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What changed in WESTERN ALLIANCE BANCORPORATION's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of WESTERN ALLIANCE BANCORPORATION's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+433 added−435 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-28)

Top changes in WESTERN ALLIANCE BANCORPORATION's 2024 10-K

433 paragraphs added · 435 removed · 334 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+11 added−8 removed53 unchanged
Biggest changeThe Company's investment policy limits new securities purchases to certain eligible investment types and, in the aggregate, are further subject to the following quantitative limits of the Bank, which are calculated as a percent of CET1, as of December 31, 2023: Securities Category Policy Limit Actual Held-to-maturity Tax-exempt low income housing development bonds 35.0 % 20.0 % Available-for-sale debt and equity securities CLO 40.0 22.6 Corporate debt securities 10.0 6.6 High quality liquid assets: Non‐GNMA 80.0 39.8 GNMA 65.0 6.1 Private label residential MBS 30.0 21.2 Municipal securities and tax-exempt low income housing development bonds (AFS) 20.0 15.2 US treasuries (with maturities less than 1 year) No limit 65.8 US treasuries & agency notes (with maturities greater than 1 year) 50.0 12.1 CRA 5.0 1.1 Preferred stock 5.0 1.7 The Company's policies also govern the use of derivatives, and provide that the Company prudently use derivatives in accordance with applicable regulations as a risk management tool to reduce the overall exposure to interest rate risk, and not for speculative purposes.
Biggest changeThe Company's investment policy limits new securities purchases to certain eligible investment types and, in the aggregate, are further subject to the following quantitative limits of the Bank, which are calculated as a percent of CET1, as of December 31, 2024: Securities Category Policy Limit Actual Held-to-maturity Tax-exempt low income housing development bonds 35.0 % 19.9 % Available-for-sale debt and equity securities CLO 22.5 8.4 Corporate debt securities 10.0 6.0 High quality liquid assets: Non‐GNMA 70.0 36.4 GNMA 92.5 61.7 Private label residential MBS 25.0 16.9 Municipal securities and tax-exempt low income housing development bonds 20.0 13.9 U.S.
Furthermore, the Bank's senior management team plays an active role in monitoring compliance with such standards. Loan originations are subject to a process that includes the credit evaluation of borrowers, utilizing established lending limits, analysis of collateral, and procedures for continual monitoring and identification of credit deterioration.
Furthermore, the Bank's senior management team plays an active role in monitoring compliance with such standards. Loan originations are subject to a process that includes the credit evaluation of borrowers, utilizing established lending limits, collateral analysis, and procedures for continual monitoring and identification of credit deterioration.
The Company is not dependent upon any single or limited number of customers, the loss of which would have a material adverse effect on the Company. Neither the Company nor any of its reportable segments have customer relationships that individually account for 10% or more of consolidated or segment revenues. No material portion of the Company’s business is seasonal.
The Company is not dependent upon any single or limited number of customers, the loss of which would have a material adverse effect on the Company. Neither the Company nor any of its reportable segments have customer relationships that individually account for 10% or more of consolidated or segment revenues. No material portion of the Company’s lending business is seasonal.
The SEC maintains an internet site at http://www.sec.gov , from which all forms filed electronically may be accessed. The Company’s internet website and the information contained therein are not incorporated into this Form 10-K. In addition, copies of the Company’s annual report will be made available, free of charge, upon written request. 15 Table of Contents
The SEC maintains an internet site at http://www.sec.gov , from which all forms filed electronically may be accessed. The Company’s internet website and the information contained therein are not incorporated into this Form 10-K. In addition, copies of the Company’s annual report will be made available, free of charge, upon written request. 14 Table of Contents
The Bank's lending policies generally incorporate consistent underwriting standards across all geographic regions in which the Bank operates, customized as necessary to conform to state law and local market conditions. The Bank's credit culture emphasizes timely identification of troubled credits to allow management to take prompt corrective action, when necessary.
The Bank's lending policies generally incorporate consistent underwriting standards across all geographic regions in which the Bank operates, customized as necessary to conform to state law and local market conditions. The Bank's credit culture emphasizes timely identification of troubled credits allowing management to take prompt corrective action, when necessary.
As of December 31, 2023 and 2022, 16% of the Company's CRE loans were owner occupied. Owner occupied CRE loans are loans secured by owner occupied non-farm nonresidential properties for which the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property.
As of December 31, 2024 and 2023, 16% of the Company's CRE loans were owner occupied. Owner occupied CRE loans are loans secured by owner occupied non-farm nonresidential properties for which the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property.
Any difference in the corporate tax rate and the aggregate effective tax rates in the segments are adjusted in the Corporate & Other segment. Lending Activities General Through WAB and its banking divisions and operating subsidiaries, the Company provides a variety of lending products to customers, including the loan types discussed below.
Any difference in the corporate tax rate and the aggregate effective tax rates in the segments are reflected in the Corporate & Other segment. Lending Activities General Through WAB and its banking divisions and operating subsidiaries, the Company provides a variety of lending products to customers, including the loan types discussed below.
Non-owner occupied CRE loans are CRE loans for which the primary source of repayment is rental income generated from the collateral property. Construction and Land Development: Construction and land development loans comprise 10% and 8% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively.
Non-owner occupied CRE loans are CRE loans for which the primary source of repayment is rental income generated from the collateral property. Construction and Land Development: Construction and land development loans comprise 8% and 10% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively.
The CFO and Treasurer have the authority to purchase and sell securities within specified guidelines. All investment transactions for the Bank and for the holding company during the year ended December 31, 2023 were reviewed by the ALCO and BOD.
The CFO and Treasurer have the authority to purchase and sell securities within specified guidelines. All investment transactions for the Bank and for the holding company during the year ended December 31, 2024 were reviewed by the ALCO and BOD.
Although the Company does not pay interest to depositors of non-interest-bearing accounts, earnings credits and referral fees are awarded to some account holders, which offset charges incurred by account holders for other services.
Although the Company does not pay interest to depositors of non-interest-bearing accounts, earnings credits and referral fees are awarded to certain account holders, which offset charges incurred by account holders for other services.
WAL also has eight unconsolidated subsidiaries used as business trusts in connection with issuance of trust-preferred securities as described in "Note 11. Qualifying Debt" in Item 8 of this Form 10-K.
WAL also has eight unconsolidated subsidiaries used as business trusts in connection with issuance of trust-preferred securities as described in "Note 12. Qualifying Debt" in Item 8 of this Form 10-K.
An analysis of each construction project is performed as part of the underwriting process to determine whether the type of property, location, construction costs, and contingency funds are appropriate and adequate. Loans to finance commercial raw land are primarily to borrowers who plan to initiate active development of the property within two years.
An analysis of each construction project is performed as part of the underwriting process to 6 Table of Contents determine whether the type of property, location, construction costs, and contingency funds are appropriate and adequate. Loans to finance commercial raw land are primarily to borrowers who plan to initiate active development of the property within two years.
As a matter of longstanding practice, the Arizona Department of Financial Institutions uses the same aggregation analysis as applied to national banks by the Office of the Comptroller of the Currency. Concentrations of Credit Risk.
As a matter of longstanding practice, the Arizona Department of Insurance and Financial Institutions uses the same aggregation analysis as applied to national banks by the Office of the Comptroller of the Currency. Concentrations of Credit Risk.
As elevated focus on the evolving industry dynamics facing the CRE market have emerged during the year, the Company has been proactive in establishing enhanced monitoring policies and procedures as it relates to its CRE loans and has undertaken actions to limit growth of its CRE portfolio.
As elevated focus on the evolving industry dynamics facing the CRE market have emerged over the past year, the Company has been proactive in establishing enhanced monitoring policies and procedures as it relates to its CRE loans and has undertaken actions to limit growth of its CRE portfolio.
The table below presents the Company's employee turnover rate by age group: Year ended December 31, Turnover Rate by Age Group 2023 (1) 2022 (1) 2021 Under 30 18 % 27 % 27 % Between 30-50 14 15 19 Over 50 14 15 16 (1) Excludes the impact of reductions in workforce during the period.
The table below presents the Company's employee turnover rate by age group: Year ended December 31, Turnover Rate by Age Group 2024 2023 (1) 2022 (1) Under 30 19 % 18 % 27 % Between 30-50 14 14 15 Over 50 15 14 15 (1) Excludes the impact of reductions in workforce during the period.
The CBDP is an 18-month, on-the-job development program to train successful credit analysts that offers progressive assignments, 13 Table of Contents mentoring, opportunities to learn the business and various aspects of leadership, with the objective of developing future leaders of the Company.
The CBDP is an 18-month, on-the-job development program to train successful credit analysts that offers progressive assignments, mentoring, opportunities to learn the business and various aspects of leadership, with the objective of developing future leaders of the Company.
CRE: Loans to fund the purchase or refinancing of CRE for investors (non-owner occupied) or owner occupants represent 23% and 21% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. These CRE loans are secured by multi-family residential properties, professional offices, industrial facilities, retail centers, hotels, and other commercial properties.
CRE: Loans to fund the purchase or refinancing of CRE for investors (non-owner occupied) or owner occupants represent 22% and 23% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively. These CRE loans are secured by multi-family residential properties, professional offices, industrial facilities, retail centers, hotels, and other commercial properties.
To support these efforts, 14 Table of Contents the Company has established Wellness Committees to engage its people in well-being initiatives that provide opportunities for employees to develop healthier lifestyles by promoting habits and attitudes that support wellness. Supervision and Regulation The Company and its subsidiaries are extensively regulated and supervised under both federal and state laws.
To support these efforts, the Company has established Wellness Committees to engage its people in well-being initiatives that provide opportunities for employees to develop healthier lifestyles by promoting habits and attitudes that support wellness. Supervision and Regulation The Company and its subsidiaries are extensively regulated and supervised under both federal and state laws.
In addition, 33% and 29% of the Company's HFI loan portfolio at December 31, 2023 and 2022, respectively, was represented by CRE and construction and land development loans. The Company’s CRE business is concentrated primarily in the Company's core footprint states: Arizona, California, and Nevada. Consequently, the Company is dependent on the trends of these regional economies.
In addition, 30% and 33% of the Company's HFI loan portfolio at December 31, 2024 and 2023, respectively, was represented by CRE and construction and land development loans. The Company’s CRE business is concentrated primarily in the Company's core footprint states: Arizona, California, and Nevada. Consequently, the Company is dependent on the trends of these regional economies.
This portfolio includes single family and multi-family residential 6 Table of Contents projects, industrial/warehouse properties, office buildings, retail centers, medical office facilities, and residential lot developments. These loans are primarily originated to experienced local and national developers with whom the Company has a satisfactory lending history.
This portfolio includes single family and multi-family residential projects, industrial/warehouse properties, office buildings, retail centers, medical office facilities, and residential lot developments. These loans are primarily originated to experienced local and national developers with whom the Company has a satisfactory lending history.
The Company employs a diverse workforce that reflects its communities, which is shown in the Company's ethnic and gender diversity metrics presented in the table below: December 31, 2023 2022 2021 (as a percentage of total employees) Employees belonging to an ethnic minority group 44 % 43 % 44 % Female employees 51 52 55 As of December 31, 2023, 43% of employees that occupied roles involving supervision and management of other employees were women, compared to 44% in the prior year.
The Company employs a diverse workforce that reflects its clients and communities, which is shown in the Company's ethnic and gender diversity metrics presented in the table below: December 31, 2024 2023 2022 (as a percentage of total employees) Employees belonging to an ethnic minority group 45 % 44 % 43 % Female employees 50 51 52 As of December 31, 2024, 44% of employees that occupied roles involving supervision and management of other employees were women, compared to 43% in the prior year.
Bank Subsidiary At December 31, 2023, WAL has the following bank subsidiary: Bank Name Headquarters Location Cities Total Assets Net Loans Deposits (in millions) Western Alliance Bank Phoenix, Arizona Arizona: Chandler, Flagstaff, Gilbert, Mesa, Phoenix, Scottsdale, and Tucson $ 70,853 $ 51,362 $ 55,689 Nevada: Carson City, Fallon, Henderson, Las Vegas, Mesquite, Reno, and Sparks California: Beverly Hills, Carlsbad, Costa Mesa, Irvine, La Mesa, Los Angeles, Oakland, Pleasanton, San Diego, San Francisco, San Jose, and Woodland Hills Other: Atlanta, Georgia; Austin, Houston, and Irving, Texas; Boston, Massachusetts; Chicago, Illinois; Columbus, Ohio; Denver, Colorado; Minneapolis, Minnesota; New York, New York; Seattle, Washington; and Tysons, Virginia WAB has the following significant wholly-owned subsidiaries: • WABT holds certain investment securities, municipal and non-profit loans, and leases. • WA PWI holds interests in certain limited partnerships invested primarily in low income housing tax credits and small business investment corporations. • BW Real Estate, Inc. operates as a real estate investment trust and holds certain of WAB's real estate loans and related securities. • Helios Prime, Inc. holds certain equity interests in renewable energy tax credit transactions. • Western Finance Company purchases and originates equipment finance leases and provides mortgage banking services through its wholly-owned subsidiary, AmeriHome. • DST provides digital payments services for the class action legal industry.
Bank Subsidiary At December 31, 2024, WAL has the following bank subsidiary: Bank Name Headquarters Location Cities Total Assets Net Loans Deposits (in millions) Western Alliance Bank Phoenix, Arizona Arizona: Chandler, Flagstaff, Gilbert, Mesa, Phoenix, Scottsdale, and Tucson $ 80,862 $ 55,588 $ 66,760 Nevada: Carson City, Fallon, Henderson, Las Vegas, Mesquite, Reno, and Sparks California: Beverly Hills, Carlsbad, Costa Mesa, Irvine, La Mesa, Los Angeles, Oakland, Pleasanton, San Diego, San Francisco, San Jose, and Woodland Hills Other: Atlanta, Georgia; Austin, Houston, and Irving, Texas; Boston, Massachusetts; Chicago, Illinois; Columbus, Ohio; Denver, Colorado; Minneapolis, Minnesota; New York, New York; Seattle, Washington; and Tysons, Virginia WAB has the following wholly-owned operating subsidiaries: • WABT holds certain investment securities, municipal and non-profit loans, and leases. • WA PWI holds interests in certain limited partnerships invested primarily in low income housing tax credits and small business investment corporations. • BW Real Estate, Inc. operates as a real estate investment trust and holds certain of WAB's real estate loans and related securities. • Helios Prime, Inc. holds interests in certain limited partnerships invested in renewable energy projects. • Western Finance Company purchases and originates equipment finance leases and provides mortgage banking services through its wholly-owned subsidiary, AmeriHome. • DST provides digital payments services for the class action legal industry.
Commercial and Industrial: Commercial and industrial loans comprise 38% and 40% of the Company's HFI loan portfolio as of December 31, 2023 and 2022, respectively. These loans include working capital lines of credit, loans to technology companies, inventory and accounts receivable lines, mortgage warehouse lines, and other commercial loans.
Commercial and Industrial: Commercial and industrial loans comprise 43% and 38% of the Company's HFI loan portfolio as of December 31, 2024 and 2023, respectively. These loans include working capital lines of credit, loans to technology companies, inventory and accounts receivable lines, mortgage warehouse lines, and other commercial loans.
In 2023, 2022 and 2021, the Company's turnover rate was highest among employees in the Under 30 age group.
In 2024, 2023 and 2022, the Company's turnover rate was highest among employees in the Under 30 age group.
Employees are encouraged to dedicate their time and expertise to charitable and civic organizations they are passionate about. In total, employees have volunteered more than 28,000 hours in 2023. The Company is also committed to providing financial support for education, affordable housing, and community development lending and investments.
Employees are encouraged to dedicate their time and expertise to charitable and civic organizations they are passionate about. In total, employees volunteered more than 18,000 hours in 2024. The Company is also committed to providing financial support for education, affordable housing, and community development lending and investments.
The total net realized and unrealized gains and losses on repossessed and other assets was not significant during each of the years ended December 31, 2023, 2022, and 2021. However, losses may be experienced in future periods. Criticized Assets Federal bank regulators require banks to classify their assets on a regular basis.
Total net gains and losses on sales and reappraisals of repossessed and other assets was not significant during each of the years ended December 31, 2024, 2023, and 2022. However, losses may be experienced in future periods. Criticized Assets Federal bank regulators require banks to classify their assets on a regular basis.
The Company also offers a variety of resources to help its employees grow in their current roles and build new skills, including online development programs and workshops, mentoring programs, and internal webinars that feature speakers from across the Company, sharing information about and success in their business line, division, or functional area.
The Company also offers a variety of resources and training to help its employees grow in their current roles and build new skills and awareness, including online development programs and workshops, mentoring programs, tuition reimbursement, participation in Business Resource Groups, and internal webinars that feature speakers from across the Company, sharing information about and success in their business line, division, or functional area.
These office loans primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects with more modern standards attractive to in-office employers in today’s environment, including enhanced on-site amenities. The vast majority of these projects are located in suburban locations with central business district and midtown exposure totaling approximately 2% and 10% of office loans, respectively.
These office loans primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects with more modern standards attractive to in-office employers in today’s environment, including enhanced on-site amenities. The vast majority of these projects are located in suburban locations with central business district and midtown exposure of less than 1% and 11% of office loans, respectively.
Market Segments The Company's reportable segments are aggregated with a focus on products and services offered and consist of three reportable segments: • Commercial segment: provides commercial banking and treasury management products and services to small and middle-market businesses, specialized banking services to sophisticated commercial institutions and investors within niche industries, as well as financial services to the real estate industry. • Consumer Related segment: offers both commercial banking services to enterprises in consumer-related sectors and consumer banking services, such as residential mortgage banking. 5 Table of Contents • Corporate & Other: consists of the Company's investment portfolio, Corporate borrowings and other related items, income and expense items not allocated to other reportable segments, and inter-segment eliminations.
Market Segments The Company's reportable segments are aggregated with a focus on products and services offered and consist of three reportable segments: • Commercial segment: provides commercial banking and treasury management products and services to small and middle-market businesses, specialized banking services to sophisticated commercial institutions and investors within niche industries, as well as financial services to the real estate industry. • Consumer Related segment: offers commercial banking services to enterprises in consumer-related sectors, as well as consumer banking services, such as residential mortgage banking. • Corporate & Other: consists of the Company's investment portfolio, Corporate borrowings and other related items, as well as income and expense items not allocated to other reportable segments and inter-segment eliminations. 5 Table of Contents Loan and deposit accounts are typically assigned directly to the segments where these products are originated and/or serviced.
Approximately $2.4 billion, or 4.7%, of total loans HFI consisted of CRE non-owner occupied office loans as of December 31, 2023, compared to $2.4 billion, or 4.6%, as of December 31, 2022.
Approximately $2.3 billion, or 4.4%, of total loans HFI consisted of CRE non-owner occupied office loans as of December 31, 2024, compared to $2.4 billion, or 4.7%, as of December 31, 2023.
Loan Approval Procedures and Authority The Company's loan approval procedures are executed through a tiered loan limit authorization process, which is structured as follows: • Individual Credit Authorities. The credit approval levels for individual divisional and senior credit officers are set by policy and certain credit administration officers' approval authorities are established on a delegated basis. • Management Loan Committees.
Loan Approval Procedures and Authority The Company's loan approval procedures are executed through a tiered loan limit authorization process, which is structured as follows: • Individual Credit Authorities. The credit approval levels for individual credit officers are set by policy and certain credit officers' approval authorities are established on a delegated basis. • SLC Subcommittees.
