as of March 31, 2023 and December 31, 2022, respectively.

Warehouse Borrowings

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

As of March 31, 2023, the Company had access to approximately $1.0 billion in uncommitted warehouse funding, of which $566 million was drawn at a weighted average borrowing rate of 5.09%. There were no warehouse borrowings outstanding at December 31, 2022.

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Repurchase Agreements

Other short-term borrowing sources available to the Company include securities and customer ~~and~~repurchase agreements. The Company's securities repurchase ~~agreements.~~agreements are collateralized by CLO investments. The balance and weighted average rate on these agreements was $1.5 billion and 6.39%, respectively, as of March 31, 2023. There were no securities repurchase agreements outstanding at December 31, 2022.

The balance of customer repurchase agreements was ~~0.16%~~$8 million and $27 million as of March 31, 2023 and December 31, 2022, respectively, and the weighted average rate was 0.22% and 0.15% as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Secured Borrowings

Secured borrowings consist of transfers of loans HFS not qualifying for sales accounting treatment. The weighted average interest rate on secured borrowings was ~~5.46%~~6.43% and ~~3.05%~~6.39% as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Warehouse Borrowings~~

~~As of September 30, 2022, the Company had access to approximately $1.0 billion in uncommitted warehouse funding, of which no amounts were drawn.~~

Long-Term Borrowings

AmeriHome Senior Notes

Prior to the Company's acquisition of AmeriHome, in October 2020, AmeriHome issued senior notes with an aggregate principal amount of $300 million, maturing on October 26, 2028. The senior notes accrue interest at a rate of 6.50% per annum, paid semiannually. The senior notes contain provisions that allow for redemption of up to 40% of the original aggregate principal amount of the notes during the first three years after issuance at a price equal to 106.50%, plus accrued and unpaid interest. After this three-year period, AmeriHome may redeem some or all of the senior notes at a price equal to 103.25% of the outstanding principal amount, plus accrued and unpaid interest. In 2025, the redemption price of these senior notes declines to 100% of the outstanding principal balance. The carrying amount of the senior notes includes a fair value adjustment (premium) of $19 million recognized as of the acquisition date that is being amortized over the term of the notes.

Credit Linked Notes

The Company ~~has~~ entered into credit linked note transactions that effectively transfer the risk of first losses on certain pools of the Company’s warehouse and equity fund resource loans to the purchasers of these notes. In the event of a failure to pay by the relevant obligor, insolvency of the relevant obligor, or restructuring of such loans that results in a loss on a loan that is included in any of the reference pools, the principal balance of the notes will be reduced to the extent of such loss and a gain on recovery of credit guarantees will be recognized within non-interest income in the Consolidated Income Statement. The purchasers of the notes have the option to acquire the underlying reference loan in the event of obligor default. ~~Losses~~There have been no historical losses on the warehouse lines of credit and equity fund resource ~~loans have not generally been significant.~~loans.

The Company ~~has~~ also entered into credit linked note transactions that effectively transfer the risk of first losses on reference pools of the Company's loans purchased under its residential mortgage purchase program to the purchasers of the notes. The principal and interest payable on these notes may be reduced by a portion of the Company's loss on such loans if one of the following occurs with respect to a covered loan: (i) realized losses incurred by the Company on a loan following a liquidation of the loan or certain other events, or (ii) a modification of the loan resulting in a reduction in payments. The aggregate losses, if any, for each payment date will be allocated to reduce the class principal amount and (for modifications) the current interest of the notes in reverse order of class priority. Losses on residential mortgages have not generally been significant.

~~Table of Contents~~

The Company's credit linked note issuances are detailed in the tables below:

September 30, 2022
Description Issuance Date Maturity Date Interest Rate Principal Debt Issuance Costs
(in millions)
Residential mortgage loans (1) June 30, 2022 April 25, 2052 SOFR + 6.00% $ 191 $ 3
Equity fund resource loans (2) June 23, 2022 June 30, 2028 SOFR + 6.75% 300 5
Residential mortgage loans (3) December 29, 2021 July 25, 2059 SOFR + 4.67% 206 3
Warehouse loans (4) June 28, 2021 December 30, 2024 LIBOR + 5.50% 242 2
Total $ 939 $ 13

March 31, 2023

Description

Issuance Date

Maturity Date

Interest Rate

Principal

Debt Issuance Costs

(in millions)

Residential mortgage loans (1)

December 12, 2022

October 25, 2052

SOFR + 7.80%

Residential mortgage loans (2)

June 30, 2022

April 25, 2052

SOFR + 6.00%

187

Equity fund resource loans (3)

June 23, 2022

June 30, 2028

SOFR + 6.75%

275

Residential mortgage loans (4)

December 29, 2021

July 25, 2059

SOFR + 4.67%

199

Total

755

Table of Contents

December 31, 2022

Description

Issuance Date

Maturity Date

Interest Rate

Principal

Debt Issuance Costs

(in millions)

Residential mortgage loans (1)

December 12, 2022

October 25, 2052

SOFR + 7.80%

Residential mortgage loans (2)

June 30, 2022

April 25, 2052

SOFR + 6.00%

189

Equity fund resource loans (3)

June 23, 2022

June 30, 2028

SOFR + 6.75%

300

Residential mortgage loans (4)

December 29, 2021

July 25, 2059

SOFR + 4.67%

202

Warehouse loans (5)

June 28, 2021

December 30, 2024

LIBOR + 5.50%

242

Total

1,028

(1) There are multiple classes of these notes, each with an interest rate of SOFR plus a spread that ranges from 2.25% to 11.00% (or, a weighted average spread of 7.80%) on a reference pool balance of $1.9 billion as of March 31, 2023 and December 31, 2022.

(2) There are multiple classes of these notes, each with an interest rate of SOFR plus a spread that ranges from 2.25% to 15.00% (or, a weighted average spread of 6.00%) on a reference pool balance of $3.7 billion and $3.8 billion as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

~~(2)~~(3) These notes had a reference pool balance of ~~$2.2~~$1.5 billion and $1.6 billion as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

~~(3)~~(4) There are six classes of these notes, each with an interest rate of SOFR plus a spread that ranges from 3.15% to 8.50% (or, a weighted average spread of 4.67%) on a reference pool balance of $3.9 billion and $4.0 billion as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

~~(4) The benchmark rate on these notes will convert to SOFR upon the discontinuation of LIBOR in June 2023.~~(5) These notes had a reference pool balance of ~~$754~~$689 million ~~as of September 30, 2022.~~

December 31, 2021
Description Issuance Date Maturity Date Interest Rate Principal Debt Issuance Costs
(in millions)
Residential mortgage loans (1) December 29, 2021 July 25, 2059 SOFR + 4.67% $ 228 $ 3
Warehouse loans (2) June 28, 2021 December 30, 2024 LIBOR + 5.50% 242 2
Total $ 470 $ 5

(1) There are six classes of these notes, each with an interest rate of SOFR plus a spread that ranges from 3.15% to 8.50% (or, a weighted average spread of 4.67%) on a reference pool balance of $4.6 billion as of December 31, ~~2021.~~2022.

~~(2) The benchmark rate~~During the three months ended March 31, 2023, the Company recognized a gain on ~~these notes will convert~~extinguishment of debt of $12.7 million related to ~~SOFR upon~~ the ~~discontinuation~~pay off of ~~LIBOR in June 2023. These notes had~~the credit linked note on its warehouse loans and a ~~reference pool balance~~paydown of ~~$1.9 billion as~~$25 million on the credit linked note on its equity fund resource loans.

Table of ~~December 31, 2021.~~Contents

8. QUALIFYING DEBT

Subordinated Debt

The Company's subordinated debt issuances are detailed in the ~~table~~tables below:


September 30, 2022
March 31, 2023										March 31, 2023
Description	Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs		Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs
						(in millions)									(in millions)
WAL fixed-to-variable-rate (1)	WAL fixed-to-variable-rate (1)	June 2021	June 15, 2031	3.00	%	$	600	$	7	WAL fixed-to-variable-rate (1)	June 2021	June 15, 2031	3.00	%	$	600	$	6
WAB fixed-to-variable-rate (2)	WAB fixed-to-variable-rate (2)	May 2020	June 1, 2030	5.25	%	225		2		WAB fixed-to-variable-rate (2)	May 2020	June 1, 2030	5.25	%	225		1
Total	Total					$	825	$	9	Total					$	825	$	7

(1) Notes are redeemable, in whole or in part, beginning on June 15, 2026 at their principal amount plus accrued and unpaid interest and has a fixed interest rate of 3.00%. The notes also convert to a variable rate of three-month SOFR plus 225 basis points on this date.

(2) Debt is redeemable, in whole or in part, on or after June 1, 2025 at its principal amount plus accrued and unpaid interest and has a fixed interest rate of 5.25% through June 1, 2025 and then converts to a variable rate per annum equal to three-month SOFR plus 512 basis points.


December 31, 2021
December 31, 2022										December 31, 2022
Description	Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs		Description	Issuance Date	Maturity Date	Interest Rate		Principal		Debt Issuance Costs
						(in millions)									(in millions)
WAL fixed-to-variable-rate (1)	WAL fixed-to-variable-rate (1)	June 2021	June 15, 2031	3.00	%	$	600	$	8	WAL fixed-to-variable-rate (1)	June 2021	June 15, 2031	3.00	%	$	600	$	7
WAB fixed-to-variable-rate (2)	WAB fixed-to-variable-rate (2)	May 2020	June 1, 2030	5.25	%	225		2		WAB fixed-to-variable-rate (2)	May 2020	June 1, 2030	5.25	%	225		1
Total	Total					$	825	$	10	Total					$	825	$	8

The carrying value of all subordinated debt issuances totaled ~~$816~~$818 million and ~~$815~~$817 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Table of Contents~~

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 in 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 ~~$73~~$77 million and ~~$81~~$76 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022, respectively, with maturity dates ranging from 2033 through 2037. The weighted average interest rate of all junior subordinated debt as of ~~September 30, 2022~~March 31, 2023 was ~~6.09%~~7.53%, which is equal to three-month LIBOR plus the contractual spread of 2.34%, compared to a weighted average interest rate of ~~2.55%~~7.11% at December 31, ~~2021.~~2022. Subsequent to June 30, 2023, interest rates on the Company's junior subordinated debt will be based on SOFR plus a spread adjustment.

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

Table of Contents

9. STOCKHOLDERS' EQUITY

Stock-Based Compensation

Restricted Stock Awards

Restricted stock awards granted to employees generally vest over a 3-year ~~period. Stock~~period and stock grants made to non-employee WAL directors ~~in 2022 were fully vested on July 1, 2022.~~generally vest over six months. The Company estimates the compensation cost for stock grants based upon the grant date fair value. Stock compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. The aggregate grant date fair value for the restricted stock awards granted during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 was ~~$0.8~~$44.5 million and ~~$42.2~~$40.0 million, respectively. Stock compensation expense related to restricted stock awards granted to employees is 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 the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized ~~$7.1~~$8.5 million ~~and $21.8 million, respectively,~~ in stock-based compensation expense related to these stock grants, compared to ~~$5.0 million and $17.2~~$7.1 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~

In addition, the Company previously granted shares of restricted stock to certain members of executive management that had both performance and service conditions that affect vesting. There were no such grants made during the three and nine months ended September 30, 2022 and 2021, however expense was still being recognized through June 30, 2021 for a grant made in 2017 with a four-year vesting period. The Company recognized $0.6 million in stock-based compensation expense related to these performance-based restricted stock grants during the nine months ended September 30, 2021.March 31, 2022.

Performance Stock Units

The Company grants performance stock units to members of its executive management that do not vest unless the Company achieves a specified cumulative EPS target and a TSR performance measure over a three-year performance period. The number of shares issued will vary based on the cumulative EPS target and relative TSR performance factor that is achieved. The Company estimates the cost of performance stock units based upon the grant date fair value and expected vesting percentage over the three-year performance period. ~~For~~During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized ~~$2.3 million and $8.5 million, respectively, in~~a net reversal of stock-based compensation expense ~~related to these~~of $2.5 million on unvested performance stock units due to revised performance expectations, compared to ~~$3.1 million and $7.7~~$2.8 million in stock-based compensation expense for such units during the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022.

The three-year performance period for the 2020 grant ended on December 31, 2022, and based on the Company's cumulative EPS and TSR performance measure for the performance period, these shares vested at 180% of the target award under the terms of the grant. As a result, 157,784 shares became fully vested and distributed to executive management in the first quarter of 2023.

The three-year performance period for the 2019 grant ended on December 31, 2021, and the Company's cumulative EPS and TSR performance measure for the performance period exceeded the level required for a maximum award under the terms of the grant. As a result, 203,646 shares became fully vested and were distributed to executive management in the first quarter of 2022.

~~Table of Contents~~

Preferred Stock

~~On September 15, 2021, the~~The Company ~~entered into an underwriting agreement, pursuant to which the Company agreed to issue and sell an aggregate of~~has 12,000,000 depositary shares outstanding, each representing a 1/400th ownership interest in a share of the Company’s 4.250% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Shares, Series A, par value $0.0001 per share, with a liquidation preference of $25 per depositary share (equivalent to $10,000 per share of Series A preferred stock).

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, the Company declared and paid a quarterly cash dividend of $0.27 per depositary share, for a total dividend payment to preferred shareholders of $3.2 ~~million and $9.6 million, respectively. The Company did not pay a dividend to preferred shareholders during the three and nine months ended September 30, 2021.~~million.

Common Stock Issuances

Pursuant to ATM Distribution Agreement

~~The Company has a distribution agency agreement with J.P. Morgan Securities LLC and Piper Sandler & Co., under which~~During the three months ended March 31, 2022, the Company ~~may sell up to 6,132,670~~sold 1.3 million shares under the ATM program at a weighted-average selling price of ~~its common stock on the NYSE. The Company pays the distribution agents a mutually agreed rate, not to exceed 2% of the~~$86.78 per share for gross ~~offering~~ proceeds of the shares sold pursuant to the distribution agency agreement. The common stock will be sold at prevailing market prices at the time of the sale or at negotiated prices and, as a result, prices will vary.$108.4 million. Sales under the ATM program ~~are~~were being made pursuant to a prospectus dated May 14, 2021 and prospectus supplements filed with the SEC in an offering of shares from the Company's shelf registration statement on Form S-3 (No. 333-256120). ~~During~~Total related offering costs were $0.7 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, of which $0.4 million related to compensation costs paid to the Company sold 0.6 million and 1.9 million shares, respectively, under the ATM program at a weighted-average selling price of $78.27 and $83.89 per share for gross proceeds of $50.3 million and $158.7 million, respectively.distribution agent. There were no sales under the ATM program during the three months ended ~~September 30, 2021. During the nine months ended September 30, 2021, the Company sold 0.7 million shares under the ATM program at a weighted-average selling price~~March 31, 2023 and as of $100.59 per share for gross proceeds of $70.4 million. Total related offering costs were $0.3 million and $1.0 million, respectively, for the three and nine months ended September 30, 2022, substantially all of which relates to compensation costs paid to the distribution agents, and $0.6 million for the nine months ended September 30, 2021, of which $0.4 million relates to compensation costs paid to the distribution agent. As of September 30, 2022,March 31, 2023, the remaining number of shares that can be sold under this agreement totaled 1,107,769.

~~Registered Direct Offering~~

~~The Company sold 2.3 million shares~~

Table of ~~its common stock in a registered direct offering during the nine months ended September 30, 2021. The shares were sold for $91.00 per share for aggregate net proceeds of $209.2 million.~~Contents

Cash Dividend on Common Shares

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, the Company declared and paid a quarterly cash dividend of $0.36 per share, for a total dividend payment to shareholders of $39.4 million. During the three months ended March 31, 2022, the Company declared and paid a quarterly cash dividend of $0.35 per share, for ~~the first two quarters of the year and increased the quarterly cash dividend to $0.36 per share in the third quarter, for~~ a total dividend payment to shareholders of $39.0 million and $114.2 million, respectively. During the three and nine months ended September 30, 2021, the Company declared and paid quarterly cash dividends of $0.25 per share for the first two quarters of the year and increased the quarterly cash dividend to $0.35 per share in the third quarter, for a total dividend payment to shareholders of $36.5 million and $87.6 million, respectively.$37.3 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,~~March 31, 2023, the Company purchased treasury shares of 143,404 at a weighted average price of $74.70 per share. During the three months ended March 31, 2022, the Company purchased treasury shares of ~~11,039 and 199,208, respectively,~~185,534 at a weighted average price of ~~$77.36 and $92.40~~$93.51 per share, respectively. During the three and nine months ended September 30, 2021, the Company purchased treasury shares of 16,858 and 173,277, respectively, at a weighted average price of $96.90 and $85.15 per share, respectively.share.

10. 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 gains (losses) on AFS securities Unrealized holding losses on SERP Unrealized holding gains (losses) on junior subordinated debt Total
(in millions)
Balance, June 30, 2022 $ (521.1) $ (0.3) $ 3.5 $ (517.9)
Other comprehensive (loss) income before reclassifications (219.9) — 1.6 (218.3)
Amounts reclassified from AOCI — — — —
Net current-period other comprehensive (loss) income (219.9) — 1.6 (218.3)
Balance, September 30, 2022 $ (741.0) $ (0.3) $ 5.1 $ (736.2)
Balance, June 30, 2021 $ 64.8 $ (0.3) $ — $ 64.5
Other comprehensive loss before reclassifications (21.8) — (0.1) (21.9)
Amounts reclassified from AOCI — — — —
Net current-period other comprehensive loss (21.8) — (0.1) (21.9)
Balance, September 30, 2021 $ 43.0 $ (0.3) $ (0.1) $ 42.6
Nine Months Ended September 30,
Unrealized holding gains (losses) on AFS securities Unrealized holding losses on SERP Unrealized holding gains (losses) on junior subordinated debt Total
(in millions)
Balance, December 31, 2021 $ 16.7 $ (0.3) $ (0.7) $ 15.7
Other comprehensive (loss) income before reclassifications (752.3) — 5.8 (746.5)
Amounts reclassified from AOCI (5.4) — — (5.4)
Net current-period other comprehensive (loss) income (757.7) — 5.8 (751.9)
Balance, September 30, 2022 $ (741.0) $ (0.3) $ 5.1 $ (736.2)
Balance, December 31, 2020 $ 92.1 $ (0.3) $ 0.5 $ 92.3
Other comprehensive loss before reclassifications (49.0) — (0.6) (49.6)
Amounts reclassified from AOCI (0.1) — — (0.1)
Net current-period other comprehensive loss (49.1) — (0.6) (49.7)
Balance, September 30, 2021 $ 43.0 $ (0.3) $ (0.1) $ 42.6


	Three Months Ended March 31,
	Unrealized holding gains (losses) on AFS securities		Unrealized holding losses on SERP		Unrealized holding gains (losses) on junior subordinated debt		Impairment loss on securities		Total
	(in millions)
Balance, December 31, 2022	$	(663.7)	$	(0.3)	$	3.0	$	—	$	(661.0)
Other comprehensive income (loss) before reclassifications	60.1		—		(1.1)		—		59.0
Amounts reclassified from AOCI	9.3		—		—		1.2		10.5
Net current-period other comprehensive income (loss)	69.4		—		(1.1)		1.2		69.5
Balance, March 31, 2023	$	(594.3)	$	(0.3)	$	1.9	$	1.2	$	(591.5)

Balance, December 31, 2021	$	16.7	$	(0.3)	$	(0.7)	$	—	$	15.7
Other comprehensive (loss) income before reclassifications	(247.9)		—		2.2		—		(245.7)
Amounts reclassified from AOCI	(5.1)		—		—		—		(5.1)
Net current-period other comprehensive (loss) income	(253.0)		—		2.2		—		(250.8)
Balance, March 31, 2022	$	(236.3)	$	(0.3)	$	1.5	$	—	$	(235.1)

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11. DERIVATIVES AND HEDGING ACTIVITIES

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

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

Derivatives Designated in Hedge Relationships

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

The Company has 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 variable-rate interest payments are based on LIBOR and will convert to SOFR plus a spread adjustment upon the discontinuation of LIBOR in June 2023.

The Company also had pay fixed/receive variable interest rate swaps, designated as fair value hedges using the last-of-layer method to manage the exposure to changes in fair value associated with fixed rate loans, resulting from changes in the designated benchmark interest rate (federal funds rate). These last-of-layer hedges provided the Company the ability to execute a fair value hedge of the interest rate risk associated with a portfolio of similar prepayable assets whereby the last dollar amount estimated to remain in the portfolio of assets was identified as the hedged item. Under these interest rate swap contracts, the Company received a variable rate and paid a fixed rate on the outstanding notional amount. During the year ended December 31, 2021, the Company completed a partial discontinuation of one of its last-of-layer hedges, which reduced the total hedged amount on these hedges from $1.0 billion to $880 million. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company discontinued the remaining portion of these last-of-layer hedges. The cumulative basis adjustment on the discontinued last-of-layer hedges totaled $31 million, which was allocated across the remaining loan pool upon termination of the hedges and is being amortized over the remaining term.

~~The Company had a receive fixed/pay variable interest rate swap, designated as a fair value hedge on its $175 million subordinated debentures issued on June 16, 2016. This swap was terminated during~~ At March 31, 2023, the year ended December 31, 2021 in connection with the full redemption of the debt. The Company was paying a variable rate of three-month LIBOR plus 3.25% and was receiving quarterly fixed payments of 6.25% to match the paymentsremaining cumulative basis adjustment on the ~~debt.~~discontinued last-of-layer hedges totaled $18 million.

Derivatives Not Designated in Hedge Relationships

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

~~As it relates to the Company's mortgage banking business, it~~The Company also uses derivative financial instruments to manage exposure to interest rate risk within its mortgage banking business related to IRLCs and its inventory of loans HFS and MSRs. The Company economically hedges the changes in fair value associated with changes in interest rates generally by utilizing forward sale commitments and interest rate futures.

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Fair Value Hedges

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the following amounts are reflected on the Consolidated Balance Sheets related to cumulative basis adjustments for outstanding fair value hedges:

September 30, 2022 December 31, 2021
Carrying Value of Hedged Assets/(Liabilities) Cumulative Fair Value Hedging Adjustment (1) Carrying Value of Hedged Assets/(Liabilities) Cumulative Fair Value Hedging Adjustment (1)
(in millions)
Loans HFI, net of deferred loan fees and costs (2) $ 447 $ 22 $ 1,391 $ 39


	March 31, 2023				December 31, 2022
	Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)		Carrying Value of Hedged Assets/(Liabilities)		Cumulative Fair Value Hedging Adjustment (1)
	(in millions)
Loans HFI, net of deferred loan fees and costs	$	447	$	13	$	447	$	17

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

~~(2)~~As of December 31, 2021, included last-of-layer derivative instruments, with $880 million designated as the hedged amount (from a closed portfolio of prepayable fixed rate loans with a carrying value of $1.4 billion). The cumulative basis adjustment included in the carrying value of these hedged items totaled $16 million and the basis adjustment related to the discontinued portion was $1 million as of December 31, 2021.

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


		Three Months Ended September 30,									Three Months Ended March 31,
		2022				2021					2023				2022
Income Statement Classification	Income Statement Classification	Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Income Statement Classification	Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item
		(in millions)									(in millions)
Interest income	Interest income	$	27.5	$	(27.5)	$	7.5	$	(7.4)	Interest income	$	(4.3)	$	4.3	$	33.5	$	(33.4)
Interest expense		—		—		(0.5)		0.5

		Nine Months Ended September 30,
		2022				2021
Income Statement Classification		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item		Gain/(Loss) on Swaps		Gain/(Loss) on Hedged Item
		(in millions)
Interest income		$	76.3	$	(76.2)	$	35.4	$	(35.3)
Interest expense		—		—		(2.4)		2.4

In addition to the gains and losses on the Company's outstanding fair value hedges presented in the above table, the Company recognized $3.0 million ~~and $7.0 million~~ in interest income related to the amortization of the cumulative basis adjustment on its discontinued last-of-layer hedges during the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

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

The following table summarizes the fair value of the Company's derivative instruments on a gross basis as of ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021,~~2022, and ~~September 30, 2021.~~March 31, 2022. The change in the notional amounts of these derivatives from ~~September 30, 2021~~March 31, 2022 to ~~September 30, 2022~~March 31, 2023 indicates the volume of the Company's derivative transaction activity during these periods. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow the Company to settle all derivative contracts with the same counterparty on a net basis and to offset the net derivative position with the related cash collateral. Where master netting agreements are not in effect or are not enforceable under bankruptcy laws, the Company does not adjust those derivative amounts with counterparties.


