e10vq

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, 2005


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: 333-124406

WESTERN ALLIANCE BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)


Nevada		88-0365922

(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer I.D. Number)
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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)


Yes o		No þ

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: 22,810,191 shares as of October 31, 2005.

Part I. Financial Information

ITEM I. FINANCIAL STATEMENTS

Western Alliance Bancorporation and Subsidiaries

Consolidated Balance Sheets
September 30, 2005 and December 31, 2004


	September 30,			December 31,
($ in thousands, except per share amounts)	2005			2004

	(Unaudited)
Assets
Cash and due from banks	$	90,618		$	92,282
Federal funds sold		203,999			23,115

Cash and cash equivalents		294,617			115,397

Securities held to maturity (approximate fair value $115,689 and $128,984, respectively)		117,116			129,549
Securities available for sale		595,959			659,073
Loans, net of allowance for loan losses of $19,288 and $15,271, respectively		1,598,253			1,173,264
Premises and equipment, net		36,859			29,364
Bank owned life insurance		51,215			26,170
Investment in Federal Home Loan Bank stock		14,006			15,097
Accrued interest receivable		9,189			8,359
Deferred tax assets, net		8,858			5,949
Goodwill		3,946			3,946
Other intangible assets, net of accumulated amortization of $349 and $183, respectively		1,274			1,440
Other assets		13,722			9,241

Total assets	$	2,745,014		$	2,176,849


Liabilities and Stockholders’ Equity
Liabilities
Non-interest bearing demand deposits	$	1,048,175		$	749,550
Interest bearing deposits:
Demand		107,700			103,723
Savings and money market		893,736			665,425
Time, $100 and over		275,325			219,451
Other time		22,562			17,887

		2,347,498			1,756,036
Federal Home Loan Bank advances and other borrowings
One year or less		55,810			185,494
Over one year		63,700			63,700
Junior subordinated debt		30,928			30,928
Accrued interest payable and other liabilities		8,825			7,120

Total liabilities		2,506,761			2,043,278

Commitments and Contingencies
Stockholders’ Equity
Preferred stock, par value $.0001; shares authorized 20,000,000; no shares issued and outstanding 2005 and 2004		—			—
Common stock, par value $.0001; shares authorized 100,000,000; shares issued and outstanding 2005: 22,793,241; 2004:18,249,554		2			2
Additional paid-in capital		167,950			80,459
Retained earnings		77,839			58,216
Deferred compensation — restricted stock		(386	)		—
Accumulated other comprehensive loss — net unrealized loss on available for sale securities		(7,152	)		(5,106	)

Total stockholders’ equity		238,253			133,571

Total liabilities and stockholders’ equity	$	2,745,014		$	2,176,849

See Notes to Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands, except per share amounts)	2005		2004		2005		2004

Interest income on:
Loans, including fees	$	27,343	$	15,866	$	71,266	$	40,819
Securities — taxable		7,269		7,989		22,053		22,097
Securities — nontaxable		85		84		256		256
Dividends — taxable		135		149		441		384
Federal funds sold and other		868		57		1,919		224

Total interest income		35,700		24,145		95,935		63,780

Interest expense on:
Deposits		6,767		3,228		17,124		8,344
Short-term borrowings		357		601		1,305		1,961
Long-term borrowings		699		912		2,259		2,376
Junior subordinated debt		546		407		1,520		1,103

Total interest expense		8,369		5,148		22,208		13,784

Net interest income		27,331		18,997		73,727		49,996
Provision for loan losses		1,283		1,256		4,217		3,163

Net interest income after provision for loan losses		26,048		17,741		69,510		46,833

Other income:
Trust and investment advisory services		1,448		1,045		4,108		1,801
Service charges		662		638		1,858		1,884
Income from bank owned life insurance		463		293		1,045		908
Investment securities gains (losses), net		—		58		69		14
Other		660		585		1,655		1,568

		3,233		2,619		8,735		6,175

Other expense:
Salaries and employee benefits		9,541		6,678		27,049		17,934
Occupancy		2,619		1,917		7,314		5,271
Customer service		1,257		468		2,930		1,473
Advertising and other business development		702		316		2,023		1,234
Legal, professional and director fees		527		420		1,523		1,057
Correspondent and wire transfer costs		417		349		1,220		888
Audits and exams		367		311		1,128		822
Data processing		350		168		715		467
Supplies		304		230		804		616
Travel and automobile		232		173		487		307
Insurance		223		167		540		383
Telephone		195		149		558		419
Other		540		394		1,523		1,185

		17,274		11,740		47,814		32,056


Income before income taxes		12,007		8,620		30,431		20,952

Income tax expense		4,258		3,071		10,808		7,324


Net income	$	7,749	$	5,549	$	19,623	$	13,628

Comprehensive income	$	6,071	$	12,631	$	17,577	$	12,713

Earnings per share:
Basic	$	0.34	$	0.33	$	0.99	$	0.81

Diluted	$	0.31	$	0.31	$	0.90	$	0.76

See Notes to Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statement of Stockholders’ Equity

Nine Months Ended September 30, 2005 (Unaudited)

($ in thousands, except per share amounts)


																Deferred			Accumulated
												Additional				Compensation -			Other
	Comprehensive			Preferred Stock				Common Stock				Paid-in		Retained		Restricted			Comprehensive
Description	Income			Shares Issued		Amount		Shares Issued		Amount		Capital		Earnings		Stock			(Loss)			Total

Balance, December 31, 2004					—	$	—		18,249,554	$	2	$	80,459	$	58,216	$	—		$	(5,106	)	$	133,571

Issuance of 4,200,000 shares of common stock, net of offering costs of $7,337									4,200,000		—		85,063		—		—			—			85,063
Stock options exercised									210,864		—		1,176		—		—			—			1,176
Stock warrants exercised									105,823		—		806		—		—			—			806
Restricted stock granted									27,000		—		446		—		(446	)		—			—
Compensation cost on restricted stock									—		—		—		—		60			—			60
Comprehensive income:
Net income	$	19,623							—		—		—		19,623		—			—			19,623
Other comprehensive income
Unrealized holding losses on securities available for sale arising during the period, net of taxes of $1,239		(2,001	)
Less reclassification adjustment for gains included in net income, net of taxes of $24		(45	)

Net unrealized holding losses		(2,046	)						—		—		—		—		—			(2,046	)		(2,046	)

	$	17,577




Balance, September 30, 2005					—	$	—		22,793,241	$	2	$	167,950	$	77,839	$	(386	)	$	(7,152	)	$	238,253

See Notes to Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2005 and 2004 (Unaudited)

($ in thousands)


	2005			2004

Cash Flows from Operating Activities:
Net income	$	19,623		$	13,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,809			1,890
Net amortization of securities premiums		1,196			3,024
Stock dividends received, FHLB stock		(440	)		(384	)
Provision for loan losses		4,217			3,163
(Gain) loss on sales of securities available for sale		(69	)		14
Deferred taxes		(25	)		(522	)
Compensation cost on restricted stock		60			—
(Decrease) in accrued interest receivable		(830	)		(1,094	)
(Increase) in bank-owned life insurance		(1,045	)		(907	)
Increase in other assets		(4,260	)		(1,535	)
Increase in accrued interest payable and other liabilities		84			1,029
Other, net		(30	)		15

Net cash provided by operating activities		21,290			18,321

Cash Flows from Investing Activities:
Purchases of securities held to maturity		(8,233	)		(19,964	)
Proceeds from maturities of securities held to maturity		20,560			26,491
Purchases of securities available for sale		(85,747	)		(409,644	)
Proceeds from maturities of securities available for sale		125,697			244,469
Proceeds from the sale of securities available for sale		18,728			13,768
Net cash paid in settlement of acquisition		—			(2,177	)
Proceeds from sale (purchase) of Federal Home Loan Bank stock		1,531			(2,483	)
Net increase in loans made to customers		(429,206	)		(352,361	)
Purchase of premises and equipment		(10,285	)		(7,142	)
Proceeds from sale of premises and equipment		62			—
Purchase of bank owned life insurance		(24,000	)		—

Net cash used in investing activities		(390,893	)		(509,043	)

Cash Flows from Financing Activities:
Net increase in deposits		591,462			595,294
Net repayments on borrowings		(129,684	)		(75,360	)
Proceeds from stock issuance		85,063			14,955
Proceeds from exercise of stock options and stock warrants		1,982			502

Net cash provided by financing activities		548,823			535,391

Increase in cash and cash equivalents		179,220			44,669
Cash and Cash Equivalents, beginning of period		115,397			65,908

Cash and Cash Equivalents, end of period	$	294,617		$	110,577


Supplemental Disclosure of Cash Flow Information
Cash payments for interest	$	23,141		$	14,860
Cash payments for income taxes	$	12,640		$	6,935
Supplemental Disclosure of Noncash Investing and Financing Activities
Stock issued in connection with acquisition	$	—		$	2,400

See Notes to Consolidated Financial Statements.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

($ in thousands, except per share amounts)

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

Nature of business

Western Alliance Bancorporation is a bank holding company providing a full range of banking services to commercial and consumer customers through its wholly owned subsidiaries BankWest of Nevada, operating in Nevada, Alliance Bank of Arizona, operating in Arizona, Torrey Pines Bank, operating in Southern California, Miller/Russell & Associates, Inc., operating in Nevada, Arizona and Southern California, and Premier Trust, Inc., operating in Nevada and Arizona. These entities are collectively referred to herein as the Company. Alliance Bank of Arizona and Torrey Pines Bank began operations during the year ended December 31, 2003. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general industry practices.