Customer, Product, and Geographic Concentrations Commercial and industrial loans make up 38% and 40% of the Company's HFI loan portfolio as of December 31, 2023 and 2022, respectively. Residential loans comprise 29% and 31% of the Company's HFI loan portfolio as of December 31, 2023 and 2022, respectively.
Customer, Product, and Geographic Concentrations Commercial and industrial loans make up 43% and 38% of the Company's HFI loan portfolio as of December 31, 2024 and 2023, respectively. Residential loans comprise 27% and 29% of the Company's HFI loan portfolio as of December 31, 2024 and 2023, respectively.
The Bank considers a number of factors when determining deposit rates, including: • current and projected national and local economic conditions and the outlook for interest rates; • competition from other institutions; • loan and deposit positions and forecasts, including any concentrations in either; and • alternative borrowing costs from the FHLB or other sources. 11 Table of Contents The following table shows the Company's deposit composition: December 31, 2023 2022 Amount Percent Amount Percent (in millions) Non-interest-bearing demand deposits $ 14,520 26.2 % $ 19,691 36.7 % Interest-bearing transaction accounts 15,916 28.8 9,507 17.7 Savings and money market accounts 14,791 26.7 19,397 36.2 Time certificates of deposit ($250,000 or more) (1) 1,478 2.7 1,101 2.0 Other time deposits 8,628 15.6 3,948 7.4 Total deposits $ 55,333 100.0 % $ 53,644 100.0 % (1) Retail brokered time deposits over $250,000 of $5.8 billion and $2.7 billion as of December 31, 2023 and 2022, respectively, are included within Other time deposits as these deposits are generally participated out by brokers in shares below the FDIC insurance limit.
The Bank considers a number of factors when determining deposit rates, including: • current and projected national and local economic conditions and the outlook for interest rates; • competition for deposits; • loan and deposit positions and forecasts, including any concentrations in either; and • alternative borrowing costs from the FHLB or other sources. 11 Table of Contents The following table shows the Company's deposit composition: December 31, 2024 2023 Amount Percent Amount Percent (in millions) Non-interest-bearing demand deposits $ 18,846 28.4 % $ 14,520 26.2 % Interest-bearing transaction accounts 15,878 23.9 15,916 28.8 Savings and money market accounts 21,208 32.0 14,791 26.7 Time certificates of deposit ($250,000 or more) 1,640 2.5 1,478 2.7 Other time deposits (1) 8,769 13.2 8,628 15.6 Total deposits $ 66,341 100.0 % $ 55,333 100.0 % (1) Retail brokered time deposits over $250,000 of $5.6 billion and $5.8 billion as of December 31, 2024 and 2023, respectively, are included within Other time deposits as these deposits are generally participated out by brokers in shares below the FDIC insurance limit.
The SLC is chaired by the WAB CCO and includes the Company’s CEO. 7 Table of Contents Management and monitoring of credit risk for the Company's overall lending portfolio continues to be a high priority.
SLC membership includes the CEO and other senior executives appointed by the CEO and is chaired by the Bank's CCO. 7 Table of Contents Management and monitoring of credit risk for the Company's overall lending portfolio continues to be a high priority.
People, Performance, and Possibilities capture the Company's defining values and behaviors that shape our unique culture and how we do business. People are the foundation of the Company and the Company invests in their success by providing expanded opportunities to attract and retain its people.
People, Performance, and Possibilities capture the Company's defining values and behaviors that shape our unique culture and how we do business. People are the foundation of the Company and the Company invests in their success by providing expanded opportunities for career growth and advancement.
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 business customers across the country, including mortgage banking services through AmeriHome, treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry.
The Company also provides an array of specialized financial services to business customers across the country, including mortgage banking services through AmeriHome, treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry.
The Company's investment securities portfolio includes debt and equity securities. Debt securities are classified as AFS or HTM pursuant to ASC Topic 320, Investments and ASC Topic 825, Financial Instruments . Equity securities are reported at fair value in accordance with ASC Topic 321, Equity Securities .
Debt securities are classified as AFS or HTM pursuant to ASC Topic 320, Investments and ASC Topic 825, Financial Instruments . Equity securities are reported at fair value in accordance with ASC Topic 321, Equity Securities . For further discussion of significant accounting policies related to the Company's investment securities portfolio refer to "Note 1.
BOLI is used to help offset employee benefit costs. For additional information concerning investments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations and Financial Condition – Investments” in Item 7 of this Form 10-K.
For additional information concerning investments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations and Financial Condition – Investments” in Item 7 of this Form 10-K.
The table below presents the Company's overall employee turnover rate: Year ended December 31, 2023 (1) 2022 (1) 2021 Turnover Rate 14 % 17 % 19 % (1) Excludes the impact of reductions in workforce during the period. For 2023 compared to 2022, the turnover rate decreased from 17% to 14%.
The table below presents the Company's overall employee turnover rate: Year ended December 31, 2024 2023 (1) 2022 (1) Turnover Rate 15 % 14 % 17 % (1) Excludes the impact of reductions in workforce during the period. The turnover rate was largely consistent at 15% in 2024 compared to 2023.
The following table sets forth the composition of the Company's HFI loan portfolio: December 31, 2023 2022 Amount Percent Amount Percent (dollars in millions) Commercial and industrial $ 19,103 38.0 % $ 20,710 39.9 % Commercial real estate - non-owner occupied 9,650 19.2 9,319 18.0 Commercial real estate - owner occupied 1,810 3.6 1,818 3.5 Construction and land development 4,889 9.7 4,013 7.7 Residential real estate 14,778 29.4 15,928 30.7 Consumer 67 0.1 74 0.2 Loans HFI, net of deferred loan fees and costs $ 50,297 100.0 % $ 51,862 100.0 % Allowance for credit losses (337) (310) Net loans HFI $ 49,960 $ 51,552 For additional information regarding loans, see "Note 4.
The following table sets forth the composition of the Company's HFI loan portfolio: December 31, 2024 2023 Amount Percent Amount Percent (dollars in millions) Commercial and industrial $ 23,128 43.1 % $ 19,103 38.0 % Commercial real estate - non-owner occupied 9,868 18.4 9,650 19.2 Commercial real estate - owner occupied 1,825 3.4 1,810 3.6 Construction and land development 4,479 8.3 4,889 9.7 Residential real estate 14,326 26.7 14,778 29.4 Consumer 50 0.1 67 0.1 Loans HFI, net of deferred loan fees and costs $ 53,676 100.0 % $ 50,297 100.0 % Allowance for credit losses (374) (337) Net loans HFI $ 53,302 $ 49,960 For additional information regarding loans, see "Note 4.
The average duration, which is a measure of the interest rate sensitivity of the Company's debt securities portfolio, is 4.0 years as of December 31, 2023. 10 Table of Contents The following table summarizes the carrying value of the Company's investment securities: December 31, 2023 2022 Amount Percent Amount Percent (dollars in millions) Debt securities U.S.
The average duration, which is a measure of the interest rate sensitivity of the Company's debt securities portfolio, is 3.4 years as of December 31, 2024. 10 Table of Contents The following table summarizes the carrying value of the Company's investment securities: December 31, 2024 2023 Amount Percent Amount Percent (dollars in millions) Debt securities Residential MBS issued by GSEs $ 5,831 38.6 % $ 1,972 15.5 % U.S.
Set forth below are the primary segmentation limits and actual measures based on outstanding amounts as of December 31, 2023: Percent of Tier 1 Capital and ACL (1) Policy Limit Actual Loans HFI CRE 295 % 180 % Commercial and industrial 485 299 Construction and land development 85 77 Residential real estate 300 232 Consumer 10 1 Loans HFS Residential real estate 215 22 (1) ACL refers to the allowance for credit losses on funded loans.
Set forth below are the primary segmentation limits and actual measures based on outstanding amounts as of December 31, 2024: Percent of Tier 1 Capital and ACL (1) Policy Limit Actual Loans HFI CRE 230 % 165 % Commercial and industrial 550 327 Construction and land development 85 63 Residential real estate 260 202 Consumer 7 1 Loans HFS Residential real estate 60 32 (1) ACL refers to the allowance for credit losses on funded loans.
Treasury securities $ 4,853 38.2 % $ — — % Tax-exempt 2,101 16.5 1,982 23.2 Residential MBS issued by GSEs 1,972 15.5 1,740 20.4 CLO 1,399 11.0 2,706 31.7 Private label residential MBS 1,303 10.2 1,397 16.3 Commercial MBS issued by GSEs 530 4.2 97 1.1 Corporate debt securities 367 2.9 390 4.6 Other 69 0.5 69 0.8 Total debt securities $ 12,594 99.0 % $ 8,381 98.1 % Equity securities Preferred stock $ 100 0.8 % $ 108 1.3 % CRA investments 26 0.2 49 0.6 Common stock — — 3 — Total equity securities $ 126 1.0 % $ 160 1.9 % Total investment securities $ 12,720 100.0 % $ 8,541 100.0 % As of December 31, 2023 and 2022, the Company also held investments in BOLI of $186 million and $182 million, respectively.
Treasury securities 4,383 29.0 4,853 38.2 Tax-exempt 2,195 14.5 2,101 16.5 Private label residential MBS 1,123 7.4 1,303 10.2 CLO 570 3.8 1,399 11.0 Commercial MBS issued by GSEs 437 2.9 530 4.2 Corporate debt securities 386 2.6 367 2.9 Other 69 0.4 69 0.5 Total debt securities $ 14,994 99.2 % $ 12,594 99.0 % Equity securities Preferred stock $ 91 0.6 % $ 100 0.8 % CRA investments 26 0.2 26 0.2 Total equity securities $ 117 0.8 % $ 126 1.0 % Total investment securities $ 15,111 100.0 % $ 12,720 100.0 % As of December 31, 2024 and 2023, the Company also held investments in BOLI of $1.0 billion and $186 million, respectively.
Loan and deposit accounts are typically assigned directly to the segments where these products are originated and/or serviced. Equity capital is assigned to each segment based primarily on the risk profile of their assets and liabilities. Any excess equity not allocated to segments based on risk is assigned to the Corporate & Other segment.
Equity capital is assigned to each segment based primarily on the risk profile of their assets and liabilities. Any excess equity not allocated to segments based on risk is assigned to the Corporate & Other segment.
At December 31, 2023, the Company's HFI loan portfolio totaled $50.3 billion, or approximately 71% of total assets.
At December 31, 2024, the Company's HFI loan portfolio totaled $53.7 billion, or approximately 66% of total assets.
Competition The financial services industry is highly competitive and has been significantly impacted by federal and state legislation that makes it easier for non-bank financial institutions to compete with the Company. The Company competes for loans, deposits, and customers with other banks, mortgage companies, insurance companies, finance companies, financial technology firms, and other non-bank financial services providers.
However, seasonality in the Company's mortgage warehouse deposits may impact lending activities. Competition The financial services industry is highly competitive and has been significantly impacted by federal and state legislation that makes it easier for non-bank financial institutions to compete with the Company.
Equipment loans and leases, tax-exempt municipalities, and not-for-profit organizations are also categorized as commercial and industrial loans. Residential: Residential loans comprise 29% and 31% of the Company's loan portfolio as of December 31, 2023 and 2022, respectively. The Company executes flow and bulk residential loan purchases that meet the Company's goals and underwriting criteria through its residential mortgage acquisition program.
Equipment loans and leases and loans to tax-exempt municipalities and not-for-profit organizations are also categorized as commercial and industrial loans. Residential: Residential loans comprise 27% and 29% of the Company's loan portfolio as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, the Company's investment securities portfolio totaled $12.7 billion, representing approximately 18% of the Company's total assets, with a significant portion of the portfolio invested in AAA/AA+ rated securities.
Summary of Significant Accounting Policies" in Item 8 of this Form 10-K. As of December 31, 2024, the Company's investment securities portfolio totaled $15.1 billion, representing approximately 19% of the Company's total assets, with a significant portion of the portfolio invested in AAA/AA+ rated securities.
This strong competition for deposit and loan products directly affects the interest rates on those products and the terms on which they are offered to customers. In addition, many of the Company's competitors are much larger in total assets and capitalization and are able to offer a broader range of financial services than the Company can offer.
In addition, many of the Company's competitors are much larger in total assets and capitalization and are able to offer a broader range of financial services than the Company can offer.
As a growing company, recruiting new talent to the organization is key to the Company’s success and part of that objective includes building a diverse workforce that is representative of the communities the Company serves. In 2023, 47% of WAB’s open positions were filled by external candidates belonging to an ethnic minority group compared to 48% in 2022.
As a growing company, recruiting new talent to the organization is key to the Company’s success and part of that objective includes building a workforce that is representative of the communities the Company exists in and serves.
Item 1. Business. Organization Structure and Description of Services WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated under the laws of the state of Delaware. WAL provides a full spectrum of customized loan, deposit and treasury management capabilities, including funds transfer and other digital payment offerings through its wholly-owned banking subsidiary, WAB.
Item 1. Business. Organization Structure and Description of Services WAL is a bank holding company headquartered in Phoenix, Arizona, incorporated under the laws of the state of Delaware.
As of December 31, 2023, the deposit portfolio was comprised of 26% non-interest-bearing deposits and 74% interest-bearing deposits. The competition for deposits in the Company's markets is strong.
Recently, the Company has also focused on expanding into new deposit channels, including online consumer focused deposit initiatives. As of December 31, 2024, the deposit portfolio was comprised of 28% non-interest-bearing deposits and 72% interest-bearing deposits. The competition for deposits in the Company's markets is strong.
In addition, at the leadership level, the Company's female and ethnic employees increased to 45% as of December 31, 2023 from 41% in the prior year.
In addition, at the leadership level, the Company's female and ethnic employees increased to 48% as of December 31, 2024 from 45% in the prior year. Recruiting, Retention, and Talent Development The Company recognizes its success is highly dependent on its ability to attract, retain and develop employees.
As of December 31, 2023, the Company employed 3,260 full-time equivalent employees in its branches and loan production offices across the United States, a decrease of 3% from December 31, 2022. The Company’s employees are not represented by a union or covered by a collective bargaining agreement.
As of December 31, 2024, the Company employed 3,524 full-time equivalent employees, an increase of 8% from December 31, 2023. The Company’s employees are not represented by a union or covered by a collective bargaining agreement. Human Capital Metrics The Company is committed to maintaining a dynamic and diverse workforce and provides equal opportunity in all aspects of employment.
These loan purchases consist of both conforming and non-conforming loans. Non-conforming loan purchases are considered to be high quality as the borrowers have high FICO scores and the loans generally have low loan-to-values.
The Company executes flow and bulk residential loan purchases that meet the Company's goals and underwriting criteria through its residential mortgage acquisition program. These loan purchases consist of both conforming and non-conforming loans. Non-conforming loan purchases are generally limited to borrowers with high FICO scores and loans with low loan-to-value ratios.
One aspect of this work is the active support of Business Resource Groups focused on the career advancement of diverse groups within the Company, such as women, minority groups, and LGBTQIA+ employees. These groups foster opportunities to engage in programs, network with peers, and connect with Bank leadership.
One aspect of this work is the active support of Business Resource Groups, which are employee-led groups to support the diverse aspects and experiences of our people, such as women, veterans, minority groups, cancer survivors and caretakers, LGBTQIA+ employees, employees with disabilities, and encouraging multigenerational connections.
Credits in excess of individual divisional or senior credit officer approval authority are submitted to the appropriate divisional or NBL loan committee. The divisional committees consist of members of the Bank's senior management team of each division and the NBL loan committees consist of the Bank's divisional or senior credit officers. • Credit Administration.
Credits in excess of individual credit authorities but less than SLC approval thresholds are submitted to the appropriate subcommittee based on risk segment. The Company's risk segments are defined primarily by product lines organized based on loan type and risk profile. The subcommittees consist of members of the Bank's senior management and senior credit officers. • SLC.
Removed
Credits in excess of the divisional or NBL loan committee approval authority require the additional approval of the Bank's CCO and any credits in excess of the CCO's individual approval authority are submitted to the WAB SLC. In addition, the SLC reviews all other loan approvals to any one new borrower in excess of established thresholds.
Added
WAL provides a full spectrum of customized loan, deposit and treasury management capabilities, including funds transfer and other digital payment offerings through its wholly-owned banking subsidiary, WAB , together with its banking divisions: ABA, BON, FIB, Bridge, and TPB.
Removed
For further discussion of significant accounting policies related to the Company's investment securities portfolio refer to "Note 1. Summary of Significant Accounting Policies" in Item 8 of this Form 10-K.
Added
Credits in excess of subcommittee approval authority require the approval of the Bank's SLC, which has the highest level of credit approval authority.
Removed
Diversity, Equity, and Inclusion The Company is committed to improving workforce diversity at all levels of the organization and to providing equal opportunity in all aspects of employment. In 2023, the Company continued to make progress towards enhancing its ability to attract and retain a diverse population of employees.
Added
Treasury securities & agency notes with maturities greater than 1 year (1) 50.0 — CRA 5.0 1.0 Preferred stock 5.0 1.4 (1) There is no investment policy limit for purchases of U.S. Treasury securities with maturities less than 1 year.
Removed
The Company has built relationships with community and educational institutions to strengthen its pipelines of talent in underrepresented communities. The Company established an executive-led Opportunity Council, which guides and sponsors DEI initiatives, provides access to leadership, and evaluates organizational and best practice DEI strategies. Overall, the Opportunity Council is focused on accelerating DEI activities and results.
Added
The Company's policies also govern the use of derivatives, and provide that the Company prudently use derivatives in accordance with applicable regulations as a risk management tool to reduce the overall exposure to interest rate risk, and not for speculative purposes. The Company's investment securities portfolio includes debt and equity securities.
Removed
The below table presents the ethnic and gender diversity metrics for the Company's BOD: December 31, 2023 2022 2021 (as a percentage of total directors) Directors belonging to an ethnic minority group 15 % 21 % 15 % Female directors 15 21 15 Recruiting, Retention, and Talent Development The Company recognizes its success is highly dependent on its ability to attract, retain and develop employees.
Added
BOLI is used as a tax efficient method to help offset employee benefit costs. The increase in BOLI from December 31, 2023 is attributable to the purchase of a new BOLI policy during the year.
Removed
The Company has made a commitment to growing the share of its employee population from diverse communities and has experienced success in recent years, although the Company believes there is still an opportunity for additional advancement in this area. Retaining employees who have been key contributors to the Company's success story remains an important objective.
Added
The earnings from the new BOLI separate life policy are linked to the performance of a pool of highly rated (AA or better) CLO securities, secured by a stable value wrap that provides a level of stability to the investment performance of the underlying CLO portfolio.
Removed
During 2023, the Company’s workforce was reduced in conjunction with the Company's balance sheet repositioning efforts to align with current business initiatives. This reduction represented 4% of the Company’s 2023 average employees. For 2022, the Company’s residential mortgage banking workforce was reduced to align with lower residential mortgage loan production volumes, which was driven by rising interest rates through 2022.
Added
The Company competes for loans, deposits, and customers with other banks, mortgage companies, insurance companies, finance companies, financial technology firms, and other non-bank financial services providers. This strong competition for deposit and loan products directly affects the interest rates on those products and the terms on which they are offered to customers.