		September 30, 2022						December 31, 2021						September 30, 2021							March 31, 2023						December 31, 2022						March 31, 2022
				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 millions)																			(in millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:																			Derivatives designated as hedging instruments:
Fair value hedges	Fair value hedges																			Fair value hedges
Interest rate swaps ~~(1)~~	Interest rate swaps ~~(1)~~	$	483	$	22	$	—	$	1,383	$	14	$	55	$	1,547	$	7	$	57	Interest rate swaps ~~(1)~~	$	470	$	14	$	1	$	476	$	18	$	—	$	499	$	2	$	23
Total	Total	483		22		—		1,383		14		55		1,547		7		57		Total	470		14		1		476		18		—		499		2		23

Derivatives not designated as hedging instruments (2):
Derivatives not designated as hedging instruments (1):																				Derivatives not designated as hedging instruments (1):
Foreign currency contracts	Foreign currency contracts	$	146	$	2	$	1	$	180	$	—	$	1	$	118	$	2	$	—	Foreign currency contracts	$	189	$	2	$	1	$	250	$	1	$	9	$	151	$	1	$	2
Forward purchase contracts	Forward purchase contracts	8,226		3		249		11,714		8		18		6,551		1		37		Forward purchase contracts	7,814		34		5		2,709		1		13		5,019		4		65
Forward sales contracts	Forward sales contracts	11,792		380		6		17,358		16		18		13,984		71		4		Forward sales contracts	9,702		3		64		4,985		16		8		9,557		149		6
Futures purchase contracts ~~(3)~~(2)	Futures purchase contracts ~~(3)~~(2)	172,333		—		—		218,054		—		—		224,325		—		—		Futures purchase contracts ~~(3)~~(2)	138,422		—		—		150,943		—		—		202,818		—		—
Futures sales contracts ~~(3)~~(2)	Futures sales contracts ~~(3)~~(2)	180,454		—		—		229,040		—		—		232,527		—		—		Futures sales contracts ~~(3)~~(2)	148,132		—		—		159,649		—		—		219,617		—		—
Interest rate lock commitments	Interest rate lock commitments	1,918		3		31		3,033		11		2		3,576		15		6		Interest rate lock commitments	1,557		14		1		1,459		5		3		2,420		6		17
Interest rate swaps		2,155		5		5		4		—		—		4		—		—
Options contracts		—		—		—		—		—		—		50		—		—
Interest rate contracts																				Interest rate contracts	1,983		5		6		1,538		6		6		64		—		—

Risk participation agreements																				Risk participation agreements	51		—		—		48		—		—		—		—		—
Total	Total	$	377,024	$	393	$	292	$	479,383	$	35	$	39	$	481,135	$	89	$	47	Total	$	307,850	$	58	$	77	$	321,581	$	29	$	39	$	439,646	$	160	$	90
Margin	Margin			(100)		(11)				1		6				1		37		Margin			5		(14)				4		1				—		65
Total, including margin	Total, including margin	$	377,024	$	293	$	281	$	479,383	$	36	$	45	$	481,135	$	90	$	84	Total, including margin	$	307,850	$	63	$	63	$	321,581	$	33	$	40	$	439,646	$	160	$	155

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

~~(2)~~Relate to economic hedging arrangements.

~~(3)~~(2)The Company enters into forward purchase and sales contracts that are subject to daily remargining and almost all of which are based on three-month LIBOR to hedge against its MSR valuation exposure. The notional amount on these contracts is substantial as these contracts have a duration of only 0.25 years and are intended to cover the longer duration of MSR hedges.

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


		September 30, 2022						December 31, 2021						September 30, 2021							March 31, 2023						December 31, 2022						March 31, 2022
		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)			Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)		Gross amount of recognized assets (liabilities)		Gross offset		Net assets (liabilities)
		(in millions)																			(in millions)
Derivatives subject to master netting arrangements:	Derivatives subject to master netting arrangements:																			Derivatives subject to master netting arrangements:
Assets	Assets																			Assets
Forward purchase contracts	Forward purchase contracts	$	3	$	—	$	3	$	8	$	—	$	8	$	1	$	—	$	1	Forward purchase contracts	$	30	$	—	$	30	$	1	$	—	$	1	$	3	$	—	$	3
Forward sales contracts	Forward sales contracts	360		—		360		15		—		15		69		—		69		Forward sales contracts	3		—		3		13		—		13		149		—		149
Interest rate swaps		22		—		22		14		—		14		7		—		7
Interest rate contracts																				Interest rate contracts	14		—		14		18		—		18		2		—		2
Margin	Margin	(100)		—		(100)		1		—		1		1		—		1		Margin	5		—		5		4		—		4		—		—		—
Netting	Netting	—		(233)		(233)		—		(28)		(28)		—		(66)		(66)		Netting	—		(38)		(38)		—		(17)		(17)		—		(130)		(130)
		$	285	$	(233)	$	52	$	38	$	(28)	$	10	$	78	$	(66)	$	12		$	52	$	(38)	$	14	$	36	$	(17)	$	19	$	154	$	(130)	$	24
Liabilities	Liabilities																			Liabilities
Forward purchase contracts	Forward purchase contracts	$	(242)	$	—	$	(242)	$	(18)	$	—	$	(18)	$	(37)	$	—	$	(37)	Forward purchase contracts	$	(4)	$	—	$	(4)	$	(12)	$	—	$	(12)	$	(64)	$	—	$	(64)
Forward sales contracts	Forward sales contracts	(6)		—		(6)		(18)		—		(18)		(4)		—		(4)		Forward sales contracts	(52)		—		(52)		(8)		—		(8)		(6)		—		(6)
Interest rate swaps		—		—		—		(54)		—		(54)		(57)		—		(57)
Interest rate contracts																				Interest rate contracts	(1)		—		(1)		—		—		—		(23)		—		(23)
Margin	Margin	11		—		11		(6)		—		(6)		(37)		—		(37)		Margin	14		—		14		(1)		—		(1)		(65)		—		(65)
Netting	Netting	—		233		233		—		28		28		—		66		66		Netting	—		38		38		—		17		17		—		130		130
		$	(237)	$	233	$	(4)	$	(96)	$	28	$	(68)	$	(135)	$	66	$	(69)		$	(43)	$	38	$	(5)	$	(21)	$	17	$	(4)	$	(158)	$	130	$	(28)
Derivatives not subject to master netting arrangements:	Derivatives not subject to master netting arrangements:																			Derivatives not subject to master netting arrangements:
Assets	Assets																			Assets
Foreign currency contracts	Foreign currency contracts	$	2	$	—	$	2	$	—	$	—	$	—	$	2	$	—	$	2	Foreign currency contracts	$	2	$	—	$	2	$	1	$	—	$	1	$	—	$	—	$	—

Forward purchase contracts																				Forward purchase contracts	4		—		4		—		—		—		1		—		1
Forward sales contracts	Forward sales contracts	20		—		20		1		—		1		2		—		2		Forward sales contracts	—		—		—		3		—		3		1		—		1
Interest rate lock commitments	Interest rate lock commitments	3		—		3		11		—		11		15		—		15		Interest rate lock commitments	14		—		14		5		—		5		6		—		6
Interest rate swaps		5		—		5		—		—		—		—		—		—
Interest rate contracts																				Interest rate contracts	5		—		5		6		—		6		—		—		—

		$	30	$	—	$	30	$	12	$	—	$	12	$	19	$	—	$	19		$	25	$	—	$	25	$	15	$	—	$	15	$	8	$	—	$	8
Liabilities	Liabilities																			Liabilities
Foreign currency contracts	Foreign currency contracts	$	(1)	$	—	$	(1)	$	(2)	$	—	$	(2)	$	—	$	—	$	—	Foreign currency contracts	$	(1)	$	—	$	(1)	$	(9)	$	—	$	(9)	$	(2)	$	—	$	(2)
Forward purchase contracts	Forward purchase contracts	(7)		—		(7)		—		—		—		—		—		—		Forward purchase contracts	(1)		—		(1)		(1)		—		(1)		—		—		—

Forward sales contracts																				Forward sales contracts	(12)		—		(12)		—		—		—		—		—		—
Interest rate lock commitments	Interest rate lock commitments	(31)		—		(31)		(2)		—		(2)		(6)		—		(6)		Interest rate lock commitments	(1)		—		(1)		(3)		—		(3)		(18)		—		(18)
Interest rate swaps		(5)		—		(5)		—		—		—		—		—		—
Interest rate contracts																				Interest rate contracts	(6)		—		(6)		(6)		—		(6)		—		—		—
		$	(44)	$	—	$	(44)	$	(4)	$	—	$	(4)	$	(6)	$	—	$	(6)		$	(21)	$	—	$	(21)	$	(19)	$	—	$	(19)	$	(20)	$	—	$	(20)
Total derivatives and margin	Total derivatives and margin																			Total derivatives and margin
Assets	Assets	$	315	$	(233)	$	82	$	50	$	(28)	$	22	$	97	$	(66)	$	31	Assets	$	77	$	(38)	$	39	$	51	$	(17)	$	34	$	162	$	(130)	$	32
Liabilities	Liabilities	$	(281)	$	233	$	(48)	$	(100)	$	28	$	(72)	$	(141)	$	66	$	(75)	Liabilities	$	(64)	$	38	$	(26)	$	(40)	$	17	$	(23)	$	(178)	$	130	$	(48)

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The following table summarizes the net gain (loss) on derivatives included in income:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		($ in millions)									($ in millions)
Net gain (loss) on loan origination and sale activities:	Net gain (loss) on loan origination and sale activities:									Net gain (loss) on loan origination and sale activities:
Interest rate lock commitments	Interest rate lock commitments	$	(39.3)	$	(26.6)	$	(36.9)	$	(7.0)	Interest rate lock commitments	$	11.5	$	(20.8)
Forward contracts	Forward contracts	145.3		17.1		487.6		(50.6)		Forward contracts	(36.8)		241.3

Interest rate swaps	Interest rate swaps	(8.6)		—		(8.6)		—		Interest rate swaps	1.2		—
Other contracts	Other contracts	1.6		(2.4)		(8.2)		(0.1)		Other contracts	(0.5)		(3.7)
Total gain (loss)		$	99.0	$	(11.9)	$	433.9	$	(57.7)
Total loss										Total loss	$	(24.6)	$	216.8
Net loan servicing revenue:	Net loan servicing revenue:									Net loan servicing revenue:
Forward contracts	Forward contracts	$	(18.0)	$	(2.6)	$	(60.9)	$	10.1	Forward contracts	$	(1.6)	$	(34.9)
Options contracts		—		1.4		—		0.4

Futures contracts	Futures contracts	2.4		(8.9)		(41.5)		15.7		Futures contracts	(4.0)		(22.0)
Interest rate swaps	Interest rate swaps	(52.8)		—		(52.8)		—		Interest rate swaps	19.0		—
Total loss		$	(68.4)	$	(10.1)	$	(155.2)	$	26.2
Total gain										Total gain	$	13.4	$	(56.9)

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected replacement value of the contracts. Management enters into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with the same counterparty. Additionally, management monitors counterparty credit risk exposure on each contract to determine appropriate limits on the Company's total credit exposure across all product types, which may require the Company to post collateral to counterparties when these contracts are in a net liability position and conversely, for counterparties to post collateral to the Company when these contracts are in a net asset position. Management reviews the Company's collateral positions on a daily basis and exchanges collateral with counterparties in accordance with standard ISDA documentation and other related agreements. The Company generally posts or holds collateral in the form of cash deposits or highly rated securities issued by the U.S. Treasury or government-sponsored enterprises ~~such as GNMA, FNMA,~~(FNMA, and ~~FHLMC. The net~~FHLMC), or guaranteed by GNMA. At March 31, 2023, December 31, 2022, and March 31, 2022 collateral pledged by the Company to counterparties for its derivatives ~~designated as hedging instruments~~ totaled $5$33 million, ~~$67~~$11 million, and ~~$98~~$45 million, ~~as of September 30, 2022, December 31, 2021, and September 30, 2021,~~ respectively.

12. EARNINGS PER SHARE

Diluted EPS is ~~based on~~calculated using the weighted average outstanding common shares during the period, including common stock equivalents. Basic EPS is ~~based on~~calculated using 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,
2022 2021 2022 2021
(in millions, except per share amounts)
Weighted average shares - basic 107.5 103.3 107.0 102.3
Dilutive effect of stock awards 0.4 0.6 0.4 0.6
Weighted average shares - diluted 107.9 103.9 107.4 102.9
Net income available to common stockholders $ 260.8 $ 236.9 $ 754.7 $ 653.2
Earnings per share - basic 2.43 2.29 7.06 6.39
Earnings per share - diluted 2.42 2.28 7.03 6.35

~~The Company had no anti-dilutive stock options outstanding as of September 30, 2022 and 2021.~~


	Three Months Ended March 31,
	2023		2022
	(in millions, except per share amounts)
Weighted average shares - basic	108.1		106.0
Dilutive effect of stock awards	0.2		0.6
Weighted average shares - diluted	108.3		106.6
Net income available to common stockholders	$	139.0	$	236.9
Earnings per share - basic	1.29		2.23
Earnings per share - diluted	1.28		2.22

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13. INCOME TAXES

The Company's effective tax rate was ~~19.9%~~23.0% and ~~21.7%~~19.5% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~For the nine months ended September 30, 2022 and 2021, the Company's effective tax rate was 19.7%.~~ The ~~decrease~~increase in the ~~three month~~ effective tax rate was primarily due to ~~increases~~a decrease in LIHTC and solar ~~tax~~ credit ~~investments~~benefits and a decrease in ~~state tax expense.~~excess stock compensation benefit.

As of ~~September 30, 2022,~~March 31, 2023, the net DTA balance totaled ~~$302~~$289 million, ~~an increase~~a decrease of ~~$281~~$22 million from ~~$21~~$311 million at December 31, ~~2021.~~2022. This overall ~~increase~~decrease in the net ~~DTA~~deferred tax asset was primarily the result of ~~decreases~~increases in the fair market value of AFS securities and ~~expected~~a decrease to tax credit carryovers. These items were not fully offset by ~~increases~~decreases to DTLs related to MSRs.

Although realization is not assured, the Company believes that the realization of the recognized deferred tax asset of ~~$302~~$289 million at ~~September 30, 2022~~March 31, 2023 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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no deferred tax valuation allowance.

LIHTC and renewable energy projects

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

Investments in LIHTC and renewable energy totaled ~~$727~~$611 million and ~~$631~~$624 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Unfunded LIHTC and renewable energy obligations are included in Other liabilities on the Consolidated Balance ~~Sheets~~Sheet and totaled ~~$431~~$393 million and ~~$361~~$398 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, $16.8~~$11.3 million and $12.9 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense. For the nine months ended September 30, 2022 and 2021, $45.6 million and $36.6$13.4 million, respectively, of amortization related to LIHTC investments was recognized as a component of income tax expense.

14. COMMITMENTS AND CONTINGENCIES

Unfunded Commitments and Letters of Credit

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

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

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

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
Commitments to extend credit, including unsecured loan commitments of $1,326 at September 30, 2022 and $1,200 at December 31, 2021		$	18,229	$	13,396
Commitments to extend credit, including unsecured loan commitments of $1,254 at March 31, 2023 and $1,209 at December 31, 2022						Commitments to extend credit, including unsecured loan commitments of $1,254 at March 31, 2023 and $1,209 at December 31, 2022	$	17,927	$	18,674
Credit card commitments and financial guarantees	Credit card commitments and financial guarantees	365		307		Credit card commitments and financial guarantees	392		379
Letters of credit, including unsecured letters of credit of $7 at September 30, 2022 and $13 at December 31, 2021		273		198
Letters of credit, including unsecured letters of credit of $9 at March 31, 2023 and $7 at December 31, 2022						Letters of credit, including unsecured letters of credit of $9 at March 31, 2023 and $7 at December 31, 2022	260		265
Total	Total	$	18,867	$	13,901	Total	$	18,579	$	19,318

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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~~ACL reported in "Note 5.4. Loans, Leases and Allowance for Credit Losses" of these Notes to Unaudited Consolidated Financial Statements. This loss contingency for unfunded loan commitments and letters of credit was ~~$52~~$45 million and ~~$38~~$47 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Changes to this liability are adjusted through the provision for credit losses in the Consolidated Income Statement.

Commitments to Invest in Renewable Energy Projects

The Company has off-balance sheet commitments to invest in renewable energy projects, as described in "Note 13. Income Taxes" of these Notes to Unaudited Consolidated Financial Statements, subject to the underlying project meeting certain milestones. These conditional commitments totaled $115 million and $117 million as of March 31, 2023 and December 31, 2022, respectively.

Concentrations of Lending Activities

The Company does not have a single external customer from which it derives 10% or more of its revenues. The Company monitors concentrations of lending activities at the product and borrower relationship level. ~~Commercial and industrial loans made up 43% and 47% of the Company's HFI loan portfolio as of September 30, 2022 and December 31, 2021, respectively.~~ The Company's loan portfolio includes significant credit exposure to the CRE market. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, CRE related loans accounted for approximately ~~27%~~34% and 29% of total loans, ~~respectively. Substantially all~~respectively, and approximately 16% of ~~these loans are secured by first liens with an initial loan-to-value ratio of generally not more than 75%. Approximately 18% and 23% of these~~ CRE loans, excluding construction and land loans, were owner-occupied as of ~~September 30, 2022~~March 31, 2023 and December 31, 2022. In addition, approximately $2.5 billion, or 5.5%, of the Company’s HFI loan portfolio consisted of office loans as of March 31, 2023, compared to $2.4 billion, or 4.6%, as of December 31, ~~2021,~~2022. Over 90% of these office loans are considered CRE-non-owner occupied and primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects, with the vast majority located in midtown or suburban locations. The Company's commercial and industrial loans made up 33% and 40% of the Company's HFI loan portfolio as of March 31, 2023 and December 31, 2022, respectively. No borrower relationships at both the commitment and funded loan level exceeded 5% of total loans HFI ~~loans~~ as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Contingencies

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

Lease Commitments

The Company has operating leases under which it leases its branch offices, corporate headquarters, other offices, and data facility centers. Operating lease costs totaled ~~$6.2 million and $18.3~~$7.4 million during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$5.8 million and $13.9~~$5.9 million for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. Other lease costs, which include common area maintenance, parking, and taxes, and were included as occupancy expense, totaled ~~$1.2 million and $3.3~~$1.3 million during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$0.9 million and $2.8~~$1.1 million for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

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15. FAIR VALUE ACCOUNTING

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

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

Under ASC 825, the Company elected the FVO treatment for junior subordinated debt issued by WAL. This election is irrevocable and results in the recognition of unrealized gains and losses on the debt at each reporting date. These unrealized gains and losses are recognized in OCI 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, 2022 and 2021,~~The following table presents unrealized gains and losses from fair value changes on junior subordinated ~~debt were as follows:~~debt:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in millions)									(in millions)
Unrealized losses (gains)		$	2.1	$	(0.2)	$	7.7	$	(0.8)
Unrealized gains (losses)										Unrealized gains (losses)	$	(1.5)	$	2.9
Changes included in OCI, net of tax	Changes included in OCI, net of tax	1.6		(0.1)		5.8		(0.6)		Changes included in OCI, net of tax	(1.1)		2.2

Fair value on a recurring basis

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

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

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

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

~~Table of Contents~~

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

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between management’s review and the prices provided by the vendor are discussed with the vendor and/or the Company’s other valuation advisors.

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

~~The fair value of EBO loans, non-agency loans, and loans that are delinquent or have an underwriting defect are valued using Level 3 inputs since they lack active markets.~~

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

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

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

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


		Fair Value Measurements at the End of the Reporting Period Using:									Fair Value Measurements at the End of the Reporting Period Using:
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
		(in millions)									(in millions)
September 30, 2022
March 31, 2023										March 31, 2023
Assets:	Assets:									Assets:

Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities
CLO	CLO	$	—	$	2,641	$	—	$	2,641	CLO	$	—	$	2,436	$	—	$	2,436
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	—		62		—		62		Commercial MBS issued by GSEs	—		62		—		62
Corporate debt securities	Corporate debt securities	—		391		—		391		Corporate debt securities	—		358		—		358
Private label residential MBS	Private label residential MBS	—		1,228		—		1,228		Private label residential MBS	—		1,175		—		1,175
Residential MBS issued by GSEs	Residential MBS issued by GSEs	—		1,694		—		1,694		Residential MBS issued by GSEs	—		1,787		—		1,787
Tax-exempt	Tax-exempt	—		874		—		874		Tax-exempt	—		860		—		860

U.S. Treasury securities										U.S. Treasury securities	900		—		—		900
Other	Other	25		45		—		70		Other	27		40		—		67
Total AFS debt securities	Total AFS debt securities	$	25	$	6,935	$	—	$	6,960	Total AFS debt securities	$	927	$	6,718	$	—	$	7,645
Equity securities	Equity securities									Equity securities
Common stock										Common stock	$	3	$	—	$	—	$	3
CRA investments	CRA investments	$	24	$	25	$	—	$	49	CRA investments	25		14		—		39
Preferred stock	Preferred stock	116		—		—		116		Preferred stock	94		5		—		99
Total equity securities	Total equity securities	$	140	$	25	$	—	$	165	Total equity securities	$	122	$	19	$	—	$	141
Loans HFS		$	—	$	2,052	$	1	$	2,053
Mortgage servicing rights		—		—		1,044		1,044
Loans HFS (2)										Loans HFS (2)	$	—	$	1,100	$	1	$	1,101
MSRs										MSRs	—		—		910		910
Derivative assets (1)	Derivative assets (1)	—		312		3		315		Derivative assets (1)	—		63		14		77
Liabilities:	Liabilities:									Liabilities:
Junior subordinated debt (2)		$	—	$	—	$	60	$	60
Junior subordinated debt (3)										Junior subordinated debt (3)	$	—	$	—	$	64	$	64
Derivative liabilities (1)	Derivative liabilities (1)	—		250		31		281		Derivative liabilities (1)	—		63		1		64

(1)See "Note 11. Derivatives and Hedging Activities." In addition, the carrying value of loans is decreased by ~~$22~~$13 million as of ~~September 30,~~March 31, 2023 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 loans HFS that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

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

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	Fair Value Measurements at the End of the Reporting Period Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
December 31, 2022
Assets:




Available-for-sale debt securities
CLO	$	—	$	2,706	$	—	$	2,706
Commercial MBS issued by GSEs	—		97		—		97
Corporate debt securities	—		390		—		390
Private label residential MBS	—		1,199		—		1,199
Residential MBS issued by GSEs	—		1,740		—		1,740
Tax-exempt	—		891		—		891


Other	24		45		—		69
Total AFS debt securities	$	24	$	7,068	$	—	$	7,092
Equity securities
Common stock	$	3	$	—	$	—	$	3
CRA investments	24		25		—		49
Preferred stock	108		—		—		108
Total equity securities	$	135	$	25	$	—	$	160
Loans - HFS	$	—	$	1,172	$	1	$	1,173
Mortgage servicing rights	—		—		1,148		1,148
Derivative assets (1)	—		46		5		51
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	63	$	63
Derivative liabilities (1)	—		37		3		40

(1)See "Note 11. Derivatives and Hedging Activities." In addition, the carrying value of loans is decreased by $17 million as of December 31, 2022 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

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

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Fair Value Measurements at the End of the Reporting Period Using:
Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Fair Value
(in millions)
December 31, 2021
Assets:
Available-for-sale debt securities
CLO $ — $ 926 $ — $ 926
Commercial MBS issued by GSEs — 69 — 69
Corporate debt securities — 383 — 383
Private label residential MBS — 1,508 — 1,508
Residential MBS issued by GSEs — 1,993 — 1,993
Tax-exempt — 1,215 — 1,215
U.S. treasury securities 13 — — 13
Other 28 54 — 82
Total AFS debt securities $ 41 $ 6,148 $ — $ 6,189
Equity securities
CRA investments $ 28 $ 17 $ — $ 45
Preferred stock 114 — — 114
Total equity securities $ 142 $ 17 $ — $ 159
Loans - HFS $ — $ 3,894 $ 46 $ 3,940
Mortgage servicing rights — — 698 698
Derivative assets (1) — 39 11 50
Liabilities:
Junior subordinated debt (2) $ — $ — $ 67 $ 67
Derivative liabilities (1) — 98 2 100

~~(1)~~See "Note 11. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by $39 million as of December 31, 2021 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

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

~~For the three and nine months ended September 30, 2022 and 2021, the~~The change in Level 3 liabilities measured at fair value on a recurring basis included in OCI was as follows:


		Junior Subordinated Debt									Junior Subordinated Debt
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in millions)									(in millions)
Beginning balance	Beginning balance	$	(61.8)	$	(66.5)	$	(67.4)	$	(65.9)	Beginning balance	$	(62.5)	$	(67.4)
Change in fair value (1)	Change in fair value (1)	2.1		(0.2)		7.7		(0.8)		Change in fair value (1)	(1.5)		2.9
Ending balance	Ending balance	$	(59.7)	$	(66.7)	$	(59.7)	$	(66.7)	Ending balance	$	(64.0)	$	(64.5)

(1)Unrealized gains/(losses) attributable to changes in the fair value of junior subordinated debt are recorded in OCI, net of tax, and totaled ~~$1.6~~$(1.1) million and ~~$(0.1)~~$2.2 million for three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $5.8 million and $(0.6) million for the nine months ended September 30, 2022, and 2021,~~ respectively.

