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CoBiz Financial (NASDAQ:COBZ)

Q4 2013 Earnings Call

January 24, 2014 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 - Chairman of Colorado Business Bank and Chairman of Arizona Business Bank

Analysts

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

Operator

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.

But as I mentioned, investment banking revenues were not as high as we typically see in the fourth quarter. They do have a decent pipeline of activity. But as I mentioned in previous phone call, we've cut the cost structure to a break-even rate now, that's approximately $3.5 million a year, as we head into 2014. As I look out over the last 8 years, there's only been 2 years, one of them in 2009, when all of our companies underperformed. And then last year are the only 2 years that we've had, where our revenues have been less than $3.5 million. And I really don't think that the revenue potential of GMB has been harmed at all by any of the cuts that were made.

For CoBiz, overall, I believe that we're really well positioned now for a strong 2014 because, we entered the year with really a strong pipeline of activities in all of our businesses. Unlike 2013, when the bank emptied out its pipeline, and you may have remembered that phone call, we talked about it. We were ecstatic about the fourth quarter 2012, but we did say, we entered the 2013 with a pretty empty pipeline and flat -- in fact, I think, we were flat during the first quarter as far as loan growth is concerned.

But right now, the pipeline of activity is pretty well-balanced from really all of our different loan categories. The Arizona market appears to be gaining momentum, and they should be a significant part of our success in 2014. We made a number of investments in 2013, most of them were not planned, as we entered the year. But we announced 2 new banks, you remember one of them in Fort Collins and one in Colorado Springs. We opened up a private bank within the company. We've significantly expanded our SBA capabilities. We opened an international banking group that's kind of that's focusing primarily on foreign exchange transactions. We've even recently hired a real estate banker in the Arizona market now. So I know Jon will spend more time on that.

So as we head into 2014, I really would expect a quicker start than usual for CoBiz. Historically, we start the year slow, gain momentum as the year progresses, but because of the pipeline of activities, and I'm feeling pretty good about the first half of the year. And as we head into the second half of the year, these new initiatives should start to contribute in the second half of the year, and we really should make a significant difference in 2015. It's going to be important for us though it's to balance that growth. The expectations were some prudent expense controls. Our noninterest expense for the fourth quarter was up 1.8% over the previous fourth quarter, when you exclude any gains or losses from OREO or investment activities. And I anticipate that number will probably drift higher in 2014, as these new initiatives start to take hold. I'm going to ask Lyne to give you some more detail from our financial results, and I know, Jon is going to give you some more color from what we're seeing on both markets. So I'll turn it over to Lyne.

Lyne B. Andrich

All right. Thank you, Steve. Overall, though we're pleased with how we ended 2013. In our year results, maybe you saw, we've reported an increase in net income available to our common shareholders of 23% over 2012. That was EPS -- diluted EPS of $0.66 versus $0.55 for the prior year. And for the fourth quarter, Steve mentioned you, our net income was $7.1 million and 18% -- or $0.18 earnings per share. I think, as I look at it, the quarter was highlighted by the continued growth that we saw in our net interest income on a tax equivalent basis, the improved asset quality, and also steady credit generation is [ph] you measure it with credit commitments. Overall, for the quarter, we reported an ROA of 1.03% and a return on tangible common equity of 13%, which approximates our full year ROA of about 102 [ph] and 12.8%. If you look at our net interest income, it was a $98.5 million for the full year of 2013, but it ended, the year at a quarterly run rate at $25.5 million or just about $102 million annualized.

On a year-over-year perspective, you saw our NIM come in about 20 basis points, however, as Steve mentioned, we did see our net interest margin stabilized over the last several quarters and finally settling in at around 3.85%.

With that, we were able to see the continued loan generation, we do formally translate into top line revenue growth with our NII increasing each period during 2013, over the prior linked quarters.

Looking at the margin for the period, our yield on average earning assets came in at about 8 basis points, mainly due to lower loan yields, but that was offset by an increase in the yield on our investment book, which benefited from a slowdown in mortgage prepays. We were also successful in combating the compression, our average earning asset yields by reducing our cost of interest-bearing liabilities by 10 basis points.

So overall, our deposit yields dropped 4 basis points, particularly, you saw us manage down the cost of our money market product. So that brought our average cost of total deposits, if you include the level of DDA, we have to 19 basis points for the fourth quarter. We also had full quarter benefit in the fourth quarter from the $21 million call, we had of a 9% sub debt, you recall, we did that in August 2013, so we had a full quarter impact of that in the fourth quarter.