Removed
With the understanding that bias is a larger societal issue, the Company offers training to create awareness and understanding of everyday biases and micro-behaviors, and helps individuals to implement solutions to create a more inclusive workplace. This training is required for all employees and additional, focused trainings are required for all managers, including one specifically promoting inclusion.
Added
The Company continually assesses opportunities to attract and retain a diverse population of high performing employees to support the growth of the Company. The Company has built relationships with community and educational institutions to strengthen its pipelines of potential job candidates.
Added
The Company maintains an executive-led Opportunity Council, which provides access to leadership, and evaluates organizational practices that build a sense of belonging, enhance the Company's pipeline of talent, engage its people, and create a culture instilled with the Company's corporate values.
Added
These groups are open to all, provide connection with Bank leadership, and are focused on education, professional development, and community engagement.
Added
In 2024, 51% of WAB’s open positions were filled by external candidates belonging to an ethnic minority group compared to 47% in 2023. 13 Table of Contents Retaining qualified employees who have been key contributors to the Company's success story remains an important objective.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

66 edited+28 added−14 removed160 unchanged
Biggest changeIf we lose a significant portion of our core deposits or a significant deposit relationship, or our cost of funding deposits increases significantly, our liquidity and/or profitability would be adversely impacted.
Biggest changeAlthough our capital ratios are in line with our targets, we may need to issue additional equity capital or reduce the pace at which we are growing in order to increase our CET1 and other capital ratios. 22 Table of Contents If we lose a significant portion of our core deposits, whether through a significant deposit relationship or concentrations in an industry, or our cost of funding deposits increases significantly, our liquidity and/or profitability would be adversely impacted.
In addition to the potential effects on net interest margin and loan volumes, an increase in the general level of interest rates may affect the ability of certain borrowers to pay interest and principal on their obligations and reduces the amount of non-interest income we can earn due to potentially lower levels of banking business conducted, generally, as well lower levels of servicing, gain on sale, and other revenues generated through our residential mortgage business.
In addition to the potential effects on net interest margin and loan volumes, an increase in the general level of interest rates may affect the ability of certain borrowers to pay interest and principal on their obligations and reduces the amount of non-interest income we can earn due to potentially lower levels of banking business conducted, generally, as well as lower levels of servicing, gain on sale, and other revenues generated through our residential mortgage business.
Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations. Increased scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to ESG practices may impose additional costs on the Company or expose it to new or additional risks.
Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations. Evolving scrutiny and expectations from customers, regulators, investors, and other stakeholders with respect to ESG practices may impose additional costs on the Company or expose it to new or additional risks.
Intended to protect customers, depositors, and the DIF, these laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the business activities in which we can engage, require monitoring and reporting of suspicious activity and of customers who are perceived to present a heightened risk of money laundering or other illegal activity, limit the dividends or distributions that WAB can pay to WAL or that we can pay to our stockholders, restrict the ability of affiliates to guarantee our debt, impose certain specific accounting requirements on us that may be more restrictive and result in greater or earlier charges to earnings or reductions in our capital than prescribed by GAAP, among other things.
Intended to protect customers, depositors, and the DIF, these laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the business activities in which we can engage, require monitoring and reporting of suspicious activity and of customers who are perceived to present a heightened risk of money laundering or other illegal activity, limit the dividends or distributions that WAB can pay to WAL or that we can pay to our stockholders, restrict the ability of affiliates to guarantee our debt, impose certain specific accounting requirements on us that may be more restrictive 25 Table of Contents and result in greater or earlier charges to earnings or reductions in our capital than prescribed by GAAP, among other things.
State and federal banking agencies, including the FRB, FDIC, and CFPB, periodically conduct examinations of our business, including for compliance with laws and regulations.
State and federal banking agencies, including the FRB, FDIC, CFPB, and OCC periodically conduct examinations of our business, including for compliance with laws and regulations.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, U.S. government debt default or shutdown, the imposition of tariffs on trade, natural disasters, the emergence of widespread health emergencies or pandemics (such as the COVID-19 pandemic), terrorist attacks, acts of war (such as the military conflicts in Ukraine and the Middle East), or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, U.S. government debt default or shutdown, the imposition of tariffs on trade, natural disasters, the emergence of widespread health emergencies or pandemics, terrorist attacks, acts of war (such as the military conflicts in Ukraine and the Middle East), or a combination of these or other factors.
In particular, the transition could: • adversely affect the interest rates received or paid on the value of our assets and liabilities that are based on the discontinued interest rate benchmark compared to the rate received or paid based on the alternative benchmark rates; • adversely affect the interest rates received or paid on the value of other securities or financial arrangements; • result in charges to the financial statements and obligation to "de-designate" certain interest rate swaps used in hedges of certain loans indexed to the discontinued interest rate benchmark; • prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of the discontinued interest rate benchmark with an alternative reference rate; and • result in disputes, litigation or other actions with borrowers or counterparties about the transition to an alternative reference rate.
In particular, the transition could: • adversely affect the interest rates received or paid on the value of our assets and liabilities that are based on the discontinued interest rate benchmark compared to the rate received or paid based on the alternative benchmark rates; • adversely affect the interest rates received or paid on the value of other securities or financial arrangements; • result in charges to the financial statements and obligation to "de-designate" certain interest rate swaps used in hedges of certain loans indexed to the discontinued interest rate benchmark; • prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of the discontinued interest rate benchmark with an alternative reference rate; and 16 Table of Contents • result in disputes, litigation or other actions with borrowers or counterparties about the transition to an alternative reference rate.
We may from time to time issue debt securities, borrow money through other means, or issue preferred stock. We may also borrow money from the FRB, the FHLB, other financial institutions, and other lenders. At December 31, 2023, we had outstanding subordinated debt, senior secured and unsecured debt, and short-term borrowings.
We may from time to time issue debt securities, borrow money through other means, or issue preferred stock. We may also borrow money from the FRB, the FHLB, other financial institutions, and other lenders. At December 31, 2024, we had outstanding subordinated debt, senior secured and unsecured debt, and short-term borrowings.
Other factors that may cause fluctuations in our stock price include: • actual or anticipated changes in the political climate or public policy; • changes in national and global financial markets and economies and general market conditions, such as interest or foreign exchange rates, inflation, stock, commodity or real estate valuations or volatility and other global, geopolitical, regulatory or judicial events that effect the financial markets and economy including pandemics, terrorism and war, including the military conflicts in Ukraine and the Middle East; • sales of our equity securities; • our financial condition, performance, creditworthiness, and prospects; • quarterly variations in our operating results or the quality of our assets; • operating results that vary from the expectations of management, securities analysts, and investors; • changes in expectations as to our future financial performance; • announcements of strategic developments, acquisitions, and other material events by us or our competitors; • the operating and securities price performance of other companies that investors believe are comparable to us; • the credit, mortgage, and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; • changes in interest rates and the slope of the yield curve; • events affecting the financial services industry generally or financial institutions similar to us or that may be viewed as similar to us; and • our past and future dividend and share repurchase practices.
Factors that may cause fluctuations in our stock price include: • actual or anticipated changes in the political climate or public policy; • volatility and economic disruption in the banking industry, such as that experienced in 2023, or the economy more broadly; • changes in national and global financial markets and economies and general market conditions, such as interest or foreign exchange rates, inflation, stock, commodity or real estate valuations or volatility and other global, geopolitical, regulatory or judicial events that effect the financial markets and economy including pandemics, terrorism and war, including the military conflicts in Ukraine and the Middle East; • sales of our equity securities; • our financial condition, performance, creditworthiness, and prospects; • quarterly variations in our operating results or the quality of our assets; • operating results that vary from the expectations of management, securities analysts, and investors; • changes in expectations as to our future financial performance; • announcements of strategic developments, acquisitions, and other material events by us or our competitors; • the operating and securities price performance of other companies that investors believe are comparable to us; • the credit, mortgage, and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; • changes in interest rates and the slope of the yield curve; • events affecting the financial services industry generally or financial institutions similar to us or that may be viewed as similar to us; and • our past and future dividend and share repurchase practices.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, and financial condition. 21 Table of Contents We are pursuing digital payments initiatives which are subject to significant uncertainty and could adversely affect our business, reputation, or financial results.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, and financial condition. 21 Table of Contents We are continuing to pursue digital payments initiatives which are subject to significant uncertainty and could adversely affect our business, reputation, or financial results.
Finally, our AmeriHome subsidiary needs to maintain certain state licenses and federal and government-sponsored agency approvals required to conduct its business and is subject to periodic examinations by such state and federal agencies, which can result in increases in administrative costs, substantial penalties due to compliance errors, or the loss of licenses.
Finally, our AmeriHome subsidiary needs to maintain certain state licenses and federal and 26 Table of Contents government-sponsored agency approvals required to conduct its business and is subject to periodic examinations by such state and federal agencies, which can result in increases in administrative costs, substantial penalties due to compliance errors, or the loss of licenses.
Our competitors, including money center banks, national and regional commercial banks, community banks, thrift institutions, mutual savings banks, credit unions, finance companies, insurance companies, securities dealers, brokers, mortgage bankers, investment advisors, money market mutual funds, financial technology companies and other financial institutions, compete with lending and deposit-gathering services offered by us.
Our competitors, including money center banks, national and regional commercial banks, community banks, thrift institutions, mutual savings banks, credit unions, finance companies, insurance companies, securities dealers, brokers, mortgage bankers, investment advisors, money market mutual funds, financial technology companies and other financial service organizations including private credit funds, compete with lending and deposit-gathering services offered by us.
Such conditions or events could adversely affect our business, results of operations, and financial condition. 16 Table of Contents Changes in interest rates and increased rate competition could adversely affect our profitability, business, and prospects.
Such conditions or events could adversely affect our business, results of operations, and financial condition. 15 Table of Contents Changes in interest rates and increased rate competition could adversely affect our profitability, business, and prospects.
As a result, our computer systems, software, and networks and those of our customers and third-party vendors may be vulnerable to unauthorized payments and account access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks, and other events that could have an adverse security impact and result in significant losses to us and/or our customers.
As a result, our computer systems, software, and networks and those of our customers and third-party vendors are, and are likely to continue to be vulnerable to unauthorized payments and account access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks, and other events that could have an adverse security impact and result in significant losses to us and/or our customers.
Any of these effects could result in greater loan delinquencies, increases in non-performing, criticized, and classified assets, and a decline in demand for our products and services. The markets in which we operate are subject to the risk of both natural and man-made disasters.
Any of these effects could result in greater loan delinquencies, increases in non-performing, criticized, and classified assets, and a decline in demand for our products and services. 17 Table of Contents The markets in which we operate are subject to the risk of both natural and man-made disasters.
In addition, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified, or mitigated. 25 Table of Contents Our internal controls and procedures may fail or be circumvented and the accuracy of judgments and estimates about financial and accounting matters may impact operating results and financial condition.
In addition, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified, or mitigated. Our internal controls and procedures may fail or be circumvented and the accuracy of judgments and estimates about financial and accounting matters may impact operating results and financial condition.
Regulations affecting banks and other financial institutions are under continuous review and frequently change, and the ultimate effect of such changes cannot be predicted. Regulations and laws may be modified at any time, and 26 Table of Contents new legislation may be enacted that will affect us, WAB, and our other subsidiaries.
Regulations affecting banks and other financial institutions are under continuous review and frequently change, and the ultimate effect of such changes cannot be predicted. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us, WAB, and our other subsidiaries.
Although we take numerous protective measures to maintain the confidentiality, integrity, and security of our customers’ information across all geographies and product lines, and endeavor to modify these protective measures as circumstances warrant, the nature of cyber threats continues to evolve.
Although we take numerous protective measures to maintain the confidentiality, integrity, and security of our customers’ information across all geographies and product lines, and endeavor 23 Table of Contents to modify these protective measures as circumstances warrant, the nature of cyber threats continues to evolve.
We may not successfully implement such changes or improvements in an efficient or timely manner, or we may discover deficiencies in our existing systems and controls that adversely affect our ability to support and grow our existing businesses and client relationships, and could require us to incur additional expenditures to expand our administrative and operational infrastructure.
We may not successfully implement such changes or improvements in an efficient or timely manner, or we may discover deficiencies in our existing systems and controls that adversely affect our ability to support and grow our existing businesses and client relationships, and could require us to incur additional expenditures to expand our administrative and 24 Table of Contents operational infrastructure.
Like previous acquisitions by us such as the acquisition of AmeriHome in 2021 and DST in 2022, any future acquisitions will be accompanied by risks commonly encountered in such transactions, including, among other things: • time and expense incurred while identifying, evaluating and negotiating potential acquisitions and transactions; • difficulty in accurately estimating the value of target companies or assets and in evaluating their credit, operations, management, and market risks; • potential payment of a premium over book and market values that may cause dilution of our tangible book value or earnings per share; • exposure to unknown or contingent liabilities of the target company; • potential exposure to asset quality issues of the target company; • difficulty of integrating the operations and personnel; • potential disruption of our ongoing business; • failure to retain key personnel of the acquired business; • inability of our management to maximize our financial and strategic position by the successful implementation of uniform product offerings and the incorporation of uniform technology into our product offerings and control systems; and • failure to realize any expected revenue increases, cost savings, and other projected benefits from an acquisition.
Like previous acquisitions by us, any future acquisitions will be accompanied by risks commonly encountered in such transactions, including, among other things: • time and expense incurred while identifying, evaluating and negotiating potential acquisitions and transactions; • difficulty in accurately estimating the value of target companies or assets and in evaluating their credit, operations, management, and market risks; • potential payment of a premium over book and market values that may cause dilution of our tangible book value or earnings per share; • diversion of our management's attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses; • exposure to unknown or contingent liabilities of the target company; • potential exposure to asset quality issues of the target company; • difficulty of integrating the operations and personnel; • potential disruption of our ongoing business; • failure to retain key personnel of the acquired business; • inability of our management to maximize our financial and strategic position by the successful implementation of uniform product offerings and the incorporation of uniform technology into our product offerings and control systems; and • failure to realize any expected revenue increases, cost savings, and other projected benefits from an acquisition.
Additionally, on November 15, 2023, the Bloomberg Index Services Limited announced the permanent cessation of the Bloomberg Short-Term Bank Yield Index, effective November 15, 2024. Transitioning away from an interest rate benchmark to alternative reference rates is complex and could have a range of adverse effects on our business, financial condition and results of operations.
Additionally, effective November 15, 2024, the Bloomberg Index Services Limited ceased publication of the Bloomberg Short-Term Bank Yield Index. Transitioning away from an interest rate benchmark to alternative reference rates is complex and could have a range of adverse effects on our business, financial condition and results of operations.
As of December 31, 2023, we have $6.2 billion of borrowings from the FHLB of San Francisco and no borrowings from the FRB. We utilize borrowings from the FHLB of San Francisco and the FRB to satisfy short-term liquidity needs. Our borrowing capacity is generally dependent on the value of our collateral pledged to these entities.
As of December 31, 2024, we have $5.1 billion of borrowings from the FHLB of San Francisco and no borrowings from the FRB. We utilize borrowings from the FHLB of San Francisco and the FRB to satisfy short-term liquidity needs. Our borrowing capacity is generally dependent on the value of our collateral pledged to these entities.
Our mortgage warehouse lending operations subject us to regulations that have grown in complexity in recent years and may continue to do so as the government continues to prioritize consumer protection measures.
Our mortgage warehouse lending operations subject us to regulations that have grown in complexity in recent years and may continue to do so as consumer protection measures change.
These provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our stockholders. Item 1B. Unresolved Staff Comments. None.
These provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our stockholders.
In addition, failure to comply with the privacy, data use and security laws and regulations to which we are subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions, penalties, reputational harm, loss of consumer confidence, and other adverse consequences, any of which could have a material adverse effect on our results of operations and business. 27 Table of Contents We could be subject to adverse changes or interpretations of tax laws, tax audits, or challenges to our tax positions.
In addition, failure to comply with the privacy, data use and security laws and regulations to which we are subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions, penalties, reputational harm, loss of consumer confidence, and other adverse consequences, any of which could have a material adverse effect on our results of operations and business.
The quality and accuracy of those estimates and judgments will impact operating results and financial condition. If we are unable to understand and adapt to technological change and implement new technology-driven products and services, our business could be adversely affected. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
The quality and accuracy of those estimates and judgments will impact operating results and financial condition. If we are unable to understand and adapt to technological change and implement new technology-driven products and services, our business could be adversely affected.
If we fail to meet these guidelines and other regulatory requirements, we may be restricted in the types of activities we may conduct and may be prohibited from taking certain capital actions, such as paying executive bonuses or dividends and repurchasing or redeeming capital securities. At December 31, 2023, our CET1 ratio was 10.8%.
If we fail to meet these guidelines and other regulatory requirements, we may be restricted in the types of activities we may conduct and may be prohibited from taking certain capital actions, such as paying executive bonuses or dividends and repurchasing or redeeming capital securities.
Despite such efforts, the manner and impact of the transition and related developments, as well as the effect of such developments on our funding costs, investment and trading securities portfolios, and business, would be uncertain and could have a material adverse impact on our profitability. Our risk management practices may prove to be inadequate or ineffective.
Despite such efforts, the manner and impact of the transition and related developments, as well as the effect of such developments on our funding costs, investment and trading securities portfolios, and business, would be uncertain and could have a material adverse impact on our profitability.
Our risk management framework seeks to mitigate risk while appropriately balancing risk and return. We have established policies and procedures intended to identify, monitor, and manage the types of risk to which we are subject, including, but not limited to credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, and reputational risk.
We have established policies and procedures intended to identify, monitor, and manage the types of risk to which we are subject, including, but not limited to credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, and reputational risk.
Many of the real and personal properties securing our loans are located in California and more generally in the southwestern portion of the United States. Substantial portions of California experience wildfires from time to time that may cause significant damage throughout the state.
Many of the real and personal properties securing our loans are located in California and more generally in the southwestern portion of the United States. Substantial portions of California experience wildfires from time to time that may cause significant damage throughout the state. For example, early in 2025, Southern California has experienced prolonged wildfires that have resulted in extensive damage.
If management’s assumptions and judgments are incorrect or if economic conditions worsen compared to forecast, our actual credit losses may exceed our ACL. 17 Table of Contents At December 31, 2023, our ACL on funded loans and loss contingency on unfunded loan commitments and letters of credit totaled $336.7 million and $31.6 million, respectively.
If management’s assumptions and judgments are incorrect or if economic conditions worsen compared to forecast, our actual credit losses may exceed our ACL. At December 31, 2024, our ACL on funded loans and loss contingency on unfunded loan commitments and letters of credit totaled $373.8 million and $39.5 million, respectively.
We are subject to federal and applicable state income tax laws and regulations. Income tax laws and regulations are often complex and require significant judgment in determining our effective tax rate and in evaluating our tax positions.
We could be subject to adverse changes or interpretations of tax laws, tax audits, or challenges to our tax positions. We are subject to federal and applicable state income tax laws and regulations. Income tax laws and regulations are often complex and require significant judgment in determining our effective tax rate and in evaluating our tax positions.
We are pursuing digital payments initiatives, including our 2022 acquisition of DST, a digital payments platform for the class action legal industry, and implementation of a fully integrated digital banking platform for our customers. The digital payments products and services we offer may use or rely on blockchain-based technologies or assets.
We are continuing to pursue digital payments initiatives and implementation of a fully integrated digital banking platform for our customers. The digital payments products and services we offer may use or rely on blockchain-based technologies or assets.
