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

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

Nevada		88-0365922
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer I.D. Number)
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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filero (Do not check if a smaller reporting company)		Smaller reporting company 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: 30,255,760 shares as of April 30, 2008.

 

 

Table of Contents

Index		Page
Part I. Financial Information
Item 1 — Financial Statements Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007			3
Consolidated Statements of Income for the Three Months Ended March 31, 2008 and 2007			4
Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2008			5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007			6
Notes to Unaudited Consolidated Financial Statements			7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			34
Item 4 — Controls and Procedures			34
Part II. Other Information
Item 1 — Legal Proceedings			35
Item 1A — Risk Factors			35
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3 — Defaults Upon Senior Securities			35
Item 4 — Submission of Matters to a Vote of Security Holders			35
Item 5 — Other Information			35
Item 6 — Exhibits			36
Signatures			37
Exhibit Index			38
EX-31.1
EX-31.2
EX-32

Part I. Financial Information

ITEM I. FINANCIAL STATEMENTS

		March 31,				December 31,
($ in thousands, except per share amounts)		2008				2007
Assets
Cash and due from banks		$	132,894			$	104,650
Federal funds sold and other			58,967				10,979
Cash and cash equivalents			191,861				115,629
Securities held to maturity (approximate fair value $8,972 and $9,530, respectively)			8,790				9,406
Securities available for sale			477,095				486,354
Securities measured at fair value			245,238				240,440
Gross loans, including net deferred loan fees			3,722,632				3,633,009
Less: Allowance for loan losses			(50,839	)			(49,305	)
Loans, net			3,671,793				3,583,704
Premises and equipment, net			143,923				143,421
Other real estate owned			6,901				3,412
Bank owned life insurance			88,861				88,061
Investment in restricted stock, at cost			46,351				27,003
Accrued interest receivable			20,636				22,344
Deferred tax assets, net			35,346				25,900
Goodwill			217,810				217,810
Other intangible assets, net of accumulated amortization of $4,507 and $3,693, respectively			23,556				24,370
Other assets			19,142				28,242
Total assets		$	5,197,303			$	5,016,096
Liabilities and Stockholders’ Equity
Liabilities
Non-interest bearing demand deposits		$	1,032,229			$	1,007,642
Interest bearing deposits:
Demand			276,492				264,586
Savings and money market			1,538,319				1,558,867
Time, $100 and over			623,767				649,351
Other time			159,457				66,476
			3,630,264				3,546,922
Customer repurchase agreements			224,630				275,016
Federal Home Loan Bank advances and other borrowings
One year or less			645,380				489,330
Over one year ($31,458 and $30,768 measured at fair value, respectively)			51,029				55,369
Junior subordinated debt, measured at fair value			56,022				62,240
Subordinated debt			60,000				60,000
Accrued interest payable and other liabilities			36,018				25,701
Total liabilities			4,703,343				4,514,578
Commitments and Contingencies (Note 7)
Stockholders’ Equity
Preferred stock, par value $.0001; shares authorized 20,000,000; no shares issued and outstanding 2008 and 2007			—				—
Common stock, par value $.0001; shares authorized 100,000,000; shares issued and outstanding 2008: 30,229,840; 2007: 30,157,079			3				3
Additional paid-in capital			380,413				377,973
Retained earnings			156,259				152,286
Accumulated other comprehensive loss — net unrealized loss on available for sale securities			(42,715	)			(28,744	)
Total stockholders’ equity			493,960				501,518
Total liabilities and stockholders’ equity		$	5,197,303			$	5,016,096

See Notes to Unaudited Consolidated Financial Statements.

