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Dynamic quotes 
OFFON

WESTERN ALLIANCE BANCORPORATION

(WAL)
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WESTERN ALLIANCE BANCORPORATION : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/30/2021 | 04:45pm EDT
This discussion is designed to provide insight into management's assessment of
significant trends related to the Company's consolidated financial condition,
results of operations, liquidity, capital resources, and interest rate
sensitivity. This Quarterly Report on Form 10-Q should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
2020 and the interim Unaudited Consolidated Financial Statements and Notes to
Unaudited Consolidated Financial Statements hereto and financial information
appearing elsewhere in this report. Unless the context requires otherwise, the
terms "Company," "we," and "our" refer to Western Alliance Bancorporation and
its wholly-owned subsidiaries on a consolidated basis.
Forward-Looking Information
Certain statements contained in this Quarterly Report on Form 10-Q for the
quarter ended June 30, 2021 are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act. The Company intends such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws, including statements that are
related to or are dependent on estimates or assumptions relating to
expectations, beliefs, projections, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that are not
historical facts.
The forward-looking statements contained in this Form 10-Q reflect the Company's
current views about future events and financial performance and involve certain
risks, uncertainties, assumptions, and changes in circumstances that may cause
the Company's actual results to differ significantly from historical results and
those expressed in any forward-looking statement, including those risks
discussed under the heading "Risk Factors" in this Form 10-Q. Risks and
uncertainties include those set forth in the Company's filings with the SEC and
the following factors that could cause actual results to differ materially from
those presented: 1) ability to successfully integrate and operate AMH; 2) the
potential adverse effects of the ongoing COVID-19 pandemic and any governmental
or societal responses thereto, including legislative or regulatory changes such
as the CARES Act as well as the distribution and effectiveness of COVID-19
vaccines; 3) other financial market and economic conditions adversely effecting
financial performance; 4) dependency on real estate and events that negatively
impact the real estate market; 5) high concentration of commercial real estate
and commercial and industrial loans; 6) the inherent risk associated with
accounting estimates, including the impact to the Company's allowance, provision
for credit losses, and capital levels under the CECL accounting standard; 7)
results of any tax audit findings, challenges to the Company's tax positions, or
adverse changes or interpretations of tax laws; 8) the geographic concentrations
of the Company's assets increase the risks related to local economic conditions;
9) the Company's ability to compete in a highly competitive market; 10)
dependence on low-cost deposits; 11) ability to borrow from the FHLB or the FRB;
12) exposure to environmental liabilities related to the properties to which the
Company acquires title; 13) perpetration of fraud; 14) information security
breaches; 15) reliance on third parties to provide key components of the
Company's infrastructure; 16) a change in the Company's creditworthiness; 17)
the Company's ability to implement and improve its controls and processes to
keep pace with its growth; 18) expansion strategies may not be successful; 19)
risks associated with new lines of businesses or new products and services
within existing lines of business; 20) the Company's ability to recruit and
retain qualified employees and implement adequate succession planning to
mitigate the loss of key members of its senior management team; 21) inadequate
or ineffective risk management practices and internal controls and procedures;
22) the Company's ability to adapt to technological change; 23) exposure to
natural and man-made disasters in markets that the Company operates; 24) risk of
operating in a highly regulated industry and the Company's ability to remain in
compliance; 25) failure to comply with state and federal banking agency laws and
regulations; 26) exposure of financial instruments to certain market risks may
increase the volatility of earnings and AOCI; 27) uncertainty about the future
of LIBOR, changes in interest rates, and increased rate competition; and 28)
risks related to ownership and price of the Company's common stock.
For more information regarding risks that may cause the Company's actual results
to differ materially from any forward-looking statements, see "Risk Factors" in
Item 1A of the Company's Annual Report on Form 10-K for the year ended December
31, 2020.
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Recent Developments: Closing of AMH Acquisition
On April 7, 2021, the Company completed its previously announced acquisition of
Aris, the parent company of AMH, pursuant to which, Aris merged with and into an
indirect subsidiary of WAB. Based on AMH's closing balance sheet and a $275
million cash premium, total cash consideration was approximately $1.22 billion.
As a result of the Merger, AMH is now a wholly-owned indirect subsidiary of the
Company and will continue to operate as AmeriHome Mortgage, a Western Alliance
Bank company. AMH is a leading national business to business mortgage acquirer
and servicer. The acquisition of AMH complements the Company's national
commercial businesses with a national mortgage franchise that allows the Company
to expand mortgage-related offerings to existing clients and diversifies the
Company's revenue profile by expanding sources of non-interest income.
AMH's results of operations have been included in the Company's results
beginning April 7, 2021.
Recent Developments: COVID-19 and the CARES Act
The COVID-19 pandemic and certain provisions of the CARES Act and other recent
legislative and regulatory relief efforts have had and are expected to continue
to have a material impact on the Company's operations, as further discussed
below.
Financial position and results of operations
The continued improved outlook for the overall economy from December 31, 2020
resulted in a release of $14.5 million and $46.9 million in credit loss
provisions during the three and six months ended June 30, 2021, respectively.
While the Company has not to date experienced significant write-offs related to
the COVID-19 pandemic, the Company is continuing to closely monitor its loans
with borrowers in COVID-19 impacted industries.
The below table details the Company's exposure to borrowers in industries
generally considered to be the most impacted by the COVID-19 pandemic:
                                                 June 30, 2021
                               Loan Balance       Percent of Total Loan Portfolio
                                             (dollars in millions)
         Industry (1):
         Hotel                $     2,313.9                                 6.7  %
         Investor dependent         1,020.0                                 3.0
         Retail (2)                   714.5                                 2.1
         Gaming                       557.9                                 1.6
         Total                $     4,606.3                                13.4  %


(1)Balances capture credit exposures in the business segments that manage the
significant majority of industry relationships.
(2)Consists of real estate secured loan amounts that have significant retail
dependency.
Although the Company has not experienced disproportionate impacts among its
business segments to date, borrowers in the industries detailed in the table
above could have greater sensitivity to the economic downturn with potentially
longer recovery periods than other business lines.
Lending operations and accommodations to borrowers
The original PPP terminated on August 8, 2020, but was reopened in January 2021,
with $284 billion in additional funding. As part of the resumption of the
program, significant clarifications and modifications were made related to the
scope of businesses eligible, expansion of the scope of expenses eligible for
forgiveness, and simplification of forgiveness mechanisms for loans of $150,000
or less. Eligible businesses were able to apply for and receive PPP loans
through May 31, 2021 and certain small businesses that previously received a
loan under the original program were eligible to obtain an additional loan.
These loans have a five-year term and earn interest at a rate of 1%. During the
three months ended June 30, 2021, the Company funded $42.3 million in loans
under the second round of the PPP and received $727.3 million in loan payoffs on
the first round of PPP loans. During the six months ended June 30, 2021, the
Company funded $602.2 million in loans under the second round of the PPP and
received $1.2 billion in loan payoffs on the first round of PPP loans. As of
June 30, 2021, the carrying value of loans originated under the first and second
round of the PPP totaled $864.8 million.
The CARES Act permitted financial institutions to suspend requirements under
GAAP for loan modifications to borrowers affected by COVID-19 and provided
interpretive guidance as to conditions that would constitute a short-term
modification that would not meet the definition of a TDR. This included the
following (i) the loan modification was made between March 1, 2020 and December
31, 2020, and (ii) the applicable loan was not more than 30 days past due as of
December 31, 2019. The
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Consolidated Appropriations Act, 2021, signed into law on December 27, 2020,
extends these provisions through January 1, 2022. The Company is applying this
guidance to qualifying loan modifications. The types of loan modifications
granted to borrowers included extensions of loan maturity dates, covenant
waivers, interest only payments for a specified period of time, and loan payment
deferrals. As of June 30, 2021, the Company has outstanding modifications on HFI
loans that met these conditions with a net balance of $228.4 million, none of
which involve loan payment deferrals. Further, residential mortgage loans in
forbearance have a net balance of $49.8 million as of June 30, 2021.
Included at the end of this section are updates to the Supervision and
Regulation discussion disclosed in "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations," in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2020.
Financial Overview and Highlights
WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated
under the laws of the state of Delaware. WAL provides a full spectrum of
deposit, lending, mortgage banking, treasury management, international banking,
and online banking products and services through its wholly-owned banking
subsidiary, WAB. Most recently, the Company added to these capabilities with the
acquisition of AmeriHome on April 7, 2021, a leading national
business-to-business mortgage platform.
WAB operates the following full-service banking divisions: ABA, BON and FIB,
Bridge, and TPB. The Company also provides an array of specialized financial
services to its business customers across the country.
Financial Results Highlights for the Second Quarter of 2021
•Net income of $223.8 million, compared to $93.3 million for the second quarter
2020
•Diluted earnings per share of $2.17, compared to $0.93 per share for the second
quarter 2020
•Total loans, HFI of $30.0 billion, up $1.3 billion from March 31, 2021, and
$3.0 billion from December 31, 2020
•Total deposits of $41.9 billion, up $3.5 billion from March 31, 2021, and $10.0
billion from December 31, 2020
•Net interest margin of 3.51%, compared to 4.19% in the second quarter 2020
•Net revenue of $506.5 million, an increase of 58.4%, or $186.8 million,
compared to the second quarter 2020, with non-interest expense increase of
113.2%, or $130.0 million, compared to the second quarter 2020
•PPNR of $277.4 million, up 35.4% from $204.9 million in the second quarter
20201
•Efficiency ratio of 44.5% in the second quarter 2021, compared to 35.1% in the
second quarter 20201
•Nonperforming assets (nonaccrual loans and repossessed assets) decreased to
0.20% of total assets, from 0.47% at June 30, 2020
•Annualized net loan charge-offs to average loans outstanding of approximately
0.00%, compared to 0.09% for the second quarter 2020
•Tangible common equity ratio of 7.1%, compared to 8.9% at June 30, 20201
•Stockholders' equity of $4.0 billion, an increase of $321.8 million from March
31, 2021 and $621.0 million from December 31, 2020
•Book value per common share of $38.70, an increase of 25.8% from $30.76 at June
30, 2020
•Tangible book value per share, net of tax, of $32.86, an increase of $5.02, or
18.0%, from $27.84 at June 30, 20201
The impact to the Company from these items, and others of both a positive and
negative nature, are discussed in more detail below as they pertain to the
Company's overall comparative performance for the three and six months ended
June 30, 2021.

