UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2007 or

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

For the Transition period from                     to                     

Commission File Number: 001-32550

WESTERN ALLIANCE BANCORPORATION

Nevada		88-0365922
(State or Other Jurisdiction		(I.R.S. Employer I.D. Number)
of Incorporation or Organization)
2700 W. Sahara Avenue, Las Vegas, NV		89102
(Address of Principal Executive Offices)		(Zip Code)
(702) 248-4200
(Registrant’s telephone number,
including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Accelerated filer þ      Non-accelerated filer o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock Issued and Outstanding: 29,910,702 shares as of October 31, 2007.

 

 

Table of Contents

Index		Page
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets at September 30, 2007 and December 31, 2006			3
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2007 and 2006			4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006			5
Notes to Unaudited Consolidated Financial Statements			6
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operation			20
Item 3 - Quantitative and Qualitative Disclosures about Market Risk			40
Item 4 - Controls and Procedures			40
Part II. Other Information
Item 1 - Legal Proceedings			41
Item 1A — Risk Factors			41
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3 - Defaults Upon Senior Securities			41
Item 4 - Submission of Matters to a Vote of Security Holders			41
Item 5 - Other Information			42
Item 6 - Exhibits			43
Signatures			44
Exhibit Index			45
Exhibit 31.1
Exhibit 31.2
Exhibit 32

Part I. Financial Information

ITEM I. FINANCIAL STATEMENTS
Western Alliance Bancorporation and Subsidiaries

		September 30,				December 31,
($ in thousands, except per share amounts)		2007				2006
Assets
Cash and due from banks		$	128,899			$	143,721
Federal funds sold			37,628				121,159
Cash and cash equivalents			166,527				264,880
Securities held to maturity (approximate fair value $7,098 and $95,404, respectively)			6,966				97,495
Securities available for sale			522,508				444,826
Securities measured at fair value			258,897				—
Gross loans, including net deferred loan fees			3,546,527				3,003,222
Less: Allowance for loan losses			(39,911	)			(33,551	)
Loans, net			3,506,616				2,969,671
Premises and equipment, net			138,415				99,859
Bank owned life insurance			87,148				82,058
Investment in restricted stock			22,355				18,483
Accrued interest receivable			21,587				17,425
Deferred tax assets, net			12,261				8,000
Goodwill			219,212				132,188
Other intangible assets, net of accumulated amortization of $2,401 and $1,457, respectively			23,908				16,042
Other assets			17,032				18,677
Total assets		$	5,003,432			$	4,169,604
Liabilities and Stockholders’ Equity
Liabilities
Non-interest bearing demand deposits		$	1,112,065			$	1,154,245
Interest bearing deposits:
Demand			259,179				246,318
Savings and money market			1,710,794				1,407,916
Time, $100 and over			641,041				524,935
Other time			69,583				67,009
			3,792,662				3,400,423
Customer repurchase agreements			204,062				170,656
Federal Home Loan Bank advances and other borrowings
One year or less			297,525				11,000
Over one year (2007 $30,195 measured at fair value)			58,825				58,011
Junior subordinated debt (2007 measured at fair value)			53,696				61,857
Subordinated debt			60,000				40,000
Accrued interest payable and other liabilities			20,749				19,078
Total liabilities			4,487,519				3,761,025
Commitments and Contingencies (Note 7)
Minority Interest			18				—
Stockholders’ Equity
Preferred stock, par value $.0001; shares authorized 20,000,000; no shares issued and outstanding 2007 and 2006			—				—
Common stock, par value $.0001; shares authorized 100,000,000; shares issued and outstanding 2007: 29,982,009; 2006: 27,084,626			3				3
Additional paid-in capital			379,173				287,553
Retained earnings			149,844				126,170
Accumulated other comprehensive loss			(13,125	)			(5,147	)
Total stockholders’ equity			515,895				408,579
Total liabilities and stockholders’ equity		$	5,003,432			$	4,169,604

