Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the Second Quarter 2015. Our speakers today are Robert Sarver, Chairman and CEO; and Dale Gibbons, Chief Financial Officer. All participants will be in listen-only mode. [Operator Instructions] You may also view the presentation today via webcast through the company's web site at www.westernalliancebankcorp.com. The call will be recorded and made available for replay after 2:00 PM Eastern Time on July 27, 2015 through Thursday August 27, 2015 at 9 AM Eastern Time by dialing 1877-344-7529 and entering passcode 10068074. 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.

Thank you. Good morning everybody. Welcome to the Western Alliance second quarter earnings call. First, I’ll summarize some of our high level performance for the quarter, the effect of the merger with Bridge Capital Holdings, and then Dale will discuss our results in a little more detail. After that, we’ll offer you an update to our outlook and then open the lines for your questions. We closed the Bridge transaction on June 30. Consequently, all the balance sheet data, non-performing asset information, and capital ratios are reflected in the consolidated entity. However, except for merger charge, none of the income statement information where the revenue, expense, or performance ratios includes any operating performance from Bridge. At June 30, Bridge increased our loans by $1.45 billion, deposits by $1.74 billion, equity by $435 million of which $275 million ended up in goodwill, and total assets by $2.22 billion. Net income for the second quarter was $34.7 million or $0.39 a share. However, this included a $7.8 million charge for employment contracts, severance, and some legal fees from the merger; a $7.7 million charge for increase in the liability for our outstanding trust preferred securities as we had a new valuation mark from the issuance of $150 million of subordinated debt during the quarter; and net gains from the disposition of repossessed assets of $1.2 million. Net of tax, these non-recurring charges reduced earnings by $0.10 a share giving us operating earnings performance of $0.49. Our top line revenue growth was very strong at a 15% increase from the second quarter of 2014 to $114.4 million, and again this includes nothing from Bridge. Meanwhile, the increase in expenses was held to a third of that at 5% taking our efficiency ratio down again to a record 44.6% and increasing our pretax pre-provision…

The cash position was very high at quarter end as certain positions were liquidated in advance of the merger and will drop substantially in the current period. The securities portfolio balance was flat, while the yield slipped to 3.06%. Loan yields edged up aided by an additional day and an increase in disposition accretion on impaired loans, while interest-bearing funding cost was stable at just over 30 basis points. The higher loan yield drove the margin increase 6 basis points to 4.41%. Net of disposition accretion the margin was up 2 basis points to 433. Both the adjusted and on adjusted margins have been essentially flat during the past year. With taxable equivalent revenue rising $6 million during the quarter to 122, while operating expenses rose just 400,000, the efficiency ratio fell to 44.6%, nearly 5 point lower than the 49.3% in the same quarter last year. Western Alliance FTE employees before Bridge were 1155 June 30, which was up 24 from March 31. While Bridge added 256 FTE bringing the total to 1411. Our improved efficiency cost pre-pre-ROA declined to 2.14%, which was the post-prize this high. ROA was 1.24% weighed down by the merger and debt evaluation charges Robert mentioned. On an operating basis ROA was 1.5 cents. Reflecting the Bridge transaction, total assets declined to $13.5 billion. Bridge loans were booked net of a $25 million in credit and rate discounts with an average life or 4.25 years. The increase in allowance for credit losses is solely from net recoveries during the quarter as no reserve was booked for Bridge and no provision for loan losses was taken. Other right assets include $260 million in additional goodwill and $15 million in core deposit intangible assets with a 10 year life from the Bridge merger. Shareholders’ equity rose…

In terms of our outlook for the rest of 2015, Bridge has strong momentum moving into the third quarter with solid business development pipelines. I've been out and had a chance to meet with pretty much all of the employees other than that to remote offices and feel good about where we are in terms of growing their business. For the quarter it grew its loans and deposits each about $100 million, compared to the second quarter and they appear on track for similar performance again as part of the Western Alliance team. We have two new lines of businesses, we are exploring in the middle of underwriting and really analyzing and I think we're probably going to go forward on these; one is a business line where we actually bank venture capital VC companies, this will be more of a heavy deposit. Opportunity was some credit, as some of these companies take loans to secure it with obligations from their investors to fund capital contributions. In addition, and as you know we have a large business and health care; we bank lot of physicians and hospitals. We are in the process of underwriting the newline of business with Bridge to be banking earlier stage healthcare companies. There’s a lot of opportunities; this is a very growing space. Bridge already has offices in a couple of the best markets, which includes Boston and of course we have a big presence in San Diego, which is also an area that has a lot of these companies. Bridge’s efficiency ratio was 61% in the second quarter. We’re quite confident that we can achieve our targeted efficiency ratio improvement of 15%. These gains will be realized over the next six quarters culminating in system conversion near the end of 2016. Irrespective of the…

