SVB Financial Group (SIVB) 2003 Q1 法說會逐字稿

Good afternoon. Well to the Silicon Valley Banc first quarter financial results conference call. All participants will be able to listen-only until the question and answer session. This conference is being recorded. If anyone has any objection, you may disconnect at this time. I would like to introduce your host for today's call, Miss Lisa Bertolet.

Thank you. For joining us. Ken Wilcox our President and CEO and Lauren Friedman, our CFO will discuss the company's first quart financial highline lights. Following their presentations along with the strategy officer and credit officer will be available to answer the questions. I'd like to start the meeting by reading the safe harbor disclosure. The presentation may contain projections or other forward looking statements regarding future events or financial performance of the company. We wish to caution you that such statements are just predictions and actual events may differ materially. We may refer you to documents that the company filed from time to time with the Securities and Exchange Commission with the form 10K, filed March 5, 2003. These documents identify important risk factors that could cause the company's actual results to differ materially from those contained in the projections or other forward-look being statements. Now I'll turn the call over to Ken.

Hello. And welcome. This is Ken Wilcox, C.E.O. of Silicon Valley Bancshares. I'm encouraged by Silicon Valley Bancshares' continued steady performance during these most unsteady of times. Silicon Valley Bancshares employees r working harder and more effectively than ever to win and keep clients. They (ph) offer innovative new approaches to solving client business problems and control costs. The impact of their efforts is apparent in our results today. Silicon Valley Bancshares is enjoying growth in key areas such as loans and fee-based services. And holding steady in client count, deposit levels and net interest income. We continue to deliver strong credit quality, and have been able to lower our allowance for loan losses this quarter while many financial institutions are struggling to cover theirs. Of course, we face challenges. Current economic conditions have hampered our progress, and limited our opportunities for growth. The economy is still struggling. Interest rates may continue to fall. Venture capitalists continue to cut back on funds and funding. IPO's have yet to show signs of a comeback. If you're in financial services or technology, business is tough. To put it mildly. Nonetheless, Silicon Valley Bancshares continues to grow modestly and to do well.

One key to our continued consistent performance is our ongoing investment in new products and services. Silicon Valley Bancshares' strategy is to provide a complete range of financial services for companies from startup stage throughout corporate maturity. To include even the very few large technology companies in the market today. Our strategy and synergistic diversification continues to drive good results for the company. As we reported last quarter, growth in our corporate technology business, for later stage and public companies, is going according to plan. And we are focusing on further building out our already thriving life sentences business especially on the west coast. We have been successful in generating new fee-based services income for additional business for our broker dealer subsidiary, SVB Securities. Clients are also responding favorably to our efforts to meet their global treasury needs, most recently through Silicon Valley's membership in I-boss, the leading international alliance for corporate cash management. In other areas of the business, revenues from our M & A subsidiary, Alliant partners are up for the second quarter running. And an encouraging sign, especially in this volatile market.

Under new leadership, which we announced last quarter, our private bank has flushed out its product set, almost to completion. And they will continue to focus on providing state of the art credit, investment and financial planning services for its clientele. Our merchant bank continues to enjoy success, adding new venture capital clients and offering new opportunities on the investment side. A second key to our progress is our Silicon Valley Bancshares employees. Who consistently give their very best to insure the success of our clients and our company. Their unflagging efforts have been critical to our success in good times and bad, and for this I thank them. The final key to our ability to prosper during these challenging times is our unique profile as a financial institution. At Silicon Valley Bancshares, we are -- we see ourselves as business people rather than bankers. The difference being that bankers strive to eliminate risk while businesspeople strive to manage risk for financial gain.