See Notes to Unaudited Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
($ in thousands, except per share amounts)		2007				2006				2007				2006
Interest income on:
Loans, including fees		$	69,066			$	57,508			$	195,279			$	144,266
Securities — taxable			9,854				6,149				24,793				19,106
Securities — nontaxable			230				131				518				708
Dividends — taxable			467				261				1,299				645
Dividends — nontaxable			498				—				1,343				—
Federal funds sold and other			358				295				1,400				1,198
Total interest income			80,473				64,344				224,632				165,923
Interest expense on:
Deposits			26,571				18,987				74,276				44,329
Short-term borrowings			4,337				3,777				9,403				7,951
Long-term borrowings			933				710				2,088				2,131
Junior subordinated debt and subordinated debt			1,858				1,594				5,409				3,299
Total interest expense			33,699				25,068				91,176				57,710
Net interest income			46,774				39,276				133,456				108,213
Provision for loan losses			3,925				953				6,378				3,950
Net interest income after provision for loan losses			42,849				38,323				127,078				104,263
Other income:
Trust and investment advisory services			2,633				1,897				6,875				5,335
Service charges			1,253				918				3,489				2,453
Income from bank owned life insurance			962				641				2,850				1,863
Other			1,092				1,175				4,334				2,958
Non-interest income, excluding securities and fair value gains (losses)			5,940				4,631				17,548				12,609
Investment securities gains, net			380				—				664				—
Unrealized gains (losses) on assets and liabilities measured at fair value, net			1,676				—				(2,103	)			—
Non-interest income			7,996				4,631				16,109				12,609
Other expense:
Salaries and employee benefits			20,556				14,243				56,410				39,353
Occupancy			5,240				3,556				14,351				9,146
Customer service			1,675				1,817				4,895				5,029
Advertising and other business development			1,485				970				4,405				2,930
Insurance			884				265				2,277				769
Legal, professional and director fees			828				715				3,039				2,137
Data processing			594				353				1,657				1,220
Supplies			499				598				1,518				1,255
Correspondent and wire transfer costs			458				416				1,333				1,254
Audits and exams			433				682				1,596				1,608
Travel and automobile			404				251				960				590
Telephone			380				297				1,081				754
Intangible amortization			260				242				1,074				499
Merger expenses			—				—				747				—
Organizational costs			—				426				—				854
Other			925				226				2,473				1,749
			34,621				25,057				97,816				69,147
Income before income taxes			16,224				17,897				45,371				47,725
Minority interest			41				—				41				—
Income tax expense			5,100				6,330				14,898				16,844
Net income		$	11,083			$	11,567			$	30,432			$	30,881
Comprehensive income		$	1,112			$	15,088			$	22,454			$	31,032
Earnings per share:
Basic		$	0.38			$	0.44			$	1.06			$	1.22
Diluted		$	0.35			$	0.40			$	0.98			$	1.11

See Notes to Unaudited Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2007 and 2006 (Unaudited)

($ in thousands)		2007				2006
Cash Flows from Operating Activities:
Net income		$	30,432			$	30,881
Adjustments to reconcile net income to net cash provided by operating activities:
(Increase) decrease in other assets			1,292				(544	)
(Decrease) in accrued interest payable and other liabilities			(3,875	)			(11,850	)
Provision for loan losses			6,378				3,950
Net unrealized loss on assets and liabilities measured at fair value			2,103				—
Other, net			128				2,117
Net cash provided by operating activities			36,458				24,554
Cash Flows from Investing Activities:
Proceeds from maturities of securities			71,409				250,918
Purchases of securities			(354,312	)			(23,462	)
Proceeds from the sale of securities			80,366				—
Net cash received in settlement of acquisition			47,186				3,254
Net increase in loans made to customers			(255,504	)			(518,329	)
Purchase of premises and equipment			(29,688	)			(27,392	)
Proceeds from sale of premises and equipment			3,041				—
Other, net			878				1,423
Net cash (used in) investing activities			(436,624	)			(313,588	)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits			(10,626	)			188,980
Net proceeds from (repayments on) borrowings			321,007				81,528
Proceeds from issuance of junior subordinated debt and subordinated debt			20,000				40,000
Payments in redemption of trust preferred securities			(15,923	)			—
Proceeds from exercise of stock options and stock warrants			2,724				2,069
Stock repurchases			(15,369	)			—
Other, net			—				9,191
Net cash provided by financing activities			301,813				321,768
Increase (decrease) in cash and cash equivalents			(98,353	)			32,734
Cash and Cash Equivalents, beginning of period			264,880				174,336
Cash and Cash Equivalents, end of period		$	166,527			$	207,070
Supplemental Disclosure of Cash Flow Information
Cash payments for interest		$	90,157			$	56,132
Cash payments for income taxes		$	15,283			$	17,265
Supplemental Disclosure of Noncash Investing and Financing Activities
Stock issued in connection with acquisition		$	99,297			$	104,411

See Notes to Unaudited Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1. Nature of Business and Summary of Significant Accounting Policies

(Dollars in thousands, except per share amounts)

Nature of business

Western Alliance Bancorporation is a bank holding company providing a full range of banking services to commercial and consumer clientele through its wholly owned subsidiaries Bank of Nevada and First Independent Bank of Nevada, operating in Nevada, Alliance Bank of Arizona, operating in Arizona, Torrey Pines Bank and Alta Alliance Bank, operating in California, Miller/Russell & Associates, Inc., operating in Nevada, Arizona and Southern California, Premier Trust, Inc., operating in Nevada and Arizona and Shine Investment Advisory Services, Inc., operating in Colorado. These entities are collectively referred to herein as the Company. First Independent Bank was acquired on March 30, 2007. The Company acquired a majority interest in Shine Investment Advisory Services on July 31, 2007. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general industry practices.

Use of estimates in the preparation of financial statements

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses and the fair value of collateralized debt obligations (CDOs), synthetic CDOs, and related embedded derivatives.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Bank of Nevada, First Independent Bank of Nevada, Alliance Bank of Arizona, Torrey Pines Bank, Alta Alliance Bank (collectively referred to herein as the Banks), Miller/Russell & Associates, Inc., Premier Trust, Inc and Shine Investment Advisory Services, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Interim financial information

The accompanying unaudited consolidated financial statements as of September 30, 2007 and 2006 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006.

