Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the First Quarter 2016. 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 2:00 p.m. Eastern Time on April 22, 2016 through Sunday, May 22, 2016 at 11:59 p.m. Eastern Time by dialing 1877-344-7529, passcode 10083308. 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 opening remarks, I would like to turn the conference over to Robert Sarver. Please go ahead.

Thank you. Welcome to Western Alliance first quarter earnings call for 2016. This one is going to be little longer than the last one. I’ll summarize our strong quarter result and then I’ll turn it over to Dale to review the performance in little more detail, then I’ll summarize our transaction with GE Capital and give you a little information on the following quarter and will open up the lines for questions. Net income for the first quarter was $61.3 million or $0.60 per share compared to $58.5 million or $0.50 a share for the prior quarter. Our EPS was up 33% from the $0.45 per share in the first quarter of last year as our return on assets reached a new high of 1.7%. Net interest margin declined 9 basis points from the fourth quarter to 4.58% and is up 23 basis points from a year ago. Our efficiency ratio ticked up a bit to 45.6% during the quarter from 45.2% in the prior quarter as expenses rose primarily related to first quarter seasonal factors. Quarterly long growth was $105 million, reflecting continued credit and pricing discipline for new originations, deposit growth was a record at over $1 billion, reflecting that in March we began focusing on the generation of liquidity needed to fund the purchase of the GE Hotel Franchise Finance portfolio which closed this week. Non-performing assets declined to 1.11% of total assets a year ago to 57 basis points at March 31, 2016. Net loan losses for the quarter were $2.3 million or 8 basis points on an annualized basis compared to 6 basis points and that recovery’s in the first quarter last year. Despite organic asset growth of 1 billion during the quarter, the tangible common equity ratio only slipped one tenth of 1% to 9.1% of total assets, as our strong income performance drove a 70 million increase in tangible capital. Dale?

Net interest income for the first quarter increased by $2.4 million on a linked quarter basis to a $145.7 million and is up $42 million or 41% from the year ago period. Our operating non-interest income rose $2.7 million during the quarter to $12.1 million that included $2.5 million gain on the disposition of $24 million of loans. Operating expenses increased $3 million during the quarter to $75.8 million, $2 million of that increase was, as Robert alluded to, related to seasonal payroll taxes as FICA starts over each year and we also had a $1 million reduction of loan origination cost deferrals related to FAS 91 as our loan growth was slower than in the fourth quarter. Operating pre-provision net revenue was $82.1 million, up 2.8% from the fourth quarter and $2.5 million was again provided for loan losses, essentially matching net charge-offs for the period of $2.3 million, while most of our credit metrics were improved during the first quarter. Minor portfolio repositioning resulted in $1 million of securities gains. The income tax line benefited from a new accounting standards update which requires the changes in tax deductions from differences in stock values from when a restricted share award is made to what is best should be run through the income statement. Previously, these went directly to equity. Since WAL stock price today is higher for brands divested in the first quarter than when they were made in the first quarter of 2013 and ‘14, tax expense fell by $3.9 million. Since virtually all of the awards of Western Alliance are made in the first quarter of each year, this is not likely to recur until the first quarter of 2017 and then only if the share price is different from the value when the awards were granted.…

Thanks, Dale. Let me talk about the GE portfolio for a little bit. As I said earlier, on Wednesday, we closed the transaction, we purchased, the domestic hotel franchise financial loan portfolio from GE Capital. The total loans purchased were $1.34 billion. They are all performing on payments, none of them were more than 30 days past-due. Approximately 4% of the book is classified. The weighted average current estimated loan to value is 65%. What I mean by current estimated is what they do is they look at on a quarterly basis to operating performance of every one of the hotels in the portfolio, which is about 230 hotels, and they compare that with looking at their loan amount versus what the current cap rates are for a hotel sales in that particular market, based on the cash flow of their project. So, in a sense the re-underwriting, the loan to value on a quarterly basis, that number is about 65%. The weighted average debt service coverage of the portfolio was 1.70%. As mentioned, we acquired the portfolio at a discount of $67 million. We’re currently evaluating how the credit and rate discounts will be allocated, giving attention not only to classified loans but also to properties that could be stressed in the future, because they’re domiciled in energy sector markets. One of the things we like about this portfolio is it is based here in Scottsdale, Arizona and there will be a team of about 35 people, moving over to Western Alliance, half of them have moved over yesterday and the other half will be moving over in about 30 days. Their target customer is a over-five unit owner operator in the upper end of the limited service hotel franchise business. So, the limited service business is broken down…

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

I thought you telegraphed the slower loan growth, organic growth in the first quarter fairly well. Now that the market appears to have settled down or at least the fears of recession have subsided, what are your expectations for organic growth in the near term and the remainder of 2016? And as pricing get better such that you feel better compensated for the risks you’re taking I guess?