($ in thousands, except per share amounts)		2008				2007
Interest income on:
Loans, including fees		$	65,704			$	59,020
Securities — taxable			9,570				6,895
Securities — nontaxable			357				58
Dividends — taxable			627				420
Dividends — nontaxable			419				387
Federal funds sold and other			115				533
Total interest income			76,792				67,313
Interest expense on:
Deposits			19,514				21,873
Short-term borrowings			7,580				2,389
Long-term borrowings			715				516
Junior subordinated debt and subordinated debt			2,121				1,679
Total interest expense			29,930				26,457
Net interest income			46,862				40,856
Provision for loan losses			8,059				441
Net interest income after provision for loan losses			38,803				40,415
Non-interest income:
Trust and investment advisory services			2,796				2,105
Service charges			1,427				1,069
Income from bank owned life insurance			800				928
Other			3,395				1,488
Non-interest income, excluding securities and fair value gains (losses)			8,418				5,590
Investment securities gains, net			161				284
Derivative gains			43				—
Securities impairment charges			(5,280	)			—
Unrealized gain (loss) on assets and liabilities measured at fair value, net			1,381				(13	)
Non-interest income			4,723				5,861
Other expense:
Salaries and employee benefits			21,934				17,033
Occupancy			5,028				4,239
Advertising and other business development			2,100				1,462
Customer service			1,200				1,323
Insurance			972				298
Legal, professional and director fees			931				1,044
Intangible amortization			789				257
Data processing			769				435
Audits and exams			648				531
Telephone			401				340
Supplies			371				509
Travel and automobile			338				287
Correspondent and wire transfer costs			301				418
Other			2,156				745
			37,938				28,921
Income before income taxes			5,588				17,355
Minority interest			65				—
Income tax expense			1,381				5,952
Net income		$	4,142			$	11,403
Earnings per share:
Basic		$	0.14			$	0.42
Diluted		$	0.14			$	0.39

See Notes to Unaudited Consolidated Financial Statements.

Consolidated Statement of Stockholders’ Equity
Three Months Ended March 31, 2008 (Unaudited)
($ in thousands, except per share amounts)

																						Accumulated
														Additional								Other
		Comprehensive				Common Stock								Paid-in				Retained				Comprehensive
Description		Income (loss)				Shares Issued				Amount				Capital				Earnings				(Loss)				Total
Balance, December 31, 2007							30,157			$	3			$	377,973			$	152,286			$	(28,744	)		$	501,518
Stock options exercised							68				—				553				—				—				553
Stock-based compensation expense							25				—				2,243				—				—				2,243
Stock repurchases							(20	)			—				(356	)			—				—				(356	)
Cumulative effect adjustment related to adoption of EITF No. 06-4							—				—				—				(169	)			—				(169	)
Comprehensive income (loss):
Net income		$	4,142				—				—				—				4,142				—				4,142
Other comprehensive income (loss)
Unrealized holding losses on securities available for sale arising during the period, net of taxes of $10,048			(17,403	)
Less reclassification adjustment for impairment losses included in net income, net of taxes of $1,848			3,432
Net unrealized holding losses			(13,971	)			—				—				—				—				(13,971	)			(13,971	)
		$	(9,829	)
Balance, March 31, 2008							30,230			$	3			$	380,413			$	156,259			$	(42,715	)		$	493,960

See Notes to Unaudited Consolidated Financial Statements.

Consolidated Statements of Cash Flows
Three Months Ended March 31, 2008 and 2007 (Unaudited)
($ in thousands)

		2008				2007
Cash Flows from Operating Activities:
Net income		$	4,142			$	11,403
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			8,059				441
Securities impairment charges			5,280				—
Change in fair value of assets and liabilities measured at fair value			(1,788	)			—
Decrease in other assets			7,976				6,545
Increase in other liabilities			7,872				47
Other, net			4,204				825
Net cash provided by operating activities			35,745				19,261
Cash Flows from Investing Activities:
Proceeds from maturities of securities			34,006				17,610
Purchases of securities			(82,434	)			(52,706	)
Proceeds from the sale of securities			22,011				8,764
Net cash received in settlement of acquisition			—				46,793
Net increase in loans made to customers			(96,148	)			(40,197	)
Purchase of premises and equipment			(2,893	)			(11,889	)
Proceeds from sale of premises and equipment			—				2,628
(Liquidations) purchases of restricted stock			(18,901	)			938
Net cash (used in) investing activities			(144,359	)			(28,059	)
Cash Flows from Financing Activities:
Net increase in deposits			84,016				46,460
Net proceeds from (repayments on) borrowings			100,633				(7,103	)
Proceeds from exercise of stock options and stock warrants			553				1,018
Stock repurchases			(356	)			—
Net cash provided by financing activities			184,846				40,375
Increase in cash and cash equivalents			76,232				31,577
Cash and Cash Equivalents, beginning of period			115,629				264,880
Cash and Cash Equivalents, end of period		$	191,861			$	296,457
Supplemental Disclosure of Cash Flow Information
Cash payments for interest		$	40,595			$	26,590
Cash payments for income taxes		$	—			$	—
Supplemental Disclosure of Noncash Investing and Financing Activities
Stock issued in connection with acquisition		$	—			$	91,304
Trading securities in the process of settlement		$	12,878			$	—
Transfers of loans to other real estate owned		$	6,901			$	—