This will look at credit -- touch on that for a second. We did see a continued decline in problem loan levels. Classified loans particularly, declined 5% on a linked quarter, as well as 43% from a prior year-end. Because of that, that did drive our allowance methodology to calculate their provision reversal for the quarter of $4.6 million -- I mean, for the full year, we reversed about $8.8 million of provision for loan losses.

During the quarter, we had net charge-offs of about $165,000, which for the full year meant charge-offs came in about $1 million, about 5 basis points of our average loans. In addition to the improving problem loan levels that helped drive that reversal for provision, we also had recoveries at $3.6 million for 2013, which offset in gross charge-offs about $4.6 million. So at the end of the day, our allowance into the year at $37.1 million, which leaves us with a coverage of about 1.8% of total loans and a healthy coverage of over 260% of our nonperforming loans.

Just to touch on noninterest income for a moment. For the full year, we reported, noninterest income of $30.9 million versus $30.6 million in the prior year. Overall, we're generally pleased with the momentum, we saw in revenue growth from our recurring business lines, which is insurance and wealth, however, our investment banking unit did have a disappointing year.

Looking at the breaking out the various lines. Starting with insurance, we did see a modest amount of -- we do have a modest amount of seasonality in our insurance segment. So there was a small drop off in income from the fourth quarter versus the third quarter, however, if you measure fourth quarter over the prior year quarter, it was up 13%. And for the full year, their revenues increased 16% over 2012.

Looking at the Wealth segment, as Steve mentioned, they had a strong year and end of the year and a strong note as well, so they were up on a linked quarter basis, as well as their revenues for the full year increased nearly 20%.

On the other hand, our investment banking segment, which did have a better fourth quarter this year than the third quarter. Their revenues were significantly down from the prior year quarter, and for the full year, the revenues were $2.3 million versus $3.8 million in 2012. The other item, I might note that I think is noteworthy is, we did see a decline in 2013 from income realized from equity method investments, which for 2013 was about $900,000, which is down from $2.2 million in 2012, which was a historically high level for us in terms of income, we realized from these equity method investments, which effectively a limited partnerships interest we have in various mezz funds.

Looking at noninterest expenses. Just to look at that for the full year, we had $94.6 million or just $91.2 million that we reported in 2012. The increase is really primarily due to salary and benefit costs, that costs several line items including base salaries, restricted stock expense or stock option expense, our 401(k) expense, as well as higher medical claims.

If you look at headcount, the RPE [ph] the year, we increased FTEs like 10 during 2013, ending the year at about 513, primarily due to the 3 new initiative investment banking initiatives that Steve mentioned.

Occupancy expenses were up in the linked quarter, primarily due to an adjustment for some common area of management expenses that we saw in the fourth quarter, but we're actually down for the full year 2013 versus '12.

Other operating expense line, you may note that ticked up in the third -- from the third quarter, really due to some seasonal marketing expenses that we have and year-end expenses, as well as some professional service fees. But year-over-year, declined $1.2 million or 7% for the full year, basically due to its lower loan workout and OREO expenses. And lastly, I think, I'm looking at noninterest expenses. As Steve mentioned, we did see a $2.1 million loss on OREO during the fourth quarter. On the loss was attributed to our single-largest OREO property that was scheduled to be reappraised in the fourth quarter. The carrying value was written down to $5.4 million to $3.3 million. It was frustrating to see where the appraisal came in at, but I wasn't -- I think, it's too conservative or I believe that, that markets reflective of a trend in our general real estate value. I think, it's just attributed to just that unique positioning of that one property because if you exclude that property, we recognized net gains of about $1.4 million on the remainder of our OREO properties or portfolio within calendar year 2013.

So at the end of the day, as Steve mentioned, we only have about $5 million left in total OREO on our books as of the end of 2013. So that's the comments I have, I think at this point, I'll turn it over to Jon and allow him to comment.