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

September 30, 2022 Valuation Technique Significant Unobservable Inputs Input Value
(in millions)
Junior subordinated debt $ 60 Discounted cash flow Implied credit rating of the Company 7.67 %

March 31, 2023

Valuation Technique

Significant Unobservable Inputs

Input Value

(in millions)

Junior subordinated debt

Discounted cash flow

Implied credit rating of the Company

8.24

December 31, 2021 Valuation Technique Significant Unobservable Inputs Input Value
(in millions)
Junior subordinated debt $ 67 Discounted cash flow Implied credit rating of the Company 2.61 %

December 31, 2022

Valuation Technique

Significant Unobservable Inputs

Input Value

(in millions)

Junior subordinated debt

Discounted cash flow

Implied credit rating of the Company

8.13

The significant unobservable inputs used in the fair value measurement of the Company’s junior subordinated debt as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was the implied credit risk for the Company. As of ~~September 30, 2022~~March 31, 2023 and

~~Table of Contents~~

December 31, ~~2021,~~2022, the implied credit risk spread was calculated as the difference between the average of the 15-year 'BB' and 'BBB' rated financial indexes over the corresponding swap index.

Table of Contents

As of ~~September 30, 2022,~~March 31, 2023, the Company estimates the discount rate at ~~7.67%~~8.24%, which represents an implied credit spread of ~~3.92%~~3.05% plus three-month LIBOR ~~(3.75%~~(5.19%). As of December 31, ~~2021,~~2022, the Company estimated the discount rate at ~~2.61%~~8.13%, which was a ~~2.40%~~3.36% credit spread plus three-month LIBOR ~~(0.21%~~(4.77%).

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


		Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022							Three Months Ended March 31, 2023
		Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)		Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)			Loans HFS		MSRs		Net IRLCs (1)
		(in millions)													(in millions)
Balance, beginning of period	Balance, beginning of period	$	1	$	826	$	12	$	46	$	698	$	9	Balance, beginning of period	$	1	$	1,148	$	2
Purchases and additions	Purchases and additions	241		180		5,205		1,121		578		16,104		Purchases and additions	2		142		2,946
Sales and payments	Sales and payments	(241)		—		—		(1,187)		(350)		—		Sales and payments	(4)		(350)		—
Transfers from Level 2 to Level 3	Transfers from Level 2 to Level 3	—		—		—		38		—		—		Transfers from Level 2 to Level 3	2		—		—
Transfers from Level 3 to Level 2	Transfers from Level 3 to Level 2	—		—		—		(17)		—		—		Transfers from Level 3 to Level 2	—		—		—
Settlement of interest rate lock commitments upon acquisition or origination of loans HFS		—		—		(5,235)		—		—		(16,099)
Settlement of IRLCs upon acquisition or origination of loans HFS														Settlement of IRLCs upon acquisition or origination of loans HFS	—		—		(2,935)
Change in fair value	Change in fair value	—		63		(10)		—		206		(42)		Change in fair value	—		(8)		1
Mark to market adjustments														Mark to market adjustments	—		3		—
Realization of cash flows	Realization of cash flows	—		(25)		—		—		(88)		—		Realization of cash flows	—		(25)		—
Balance, end of period	Balance, end of period	$	1	$	1,044	$	(28)	$	1	$	1,044	$	(28)	Balance, end of period	$	1	$	910	$	14
Changes in unrealized gains (losses) for the period (2)	Changes in unrealized gains (losses) for the period (2)	$	—	$	62	$	(28)	$	—	$	150	$	(28)	Changes in unrealized gains (losses) for the period (2)	$	—	$	(3)	$	14

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

(2) Amounts ~~included in income that are attributable to Level 3 assets or liabilities held at period end.~~recognized as part of non-interest income.


		Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021							Three Months Ended March 31, 2022
		Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)		Loans held for sale		Mortgage servicing rights		Net interest rate lock commitments (1)			Loans HFS		MSRs		Net IRLCs (1)
		(in millions)													(in millions)
Balance, beginning of period	Balance, beginning of period	$	1	$	726	$	31	$	—	$	—	$	—	Balance, beginning of period	$	46	$	698	$	9
Acquired in AMH acquisition		—		—		—		1		1,376		24

Purchases and additions	Purchases and additions	3		230		8,331		3		513		14,669		Purchases and additions	292		204		5,324
Sales and payments	Sales and payments	(3)		(327)		—		(4)		(1,199)		—		Sales and payments	(351)		—		—
Transfers from Level 2 to Level 3	Transfers from Level 2 to Level 3	4		—		—		5		—		—		Transfers from Level 2 to Level 3	39		—		—

Settlement of interest rate lock commitments upon acquisition or origination of loans HFS		—		—		(8,357)		—		—		(14,681)
Transfers from Level 3 to Level 2														Transfers from Level 3 to Level 2	(18)		—		—
Settlement of IRLCs upon acquisition or origination of loans HFS														Settlement of IRLCs upon acquisition or origination of loans HFS	—		—		(5,321)
Change in fair value	Change in fair value	—		15		4		—		22		(3)		Change in fair value	—		81		(23)
Realization of cash flows	Realization of cash flows	—		(39)		—		—		(107)		—		Realization of cash flows	—		(33)		—
Balance, end of period	Balance, end of period	$	5	$	605	$	9	$	5	$	605	$	9	Balance, end of period	$	8	$	950	$	(11)
Changes in unrealized gains (losses) for the period (2)	Changes in unrealized gains (losses) for the period (2)	$	—	$	6	$	9	$	—	$	(9)	$	9	Changes in unrealized gains (losses) for the period (2)	$	—	$	80	$	(11)

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

(2) Amounts ~~included in income that are attributable to Level 3 assets or liabilities held at period end.~~recognized as part of non-interest income.

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

~~September 30, 2022~~March 31, 2023

Asset/liability

Key inputs

Range

Weighted average

~~Mortgage servicing rights:~~MSRs:

Option adjusted spread (in basis points)

~~209~~20 - ~~631~~438

~~375~~286

Conditional prepayment rate (1)

~~8.4%~~9.1% - ~~17.2%~~21.0%

~~12.7%~~15.1%

Recapture rate

20.0% - 20.0%

20.0%

Servicing fee rate (in basis points)

25.0 - 56.5

3332.6

Cost to service

$8793 - ~~$94~~$100

$9095

~~Loans held for sale:~~

~~Whole loan spread to TBA price (in basis points)~~

~~1.9 - 3.1~~

~~2.7~~

~~Interest rate lock commitments:~~IRLCs:

Servicing fee multiple

~~3.3~~2.9 - ~~6.1~~5.3

~~5.1~~4.1

Pull-through rate

~~73%~~66% - 100%

~~88%~~85%

December 31, ~~2021~~2022

Asset/liability

Key inputs

Range

Weighted average

~~Mortgage servicing rights:~~MSRs:

Option adjusted spread (in basis points)

~~553~~190 - ~~735~~621

~~600~~378

Conditional prepayment rate (1)

~~9.9%~~8.5% - ~~20.7%~~18.5%

~~15.2%~~13.4%

Recapture rate

20.0% - 20.0%

~~20.0%~~20%

Servicing fee rate (in basis points)

25.0 - ~~50.0~~56.5

~~29.5~~33.2

Cost to service

$8487 - ~~$91~~$94

$8690

Loans ~~held for sale:~~HFS:

Whole loan spread to TBA price (in basis points)

~~(3.7)~~(0.6) - ~~(2.9)~~(0.6)

~~(3.3)~~(0.6)

~~Interest rate lock commitments:~~IRLCs:

Servicing fee multiple

~~3.6~~2.9 - ~~5.4~~5.5

~~4.6~~4.3

Pull-through rate

~~75%~~69% - 100%

~~90%~~89%

(1) Lifetime total prepayment speed annualized.

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


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Fair value		Unpaid principal balance		Difference		Fair value		Unpaid principal balance		Difference			Fair value		UPB		Difference		Fair value		UPB		Difference
		(in millions)													(in millions)
Loans held for sale:
Loans HFS:														Loans HFS:
Current through 89 days delinquent	Current through 89 days delinquent	$	2,053	$	2,098	$	(45)	$	3,938	$	3,808	$	130	Current through 89 days delinquent	$	1,100	$	1,064	$	36	$	1,172	$	1,138	$	34
90 days or more delinquent	90 days or more delinquent	1		1		—		2		2		—		90 days or more delinquent	1		1		—		1		1		—
Total	Total	$	2,054	$	2,099	$	(45)	$	3,940	$	3,810	$	130	Total	$	1,101	$	1,065	$	36	$	1,173	$	1,139	$	34

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Fair value on a nonrecurring basis

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


		Fair Value Measurements at the End of the Reporting Period Using									Fair Value Measurements at the End of the Reporting Period Using
		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)
		(in millions)									(in millions)
As of September 30, 2022:
As of March 31, 2023:										As of March 31, 2023:
Loans HFI	Loans HFI	$	254	$	—	$	—	$	254	Loans HFI	$	272	$	—	$	—	$	272
Other assets acquired through foreclosure	Other assets acquired through foreclosure	11		—		—		11		Other assets acquired through foreclosure	11		—		—		11
As of December 31, 2021:
As of December 31, 2022:										As of December 31, 2022:
Loans HFI	Loans HFI	$	216	$	—	$	—	$	216	Loans HFI	$	295	$	—	$	—	$	295
Other assets acquired through foreclosure	Other assets acquired through foreclosure	12		—		—		12		Other assets acquired through foreclosure	11		—		—		11

For Level 3 assets measured at fair value on a nonrecurring basis as of ~~September 30, 2022 and December 31, 2021,~~period end, the significant unobservable inputs used in the fair value measurements were as follows:

~~September 30, 2022~~March 31, 2023

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in millions)

Loans HFI

~~254~~272

Collateral method

Third party appraisal

Costs to sell

6.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

3.0% to 8.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Other assets acquired through foreclosure

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

December 31, ~~2021~~2022

Valuation Technique(s)

Significant Unobservable Inputs

Range

(in millions)

Loans HFI

~~216~~295

Collateral method

Third party appraisal

Costs to sell

6.0% to 10.0%

Discounted cash flow method

Discount rate

Contractual loan rate

3.0% to ~~6.0%~~8.0%

Scheduled cash collections

Probability of default

0% to 20.0%

Proceeds from non-real estate collateral

Loss given default

0% to 70.0%

Other assets acquired through foreclosure

1211

Collateral method

Third party appraisal

Costs to sell

4.0% to 10.0%

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

Total Level 3 collateral dependent loans had an estimated fair value of ~~$254~~$272 million and ~~$216~~$295 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, net of a specific ~~allowance for credit losses~~ACL of ~~$14~~$6 million and ~~$11~~$7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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~~12 months. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense.

Fair value is determined, where possible, using market prices derived from an appraisal or evaluation, which are considered to be Level 2. However, certain assumptions and unobservable inputs are often used by the appraiser, therefore qualifying the assets as Level 3 in the fair value hierarchy. When significant adjustments are based on unobservable inputs, such as when a current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the resulting fair value measurement has been categorized as a Level 3 measurement. The Company had $11 million ~~and $12 million~~ of such assets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022.

Fair Value of Financial Instruments

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


		September 30, 2022															March 31, 2023
		Carrying Amount			Fair Value												Carrying Amount			Fair Value
				Level 1			Level 2			Level 3			Total						Level 1			Level 2			Level 3			Total
				(in millions)															(in millions)
Financial assets:	Financial assets:															Financial assets:

Investment securities:	Investment securities:															Investment securities:
HTM	HTM	$	1,270		$	—		$	1,084		$	—		$	1,084	HTM	$	1,325		$	—		$	1,185		$	—		$	1,185
AFS	AFS	6,960			25			6,935			—			6,960		AFS	7,645			927			6,718			—			7,645
Equity	Equity	165			140			25			—			165		Equity	141			122			19			—			141
Derivative assets	Derivative assets	315			—			312			3			315		Derivative assets	77			—			63			14			77
Loans HFS(1)	Loans HFS(1)	2,204			—			2,053			152			2,205		Loans HFS(1)	7,022			—			7,010			14			7,024
Loans HFI, net	Loans HFI, net	51,897			—			—			50,068			50,068		Loans HFI, net	46,130			—			—			43,680			43,680
Mortgage servicing rights	Mortgage servicing rights	1,044			—			—			1,044			1,044		Mortgage servicing rights	910			—			—			910			910
Accrued interest receivable	Accrued interest receivable	313			—			313			—			313		Accrued interest receivable	350			—			350			—			350
Financial liabilities:	Financial liabilities:															Financial liabilities:
Deposits	Deposits	$	55,589		$	—		$	55,600		$	—		$	55,600	Deposits	$	47,587		$	—		$	47,584		$	—		$	47,584
Other borrowings	Other borrowings	6,319			—			6,217			—			6,217		Other borrowings	15,853			—			15,771			—			15,771
Qualifying debt	Qualifying debt	889			—			743			72			815		Qualifying debt	895			—			558			77			635
Derivative liabilities	Derivative liabilities	281			—			250			31			281		Derivative liabilities	64			—			63			1			64
Accrued interest payable	Accrued interest payable	20			—			20			—			20		Accrued interest payable	65			—			65			—			65

(1) Includes loans transferred from HFI to HFS. As these transferred loans are salable into active markets, the fair value is based on quoted market or contracted selling prices or a market price equivalent, which are categorized as Level 2 in the fair value hierarchy.

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		December 31, 2021															December 31, 2022
		Carrying Amount			Fair Value												Carrying Amount			Fair Value
				Level 1			Level 2			Level 3			Total						Level 1			Level 2			Level 3			Total
				(in millions)															(in millions)
Financial assets:	Financial assets:															Financial assets:
Investment securities:	Investment securities:															Investment securities:
HTM	HTM	$	1,107		$	—		$	1,146		$	—		$	1,146	HTM	$	1,289		$	—		$	1,112		$	—		$	1,112
AFS	AFS	6,189			41			6,148			—			6,189		AFS	7,092			24			7,068			—			7,092
Equity securities	Equity securities	159			142			17			—			159		Equity securities	160			135			25			—			160
Derivative assets	Derivative assets	50			—			39			11			50		Derivative assets	51			—			46			5			51
Loans HFS	Loans HFS	5,635			—			3,894			1,760			5,654		Loans HFS	1,184			—			1,172			1			1,173
Loans HFI, net	Loans HFI, net	38,823			—			—			39,218			39,218		Loans HFI, net	51,552			—			—			47,679			47,679
Mortgage servicing rights	Mortgage servicing rights	698			—			—			698			698		Mortgage servicing rights	1,148			—			—			1,148			1,148
Accrued interest receivable	Accrued interest receivable	228			—			228			—			228		Accrued interest receivable	357			—			357			—			357
Financial liabilities:	Financial liabilities:															Financial liabilities:
Deposits	Deposits	$	47,612		$	—		$	47,616		$	—		$	47,616	Deposits	$	53,644		$	—		$	53,698		$	—		$	53,698
Other borrowings	Other borrowings	1,502			—			1,518			—			1,518		Other borrowings	6,299			—			6,261			—			6,261
Qualifying debt	Qualifying debt	896			—			858			81			939		Qualifying debt	893			—			735			75			810
Derivative liabilities	Derivative liabilities	100			—			98			2			100		Derivative liabilities	40			—			37			3			40
Accrued interest payable	Accrued interest payable	9			—			9			—			9		Accrued interest payable	35			—			35			—			35

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 letters of credit outstanding at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 approximates zero as there have been no significant changes in borrower creditworthiness. Loan commitments on which the committed interest rates are less than the current market rate are insignificant at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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16. SEGMENTS

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

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

•Consumer ~~Related segment:~~Related: offers ~~consumer banking services, such as mortgage banking and~~both commercial banking services to enterprises in consumer-related sectors and ~~beginning on January 25, 2022 includes the financial results of DST.~~consumer banking services, such as residential mortgage banking.

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

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

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

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

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

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

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


Balance Sheet:	Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate & Other		Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate & Other
At September 30, 2022:		(in millions)
At March 31, 2023:										At March 31, 2023:	(in millions)
Assets:	Assets:									Assets:
Cash, cash equivalents, and investment securities	Cash, cash equivalents, and investment securities	$	10,213	$	12	$	—	$	10,201	Cash, cash equivalents, and investment securities	$	13,132	$	12	$	—	$	13,120
Loans held for sale		2,204		—		2,204		—
Loans, net of deferred fees and costs		52,201		32,060		20,141		—
Loans HFS										Loans HFS	7,022		4,732		2,290		—
Loans HFI, net of deferred fees and costs										Loans HFI, net of deferred fees and costs	46,435		27,282		19,153		—
Less: allowance for credit losses	Less: allowance for credit losses	(304)		(266)		(38)		—		Less: allowance for credit losses	(305)		(255)		(50)		—
Total loans		51,897		31,794		20,103		—
Net loans HFI										Net loans HFI	46,130		27,027		19,103		—
Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	11		11		—		—		Other assets acquired through foreclosure, net	11		11		—		—
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	682		294		388		—		Goodwill and other intangible assets, net	677		293		384		—
Other assets	Other assets	4,158		370		1,890		1,898		Other assets	4,075		550		1,703		1,822
Total assets	Total assets	$	69,165	$	32,481	$	24,585	$	12,099	Total assets	$	71,047	$	32,625	$	23,480	$	14,942
Liabilities:	Liabilities:									Liabilities:
Deposits	Deposits	$	55,589	$	30,006	$	20,957	$	4,626	Deposits	$	47,587	$	21,991	$	20,017	$	5,579
Borrowings and qualifying debt	Borrowings and qualifying debt	7,208		26		375		6,807		Borrowings and qualifying debt	16,748		8		927		15,813
Other liabilities	Other liabilities	1,347		105		447		795		Other liabilities	1,191		97		302		792
Total liabilities	Total liabilities	64,144		30,137		21,779		12,228		Total liabilities	65,526		22,096		21,246		22,184
Allocated equity:	Allocated equity:	5,021		2,802		1,711		508		Allocated equity:	5,521		2,545		1,613		1,363
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	69,165	$	32,939	$	23,490	$	12,736	Total liabilities and stockholders' equity	$	71,047	$	24,641	$	22,859	$	23,547
Excess funds provided (used)	Excess funds provided (used)	—		458		(1,095)		637		Excess funds provided (used)	—		(7,984)		(621)		8,605

Income Statement:	Income Statement:									Income Statement:
Three Months Ended September 30, 2022:		(in millions)
Three Months Ended March 31, 2023:										Three Months Ended March 31, 2023:	(in millions)
Net interest income	Net interest income	$	602.1	$	413.0	$	235.0	$	(45.9)	Net interest income	$	609.9	$	389.4	$	199.3	$	21.2
Provision for credit losses	Provision for credit losses	28.5		19.9		7.6		1.0		Provision for credit losses	19.4		(2.7)		1.5		20.6
Net interest income (expense) after provision for credit losses	Net interest income (expense) after provision for credit losses	573.6		393.1		227.4		(46.9)		Net interest income (expense) after provision for credit losses	590.5		392.1		197.8		0.6
Non-interest income	Non-interest income	61.8		16.1		44.2		1.5		Non-interest income	(58.0)		(96.7)		51.0		(12.3)
Non-interest expense	Non-interest expense	305.8		111.0		178.4		16.4		Non-interest expense	347.9		136.0		192.0		19.9
Income (loss) before income taxes	Income (loss) before income taxes	329.6		298.2		93.2		(61.8)		Income (loss) before income taxes	184.6		159.4		56.8		(31.6)
Income tax expense (benefit)	Income tax expense (benefit)	65.6		71.0		22.3		(27.7)		Income tax expense (benefit)	42.4		38.5		12.8		(8.9)
Net income (loss)	Net income (loss)	$	264.0	$	227.2	$	70.9	$	(34.1)	Net income (loss)	$	142.2	$	120.9	$	44.0	$	(22.7)

Nine Months Ended September 30, 2022:		(in millions)
Net interest income		$	1,576.6	$	1,118.3	$	637.7	$	(179.4)
Provision for (recovery of) credit losses		65.0		53.1		12.9		(1.0)
Net interest income (expense) after provision for credit losses		1,511.6		1,065.2		624.8		(178.4)
Non-interest income		263.1		51.0		198.0		14.1
Non-interest expense		823.3		341.4		442.5		39.4
Income (loss) before income taxes		951.4		774.8		380.3		(203.7)
Income tax expense (benefit)		187.1		184.4		90.8		(88.1)
Net income (loss)		$	764.3	$	590.4	$	289.5	$	(115.6)

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Balance Sheet:	Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate		Balance Sheet:	Consolidated Company		Commercial		Consumer Related		Corporate
At December 31, 2021:		(in millions)
At December 31, 2022:										At December 31, 2022:	(in millions)
Assets:	Assets:									Assets:
Cash, cash equivalents, and investment securities	Cash, cash equivalents, and investment securities	$	8,057	$	13	$	82	$	7,962	Cash, cash equivalents, and investment securities	$	9,803	$	12	$	—	$	9,791
Loans held for sale	Loans held for sale	5,635		—		5,635		—		Loans held for sale	1,184		—		1,184		—
Loans, net of deferred fees and costs	Loans, net of deferred fees and costs	39,075		25,092		13,983		—		Loans, net of deferred fees and costs	51,862		31,414		20,448		—
Less: allowance for credit losses	Less: allowance for credit losses	(252)		(226)		(26)		—		Less: allowance for credit losses	(310)		(262)		(48)		—
Total loans	Total loans	38,823		24,866		13,957		—		Total loans	51,552		31,152		20,400		—
Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	12		12		—		—		Other assets acquired through foreclosure, net	11		11		—		—
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	635		295		340		—		Goodwill and other intangible assets, net	680		293		387		—
Other assets	Other assets	2,821		254		1,278		1,289		Other assets	4,504		435		2,180		1,889
Total assets	Total assets	$	55,983	$	25,440	$	21,292	$	9,251	Total assets	$	67,734	$	31,903	$	24,151	$	11,680
Liabilities:	Liabilities:									Liabilities:
Deposits	Deposits	$	47,612	$	30,467	$	15,363	$	1,782	Deposits	$	53,644	$	29,494	$	18,492	$	5,658
Borrowings and qualifying debt	Borrowings and qualifying debt	2,398		—		353		2,045		Borrowings and qualifying debt	7,192		27		340		6,825
Other liabilities	Other liabilities	1,010		233		138		639		Other liabilities	1,542		83		656		803
Total liabilities	Total liabilities	51,020		30,700		15,854		4,466		Total liabilities	62,378		29,604		19,488		13,286
Allocated equity:	Allocated equity:	4,963		2,588		1,596		779		Allocated equity:	5,356		2,684		1,691		981
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	55,983	$	33,288	$	17,450	$	5,245	Total liabilities and stockholders' equity	$	67,734	$	32,288	$	21,179	$	14,267
Excess funds provided (used)	Excess funds provided (used)	—		7,848		(3,842)		(4,006)		Excess funds provided (used)	—		385		(2,972)		2,587