A summary of the significant accounting policies of the Company follows:

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. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, BankWest of Nevada, Alliance Bank of Arizona, Torrey Pines Bank (collectively referred to herein as the Banks), Miller/Russell & Associates, Inc., and Premier Trust, 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, 2005 and 2004 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.

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.

Condensed financial information as of December 31, 2004 has been presented next to the interim consolidated balance sheet for informational purposes.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

($ in thousands, except per share amounts)

Note 1. Nature of Business and Summary of Significant Accounting Policies (continued)

Stock compensation plans

At September 30, 2005, the Company has the 2005 Stock Inventive Plan (2005 Plan), which is an amendment and restatement of the three plans described more fully in Note 12 of the audited financial statements. There were no modifications to outstanding options as a result of this amendment. The shares available for issuance under the 2005 Plan are 3,255,000, taking into account awards outstanding under the prior three plans of 2,248,550. The Company accounts for the plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, no stock-based employee compensation cost has been recognized, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share had compensation cost for all of the stock-based compensation plans been determined based on the grant date fair values of awards (the method described in FASB Statement No. 123, Accounting for Stock-Based Compensation):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004

Net income:
As reported	$	7,749		$	5,549		$	19,623		$	13,628
Deduct total stock-based employee compensation expense determined under fair value based method for all awards		(259	)		(172	)		(684	)		(481	)
Related tax benefit for nonqualified stock options		19			10			42			19

Pro forma	$	7,509		$	5,387		$	18,981		$	13,166


Earnings per share:
Basic — as reported	$	0.34		$	0.33		$	0.99		$	0.81
Basic — pro forma		0.33			0.32			0.96			0.78
Diluted — as reported		0.31			0.31			0.90			0.76
Diluted — pro forma		0.30			0.30			0.87			0.73

The pro forma compensation cost was recognized for the fair value of the stock options granted, which was estimated using the minimum value method for those options granted prior to our initial public offering, and the Black-Scholes method for those granted after it. For options granted prior to our initial public offering, the assumptions used in determining the fair value per optional share of $4.04 and $2.84 for stock options granted in the nine months ended September 30, 2005 and 2004, respectively, were as follows: expected life of seven years and risk free interest rate of 4.1% and 3.9%, respectively. For options granted after our initial public offering, the assumptions used in determining the fair value per optional shares of $9.40 were a follows: expected life of seven years, risk free interest rate of 4.0%, and volatility of 29%.

Recent Accounting Pronouncements

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

($ in thousands, except per share amounts)

Note 1. Nature of Business and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

instruments issued. FAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement. Modifications of share-based payments will be treated as replacement awards with the cost of the incremental value recorded in the financial statements.

The Statement will be effective at the beginning of the first quarter of 2006. As of the effective date, we will apply the Statement using a modified version of prospective application. Under that transition method, compensation cost will be recognized for (i) all awards granted after the required effective date and to awards modified, cancelled, or repurchased after that date and (ii) the portion of awards granted subsequent to completion of the Company’s initial public offering (IPO) and prior to the effective date for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated for pro forma disclosures under SFAS 123. No compensation cost will be recognized for awards granted before the completion of the Company’s IPO since the value of those awards were calculated using the minimum value method. The impact of this statement on the Company in 2006 and beyond will depend on various factors, including our compensation strategy.

Capital Stock

On April 27, 2005, the Company’s shareholders approved an increase in the total number of authorized shares of capital stock from 50,000,000 to 120,000,000. The total increase of 70,000,000 shares includes 50,000,000 shares designated as common stock and 20,000,000 shares designated as preferred stock. Upon the issuance of any series of preferred stock, the holders of shares of such series will have certain preferences over the holders of outstanding shares of common stock, depending upon the specific terms of such series designated by the Board of Directors.

Note 2. 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.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 2. Earnings Per Share (continued)

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,
	2005		2004		2005		2004

Basic:
Net income applicable to common stock	$	7,749	$	5,549	$	19,623	$	13,628
Average common shares outstanding		22,732,713		16,994,849		19,841,670		16,838,882

Earnings per share	$	0.34	$	0.33	$	0.99	$	0.81


Diluted:
Net income applicable to common stock	$	7,749	$	5,549	$	19,623	$	13,628


Average common shares outstanding		22,732,713		16,994,849		19,841,670		16,838,882
Stock option adjustment		1,340,705		669,478		1,128,402		694,500
Stock warrant adjustment		1,008,205		540,772		886,541		500,715

Average common equivalent shares outstanding		25,081,623		18,205,099		21,856,613		18,034,097

Earnings per share	$	0.31	$	0.31	$	0.90	$	0.76

6,250 stock options are not included in the above calculations for the three months ended September 30, 2005 as the effect would have been anti-dilutive.

Note 3. Loans

The components of the Company’s loan portfolio as of September 30, 2005 and December 31, 2004 are as follows:


	September 30,			December 31,
	2005			2004

Construction and land development	$	396,970		$	323,176
Commercial real estate		655,004			491,949
Residential real estate		239,538			116,360
Commercial and industrial		307,045			241,292
Consumer		21,046			17,682
Less: net deferred loan fees		(2,062	)		(1,924	)

		1,617,541			1,188,535

Less:
Allowance for loan losses		(19,288	)		(15,271	)

	$	1,598,253		$	1,173,264

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 4. Loans (continued)

Changes in the allowance for loan losses for the three months ended September 30, 2005 and 2004 are as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004

Balance, beginning	$	18,118		$	13,360		$	15,271		$	11,378
Provision charged to operating expense		1,283			1,256			4,217			3,163
Recoveries of amounts charged off		13			24			171			130
Less amounts charged off		(126	)		(115	)		(371	)		(146	)

Balance, ending	$	19,288		$	14,525		$	19,288		$	14,525

At September 30, 2005, total impaired and non-accrual loans were $175, and loans past due 90 days or more and still accruing were $2,503.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 4. Commitments and Contingencies

Commitments

On September 15, 2005, BankWest of Nevada entered into a real estate purchase agreement for the purchase of a bank branch and office building, which is currently leased by BankWest of Nevada and serves as the headquarters for BankWest of Nevada and the Company. The purchase price is $16,300 and the transaction is expected to close in the fourth quarter of 2005.

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

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other parties to the financial instrument for these commitments is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of the contract amount of the Company’s exposure to off-balance sheet risk is as follows:


	September 30,		December 31,
	2005		2004

Commitments to extend credit, including unsecured loan commitments of $125,960 in 2005 and $81,606 in 2004	$	674,341	$	423,767
Credit card guarantees		7,404		5,421
Standby letters of credit, including unsecured letters of credit of $4,463 in 2005 and $1,264 in 2004		29,506		5,978

	$	711,251	$	435,166

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

The Company guarantees certain customer credit card balances held by an unrelated third party. These unsecured guarantees act to streamline the credit underwriting process and are issued as a service to

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 4. Commitments and Contingencies (continued)

Financial instruments with off-balance sheet risk (continued)

certain customers who wish to obtain a credit card from the third party vendor. The Company recognizes nominal fees from these arrangements and views them strictly as a means of maintaining good customer relationships. The guarantee is offered to those customers who, based solely upon management’s evaluation, maintain a relationship with the Company that justifies the inherent risk. Essentially all such guarantees exist for the life of each respective credit card relationship. The Company would be required to perform under the guarantee upon a customer’s default on the credit card relationship with the third party. Historical losses under the program have been nominal. Upon entering into a credit card guarantee, the Company records the related liability at fair value pursuant to FASB Interpretation 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Thereafter, the related liability is evaluated pursuant to FASB 5. The total credit card balances outstanding at September 30, 2005 and December 31, 2004 are $1,319 and $1,109, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required as the Company deems necessary. Essentially all letters of credit issued have expiration dates within one year. Upon entering into a letter of credit, the Company records the related liability at fair value pursuant to FIN 45. Thereafter, the related liability is evaluated pursuant to FASB 5.

The total liability for financial instruments with off-balance sheet risk as of September 30, 2005 and December 31, 2004 was $507 and $307, respectively.

Concentrations

The Company grants commercial, construction, real estate and consumer loans to customers through offices located in the Company’s primary markets. The Company’s business is concentrated in these areas and the loan portfolio includes significant credit exposure to the commercial real estate industry of these areas. At September 30, 2005 real estate related loans accounted for approximately 80% of total loans, and approximately 6% of real estate loans are secured by undeveloped land. Substantially all of these loans are secured by first liens with an initial loan to value ratio of generally not more than 80%. Approximately one-half of these real estate loans are owner occupied. At September 30, 2005, 30.3% of our loan portfolio consisted of investor real estate loans, compared to 33.3% at December 31, 2004. In addition, approximately 7% of total loans are unsecured as of September 30, 2005 and December 31, 2004.

The loans are expected to be repaid from cash flows or proceeds from the sale of selected assets of the borrowers. The Company’s policy for requiring collateral is to obtain collateral whenever it is available or desirable, depending upon the degree of risk the Company is willing to take.

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 5. Stock Options, Stock Warrants and Restricted Stock

The Company granted 383,500 stock options and 27,000 shares of restricted stock to various employees and directors during the nine months ended September 30, 2005. The options had a weighted average exercise price of $17.28 and vest at 20% a year from the date of grant. The restricted stock vests at 20% per year. 210,864 stock options were exercised and 35,100 stock options were forfeited during the nine months ended September 30, 2005. These exercised and forfeited options had a weighted average exercise price of $5.51 and $10.85, respectively.