[Operator Instructions] And our first question will come from Joe Morford of RBC Capital Markets.

Thanks. Good morning, everyone.

Hey, I got a question for you – you were in the question queue before we even started the damn presentation.

Well, it’s a style then and logged when I dialled in.

How do you know we weren’t going to answer your question before we had a chance to answer it?

I’d come up with a different question.

Okay. Well, that’s resourceful. What have you got?

I’m curious a little more on your loan sale activity and just these relationships exists, which portfolios are these coming from, the types of credits, and do you see much more of that to do, or have you pretty much wrap that up and just kind of curious about just pay down activity in general?

Yeah, we are actually getting pretty good at syndicating credit. We just syndicated $105 million credit to a customer of ours that’s in the hospital business, actually long-term acute care business. And so, we are doing two things. One, we are now able to take larger credits and syndicating them ourselves. And two, in a couple of areas where we originate some larger credits like the municipal finance business, we are beginning to sell down some of those credits and skim – get a skim on the yield, the rate, and the fees, to keep our interest margin up high. That’s number one. Number two, we have customers that they get bigger and other banks go after them. They were offered opportunities to get lower rates, so we were in a credit this quarter. We have won four banks and a credit and a large Las Vegas-based company, non-gaming company, that we had $40 million out in a credit facility at LIBOR plus, I think, 2.75% with some fees, and one of the large money center banks came in and said they’d change it to LIBOR plus 1.75%, and we said sorry, but no thanks. We don’t make enough money at that. You guys do, it’s perfect for you, but not for us and we exited that relationship. We had two of those. So, fortunately, we have a pretty good pipeline, and we have a lot of different products and so we are just not going to bank credits and businesses where we don’t get the appropriate risk-based return, and we exit some of those.

Okay. That makes sense, Sarver. I guess the...

We also had a real big first quarter. Sometimes it happens.

Yeah.

Your officers are dealing with their pipelines, and if there is a huge focus and a bunch of stuff get closed at the end of the quarter then it kind of sets them back for the next quarter. So the first quarter was a little bit – I think, we drew $1.2 billion in combined loans and deposits and that kind of set us back in the second quarter.

Okay. Dale, I was curious to what’s – currently what’s your – the incremental step-up expected in the expense run rate in the third quarter for Bridge? It sounds like the timings for the savings are going to be in the next six quarters, but the conversions now – not till the end of 2016, is that what you are saying?

Yeah, we are – we are going to get savings coming along all the time, and the costs are going to in part reflect that. It’s a little bit of a barbell on the merger chart. So, kind of right away as you just saw, we will see some tail event for the next few quarters, and then when we finally do the final conversion that will be the biggest piece. So we should continue to show improvement. I’m looking for the efficiency ratio to get a – if you take the weighted average of the two to begin with and then you can – I think we can continue to kind of bleed that down a little bit. And then I don’t have an exact day for you in terms of when we are going to get kind of the final nut, which could be on the conversion, but that is going to be a year out. So, their expenses have been running by $16 million a quarter. It’s what they were in Q2, and so I would look for a dramatic improvement in that, although we expect that we are going to get to kind of the 15% or in other words $10 million over time and you will start to see that immediately, but with some tail later on.

Great. Thanks very much.

And the next question comes from Brad Milsaps with Sandler O'Neill.

Bradley.

Hey, good morning.

How you doing?

I’m doing well. Dale, just on the margin, I appreciate the guidance there. I know you’ve got a lot of moving parts this quarter with the sub-debt, the payoff of the notes, and then with Bridge coming in. So, if I understand correctly, you kind of expect flattish and then it would start to move up from there given the influence of their balance sheet?