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

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

interim financial information should be read in conjunction with the Company’s audited financial statements.

Condensed financial information as of December 31, 2006 has been presented next to the interim consolidated balance sheet for informational purposes.

Repurchase program

For the quarter ended September 30, 2007, the Company repurchased 559,900 shares of common stock on the open market with a weighted average price of $26.41 per share. The Company has the remaining authority to repurchase shares with an aggregate purchase price of $34.6 million under a share repurchase program authorized by the Board of Directors through December 31, 2008. All repurchased shares are retired as soon as is practicable after settlement.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation provides that the tax effects from an uncertain tax position can be recognized in our financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. For further discussion of the impact of FIN 48, please refer to Note 8 of these financial statements.

In September 2006, the FASB ratified the consensus of the Emerging Issues Task Force (EITF) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangement (EITF 06-4) applies to endorsement split dollar life insurance policies that provide a benefit to an employee that extends to postretirement periods and requires an employer to recognize a liability for future benefits over the service period based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007, with early adoption permitted. We do not expect EITF 06-4 to have a material impact on our financial statements.

Derivative Financial Instruments

All derivatives are recognized on the balance sheet at their fair value. On the date the derivative contract is entered into, the Company may designate the derivative as a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability “cash flow” hedge. Changes in the fair value of a derivative that is highly effective as — and that is designated and qualifies as — a cash-flow hedge are recorded in other comprehensive income, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings).

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedged transactions. This process includes linking all derivatives that are designated as cash-flow hedges to specific assets and liabilities on the balance sheet or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively, as discussed below.

The Company discontinues hedge accounting prospectively when (1) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item (including forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) the derivative is dedesignated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; or (4) management determines that designation of the derivative as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. In all other situations in which hedge accounting is discontinued, the derivative will be carried at its fair value on the balance sheet, with subsequent changes in its fair value recognized in current-period earnings.

The Company occasionally purchases a financial instrument that contains a derivative instrument that is “embedded” in the financial instrument. Upon purchasing the instrument, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where (1) the host contract is measured at fair value, with changes in fair value reported in current earnings or (2) the Company is unable to reliably identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at fair value and is not designated as a hedging instrument.

Note 2. Fair Value Accounting

The Company elected early adoption of Statements of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, effective January 1, 2007. Instruments for which the fair value option (FVO) was adopted and the reasons therefore are as follows:

	•		Junior subordinated debt
	•		All investment securities previously classified as held-to-maturity, with the exception of tax-advantaged municipal bonds
	•		All fixed-rate securities previously classified as available-for-sale

The junior subordinated debt, with a balance of $61.9 million at January 1, 2007, (before the application of SFAS 159) is a primary source of funding for the Company’s held-to-maturity portfolio, which excluding tax-advantaged municipal obligations had an amortized cost of $90.5 million at the same date. The held-to-maturity portfolio consists primarily of fixed rate and hybrid adjustable rate mortgage-backed securities and collateralized mortgage obligations. The junior subordinated debt includes $20.0 million which carries a fixed rate through June 2011, with the remaining balances carrying rates which re-set at least semi-annually. This represents a natural hedge on the Company’s balance sheet, with changes in fair value of the fixed rate securities and fixed rate junior subordinated debt moving inversely from one

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

another as market rates move up and down. The early adoption of SFAS 159 on these instruments will more accurately reflect this hedge in the Company’s consolidated financial statements. The FVO was not elected for tax-advantaged securities since the tax benefit is based upon the contractual rate paid on the security at time of purchase and does not include changes in fair value or accretion or amortization of discounts or premiums resulting from revaluation. The carrying value of these tax-advantaged securities was $7.0 million at September 30, 2007.

Fixed-rate available-for-sale securities had an amortized cost of $215.6 million and an aggregate net unrealized loss of $5.9 million at January 1, 2007. These securities represent some of the most volatile on the Company’s balance sheet with long durations and low coupon rates relative to the market. While initially these investments were funded with relatively long duration non-interest bearing and administered rate money market deposits, as the liability structure of the company has shortened they are now preponderantly funded with overnight Federal Home Loan Bank borrowings, customer repurchase agreements and CDs. All of these sources of funding have pricing which moves with the market, and thus there is not an effective match for the fixed rate securities on the liability side of the balance sheet. This causes volatility in reported earnings as interest rates move and the net interest margin contracts and expands. The Company’s ability to hedge the market-value risk on the securities was historically limited by the complexities of accounting for derivative financial instruments. The adoption of SFAS 159 on these securities provides more transparency in the consolidated financial statements as users will be more able to ascertain changes in the Company’s net income caused by changes in market interest rates. The FVO was not elected for variable-rate available-for-sale securities since the liability funding match is more closely aligned with these shorter duration assets.