See 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. 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; fair value of collateralized debt obligations (CDOs), synthetic CDOs and related embedded derivatives; classification of impaired securities as other than temporary; and impairment of goodwill and other intangible assets.

Principles of consolidation

With the exception of certain trust subsidiaries which do not meet the criteria for consolidation pursuant to Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, the consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Bank of Nevada and its subsidiary BW Real Estate, Inc., Alliance Bank of Arizona, Torrey Pines Bank, Alta Alliance Bank, First Independent Bank of Nevada (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 March 31, 2008 and 2007 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, 2007.

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

Repurchase program

For the quarter ended March 31, 2008, the Company repurchased 20,000 shares of common stock on the open market with a weighted average price of $17.75 per share. The Company has the remaining authority to repurchase shares with an aggregate purchase price of $30.6 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 September 2007, 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. The adoption of EITF 06-4 resulted in a cumulative effect adjustment of $0.2 million, effective January 1, 2008.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). These new standards significantly change the accounting for and reporting of business combination transactions and noncontrolling interests (previously referred to as minority interests) in consolidated financial statements. These Statements are effective for the Company beginning on January 1, 2009. The Company does not expect SFAS 141R and SFAS 160 to have a material impact on the financial statements. These standards will change the Company’s accounting treatment for business combinations on a prospective basis.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 amends and expands the disclosure requirements of FASB Statement No. 133, requiring enhanced disclosures about (a) how and why the Company uses derivative instruments, (b) how derivative instruments and related hedge items are accounted for under FASB Statement No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect the Company’s financial position, results of operations, and cash flows. SFAS 161 is effective January 1, 2009 on a prospective basis, with comparative disclosures of earlier periods encouraged upon initial adoption.

Derivative financial instruments

All derivatives are recognized on the balance sheet at their fair value, with changes in fair value reported in current-period earnings. These instruments consist primarily of interest rate swaps.

Note 2. Fair Value Accounting

For the three months ended March 31, 2008, gains and losses from fair value changes included in the Consolidated Statement of Income were as follows (in thousands):

 

		Changes in Fair Values for the Three-Month Period Ended March 31, 2008 for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
														Total
		Unrealized												Changes in
		Gain (Loss) on								Interest				Fair Values
		Assets and								Expense on				Included in
		Liabilities				Interest				Junior				Current-
		Measured at				Income on				Subordinated				Period
Description		Fair Value, Net				Securities				Debt				Earnings
Securities measured at fair value		$	(4,077	)		$	337			$	—			$	(3,740	)
Junior subordinated debt			6,148				—				70			$	6,218
Fixed-rate term borrowings			(690	)			—				—				(690	)
		$	1,381			$	337			$	70			$	1,788

The difference between the aggregate fair value of $56.0 million and the aggregate unpaid principal balance of $66.5 million of junior subordinated debt was $10.5 million at March 31, 2008.

The difference between the aggregate fair value of $31.5 million and the aggregate unpaid principal balance of $30.0 million of fixed-rate term borrowings measured at fair value was $1.5 million at March 31, 2008.

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 will generally be 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.