105,823 warrants were exercised during the nine months ended September 30, 2005 at an exercise price of $7.62.

Note 6. Segment Information

The following is a summary of selected operating segment information as of and for the periods ended September 30, 2005 and 2004:


	BankWest			Alliance Bank			Torrey Pines						Intersegment			Consolidated
	of Nevada			of Arizona			Bank			Other			Eliminations			Company

At September 30, 2005:
Assets	$	1,815,708		$	514,073		$	357,272		$	277,999		$	(220,038	)	$	2,745,014
Gross loans and deferred fees		1,002,762			358,490			256,289			—			—			1,617,541
Less: Allowance for loan losses		(11,474	)		(4,833	)		(2,981	)		—			—			(19,288	)

Net loans		991,288			353,657			253,308			—			—			1,598,253

Deposits		1,586,490			460,078			315,093			—			(14,163	)		2,347,498
Stockholders’ equity		122,708			43,132			32,705			245,289			(205,581	)		238,253
Three Months Ended September 30, 2005:
Net interest income	$	18,414		$	5,128		$	3,929		$	(122	)	$	(18	)	$	27,331
Provision for loan losses		375			515			393			—			—			1,283

Net interest income after provision for loan losses		18,039			4,613			3,536			(122	)		(18	)		26,048
Noninterest income		1,375			454			213			9,929			(8,738	)		3,233
Noninterest expense		(9,345	)		(3,707	)		(2,465	)		(2,035	)		278			(17,274	)

Income before income taxes		10,069			1,360			1,284			7,772			(8,478	)		12,007
Income tax expense		3,227			483			517			31			—			4,258

Net income	$	6,842		$	877		$	767		$	7,741		$	(8,478	)	$	7,749

Nine Months Ended September 30, 2005:
Net interest income	$	51,208		$	13,469		$	10,114		$	(1,046	)	$	(18	)	$	73,727
Provision for loan losses		1,817			1,417			983			—			—			4,217

Net interest income after provision for loan losses		49,391			12,052			9,131			(1,046	)		(18	)		69,510
Noninterest income		3,830			983			488			25,826			(22,392	)		8,735
Noninterest expense		(26,098	)		(9,603	)		(7,282	)		(5,563	)		732			(47,814	)

Income before income taxes		27,123			3,432			2,337			19,217			(21,678	)		30,431
Income tax expense (benefit)		8,997			1,312			940			(441	)		—			10,808

Net income	$	18,126		$	2,120		$	1,397		$	19,658		$	(21,678	)	$	19,623

Western Alliance Bancorporation and Subsidiaries

Notes to Unaudited Consolidated Financial Statements
($ in thousands, except per share amounts)

Note 6. Segment Information (continued)


	BankWest			Alliance Bank			Torrey Pines						Intersegment			Consolidated
	of Nevada			of Arizona			Bank			Other			Eliminations			Company

At September 30, 2004:
Assets	$	1,579,308		$	294,704		$	244,147		$	166,460		$	(158,367	)	$	2,126,252
Gross loans and deferred fees		752,326			203,736			129,377			—			—			1,085,439
Less: Allowance for loan losses		(9,861	)		(2,905	)		(1,759	)		—			—			(14,525	)

Net loans		742,465			200,831			127,618			—			—			1,070,914

Deposits		1,253,583			232,683			217,368			—			(13,694	)		1,689,940
Stockholders’ equity		85,959			27,651			24,245			134,557			(144,390	)		128,022
Three Months Ended September 30, 2004:
Net interest income	$	14,544		$	2,686		$	2,174		$	(404	)	$	(3	)	$	18,997
Provision for loan losses		679			527			50			—			—			1,256

Net interest income after provision for loan losses		13,865			2,159			2,124			(404	)		(3	)		17,741
Noninterest income		1,270			240			124			7,178			(6,193	)		2,619
Noninterest expense		(6,916	)		(2,075	)		(1,727	)		(1,143	)		121			(11,740	)

Income before income taxes		8,219			324			521			5,631			(6,075	)		8,620
Income tax expense		2,723			87			194			67			—			3,071

Net income	$	5,496		$	237		$	327		$	5,564		$	(6,075	)	$	5,549

Nine Months Ended September 30, 2004:
Net interest income	$	38,509		$	6,858		$	5,663		$	(1,032	)	$	(2	)	$	49,996
Provision for loan losses		1,417			1,146			600			—			—			3,163

Net interest income after provision for loan losses		37,092			5,712			5,063			(1,032	)		(2	)		46,833
Noninterest income		3,703			545			480			16,882			(15,435	)		6,175
Noninterest expense		(19,844	)		(5,803	)		(4,443	)		(2,264	)		298			(32,056	)

Income before income taxes		20,951			454			1,100			13,586			(15,139	)		20,952
Income tax expense (benefit)		6,893			81			387			(37	)		—			7,324

Net income	$	14,058		$	373		$	713		$	13,623		$	(15,139	)	$	13,628

Note 7. Initial Public Offering

On June 29, 2005, the Company’s registration statement on Form S-1 related to the initial public offering of shares of the Company’s common stock was declared effective. The Company signed an underwriting agreement on June 29, 2005, which was on a firm commitment basis, pursuant to which the underwriters agreed to purchase 3,750,000 shares of common stock (with an option to purchase 450,000 shares to cover over-allotments) and closed the transaction on July 6, 2005.

On July 1, 2005, the principal underwriter exercised the over-allotment to purchase an additional 450,000 shares of the Company’s common stock. The total proceeds related to the over-allotment (net of offering costs) of $9.3 million were recorded in July 2005.

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 Form S-1, as amended, filed with the Securities and Exchange Commission on April 28, 2005, which includes the audited financial statements for the year ended December 31, 2004. 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 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 second quarter of 2005, we remained focused on increasing our earnings through growth of our interest earning assets funded with low-cost deposits. Loan growth for the quarter ended September 30, 2005 was $164.2 million, or 11.3%, as compared to $127.1 million, or 13.3% for the same period in 2004. Deposit growth was $153.2 million, or 7.2%, for the three months ended September 30, 2005, compared to $50.6 million, or 3.1% for the same period in 2004. We reported net income of $7.7 million, or $0.31 per diluted share, for the quarter ended September 30, 2005, as compared to $5.5 million, or $0.31 per diluted share, for the same period in 2004. The increase in earnings is primarily due to higher net interest income, due primarily to an increase in loans and the increase in interest rates. Earnings per share remained flat due to the increase in shares outstanding. The provision for loan losses increased $27,000 from the three months ended September 30, 2004 to the same period in 2005, due to an increase in size of the loan portfolio. Non-interest income for the quarter ended September 30, 2005 increased 23.4% from the same period in the prior year, due primarily to an increase in trust and investment advisory fees. Non-interest expense for the quarter ended September 30, 2005 increased 47.1% from the same period in 2004, due primarily to an increase in salary and benefits and occupancy costs.

Selected financial highlights are presented in the table below.

Summary of Consolidated Financial and Other Data


	At or for the three months ended Sept 30,									For the nine months ended Sept 30,
	2005			2004			Change %			2005			2004			Change %

Selected Balance Sheet Data: (in millions)
Total assets	$	2,745.0		$	2,126.2			29.1	%
Gross loans, including net deferred fees		1,617.5			1,085.4			49.0
Securities		713.1			853.4			(16.4	)
Federal funds sold		204.0			22.8			794.7
Deposits		2,347.5			1,689.9			38.9
Short term borrowings and long term debt		119.5			263.3			(54.6	)
Junior subordinated debt		30.9			30.9			0.0
Stockholders’ equity		238.3			128.0			86.2

Selected Income Statement Data: (in thousands)
Interest income	$	35,700		$	24,145			47.9		$	95,935		$	63,780			50.4	%
Interest expense		8,369			5,148			62.6			22,208			13,784			61.1

Net interest income		27,331			18,997			43.9			73,727			49,996			47.5
Provision for loans losses		1,283			1,256			2.1			4,217			3,163			33.3

Net interest income after provision for loan losses		26,048			17,741			46.8			69,510			46,833			48.4
Non-interest income		3,233			2,619			23.4			8,735			6,175			41.5
Non-interest expense		17,274			11,740			47.1			47,814			32,056			49.2

Income before income taxes		12,007			8,620			39.3			30,431			20,952			45.2
Income tax expense		4,258			3,071			38.7			10,808			7,324			47.6

Net Income		7,749			5,549			39.6			19,623			13,628			44.0


Common Share Data:
Net income per share:
Basic	$	0.34		$	0.33			3.0		$	0.99		$	0.81			22.2
Diluted		0.31			0.31			0.0			0.90			0.76			18.4
Book value per share		10.45			7.02			48.9
Average shares outstanding (in thousands):
Basic		22,732			16,995			33.8			19,842			16,839			17.8
Diluted		25,082			18,205			37.8			21,856			18,034			21.2
Common shares outstanding		22,793			18,236			25.0

Selected Performance Ratios:
Return on average assets (1)		1.17	%		1.10	%		6.4			1.09	%		1.00	%		9.0
Return on average stockholders’ equity (1)		12.80			19.26			(33.5	)		14.82			16.84			(12.0	)
Net interest margin (1)		4.43			4.02			10.2			4.39			3.93			11.7
Net interest spread		3.52			3.44			2.3			3.58			3.38			5.9
Efficiency ratio		56.52			54.31			4.1			57.98			57.07			1.6
Loan to deposit ratio		68.90			64.23			7.3

Capital Ratios:
Tangible Common Equity		8.5	%		5.8	%		46.6	%
Leverage ratio		10.3			7.8			32.1
Tier 1 Risk Based Capital		13.6			11.3			20.4
Total Risk Based Capital		14.6			12.4			17.7

Asset Quality Ratios:
Net charge-offs to average loans outstanding (1)		0.03	%		0.04	%		(25.0	)		0.02	%		0.00	%		100.0
Non-accrual loans to gross loans		0.01			0.02			(50.0	)
Non-accrual loans to total assets		0.01			0.01			0.0
Loans past due 90 days or more and still accruing		0.15			0.01			1,400.0
Allowance for loan losses to gross loans		1.19			1.34			(11.2	)
Allowance for loan losses to non-performing loans	> 10 times			> 10 times


(1)		Annualized for the three and nine-month periods ended September 30, 2005 and 2004.