Income Statements:	Income Statements:									Income Statements:
Three Months Ended September 30, 2021:		(in millions)
Three Months Ended March 31, 2022:										Three Months Ended March 31, 2022:	(in millions)
Net interest income	Net interest income	$	410.4	$	304.4	$	170.3	$	(64.3)	Net interest income	$	449.5	$	334.9	$	183.2	$	(68.6)
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	12.3		19.3		(5.5)		(1.5)		Provision for (recovery of) credit losses	9.0		0.6		10.5		(2.1)
Net interest income (expense) after provision for credit losses	Net interest income (expense) after provision for credit losses	398.1		285.1		175.8		(62.8)		Net interest income (expense) after provision for credit losses	440.5		334.3		172.7		(66.5)
Non-interest income	Non-interest income	138.1		15.1		123.8		(0.8)		Non-interest income	106.3		16.9		79.2		10.2
Non-interest expense	Non-interest expense	233.8		107.0		123.6		3.2		Non-interest expense	248.6		114.4		125.0		9.2
Income (loss) before income taxes	Income (loss) before income taxes	302.4		193.2		176.0		(66.8)		Income (loss) before income taxes	298.2		236.8		126.9		(65.5)
Income tax expense (benefit)	Income tax expense (benefit)	65.5		46.5		42.6		(23.6)		Income tax expense (benefit)	58.1		56.2		30.4		(28.5)
Net income (loss)	Net income (loss)	$	236.9	$	146.7	$	133.4	$	(43.2)	Net income (loss)	$	240.1	$	180.6	$	96.5	$	(37.0)

Nine Months Ended September 30, 2021:		(in millions)
Net interest income		$	1,098.2	$	848.8	$	417.8	$	(168.4)
(Recovery of) provision for credit losses		(34.6)		(35.5)		3.4		(2.5)
Net interest income (expense) after provision for credit losses		1,132.8		884.3		414.4		(165.9)
Non-interest income		293.8		48.2		241.1		4.5
Non-interest expense		613.6		309.4		294.4		9.8
Income (loss) before income taxes		813.0		623.1		361.1		(171.2)
Income tax expense (benefit)		159.8		149.8		87.5		(77.5)
Net income (loss)		$	653.2	$	473.3	$	273.6	$	(93.7)

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17. REVENUE FROM CONTRACTS WITH CUSTOMERS

~~ASC 606,~~ ~~Revenue from Contracts with Customers~~, requires revenue to be recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. The majority of the Company’s revenue streams are outside the scope of ASC 606. Revenue streams within the scope of ASC 606 include service charges and fees, interchange fees on credit and debit cards, success fees, and legal settlement service ~~fees.~~

~~Performance Obligations~~

~~Many of~~fees and totaled $14.0 million and $14.4 million for the ~~services the Company performs for its customers are ongoing,~~three months ended March 31, 2023 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. For services provided at a point in time, fees are recognized at the time such services are rendered.2022, respectively. The Company had no material unsatisfied performance obligations as of ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

~~Service Charges and Fees~~

~~The Company performs deposit account services for its customers, which include analysis and treasury management services, use~~

Table of ~~safe deposit boxes, check upcharges, and other ancillary services. The depository arrangements~~Contents

18. MERGERS, ACQUISITIONS AND DISPOSITIONS

Acquisition of Digital Disbursements

On January 25, 2022, the Company ~~holds~~completed its acquisition of DST, doing business as Digital Disbursements, a digital payments platform for the class action legal industry. The acquisition of DST extended the Company's digital payment efforts by providing a digital payments platform for the class action market and broader legal industry.

Total consideration of $57.0 million, comprised of cash paid at closing of $50.6 million and contingent consideration with ~~its customers are considered day-to-day contracts with ongoing renewals~~an estimated fair value of $6.4 million, was exchanged for all of the issued and ~~optional purchases, and as such,~~outstanding membership interests of DST. The terms of the ~~contract duration does not extend beyond~~acquisition include a contingent consideration arrangement that is based on performance for the ~~services performed. Due~~three year period subsequent to the ~~short-term nature~~acquisition. There is no required minimum or maximum payment amount specified under the terms of ~~such contracts,~~ the ~~Company generally recognizes revenue for deposit related fees as services are rendered. From time to time,~~contingent consideration agreement. The fair value of the ~~Company may waive certain fees for its customers. The Company considers historical experience when recognizing revenue from contracts with customers, and may reduce~~contingent consideration recognized on the ~~transaction price to account for fee waivers or refunds.~~acquisition date was estimated using a discounted cash flow approach.

~~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. Interchange fees on credit and debit cards are~~DST’s results of operations have been included in ~~Commercial banking~~the Company's results beginning January 25, 2022 and are reported as part of the Consumer Related segment. There were no acquisition and restructure expenses related ~~income~~to the DST acquisition incurred during the three months ended March 31, 2023. For the three months ended March 31, 2022, there was $0.4 million of acquisition and restructure expenses included as a component of non-interest expense in the Consolidated Income ~~Statements.~~ Statement, all of which were acquisition related costs as defined by ASC 805.

The fair value amounts of identifiable assets acquired and liabilities assumed in the DST acquisition are as follows:


	January 25, 2022
	(in millions)
Assets acquired:
Cash and cash equivalents	$	0.6
Identified intangible assets	20.1
Other assets	0.1
Total assets	$	20.8
Liabilities assumed:
Other liabilities	$	0.4
Total liabilities	0.4
Net assets acquired	$	20.4
Consideration paid
Cash	$	50.6
Contingent consideration	6.4
Total consideration	$	57.0
Goodwill	$	36.6

In connection with the acquisition, the Company ~~considers~~acquired identifiable intangible assets totaling $20.1 million, as detailed in the ~~merchant~~table below:


	Acquisition Date Fair Value		Estimated Useful Life
	(in millions)		(in years)
Customer relationships	$	15.7	7
Developed technology	4.1		5
Trade name	0.3		10
Total	$	20.1

Goodwill in the amount of $36.6 million was recognized, of which $31.8 million is expected to be ~~its customer in these transactions as nightly~~deductible for tax purposes. Goodwill was allocated entirely to the Consumer Related segment and represents the strategic, operational, and financial benefits expected from the acquisition, including expansion of the Company's settlement services ~~between~~offerings, diversification of its revenue sources, and post-acquisition synergies from integrating Digital Disbursements, as well as the ~~payment network and~~value of the ~~merchant are being provided~~acquired workforce.

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19. SUBSEQUENT EVENTS

Subsequent to ~~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,~~March 31, 2023, the Company ~~acts as an agent. Interchange fees are recorded net of expenses as the services are provided.~~

~~Success Fees~~

~~Success fees are one-time fees detailed as part of certain~~has continued to execute on its balance sheet repositioning strategy, with loan ~~agreements~~dispositions totaling approximately $2.0 billion and ~~are earned~~no significant fair value adjustments 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 as the transaction price can vary and is contingent on the occurrence or non-occurrence of a triggering event. These fees are included in Income from equity investments in the Consolidated Income Statements.

~~Legal Settlement Services~~

The Company provides payment services for claim administrators responsible for distributing funds from legal settlements, such as class action lawsuits. Claimants access the Company's platform, select their preferred method of payment, and funds are transferred to the claimant. Upon the transfer of funds,settlement. In addition, the Company ~~is entitled to~~substantially paid off the balance of its credit linked note on its warehouse loans, which had a ~~fee paid by the claim administrator. Revenue is recognized upon each transfer~~principal balance of ~~funds to~~$275 million as of March 31, 2023. This payoff did not have a ~~claimant.~~

Revenues within the scope of ASC 606 totaled $9.0 million for the three months ended September 30, 2022 and 2021. Revenues within the scope of ASC 606 totaled $34.6 million and $27.6 million for the nine months ended September 30, 2022, and 2021, respectively.significant income statement impact.

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

This discussion is designed to provide insight into management's assessment of significant trends related to the Company's consolidated financial condition, results of operations, liquidity, capital resources, and interest rate sensitivity. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 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, 2022~~March 31, 2023 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. 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) ~~the potential adverse effects of the ongoing COVID-19 pandemic and any governmental or societal responses thereto; 2) other~~ adverse financial market and economic conditions, including the effects of any recession in the United States, the impact of the recent bank failures and related adverse developments in the banking industry, the potential impact on borrowers of supply chain disruptions and the economic and market impacts of the military conflict between Russia and Ukraine; 3)2) changes in interest rates and increased rate competition; 4)3) exposure of financial instruments to certain market risks that may increase the volatility of earnings and AOCI; 5)4) the inherent risk associated with accounting estimates, including the impact to the ~~Company's~~ allowance, provision for credit losses, and capital ~~levels under the CECL accounting standard; 6)~~levels; 5) exposure to natural and man-made disasters in markets that ~~the Company operates~~we operate and the impact of climate change and ESG practices on us and our customers; 6) the ~~Company and its customers;~~potential adverse effects of the ongoing COVID-19 pandemic; 7) dependency on real estate and events that negatively impact the real estate market; 8) ~~high concentration of commercial real estate, residential mortgage, and commercial and industrial loans;~~concentrations in certain business lines or product types within our loan portfolio; 9) residual risk retained by ~~the Company~~us on reference pools covered by credit linked notes; 10) exposure to environmental liabilities related to the properties to which ~~the Company acquires~~we acquire title; 11) ~~the Company's~~ ability to compete in a highly competitive market; 12) expansion strategies through acquisitions or implementation of new lines of business or new products and services that may not be successful; 13) uncertainty associated with digital payment initiatives; 14) ~~the Company's~~ ability to recruit and retain qualified employees and implement adequate succession planning to mitigate the loss of key members of ~~its~~our senior management team; 15) ability to meet capital adequacy and liquidity requirements; 16) dependence on low-cost deposits; ~~16)~~17) risks related to representations and warranties made on third-party loan sales; ~~17)~~18) ability to borrow from the FHLB or the FRB; ~~18)~~19) a change in ~~the Company's~~our creditworthiness; ~~19)~~20) information security breaches; ~~20)~~21) reliance on third parties to provide key components of ~~the Company's~~our infrastructure; ~~21)~~22) perpetration of fraud; ~~22) the Company's~~23) ability to implement and improve ~~its~~our controls and processes to keep pace with ~~its~~ growth; ~~23)~~24) the replacement of LIBOR; ~~24) the Company's ability to adapt to technological change;~~ 25) risk of operating in a highly regulated industry and ~~the Company's~~our ability to remain in compliance; 26) ability to adapt to technological change; 27) failure to comply with state and federal banking agency laws and regulations; ~~27)~~28) results of any tax audit findings, challenges to ~~the Company's~~our tax positions, or adverse changes or interpretations of tax laws; and ~~28)~~29) risks related to ownership and price of the ~~Company's~~our common ~~stock.~~stock; and 30) ability to continue to declare quarterly dividends.

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, ~~2021.~~2022. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Recent ~~Developments: Acquisition~~Banking Industry and Market Developments

The closures of ~~Digital Disbursements~~Silicon Valley Bank and Signature Bank have caused significant disruption in the United States banking industry, particularly among mid-size banks, such as the Company. These bank closures triggered a surge in deposit outflows and stock price volatility at many mid-sized banks.

~~On January 25, 2022,~~The FRB announced the BTFP, which offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral valued at par. Under this program, the Bank has access to $1.4 billion in borrowing capacity, of which $1.3 billion was drawn at March 31, 2023.

Additionally, the Department of the Treasury, FRB, and FDIC issued a joint statement relating to the resolution of Silicon Valley Bank and Signature Bank, which stated that losses to support uninsured deposits of those banks would be recovered via a special assessment on banks. Although the exact terms of that special assessment have not been announced, the Company ~~completed~~expects that future FDIC deposit insurance assessments will increase.

Most recently, on May 1, 2023, First Republic Bank was closed by its ~~acquisition~~primary state regulator, which appointed the FDIC as receiver, and the FDIC announced that JP Morgan Chase Bank, National Association agreed to assume all of ~~Digital Settlement Technologies LLC, doing business~~First Republic Bank’s deposits and substantially all of its assets and that the expected related cost to the Deposit Insurance Fund would be approximately $13 billion. The recent volatility in the banking industry and other recent regulatory actions have had and may continue to have a material impact on the Company's operations, as ~~Digital Disbursements,~~further discussed below.

Capital and liquidity

While the Company believes it has sufficient capital, funding, and access to contingent sources of liquidity, the Company has taken several actions to ensure the strength of its capital and liquidity position. These actions included sale of selected assets, including $459 million of AFS securities and $915 million of loans, as well as transfer of $5.9 billion of loans to HFS, net of a ~~digital payments platform~~pre-tax fair value loss adjustment of $123.5 million, and increasing its borrowing capacity with the FRB.

The Company's deposit balances stabilized as of March 20, 2023 and from such date through March 31, 2023 deposits increased, but were down $6.1 billion from December 31, 2022. The Company also strengthened its insured deposit ratio from 45% as of December 31, 2022 to 68% as of March 31, 2023, with a further increase to 74% as of May 2, 2023.

Financial position and results of operations

The Company's financial position and results of operations as of and for the ~~class action legal industry. DST's proprietary platform enables claimants~~three months ended March 31, 2023 have been impacted by this disruption. The current conditions in the banking industry contributed to ~~select their payment method, including direct-to-bank account options~~the $19.4 million provision for credit losses recognized during the three months ended March 31, 2023, of which $17.1 million related to a charge-off of a corporate debt security from a financial institution issuer. The Company's actions to strengthen its capital and ~~popular digital wallets. This provides~~liquidity position contributed to a $147.8 million pre-tax fair value loss adjustment primarily related to the ~~Company with~~transfer of loans to HFS, a loss of $12.5 million on sales of investment securities, and a $12.7 million gain on extinguishment of debt. The continued uncertainty regarding the ~~internal capability~~severity and duration of the volatility in the banking industry and related economic effects will continue to affect the Company’s estimate of its allowance for credit losses and resulting provision for credit losses. To the extent the impact of the recent banking industry volatility is prolonged and economic conditions worsen or persist longer than forecast, such estimates may be insufficient and may change significantly ~~increase efficacy, reduce distribution costs and improve potential fraud detection for~~in the ~~legal class action market.~~future. The ~~acquisition is expected to grow~~Company’s net interest margin also may be negatively impacted in future periods if the Company's ~~deposit base~~borrowings remain elevated. These uncertainties and the economic environment will continue to ~~extend~~affect earnings, growth, and may result in deterioration of asset quality in the ~~suite~~Company's loan and investment portfolios.

Depositors in the technology industry are generally considered to be the most impacted by recent events and may have greater sensitivity to the recent volatility in the banking industry with potentially longer recovery periods than other types of ~~legal banking services offered while serving adjacent sectors~~businesses. The Company's deposit exposure to the technology industry totaled $4.2 billion, or 8.8% of total deposits, as of March 31, 2023.

Asset valuation

Continued and sustained declines in the Company's stock price and/or other liquidity related impacts, such as increases in deposit outflows, could give rise to triggering events in the future that ~~will benefit from digital payments technology.~~could result in a write-down in the value of our goodwill, which could have a material adverse impact on our results of operations.

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Financial Overview and Highlights

WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated under the laws of the state of Delaware. WAL provides a full spectrum of customized loan, deposit and treasury management capabilities, including 24/7 funds transfer and other ~~blockchain-based~~digital payment offerings through its wholly-owned banking subsidiary, WAB.

WAB operates the following full-service banking divisions: ABA, BON and FIB, Bridge, and TPB. The Company also provides an array of specialized financial services across the country, including mortgage banking services through AmeriHome and ~~has added to its capabilities with the acquisition of DST on January 25, 2022, which provides~~ digital payment services for the class action legal ~~industry.~~industry through DST.

Financial Results Highlights for the ~~Third~~First Quarter of ~~2022~~2023

•Net income available to common stockholders of ~~$260.8~~$139.0 million, or $248.7 million1 after adjusting for after tax net non-operating charges resulting from execution of the Company's balance sheet repositioning strategy, compared to $236.9 million for the ~~third~~first quarter ~~2021~~2022

•Diluted earnings per share of ~~$2.42,~~$1.28, or $2.30 adjusted1, compared to ~~$2.28~~$2.22 per share for the ~~third~~first quarter ~~2021~~2022

•Net revenue of ~~$663.9~~$551.9 million, ~~an increase of 21.0%,~~ or ~~$115.4~~$712.2 million adjusted1, compared to $555.8 million for the ~~third~~first quarter ~~2021,~~2022, with non-interest expense ~~increase~~ of ~~30.8%,~~$347.9 million, or ~~$72.0~~$360.6 millionadjusted1, compared to $248.6 million for the ~~third~~first quarter ~~2021~~2022

•PPNR of ~~$358.1~~$351.6 million, up ~~13.8%~~14.6% from ~~$314.7~~$306.9 million in the ~~third~~first quarter ~~2021~~20221

•Total loans HFI ~~loans~~ of ~~$52.2~~$46.4 billion, ~~up $13.1~~down $5.4 billion, or ~~33.6%~~10.5%, from December 31, ~~2021~~2022

•Total deposits of ~~$55.6~~$47.6 billion, ~~up $8.0~~down $6.1 billion, or ~~16.8%~~11.3%, from December 31, ~~2021~~2022

•Stockholders' equity of ~~$5.0~~$5.5 billion, an increase of ~~$58~~$165 million from December 31, ~~2021~~2022

•Nonperforming assets (nonaccrual loans and repossessed assets) ~~decreased to 0.15%~~flat at 0.17% of total assets ~~from 0.17% at September 30, 2021~~compared to March 31, 2022

•Annualized net loan ~~(recoveries)~~ charge-offs to average loans outstanding of ~~(0.02)%~~0.05%, compared to ~~0.04%~~approximately 0.00% for the ~~third~~first quarter ~~2021~~2022

•Net interest margin of ~~3.78%~~3.79%, ~~compared to 3.43%~~increased from 3.32% in the ~~third~~first quarter ~~2021~~2022

•Tangible common equity ratio of ~~5.9%~~6.5%, a decrease compared to ~~6.9%~~6.7% at ~~September 30, 2021~~March 31, 20221

•Book value per common share of ~~$43.39,~~$47.72, an increase of ~~7.2%~~9.6% from ~~$40.49~~$43.56 at ~~September 30, 2021~~March 31, 2022

•Tangible book value per share, net of tax, of ~~$37.16,~~$41.56, an increase of ~~$2.49,~~$4.43, or ~~7.2%~~11.9%, from ~~$34.67~~$37.13 at ~~September 30, 2021~~March 31, 20221

•Efficiency ratio of ~~45.5%~~62.1%, or 50.0% adjusted, in the ~~third~~first quarter ~~2022,~~2023, compared to ~~42.0%~~44.1% in the ~~third~~first quarter ~~2021~~20221

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, 2022.~~March 31, 2023.

1 See Non-GAAP Financial Measures section beginning on page ~~78.~~61.

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

Results of Operations and Financial Condition

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021				2023			2023 Adjusted (1)			2022
		(in millions, except per share amounts)													(in millions, except per share amounts)
Net income	Net income	$	264.0		$	236.9		$	764.3		$	653.2		Net income	$	142.2		$	251.9		$	240.1
Net income available to common stockholders	Net income available to common stockholders	260.8			236.9			754.7			653.2			Net income available to common stockholders	139.0			248.7			236.9
Earnings per share - basic	Earnings per share - basic	2.43			2.29			7.06			6.39			Earnings per share - basic	1.29			2.30			2.23
Earnings per share - diluted	Earnings per share - diluted	2.42			2.28			7.03			6.35			Earnings per share - diluted	1.28			2.30			2.22
Return on average assets	Return on average assets	1.53		%	1.83		%	1.60		%	1.89		%	Return on average assets	0.81		%	1.43		%	1.64		%
Return on average equity	Return on average equity	20.3			22.5			20.2			22.8			Return on average equity	10.3			18.3			19.5
Return on average tangible common equity (1)	Return on average tangible common equity (1)	24.9			26.6			24.8			26.3			Return on average tangible common equity (1)	12.2			21.9			23.9
Net interest margin	Net interest margin	3.78			3.43			3.56			3.44			Net interest margin	3.79						3.32

(1) See Non-GAAP Financial Measures section beginning on page ~~78.~~61.


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
Total assets	Total assets	$	69,165	$	55,983	Total assets	$	71,047	$	67,734
Loans HFS	Loans HFS	2,204		5,635		Loans HFS	7,022		1,184
Loans HFI, net of deferred loan fees and costs	Loans HFI, net of deferred loan fees and costs	52,201		39,075		Loans HFI, net of deferred loan fees and costs	46,435		51,862
Investment securities						Investment securities	9,111		8,541
Total deposits	Total deposits	55,589		47,612		Total deposits	47,587		53,644
Other borrowings	Other borrowings	6,319		1,502		Other borrowings	15,853		6,299
Qualifying debt	Qualifying debt	889		896		Qualifying debt	895		893
Stockholders' equity	Stockholders' equity	5,021		4,963		Stockholders' equity	5,521		5,356
Tangible common equity, net of tax (1)	Tangible common equity, net of tax (1)	4,047		4,035		Tangible common equity, net of tax (1)	4,551		4,383

(1) See Non-GAAP Financial Measures section beginning on page ~~78.~~61.

~~Asset Quality~~

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


		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		(dollars in millions)							(dollars in millions)
Nonaccrual loans	Nonaccrual loans	$	90		$	73		Nonaccrual loans	$	107		$	85
Repossessed assets	Repossessed assets	11			12			Repossessed assets	11			11
Non-performing assets	Non-performing assets	103			87			Non-performing assets	138			98
Nonaccrual loans to funded loans	Nonaccrual loans to funded loans	0.17		%	0.19		%	Nonaccrual loans to funded loans	0.23		%	0.16		%
Nonaccrual and repossessed assets to total assets	Nonaccrual and repossessed assets to total assets	0.15			0.15			Nonaccrual and repossessed assets to total assets	0.17			0.14
Allowance for loan losses to funded loans	Allowance for loan losses to funded loans	0.58			0.65			Allowance for loan losses to funded loans	0.66			0.60
Allowance for credit losses to funded loans	Allowance for credit losses to funded loans	0.68			0.74			Allowance for credit losses to funded loans	0.75			0.69
Net (recoveries) charge-offs to average loans outstanding (1)		(0.02)			0.02
Net charge-offs to average loans outstanding (1)								Net charge-offs to average loans outstanding (1)	0.05			0.00

(1)Annualized on an actual/actual basis for the three months ended ~~September 30, 2022.~~March 31, 2023. Actual year-to-date for the year ended December 31, ~~2021.~~2022.