I think two things we’ll look at, one is our growth in deposits and therefore our liquidity will be one factor. We still got to beef up that liquidity a little bit to absorb the acquisition. We borrowed about $300 million of the Federal Home Loan Bank overnight and we’re going to want to pay that off over the quarter. So that’s one factor. And the other factor is competitive pressures. And that is going to continue to have some bit of an impact. I mean we see competitors out there that are pricing credits in some ways that we think make no sense whatsoever. And so, our growth organically in our loan book is going to be based on those two things. And we’re not going to try to push a number. We’re just trying to do the right thing in each of our business lines; we proved it, be opportunistic. And so I think that growth, organic growth rate will begin to pick up a little bit as we have more liquidity but realistically, I don’t see us doing 1.2 billion or 1.3 billion in organic loan growth this year, given competitive pressures and given our liquidity with this acquisition.

And are you just targeting the $350 million in terms of deposit growth in the second quarter or should we see -- are you looking for a bigger quarter like we saw in…

Yes, I think we may do better than that, at least so far we’re off to a start that would lead us to believe that.

Okay. And then, I guess Dale, it sounds like -- given your comments about the day counts and then the deploying the liquidity with the GE transaction this week, should we see a pretty healthy bounce back in the margin this quarter and what are you thinking there?

Okay. So, this portfolio yields 480, our marginal cost of deposit acquisition to cover this and then in the 40 basis point range, so little higher than our average cost and that contributed to our 1 basis-point increase in funding. So, if you look at that on a standalone basis, that’s a 440 margin which would be modestly dilutive to the margin on a rate basis but substantially accretive to net interest income because our loans are now up 1.5 billion from where they were for the first quarter. So, based on both of those, I mean net interest income should be up significantly; the margin is more or less a push. There could be a portion of this $67 million discount that gets recognized as well, either through pay-offs of loans or through some of the -- an allocation of the purchase price premium that is not put to credit marks that comes in through revenue. I don’t have what that number is. So, all in all, I’m not looking for the margin number to change that much but because the earning assets are going to be up significantly and the mix of earning assets is going to change, more skewed to loans, then, yes, I look for net interest income to increase substantially.

Understood, okay. Thanks very much.

That mix will help the margin a little. And we may get a little bit of increase on the 480 on the mark. So, it will -- it’s probably about a wash I think.

I don’t think it’s going to go down and I think it’s going to probably go up but not substantially.

Right, but the dollars are up significantly as you said?

We think we’ll make about a 100-grand a day on this deal.

And our next question will come from Casey Haire of Jefferies.

I guess following up I guess first on the liquidity profile, understand you guys are not pushing a long growth number, just kind of in a response to the environment. But it does sound like you guys are -- you do want to get your liquidity profile back to where it was pre-deal. Is that an accurate represent, like that low 90s would, if you got the loan to deposit ratio to the low 90 level which where it was pre-deal, would that would be, would that take your foot off the brakes in terms of long growth?

Yes. Today it’s at 95; so we pushed it to down into the 80s with the growth that we had to deposits in March and today it’s 95%.

Okay, great. And then, on the asset sensitivity, I know Dale, you mentioned the day count and then some prepay, I think one against you couple of bps. But even adding that back in, I mean the loan yield is only up a couple of bps with increased purchase accounting. I’m just a little surprised, we didn’t see a little bit more of the asset sensitivity pull through, given -- I know you guys positioned inter-quarter for a little bit of a lower longer environment. Could you give a little bit more color on why we didn’t see a little bit more of the asset sensitivity?

Well, part of it is mix. I don’t think that it’s kind of a permanent situation, so I’d say. But there has been kind of increased competitive pressure. But, we looked at on our loan yield that came off during -- and they were just over -- just under 5% and the weighted average of new loans put on during the quarter was just over 5%. So, I -- we add back the 6 basis points for the day count, add back, and I did, my number is 3 basis points for the cost of the liquidity fees plus another couple of basis points for reduction of prepayment activity that was heavier in the fourth quarter than what we saw in the first quarter at acceleration of loan fees, as such. Those are really the -- those are the elements that kind of drove this.

The other thing that would factor in a little bit is we have floors on most of our floating rate loans. And so some of those loans are right now paying at a rate where -- they are paying at the floor rate instead of the contract rate.