Primary Factors in Evaluating Financial Condition and Results of Operations

As a bank holding company, we focus on several factors in evaluating our financial condition and results of operations, including:

	•		Return on Average Equity, or ROE;

	•		Return on Average Assets, or ROA;

	•		Asset Quality;

	•		Asset and Deposit Growth; and

	•		Operating Efficiency.

Return on Average Equity. Our net income for the three months ended September 30, 2005 increased 39.6% to $7.7 million compared to $5.5 million for the three months ended September 30, 2004. The increase in net income was due primarily to an increase in net interest income of $8.3 million and an increase in non-interest income of $614,000, offset by an increase of $5.5 million in other expenses. Basic earnings per share increased to $0.34 per share for the three months ended September 30, 2005 compared to $0.33 per share for the same period in 2004. Diluted earnings per share was $0.31 per share for the three month periods ended September 30, 2005 and 2004, which remained flat due to the increase in the number of shares outstanding. The increase in net income offset by the increase in equity resulted in an ROE of 12.80% for the three months ended September 30, 2005 compared to 19.26% for the three months ended September 30, 2004.

For the nine months ended September 30, 2005, net income increased 44.0% to $19.6 million compared to $13.6 million for the same period on 2004. The increase in net income was due primarily to an increase in net interest income of $23.7 million and an increase in non-interest income of $2.6 million, offset by an increase of $1.1 million to the provision for loan losses, and an increase of $15.8 million in other expenses. Basic earnings per share increased to $0.99 per share for the nine months ended September 30, 2005 compared to $0.81 per share for the same period in 2004. Diluted earnings per share increased to $0.90 per share for the nine months ended September 30, 2005 compared to $0.76 per share for the same period last year. The increase in net income offset by the increase in equity resulted in an ROE of 14.82% for the nine months ended September 30, 2005 compared to 16.84% for the nine months ended September 30, 2004.

Return on Average Assets. Our ROA for the three months ended September 30, 2005 increased to 1.17% compared to 1.10% for the same period in 2004. Our ROA for the nine months ended September 30, 2005 increased to 1.09% compared to 1.00% for the same period in 2004. The increases in ROA are primarily due to the increases in net income as discussed above.

Asset Quality. For all banks and bank holding companies, asset quality plays a significant role in the overall financial condition of the institution and results of operations. We measure asset quality in terms of non-accrual and restructured loans and assets as a percentage of gross loans and assets, and net charge-offs as a percentage of average loans. Net charge-offs are calculated as the difference between charged-off loans and recovery payments received on

previously charged-off loans. As of September 30, 2005, non-accrual loans were $175,000 compared to $342,000 at September 30, 2004. Non-accrual loans as a percentage of gross loans were 0.01% as of September 30, 2005, compared to 0.02% as of September 30, 2004. For the three and nine months ended September 30, 2005, net charge-offs as a percentage of average loans were 0.03% and 0.04%, respectively.

Asset Growth. The ability to produce loans and generate deposits is fundamental to our asset growth. Our assets and liabilities are comprised primarily of loans and deposits, respectively. Total assets increased 29.1% to $2.7 billion as of September 30, 2005 from $2.2 billion as of September 30, 2004. Gross loans grew 49.0% to $1.6 billion as of September 30, 2005 from $1.2 billion as of September 30, 2004. Total deposits increased 38.9% to $2.3 billion as of September 30, 2005 from $1.8 billion as of September 30, 2004.

Operating Efficiency. Operating efficiency is measured in terms of how efficiently income before income taxes is generated as a percentage of revenue. Our efficiency ratio (non-interest expenses divided by the sum of net interest income and non interest income) was 56.5% for the three months ended September 30, 2005, compared to 54.3% for the same period in 2004. Our efficiency ratios for the nine months ended September 30, 2005 and 2004 were 58.0% and 57.1%, respectively.

Critical Accounting Policies

The Notes to Audited Consolidated Financial Statements for the year ended December 31, 2004 contain a summary of our significant accounting policies, including discussions on recently issued accounting pronouncements, our adoption of them and the related impact of their adoption. We believe that certain of these policies, along with various estimates that we are required to make in recording our financial transactions, are important to have a complete picture of our financial position. In addition, these estimates require us to make complex and subjective judgments, many of which include matters with a high degree of uncertainty. The following is a discussion of these critical accounting policies and significant estimates. Additional information about these policies can be found in Note 1 of the Audited Consolidated Financial Statements filed with the Company’s Form S-1.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses incurred in the loan portfolio. Our allowance for loan loss methodology incorporates a variety of risk considerations in establishing an allowance for loan loss that we believe is adequate to absorb losses in the existing portfolio. Such analysis addresses our historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, economic conditions, peer group experience and other considerations. This information is then analyzed to determine “estimated loss factors” which, in turn, is assigned to each loan category. These factors also incorporate known information about individual loans, including the borrowers’ sensitivity to interest rate movements. Changes in the factors themselves are driven by perceived risk in pools of homogenous loans classified by collateral type, purpose and term. Management monitors local trends to anticipate future delinquency potential on a quarterly basis. In addition to ongoing internal loan reviews and risk assessment, management utilizes an independent loan review firm to provide advice on the appropriateness of the allowance for loan losses.

The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. Provisions for loan losses are

provided on both a specific and general basis. Specific allowances are provided for watch, criticized, and impaired credits for which the expected/anticipated loss may be measurable. General valuation allowances are based on a portfolio segmentation based on collateral type, purpose and risk grading, with a further evaluation of various factors noted above.

We incorporate our internal loss history to establish potential risk based on collateral type securing each loan. As an additional comparison, we examine peer group banks to determine the nature and scope of their losses. Finally, we closely examine each credit graded “Watch List/Special Mention” and below to individually assess the appropriate specific loan loss reserve for such credit.

At least annually, we review the assumptions and formulae by which additions are made to the specific and general valuation allowances for loan losses in an effort to refine such allowance in light of the current status of the factors described above. The total loan portfolio is thoroughly reviewed at least quarterly for satisfactory levels of general and specific reserves together with impaired loans to determine if write downs are necessary.

Although we believe the level of the allowance as of September 30, 2005 was adequate to absorb probable losses in the loan portfolio, a decline in local economic or other factors could result in increasing losses that cannot be reasonably estimated at this time.

Available-for-Sale Securities. Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, requires that available-for-sale securities be carried at fair value. Management utilizes the services of a third party vendor to assist with the determination of estimated fair values. Adjustments to the available-for-sale securities fair value impact the consolidated financial statements by increasing or decreasing assets and stockholders’ equity.

Stock Based Compensation. We account for stock-based employee compensation arrangements in accordance with provision of Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees” and comply with the disclosure provisions of Statement of Financial Accounting Standards, or SFAS, No. 123 “Accounting for Stock-Based Compensation.” Therefore, we do not record any compensation expense for stock options we grant to our employees where the exercise price equals the fair market value of the stock on the date of grant and the exercise price, number of shares eligible for issuance under the options and vesting period are fixed. We comply with the disclosure requirements of SFAS No. 123 and SFAS No. 148, which require that we disclose our pro forma net income or loss and net income or loss per common share as if we had expensed the fair value of the options.

In December 2004, the Financial Accounting Standards Board published FASB Statement No. 123 (revised 2004), Share-Based Payment, or FAS 123(R). FAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. FAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement. Modifications of share-based payments will be treated as replacement awards with the cost of the incremental value recorded in the financial statements.

The Statement will be effective at the beginning of the first quarter of 2006. As of the effective date, we will apply the Statement using a modified version of prospective application.

Under that transition method, compensation cost will be recognized for (i) all awards granted after the required effective date and to awards modified, cancelled, or repurchased after that date and (ii) the portion of awards granted subsequent to completion of the IPO and prior to the effective date for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated for pro forma disclosures under SFAS 123. The impact of this statement on the Company in 2006 and beyond will depend on various factors, including our compensation strategy.

Results of Operations

Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of loans receivable, securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of non-interest income, consisting of income from trust and investment advisory services and banking service fees. Other factors contributing to our results of operations include our provisions for loan losses, gains or losses on sales of securities and income taxes, as well as the level of our non-interest expenses, such as compensation and benefits, occupancy and equipment and other miscellaneous operating expenses.