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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 ~~$69.2~~$71.0 billion at ~~September 30, 2022~~March 31, 2023 from ~~$56.0~~$67.7 billion at December 31, ~~2021.~~2022. The increase in total assets of ~~$13.2~~$3.3 billion, or ~~23.5%~~4.9%, was driven by ~~continued organic loan and~~an increase in borrowings as the recent disruption in the banking industry caused a temporary surge in deposit ~~growth,~~outflows, increasing the need for additional liquidity, which contributed to an increase in cash of ~~$1.1~~$2.6 billion as well as an increase in investment securities of ~~$941~~$569 million. Loans HFI ~~loans increased~~decreased by ~~$13.1~~$5.4 billion, or ~~33.6%~~10.5%, to ~~$52.2~~$46.4 billion as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$39.1~~$51.9 billion as of December 31, ~~2021.~~2022. The ~~increase~~decrease in loans HFI ~~loans~~ from December 31, ~~2021~~2022 was ~~driven by increases in~~attributable to the transfer of $5.9 billion to HFS, net of a fair value loss adjustment of $123.5 million. By loan type, commercial and industrial loans and residential real estate loans ~~of $6.4~~decreased $5.2 billion ~~(includes a transfer of EBO~~and $904 million, respectively, from December 31, 2022, partially offset by increases in construction and land development loans ~~from HFS to HFI in the second quarter of 2022 with a balance of $1.8 billion at September 30, 2022), commercial~~ and ~~industrial loans of $4.0 billion,~~ CRE, non-owner occupied loans of ~~$2.1~~$394 million and $298 million, respectively. Loans HFS increased by $5.8 billion ~~and construction and land development loans~~as a result of ~~$598 million. These increases were partially offset by a decrease in CRE, owner occupied loans of $50 million. In addition, HFS loans decreased by $3.4 billion,~~this transfer, up from ~~$5.6~~$1.2 billion as of December 31, ~~2021, primarily related to a transfer of EBO loans from HFS to HFI in the second quarter of 2022 with a balance of $1.8 billion at September 30,~~ 2022.

Total deposits ~~increased $8.0~~decreased $6.1 billion, or ~~16.8%~~11.3%, to ~~$55.6~~$47.6 billion as of ~~September 30, 2022~~March 31, 2023 from ~~$47.6~~$53.6 billion as of December 31, ~~2021. The increase~~2022. By type, the decrease in deposits from December 31, ~~2021~~2022 was driven by ~~increases~~a decrease of ~~$3.6 billion in non-interest bearing demand deposits, $1.9~~$5.6 billion in savings and money market accounts ~~$1.4~~and $3.2 billion in non-interest bearing demand deposits, partially offset by an increase of $1.5 billion in certificates of deposit and $1.2 billion in interest bearing demand ~~deposits, and $1.1 billion in certificates of deposit.~~deposits.

RESULTS OF OPERATIONS

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


		Three Months Ended September 30,				Increase		Nine Months Ended September 30,				Increase			Three Months Ended March 31,				Increase
		2022		2021		(Decrease)		2022		2021		(Decrease)			2023		2022		(Decrease)
		(in millions, except per share amounts)													(in millions, except per share amounts)
Consolidated Income Statement Data:	Consolidated Income Statement Data:													Consolidated Income Statement Data:
Interest income	Interest income	$	739.4	$	442.8	$	296.6	$	1,803.5	$	1,175.4	$	628.1	Interest income	$	968.9	$	484.5	$	484.4
Interest expense	Interest expense	137.3		32.4		104.9		226.9		77.2		149.7		Interest expense	359.0		35.0		324.0
Net interest income	Net interest income	602.1		410.4		191.7		1,576.6		1,098.2		478.4		Net interest income	609.9		449.5		160.4
Provision for (recovery of) credit losses		28.5		12.3		16.2		65.0		(34.6)		99.6
Net interest income after provision for (recovery of) credit losses		573.6		398.1		175.5		1,511.6		1,132.8		378.8
Provision for credit losses														Provision for credit losses	19.4		9.0		10.4
Net interest income after provision for credit losses														Net interest income after provision for credit losses	590.5		440.5		150.0
Non-interest income	Non-interest income	61.8		138.1		(76.3)		263.1		293.8		(30.7)		Non-interest income	(58.0)		106.3		(164.3)
Non-interest expense	Non-interest expense	305.8		233.8		72.0		823.3		613.6		209.7		Non-interest expense	347.9		248.6		99.3
Income before provision for income taxes	Income before provision for income taxes	329.6		302.4		27.2		951.4		813.0		138.4		Income before provision for income taxes	184.6		298.2		(113.6)
Income tax expense	Income tax expense	65.6		65.5		0.1		187.1		159.8		27.3		Income tax expense	42.4		58.1		(15.7)
Net income	Net income	264.0		236.9		27.1		764.3		653.2		111.1		Net income	142.2		240.1		(97.9)
Dividends on preferred stock	Dividends on preferred stock	3.2		—		3.2		9.6		—		9.6		Dividends on preferred stock	3.2		3.2		—
Net income available to common stockholders	Net income available to common stockholders	$	260.8	$	236.9	$	23.9	$	754.7	$	653.2	$	101.5	Net income available to common stockholders	$	139.0	$	236.9	$	(97.9)
Earnings per share:	Earnings per share:													Earnings per share:
Basic	Basic	$	2.43	$	2.29	$	0.14	$	7.06	$	6.39	$	0.67	Basic	$	1.29	$	2.23	$	(0.94)
Diluted	Diluted	2.42		2.28		0.14		$	7.03	$	6.35	$	0.68	Diluted	1.28		2.22		(0.94)

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Non-GAAP Financial Measures

The following discussion and analysis contains financial information determined by methods other than those prescribed by GAAP. The Company's management uses these non-GAAP financial measures in their analysis of the Company's performance. Management believes presentation of these non-GAAP financial measures provides useful supplemental information that is essential to a complete understanding of the operating results of the Company. Since the presentation of these non-GAAP performance measures and their impact differ between companies, these non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Pre-Provision Net Revenue

Banking regulations define PPNR as the sum of net interest income and non-interest income less expenses before adjusting for loss ~~provisions.~~provisions and has been further adjusted for non-operating items. Management believes that this is an important metric as it illustrates the underlying performance of the Company, it enables investors and others to assess the Company's ability to generate capital to cover credit losses through the credit cycle, and provides consistent reporting with a key metric used by bank regulatory agencies.

The following table shows the components used in the calculation of ~~PPNR for the three and nine months ended September 30, 2022 and 2021:~~PPNR:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(in millions)									(in millions)
Net interest income	Net interest income	$	602.1	$	410.4	$	1,576.6	$	1,098.2	Net interest income	$	609.9	$	449.5
Total non-interest income	Total non-interest income	61.8		138.1		263.1		293.8		Total non-interest income	(58.0)		106.3
Net revenue		$	663.9	$	548.5	$	1,839.7	$	1,392.0
Adjusted for:										Adjusted for:
Loss (gain) on sales of investment securities										Loss (gain) on sales of investment securities	12.5		(6.9)
Fair value loss adjustments, net										Fair value loss adjustments, net	147.8		6.6
Total non-interest income, adjusted										Total non-interest income, adjusted	$	102.3	$	106.0
Net revenue, adjusted										Net revenue, adjusted	$	712.2	$	555.5
Total non-interest expense	Total non-interest expense	305.8		233.8		823.3		613.6		Total non-interest expense	347.9		248.6

Adjusted for:										Adjusted for:
Gain on extinguishment of debt										Gain on extinguishment of debt	12.7		—
Total non-interest expense, adjusted										Total non-interest expense, adjusted	$	360.6	$	248.6
Pre-provision net revenue	Pre-provision net revenue	$	358.1	$	314.7	$	1,016.4	$	778.4	Pre-provision net revenue	$	351.6	$	306.9
Less:	Less:									Less:

Provision for (recovery of) credit losses		28.5		12.3		65.0		(34.6)
Provision for credit losses										Provision for credit losses	19.4		9.0
Income tax expense	Income tax expense	65.6		65.5		187.1		159.8		Income tax expense	42.4		58.1
Loss (gain) on sales of investment securities										Loss (gain) on sales of investment securities	12.5		(6.9)
Fair value loss adjustments, net										Fair value loss adjustments, net	147.8		6.6
Plus: Gain on extinguishment of debt										Plus: Gain on extinguishment of debt	12.7		—
Net income	Net income	$	264.0	$	236.9	$	764.3	$	653.2	Net income	$	142.2	$	240.1

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Efficiency Ratio

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021				2023			2022
		(dollars in millions)													(dollars in millions)
Total non-interest expense		$	305.8		$	233.8		$	823.3		$	613.6
Total non-interest expense, adjusted														Total non-interest expense, adjusted	$	360.6		$	248.6
Divided by:	Divided by:													Divided by:
Total net interest income	Total net interest income	602.1			410.4			1,576.6			1,098.2			Total net interest income	609.9			449.5
Plus:	Plus:													Plus:
Tax equivalent interest adjustment	Tax equivalent interest adjustment	8.5			8.5			24.7			24.9			Tax equivalent interest adjustment	8.8			8.0
Total non-interest income		61.8			138.1			263.1			293.8
Total non-interest income, adjusted														Total non-interest income, adjusted	102.3			106.0
		$	672.4		$	557.0		$	1,864.4		$	1,416.9			$	721.0		$	563.5
Efficiency ratio - tax equivalent basis	Efficiency ratio - tax equivalent basis	45.5		%	42.0		%	44.2		%	43.3		%	Efficiency ratio - tax equivalent basis	62.1		%	44.1		%
Efficiency ratio - tax equivalent basis, adjusted														Efficiency ratio - tax equivalent basis, adjusted	50.0		%	44.1		%

Earnings Per Share, Adjusted

The following table shows the components used in the calculation of earnings per share, adjusted to exclude non-operating items:


	Three Months Ended March 31,
	2023		2022
	(in millions)
Net income available to common stockholders	$	139.0	$	236.9
Adjusted for:
Loss (gain) on sales of investment securities	12.5		(6.9)
Fair value loss adjustments, net	147.8		6.6
Gain on extinguishment of debt	(12.7)		—
Tax effect of adjustments	(37.9)		0.1
Net income available to common stockholders, adjusted	$	248.7	$	236.7
Diluted shares	108.3		106.6
Diluted earnings per share, adjusted	$	2.30	$	2.22

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Tangible Common Equity and Return on Average Tangible Common Equity

The following ~~table presents~~tables present financial measures related to tangible common equity. Tangible common equity represents total stockholders' equity, less ~~identifiable~~goodwill and intangible assets and ~~goodwill.~~preferred stock. 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, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		(dollars and shares in millions)							(dollars and shares in millions)
Total stockholders' equity	Total stockholders' equity	$	5,021		$	4,963		Total stockholders' equity	$	5,521		$	5,356
Less:	Less:							Less:
Goodwill and intangible assets	Goodwill and intangible assets	682			635			Goodwill and intangible assets	677			680
Preferred stock	Preferred stock	295			295			Preferred stock	295			295
Total tangible common stockholders' equity	Total tangible common stockholders' equity	4,044			4,033			Total tangible common stockholders' equity	4,549			4,381
Plus: deferred tax - attributed to intangible assets	Plus: deferred tax - attributed to intangible assets	3			2			Plus: deferred tax - attributed to intangible assets	2			2
Total tangible common equity, net of tax	Total tangible common equity, net of tax	$	4,047		$	4,035		Total tangible common equity, net of tax	$	4,551		$	4,383

Total assets	Total assets	$	69,165		$	55,983		Total assets	$	71,047		$	67,734
Less: goodwill and intangible assets, net	Less: goodwill and intangible assets, net	682			635			Less: goodwill and intangible assets, net	677			680
Tangible assets	Tangible assets	68,483			55,348			Tangible assets	70,370			67,054
Plus: deferred tax - attributed to intangible assets	Plus: deferred tax - attributed to intangible assets	3			2			Plus: deferred tax - attributed to intangible assets	2			2
Total tangible assets, net of tax	Total tangible assets, net of tax	$	68,486		$	55,350		Total tangible assets, net of tax	$	70,372		$	67,056

Tangible common equity ratio	Tangible common equity ratio	5.9		%	7.3		%	Tangible common equity ratio	6.5		%	6.5		%
Common shares outstanding	Common shares outstanding	108.9			106.6			Common shares outstanding	109.5			108.9
Book value per common share	Book value per common share	$	43.39		$	43.78		Book value per common share	$	47.72		$	46.47
Tangible book value per common share, net of tax	Tangible book value per common share, net of tax	37.16			37.84			Tangible book value per common share, net of tax	41.56			40.25


	Three Months Ended March 31,
	2023			2022
	(dollars in millions)
Net income available to common shareholders	$	139.0		$	236.9
Divided by:
Average stockholders' equity	5,587.8			4,988.9
Less:
Average goodwill and intangible assets	(678.6)			(679.3)
Average preferred stock	(294.5)			(294.5)
Average tangible common equity	4,614.7			4,015.1


Return on average tangible common equity	12.2		%	23.9		%

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Regulatory Capital

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

As permitted by the regulatory capital rules, the Company elected to delay the estimated impact of CECL on its regulatory capital over a five-year transition period ending December 31, 2024. ~~Beginning in 2022,~~Accordingly, capital ratios and amounts for 2022 include a 25% reduction to the capital benefit that resulted from the increased ~~allowance for credit losses~~ACL related to the adoption of ASC ~~326.~~326, which has increased to include a 50% reduction beginning in 2023.


		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		(dollars in millions)							(dollars in millions)
Common equity tier 1:	Common equity tier 1:							Common equity tier 1:
Common equity	Common equity	$	4,762		$	4,715		Common equity	$	5,250		$	5,097
Less:	Less:							Less:
Non-qualifying goodwill and intangibles	Non-qualifying goodwill and intangibles	675			631			Non-qualifying goodwill and intangibles	669			672

Disallowed deferred tax asset	Disallowed deferred tax asset	52			—			Disallowed deferred tax asset	13			12
AOCI related adjustments	AOCI related adjustments	(741)			16			AOCI related adjustments	(593)			(664)
Unrealized gain on changes in fair value liabilities	Unrealized gain on changes in fair value liabilities	5			—			Unrealized gain on changes in fair value liabilities	2			4
Common equity tier 1	Common equity tier 1	$	4,771		$	4,068		Common equity tier 1	$	5,159		$	5,073
Divided by: Risk-weighted assets	Divided by: Risk-weighted assets	$	55,053		$	44,697		Divided by: Risk-weighted assets	$	54,988		$	54,461
Common equity tier 1 ratio	Common equity tier 1 ratio	8.7		%	9.1		%	Common equity tier 1 ratio	9.4		%	9.3		%

Common equity tier 1	Common equity tier 1	$	4,771		$	4,068		Common equity tier 1	$	5,159		$	5,073

Plus: Preferred stock and trust preferred securities	Plus: Preferred stock and trust preferred securities	376			376			Plus: Preferred stock and trust preferred securities	376			376

Tier 1 capital	Tier 1 capital	$	5,147		$	4,444		Tier 1 capital	$	5,535		$	5,449
Divided by: Tangible average assets	Divided by: Tangible average assets	$	68,330		$	56,973		Divided by: Tangible average assets	$	71,412		$	69,814
Tier 1 leverage ratio	Tier 1 leverage ratio	7.5		%	7.8		%	Tier 1 leverage ratio	7.8		%	7.8		%

Total capital:	Total capital:							Total capital:
Tier 1 capital	Tier 1 capital	$	5,147		$	4,444		Tier 1 capital	$	5,535		$	5,449
Plus:	Plus:							Plus:
Subordinated debt	Subordinated debt	816			815			Subordinated debt	817			817
Adjusted allowances for credit losses	Adjusted allowances for credit losses	319			240			Adjusted allowances for credit losses	328			320

Tier 2 capital	Tier 2 capital	1,135			1,055			Tier 2 capital	1,145			1,137

Total capital	Total capital	$	6,282		$	5,499		Total capital	$	6,680		$	6,586
Total capital ratio	Total capital ratio	11.4		%	12.3		%	Total capital ratio	12.1		%	12.1		%

Classified assets to tier 1 capital plus allowance:	Classified assets to tier 1 capital plus allowance:							Classified assets to tier 1 capital plus allowance:
Classified assets	Classified assets	$	385		$	301		Classified assets	$	459		$	393

Divided by: Tier 1 capital	Divided by: Tier 1 capital	5,147			4,444			Divided by: Tier 1 capital	5,535			5,449
Plus: Adjusted allowances for credit losses	Plus: Adjusted allowances for credit losses	319			240			Plus: Adjusted allowances for credit losses	328			320
Total Tier 1 capital plus adjusted allowances for credit losses	Total Tier 1 capital plus adjusted allowances for credit losses	$	5,466		$	4,684		Total Tier 1 capital plus adjusted allowances for credit losses	$	5,863		$	5,769
Classified assets to tier 1 capital plus allowance	Classified assets to tier 1 capital plus allowance	7.0		%	6.4		%	Classified assets to tier 1 capital plus allowance	7.8		%	6.8		%

8064

Table of Contents

Net Interest Margin

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


		Three Months Ended September 30,													Three Months Ended March 31,
		2022						2021							2023						2022
		Average Balance		Interest		Average Yield / Cost		Average Balance		Interest		Average Yield / Cost			Average Balance		Interest		Average Yield / Cost		Average Balance		Interest		Average Yield / Cost
		(dollars in millions)													(dollars in millions)
Interest earning assets	Interest earning assets													Interest earning assets
Loans held for sale	Loans held for sale	$	3,993	$	49.0	4.87	%	$	7,254	$	61.3	3.35	%	Loans held for sale	$	2,153	$	31.3	5.90	%	$	6,522	$	50.4	3.14	%
Loans held for investment:	Loans held for investment:													Loans held for investment:
Commercial and industrial	Commercial and industrial	21,551		282.1		5.25		14,943		156.1		4.23		Commercial and industrial	20,481		368.2		7.35		17,487		165.9		3.91
CRE - non-owner-occupied	CRE - non-owner-occupied	8,128		111.4		5.44		5,754		68.5		4.73		CRE - non-owner-occupied	9,520		169.4		7.22		6,690		73.2		4.44
CRE - owner-occupied	CRE - owner-occupied	1,839		23.3		5.12		2,030		25.1		5.00		CRE - owner-occupied	1,809		24.6		5.62		1,859		22.8		5.07
Construction and land development	Construction and land development	3,471		59.5		6.80		2,863		40.6		5.63		Construction and land development	4,230		93.3		8.94		3,090		41.7		5.47
Residential real estate	Residential real estate	15,125		130.9		3.43		5,907		46.0		3.09		Residential real estate	15,839		144.7		3.71		10,384		80.2		3.13
Consumer	Consumer	63		0.8		5.32		44		0.4		4.18		Consumer	73		1.2		6.82		52		0.5		3.95
Total HFI loans (1), (2), (3)		50,177		608.0		4.84		31,541		336.7		4.28
Total loans HFI (1), (2), (3)														Total loans HFI (1), (2), (3)	51,952		801.4		6.28		39,562		384.3		3.98
Securities:	Securities:													Securities:
Securities - taxable	Securities - taxable	6,680		56.4		3.35		5,521		25.6		1.84		Securities - taxable	6,658		75.2		4.58		5,534		29.9		2.19
Securities - tax-exempt	Securities - tax-exempt	2,047		19.5		4.73		2,223		17.9		4.00		Securities - tax-exempt	2,117		20.9		5.00		2,136		18.1		4.29
Total securities (1)	Total securities (1)	8,727		75.9		3.66		7,744		43.5		2.46		Total securities (1)	8,775		96.1		4.68		7,670		48.0		2.77
Other		1,239		6.5		2.07		1,883		1.3		0.27
Cash and other														Cash and other	3,331		40.1		4.88		2,057		1.8		0.36
Total interest earning assets	Total interest earning assets	64,136		739.4		4.62		48,422		442.8		3.70		Total interest earning assets	66,211		968.9		5.99		55,811		484.5		3.58
Non-interest earning assets	Non-interest earning assets													Non-interest earning assets
Cash and due from banks	Cash and due from banks	242						291						Cash and due from banks	265						245
Allowance for credit losses	Allowance for credit losses	(282)						(242)						Allowance for credit losses	(315)						(262)
Bank owned life insurance	Bank owned life insurance	180						179						Bank owned life insurance	182						181
Other assets	Other assets	4,100						2,684						Other assets	4,931						3,299
Total assets	Total assets	$	68,376					$	51,334					Total assets	$	71,274					$	59,274
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	8,466	$	24.5	1.15	%	$	4,787	$	1.4	0.12	%	Interest-bearing transaction accounts	$	10,534	$	68.2	2.63	%	$	7,743	$	2.7	0.14	%
Savings and money market accounts	Savings and money market accounts	18,515		44.5		0.95		16,833		8.9		0.21		Savings and money market accounts	18,066		115.5		2.59		18,131		9.6		0.21
Certificates of deposit	Certificates of deposit	2,843		8.6		1.19		1,902		2.0		0.41		Certificates of deposit	5,520		47.9		3.52		1,920		1.8		0.38
Total interest-bearing deposits	Total interest-bearing deposits	29,824		77.6		1.03		23,522		12.3		0.21		Total interest-bearing deposits	34,120		231.6		2.75		27,794		14.1		0.21
Short-term borrowings	Short-term borrowings	4,136		27.0		2.59		418		1.1		1.07		Short-term borrowings	7,288		87.5		4.87		1,150		1.7		0.62
Long-term debt	Long-term debt	1,228		23.8		7.69		558		8.2		5.79		Long-term debt	1,275		30.6		9.73		770		10.8		5.67
Qualifying debt	Qualifying debt	891		8.9		3.94		1,076		10.8		3.98		Qualifying debt	893		9.3		4.24		896		8.4		3.81
Total interest-bearing liabilities	Total interest-bearing liabilities	36,079		137.3		1.51		25,574		32.4		0.50		Total interest-bearing liabilities	43,576		359.0		3.34		30,610		35.0		0.46
Interest cost of funding earning assets	Interest cost of funding earning assets					0.84						0.27		Interest cost of funding earning assets					2.20						0.26
Non-interest-bearing liabilities	Non-interest-bearing liabilities													Non-interest-bearing liabilities
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	25,865						20,732						Non-interest-bearing demand deposits	20,521						22,580
Other liabilities	Other liabilities	1,282						855						Other liabilities	1,589						1,095
Stockholders’ equity	Stockholders’ equity	5,150						4,173						Stockholders’ equity	5,588						4,989
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	68,376					$	51,334					Total liabilities and stockholders' equity	$	71,274					$	59,274
Net interest income and margin (4)	Net interest income and margin (4)			$	602.1	3.78	%			$	410.4	3.43	%	Net interest income and margin (4)			$	609.9	3.79	%			$	449.5	3.32	%

(1)Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was ~~$8.5~~$8.8 million and $8.0 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021.~~respectively.

(2)Included in the yield computation are net loan fees of ~~$31.9~~$35.6 million and ~~$30.4~~$29.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

(3)Includes non-accrual loans.

(4)Net interest margin is computed by dividing net interest income by total average earning assets, annualized on an actual/actual basis.