1 See 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 Condition
A summary of the Company's results of operations, financial condition, and
selected metrics are included in the following tables:
                                            Three Months Ended June 30,                 Six Months Ended June 30,
                                             2021                  2020                  2021                 2020
                                                           (in millions, except per share amounts)
Net income                             $       223.8$     93.3$      416.3$    177.2
Earnings per share - basic                      2.18                 0.93                  4.09                 1.76
Earnings per share - diluted                    2.17                 0.93                  4.07                 1.76
Return on average assets                        1.86   %             1.22  %               1.89   %             1.22  %
Return on average equity                        23.7                 12.3                  23.0                 11.6
Return on average tangible
common equity (1)                               28.1                 13.6                  26.2                 12.9
Net interest margin                             3.51                 4.19                  3.45                 4.20

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

                                                                                         December 31,
                                                                  June 30, 2021              2020
                                                                            (in millions)
Total assets                                                    $     49,069.0$  36,461.0
HFI loans, net of deferred loan fees and costs                        30,026.4             27,053.0
Total deposits                                                        41,921.0             31,930.5


Asset Quality
For all banks and bank holding companies, asset quality plays a significant role
in the overall financial condition of the institution and results of operations.
The Company measures asset quality in terms of nonaccrual loans as a percentage
of gross loans and net charge-offs as a percentage of average loans. Net
charge-offs are calculated as the difference between charged-off loans and
recovery payments received on previously charged-off loans. The following table
summarizes the Company's key asset quality metrics:
                                                       June 30, 2021      December 31, 2020
                                                              (dollars in millions)
Nonaccrual loans                                      $       96.3       $          115.2
Non-performing assets                                        124.5                  149.8
Nonaccrual loans to funded HFI loans                          0.32  %                0.43  %
Net charge-offs to average loans outstanding (1)              0.00          

0.06



(1)Annualized on an actual/actual basis for the three months ended June 30,
2021. Actual year-to-date for the year ended December 31, 2020.
Asset and Deposit Growth
The Company's assets and liabilities are comprised primarily of loans and
deposits. Therefore, the ability to originate new loans and attract new deposits
is fundamental to the Company's growth.
Total assets increased to $49.1 billion at June 30, 2021 from $36.5 billion at
December 31, 2020. The increase in total assets of $12.6 billion, or 34.6%, was
driven by the acquisition of AmeriHome as well as continued organic loan and
deposit growth. HFI loans increased by $3.0 billion, or 11.0%, to $30.0 billion
as of June 30, 2021, compared to $27.1 billion as of December 31, 2020. The
increase in loans from December 31, 2020 was driven by increases in residential
real estate loans of $2.7 billion and construction and land development loans of
$425.6 million. These increases were partially offset by a decrease in CRE,
owner occupied loans of $128.7 million.
Total deposits increased $10.0 billion, or 31.3%, to $41.9 billion as of June
30, 2021 from $31.9 billion as of December 31, 2020. The increase in deposits
from December 31, 2020 was driven by increases of $6.6 billion in non-interest
bearing demand deposits and $3.4 billion in savings and money market accounts.
These increases were offset in part by a decrease in interest bearing demand
deposits of $208.7 million.
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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
                                         2021              2020            (Decrease)               2021                2020            (Decrease)
                                                                         (in millions, except per share amounts)
Consolidated Income Statement Data:
Interest income                       $  398.5$ 318.2$      80.3$       732.6$ 625.4$     107.2
Interest expense                          28.0             19.8                  8.2                   44.8             58.0                (13.2)
Net interest income                      370.5            298.4                 72.1                  687.8            567.4                120.4
(Recovery of) provision for
credit losses                            (14.5)            92.0               (106.5)                 (46.9)           143.2               (190.1)
Net interest income after
(recovery of) provision for
credit losses                            385.0            206.4                178.6                  734.7            424.2                310.5
Non-interest income                      136.0             21.3                114.7                  155.7             26.4                129.3
Non-interest expense                     244.8            114.8                130.0                  379.8            235.3                144.5
Income before provision for
income taxes                             276.2            112.9                163.3                  510.6            215.3                295.3
Income tax expense                        52.4             19.6                 32.8                   94.3             38.1                 56.2
Net income                            $  223.8$  93.3          $ 

130.5 $ 416.3$ 177.2$ 239.1 Earnings per share - basic

            $   2.18$  0.93          $  

1.25 $ 4.09$ 1.76$ 2.33 Earnings per share - diluted $ 2.17$ 0.93 $

1.24 $ 4.07$ 1.76$ 2.31



Non-GAAP Financial Measures
The following discussion and analysis contains financial information determined
by methods other than those prescribed by GAAP. The Company's management uses
these non-GAAP financial measures in their analysis of the Company's
performance. Management believes presentation of these non-GAAP financial
measures provides useful supplemental information that is essential to a
complete understanding of the operating results of the Company. Since the
presentation of these non-GAAP performance measures and their impact differ
between companies, these non-GAAP disclosures should not be viewed as a
substitute for operating results determined in accordance with GAAP, nor are
they necessarily comparable to non-GAAP performance measures that may be
presented by other companies.
Pre-Provision Net Revenue
PPNR is defined by the Federal Reserve in SR 14-3, which requires companies
subject to the rule to project PPNR over the planning horizon for each of the
economic scenarios defined annually by the regulators. Banking regulations
define PPNR as net interest income plus non-interest income less non-interest
expense. Management believes that this is an important metric as it illustrates
the underlying performance of the Company, it enables investors and others to
assess the Company's ability to generate capital to cover credit losses through
the credit cycle, and provides consistent reporting with a key metric used by
bank regulatory agencies.
The following table shows the components of PPNR for the three and six months
ended June 30, 2021 and 2020:
                                                Three Months Ended June 30,                 Six Months Ended June 30,
                                                 2021                  2020                  2021                 2020
                                                                            (in millions)
Net interest income                        $        370.5$    298.4$       687.8$    567.4
Total non-interest income                           136.0                21.3                  155.7                26.4
Net revenue                                $        506.5$    319.7$       843.5$    593.8
Total non-interest expense                          244.8               114.8                  379.8               235.3
Less: Acquisition and restructure
expense                                              15.7                   -                   16.1                   -

Total non-interest expense, adjusted $ 229.1$ 114.8$ 363.7$ 235.3 Pre-provision net revenue(1)

               $        277.4$    204.9$       479.8$    358.5
Less:
Acquisition and restructure expense                  15.7                   -                   16.1                   -
(Recovery of) provision for credit
losses                                              (14.5)               92.0                  (46.9)              143.2
Income tax expense                                   52.4                19.6                   94.3                38.1
Net income                                 $        223.8$     93.3$       416.3$    177.2

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

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Efficiency Ratio
The following table shows the components used in the calculation of the
efficiency ratio, which management uses as a metric for assessing cost
efficiency:
                                           Three Months Ended June 30,                 Six Months Ended June 30,
                                            2021                  2020                  2021                 2020
                                                                   (dollars in millions)
Total non-interest expense, adjusted  $       229.1$    114.8$      363.7$    235.3
Divided by:
Total net interest income             $       370.5$    298.4$      687.8$    567.4
Plus:
Tax equivalent interest adjustment              8.5                  7.0                  16.5                 13.4
Total non-interest income                     136.0                 21.3                 155.7                 26.4
                                      $       515.0$    326.7$      860.0$    607.2
Efficiency ratio - tax equivalent
basis                                          44.5   %             35.1  %               42.3   %             38.7  %


Tangible Common Equity
The following table presents financial measures related to tangible common
equity. Tangible common equity represents total stockholders' equity, less
identifiable intangible assets and goodwill. Management believes that tangible
common equity financial measures are useful in evaluating the Company's capital
strength, financial condition, and ability to manage potential losses. In
addition, management believes that these measures improve comparability to other
institutions that have not engaged in acquisitions that resulted in recorded
goodwill and other intangible assets.
                                                                   June 30, 

2021 December 31, 2020

                                                                      (dollars and shares in millions)
Total stockholders' equity                                       $      4,034.5$        3,413.5
Less: goodwill and intangible assets                                      610.7                     298.5
Total tangible stockholders' equity                                     3,423.8                   3,115.0
Plus: deferred tax - attributed to intangible assets                        1.8                       1.6
Total tangible common equity, net of tax                         $      

