WESTERN ALLIANCE BANCORPORATION Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-Q)

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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 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 June 30, 2022 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 potential impact on borrowers of supply chain disruptions and
the economic and market impacts of the military conflict between Russia and
Ukraine; 3) changes in interest rates and increased rate competition; 4)
exposure of financial instruments to certain market risks that may increase the
volatility of earnings and AOCI; 5) 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) exposure to
natural and man-made disasters in markets that the Company operates and the
impact of climate change on the Company and its customers; 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; 9) residual risk retained by the Company on reference
pools covered by credit linked notes; 10) exposure to environmental liabilities
related to the properties to which the Company acquires title; 11) the Company's
ability to compete in a highly competitive market; 12) expansion strategies 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 senior management team; 15) dependence on low-cost deposits; 16) risks
related to representations and warranties made on third-party loan sales; 17)
ability to borrow from the FHLB or the FRB; 18) a change in the Company's
creditworthiness; 19) information security breaches; 20) reliance on third
parties to provide key components of the Company's infrastructure; 21)
perpetration of fraud; 22) the Company's ability to implement and improve its
controls and processes to keep pace with its growth; 23) 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 ability to remain in
compliance; 26) failure to comply with state and federal banking agency laws and
regulations; 27) results of any tax audit findings, challenges to the Company's
tax positions, or adverse changes or interpretations of tax laws; 28) potential
negative publicity and reputational harm from certain allegations with respect
to the Phoenix Suns and Robert Sarver; and 29) risks related to ownership and
price of the Company's common stock.

For more information regarding risks that may cause the Company's actual results
to differ materially from any forward-looking statements, see "Risk Factors" in
Item 1A of the Company's Annual Report on Form 10-K for the year ended December
31, 2021. 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 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. DST's proprietary platform enables
claimants to select their payment method, including direct-to-bank account
options and popular digital wallets. This provides the Company with the internal
capability to significantly increase efficacy, reduce distribution costs and
improve potential fraud detection for the legal class action market. The
acquisition is expected to grow the Company's deposit base and continue to
extend the suite of legal banking services offered while serving adjacent
sectors that will benefit from digital payments technology.

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 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.

Second Quarter 2022 Financial Results Highlights

• Net profit available to ordinary shareholders of $257.0 millioncompared to
$223.8 million for the second quarter of 2021

• Diluted earnings per share of $2.39compared to $2.17 per share for the second quarter of 2021

•Net income from $620.0 millioni.e. an increase of 22.4%, i.e. $113.5 millioncompared to the second quarter of 2021, with an increase in non-interest expenses of 9.8%, or $24.1 millioncompared to the second quarter of 2021

• PPNR of $351.1 millionup 34.2% compared to $261.7 million in the second quarter of 20211

•Total HFI loans of $48.6 billion, up $9.5 billion, which includes transfer of
$1.5 billion in government guaranteed EBO loans from HFS to HFI, from December
31, 2021

• Total deposits of $53.7 billionat the top $6.1 billion of December 31, 2021

• Equity of $5.0 billiona decrease of $4 million of December 31, 2021

• Non-performing assets (non-current loans and repossessed assets) decreased to 0.15% of total assets, from 0.20% at June 30, 2021

• Annualized net write-offs of loans relative to average outstanding loans of 0.01%, compared to around 0.00% for the second quarter of 2021

• Net interest margin of 3.54%, compared to 3.51% in the second quarter of 2021

•Tangible common equity ratio of 6.1%, compared to 7.1% at June 30th20211

• Book value per common share of $43.07i.e. an increase of 11.3% compared to $38.70 at June 30, 2021

• Tangible book value per share, net of tax, $36.67an augmentation of $3.81i.e. 11.6%, of $32.86 at June 30th20211

• Efficiency ratio of 42.8% in the second quarter of 2022, compared to 47.5% in the second quarter of 20211

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 six months ended
June 30, 2022.


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

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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 situation

A summary of the Company’s results of operations, financial condition and selected measures is included in the following tables:

                                               Three Months Ended June 30,                 Six Months Ended June 30,
                                                2022                  2021                  2022                 2021
                                                              (in millions, except per share amounts)
Net income                                $       260.2           $    223.8          $      500.3           $    416.3
Net income available to common
stockholders                                      257.0                223.8                 493.9                416.3
Earnings per share - basic                         2.40                 2.18                  4.63                 4.09
Earnings per share - diluted                       2.39                 2.17                  4.61                 4.07
Return on average assets                           1.62   %             1.86  %               1.63   %             1.89  %
Return on average equity                           20.8                 23.7                  20.2                 23.0
Return on average tangible common
equity (1)                                         25.6                 28.1                  24.8                 26.2
Net interest margin                                3.54                 3.51                  3.44                 3.45

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

                                                                                            December 31,
                                                                     June 30, 2022              2021
                                                                                (in millions)
Total assets                                                       $       66,055          $     55,983
Loans HFS                                                                   2,803                 5,635
Loans HFI, net of deferred loan fees and costs                             48,572                39,075
Total deposits                                                             53,712                47,612
Other borrowings                                                            5,210                 1,502
Qualifying debt                                                               891                   896
Stockholders' equity                                                        4,959                 4,963
Tangible common equity, net of tax (1)                                      3,971                 4,035


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

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:

                                                                      June 30, 2022           December 31, 2021
                                                                                (dollars in millions)
Nonaccrual loans                                                    $         85            $            73
Repossessed assets                                                            12                         12
Non-performing assets                                                        100                         87
Nonaccrual loans to funded loans                                            0.17    %                  0.19     %
Nonaccrual and repossessed assets to total assets                           0.15                       0.15
Allowance for loan losses to funded loans                                   0.56                       0.65
Allowance for credit losses to funded loans                                 0.67                       0.74
Net charge-offs to average loans outstanding (1)                            0.01                       0.02


(1)Annualized on a real/real basis for the three months ended June 30, 2022. Actual year-to-date for the fiscal year ended December 31, 2021.

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Growth in assets and deposits

The Company’s assets and liabilities consist primarily of loans and deposits. Therefore, the ability to issue new loans and attract new deposits is critical to the Company’s growth.

Total assets increased to $66.1 billion at June 30, 2022 from $56.0 billion at
December 31, 2021. The increase in total assets of $10.1 billion, or 18.0%, was
driven by continued organic loan and deposit growth, which contributed to an
increase in cash of $1.4 billion as well as an increase in investment securities
of $1.2 billion. HFI loans increased by $9.5 billion, or 24.3%, to $48.6 billion
as of June 30, 2022, compared to $39.1 billion as of December 31, 2021. The
increase in HFI loans from December 31, 2021 was driven by increases in
residential real estate loans of $5.6 billion (includes a $1.5 billion transfer
of EBO loans from HFS to HFI), commercial and industrial loans of $2.5 billion,
CRE, non-owner occupied loans of $1.2 billion, and construction and land
development loans of $208 million. These increases were partially offset by
decreases in CRE, owner occupied loans of $50 million. In addition, HFS loans
decreased by $2.8 billion, from $5.6 billion as of December 31, 2021, primarily
related to a $1.5 billion transfer of EBO loans from HFS to HFI during the three
months ended June 30, 2022.