8165

Table of Contents

Nine Months Ended September 30,
2022 2021
Average
Balance Interest Average
Yield / Cost Average
Balance Interest Average
Yield / Cost
(dollars in millions)
Interest earning assets
Loans held for sale $ 4,939 $ 142.5 3.86 % $ 4,235 $ 104.1 3.29 %
Loans held for investment:
Commercial and industrial 19,553 653.5 4.53 14,268 455.3 4.36
CRE - non-owner occupied 7,328 267.6 4.89 5,701 201.3 4.73
CRE - owner occupied 1,844 68.8 5.08 2,050 73.5 4.91
Construction and land development 3,301 148.9 6.03 2,714 116.1 5.72
Residential real estate 13,087 325.0 3.32 4,067 98.6 3.24
Consumer 58 2.0 4.57 37 1.3 4.65
Total HFI loans (1), (2), (3) 45,171 1,465.8 4.37 28,837 946.1 4.44
Securities:
Securities - taxable 6,300 127.5 2.71 5,231 70.2 1.79
Securities - tax-exempt 2,067 55.7 4.51 2,124 50.8 4.02
Total securities (1) 8,367 183.2 3.14 7,355 121.0 2.44
Other 1,646 12.0 0.97 3,205 4.2 0.17
Total interest earning assets 60,123 1,803.5 4.06 43,632 1,175.4 3.68
Non-interest earning assets
Cash and due from banks 250 306
Allowance for credit losses (270) (263)
Bank owned life insurance 180 178
Other assets 3,724 2,392
Total assets $ 64,007 $ 46,245
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $ 8,188 $ 35.2 0.57 % $ 4,357 $ 4.2 0.13 %
Savings and money market accounts 18,474 70.6 0.51 15,342 24.0 0.21
Certificates of deposit 2,271 13.0 0.76 1,774 6.5 0.49
Total interest-bearing deposits 28,933 118.8 0.55 21,473 34.7 0.22
Short-term borrowings 2,745 37.4 1.82 664 5.8 1.16
Long-term debt 930 44.8 6.45 309 12.8 5.55
Qualifying debt 893 25.9 3.87 777 23.9 4.12
Total interest-bearing liabilities 33,501 226.9 0.91 23,223 77.2 0.44
Interest cost of funding earning assets 0.50 0.24
Non-interest-bearing liabilities
Non-interest-bearing demand deposits 24,269 18,380
Other liabilities 1,183 812
Stockholders’ equity 5,054 3,830
Total liabilities and stockholders' equity $ 64,007 $ 46,245
Net interest income and margin (4) $ 1,576.6 3.56 % $ 1,098.2 3.44 %

~~(1)Yields on loans and securities have been adjusted to a TEB. The taxable-equivalent adjustment was $24.7 million and $24.9 million for the nine months ended September 30, 2022 and 2021, respectively.~~

~~(2)Included in the yield computation are net loan fees of $97.4 million and $95.9 million for the nine months ended September 30, 2022 and 2021, respectively.~~

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

~~(4)Net interest margin is computed by dividing net interest income by total average earning assets, annualized on an actual/actual basis.~~

~~Table of Contents~~


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022 versus 2021						2022 versus 2021							2023 versus 2022
		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 millions)													(in millions)
Interest income:	Interest income:													Interest income:
Loans held for sale	Loans held for sale	$	(40.0)	$	27.7	$	(12.3)	$	20.3	$	18.1	$	38.4	Loans held for sale	$	(63.5)	$	44.4	$	(19.1)
Loans:	Loans:													Loans:
Commercial and industrial	Commercial and industrial	86.5		39.5		126.0		176.6		21.6		198.2		Commercial and industrial	53.8		148.5		202.3
CRE - non-owner occupied	CRE - non-owner occupied	32.5		10.4		42.9		59.4		6.9		66.3		CRE - non-owner occupied	50.4		45.8		96.2
CRE - owner-occupied	CRE - owner-occupied	(2.4)		0.6		(1.8)		(7.7)		3.0		(4.7)		CRE - owner-occupied	(0.7)		2.5		1.8
Construction and land development	Construction and land development	10.4		8.5		18.9		26.4		6.4		32.8		Construction and land development	25.1		26.5		51.6
Residential real estate	Residential real estate	79.8		5.1		84.9		224.0		2.4		226.4		Residential real estate	49.8		14.7		64.5
Consumer	Consumer	0.2		0.2		0.4		0.7		—		0.7		Consumer	0.3		0.4		0.7
Total HFI loans		207.0		64.3		271.3		479.4		40.3		519.7
Total loans HFI														Total loans HFI	178.7		238.4		417.1
Securities:	Securities:													Securities:
Securities - taxable	Securities - taxable	9.8		21.0		30.8		21.6		35.7		57.3		Securities - taxable	12.7		32.6		45.3
Securities - tax-exempt	Securities - tax-exempt	(1.7)		3.3		1.6		(1.6)		6.5		4.9		Securities - tax-exempt	(0.2)		3.0		2.8
Total securities	Total securities	8.1		24.3		32.4		20.0		42.2		62.2		Total securities	12.5		35.6		48.1
Other		(3.4)		8.6		5.2		(11.4)		19.2		7.8
Cash and other														Cash and other	15.3		23.0		38.3
Total interest income	Total interest income	171.7		124.9		296.6		508.3		119.8		628.1		Total interest income	143.0		341.4		484.4

Interest expense:	Interest expense:													Interest expense:
Interest-bearing transaction accounts	Interest-bearing transaction accounts	10.6		12.5		23.1		16.5		14.5		31.0		Interest-bearing transaction accounts	18.1		47.4		65.5
Savings and money market		4.0		31.6		35.6		12.0		34.6		46.6
Savings and money market accounts														Savings and money market accounts	(0.4)		106.3		105.9
Certificates of deposit	Certificates of deposit	2.8		3.8		6.6		2.8		3.7		6.5		Certificates of deposit	31.2		14.9		46.1
Short-term borrowings	Short-term borrowings	24.3		1.6		25.9		28.4		3.2		31.6		Short-term borrowings	73.7		12.1		85.8
Long-term debt	Long-term debt	13.0		2.6		15.6		29.9		2.1		32.0		Long-term debt	12.1		7.7		19.8
Qualifying debt	Qualifying debt	(1.8)		(0.1)		(1.9)		3.4		(1.4)		2.0		Qualifying debt	—		0.9		0.9
Total interest expense	Total interest expense	52.9		52.0		104.9		93.0		56.7		149.7		Total interest expense	134.7		189.3		324.0

Net change	Net change	$	118.8	$	72.9	$	191.7	$	415.3	$	63.1	$	478.4	Net change	$	8.3	$	152.1	$	160.4

(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, 2022,~~March 31, 2023, interest income was ~~$739.4~~$968.9 million, an increase of ~~$296.6~~$484.4 million, or ~~67.0%~~100.0%, compared to ~~$442.8~~$484.5 million for the three months ended ~~September 30, 2021.~~March 31, 2022. This increase was primarily the result of a ~~$271.3~~$417.1 million increase in interest income from loans HFI ~~loans~~ that was driven by ~~an $18.6~~a $12.4 billion increase in the average loan HFI ~~loan~~ balance, coupled with a ~~$32.4~~$48.1 million increase in interest income from investment securities due to higher investment yields and an increase in the average investment balance of ~~$983 million.~~

~~For~~$1.1 billion. Interest income from cash and other also increased $38.3 million due to the nine months ended September 30, 2022, interest income was $1.8 billion, an increase of $628.1 million, or 53.4%, compared to $1.2 billion for the nine months ended September 30, 2021. This increase was primarily the result of a $16.3 billion increase in the average HFI loan balance, which drove a $519.7 million increase in HFI loan interest income for the nine months ended September 30, 2022 as well ashigher rate environment and an increase in ~~investment yields and the average investment balance of $1.0 billion~~cash balances resulting ~~in an increase in interest income of $62.2 million.~~from higher short-term borrowings.

For the three months ended ~~September 30, 2022,~~March 31, 2023, interest expense was ~~$137.3~~$359.0 million, an increase of ~~$104.9~~$324.0 million, ~~or 323.8%,~~ compared to ~~$32.4~~$35.0 million for the three months ended ~~September 30, 2021. Increased~~March 31, 2022. The increase in interest expense was due to an increase in interest expense on deposits of ~~$65.3~~$217.5 million driven by increased interest rates and a $6.3 billion increase in the average interest-bearing deposit balance combined with a ~~$41.5~~$105.6 million increase in interest expense on other borrowings resulting from an increase in the average balance of ~~$4.4~~$6.6 billion.

For the nine months ended September 30, 2022, interest expense was $226.9 million, an increase of $149.7 million, or 193.9%, compared to $77.2 million for the nine months ended September 30, 2021. Interest expense on deposits increased by $84.1 million driven by an increase in deposit rates and an increase in the average deposit balance of $7.5 billion coupled with an increase in the average balance of other borrowings of $2.7 billion, which drove a $63.6 million increase in interest expense.

~~Table of Contents~~

For the three months ended ~~September 30, 2022,~~March 31, 2023, net interest income was ~~$602.1~~$609.9 million, an increase of ~~$191.7~~$160.4 million, or ~~46.7%~~35.7%, compared to ~~$410.4~~$449.5 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in net interest income reflects a ~~$15.7~~$10.4 billion increase in average interest-earning assets, partially offset by an increase of ~~$10.5~~$13.0 billion in average interest-bearing liabilities. The increase in net interest margin of 3547 basis points to ~~3.78%~~3.79% is largely the result of an increase in loan balances and related yields, partially offset by higher deposit balances and rates compared to the same period in ~~2021.~~2022.

~~For the nine months ended September 30, 2022, net interest income was $1.6 billion, an increase~~

Table of $478.4 million, or 43.6%, compared to $1.1 billion for the nine months ended September 30, 2021. The increase in net interest income reflects a $16.5 billion increase in average interest-earning assets, partially offset by an increase of $10.3 billion in average interest-bearing liabilities. The increase in net interest margin of 12 basis point to 3.56% is the result of an increase in loan balances, partially offset by higher deposit rates and increase in the balance of deposits and other borrowings compared to the same period in 2021.Contents

Provision for Credit Losses

The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans, unfunded loan commitments, and investment securities. The provision is equal to the amount required to maintain the ~~allowance for credit losses~~ACL at a level that is adequate to absorb estimated lifetime credit losses inherent in the loan and investment securities portfolios ~~at the time that the loan is originated or the security is purchased.~~based on remaining contractual maturity, adjusted for estimated prepayments as of each period end. The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company recorded a provision for credit losses of ~~$28.5~~$19.4 million, ~~and $65.0 million, respectively,~~ compared to ~~$12.3~~$9.0 million ~~and a release of credit loss provisions of $34.6 million, respectively,~~ for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The increase in the provision for credit losses from the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 is primarily related to ~~loan growth~~a $17.1 million charge-off in the Company's AFS securities portfolio of a corporate debt security from a financial institution issuer and from heightened economic ~~uncertainty.~~uncertainty, offset by a decrease in loans HFI balances as the Company transferred $5.9 billion to HFS, net of a fair value loss adjustment of $123.5 million.

Non-interest Income

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Increase (Decrease)		2022		2021		Increase (Decrease)			2023		2022		Increase (Decrease)
		(in millions)													(in millions)
Net loan servicing revenue (expense)		$	23.0	$	2.2	$	20.8	$	109.5	$	(18.6)	$	128.1
Net loan servicing revenue														Net loan servicing revenue	$	41.9	$	41.1	$	0.8
Net gain on loan origination and sale activities	Net gain on loan origination and sale activities	14.5		121.0		(106.5)		78.6		253.0		(174.4)		Net gain on loan origination and sale activities	31.4		36.9		(5.5)
Service charges and fees	Service charges and fees	6.5		7.1		(0.6)		21.1		21.2		(0.1)		Service charges and fees	9.5		7.0		2.5
Commercial banking related income	Commercial banking related income	5.1		4.6		0.5		16.0		12.5		3.5		Commercial banking related income	6.2		5.1		1.1
Gain on recovery from credit guarantees														Gain on recovery from credit guarantees	3.3		2.3		1.0
Income from equity investments	Income from equity investments	4.3		2.5		1.8		13.6		16.9		(3.3)		Income from equity investments	1.4		4.1		(2.7)
Gain on recovery from credit guarantees		0.4		—		0.4		11.7		—		11.7
Gain on sales of investment securities		—		—		—		6.7		0.1		6.6
(Loss) gain on sales of investment securities														(Loss) gain on sales of investment securities	(12.5)		6.9		(19.4)

Fair value loss on assets measured at fair value, net		(2.8)		(2.2)		(0.6)		(19.4)		(0.5)		(18.9)
Fair value loss adjustments, net														Fair value loss adjustments, net	(147.8)		(6.6)		(141.2)
Other income	Other income	10.8		2.9		7.9		25.3		9.2		16.1		Other income	8.6		9.5		(0.9)
Total non-interest income	Total non-interest income	$	61.8	$	138.1	$	(76.3)	$	263.1	$	293.8	$	(30.7)	Total non-interest income	$	(58.0)	$	106.3	$	(164.3)

Total non-interest income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021~~2022 decreased ~~$76.3~~$164.3 million. The decrease in non-interest income was driven by a decrease in net gain on loan origination and sale activities of $106.5 million due to compressed margins, a decline in production volume, and losses due to fair value changes. This decrease was offset in part by an increase in net loan servicing revenue of $20.8 million fro~~m lower payoffs, gain on sales of MSRs, and higher servicing fees.~~

~~Total non-interest income for the nine months ended September 30, 2022 compared to the same period in 2021 decreased $30.7 million. The~~ decrease in non-interest income was driven by non-operating charges following the execution of the Company's balance sheet repositioning strategy, which included sales of selected loans and investment securities and the transfer of $5.9 billion of loans HFI to HFS, net of a ~~decrease~~ fair value loss adjustment of $123.5 million.~~in net gain on loan origination and sale activities~~ Consequently, the Company recognized fair value loss adjustments of ~~$174.4~~$147.8 million ~~due~~ primarily related to ~~compressed margins, decline in production volume in capitalized MSRs,~~the transfer of loans to HFS and a ~~decrease in gains due to fair value changes. Mark-to-market losses on equity securities also resulted in a decrease to non-interest income~~net loss of ~~$18.9 million. These decreases were offset in part by an increase in net loan servicing revenue of $128.1~~$12.5 million ~~from~~ ~~lower payoffs, gain~~ on sales of ~~MSRs, and higher servicing fees.~~investment securities during the three months ended March 31, 2023.

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Non-interest Expense

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Increase (Decrease)		2022		2021		Increase (Decrease)			2023		2022		Increase (Decrease)
		(in millions)													(in millions)
Salaries and employee benefits	Salaries and employee benefits	$	136.5	$	133.5	$	3.0	$	413.8	$	346.1	$	67.7	Salaries and employee benefits	$	148.9	$	138.3	$	10.6
Deposit costs	Deposit costs	56.2		7.3		48.9		83.6		20.7		62.9		Deposit costs	86.9		9.3		77.6
Data processing														Data processing	26.4		17.6		8.8
Legal, professional, and directors' fees	Legal, professional, and directors' fees	24.8		13.7		11.1		73.9		37.8		36.1		Legal, professional, and directors' fees	23.1		24.0		(0.9)
Data processing		21.8		15.4		6.4		59.1		40.3		18.8
Loan servicing expenses		15.2		15.6		(0.4)		40.7		37.9		2.8
Occupancy	Occupancy	13.9		12.4		1.5		39.7		31.4		8.3		Occupancy	16.5		12.8		3.7
Insurance	Insurance	8.1		6.2		1.9		22.2		15.9		6.3		Insurance	15.7		7.2		8.5
Loan servicing expenses														Loan servicing expenses	13.8		10.8		3.0
Business development and marketing														Business development and marketing	5.2		4.4		0.8
Loan acquisition and origination expenses	Loan acquisition and origination expenses	5.8		9.7		(3.9)		18.7		20.2		(1.5)		Loan acquisition and origination expenses	4.4		6.5		(2.1)
Business development and marketing		5.0		2.8		2.2		14.8		7.4		7.4
Net gain on sales and valuations of repossessed and other assets		(0.2)		(1.3)		1.1		(0.4)		(3.1)		2.7
Acquisition and restructure expenses		—		2.4		(2.4)		0.4		18.5		(18.1)
Gain on extinguishment of debt														Gain on extinguishment of debt	(12.7)		—		(12.7)

Other expense	Other expense	18.7		16.1		2.6		56.8		40.5		16.3		Other expense	19.7		17.7		2.0
Total non-interest expense	Total non-interest expense	$	305.8	$	233.8	$	72.0	$	823.3	$	613.6	$	209.7	Total non-interest expense	$	347.9	$	248.6	$	99.3

Total non-interest expense for the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$72.0~~$99.3 million compared to the same period in ~~2021.~~2022. The increase in non-interest expense was driven by ~~increases~~an increase in deposit costs ~~legal, professional,~~ and ~~directors' fees,~~salaries and ~~data processing costs.~~employee benefits. The increase in deposit costs from the prior year relates primarily ~~relates~~ to an increase in ~~overall deposits~~deposit balances throughout 2022 and higher average ECR rates. The increase in ~~legal, professional,~~salaries and ~~directors' fees and data processing costs~~employee benefits from the prior year relates to an increase in ~~project initiatives and consulting work~~headcount. These increases were partially offset by a gain on extinguishment of debt of $12.7 million primarily related to ~~support ongoing implementations.~~

~~Total non-interest expense for~~payoff of the nine months ended September 30, 2022 increased $209.7 million compared to the same period in 2021. The increase in non-interest expense was driven by increases in salaries and employee benefits, deposit costs, and legal, professional, and directors' fees. The increase in deposit costs primarily relates to an increase in overall deposits and higher average ECR rates. Salaries and employee benefits increased $67.7 million from an increase in headcount year over year. The increase in legal, professional, and directors' fees relates to an increase in project initiatives and consulting work to support ongoing implementations.Company's credit linked note on its warehouse loans.

Income Taxes

The Company's effective tax rate was ~~19.9%~~23.0% and ~~21.7%~~19.5% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~For the~~ ~~nine~~ ~~months ended September 30, 2022 and 2021, the Company's effective tax rate was 19.7%.~~ The ~~decrease~~increase in the ~~three month~~ effective tax rate was primarily due to ~~increases~~a decrease in LIHTC and solar ~~tax~~ credit ~~investments~~benefits and a decrease in ~~state tax expense.~~excess stock compensation benefit.

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Business Segment Results

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

•Consumer ~~Related segment:~~Related: offers consumer banking services, such as mortgage banking and commercial banking services to enterprises in consumer-related ~~sectors and beginning on January 25, 2022 includes the financial results of DST.~~sectors.

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

Consolidated Company Commercial Consumer Related Corporate & Other
At September 30, 2022 (in millions)
HFI loans, net of deferred loan fees and costs $ 52,201 $ 32,060 $ 20,141 $ —
Deposits 55,589 30,006 20,957 4,626
At December 31, 2021
HFI loans, net of deferred loan fees and costs $ 39,075 $ 25,092 $ 13,983 $ —
Deposits 47,612 30,467 15,363 1,782


	Consolidated Company		Commercial		Consumer Related		Corporate & Other
At March 31, 2023	(in millions)
Loans HFI, net of deferred loan fees and costs	$	46,435	$	27,282	$	19,153	$	—
Deposits	47,587		21,991		20,017		5,579

At December 31, 2022
Loans HFI, net of deferred loan fees and costs	$	51,862	$	31,414	$	20,448	$	—
Deposits	53,644		29,494		18,492		5,658


Three Months Ended September 30, 2022		(in millions)
Three Months Ended March 31, 2023										Three Months Ended March 31, 2023	(in millions)
Pre-tax income (loss)	Pre-tax income (loss)	$	329.6	$	298.2	$	93.2	$	(61.8)	Pre-tax income (loss)	$	184.6	$	159.4	$	56.8	$	(31.6)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2022										Three Months Ended March 31, 2022
Pre-tax income (loss)	Pre-tax income (loss)	$	951.4	$	774.8	$	380.3	$	(203.7)	Pre-tax income (loss)	$	298.2	$	236.8	$	126.9	$	(65.5)

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

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

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BALANCE SHEET ANALYSIS

Total assets increased ~~$13.2~~$3.3 billion, or ~~23.5%~~4.9%, to ~~$69.2~~$71.0 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$56.0~~$67.7 billion at December 31, ~~2021.~~2022. The increase in total assets was driven by ~~continued organic loan and~~an increase in borrowings as the recent disruption in the banking industry caused a temporary surge in deposit ~~growth,~~outflows, increasing the need for additional liquidity, which contributed to an increase in cash of ~~$1.1~~$2.6 billion as well as an increase in investment securities of ~~$941~~$569 million. Loans HFI ~~loans increased~~decreased by ~~$13.1~~$5.4 billion, or ~~33.6%~~10.5%, to ~~$52.2~~$46.4 billion as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$39.1~~$51.9 billion as of December 31, ~~2021.~~2022. The ~~increase~~decrease in loans HFI ~~loans~~ from December 31, ~~2021~~2022 was driven by ~~increases in~~the transfer of $5.9 billion to HFS, net of a fair value loss adjustment of $123.5 million. By loan type, commercial and industrial loans and residential real estate loans ~~of $6.4~~decreased $5.2 billion ~~(including EBO~~and $904 million, respectively, from December 31, 2022, offset by increases in construction and land development loans ~~transferred from HFS to HFI in the second quarter 2022 with a $1.8 billion balance at September 30, 2022), commercial~~ and ~~industrial loans of $4.0 billion,~~ CRE, non-owner occupied loans of ~~$2.1~~$394 million and $298 million, respectively. Loans HFS increased $5.8 billion ~~and construction and land development loans~~as a result of ~~$598 million. These increases were partially offset by a decrease in CRE, owner occupied loans of $50 million. In addition, HFS loans decreased by $3.4 billion, down~~this transfer, up from ~~$5.6~~$1.2 billion as of December 31, ~~2021, primarily related to the transfer of EBO loans from HFS to HFI during the nine months ended September 30,~~ 2022.

Total liabilities increased ~~$13.1~~$3.1 billion, or ~~25.7%~~5.0%, to ~~$64.1~~$65.5 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$51.0~~$62.4 billion at December 31, ~~2021.~~2022. The increase in liabilities is due primarily to an increase in borrowings as total deposits ~~of $8.0~~were down $6.1 billion, or ~~16.8%~~11.3%, to ~~$55.6~~$47.6 billion. ~~The increase~~By type, the decrease in deposits from December 31, ~~2021~~2022 was driven by ~~increases~~a decrease of ~~$3.6 billion in non-interest bearing demand deposits, $1.9~~$5.6 billion in savings and money market accounts ~~$1.4~~and $3.2 billion in non-interest bearing demand deposits, partially offset by an increase of $1.5 billion in certificates of deposit and $1.2 billion in interest bearing demand ~~deposits, and $1.1 billion in certificates of deposit.~~deposits. Other borrowings ~~also~~ increased ~~$4.8~~$9.6 billion from December 31, ~~2021~~2022 due to an increase in short-term ~~borrowings of $4.3 billion and issuance of two credit linked notes in June 2022, with a principal balance totaling $494 million.~~borrowings.

Total stockholders’ equity of ~~$5.0~~$5.5 billion at ~~September 30, 2022~~March 31, 2023 increased by ~~$58~~$165 million, or ~~1.2%~~3.1%, from December 31, ~~2021.~~2022. The increase in stockholders' equity is primarily a function of net income and ~~net proceeds of $157.7 million from issuance of common stock during the nine months ended September 30, 2022, offset by quarterly dividends to common and preferred shareholders and~~ unrealized fair value ~~losses~~gains on AFS securities recorded net of tax in other comprehensive ~~income.~~income, offset by quarterly dividends to common and preferred shareholders.

Investment securities

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

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

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


		September 30, 2022		December 31, 2021		Increase (Decrease)			March 31, 2023		December 31, 2022		Increase (Decrease)
		(in millions)							(in millions)
Debt securities	Debt securities							Debt securities
CLO	CLO	$	2,641	$	926	$	1,715	CLO	$	2,436	$	2,706	$	(270)
Commercial MBS issued by GSEs	Commercial MBS issued by GSEs	62		69		(7)		Commercial MBS issued by GSEs	62		97		(35)
Corporate debt securities	Corporate debt securities	391		383		8		Corporate debt securities	358		390		(32)

Private label residential MBS	Private label residential MBS	1,429		1,725		(296)		Private label residential MBS	1,370		1,397		(27)
Residential MBS issued by GSEs	Residential MBS issued by GSEs	1,694		1,993		(299)		Residential MBS issued by GSEs	1,788		1,740		48
Tax-exempt	Tax-exempt	1,943		2,105		(162)		Tax-exempt	1,990		1,982		8

U.S. treasury securities		—		13		(13)
U.S. Treasury securities								U.S. Treasury securities	900		—		900
Other	Other	70		82		(12)		Other	66		69		(3)
Total debt securities	Total debt securities	$	8,230	$	7,296	$	934	Total debt securities	$	8,970	$	8,381	$	589

Equity securities	Equity securities							Equity securities
Common stock								Common stock	$	3	$	3	$	—
CRA investments	CRA investments	$	49	$	45	$	4	CRA investments	39		49		(10)
Preferred stock	Preferred stock	116		114		2		Preferred stock	99		108		(9)
Total equity securities	Total equity securities	$	165	$	159	$	6	Total equity securities	$	141	$	160	$	(19)

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Loans HFS

The Company purchases and originates residential mortgage loans through its AmeriHome mortgage banking business channel that are held for sale or securitization. ~~At September 30, 2022,~~These loans have historically made up the ~~Company had $2.2~~entire balance of loans HFS. As of March 31, 2023, the loans HFS balance includes $5.9 billion of loans (primarily commercial and industrial loans) that were transferred to HFS, ~~compared~~net of a fair value loss adjustment of $123.5 million, as the Company executes its balance sheet repositioning strategy to ~~$5.6 billion at December 31, 2021. The decrease in loans HFS from December 31, 2021 relates to sales, a decline in production volumes,~~further strengthen its capital and aliquidity position. This transfer of ~~EBO~~ loans ~~during the nine months ended September 30, 2022~~ that were previously classified as HFI increased the balance of loans HFS to ~~HFI.~~$7.0 billion at March 31, 2023, compared to $1.2 billion at December 31, 2022.