3,425.6 $ 3,116.6


Total assets                                                     $     49,069.0$       36,461.0
Less: goodwill and intangible assets, net                                 610.7                     298.5
Tangible assets                                                        48,458.3                  36,162.5
Plus: deferred tax - attributed to intangible assets                        1.8                       1.6
Total tangible assets, net of tax                                $     

48,460.1 $ 36,164.1


Tangible common equity ratio                                                7.1  %                    8.6  %
Common shares outstanding                                                 104.2                     100.8
Book value per share                                             $        38.70          $          33.85
Tangible book value per share, net of tax                                 32.86                     30.90


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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. As a result, capital ratios and amounts as of
June 30, 2021 exclude the impact of the increased allowance for credit losses
related to the adoption of ASC 326.
                                                                  June 30, 

2021 December 31, 2020

                                                                           (dollars in millions)
Common equity tier 1:
Common equity                                                    $     4,074.6$        3,465.9
Less:
Non-qualifying goodwill and intangibles                                  607.9                     296.9

Disallowed deferred tax asset                                              0.7                         -
AOCI related adjustments                                                  64.5                      91.8
Unrealized gain on changes in fair value liabilities                         -                       0.5
Common equity tier 1                                             $     3,401.5$        3,076.7
Divided by: Risk-weighted assets                                 $    37,153.5$       31,015.4
Common equity tier 1 ratio                                                 9.2  %                    9.9  %

Common equity tier 1                                             $     3,401.5$        3,076.7

Plus: Trust preferred securities                                          81.5                      81.5

Tier 1 capital                                                   $     3,483.0$        3,158.2
Divided by: Tangible average assets                              $    47,515.0$       34,349.3
Tier 1 leverage ratio                                                      7.3  %                    9.2  %

Total capital:
Tier 1 capital                                                   $     3,483.0$        3,158.2
Plus:
Subordinated debt                                                      1,045.3                     454.8
Adjusted allowances for credit losses                                    222.3                     259.0

Tier 2 capital                                                   $     1,267.6          $          713.8

Total capital                                                    $     4,750.6$        3,872.0
Total capital ratio                                                       12.8  %                   12.5  %

Classified assets to tier 1 capital plus allowance: Classified assets

                                                $       

238.5 $ 223.7


Divided by: Tier 1 capital                                             3,483.0                   3,158.2
Plus: Adjusted allowances for credit losses                              222.3                     259.0

Total Tier 1 capital plus adjusted allowances for credit losses $ 3,705.3$ 3,417.2 Classified assets to tier 1 capital plus allowance

6.4  %                    6.5  %



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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,
                                                                     2021                                                             2020
                                             Average                                  Average                 Average                                  Average
                                             Balance           Interest             Yield / Cost              Balance           Interest             Yield / Cost
                                                                                             (dollars in millions)
Interest earning assets
Loans held for sale                       $  5,347.3$   42.7                       3.21  %       $     21.7          $      -                          -  %
Loans held for investment:
Commercial and industrial                   13,897.5             148.2                       4.37            12,318.3             141.9                       4.73
CRE - non-owner-occupied                     5,698.0              67.8                       4.78             5,345.0              65.6                       4.95
CRE - owner-occupied                         2,024.9              24.1                       4.88             2,273.7              27.5                       4.97
Construction and land development            2,791.7              39.9                       5.73             2,128.5              30.9                       5.86
Residential real estate                      3,748.0              30.7                       3.29             2,329.4              23.0                       3.97
Consumer                                        34.1               0.4                       4.52                53.7               0.7                       5.21
Total HFI loans (1), (2), (3)               28,194.2             311.1                       4.48            24,448.6             289.6                       4.82
Securities:
Securities - taxable                         5,629.7              26.0                       1.85             2,781.3              16.2                       2.35
Securities - tax-exempt                      2,165.8              17.5                       4.07             1,403.3              12.0                       4.34
Total securities (1)                         7,795.5              43.5                       2.47             4,184.6              28.2                       3.02
Other                                        1,911.3               1.2                       0.25               671.4               0.4                       0.24
Total interest earning assets               43,248.3             398.5                       3.77            29,326.3             318.2                       4.46
Non-interest earning assets
Cash and due from banks                        457.7                                                            162.0
Allowance for credit losses                   (257.3)                                                          (271.2)
Bank owned life insurance                      177.6                                                            186.6
Other assets                                 4,518.4                                                          1,221.8
Total assets                              $ 48,144.7$ 30,625.5
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction
accounts                                  $  4,370.1$    1.5                       0.14  %       $  3,495.4$    1.6                       0.18  %
Savings and money market accounts           15,168.1               8.0                       0.21             9,428.4               5.5                       0.24
Certificates of deposit                      1,736.3               2.1                       0.49             2,150.5               7.9                       1.47
Total interest-bearing deposits             21,274.5              11.6                       0.22            15,074.3              15.0                       0.40
Short-term borrowings                        1,505.7               4.5                       1.21               267.4               0.1                       0.18
Long-term debt                                 353.1               4.7                       5.30                   -                 -                             -
Qualifying debt                                701.2               7.2                       4.12               489.0               4.7                       3.88
Total interest-bearing liabilities          23,834.5              28.0                       0.47            15,830.7              19.8                 

0.50

Interest cost of funding earning
assets                                                                                       0.26                                                       

0.27

Non-interest-bearing liabilities
Non-interest-bearing demand
deposits                                    18,384.8                                                         11,130.0
Other liabilities                            2,140.4                                                            608.7
Stockholders' equity                         3,785.0                                                          3,056.1
Total liabilities and stockholders'
equity                                    $ 48,144.7$ 30,625.5
Net interest income and margin (4)                            $  370.5                       3.51  %                           $  298.4

4.19 %



(1)Yields on loans and securities have been adjusted to a TEB. The
taxable-equivalent adjustment was $8.5 million and $7.0 million for the three
months ended June 30, 2021 and 2020, respectively.
(2)Included in the yield computation are net loan fees of $32.6 million and
$27.8 million for the three months ended June 30, 2021 and 2020, respectively.
(3)Includes non-accrual loans.
(4)Net interest margin is computed by dividing net interest income by total
average earning assets, annualized on an actual/actual basis.




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                                                                                          Six Months Ended June 30,
                                                                    2021                                                             2020
                                            Average                                  Average                 Average                                  Average
                                            Balance           Interest             Yield / Cost              Balance           Interest             Yield / Cost
                                                                                            (dollars in millions)
Interest earning assets
Loans held for sale                      $  2,688.4$   42.7                       3.21  %       $     21.8$    0.3                       3.00  %
Loans held for investment:
Commercial and industrial                  13,924.4             299.1                       4.43            10,984.7             266.5                       4.99
CRE - non-owner occupied                    5,674.0             132.9                       4.73             5,291.5             134.5                       5.12
CRE - owner occupied                        2,059.4              48.5                       4.86             2,277.5              56.7                       5.11
Construction and land development           2,639.1              75.5                       5.77             2,067.2              63.2                       6.17
Residential real estate                     3,131.3              52.7                       3.39             2,243.8              43.8                       3.92
Consumer                                       34.3               0.8                       4.96                54.5               1.5                       5.34
Total HFI loans (1), (2), (3)              27,462.5             609.5                       4.53            22,919.2             566.2                       5.04
Securities:
Securities - taxable                        5,083.6              44.5                       1.77             2,833.3              33.5                       2.38
Securities - tax-exempt                     2,073.8              33.0                       4.03             1,285.8              22.1                       4.36
Total securities (1)                        7,157.4              77.5                       2.42             4,119.1              55.6                       3.00
Other                                       3,876.7               2.9                       0.15               736.7               3.3                       0.92
Total interest earning assets              41,185.0             732.6                       3.67            27,796.8             625.4                  

4.62

Non-interest earning assets
Cash and due from banks                       312.7                                                            179.0
Allowance for credit losses                  (273.1)                                                          (231.9)
Bank owned life insurance                     177.1                                                            180.5
Other assets                                2,903.8                                                          1,190.3
Total assets                             $ 44,305.5$ 29,114.7
Interest-bearing liabilities
Interest-bearing deposits:
Interest-bearing transaction
accounts                                 $  4,139.0$    2.8                       0.14  %       $  3,296.9$    6.1                       0.37  %
Savings and money market accounts          14,584.5              15.1                       0.21             9,230.9              23.2                       0.51
Certificates of deposit                     1,708.9               4.5                       0.54             2,248.3              18.2                       1.63
Total interest-bearing deposits            20,432.4              22.4                       0.22            14,776.1              47.5                       0.65
Short-term borrowings                         769.3               4.6                       1.21               207.8               0.5                       0.53
Long-term debt                                177.5               4.7                       5.30                   -                 -                          -
Qualifying debt                               624.6              13.1                       4.24               442.0              10.0                       4.53
Total interest-bearing liabilities         22,003.8              44.8                       0.41            15,425.9              58.0                  

0.76

Interest cost of funding earning
assets                                                                                      0.22                                                        

0.42

Non-interest-bearing liabilities
Non-interest-bearing demand
deposits                                   17,185.4                                                          9,999.9
Other liabilities                           1,460.2                                                            625.9
Stockholders' equity                        3,656.1                                                          3,063.0
Total liabilities and
stockholders' equity                     $ 44,305.5$ 29,114.7
Net interest income and margin (4)                           $  687.8                       3.45  %                           $  567.4