Total deposits increased $6.1 billion, or 12.8%, to $53.7 billion as of June 30,
2022 from $47.6 billion as of December 31, 2021. The increase in deposits from
December 31, 2021 was driven by increases of $2.4 billion in non-interest
bearing demand deposits, $1.7 billion in savings and money market accounts, $1.5
billion in interest bearing demand deposits, and $522 million in certificates of
deposit.

RESULTS OF OPERATIONS

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

                                      Three Months Ended June 30,           Increase               Six Months Ended June 30,               Increase
                                         2022              2021            (Decrease)                2022                 2021            (Decrease)
                                                                          (in millions, except per share amounts)
Consolidated Income Statement Data:
Interest income                       $  579.6          $ 398.5          $     181.1          $       1,064.1          $ 732.6          $     331.5
Interest expense                          54.6             28.0                 26.6                     89.6             44.8                 44.8
Net interest income                      525.0            370.5                154.5                    974.5            687.8                286.7
Provision for (recovery of)
credit losses                             27.5            (14.5)                42.0                     36.5            (46.9)                83.4
Net interest income after
provision for (recovery of)
credit losses                            497.5            385.0                112.5                    938.0            734.7                203.3
Non-interest income                       95.0            136.0                (41.0)                   201.3            155.7                 45.6
Non-interest expense                     268.9            244.8                 24.1                    517.5            379.8                137.7
Income before provision for
income taxes                             323.6            276.2                 47.4                    621.8            510.6                111.2
Income tax expense                        63.4             52.4                 11.0                    121.5             94.3                 27.2
Net income                               260.2            223.8                 36.4                    500.3            416.3                 84.0
Dividends on preferred stock               3.2                -                  3.2                      6.4                -                  6.4
Net income available to common
stockholders                          $  257.0          $ 223.8          $      33.2          $         493.9          $ 416.3          $      77.6
Earnings per share:
Basic                                 $   2.40          $  2.18          $      0.22          $          4.63          $  4.09          $      0.54
Diluted                                   2.39             2.17                 0.22          $          4.61          $  4.07          $      0.54


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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.

Net income before provision

Banking regulations define PPNR as the sum of net interest income and
non-interest income less expenses before adjusting for loss provisions.
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 presents the components of the PPNR for the three and six month periods ended June 30, 2022 and 2021:

                                                Three Months Ended June 30,                  Six Months Ended June 30,
                                                 2022                  2021                   2022                  2021
                                                                             (in millions)
Net interest income                        $        525.0          $    

$370.5 974.5 $687.8
Total non-interest income

                            95.0               136.0                    201.3               155.7
Net revenue                                $        620.0          $    

506.5 $1,175.8 $843.5
Total non-interest expense

                          268.9               244.8                    517.5               379.8

Pre-provision net revenue                  $        351.1          $    

$261.7 658.3 $463.7
Less:

Provision for (recovery of) credit
losses                                               27.5               (14.5)                    36.5               (46.9)
Income tax expense                                   63.4                52.4                    121.5                94.3
Net income                                 $        260.2          $    223.8          $         500.3          $    416.3


Efficiency Ratio

The following table shows the components used in the calculation of the efficiency ratio, which management uses as a metric to assess profitability:

                                           Three Months Ended June 30,                  Six Months Ended June 30,
                                            2022                  2021                   2022                  2021
                                                                    (dollars in millions)
Total non-interest expense            $       268.9           $    244.8          $        517.5           $    379.8
Divided by:
Total net interest income             $       525.0           $    370.5          $        974.5           $    687.8
Plus:
Tax equivalent interest adjustment              8.2                  8.5                    16.2                 16.5
Total non-interest income                      95.0                136.0                   201.3                155.7
                                      $       628.2           $    515.0          $      1,192.0           $    860.0
Efficiency ratio - tax equivalent
basis                                          42.8   %             47.5  %                 43.4   %             44.2  %


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Tangible common shares

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

                                                                   June 30, 

2022 December 31, 2021

                                                                      (dollars and shares in millions)
Total stockholders' equity                                       $        4,959          $          4,963
Less:
Goodwill and intangible assets                                              695                       635
Preferred stock                                                             295                       295
Total tangible common stockholders' equity                                3,969                     4,033
Plus: deferred tax - attributed to intangible assets                          2                         2
Total tangible common equity, net of tax                         $        

3,971 $4,035

Total assets                                                     $       66,055          $         55,983
Less: goodwill and intangible assets, net                                   695                       635
Tangible assets                                                          65,360                    55,348
Plus: deferred tax - attributed to intangible assets                          2                         2
Total tangible assets, net of tax                                $       

$65,362 55,350

Tangible common equity ratio                                                6.1  %                    7.3  %
Common shares outstanding                                                 108.3                     106.6
Book value per common share                                      $        43.07          $          43.78
Tangible book value per common share, net of tax                          36.67                     37.84


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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 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, capital ratios and amounts
include a 25% reduction to the capital benefit that resulted from the increased
allowance for credit losses related to the adoption of ASC 326.

                                                                  June 30, 

2022 December 31, 2021

                                                                           (dollars in millions)
Common equity tier 1:
Common equity                                                    $       4,700          $          4,715
Less:
Non-qualifying goodwill and intangibles                                    690                       631

Disallowed deferred tax asset                                                6                         -
AOCI related adjustments                                                  (521)                       16
Unrealized gain on changes in fair value liabilities                         4                         -
Common equity tier 1                                             $       4,521          $          4,068
Divided by: Risk-weighted assets                                 $      50,292          $         44,697
Common equity tier 1 ratio                                                 9.0  %                    9.1  %

Common equity tier 1                                             $       4,521          $          4,068

Plus: Preferred stock and trust preferred securities                       376                       376

Tier 1 capital                                                   $       4,897          $          4,444
Divided by: Tangible average assets                              $      64,085          $         56,973
Tier 1 leverage ratio                                                      7.6  %                    7.8  %

Total capital:
Tier 1 capital                                                   $       4,897          $          4,444
Plus:
Subordinated debt                                                          816                       815
Adjusted allowances for credit losses                                      288                       240

Tier 2 capital                                                   $       1,104          $          1,055

Total capital                                                    $       6,001          $          5,499
Total capital ratio                                                       11.9  %                   12.3  %

Assets classified as Tier 1 capital plus allowance: Assets classified as

                                                $         346          $            301

Divided by: Tier 1 capital                                               4,897                     4,444
Plus: Adjusted allowances for credit losses                                288                       240

Total Tier 1 capital plus adjusted provisions for credit losses $5,185 $4,684 Assets classified as Tier 1 capital plus deduction

