DENVER, April 24 /PRNewswire-FirstCall/ -- CoBiz Financial Inc. , a financial services company with $2.4 billion in assets, reported first quarter 2008 diluted earnings per share (EPS) of $0.07, compared to $0.24 diluted EPS a year ago. As pre-announced on April 14, 2008, the Company recorded a $5.0 million (pre-tax) provision for loan losses in the first quarter of 2008 in response to continued deterioration in the Arizona real estate market. Net income was $1.6 million in the first quarter 2008 versus $5.9 million for the prior-year period. Return on average equity was 3.29% for the current quarter versus 13.19% a year earlier. Return on average assets was 0.27% for the current quarter versus 1.13% in the prior-year period.
Financial Performance - First Quarter 2008 -- Quarterly loan growth of $29.0 million, or 6.3% annualized; annual loan growth of $306.5 million, or 19.5%. -- Quarterly deposit and customer repurchase agreements (Customer Repo) growth of $22.1 million, or 4.6% annualized; annual growth of $188.2 million, or 10.8%. -- Provision for loan losses of $5.0 million (pre-tax), or $0.13 per diluted share. -- Net loan charge-offs of $1.7 million, or 0.09% of average loans. -- Nonperforming assets to total assets at 0.73%. -- Allowance for loan and credit losses (Allowance) increased to 1.28% of total loans. -- Decreased net interest margin on a linked-quarter basis to 4.01% in Q1 2008 from 4.21% in Q4 2007. -- Minimal Investment Banking revenues reported during the first quarter; however, two successful transactions were closed and recognized after quarter-end.
"Our first quarter earnings were materially affected by the provision for loan losses reported during the period," said Chairman and CEO Steve Bangert. "While credit quality has always been a hallmark of our Company, we have not been immune to the real estate downturn in the Arizona market. In 2007, the Phoenix market began to experience significant declines in real estate values in the outlying fringes of the metro area. However, valuations for projects in the 'in-fill' areas -- where the majority of our projects are focused -- remained relatively stable. As market conditions worsened throughout the latter half of 2007 and early 2008, the impact began to spread and has now affected the value of projects throughout Phoenix. Approximately 63% of our total loans are within Colorado, and we continue to be pleased with the performance of that portfolio. But as a result of the downturn of the Phoenix market, we increased our Allowance coverage.
"Due to the natural seasonality of all of our businesses, our first quarter is typically one of our softest," said Bangert. "It's generally our weakest for loan generation and has seasonally low insurance revenues. This quarter, our earnings were not only impacted by the outsized provision for loan losses, but also by a lack of Investment Banking transactions closed during the period. However, the segment has already generated $2.6 million of revenue in early April that should position it for a profitable second quarter."
Loans
Loans [for Colorado Business Bank and Arizona Business Bank (collectively, the Bank)] ended the period at $1.9 billion, an increase of $306.5 million, or 19.5%, over the same period in 2007. Net loan generation is typically less robust in our first quarter. After an extremely strong fourth quarter for loan production (22.2% annualized growth), the Bank entered the first quarter with a smaller backlog of business. As a result, loan growth for the first quarter of 2008 was muted, increasing $29.0 million, or an annualized rate of 6.3%. The majority of the growth in the first quarter of 2008 came from Term Real Estate and Commercial (C&I) loans in Colorado. Arizona was down $7.2 million in total loans for the quarter, mainly due to the payoff of one large criticized C&I loan.
The metro Denver economy as a whole continues to be stable. The state ranked third in the nation in terms of month-over-month employment increases between February and March 2008 and fifth in the nation during the past year. Meanwhile, the declining housing market continues to impact the greater Phoenix metropolitan area. Economists have revised 2006 and 2007 employment data to reflect a weaker economy than originally reported. Projections for 2007 non-farm job growth were revised downward to 1.2%, and expectations for 2008 growth were lowered to 1.1%. Consistent with the general economic environment, loan demand in Colorado continues to be brisk, while activity in Arizona has slowed.
Deposits and Customer Repo Balances
Deposit and Customer Repo balances ended the period at $1.9 billion, an increase of $188.2 million, or 10.8%, from the same period in 2007. As of March 31, 2008, $430.9 million, or 24.2%, of our deposits were noninterest-bearing, down from 29.8% a year ago. Part of the decrease is related to a shift in the Company's funding mix as funds have migrated within the deposit portfolio from lower-cost savings and transaction accounts, into higher-cost savings and time deposits.
In July 2007, the Company introduced its Eurodollar Sweep deposit product as part of its Treasury Management services. The product continues to be well received with balances reaching $96.1 million as of the end of the first quarter of 2008. Most of the balances were transferred from existing Customer Repo accounts; however, 22.8% of the balances were from new relationships.