The following table provides the impact of adoption on the Company’s balance sheet as of January 1, 2007 (in thousands):

		Carrying								Carrying
		Value				Cumulative				Value
		Prior to				Effect				After
Description		Adoption				Adjustment				Adoption
Securities previously reported as held to maturity		$	97,495			$	(2,267	)		$	95,228
Securities previously reported as available for sale			444,826				(5,861	)			444,826
Junior subordinated debt			(61,857	)			(2,270	)			(64,127	)
Gross cumulative effect adjustment							(10,398	)
Less reclassification from other comprehensive income							5,861
Pre-tax cumulative effect adjustment							(4,537	)
Effect on net deferred tax asset							1,588
Cumulative effect adjustment, net						$	(2,949	)

All securities for which the fair value measurement option has been elected are included in a separate line item on the balance sheet entitled “securities measured at fair value.”

For the three and nine months ended September 30, 2007, gains and losses from fair value changes included in the Consolidated Statement of Income were as follows (in thousands):

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

		Changes in Fair Values for the Three and Six Month
		Periods Ended September 30, 2007 for Items Measured at Fair
		Value Pursuant to Election of the Fair Value Option
														Total
		Unrealized								Interest				Changes in
		Gain/Loss on								Expense on				Fair Values
		Assets and								Junior				Included in
		Liabilities				Interest				Subordinated				Current-
		Measured at				Income on				Debt and				Period
Description		Fair Value, Net				Securities				Borrowings				Earnings
(Three months ended September 30, 2007)
Securities measured at fair value		$	2,202			$	450			$	—			$	2,652
Junior subordinated debt			—				—				119				119
Fixed-rate term borrowings			(526	)			—				—				(526	)
(Nine months ended September 30, 2007)
Securities measured at fair value		$	(1,908	)		$	1,404			$	—			$	(504	)
Junior subordinated debt			—				—				503				503
Fixed-rate term borrowings			(195	)			—				—				(195	)

The difference between the aggregate fair value of $53.7 million and the aggregate unpaid principal balance of $53.6 million of junior subordinated debt was $0.1 million at September 30, 2007.

Interest income on securities measured at fair value are accounted for similarly to those classified as available for sale and held to maturity. As of January 1, 2007, a discount or premium was calculated for each security based upon the difference between the par value and the fair value at that date. These premiums and discounts are recognized in interest income over the term of the securities. For mortgage-backed securities, estimates of prepayments are considered in the constant yield calculations. Interest expense on junior subordinated debt is also determined under a constant yield calculation. As of January 1, 2007, a premium was recorded for certain junior subordinated debt offerings. These premiums are being amortized over the expected lives of the offerings.

During the nine months ended September 30, 2007, the Company elected the FVO for two newly acquired financial instruments. These financial instruments and the reasons for the election are as follows:

	•		Collateralized debt obligation
	•		Fixed-rate term advance from the Federal Home Loan Bank

The collateralized debt obligation’s fair value is influenced by the perceived credit risk of the underlying collateral. The election of the FVO will allow the Company to better reflect the potential market value volatility of this instrument in its consolidated financial statements.

The fixed-rate term advance from the Federal Home Loan Bank, with a par value of $30.0 million, has an interest rate of 4.91% and is due in May 2010. The Company secured this advance primarily as a means of hedging a portion of the market value risk inherent in our securities measured at fair value portfolio.

Concurrent with the adoption of SFAS 159, the Company adopted SFAS No. 157, Fair Value Measurements, effective January 1, 2007. SFAS 159 requires early adoption of SFAS 157 if the company

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

chooses to early adopt SFAS 159. SFAS 157 provides a definition of fair value and provides a framework for calculating fair value.

The Company measures certain assets and liabilities at fair value on a recurring basis, including securities available for sale, securities measured at market value and junior subordinated debt. The fair value of these assets and liabilities were determined using the following inputs at September 30, 2007 (in thousands):

						Fair Value Measurements at Reporting Date Using:
						Quoted Prices
						in Active				Significant
						Markets for				Other				Significant
						Identical				Observable				Unobservable
						Assets				Inputs				Inputs
Description		September 30, 2007				(Level 1)				(Level 2)				(Level 3)
Assets:
Securities available for sale		$	522,508			$	39,999			$	441,030			$	41,479
Securities measured at fair value			258,897				—				254,447				4,450
Interest rate swaps			863				—				863				—
Total		$	782,268			$	39,999			$	696,340			$	45,929
Liabilities:
Fixed-rate term borrowings		$	30,195			$	—			$	30,195			$	—
Junior subordinated debt			53,696				—				53,696				—
Interest rate swaps			436				—				436				—
Total		$	84,327			$	—			$	84,327			$	—

Fair Value Measurements Using
Significant Unobservable Inputs
(Level 3)

		Securities Measured
		at Fair Value
Beginning balance January 1, 2007		$	—
Total gains or losses (realized/unrealized)
Included in earnings			—
Included in other comprehensive income			(10,681	)
Purchases, issuances, and settlements			46,833
Transfers in and/or out of Level 3			9,777
Ending balance September 30, 2007		$	45,929
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date		$	—

There were no Level 3 gains or losses (realized and unrealized) included in earnings for the three months ended September 30, 2007.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

To value securities available for sale and securities measured at fair value the Company generally utilizes matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ similarities to other benchmark quoted securities. When matrix pricing is not deemed an appropriate method of valuation, pricing is determined using the best information available in the circumstances.