Okay, understood. And then on the tax rate, if I strip out that benefit, it actually comes in around 29%. Dale, I know you mentioned, depending on what the stock price does between now and first quarter ‘17, can you just provide some color on how that -- what the stock price needs to do, to get that tax benefit again? And then where does the overall tax rate settle out going forward with GE now on board?

Yes. So, GE skews us to a greater proportion of our revenue from taxable sources, which I think is a good thing. When it does, it means we have more appetite to take advantage of different opportunities that can reduce that. I’m looking for the tax rate to be about 28% kind of prospectively. And we’re going through a process to see what we can do to obviously to mitigate that. It’s not going to go down to the level it was before. We benefited from a substantial portion of revenue skewed towards kind of lower tax base like Nevada and Arizona comparatively as this has become a more of a national kind of a revenue profile, we are in more states that have higher state income taxes. So, I think we can keep it to the higher 20s, but I’m not looking for it to go back to the mid-20s as it was.

Understood. And just one more if I may. You guys mentioned, you’re going to manage the GE business to approximately 10% on your loan book. It looks like it’s 12% today. Are you guys kind of -- if you look into -- I mean just hit the brakes on growth in that category or potentially sell to get down that 10% limit? Just some color on how that trends over the next little bit.

Yes. It’s about right at 10% today. If you add -- I mean adding the loan book to the denominator, we’re just a hair over 10, and using the discounted amount, which is the amount that shows upon our book.

And our next question will come from Brad Milsaps to Sandler O’Neill.

Dale or Rob, just to follow-up on Casey’s question, just in terms of amortization on the hotel book, it sounds like, you guys probably aren’t going to be adding to it. So, we should just assume that continues to decline over the next several quarters. And then at some point you may look at maybe backfilling some of those loans. But is that kind of how to think about it…

I think the way to think about it requires to be kind of somewhat flattish. They typically have about 300 million to 400 million a year in amortization and payoff. So, we’ll get that replenished. I think there is some good opportunities out there. But I also recognize knowing this hotel business pretty good, I’ve been owner investor for 25 years and that was my dad’s business, so I grew up in it. It’s fairly sensitive to the economy and like other areas of real estate, these low interest rates have made valuations in many areas pretty frothy. So, we’re going to be cautious to make sure our underwriting is really sound. It’s not a time to go crazy, growing a hell out of a loan book with hotels, but there is good selective opportunities and the Company has some really good core customers. So, I think if you think that book is more flattish with the new originations replacing the amortization, that’s probably a general way to look at it.

They participated some of their loans in the past, there is different things we can do that enable them to continue to be important in the space and yet manage our exposure on our balance sheet.

And then Robert, just on the deposits, I know you guys have put some incentives in place to really -- and seeing your folks to grow deposits. Can you just talk about more color behind what happened, I guess this quarter, and is it -- was it several teams that came over or just refocused? It looks like a pretty broad-based growth really in all regions, all business lines.

Yes. It was pretty broad based. We did get a good bump in our homeowner association banking group, and that’s cyclical. So, in the first quarter that’s when a lot of the new businesses move over, because of the timing of when they mail out all their payments for the year and stuff. So that was a big boost there. In the rest, it was pretty broad-based. We’re getting exposed to a number of larger deposit opportunities, especially some of the bigger banks are exiting some of those relationships with the liquidity rules they have. And then some of the niches we’re in, whether it’s life science or technology, municipality, they’re just fairly deposit rich opportunities, so we just put a little more focus on the deposit side.

And then final question with the GE deal now closed, what’s your appetite for more M&A; doesn’t really seem like you have to do something but just curious what your appetite is at this point?

Well, appetite is pretty much the same and the GE deal is pretty simple; it’s not a heavy integration; it’s no deposits, no offices and 230 loans. So that integration is not going to be complicated. The key there is making sure liquidity growth and all that and capital ratios and all that are good. So operationally, it’s not a challenging deal also. Our appetite is the same as it was last quarter.

And the next question comes from Brett Rabatin of Piper Jaffray.

I wanted to just ask, Robert, you talked about seeing some pull back, in the first quarter obviously some concerns around economy at one point, and maybe that’s -- I was just curious for how you see things playing out over the next year, what you’re seeing in terms of economy, and how you feel about at this point?