Allowance for Loan and Credit Losses and Credit Quality
Total nonperforming assets (NPAs) increased to $17.8 million at March 31, 2008, from $3.5 million at December 31, 2007. NPAs to total assets increased to 0.73% from 0.15% at December 31, 2007. While the linked-quarter increase in NPAs was significant, the Company's NPAs to total asset and net charge-off ratios continue to be well below that of peer banks.
During the first quarter 2008, we recorded a $5.0 million loan loss provision, as compared to $3.9 million for 2007 and $1.5 million for the fourth quarter of 2007. The Company charged-off $1.7 million in loans during the first quarter of 2008, versus $1.8 million for the full year of 2007. As a result, the Allowance was increased to $23.9 million as of March 31, 2008, from $20.6 million as of December 31, 2007. The Allowance to total loans was 1.28% at March 31, 2008, as compared to 1.12% at the end of 2007.
The Company actively monitors the quality of its loan portfolio, and has heightened scrutiny of construction and development (C&D) credits, particularly in Arizona, which have been affected by the continuing deterioration of real estate values. Loan grades are closely reviewed and updated, and even credits that are current in terms of principal and interest payments are continually re-evaluated based on changes in economic conditions. Beginning in the fourth quarter of 2007, the Company noted increased migration into higher-risk loan classifications, particularly in the Arizona real estate portfolio. That trend has continued into 2008, and certain real estate development loans in the Arizona market were further downgraded based on current property appraisals that showed declining collateral values. To date, the asset quality problems have been isolated primarily to land acquisition and development loans in the Arizona market, and we have not seen systemic credit weaknesses spread to other parts of the loan portfolio.
Management believes the Allowance is at an appropriate level based on its current evaluation and analysis of the credit quality of our loan portfolio and prevailing economic conditions. Currently, the Allowance exceeds 134% of NPAs. Due to uncertainty as to the depth and duration of the real estate slowdown and its economic effect in our markets, no assurance can be given that the Allowance will be adequate in future periods. If the real estate conditions continue to deteriorate, an elevated level of loan loss provisioning may be required in the future.
Shareholders' Equity and Regulatory Capital
During the first quarter, total shareholders' equity increased by $2.8 million, however, tangible equity decreased by $3.7 million due to our recent acquisition by CoBiz Insurance of the assets of Bernard Dietrich & Associates (with such assets now being operated as CoBiz Insurance-AZ). As a result, tangible equity to tangible assets decreased slightly to 5.8% from 6.1% as of the end of the year.
As of the end of 2007, the Bank was well-capitalized with a Tier 1 Capital ratio of 10.27%, and Total Capital ratio of 11.23%. The minimum ratios to be considered well-capitalized under the risk-based capital standards are 6% and 10%, respectively. At the holding company level, the Company's Tier 1 Capital ratio at December 31, 2007 was 9.44%, and its Total Capital ratio was 10.69%. The Company continually monitors its capital position to ensure it has adequate excess to support future growth, ongoing initiatives and potential loan losses. Based on the current economic uncertainty, the Company is currently considering reinforcing its capital position and evaluating Tier II capital alternatives.
Net Interest Income & Margin
Net interest income for the first quarter of 2008 increased to $22.0 million, up $1.0 million, or 4.6%, over the first quarter of 2007. Net interest income for the fourth quarter of 2007 was $22.9 million.
Average earning asset balances grew by $47.6 million from the fourth quarter of 2007 mainly due to $47.0 million in average loan growth. The net increase in earning assets was primarily funded by an increase in average NOW and money market deposits ($59.8 million), offset by a decrease in average noninterest-bearing demand deposits ($29.2 million). Yields on average earning assets decreased 49 basis points (0.49%) from the fourth quarter of 2007 to the first quarter of 2008; while rates paid on average interest-bearing liabilities decreased 58 basis points (0.58%).
Since the end of 2007, the Federal Open Market Committee (FOMC) lowered its target for the federal funds rate by 200 basis points. Although the Company maintains a relatively neutral interest rate sensitivity position, the magnitude of the rate cuts, combined with a shift to a less favorable funding mix, caused our net interest margin to decrease to 4.01% from 4.21% in the fourth quarter of 2007. Future rate cuts may continue to place downward pressure on our net interest margin. To date, we have been effective in reducing rates paid on deposit accounts as the federal funds rate has dropped. However, in the event of future rate cuts by the FOMC, our net interest margin will greatly depend on how successful we are in continuing to pass on additional rate decreases to our customers, as well as the rates we may be required to pay to attract new deposits.