Junior subordinated debt and fixed-rate term borrowings are valued by comparing interest rates and spreads to benchmark indices offered to institutions with similar credit profiles to our own and discounting the cash flows on our borrowings using these market rates.

Interest rate swaps are priced against the LIBOR swap curve as of the end of the period.

Note 3. Merger and Acquisition Activity

Effective March 30, 2007, the Company acquired 100% of the outstanding common stock of First Independent Capital of Nevada (FICN), headquartered in Reno, Nevada. FICN was the parent company of First Independent Bank of Nevada (FIB). The tax-free merger was accomplished according to the Agreement and Plan of Merger (the Merger Agreement), dated December 19, 2006. At the date of acquisition, FIB became a wholly-owned subsidiary of the Company. As the merger closed on March 30, 2007, FIB’s results for the three months ended March 31, 2007 were not included with the Company’s results of operations. The merger increases the Company’s presence in Northern Nevada.

Total assets, loans and deposits acquired in this merger were $530.2 million, $291.2 million and $402.9 million, respectively, and are included in the Company’s consolidated balance sheet as of September 30, 2007. We also added four full service offices in Northern Nevada through this merger.

As provided by the Merger Agreement and based on valuation amounts determined as of the merger date, approximately 1.12 million shares of FICN common stock were exchanged for approximately $21.9 million in cash and approximately 2.5 million shares of the Company’s common stock at a calculated exchange ratio of 2.84412. The exchange of shares represented approximately 8% of the Company’s outstanding common stock as of the merger date. As part of the acquisition, 389,000 replacement options were issued to FICN shareholders. As part of the merger agreement, $2.0 million of contingent consideration may be paid pro rata to the FICN shareholders at any time prior to the two-year anniversary of the merger date, depending on the performance of certain loans segregated in the FICN portfolio.

Effective July 31, 2007, the Company acquired 80% of the outstanding common stock of Shine Investment Advisory Services, Inc. (Shine), headquartered in Lone Tree, Colorado. Since the merger closed on July 31, 2007, Shine’s results of operations were not included prior to the closing date.

Shine’s assets under management at the date of merger were $409.9 million. The book value of total assets acquired through this merger was $0.4 million.

As provided in the purchase agreement and based on valuation amounts as of the merger date, approximately 314,000 shares of the Company’s stock at a price of approximately $25.48 were issued in connection with the Shine acquisition.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

For the quarter ended September 30, 2007, goodwill increased $15.0 million to $219.2 million and other intangible assets decreased $9.3 million to $23.9 million. $7.6 million of the increase in goodwill was due to the Shine acquisition. The remaining increase to goodwill and decrease to other intangible assets was due to an adjustment to the preliminary core deposit intangible valuation and other purchase accounting adjustments related to the FICN merger.

Both mergers were accounted for under the purchase method of accounting in accordance with SFAS No. 141, Business Combinations. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the merger date. Appropriate amounts and adjustments shown were recorded by FIB or Shine and included in the respective reporting segment. Certain amounts, including goodwill, are subject to change when the determination of the asset and liability values is finalized within one year from the merger date. Valuations of certain assets and liabilities of FIB and Shine will be performed with the assistance of independent valuation consultants. None of the resulting goodwill is expected to be deductible for tax purposes.

Note 4. Earnings Per Share

Diluted earnings per share is based on the weighted average outstanding common shares during each period, including common stock equivalents. Basic earnings per share is based on the weighted average outstanding common shares during the period.

Basic and diluted earnings per share, based on the weighted average outstanding shares, are summarized as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
		(in thousands, except per share amounts)
Basic:
Net income applicable to common stock		$	11,083			$	11,567			$	30,432			$	30,881
Average common shares outstanding			29,501				26,471				28,715				25,216
Earnings per share		$	0.38			$	0.44			$	1.06			$	1.22
Diluted:
Net income applicable to common stock		$	11,083			$	11,567			$	30,432			$	30,881
Average common shares outstanding			29,501				26,471				28,715				25,216
Stock option adjustment			1,196				1,407				1,141				1,386
Stock warrant adjustment			904				1,047				952				1,049
Restricted stock adjustment			102				236				108				182
Average common equivalent shares outstanding			31,703				29,161				30,916				27,833
Earnings per share		$	0.35			$	0.40			$	0.98			$	1.11

Note 5. Loans

The components of the Company’s loan portfolio as of September 30, 2007 and December 31, 2006 are as follows (in thousands):

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

		September 30,				December 31,
		2007				2006
Construction and land development		$	801,667			$	715,546
Commercial real estate			1,484,725				1,232,260
Residential real estate			466,786				384,082
Commercial and industrial			752,076				645,469
Consumer			49,929				29,561
Less: net deferred loan fees			(8,656	)			(3,696	)
			3,546,527				3,003,222
Less:
Allowance for loan losses			(39,911	)			(33,551	)
		$	3,506,616			$	2,969,671

Changes in the allowance for loan losses for the three and nine months ended September 30, 2007 and 2006 are as follows (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2007				2006				2007				2006
Balance, beginning		$	36,946			$	32,158			$	33,551			$	21,192
Acquisitions			(370	)			403				3,419				8,768
Provision charged to operating expense			3,925				953				6,378				3,950
Recoveries of amounts charged off			26				21				197				305
Less amounts charged off			(616	)			(425	)			(3,634	)			(1,105	)
Balance, ending		$	39,911			$	33,110			$	39,911			$	33,110

At September 30, 2007, total impaired and non-accrual loans were $19.0 million compared with $2.3 million at December 31, 2006. Loans past due 90 days or more and still accruing were $0.8 million at September 30, 2007 and at December 31, 2006.

