COBZ

CoBiz Financial Inc. (COBZ)

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CoBiz Financial (COBZ)

Q3 2013 Earnings Call

October 18, 2013 11:00 am ET

Executives

Lyne B. Andrich - Chief Financial Officer, Executive Vice President and Director of Cobiz Insurance Inc

Steven Bangert - Chairman, Chief Executive Officer, Chairman of Executive Committee, Chairman of Cobiz Bank NA, Director of Cobiz Gmb Inc, Director of Financial Designs Ltd, Director of Colorado Business Leasing Inc, Director of Cobiz Insurance Inc and Director of Alexander Capital Management Group LLC

Jonathan C. Lorenz - Chief Executive Officer of Colorado Business Bank and Chief Executive Officer of Arizona Business Bank

Analysts

Joe Morford - RBC Capital Markets, LLC, Research Division

Brian James Zabora - Keefe, Bruyette, & Woods, Inc., Research Division

Timothy O'Brien - Sandler O'Neill + Partners, L.P., Research Division

Gary P. Tenner - D.A. Davidson & Co., Research Division

Presentation

Operator

Good morning. My name is Dawn, and I will be your conference operator today. At this time, I would like to welcome everyone to the CoBiz Financial Third Quarter 2013 Earnings Conference Call. [Operator Instructions] Thank you.

Ms. Lyne Andrich, Chief Financial Officer, you may begin your conference, ma'am.

Lyne B. Andrich

All right. Thank you, Dawn. And good morning, everyone.

Before we commence with management comments, I need to make certain Safe Harbor disclosures. Certain of the matters discussed in this presentation may constitute forward-looking statements for the purposes of the federal securities laws and, as such, may involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of CoBiz to be materially different from future results, performance and achievements expressed or implied by such forward-looking statements. Additional information concerning factors that could cause our actual results to be materially different than those in the forward-looking statements may be found on the company's filings with the Securities and Exchange Commission, including our forms 10-Q, 10-K and other reports and statements we file with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

Also on today's call, our speakers may reference to certain non-GAAP financial measures, which we believe provide useful information for our investors. Reconciliation of these non-GAAP numbers to GAAP results are included in our earnings release, which is available on the Investor Relations page of our website.

I would now like to introduce Steve Bangert, Chairman and CEO of CoBiz Financial.

Steven Bangert

Thanks, Lyne. Well, thank you, everybody, for participating in our third quarter conference call.

I'll try to be brief and then give both Lyne and Jon Lorenz some time to give you some more clarity on what's happened during the quarter. As you saw last night, we reported earnings of $0.17 per diluted common share versus $0.14 same quarter last year. So year-to-date now, we're at $0.49 versus $0.38 for the first 9 months of the year. I'm feeling pretty good about the success that we've had, primarily with the fight in our -- or the margin compression. It -- I would not have been surprised this quarter to see some further compression when you look at the outsized loan payoffs that we experienced, even though we did have some positive impact from the retirements that [indiscernible] some debt during the quarter. And I'm sure Lyne's going to talk about that.

But as for me, what that indicates is that we're now starting to essentially put loans on at the same pace or same yield as loans that are paying off, and that Jon and I have spent a little bit of time looking at some of the payoffs. And we did have a couple of loans with pretty high payoff rates on that have paid off, but we also had some fairly large loans that had below-market -- below-portfolio yields on them that paid off. And so I'm pretty optimistic that the margin compression, certainly the pace of margin compression, has slowed down dramatically. From my view, that is, from June of 2011 -- 2012 to June of 2013, we lost 34 basis points out of our margins. But during -- as I look at the last 4 quarters, the margins really kind of hung in there. It has been, starting with the fourth quarter 2012, 3.89%; and then it was 3.94%; 3.85%; and then finally, 3.87% this last quarter. So it seems to have stabilized there.

And really, our primary focus as we head into 2014 now is going to be growing our net interest income while growing our loans and paying close attention to the composition of our earning assets. The last couple of years, we really have addled that as the margin has come in. Even though we've shown good loan growth, the loan growth has really just been offset by the margin compression. And our net interest income, consequently, has been kind of stuck around $95 million, $96 million for 3 to 4 years now in that. But as I look at this last quarter, we're up $1 million over the previous quarter in that, and our net interest income is -- was up over $25 million for the quarter when you adjust it for the impact of our tax exempt portfolio. So I'm feeling pretty good about that. Historically, when you've looked at CoBiz, our net interest income has -- prior to the recession, used to grow at double-digit rates every year. That was a big focus for us. Since the recession, we actually saw a decline during the recession. And then as I said, during the last 3 years, it's kind of been stuck around the $95 million to $97 million number. But I'm optimistic now that, as we head into 2014, you're going to start to see some growth in that. But we're -- we still recognize the challenges in a very, very competitive market, and I'm sure Jon is going to talk about that.

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