Noninterest Income
Noninterest income for the first quarter of 2008 was $7.4 million, down $0.9 million from the fourth quarter of 2007. First quarter operating results include noninterest income of $1.8 million from the Company's two recent acquisitions: Wagner Investment Management, Inc. (Wagner) and Bernard Dietrich & Associates (renamed CoBiz Insurance-AZ). The transactions were completed on December 31, 2007 and January 2, 2008, respectively. Accordingly, their operating results are included in our first quarter totals, but not in any prior periods reported. As a percentage of total operating revenue, noninterest income was 25.3% in the first quarter of 2008 versus 24.0% for the prior year period.
Insurance
Insurance revenues increased from $2.6 million in the first quarter of 2007 to $3.6 million in 2008.
-- The segment was positively affected by the addition of CoBiz Insurance-AZ, which contributed $1.3 million in revenue during the period. -- The Group Employee Benefits area continues to see steady revenue growth, and has improved revenues by 11.2% over the same period in 2007. -- A decrease in First-Year Life revenue from the wealth transfer division offset part of the contributions from CoBiz Insurance-AZ, and the Group Employee Benefits area. Revenues from the division are transactional in nature, as estate planning goals are primarily achieved through the placement of life insurance. In 2007, the wealth transfer division had a disappointing year as several large cases did not close as a result of medical underwriting issues. However, based on the number and quality of cases currently in underwriting, Management expects the division's full year results to significantly improve from 2007, inline with previous years' results. Investment Banking
Investment banking revenues were $0.3 million for the first quarter, as compared to $2.2 million in the fourth quarter of 2007 and $1.4 million in first quarter of 2007. The segment had two transactions, totaling $2.6 million in revenue, scheduled to close during the first quarter that were not recognized until after quarter-end.
The segment continues to enjoy a steady, diversified backlog of engaged transactions. Management believes that middle market M&A activity during 2008 will remain strong for quality businesses, while the overall market will hinge on several key economic and political events. The Company expects valuation multiples will remain high for well-positioned companies with strong historic and projected growth as financial and strategic buyers struggle to deploy capital. In addition, due to the uncertainty related to the impending national elections, potential sellers may feel compelled to take advantage of the current attractive capital gains tax rates.
Investment Advisory & Trust
The segment's revenues were $1.7 million in the first quarter, 45% greater than the first quarter of 2007. The Company closed the acquisition of Wagner as of December 31, 2007. The Wagner acquisition had no impact on the Company's results of operation for 2007, but contributed $0.5 million in revenues to the segment for the first quarter of 2008.
Discretionary Assets under Management (AUM) were $878.3 million as of March 2008. Total AUM, including custody and advisory assets, were $1.6 billion including Wagner (which has a very significant advisory client base on which they receive an hourly consulting fee, as opposed to a basis-point-fee on AUM).
Deposit Service Charges
Deposit service charges are up 37.3% from the prior-year period, mainly due to treasury management analysis fees. We provide customers with the option of paying for treasury management services in cash or by maintaining additional noninterest-bearing account balances. The earnings credit rate applied to analysis balances has decreased as general interest rates have declined. As a result, we are collecting more of our fees in the form of "hard-dollar" cash, versus "soft-dollar" compensating balances.
Operating Expenses
Operating expenses totaled $21.9 million for the first quarter of 2008, an increase of $3.5 million from the first quarter of 2007 and $1.1 million from the fourth quarter of 2007. Our first quarter noninterest expenses were affected by the acquisitions of Wagner and CoBiz Insurance-AZ. Combined, they added $1.5 million in operating expenses for the period. Without Wagner and CoBiz Insurance-AZ, noninterest expense increased 11.2% from the first quarter of 2007 to the first quarter of 2008. Contributing to the increases in expenses (excluding the Wagner and CoBiz Insurance-AZ acquisitions) were:
-- An increase in compensation, primarily from the continued hiring of seasoned bankers in the latter half of 2007. Base salary expense (excluding variable commission expense) is up 9.9% year over year, and 5.0% on a linked-quarter basis; an increase in stock-based compensation expense under SFAS 123(R); -- an increase in occupancy costs of 7%, due in part to two new bank offices scheduled to open by mid-2008; -- expenses related to the company-wide branding project, most of which were not incurred until after the first quarter of 2007; -- an increase in FDIC insurance costs of $213,000, or 511%.
For the first quarter of 2008, our efficiency ratio increased to 74.3% from 66.4% for the same period in 2007. The fee-based business lines run at a higher efficiency ratio than the Bank (but are less capital-intensive). The first quarter ratio was negatively impacted by seasonally low insurance revenues, lack of Investment Banking transactions, and the introduction of the recent acquisitions. In addition, the Bank's efficiency ratio has also increased as net interest income has not grown at the same rate as overhead expenses due to the declining interest rate environment. While our efficiency ratio will continue to be under pressure due to net interest margin contraction, we expect it to improve over the year as the contribution from the fee-based businesses increases.