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 March 31, 2008 (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		March 31, 2008				(Level 1)				(Level 2)				(Level 3)
Assets:
Securities available for sale		$	477,095			$	61,198			$	323,278			$	92,619
Securities measured at fair value			245,238				—				245,238				—
Interest rate swaps			4,434				—				4,434				—
Total		$	726,767			$	61,198			$	572,950			$	92,619
Liabilities:
Fixed-rate term borrowings		$	31,458			$	—				31,458			$	—
Junior subordinated debt			56,022				—				—				56,022
Interest rate swaps			3,233				—				3,233				—
Total		$	90,713			$	—			$	34,691			$	56,022

		Securities Available				Securities Measured				Junior Subordinated
		For Sale				at Fair Value				Debt
Beginning balance January 1, 2008		$	115,921			$	2,787			$	(62,240	)
Total gains (losses) (realized/unrealized)
Included in earnings			(5,671	)			(2,787	)			6,218
Included in other comprehensive income			(17,631	)			—				—
Purchases, issuances, and settlements, net			—				—				—
Transfers in and/or out of Level 3			—				—				—
Ending balance March 31, 2008		$	92,619			$	—			$	(56,022	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date		$	(5,671	)		$	(2,787	)		$	6,218

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
		March 31,
		2008				2007
		(in thousands, except per share
		amounts)
Basic:
Net income applicable to common stock		$	4,142			$	11,403
Average common shares outstanding			29,544				26,950
Earnings per share		$	0.14			$	0.42
Diluted:
Net income applicable to common stock		$	4,142			$	11,403
Average common shares outstanding			29,544				26,950
Stock option adjustment			435				1,134
Restricted stock adjustment			—				104
Stock warrant adjustment			568				993
Average common equivalent shares outstanding			30,547				29,181
Earnings per share		$	0.14			$	0.39

As of March 31, 2008, approximately 978,000 stock options and 132,000 stock warrants were considered anti-dilutive and excluded for purposes of calculating diluted earnings per share because they were out of the money.

Note 4. Securities

Carrying amounts and fair values of investment securities at March 31, 2008 are summarized as follows (in thousands):

		March 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
Securities held to maturity		Cost				Gains				(Losses)				Value
Municipal obligations		$	7,290			$	182			$	—			$	7,472
Other			1,500				—				—				1,500
		$	8,790			$	182			$	—			$	8,972
Securities available for sale
U.S. Treasury securities		$	5,976			$	—			$	8			$	5,984
U.S. Government-sponsored agencies			7,975				15				(14	)			7,976
Municipal obligations			14,019				233				(36	)			14,216
Mortgage-backed securities			284,529				4,182				(1,063	)			287,648
Adjustable-rate preferred stock			57,486				—				(25,520	)			31,966
Debt obligations and structured securities			160,161				—				(44,292	)			115,869
Other			13,498				—				(62	)			13,436
		$	543,644			$	4,430			$	(70,979	)		$	477,095
Securities measured at fair value
U.S. Government-sponsored agencies														$	2,480
Municipal obligations															111
Mortgage-backed securities															242,647
														$	245,238

		December 31, 2007
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
Securities held to maturity		Cost				Gains				(Losses)				Value
Municipal obligations		$	7,906			$	124			$	—			$	8,030
Other			1,500				—				—				1,500
		$	9,406			$	124			$	—			$	9,530
Securities available for sale
U.S. Government-sponsored agencies		$	14,971			$	128			$	(20	)		$	15,079
Municipal obligations			14,143				88				(36	)			14,195
Mortgage-backed securities			273,368				2,429				(1,507	)			274,290
Adjustable-rate preferred stock			51,506				—				(21,796	)			29,710
Debt obligations and structured securities			162,855				—				(23,515	)			139,340
Other			13,890				—				(150	)			13,740
		$	530,733			$	2,645			$	(47,024	)		$	486,354
Securities measured at fair value
U.S. Government-sponsored agencies														$	9,049
Municipal obligations															110
Mortgage-backed securities															228,494
Debt obligations and structured securities															2,787
														$	240,440

At March 31, 2008, the combined unrealized loss on our adjustable rate preferred stock and debt and other structured securities portfolios classified as available for sale was $69.8 million, compared with $45.3 million at December 31, 2007. The increase is unrealized losses is generally due to widening interest spreads which began in the third quarter of 2007. During March 2008, the near insolvency of Bear Stearns caused the debt of almost all financial companies to decline in value. This compounded the lack of liquidity for such securities that existed since late 2007. The Company is actively monitoring these portfolios for declines in fair value that are considered other-than-temporary. These combined unrealized losses were not considered as other than temporary as of March 31, 2008.