Loans HFI

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


		September 30, 2022		December 31, 2021		Increase (Decrease)			March 31, 2023		December 31, 2022		Increase (Decrease)
		(in millions)							(in millions)
Warehouse lending	Warehouse lending	$	5,525	$	5,156	$	369	Warehouse lending	$	4,788	$	5,561	$	(773)
Municipal & nonprofit	Municipal & nonprofit	1,522		1,579		(57)		Municipal & nonprofit	1,543		1,524		19
Tech & innovation	Tech & innovation	2,175		1,418		757		Tech & innovation	2,471		2,293		178
Equity fund resources	Equity fund resources	5,107		3,830		1,277		Equity fund resources	971		3,717		(2,746)
Other commercial and industrial	Other commercial and industrial	8,182		6,465		1,717		Other commercial and industrial	5,912		7,793		(1,881)
CRE - owner occupied	CRE - owner occupied	1,686		1,723		(37)		CRE - owner occupied	1,645		1,656		(11)
Hotel franchise finance	Hotel franchise finance	3,602		2,534		1,068		Hotel franchise finance	3,900		3,807		93
Other CRE - non-owner occupied	Other CRE - non-owner occupied	5,021		3,952		1,069		Other CRE - non-owner occupied	5,650		5,457		193
Residential	Residential	13,810		9,243		4,567		Residential	13,435		13,996		(561)
Residential - EBO	Residential - EBO	1,815		—		1,815		Residential - EBO	1,538		1,884		(346)
Construction and land development	Construction and land development	3,579		3,006		573		Construction and land development	4,388		3,995		393
Other	Other	177		169		8		Other	194		179		15
Total loans HFI	Total loans HFI	52,201		39,075		13,126		Total loans HFI	46,435		51,862		(5,427)
Allowance for credit losses	Allowance for credit losses	(304)		(252)		(52)		Allowance for credit losses	(305)		(310)		5
Total loans HFI, net of allowance	Total loans HFI, net of allowance	$	51,897	$	38,823	$	13,074	Total loans HFI, net of allowance	$	46,130	$	51,552	$	(5,422)

Concentrations of Lending Activities

The Company monitors concentrations of lending activities at the product and borrower relationship level. ~~Commercial and industrial loans made up 43% and 47%~~As of ~~the Company's HFI loan portfolio as of September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively. In addition,~~2022, no borrower relationships at both the commitment and funded loan level exceeded 5% of total loans HFI.

The Company’s loan portfolio includes significant credit exposure to the CRE market as CRE related loans accounted for approximately ~~27%~~34% and 29% of total loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Approximately $2.5 billion, or 5.5%, of the Company’s HFI loan portfolio consisted of office loans as of March 31, 2023, compared to $2.4 billion, or 4.6%, as of December 31, 2022. Over 90% of these office loans are considered CRE-non-owner occupied ("CRE-investor") and primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects with more modern standards attractive to in-office employers in today’s environment, including enhanced on-site amenities. The vast majority of these projects are located in midtown or suburban locations with Central Business District or downtown exposure totaling less than 15% of office loans. Among the CRE-investor office portfolio, the Company focuses on serving well-understood locations where the Company has an established track record, with the largest MSA exposures in Phoenix (31%), Los Angeles (19%), San Diego (10%), and Las Vegas (8%). Concentration in metropolitan areas generally assumed to be most impacted by “work-from-home” trends is limited to less than 15%, which include: San Francisco-Oakland (< 5%), San Jose-Sunnyvale-Santa Clara (< 3%), Seattle (<4%) and New York City (<3%).

The office loan portfolio largely consists of value-add loans that require significant up-front cash equity contributions from institutional sponsors and large regional and national developers. Leverage is low with initial loan-to-value ratios less than 55% and a weighted average loan-to-cost of less than 62% at time of origination. The properties underlying these loans have stable business trends and low vacancy rates. In addition to adhering to conservative underwriting standards, asset-specific credit risk

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is mitigated through continued sponsor support of projects by re-appraisal rights by the Company, re-margining requirements and ongoing debt service, and debt yield covenants.

Substantially all of ~~these~~the Company's remaining CRE loans are secured by first liens with an initial loan to value ratio of generally not more than 75%. Approximately ~~18% and 23%~~16% of these CRE loans, excluding construction and land loans, were owner-occupied at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively. No borrower relationships at both~~2022.

In addition, commercial and industrial loans made up 33% and 40% of the ~~commitment and funded~~Company's HFI loan ~~level exceeded 5% of total HFI loans~~portfolio as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

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Non-performing Assets

Total non-performing loans increased ~~$16~~$40 million to ~~$92~~$127 million at ~~September 30, 2022,~~March 31, 2023, from ~~$76~~$87 million at December 31, ~~2021.~~2022.


		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		(dollars in millions)							(dollars in millions)
Total nonaccrual loans (1)	Total nonaccrual loans (1)	$	90		$	73		Total nonaccrual loans (1)	$	107		$	85
Loans past due 90 days or more on accrual status (2)	Loans past due 90 days or more on accrual status (2)	—			—			Loans past due 90 days or more on accrual status (2)	1			—
Accruing troubled debt restructured loans		2			3
Accruing restructured loans								Accruing restructured loans	19			2
Total nonperforming loans	Total nonperforming loans	$	92		$	76		Total nonperforming loans	$	127		$	87

Other assets acquired through foreclosure, net	Other assets acquired through foreclosure, net	$	11		$	12		Other assets acquired through foreclosure, net	$	11		$	11

Nonaccrual loans to funded HFI loans		0.17		%	0.19		%
Loans past due 90 days or more on accrual status to funded HFI loans		—			—
Nonaccrual loans to funded loans HFI								Nonaccrual loans to funded loans HFI	0.23		%	0.16		%
Loans past due 90 days or more on accrual status to funded loans HFI								Loans past due 90 days or more on accrual status to funded loans HFI	0.00			—

(1)Includes ~~non-accrual~~loan modifications to borrowers experiencing financial difficulty of $7 million and TDR loans of ~~$29 million and $18~~$12 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

(2)Excludes government guaranteed residential mortgage loans of ~~$644~~$495 million and ~~zero~~$582 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Interest income that would have been recorded under the original terms of nonaccrual loans was ~~$1.3~~$0.8 million and ~~$1.4~~$1.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $3.6 million and $4.4 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

The composition of nonaccrual loans HFI ~~loans~~ by loan portfolio segment were as follows:


		September 30, 2022							March 31, 2023
		Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans			Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total Loans HFI
		(dollars in millions)							(dollars in millions)

Municipal & nonprofit	Municipal & nonprofit	$	7	7.8	%	0.01	%	Municipal & nonprofit	$	13	12.1	%	0.03	%
Tech & innovation	Tech & innovation	4		4.5		0.01		Tech & innovation	9		8.4		0.02

Other commercial and industrial	Other commercial and industrial	18		20.0		0.03		Other commercial and industrial	29		27.1		0.06
CRE - owner occupied	CRE - owner occupied	11		12.2		0.02		CRE - owner occupied	21		19.6		0.05
Hotel franchise finance		10		11.1		0.02

Other CRE - non-owner occupied	Other CRE - non-owner occupied	19		21.1		0.04		Other CRE - non-owner occupied	5		4.7		0.01
Residential	Residential	20		22.2		0.04		Residential	28		26.2		0.06

Construction and land development	Construction and land development	1		1.1		0.00		Construction and land development	2		1.9		0.00

Total non-accrual loans	Total non-accrual loans	$	90	100.0	%	0.17	%	Total non-accrual loans	$	107	100.0	%	0.23	%


		December 31, 2021							December 31, 2022
		Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total HFI Loans					Nonaccrual Balance		Percent of Nonaccrual Balance		Percent of Total Loans HFI
		(dollars in millions)						(dollars in millions)

Municipal & nonprofit										Municipal & nonprofit	$	7	8.2	%	0.01	%
Tech & innovation										Tech & innovation	1		1.2		0.00

Tech & innovation		$	13	18.3	%	0.03	%
Equity fund resources		1		0.8		0.00
Other commercial and industrial	Other commercial and industrial	16		22.2		0.05				Other commercial and industrial	24		28.2		0.04
CRE - owner occupied	CRE - owner occupied	13		17.9		0.03				CRE - owner occupied	12		14.1		0.02

Hotel franchise finance										Hotel franchise finance	10		11.8		0.02
Other CRE - non-owner occupied	Other CRE - non-owner occupied	13		18.0		0.03				Other CRE - non-owner occupied	8		9.4		0.02
Residential	Residential	15		20.8		0.05				Residential	19		22.4		0.04
Construction and land development	Construction and land development	1		1.4		0.00				Construction and land development	4		4.7		0.01
Other		1		0.6		0.00

Total non-accrual loans	Total non-accrual loans	$	73	100.0	%	0.19	%			Total non-accrual loans	$	85	100.0	%	0.16	%

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Restructurings for Borrowers Experiencing Financial Difficulty

The Company adopted the amendments in ASU 2022-02, which eliminated the accounting guidance on TDR loans for creditors and requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty that were made on or after January 1, 2023.

The following table presents the amortized cost of loans HFI that were modified during the period by loan portfolio segment:


	March 31, 2023
	Payment Delay and Term Extension		Term Extension		Payment Delay		Total		% of Total Class of Financing Receivable
	(dollars in millions)


Tech & innovation	$	2	$	—	$	5	$	7	0.3	%



Hotel franchise finance	—		18		—		18		0.5

Residential	—		—		1		1		—



Total	$	2	$	18	$	6	$	26	0.1	%

None of the loans that were modified were in payment default and the loans remain current with contractual payments as of March 31, 2023.

Troubled Debt Restructured Loans

~~A TDR loan is~~Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan ~~on which the Company, for reasons related to a borrower’s financial difficulties, grants~~that resulted in granting a concession to ~~the~~a borrower ~~that the Company would not otherwise consider.~~experiencing financial difficulties as a TDR. The loan terms that ~~have been~~were modified or restructured due to a borrower’s financial situation ~~include,~~included, but ~~are~~were 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~~were extensions in terms or deferral of payments which ~~result~~resulted in no lost principal or ~~interest followed by reductions in interest rates or accrued~~ interest. Consistent with regulatory guidance, a TDR loan that iswas subsequently modified in another restructuring agreement but ~~has~~had shown sustained performance and classification as a TDR, ~~will be~~was removed from TDR status provided that the modified terms were market-based at the time of modification.

The following table presents TDR loans:


		September 30, 2022			December 31, 2021				December 31, 2022
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment
		(dollars in millions)

Tech & innovation		1	$	3	2	$	2

Other commercial and industrial	Other commercial and industrial	7	8		7	6		Other commercial and industrial	4	$	2
CRE - owner occupied	CRE - owner occupied	1	1		1	1		CRE - owner occupied	1	1
Hotel franchise finance	Hotel franchise finance	1	10		—	—		Hotel franchise finance	1	10
Other CRE - non-owner occupied	Other CRE - non-owner occupied	3	8		5	11		Other CRE - non-owner occupied	1	1

Construction and land development		1	1		1	1

Total	Total	14	$	31	16	$	21	Total	7	$	14

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Allowance for Credit Losses on Loans HFI ~~Loans~~

The ~~allowance for credit losses~~ACL consists of the ~~allowance for credit losses~~ACL on loans and an ~~allowance for credit losses~~ACL on unfunded loan commitments. The ~~allowance for credit losses~~ACL on AFS and HTM securities is estimated separately from loans and is discussed within the Investment Securities section.

The following table summarizes the allocation of the ~~allowance for credit losses~~ACL on loans HFI ~~loans~~ by loan portfolio segment:


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans		Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total HFI loans			Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total loans HFI		Allowance for credit losses		Percent of total allowance for credit losses		Percent of loan type to total loans HFI
		(dollars in millions)						(dollars in millions)							(dollars in millions)
Warehouse lending	Warehouse lending	$	4.4	1.4	%	10.6	%	$	3.0	1.2	%	13.2	%	Warehouse lending	$	6.6	2.2	%	10.3	%	$	8.4	2.7	%	10.7	%
Municipal & nonprofit	Municipal & nonprofit	15.2		5.0		2.9		13.7		5.4		4.1		Municipal & nonprofit	18.4		6.0		3.3		15.9		5.1		3.0
Tech & innovation	Tech & innovation	25.2		8.3		4.2		25.7		10.2		3.6		Tech & innovation	36.4		11.9		5.3		30.8		10.0		4.4
Equity fund resources	Equity fund resources	10.9		3.6		9.8		9.6		3.8		9.8		Equity fund resources	3.3		1.1		2.1		6.4		2.1		7.2
Other commercial and industrial	Other commercial and industrial	106.2		34.9		15.7		103.6		41.0		16.5		Other commercial and industrial	51.1		16.8		12.8		85.9		27.7		15.0
CRE - owner occupied	CRE - owner occupied	6.7		2.2		3.2		10.6		4.2		4.4		CRE - owner occupied	8.6		2.8		3.6		7.1		2.3		3.2
Hotel franchise finance	Hotel franchise finance	51.0		16.8		6.9		41.5		16.4		6.5		Hotel franchise finance	47.7		15.7		8.4		46.9		15.2		7.4
Other CRE - non-owner occupied	Other CRE - non-owner occupied	33.4		11.0		9.6		16.9		6.7		10.1		Other CRE - non-owner occupied	66.4		21.8		12.2		47.4		15.3		10.5
Residential	Residential	25.6		8.4		26.4		12.5		5.0		23.7		Residential	31.7		10.4		28.9		30.4		9.8		27.0
Residential - EBO	Residential - EBO	—		—		3.5		—		—		—		Residential - EBO	—		—		3.3		—		—		3.6
Construction and land development	Construction and land development	22.4		7.4		6.9		12.5		5.0		7.7		Construction and land development	31.5		10.3		9.4		27.4		8.8		7.7
Other	Other	3.1		1.0		0.3		2.9		1.1		0.4		Other	3.0		1.0		0.4		3.1		1.0		0.3
Total	Total	$	304.1	100.0	%	100.0	%	$	252.5	100.0	%	100.0	%	Total	$	304.7	100.0	%	100.0	%	$	309.7	100.0	%	100.0	%

During the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ net loan ~~(recoveries)~~ charge-offs to average loans outstanding were ~~(0.02)%~~0.05% and ~~0.04%~~approximately 0.00%, respectively.

In addition to the ~~allowance for credit losses~~ACL on funded loans HFI, ~~loans,~~ the Company maintains a separate ~~allowance for credit losses~~ACL related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance balance totaled ~~$52.1~~$44.8 million and ~~$37.6~~$47.0 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and is included in Other liabilities on the Consolidated Balance ~~Sheets.~~Sheet.

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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 "Note 1. Summary of Significant Accounting Policies" in the Notes to Unaudited Consolidated Financial Statements" of this report.~~ The following table presents information regarding potential and actual problem loans, consisting of loans graded as Special Mention, Substandard, Doubtful, and Loss, but which are still performing:


		September 30, 2022								March 31, 2023
		Number of Loans	Problem Loan Balance		Percent of Problem Loan Balance		Percent of Total HFI Loans			Number of Loans	Problem Loan Balance		Percent of Problem Loan Balance		Percent of Total Loans HFI
		(dollars in millions)								(dollars in millions)

Municipal & nonprofit	Municipal & nonprofit	1	$	6	1.8	%	0.01	%	Municipal & nonprofit	1	$	7	1.8	%	0.01	%
Tech & innovation	Tech & innovation	24	61		18.1		0.12		Tech & innovation	19	54		14.3		0.12

Other commercial and industrial	Other commercial and industrial	66	46		13.6		0.09		Other commercial and industrial	42	32		8.5		0.07
CRE - owner occupied	CRE - owner occupied	10	16		4.7		0.03		CRE - owner occupied	8	3		0.8		0.01
Hotel franchise finance	Hotel franchise finance	5	76		22.5		0.15		Hotel franchise finance	1	8		2.1		0.02
Other CRE - non-owner occupied	Other CRE - non-owner occupied	11	53		15.7		0.10		Other CRE - non-owner occupied	11	136		36.1		0.29
Residential	Residential	44	21		6.2		0.04		Residential	60	30		8.0		0.06

Construction and land development	Construction and land development	2	44		13.0		0.08		Construction and land development	2	99		26.3		0.21
Other	Other	17	15		4.4		0.03		Other	19	8		2.1		0.02
Total	Total	180	$	338	100.0	%	0.65	%	Total	163	$	377	100.0	%	0.81	%


		December 31, 2021								December 31, 2022
		Number of Loans	Problem Loan Balance		Percent of Problem Loan Balance		Percent of Total HFI Loans			Number of Loans	Problem Loan Balance		Percent of Problem Loan Balance		Percent of Total Loans HFI
		(dollars in millions)								(dollars in millions)

Warehouse lending									Warehouse lending	1	$	43	11.3	%	0.08	%

Tech & innovation	Tech & innovation	13	$	39	11.4	%	0.10	%	Tech & innovation	27	81		21.4		0.16

Other commercial and industrial	Other commercial and industrial	66	60		17.9		0.16		Other commercial and industrial	50	36		9.5		0.07
CRE - owner occupied	CRE - owner occupied	14	16		4.7		0.04		CRE - owner occupied	8	4		1.0		0.01
Hotel franchise finance	Hotel franchise finance	9	139		40.9		0.35		Hotel franchise finance	2	26		6.9		0.05
Other CRE - non-owner occupied	Other CRE - non-owner occupied	5	11		3.4		0.03		Other CRE - non-owner occupied	9	55		14.5		0.10
Residential	Residential	35	16		4.6		0.04		Residential	39	20		5.3		0.04
Construction and land development	Construction and land development	7	28		8.3		0.07		Construction and land development	2	98		25.9		0.19
Other	Other	17	30		8.8		0.08		Other	18	16		4.2		0.03
Total	Total	166	$	339	100.0	%	0.87	%	Total	156	$	379	100.0	%	0.73	%

Mortgage Servicing Rights

The fair value of the Company's MSRs related to residential mortgage loans totaled ~~$1.0~~$910 million and $1.1 billion ~~and $698 million~~ as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The decrease in MSRs is primarily related to sales of MSRs, partially offset by new production.

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in millions)					(in millions)
FNMA and FHLMC	FNMA and FHLMC	$	33,493	$	38,754	FNMA and FHLMC	$	42,198	$	38,113
GNMA	GNMA	27,692		14,379		GNMA	14,545		31,046
Non-agency	Non-agency	1,656		1,215		Non-agency	1,723		1,690
Total unpaid principal balance of loans	Total unpaid principal balance of loans	$	62,841	$	54,348	Total unpaid principal balance of loans	$	58,466	$	70,849

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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 totaling ~~$526~~$527 million at ~~September 30, 2022. The increase from $491 million at~~March 31, 2023 and December 31, ~~2021 is attributable to the DST acquisition in January~~ 2022. ~~See "Note 2. Mergers, Acquisitions and Dispositions" for further discussion of the acquisition.~~

The Company performs its annual goodwill and ~~intangibles~~intangible assets 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 Company evaluated whether the ~~three~~recent events in the banking sector may give rise to a triggering event and ~~nine months ended September 30, 2022~~elected to perform a Step 0 goodwill impairment assessment, which included analyzing qualitative factors applicable to the Company, the financial performance of the Company, and ~~2021, there were no~~valuation metrics of publicly traded companies comparable to the Company and its reporting units. As of March 31, 2023, the Company does not believe that these events or circumstances have significantly altered the long-term financial performance of the Company. Accordingly, it was determined that ~~indicated~~it is more likely than not that the fair value of the Company and its reporting units exceeds their respective carrying values as of March 31, 2023. The Company will continue to monitor developments in the banking industry and the resulting impact on the Company’s performance to assess whether an interim impairment test of goodwill or other intangible assets ~~was necessary.~~may be necessary in subsequent quarters.

Deferred Tax Assets

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no deferred tax valuation allowance.

Deposits

Deposits are the primary source for funding the Company's asset growth. Total deposits ~~increased~~decreased to ~~$55.6~~$47.6 billion at ~~September 30, 2022,~~March 31, 2023, from ~~$47.6~~$53.6 billion at December 31, ~~2021, an increase~~2022, a decrease of ~~$8.0~~$6.1 billion, or ~~16.8%~~11.3%. By deposit type, the ~~increase~~decrease in deposits is attributable to ~~increases~~decreases in ~~non-interest bearing demand deposits of $3.6 billion,~~ savings and money market accounts of ~~$1.9~~$5.6 billion and non-interest bearing demand deposits of $3.2 billion, partially offset by increases in certificates of deposit of $1.5 billion and interest bearing demand deposits of ~~$1.4 billion, and certificates of deposit of $1.1~~$1.2 billion.

WAB is a participant in the IntraFi Network, a network that offers deposit placement services such as CDARS and ICS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance. At ~~September 30,~~March 31, 2023, the Company had $8.0 billion of reciprocal deposits, compared to $2.8 billion at December 31, 2022.

Brokered deposits provide an additional source of deposits and are placed with the Bank through third-party brokers. At March 31, 2023 and December 31, 2022, the Company had $705 million of CDARS deposits and $2.2 billion of ICS deposits, compared to $729 million of CDARS deposits and $1.8 billion of ICS deposits at December 31, 2021. At September 30, 2022 and December 31, 2021, the Company also hadreported wholesale brokered deposits of ~~$3.8~~$8.1 billion and ~~$1.8~~$4.8 billion, respectively. Brokered deposits of $8.1 billion at March 31, 2023 include $3.0 billion of reciprocal deposits that exceeded the $5.0 billion reciprocal deposits reporting exclusion threshold.

In addition, deposits for which the Company provides account holders with earnings credits or referral fees totaled $~~15.9~~13.4 billion and ~~$10.8~~$12.9 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company incurred ~~$55.4~~$85.6 million and ~~$6.6~~$8.7 million in deposit related costs on these deposits during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The Company incurred $81.4 million and $12.4 million in deposit related costs on these deposits during the nine months ended September 30, 2022 and 2021,~~ respectively. These costs are reported as Deposit costs in non-interest expense. The increase in these costs from the prior year is due to an increase in earnings credit rates as well as an increase in average deposit balances eligible for earnings credits or referral fees.

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


		Three Months Ended September 30,									Three Months Ended March 31,
		2022				2021					2023				2022
		Average Balance		Rate		Average Balance		Rate			Average Balance		Rate		Average Balance		Rate
		(dollars in millions)									(dollars in millions)
Interest-bearing transaction accounts	Interest-bearing transaction accounts	$	8,466	1.15	%	$	4,787	0.12	%	Interest-bearing transaction accounts	$	10,534	2.63	%	$	7,743	0.14	%
Savings and money market accounts	Savings and money market accounts	18,515		0.95		16,833		0.21		Savings and money market accounts	18,066		2.59		18,131		0.21
Certificates of deposit	Certificates of deposit	2,843		1.19		1,902		0.41		Certificates of deposit	5,520		3.52		1,920		0.38
Total interest-bearing deposits	Total interest-bearing deposits	29,824		1.03		23,522		0.21		Total interest-bearing deposits	34,120		2.75		27,794		0.21
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	25,865		—		20,732		—		Non-interest-bearing demand deposits	20,521		—		22,580		—
Total deposits	Total deposits	$	55,689	0.55	%	$	44,254	0.11	%	Total deposits	$	54,641	1.72	%	$	50,374	0.11	%

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Nine Months Ended September 30,
2022 2021
Average Balance Rate Average Balance Rate
(dollars in millions)
Interest-bearing transaction accounts $ 8,188 0.57 % $ 4,357 0.13 %
Savings and money market accounts 18,474 0.51 15,342 0.21
Certificates of deposit 2,271 0.76 1,774 0.49
Total interest-bearing deposits 28,933 0.55 21,473 0.22
Non-interest-bearing demand deposits 24,269 — 18,381 —
Total deposits $ 53,202 0.30 % $ 39,854 0.12 %
At March 31, 2023 and December 31, 2022, the Company's insured deposits as a percentage of total deposits was 68% and 45%, respectively. The Company's insured deposit ratio further increased to 74% as of May 2, 2023.