That difference has never been more critical to us, and to our clients, than it is today. When support for any business, any new venture and any bold idea is fraught with risk. For many financial institutions, eliminating risks means necessarily eliminating business opportunities. At Silicon Valley Bancshares, we have been able to leverage our considerable network in our two decade legacy of partnership with the venture capital community to make the right decisions for success. Our ability to differentiate between real and perceived risk allows us to navigate these treacherous economic waters safely and effectively. It also allows our clients to get the financial support they need at a time when many banks are making it more difficult for companies to grow. Like every other business, we hope for an eventual economic upturn. But as we have consistently demonstrated since the downturn began, we are now counting on that to insure our future success. We have always focused on fundamentals, and the challenging economy has made that focus even more critical. As a result, Silicon Valley Bancshares is a better, more effective company today than ever before. Our ability to maintain modest growth, stable client and deposit levels, and superior credit quality in this market bodes well for our prospects. Once charge rates, venture capital investment and the IPO market become more favorable for us. In the meantime, we will continue to focus on producing steady, reliable, modest returns controlling expenses, and anticipating and meeting our clients' needs, and being their partners in managing the risk of building successful businesses. Thank you. Now I'd like to introduce our CFO, Lauren Friedman.

Thank you, Ken. Good afternoon. First quarter results exceeded our guidance, as credit quality remained outstanding. Loan and deposit volumes remained strong. And warrant income exceeded net equity investment write-downs as we announced in our press release, first quarter net income was 26 cents per share, two cents above the top of the guidance range and down two cents per share from the previous quarter. Our performance, especially the fundamentals is strong, and we are continuing to improve our financial strength to allow us to take advantage of both existing and future economic opportunities. We have now had record high average loan balances for the last four quarters. Our credit quality remains excellent as reflected by another reduction in allowance for loan losses, net interest margin held study due to the collection on loans that had been non-accrual, the addition of interest rate floors to loan agreements, the extension of investment portfolio duration and management of funding costs. Average deposits are at the top end of the $2.9 million to $3.2 million range that we have experienced since the fourth quarter of 2001. With our continuing strong credit quality, we were able to reduce the level of the allowance for loan losses by half a million dollars from year end. This resulted in a provision expense that was higher than the fourth quarter, because that quarter's amount was unusually low, reflecting ongoing improvement in credit quality. In the long run, the provision must equal the level of net charge offs. This quarter's provision of $3.4 million is more representative than the last quarter amount of the long term run rate for provision expense.

The difference in the provision reduced earnings per share by about three-and-a-half cents compared to the fourth quarter. Thus if you put the quarters on equal footing by adjusting for the difference in provision, we in increased earnings by a penny and a-and-a-half. Fourth quarter to first quarter, averaged from 17 million to $1.9 million. This continues the trends to increasing loans in four successive quarters and reflects the lending effort. We expect this trend to continue throughout 2003 but at a slower pace than in 2002. First quarter net interest margin watt 5.7%, unchanged from the fourth quarter. Margin was negatively impacted by the November Federal Reserve interest rate cut, but the effect was offset 16 basis points by corrections in flow on loans that had been on non-accrual. Further mitigating the impact of the rate cut were interest rate floors imbedded in loan contract longer investment portfolio duration and management of funding costs. The decline in overall investment portfolio yield was 11 basis points.

Going forward, we expect the margin in the second quarter to be slightly lower than it was in the first quarter because of the expected absence of as large an amount of collections on non-accrual loans. Average deposits increased modestly by about $74 million. To $3.2 billion. Deposits remained in the $2.9 to $3.2 billion range. However, deposits were down slightly quarter over quarter. This is due to the seasonal year end balance increases that aid the fourth quarter. We are expecting average deposits to be slightly lower in the second quarter, but remain in the range of the last several quarters. Private equity securities investment write-downs in the first quarter had the worst showing since 2001, with $4.7 million gross, and $1.7 million net. The large write-down primarily resulted from the company's share of losses recorded by venture capital funds, in which we invested either directly or through the funds. Venture capital funds took writedowns from connection with year-end audits and we recorded our share of writedowns. We expected the writedowns that the bulk of the investment equity writedowns is behind us. We incurred $3.2 million in writedowns in the fourth quarter. Net of minority interest and the impact on the company was $1.4 million in the quarter.