During the quarter ended March 31, 2008, the Company recorded impairment charges totaling $5.3 million, including $2.2 million related to a security which suffered a significant downgrade and $3.1 million

related to an auction-rate leveraged security that was discussed in the Company’s Form 10-K for the year ended December 31, 2007.

Note 5. Loans

The components of the Company’s loan portfolio as of March 31, 2008 and December 31, 2007 are as follows (in thousands):

		March 31,				December 31,
		2008				2007
Construction and land development		$	805,464			$	806,110
Commercial real estate			1,550,793				1,514,533
Residential real estate			519,614				492,551
Commercial and industrial			808,948				784,378
Consumer			46,234				43,517
Less: net deferred loan fees			(8,421	)			(8,080	)
			3,722,632				3,633,009
Less:
Allowance for loan losses			(50,839	)			(49,305	)
		$	3,671,793			$	3,583,704

Changes in the allowance for loan losses for the three months ended March 31, 2008 and 2007 are as follows (in thousands):

		Three Months Ended
		March 31,
		2008				2007
Balance, beginning		$	49,305			$	33,551
Acquisitions			—				3,706
Provision charged to operating expense			8,059				441
Recoveries of amounts charged off			103				79
Less amounts charged off			(6,628	)			(258	)
Balance, ending		$	50,839			$	37,519

At March 31, 2008, total impaired and non-accrual loans were $51.3 million and $9.8 million, respectively, compared with $35.1 million and $17.9 million at December 31, 2007, respectively. Included in impaired loans were loans past due 90 days or more and still accruing of $3.2 million at March 31, 2008 and $0.8 million at December 31, 2007.

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 March 31, 2008 and December 31, 2007 follows (in thousands):

		March 31,				December 31,
		2008				2007
Short Term
FHLB Advances (weighted average rate is 2008: 2.19% and 2007: 3.30%)		$	601,000			$	447,600
Other short term debt (weighted average rate is 2008: 4.87% and 2007: 4.83%)			44,380				41,730
Due in one year or less		$	645,380			$	489,330
Long Term
FHLB Advances (weighted average rate is 2008: 4.77% and 2007: 4.63%)		$	41,458			$	45,768
Other long term debt (weighted average rate is 8.79%)			9,571				9,601
Due in over one year		$	51,029			$	55,369

The Company was not in compliance with a loan covenant with a single lending institution. The lending institution waived this requirement as of March 31, 2008. In consideration for waiving the covenant as of March 31, 2008, the line of credit was decreased from $50 million to $40 million.

Note 7. Income Tax Matters

The reasons for the differences between the statutory federal income tax rate and the effective tax rate are summarized as follows:

		March 31,				March 31,
		2008				2007
Computed “expected” tax expense		$	1,956			$	6,075
Increase (decrease) resulting from:
State income taxes, net of federal benefit			70				179
Dividends received deductions			(147	)			(58	)
Bank-owned life insurance			(280	)			(325	)
Tax-exempt income			(125	)			(16	)
Nondeductible expenses			85				84
Other			(178	)			13
		$	1,381			$	5,952

Note 8. 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 (in thousands):

		March 31,				December 31,
		2008				2007
Commitments to extend credit, including unsecured loan commitments of $241,298 in 2008 and $230,677 in 2007		$	1,157,695			$	1,193,522
Credit card commitments and guarantees			30,598				26,507
Standby letters of credit, including unsecured letters of credit of $14,687 in 2008 and $14,543 in 2007			80,402				80,790
		$	1,268,695			$	1,300,819

Subsequent to the period ended March 31, 2008, the Company entered into an agreement with the Federal Reserve Bank in which certain assets may be pledged as collateral on a borrowing line.

Note 9. Stock-based Compensation

For the three months ended March 31, 2008, 423,625 stock options with a weighted average exercise price of $15.90 per share were granted to certain key employees and directors. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes valuation model. The weighted average grant date fair value of these options was $5.07 per share. These stock options generally have a vesting period of four years and a contractual life of seven years.

As of March 31, 2008 and March 31, 2007, there were 2.6 million options outstanding.