Yeah, yeah, their balance sheet should add to the margin. We still have pricing pressure as everyone does and as Robert kind of alluded to in terms of the exit for some of these transactions, our margin have been fairly stable for quite some time. And so, I think you still have that pressure coming in, but this particular core, we are going to gain from Bridge like you mentioned and then we have the higher debt thing. That’s pretty much neutral out of the gate and then – but then as we pay off that debt, I’m looking for things to improve a little bit kind of in the fourth quarter and then after that it will depend up on again new organic activities that the company undertakes.

And in terms of the accretion, on a quarterly basis, I think you said $25 million in March, would you expect those to kind of come through similar to what we have seen or would any of that be offset by provisioning as those notes renew? How should we think about that?

Yeah, it’s $25 million. If you did straight lines and not quite straight lines, but that would be about $6 million a year in additional interest income. The reserve, we would like to see how that goes. I think the reserve was adequate certainly today in my view about 1.34%, 1.35%. As you know, the new loans that come in, there could be provisioning elements to that. I don’t see anything that’s going to drive us to a notable provision level in the – kind of in the near-term, but that could happen based upon where we are. So I think the provision could be – could be a little bit lower than maybe what the Street generally has been projecting is what we’ve seen for the past few quarters as well. So – but that $25 million really is their loan loss reserve. so, you know, I mean, they are not going to have no losses. So you kind of -- to a certain degree, you’ve got to figure over the next five years that that’s just an accounting move taken out of a loan loss reserve and stick it in another bucket. Maybe in the short run, we can count some of that earnings, but I don’t really look at it as earnings. It’s just…

Certainly as those loans roll over and you generate new loans and then…

Yeah.

[Indiscernible].

It happened to the old pool in accounting. Made it simpler, you just stuck the reserve on.

We were going to do it that way. I think it’s a lot more clear.

Pooling would be good for M&A. And then finally, Robert, just - any new hires in the quarter? I think you made six in the first quarter, you made sure maybe the last quarter the pace might be little slower with all the Bridge people coming, but just curious on organic new hires?

Yeah. We had a few new hires but they had a few new hires too, so I think our big focus right now is to make sure that not only we keeping other good people which we have so far but really trying to even up, augment some of the staff and get them to take advantage of some of the opportunities with us. But overall, if you exclude the Bridge people, we brought in another half a dozen new lending relationship people to the company.

Great. Thank you.

And next, we have a question from John Moran of Macquarie Capital.

Hi guys.

Hi, John.

How is it going? Dale, maybe a quick question just on the asset sensitivity and I know that you guys have been shifting a little bit more asset sensitive naturally anyway but then Bridge had just a great deposit base. Do you have a quick look or on kind of how that changes now that that one is closed?

Yeah. It’s pretty much going to be kind of the way that average look of the few institutions together. So we’ve been migrating to asset sensitivity. We are slowing that down now. We don’t think we need to be more asset sensitive certainly than we are. And so some of the things that we have done whereby we have about 600 million of swaps to increase the sensitivity on our loans, we are no longer pursuing those. So it’s going to temper the improvement in asset sensitivity that we otherwise have been generating the past couple of years. Bridge is much more asset sensitive than us, so like you mentioned, in terms of their DDA composition of their deposits certainly moves them to that level as well as C&I loans generally tend to be variable rate as oppose to CRE. So if you weight the average together say 6 to 1 in terms of balance sheet, that would tend to skew us to being of a bit more asset sensitive. But as I mentioned, we are doing things to mitigate further migration in that direction.

Okay, got it. Thanks. And then just I guess on the – another one on Bridge, I think originally the guidance that you guys have put out there was $3 a share on the incremental shares that would be issued and I assume that now that it’s closed and you’ve really had a chance to kick the tires, there is nothing in there that changes that kind of look on – I think it was by ’17 right?

Yeah. Now, we are confident in terms of where we are and our integration plan, and the results that we are seeing. Bridge is showing good momentum in the second quarter and looks good for the third quarter as well. So we standby really of the estimates that we had in terms of incremental EPS on shares as well as efficiencies that we can realize from them.