On a positive note, 88 new warrant contracts were collected in the first quarter. Revenues of Alliant partner, our investment banking subsidiary were $4.1 million, up $600,000 from last quarter. Alliant's pipeline continues to grow, and we expect the revenues to grow throughout the year while remaining volatile. Non-interest expenses were $2.2 million quarter over quarter. The primary reason for the increase was a rise in compensation costs. Compensation costs increased for three reasons. First, incentive compensation accruals resumed and the fourth quarter, no incentive compensation was accrued. Second, we incurred $1.2 million in severance costs related to our ongoing efforts to insure that the staffing is in line with the company's strategic plan. Finally, there is a seasonal effect from the fourth quarter to the first related to payroll taxes and benefits. Period end private label client investments were approximately $8.1 billion, compared to $8.5 billion in the fourth quarter. This decrease in period imbalance was expected as the seasonal effect of year-end balance increases dissipated. However, average balances increased from $8.2 to $8.5. Nevertheless, income fee income decreased a half million dollars due to a shift by clients to more profitable products to less profitable ones. Our effort to increase private label client investment balances by generating businesses for the newly created broker dealer is still in its infancy.

The average fee earned per dollar manage managed is moving down, we expect that broker dealer services will attract larger balances that will offset the lower fees through greater volume. We expect average balances in the second quarter to be slightly below those of the first quarter, as we continue to realign our sales efforts. But we expect balances to increase overall this year. On the credit front, our credit quality remains strong. Non-performing loans dropped 6% or $1 million to $19 million. Non-performing loans now represent only 92 basis points when compared with gross loans. The average non-performing loan is $1.3 million in size, and there is no concentration within any one segment of our target market. Net chargeoffs decreased from $4.3 million in the December quarter, $3.9 million in the March quarter. Those charge offs were $8.7 million. Continuing our bias to identify problem loans quickly. Recoveries were surprisingly high, $4.8 million. Included in the first quarter recoveries was the payment from one of the two remaining insurance companies in the remaining film loan. The case with the last insurance company continues to progress for a fall trial. The loan loss reserve stands at $70 million. The reserve was reduced another half million dollars after dropping $1.9 million last year. The reduction reflects our competence in the trend of positive credit quality indicators. The loan loss reserve held flat as a percentage of gross loans at 3.4%. The allowance was 366% of non-performing loans an increase from 344% as of year-end. In September, 2002, we announced that our board of directors approved a $100 million share buy-back program. In the 2003 first quarter, we repurchased 1.9 million shares for $32 bin 4 million, bringing the total under this program to $5.2 million shares for $92.1 million. We expect that the remaining $7.9 million will be used in the second quarter.

Virtually all of the repurchases in the first quarter were executed through two accelerated stock repurchase programs. These programs enabled us to acquire a large amount of stock at one time. Both accelerated stock repurchase programs have been completed and there are no remaining open forward contracts. Since the inception of the buy-back programs in someone 2001, the company has repurchased almost $250 million of stock. With respect to next quarter's guidance, we expect second quarter earnings per share to be between 23 cents and 27 cents. And here interguidance is a continuation of existing interest rate levels. We expect net interest margin and net interest income to drop slightly due to the absence of correction of non-accrual loans that helped the first quarter. We expect the loan loss provision to remain at first quarter levels. Non-interest income to rise primarily in Alliant revenues and foreign exchange fee income and non-interest expense to remain steady. We expect beau gross and net writedowns on investments will be smaller as will warrant gains. And in summary, we had much success in the first quarter. Credit quality remained high. We continued to grow loans, deposits remained steady, average private label client investment balances rose and investment banking fees increased, but the historically low interest rates continued to suppress our net interest margin and net interest income. Silicon Valley Bancshares is becoming stronger. We are building our customer base and our product and services offerings. For example, our foreign exchange group is working on a new product that will enable customers to maintain foreign currency denominated deposits with us. Our newly established broker dealer is working to attract larger private label client investment balances. We continuously look for ways to grow revenues and reduce expenses. We will take advantage of every opportunity to position the company for a profitable, rewarding future.

