Welcome to the earnings call for Western Alliance Bancorporation for the Fourth Quarter 2014. Our speakers today are Robert Sarver, Chairman and CEO and Dale Gibbons, Chief Financial Officer. You may also view the presentation today via webcast through the company's website at www.westernalliancebankcorp.com. The call will be recorded and made available for replay after 2 PM Eastern Time, January 23rd, 2015 through Tuesday February 24th, 2015 at 9 AM Eastern Time by dialing 1-877-344-7529 and using pass code 10057230. The discussion during this call may contain forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement. Some factors that could cause actual results to differ materially from historical or expected results include those listed in the filings with the Securities and Exchange Commission, except as required by law, the company does not undertake any obligation to update any forward-looking statements. Now for the opening remarks, I would like to turn the call over to Robert Sarver. Please go ahead, sir.

Thanks. Good morning, everybody. Welcome to Western Alliance's fourth quarter earnings call. First I'll review our performance highlights, then I'll turn it over to Dale to discuss in more detail our results and then we'll open the lines up for your questions. 2014 was the best year in our company's history. It culminated with strong fourth quarter growth in our balance sheet, record revenue and credit recoveries. Net income was $40.4 million or $0.46 per share, the same amount as the third quarter and up 28% from the $0.36 we made in the fourth quarter of 2013. Loan growth was $469 million or up 20% annualized on a linked quarter basis. Deposits were up $233 million or 11% annualized. Our tangible book value per share increased 28% during the quarter on an annualized basis to $10.21 at year-end as we continued to grow our tangible book value faster than our return on equity. Non-performing assets improved to just 1.18% of total assets while net loan recoveries to average loans were 4 basis points annualized. Despite our strong balance sheet growth, capital remained strong and our Tier 1 leverage ratio was 9.7%. Our return on assets was 1.56% and our return on tangible common equity was over 18%. For the year, loans grew $1.6 billion and deposits grew $1.1 billion. Earnings per share climbed 27% from 2013 to $1.67 in 2014 which was the largest component of our $2.31 increase in our tangible book value per share last year. Our full year return on assets was 1.5% and our full year return on equity was 18.5%, similar ratios to our fourth quarter. Fourth quarter net income increased $4 million to $102 million, while non-interest income increased $1.3 million including $1 million from bank-owned life insurance and performance payments on service contracts.…

Thank you. The interest margin increased 1 basis point during the quarter as there were several offsetting items. Cash balances declined $95 million from September 30th to year-end and fell $16 million on an average balance basis during the quarter. While the securities portfolio yield slipped 5 basis points, the loan yield increased by two. Our interest bearing deposit cost edged down 1 basis point to 32 basis points and our total cost of deposits which include our $2.3 billion in non-interest bearing came down the same amount to 24 basis points. 1 basis point increase in the margin during the quarter to 4.44% on a 33-60 [ph] basis included the benefit of an additional day during the fourth quarter. On the bottom graph, disposition accretion on purchased credit impaired loans fell from $2.5 million in the third quarter to $1.2 million in the fourth. However, this $1.3 million reduction in interest income was more than offset from margin benefits from $1.8 million in prepayment penalties in our own organic loan portfolio. Operating expense increased $5 million for the quarter and includes a $1 million contribution to establish Western Alliance charitable foundation from which future donations will be made. A $1 million catch-up accrual was also incurred for long-term incentive compensation. These charges will not repeat in the first quarter. During the fourth quarter, we opened an office in Chandler, Arizona bringing our total to 40. Staffing for the new facility contributed to the increase in FTE employees during the quarter of 11. While slipping from 3Q, we remained at our pre-pre-ROA target of 2% during the quarter. Net income again exceeded $40 million in the fourth quarter while our return on assets was above 1.5%. The investment portfolio and cash position declined during the quarter, making up a substantial…