Although our deposits have stabilized and increased since we experienced the period of elevated withdrawals, we cannot be assured similar unusual deposit withdrawal activity will not affect banks generally or us in the future. If we were to lose a significant deposit relationship or a significant portion of our low-cost deposits, our liquidity would be adversely impacted.
We cannot be assured similar unusual deposit withdrawal activity will not affect banks generally or us in the future. If we were to lose a significant portion of our low-cost deposits, whether through a significant deposit relationship or concentrations in an industry, our liquidity would be adversely impacted.
In addition, some of the financial services organizations we compete with are not subject to the same degree of regulation as is imposed on bank holding companies and federally insured depository institutions.
In addition, some of the non-bank financial services organizations we compete with are not subject to the same degree of regulation as is imposed on bank holding companies and federally insured depository institutions. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services.
Furthermore, failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents Our loan portfolio contains concentrations in certain business lines or product types that have unique risk characteristics and may expose us to increased lending risks.
Furthermore, failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on our business, financial condition and results of operations.
If interest rates continue to increase, our business, financial condition and results of operations may be materially and adversely affected. Conversely, our earnings also could be adversely affected in a declining rate environment if the rates on our loans and other investments fall more quickly than those on our deposits and other liabilities.
Our earnings also could be adversely affected in a declining rate environment if the rates on our loans and other investments fall more quickly than those on our deposits and other liabilities.
Likewise, any loss of or decline in the credit rating assigned to us could impair our ability to attract deposits or to obtain other funding sources, or increase our cost of funding. 23 Table of Contents Operational and Technological Risks A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
Operational and Technological Risks A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
Because our decision to issue securities in the future will depend on market conditions, our acquisition activity, and other factors, we cannot predict or estimate the amount, 28 Table of Contents timing, or nature of our future offerings.
Because our decision to issue securities in the future will depend on market conditions, our acquisition activity, and other factors, we cannot predict or estimate the amount, timing, or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.
Bank regulators have increasingly viewed financial institutions as playing an important role in helping to address climate change, which may result in increased requirements regarding the disclosure and management of climate risks and related lending activities.
Bank regulators have increasingly focused on the physical and financial risks to financial institutions associated with climate change, which may result in increased requirements regarding the disclosure and management of climate risks and related lending activities.
In recent years, drought and decreased snowfall in the Rocky Mountains has led to decreased water flow in the Colorado River, from which many areas in the southwest obtain water, including certain of our markets.
California and the southwestern United States are also prone to other natural disasters, including, but not limited to, drought, earthquakes, flooding, and mudslides. In recent years, drought and decreased snowfall in the Rocky Mountains has led to decreased water flow in the Colorado River, from which many areas in the southwest obtain water, including certain of our markets.
Our dividend payments and/or stock repurchase practices may change from time-to-time, and no assurance can be provided that we will continue to declare dividends in any particular amounts or at all, or institute a new stock repurchase program.
We have previously adopted common stock repurchase programs, pursuant to which we have repurchased shares of our outstanding common stock, the most recent of which expired in December 2020. 28 Table of Contents Our dividend payments and/or stock repurchase practices may change from time-to-time, and no assurance can be provided that we will continue to declare dividends in any particular amounts or at all, or institute a new stock repurchase program.
These transactions are structured as credit linked notes, which transfer the risk of first losses on covered loans to these note holders. These notes have an aggregate principal amount of $459.9 million on a $9.1 billion reference pool of warehouse and equity fund resource loans and residential mortgages.
We have entered into transactions to mitigate exposure to losses on our loan portfolio. These transactions are structured as credit linked notes, which transfer the risk of first losses on covered loans to these note holders. These notes have an aggregate principal amount of $434.2 million on a $8.6 billion reference pool of residential mortgages.
Any such challenges that are not resolved in our favor may adversely affect our effective tax rate, tax payments or financial condition. Securities-Related Risks The price of our common stock may fluctuate significantly in the future. The price of our common stock on the New York Stock Exchange constantly changes.
Any such challenges that are not resolved in our favor may adversely affect our effective tax rate, tax payments or financial condition. 27 Table of Contents Securities-Related Risks The price of our common stock may fluctuate significantly in the future, which could result in losses to our investors and litigation against us.
Adverse conditions in the real estate market or the general business climate and economy or in occupancy rates where the property is located could increase the likelihood of default. CRE loans generally have large loan balances, and therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of our non-performing loans.
CRE loans generally have large loan balances, and therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of our non-performing loans.
In recent years, commercial real estate markets have been impacted by economic disruptions, including those resulting from the COVID-19 pandemic and the effects of increases in remote work on urban centers and changes in the characteristics of certain urban centers.
A decline in real estate activity would likely cause a decline in asset and deposit growth and negatively impact our earnings and financial condition. In recent years, commercial real estate markets have been impacted by economic disruptions, including those resulting from the effects of increases in remote work in urban centers and changes in the characteristics of certain urban centers.
We cannot assure we will be able to successfully identify and acquire suitable acquisition targets on acceptable terms and conditions, or that we will be able to obtain the regulatory approvals needed to complete any such transactions. We cannot provide any assurance we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions.
We cannot assure we will be able to successfully identify and acquire suitable acquisition targets on acceptable terms and conditions, or that we will be able to obtain the regulatory approvals needed to complete any such transactions. We may issue equity securities, including common stock and securities convertible into shares of our common stock in connection with future acquisitions.
As a regulated financial institution and a publicly traded company, we are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosure.
As a regulated financial institution and a publicly traded company, we are facing evolving scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosure. Frequently, these stakeholders have differing, and sometimes conflicting, views, priorities and expectations regarding ESG issues, which must be considered.
While these wildfires have not significantly damaged our own properties, it is possible our borrowers may experience losses in the future, which may materially impair their ability to meet the terms of their obligations. California and the southwestern United States are also prone to other natural disasters, including, but not limited to, drought, earthquakes, flooding, and mudslides.
While these wildfires have not significantly damaged our own properties or the properties pledged by borrowers as collateral, it is possible our borrowers may experience losses in the future, which may materially impair their ability to meet the terms of their obligations.
Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the persistence and increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud. 24 Table of Contents Our controls and processes, our reporting systems and procedures, and our operational infrastructure may not be able to keep pace with our growth, which could cause us to experience compliance and operational problems, lose customers, or incur additional expenditures, any one of which could adversely affect our financial results.
Our controls and processes, our reporting systems and procedures, and our operational infrastructure may not be able to keep pace with our growth, which could cause us to experience compliance and operational problems, lose customers, or incur additional expenditures, any one of which could adversely affect our financial results.
Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us. There can be no assurance that we will continue to declare cash dividends or repurchase stock as we have in the past.
There can be no assurance that we will continue to declare cash dividends or repurchase stock as we have in the past.
Our credit linked notes do not ensure full protection against credit losses, and as such we could still incur significant credit losses on loans for which risk of loss has been transferred pursuant to these transactions. We have entered into transactions to mitigate exposure to losses on our loan portfolio.
Unforeseen adverse events, changes in economic conditions, and changes in regulatory policy affecting borrowers’ industries or markets could have a material adverse impact on our financial condition and results of operations. 19 Table of Contents Our credit linked notes do not ensure full protection against credit losses, and as such we could still incur significant credit losses on loans for which risk of loss has been transferred pursuant to these transactions.
In addition, the proliferation of hybrid work environments, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography. We incentivize employee retention through our equity incentive plans; however, we cannot guarantee the effectiveness of our equity incentive plans in retaining these key employees and executives.
We incentivize employee retention through our equity incentive plans; however, we cannot guarantee the effectiveness of our equity incentive plans in retaining these key employees and executives.
The financial services industry is also facing increasing competitive pressure from the introduction of disruptive new technologies such as blockchain and digital payments, often by non-traditional competitors and financial technology companies. Among other things, technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction.
Among other things, technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain customers and business partners, and stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory or voluntary reporting, diligence, and disclosure.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards on ESG-related issues, or taking action that conflicts with one or another of our stakeholder’s expectations, could negatively impact our reputation, ability to do business with certain customers and business partners, and stock price.
There can be no assurances about the market price for our common stock. Our stock price may fluctuate as a result of a variety of factors many of which are beyond our control.
Our stock price may fluctuate as a result of a variety of factors many of which are beyond our control and unrelated to our financial performance.
When loans are sold or securitized, we make customary representations and warranties about such loans to the loan purchaser or through documents governing our securitized loan pools.
We may be required to repurchase mortgage loans or indemnify investors under certain circumstances. A substantial portion of our mortgage banking operations involves the sale of loans to third parties, including through securitization. When loans are sold or securitized, we make customary representations and warranties about such loans to the loan purchaser or through documents governing our securitized loan pools.
As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services. 20 Table of Contents The banking business in our primary market areas is very competitive, and the level of competition facing us may increase further, which may limit our asset growth and financial results.
The banking business in our primary market areas is very competitive, and the level of competition facing us may increase further, which may limit our asset growth and financial results. In particular, our predominate source of revenue is net interest income.
We may also become subject to new or heightened regulatory requirements related to climate change, such as 18 Table of Contents requirements relating to operational resiliency or stress testing for various climate stress scenarios. New or increased regulations, including potential additional climate-related disclosure requirements, could result in increased compliance costs or capital requirements.
We have also, and may continue, to become subject to new or heightened regulatory requirements related to climate change, such as requirements relating to operational resiliency, stress testing for various climate stress scenarios, greenhouse gas emissions disclosures, or climate-related financial risk disclosures.
ESG-related costs, including with respect to compliance with any additional regulatory or disclosure requirements or expectations, could adversely impact our results of operations. Credit Risks We are highly dependent on real estate and events negatively impacting the real estate market will hurt our business and earnings.
Credit Risks We are highly dependent on real estate and events negatively impacting the real estate market will hurt our business and earnings.
We also participated in the BTFP where the company borrowed $1.3 billion, all of which was repaid as of December 31, 2023. Moreover, the competition for these relatively low-cost deposits in our markets is strong and customers may demand higher interest rates on their deposits or seek other investments offering higher rates of return.
Additionally, if our borrowings increase or remain elevated in future periods, our net interest margin and profitability may be adversely impacted. Moreover, the competition for these relatively low-cost deposits in our markets is strong and customers may demand higher interest rates on their deposits or seek other investments offering higher rates of return.
Any sale of investment securities held in an unrealized loss position for liquidity or other purposes will cause actual losses to be realized. Gross unrealized losses on our HTM and AFS investment securities totaled $179 million and $702 million, respectively, as of December 31, 2023.
Interest rates rose rapidly during 2023, resulting in a significant decline in the fair market values of long duration fixed rate investment securities. Any sale of investment securities held in an unrealized loss position for liquidity or other purposes will cause actual losses to be realized.
In particular, our predominate source of revenue is net interest income. Therefore, if we are unable to compete effectively, including sustaining loan and deposit growth at our historical levels, our business and results of operations may be adversely affected.
Therefore, if we are unable to compete effectively, including sustaining loan and deposit growth at our historical levels, our business and results of operations may be adversely affected. 20 Table of Contents The financial services industry is also facing increasing competitive pressure from the introduction of disruptive new technologies such as blockchain and digital payments, often by non-traditional competitors and financial technology companies.
We have not entered into employment agreements with most of our employees and competition for talent in our industry is strong. The labor market is currently challenging, with high employee turnover and increased wage pressure.
We have not entered into employment agreements with most of our employees and competition for talent in our industry is strong. In addition, the proliferation of hybrid work environments may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
These costs and claims could be substantial and adversely affect our business and prospects. Strategic Risks Our future success depends on our ability to compete effectively in a highly competitive and rapidly evolving market. We face substantial competition in all phases of our operations from a variety of different competitors.
We face substantial competition in all phases of our operations from a variety of different competitors.
Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts.
Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the persistence and increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud.
Removed
Interest rates rose during 2023, resulting in certain of the rising rate environment effects described herein. Specifically, inflation and rapid interest rate increases during 2023 led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates.
Added
Gross unrealized losses on our HTM and AFS investment securities totaled $218 million and $729 million, respectively, as of December 31, 2024. In 2024, the FRB began lowering rates as inflationary pressure started to ease.
Removed
Investor advocacy groups, investment funds, and influential investors are increasingly focused on these practices, especially as they relate to climate risk, hiring practices, diversity of the workforce, and racial and social justice issues.
Added
The FRB has indicated additional decreases to the federal funds target rate in 2025, but noted it will continue to assess additional information and implications for the economic outlook in determining future actions with respect to target rates.
Removed
A decline in real estate activity would likely cause a decline in asset and deposit growth and negatively impact our earnings and financial condition.
Added
New or increased regulations have resulted, and in the future, could result in increased compliance costs or capital requirements.
Removed
Unforeseen adverse events, changes in economic conditions, and changes in regulatory policy affecting borrowers’ industries or markets could have a material adverse impact on our financial condition and results of operations.
Added
State and federal initiatives on social or climate matters may differ or conflict with one another and may also differ from our shareholders' and stakeholders' expectations. These differing, and sometimes conflicting, views, priorities and expectations on ESG issues increase the risk that any action or lack thereof by us on such matters will be perceived negatively by some stakeholders.
Removed
We are exposed to risk of environmental liabilities with respect to properties to which we obtain title. Approximately 62% of our loan portfolio at December 31, 2023 was secured by real estate. In the course of our business, we may foreclose on and take title to real estate, and could be subject to environmental liabilities with respect to these properties.
Added
Any adverse publicity regarding ESG matters or shifts in investor priorities may result in adverse effects on our stock price and/or our business, operations and 18 Table of Contents earnings. Additionally, ESG-related costs, including with respect to compliance with any additional or altered regulatory or disclosure requirements or expectations, could adversely impact our results of operations.
Removed
We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation, and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property.
Added
Adverse conditions in the real estate market or the general business climate and economy or in occupancy rates where the property is located could increase the likelihood of default.
Removed
The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
Added
In particular, CRE office borrowers in central business districts have been impacted by decreased property valuations, oversupply due to remote work trends, and rising interest rates which has increased default rates and impeded their ability to secure new financing.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThose in the First Line are each responsible for identifying and managing the information security risk associated with their activities. The Company’s Enterprise & Operational Risk Management Department is part of the independent risk oversight of information security risk along with the Company’s ORMC and ERM Committee, both of which are management 29 Table of Contents risk oversight committees.
Biggest changeThe Company’s Enterprise & Operational Risk Management Department is part of the independent risk oversight of information security risk along with the Company’s ORMC and ERM Committee, both of which are management risk oversight committees. The Company manages the risk associated with cybersecurity and information security in accordance with our Risk Appetite Statement, as approved by the BOD.
Cybersecurity assessments The Company engages external third parties to perform assessments on our adherence to the FFIEC’s recommendations on cyber preparedness and NIST Cybersecurity Framework, as well as to review for best practices for the use of cloud services, Swift and FedLine requirements.
Cybersecurity assessment The Company engages external third parties to perform assessments on our adherence to the FFIEC’s recommendations on cyber preparedness and NIST Cybersecurity Framework, as well as to review for best practices for the use of cloud services, Swift and FedLine requirements.
Our investment in people is critical to maintaining an effective cyber defense, which begins by developing and maintaining a robust Information Security function within the First Line. Collectively, the Company’s senior leadership in this area have nearly 80 years of experience.
Our investment in people is critical to maintaining an effective cyber defense, which begins by developing and maintaining a robust Information Security function within the First Line. Collectively, the Company’s senior leadership in this area have over 75 years of experience.
The CSR Plan organizes resources to manage and resolve events that harm or threaten the security of information assets. The CSR plan includes involvement of the Company’s Executive Leadership Team and BOD based on the severity of a cyber event, including the analysis of reporting requirements.
The CSR Plan organizes resources to detect, manage, respond to, resolve and recover from events that harm or threaten the security of information assets. The CSR plan includes involvement of the Company’s Executive Leadership Team and BOD based on the severity of a cyber event, including the analysis of reporting requirements.
The BOD also receives regular education on innovative technology, cybersecurity, information systems/data management, fintech and privacy, from internal and external experts.
The BOD is regularly informed and actively oversees the data security and privacy program and its policies. The BOD also receives regular education on innovative technology, cybersecurity, information systems/data management, fintech and privacy, from internal and external experts.
The Company’s CISO has over 25 years of network architecture, information technology and cybersecurity experience, maintains Certified Information Systems Security Professional credentials and has served on the Federal Reserve Secure Payments Task Force. Each Company employee is responsible for an effective cybersecurity defense which is enforced with mandatory interactive cyber awareness training, periodic newsletters, executive security briefs and updates.
The Company’s CISO has over 25 years of network architecture, information technology and cybersecurity experience, maintains Certified Information Systems Security Professional credentials and has served on the Federal Reserve Secure Payments Task Force.
Potential security events are identified and addressed through defined IT incident response activities, the SMC’s oversight through SIEM, and with support of the Company’s CSR Plan.
Through the collection and integration of security-related IT infrastructure information, external threat intelligence and the expertise of trained SMC analysts, the Company works to identify and address potential indicators of compromise. Potential security events are identified and addressed through defined IT incident response activities, the SMC’s oversight through SIEM, and with support of the Company’s CSR Plan.
Item 1C. Cybersecurity. Cybersecurity risk management and strategy Cybersecurity and risks associated with information security are operational risks included in the Company’s ERM Framework. Under the ERM Framework, the Company’s Information Security Risk and Compliance departments and all employees are the First Line.
Item 1C. Cybersecurity. Cybersecurity risk management and strategy Cybersecurity and risks associated with information security are operational risks included in the Company’s ERM Framework. Cybersecurity risks may also include fraud, harm to employees or customers, violation of privacy or security laws and other legal risks, and reputational risk.
The CSR plan is tested annually and includes technical and executive management in simulated crisis management cybersecurity tabletop exercises.
The CSR plan is tested annually and includes technical and executive management in simulated crisis management cybersecurity tabletop exercises. Cyber threat actors and cybersecurity incidents are a reality and the Company and our third parties face cybersecurity threats in the normal course of business.
The Company’s SMC, which is part of the CISO organization, manages the security of our systems through the ingestion of multiple external threat feeds and systems logs. Through the collection and integration of security-related IT infrastructure information, external threat intelligence and the expertise of trained SMC analysts, the Company works to identify and address potential indicators of compromise.
As an ongoing operation, the Company’s SMC, which is part of the CISO organization, manages the security of our systems through the ingestion of multiple external threat feeds and systems logs.
The Company manages the risk associated with information security in accordance with our Risk Appetite Statement, as approved by the BOD. The Risk Committee of the BOD and ORMC are primarily responsible for monitoring management’s implementation of operations and technology risk controls, including those relating to cyber security and information security.
The Risk Committee of the BOD and ERM Committee are primarily responsible for monitoring management’s implementation of operations and technology risk controls, including those relating to cybersecurity and information security. The Audit Committee of the BOD oversees the audit control functions of which cybersecurity practices may be a part.
Cybersecurity operational measures Led by our CISO, the Company's data protection, information, cyber and technology services team collaborates with subject-matter experts throughout the business to identify, monitor and mitigate material risks, as well as to monitor compliance with the Company’s security polices, applicable laws and regulations.