For the three months ended March 31, 2008 and March 31, 2007 the company recognized stock-based compensation expense related to all options of $0.5 million and $0.4 million, respectively.

During the three months ended March 31, 2008, 27,150 shares of restricted stock were also issued. The Company estimates the compensation cost for restricted stock grants based upon the grant date fair value. Generally, these restricted stock grants have a three year vesting period. The weighted average grant date fair value was $0.4 million.

There were approximately 625,000 and 399,000 restricted shares outstanding at March 31, 2008 and 2007, respectively. For the three months ended March 31, 2008 and March 31, 2007 the Company recognized stock-based compensation of $1.7 million and $0.9 million related to the Company’s restricted stock plan.

The following is a summary of selected operating segment information as of and for the periods ended March 31, 2008 and 2007:

		Bank				Alliance Bank				Torrey Pines				Alta Alliance				First Independent								Intersegment				Consolidated
(in thousands)		of Nevada				of Arizona				Bank				Bank				Bank				Other				Eliminations				Company
At March 31, 2008:
Assets		$	3,098,135			$	768,970			$	704,157			$	102,759			$	546,486			$	24,779			$	(47,983	)		$	5,197,303
Gross loans and deferred fees			2,229,694				597,063				555,036				45,627				338,212				—				(43,000	)			3,722,632
Less: Allowance for loan losses			(32,868	)			(7,497	)			(5,829	)			(416	)			(4,229	)			—				—				(50,839	)
Net loans			2,196,826				589,566				549,207				45,211				333,983				—				(43,000	)			3,671,793
Deposits			2,017,709				668,922				452,348				81,567				414,208				—				(4,490	)			3,630,264
Stockholders’ equity			313,122				54,066				44,181				21,081				120,702				(59,192	)			—				493,960
Number of branches			15				11				7				2				5				—				—				40
Number of full-time employees			490				135				136				30				109				79				—				979
Three Months Ended March 31, 2008:
Net interest income		$	27,756			$	7,297			$	7,623			$	817			$	4,756			$	(1,387	)		$	—			$	46,862
Provision for loan losses			6,041				725				722				39				532				—				—				8,059
Net interest income after provision for loan losses			21,715				6,572				6,901				778				4,224				(1,387	)			—				38,803
Gain (loss) on sale of securities			—				158				—				—				3				—				—				161
Mark-to-market gains (losses), net			(9,787	)			(166	)			(122	)			—				—				6,219				—				(3,856	)
Noninterest income, excluding																															—
securities and fair value gains (losses)			3,313				1,894				592				85				261				2,807				(534	)			8,418
Noninterest expense			(15,574	)			(6,465	)			(6,961	)			(1,434	)			(3,671	)			(4,367	)			534				(37,938	)
Income (loss) before income taxes			(333	)			1,993				410				(571	)			817				3,272				—				5,588
Minority interest			—				—				—				—				—				65				—				65
Income tax expense (benefit)			(522	)			707				171				(236	)			132				1,129				—				1,381
Net income (loss)		$	189			$	1,286			$	239			$	(335	)		$	685			$	2,078			$	—			$	4,142

		Bank of				Alliance Bank				Torrey Pines				Alta Alliance				First Independent								Intersegment				Consolidated
(in thousands)		Nevada				of Arizona				Bank				Bank				Bank				Other				Eliminations				Company
At March 31, 2007:
Assets		$	2,913,926			$	706,779			$	616,526			$	63,905			$	530,670			$	24,425			$	(128,587	)		$	4,727,644
Gross loans and deferred fees			2,122,463				503,777				424,735				12,265				292,797				—				(20,000	)			3,336,037
Less: Allowance for loan losses			(23,296	)			(5,732	)			(4,672	)			(113	)			(3,706	)			—				—				(37,519	)
Net loans			2,099,167				498,045				420,063				12,152				289,091				—				(20,000	)			3,298,518
Deposits			2,274,568				618,822				519,382				41,131				402,865				—				(7,623	)			3,849,145
Stockholders’ equity			347,210				52,859				40,609				23,681				122,748				(75,862	)			—				511,245
Number of branches			15				10				6				2				4				—				—				37
Number of full-time employees			538				134				111				30				95				51				—				959
Three Months Ended March 31, 2007:
Net interest income		$	28,966			$	6,694			$	5,856			$	379			$	—			$	(1,039	)		$	—			$	40,856
Provision for loan losses			287				—				121				33				—				—				—				441
Net interest income after provision for loan losses			28,679				6,694				5,735				346				—				(1,039	)			—				40,415
Noninterest income			2,922				531				448				82				—				2,353				(475	)			5,861
Noninterest expense			(15,053	)			(5,399	)			(4,324	)			(1,323	)			—				(3,297	)			475				(28,921	)
Income before income taxes			16,548				1,826				1,859				(895	)			—				(1,983	)			—				17,355
Income tax expense			5,510				711				727				(358	)			—				(638	)			—				5,952
Net income		$	11,038			$	1,115			$	1,132			$	(537	)		$	—			$	(1,345	)		$	—			$	11,403