Thank you, Lauren. We'd like to open the call up to questions, please.

Thank you. At this time, we'd like to begin the formal question and answer session. If you would like to ask a question, please press star-one. You will announced prior to asking your question. To withdraw your question, please press star-two. Once again to ask a question, please press star-one. Our first question comes from Charlotte Chamberlain (ph) with Jeffries & Company. You may ask your question.

Congratulations to all of you on clearly a quarter with stronger credit quality and stronger fundamentals. Lauren, just a very quick question, on your help for us in doing our models, the increase in comp that you talked about that was due to -- the taxes and the benefits, is that the run --is that $31 million the run rate we should be using going or should we be taking something off on that number going forward?

Charlotte, this is Lauren, I think you should take something off of that number going forward. For several reasons. There were some severance costs in there, and that should take -- taking the severance costs out would reduce the run rate in comp by -- well, it's hard to say but there's roughly $1.2 million this quarter, so you can try to figure out what it is going forward, and additionally, I think you should take some off for the effective benefits and taxes. That's something that will tail off quarterly throughout the year.

Okay. So, you know, it was 24.4 million in the December quarter, 31 this quarter. Should we, like, split the difference, do you think, or -

No. I think that probably in the -- Charlotte, I'm just taking a guess here, so I'm not sure that I really know, but I would say probably in the 29 to 30 range is probably where we ought to be.

Okay. Great. Thanks very much.

Joe Moreford (ph) with RBC. You may ask your question.

Thanks. Good afternoon, everyone. I guess I wondered if you could talk about any further discussion on the capital management front on what the target capital ratio would be or target equity asset or whatever in your target that we're looking at and how you plan to get there and over what period, for example, you mention, Lauren you're about finished with the buy-back program. Should we be expecting to see new ones being announced and other uses for capital that you've identified. Thanks.

Steve Didion (ph) with Hoefer & Arnett (ph).

We have to answer the other question, first.

Joe, it's Lauren. Joe, clearly, we expect to continue to bring our capital down. At this point, we haven't announced any particular activities to do that, but we certainly think that our capital still remains very high, and it's something that we have our capital plan, we just did our semiannual review of that, and we are discussing what we need to do to continue to move our capital in the direction we want to move it in, but as you know, it has moved down substantially over the last year-and-a-half.

Yep. I was -- absolutely. I was so curious. Have you decided upon like a target ratio and where you are looking to go to over the long term?

I think that our target is something above our peers, maybe 50 to 100 basis points above our beer, but that's as close as we have defined it.

Okay. Maybe as a separate follow-up question, could you elaborate a bit on the expectation for decline in average deposits in the second quarter?

Joe, I'd be happy to do that. I think it would be very marginal. I just don't expect deposit growth in the second quarter for all practical purposes. You could say it would be flat, but the reason I said it would be slightly down is I think that you know, we might lose maybe as much as $50 million, but that's probably about it.

Okay. Thanks very much, Lauren.

Steve Didion with Hoefer & Arnett. You may ask your question.

Lauren, could you go over the accounting for me on the minority interest line.

I certainly would be happy to try, Steve. The bulk of the minor interest has to do with the private --with the investments in private equity.

Right.

We have through our funds. In my comments, I mentioned that we had $4.7 million of gross writedowns on the funds and $1.7 million of net writedowns. And the difference between the two is what gets backed out in the minority interest line.

Okay.

Okay?

Yeah. Fair enough. It's -- that's much clearer. It's -- the explanation in the 10K is not as clear. So, thanks for that.

Well, it's a little more complicated than that, because there are other thing, but that's the bulk of it.

One other question. You talked about the loan growth that you have had, and I was just trying to look at it quarter to quarter, meaning the sequential fourth quarter to this quarter, and it looked like from the numbers that I had, the majority of the growth came in average balances came in the consumer and other category. Just wondering if you could confirm that and also tell us what that's really made up of.