4.20 %



(1)Yields on loans and securities have been adjusted to a TEB. The
taxable-equivalent adjustment was $16.5 million and $13.4 million for the six
months ended June 30, 2021 and 2020, respectively.
(2)Included in the yield computation are net loan fees of $65.5 million and
$43.3 million for the six months ended June 30, 2021 and 2020, respectively.
(3)Includes non-accrual loans.
(4)Net interest margin is computed by dividing net interest income by total
average earning assets, annualized on an actual/actual basis.
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                                                   Three Months Ended June 30,                                Six Months Ended June 30,
                                                        2021 versus 2020                                          2021 versus 2020
                                            Increase (Decrease) Due to Changes in (1)                 Increase (Decrease) Due to Changes in (1)
                                            Volume                Rate            Total               Volume                Rate            Total
                                                                                       (in millions)
Interest income:
Loans held for sale                    $         42.5          $   0.2$  42.7$    42.4               $     -          $  42.4

Loans:

Commercial and industrial                        16.8            (10.5)             6.3               63.1                 (30.5)            32.6
CRE - non-owner occupied                          4.2             (2.0)             2.2                9.0                 (10.6)            (1.6)
CRE - owner-occupied                             (3.0)            (0.4)            (3.4)              (5.1)                 (3.1)            (8.2)
Construction and land
development                                       9.5             (0.5)             9.0               16.4                  (4.1)            12.3
Residential real estate                          11.6             (3.9)             7.7               14.9                  (6.0)             8.9
Consumer                                         (0.2)            (0.1)            (0.3)              (0.5)                 (0.2)            (0.7)
Total HFI loans                                  38.9            (17.4)            21.5               97.8                 (54.5)            43.3
Securities:
Securities - taxable                             13.2             (3.4)             9.8               19.7                  (8.7)            11.0
Securities - tax-exempt                           6.2             (0.7)             5.5               12.5                  (1.6)            10.9
Total securities                                 19.4             (4.1)            15.3               32.2                 (10.3)            21.9
Other                                             0.8                -              0.8                2.3                  (2.7)            (0.4)
Total interest income                           101.6            (21.3)            80.3              174.7                 (67.5)           107.2

Interest expense:
Interest-bearing transaction
accounts                                          0.3             (0.4)            (0.1)               0.6                  (3.9)            (3.3)
Savings and money market                          3.0             (0.5)             2.5                5.5                 (13.6)            (8.1)
Certificates of deposit                          (0.5)            (5.3)            (5.8)              (1.4)                (12.3)           (13.7)
Short-term borrowings                             3.7              0.7              4.4                3.4                   0.7              4.1
Long-term debt                                    4.7                -              4.7                4.7                     -              4.7
Qualifying debt                                   2.2              0.3              2.5                3.8                  (0.7)             3.1
Total interest expense                           13.4             (5.2)             8.2               16.6                 (29.8)           (13.2)

Net change                             $         88.2          $ (16.1)$  72.1$   158.1$ (37.7)$ 120.4


(1)  Changes attributable to both volume and rate are designated as volume
changes.
Comparison of interest income, interest expense and net interest margin
The Company's primary source of revenue is interest income. For the three months
ended June 30, 2021, interest income was $398.5 million, an increase of $80.3
million, or 25.2%, compared to $318.2 million for the three months ended June
30, 2020. This increase was primarily the result of interest income from
AmeriHome's HFS loans of $42.7 million, coupled with a $3.7 billion increase in
the average HFI loan balance that drove a $21.5 million increase in interest
income from HFI loans from the three months ended June 30, 2020. Interest income
from investment securities also increased by $15.3 million for the comparable
period due to an increase in the average investment balance of $3.6 billion.
For the six months ended June 30, 2021, interest income was $732.6 million, an
increase of $107.2 million, or 17.1%, compared to $625.4 million for the six
months ended June 30, 2020. This increase was primarily the result of a $4.5
billion increase in the average HFI loan balance that drove a $43.3 million
increase in interest income from HFI loans from the six months ended June 30,
2020 as well as interest income from AmeriHome's HFS loans of $42.7 million.
Interest income from investment securities also increased by $21.9 million for
the comparable period due to an increase in the average investment balance of
$3.0 billion.
For the three months ended June 30, 2021, interest expense was $28.0 million, an
increase of $8.2 million, or 41.4%, compared to $19.8 million for the three
months ended June 30, 2020. This increase was primarily the result of an
increase in borrowings resulting from the AmeriHome acquisition, combined with
the issuance of $600.0 million in subordinated debt in June 2021. These
increases were offset by a decrease in interest expense on deposits of $3.4
million for the same period despite an increase in average interest-bearing
deposits of $6.2 billion as the Company benefited from repricing efforts in a
lower rate environment, resulting in an 18 basis point reduction in the average
cost of interest-bearing deposits.
For the six months ended June 30, 2021, interest expense was $44.8 million, a
decrease of $13.2 million, or 22.8%, compared to $58.0 million for the six
months ended June 30, 2020. Interest expense on deposits decreased $25.1 million
for the same period despite an increase in average interest-bearing deposits of
$5.7 billion as the Company benefited from repricing efforts in a
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lower rate environment, resulting in a 43 basis point reduction in the average
cost of interest-bearing deposits. This decrease was offset in part by an
increase in interest expense due to an increase in borrowings resulting from the
AmeriHome acquisition, combined with the issuance of $600.0 million in
subordinated debt in June 2021.
For the three months ended June 30, 2021, net interest income was $370.5
million, an increase of $72.1 million, or 24.2%, compared to $298.4 million for
the three months ended June 30, 2020. The increase in net interest income
reflects a $13.9 billion increase in average interest-earning assets, partially
offset by an increase of $8.0 billion in average interest-bearing liabilities.
The decrease in net interest margin of 68 basis points to 3.51% is largely the
result of a decrease in loan and investment security yields due to a lower rate
environment and increased funding costs on AmeriHome's borrowings during the
three months ended June 30, 2021. The decrease to net interest margin was
partially offset by lower deposit costs for the three months ended June 30, 2021
compared to the same period in 2020.
For the six months ended June 30, 2021, net interest income was $687.8 million,
an increase of $120.4 million, or 21.2%, compared to $567.4 million for the six
months ended June 30, 2020. The increase in net interest income reflects a $13.4
billion increase in average interest-earning assets, partially offset by an
increase of $6.6 billion in average interest-bearing liabilities. The decrease
in net interest margin of 75 basis points to 3.45% is largely the result of a
decrease in loan and investment security yields due to a lower rate environment
and higher funding costs during the six months ended June 30, 2021. These
decreases to net interest margin were offset in part by lower deposit costs for
the six months ended June 30, 2021 compared to the same period in 2020.
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, investment securities, and servicing advances. 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, 2021, a release of credit loss provisions of $14.5 million and
$46.9 million was recognized, respectively, compared to a provision for credit
losses of $92.0 million and $143.2 million for the three and six months ended
June 30, 2020, respectively. The significant decrease in the provision for
credit losses from the three and six months ended June 30, 2020 is primarily
related to the current improved economic outlook.
Non-interest Income
The following table presents a summary of non-interest income for the periods
presented:
                                                  Three Months Ended June 30,                                   Six Months Ended June 30,
                                                                              Increase                                                       Increase
                                          2021               2020            (Decrease)                2021                 2020            (Decrease)
                                                                                        (in millions)
Net gain on loan purchase,
origination, and sale
activities                           $     132.0          $     -          $      132.0$    132.0              $     -          $      132.0
Service charges and fees                     7.4              5.1                   2.3                14.1                 11.5                   2.6
Income from equity investments               6.8              1.3                   5.5                14.4                  5.1                   9.3
Commercial banking related
income                                       4.5              2.4                   2.1                 7.9                  6.2                   1.7
Foreign currency income                      1.5              1.2                   0.3                 3.7                  2.5                   1.2
Income from bank owned life
insurance                                    0.9              6.7                  (5.8)                1.9                  7.7                  (5.8)
Fair value gain (loss) on
assets measured at fair value,
net                                          3.2              4.4                  (1.2)                1.7                 (6.9)                  8.6
Net loan servicing revenue                 (20.8)               -                 (20.8)              (20.8)                   -                 (20.8)

Other income                                 0.5              0.2                   0.3                 0.8                  0.3                   0.5
Total non-interest income            $     136.0$  21.3$      114.7$    155.7$  26.4$      129.3