Jonathan C. Lorenz

Thanks, Lyne. I got it maybe just to touch initially on Lyne's comments on the OREO write-down. I do think that was really an anomaly in terms of the nature of this property. Some of you may recall, it's a affordable development project in Eagle County, where Vail is located, and while the Vail probably in market -- residential market has and is improving pretty rapidly. This project is down Valley in an area that hasn't started recovery actually, primarily is comprised of lower end properties. So I think, we've got a couple of factors that led to the write-down. One is that appraisals always tend to like the market, and I think that is the case here. We're actually seeing improvements in the housing market in that market, but not yet reflected in appraised values, so that certainly was a factor. And then I think, just the nature of this property, there is a developer engaged in the property. We are selling homes in the property, but our absorption in 2013 wasn't as high as the -- as a previous appraisal, so that also was a factor in reducing the value. But there is activity going on. I think that Steve and Lyne said, we think with our mark, we have on the property, we have got a number of different options to pursue and at this point, it certainly wouldn't expect any further write-downs as our expectation is that market is going to continue to improve. And apart from that property, we have very little less as Lyne mentioned in the portfolio. I think, our largest -- or our total OREO in Colorado now is $400,000.

So -- and again, I would do that as an anomaly not any indication of any other factors. Looking at the loan portfolio and our loan growth for the quarter. Our growth for the quarter was 7% above third quarter, but the activity level that we saw in the portfolio was really significantly higher. We experienced a lot of loan activity in the fourth quarter, but much of it didn't show up in our footings, primarily due to elevated levels of paydowns that continued into the fourth quarter. You may recall -- when we talk about third quarter our paydown level had increased or jumped from about $150 million up to a little over $190 million in the third quarter, which we viewed at that time as an anomaly, but paydowns did increase by about another $8 million from third quarter to the fourth quarter, so we're about $201 million in paydowns during the fourth quarter, which was much higher than what we had anticipated.

We reviewed, the transaction that seems to be coming from a lot of smaller paydowns within the portfolio. We're not seeing any unusual, we're not losing significant really any credit relationships, but the paydown level is elevated. So that's somewhat of a question mark for us going into the 2014, in terms of where paydowns will settle in as we move into this year. Our growth that we did have was spread between our commercial portfolio and our real estate portfolios. We experienced a very nice bump in our construction loan outstanding it's at about $21 million during the quarter. That was up over 30% from our outstandings at the end of Q3, and was really the first significant increase, we've had in that Construction portfolio since the recovery started. So we've talked about that we've been booking quite a few new construction commitments, and we really saw outstandings under those commitments beginning to take place in the fourth quarter of '13.

We also had, as mentioned in the press release, $82 million in new credit commitments approved during the quarter, that was almost 30% higher in terms of new credit commitments than what we recorded for the third quarter. So I feel very good, again, about the level of activity that we are seeing within the portfolio in terms of new credit commitment bookings and where we're seeing some of this activity translate to in terms of our commitment. And I think, there should be a good leading indicator for 2014 in loan growth and 2014, which is the level of activity and the level of new credit commitments that we're now seeing. The economies in both of our states continue to strengthen. All indications are that Colorado will be one of the strongest economies in the country this year. Our unemployment in Colorado has now dropped under 6%. Projections are for continued strong job growth in '14 in Colorado and we're also showing good job growth in Arizona. So I think, the economy is finally at a point that should be giving us a good lift as we move into '14 also.

Our pipeline, I would say are much stronger going into 2014. Our loan pipelines than what they were going in the '13. As Steve mentioned, the fourth quarter of '12 was a significant booking quarter for us. We kind of emptied out pipelines in that quarter and that was reflected in about a flat loan portfolio in the first quarter of '13. This year, we do have strong pipelines going into the year. I think, we're well-positioned with people in both markets and bankers to execute our growth strategies in both markets in '14. We added about 6 new bankers in Arizona last year. They're beginning to take hold and I think [ph] of them being productive contributors for us in '14. And I think importantly, one of the new bankers we just recently hired in Arizona is a seasoned real estate banker. He's an in-market banker, so we think, he can hit the ground running pretty quickly for us. So already looking at a couple of opportunities in Arizona, and I think, we see -- we'll see some good real estate lending opportunities in Arizona in 2014.

We've also got strong loan pipelines on our health care portfolio, which is -- has been a very consistent contributor for us. Public finance, we're seeing a lot of opportunities in that area also in any near-term opportunities for both of those areas. And really, just what we don't know is what our paydown levels will be as we go into '14. But I feel very confident, we're going to show good growth, reasonable growth in the first half for the year, and then as some of these new bankers continue to kick in with higher levels of productivity. Steve mentioned our new markets, I think, it will probably be second half for the year, that we're really start to see some contributions from our new Fort Collins market, Colorado Springs market, as well as our private banking group. We don't have locations open yet, neither at the new markets that expected early in second quarter of this year, and I think, it always helps, when you can say that you actually have an office in a big location and that should I think really help us in terms of starting to book business in the second half for the year in both of those markets. So again, what -- while I wouldn't classify our growth in the fourth quarter as sterling by any means, I really do see a lot of good activity taking place and I think that should lead to a growth -- a good growth year for us in '14, again, with some nice tailwinds from the economies in both states.