6.7  %                    6.4  %



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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 June 30,
                                                                    2022                                                           2021
                                            Average                                 Average                Average                                 Average
                                            Balance          Interest             Yield / Cost             Balance          Interest             Yield / Cost
                                                                                           (dollars in millions)
Interest earning assets
Loans held for sale                       $  4,333          $   43.1                       3.99  %       $  5,347          $   42.7                       3.21  %
Loans held for investment:
Commercial and industrial                   19,576             205.6                       4.27            13,897             148.2                       4.37
CRE - non-owner-occupied                     7,152              83.1                       4.67             5,698              67.8                       4.78
CRE - owner-occupied                         1,836              22.7                       5.05             2,025              24.1                       4.88
Construction and land development            3,336              47.7                       5.73             2,792              39.9                       5.73
Residential real estate                     13,698             113.8                       3.33             3,748              30.7                       3.29
Consumer                                        58               0.6                       4.29                34               0.4                       4.52
Total HFI loans (1), (2), (3)               45,656             473.5                       4.19            28,194             311.1                       4.48
Securities:
Securities - taxable                         6,674              41.3                       2.48             5,630              26.0                       1.85
Securities - tax-exempt                      2,017              18.0                       4.53             2,166              17.5                       4.07
Total securities (1)                         8,691              59.3                       2.94             7,796              43.5                       2.47
Other                                        1,650               3.7                       0.91             1,911               1.2                       0.25
Total interest earning assets               60,330             579.6                       3.91            43,248             398.5                     

3.77

Non-interest earning assets
Cash and due from banks                        262                                                            458
Allowance for credit losses                   (266)                                                          (257)
Bank owned life insurance                      179                                                            178
Other assets                                 3,766                                                          4,518
Total assets                              $ 64,271                                                       $ 48,145
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction
accounts                                  $  8,346          $    8.0                       0.38  %       $  4,370          $    1.5                       0.14  %
Savings and money market accounts           18,771              16.5                       0.35            15,168               8.0                       0.21
Certificates of deposit                      2,040               2.6                       0.52             1,737               2.1                       0.49
Total interest-bearing deposits             29,157              27.1                       0.37            21,275              11.6                       0.22
Short-term borrowings                        2,917               8.6                       1.19             1,506               4.5                       1.21
Long-term debt                                 786              10.3                       5.24               353               4.7                       5.30
Qualifying debt                                894               8.6                       3.85               701               7.2                       4.12
Total interest-bearing liabilities          33,754              54.6                       0.65            23,835              28.0                     

0.47

Interest cost of funding earning
assets                                                                                     0.37                                                         

0.26

Non-interest-bearing liabilities
Non-interest-bearing demand
deposits                                    24,327                                                         18,385
Other liabilities                            1,169                                                          2,140
Stockholders' equity                         5,021                                                          3,785
Total liabilities and stockholders'
equity                                    $ 64,271                                                       $ 48,145
Net interest income and margin (4)                          $  525.0                       3.54  %                         $  370.5                     

3.51%

(1) Yields on loans and securities have been adjusted to a TEB. The taxable equivalent adjustment has been $8.2 million and $8.5 million for the three months ended June 30, 2022 and 2021, respectively.

(2) Included in the calculation of the yield are the net loan costs of $36.4 million and
$32.6 million for the three months ended June 30, 2022 and 2021, respectively.

(3) Includes outstanding loans.

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

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                                                                                        Six Months Ended June 30,
                                                                   2022                                                           2021
                                           Average                                 Average                Average                                 Average
                                           Balance          Interest             Yield / Cost             Balance          Interest             Yield / Cost
                                                                                          (dollars in millions)
Interest earning assets
Loans held for sale                      $  5,421          $   93.6                       3.48  %       $  2,688          $   42.7                       3.21  %
Loans held for investment:
Commercial and industrial                  18,537             371.5                       4.10            13,925             299.1                       4.43
CRE - non-owner occupied                    6,922             156.2                       4.56             5,674             132.9                       4.73
CRE - owner occupied                        1,847              45.5                       5.06             2,059              48.5                       4.86
Construction and land development           3,214              89.3                       5.61             2,639              75.5                       5.77
Residential real estate                    12,050             194.1                       3.25             3,131              52.7                       3.39
Consumer                                       55               1.1                       4.14                34               0.8                       4.96
Total HFI loans (1), (2), (3)              42,625             857.7                       4.09            27,462             609.5                       4.53
Securities:
Securities - taxable                        6,107              71.1                       2.35             5,084              44.5                       1.77
Securities - tax-exempt                     2,076              36.2                       4.41             2,074              33.0                       4.03
Total securities (1)                        8,183             107.3                       2.86             7,158              77.5                       2.42
Other                                       1,853               5.5                       0.60             3,877               2.9                       0.15
Total interest earning assets              58,082           1,064.1                       3.75            41,185             732.6                      

3.67

Non-interest earning assets
Cash and due from banks                       254                                                            313
Allowance for credit losses                  (264)                                                          (273)
Bank owned life insurance                     180                                                            177
Other assets                                3,534                                                          2,904
Total assets                             $ 61,786                                                       $ 44,306
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction
accounts                                 $  8,046          $   10.7                       0.27  %       $  4,139          $    2.8                       0.14  %
Savings and money market accounts          18,453              26.1                       0.29            14,584              15.1                       0.21
Certificates of deposit                     1,981               4.4                       0.45             1,709               4.5                       0.54
Total interest-bearing deposits            28,480              41.2                       0.29            20,432              22.4                       0.22
Short-term borrowings                       2,038              10.4                       1.03               769               4.6                       1.21
Long-term debt                                778              21.0                       5.45               178               4.7                       5.30
Qualifying debt                               895              17.0                       3.83               625              13.1                       4.24
Total interest-bearing liabilities         32,191              89.6                       0.56            22,004              44.8                      

0.41

Interest cost of funding earning
assets                                                                                    0.31                                                          

0.22

Non-interest-bearing liabilities
Non-interest-bearing demand
deposits                                   23,458                                                         17,186
Other liabilities                           1,132                                                          1,460
Stockholders' equity                        5,005                                                          3,656
Total liabilities and
stockholders' equity                     $ 61,786                                                       $ 44,306
Net interest income and margin (4)                         $  974.5                       3.44  %                         $  687.8                      

3.45%

(1) Yields on loans and securities have been adjusted to a TEB. The taxable equivalent adjustment has been $16.2 million and $16.5 million for the six months ended June 30, 2022 and 2021, respectively.

(2) Included in the calculation of the yield are the net loan costs of $65.5 million for the six months ended June 30, 2022 and 2021.

(3) Includes outstanding loans.