I think the overall general economy in the markets we’re in are pretty good. I think you see some softness in some areas, other pockets; obviously you’re hearing stuff about some areas on the East Coast and some of the areas where there is oil and gas. But in the markets we’re in, it’s pretty solid. But the competition in terms of pricing is getting stiffer. And we just think that we have to take a close look at risk adjusted returns. And fortunately we’ve got a lot of different products we can offer, and we’re not stuck having compete after these commodity type credits like apartment mortgages or some of the owner occupied CRE with some of the competitors are offering high 2s, low 3s and 7, 10-year fixed rate loan; I mean we’re just not doing some of that.

Okay. And then…

We lost a deal to an LA based bank couple of months ago and on a term real estate loans, it’s really safe loan but they undercut us by 150 basis points. So, there is things going on out there where lot of the competitors are happy with the 2.5%, 3% margin. And over time I just don’t think -- I think our business carries too much risk for that.

And then, it sounds like the portfolio that you’ve acquired is underwritten pretty conservatively. But I was curious on the -- you mentioned the 65% LTV and how to get there, and there was parts of function of the cap rates. What kind of handle on the cap rates do you have an idea of the assumption there?

Yes. Those systems are really good and may have a lot of controls in place. And what I like about their systems, basically they do a few things really good that I like. For one they’ve got a couple of people that actually underwrite the franchisors in the business lines that franchisors have. They also -- when they look at underwriting credit, they’ll go back 10 years and look at average daily rates occupancy and RevPAR in particular markets. So, they’re cautious to lend into what’s been a good market for the last 12 months. They want to know how was that market during the last recession. Then what they do is they pull from a lot of databases. So, they look at what is the current cap rate in a particular hotel market right now because you could be deceived by saying okay, we got a 2% cash flow coverage from a hotel but that hotel maybe in a market that people are really nervous about and so that cap rate maybe 10% or 11%. And so, the value of that hotel may not be what it appears to be, based on the debt service coverage. And so, they’re trying to get together and it’s pretty good more real time valuations of these loans. And that was one of the things in general that really sold me on the Company is, one, I know the business pretty good; and two, it’s local. But really the way they underwrite and the type of metrics they use are really good. And so, they’ve got a really good handle on how these hotels are performing and how to underwrite them. And some of the things they do, I am going to use in all other areas of our Company. But that’s kind of what they do. So, you could go to in an area maybe in Texas, Oklahoma and have pretty good cash flow today but those cap rates could be 11%, which is you could go to another market and the cap rate could be 6.5 today.

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

So, congratulations on the GE Capital loan purchase. I am actually -- from what you’ve talked about, it just seems to me highlights again pretty low risk and high profitable deal for you guys. So, does it make sense -- I am kind of penciling out something; it looks like the return on those assets you’re acquiring because it’s pretty low overhead, something that’s north of 250 basis points of ROA on that acquired portfolio, does that sound like…

It’s about 100-grand a day pre-tax.

Okay. And then, I guess having said that, if you don’t grow earnings from this current quarter, which I think seems unreasonable that’s EPS accretion that could be something in the 12% to 13%, even maybe 14% range. So, does that sound right, thinking about that kind of accretion from the deal?

100-grand a day. I mean if you look at piece of this, so the margin is excluding what might happen on accretion of discounts is not much different than ours. But the cost associated with it, this operates at a 30% efficiency ratio out of the gate and improving starting in the fourth quarter from there. So, that’s a pretty good number. So, I mean one of the key measures of productivity we look at for ourselves is how much of the balance sheet does each person carry? So Western Alliance, if you add our loans with our deposits together and divide that by our FTE which is just like a 1,500, it’s $16 million per person. GE which is -- obviously it doesn’t come with a funding source, so there is other elements you need. But on a marginal basis that number is 40 million per person. You take 35 people and divide it into just under 1.4 billion. So that is dramatically much more efficient than this. And so consequently, it drives you as you’re alluding to Brian, to higher ROA and entire higher incremental performance relative to the size of this balance sheet, the size of Western Alliance’s balance sheet getting to kind of double digit accretion like you mentioned.

Okay, great. And then so, Robert, I think you guys aren’t turning off loan growth obviously, you’re going to look at liquidity. But given the strong deposit growth you’ve had to fund this deal with a lot of low cost deposits. I mean you may not get back to what that target was before, but the growth rate should be better than you had in the first quarter from an organic Western Alliance perspective going forward.

Yes, I think so. Well, I think that’s accurate.

And the next question comes from John Moran of Macquarie.

Just a follow-up on the GE piece of things. And I understand it’s somewhat more volatile stream here, but any sense of what sort of through the credit cycle loss content in that book would be? And I know that obviously it’s bought at a discount to par here but what provisioning requirements might look like, kind of once we’re through the initial phase of it?