Steven Bangert

Okay. Thanks, Jon. We will just open up for questions now.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Joe Morford, RBC Capital Markets.

Joe Morford - RBC Capital Markets, LLC, Research Division

I guess, first was just maybe just following up a little bit more on the loan trends. If you could talk a little bit more about geographically between Arizona and Colorado. Any noticeable trends in terms of like pipeline bookings or maybe paydowns or stronger in one market than the other? Or just -- it sounds like, you're starting to build momentum in Arizona that we could possibly see here in the first half of the year? And I just wondered if there kind of more tangible signs of that? Behind the numbers?

Jonathan C. Lorenz

Yes, Joe. I think, so as to paydowns, Colorado had more paydowns in terms of the fourth quarters. So that's where the bulk of the paydowns came from, probably 2/3 of the paydowns, a little more than that, probably closer to 3 quarters were in Colorado. And I think that's just in part due to the Colorado is a more mature portfolio and we just have a lot more activity that tends to occur in the Colorado portfolio. But as to the outlook, I would say, first half of the year, I would expect, most of our growth to come from the Colorado market as we talked about before, the Colorado economy is still ahead of the Arizona economy in terms of recovery, particularly as your -- as we're getting into the some of the C&I base of companies, the service companies, manufacturing companies, technology companies. I think, there's just -- there's still a much better feel for Colorado and a lot of core businesses here in the state, increased bookings, backlog, expectations for revenue growth in 2014 from our operating business -- operating company customers. So I think, first half for the year, I'd expect, the growth to come predominantly in the Colorado market, and then as some of our new bankers in Arizona begin to pick up steam in the Arizona market continues to improve in '14. I think, second half for the year, hopefully, we'll see continued growth in Colorado and that supplemented by the growth in Arizona. And then again with our 2 new markets in Colorado that those markets will be contributors in the second half of the year also. We've gotten very good receptivity in both Fort Collins and Colorado Springs for the bank. I think, as I mentioned, I think, people would like to see that we really have the bank open up there before they start moving deposits and a lot of business to us, but I think, we think those markets are going to afford us with good opportunities. And Fort Collins, while the smaller market of the two, is really seeing a strong increase in economic activity and business activity in that market. And as to type, we haven't -- we continue to see pretty steady C&I, loan growth. It hasn't been huge, we obviously aren't getting usage under our lines yet, and while that dropped to 38%, again, as was mentioned in the press release that was really primarily due to the significant increase in credit commitments that we booked in the quarter. So at some point, we will start seeing increased line usage. I would guess that would come probably, primarily in the Colorado market, just given our larger base of business in Colorado. And then real estate, specifically, we haven't really done anything yet in Arizona to tap into that market as real estate improves down there. And I think, now we're going to put a lot of emphasis on opportunities down there. That now will be as -- and is essentially managed group in terms of our real estate lending for both states under Patty Gauge and that's going to be an area of emphasis for us for growth in 2014.

Joe Morford - RBC Capital Markets, LLC, Research Division

I guess, just following up on that, it was nice to see that you are start to get some outstandings in the construction portfolio. What are the types of projects that you're funding? I'd take it, that's probably mostly in Colorado as well. And then, just how do see the growth playing out over '14 and the Construction portfolio? So do you expect it to be pretty steady as well?

Jonathan C. Lorenz

Yes, I think it was a pretty good mix of residential construction and commercial construction. And I think it from an opportunity standpoint, I think, we see both activities increasing in both states. It really hasn't been any commercial construction taking place of any magnitude in Arizona, so I'd think earlier on activities would probably come from residential construction lending down there, which will values -- housing values are tempering in Arizona, I think that's good because they were escalating this. I'm sure, you've seen it at a very high rate 25%, 30% over the last year. So I think that would be good, but I think, we'll continue to see new construction activity in residential down there. And then probably later next year and into '15 is we're -- hopefully, we'll start to see some commercial construction activity. And in Colorado, it's pretty well-balanced between commercial -- some commercial office, industrial, as well as residential. And I think, residential opportunities should continue to grow for us in Colorado also.