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

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                                                Three Months Ended June 30,                           Six Months Ended June 30,
                                                      2022 versus 2021                                     2022 versus 2021
                                         Increase (Decrease) Due to Changes in (1)            Increase (Decrease) Due to Changes in (1)
                                          Volume             Rate            Total             Volume             Rate            Total
                                                                                  (in millions)
Interest income:
Loans held for sale                    $   (10.1)         $  10.5          $   0.4          $    47.2          $   3.7          $  50.9
Loans:
Commercial and industrial                   59.6             (2.2)            57.4               92.4            (20.0)            72.4
CRE - non-owner occupied                    16.9             (1.6)            15.3               28.2             (4.9)            23.3
CRE - owner-occupied                        (2.3)             0.9             (1.4)              (5.2)             2.2             (3.0)
Construction and land
development                                  7.8                -              7.8               16.0             (2.2)            13.8
Residential real estate                     82.7              0.4             83.1              143.7             (2.3)           141.4
Consumer                                     0.2                -              0.2                0.4             (0.1)             0.3
Total HFI loans                            164.9             (2.5)           162.4              275.5            (27.3)           248.2
Securities:
Securities - taxable                         6.5              8.8             15.3               11.9             14.7             26.6
Securities - tax-exempt                     (1.3)             1.8              0.5                  -              3.2              3.2
Total securities                             5.2             10.6             15.8               11.9             17.9             29.8
Other                                       (0.6)             3.1              2.5               (6.0)             8.6              2.6
Total interest income                      159.4             21.7            181.1              328.6              2.9            331.5

Interest expense:
Interest-bearing transaction
accounts                                     3.8              2.7              6.5                5.2              2.7              7.9
Savings and money market                     3.2              5.3              8.5                5.5              5.5             11.0
Certificates of deposit                      0.4              0.1              0.5                0.6             (0.7)            (0.1)
Short-term borrowings                        4.2             (0.1)             4.1                6.5             (0.7)             5.8
Long-term debt                               5.7             (0.1)             5.6               16.2              0.1             16.3
Qualifying debt                              1.9             (0.5)             1.4                5.1             (1.2)             3.9
Total interest expense                      19.2              7.4             26.6               39.1              5.7             44.8

Net change                             $   140.2          $  14.3          $ 154.5          $   289.5          $  (2.8)         $ 286.7

(1) Changes attributable to both volume and price are referred to 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 June 30, 2022, interest income was $579.6 million, an increase of $181.1
million, or 45.4%, compared to $398.5 million for the three months ended June
30, 2021. This increase was primarily the result of a $162.4 million increase in
interest income from HFI loans that was driven by a $17.5 billion increase in
the average HFI loan balance, coupled with a $15.8 million increase in interest
income from investment securities due to an increase in the average investment
balance of $895 million and higher investment yields.

For the six months ended June 30, 2022, interest income was $1.1 billion, an
increase of $331.5 million, or 45.2%, compared to $732.6 million for the six
months ended June 30, 2021. This increase was primarily the result of a $15.2
billion increase in the average HFI loan balance, which drove a $248.2 million
increase in HFI loan interest income for the six months ended June 30, 2022 as
well as an increase in the average HFS loan balance of $2.7 billion resulting in
an increase of $50.9 million in HFS loan interest income.

For the three months ended June 30, 2022, interest expense was $54.6 million, an
increase of $26.6 million, or 95.0%, compared to $28.0 million for the three
months ended June 30, 2021. Increased interest expense was due to an increase in
interest expense on deposits of $15.5 million driven by increased interest rates
and a $7.9 billion increase in the average interest-bearing deposit balance and
a $9.7 million increase in interest expense on other borrowings resulting from
an increase in the average balance of $1.8 billion.

For the six months ended June 30, 2022, interest expense was $89.6 million, an
increase of $44.8 million, or 100.0%, compared to $44.8 million for the six
months ended June 30, 2021. Interest expense on total debt increased by
$26.0 million driven by an increase in the average debt balance of $2.1 billion
and an increase in average interest-bearing deposits of $8.0 billion, which
drove an $18.8 million increase in interest expense.
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For the three months ended June 30, 2022, net interest income was $525.0
million, an increase of $154.5 million, or 41.7%, compared to $370.5 million for
the three months ended June 30, 2021. The increase in net interest income
reflects a $17.1 billion increase in average interest-earning assets, partially
offset by an increase of $9.9 billion in average interest-bearing liabilities.
The increase in net interest margin of 3 basis points to 3.54% is largely the
result of an increase in loan balances, partially offset by higher deposit
balances and rates compared to the same period in 2021.

For the six months ended June 30, 2022, net interest income was $974.5 million,
an increase of $286.7 million, or 41.7%, compared to $687.8 million for the six
months ended June 30, 2021. The increase in net interest income reflects a $16.9
billion increase in average interest-earning assets, partially offset by an
increase of $10.2 billion in average interest-bearing liabilities. The decrease
in net interest margin of 1 basis point to 3.44% is the result of a decrease in
loan yields due to a loan portfolio shift towards residential mortgage loans and
higher deposit and borrowing costs. The decrease to net interest margin was
partially offset by higher investment yields compared to the same period in
2021.

Provision for credit losses

The provision for credit losses in each period is reflected as a reduction in
earnings for that period and includes amounts related to funded loans, unfunded
loan commitments, and investment securities. The provision is equal to the
amount required to maintain the allowance for credit losses at a level that is
adequate to absorb estimated lifetime credit losses inherent in the loan and
investment securities portfolios at the time that the loan is originated or the
security is purchased. The Company's CECL models incorporate historical
experience, current conditions, and reasonable and supportable forecasts in
measuring expected credit losses. For the three and six months ended June 30,
2022, the Company recorded a provision for credit losses of $27.5 million and
$36.5 million, respectively, compared to a release of credit loss provisions of
$14.5 million and $46.9 million, respectively, for the three and six months
ended June 30, 2021. The increase in the provision for credit losses from the
three and six months ended June 30, 2021 is primarily related to loan growth and
emerging economic uncertainty.

Non-interest income

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

                                                 Three Months Ended June 30,                                  Six Months Ended June 30,
                                                                            Increase                                                      Increase
                                         2022              2021            (Decrease)                2022                2021            (Decrease)
                                                                                       (in millions)
Net loan servicing revenue
(expense)                            $    45.4          $ (20.8)         $       66.2          $     86.5             $ (20.8)         $      107.3
Net gain on loan origination
and sale activities                       27.2            132.0                (104.8)               64.1               132.0                 (67.9)
Gain on recovery from credit
guarantees                                 9.0                -                   9.0                11.3                   -                  11.3
Service charges and fees                   7.6              7.4                   0.2                14.6                14.1                   0.5
Commercial banking related
income                                     5.8              4.5                   1.3                10.9                 7.9                   3.0
Income from equity investments             5.2              6.8                  (1.6)                9.3                14.4                  (5.1)
(Loss) gain on sales of
investment securities                     (0.2)               -                  (0.2)                6.7                 0.1                   6.6

Fair value (loss) gain on
assets measured at fair value,
net                                      (10.0)             3.2                 (13.2)              (16.6)                1.7                 (18.3)
Other income                               5.0              2.9                   2.1                14.5                 6.3                   8.2
Total non-interest income            $    95.0          $ 136.0          $      (41.0)         $    201.3             $ 155.7          $       45.6


Total non-interest income for the three months ended June 30, 2022 compared to
the same period in 2021 decreased $41.0 million. The decrease in non-interest
income was driven by a decrease in net gain on loan origination and sale
activities of $104.8 million due to lower mortgage loan production volume and a
decrease in gain on sale margins. Mark to market losses on equity securities
also resulted in a decrease to non-interest income of $13.2 million from the
prior year. These decreases were offset in part by an increase in net loan
servicing revenue of $66.2 million and gain on recovery from credit guarantees
of $9.0 million related to the credit risk transfer transactions undertaken by
the Company that transfer first loss exposure to unrelated third parties.