Note 6. Borrowed Funds

The Company has a line of credit available from the Federal Home Loan Bank (FHLB). Borrowing capacity is determined based on collateral pledged, generally consisting of securities and loans, at the time of the borrowing. The Company also has borrowings from other sources pledged by securities. A summary of the Company’s borrowings as of September 30, 2007 and December 31, 2006 follows:

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

		September 30,				December 31,
		2007				2006
Short Term
FHLB Advances (weighted average rate is 2007: 4.93% and 2006: 5.26%)		$	277,525			$	11,000
Securities sold under agreement to repurchase (weighted average rate is 2007: 4.45% and 2006: 4.42%)			224,062				170,656
Due in one year or less		$	501,587			$	181,656
Long Term
FHLB Advances (weighted average rate is 2007: 4.23% and 2006: 3.07%)		$	49,195			$	48,300
Other long term debt (weighted average rate is 8.79%)			9,630				9,711
Due in over one year		$	58,825			$	58,011

Note 7. Contingencies

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the consolidated financial statements.

Financial instruments with off-balance sheet risk

A summary of the contract amount of the Company’s exposure to off-balance sheet risk is as follows:

		September 30,				December 31,
		2007				2006
		(in thousands)
Commitments to extend credit, including unsecured loan commitments of $235,637 in 2007 and $239,218 in 2006		$	1,181,745			$	1,083,854
Credit card guarantees			24,229				16,233
Standby letters of credit, including unsecured letters of credit of $14,632 in 2007 and $5,127 in 2006			85,698				61,157
		$	1,291,672			$	1,161,244

Note 8. Stock-based Compensation

As of September 30, 2007, there were 2.4 million options outstanding, compared with 2.3 million at September 30, 2006. Related to the acquisition of FICN, 389,000 replacement options with a weighted

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

average exercise price of $7.13 were issued. These replacement options have a total fair value of $10.1 million, were fully vested as of the grant date and were included in the purchase price.

For the three and nine months ended September 30, 2007, the Company recognized stock-based compensation expense related to all options of $0.4 million and $1.1 million, respectively, as compared to $0.2 million and $0.5 million, respectively, for the three and nine months ended September 30, 2006.

For the three months ended September 30, 2007, 3,200 shares of restricted stock were issued. The Company estimates the compensation cost for restricted stock grants based upon the grant date fair value. These restricted stock grants have a three year vesting period.

There were approximately 419,000 and 247,000 restricted shares outstanding at September 30, 2007 and 2006, respectively. For the three and nine months ended September 30, 2007, the Company recognized stock-based compensation of $1.2 million and $3.3 million, respectively, compared to $0.5 million and $1.2 million, respectively, for the three and nine months ended September 30, 2006 related to the Company’s restricted stock plan.

Note 9. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and in various states. The Company is no longer subject to U.S. federal, state or local tax examinations by tax authorities for years before 2003. The Company has not undergone any recent examinations by the Internal Revenue Service.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Management believes that the Company has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

The Company would recognize interest accrued related to unrecognized tax benefits in tax expense. The Company has not recognized or accrued any interest or penalties for the periods ended September 30, 2007 and 2006.

Note 10. Segment Information

The following is a summary of selected operating segment information as of and for the periods ended September 30, 2007 and 2006:

