As the invisible financial hand behind hundreds of loans, CoBiz Financial Inc. has helped airport businesses expand, furniture companies merge and contracting firms plug potholes.
There have been flops, too — commercial real estate deals, for example, that left land tracts ghostly bare in northern Boulder County.
To the federal government, the Denver bank’s record of success makes it a worthwhile wager to add oomph to the Colorado economy. Or at least help stabilize it.
CoBiz won a $64.5 million infusion of U.S. Treasury bailout funds, the largest share given to any state financial institution to date. Nationally, its share ranks in the top 25 percent of 441 institutions snagging Toxic Asset Relief Program funds.
The potential impact is big: The $64.5 million could be leveraged conservatively to make $645 million in loans to Colorado businesses and, theoretically, up to $1 billion, analysts say. That could translate into business startups, expansions or other job-generating investments.
Just how long it will take to put that money into circulation through loans and just what other investments could be made with the money is still not entirely clear to CoBiz executives, they say. Plus, Treasury officials are still crafting guidelines for a TARP program left virtually open-ended by the Bush administration. Few conditions apply to the money, and that has generated intense debates nationally about how banks should handle the money.
Members of Congress have appealed to banks to quickly inject the money into the economy through lending. But CoBiz executives say the flow could instead resemble a slow-dripping syringe.
“Realistically, it could take us 24 to 30 months” to move the money into the economy, said CoBiz chairman Steve Bangert. “We’re not going to take on undue risk.”
CoBiz, like other banks, is tightening underwriting standards to keep risky bets at bay. But demand for loans also isn’t high at the moment, he said.
The bank also is considering using perhaps half its allocation to acquire another bank, though it won’t discuss details of those plans.
The appetite for bank takeovers frustrates some economic analysts who believe the banks have too much leeway and that Treasury should have restricted the money to giving out loans.
Dean Canova, an international monetary expert at Chapman University School of Law, said the best way to maximize the funding is through loans, not an acquisition that doesn’t provide direct boosts to the economy and reduces choices for consumers.
“There’s no reason to believe any of this money will be lent,” said Canova, referring to TARP banks in general.
Banking analyst Ben Crabtree of Stifel, Nicolaus & Co. predicts CoBiz will put the money to valid uses such as lending. He also agrees it will take time.
“Getting this money into the economy won’t be easy to accomplish over a short term without being foolish,” Crabtree said. “These guys are not foolish.”
CoBiz, a $2.7 billion company founded in 1980, is no Goldman Sachs or Citi Group. Its main focus is business lending. It hasn’t shelled out tens of millions in bonuses to executives or splurged on jet renovations.
Bangert pulled in more than $1 million in salary and benefits in 2007, regulatory filings show. His bonuses periodically hover around $50,000 or lower annually. Under new executive compensation rules, he will have to forgo his bonuses until the money is paid back, unless it comes through restricted stock.
The vast majority of CoBiz’s clients are “heartland businesses,” as Bangert describes them, small businesses with annual sales between $5 million and $75 million.
As an example of how CoBiz’s TARP money, though a small amount, already has been used to lend, Bangert points to three loans or refinancings — valued at more than $4 million altogether — made in late 2008, around the time the government allocation was made. The government grants gave the bank confidence to make the loans, Bangert said, at a time of worsening uncertainty.
Among them was a $2 million line of credit to Boulder Airport-based Air Comm Corp., a manufacturer of air conditioners for turbine helicopters.
Owner Keith Steiner said the loan allowed him to remodel and build more space. And he’s going to be able to add more employees.
By several measures, CoBiz has performed well as a lender. Its Texas ratio — bad loans compared with its tangible equity — is among the lowest of the hundreds of TARP recipients. And its loan growth has been steady during the past five years, only dipping slightly last year.
The recession did hit CoBiz Financial hard in the fourth quarter. It lost $8.6 million and reported a $23 million provision for bad loans.
Currently, regulators are particularly sensitive about banks that have heavy concentrations of commercial real estate loans in their portfolios, and CoBiz has exceeded the 300 percent limit recommended by the FDIC since 2007, its executives acknowledge.
Overall, though, regulators are satisfied with CoBiz’s risk management controls, said Lyne Andrich, chief financial officer for CoBiz.
“We don’t have too much exposure in any one particular pocket,” she said. “We’ve got a well diversified portfolio.”
CoBiz has put new controls in place after some loans for real estate went bad. Those controls will help CoBiz make smart loans with TARP money, bank executives say.
Bangert agrees with analysts that the bank should be able to leverage much of its TARP money at least 10 times when it comes to lending.
“You balance the need to be prudent with the need to get the money out,” Bangert said. “We feel the pressure to get the money invested. We also think a 30-month time period is reasonable.”
Miles Moffeit: 303-954-1415 or mmoffeit@denverpost.com
Denver Post staff writer Aldo Svaldi and research librarian Barry Osborne contributed to this report.
