CoBiz Financial Inc. (COBZ)

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CoBiz Financial Inc. (COBZ)

Q1 2008 Earnings Call

April 25, 2008 11:00 am


Steven Bangert – Chairman of the Board and Chief Executive Officer

Jonathan Lorenz – Vice Chairman

Lyne Andrich – Executive Vice President and Chief Financial Officer


Ross Haberman – Haberman Funds

Ben Crabtree – Stifel Nicolaus & Company, Inc.

Jason Werner – Howe Barnes Hoefer & Arnett Inc.

Peyton Green – Ftn Midwest Securities Corp.

Bain Slack – Keefe, Bruyette & Woods



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 first quarter 2008 earnings conference call. (Operator Instructions). After the speakers’ remarks there will be a question and answer period. (Operator Instructions) It is now my pleasure to turn this over to your host Steven Bangert, Chairman and CEO. Sir, you may begin your conference.

Steven Bangert

Thank you, Melissa. Well welcome to our first quarter conference call. I want to let everybody know that in the room here I have John Lorenz, the Vice Chairman and CEO of the bank that will have some comments available. I also have Lyne Andrich, our CFO will be for any questions that we might have at the end also.

Last night you probably saw the release, earnings of 7 cents versus 24 cents a year ago. Included in that 7 cents our earnings this quarter was a $5 million provision we previously had announced in our April 14th release.

In addition to the much higher provision which you’ve typically seen our of CoBiz is it is also happened during the first quarter which historically has been a very difficult quarter for us because the seasonality and a number of our different segments. banking is historically down 2 to 3 cents over the fourth quarter of the previous year due to seasonality of their business.

That’s primarily because of slower loan growth in the first quarter and a lot of our customers also dividend money out to themselves from previous years’ earnings in January. So historically the bank does not do as well in the first quarter as it did in the previous fourth quarter and that’s no different this year.

In terms of investment banking, typically are slower in the first quarter also. We will get into that a little bit more because of all three segments so I think it’s as you see as the year progresses it should have quite a bit of momentum and their earnings.

The bank itself, loan growth was at 29 million for the quarter, much slower than usual, but that’s primarily because it’s seasonality. If you look at the previous two quarters we had very robust quarters as far as growth was concerned and so you saw a lot of emptying out of the pipeline. We spoke about that in previous phone calls.

I’m not sure that it necessarily means slow loan growth as you look beyond into the rest of the year. It’s probably too early to forecast the second quarter but we are over $40 million in loan growth in the first 20-some days of April and that. So we’ve already exceeded the quarter and we talked to the Colorado bankers, they’re still seeing an awful lot of activity.

We are seeing some activity down in the Arizona bank also, but any growth that we see down there as far as customers coming to the bank. Hopefully we kind of work through some of the issues we have in Colorado or Arizona. You’ll see some of that offset in the growth that we’re bringing on.

So I think the growth that you would anticipate out of Arizona for the remainder of the year will be muted by or hopefully we’re successful in working or moving our way out of some difficult relationships we have down in the Arizona market. And we’ll speak to those, those really haven’t changed. It’s essentially the same as what we’ve been talking about for the last 90 to 120 days and I’ll let John speak a little bit more about that.

The $5 million provision is primarily related to the economic slowdown in Arizona. What’s interesting to know though is the NPA growth that you saw during the quarter was primarily in Colorado and not Arizona, really free credits.

We believe there’s minimal loss exposure in all three of them. And we should be working our way through the system over the next couple of quarters. However, as that happens we do anticipate some Arizona properties we’ll replace them as we work our way through some of the more difficult projects down there. And I’ll let John kind of expand more upon that when I turn it over to John.

Deposit growth, 11% year-over-year. Not as much growth during the quarter again. But we also there in the quarter had been running off the broker deposits, and so that I think we at the end of the quarter run off around 46 million in broker deposits.

We started the year with around 148 million I believe around broker deposits, ran off around 46 million during the quarter but those are being replaced at much more attractive cost structures for us. Broker deposits is another way we use to fund ourselves over the last few years. Typically only 5 to about 7% of our funding comes from broker deposits.

What we’ve seen though is that the capital market that deteriorated over the last three to four months, that cost is an alternative borrowing source is quite a bit more expensive than other alternative borrowings and so I think you’ll continue to see us replace those deposits with other sources of borrowing such as federal home loan bank borrowings.

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