Yes, we’ve got those numbers on what their losses were during that period. And I will say too, obviously that was pretty tough recession. And they did change their business model a little bit, they went more upper end in terms of in the limited service space. And I mentioned earlier on the call, it was more -- right now -- portfolio 97% of the portfolio is upper scale or upper middle. And so, they did make some adjustments from that. But if you want to look at what their historical losses were during the last recession, those numbers -- do you have it, Dale.

Yes. We also ran this through the Moody’s commercial mortgage metrics program. And the losses, based upon kind of the baseline case for the CCAR process are quite nominal. And then in the severely adverse scenario, which I don’t think anyone is projecting, those numbers are really on top of the total discount that is in the transaction.

Got you. So, even in that sort of severely stressed scenario, we’re looking 5% discount to par or whatever covers you guys there?

Yes, using the CCAR scenario.

Got you, okay, perfect. That is helpful. Then the other kind of just on credit, I guess Sili Valley [ph] saw some-charge off activity out of the early stage book and I know which is a little bit different than that, but you’re seeing anything kind of bubbling up out of that portfolio that has you incrementally concerned at the margin or are you feeling pretty good there?

No, I think we’re feeling pretty good. I mean, remember, our portfolio, our innovation loan portfolio’s about $564 million at quarter-end and the majority of that portfolio for us continues to be underwritten by collateral with a really limited exposure to venture debt or enterprise lending. And so, the fluctuations in valuations which has been the biggest concern. And I think for this year investors continue to believe that the valuation is probably the biggest challenge facing the industry, in spite of the fact that fundamentally we see investment continues to have pretty good results, venture capital fund raising in the first quarter ‘16 was 12 billion, 57 new funds raised, which is about 50% increase over a year ago. But it’s mostly a concern over valuations. And when you look at the stage that bridges in, we’re not quite as exposed to that risk. And in addition, with some of these companies having to stay private longer, it actually gives us a little bit of an opportunity to pick up some new businesses that are going to remain private for a little bit longer. Long-term, the venture funds performance is still pretty good. Ten-year return for the asset class is 11% versus 8% for the NASDAQ and 7% for the S&P. So, we’re -- I don’t see significant impact in that regard to our specific book at bridge.

Perfect. And then last one for you, Robert. just on M&A, obviously GE kind of done and that will be the focus here over the near-term but preference in terms of whole bank versus line of business or additional portfolio deals or any thoughts around kind of what’s going on in that environment?

Yes. I mean we continue to have a lot of discussions with companies, the companies that we’ve done business with where we’ve done deals and they’ve gotten our stock, they’ve done well. But our businesses create value for our shareholders, not someone else’s shareholders until they become our shareholders. And so, we we’re going to want to do deals that make sense for our shareholders. And we’re just not out to do deals that make the Company bigger, so Dale and I get higher base salaries. So, we’ll look at lines of business, we’ll look at whole banks, we’ve got some discussions and strategic discussions in markets we like with companies. But it’s all going to have to work. We’re not just going to do acquisitions to get big.

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

Dale, I just had a follow-up question for you on expenses. You mentioned that some of that first quarter personnel line was impacted obviously by seasonal FICA, payroll stuff as well as less of sort of adjustment for FAS 91. If those, without a recurrence of those, as presumably loan production improves in second quarter and you have the FICA impact. You also said that expenses ex-GE Capital would be flat. So, what’s the offset to some of the personnel line relief that you might get this quarter?

So, I’ve been guiding to kind of mid-single-digit annualized growth rate in expenses, which basically is a percent in the quarter, per quarter, right. So, about $1 million per quarter. And so that’s kind of the natural growth rate. I mean we hired seven new originators this time. Our staff was up 40; our balance sheet continues to grow. So, we’re always kind of layering in additional infrastructure to keep up with the balance sheet that we’re adding on. So, it’s going to grow naturally about $1 million per quarter. This quarter, I don’t expect that to shine through at all, because of the savings, we’re going to have on the FICA taxes that you mentioned. And perhaps we won’t get as much of -- I’m not exactly sure what the loan growth is going to be, but I don’t think it’s necessarily going to look for another $1 million of expenses there. So, it’s just the natural inherent increase in the expense side relative to the revenue line. We think we’re going to still see strong kind of positive operating leverage going. But that growth will be absorbed through the reductions that we’re going to see in the FICA in particular.

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

Nothing else to add. I appreciate you taking the time to listen to our first quarter update. And we’ll visit with you again in 90 days. Thanks.

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