Thanks, Dale. So looking into 2015, I've been reading the number -- the reports that have been coming out from banks and lot of the expectations are a little muted and a lot, number of the banks have some kind of tough quarters. We face some of the same headwinds that many of the banks face which is primarily pressure on net interest margin due to what looks to be a lower interest rate environment and a lower rate environment for longer than most have expected, but offsetting that, we got a couple tailwinds behind us. One is our balance sheet momentum. We continue to have very strong organic growth in both loans and deposits. We finished the year out very strong and we also continue to be able to recruit and retain some of the best bankers in our markets and in our specialty groups that provide a great level of service to the customers and the customers keep coming. So that's probably the biggest differentiator with our business model than most of our peers is the organic growth and that's what allows us to earn through some of these interest pressures -- interest rate pressures. And along with our manageable expense base, given that we've just opened up our 40th office, we are able to continue to drive positive operating leverage and continue to grow earnings. So a little more specifically, we continue to believe that we can support our net organic loan and deposit growth goals of $1 billion for 2015. Although the margin was essentially flat in the fourth quarter from the third, the lower rate environment and continued competitive pressure, as I mentioned, will likely crimp the interest margin a bit this year. However, we expect to sustain our net interest income increases as this compression is more than offset by the balance sheet growth we continue to have and think we will have again this year. As we mentioned on the last call, our operating efficiency ratio climbed during the fourth quarter from the third. For the first quarter, we expect it to be essentially flat as net interest income is a little challenged given the drop in number of days in the quarter from 92 to 90. However, we also expect our operating expenses to decline from that of the fourth quarter due to some lower incentive compensation accruals that we caught up on as well as we funded our charitable foundation and funded everything else we could get our hands on. So we expect the efficiency ratio to resume its longer term improving trend after the first quarter. As we saw every quarter in 2014, our asset quality outlook continues to be benign when low levels of gross loan losses and a continued tailwind of recoveries in Nevada. We think those will continue in 2015 estimated at a couple million a quarter. And so at this time, I would like to open it up for questions.

[Operator Instructions]. And our first question is from Casey Haire of Jefferies.

I wanted to dig in a little bit on the NIM outlook. Can you give some color as to what your new money loan yield is on production?

It climbed during the quarter, fourth quarter over third and we averaged a 4.81.

Sorry, 4.41?

4.81%.

Okay. Got you. And in terms of the loan growth guide of $1 billion--

Casey, that number wouldn't include fees or anything like that, that's just the weighted mean of the loans originated during 4Q.

And then on the loan growth, loan deposit growth outlook, obviously it is competitive out there. But $1 billion -- are you guys just being a little conservative? Because that is a pretty nice pullback from the $1.6 billion production that we just saw in 2014.

Well, I hope we can do better, but those are pretty good numbers.

Okay. And then just lastly, M&A prospects on the year, you guys have been pretty optimistic recently about your chances at landing a deal. How is that shaping up as we look in 2015? And what size targets are you guys looking at?

I don't want to really get into too many specifics but we do have a lot of opportunities we're working on and feel pretty confident we're going to make a good deal this year, but beyond that, I'm not going to get into any specifics.

Our next question will come from Brad Milsaps of Sandler O'Neill.

Robert, I appreciate all the guidance on loan growth. Just curious, I think last quarter you mentioned you hired nine new lenders in the third quarter. Curious how many you hired in the fourth -- maybe by geography and what types of parts of your business they concentrate on.

Yes, I think we hired about 11 during the quarter. We hired some folks in the bay area. We're going to be opening up a -- we just came to terms on some space in downtown San Francisco for a good well-located office. We just opened up a large regional office in Chandler, Arizona which is probably the most healthy growing city in Arizona and we hired some folks there and we also hired a few people in the Los Angeles market and also in Phoenix.

And then any additional color, any change on the economy in Nevada or still sort of status quo there?

Well it's getting better, and that's where hopefully we have some opportunity this year because our loan totals in Nevada have been shrinking for the last six years including last year. But business is looking a little better there. I was just looking at some recent economic data. Unemployment rate dropped again. They actually had some of the highest price housing value increases in the western U.S., in the Southwest, I'll say and we're seeing more momentum there. So we're thinking that maybe this year turns the corner in terms of loan growth and we actually start growing our book of loans in Nevada and Reno's got a little excitement going on there too. So that could have a meaningful addition for us.

Our next question will come from John Moran of Macquarie.

I just wanted to kind of touch real quick. A lot of the growth in the fourth quarter and for the year really came out of the central business lines versus traditional C&I or commercial real estate. And I know that there's been better just flat out better, risk adjusted opportunities there and a little bit less competition. Wondering if you could give a quick update on where those yields might be today versus the traditional business and how you kind of see that playing out over 2015.

Well yes, the nonprofit area and the municipal area have had really strong growth for us and actually the growth has started to pick up in deposits too. In that book of business we opened up about 10 new deposit relationships in the quarter over $10 million and so we've carved a pretty nice niche there in our markets. It's a good market for us because we really only compete against the money center banks because the rest of the banks aren't really in the business and so we're able to get some pretty good returns. I don't know Dale, do you have the exact numbers? I mean, on the real high quality stuff we're averaging spreads of about 320 over life term LIBOR swap rates. So they're pretty good spreads. And what happens with some of these specialty areas, you carve a niche and your niche is that you have people with expertise that really know the business. So we have this in medical. We have it in legal. We have it in like we've done a fair amount of kind of high tier franchise restaurant financing, but then you follow the market and you see where it goes and as an example, we got into the restaurant business five years ago and we were making loans in the 6's because all the finance companies had vanished. And so we picked up some pretty good market share. Now the finance companies are back with terms that are probably not real smart and so we're not doing much of that anymore. And so we got about 15 of these different niches and for us it's hitting the gas and the brakes at the right time in each of them, but it's the best way for us to grow our business because we really add value to the customer. If you're just limited to traditional C&I loan and real estate investor, owner occupied loan; those clients, while we're good at it, they have a lot of options. When you get into some of these areas that require someone to really understand the business, there is a lot less options and less options means better credit structure and better risk adjusted pricing.