After they have established a joint cyber risk plan, the Company’s second line of defense reviews and challenges the plan. Thereafter, the CISO and CIO teams cooperate with subject-matter experts throughout the business to identify, monitor and mitigate material risks, as well as to monitor compliance with the Company’s security polices, applicable laws and regulations.
Additionally, the BOD’s Risk Committee is informed about cybersecurity and the relevant risks posed to the Company via regular updates from the Company’s CISO. The BOD is regularly informed and actively oversees the data security and privacy program and its policies.
Each Company employee is responsible for an effective cybersecurity defense which is enforced with mandatory interactive cyber awareness training, periodic newsletters, executive security briefs and updates. Additionally, the BOD’s Risk Committee is informed about cybersecurity and the relevant risks posed to the Company via regular updates from the Company’s CISO and CIO.
Removed
As of the date of this report, other than the risks discussed in “Risk Factors,” the Company knows of no risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition. 30 Table of Contents
Added
These risks are all considered in the Company’s ERM Framework as part of the Company’s overall risk assessment process. Under the ERM Framework, the Company’s Information Security Risk and Compliance departments and all employees are the First Line. Those in the First Line are each responsible for identifying and managing the information security risk associated with their activities.
Added
The Company’s CIO has over 30 years of technology executive leadership, technology experience focused on strategy, design, development, implementation and support of application systems, and overseeing transformative technology changes, including digital transformations and fraud and BSA/AML capabilities.
Added
While the CIO and information technology organizations collaborate with the CISO organization as described herein, to create independence between the CISO and CIO functions, the CISO reports to the Company’s Chief Administration Officer and the CIO reports to the Company’s Chief Banking Officer for National Business Lines.
Added
Cybersecurity operational measures Operationally, the Company’s overall cyber risk strategy is a collaborative process between the CIO and the information technology teams, and the CISO led data protection, information and cyber teams. The CIO oversees the establishment and 30 Table of Contents implementation of the technical plan for cyber risk strategy which the CISO and his team reviews and critiques.
Added
As of the date of this report, we are aware of the incident described in Item 9B “Other Information” of this report and, as of the date of this report, we have not experienced material losses or consequences relating to material cybersecurity incidents experienced by us or our third parties.
Added
However, we expect businesses will continue to experience cybersecurity risks that could result in adverse impacts with increased frequency and severity due to the evolving threat environment, and there can be no assurance that future cybersecurity incidents, including incidents experienced by third parties, will not have a material adverse impact on the Company, including its business strategy, results of operations and/or financial condition.
Added
Future cybersecurity threats and incidents could have a material impact on our service, systems or business and are discussed in “Risk Factors” to this report.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. The Company and WAB are headquartered at One E. Washington Street in Phoenix, Arizona. WAB operates 38 domestic branch locations, which include five executive and administrative offices, of which 20 of these locations are owned and 18 are leased. The Company also has several loan production and other offices across the United States.
Biggest changeItem 2. Properties. The Company and WAB are headquartered at One E. Washington Street in Phoenix, Arizona. WAB operates 37 domestic branch locations, which include five executive and administrative offices, of which 19 of these locations are owned and 18 are leased. The Company also has several loan production and other offices across the United States.
In addition, WAB owns and occupies a 36,000 square foot operations facility in Las Vegas, Nevada. See "Item 1. Business” in this Form 10-K for location cities. For information regarding rental payments, see "Note 7. Leases" in Item 8 included in this Form 10-K.
In addition, WAB owns and occupies a 36,000 square foot operations facility in Las Vegas, Nevada. See "Item 1. Business” in this Form 10-K for location cities. For information regarding rental payments, see "Note 8. Leases" in Item 8 included in this Form 10-K.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, the Company is involved in a variety of litigation matters in the ordinary course of its business and anticipates that it will become involved in new litigation matters in the future. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeFrom time to time, the Company is involved in a variety of litigation matters in the ordinary course of its business and anticipates that it will become involved in new litigation matters in the future. Item 4. Mine Safety Disclosures. Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare Repurchases The following table provides information about the Company's purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act for the periods indicated: Period Total Number of Shares Purchased (1)(2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares That May Yet to be Purchased Under the Plans or Programs October 2023 841 $ 44.04 — $ — November 2023 161 45.87 — — December 2023 92 54.86 — — Total 1,094 $ 45.22 — $ — (1) Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period.
Biggest changeShare Repurchases The following table provides information about the Company's purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act for the periods indicated: Period Total Number of Shares Purchased (1)(2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares That May Yet to be Purchased Under the Plans or Programs October 1-31, 2024 105 $ 61.25 — $ — November 1-30, 2024 169 83.31 — — December 1-31, 2024 184 93.16 — — Total 458 $ 82.21 — $ — (1) Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock awards during the period.
(2) The Company does not currently have a common stock repurchase program. 31 Table of Contents Performance Graph The following graph summarizes a five year comparison of the cumulative total returns for the Company’s common stock, the Standard & Poor’s 500 stock index and the KBW Regional Banking Total Return Index, each of which assumes an initial value of $100.00 on December 31, 2018 and reinvestment of dividends.
(2) The Company does not currently have a common stock repurchase program. 32 Table of Contents Performance Graph The following graph summarizes a five year comparison of the cumulative total returns for the Company’s common stock, the Standard & Poor’s 500 stock index and the KBW Regional Banking Total Return Index, each of which assumes an initial value of $100.00 on December 31, 2019 and reinvestment of dividends.
The Company has filed, without qualifications, its 2023 Domestic Company Section 303A CEO Certification regarding its compliance with the NYSE’s corporate governance listing standards. Holders At February 21, 2024, there were approximately 2,230 stockholders of record of our common stock. This number does not include stockholders who hold shares in the name of brokerage firms or other financial institutions.
The Company has filed, without qualifications, its 2024 Domestic Company Section 303A CEO Certification regarding its compliance with the NYSE’s corporate governance listing standards. Holders At February 18, 2025, there were approximately 2,246 stockholders of record of our common stock. This number does not include stockholders who hold shares in the name of brokerage firms or other financial institutions.
In addition, the Company paid a cash dividend of $0.27 per depository share to preferred stockholders on December 30, 2023, totaling $3.2 million.
In addition, the Company paid a cash dividend of $0.27 per depositary share to preferred stockholders on December 17, 2024, totaling $3.2 million.
The Company is not provided the exact number of or identities of these stockholders. There are no other classes of common equity outstanding. Dividends During the fourth quarter of 2023, the Company's BOD approved a cash dividend of $0.37 per common share. The dividend payment to stockholders totaled $40.5 million and was paid on December 1, 2023.
The Company is not provided the exact number of or identities of these stockholders. There are no other classes of common equity outstanding. Dividends During the fourth quarter of 2024, the Company's BOD approved a cash dividend of $0.38 per common share. The dividend payment to stockholders totaled $41.8 million and was paid on November 29, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe composition of nonaccrual loans HFI by loan portfolio segment were as follows: December 31, 2023 Nonaccrual Balance Percent of Nonaccrual Balance Percent of Total Loans HFI (dollars in millions) Municipal & nonprofit $ 6 2.2 % 0.01 % Tech & innovation 33 12.1 0.06 Other commercial and industrial 53 19.4 0.11 CRE - owner occupied 9 3.3 0.02 Other CRE - non-owner occupied 83 30.4 0.16 Residential 70 25.6 0.14 Construction and land development 19 7.0 0.04 Total non-accrual loans $ 273 100.0 % 0.54 % 51 Table of Contents December 31, 2022 Nonaccrual Balance Percent of Nonaccrual Balance Percent of Total Loans HFI (dollars in millions) Municipal & nonprofit $ 7 8.2 % 0.01 % Tech & innovation 1 1.2 0.00 Other commercial and industrial 24 28.2 0.04 CRE - owner occupied 12 14.1 0.02 Hotel franchise finance 10 11.8 0.02 Other CRE - non-owner occupied 8 9.4 0.02 Residential 19 22.4 0.04 Construction and land development 4 4.7 0.01 Total non-accrual loans $ 85 100.0 % 0.16 % Restructurings for Borrowers Experiencing Financial Difficulty The Company adopted the amendments in ASU 2022-02, which eliminated the accounting guidance on TDR loans for creditors and requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty made on or after January 1, 2023.
Biggest changeInterest income that would have been recorded under the original terms of nonaccrual loans was $24.5 million, $12.3 million, and $4.7 million for the years ended December 31, 2024, 2023, and 2022, respectively. 51 Table of Contents The composition of nonaccrual loans HFI by loan portfolio segment were as follows: December 31, 2024 Nonaccrual Balance Percent of Nonaccrual Balance Percent of Total Loans HFI (dollars in millions) Municipal & nonprofit $ 5 1.0 % 0.01 % Tech & innovation 60 12.6 0.11 Equity fund resources 1 0.2 0.00 Other commercial and industrial 17 3.6 0.03 CRE - owner occupied 5 1.0 0.01 Other CRE - non-owner occupied 243 51.1 0.45 Residential 88 18.5 0.17 Construction and land development 56 11.8 0.11 Other 1 0.2 0.00 Total non-accrual loans $ 476 100.0 % 0.89 % December 31, 2023 Nonaccrual Balance Percent of Nonaccrual Balance Percent of Total Loans HFI (dollars in millions) Municipal & nonprofit $ 6 2.2 % 0.01 % Tech & innovation 33 12.1 0.06 Other commercial and industrial 53 19.4 0.11 CRE - owner occupied 9 3.3 0.02 Other CRE - non-owner occupied 83 30.4 0.16 Residential 70 25.6 0.14 Construction and land development 19 7.0 0.04 Total non-accrual loans $ 273 100.0 % 0.54 % Restructurings for Borrowers Experiencing Financial Difficulty The following tables present the amortized cost of loans HFI that were modified during the period by loan portfolio segment: Amortized Cost Basis at December 31, 2024 Payment Delay and Term Extension Term Extension Interest Rate Reduction Payment Delay Total % of Total Class of Financing Receivable Year Ended (dollars in millions) Tech & innovation $ — $ 5 $ 1 $ 41 $ 47 1.4 % Other commercial and industrial — 7 — 86 93 1.0 Other CRE - non-owner occupied — 46 — 111 157 2.5 Total $ — $ 58 $ 1 $ 238 $ 297 0.6 % Amortized Cost Basis at December 31, 2023 Payment Delay and Term Extension Term Extension Interest Rate Reduction Payment Delay Total % of Total Class of Financing Receivable Year Ended (dollars in millions) Tech & innovation $ 1 $ 6 $ — $ 8 $ 15 0.5 % Other commercial and industrial — 23 — 8 31 0.4 CRE - owner occupied — 3 — — 3 0.2 Hotel franchise finance — 37 — — 37 1.0 Other CRE - non-owner occupied — 119 — — 119 2.0 Residential — — — 1 1 0.0 Total $ 1 $ 188 $ — $ 17 $ 206 0.4 % 52 Table of Contents The performance of these modified loans is monitored for 12 months following the modification.
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.
The Company’s liquidity is comprised of three primary classifications: 1) cash flows used in operating activities; 2) cash flows used in investing activities; and 3) cash flows provided by financing activities.
Incentive Compensation The Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Company and WAB, with at least $1 billion in total consolidated assets, that encourage inappropriate risks by providing an executive officer, employee, director, or principal stockholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity.
Incentive Compensation The Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities with at least $1 billion in total consolidated assets, including the Company and WAB, that encourage inappropriate risks by providing an executive officer, employee, director, or principal stockholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity.
On October 24, 2023, the federal bank regulatory agencies jointly issued a final rule to modernize CRA regulations consistent with the following key goals: (1) to encourage banks to expand access to credit, investment, and banking services in low to moderate income communities; (2) to adapt to changes in the banking industry, including internet and mobile banking and the growth of non-branch delivery systems; (3) to provide greater clarity and consistency in the application of the CRA regulations, including adoption of a new metrics-based approach to evaluating bank retail lending and community development financing; and (4) to tailor CRA evaluations and data collection to bank size and type, recognizing differences in bank size and business models may impact CRA evaluations and qualifying activities.
On October 24, 2023, the federal bank regulatory agencies jointly issued a final rule to modernize CRA regulations consistent with the following key goals: (1) to encourage banks to expand access to credit, investment, and banking services in low to moderate income communities; (2) to adapt to changes in the banking industry, including internet and mobile banking and the growth of non-branch delivery systems; (3) to provide greater clarity and consistency in the application of the CRA regulations, 69 Table of Contents including adoption of a new metrics-based approach to evaluating bank retail lending and community development financing; and (4) to tailor CRA evaluations and data collection to bank size and type, recognizing differences in bank size and business models may impact CRA evaluations and qualifying activities.
The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates used to manage the underlying business. 59 Table of Contents 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.
The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates used to manage the underlying business. 58 Table of Contents 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.
The Company has a Bank Secrecy Act and 71 Table of Contents USA PATRIOT Act BOD-approved compliance program and engages in relatively few transactions with foreign financial institutions or foreign persons. The FCRA’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement, and administer an identity theft prevention program.
The Company has a Bank Secrecy Act and USA PATRIOT Act BOD-approved compliance program and engages in relatively few transactions with foreign financial institutions or foreign persons. 70 Table of Contents The FCRA’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement, and administer an identity theft prevention program.
Summary of Significant Accounting Policies," in Item 8 of this Form 10-K 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 WAL, WAB, and certain of its non-banking subsidiaries are subject to comprehensive regulation under federal and state laws.
Summary of Significant Accounting Policies," in Item 8 of this Form 10-K 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 WAL, WAB, and certain of its non-depository subsidiaries are subject to comprehensive regulation under federal and state laws.
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 17. Commitments and Contingencies" in Item 8 of this Form 10-K) as calculated under regulatory accounting practices.
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 18. Commitments and Contingencies" in Item 8 of this Form 10-K) as calculated under regulatory accounting practices.
The Company believes it is in compliance with these requirements as of December 31, 2023. 57 Table of Contents Critical Accounting Estimates The Notes to the Consolidated Financial Statements contain a discussion of the Company's significant accounting policies, including information regarding recently issued accounting pronouncements, adoption of such policies, and the related impact of their adoption.
The Company believes it is in compliance with these requirements as of December 31, 2024. 57 Table of Contents Critical Accounting Estimates The Notes to the Consolidated Financial Statements contain a discussion of the Company's significant accounting policies, including information regarding recently issued accounting pronouncements, adoption of such policies, and the related impact of their adoption.
As of December 31, 2023 and 2022, 16% of the Company's CRE loans, excluding construction and land loans, were owner occupied, with substantially all of these loans secured by first liens and had an initial loan-to-value ratio of generally not more than 75%.
As of December 31, 2024 and 2023, 16% of the Company's CRE loans, excluding construction and land loans, were owner occupied, with substantially all of these loans secured by first liens and had an initial loan-to-value ratio of generally not more than 75%.
Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as the Company and WAB, from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain covered funds, subject to certain limited exceptions.
Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as WAL and WAB, from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain covered funds, subject to certain limited exceptions.
In June 2020, the Federal Reserve and other regulatory agencies issued a final rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring covered funds by: (1) streamlining the covered funds portion of the rule; (2) addressing the extraterritorial treatment of certain foreign funds; and (3) permitting banking entities to offer financial services and engage in 65 Table of Contents other activities that do not raise concerns the Volcker Rule was intended to address.
In June 2020, the Federal Reserve and other regulatory agencies issued a final rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring covered funds by: (1) streamlining the covered funds portion of the rule; (2) addressing the extraterritorial treatment of certain foreign funds; and (3) permitting banking entities to offer financial services and engage in other activities that do not raise concerns the Volcker Rule was intended to address.
At December 31, 2023, the Company's long-term liquidity needs primarily relate to funds required to support loan originations, commitments, and deposit withdrawals, which can be met by cash flows from investment payments and maturities, and investment sales, if necessary.
At December 31, 2024, 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.
Bank holding companies that have elected to become financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity that is either: (i) financial in nature or incidental to such financial activity 64 Table of Contents (as determined by the FRB in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the FRB).
Bank holding companies that have elected to become financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity that is either: (i) financial in nature or incidental to such financial activity (as determined by the FRB in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the FRB).
In the Company's analysis of Parent liquidity, it is assumed 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.
In the Company's analysis of Parent liquidity, it is assumed 60 Table of Contents 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.
The Company's liquidity, represented by cash and amounts due from banks, federal funds sold, loans HFS, and non-pledged marketable securities, is a result of the Company's operating, investing, and financing activities and related cash flows. The Company actively monitors and manages liquidity, and no less than quarterly will estimate probable liquidity needs on a 12-month horizon.
The Company's liquidity, represented by cash and amounts due from banks, loans HFS, and non-pledged marketable securities, is a result of the Company's operating, investing, and financing activities and related cash flows. The Company actively monitors and manages liquidity, and no less than quarterly will estimate probable liquidity needs on a 12-month horizon.
As elevated focus on the evolving industry dynamics facing the CRE market have emerged during the year, the Company has been proactive in establishing enhanced monitoring policies and procedures as it relates to its CRE loans and has undertaken actions to limit growth of its CRE portfolio, as further discussed in “Item 1.
As elevated focus on the evolving industry dynamics facing the CRE market have emerged over the past year, the Company has been proactive in establishing enhanced monitoring policies and procedures as it relates to its CRE loans and has undertaken actions to limit growth of its CRE portfolio, as further discussed in “Item 1.
Bankruptcy Code provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal banking agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. Capital Adequacy The Capital Rules established a comprehensive capital framework for U.S. banking organizations.
Bankruptcy Code provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal banking agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. 65 Table of Contents Capital Adequacy The Capital Rules established a comprehensive capital framework for U.S. banking organizations.
Net unamortized purchase premiums on acquired and purchased loans of $177 million and $195 million increased the carrying value of loans as of December 31, 2023 and 2022, respectively. 48 Table of Contents The following table sets forth the amount of loans outstanding by type of loan as of December 31, 2023 that were contractually due in under one year, one through five years, after five through 15 years, and more than 15 years based on remaining scheduled repayments of principal.
Net unamortized purchase premiums on acquired and purchased loans of $175 million and $177 million increased the carrying value of loans as of December 31, 2024 and 2023, respectively. 48 Table of Contents The following table sets forth the amount of loans outstanding by type of loan as of December 31, 2024 that were contractually due in under one year, one through five years, after five through 15 years, and more than 15 years based on remaining scheduled repayments of principal.
A change in statutes, regulations, or regulatory policies applicable to WAL or any of its subsidiaries could have a material effect on the business of the Company. 72 Table of Contents
A change in statutes, regulations, or regulatory policies applicable to WAL or any of its subsidiaries could have a material effect on the business of the Company. 71 Table of Contents
In addition, the Company has repurchase facilities, collateralized by securities and EBO loans, including assets 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 assets.
In addition, the Company has repurchase facilities, collateralized by securities or loans 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 assets.
As of December 31, 2023 and 2022, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the various banking agencies.
As of December 31, 2024 and 2023, the Company and the Bank exceeded the capital levels necessary to be classified as well-capitalized, as defined by the various banking agencies.
In addition, the Company's loan portfolio includes significant credit exposure to the CRE market as CRE related loans accounted for approximately 33% and 29% of total loans at December 31, 2023 and 2022 respectively. Non-owner occupied CRE loans are CRE loans for which the primary source of repayment is rental income generated from the collateral property.