Steve, this is Dave Jones (ph). Let me take at least a first shot at that. In 2002, we enjoyed very good growth in our private banking executive banking initiative where it is that we bank the individual venture capitalists, the CEOs and CFO's. These would be well secured lines of credit to these individuals.

Okay. So, the core technology emerging growth sort of lending wasn't really picked up from that basis. This is more lending to the executives? Is that right?

Excuse me. This is Dave again. We did enjoy good growth across the portfolio so hardware, software, life sentences, wine, each had growth. I don't think that the growth in the private banking, executive banking initiative was materially stronger than the growth that we had in our other core components of the portfolio.

Okay. It was confusing because the commercial line shows a decline in average balance from December to this quarter, and the only line that shows an increase was that consumer line, so -- it may just be different level of accounting. I don't know.

I think that may be right. Just a different level of accounting.

Okay. Thank you.

Our next question comes from Gary Townsend (ph) with Friedman, Billings and Ramsey. You may ask your question.

Thank you. And congratulations on a good quarter. What should we expect with respect to asset yields in the current quarter? If we adjust for the non-accrual interest payment that came in, aim assuming -- I'm estimating around $1.2 million would have been the size of that, is that correct? Then the -- well, let me just make it short. What do you expect the direction of asset yields to be in the present quarter? And what -- what type of shrinkage might be there?

Gary, this is Lauren. We are expecting roughly a 10 basis point drop in yield going into the second quarter. We have a number of initiatives continuing to try to mitigate any yield drop. We are forecasting flat rates, which is consistent with the current yield curve, and so, we're -- you know, expecting about a -- roughly a (inaudible) drop.

Do you think that you can lower your funding costs any more than you have? Is there still more room to bring those down?

Gary, believe it or not, yes. I think that there is some -- to bring it down. We're going to keep working at it.

Okay. Well, I'm sure if anyone can do it, you can. You've shown that you can.

Thank you.

Thanks very much.

Our next question comes from Brian Harvey (ph) with Fox Pitt and Kelton. You may ask your question.

Thank you. Good afternoon. Ken or Mark (ph), can you just give as you little more color on the V.C. industry in general. Just talk about the level of investment this year. Has there been much change, and maybe if you give us anecdotes about what you are hearing now post some of the war events if there's any more activity or any more follow-through?

Okay. This is Marc first and I'll start. Anecdotally, we are hearing that the venture capitalists in good firms are feeling pretty good about the situations now. They feel that the valuations are coming down on companies. They're feeling that they're getting to see good opportunities. They feel pretty comfortable with their investment pace. So they all -- and they have to a large degree sort of cleared out a fair amount of companies that were funded in sort of the 1999-2000 area, although there's still clearly more to do. We won't get real numbers on the industry probably for another week or two. But anecdotally, we're still staying with our prediction on the market that we think this year could be somewhere in the 13 to $15 billion one rate as far as investments in companies, which is down from the 19 to 20 billion run rate of last year, but it's consistent with the investment base we saw the last six months of 2002. So, in general, you know, I think that the industry feels that they have hit bot top, and that -- in that they're starting to climb up the other direction.

Okay. Good. Just one question for Lauren. You can just talk about the --some of the staff initiative levels or some of the expense saving initiatives that you are talking. It looks like some of the employee levels are down this quarter. Some of that cost savings is already in the numbers, or is there more to come?

This is Lauren. I think there's more to come. The effect of staffing takes --you know, take as little bit of a lag, so I do believe there's more to come. I can't promise you that it will be particularly material. But we continue to look at staffing, as I think this is an ongoing process, and it's something that we are always paying attention to make sure that our staffing levels are appropriate for what we need to be doing. You know, in terms of general cost savings, we are trying to be very conscientious of every category of cost, professional services, rent, furniture, and there are a number of initiatives that are under way that we hope in the long run will in fact have very meaningful expense reductions, but these are long term initiatives. The real meaningful expense reductions come via long term initiatives.

Okay. Thank you.

The next question comes from K.C. Ambrick (ph)with Millennium Partners. You may ask your question.