I've got two kind of finance geek questions for Dale too. One is just with the partial retirement of the SBLF and then I think there's still a chunk of higher cost debt coming due at the end of the year, any thoughts on replacement capital that might be needed at the end of 2015? Obviously, going to come at a much lower rate than what's hanging around out there today given the ratings and then just on tax rate which ran a little bit high in the quarter and looking for what might be a good rate to use going forward there.

So next year on September 1, we have $58 million of senior debt at the parent that has a cost of 10.4% on it and then we have the other remaining --

We must have been desperate back then.

Five years ago, then we have the remaining $70.5 million of SBLF funds that will -- unless it's paid off will rise in March of 2016 to 9% and it currently pays 1%. So what I'm looking to do is that we will probably do a subordinated debt offering sometime, maybe out of Western Alliance Bank that will take care of both of those items and probably be neutral to EPS, that is, we're eliminating 10.4%, $58 million and then 1%, $70 million. So the numbers where rates are -- I think are today is I think we can do that, that is basically EPS neutral and sustain our capital levels really kind of where they are, maybe even take them a little bit higher since only the $70 million qualifies as capital and all the subordinated debt we would do would qualify. Regarding the tax rate, yes it came up a little bit. We had a true-up on that as well. We're looking for the tax rate to fade slightly in 2015 but it will be higher than it was in 2014, somewhere around 25.5.

The next question is from Brian Klock of Keefe, Bruyette & Woods.

I guess thinking about the year and the good growth and you guys have done a really good job on the expense side and so [inaudible] the sort of one-time items in the quarter, the ORE gains and the two other expense items you talked about. So should we be thinking about $55 million as the sort of first quarter run-rate for that expense base?

Yes, we should get back at least a couple of million dollars that we identified and I think maybe about half of the increase from the third quarter to the fourth we should pick up coming into 2015.

You want us to write your whole projection of pro forma, Brian or?

Well maybe just part of it. Thanks. On the margin too, I guess maybe try to get a little finer point on the first quarter, taking out the prepayment penalty would put your fourth quarter NIM at somewhere around 433. So I guess thinking about that--

You know, I was talking to Dale about this a little last night. Some of the things we get only happen like once and some of the things we get happen more than once but you don't know when they're going to happen. And so we have prepayment penalties and somewhere between a third and half of our loans, and a number of the type of business we're doing more now has more prepayment teeth in them. And so maybe we'll average $500,000 a quarter in prepayment penalties, maybe it will start to go up a little bit. I don't know. But I wouldn't take the whole $1.8 million out.

That's fair. So thinking then that's where we should start to think, somewhere in the -- call it 435 range and then think about the other margin pressures that could be there because of the interest rate environment we're in?

It should ebb off. We've talked about this for a while.

Only five years.

I'm crying wolf here, I guess. But at the same time, with the money we have on the balance sheet, we're looking for net interest income to certainly earn through that a contraction of four basis points or whatever.

Okay. And last question, the mortgage warehouse lending, it looks like it was up I'm kind of guessing somewhere around $60 million. Is there a thought process of kind of where that portfolio would go or do you expect that to -- where do you expect that to go going forward?

It was up a little high for the quarter because these rates came down a little more. So activity was up, but we picked up some more customers too. So that number -- let's see, where did we end? A little under $400 million in balances that's probably a pretty good number. I think we're only projecting that to grow this year from that height about 10%, but with that portfolio, the month-end or quarter-end numbers aren't really as important, it's more the average because there tends to be a lot of funding's at the end of the month or the end of the quarter, that books' about a $300 million average outstanding balance book for us and should grow on the average 10% to 20%. It's more volatile on a day-to-day basis than most of the other items but -- so, yes, it was $358 million at year-end.

And our next question is from Brett Rabatin of Sterne Agee.

Wanted to ask, you've been talking about potentially some new lending initiatives the past quarter or so as you're looking out into what you can do on a risk adjusted basis that makes sense. Are you guys any closer to adding anything new material? And as you grow in Northern California, does the VC and private equity markets, does that attract you any vis-a-vis what you're doing in other central lines of business?

