Company: WAL-PA
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001212545-25-000090
Chunk: 149

Company: WESTERN ALLIANCE BANCORPORATION
Filing Date: 2025-02-25
Form: 10-K
Item: Item 8
Chunk 149
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 adjustments to quantitative estimates of expected credit losses on loans held for investment and unfunded loan commitments related to the incorporation of different probability weighted economic scenarios, current trends and conditions to the allowance for credit losses on loans held for investment and unfunded loan commitments calculations.

Valuation of Mortgage Servicing Rights

As described in Notes 1 and 5 to the financial statements, the Company’s mortgage servicing rights totaled $1,127 million as of December 31, 2024. When the Company sells mortgage loans in the secondary market and retains the right to service these loans, a servicing right asset is capitalized at the time of sale when the benefits of servicing are deemed to be greater than adequate compensation for performing the servicing activities. Mortgage servicing rights represent the then-current fair value of future net cash flows expected to be realized from performing servicing activities. The Company has elected to subsequently measure mortgage servicing rights at fair value. The Company estimates the fair value of mortgage servicing rights using a discounted cash flow model that incorporates assumptions that market participants would use in estimating the fair value of servicing rights, including, but not limited to, option adjusted spread, conditional prepayment rate and cost to service. 

We identified the option adjusted spread and conditional prepayment rate assumptions used in the valuation of mortgage servicing rights as a critical audit matter due to the significant judgement required by management in determining these assumptions. Auditing these assumptions involved a high degree of auditor judgement and increased audit effort as there was 

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limited observable market information and the calculated fair value of the mortgage servicing rights is sensitive to changes in these key assumptions.

Our audit procedures related to the valuation of mortgage servicing rights as of December 31, 2024 included, among others, testing management’s process for determining the fair value, including:

•We obtained an understanding of the relevant controls related to the establishment of the option adjusted spread and conditional prepayment assumptions used in the valuation of mortgage servicing rights and tested such controls for design and operating effectiveness.

•We evaluated the appropriateness of the valuation model and methodology.

•We tested the completeness and accuracy of the data used in the model.

•We utilized internal valuation specialists to assist with evaluating the reasonableness of the option adjusted spread and conditional prepayment rate assumptions by considering the consistency with available external market and industry data.

/s/ RSM US LLP

We have served as the Company’s auditor since 1994.

Austin, Texas

February 25, 2025

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WESTERN ALLIANCE BANCORPORATION AND SUBSIDIARIES