Total non-interest income for the three months ended June 30, 2021 compared to
the same period in 2020 increased $114.7 million. The primary driver of the
increase in non-interest income is the AmeriHome mortgage banking revenue as the
Net gain on loan origination and sale activities totaled $132.0 million for the
three months ended June 30, 2021. Income from equity investments also increased
$5.5 million due to an increase in warrant activity. These increases in
non-interest income were partially offset by a loss of $20.8 million from
AmeriHome loan servicing activities and a decrease in income from bank-owned
life insurance of $5.8 million as the prior year period included a one-time
enhancement fee of $5.6 million from the surrender and replacement of certain
policies, which was intended to offset an increase in tax expense related to the
surrender.
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Total non-interest income for the six months ended June 30, 2021 compared to the
same period in 2020 increased by $129.3 million. The increase in non-interest
income is attributable to a Net gain on loan origination and sale activities of
$132.0 million from AmeriHome and an increase of $9.3 million in income from
equity investments, as further explained above. In addition, the Company
recognized a net fair value gain on assets of $1.7 million during the six months
ended June 30, 2021, compared to a net loss of $6.9 million during the six
months ended June 30, 2020, which primarily relates to changes in valuations of
preferred stock holdings of other banking companies. These increases in
non-interest income were partially offset by a loss of $20.8 million from
AmeriHome loan servicing activities and a decrease in income from bank-owned
life insurance of $5.8 million, as further explained above.
Non-interest Expense
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
                                          2021                 2020            (Decrease)                2021                2020            (Decrease)
                                                                                        (in millions)
Salaries and employee benefits     $    128.9$  69.6$       59.3$    212.6$ 141.7$       70.9
Loan servicing expenses                  22.3                     -                  22.3                22.3                   -                  22.3
Data processing                          15.0                   8.6                   6.4                24.9                17.2                   7.7
Legal, professional, and
directors' fees                          14.0                  10.7                   3.3                24.1                21.1                   3.0
Loan acquisition and origination
expenses                                 10.5                     -                  10.5                10.5                   -                  10.5
Occupancy                                10.4                   8.1                   2.3                19.0                16.3                   2.7
Deposit costs                             7.1                   3.5                   3.6                13.4                10.8                   2.6
Insurance                                 5.5                   3.4                   2.1                 9.7                 6.4                   3.3
Loan and repossessed asset
expenses                                  2.5                   2.0                   0.5                 4.7                 3.5                   1.2
Intangible amortization                   1.8                   0.4                   1.4                 2.3                 0.8                   1.5
Marketing                                 1.7                   0.9                   0.8                 2.3                 1.8                   0.5
Business development                      1.5                   0.8                   0.7                 2.3                 3.1                  (0.8)
Card expense                              0.6                   0.4                   0.2                 1.2                 1.1                   0.1
Net (gain) loss on sales /
valuations of repossessed and
other assets                             (1.5)                  0.0                  (1.5)               (1.8)               (1.4)                

(0.4)

Acquisition and restructure
expenses                                 15.7                     -                  15.7                16.1                   -                  16.1

Other expense                             8.8                   6.4                   2.4                16.2                12.9                   3.3
Total non-interest expense         $    244.8$ 114.8$      130.0$    379.8$ 235.3$      144.5


Total non-interest expense for the three months ended June 30, 2021 increased
$130.0 million compared to the same period in 2020. The increase in non-interest
expense was driven by the AmeriHome acquisition, which contributed to the
increase in salaries and employee benefits of $59.3 million from the addition of
approximately 1,000 employees and also created new types of expenses related to
mortgage banking activities, including Loan servicing expenses of $22.3 million
and Loan acquisition and origination expenses of $10.5 million, recognized
during the three months ended June 30, 2021. In addition, the Company incurred
acquisition and restructure expenses related to AmeriHome of $15.7 million.
Included as part of restructure expenses are costs incurred to optimize the
Company's balance sheet, including the disposition of MSRs and repurchase of
loans.
Total non-interest expense for the six months ended June 30, 2021 increased
$144.5 million compared to the same period in 2020. As explained above, the
increase in non-interest expense over the prior year was driven by the AmeriHome
acquisition, which increased employee headcount, added expenses specific to
mortgage banking activities, and resulted in recognition of $16.1 million in
acquisition and restructure expenses for the six months ended June 30, 2021.
Income Taxes
The Company's effective tax rate was 19.0% and 17.4% for the three months ended
June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and
2020, the Company's effective tax rate was 18.5% and 17.7%, respectively. The
increase in the three and six month effective tax rate is primarily due to an
increase in projected pretax book income for the year.
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Business Segment Results
The Company's reportable segments are aggregated with a focus on products and
services offered and consist of three reportable segments:
•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 residential
mortgage banking, and commercial banking services to enterprises in
consumer-related sectors.
•Corporate & Other segment: consists of the Company's investment portfolio,
Corporate borrowings and other related items, income and expense items not
allocated to our other reportable segments, and inter-segment eliminations.
The following tables present selected operating segment information for the
periods presented:
                                                     Consolidated                               Consumer           Corporate &
                                                       Company             Commercial            Related              Other
At June 30, 2021                                                                   (in millions)
HFI loans, net of deferred loan fees and
costs                                              $    30,026.4$ 20,642.9$  9,387.0$      (3.5)
Deposits                                                41,921.0            26,262.3            14,841.8                816.9

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


Three Months Ended June 30, 2021                         (in millions)
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)


Three Months Ended June 30, 2020
Pre-tax income (loss)                  $ 112.9$  95.3$  62.1

$ (44.5)


Six Months Ended June 30, 2020
Pre-tax income (loss)                  $ 215.3$ 205.0$  89.4$  (79.1)


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BALANCE SHEET ANALYSIS
Total assets increased $12.6 billion, or 34.6%, to $49.1 billion at June 30,
2021, compared to $36.5 billion at December 31, 2020. The increase in total
assets was driven by the acquisition of AmeriHome as well as continued organic
loan and deposit growth. HFI loans increased by $3.0 billion, or 11.0%, to $30.0
billion as of June 30, 2021, compared to $27.1 billion as of December 31, 2020.
The increase in loans from December 31, 2020 was driven by increases in
residential real estate loans of $2.7 billion and construction and land
development loans of $425.6 million. These increases were partially offset by a
decrease in CRE, owner occupied loans of $128.7 million.
Total liabilities increased $12.0 billion, or 36.3%, to $45.0 billion at June
30, 2021, compared to $33.0 billion at December 31, 2020. The increase in
liabilities is due primarily to an increase in total deposits of $10.0 billion,
or 31.3%, to $41.9 billion. The increase in deposits from December 31, 2020 was
driven by increases of $6.6 billion in non-interest bearing demand deposits and
$3.4 billion in savings and money market accounts. These increases were offset
in part by a decrease in interest bearing demand deposits of $208.7 million.
Total stockholders' equity increased by $621.0 million, or 18.2%, to $4.0
billion at June 30, 2021 from $3.4 billion at December 31, 2020. The increase in
stockholders' equity is primarily a function of net income and net proceeds of
$279.0 million from sales of the Company's common stock during the six months
ended June 30, 2021, partially offset by quarterly dividends to shareholders.
Investment securities
Debt securities are classified at the time of acquisition as either HTM, AFS, or
trading based upon various factors, including asset/liability management
strategies, liquidity and profitability objectives, and regulatory requirements.
HTM securities are carried at amortized cost, adjusted for amortization of
premiums or accretion of discounts. AFS securities are securities that may be
sold prior to maturity based upon asset/liability management decisions.
Investment securities classified as AFS are carried at fair value. Unrealized
gains or losses on AFS debt securities are recorded as part of AOCI in
stockholders' equity, net of tax. Amortization of premiums or accretion of
discounts on MBS is periodically adjusted for estimated prepayments. Trading
securities are reported at fair value, with unrealized gains and losses included
in current period earnings.
The Company's investment securities portfolio is utilized as collateral for
borrowings, required collateral for public deposits and customer repurchase
agreements, and to manage liquidity, capital, and interest rate risk.
The following table summarizes the carrying value of the investment securities
portfolio for each of the periods below:
                                     June 30, 2021       December 31, 2020
                                                 (in millions)
Debt securities
CLO                                 $        937.1      $            146.9
Commercial MBS issued by GSEs                 81.5                    84.6
Corporate debt securities                    363.4                   270.2

Private label residential MBS              1,940.6                 1,476.9
Residential MBS issued by GSEs             2,105.7                 1,486.6
Tax-exempt                                 2,085.9                 1,756.2

U.S. treasury securities                       9.3                       -
Other                                         60.4                    55.9
Total debt securities               $      7,583.9      $          5,277.3

Equity securities
CRA investments                     $         57.0      $             53.4
Preferred stock                              136.8                   113.9
Total equity securities             $        193.8      $            167.3


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Loans, HFS
The Company acquired loans held for sale as part of the AMH acquisition. The
following is a summary of loans held for sale by type:
                                              June 30, 2021
                                              (in millions)
Government-insured or guaranteed:
EBO (1)                                      $      2,208.7
Non-EBO                                               905.9
Total government-insured or guaranteed              3,114.6
Agency-conforming                                   1,350.6

Total loans HFS                              $      4,465.2


(1)  EBO loans are delinquent loans repurchased under the terms of the Ginnie
Mae MBS program that can be resold when loans are brought current.
Loans, HFI
The table below summarizes the distribution of the Company's held for investment
loan portfolio:
                                        June 30, 2021       December 31, 2020
                                                    (in millions)
Warehouse lending                      $      4,434.7      $          4,340.2
Municipal & nonprofit                         1,716.3                 1,728.8
Tech & innovation                             2,600.3                 2,548.3
Other commercial and industrial               5,736.1                 5,911.2
CRE - owner occupied                          1,789.9                 1,909.3
Hotel franchise finance                       1,997.6                 1,983.9
Other CRE - non-owned occupied                3,663.9                 

3,640.2

Residential                                   5,071.3                 

2,378.5

Construction and land development             2,853.6                 2,429.4
Other                                           162.7                   183.2
Total loans HFI                              30,026.4                27,053.0
Allowance for credit losses                    (232.9)                 (278.9)