Operator

Your nest question comes from the line of John Rodis, FIG Partners.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Just -- as it relates to the loan growth, I think, I know, the answer to this, but did you see any benefit from the new locations, the Colorado Springs and the Fort Collins at all this quarter?

Jonathan C. Lorenz

No, I don't -- I think, we've booked a couple of small deposit accounts and won one loan in Colorado Springs.

Steven Bangert

Yes, less than $2 million.

Jonathan C. Lorenz

So, yes, less than $2 million of new footings out of those markets. So all of that is really yet to come.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Okay. And then I guess maybe a question for you, Lyne, on the expense side, regarding those new locations. How much of the expenses, I guess, have -- were already in there in the fourth quarter? And then, I guess how much more is to come going into 2014?

Lyne B. Andrich

Right. So we did see most of the personnels on board by the end of the fourth quarter, but we don't obviously, as Jon mentioned, the facilities aren't opened yet. So we aren't seeing those full occupancy costs until next year. In 2013 for the full year, we had just about $900,000 of incremental expense because of the 3 new banking initiatives and that's due to specifically the 2 new markets, as well as, CoBiz private bank that doesn't include some of things that Steve mentioned, in terms of our investments in international product line or SBA offerings. So just the 3 new incremental locations. Most of that was back ended in the fourth quarter about $700,000. So that is going to ramp up a little bit over 2014, as the facilities start to open up, when we get the full salaries, expense burden of all this staff being full up, although, as I said most of those people were hired by the end of the fourth quarter.

Steven Bangert

And certainly, more of the expensive ones were on during the entire fourth quarter.

Lyne B. Andrich

Yes. So, when they fully report that burden, they'll probably be and this is again before, at some point they'll start generating on loans and deposits that will create some top line revenue, but fully burden their expense will be $1.5 million, $1,750,000 is an estimate for 2014.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Okay. And the vast majority of that, I assume, is in the salary line item? Is that correct?

Lyne B. Andrich

That's right. Because our model is to keep a pretty small branch footprint and lease out those facilities, so most of that expenses is in the salary and benefits.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Okay. And, Lyne, maybe just one other question for you. The other income line items sort of ticked up a little bit in the fourth quarter. Was that related to swaps? Or what was going on there?

Lyne B. Andrich

Yes, for the fourth quarter most of that was related to a little bit of swap income funds in the third quarter, as well as, we did see some other kind of miscellaneous noninterest income from treasury management fees and international fees kind of pop up.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Okay, super. And Steve, maybe just one other question for you. Your investment in the mezzanine funds, will that in any way be affected by the broker rule?

Steven Bangert

No, it won't have any impact on it.

Lyne B. Andrich

Those are all SBIC funds that are actually scoped out of focus [ph].

Operator

Your next question comes from the line of Tim O'Brien, Sandler O'Neill + Partners.

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

This is actually Andrew Liesch on for Tim. A couple of questions. First one setting around the paydowns that you've had. I am just curious as to what were they been on the couple of quarters as if you might see any larger paydowns that might be coming in the near future just from your look inside the portfolio?

Jonathan C. Lorenz

Yes. The only -- we'll have a large paydown on a problem loan asset, which is good in the first quarter. And by large, it will probably be in the $6 million range. But beyond that, we're not expecting any -- as we improve that portfolio quality, the level of paydowns coming from our problem assets as we resolve them that would come our problem asset is certainly decreasing and we don't expect a lot as we move into '14 in terms of paydowns from problem loans, as those return to more normalized levels of problems. And on paydowns within the existing portfolio, we're not seeing any large paydowns other than normal paydowns as some construction loans would move to a life insurance company for a permanent financing, but more -- again, more normal levels of activity. I would think, we'll come down some in paydown levels, as we move into '14 from where we were in the fourth quarter. But that said, fourth quarter was higher level of paydowns than what I would have expected, but nothing out of the ordinary, more just across-the-board activity that led to higher paydowns for the quarter.

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

Got you. And then -- just with the reserves, I mean, obviously, it's been bleeding lowers, I mean that's been supported by just improving credit quality and lower provisions anyway, but I mean, just curious, how we might want to think about that going forward as the reserve does bleed lower and credit improves? I mean, what's the likelihood for further negative provisions?

