Robert Sarver, Chairman and CEO, Western Alliance Bancorporation
Thanks Dale. So looking into 2015, I have been reading the number, the reports that have been coming out from banks, and a lot of the expectations are little muted and a lot number of the banks have some kind of tough quarters, we faced some of the same headwinds that many of the banks faced, which is primarily pressure on that interest margin, due to what looks to be a lower interest rate environment and a lower rate environment for longer that the most have expected. But, offsetting that, we got a couple of tailwinds behind us. One is our balance sheet momentum. We continue to have a 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, in our specialty groups that provided great levels of service to the customers so the customers keep coming.
So that is probably the biggest differentiator with our business model that the most of our peers is the organic growth. And that’s what allows us to earn through some of this interest rate pressures, and, along with our manageable expense base, given that we have 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 per each for 2015. Although the margin was centrally flat in the fourth quarter from the third, the lower rate environment and continued competitive pressure, as I mentioned, will likely crimp that 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 can 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 growth loan losses and a continued tailwind of recoveries in Nevada. We think those will continue in 2015, estimated in $2 million a quarter. And so at this time I would like to open it up for questions.