Yeah. The cost save numbers we came in at, we are already over 50% executed on those and it’s pretty much just as we thought when we did the underwriting of the deal.

Sounds good. And the last one from me was just in Nevada, it looks like just sort of year-to-date it’s growing pretty well, a little bit of a step backwards, this quarter I guess two steps forward, one back, if you could give us any update on what you see going on in that market and what you think the contribution there might be for the rest of the year?

Yeah. That one credit I told you like the big one, the $40 million we got out for pricing that was in Las Vegas. So they get hit with that one big credit, but overall I think they’re going to show growth for the year at a lag Arizona and California a bit, but they’re going to show some positive growth for the year.

Sounds good. Thanks very much guys.

Thank you.

And the next question is from Casey Haire of Jefferies.

Hi. Good morning guys.

Hi.

I wanted to follow-up on the cost save schedule for Bridge and if I understand it correctly you're saying the conversion comes on, you’re going to convert the systems in late 2016, just curious why that seems like an awfully long time now from now, I'm just curious what's driving that, is that conservative and if I understood it correctly, a lot of the cost saves are going to come following that conversion.

Not really, we've got – what’s going to happen is, really most of the cost saves are going to happen before the conversion and so we've - just like simple numbers we identified $10 million in cost saves and we've already got over half of that already either executed or the employees have been noticed and that kind of stuff. So really about 80% of those cost saves are coming without that, what we’re finding is, we’re evaluating all the different systems at WAL and Bridges and we’re in the process of determining which systems we're going to be using going forward together, but the good news on that is some of the numbers we’re seeing on bidding that out is, I mean we may be looking a lot more in cost saves because some of these proposals are coming in a lot lower than what both companies are paying together right now; and we didn’t really think about that when we came up with a cost save. So, within 12 months we’ll hit that $10 million in cost save number, but - I mean the cost saves are kind of important but the reality is there’s still lot more to make on the revenue side, so there is just more upside in terms of the revenue piece.

Okay understood and just following up on the margin question, just trying to quantify it, if I were to pro forma the balance sheets with the margin, I would end up at around a little less 4.5, does that sound about right for you guys in terms of where you are thinking the margin will end up in the fourth quarter?

Well certainly we will have more information in terms of origination activity, but yes you weight the two margins together it adds about 6 basis points to kind of where we were. You know, we think overall our margin has been pretty stable, we've done some things in terms of kind of moving assets around and backing out of some of the lower yields [indiscernible] wrong on the margin for three years.

That would be the number and how you would compute debt.

Okay. And then just on the deal front you guys got this deal underway or closing in pretty short order, just curious how are activities levels now, are you guys out there and looking, or what…?

Yes we are. We do a lot of meetings one-on-one to kind of get to know management it's like Bridge, I mean we're meeting with them the year before we put a deal together, just really understand the cultural aspects and talk to business plans and so we've got a number of meetings that we've had and continue to have with other banks and my guess is within the next six months we’ll be announcing another deal, but there is nothing signed or agreed to. We’re not at that stage with anybody, but we have a number of ions on the fire, but just make sure we take our time and do it right and make sure we get the Bridge deal squared away and really on track and going to the right direction and then we’ll probably add another one.

Okay great. Just last one more tax rate, little late this quarter, what's a good go forward rate?

Well the tax rate was late because of the charges that we took and the incremental marginal tax rate is lower than the average tax rate of - our average tax rate is around 26%, 27%. So Bridges tax rate has been about 43% and again I would say if you kind of weighed them together it pulls that tax rate up. Over time and we think, beginning say in the, certainly in the fourth quarter if not maybe a little trickle into the third, we think we can get that combined rate down. We’re not going to be able to get into as low as we were on our own as Bridges revenue comes predominantly from high tax rate dates, you know California certainly and Massachusetts, but we think there is opportunity there to move the combined tax rate from what you will see in 3Q lower over the next say six quarters.

Okay great thanks for the questions.

And next we have a question from Gary Tenner of D.A. Davidson.

Thanks good morning.

Hi Gary.

Just a question, you had mentioned the new launch of business you are looking at and you mentioned the venture capital business, which I assume you're talking about capital call line types of business…

Right.