The following table sets forth a summary financial overview for the three and nine month periods ended September 30, 2005 and 2004.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005		2004		Increase		2005		2004		Increase
	(in thousands, except per share amounts)
Consolidated Statement of Earnings Data:
Interest income	$	35,700	$	24,145	$	11,555	$	95,935	$	63,780	$	32,155
Interest expense		8,369		5,148		3,221		22,208		13,784		8,424

Net interest income		27,331		18,997		8,334		73,727		49,996		23,731
Provision for loan losses		1,283		1,256		27		4,217		3,163		1,054

Net interest income after provision for loan losses		26,048		17,741		8,307		69,510		46,833		22,677
Other income		3,233		2,619		614		8,735		6,175		2,560
Other expense		17,274		11,740		5,534		47,814		32,056		15,758

Net income before income taxes		12,007		8,620		3,387		30,431		20,952		9,479
Income tax expense		4,258		3,071		1,187		10,808		7,324		3,484

Net income	$	7,749	$	5,549	$	2,200	$	19,623	$	13,628	$	5,995

Earnings per share — basic	$	0.34	$	0.33	$	0.01	$	0.99	$	0.81	$	0.18

Earnings per share — diluted	$	0.31	$	0.31	$	—	$	0.90	$	0.76	$	0.14

The 39.6% increase in net income in the three months ended September 30, 2005 compared to the same period in 2004 was attributable primarily to an increase in net interest income of $8.3 million and an increase in non-interest income of $614,000, offset by an increase of $5.5 million in other expenses. Net income for the nine months ended September 30, 2005 increased 44.0% over the same period in the 2004, which is due to an increase in net interest income of $23.7 million and an increase in non-interest income of $2.6 million, offset by an increase of $1.1 million to the provision for loan losses and $15.8 million in other expenses. The increase in net interest income for the three and nine month periods ended September 30, 2005 over the same periods in September 30, 2004 was the result of an increase in the volume of and yield earned on interest-earning assets, primarily loans.

Net Interest Income and Net Interest Margin. The 43.9% increase in net interest income for the three months ended September 30, 2005 compared to the same period in 2004 was due to an increase in interest income of $11.6 million, reflecting the effect of an increase of $567.6 million in average interest-bearing assets which was funded with an increase of $620.8 million in average deposits, of which $260.3 million were non-interest bearing.

Net interest income for the nine months ended September 30, 2005 increased 47.5% over the same period in 2004. This was due to an increase in interest income of $32.2 million, reflecting the effect of an increase of $543.8 million in average interest-bearing assets which was funded with an increase of $624.8 million in average deposits, of which $252.1 million were non-interest bearing.

The average yield on our interest-earning assets was 5.79% and 5.71% for the three and nine months ended September 30, 2005, respectively, compared to 5.11% and 5.01% for the same periods in 2004. The increase in the yield on our interest-earning assets is a result of an increase in market rates, repricing on our adjustable rate loans, and new loans originated with higher interest rates because of the higher interest rate environment. Also, loans, which typically yield more than our other interest-bearing assets, increased as a percent of total interest-bearing assets from 53.9% and 52.0% for the three and nine months ended September 30, 2004, respectively, to 64.9% and 62.5% for the same periods in 2005.

The cost of our average interest-bearing liabilities increased to 2.27% and 2.14% in the three and nine months ended September 30, 2005, respectively, from 1.67% and 1.63% in the three and nine months ended September 30, 2004, respectively, which is a result of higher rates paid on deposit accounts, borrowings and junior subordinated debt. The increase in the cost of our interest-bearing liabilities was partially offset by lower average balances on our borrowings, which typically carry higher rates than our deposits.

Average Balances and Average Interest Rates. The tables below set forth balance sheet items on a daily average basis for the three and nine months ended September 30, 2005 and 2004 and present the daily average interest rates earned on assets and the daily average interest rates paid on liabilities for such periods. Non-accrual loans have been included in the average loan balances. Securities include securities available for sale and securities held to maturity. Securities available for sale are carried at amortized cost for purposes of calculating the average rate received on taxable securities above. Yields on tax-exempt securities and loans are not computed on a tax equivalent basis.


	Three Months Ended September 30,
($ in thousands)	2005								2004
						Average								Average
	Average					Yield/Cost			Average					Yield/Cost
	Balance			Interest		(6)			Balance			Interest		(6)

Earning Assets
Securities:
Taxable	$	736,610		$	7,269		3.92	%	$	827,710		$	7,989		3.84	%
Tax-exempt (1)		7,053			85		4.78	%		7,186			84		4.65	%

Total securities		743,663			7,354		3.92	%		834,896			8,073		3.85	%
Federal funds sold		100,587			868		3.42	%		15,862			57		1.43	%
Loans (1) (2) (3)		1,588,616			27,343		6.83	%		1,013,216			15,866		6.23	%
Federal Home Loan Bank stock		13,133			135		4.08	%		14,427			149		4.11	%

Total earnings assets		2,445,999			35,700		5.79	%		1,878,401			24,145		5.11	%
Non-earning Assets
Cash and due from banks		78,012								62,767
Allowance for loan losses		(18,602	)							(13,809	)
Bank-owned life insurance		40,194								25,694
Other assets		75,871								49,933

Total assets	$	2,621,474							$	2,002,986

Interest Bearing Liabilities
Sources of Funds
Interest-bearing deposits:
Interest checking		112,978			148		0.52	%		74,277			28		0.15	%
Savings and money market		854,804			4,397		2.04	%		607,683			2,043		1.34	%
Time deposits		299,920			2,222		2.94	%		225,183			1,157		2.04	%

Total interest-bearing deposits		1,267,702			6,767		2.12	%		907,143			3,228		1.42	%
Short-term borrowings		63,530			357		2.23	%		154,198			601		1.55	%
Long-term debt		97,374			699		2.85	%		133,104			912		2.73	%
Junior subordinated debt		30,928			546		7.00	%		30,928			407		5.24	%

Total interest-bearing liabilities		1,459,534			8,369		2.27	%		1,225,373			5,148		1.67	%
Non-interest Bearing Liabilities
Noninterest-bearing demand deposits		910,239								649,971
Other liabilities		11,486								13,070
Stockholders’ equity		240,215								114,572

Total liabilities and stockholders’ equity	$	2,621,474							$	2,002,986

Net interest income and margin (4)				$	27,331		4.43	%				$	18,997		4.02	%

Net interest spread (5)							3.52	%							3.44	%


(1)		Yields on loans and securities have not been adjusted to a tax equivalent basis.
(2)		Net loan fees of $300,000 and $215,000 are included in the yield computation for September 30, 2005 and 2004, respectively.
(3)		Includes average non-accrual loans of $369,000 in 2005 and $248,000 in 2004.


(4)		Net interest margin is computed by dividing net interest income by total average earning assets.
(5)		Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
(6)		Annualized.


	Nine Months Ended September 30,
($ in thousands)	2005								2004
						Average								Average
	Average					Yield/Cost			Average					Yield/Cost
	Balance			Interest		(6)			Balance			Interest		(6)

Earning Assets
Securities:
Taxable	$	739,072		$	22,053		3.99	%	$	765,629		$	22,097		3.86	%
Tax-exempt (1)		7,064			256		4.85	%		7,241			256		4.72	%

Total securities		746,136			22,309		4.00	%		772,870			22,353		3.86	%
Federal funds sold		82,124			1,919		3.12	%		29,190			224		1.03	%
Loans (1) (2) (3)		1,403,124			71,266		6.79	%		884,730			40,819		6.16	%
Federal Home Loan Bank stock		13,242			441		4.45	%		14,046			384		3.65	%

Total earnings assets		2,244,626			95,935		5.71	%		1,700,836			63,780		5.01	%
Non-earning Assets
Cash and due from banks		76,331								66,513
Allowance for loan losses		(17,255	)							(12,859	)
Bank-owned life insurance		31,064								25,395
Other assets		66,436								44,434

Total assets	$	2,401,202							$	1,824,319

Interest Bearing Liabilities
Sources of Funds:
Interest-bearing deposits:
Interest checking		107,359			407		0.51	%		67,778			76		0.15	%
Savings and money market		791,664			11,279		1.90	%		527,711			5,143		1.30	%
Time deposits		276,385			5,438		2.63	%		207,254			3,125		2.01	%

Total interest-bearing deposits		1,175,408			17,124		1.95	%		802,743			8,344		1.39	%
Short-term borrowings		72,219			1,305		2.42	%		186,620			1,961		1.40	%
Long-term debt		111,314			2,259		2.71	%		110,487			2,376		2.87	%
Junior subordinated debt		30,928			1,520		6.57	%		30,928			1,103		4.76	%

Total interest-bearing liabilities		1,389,869			22,208		2.14	%		1,130,778			13,784		1.63	%
Non-interest Bearing Liabilities
Noninterest-bearing demand deposits		823,867								571,745
Other liabilities		10,482								13,679
Stockholders’ equity		176,984								108,117

Total liabilities and stockholders’ equity	$	2,401,202							$	1,824,319

Net interest income and margin (4)				$	73,727		4.39	%				$	49,996		3.93	%

Net interest spread (5)							3.57	%							3.38	%


(1)		Yields on loans and securities have not been adjusted to a tax equivalent basis.
(2)		Net loan fees of $915,000 and $635,000 are included in the yield computation for September 30, 2005 and 2004, respectively.
(3)		Includes average non-accrual loans of $454,000 in 2005 and $347,000 in 2004.