Other Borrowings

Short-Term Borrowings

The Company utilizes short-term borrowed funds to support short-term liquidity ~~needs generally created by increased loan demand.~~needs. The majority of these short-term borrowed funds consist of advances from the FHLB, federal funds purchased from correspondent banks or the FHLB, the BTFP, and 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, 2022, total short-term borrowed funds consisted of~~securities and the BTFP. Total short term borrowings increased $9.8 billion to $14.8 billion at March 31, 2023 from $5.0 billion at December 31, 2022. The increase was driven by increases in FHLB advances of ~~$4.0~~$6.7 billion, ~~federal funds purchased of $1.0 billion,~~securities repurchase agreements of ~~$26 million, and secured~~$1.5 billion, BTFP borrowings of ~~$60 million. At December 31, 2021, total short-term borrowed funds consisted~~$1.3 billion, and $566 million of ~~federal funds purchased of $675 million, secured borrowings of $35 million, and repurchase agreements of $17 million.~~warehouse borrowings.

Long-Term Borrowings

The Company's long-term borrowings consist of AmeriHome senior notes ~~from the acquisition on April 7, 2021~~ and credit linked notes, ~~issued,~~ inclusive of issuance costs and fair market value adjustments. At ~~September 30, 2022,~~March 31, 2023, the carrying value of long-term borrowings was ~~$1.2~~$1.0 billion, compared to ~~$775 million~~$1.3 billion at December 31, ~~2021.~~2022. The ~~increase~~decrease in long-term borrowings from December 31, ~~2021~~2022 primarily relates to ~~new~~the payoff of the credit linked note ~~issuances~~on the Company's mortgage warehouse loans during the ~~nine~~three months ended ~~September 30, 2022, totaling $486 million, net of issuance costs.~~March 31, 2023.

Qualifying Debt

Qualifying debt consists of subordinated debt and junior subordinated debt, inclusive of issuance costs and fair market value adjustments. At ~~September 30, 2022,~~March 31, 2023, the carrying value of qualifying debt was ~~$889~~$895 million, compared to ~~$896~~$893 million at December 31, ~~2021.~~2022.

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Capital Resources

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

~~In connection with its adoption of CECL on January 1, 2020,~~As permitted by the regulatory capital rules, the Company elected the ~~five-year~~ CECL transition option that delayed the estimated impact on regulatory capital resulting from the adoption of ~~CECL. As~~CECL over a result of this election, the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology was delayed for two years, followed by a three-yearfive-year transition period ~~to phase out the aggregate amount of capital benefit provided during the initial two-year delay. Beginning in 2022,~~ending December 31, 2024. Accordingly, capital ratios and amounts for 2022 include a 25% reduction to the capital benefit that resulted from the increased ~~allowance for credit losses~~ACL related to the adoption of ASC ~~326.~~326, which has increased to include a 50% reduction beginning in 2023.

As ~~a result~~ of the Company's continued commercial loan growth and the acquisition of AmeriHome, the Company continues to undertake various capital actions to ensure that its capital levels remain strong, which during the nine months ended September 30, 2022, included sales of common stock under the Company's ATM program and two credit linked note issuances. As of September 30, 2022March 31, 2023 and December 31, ~~2021,~~2022, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the various banking agencies. The actual capital amounts and ratios for the Company and the Bank are presented in the following ~~tables as of the periods indicated:~~tables:


		Total Capital		Tier 1 Capital		Risk-Weighted Assets		Tangible Average Assets		Total Capital Ratio		Tier 1 Capital Ratio		Tier 1 Leverage Ratio		Common Equity Tier 1			Total Capital		Tier 1 Capital		Risk-Weighted Assets		Tangible Average Assets		Total Capital Ratio		Tier 1 Capital Ratio		Tier 1 Leverage Ratio		Common Equity Tier 1
		(dollars in millions)																	(dollars in millions)
September 30, 2022
March 31, 2023																		March 31, 2023
WAL	WAL	$	6,282	$	5,147	$	55,053	$	68,330	11.4	%	9.3	%	7.5	%	8.7	%	WAL	$	6,680	$	5,535	$	54,988	$	71,412	12.1	%	10.1	%	7.8	%	9.4	%
WAB	WAB	5,936		5,394		54,977		68,264		10.8		9.8		7.9		9.8		WAB	6,361		5,809		54,914		71,360		11.6		10.6		8.1		10.6
Well-capitalized ratios	Well-capitalized ratios									10.0		8.0		5.0		6.5		Well-capitalized ratios									10.0		8.0		5.0		6.5
Minimum capital ratios	Minimum capital ratios									8.0		6.0		4.0		4.5		Minimum capital ratios									8.0		6.0		4.0		4.5

December 31, 2021
December 31, 2022																		December 31, 2022
WAL	WAL	$	5,499	$	4,444	$	44,697	$	56,973	12.3	%	9.9	%	7.8	%	9.1	%	WAL	$	6,586	$	5,449	$	54,461	$	69,814	12.1	%	10.0	%	7.8	%	9.3	%
WAB	WAB	5,120		4,658		44,726		56,962		11.4		10.4		8.2		10.4		WAB	6,280		5,737		54,411		69,762		11.5		10.5		8.2		10.5
Well-capitalized ratios	Well-capitalized ratios									10.0		8.0		5.0		6.5		Well-capitalized ratios									10.0		8.0		5.0		6.5
Minimum capital ratios	Minimum capital ratios									8.0		6.0		4.0		4.5		Minimum capital ratios									8.0		6.0		4.0		4.5

The Company is also required to maintain specified levels of capital to remain in good standing with certain federal government agencies, including FNMA, FHLMC, GNMA, and HUD. These capital requirements are generally tied to the unpaid balances of loans included in the Company's servicing portfolio or loan production volume. Noncompliance with these capital requirements can result in various remedial actions up to, and including, removing the Company's ability to sell loans to and service loans on behalf of the respective agency. The Company believes that it is in compliance with these requirements as of ~~September 30, 2022.~~March 31, 2023.

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Critical Accounting Estimates

Critical accounting estimates 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 estimates 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, ~~2021,~~2022, 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, loans HFS, ~~mortgages,~~ 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,~~The Company actively monitors and manages liquidity, and no less than quarterly will estimate probable liquidity needs 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.~~12-month horizon. Liquidity ~~requirements~~needs 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:~~credit as of March 31, 2023:

September 30, 2022
Available
Balance Outstanding Balance
(in millions)
Unsecured fed funds credit lines at correspondent banks $ 4,706 $ 1,010


	March 31, 2023
	Available Balance		Outstanding Balance
	(in millions)
Unsecured fed funds credit lines at correspondent banks	$	1,084	$	400

In addition to lines of credit, the Company has borrowing capacity with the FHLB and FRB from pledged loans and securities and warehouse borrowing lines of credit. The borrowing capacity, outstanding borrowings, and available credit as of ~~September 30, 2022~~March 31, 2023 are presented in the following table:


	~~September 30, 2022~~March 31, 2023
	(in millions)
FHLB:
Borrowing capacity	$	~~11,084~~11,870
Outstanding borrowings	~~4,000~~11,000
Letters of credit	21194
Total available credit	$	~~7,063~~676

FRB:
Borrowing capacity	$	~~4,976~~17,947
Outstanding borrowings (BTFP)	—1,300
Total available credit	$	~~4,976~~16,647

Warehouse borrowings:
Borrowing capacity	$	1,000
Outstanding borrowings	—566
Total available credit	$	~~1,000~~434

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, 2022,~~March 31, 2023, there were ~~$9.0~~$5.7 billion in liquid assets, comprised of ~~$1.6~~$3.6 billion in cash and cash equivalents, ~~$2.0~~$1.0 billion in loans HFS, ~~mortgages,~~ and ~~$5.4~~$1.1 billion in unpledged marketable securities. At December 31, ~~2021,~~2022, the Company maintained ~~$8.7~~$7.7 billion in liquid assets, comprised of $1.1 billion of cash and cash equivalents, $1.1 billion in loans HFS, and $5.5 billion of unpledged marketable securities.

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~~comprised of $516 million of cash and cash equivalents, $4.0 billion in HFS mortgages, and $4.2 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, 2022,~~March 31, 2023, 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, 2023 and 2022, ~~and 2021,~~ net cash provided by ~~(used in)~~ operating activities was ~~$1.5 billion~~$357.3 million and ~~$(3.3) billion,~~$622.9 million, respectively.

The Company's primary investing activities are the origination of real estate and commercial loans, the collection of repayments of these loans, and the purchase and sale of securities. The Company's net cash provided by and used in investing activities has been primarily influenced by its loan and securities activities. The Company's cash balance during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was reduced by ~~$11.7~~$1.0 billion and ~~$8.4~~$2.0 billion, respectively, as a result of a net increase in loans, excluding non-cash transfers of loans from HFI to HFS, as well as a net increase in investment securities of ~~$1.8 billion~~$478 million and ~~$2.3 billion,~~$518 million, respectively.

Net cash provided by financing activities has been impacted significantly by ~~increased~~ deposit levels. During the ~~nine~~three months ended ~~September 30, 2022 and 2021,~~March 31, 2023, net deposits ~~increased $8.0~~decreased $6.1 billion, ~~and $13.4~~compared to an increase in net deposits of $4.5 billion ~~respectively.~~during the three months ended March 31, 2022.

Fluctuations in core deposit levels may increase the Company's need for liquidity as certificates of deposit mature or are withdrawn before maturity, and as non-maturity deposits, such as checking and savings account balances, are withdrawn. Additionally, the Company is exposed to the risk that customers with large deposit balances will withdraw all or a portion of such deposits, due in part to the FDIC limitations on the amount of insurance coverage provided to depositors. To mitigate the uninsured deposit risk, the Company participates in the CDARS and ICS programs, which allow an individual customer to invest up to $50.0 million and $150.0 million, respectively, through one participating financial institution or, a combined total of $200.0 million per individual customer, with the entire amount being covered by FDIC insurance. As of ~~September 30, 2022,~~March 31, 2023, the Company had $8.0 billion of total reciprocal deposits.

As of March 31, 2023, the Company has ~~$705 million of CDARS and $2.2 billion of ICS deposits.~~

~~As of September 30, 2022, the Company has $3.8~~$8.1 billion of wholesale brokered deposits outstanding. Brokered deposits are generally considered to be deposits that have been received from a third party who is engaged in the business of placing deposits on behalf of others. A traditional deposit broker will direct deposits to the banking institution offering the highest interest rate available. Federal banking laws and regulations place restrictions on depository institutions regarding brokered deposits because of the general concern that these deposits are not relationship based and are at a greater risk of being withdrawn and placed on deposit at another institution offering a higher interest rate, thus posing liquidity risk for institutions that gather brokered deposits in significant amounts. As of March 31, 2023, $3.0 billion of reciprocal deposits were included as brokered deposits as these deposits exceeded the $5 billion threshold for exclusion from brokered deposits.

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 ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, WAB and CSI paid dividends to the Parent of $55 million and ~~$105~~$100 million, respectively. Subsequent to March 31, 2023, WAB paid dividends to the Parent of $55 million.

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Supervision and Regulation

The following information is intended to update, and should be read in conjunction with, the information contained under the caption “Supervision and Regulation” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Bank Term Funding Program

In response to recent bank failures, the Federal Reserve System has established a BTFP, which is intended to provide additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. The BTFP offers loans of up to one year in length to eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations (for example, U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities), which will be valued at par. The U.S. Department of the Treasury will provide $25 billion as credit protection to the Federal Reserve Banks in connection with the BTFP. The goal of the BTFP is to be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress. The Company has borrowings under the BTFP that totaled $1.3 billion as of March 31, 2023.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk.

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

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

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

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

Net Interest Income Simulation. ~~In order to~~To measure interest rate risk at ~~September 30, 2022,~~March 31, 2023, the Company used a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between a baseline net interest income forecast using current yield curves that do not take into consideration any future anticipated rate hikes, compared to forecasted net income resulting from an immediate parallel shift in rates upward or downward, along with other scenarios directed by ALCO. The income simulation model includes various assumptions regarding re-pricing relationships for each of the Company's products. Many of the Company's assets are variable rate loans, which are assumed to re-price immediately and, proportional to the change in market rates, depending on their contracted index, including the impact of caps or floors. Some loans and investments contain contractual prepayment features (embedded options) and, accordingly, the simulation model incorporates prepayment assumptions. The Company's non-term deposit products re-price concurrently with interest rate changes taken by the FOMC.

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 a significant effect on the Company's actual net interest income.

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This simulation model assesses the changes in net interest income that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates. At ~~September 30, 2022,~~March 31, 2023, our net interest income exposure for the next twelve months related to these hypothetical changes in market interest rates was within our current guidelines.

Sensitivity of Net Interest Income


		Parallel Shift Rate Scenario (change in basis points from Base)												Parallel Shift Rate Scenario (change in basis points from Base)
		Down 100			Base		Up 100			Up 200				Down 100			Base		Up 100			Up 200
		(in millions)												(in millions)
Interest Income	Interest Income	$	2,775.9		$	3,097.3	$	3,440.4		$	3,793.9		Interest Income	$	3,384.0		$	3,737.3	$	4,092.9		$	4,443.7
Interest Expense	Interest Expense	520.7			721.6		923.2			1,124.9			Interest Expense	1,485.8			1,824.7		2,165.6			2,506.8
Net Interest Income	Net Interest Income	$	2,255.2		$	2,375.7	$	2,517.2		$	2,669.0		Net Interest Income	$	1,898.2		$	1,912.6	$	1,927.3		$	1,936.9
% Change	% Change	(5.1)		%			6.0		%	12.3		%	% Change	(0.8)		%			0.8		%	1.3		%


		Interest Rate Ramp Scenario (change in basis points from Base)												Interest Rate Ramp Scenario (change in basis points from Base)
		Down 100			Base		Up 100			Up 200				Down 100			Base		Up 100			Up 200
		(in millions)												(in millions)
Interest Income	Interest Income	$	2,960.4		$	3,097.3	$	3,241.0		$	3,390.5		Interest Income	$	3,585.1		$	3,737.3	$	3,890.6		$	4,042.7
Interest Expense	Interest Expense	632.9			721.6		810.6			899.7			Interest Expense	1,669.5			1,824.7		1,980.4			2,136.1
Net Interest Income	Net Interest Income	$	2,327.5		$	2,375.7	$	2,430.4		$	2,490.8		Net Interest Income	$	1,915.6		$	1,912.6	$	1,910.2		$	1,906.6
% Change	% Change	(2.0)		%			2.3		%	4.8		%	% Change	0.2		%			(0.1)		%	(0.3)		%

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, 2022,~~March 31, 2023, the Company's EVE exposure related to these hypothetical changes in market interest rates was within the Company's current ~~guidelines.~~ guidelines, with the exception of the Up 100 and Up 200 rate scenarios, where there was a breach on the Company's guideline of (10.0)% and (20.0)%, respectively. The breach is the result of a decline in duration of the Company's deposit liabilities from lower deposit balances and higher short-term borrowings. The BOD and ALCO have reviewed and approved the breach. It is the Company's belief that revised growth expectations with an emphasis on relationship deposits, the addition of short duration high-quality liquid assets, paydown of short term borrowings and a strategic hedging strategy will reduce EVE exposure in the Up 100 and Up 200 rate scenarios and remediate both policy breaches.

The following table shows the Company's projected change in EVE for this set of rate shocks at ~~September 30, 2022:~~March 31, 2023:

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					Down 100			Base		Up 100			Up 200			Up 300
		(in millions)																(in millions)
Assets	Assets		$	66,582		$	64,688	$	63,003		$	61,471		$	60,207		Assets		$	69,072		$	67,200	$	65,587		$	64,192		$	62,974
Liabilities	Liabilities		53,654			53,551		52,845			52,169			51,529			Liabilities		59,898			59,193		58,513			57,867			57,188
Net Present Value	Net Present Value		$	12,928		$	11,137	$	10,158		$	9,302		$	8,678		Net Present Value		$	9,174		$	8,007	$	7,074		$	6,325		$	5,786
% Change	% Change		16.1		%			(8.8)		%	(16.5)		%	(22.1)		%	% Change		14.6		%			(11.7)		%	(21.0)		%	(27.7)		%

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

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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, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Outstanding Derivatives Positions


September 30, 2022					December 31, 2021
March 31, 2023										March 31, 2023				December 31, 2022
Notional	Notional	Net Value		Weighted Average Term (Years)	Notional		Net Value		Weighted Average Term (Years)	Notional	Net Value		Weighted Average Term (Years)	Notional		Net Value		Weighted Average Term (Years)
(dollars in millions)	(dollars in millions)									(dollars in millions)
$	377,507	$	34	1.2	$	480,766	$	(50)	1.5	308,320	$	13	1.1	$	322,057	$	11	0.6

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Item 4.Controls and Procedures.

Evaluation of Disclosure Controls

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

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting during the quarter ended ~~September 30, 2022,~~March 31, 2023, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

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

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Item 1A.Risk Factors.

~~There have not been any material changes to the risk factors previously disclosed in Item 1A~~Risk Factors of the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022 includes a discussion of the material risks and uncertainties that could adversely affect our business and impact our results of operations or financial condition. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the Annual Report on Form 10-K.

Adverse developments or concerns affecting the financial services industry in general or financial institutions that are similar to us or that may be viewed as being similar to us, such as the recent bank closures and disruption in the United States banking industry, could adversely affect our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in the banking system or certain banks, deposit volatility, liquidity issues, stock price volatility and other adverse developments. The recent closures of Silicon Valley Bank and Signature Bank led to such disruption and volatility, including deposit outflows, at many mid-sized banks, increasing the need for liquidity. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of Silicon Valley Bank would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, it is not certain that the Federal Reserve or FDIC will treat future bank failures similarly. On May 1, 2023, First Republic Bank was also closed by its primary state regulator, which appointed the FDIC as receiver, and the FDIC announced that JP Morgan Chase Bank, National Association agreed to assume all of First Republic Bank’s deposits and substantially all of its assets.

Shortly following the closures of Silicon Valley Bank and Signature Bank, we and certain other banks experienced a brief period of elevated deposit withdrawals. While we cannot know for certain with respect to all withdrawals, we believe the elevated withdrawals were at least in part due to certain perceived similarities between our loan portfolio and deposit gathering activities and those of these banks. Our deposit balances stabilized as of March 20, 2023 and from such date through March 31, 2023 deposits increased, but were down $6.1 billion from December 31, 2022. During this time, we took additional measures to ensure liquidity, strengthen our capital position and increase customer confidence, which included increasing our borrowing capacity with the FRB, selling certain assets and strengthening our insured deposit ratio from 45% as of December 31, 2022 to 68% as of March 31, 2023. We have also participated in the BTFP, with $1.3 billion of funds drawn as of March 31, 2023 on $1.4 billion of access capacity for the Bank. Although our deposits have stabilized and increased since we experienced the period of elevated withdrawals, we cannot be assured that similar unusual deposit withdrawal activity will not affect banks generally or us in the future. Our net interest margin also may be negatively impacted if the Company’s borrowings remain elevated in future periods.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Any sale of investment securities that are held in an unrealized loss position by financial institutions for liquidity or other purposes will cause actual losses to be realized. Gross unrealized losses on our HTM and AFS investment securities totaled $142 million and $794 million, respectively, as of March 31, 2023. There can be no assurance that there will not be additional bank failures or liquidity concerns in particular segments of the financial services industry or in the U.S. financial system as a whole. The volatility and economic disruption resulting from the recent bank closures have particularly impacted the price of capital stock and other securities issued by financial institutions, including us. Continued uncertainty regarding or worsening of the severity and duration of the volatility in the banking industry and related economic effects may also adversely impact the Company’s estimate of its allowance for credit losses and resulting provision for credit losses.

Any of these impacts, or any other impacts resulting from the events described above or other related or similar events, could have a material adverse effect on our liquidity and our current and/or projected business operations and financial condition and results of operations.

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

Issuer Purchases of Equity Securities

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

Total Number of Shares Purchased (1)(2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
July 2022 1,043 $ 76.36 — $ —
August 2022 9,131 78.30 — —
September 2022 865 68.61 — —
Total 11,039 $ 77.36 — $ —


	Total Number of Shares Purchased (1)(2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
January 2023	61	$	64.60	—	$	—
February 2023	143,343	74.70		—	—
March 2023	—	—		—	—
Total	143,404	$	74.70	—	$	—

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

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

Item 5.Other Information

Not applicable.

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Item 6.Exhibits

EXHIBITS


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

3.3						Amended and Restated Bylaws of Western Alliance, effective as of June 14, 2022 (incorporated by reference to Exhibit 3.1 of Western Alliance's Form 8-K filed with the SEC on June 16, 2022).

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

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

~~10.1±~~						~~Form of Amendment to Executive Restricted Stock Agreement pursuant to the Company's 2005 Stock Incentive Plan.~~

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~~101*						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, (ii) the Consolidated Income Statements for the three months ended ~~September 30,~~March 31, 2023 and March 31, 2022 and ~~September 30, 2021 and nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (iii) the Consolidated Statements of Comprehensive Income for the three months ended ~~September 30,~~March 31, 2023 and March 31, 2022 and ~~September 30, 2021 and nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (iv) the Consolidated Statements of Stockholders’ Equity for the three months ended ~~September 30,~~March 31, 2023 and March 31, 2022 and ~~September 30, 2021~~the three months March 31, 2023 and ~~the nine months September 30,~~ 2022, ~~and 2021,~~ (v) the Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and (vi) the Notes to unaudited Consolidated Financial Statements. (Pursuant to Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.) ~~(Filed herewith)~~.

~~104~~104*						The cover page of Western Alliance Bancorporation’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2022,~~March 31, 2023, formatted in Inline XBRL (contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

± Management contract or compensatory arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTERN ALLIANCE BANCORPORATION

~~November 1, 2022~~May 8, 2023

By:

/s/ Kenneth A. Vecchione

Kenneth A. Vecchione

President and Chief Executive Officer

~~November 1, 2022~~May 8, 2023

By:

/s/ Dale Gibbons

Dale Gibbons

Vice Chairman and Chief Financial Officer

~~November 1, 2022~~May 8, 2023

By:

/s/ J. Kelly Ardrey Jr.

J. Kelly Ardrey Jr.

Chief Accounting Officer

~~103~~89


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Glossary of Entities and Terms	3
	Financial Statements (Unaudited)
	Consolidated Balance Sheets	4
	Consolidated Income Statements	4
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	98
	Notes to Unaudited Consolidated Financial Statements	1110
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	7456
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9882
Item 4.	Controls and Procedures	~~100~~85

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	~~100~~85
Item 1A.	Risk Factors	~~101~~86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~101~~87
Item 5.	Other Information	~~101~~87
Item 6.	Exhibits	~~102~~88

SIGNATURES		~~103~~89


	Nine Months Ended September 30, 2022
	Balance, December 31, 2021		Recovery of Credit Losses		Charge-offs		Recoveries		Balance, September 30, 2022
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	5.2	$	(0.8)	$	—	$	—	$	4.4


	Three Months Ended September 30, 2021:
	Balance, June 30, 2021		Recovery of Credit Losses		Charge-offs		Recoveries		Balance September 30, 2021
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	6.0	$	(1.5)	$	—	$	—	$	4.5


	Nine Months Ended September 30, 2021:
	Balance, December 31, 2020		Recovery of Credit Losses		Charge-offs		Recoveries		Balance September 30, 2021
	(in millions)
Held-to-maturity debt securities
Tax-exempt	$	6.8	$	(2.3)	$	—	$	—	$	4.5