Encouraged by the success of its expansion into Phoenix, CoBiz Inc. of Denver aims to nearly double its assets, to $3 billion, by 2007 - with $1 billion in Arizona alone.
After that, it plans on scouting new markets in Las Vegas, Portland, Ore., and southern California.
"We may bring in a group of bankers and open a de novo branch in any one of these markets, or we may enter a market by buying a bank," said Steven Bangert, CoBiz's chairman and chief executive.
CoBiz first ventured beyond its home state three years ago when the Colorado economy started to slow. In March 2001, CoBiz acquired the $123 million-asset First Capital Bank in Phoenix and merged it into its bank, but under a separate name, Arizona Business Bank, that has assets of $360 million. That brand started with two branches, has four now, and will add three new ones by January.
Thanks to the Phoenix area's booming economy, the Arizona bank is fueling much of the company's growth. CoBiz Bank plans to add about a half-dozen more branches there by 2007 and expects the Arizona operation to account for roughly a third of its assets by then.
"We're very excited about the Phoenix area, not just in terms of its own growth potential, but also because of the layout of the competition," Mr. Bangert said. "Ninety percent of the deposits are held by large, out-of-state banks, which creates an opportunity for banks like us."
Though CoBiz has less than 1% deposit market share in the area, "We feel like we can steal market share from the bigger banks by offering their products, but with a more hands-on, responsive approach than they can do," Mr. Bangert said.
Founded in 1994, CoBiz Bank (operating first as Women's Business Bank and then as Colorado Business Bank) grew from $123 million of assets in 1994 to $633 million at the end of 2000. But it focused on companies with revenue of $1 million to $10 million, so its executives knew CoBiz could only grow so much in a mostly rural state.
The Phoenix area is one of the fastest-growing regions of the country. People and businesses continue to move there not only from colder climates, but also from the more expensive coastal cities in California.
As a banking market, it is dominated by large companies. J.P. Morgan Chase & Co., Bank of America Corp., and Wells Fargo & Co. control 70% of its deposits, according to the Federal Deposit Insurance Corp.
But Phoenix has also become a start-up hotbed; at least seven state-chartered banks have opened there since the beginning of 2003, according to Bruce Tunell, Arizona's deputy superintendent of banks.
Targeting primarily middle-market borrowers, CoBiz's Arizona bank reported a 46% increase in loans in the third quarter, to $272 million, and a 20% increase in deposits, to $221 million. As a result, CoBiz's net income rose 45.6%, to $4.8 million.
Much of CoBiz's growth has come from Arizona over the past several years, but loan and deposit growth from its Colorado operations is "nothing to sneeze at," Mr. Bangert said. Though the Colorado economy has been sputtering, loans grew 17% and deposits 15% under the Colorado Business Bank brand in the third quarter. (It has 11 branches in Colorado.)
Denver - which has attracted a number of telecommunication and high-technology companies during the 1990s - was hit hard during the last downturn, logging nearly three years of negative job growth through March. This year job growth, though meager, has been positive, which indicates the local economy is finally turning around, Mr. Bangert said.
Joseph K. Morford, an analyst with Royal Bank of Canada's RBC Capital Markets in San Francisco, said CoBiz's practice of snaring its competitors' best bankers has proven effective. Whenever it hires a banker, it opens a new branch and names the banker its president.
"CoBiz lets these bankers build their own business plan and set up their offices" in a way that "suits them best," Mr. Morford said. "Some of them are more focused on deposits, some are more focused on loans, and some of more focused on private banking. All of these bankers are coming in and transferring over their existing relationships, and that's been a big driver behind the growth."
Peyton Green, an analyst at First Horizon's FTN Midwest Research in Nashville, said CoBiz's earnings are also benefiting from higher revenues at all of its nonbank subsidiaries, particularly a 2001 acquisition, Green Manning & Bunch, an investment banking firm for middle-market companies. Green Manning posted a second-quarter profit after losing money for several years.
"CoBiz is starting to fire on all eight cylinders now," Mr. Green said.
He said that CoBiz's net interest margin should get better as short-term interest rates rise, because the bank is very asset-sensitive - 33% of its deposits are core deposits.