Total non-interest income for the six months ended June 30, 2022 compared to the
same period in 2021 increased $45.6 million. The increase in non-interest income
was driven by an increase in net loan servicing revenue of $107.3 million and
gain on recovery from credit guarantees of $11.3 million. These increases were
offset in part by a decrease of $67.9 million in net gain on loan origination
and sale activities and mark to market losses on equity securities, which
totaled $16.6 million for the six months ended June 30, 2022.
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Non-interest expenses

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

                                              Three Months Ended June 30,                                    Six Months Ended June 30,
                                                                           Increase                                                      Increase
                                      2022               2021             (Decrease)                2022                2021            (Decrease)
                                                                                    (in millions)
Salaries and employee benefits   $     139.0          $ 128.9          $        10.1          $    277.3             $ 212.6          $       64.7
Legal, professional, and
directors' fees                         25.1             14.0                   11.1                49.1                24.1                  25.0
Data processing                         19.7             15.0                    4.7                37.3                24.9                  12.4
Deposit costs                           18.1              7.1                   11.0                27.4                13.4                  14.0
Loan servicing expenses                 14.7             22.3                   (7.6)               25.5                22.3                   3.2
Occupancy                               13.0             10.4                    2.6                25.8                19.0                   6.8
Insurance                                6.9              5.5                    1.4                14.1                 9.7                   4.4
Loan acquisition and origination
expenses                                 6.4             10.5                   (4.1)               12.9                10.5                   2.4
Business development and
marketing                                5.4              3.2                    2.2                 9.8                 4.6                   5.2
Net gain on sales and valuations
of repossessed and other assets         (0.3)            (1.5)                   1.2                (0.2)               (1.8)                  1.6
Acquisition and restructure
expenses                                   -             15.7                  (15.7)                0.4                16.1                 (15.7)

Other expense                           20.9             13.7                    7.2                38.1                24.4                  13.7

Total non-interest expense $268.9 $244.8 $

     24.1          $    517.5             $ 379.8          $      137.7


Total non-interest expense for the three months ended June 30, 2022 increased
$24.1 million compared to the same period in 2021. The increase in non-interest
expense was driven by increases in legal, professional, and directors' fees,
deposit costs, and salaries and employee benefits. Legal, professional, and
directors' fees increased $11.1 million primarily related to an increase in IT
and consulting initiatives. The increase in deposit costs primarily relates to
an increase in deposit earnings credits paid to account holders due to higher
balances and rising interest rates. Salaries and employee benefits increased
$10.1 million from the addition of employees as part of the AmeriHome
acquisition that closed on April 7, 2021. These increases to non-interest
expense were offset in part by a reduction in acquisition and restructure
expenses of $15.7 million incurred as part of the AmeriHome acquisition.

Total non-interest expenses for the six months ended June 30, 2022 increase
$137.7 million compared to the same period in 2021. The increase in non-interest expenses is explained by the increase in salaries and benefits, legal, professional and directors’ fees, and filing costs, offset by partly by a reduction in acquisition and restructuring costs. These fluctuations in non-interest expense are discussed in the paragraph above.

Income taxes

The Company's effective tax rate was 19.6% and 19.0% for the three months ended
June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and
2021, the Company's effective tax rate was 19.5% and 18.5%, respectively. The
increase in the effective tax rate was primarily due to projected pretax book
income growth outpacing growth in permanent tax benefit items for the year and
an increase in state tax expense.
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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:

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

• Consumer-related segment: offers consumer banking services, such as mortgage banking and commercial banking services to businesses in consumer-related sectors and from January 25, 2022 includes DST’s financial results.

•Business and Other segment: includes the Company’s investment portfolio, corporate borrowings and other related items, income and expense items not allocated to our other reportable segments and intersegment eliminations.

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

                                                     Consolidated                                 Consumer           Corporate &
                                                        Company              Commercial           Related               Other
At June 30, 2022                                                                    (in millions)
HFI loans, net of deferred loan fees and
costs                                              $       48,572          $    29,448          $  19,124          $          -
Deposits                                                   53,712               29,482             19,690                 4,540

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


Three Months Ended June 30, 2022                         (in millions)
Pre-tax income (loss)                  $ 323.6      $ 239.9      $ 160.1    

$(76.4)

Six Months Ended June 30, 2022
Pre-tax income (loss)                  $ 621.8      $ 476.6      $ 287.1    

$(141.9)

Three Months Ended June 30, 2021
Pre-tax income (loss)                  $ 276.2      $ 209.1      $ 113.6    

$(46.5)

Six Months Ended June 30, 2021
Pre-tax income (loss)                  $ 510.6      $ 430.0      $ 185.1      $ (104.5)


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ANALYSIS OF THE BALANCE SHEET

Total assets increased $10.1 billion, or 18.0%, to $66.1 billion at June 30,
2022, compared to $56.0 billion at December 31, 2021. The increase in total
assets was driven by continued organic loan and deposit growth, which
contributed to an increase in cash of $1.4 billion as well as an increase in
investment securities of $1.2 billion. HFI loans increased by $9.5 billion, or
24.3%, to $48.6 billion as of June 30, 2022, compared to $39.1 billion as of
December 31, 2021. The increase in HFI loans from December 31, 2021 was driven
by increases in residential real estate loans of $5.6 billion (includes a $1.5
billion transfer of EBO loans from HFS to HFI), commercial and industrial loans
of $2.5 billion, CRE, non-owner occupied loans of $1.2 billion, and construction
and land development loans of $208 million. These increases were partially
offset by a decrease in CRE, owner occupied loans of $50 million. In addition,
HFS loans decreased by $2.8 billion, down from $5.6 billion as of December 31,
2021, primarily related to a $1.5 billion transfer of EBO loans from HFS to HFI
during the three months ended June 30, 2022.

Total liabilities increased $10.1 billion, or 19.7%, to $61.1 billion at June
30, 2022, compared to $51.0 billion at December 31, 2021. The increase in
liabilities is due primarily to an increase in total deposits of $6.1 billion,
or 12.8%, to $53.7 billion. The increase in deposits from December 31, 2021 was
driven by increases of $2.4 billion in non-interest bearing demand deposits,
$1.7 billion in savings and money market accounts, $1.5 billion in interest
bearing demand deposits, and $522 million in certificates of deposit. Other
borrowings also increased $3.7 billion from December 31, 2021 due to an increase
in short-term borrowings of $3.2 billion and issuance of two credit linked notes
in June 2022, with a principal balance totaling $494 million.

Total stockholders' equity of $5.0 billion at June 30, 2022 decreased by $4
million, or 0.1%, from December 31, 2021. The decrease in stockholders' equity
is primarily a function of net income and net proceeds of $107.7 million from
issuance of common stock during the six months ended June 30, 2022, offset by
quarterly dividends to common and preferred shareholders and unrealized fair
value losses on AFS securities recorded net of tax in other comprehensive
income.