Total loans HFI, net of allowance $ 29,793.5 $ 26,774.1



Loans that are held for investment are stated at the amount of unpaid principal,
adjusted for net deferred fees and costs, premiums and discounts on acquired and
purchased loans, and an allowance for credit losses. Net deferred loan fees of
$81.5 million and $75.4 million reduced the carrying value of loans as of June
30, 2021 and December 31, 2020, respectively. Net unamortized purchase premiums
on acquired and purchased loans of $84.3 million and $26.0 million increased the
carrying value of loans as of June 30, 2021 and December 31, 2020, respectively.
Concentrations of Lending Activities
The Company monitors concentrations within three broad categories: industry,
product, and collateral. The Company's loan portfolio includes significant
credit exposure to the CRE market. As of each of the periods ended June 30, 2021
and December 31, 2020, CRE related loans accounted for approximately 35% and 38%
of total loans, respectively. Substantially all of these loans are secured by
first liens with an initial loan to value ratio of generally not more than 75%.
Approximately 26% and 28% of these CRE loans, excluding construction and land
loans, were owner-occupied at June 30, 2021 and December 31, 2020, respectively.
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Non-performing Assets
Total non-performing loans decreased by $27.8 million at June 30, 2021 to $120.6
million from $148.4 million at December 31, 2020.
                                                                     June 

30, 2021 December 31, 2020

                                                                              (dollars in millions)
Total nonaccrual loans (1)                                          $       96.3          $          115.2
Loans past due 90 days or more on accrual status                               -                         -
Accruing troubled debt restructured loans                                   24.3                      33.2
Total nonperforming loans                                           $      

120.6 $ 148.4


Other assets acquired through foreclosure, net                      $        3.9          $            1.4

Nonaccrual HFI loans to funded HFI loans                                    0.32  %                   0.43  %

Loans past due 90 days or more on accrual status to funded HFI loans

                                                                      -                         -


(1)Includes non-accrual TDR loans of $36.1 million and $28.4 million at June 30,
2021 and December 31, 2020, respectively.
Interest income that would have been recorded under the original terms of
non-accrual loans was $1.5 million and $1.7 million for the three months ended
June 30, 2021 and 2020, respectively, and $3.0 million and $2.4 million for the
six months ended June 30, 2021 and 2020, respectively.
The composition of nonaccrual HFI loans by loan type and by segment were as
follows:
                                                                                        June 30, 2021
                                                               Nonaccrual         Percent of Nonaccrual           Percent of
                                                                Balance                  Balance               Total HFI Loans
                                                                                    (dollars in millions)
Warehouse lending                                            $         -                           -  %                     -  %
Municipal & nonprofit                                                  -                           -                        -
Tech & innovation                                                   19.8                        20.6                     0.07
Other commercial and industrial                                     14.1                        14.6                     0.05
CRE - owner occupied                                                30.7                        31.9                     0.10
Hotel franchise finance                                                -                           -                        -
Other CRE - non-owned occupied                                      18.6                        19.3                     0.06
Residential                                                          9.9                        10.3                     0.03
Construction and land development                                      -                           -                        -
Other                                                                3.2                         3.3                     0.01
Total non-accrual loans                                      $      96.3                       100.0  %                  0.32  %


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


Troubled Debt Restructured Loans
A TDR loan is a loan on which the Company, for reasons related to a borrower's
financial difficulties, grants a concession to the borrower that the Company
would not otherwise consider. The loan terms that have been modified or
restructured due to a borrower's financial situation include, but are not
limited to, a reduction in the stated interest rate, an extension of the
maturity or renewal of the loan at an interest rate below current market, a
reduction in the face amount of the debt, a reduction in the
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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.
Allowance for Credit Losses
The allowance for credit losses consists of the allowance for credit losses on
loans and an allowance for credit losses on unfunded loan commitments. The
following table summarizes the activity in the Company's allowance for credit
losses on loans held for investment for the period indicated:
                                                                Three Months Ended June 30, 2021

                                        Balance,            Provision for                                                              Balance,
                                     March 31, 2021         (Recovery of)                                                            June 30, 2021
                                          (1)               Credit Losses                  Write-offs           Recoveries                (1)
                                                                          (in millions)
Warehouse lending                    $       3.6          $          (0.4)               $         -          $         -          $          3.2
Municipal & nonprofit                       15.2                      0.7                          -                    -                    15.9
Tech & innovation                           23.9                     (0.4)                       2.0                 (0.1)                   21.6
Other commercial and
industrial                                  78.4                     (2.0)                       0.3                 (0.3)                   76.4
CRE - owner occupied                         9.7                     (0.4)                         -                    -                     9.3
Hotel franchise finance                     49.4                        -                          -                    -                    49.4
Other CRE - non-owned occupied              32.7                     (4.1)                         -                 (1.2)                   29.8
Residential                                  3.2                      4.8                          -                 (0.1)                    8.1
Construction and land
development                                 25.9                    (11.8)                         -                    -                    14.1
Other                                        5.1                     (0.5)                         -                 (0.5)                    5.1
Total                                $     247.1          $         (14.1)               $       2.3$      (2.2)$        232.9


        Net charge-offs to average loans outstanding                  0.00  %
        Allowance for credit losses on loans to funded HFI loans      0.78


(1)Includes an estimate of future recoveries.


                                                                    Six Months Ended June 30, 2021

                                           Balance,               Provision for                                                              Balance,
                                      December 31, 2020           (Recovery of)                                                            June 30, 2021
                                             (1)                  Credit Losses                  Write-offs           Recoveries                (1)
                                                                             (in millions)
Warehouse lending                    $         3.4              $          (0.2)               $         -          $         -          $          3.2
Municipal & nonprofit                         15.9                            -                          -                    -                    15.9
Tech & innovation                             35.3                        (12.0)                       2.0                 (0.3)                   21.6
Other commercial and
industrial                                    94.7                        (18.5)                       0.4                 (0.6)                   76.4
CRE - owner occupied                          18.6                         (9.3)                         -                    -                     9.3
Hotel franchise finance                       43.3                          6.1                          -                    -                    49.4
Other CRE - non-owned occupied                39.9                         (9.5)                       2.0                 (1.4)                   29.8
Residential                                    0.8                          7.2                          -                 (0.1)                    8.1
Construction and land
development                                   22.0                         (7.9)                         -                    -                    14.1
Other                                          5.0                         (0.4)                         -                 (0.5)                    5.1
Total                                $       278.9              $         (44.5)               $       4.4$      (2.9)$        232.9


              Net charge-offs to average loans outstanding      0.01  %


(1)Includes an estimate of future recoveries.

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                                                                 Three Months Ended June 30, 2020

                                        Balance,             Provision for                                                              Balance,
                                     March 31, 2020          (Recovery of)                                                            June 30, 2020
                                          (1)                Credit Losses                  Write-offs           Recoveries                (1)
                                                                          (in millions)
Warehouse lending                    $       0.4          $            0.3                $         -          $         -          $          0.7
Municipal & nonprofit                       16.2                       0.9                          -                    -                    17.1
Tech & innovation                           39.8                      17.6                        2.8                    -                    54.6
Other commercial and
industrial                                 120.3                      (9.0)                       1.9                 (0.5)                  109.9
CRE - owner occupied                        10.5                       5.1                          -                    -                    15.6
Hotel franchise finance                     18.8                      17.0                          -                    -                    35.8
Other CRE - non-owned occupied              14.2                      19.8                        0.9                  0.4                    32.7
Residential                                  1.3                       0.4                          -                    -                     1.7
Construction and land
development                                  7.1                      28.7                          -                    -                    35.8
Other                                        6.7                      (0.1)                       0.1                 (0.1)                    6.6
Total                                $     235.3          $           80.7                $       5.7$      (0.2)$        310.5


        Net charge-offs to average loans outstanding                        

0.09 %

        Allowance for credit losses on loans to funded HFI loans            1.24


                                                                   Six Months Ended June 30, 2020

                                          Balance,              Provision for                                                              Balance,
                                      January 1, 2020           (Recovery of)                                                            June 30, 2020
                                            (1)                 Credit Losses                  Write-offs           Recoveries                (1)
                                                                            (in millions)
Warehouse lending                    $       0.2              $           0.5                $         -          $         -          $          0.7
Municipal & nonprofit                       17.4                         (0.3)                         -                    -                    17.1
Tech & innovation                           22.4                         35.0                        2.8                    -                    54.6
Other commercial and
industrial                                  95.8                         14.3                        2.0                 (1.8)                  109.9
CRE - owner occupied                        10.4                          5.2                          -                    -                    15.6
Hotel franchise finance                     14.1                         21.7                          -                    -                    35.8
Other CRE - non-owned occupied              10.5                         21.5                        0.9                 (1.6)                   32.7
Residential                                  3.8                         (2.1)                         -                    -                     1.7
Construction and land
development                                  6.2                         29.6                          -                    -                    35.8
Other                                        6.1                          0.5                        0.1                 (0.1)                    6.6
Total                                $     186.9              $         125.9                $       5.8$      (3.5)$        310.5


              Net charge-offs to average loans outstanding      0.02  %


(1)Includes an estimate of future recoveries.