In addition, the Company's loan portfolio includes significant credit exposure to the CRE market as CRE related loans accounted for approximately 30% and 33% of total loans at December 31, 2024 and 2023 respectively. Non-owner occupied CRE loans are CRE loans for which the primary source of repayment is rental income generated from the collateral property.
The BHCA requires prior FRB approval for a bank holding company to acquire, directly or indirectly, 5% or more of any class of voting securities of a commercial bank or its parent holding company and for a company, other than a bank holding company, to acquire 25% or more of any class of voting securities of a bank or bank holding company.
The BHCA requires prior FRB approval for a bank holding company to acquire, directly or indirectly, 5% or more of any class of voting securities of a commercial bank or its parent holding company and for a company, other than a bank 63 Table of Contents holding company, to acquire 25% or more of any class of voting securities of a bank or bank holding company.
Although the Company may continue 67 Table of Contents to include its existing trust preferred securities as Tier 1 capital, the prohibition on the use of these securities as Tier 1 capital going forward may limit the Company’s ability to raise capital in the future.
Although the Company may continue to include its existing trust preferred securities as Tier 1 capital, the prohibition on the use of these securities as Tier 1 capital going forward may limit the Company’s ability to raise capital in the future.
Each FHLB makes loans to its members in accordance with policies and procedures established by the board of directors of the FHLB. As a member, WAB must purchase and maintain stock in the FHLB of San Francisco. At December 31, 2023, WAB’s total investment in FHLB stock was $189 million.
Each FHLB makes loans to its members in accordance with policies and procedures established by the board of directors of the FHLB. As a member, WAB must purchase and maintain stock in the FHLB of San Francisco. At December 31, 2024, WAB’s total investment in FHLB stock was $138 million.
For the year ended December 31, 2023, the Company recognized $2.6 million provision for credit losses on HTM securities, compared to no provision of credit losses of for the same period in 2022, resulting in a total allowance of $7.8 million and $5.2 million as of December 31, 2023 and 2022, respectively. 47 Table of Contents Loans HFS The Company purchases and originates residential mortgage loans through its AmeriHome mortgage banking business channel that are held for sale or securitization.
For the year ended December 31, 2024, the Company recognized a provision for credit losses on HTM securities of $8.6 million, compared to $2.6 million for the same period in 2023, resulting in a total allowance of $16.4 million and $7.8 million as of December 31, 2024 and 2023, respectively. 47 Table of Contents Loans HFS The Company purchases and originates residential mortgage loans through its AmeriHome mortgage banking business channel that are held for sale or securitization.
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 $225.0 million, respectively, through one participating financial institution or, a combined total of $275.0 million per individual customer, with the entire amount being covered by FDIC insurance.
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 million and $265 million, respectively, through one participating financial institution or, a combined total of $315 million per individual customer, with the entire amount being covered by FDIC insurance.
WATC may engage in any of the enumerated activities or roles permitted for national trust banks listed in federal statutes and regulations as well as any other capacity that the OCC authorizes pursuant to federal law. As a non-depository national trust bank, WATC may not accept deposits and is not subject to legal requirements to maintain FDIC deposit insurance.
WATC may engage in any of the enumerated activities or roles permitted for national trust banks listed in federal statutes and regulations as well as any other capacity that the OCC authorizes pursuant to federal law. As a non-depository national trust bank, WATC may not accept deposits and does not maintain FDIC deposit insurance.
The Company believes it is fully compliant with the Volcker Rule, including as modified by the EGRRCPA rule. Dividends The Company has paid regular quarterly dividends since the third quarter of 2019.
The Company believes it is fully compliant with the Volcker Rule, including as modified by the EGRRCPA rule. 64 Table of Contents Dividends The Company has paid regular quarterly dividends since the third quarter of 2019.
The decrease in the ACL related to off-balance sheet credit exposures is due to lower unfunded loan commitments at December 31, 2023 compared to December 31, 2022. 53 Table of Contents Problem Loans The Company classifies loans consistent with federal banking regulations using a nine category grading system. These loan grades are described in further detail in "Item 1.
The increase in the ACL related to off-balance sheet credit exposures is due to higher unfunded loan commitments at December 31, 2024 compared to December 31, 2023. 53 Table of Contents Problem Loans The Company classifies loans consistent with federal banking regulations using a nine category grading system. These loan grades are described in further detail in "Item 1.
At December 31, 2023, the carrying value of qualifying debt was $895 million, compared to $893 million at December 31, 2022. Capital Resources The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.
At December 31, 2024, the carrying value of qualifying debt was $899 million, compared to $895 million at December 31, 2023. Capital Resources The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.
In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization customers for four or more hours.
In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization customers for four or more hours. The rule became effective May 1, 2022.
As of December 31, 2023 and 2022, no borrower relationships at both the commitment and funded loan level exceeded 5% of total loans HFI. Commercial and industrial loans made up 38% and 40% of the Company's HFI loan portfolio as of December 31, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, no borrower relationships at both the commitment and funded loan level exceeded 5% of total loans HFI. Commercial and industrial loans made up 43% and 38% of the Company's HFI loan portfolio as of December 31, 2024 and 2023, respectively.
WAB is a participant in the IntraFi Network, a network that offers deposit placement services such as CDARS and ICS, which offer products that qualify large deposits for FDIC insurance. At December 31, 2023, the Company had $13.3 billion of these reciprocal deposits, compared to $2.8 billion at December 31, 2022.
WAB is a participant in the IntraFi Network, a network that offers deposit placement services such as CDARS and ICS, which offer products that qualify large deposits for FDIC insurance. At December 31, 2024, the Company had $14.0 billion of these reciprocal deposits, compared to $13.3 billion at December 31, 2023.
Goodwill and other intangible assets acquired in a business combination that are determined to have an indefinite useful life are not subject to amortization, but are subsequently evaluated for impairment at least annually. The Company has goodwill totaling $527 million as of December 31, 2023 and 2022.
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 $659 million and $669 million as of December 31, 2024 and 2023, respectively.
In addition to the ACL on funded loans HFI, the Company maintains a separate ACL related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance balance totaled $31.6 million and $47.0 million at December 31, 2023 and 2022, respectively, and is included in Other liabilities on the Consolidated Balance Sheets.
In addition to the ACL on funded loans HFI, the Company maintains a separate ACL related to off-balance sheet credit exposures, including unfunded loan commitments. This allowance balance totaled $39.5 million and $31.6 million at December 31, 2024 and 2023, respectively, and is included in Other liabilities on the Consolidated Balance Sheet.
The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the year ended December 31, 2023 and 2022, the Company recorded a provision for credit losses of $62.6 million and $68.1 million, respectively.
The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the year ended December 31, 2024 and 2023, the Company recorded a provision for credit losses of $145.9 million and $62.6 million, respectively.
At December 31, 2023 and 2022, the Company also had wholesale brokered deposits of $6.6 billion and $4.8 billion, respectively. In addition, deposits for which the Company provides account holders with earnings credits or referral fees totaled $17.8 billion and $12.9 billion at December 31, 2023 and 2022, respectively.
At December 31, 2024 and 2023, the Company also had wholesale brokered deposits of $6.9 billion and $6.6 billion, respectively. In addition, deposits for which the Company provides account holders with earnings credits or referral fees totaled $20.7 billion and $17.8 billion at December 31, 2024 and 2023, respectively.
The increase in net interest income was driven by a $4.1 billion increase in average interest earning assets, partially offset by an increase of $9.9 billion in average interest-bearing liabilities.
The increase in net interest income was driven by an $8.9 billion increase in average interest earning assets, partially offset by an increase of $4.5 billion in average interest-bearing liabilities.
Notwithstanding these changes, the capital planning and risk management practices of the Company and the Bank will continue to be reviewed through the regular supervisory processes of the FRB.
Notwithstanding these changes, the capital planning and risk management practices of WAL and WAB will continue to be reviewed through the regular supervisory processes of the FRB.
In connection with the special assessment, the Company recognized a charge of $66.3 million during the year ended December 31, 2023. Financial Privacy and Data Security The Company is subject to federal laws, including the GLBA, and certain state laws containing consumer privacy protection provisions.
In connection with the special assessment, the Company recognized a charge of $8.3 million during the year ended December 31, 2024. 68 Table of Contents Financial Privacy and Data Security The Company is subject to federal laws, including the GLBA, and certain state laws containing consumer privacy protection provisions.
The Capital Rules: (i) include CET1 and the related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations.
The Capital Rules: (i) include CET1 and the related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) set forth deductions from and adjustments to capital.
The increase in stockholders' equity is primarily a function of net income and unrealized fair value gains on AFS securities recorded net of tax in other comprehensive income, offset by dividends to common and preferred stockholders. 45 Table of Contents 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.
The increase in stockholders' equity is primarily a function of net income, partially offset by dividends to common and preferred stockholders. 45 Table of Contents 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.
Of the non-owner occupied office loan balance as of 50 Table of Contents December 31, 2023, $477 million is scheduled to mature in 2024. These office loans primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects with more modern standards attractive to in-office employers in today’s environment, including enhanced on-site amenities.
Of the non-owner occupied office loan balance as of December 31, 2024, $1.1 billion is scheduled to mature in 2025. These office loans primarily consist of shorter-term bridge loans that enable borrowers to reposition or redevelop projects with more modern standards attractive to in-office employers in today’s environment, including enhanced on-site amenities.
These include, for example, the requirement that mortgage servicing assets, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.
These include, for example, the requirement that mortgage servicing assets, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 25% of CET1 capital.
Net deferred loan fees of $108 million and $141 million reduced the carrying value of loans as of December 31, 2023 and 2022, respectively.
Net deferred loan fees of $106 million and $108 million reduced the carrying value of loans as of December 31, 2024 and 2023, respectively.
The following table summarizes the allocation of the ACL on loans HFI by loan portfolio segment: December 31, 2023 December 31, 2022 Allowance for credit losses Percent of total allowance for credit losses Percent of loan type to total loans HFI Allowance for credit losses Percent of total allowance for credit losses Percent of loan type to total loans HFI (dollars in millions) Warehouse lending $ 5.8 1.7 % 13.2 % $ 8.4 2.7 % 10.7 % Municipal & nonprofit 14.7 4.4 3.1 15.9 5.1 3.0 Tech & innovation 42.1 12.5 5.6 30.8 10.0 4.4 Equity fund resources 1.3 0.4 1.7 6.4 2.1 7.2 Other commercial and industrial 81.4 24.2 14.8 85.9 27.7 15.0 CRE - owner occupied 6.0 1.8 3.3 7.1 2.3 3.2 Hotel franchise finance 33.4 9.9 7.6 46.9 15.2 7.4 Other CRE - non-owner occupied 96.0 28.5 11.9 47.4 15.3 10.5 Residential 23.1 6.9 26.4 30.4 9.8 27.0 Residential - EBO — — 2.4 — — 3.6 Construction and land development 30.4 9.0 9.6 27.4 8.8 7.7 Other 2.5 0.7 0.4 3.1 1.0 0.3 Total $ 336.7 100.0 % 100.0 % $ 309.7 100.0 % 100.0 % During the years ended December 31, 2023 and 2022, net loan charge-offs to average loans outstanding were 0.06% and approximately 0.00%, respectively.
The following table summarizes the allocation of the ACL on loans HFI by loan portfolio segment: December 31, 2024 December 31, 2023 Allowance for credit losses Percent of total allowance for credit losses Percent of loan type to total loans HFI Allowance for credit losses Percent of total allowance for credit losses Percent of loan type to total loans HFI (dollars in millions) Warehouse lending $ 6.4 1.7 % 15.3 % $ 5.8 1.7 % 13.2 % Municipal & nonprofit 14.7 3.9 3.0 14.7 4.4 3.1 Tech & innovation 55.9 15.0 6.3 42.1 12.5 5.6 Equity fund resources 1.6 0.4 1.7 1.3 0.4 1.7 Other commercial and industrial 77.8 20.8 17.1 81.4 24.2 14.8 CRE - owner occupied 3.4 0.9 3.1 6.0 1.8 3.3 Hotel franchise finance 35.3 9.4 7.1 33.4 9.9 7.6 Other CRE - non-owner occupied 134.4 36.0 11.8 96.0 28.5 11.9 Residential 19.7 5.3 24.1 23.1 6.9 26.4 Residential - EBO — — 1.8 — — 2.4 Construction and land development 21.3 5.7 8.4 30.4 9.0 9.6 Other 3.3 0.9 0.3 2.5 0.7 0.4 Total $ 373.8 100.0 % 100.0 % $ 336.7 100.0 % 100.0 % During the years ended December 31, 2024 and 2023, net loan charge-offs to average loans outstanding were 0.18% and 0.06%, respectively.
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: Year Ended December 31, 2023 2022 2021 (dollars in millions, except per share amounts) Net income $ 722.4 $ 1,057.3 $ 899.2 Net income available to common stockholders 709.6 1,044.5 895.7 Earnings per share - basic 6.55 9.74 8.72 Earnings per share - diluted 6.54 9.70 8.67 Return on average assets 1.03 % 1.62 % 1.83 % Return on average equity 12.6 20.7 22.3 Return on average tangible common equity (1) 14.9 25.4 26.2 Net interest margin 3.63 3.67 3.41 (1) See Non-GAAP Financial Measures section beginning on page 37.
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: Year Ended December 31, 2024 2023 2022 (dollars in millions, except per share amounts) Net income $ 787.7 $ 722.4 $ 1,057.3 Net income available to common stockholders 774.9 709.6 1,044.5 Earnings per share - basic 7.14 6.55 9.74 Earnings per share - diluted 7.09 6.54 9.70 Return on average assets 0.99 % 1.03 % 1.62 % Return on average equity 12.2 12.6 20.7 Return on average tangible common equity (1) 14.0 14.9 25.4 Net interest margin 3.58 3.63 3.67 (1) See Non-GAAP Financial Measures section beginning on page 38.
In the normal course of business, the Company also modifies EBO loans, which are delinquent FHA, VA, or USDA insured or guaranteed loans repurchased under the terms of the GNMA MBS program and can be repooled or resold when loans are brought current.
In the normal course of business, the Company also modifies EBO loans, which are delinquent FHA, VA, or USDA insured or guaranteed loans repurchased under the terms of the GNMA MBS program and can be repooled or resold when loans are brought current either through the borrower's reperformance or completion of a loan modification.
Federal Reserve System As a member of the Federal Reserve System, WAB has historically been required by law to maintain reserves against its transaction deposits, which were to be held in cash or with the FRB. In response to the COVID-19 pandemic, the Federal Reserve reduced the reserve requirement ratios to zero percent effective on March 26, 2020.
Federal Reserve System As a member of the Federal Reserve System, WAB has historically been required by law to maintain reserves against its transaction deposits, which were to be held in cash or with the FRB. Since March 26, 2020, the reserve requirement ratios have been zero percent.
The taxable-equivalent adjustment was $35.5 million and $33.7 million for the year ended December 31, 2023 and 2022, respectively. (2) Included in the yield computation are net loan fees of $131.2 million and $132.2 million for the year ended December 31, 2023 and 2022, respectively. (3) Includes non-accrual loans.
The taxable-equivalent adjustment was $39.5 million and $35.5 million for the year ended December 31, 2024 and 2023, respectively. (2) Included in the yield computation are net loan fees of $109.0 million and $131.2 million for the year ended December 31, 2024 and 2023, respectively. (3) Includes non-accrual loans.
The decrease in net interest margin of 4 basis points compared to 2022 is the result of higher funding costs on deposits and borrowings, partially offset by higher loan and investment security yields during 2023. 42 Table of Contents Provision for Credit Losses The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans, unfunded loan commitments, and investment securities.
The decrease in net interest margin of 5 basis points compared to 2023 is the result of higher funding costs on deposits and borrowings, coupled with lower asset yields during 2024. 42 Table of Contents Provision for Credit Losses The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans, unfunded loan commitments, and investment securities.
Specific to uninsured time deposits, the Company made certain assumptions to estimate uninsured amounts by maturity. At the account level, deposit insurance was assumed to apply first to non-time deposits, then any remaining insurance amounts were applied to maturity groupings on a pro-rata basis, based on the depositor's total amount of time deposits.
At the account level, deposit insurance was assumed to apply first to non-time deposits, then any remaining insurance amounts were applied to maturity groupings on a pro-rata basis, based on the depositor's total amount of time deposits.
In addition to supervision by the federal banking agencies with primary jurisdiction over the Company and WAB, AmeriHome is subject to the rules, regulations and oversight of certain federal, state and local governmental authorities, including the CFPB, HUD, and GNMA, and government-sponsored enterprises in the mortgage industry such as FHLMC and FNMA. 63 Table of Contents Further, AmeriHome 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.
Further, AmeriHome 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; 62 Table of Contents • 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 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.
December 31, 2023 2022 (dollars in millions) Total nonaccrual loans (1) $ 273 $ 85 Loans past due 90 days or more on accrual status (2) 42 — Accruing restructured loans 95 2 Total nonperforming loans 410 87 Other assets acquired through foreclosure, net $ 8 $ 11 Nonaccrual loans to funded loans HFI 0.54 % 0.16 % Loans past due 90 days or more on accrual status to funded loans HFI 0.08 — (1) Includes loan modifications and borrowers experiencing financial difficulty of $111 million and TDR loans of $12 million at December 31, 2023 and 2022, respectively.
December 31, 2024 2023 (dollars in millions) Total nonaccrual loans (1) $ 476 $ 273 Loans past due 90 days or more on accrual status (2) — 42 Accruing restructured loans $ 128 95 Total nonperforming loans 604 410 Other assets acquired through foreclosure, net $ 52 $ 8 Nonaccrual loans to funded loans HFI 0.89 % 0.54 % Loans past due 90 days or more on accrual status to funded loans HFI (2) — 0.08 (1) Includes loan modifications to borrowers experiencing financial difficulty of $169 million and $111 million at December 31, 2024 and 2023, respectively.
The following table presents information regarding potential and actual problem loans, consisting of loans graded as Special Mention, Substandard, Doubtful, and Loss, but which are still performing: December 31, 2023 Number of Loans Problem Loan Balance Percent of Problem Loan Balance Percent of Total Loans HFI (dollars in millions) Warehouse lending 1 $ 26 3.6 % 0.05 % Municipal & nonprofit 2 18 2.5 0.04 Tech & innovation 14 49 6.8 0.10 Other commercial and industrial 50 95 13.2 0.19 CRE - owner occupied 9 3 0.4 0.01 Hotel franchise finance 9 203 28.3 0.40 Other CRE - non-owner occupied 15 251 35.0 0.50 Residential 143 72 10.0 0.14 Construction and land development 1 1 0.1 0.00 Other 20 1 0.1 0.00 Total 264 $ 719 100.0 % 1.43 % December 31, 2022 Number of Loans Problem Loan Balance Percent of Problem Loan Balance Percent of Total Loans HFI (dollars in millions) Warehouse lending 1 $ 43 11.3 % 0.08 % Tech & innovation 27 81 21.4 0.16 Other commercial and industrial 50 36 9.5 0.07 CRE - owner occupied 8 4 1.0 0.01 Hotel franchise finance 2 26 6.9 0.05 Other CRE - non-owner occupied 9 55 14.5 0.10 Residential 39 20 5.3 0.04 Construction and land development 2 98 25.9 0.19 Other 18 16 4.2 0.03 Total 156 $ 379 100.0 % 0.73 % Mortgage Servicing Rights The fair value of the Company's MSRs related to residential mortgage loans totaled $1.1 billion as of December 31, 2023 and 2022.