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

		Bank				Alliance Bank				Torrey Pines				Alta Alliance				First Independent								Intersegment				Consolidated
(in millions)		of Nevada				of Arizona				Bank				Bank				Bank				Other				Eliminations				Company
At September 30, 2007:
Assets		$	3,046.1			$	775.5			$	686.0			$	78.9			$	586.0			$	18.4			$	(187.5	)		$	5,003.4
Gross loans and deferred fees			2,156.5				562.3				481.0				32.8				338.9				—				(25.0	)			3,546.5
Less: Allowance for loan losses			(24.5	)			(6.4	)			(4.9	)			(0.3	)			(3.8	)			—				—				(39.9	)
Net loans			2,132.0				555.9				476.1				32.5				335.1				—				(25.0	)			3,506.6
Deposits			2,118.8				628.4				533.8				57.1				458.0				—				(3.4	)			3,792.7
Stockholders’ equity			340.4				55.8				40.5				22.6				119.8				(63.2	)			—				515.9
Number of branches			15				10				7				2				4				—				—				38
Number of full-time employees			520				138				128				32				106				63				—				987
(in thousands)
Three Months Ended September 30, 2007:
Net interest income		$	28,697			$	7,222			$	6,396			$	566			$	5,176			$	(1,283	)		$	—			$	46,774
Provision for loan losses			3,296				117				317				87				108				—				—				3,925
Net interest income after provision for loan losses			25,401				7,105				6,079				479				5,068				(1,283	)			—				42,849
Gain on sale of securities			380				—				—				—				—				—				—				380
Mark-to-market gains (net)			1,163				194				319				—				—				—				—				1,676
Noninterest income, excluding securities and fair value gains (losses)			2,527				416				392				98				232				2,678				(403	)			5,940
Noninterest expense			(15,742	)			(6,035	)			(4,966	)			(1,379	)			(3,145	)			(3,757	)			403				(34,621	)
Income before income taxes			13,729				1,680				1,824				(802	)			2,155				(2,362	)			—				16,224
Minority interest			—				—				—				—				—				(41	)			—				(41	)
Income tax expense (benefit)			4,280				557				715				(321	)			723				(854	)			—				5,100
Net income (loss)		$	9,449			$	1,123			$	1,109			$	(481	)		$	1,432			$	(1,549	)		$	—			$	11,083
Nine Months Ended September 30, 2007:
Net interest income		$	85,989			$	21,195			$	18,428			$	1,418			$	10,298			$	(3,872	)		$	—			$	133,456
Provision for loan losses			5,010				662				484				223				(1	)			—				—				6,378
Net interest income after provision for loan losses			80,979				20,533				17,944				1,195				10,299				(3,872	)			—				127,078
Gain on sale of securities			375				—				—				—				—				289				—				664
Mark-to-market losses (net)			(1,758	)			(246	)			(99	)			—				—				—				—				(2,103	)
Noninterest income, excluding securities and fair value gains (losses)			8,469				1,558				1,290				271				452				6,664				(1,156	)			17,548
Noninterest expense			(47,125	)			(17,276	)			(13,707	)			(4,147	)			(6,418	)			(10,299	)			1,156				(97,816	)
Income before income taxes			40,940				4,569				5,428				(2,681	)			4,333				(7,218	)			—				45,371
Minority interest			—				—				—				—				—				(41	)			—				(41	)
Income tax expense (benefit)			13,132				1,666				2,212				(1,073	)			1,453				(2,492	)			—				14,898
Net income (loss)		$	27,808			$	2,903			$	3,216			$	(1,608	)		$	2,880			$	(4,767	)		$	—			$	30,432

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 10. Segment Information (continued)

		Bank				Alliance Bank				Torrey Pines								Intersegment				Consolidated
(in millions)		of Nevada				of Arizona				Bank				Other				Eliminations				Company
At September 30, 2006:
Assets		$	2,847.4			$	646.2			$	598.9			$	464.8			$	(554.5	)		$	4,002.8
Gross loans and deferred fees			2,002.7				535.4				401.5				—				(20.0	)			2,919.6
Less: Allowance for loan losses			(22.7	)			(6.0	)			(4.4	)			—				—				(33.1	)
Net loans			1,980.0				529.4				397.1				—				(20.0	)			2,886.5
Deposits			2,303.1				472.1				497.0				—				(21.9	)			3,250.3
Stockholders’ equity			333.7				49.8				38.1				400.7				(429.2	)			393.1
Number of branches			15				8				6				—				—				29
Number of full-time employees			470				130				105				58				—				763
(in thousands)
Three Months Ended September 30, 2006:
Net interest income		$	28,540			$	6,110			$	5,864			$	(1,238	)		$	—			$	39,276
Provision for loan losses			680				(99	)			372				—				—				953
Net interest income after provision for loan losses			27,860				6,209				5,492				(1,238	)			—				38,323
Noninterest income			2,129				608				422				15,344				(13,872	)			4,631
Noninterest expense			(13,722	)			(4,784	)			(3,842	)			(3,164	)			455				(25,057	)
Income before income taxes			16,267				2,033				2,072				10,942				(13,417	)			17,897
Income tax expense			5,398				720				808				(596	)			—				6,330
Net income		$	10,869			$	1,313			$	1,264			$	11,538			$	(13,417	)		$	11,567
Nine Months Ended September 30, 2006:
Net interest income		$	75,897			$	18,288			$	16,393			$	(2,368	)		$	3			$	108,213
Provision for loan losses			2,393				583				974				—				—				3,950
Net interest income after provision for loan losses			73,504				17,705				15,419				(2,368	)			3				104,263
Noninterest income			5,618				1,639				1,097				40,441				(36,186	)			12,609
Noninterest expense			(36,880	)			(14,019	)			(10,627	)			(8,737	)			1,116				(69,147	)
Income before income taxes			42,242				5,325				5,889				29,336				(35,067	)			47,725
Income tax expense			14,172				2,004				2,370				(1,702	)			—				16,844
Net income		$	28,070			$	3,321			$	3,519			$	31,038			$	(35,067	)		$	30,881

Note 11. Interest Rate Swaps

During the quarter ended September 30, 2007, the Company entered into three interest rate swaps to lock in the interest cash inflows on certain of its floating-rate securities and to hedge the volatility in our securities measured at fair value. The interest rate swaps have an aggregate notional amount of $95 million. The estimated aggregate fair value of these agreements at September 30, 2007, was an asset of approximately $863,000 and a liability of approximately $436,000, which were included in other long-term assets and liabilities in the Company’s balance sheet.

