CoBiz Financial Inc. (COBZ)

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CoBiz Financial (COBZ)

Q4 2013 Earnings Call

January 24, 2014 11:00 am ET


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 - Chairman of Colorado Business Bank and Chairman of Arizona Business Bank


Joe Morford - RBC Capital Markets, LLC, Research Division

John Lawrence Rodis - FIG Partners, LLC, Research Division

Andrew Liesch - Sandler O'Neill + Partners, L.P., Research Division

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



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

I would now like to turn the call over to Ms. Lyne Andrich, Chief Financial Officer of CoBiz.

Lyne B. Andrich

All right. Thank you, and good morning, everyone. Before we commence with management comments today, I do need to remind everyone of 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 our actual results, performance or achievements to be materially different from future results, performance or 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 can be found on our fillings -- in our filings with the SEC, including forms 10-K, 10-Q and other reports and statements we have filed 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 certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of these non-GAAP numbers to GAAP results are included in our earnings release, which is also available on the Investor Relations page of our website.

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

Steven Bangert

Thanks, Lyne. Well, If you saw the earnings live tonight, we reported $0.18 earnings per share for the fourth quarter of 2013 versus $0.17 same quarter a year ago.

For the year, earnings were up almost 23%, so we reported earnings of $0.66 versus $0.55 in 2012. 2013 was really an important year for CoBiz as I think, we took advantage of the opportunities to invest back into our future. Before I talk about some of those opportunities, I thought maybe I'd spend a couple of minutes on the fourth quarter. Both Jon and Lyne will give you a deeper dive into the fourth quarter results. But I thought, the highlight of the quarter was the continued benefit we received from the improving credit quality. And we finished the quarter of nonperformers at 68 basis points, which -- so we're back to levels that we experienced prior to the recession. That allows us to book a negative provisions expense of $4.6 million, and that was partially offset by an OREO write-down of $2.1 million. This was primarily a property up in Vail Valley. We've talked about that one before. Jon will comment on this, but I believe the write-down really gives us maximum flexibility to deal with this property in the future. And I don't expect future losses out of this property. And as you probably notice, our OREO portfolio was down to $5 million. So there's not much left in that portfolio.

2013 was really an important year for us. It could stabilize our net interest margin. I think, we've seen that now for 5 quarters. We've stabilized our net interest margin. That really gave me the confidence to really start investing back into some growth initiatives, and those investments will be pretty important to us as we head into 2014 and really into 2015. And with the stable margin, we were finally able to start growing our net interest income as our loan growth continue to feed it.

You'll probably notice that our loan growth was 8.2%. For the year, when you measured over period ending balances. But I think that slightly understates the actual growth because the fourth quarter 2012 was really a record quarter for us, as we grew the loan portfolio by $115 million with the majority of that, the overwhelming majority of that closing in the last 2 weeks of December.

If you compare the averages of the 2 fourth quarters, you'll see that loans -- the loan averages were up almost 12%, fourth quarter over fourth quarter. And if you go back to any of the prior quarter comparisons, for example, and I think, third quarter over third quarter was 13%. So I think, you should still anticipate that we were a double-digit loan growth company. We certainly anticipate that and project it on a going-forward basis.

Fee income was unusually low for the fourth quarter as investment banking did not have the usual strong fourth quarter that they typically have. The other few businesses performed well and continued to show momentum. The wealth management segment, in particular, had a good year. They finished, the fourth quarter with operating margins that are now starting to approach 25%, after finishing with negative margins in 2012. So they really have turned that around. We've made some cuts in that area, but they've also had a great year as far as bringing in new business and obviously, the market has helped them out a little bit also.

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