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The following table summarizes the allocation of the allowance for credit losses
on loans held for investment by loan type.
                                                                                         June 30, 2021
                                                                                       Percent of total          Percent of loan
                                                               Allowance for         allowance for credit       type to total HFI
                                                               credit losses                losses                    loans
                                                                                     (dollars in millions)
Warehouse lending                                            $          3.2                        1.4  %                  14.8  %
Municipal & nonprofit                                                  15.9                        6.8                      5.7
Tech & innovation                                                      21.6                        9.3                      8.7
Other commercial and industrial                                        76.4                       32.8                     19.1
CRE - owner occupied                                                    9.3                        4.0                      6.0
Hotel franchise finance                                                49.4                       21.2                      6.6
Other CRE - non-owned occupied                                         29.8                       12.8                     12.2
Residential                                                             8.1                        3.5                     16.9
Construction and land development                                      14.1                        6.0                      9.5
Other                                                                   5.1                        2.2                      0.5
Total                                                        $        232.9                      100.0  %                 100.0  %


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


In addition to the allowance for loan losses, the Company maintains a separate
allowance for credit losses related to off-balance sheet credit exposures,
including unfunded loan commitments. This allowance is included in other
liabilities on the consolidated balance sheets.
The below tables reflect the activity in the allowance for credit losses on
unfunded loan commitments:
                                               Three Months Ended June 30,                   Six Months Ended June 30,
                                                 2021                  2020                  2021                  2020
                                                                            (in millions)
Balance, beginning of period              $          32.6          $     29.7          $         37.0          $      9.0
Beginning balance adjustment from
adoption of CECL                                        -                   -                       -                15.1
(Recovery of) provision for credit
losses                                               (1.3)                6.6                    (5.7)               12.2
Balance, end of period                    $          31.3          $     36.3          $         31.3          $     36.3



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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 "Item 1. Business" of the Company's Annual Report for the year ended December
31, 2020. The following table presents information regarding potential and
actual problem loans, consisting of loans graded Special Mention, Substandard,
Doubtful, and Loss, but still performing:
                                                                                     June 30, 2021
                                                                                              Percent of Loan          Percent of Total
                                                Number of Loans         Loan Balance              Balance                 HFI Loans
                                                                                 (dollars in millions)
Warehouse lending                                         -           $           -                        -  %                     -  %
Municipal & nonprofit                                     -                       -                        -                        -
Tech & innovation                                         6                    17.5                      4.9                     0.06
Other commercial and industrial                          70                    37.7                     10.4                     0.12
CRE - owner occupied                                     30                    68.5                     18.9                     0.23
Hotel franchise finance                                  11                   152.2                     42.0                     0.51
Other CRE - non-owned occupied                            4                     5.9                      1.6                     0.02
Residential                                               -                       -                        -                        -
Construction and land development                         5                    37.7                     10.4                     0.13
Other                                                    18                    42.6                     11.8                     0.14
Total                                                   144           $       362.1                    100.0  %                  1.21  %



                                                                             December 31, 2020
                                                                                        Percent of Loan          Percent of Total
                                          Number of Loans         Loan Balance              Balance                 HFI Loans
                                                                           (dollars in millions)

Tech & innovation                                   4           $        15.3                      3.6  %                  0.06  %
Other commercial and industrial                    71                    74.3                     17.6                     0.27
CRE - owner occupied                               37                    79.8                     18.9                     0.30
Hotel franchise finance                             9                   116.9                     27.6                     0.43
Other CRE - non-owned occupied                      9                    15.8                      3.7                     0.06

Construction and land development                   7                    47.3                     11.2                     0.17
Other                                              21                    73.4                     17.4                     0.27
Total                                             158           $       422.8                    100.0  %                  1.56  %


Mortgage Servicing Rights
As of June 30, 2021 the fair value of the Company's MSRs totaled $726.2 million.
The following is a summary of the UPB of loans included in the Company's MSR
portfolio by investor:
                                              June 30, 2021
                                              (in millions)
Fannie Mae and Freddie Mac                   $     40,858.7
Ginnie Mae                                         15,135.4
Private investors                                   1,094.8

Total unpaid principal balance of loans $ 57,088.9

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Goodwill and Other Intangible Assets
Goodwill represents the excess consideration paid for net assets acquired in a
business combination over their fair value. Goodwill and other intangible assets
acquired in a business combination that are determined to have an indefinite
useful life are not subject to amortization, but are subsequently evaluated for
impairment at least annually. The Company has goodwill and intangible assets
totaling $610.7 million at June 30, 2021. The increase from $298.5 million at
December 31, 2020 is due to goodwill and other intangible assets acquired in the
AMH acquisition in April 2021. See "Note 2. Mergers, Acquisitions and
Dispositions" for further discussion of the acquisition.
The Company performs its annual goodwill and intangibles impairment tests as of
October 1 each year, or more often if events or circumstances indicate that the
carrying value may not be recoverable. During the three and six months ended
June 30, 2021 and 2020, there were no events or circumstances that indicated an
interim impairment test of goodwill or other intangible assets was necessary.
Deferred Tax Assets
As of June 30, 2021, the net DTA balance totaled $36.5 million, an increase of
$5.2 million from the year end 2020 DTA balance of $31.3 million and includes
adjustments related to the AmeriHome acquisition.
At June 30, 2021 and December 31, 2020, the Company had no deferred tax
valuation allowance.
Deposits
Deposits are the primary source for funding the Company's asset growth. Total
deposits increased to $41.9 billion at June 30, 2021, from $31.9 billion at
December 31, 2020, an increase of $10.0 billion, or 31.3%. The increase in
deposits is largely attributable to increases in non-interest bearing demand
deposits of $6.6 billion and savings and money market accounts of $3.4 billion.
These increases were partially offset by a decrease in interest bearing demand
deposits of $208.7 million.
WAB is a participant in the Promontory Interfinancial Network, a network that
offers deposit placement services such as CDARS and ICS, which offer products
that qualify large deposits for FDIC insurance. At June 30, 2021 and December
31, 2020, the Company also has $830.8 million and $554.8 million, respectively,
of wholesale brokered deposits. In addition, deposits for which the Company
provides account holders with earnings credits and referral fees totaled $8.1
billion and $5.9 billion at June 30, 2021 and December 31, 2020, respectively.
The Company incurred $6.6 million and $3.1 million in deposit related costs
during the three months ended June 30, 2021 and 2020, respectively. The Company
incurred $12.4 million and $10.2 million in deposit related costs during the six
months ended June 30, 2021 and 2020, respectively.
The average balances and weighted average rates paid on deposits are presented
below:
                                                                                 Three Months Ended June 30,
                                                                   2021                                               2020
                                                  Average Balance                Rate                Average Balance               Rate
                                                                                    (dollars in millions)
Interest-bearing transaction accounts          $      4,370.1                        0.14  %       $        3,495.4                    0.18  %
Savings and money market accounts                    15,168.1                        0.21                   9,428.4                    0.24
Certificates of deposit                               1,736.3                        0.49                   2,150.5                    1.47
Total interest-bearing deposits                      21,274.5                        0.22                  15,074.3                    0.40
Non-interest-bearing demand deposits                 18,384.8                           -                  11,130.0                       -
Total deposits                                 $     39,659.3                        0.12  %       $       26,204.3                    0.23  %


                                                                                 Six Months Ended June 30,
                                                                  2021                                              2020
                                                 Average Balance               Rate                Average Balance               Rate
                                                                                   (dollars in millions)
Interest-bearing transaction accounts          $        4,139.0                    0.14  %       $        3,296.9                    0.37  %
Savings and money market accounts                      14,584.5                    0.21                   9,230.9                    0.51
Certificates of deposit                                 1,708.9                    0.54                   2,248.3                    1.63
Total interest-bearing deposits                        20,432.4                    0.22                  14,776.1                    0.65
Non-interest-bearing demand deposits                   17,185.4                       -                   9,999.9                       -
Total deposits                                 $       37,617.8                    0.12  %       $       24,776.0                    0.39  %


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Other Borrowings
Short-Term Borrowings
The Company from time to time utilizes short-term borrowed funds to support
short-term liquidity needs generally created by increased loan demand. The
majority of these short-term borrowed funds consist of advances from the FHLB
and 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, 2021, total short-term borrowed
funds consist customer repurchase agreements of $20.2 million and secured
borrowings of $37.4 million. At December 31, 2020, total short-term borrowed
funds consisted of FHLB advances of $5.0 million and customer repurchase
agreements of $16.0 million.
Long-Term Borrowings
The Company's long-term borrowings consist of AMH senior notes from the
acquisition on April 7, 2021 and credit linked notes that were issued in June
2021, inclusive of issuance costs and fair market value adjustments. At June 30,
2021, the carrying value of long-term borrowings was $557.8 million. At December
31, 2020, the Company did not have long-term borrowings.
Qualifying Debt
Qualifying debt consists of subordinated debt and junior subordinated debt,
inclusive of issuance costs and fair market value adjustments. At June 30, 2021,
the carrying value of qualifying debt was $1.1 billion, compared to $548.7
million at December 31, 2020. The increase in qualifying debt from December 31,
2020 is primarily related to issuance of $600.0 million of subordinated debt,
recorded net of issue costs of $7.7 million, during the three months ended June
30, 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 March 2020, the federal bank regulatory authorities issued an interim final
rule that delays the estimated impact on regulatory capital resulting from the
adoption of CECL. The interim final rule provides banking organizations that
implement CECL before the end of 2020 the option to delay for two years the
estimated impact of CECL on regulatory capital relative to regulatory capital
determined under the prior incurred loss methodology, followed by a three-year
transition period to phase out the aggregate amount of capital benefit provided
during the initial two-year delay. The Company has elected the five-year CECL
transition option in connection with its adoption of CECL on January 1, 2020. As
a result, capital ratios and amounts as of June 30, 2021 exclude the impact of
the increased allowance for credit losses related to the adoption of ASC 326.
As of June 30, 2021 and December 31, 2020, the Company and the Bank exceeded the
capital levels necessary to be classified as well-capitalized, as defined by the
various banking agencies (the "Agencies"). The actual capital amounts and ratios
for the Company and the Bank are presented in the following tables as of the
periods indicated:
                                                                                Risk-Weighted            Tangible           Total Capital        Tier 1