Well yes. I mean you're kind of warm there. We've got four different types of initiatives that we're in different stages in discussion on. So due to the issues around them, I can't get into details.

Okay. And I guess the other part of that question is just would any of those new initiatives be kind of acquisition oriented, i.e. an acquisition kind of gets you into some new businesses as well?

Could be, yes. The key to these things -- we'll typically -- before we got into each of these niches we're in, we'll study for a year and then we'll put a plan together. And a key part of that plan is going to be what are the opportunities? But mainly who are the people we have to have to do this? And so a lot of it centers around people and those are really the opportunities you're looking for. The right niche that can be priced properly that's not overly competitive and that you have the right people that know that business and can relate to customers, can sell it and also can manage the risk in it better than your peers. You have two ways of doing that. You either buy them or you hire them. So we're looking at both.

Next we have a question from Joe Morford of RBC.

You guys have touched on this a little bit but in the fourth quarter you grew loans at twice the rate of deposits and the loan to deposit ratio is getting well up into the 90% range now. Curious how you think about managing the funding side of the business in the year ahead and how important are acquisitions to that as well?

I'm really not going to answer any of those questions now that you're a competitor of ours. Yes, the funding is real important. We just got off with a call with our entire staff. We do a staff call every quarter, all 1100 of us and one of the things we talked about is some adjusting in our incentive plans where our deposit and our goals for annual bonus plan, our deposits are going to be really driven by non-interest bearing demand. And so we need to pick up in terms of growth, the amount of our business in DDA and help drive our fee income too from that category. That's a new piece in our annual bonus plan. So we've got a lot of loan growth demand. We can make good loans at good yields and we're going to focus more on the deposit side this year. It's funny because we have the opposite -- our issues are the opposite of the larger banks. The larger banks are swimming in money but they have a hard time lending out money to anything more than about 2% or 3% and so we're, as strange as it sounds I mean that will be one of our focus, that was probably one area I was disappointed in 2014 was our growth in checking accounts.

Okay. And then just kind of briefly on just the pace of growth in the fourth quarter, loan growth in the fourth quarter. It looks like the end of period balances were quite a bit higher than the average. So was it just more back-end loaded or was anything going on in terms of pay down activity?

Part of it is back-end loaded, the warehouse stuff funds up toward the end. That's about a $75 million swing, but yes I don't know why. People get focused on closing business at the end of the month and the end of the quarter. I don't -- just always kind of been that way.

Yes. Seasonally the fourth quarter has been our strongest and you also have some tax reasons for it on some of the equipment financing elements as well.

Next we have Tim Coffey from FIG Partners.

If we can look at slide 5 in the presentation deck, you've done a pretty good job of improving the leverage of the earning asset mix. Do you see that improvement continuing into 2015?

Well there is still some more opportunity there. We still have -- more than half of our securities portfolio is free, not pledged for anything. So there is room there. I don't think there is a lot more room on the cash side in terms of what can be done, but part of the reason that is mitigated, while others have had margin compression generally and we've avoided it is because of what we've been doing in a mix. Mix within the loan categories as well as within the balance sheet more broadly. So there is still more that could be done there if we wanted to.

Okay. So when it comes to talking about spread income, we're talking about balance sheet growth and improving the mix? Right?

Well both of those have been a factor in terms of our margin stability, yes.

Okay. And then the expectations on non-interest expense into 2015, does that include any of the kind of new opportunities to pick up teams in Southern California that started to emerge yesterday?

Well, so I mean -- within our projections that we talked about for a run-rate for this year for non-interest expense, it includes that we're going to continue to target and recruit business development officers that can bring in quality relationships and augment our growth. So whether that's related to anything on any transactions or something like this it doesn't necessarily matter. We intend to continue to pursue that strategy, that's been successful for us and it's been an important component of the momentum that we've established. A number of our expenses are tied to how the company's doing. So if we get a growth in some of the expenses like we had this year in '14, it's going to be because we're outperforming kind of what we budgeted to do and so they're kind of closely tied together. So if you see our expenses going up at a higher rate, it's going to be because our revenue is going up at a higher rate.

Right. I guess my question alluded to more of the people related expenses, not necessarily the variable expenses.

Well, a lot of the people is tied to performance. We got about $30 million to $35 million of compensation last year that was all performance driven.

This concludes our question and answer session. I would like to turn the conference back over to Robert Sarver for any closing remarks.

Yes, nothing really else to add. Appreciate you calling in and participating on our call and we'll talk to you here in three months. Thanks.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.