(4)		Net interest margin is computed by dividing net interest income by total average earning assets.
(5)		Net interest spread represents average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
(6)		Annualized.

Net Interest Income. The table below demonstrates the relative impact on net interest income of changes in the volume of earning assets and interest-bearing liabilities and changes in rates earned and paid by us on such assets and liabilities. For purposes of this table, non-accrual loans have been included in the average loan balances.


	Three Months Ended September 30,									Nine Months Ended September 30,
	2005 v. 2004									2005 v. 2004
	Increase (Decrease)									Increase (Decrease)
	Due to Changes in (1)									Due to Changes in (1)
	Volume			Rate			Total			Volume			Rate			Total
	(in thousands)
Interest on securities:
Taxable	$	(899	)	$	179		$	(720	)	$	(792	)	$	748		$	(44	)
Tax-exempt		(2	)		3			1			(6	)		6			—
Federal funds sold		731			80			811			1,237			458			1,695
Loans		9,904			1,573			11,477			26,330			4,117			30,447
Other investment		(13	)		(1	)		(14	)		(27	)		84			57


Total interest income		9,721			1,834			11,555			26,742			5,413			32,155

Interest expense:
Interest checking		51			69			120			150			181			331
Savings and Money market		1,271			1,083			2,354			3,761			2,375			6,136
Time deposits		554			511			1,065			1,360			953			2,313
Short-term borrowings		(509	)		265			(244	)		(2,067	)		1,411			(656	)
Long-term debt		(256	)		43			(213	)		17			(134	)		(117	)
Junior subordinated debt		—			139			139			—			417			417


Total interest expense		1,111			2,110			3,221			3,221			5,203			8,424


Net increase	$	8,610		$	(276	)	$	8,334		$	23,521		$	210		$	23,731


(1)		Changes due to both volume and rate have been allocated to volume changes.

Provision for Loan Losses. The provision for loan losses in each period is reflected as a charge against earnings in that period. The provision is equal to the amount required to maintain the allowance for loan losses at a level that, in our judgment, is adequate to absorb probable loan losses inherent in the loan portfolio.

Our provision for loan losses was $1.3 million and $4.2 million for the three and nine months ended September 30, 2005, respectively, compared to $1.3 million and $3.2 million for the same periods in 2004. Factors that impact the provision for loan losses are net charge-offs or recoveries, changes in the size of the loan portfolio, and the recognition of changes in current risk factors.

Non-Interest Income. We earn non-interest income primarily through fees related to:

	•		Trust and investment advisory services,

	•		Services provided to deposit customers, and

	•		Services provided to current and potential loan customers.

The following tables present, for the periods indicated, the major categories of non-interest income:


	Three Months Ended							Nine Months Ended
	September 30,				Increase			September 30,				Increase
	2005		2004		(Decrease)			2005		2004		(Decrease)
	(in thousands)
Trust and investment advisory services	$	1,448	$	1,045	$	403		$	4,108	$	1,801	$	2,307
Service charges		662		638		24			1,858		1,884		(26	)
Income from bank owned life insurance		463		293		170			1,045		908		137
Investment securities losses, net		—		58		(58	)		69		14		55
Other		660		585		75			1,655		1,568		87

Total non-interest income	$	3,233	$	2,619	$	614		$	8,735	$	6,175	$	2,560

The $614,000, or 23.4%, increase in non-interest income from the three months ended September 30, 2004 to the same period in 2005 was due primarily to an increase in Miller/Russell investment advisory revenues. The $2.6 million, or 41.5%, increase in non-interest income from the nine months ended September 30, 2004 to the nine months ended September 30, 2005 was also due to an increase in Miller/Russell investment advisory revenues.

Non-Interest Expense. The following table presents, for the periods indicated, the major categories of non-interest expense:


	Three Months Ended						Nine Months Ended
	September 30,				Increase		September 30,				Increase
	2005		2004		(Decrease)		2005		2004		(Decrease)
	(in thousands)
Salaries and employee benefits	$	9,541	$	6,678	$	2,863	$	27,049	$	17,934	$	9,115
Occupancy		2,619		1,917		702		7,314		5,271		2,043
Customer service		1,257		468		789		2,930		1,473		1,457
Advertising, public relations and business development		702		316		386		2,023		1,234		789
Legal, professional and director fees		527		420		107		1,523		1,057		466
Correspondent banking service charges and wire transfer costs		417		349		68		1,220		888		332
Audits and exams		367		311		56		1,128		822		306
Data processing		350		168		182		715		467		248
Supplies		304		230		74		804		616		188
Travel and automobile		232		173		59		487		307		180
Insurance		223		167		56		540		383		157
Telephone		195		149		46		558		419		139
Other		540		394		146		1,523		1,185		338

Total non-interest expense	$	17,274	$	11,740	$	5,534	$	47,814	$	32,056	$	15,758

Non-interest expense grew $5.5 million and $15.8 million, respectively, from the three and nine months ended September 30, 2004 to the same periods in 2005. This increase is attributable to our overall growth, and specifically to the opening of new branches and hiring of new relationship officers and other employees. At September 30, 2005, we had 522 full-time equivalent employees compared to 399 at September 30, 2004. Miller/Russell was acquired in May 2004, three banking branches were opened during calendar year 2004, and two banking branches were opened during the nine months ended September 30, 2005. The increase in salaries and occupancy expenses related to the above for the three and nine month periods ended September 30 totaled $3.6 million and $11.2 million, respectively, which is 64% and 71%, respectively, of the total increase in non-interest expenses. Customer service expense increased $789,000 and $1.5 million from the three and nine month periods ended September 30, 2004 to the same periods in 2005, respectively, due to an increase in the analysis earnings credit rate used to calculate earnings credits accrued for the benefit of certain title company deposit accounts. Other non-interest expense increased, in general, as a result of the growth in assets and operations of Alliance Bank of Arizona and Torrey Pines Bank and overall growth of BankWest of Nevada.

Provision for Income Taxes. Our effective federal income tax rate was 35.4% and 35.5%, respectively, for the three and nine months ended September 30, 2005, compared to 35.6% and 35.0%, respectively, for the three and nine months ended September 30, 2004.

Financial Condition

Total Assets

On a consolidated basis, our total assets as of September 30, 2005 and December 31, 2004 were $2.7 billion and $2.2 billion, respectively. The overall increase from December 31, 2004 to September 30, 2005 was primarily due to a $429.0 million, or 36.1%, increase in gross loans.

Loans

Our gross loans including deferred loan fees on a consolidated basis as of September 30, 2005 and December 31, 2004 were $1.6 billion and $1.2 billion, respectively. Since December 31, 2004, residential real estate loans experienced the highest percentage growth within the portfolio, growing 105.9% from $116.4 million to $239.5 million as of September 30, 2005. Our overall growth in loans from December 31, 2004 to September 30, 2005 is consistent with our focus and strategy to grow our loan portfolio by focusing on markets which we believe have attractive growth prospects.

The following table shows the amounts of loans outstanding by type of loan at the end of each of the periods indicated.


	September 30,			December 31,
	2005			2004
	(in thousands)
Construction and land development	$	396,970		$	323,176
Commercial real estate		655,004			491,949
Residential real estate		239,538			116,360
Commercial and industrial		307,045			241,292
Consumer		21,046			17,682
Net deferred loan fees		(2,062	)		(1,924	)


Gross loans, net of deferred fees		1,617,541			1,188,535
Less: Allowance for loan losses		(19,288	)		(15,271	)


	$	1,598,253		$	1,173,264

Non-Performing Assets. Non-performing assets include loans past due 90 days or more and still accruing interest, non-accrual loans, restructured loans, and other real estate owned, or OREO. In general, loans are placed on non-accrual status when we determine timely recognition of interest to be in doubt due to the borrower’s financial condition and collection efforts. Restructured loans have modified terms to reduce either principal or interest due to deterioration in the borrower’s financial condition. OREO results from loans where we have received physical possession of the borrower’s assets that collateralized the loan. The following table summarizes the loans for which the accrual of interest has been discontinued, loans past due 90 days or more and still accruing interest, restructured loans, and OREO.


	September 30,			December 31,
	2005			2004
	($ in thousands)
Total non-accrual loans	$	175		$	1,591
Loans past due 90 days or more and still accruing		2,503			2
Restructured loans		—			—
Other real estate owned (OREO)		—			—
Non-accrual loans to gross loans		0.01	%		0.13	%
Loans past due 90 days or more and still accruing to total loans		0.15			0.00
Interest income received on nonaccrual loans	$	3		$	61
Interest income that would have been recorded under the original terms of the loans		18			96

As of September 30, 2005 and December 31, 2004, non-accrual loans totaled $175,000 and $1.6 million, respectively. The decrease is due to a pay-off of a non-accrual credit with a balance of $1.2 million. Non-accrual loans at September 30, 2005 consisted of six loans, none larger than $77,000. Loans past due 90 days or more and still accruing consist almost entirely of credits with one borrower.

Allowance for Loan Losses

Like all financial institutions, we must maintain an adequate allowance for loan losses. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when we believe that collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that we believe will be adequate to absorb probable losses on existing loans that may become uncollectible, based on evaluation of the collectibility of loans and prior credit loss experience, together with the other factors noted earlier.

