SVB Financial Group (SIVB) 2003 Q4 法說會逐字稿

Good afternoon. Welcome to the Silicon Valley Bancshares final fourth quarter financial results conference call.

Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to your first speaker for the day, Ms. Lisa Bertolet. Ma'am, you may begin.

Thank you and good afternoon. Today we are hosting our final fourth quarter and year-end 2003 financial conference call. I'm the Investor Relations Manager, Lisa Bertolet. And, Mark Resinor [ph], Interim Chief Financial Officer will start the call today discussing these fourth quarter financial results.

Before we start the call, I'd like to start the meeting by reading the safe harbor disclosure. This presentation may contain projections or other forward-looking statements regarding the future events or the future financial performance of the company. We wish to caution you that such statements are just predictions and that actual events or results may differ materially. We wish to caution you that such statements are just predictions and that actual events or results may differ materially. We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's last filed form, S-3, filed September 30, 2003, and form 10(K) filed March 5, 2003. These documents contain and identify important risk factors that could cause the company's actual results from differ materially from those contained in our projections or other forward looking statements. Now I'll turn the call over to Mark.

Great. Thank you, Lisa.

Good afternoon and thank you for joining us today. When we announced our quarterly earnings last month, we were in the process of conducting a second valuation analysis of our investment banking subsidiary, Alliant Partners, as required by the statement of financial number 142. That analysis is complete, resulting in a noncash pretax charge of $46 million in the fourth quarter of 2003, bringing total impairment to 2003 to $63 million and leaving Alliant's goodwill at approximately $36 million conservatively. I would like to stress, that while we are disappointed with Alliant's most recent revenues, we are nonetheless pleased with the powerful cross selling and referral relationship that has developed between Alliant and Silicon Valley Bank as a result of the acquisition. When we purchased Alliant we were convinced that it would provide more business opportunity by broadening the range of liquidity options we can offer our clients. Alliant has met our expectations in that regard and we have every reason to anticipate that its strategic value will grow. With me today is Ken Wilcox, our Chief Executive Officer and we would be happy to take your questions at this time.

Thank you, we will now begin the question and answer session.

[Operator Instructions] One moment, please, for the first question.

Our first question comes from Joe Morford with RBC Capital Markets. Your line is open, sir.

Thanks. Good afternoon, everyone. Mark, the release talked about you all have done revised projections of Alliant's expected performance which you've used kind of as the basis here. I wonder what kind of color you can share on that in terms of new revenue targets of projections for business and deal activity and things like that.

We have done a bottoms up revision to the forecast from Alliant. And in deal volume we do expect deals to pick up this year. In fact, already, the beginning -- the start of the year has been good. We do expect modest revenue growth in 2004 over this year. We just think the projections are realistic -- or more realistic than they were back in July when we did them.

Okay. Maybe can you talk about just some of the growth you're seeing in moving Alliant to some of the other offices, or niches, or even the new products like the private placements, some of the progress there.

Well, private placements have come off the mark very strong. We're currently and actively in four engagements in the private placement business, and that's from zero just a couple of months ago. So, very pleased there. We are getting some traction in other geographic areas. But, I think in general, I mean as you read the paper, I think the general market has picked up in M & A activity, with the economy looking better, you're starting to see more companies with better currency to play with. They are more confident about their revenue forecast and so they are actively out there looking for products and companies that can add to that. So we feel very good about the environment.

Okay. Thanks very much.

Our next question comes from Charlotte Chamberlain with Jefferies. Ma'am, your line is open.

Okay. Following up on Joe's question, the web site shows that Alliant closed an additional deal in February. And on the last call you gave us guidance for roughly 3 million, and we're wondering is -- where is you said -- Ken you said that -- up to the last week of December that you were expecting -- I think you said 7 to 8 million, so I was just wondering, is 3 million still a good number to go with for the first quarter? So that's first.

The second is just how is business at the bank? You had nice long growth and deposit growth. Wondering if that's still going.

And then the rest is really bookkeeping. What are you expecting in options expense per share for the exercise of stock options by employees? What is the tangible book value? And finally, the 46 million that you're taking -- I saw on the web site that Mr. Bentley [ph] retired -- not retired, but resigned from two other boards, not Alliant, but from two other boards he was on, for personal reasons. And I was just wondering, if anyone else, for example, Mr. Bentley, were to, resign or retire, if this 46 million would cover it.

I know that's a lot, but thanks very much.

Well, let me try to answer all of those questions. I'm not sure I can remember every one of them. But, it looks like somebody is writing them down for me here anyway. We'll do our best.

I would encourage you not to watch the grass grow, Charlotte. Alliant represents, after all, on the grand scheme of things, a very small proportion of what Silicon Valley Bank does. And -- and you're now counting each individual deal. I'm not sure if that's a good use of your time. In any case, we're not going to be commenting on Alliant's quarterly expectations. We'll comment on the bank's overall expectations. But, I think if we get down to the point where we're commenting on the individual quarterly expectations for each individual 20th part of the Bank, that we're making a big mistake here. And we're going to miss the forest for the trees.