Thank you for hosting the call. Nice quarter. Two questions. First one is for Lauren. I was wondering if you could help us understand -- there were a lot of offsets. But I was wondering if you could help us understand the difference in the guidance from the end of the fourth quarter for the first quarter and what has changed from late January to report 26 cents today, which is very good.

K.C., this is Lauren. I would be happy to try to do that. I think there's several things that happened to us in this quarter that were very positive. And hopefully, we will see more of this, but that remains to be seen. One was that we had $2 million in warrant gains this quarter compared to an average of, you know, $200,000 to $300,000 over the last several quarters. We had been forecasting, you know, in the same range as in the previous quarters, and to get a $2 million gain certainly helped us. Additionally, we collected on part of the insurance -- on part of the remaining film loan, and that helped us as well. And also, we had some collections of loans that had been an non-accrual that paid in full, and when that happens, you get gnat only this quarter's interest, but you get previous quarters' interest, so we got to book on those loans more than one quarter of interest and that helped our net interest income. So, I think those three things all helped us with the guidance this quarter.

Okay. Then question for Ken. When we were recently out there visiting with the company, you commented that you kind of expect some startups to fail over the next few years. And I think you used a number 2,000 over the next few years. That was more of a directional and not a hard forecast. Then I don't know if you saw in the "Wall Street Journal" but Larry Ellisson was quoted as saying something similar. I was wondering if you could walk us through the long term strategic implications of two to 3,000 startups failing on the model and how we should think of that long term.

Sure. Absolutely.

I'm heartened by the fact that Larry is in agreement with me, although I think we're looking at it from two totally different perspectives. Having said that, we're anticipating that there will be some significant number of companies in the world of venture-backed companies that will in fact quote, unquote, fail, in the course of the next couple of years. We're not alone in that regard. I believe that many of the -- of the people in leadership positions in the venture industry have the same belief. Having said that, a couple of things to think about. One is that the industry has reached the point now where we as a group, I believe, know how to allow these companies to disappear, and to the extent possible to sell whatever residual remains in a much smoother way than was true just a few years ago. Because of the high incidence of this, bear in mind again there have been somewhere in the same neighborhood number of companies that have gone out of business in the past, say, two years or so. So, the number we would be (inaudible) in the next two years would be roughly the same to disappear as roughly the same as we expected in these last couple of years. We meaning not Silicon Valley Bancshares in particular, but the industry in which we're operating in general. And in that -- in the course of the past two year, we have learned how to do that much better. Much less abruptly and in a much smoother fashion with a lot less friction and frankly, with a lot less pain to the parties involved. Now, at the same time, what Marc was saying earlier is equally true, meaning from the point of view of new company formations, we believe, and to do again, many people in leadership positions in the venture industry, believe that the market has already hit rock bottom and has already started the upward climb. We believe we are beginning to see an increase in the number of new company formations. Between those two factor, if anything, we would anticipate that the next couple of years will be more favorable to us than the last couple.

Great. Thank you very much. Have a nice weekend.

The next question comes from Brock Vandervliet (ph) with Lehman Brothers. You may ask your question.

Thanks. Kind of a follow-on to (inaudible) question. I noticed in the press release, there was some comment that the venture capital funding levels appear to be stabilizing. After the experience of the last couple of queers, that's a pretty strong -- pretty strong statement. Can you add some color to that?

Brock, this is Marc.

Even with the flash numbers that we currently have, there's venturewire that threw out a flash number now. They tend to revise that number over the next few weeks, so take it for what it's worth. They had fundings of roughly $3.8 billion in the first quarter. If you annualize that, you kind of get to the $15 billion, you know, dollar rate. Now, why we think it may be stabilizing is again when you talk to, and as we do, to a lot of venture capital firms all the time, there's queerly (ph) 23 - 78 firms that are going to survive and prosper in the future. Their attitude is that they're on a good funding pace. They're no longer constricting, versus if you go back 18 months, you had some firms that didn't make an investment all year. If you talked to the same firms today, they're making one investment a month or one every other month, depending on the size of the partnership. We're starting to see stability and new money being put to work. So, for that reason, and given the relatively sentencing win view of where we are today, that's why we think it's stable. The corporate money has been bled out of the system. A lot of - the money is bled out of the system. You are getting to the core players in the venture capital industry that are going to be here over the longer term rather than the players that came in on very limited amounts of time.