Our allowance for loan loss methodology incorporates several quantitative and qualitative risk factors used to establish the appropriate allowance for loan loss at each reporting date. Quantitative factors include our historical loss experience, peer group experience, delinquency and charge-off trends, collateral values, changes in non-performing loans, other factors, and information about individual loans including the borrower’s sensitivity to interest rate movements. Qualitative factors include the economic condition of our operating markets and the state of certain industries. Specific changes in the risk factors are based on perceived risk of similar groups of loans classified by collateral type, purpose and terms. Statistics on local trends, peers, and an internal five-year loss history are also incorporated into the allowance. Due to the credit concentration of our loan portfolio in real estate secured loans, the value of collateral is heavily dependent on real estate values in Southern Nevada, Arizona and Southern California. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic or other conditions. In addition, the Federal Deposit Insurance Corporation, or FDIC, and state banking regulatory agencies, as an integral part of their examination processes, periodically review the Banks’ allowance for loan losses, and may require us to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

Management periodically reviews the assumptions and formulae used in determining the allowance and makes adjustments if required to reflect the current risk profile of the portfolio.

The allowance consists of specific and general components. The specific allowance relates to watch credits, criticized loans, and impaired loans. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan are lower than the carrying value of that loan, pursuant to Financial Accounting Standards Board, or FASB, Statement No. 114, Accounting by Creditors for Impairment of a Loan. The general allowance covers non-classified loans and is based on historical loss experience adjusted for the various qualitative and quantitative factors listed above, pursuant to FASB Statement No. 5, or FASB 5, Accounting for Contingencies. Loans graded “Watch List/Special Mention” and below are individually examined closely to determine the appropriate loan loss reserve.

The following table summarizes the activity in our allowance for loan losses for the period indicated.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
				($ in thousands)
Allowance for loan losses:
Balance at beginning of period	$	18,118		$	13,360		$	15,271		$	11,378
Provisions charged to operating expenses		1,283			1,256			4,217			3,163

Recoveries of loans previously charged-off:
Construction and land development		—			—			—			—
Commercial real estate		—			—			—			—
Residential real estate		—			4			3			9
Commercial and industrial		7			17			156			111
Consumer		6			3			12			10

Total recoveries		13			24			171			130
Loans charged-off:
Construction and land development		—			—			—			—
Commercial real estate		—			—			—			—
Residential real estate		—			2			—			9
Commercial and industrial		—			104			125			104
Consumer		126			9			246			33

Total charged-off		126			115			371			146
Net charge-offs		113			91			200			16
Balance at end of period	$	19,288		$	14,525		$	19,288		$	14,525
Net charge-offs to average loans outstanding		0.03	%		0.04	%		0.02	%		0.00	%
Allowance for loan losses to gross loans		1.19			1.34

Net charge-offs totaled $113,000 for the three months ended September 30, 2005, compared to $91,000 during the same period in 2004. The increase in net charge-offs resulted

primarily from larger charge-offs during the three months ended September 30, 2005 in consumer loans. The provision for loan losses totaled $1.3 million for the three months ended September 30, 2005, nearly equal to the amount provided in the three months ended September 30, 2004.

Net charge-offs totaled $200,000 for the nine months ended September 30, 2005, compared to $16,000 charged-off during the same period in 2004. The increase in net charge-offs resulted primarily from larger charge-offs during the nine months ended September 30, 2005 in consumer loans. The provision for loan losses totaled $4.2 million for the nine months ended September 30, 2005, up from the $3.2 provided during the same period in 2004. The increase in the provision for loan losses for the nine months ended September 30, 2005 compared to the same period a year ago resulted mainly from the growth in the loan portfolio.

Investments

Securities are identified as either held-to-maturity or available-for-sale based upon various factors, including asset/liability management strategies, liquidity and profitability objectives, and regulatory requirements. Held-to-maturity securities are carried at cost, adjusted for amortization of premiums or accretion of discounts. Available-for-sale securities are securities that may be sold prior to maturity based upon asset/liability management decisions. Securities identified as available-for-sale are carried at fair value. Unrealized gains or losses on available-for-sale securities are recorded as accumulated other comprehensive income in stockholders’ equity. Amortization of premiums or accretion of discounts on mortgage-backed securities is periodically adjusted for estimated prepayments.

We use our investment securities portfolio to ensure liquidity for cash requirements, manage interest rate risk, provide a source of income and to manage asset quality. The carrying value of our investment securities as of September 30, 2005 totaled $713.1 million, compared to $788.6 million at December 31, 2004. The decrease experienced from December 31, 2004 to September 30, 2005 was a result of called U.S. Government-sponsored agency obligations and principal received from mortgage-backed obligations.

The carrying value of our portfolio of investment securities at September 30, 2005 and December 31, 2004, was as follows:


	Carrying Value
	At September 30,		At December 31,
	2005		2004
	(in thousands)
U.S. Treasury securities	$	3,496	$	3,501
U.S. Government-sponsored agencies		137,464		118,348
Mortgage-backed obligations		552,456		648,100
SBA Loan Pools		507		625
State and Municipal obligations		7,153		7,290
Other		11,999		10,758

Total investment securities	$	713,075	$	788,622

We had a concentration of U.S. Government sponsored agencies and mortgage-backed securities during the three and nine months ended September 30, 2005 and the year ended

December 31, 2004. The aggregate carrying value and aggregate fair value of these securities at September 30, 2005 and December 31, 2004 was as follows:


	September 30,		December 31,
	2005		2004
	(in thousands)
Aggregate carrying value	$	689,920	$	766,448


Aggregate fair value	$	688,191	$	765,453

Other Assets

During the three months ended September 30, 2005, we purchased $24.0 million of bank owned life insurance.

Deposits

Deposits have historically been the primary source for funding our asset growth. As of September 30, 2005, total deposits were $2.3 billion, compared to $1.8 billion as of December 31, 2004. The increase in total deposits is attributable to our ability to attract a stable base of low-cost deposits. As of September 30, 2005, non-interest bearing deposits were $1.0 billion, compared to $749.6 million as of December 31, 2004. Approximately $426.2 million of total deposits, or 18.2%, as of September 30, 2005 consisted of non-interest bearing demand accounts maintained by title insurance companies. Interest-bearing accounts have also experienced growth. As of September 30, 2005, interest-bearing deposits were $1.3 billion, compared to $1.0 billion as of December 31, 2004. Interest-bearing deposits are comprised of NOW accounts, savings and money market accounts, certificates of deposit under $100,000, and certificates of deposit over $100,000.

The average balances and weighted average rates paid on deposits for the three and nine months ended September 30, 2005.


	Three Months Ended					Nine Months Ended
	September 30, 2005					September 30, 2005

	Average Balance/Rate					Average Balance/Rate
			($ in thousands)
Interest checking (NOW)	$	112,978		0.52	%	$	107,359	0.51	%
Savings and money market		854,804		2.04			791,664	1.90
Time		299,920		2.94			276,385	2.63


Total interest-bearing deposits		1,267,702		2.12			1,175,408	1.95
Non-interest bearing demand deposits		910,239					823,867


Total deposits	$	2,177,941		1.23	%	$	1,999,275	1.15	%

Contractual Obligations and Off-Balance Sheet Arrangements

We routinely enter into contracts for services in the conduct of ordinary business operations which may require payment for services to be provided in the future and may contain penalty clauses for early termination of the contracts. To meet the financing needs of our customers, we are also parties to financial instruments with off-balance sheet risk including commitments to extend credit and standby letters of credit. We have also committed to irrevocably and unconditionally guarantee the following payments or distributions with respect to the holders of preferred securities to the extent that BankWest Nevada Trust I and BankWest Nevada Trust II have not made such payments or distributions: (i) accrued and unpaid distributions, (ii) the redemption price, and (iii) upon a dissolution or termination of the trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the trust remaining available for distribution. We do not believe that these off-balance sheet arrangements have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. However, there can be no assurance that such arrangements will not have a future effect.

Long-Term Borrowed Funds. We also have entered into long-term contractual obligations consisting of advances from Federal Home Loan Bank (FHLB). These advances are secured with collateral generally consisting of securities. As of September 30, 2005, these long-term FHLB advances totaled $63.7 million and will mature by December 31, 2007.

Our commitments associated with outstanding letters of credit, commitments to extend credit, and credit card guarantees as of September 30, 2005 are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.


	September 30,		December 31,
	2005		2004

Commitments to extend credit, including unsecured loan commitments of $125,960 in 2005 and $81,606 in 2004	$	674,341	$	423,767
Credit card guarantees		7,404		5,421
Standby letters of credit, including unsecured letters of credit of $4,463 in 2005 and $1,264 in 2004		29,506		5,978

	$	711,251	$	435,166

Short-Term Borrowed Funds. Short-term borrowed funds are used to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from increased loan demand, and for other short-term purposes. The majority of these short-term borrowed funds consist of advances from FHLB. The borrowing capacity at FHLB is determined based on collateral pledged, generally consisting of securities, at the time of borrowing. We also have borrowings from other sources pledged by securities including securities sold under agreements to repurchase, which are reflected at the amount of cash received in connection with the transaction, and may require additional collateral based on the fair value of the underlying securities. As of September 30, 2005, total short-term borrowed funds were $55.8 million compared to total short-term borrowed funds of $185.5 million as of December 31, 2004. The

Current risk-based regulatory capital standards generally require banks and bank holding companies to maintain three minimum capital ratios. Tier 1 risk-based capital ratio compares “Tier 1” or “core” capital, which consists principally of common equity, and risk-weighted assets for a minimum ratio of at least 4%. Tier 1 capital ratio compares Tier 1 capital to adjusted total assets for a minimum ratio of at least 4%. Total risk-based capital ratio compares total capital, which consists of Tier 1 capital, certain forms of subordinated debt, a portion of the allowance for loan losses, and preferred stock, to risk-weighted assets for a minimum ratio of at least 8%. Risk-weighted assets are calculated by multiplying the balance in each category of assets by a risk factor, which ranges from zero for cash assets and certain government obligations to 100% for some types of loans, and adding the products together.