Investment security

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

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

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

                                                                                  Increase
                                     June 30, 2022       December 31, 2021       (Decrease)
                                                          (in millions)
Debt securities
CLO                                 $        2,678      $              926      $     1,752
Commercial MBS issued by GSEs                   61                      69               (8)
Corporate debt securities                      399                     383               16

Private label residential MBS                1,519                   1,725             (206)
Residential MBS issued by GSEs               1,821                   1,993             (172)
Tax-exempt                                   1,935                   2,105             (170)

U.S. treasury securities                         -                      13              (13)
Other                                           73                      82               (9)
Total debt securities               $        8,486      $            7,296      $     1,190

Equity securities
CRA investments                     $           51      $               45      $         6
Preferred stock                                119                     114                5
Total equity securities             $          170      $              159      $        11


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HFS Loans

The Company purchases and originates residential mortgage loans through its
AmeriHome mortgage banking business channel that are held for sale or
securitization. At June 30, 2022, the Company had $2.8 billion of loans HFS,
compared to $5.6 billion at December 31, 2021. The decrease in loans HFS from
December 31, 2021 relates to sales and a transfer of $1.5 billion of EBO loans
during the three months ended June 30, 2022 that were previously classified as
HFS to HFI as management no longer intends to sell these loans.

HFI loans

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

                                                                                     Increase
                                        June 30, 2022       December 31, 2021       (Decrease)
                                                    (in millions)
Warehouse lending                      $        5,132      $            5,156      $       (24)
Municipal & nonprofit                           1,548                   1,579              (31)
Tech & innovation                               1,648                   1,418              230
Equity fund resources                           4,752                   3,830              922
Other commercial and industrial                 7,832                   6,465            1,367
CRE - owner occupied                            1,681                   1,723              (42)
Hotel franchise finance                         3,112                   2,534              578
Other CRE - non-owner occupied                  4,625                   3,952              673
Residential                                    12,967                   9,243            3,724
Residential - EBO                               1,897                       -            1,897
Construction and land development               3,199                   3,006              193
Other                                             179                     169               10
Total loans HFI                                48,572                  39,075            9,497
Allowance for credit losses                      (273)                   (252)             (21)

Total HFI loans, net of provision $48,299 $38,823 $9,476


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. Net deferred loan fees of
$122 million and $86 million reduced the carrying value of loans as of June 30,
2022 and December 31, 2021, respectively. Net unamortized purchase premiums on
acquired and purchased loans of $192 million and $185 million increased the
carrying value of loans as of June 30, 2022 and December 31, 2021, respectively.

Lending business concentrations

The Company monitors concentrations of lending activities at the product and
borrower relationship level. The Company's loan portfolio includes significant
credit exposure to the CRE market. Commercial and industrial loans made up 43%
and 47% of the Company's HFI loan portfolio as of June 30, 2022 and December 31,
2021, respectively. In addition, CRE related loans accounted for approximately
26% and 29% of total loans at June 30, 2022 and December 31, 2021, respectively.
Substantially all of these CRE loans are secured by first liens with an initial
loan to value ratio of generally not more than 75%. Approximately 19% and 23% of
these CRE loans, excluding construction and land loans, were owner-occupied at
June 30, 2022 and December 31, 2021, respectively. No borrower relationships at
both the commitment and funded loan level exceeded 5% of total HFI loans as of
June 30, 2022 and December 31, 2021.
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Non-performing assets

Total non-performing loans increased $12 million at $88 million at June 30, 2022of $76 million at December 31, 2021.

                                                                      June 30, 2022           December 31, 2021
                                                                                (dollars in millions)
Total nonaccrual loans (1)                                          $         85            $            73
Loans past due 90 days or more on accrual status (2)                           -                          -
Accruing troubled debt restructured loans                                      3                          3
Total nonperforming loans                                           $         88            $            76

Other assets acquired through foreclosure, net                      $         12            $            12

Nonaccrual loans to funded HFI loans                                        0.17    %                  0.19     %

Loans past due 90 days or more on IFH-funded loan accrual status

                                                                      -                          -


(1)Includes unaccrued TDR loans of $19 million and $18 million at June 30, 2022 and December 31, 2021respectively.

(2) Excludes residential mortgage loans guaranteed by the government of $827 million
million and zero to June 30, 2022 and December 31, 2021respectively.

Interest income that would have been recorded under the original terms of
nonaccrual loans was $1.2 million and $1.5 million for the three months ended
June 30, 2022 and 2021, respectively, and $2.3 million and $3.0 million for the
six months ended June 30, 2022 and 2021, respectively.

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

                                                                                  June 30, 2022
                                                         Nonaccrual          Percent of Nonaccrual           Percent of
                                                           Balance                  Balance               Total HFI Loans
                                                                              (dollars in millions)

Tech & innovation                                      $          5                         5.9  %                  0.01  %

Other commercial and industrial                                  23                        27.0                     0.05
CRE - owner occupied                                              9                        10.6                     0.02
Hotel franchise finance                                          10                        11.8                     0.02
Other CRE - non-owner occupied                                   20                        23.5                     0.04
Residential                                                      17                        20.0                     0.03

Construction and land development                                 1                         1.2                     0.00

Total non-accrual loans                                $         85                       100.0  %                  0.17  %


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

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

Other CRE - non-owner occupied                                    13                        18.0                     0.03
Residential                                                       15                        20.8                     0.05
Construction and land development                                  1                         1.4                     0.00
Other                                                              1                         0.6                     0.00
Total non-accrual loans                                $          73                       100.0  %                  0.19  %

Restructured distressed debt loans

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

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

Tech & innovation                                1           $            4                        2          $            2

Other commercial and industrial                  8                        5                        7                       6
CRE - owner occupied                             1                        1                        1                       1

Other CRE - non-owner occupied                   5                       10                        5                      11

Construction and land development                1                        1                        1                       1

Total                                           16           $           21                       16          $           21


The allowance for credit losses on TDR loans totaled $1 million and zero as of
June 30, 2022 and December 31, 2021, respectively. There were no outstanding
commitments on TDR loans as of June 30, 2022 and December 31, 2021.