Okay. Totally separate question. On professional services, number has been pretty volatile over the last two quarters. Can it be held at three-and-a-half million level or is that an aberration here in Q1?

I'm sorry, Brock, could you repeat your question?

The professional services line that dropped pretty sharply from the fourth quarter. I think there was some special interests there in the fourth quarter. But is 3.5 million or roughly that range a fair number to use to model going forward?

3.5 is probably a little bit low, but not a lot. We have been trying to manage --that's one of the categories of expenses that we have been trying to manage very, very carefully. I have been taking a very hard look at it, and you know, I have really worked to get that number down. But, you know, first quarter, I think, for professional services tends to be a little on the low side, so I would expect it to be a little higher going forward.

Okay. Thanks.

Our final question comes from Charlotte Chamberlain with Jeffries & Company. You may ask your question.

Thank you very much. (inaudible) did better than all of us were expecting. Could you give us some color on what's in the pipeline, and kind of -- kind of a range of what might -- I mean, certainly, you can't tell us because you don't know, but, you know, what you think would be kind of a maximum -- you know, seeing what you have seen that you have had them now for over a year, and things are looking somewhat better, kind of where you see a range of what they could do from quarter to quarter, and kind of what you might think as kind of a means for us, again putting our models together. Thanks.

Charlotte, this is Ken. Let me try to address that one for you. Couple of things. First of all, thank you for recognizing that Alliant was up in this first quarter. I will tell you that it is something that we had anticipated based on a number of factors. Included among those factors would be Alliant has, I think, one of the more sophisticated sales forecasting tools that they use. Meaning they have a real clear idea of exactly what's in the pipeline, and exactly at what stage each individual item in the pipeline is at, and to the extent possible, exactly what the probabilities of completion are. So, I think that, you know, having been involved in them --in the businesses that have pipeline reports for 20 years now, I would say that this is one of the more sophisticated pipeline reports. So, we think we have a pretty good idea of what the future looks like. Certainly, a quarter out, pretty much two quarters out, and to a certain extent even three quarters out. We're anticipating continued growth in -- in (inaudible) results over the course of the next few quarters. That's based not just on the pipeline, but also on some fundamentals, meaning there's certain initiatives that are in process at Alliant as we speak that will help to bolster that. Among others, I would mansion --mention a couple one being that Alliant recently, and I think you're aware of that, actually, because I do think that there was a press release, opened up an office in our St. Helene office in Napa, the first time they dealt with anything other than technology, this being wine and we already have a couple of engagements that have been signed up. In addition to that, as was the original intention, for the year 2003, Alliant's now beginning the process of geographic expansion using our own network of offices as a platform, so we are anticipating a couple of offices outside of northern California. Again, these would not be separate from Silicon Valley Bancshares, it would be the same lease space outside of northern California. Between these in essence three new geographic initiatives, we feel that the expectations we have for - for 2003 are reasonable, and also consistent with the pipeline report as it stands.

Could we get a little quantification on that?

Well, I would take today's number and increase it.

Okay. I mean, is it reasonable to -

Let me turn that one to Lauren, because Lauren likes to talk with you about the numbers.

Charlotte, I would expect that our quarter over quarter growth in Alliant's revenues would be similar going into Q2 as it was quarter over quarter compared to Q4.

Right.

Thank you.

At this time there are no further questions.

Thank you. This is Lisa Bertolet again. I wanted to thank you all for joining us today. For the sake of time, we are going to have to end this call a little bit early. We are preparing for our annual meeting. We apologize for any calls that we didn't get to. Thank you for join us today.

Thank you for your participation on today's call. To listen to the replay, please dial 800-947-6452. The replay will be available until may 17, 2003. This concludes the conference call.