Note 12. Subsequent Events

Subsequent to September 30, 2007, several prominent financial institutions disclosed large write downs in their investment and loan portfolios. The Company has $81.7 million invested in adjustable rate preferred stock and other debt issued by large financial institutions. Specifically, we have seen significant

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

declines in the value of certain Merrill Lynch and Washington Mutual securities, with our total exposure to these two entities of $28.8 million at September 30, 2007. We are closely monitoring these securities for potential impairment.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and our unaudited consolidated financial statements and related footnotes in the Quarterly Report on Form 10-Q. Unless the context requires otherwise, the terms “Company”, “us”, “we”, and “our” refer to Western Alliance Bancorporation on a consolidated basis.

Forward-Looking Information

Certain statements contained in this document, including, without limitation, statements containing the words “believes”, “anticipates”, “intends”, “expects”, “should” and words of similar import, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions in those areas in which we operate, demographic changes, competition, fluctuations in interest rates, changes in business strategy or development plans, changes in governmental regulation, credit quality, the availability of capital to fund the expansion of our business, and other factors referenced in this Quarterly Report. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Overview

During the third quarter of 2007, our earnings were challenged by difficult economic conditions and slow balance sheet growth, particularly in our deposit portfolio. We continue to explore and invest in new and expanded business lines and products, including cash management services, credit cards, wealth management and equipment leasing. Organic loan growth for the quarter ended September 30, 2007 was $157.6 million, or 4.7%, as compared to $147.0 million, or 5.3% for the same period in 2006. Deposits decreased $23.2 million, or 0.6%, for the three months ended September 30, 2007, compared to an increase of $51.9 million, or 1.6% for the same period in 2006. We reported net income of $11.1 million, or $0.35 per diluted share, for the quarter ended September 30, 2007, as compared to $11.6 million, or $0.40 per diluted share, for the same period in 2006. The decrease in earnings is primarily due to an increase of $9.6 million in non-interest expenses related to expansion efforts and a $3.0 million increase in the provision for loan losses from the previous year. The provision for loan losses increased $3.0 million from the three months ended September 30, 2006 to the same period in 2007, due to challenging economic conditions in our primary markets. Non-interest income, excluding securities and fair value gains (losses) for the quarter ended September 30, 2007 increased 28.3% from the same period in the prior year, due to increases in trust and investment advisory fees, service charges and income from bank owned life insurance. Non-interest expense for the quarter ended September 30, 2007 increased 38.2% from the same period in 2006, due primarily to increases in salaries and benefits and occupancy costs caused by continued branch expansion through the second quarter of 2007.

SFAS 159 and 157 were adopted by the Company on January 1, 2007. A detailed explanation of the adoptions is included in Note 2 of the financial statements.

Selected financial highlights are presented in the table below.

Western Alliance Bancorporation and Subsidiaries
Summary Consolidated Financial Data
Unaudited

		At or for the three months												For the nine months
		ended September 30,												ended September 30,
		2007				2006				Change %				2007				2006				Change %
Selected Balance Sheet Data:
($ in millions)
Total assets		$	5,003.4			$	4,002.8				25.0	%
Gross loans, including net deferred fees			3,546.5				2,919.6				21.5
Securities			788.4				554.1				42.3
Federal funds sold			37.6				103.8				(63.8	)
Deposits			3,792.7				3,250.3				16.7
Customer repurchase agreements			204.1				149.2				36.8
Borrowings			356.4				110.0				224.0
Junior subordinated and subordinated debt			113.7				81.9				38.8
Stockholders’ equity			515.9				393.1				31.2
Selected Income Statement Data:
($ in thousands)
Interest income		$	80,473			$	64,344				25.1	%		$	224,632			$	165,923				35.4	%
Interest expense			33,699				25,068				34.4				91,176				57,710				58.0
Net interest income			46,774				39,276				19.1				133,456				108,213				23.3
Provision for loan losses			3,925				953				311.9				6,378				3,950				61.5
Net interest income after provision for loan losses			42,849				38,323				11.8				127,078				104,263				21.9
Investment securities gains, net			380				—				100.0				664				—				100.0
Unrealized gain/loss on assets and liabilities measured at fair value, net			1,676				—				100.0				(2,103	)			—				100.0
Non-interest income, excluding gains/losses on securities			5,940				4,631				28.3				17,548				12,609				39.2
Non-interest expense			34,621				25,057				38.2				97,816				69,147				41.5
Income before income taxes			16,224				17,897				(9.3	)			45,371				47,725				(4.9	)
Minority interest			41				—				100.0				41				—				100.0
Income tax expense			5,100				6,330				(19.4	)			14,898				16,844				(11.6	)
Net income		$	11,083			$	11,567				(4.2	)		$	30,432			$	30,881				(1.5	)
Memo: intangible asset amortization expense, net of tax		$	260			$	242				7.4			$	1,074			$	499				115.2