Capital Tier 1 Leverage Common Equity

                               Total Capital           Tier 1 Capital              Assets             Average Assets            Ratio                Ratio                 Ratio               Tier 1
                                                                                                        (dollars in millions)
June 30, 2021
WAL                          $      4,750.6$       3,483.0$     37,153.5$   47,515.0                 12.8  %               9.4  %                7.3  %              9.2  %
WAB                                 4,366.8                  3,862.2                37,172.4              47,555.7                 11.7                 10.4                   8.1                10.4
Well-capitalized
ratios                                                                                                                             10.0                  8.0                   5.0                 6.5
Minimum capital ratios                                                                                                              8.0                  6.0                   4.0                 4.5

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


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

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

Liquidity

Liquidity is the ongoing ability to accommodate liability maturities and deposit
withdrawals, fund asset growth and business operations, and meet contractual
obligations through unconstrained access to funding at reasonable market rates.
Liquidity management involves forecasting funding requirements and maintaining
sufficient capacity to meet the needs and accommodate fluctuations in asset and
liability levels due to changes in the Company's business operations or
unanticipated events, including the ongoing COVID-19 pandemic.
The ability to have readily available funds sufficient to repay fully maturing
liabilities is of primary importance to depositors, creditors, and regulators.
The Company's liquidity, represented by cash and amounts due from banks, federal
funds sold, and non-pledged marketable securities, is a result of the Company's
operating, investing, and financing activities and related cash flows. In order
to ensure funds are available when necessary, on at least a quarterly basis, the
Company projects the amount of funds that will be required over a twelve-month
period and it also strives to maintain relationships with a diversified customer
base. Liquidity requirements can also be met through short-term borrowings or
the disposition of short-term assets.
The following table presents the available and outstanding balances on the
Company's lines of credit:
                                                                                    June 30, 2021
                                                                       Available
                                                                        Balance             Outstanding Balance
                                                                                    (in millions)
Unsecured fed funds credit lines at correspondent banks              $   2,973.4          $                  -


In addition to lines of credit, the Company has borrowing capacity with the FHLB
and FRB from pledged loans and securities. The borrowing capacity, outstanding
borrowings, and available credit as of June 30, 2021 are presented in the
following table:
                             June 30, 2021
                             (in millions)
FHLB:
Borrowing capacity          $      6,069.5
Outstanding borrowings                   -
Letters of credit                     21.0
Total available credit      $      6,048.5

FRB:
Borrowing capacity          $      2,844.6
Outstanding borrowings                   -
Total available credit      $      2,844.6


The Company also has a separate PPP lending facility with the FRB that allows
the Company to pledge loans originated under the PPP in return for dollar for
dollar funding from the FRB, which would provide up to $865 million in
additional credit. The amount of available credit under the PPP lending facility
will decline each period as these loans are paid down.
The Company has a formal liquidity policy and, in the opinion of management, its
liquid assets are considered adequate to meet cash flow needs for loan funding
and deposit cash withdrawals for the next 90-120 days. At June 30, 2021, there
was $7.9 billion in liquid assets, comprised of $3.4 billion in cash and cash
equivalents and $4.5 billion in unpledged marketable securities. At December 31,
2020, the Company maintained $6.6 billion in liquid assets, comprised of $2.7
billion of cash and cash equivalents and $3.9 billion of unpledged marketable
securities.
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,
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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, 2021, the Company's long-term liquidity
needs primarily relate to funds required to support loan originations,
commitments, and deposit withdrawals, which can be met by cash flows from
investment payments and maturities, and investment sales, if necessary.
The Company's liquidity is comprised of three primary classifications: 1) cash
flows provided by operating activities; 2) cash flows used in investing
activities; and 3) cash flows provided by financing activities. Net cash
provided by or used in operating activities consists primarily of net income,
adjusted for changes in certain other asset and liability accounts and certain
non-cash income and expense items, such as the provision for credit losses,
investment and other amortization and depreciation. For the six months ended
June 30, 2021 and 2020, net cash (used in) provided by operating activities was
$(2.0) billion and $283.4 million, respectively.
The Company's primary investing activities are the origination of real estate
and commercial loans, the collection of repayments of these loans, and the
purchase and sale of securities. The Company's net cash provided by and used in
investing activities has been primarily influenced by its loan and securities
activities. The Company's cash balance during the six months ended June 30, 2021
and 2020 was reduced by $2.7 billion and $3.8 billion, respectively, as a result
of a net increase in loans as well as a net increase in investment securities of
$2.4 billion and $164.8 million, respectively.
Net cash provided by financing activities has been impacted significantly by
increased deposit levels. During the six months ended June 30, 2021 and 2020,
net deposits increased $10.0 billion and $4.7 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,
2021, the Company has $613.3 million of CDARS and $1.6 billion of ICS deposits.
As of June 30, 2021, the Company has $830.8 million of wholesale brokered
deposits outstanding. Brokered deposits are generally considered to be deposits
that have been received from a third party who is engaged in the business of
placing deposits on behalf of others. A traditional deposit broker will direct
deposits to the banking institution offering the highest interest rate
available. Federal banking laws and regulations place restrictions on depository
institutions regarding brokered deposits because of the general concern that
these deposits are not relationship based and are at a greater risk of being
withdrawn and placed on deposit at another institution offering a higher
interest rate, thus posing liquidity risk for institutions that gather brokered
deposits in significant amounts.
Federal and state banking regulations place certain restrictions on dividends
paid. The total amount of dividends which may be paid at any date is generally
limited to the retained earnings of the bank. Dividends paid by WAB to the
Parent would be prohibited if the effect thereof would cause the Bank's capital
to be reduced below applicable minimum capital requirements. During the three
and six months ended June 30, 2021, WAB paid dividends to the Parent of $35.0
million and $50.0 million, respectively.

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Recent accounting pronouncements
See "Note 1. Summary of Significant Accounting Policies," of the Notes to
Unaudited Consolidated Financial Statements contained in Item 1. Financial
Statements for information on recent and recently adopted accounting
pronouncements and their expected impact, if any, on the Company's Consolidated
Financial Statements.
Supervision and Regulation
The following information is intended to update, and should be read in
conjunction with, the information contained under the caption "Supervision and
Regulation" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2020, based on completion of the Company's acquisition of AMH on
April 7, 2021.
Supervision, Regulation and Licensing of AMH
AMH is a residential mortgage producer and servicer that operates in a heavily
regulated industry. In addition to supervision by the federal banking agencies
with primary jurisdiction over the Company and WAB, AMH is subject to the rules,
regulations and oversight of certain federal, state and local governmental
authorities, including the CFPB, HUD, and government-sponsored enterprises in
the mortgage industry such as FHLMC, FNMA, and GNMA.
Further, AMH must comply with a large number of federal consumer protection laws
and regulations including, among others:
•the Real Estate Settlement Procedures Act and Regulation X, which require
lenders, mortgage brokers, or servicers to provide borrowers with pertinent and
timely disclosures regarding the nature and costs of the settlement process and
prohibit specific practices related thereto;
•the Truth In Lending Act and Regulation Z, which require disclosures and timely
information on the nature and costs of the residential mortgages and the real
estate settlement process;
•the Secure and Fair Enforcement for Mortgage Licensing Act, which applies to
businesses and individuals engaging in the residential mortgage loan business;
•the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, and the rules and
regulations of the FTC and CFPB that prohibit unfair, abusive or deceptive acts
or practices;
•the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit
Transactions Act) and Regulation V, which address the accuracy, fairness, and
privacy of information in the files of consumer reporting agencies; and
•the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the
Homeowners Protection Act, and the Home Mortgage Disclosure Act and Regulation
C, which generally disallow discrimination on a prohibited basis, provide
applicants and borrowers rights with respect to credit decisioning and the
residential mortgage process, and require disclosures and impose obligations on
financial businesses conducting residential lending and mortgage servicing.
The CFPB as well as the FTC have rulemaking authority with respect to many of
the federal consumer protection laws applicable to mortgage lenders and
servicers, and their rulemaking and regulatory agendas relating to the
residential mortgage industry continues to evolve. In particular, as part of its
enforcement authority, the CFPB can order, among other things, rescission or
reformation of contracts, the refund of moneys or the return of real property,
restitution, disgorgement or compensation for unjust enrichment, the payment of
damages or other monetary relief, public notifications regarding violations,
remediation of practices, external compliance monitoring and civil money
penalties.
AMH is also subject to state and local laws, rules and regulations and oversight
by various state agencies that license and oversee consumer protection, loan
servicing, origination and collection activities of mortgage industry
participants. Despite the fact that AMH is the operating subsidiary of a
depository institution, it must comply with regulatory and licensing
requirements in certain states in order to conduct its business, and does (and
will continue to) incur significant costs to comply with these requirements.
These laws, rules and regulations may change as statutes and regulations are
enacted, promulgated, amended, interpreted and enforced.
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