Yeah, I don't disagree with that. It is just that, you know, a $46 million writedown, it may be a small part of the bank and a small part of earnings, but it is huge hit, to both [inaudible], right, not tangible book, to book value -- but I mean, that's the issue, is that -- it took a big hunk out of book value.

Absolutely, no doubt about that. That would also indicate that the expectations for revenues are probably not as high as they were before. Otherwise, there wouldn't be that large of write-off. Is that not right?

Right. And all I was asking, was are we on track for the new set of guidelines that I guess you set at the end of the year?

We're on track with respect to the projections that we put in place on the basis of which the impairment charge was determined.

Okay. And its enough to cover if somebody else left?

That's correct.

Okay. -- I'm sorry.

Sorry Charlotte, the projections do take into account people that have left. Is that your question?

Well, no. The issue was that J. Thomas Bentley is listed on the Alliant web site as having resigned from two boards that he was a member of, not the Alliant board, but two other boards, for personal reasons. And I was just wondering, if anybody else retired or resigned, is that 46 million sufficient to cover an additional partner leaving?

Yes. The answer to that would be yes.

Okay. Then the housekeeping. The options expense, tangible book.

Okay. The tangible book value as of 12/31 is 409,500,000. Or $11.69 a share.

Okay. And the option?

The option expenses is that -- if you could repeat that question --.

As I understand it, you didn't adopt -- oh, I forget which FASB it was where the options would be expensed as part of normal quarterly operations, but, rather, that you're still going to report it as a footnote, I guess, in the 10(K). Looking at, I guess you're going to do it under FAS 125 and report it as if it had been done under -- I think its FAS 25. The way you've done it in the past. and I was wondering, if you could tell us, had options been expensed, what the reduction in earnings per share would be?

You know Charlotte, it was in our Q3, and -- 10(Q) for our Q3 and I don't have that in front of me so I'll need to get back to you on that.

It was in the Q for Q3?

Note one.

Oh, so you're going to report it quarterly?

Yes.

Oh, okay.

It is required that we do that.

Okay. All right. Thanks very much.

Thank you, Charllotte.

And Charlotte, you had also asked about how business in the Bank, and the Bank in an overall sense is, and in an overall sense, the bank is doing just fine, and we're still with the same guidance which we gave in our last conference call.

Great. So you're continuing to see balanced growth and those things?

That's correct.

Great. Thanks.

Our next question comes from Gary Townsend with Friedman, Billings, Ramsey.

Good afternoon. As I recall, the Q it was 11 cents for options expensed. Does that sound right, Mark?

You know, I'll get back to you on that. I hate to guess.

Let me ask Charlotte's question in a different way. If Thomas Bentley were to resign, is that another triggering event from a standpoint of your analysis of whether there is further impairment?

No.

No.

It would not be. Okay.

No.

And the final question is, I think at the time of your -- of the conference call that was held a month or so ago, you talked in terms of $3 million in revenue for Alliant having been booked so far in the first quarter of this year. Do you stand by that still, or has that been -- has your view changed?

Do we still stand by the assertion there were $3 million in January? Yes, we do.

One last thing. If I understand Charlotte correctly, she quoted you as saying that you were expecting 7 to 8 million in revenues for Alliant in the 4th quarter and that was reported to her at the last -- in the last week of December, is that right?

Gary, that's Charlotte's number. I don't believe anybody here said that.

Thanks very much.

Our next question comes from Brian Harvey with Fox-Pitt, Kelton.

Thank you. I just had two questions. First, is there any additional programs that have been set up for the new Alliant members about any retention sort of program, and if we could give some color on that. And second, is just, can you give any sort of update in how business volume has been at the Bank in a sort of way or at least talk about any new warrant positions or any new business activity that has changed since the last conference call.

Well, with respect to retention,, Brian, a fully half of the people at Alliant are under an agreement which involves some level of retention already. There may be some consideration given to doing something with respect to some others. That's a possibility, although that is under discussion. But certainly, half of the people are already under an agreement that involves some level of retention.

Would that include all of the managing directors?

Not all of them. But a substantial proportion.

Okay.

And then regarding the business trends, we stand by what we said during our earlier conference call. We had the last half of the year, we saw very strong trends and deposits, client count growth. We saw improvements in equity, returns from our warrants. And we see a continuance of those trends in the first quarter. So we're very pleased with the business trends we're seeing.

Okay. So it is still positive trends going on in the business?

Yes.

Okay. Thank you.

Our next question comes from Campbell Chaney with Sander Morris Harris.

Most of my questions have been answered. But, let me ask you this. Does this change the cycle for your annual impairment charge on Alliant? Or is it still -- you going to do another one in about six, seven months?

No. The cycle stays the same. So we will do another one, that we will do in the second quarter.

Second quarter. Great. Thank you.

[Operator Instructions]

At this time, there are no further questions.

Thank you. And thank you for participating in the call. And have a good day.

This will conclude today's conference call.