Lyne B. Andrich

I think as we look at it and as Jon just remarked on like a couple of expected problem resolutions, I think, it's likely, we'll continue to see negative provisioning for at least another quarter or 2. But then maybe by midyear, that might turn and we may be in a position, where we'll start providing for loan losses again.

Steven Bangert

It's primarily or hopefully because of loan growth in the portfolio.

Jonathan C. Lorenz

Yes, yes, exactly.

Operator

[Operator Instructions] The next question comes from the line of Brian Zabora, KBW.

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

Just a question on loan yields. They were down a bit more in the quarter than last quarter, could you just discuss competition, and if you continue to see some pressure going forward?

Jonathan C. Lorenz

Yes, I guess I'd say, Brian, it's not easy enough if any. I don't think, we're seeing more competition or more price competition than what we have from the larger banks, from Wells, Chase and U.S. Bank. We are seeing more competition from a couple of the regional banks and in getting fairly aggressive on pricing. So my read is that the banks are still really struggling for loan growth and getting very competitive to book loans and in some cases, at very unrealistic yields. So we have walked away from a couple of deals, which we could have had, if we were willing to match pricing and just decided that it was too low. So I think yields. -- in the yields, we all have continued pressure on loan yields. I think, we'll have some offset from our -- the public finance -- financing that we're doing tends to be higher yields credit than this I think that will help our on a tax equivalent basis will be a positive to our yields, if we see some structured finance activity in 2014, those tend to be higher yield credits. I think, the core C&I and real estate I think, we'll see some pressure on, but pressure within the C&I portfolio on yields. I don't see it significantly worse, but I certainly don't see it getting any better.

Steven Bangert

Yes, I was hoping, Brian, that we're able to see more deals this year, it certainly seems like, we're seeing more deals and that allowed us to be a little bit more selective in that. As Jon said, we passed on a couple of deals that were ours if we chose to match the competition. We have to pass on a big deal last week that we didn't have to match. If we got with the 25 basis points it was our deal.

Jonathan C. Lorenz

And we couldn't even get to 25 basis points.

Steven Bangert

We couldn't get within 25 basis points. And it was a big deal, it's a quality deal. But they priced it as investment-quality type pricing within it, it certainly didn't deserve anything near that.

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

And just lastly, sorry if I missed this, SBA originations, how much did you do in the quarter? Are you still portfolio-ing at this point?

Jonathan C. Lorenz

We are still portfolio-ing. It's was a fairly minimal amount. I don't have a specific number for you, Brian. I would guess under $5 million for the quarter.

Steven Bangert

Yes, I think, probably under $5 million. I think, you'll probably see that pick up in 2014. We're anticipating that. But, Brian, I think, our goal right now is to continue to portfolio through 2014. And then we'll take a look it at the end of '14.

Jonathan C. Lorenz

And again, Brian, that growth, as I mentioned was public finance and structured finance. The SBA are higher yielding assets for us too. So any growth that we do achieve in the SBA portfolio will help us on the yield side.

Operator

Your next question comes from the line of John Rodis, FIG Partners.

John Lawrence Rodis - FIG Partners, LLC, Research Division

Steve, just to follow-up on investment banking. You've talked about rightsizing the operation, so to speak. As we try to model going forward the revenues, if we look at 2013 and 2012, the revenues were between $2 million and $4 million for the full year. Is that sort of a new level, we're working with going forward? Or do we look back to 2011, 2010, when the revenues were a lot stronger?

Steven Bangert

Yes, I think you can -- $2 million is just not acceptable on a go-forward basis, John. And I really think that -- and that 2 -- whatever our numbers were in 2013. That's not a bit acceptable on a go forward basis. And I don't anticipate that. I really don't. I mean, there's just -- there's a couple of stories to a couple of deals that surprises me that those deals didn't close. One of them is still ours, but didn't closed -- probably in '14. So it's hard for me to give you a number in that but I'd be disappointed -- I probably wouldn't -- John, model $4 million to $5 million a year and -- as a conservative number?

Operator

And there's no further audio questions at this time. Do you have any closing remarks?

Steven Bangert

That's the end of the questions, I want to thank everybody for participating in the conference call. We appreciate your continued interest in CoBiz. And I've always said in the past, please feel free to give Jon, Lyne or myself a phone call, and we'll be happy to talk to you, if there's any other questions that you have. I think, you see that we're pretty optimistic about 2014. We feel good about the markets that we're in and we're looking forward to future conference calls. Thank you.

Operator

Thank you for joining today's conference call. You may now disconnect your lines.

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