The following table presents information regarding potential and actual problem loans, consisting of loans graded as Special Mention, Substandard, Doubtful, and Loss, but which are still performing: December 31, 2024 Number of Loans Problem Loan Balance Percent of Problem Loan Balance Percent of Total Loans HFI (dollars in millions) Municipal & nonprofit 2 $ 18 3.7 % 0.03 % Other commercial and industrial 89 121 24.8 0.23 CRE - owner occupied 9 7 1.4 0.01 Hotel franchise finance 8 112 22.9 0.21 Other CRE - non-owner occupied 9 136 27.8 0.25 Residential 169 92 18.8 0.17 Other 33 3 0.6 0.01 Total 319 $ 489 100.0 % 0.91 % December 31, 2023 Number of Loans Problem Loan Balance Percent of Problem Loan Balance Percent of Total Loans HFI (dollars in millions) Warehouse lending 1 $ 26 3.6 % 0.05 % Municipal & nonprofit 2 18 2.5 0.04 Tech & innovation 14 49 6.8 0.10 Other commercial and industrial 50 95 13.2 0.19 CRE - owner occupied 9 3 0.4 0.01 Hotel franchise finance 9 203 28.3 0.40 Other CRE - non-owner occupied 15 251 35.0 0.50 Residential 143 72 10.0 0.14 Construction and land development 1 1 0.1 0.00 Other 20 1 0.1 0.00 Total 264 $ 719 100.0 % 1.43 % Mortgage Servicing Rights The fair value of the Company's MSRs related to residential mortgage loans totaled $1.1 billion as of December 31, 2024 and 2023.
At December 31, 2022, approximately $21.6 billion, or 74.5% of total variable rate loans were subject to rate floors with a weighted average interest rate of 4.1%. 49 Table of Contents Concentrations of Lending Activities The Company monitors concentrations of lending activities at the product and borrower relationship level.
At December 31, 2023, approximately $22.3 billion, or 76.2%, of total variable rate loans were subject to rate floors with a weighted average interest rate of 4.6%. 49 Table of Contents Concentrations of Lending Activities The Company monitors concentrations of lending activities at the product and borrower relationship level.
Accordingly, capital ratios and amounts for 2022 include a 25% reduction to the capital benefit that resulted from the increased ACL related to the adoption of ASC 326, which has increased to include a 50% reduction beginning in 2023.
Accordingly, capital ratios and amounts in 2024 include a 25% capital benefit that resulted from the increased ACL related to the adoption of ASC 326, compared to a 50% capital benefit for 2023.
The vast majority of these projects are located in suburban locations in the Company's core footprint states (Arizona, California, and Nevada), with central business district and midtown exposure totaling approximately 2% and 10% of office loans as of December 31, 2023, respectively.
The vast majority of these projects are located in suburban locations in the Company's core footprint states (Arizona, California, and Nevada), with central business district and midtown exposure totaling less than 1% and 11% of office loans as of December 31, 2024, respectively.
The following table presents the composition by property type and weighted average LTV of the Company’s CRE non-owner occupied loans: December 31, 2023 Amount Percent of CRE-Non OO Percent of Total HFI Loans Weighted Average LTV (1) (dollars in millions) Hotel $ 4,235 43.9 % 8.4 % 48.1 % Office 2,358 24.4 4.7 58.8 Retail 753 7.8 1.5 61.0 Multifamily 566 5.9 1.1 49.7 Industrial 565 5.8 1.1 50.4 Time share 378 3.9 0.8 34.9 Senior care 160 1.7 0.3 41.8 Medical 124 1.3 0.2 51.2 Other 511 5.3 1.0 43.4 Total CRE - non-owner occupied $ 9,650 100.0 % 19.2 % 51.1 % (1) The weighted average LTVs in the above table are based on the most recent available information, if current appraisals are not available .
The following tables present the composition by property type and weighted average LTV of the Company’s CRE non-owner occupied loans: December 31, 2024 Amount Percent of CRE-Non OO Percent of Total HFI Loans Weighted Average LTV (1) (dollars in millions) Hotel $ 4,167 42.3 % 7.8 % 46.7 % Office 2,337 23.7 4.4 69.0 Retail 783 7.9 1.4 55.7 Multifamily 632 6.4 1.2 40.7 Industrial 580 5.9 1.1 38.9 Time share 467 4.7 0.9 33.6 Medical 145 1.5 0.3 61.5 Senior care 142 1.4 0.2 41.2 Other 615 6.2 1.1 50.2 Total CRE - non-owner occupied $ 9,868 100.0 % 18.4 % 51.6 % December 31, 2023 Amount Percent of CRE-Non OO Percent of Total HFI Loans Weighted Average LTV (1) (dollars in millions) Hotel $ 4,235 43.9 % 8.4 % 48.1 % Office 2,358 24.4 4.7 58.8 Retail 753 7.8 1.5 61.0 Multifamily 566 5.9 1.1 49.7 Industrial 565 5.8 1.1 50.4 Time share 378 3.9 0.8 34.9 Senior care 160 1.7 0.3 41.8 Medical 124 1.3 0.2 51.2 Other 511 5.3 1.0 43.4 Total CRE - non-owner occupied $ 9,650 100.0 % 19.2 % 51.1 % (1) The weighted average LTVs in the above table are based on the most recent available information, if current appraisals are not available .
Prompt Corrective Action and Safety and Soundness Pursuant to Section 38 of the FDIA, federal banking agencies are required to take “prompt corrective action” should a depository institution fail to meet certain capital adequacy standards.
The Company has elected this capital relief option. 66 Table of Contents Prompt Corrective Action and Safety and Soundness Pursuant to Section 38 of the FDIA, federal banking agencies are required to take “prompt corrective action” should a depository institution fail to meet certain capital adequacy standards.
The following table summarizes the Company's key asset quality metrics for loans HFI: At or for the Year Ended December 31, 2023 2022 2021 (dollars in millions) Nonaccrual loans $ 273 $ 85 $ 73 Repossessed assets 8 11 12 Non-performing assets 323 98 87 Nonaccrual loans to funded loans 0.54 % 0.16 % 0.19 % Nonaccrual and repossessed assets to total assets 0.40 0.14 0.15 Allowance for loan losses to funded loans 0.67 0.60 0.65 Allowance for credit losses to funded loans 0.73 0.69 0.74 Allowance for loan losses to nonaccrual loans 123 364 348 Allowance for credit losses to nonaccrual loans 135 419 400 Net charge-offs to average loans outstanding 0.06 0.00 0.02 35 Table of Contents Asset and Deposit Growth The Company’s assets and liabilities are comprised primarily of loans and deposits.
The following table summarizes the Company's key asset quality metrics for loans HFI: At or for the Year Ended December 31, 2024 2023 2022 (dollars in millions) Nonaccrual loans $ 476 $ 273 $ 85 Repossessed assets 52 8 11 Non-performing assets 528 418 98 Nonaccrual loans to funded loans 0.89 % 0.54 % 0.16 % Nonaccrual and repossessed assets to total assets 0.65 0.40 0.14 Allowance for loan losses to funded loans 0.70 0.67 0.60 Allowance for credit losses to funded loans 0.77 0.73 0.69 Allowance for loan losses to nonaccrual loans 79 123 364 Allowance for credit losses to nonaccrual loans 87 135 419 Net charge-offs to average loans outstanding 0.18 0.06 0.00 36 Table of Contents Asset and Deposit Growth The Company’s assets and liabilities are comprised primarily of loans and deposits.
The Company also provides an array of specialized financial services across the country, including mortgage banking services through AmeriHome, treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry. 2023 Financial Highlights • Net income available to common stockholders of $709.6 million for 2023, a decrease from $1.0 billion for 2022 • Diluted earnings per share of $6.54 for 2023, a decrease from $9.70 per share for 2022 • Net revenue of $2.6 billion, constituting year-over-year growth of 3.1%, or $78.7 million, compared to an increase in non-interest expenses of 40.3%, or $466.7 million • PPNR 1 decreased $388.0 million to $1.0 billion, compared to $1.4 billion in 2022 • Effective tax rate of 22.6% for 2023, compared to 19.7% for 2022 • Total loans HFI of $50.3 billion, down $1.6 billion from December 31, 2022 • Total deposits of $55.3 billion, up $1.7 billion from December 31, 2022 • Stockholders' equity of $6.1 billion, an increase of $722 million from December 31, 2022 • Nonperforming assets (nonaccrual loans and repossessed assets) increased to 0.40% of total assets, from 0.14% at December 31, 2022 • Net loan charge-offs to average loans outstanding of approximately 0.06% for 2023, compared to approximately 0.00% for 2022 • Net interest margin of 3.63% in 2023, decreased from 3.67% in 2022 • Return on average assets of 1.03% for 2023, compared to 1.62% for 2022 • Tangible common equity ratio 1 of 7.3%, compared to 6.5% at December 31, 2022 • Tangible book value per share, net of tax 1 , of $46.72, an increase of 16.1% from $40.25 at December 31, 2022 • Efficiency ratio 1 of 61.1% in 2023, compared to 44.9% in 2022 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 year ended December 31, 2023. 1 See Non-GAAP Financial Measures section beginning on page 37. 34 Table of Contents As a bank holding company, management focuses on key ratios in evaluating the Company's financial condition and results of operations.
The Company also provides an array of specialized financial services across the country, including mortgage banking services through AmeriHome, treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry. 2024 Financial Highlights • Net income available to common stockholders of $774.9 million for 2024, an increase from $709.6 million for 2023 • Diluted earnings per share of $7.09 for 2024, an increase from $6.54 per share for 2023 • Net revenue of $3.2 billion, constituting year-over-year growth of 20.7%, or $542.5 million, compared to an increase in non-interest expenses of 24.7%, or $401.6 million • PPNR 1 increased $140.9 million to $1.1 billion, compared to $996.2 million in 2023 • Effective tax rate o f 20.5% for 2024, compared to 22.6% for 2023 • Total loans HFI of $53.7 billion, up $3.4 billion from December 31, 2023 • Total deposits of $66.3 billion, up $11.0 billion from December 31, 2023 • Stockholders' equity of $6.7 billion, an increase of $629 million from December 31, 2023 • Nonperforming assets (nonaccrual loans and repossessed assets) increased to 0.65% of total assets, from 0.40% at December 31, 2023 • Net loan charge-offs to average loans outstanding of 0.18% for 2024, compared to 0.06% for 2023 • Net interest margin of 3.58% in 2024, decreased from 3.63% in 2023 • Return on average assets of 0.99% for 2024, compared to 1.03% for 2023 • Tangible common equity ratio 1 of 7.2%, compared to 7.3% at December 31, 2023 • Tangible book value per share, net of tax 1 , of $52.27, an increase of 11.9% from $46.72 at December 31, 2023 • Efficiency ratio 1 of 63.2% in 2024, compared to 61.1% in 2023 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 year ended December 31, 2024. 1 See Non-GAAP Financial Measures section beginning on page 38. 35 Table of Contents As a bank holding company, management focuses on key ratios in evaluating the Company's financial condition and results of operations.
The following is a summary of acquired intangible assets: December 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in millions) Subject to amortization Core deposits $ 14 $ 12 $ 2 $ 14 $ 11 $ 3 Correspondent customer relationships 76 10 66 76 7 69 Customer relationships 18 6 12 18 3 15 Developed technology 4 2 2 4 1 3 Operating licenses 56 4 52 56 2 54 Trade names 10 2 8 10 1 9 $ 178 $ 36 $ 142 $ 178 $ 25 $ 153 Deferred Tax Assets As of December 31, 2023, the net DTA balance totaled $287 million, a decrease of $24 million from $311 million as of December 31, 2022.
The following is a summary of acquired intangible assets: December 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in millions) Subject to amortization Core deposits $ 14 $ 13 $ 1 $ 14 $ 12 $ 2 Correspondent customer relationships 76 14 62 76 10 66 Customer relationships 18 9 9 18 6 12 Developed technology 4 2 2 4 2 2 Operating licenses 56 6 50 56 4 52 Trade names 10 2 8 10 2 8 $ 178 $ 46 $ 132 $ 178 $ 36 $ 142 Deferred Tax Assets As of December 31, 2024, the net DTA balance totaled $281 million, a decrease from $287 million as of December 31, 2023.
As of December 31, 2023, modified loans on nonaccrual status totaled $111 million and the remaining $95 million were current with contractual payments.
As of December 31, 2024, modified loans of $128 million were current with contractual payments and $169 million were on nonaccrual status. As of December 31, 2023, modified loans of $95 million were current with contractual payments and $111 million were on nonaccrual status.
In addition, loans HFS increased $218 million at December 31, 2023, up from $1.2 billion as of December 31, 2022. Total liabilities increased $2.4 billion, or 3.9%, to $64.8 billion at December 31, 2023, compared to $62.4 billion at December 31, 2022. The increase in liabilities is due primarily to an increase in total deposits and borrowings.
In addition, loans HFS increased $884 million at December 31, 2024, up from $1.4 billion as of December 31, 2023. Total liabilities increased $9.4 billion, or 14.6%, to $74.2 billion at December 31, 2024, compared to $64.8 billion at December 31, 2023. The increase in liabilities is due primarily to an increase in total deposits.
Accordingly, capital ratios and amounts for 2022 include a 25% reduction to the capital benefit that resulted from the increased ACL related to the adoption of ASC 326, which has increased to include a 50% reduction beginning in 2023.
Accordingly, capital ratios and amounts for 2024 include a 25% capital benefit that resulted from the increased ACL related to the adoption of ASC 326, compared to a 50% capital benefit for 2023.
The actual capital amounts and ratios for the Company and the Bank are presented in the following tables: Total Capital Tier 1 Capital Risk-Weighted Assets Tangible Average Assets Total Capital Ratio Tier 1 Capital Ratio Tier 1 Leverage Ratio Common Equity Tier 1 (dollars in millions) December 31, 2023 WAL $ 7,201 $ 6,035 $ 52,517 $ 70,295 13.7 % 11.5 % 8.6 % 10.8 % WAB 6,802 6,229 52,508 70,347 13.0 11.9 8.9 11.9 Well-capitalized ratios 10.0 8.0 5.0 6.5 Minimum capital ratios 8.0 6.0 4.0 4.5 December 31, 2022 WAL $ 6,586 $ 5,449 $ 54,461 $ 69,814 12.1 % 10.0 % 7.8 % 9.3 % WAB 6,280 5,737 54,411 69,762 11.5 10.5 8.2 10.5 Well-capitalized ratios 10.0 8.0 5.0 6.5 Minimum capital ratios 8.0 6.0 4.0 4.5 The Company and the Bank are also subject to liquidity and other regulatory requirements as administered by the federal banking agencies.
The actual capital amounts and ratios for the Company and the Bank are presented in the following tables: Total Capital Tier 1 Capital Risk-Weighted Assets Tangible Average Assets Total Capital Ratio Tier 1 Capital Ratio Tier 1 Leverage Ratio Common Equity Tier 1 (dollars in millions) December 31, 2024 WAL $ 7,922 $ 6,687 $ 56,019 $ 82,691 14.1 % 11.9 % 8.1 % 11.3 % WAB 7,444 6,803 55,983 82,562 13.3 12.2 8.2 12.2 Well-capitalized ratios 10.0 8.0 5.0 6.5 Minimum capital ratios 8.0 6.0 4.0 4.5 December 31, 2023 WAL $ 7,201 $ 6,035 $ 52,517 $ 70,295 13.7 % 11.5 % 8.6 % 10.8 % WAB 6,802 6,229 52,508 70,347 13.0 11.9 8.9 11.9 Well-capitalized ratios 10.0 8.0 5.0 6.5 Minimum capital ratios 8.0 6.0 4.0 4.5 The Company and the Bank are also subject to liquidity and other regulatory requirements as administered by the federal banking agencies.
The rule became effective May 1, 2022. 70 Table of Contents Community Reinvestment Act and Fair Lending Laws WAB has a responsibility under the CRA to help meet the credit needs of its communities, including low and moderate income neighborhoods.
Community Reinvestment Act and Fair Lending Laws WAB has a responsibility under the CRA to help meet the credit needs of its communities, including low and moderate income neighborhoods.
The increase in the effective tax rate from 2022 to 2023 is primarily due to a decrease in pretax book income, decreases in investment tax credits and increases in nondeductible insurance premium expenses during 2023. 44 Table of Contents 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: 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: offers both commercial banking services to enterprises in consumer-related sectors and consumer banking services, such as residential mortgage banking. • Corporate & Other: consists of the Company's investment portfolio, Corporate borrowings and other related items, income and expense items not allocated to other reportable segments, and inter-segment eliminations.
The decrease in the effective tax rate for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to increases in investment tax credit benefits and tax-exempt income. 44 Table of Contents 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: 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: offers both commercial banking services to enterprises in consumer-related sectors and consumer banking services, such as residential mortgage banking. • Corporate & Other: consists of the Company's investment portfolio, Corporate borrowings and other related items, income and expense items not allocated to other reportable segments, and inter-segment eliminations.
Generally, Sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses arising from transactions with non-insured affiliates by limiting the extent to which a bank or its subsidiaries may engage in covered transactions with any one affiliate and with all affiliates of the bank in the aggregate, and requiring such transactions be on terms consistent with safe and sound banking practices. 68 Table of Contents Further, Section 22(h) of the FRA and its implementing Regulation O restricts loans to directors, executive officers, and principal stockholders (“insiders”).
Generally, Sections 23A and 23B of the FRA are intended to protect insured depository institutions from losses arising from transactions with non-insured affiliates by limiting the extent to which a bank or its subsidiaries may engage in covered transactions with any one affiliate and with all affiliates of the bank in the aggregate, and requiring such transactions be on terms consistent with safe and sound banking practices.
Amount of Commitment Expiration per Period Total Amounts Committed Less Than 1 Year 1-3 Years 3-5 Years After 5 Years (in millions) Commitments to extend credit $ 13,291 $ 3,860 $ 5,637 $ 2,195 $ 1,599 Credit card commitments and financial guarantees 418 418 — — — Letters of credit 222 166 6 50 — Total $ 13,931 $ 4,444 $ 5,643 $ 2,245 $ 1,599 The following table sets forth certain information regarding short-term borrowings: December 31, 2023 2022 2021 (dollars in millions) Repurchase Agreements: Maximum month-end balance $ 2,614 $ 523 $ 22 Balance at end of year 6 27 17 Average balance 1,076 76 20 Federal Funds Purchased Maximum month-end balance 745 1,860 2,283 Balance at end of year 175 640 675 Average balance 127 568 419 FHLB Advances: Maximum month-end balance 11,000 6,000 4,200 Balance at end of year 6,200 4,300 — Average balance 3,732 2,526 393 FRB Advances: Maximum month-end balance 1,300 — — Balance at end of year — — — Average balance 1,962 — — Warehouse borrowings: Maximum month-end balance 2,101 160 820 Balance at end of year 376 — — Average balance 855 201 442 Total Short-Term Borrowed Funds $ 6,757 $ 4,967 $ 692 Weighted average interest rate at end of year 5.72 % 4.64 % 0.16 % Weighted average interest rate during year 5.58 2.28 0.67 The Company has also committed to irrevocably and unconditionally guarantee the payments or distributions with respect to the holders of preferred securities of the Company's eight statutory business trusts to the extent the trusts have not made such payments or distributions, including: 1) accrued and unpaid distributions; 2) the redemption price; and 3) upon a dissolution or termination of the trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the trust remaining available for distribution.