I’m wondering is that suggesting as well that you maybe more active going forward on early stage in lending what Bridge has historically done.

Hey, that’s a good question.

[Indiscernible].

Yeah, you are kind of up to speed on that, a little, yeah. I mean for one, it just kind of a natural evolution, so a lot of the business Bridge gets does come from DCs but really a lot that they’ve focused on is connections through management and people that actually run the company because they do a little later stage and say Silicon Valley. But I think we are going to kind of move a little bit in that direction, not a lot but a little bit and so you’re correct in terms of your thinking.

Okay. Thanks for that. And just following up to that – actually just in terms of headcount or ads for that business, do you need to bring in people that are more specially focused on early stage or venture capital?

Yeah, you do. I mean the key with all of these specialty areas, we’ve put a good business plan together. We look at it from a compliance standpoint, from a risk management standpoint, we have a whole process that takes six months to a year to underwrite a line of business but at the end of the day it’s the people you hire to run it. Because all of these specialty types of businesses can do really well and can do really bad, and the big difference is the people, and so yeah, you do, for sure.

Okay, great. And then, Dale, you had mentioned, that excess cash balances would come down I guess a fair bit in the third quarter, is that closer to where they were maybe at the end of March or are you going to invest the whole swap of it?

No, it’s not the whole thing but I’m going to say at least say $400 million lower.

$400 million lower than the period [ph] on balance.

Yeah.

Okay, great. Thanks very much.

And next we have a question from Brian Klock of Keefe, Bruyette & Woods.

Hi, good morning guys.

You’re the caboose today.

I’m not as fast as Joe on the [indiscernible]. So I’ll be happy to take save the best the last I guess Robert.

Yeah, exactly.

There you go. So on the commercial side, I just was wondering on the central business line segment, was there any impact from the warehouse lending, was that the reason why there was a little bit of a softness in the commercial loans in the second quarter besides the loan sale activity you talked about.

The warehouse business was up pretty good.

Okay.

They had a good quarter. By the way, what we are adding to that, when you see our reporting from Bridge would be the energy infrastructure lending they do and the technology lending. So those two types of lending as well as related deposits will be in our centrally managed business line book going forward.

Okay, great. So going into the quarter, if we adjust for some of those activity you talked about with some of the - exiting some of those relationships, if we normalize for those numbers, do you think then if we look at the C&I portfolio ex-Bridge do you think the third quarter is going to be better than that second quarter growth because I guess that first quarter was just a very strong quarter, so to think about that pipeline is pretty good going into the third quarter.

Yeah, I agree. Yeah, I think so. If you take our $1 billion a year which averages out to $250 million organic net growth for the quarter and you add another $50 million to $100 million a quarter for Bridge, you put it together it’s $350 million a quarter now. So that’s the number to use.

Yeah, Brian. In terms of some of the dispositions, I mean they were in corporate finance and equipment finance, those are the central business lines that were lower in 2Q.

Great. Thank you. And just one last question, thinking about – I think if I remember correctly when you guys gave guidance for the one-time merger cost I think the pretax number was at $19 million, so with $7 million to $8 million this quarter, should we expect those to be closer to the conversion in the first quarter of ’16 then?

Yeah. So the $19 million – so we took $7 million here, there was about $6 million that showed up on Bridge’s books which you don’t see, okay. It just comes through in terms of the combined tangible common equity that came over from the share issuance that we did. So there is about a third left that that’s out there to be realized and you’re going to see a little bit of a tail for the next several quarters, but nothing that substantial, and then a few million out there when the conversion is completed and the back half is succeeded.

Great. Thanks for your time guys.

Thanks.

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

Not really much to add, just kind of the same old plan, let’s just grow our revenue at a significantly higher pace than our expenses and that’s a mandate for everybody who runs the business line in our company. I do think next quarter’s conference call will be a little more interesting because we will have a full quarter of Bridge’s operations and some of these things we are working on, we’ll be able to give you a little more guidance on. And so we are entering into an exciting time for the company and I think it’s a good opportunity for us to move up to the next level and really take advantage of some of these great opportunities and also leverage on some of the great people we just added to the company. So, thank you for taking the time to listen-in to us and we will be in touch with you next quarter.

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