Provision for credit losses on HFI loans

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

The following table summarizes the breakdown of the allowance for credit losses on loans to HFIs by segment of the loan portfolio:

                                                              June 30, 2022                                                     December 31, 2021
                                                             Percent of total        Percent of loan                            Percent of total        Percent of loan
                                       Allowance for           allowance for          type to total        Allowance for          allowance for          type to total
                                       credit losses           credit losses            HFI loans          credit losses          credit losses            HFI loans
                                                          (dollars in millions)                                               (dollars in millions)
Warehouse lending                     $         3.7                     1.4  %               10.6  %       $       3.0                     1.2  %               13.2  %
Municipal & nonprofit                          13.6                     5.0                   3.2                 13.7                     5.4                   4.1
Tech & innovation                              25.4                     9.3                   3.4                 25.7                    10.2                   3.6
Equity fund resources                          14.0                     5.1                   9.8                  9.6                     3.8                   9.8
Other commercial and industrial               119.2                    43.6                  16.1                103.6                    41.0                  16.5
CRE - owner occupied                            7.5                     2.7                   3.4                 10.6                     4.2                   4.4
Hotel franchise finance                        33.8                    12.4                   6.4                 41.5                    16.4                   6.5
Other CRE - non-owner occupied                 22.1                     8.1                   9.5                 16.9                     6.7                  10.1
Residential                                    18.8                     6.9                  26.7                 12.5                     5.0                  23.7
Residential - EBO                                 -                       -                   3.9                    -                       -                     -
Construction and land
development                                    12.2                     4.5                   6.6                 12.5                     5.0                   7.7
Other                                           2.9                     1.1                   0.4                  2.9                     1.1                   0.4
Total                                 $       273.2                   100.0  %              100.0  %       $     252.5                   100.0  %              100.0  %

In the three months ended June 30, 2022 and 2021, net loan write-offs relative to average loans outstanding were 0.01% and approximately 0.00%, respectively.

In addition to the allowance for credit losses on funded HFI loans, the Company
maintains a separate allowance for credit losses related to off-balance sheet
credit exposures, including unfunded loan commitments. This allowance balance
totaled $53.8 million and $37.6 million at June 30, 2022 and December 31, 2021,
respectively, and is included in Other liabilities on the Consolidated Balance
Sheets.



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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:

                                                                               June 30, 2022
                                                                  Problem Loan         Percent of Problem        Percent of Total
                                          Number of Loans           Balance               Loan Balance              HFI Loans
                                                                           (dollars in millions)

Municipal & nonprofit                               1           $           6                      1.9  %                  0.01  %
Tech & innovation                                  16                      59                     19.2                     0.12

Other commercial and industrial                    82                      47                     15.3                     0.10
CRE - owner occupied                               11                      16                      5.2                     0.03
Hotel franchise finance                             6                      88                     28.7                     0.18
Other CRE - non-owner occupied                     13                      43                     14.0                     0.09
Residential                                        39                      18                      5.9                     0.04

Other                                              20                      30                      9.8                     0.06
Total                                             188           $         307                    100.0  %                  0.63  %


                                                                           

December 31, 2021

                                                                     Problem Loan         Percent of Problem        Percent of Total
                                           Number of Loans             Balance               Loan Balance              HFI Loans
                                                                             (dollars in millions)

Tech & innovation                                      13          $          39                     11.4  %                  0.10  %

Other commercial and industrial                        66                     60                     17.9                     0.16
CRE - owner occupied                                   14                     16                      4.7                     0.04
Hotel franchise finance                                 9                    139                     40.9                     0.35
Other CRE - non-owner occupied                          5                     11                      3.4                     0.03
Residential                                            35                     16                      4.6                     0.04
Construction and land development                       7                     28                      8.3                     0.07
Other                                                  17                     30                      8.8                     0.08
Total                                                 166          $         339                    100.0  %                  0.87  %


Mortgage Servicing Rights

The fair value of the Company’s MSR related to residential mortgage loans totaled $826 million and $698 million of the June 30, 2022 and December 31, 2021respectively.

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

                                              June 30, 2022       December 31, 2021
                                                          (in millions)
FNMA and FHLMC                               $       26,627      $           38,754
GNMA                                                 23,989                  14,379
Non-agency                                            1,568                   1,215

Total Outstanding Loan Principal Balance $52,184 $

 54,348



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Good will 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 $530 million at
June 30, 2022. The increase from $491 million at 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 impairment tests as of
October 1 each year, or more often if events or circumstances indicate that the
carrying value may not be recoverable. During the three and six months ended
June 30, 2022 and 2021, there were no events or circumstances that indicated an
interim impairment test of goodwill or other intangible assets was necessary.

Deferred tax assets

As of June 30, 2022, the net DTA balance totaled $223 million, an increase of
$202 million from $21 million at December 31, 2021. This overall increase in the
net DTA was primarily the result of decreases in the fair market value of AFS
securities and expected tax credit carryovers. These items were not fully offset
by increases to MSRs.

To June 30, 2022 and December 31, 2021the Company had no deferred tax valuation allowance.

Deposits

Deposits are the primary source for funding the Company's asset growth. Total
deposits increased to $53.7 billion at June 30, 2022, from $47.6 billion at
December 31, 2021, an increase of $6.1 billion, or 12.8%. By deposit type, the
increase in deposits is attributable to increases in non-interest bearing demand
deposits of $2.4 billion, savings and money market accounts of $1.7 billion,
interest bearing demand deposits of $1.5 billion, and certificates of deposit of
$522 million.

WAB is a participant in the IntraFi Network, a network that offers deposit
placement services such as CDARS and ICS, which offer products that qualify
large deposits for FDIC insurance. At June 30, 2022, the Company had $685
million of CDARS deposits and $2.1 billion of ICS deposits, compared to $729
million of CDARS deposits and $1.8 billion of ICS deposits at December 31, 2021.
At June 30, 2022 and December 31, 2021, the Company also had wholesale brokered
deposits of $3.6 billion and $1.8 billion, respectively.

In addition, deposits for which the Company provides account holders with
earnings credits or referral fees totaled $14.5 billion and $10.8 billion at
June 30, 2022 and December 31, 2021, respectively. The Company incurred $17.3
million and $6.6 million in deposit related costs on these deposits during the
three months ended June 30, 2022 and 2021, respectively. The Company incurred
$26.0 million and $12.4 million in deposit related costs on these deposits
during the six months ended June 30, 2022 and 2021, respectively. These costs
are reported in Deposit costs as part of non-interest expense. The increase in
these costs from the prior year is due to an increase in 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 June 30,
                                                                 2022                                            2021
                                               Average Balance              Rate                Average Balance               Rate
                                                                                 (dollars in millions)
Interest-bearing transaction accounts          $       8,346                    0.38  %       $          4,370                    0.14  %
Savings and money market accounts                     18,771                    0.35                    15,168                    0.21
Certificates of deposit                                2,040                    0.52                     1,737                    0.49
Total interest-bearing deposits                       29,157                    0.37                    21,275                    0.22
Non-interest-bearing demand deposits                  24,327                       -                    18,385                       -
Total deposits                                 $      53,484                    0.20  %       $         39,660                    0.12  %


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                                                                               Six Months Ended June 30,
                                                                2022                                            2021
                                               Average Balance             Rate                Average Balance               Rate
                                                                                 (dollars in millions)
Interest-bearing transaction accounts          $      8,046                    0.27  %       $          4,139                    0.14  %
Savings and money market accounts                    18,453                    0.29                    14,584                    0.21
Certificates of deposit                               1,981                    0.45                     1,709                    0.54
Total interest-bearing deposits                      28,480                    0.29                    20,432                    0.22
Non-interest-bearing demand deposits                 23,458                       -                    17,186                       -
Total deposits                                 $     51,938                    0.16  %       $         37,618                    0.12  %


Other Borrowings

Short-Term Borrowings

The Company utilizes short-term borrowed funds to support short-term liquidity
needs generally created by increased loan demand. The majority of these
short-term borrowed funds consist of advances from the FHLB, federal funds
purchased from correspondent banks or the FHLB, 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
June 30, 2022, total short-term borrowed funds consisted of FHLB advances of
$2.0 billion, federal funds purchased of $1.9 billion, repurchase agreements of
$79 million, and secured borrowings of $40 million. At December 31, 2021, total
short-term borrowed funds consisted of federal funds purchased of $675 million,
secured borrowings of $35 million, and repurchase agreements of $17 million.