Amount of Commitment Expiration per Period Total Amounts Committed Less Than 1 Year 1-3 Years 3-5 Years After 5 Years (in millions) Commitments to extend credit $ 13,546 $ 3,298 $ 5,465 $ 2,279 $ 2,504 Credit card commitments and financial guarantees 585 585 — — — Letters of credit 437 179 29 137 92 Total $ 14,568 $ 4,062 $ 5,494 $ 2,416 $ 2,596 The following table sets forth certain information regarding short-term borrowings: December 31, 2024 2023 2022 (dollars in millions) Repurchase Agreements: Maximum month-end balance $ 205 $ 2,614 $ 523 Balance at end of year 14 6 27 Average balance 15 1,076 76 Federal Funds Purchased Maximum month-end balance 210 745 1,860 Balance at end of year — 175 640 Average balance 17 127 568 FHLB Advances: Maximum month-end balance 6,300 11,000 6,000 Balance at end of year 3,100 6,200 4,300 Average balance 3,375 3,732 2,526 FRB Advances: Maximum month-end balance — 1,300 — Balance at end of year — — — Average balance — 1,962 — Warehouse borrowings: Maximum month-end balance 416 2,101 160 Balance at end of year — 376 — Average balance 372 855 201 Total Short-Term Borrowed Funds $ 3,114 $ 6,757 $ 4,967 Weighted average interest rate at end of year 4.75 % 5.72 % 4.64 % Weighted average interest rate during year 5.60 5.58 2.28 The Company has also committed to irrevocably and unconditionally guarantee the payments or distributions with respect to the holders of preferred securities of the Company's eight statutory business trusts to the extent the trusts have not made such payments or distributions, including: 1) accrued and unpaid distributions; 2) the redemption price; and 3) upon a dissolution or termination of the trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the trust remaining available for distribution.
The Company’s management is not aware of any practice, condition, or violation that might lead to the termination of its deposit insurance. 69 Table of Contents To recover the loss to the Deposit Insurance Fund arising from the bank failures that occurred earlier in 2023, the FDIC approved an annual special assessment rate of approximately 13.4 basis points.
The Company’s management is not aware of any practice, condition, or violation that might lead to the termination of its deposit insurance. To recover the loss to the DIF arising from the bank failures that occurred early in 2023, the FDIC approved an annual special assessment.
The average balances and weighted average rates paid on deposits are presented below: Year Ended December 31, 2023 2022 2021 Average Balance Rate Average Balance Rate Average Balance Rate (dollars in millions) Interest-bearing transaction accounts $ 12,422 2.83 % $ 8,331 0.95 % $ 4,751 0.13 % Savings and money market accounts 14,903 2.87 18,518 0.86 15,814 0.21 Certificates of deposit 7,945 4.56 2,772 1.40 1,850 0.46 Total interest-bearing deposits 35,270 3.24 29,621 0.93 22,415 0.21 Non-interest-bearing demand deposits 18,293 — 24,133 — 19,416 — Total deposits $ 53,563 2.13 % $ 53,754 0.51 % $ 41,831 0.11 % At December 31, 2023 and 2022, the Company had total uninsured deposits of $15.2 billion and $29.5 billion, respectively.
The average balances and weighted average rates paid on deposits are presented below: Year Ended December 31, 2024 2023 2022 Average Balance Rate Average Balance Rate Average Balance Rate (dollars in millions) Interest bearing demand accounts $ 16,155 2.98 % $ 12,422 2.83 % $ 8,331 0.95 % Savings and money market accounts 17,462 3.49 14,903 2.87 18,518 0.86 Certificates of deposit 10,085 5.05 7,945 4.56 2,772 1.40 Total interest bearing deposits 43,702 3.66 35,270 3.24 29,621 0.93 Non-interest bearing deposits 22,017 — 18,293 — 24,133 — Total deposits $ 65,719 2.43 % $ 53,563 2.13 % $ 53,754 0.51 % At December 31, 2024 and 2023, the Company had total uninsured deposits of $17.6 billion and $15.2 billion, respectively.
During the year ended December 31, 2023, the Company's cash balance increased by $1.1 billion as a result of a net decrease in loans, compared to a reduction in cash of $11.2 billion during the year ended December 31, 2022 primarily from a net increase in loans.
During the year ended December 31, 2024, the Company's cash balance decreased by $3.8 billion as a result of a net increase in loans, compared to an increase in cash of $1.1 billion during the year ended December 31, 2023 primarily from a net decrease in loans.
December 31, 2023 2022 (dollars in millions) Common equity tier 1: Common equity $ 5,807 $ 5,097 Less: Non-qualifying goodwill and intangibles 658 672 Disallowed deferred tax asset 3 12 AOCI related adjustments (516) (664) Unrealized gain on changes in fair value liabilities 3 4 Common equity tier 1 $ 5,659 $ 5,073 Divided by: Risk-weighted assets $ 52,517 $ 54,461 Common equity tier 1 ratio 10.8 % 9.3 % Common equity tier 1 $ 5,659 $ 5,073 Plus: Preferred stock and trust preferred securities 376 376 Tier 1 capital $ 6,035 $ 5,449 Divided by: Tangible average assets $ 70,295 $ 69,814 Tier 1 leverage ratio 8.6 % 7.8 % Total capital: Tier 1 capital $ 6,035 $ 5,449 Plus: Subordinated debt 818 817 Adjusted allowances for credit losses 348 320 Tier 2 capital $ 1,166 $ 1,137 Total capital $ 7,201 $ 6,586 Total capital ratio 13.7 % 12.1 % Classified assets to tier 1 capital plus allowance: Classified assets $ 673 $ 393 Divided by: Tier 1 capital 6,035 5,449 Plus: Adjusted allowances for credit losses 348 320 Total Tier 1 capital plus adjusted allowances for credit losses $ 6,383 $ 5,769 Classified assets to tier 1 capital plus allowance 10.5 % 6.8 % 40 Table of Contents Net Interest Margin The net interest margin is reported on a TEB.
December 31, 2024 2023 (dollars in millions) Common equity tier 1: Common equity $ 6,425 $ 5,807 Less: Non-qualifying goodwill and intangibles 644 658 Disallowed deferred tax asset 4 3 AOCI related adjustments (535) (516) Unrealized gain on changes in fair value liabilities 1 3 Common equity tier 1 $ 6,311 $ 5,659 Divided by: Risk-weighted assets $ 56,019 $ 52,517 Common equity tier 1 ratio 11.3 % 10.8 % Common equity tier 1 $ 6,311 $ 5,659 Plus: Preferred stock and trust preferred securities 376 376 Tier 1 capital $ 6,687 $ 6,035 Divided by: Tangible average assets $ 82,691 $ 70,295 Tier 1 leverage ratio 8.1 % 8.6 % Total capital: Tier 1 capital $ 6,687 $ 6,035 Plus: Subordinated debt 819 818 Adjusted allowances for credit losses 416 348 Tier 2 capital $ 1,235 $ 1,166 Total capital $ 7,922 $ 7,201 Total capital ratio 14.1 % 13.7 % Classified assets to tier 1 capital plus allowance: Classified assets $ 1,009 $ 673 Divided by: Tier 1 capital 6,687 6,035 Plus: Adjusted allowances for credit losses 416 348 Total Tier 1 capital plus adjusted allowances for credit losses $ 7,103 $ 6,383 Classified assets to tier 1 capital plus allowance 14.2 % 10.5 % 40 Table of Contents Net Interest Margin The net interest margin is reported on a TEB.
Non-performing Assets Total non-performing loans increased by $323 million at December 31, 2023 to $410 million from $87 million at December 31, 2022.
Non-performing Assets Total non-performing loans increased by $194 million at December 31, 2024 to $604 million from $410 million at December 31, 2023.
Under Section 10-640 of the Arizona Revised Statutes, a corporation may not make a distribution to stockholders if to do so would render the corporation insolvent or unable to pay its debts as they become due. However, an Arizona bank may not declare a non-stock dividend out of capital surplus without the approval of the Arizona Superintendent.
Under Section 10-640 of the Arizona Revised Statutes, a corporation may not make a distribution to stockholders if to do so would render the corporation insolvent or unable to pay its debts as they become due.
In response to the COVID-19 pandemic, the federal bank regulatory agencies issued a final rule in late August 2020 that allows institutions that adopted the CECL accounting standard in 2020 to mitigate CECL’s estimated effects on regulatory capital for two years, followed by a three-year transition period. The Company has elected this capital relief option.
On August 26, 2020, the federal bank regulatory agencies issued a final rule that allowed institutions that adopted the CECL accounting standard in 2020 to mitigate CECL’s estimated effects on regulatory capital for two years, followed by a three-year transition period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

20 edited+6 added−3 removed6 unchanged
Biggest changeIt does not account for all factors that could impact the Company's results, including changes by management to mitigate interest rate changes or secondary factors, such as changes to the Company's credit risk profile as interest rates change. The results also will be impacted by seasonality in the balance sheet. Furthermore, loan prepayment rate estimates and spread relationships change regularly.
Biggest changeThis analysis illustrates the impact of changes in net interest income for the given set of rate changes and assumptions. It does not account for all factors that could impact the Company's results, including changes by management to mitigate interest rate changes or secondary factors, such as changes to the Company's credit risk profile as interest rates change.
Derivative Contracts. In the normal course of business, the Company uses derivative instruments to meet the needs of its customers and manage exposure to fluctuations in interest rates. For additional discussion on how derivatives in a hedging relationship (fair value hedges) are used to manage the Company's interest rate risk, see "Note 14.
Derivative Contracts. In the normal course of business, the Company uses derivative instruments to meet the needs of its customers and manage exposure to fluctuations in interest rates. For additional discussion on how derivatives in a hedging relationship (fair value hedges) are used to manage the Company's interest rate risk, see "Note 15.
If potential changes to EVE and net interest income resulting from hypothetical interest rate changes are not within the limits established by the BOD or, ALCO determines that interest rate exposures should be reduced, ALCO will either take hedging actions or adjust the asset and liability mix to bring interest rate risk within BOD-approved limits or in line with ALCO's proposed reduction.
If potential changes to EVE and earnings resulting from hypothetical interest rate changes are not within the limits established by the BOD or, ALCO determines that interest rate exposures should be reduced, ALCO will either take hedging actions or adjust the asset and liability mix to bring interest rate risk within BOD-approved limits or in line with ALCO's proposed reduction.
This analysis calculates the difference between a baseline net interest income forecast using current yield curves, compared to forecasted net income resulting from an immediate parallel shift in rates upward or downward, along with other scenarios directed by ALCO. The income simulation model includes various assumptions regarding re-pricing relationships for each of the Company's products.
This analysis calculates the difference between a baseline net interest income forecast using forward yield curves, compared to forecasted net income results from an immediate, parallel shift in rates upward or downward, along with other scenarios directed by ALCO. The simulation model includes various assumptions regarding re-pricing relationships for each of the Company's products.
The Company's net interest income and EVE exposure limits are approved by the BOD on an annual basis, or more often if market conditions warrant. During the year ended December 31, 2023, there have been no changes to the Company's exposure limits. Net Interest Income Simulation.
The Company's EaR and EVE exposure limits are approved by the BOD on an annual basis, or more often if market conditions warrant. During the year ended December 31, 2024, there have been no changes to the Company's exposure limits. Net Interest Income Simulation.
Economic Value of Equity. The Company measures the impact of market interest rate changes on the NPV of estimated cash flows from its assets, liabilities, and off-balance sheet items, defined as EVE, using a simulation model.
The Company measures the impact of market interest rate changes on the NPV of estimated cash flows from its assets, liabilities, and off-balance sheet items, defined as EVE, using a simulation model.
The Company will continue to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.
The Company continues to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.
Derivatives and Hedging Activities" in Item 8 of this Form 10-K. 74 Table of Contents
Derivatives and Hedging Activities" in Item 8 of this Form 10-K. 73 Table of Contents
Management uses various asset/liability strategies to manage the re-pricing characteristics of the Company's assets and liabilities, all of which are designed to ensure that exposure to interest rate fluctuations is limited to within the Company's guidelines of acceptable levels of risk-taking.
To that end, management actively monitors and manages the Company's interest rate risk exposure. Management uses various asset/liability strategies to manage the re-pricing characteristics of the Company's assets and liabilities, all of which are designed to ensure that exposure to interest rate fluctuations is within the Company's guidelines of acceptable levels of risk-taking.
These assumptions are inherently uncertain and as a result, actual results may differ from simulated results due to factors such as timing, magnitude and frequency of interest rate changes as well as changes in market conditions, customer behavior and management strategies, and changes that vary significantly from the modeled assumptions may have a significant effect on the Company's actual net interest income. 73 Table of Contents This simulation model assesses the changes in net interest income that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates.
These assumptions are inherently uncertain and as a result, actual results may differ from simulated results due to factors such as timing, magnitude and frequency of interest rate changes as well as changes in market conditions, customer behavior, management strategies, and changes that vary significantly from the modeled assumptions may have a significant effect on the Company's actual net interest income. 72 Table of Contents The table below presents the changes in net interest income that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates based on a dynamic balance sheet.
The following table shows the Company's projected change in EVE for this set of rate shocks at December 31, 2023: Economic Value of Equity Interest Rate Scenario Down 200 Down 100 Up 100 Up 200 (change in basis points from Base) % Change 15.3 % 8.1 % (7.2) % (13.2) % At December 31, 2023, the Company's EVE exposure related to these hypothetical changes in market interest rates was within the Company's current guidelines.
The following table shows the Company's projected change in EVE for this set of rate shocks at December 31, 2024: Economic Value of Equity Interest Rate Scenario Down 200 Down 100 Up 100 Up 200 (change in basis points from Base) % Change 3.6 % 2.9 % (3.3) % (6.4) % At December 31, 2024, the Company's EVE exposure related to these hypothetical changes in market interest rates was within the Company's current guidelines.
To measure interest rate risk at December 31, 2023, the Company used a simulation model to project changes in net interest income that result from forecasted changes in interest rates.
To measure interest rate risk at December 31, 2024, the Company used a simulation model to project changes in net interest income resulting from forecasted changes in interest rates.
Many of the Company's assets are variable rate loans, which are assumed to re-price at the next rate re-set period and, proportional to the change in market rates, depending on their contracted index, including the impact of caps or floors. Some loans and investments contain contractual prepayment features (embedded options) and, accordingly, the simulation model incorporates prepayment assumptions.
Many of the Company's assets are variable rate loans, which are assumed to re-price at the next rate re-set period and, proportional to the change in market rates, depending on their contracted index, including the impact of caps or floors. The simulation model also incorporates prepayment assumptions for applicable loans and investments with such optionality.
The Company's EVE model assumptions have not changed from the assumptions used in its December 31, 2022 simulation. This simulation model assesses the changes in the market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates.
This simulation model assesses the changes in the market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates.
Interest rate risk exposure is measured using interest rate sensitivity analysis to determine its change in both EVE and net interest income in the event of hypothetical changes in interest rates.
The Company's exposure to interest rate risk is reviewed at least quarterly by ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine its change in both EVE and earnings in the event of hypothetical changes in interest rates.
ALCO monitors interest rate risk by analyzing the potential impact on the net EVE and net interest income from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure.
ALCO monitors interest rate risk by analyzing the potential impact on EVE and earnings from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure. The Company manages its balance sheet in part to keep the potential impact on EVE and earnings within acceptable ranges despite changes in interest rates.
The Company's non-term deposit products re-price with a certain beta to underlying market rate changes. The Company regularly conducts sensitivity analysis for this assumption to determine the impact on the interest rate risk position. These betas are derived separately by deposit product and are based on both observed and projected market rate and balance trends.
The Company's non-term deposit products re-price with a certain beta to underlying market rate changes. These betas are derived separately by deposit product and are based on both observed and projected market rate and balance trends. Current product-level deposit beta assumptions range between 46% to 92%, depending on product, with an average interest bearing deposit beta of 57%.
Sensitivity of Net Interest Income Down 200 Down 100 Up 100 Up 200 (change in basis points from Base) Parallel Shift Scenario (7.1) % (3.4) % 3.2 % 6.4 % Interest Rate Ramp Scenario (3.1) (1.5) 1.5 3.0 At December 31, 2023, our net interest income exposure for the next twelve months related to these hypothetical changes in market interest rates was within our current guidelines.
Sensitivity of Net Interest Income Down 200 Down 100 Up 100 Up 200 (change in basis points from Base) Parallel Shock Scenario (8.6) % (4.7) % 5.4 % 10.9 % Gradual Ramp Scenario (5.8) (3.0) 3.1 6.5 Earnings-at-Risk.
Interest rate changes create changes in actual loan prepayment speeds that will differ from the market estimates incorporated in this analysis.
The results will also be impacted by seasonality in the balance sheet. Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes impact actual loan prepayment speeds and these changes may result in differences in the market estimates incorporated in this analysis.
A Down 200 scenario in this simulation model is also being presented as of December 31, 2023 as current projections of future market rates include consideration of rate decreases in the current high rate environment. The Company will continue to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.
In addition, the table provides results from additional scenarios in response to gradual, parallel changes (ramp) in market interest rates over twelve months. The Company continues to evaluate the scenarios that are presented as interest rates change and will update these scenario disclosures as appropriate.
Removed
To that end, management actively monitors and manages the Company's interest rate risk exposure. The Company generally manages its interest rate sensitivity by evaluating re-pricing opportunities on its earning assets to those on its funding liabilities.
Added
In addition, certain rate-sensitive non-interest income and expense items are also subject to market risk, including mortgage banking and servicing income and ECR deposit costs. Mortgage originations and prepayments are sensitive to interest rates and therefore, mortgage banking and servicing income can be impacted by volatility in interest rates.
Removed
The Company manages its balance sheet in part to keep the potential impact on EVE and net interest income within acceptable ranges despite changes in interest rates. The Company's exposure to interest rate risk is reviewed at least quarterly by ALCO.
Added
The Company’s EaR simulation model expands on its net interest income simulation, as described above, by incorporating these non-interest income and expenses amounts to measure the impact of forecasted changes in interest rates on earnings (defined as net interest income plus rate-sensitive non-interest income and expense).
Removed
Current deposit beta assumptions range between 20% to 90%, depending on product, with an average interest bearing deposit beta of 59%. This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes loan and deposit balances remain static and do not change over the course of the year.
Added
In the Company’s EaR simulation model as of December 31, 2024, deposits eligible for ECRs re-price with a beta assumption of 76% to underlying market rate changes, and total non-maturity deposits, inclusive of ECRs, re-price with a weighted average beta assumption of 64%.
Added
As a result of the higher deposit betas on deposits eligible for ECRs, in the down simulation scenarios, the Company will benefit from lower deposit costs. In a shock down 100 basis points scenario, ECR related deposit costs would decrease 23% from the baseline forecast over the next twelve months.
Added
At December 31, 2024, the Company’s earnings exposure for the next twelve months related to these hypothetical changes in market interest rates was within the Company’s current guidelines. Economic Value of Equity.
Added
The EVE and earnings simulations reported as of December 31, 2024 incorporate model enhancements that support optionality for callable securities and improve cash flow projections for structured securities. These model enhancements decreased the Company’s asset duration and improved EVE sensitivity to changes in interest rates.

Other WAL 10-K year-over-year comparisons