The following discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 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.

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 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.

During the first quarter of 2008, our earnings were challenged by difficult economic conditions in our primary markets and the economic downturn generally, causing heavy reserves to our loan portfolio and write-downs in our securities 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, and we believe the current economic climate presents our Company with the opportunity to differentiate ourselves from our competitors. Loan growth for the quarter ended March 31, 2008 was $89.6 million, or 2.5%, as compared to $40.0 million, or 1.3% for the same period in 2007. Deposit growth was $83.3 million, including $70.1 million of brokered deposits, or 2.3%, for the three months ended March 31, 2008, compared to $45.9 million, or 1.3% for the same period in 2007. We reported net income of $4.1 million, or $0.14 per diluted share, for the quarter ended March 31, 2008, as compared to $11.4 million, or $0.39 per diluted share, for the same period in 2007. The decrease in earnings is primarily due to an increase of $9.0 million in non-interest expenses related to expansion efforts, a $5.3 million impairment charge on securities and a $7.6 million increase in the provision for loan losses from the previous year. Non-interest income, excluding securities impairment charges and increases in fair value of financial instruments measured at fair value, for the quarter ended March 31, 2008 increased 50.6% from the same period in the prior year due to non-recurring income amounts of $1.1 million as well as increases in trust and investment advisory fees and service charges. Non-interest expense for the quarter ended March 31, 2008 increased 31.2% from the same period in 2007, due primarily to increases in salaries and benefits and occupancy costs caused by the acquisitions of First Independent Bank of Nevada and Shine Investment Advisory Services in 2007, the establishment of the PartnersFirst affinity credit card initiative in 2007 and continued branch expansion during 2007. Branch expansion is expected to be nominal in 2008.

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
		ended March 31,
		2008				2007				Change %
Selected Balance Sheet Data:
($ in millions)
Total assets		$	5,197.3			$	4,727.6				9.9
Gross loans, including net deferred fees			3,722.6				3,336.0				11.6
Securities			731.1				630.9				15.9
Federal funds sold and other			59.0				166.8				(64.6	)
Deposits			3,630.3				3,849.1				(5.7	)
Borrowings			696.4				56.7				1,128.2
Junior subordinated and subordinated debt			116.0				110.4				5.1
Stockholders’ equity			494.0				511.2				(3.4	)
Selected Income Statement Data:
($ in thousands)
Interest income		$	76,792			$	67,313				14.1
Interest expense			29,930				26,457				13.1
Net interest income			46,862				40,856				14.7
Provision for loan losses			8,059				441				1,727.4
Net interest income after provision for loan losses			38,803				40,415				(4.0	)
Investment security gains (losses), net			161				284				(43.3	)
Derivative gains			43				—				100.0
Securities impairment charges			(5,280	)			—				100.0
Unrealized gains (losses) on assets and liabilities measured at fair value, net			1,381				(13	)			100.0
Other income, excluding securities and fair value gains (losses)			8,418				5,590				50.6
Non-interest expense			37,938				28,921				31.2
Income before income taxes			5,588				17,355				(67.8	)
Minority interest			65				—
Income tax expense			1,381				5,952				(76.8	)
Net Income		$	4,142			$	11,403				(63.7	)
Memo: Intangible asset amortization expense, net of tax		$	513			$	257				99.6