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 June 30, 2022, the carrying
value of long-term borrowings was $1.2 billion, compared to $775 million at
December 31, 2021. The increase in long-term borrowings from December 31, 2021
relates to new credit linked note issuances during the three months ended June
30, 2022, totaling $486 million, net of issuance costs.

Eligible debt

Qualifying debt consists of subordinated debt and junior subordinated debt,
inclusive of issuance costs and fair market value adjustments. At June 30, 2022,
the carrying value of qualifying debt was $891 million, compared to $896 million
at December 31, 2021.
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Capital resources

The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements could trigger certain mandatory or discretionary actions that, if
undertaken, could have a direct material effect on the Company's business and
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance sheet items (discussed in "Note 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, the Company elected
the five-year CECL transition option that delayed the estimated impact on
regulatory capital resulting from the adoption of CECL. As 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-year transition period to phase out
the aggregate amount of capital benefit provided during the initial two-year
delay. Beginning in 2022, capital ratios and amounts include a 25% reduction to
the capital benefit that resulted from the increased allowance for credit losses
related to the adoption of ASC 326.

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 six
months ended June 30, 2022, included sales of common stock under the Company's
ATM program and two credit linked note issuances. As of June 30, 2022 and
December 31, 2021, 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:

                                                                                            Tangible
                                Total            Tier 1            Risk-Weighted             Average          Total Capital        Tier 1 

Tier 1 capital Leverage Common equity

                               Capital           Capital               Assets                Assets               Ratio                Ratio                 Ratio               Tier 1
                                                                                                 (dollars in millions)
June 30, 2022
WAL                          $  6,001          $  4,897          $        50,292          $   64,085                 11.9  %               9.7  %                7.6  %              9.0  %
WAB                             5,638             5,126                   50,228              64,051                 11.2                 10.2                   8.0                10.2
Well-capitalized
ratios                                                                                                               10.0                  8.0                   5.0                 6.5
Minimum capital ratios                                                                                                8.0                  6.0                   4.0                 4.5

December 31, 2021
WAL                          $  5,499          $  4,444          $        44,697          $   56,973                 12.3  %               9.9  %                7.8  %              9.1  %
WAB                             5,120             4,658                   44,726              56,962                 11.4                 10.4                   8.2                10.4
Well-capitalized
ratios                                                                                                               10.0                  8.0                   5.0                 6.5
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 June 30, 2022.



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Critical accounting estimates

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties and could potentially result in
materially different results under different assumptions and conditions. The
critical accounting 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, 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, 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, on at least a
quarterly basis, the Company projects the amount of funds that will be required
over a twelve-month period and it also strives to maintain relationships with a
diversified customer base. Liquidity requirements can also be met through
short-term borrowings or the disposition of short-term assets.

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

                                                                                 June 30, 2022
                                                                       Available            Outstanding
                                                                        Balance               Balance
                                                                                 (in millions)
Unsecured fed funds credit lines at correspondent banks              $     

3,408 $1,860


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 June 30, 2022 are presented in the following table:

                             June 30, 2022
                             (in millions)
FHLB:
Borrowing capacity          $        9,774
Outstanding borrowings               2,000
Letters of credit                       21
Total available credit      $        7,753

FRB:
Borrowing capacity          $        4,728
Outstanding borrowings                   -
Total available credit      $        4,728

Warehouse borrowings:
Borrowing capacity          $        1,000
Outstanding borrowings                   -
Total available credit      $        1,000


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 June 30, 2022, there
was $10.2 billion in liquid assets, comprised of $1.9 billion in cash and cash
equivalents, $2.8 billion in HFS mortgages, and $5.5 billion in unpledged
marketable securities. At December 31, 2021, the Company maintained $8.7 billion
in liquid assets, comprised of $516 million of cash and cash equivalents, $4.0
billion in HFS mortgages, and $4.2 billion of unpledged marketable securities.
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The Parent maintains liquidity that would be sufficient to fund its operations
and certain non-bank affiliate operations for an extended period should funding
from normal sources be disrupted. Since deposits are taken by WAB and not by the
Parent, 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 June 30, 2022, 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 six months ended
June 30, 2022 and 2021, net cash provided by (used in) operating activities was
$960.0 million and $(1.1) billion, 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 six months ended June 30, 2022
and 2021 was reduced by $8.0 billion and $3.5 billion, respectively, as a result
of a net increase in loans as well as a net increase in investment securities of
$1.8 billion and $2.4 billion, respectively.

Net cash provided by financing activities has been impacted significantly by
increased deposit levels. During the six months ended June 30, 2022 and 2021,
net deposits increased $6.1 billion and $10.0 billion, respectively.

Fluctuations in core deposit levels may increase the Company's need for
liquidity as certificates of deposit mature or are withdrawn before maturity,
and as non-maturity deposits, such as checking and savings account balances, are
withdrawn. Additionally, the Company is exposed to the risk that customers with
large deposit balances will withdraw all or a portion of such deposits, due in
part to the FDIC limitations on the amount of insurance coverage provided to
depositors. To mitigate the uninsured deposit risk, the Company participates in
the CDARS and ICS programs, which allow an individual customer to invest up to
$50.0 million and $150.0 million, respectively, through one participating
financial institution or, a combined total of $200.0 million per individual
customer, with the entire amount being covered by FDIC insurance. As of June 30,
2022, the Company has $685 million of CDARS and $2.1 billion of ICS deposits.

As of June 30, 2022, the Company has $3.6 billion of wholesale brokered deposits
outstanding. Brokered deposits are generally considered to be deposits that have
been received from a third party who is engaged in the business of placing
deposits on behalf of others. A traditional deposit broker will direct deposits
to the banking institution offering the highest interest rate available. Federal
banking laws and regulations place restrictions on depository institutions
regarding brokered deposits because of the general concern that these deposits
are not relationship based and are at a greater risk of being withdrawn and
placed on deposit at another institution offering a higher interest rate, thus
posing liquidity risk for institutions that gather brokered deposits in
significant amounts.

Federal and state banking regulations place certain restrictions on dividends
paid. The total amount of dividends which may be paid at any date is generally
limited to the retained earnings of the bank. Dividends paid by WAB to the
Parent would be prohibited if the effect thereof would cause the Bank's capital
to be reduced below applicable minimum capital requirements. During the three
and six months ended June 30, 2022, WAB paid dividends to the Parent of $50
million. Subsequent to June 30, 2022, WAB paid dividends to the Parent of $55
million.
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