						Adequately-					Minimum For
						Capitalized					Well-Capitalized
	Actual					Requirements(1)					Requirements
						($ in thousands)
As of September 30, 2005	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets)
BankWest of Nevada	$	140,207		11.5	%	$	97,868		8.0	%	$	122,335		10.0	%
Alliance Bank of Arizona		48,894		11.3			34,745		8.0			43,431		10.0
Torrey Pines Bank		36,228		11.8			24,581		8.0			30,727		10.0
Company		289,817		14.6			158,684		8.0			198,355		10.0

Tier I Capital (to Risk Weighted Assets)
BankWest of Nevada		128,451		10.5			48,934		4.0			73,401		6.0
Alliance Bank of Arizona		43,910		10.1			17,373		4.0			26,059		6.0
Torrey Pines Bank		33,171		10.8			12,291		4.0			18,436		6.0
Company		270,020		13.6			79,342		4.0			119,013		6.0

Leverage ratio (to Average Assets)
BankWest of Nevada		128,451		7.2			71,796		4.0			89,745		5.0
Alliance Bank of Arizona		43,910		9.5			18,571		4.0			23,214		5.0
Torrey Pines Bank		33,171		9.7			13,684		4.0			17,105		5.0
Company		270,020		10.3			104,659		4.0			130,824		5.0

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors and regulators. Our liquidity, represented by cash and due from banks, federal funds sold and available-for-sale securities, is a result of our operating, investing and financing activities and related cash flows. In order to ensure funds are available at all times, on at least a quarterly basis, we project the amount of funds that will be required and maintain relationships with a diversified customer base so funds are accessible. Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets. We have borrowing lines at correspondent banks totaling $45.0 million. In addition, securities are pledged to the FHLB totaling $491.5 million on total borrowings from the FHLB of $63.7 million as of September 30, 2005. As of September 30, 2005, we had $45.1 million in securities available to be sold or pledged to the FHLB.

purposes. We manage our interest rate sensitivity by matching the re-pricing opportunities on our earning assets to those on our funding liabilities.

Management uses various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and management of the deployment of our securities are used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Interest rate risk is addressed by each bank’s Asset Liability Management Committee, or ALCO, which is comprised of senior finance, operations, human resources and lending officers. ALCO monitors interest rate risk by analyzing the potential impact on the net economic value of equity and net interest income from potential changes in interest rates, and consider the impact of alternative strategies or changes in balance sheet structure. We manage our balance sheet in part to maintain the potential impact on economic value of equity and net interest income within acceptable ranges despite changes in interest rates.

Our exposure to interest rate risk is reviewed on at least a quarterly basis by each ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in economic value of equity in the event of hypothetical changes in interest rates. If potential changes to net economic value of equity and net interest income resulting from hypothetical interest rate changes are not within the limits established by our Board of Directors, the Board of Directors may direct management to adjust the asset and liability mix to bring interest rate risk within board-approved limits.

Economic Value of Equity. We measure the impact of market interest rate changes on the net present value of estimated cash flows from our assets, liabilities and off-balance sheet items, defined as economic value of equity, using a simulation model. This simulation model assesses the changes in the market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease (shock) in market interest rates.

At September 30, 2005 our economic value of equity exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us. The following table shows our projected change in economic value of equity for this set of rate shock as of September 30, 2005.


			Economic Value of Equity
			Percentage			Percentage			Percentage of
	Economic		Change			of Total			Equity
Interest Rate Scenario	Value		from Base			Assets			Book Value
	($ in millions)
Up 300 basis points	$	440.4		4.2	%		16.0	%		184.8	%
Up 200 basis points		435.8		3.1			15.9			182.9
Up 100 basis points		429.7		1.7			15.7			180.3
BASE		422.7		—			15.4			177.4
Down 100 basis points		412.1		(2.5	)		15.0			172.9
Down 200 basis points		393.0		(7.0	)		14.3			164.9
Down 300 basis points		365.6		(13.5	)		13.3			153.4

The computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, asset prepayments and deposit decay, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions we may undertake in response to changes in interest rates. Actual amounts may differ from the projections set forth above should market conditions vary from the underlying assumptions.

Net Interest Income Simulation. In order to measure interest rate risk at September 30, 2005, we used a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and a net interest income using a base market interest rate derived from the current treasury yield curve. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and proportional to the change in market rates, depending on their contracted index. Some loans and investments include the opportunity of prepayment (embedded options), and accordingly the simulation model uses indexes to estimate these prepayments and reinvest their proceeds at current yields. Our non-term deposit products re-price more slowly, usually changing less than the change in market rates and at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet remains static and that its structure does not change over the course of the year. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.

Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

For the rising and falling interest rate scenarios, the base market interest rate forecast was increased and decreased over twelve months by 100, 200 and 300 points. At September 30, 2005, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us.


	Sensitivity of Net Interest Income
			Percentage
	Adjusted Net		Change
Interest Rate Scenario	Interest Income		from Base
	(in millions)
Up 300 basis points	$	121.4		6.2	%
Up 200 basis points		120.6		5.5
Up 100 basis points		118.3		3.5
BASE		114.3		—
Down 100 basis points		110.2		(3.6	)
Down 200 basis points		107.8		(5.7	)
Down 300 basis points		107.0		(6.4	)

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in within the time periods specified in Securities and Exchange Commission rules and forms. Additionally, our disclosure controls and procedures were also effective in ensuring that information required to be disclosed in our Exchange Act reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2005, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which Western Alliance or any of its subsidiaries is a party or of which any of their property is the subject.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) There were no unregistered sales of equity securities during the period covered by this report.

(b) The Registration Statement on Form S-1 (File No. 333-124406) for our initial public offering was declared effective on June 29, 2005, and on July 6, 2005 we closed the initial public offering of our common stock, par value $0.0001 per share. The managing underwriters for the offering was Sandler O’Neill & Partners, L.P. We registered a total of 4,200,000 shares of common stock, for an aggregate price to the public of $92.4 million. Through September 30, 2005, the aggregate amount of expenses incurred by us in connection with our initial public offering was approximately $7.3 million, including $6.0 million in underwriting discounts and commissions and $1.3 million in other estimated offering expenses. None of our offering expenses were paid directly or indirectly to any of our officers, directors or 10% shareholders.

The net offering proceeds received by us, after deducting the estimated total expenses of $7.3 million, were approximately $85.1 million. As of September 30, 2005, approximately 13.5 million, 5 million and 5 million were contributed to our banking subsidiaries, BankWest of Nevada, Alliance Bank of Arizona and Torrey Pines Bank, respectively, and approximately $61.6 million has been retained by the Company for working capital purposes.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

On October 12, 2005, William S. Boyd terminated the Boyd Voting Agreement dated July 31, 2002, as amended (previously filed as Exhibit 9.1 to the Company’s Registration Statement on Form S-1 (File No.: 333-124406)).

On October 26, 2005, the Company’s Board of Directors approved the Western Alliance Bancorporation Nonqualified 401(k) Restoration Plan, effective January 1, 2006. The 401(k) Restoration Plan permits executives and key employees of the Company and certain affiliates to make deferrals in excess of amounts that an eligible person can contribute to the 401(k) Plan. A copy of the 401(k) Restoration Plan is attached hereto as Exhibit 10 and incorporated by reference herein.


Index	Page
Part I. Financial Information
Item 1 — Financial Statements
Consolidated Balance Sheets September 30, 2005 and December 31, 2004		3
Consolidated Statements of Income Three and Nine Months Ended September 30, 2005 and 2004		4
Consolidated Statements of Stockholders’ Equity Nine Months Ended September 30, 2005		5
Consolidated Statements of Cash Flows Nine Months Ended September 30, 2005 and 2004		6
Notes to Unaudited Consolidated Financial Statements		7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operation		17
Item 3 — Quantitative and Qualitative Disclosures about Market Risk		37
Item 4 — Controls and Procedures		40

Part II. Other Information
Item 1 — Legal Proceedings		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		41
Item 6 — Exhibits		42

Signatures		43
Exhibit Index		44
Exhibits
EX-10
EX-31.1
EX-31.2
EX-32


10		Western Alliance Bancorporation Nonqualified 401(k) Restoration Plan

31.1		CEO Certification Pursuant Rule 13a-14(a)/15d-a4(a)

31.2		CFO Certification Pursuant Rule 13a-14(a)/15d-14(a)

32		CEO and CFO Certification Pursuant 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes — Oxley Act of 2002


	WESTERN ALLIANCE BANCORPORATION
Date: November 10, 2005	By:	/s/ Robert Sarver
		Robert Sarver President and Chief Executive Officer



Date: November 10, 2005	By:	/s/ Dale Gibbons
		Dale Gibbons Executive Vice President and Chief Financial Officer


10		Western Alliance Bancorporation Nonqualified 401(k) Restoration Plan

31.1		CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a)

31.2		CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a)

32		CEO and CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



Date: November 10, 2005		/s/ Terry A. Shirey
	Terry A. Shirey Controller Principal Accounting Officer