CoBiz Financial Inc. (COBZ)

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CoBiz Inc. (COBZ)

Q4 2008 Earnings Call

February 13, 2009; 11:00 am ET


Steve Bangert - Chairman & Chief Executive Officer

Jon Lorenz - Vice Chairman

Lyne Andrich - Chief Financial Officer


Joe Morford - RBS Capital Market

Ben Crabtree - Stifel Nicolaus

Steve Scinicariello- BlackRock



Good morning. My name is Brandy and I will be your conference operator today. At this time I would like to welcome everyone to the CoBiz financial fourth quarter conference call. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

I would now like to turn the conference over to Mr. Bangert . Please go ahead sir.

Steve Bangert

Thanks Brandy. First of all I’d like to make sure everybody’s aware that I do have Jon Lorenz, the CEO of the Bank, as well as Lyne Andrich, CFO of the holding company in the room, that are both prepared to answer any questions you have. I know Jon has a few things that he’d like to say towards the end here.

I’d like to thank all of you for participating in the conference call. To start off by saying I apologize for the delay. Since we went public in ’98, we have always reported on time and take pride in doing so, but unfortunately the delay as we mentioned in the press release was really we were in the process of completing our third party bank review.

The review was really triggered by a major initiative that we discussed in our annual October strategic client session with our board and in that session we had identified ’09 and 2010 as being important years for us.

I really believe that there’ll be some opportunities out there as consolidations start to take place. I think we are very, very early on in that process, but anyway we decided that at that point in time, we had some preliminary discussions with some potential capital partners and we’ve been doing that and also recently started to explore potential merger candidates, but we’re very early in the process, so I don’t really want to imply that there’s some active discussions going on today.

We have finally taken our time; we believe that patience will pay off. What this does not mean is that we’re opposed to announcing any new capital transaction today. Reference would be the risk transaction and the transactions on hand or at least we’re relatively certain that one or two transactions will happen in a relatively short period of time.

I also don’t want to imply that our fourth quarter position was anyway influenced by the third part review, really as a function of up-going through our normal process here at CoBiz and we were reacting to what we saw as a recent slow down in the Colorado market, that we really haven’t seen up until the fourth quarter of ’08 and I don’t want to overreact to that, because Colorado probably still will be one of the better performing states in the country, but we’re not going to go to the economic slowdown on scales anyway.

We actually had a little bit of job loss in November, prior to that we were still having positive job growth. I think for the year Colorado had a little over 1% job growth, but by November it had slipped to I think it was five-tenth of 1% negative growth and then December came in around 66 basis points of negative growth.

Still much better than what we have experienced in Arizona for the last couple of years, but nevertheless did we want to get out in front of it and I think Colorado will be one of the better performing states, but it is going to have some issues in that.

As we look at the fourth quarter, the loss $8.6 million or $0.38 was really triggered by a $23.5 million provision, an increase in our reserve from $112 million a year ago to $212 million at the end of this year. We really believe that the reserve is necessary.

Also, included in that fourth quarter, was a $2.2 million pre tax loss on valuation adjustments on our OREO portfolio and a $1.2 million impairment charge on a single trust preferred security that we own. For the year there was a small income, but it was very small, around $1.3 million.

On the bright side, I thought our pretax, pre-position number which is a number I continue to monitor very closely, because one of these days we will be coming out of this slowdown, was up around 10% overall. I think it was a little over $45 million, but we are pleased with that.

As we continue to grow our loan portfolio, we had about 10% loan growth for the year, a little under 6% for the quarter, but I do think that we are positioning ourselves very well. When the economic slowdown starts to reverse itself, I think we’ll be well positioned to take advantage of that.

The process continues to be a challenge for us. We’re now starting to see some of our customers pay down the lines of credit with us with their deposit, which really is kind of double whammy for us, that’s something that we experienced in other slowdowns and so I think that’s something that we anticipated.

During the year we did pay down broker deposits from about 8.5% of our overall funding, to 4.1% by the end of the year. On the capital side I think you’ll see that we did get our TARP money. We were the very first bank in Colorado to receive TARP money, even though we weren’t anywhere near to one of the first ones to apply for it; we got that relatively quick, bring our tangible capital ratios now up to 7.6%, risk based capital up to 14.5%, so both of those I think are in a pretty good position today.

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