Summary
"Given the generally positive health of the Colorado market, we continue to generate and act on opportunities there," said Bangert. "Although there are definitely issues in Arizona, we remain well positioned to grab market share as we take advantage of opportunities from other banks faced with much greater credit stress. In the coming months, we anticipate increased momentum from our fee-based businesses particularly our Investment Banking and Wealth Transfer divisions.
"Despite the difficult operating environment, we continue to enjoy pockets of success within our franchise. I believe CoBiz will emerge from the economic slowdown in a position of strength and will continue our impressive track record of outperforming our peers."
Earnings Conference Call
In conjunction with this release, you are invited to listen to the Company's conference call on Friday, April 25, 2008 at 11:00 am ET with Steve Bangert, CoBiz chairman and CEO. The call can be accessed via the Internet at http://www.videonewswire.com/event.asp?id=47153 or by telephone at 877.493.9121, (conference ID #39966271).
Explanation of the Company's Use of Non-GAAP Financial Measures
This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations. We believe these measures provide important supplemental information to investors. However, you should not rely on non-GAAP financial measures alone as measures of our performance.
About CoBiz Financial
CoBiz Financial Inc. (http://www.cobizfinancial.com/) is a $2.4 billion financial holding company headquartered in Denver. The Company operates Colorado Business Bank and Arizona Business Bank, full-service commercial banking institutions that offer a broad range of sophisticated banking services -- including credit, treasury management, investment and deposit products -- to a targeted customer base of professionals and small to mid-sized businesses. CoBiz also offers trust and fiduciary services through CoBiz Trust; property and casualty insurance brokerage and risk management consulting services through CoBiz Insurance; investment banking services through Green Manning & Bunch; the management of stock and bond portfolios for individuals and institutions through CoBiz Trust, Alexander Capital Management Group and Wagner Investment Management, Inc.; and employee and executive benefits consulting and wealth transfer services through Financial Designs, Ltd.
Forward-looking Information
This release contains forward-looking statements that describe CoBiz's future plans, strategies and expectations. All forward-looking statements are based on assumptions and involve risks and uncertainties, many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from the results, performance or achievements contemplated by the forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may." Forward-looking statements speak only as of the date they are made. Such risks and uncertainties include, among other things:
-- Risks and uncertainties described in our reports filed with the Securities and Exchange Commission, including our most recent 10-K. -- Competitive pressures among depository and other financial institutions nationally and in our market areas may increase significantly. -- Adverse changes in the economy or business conditions, either nationally or in our market areas, could increase credit-related losses and expenses and/or limit growth. -- Increases in defaults by borrowers and other delinquencies could result in increases in our provision for losses on loans and leases and related expenses. -- Our inability to manage growth effectively, including the successful expansion of our customer support, administrative infrastructure and internal management systems, could adversely affect our results of operations and prospects. -- Fluctuations in interest rates and market prices could reduce our net interest margin and asset valuations and increase our expenses. -- The consequences of continued bank acquisitions and mergers in our market areas, resulting in fewer but much larger and financially stronger competitors, could increase competition for financial services to our detriment. -- Our continued growth will depend in part on our ability to enter new markets successfully and capitalize on other growth opportunities. -- Changes in legislative or regulatory requirements applicable to us and our subsidiaries could increase costs, limit certain operations and adversely affect results of operations. -- Changes in tax requirements, including tax rate changes, new tax laws and revised tax law interpretations may increase our tax expense or adversely affect our customers' businesses.
In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements in this release. We undertake no obligation to publicly update or otherwise revise any forward- looking statements, whether as a result of new information, future events or otherwise.
CoBiz Financial Inc. March 31, 2008 (unaudited) Quarter Ended March 31, (in thousands, except per share amounts) 2008 2007 INCOME STATEMENT DATA Interest income $37,397 $36,357 Interest expense 15,419 15,342 NET INTEREST INCOME BEFORE PROVISION 21,978 21,015 Provision for loan losses 5,031 - NET INTEREST INCOME AFTER PROVISION 16,947 21,015 Noninterest income 7,423 6,632 Noninterest expense 21,905 18,385 INCOME BEFORE INCOME TAXES 2,465 9,262 Provision for income taxes 870 3,379 NET INCOME $1,595 $5,883 EARNINGS PER COMMON SHARE BASIC $0.07 $0.25 DILUTED $0.07 $0.24 WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands) BASIC 23,017 23,513 DILUTED 23,281 24,205 COMMON SHARES OUTSTANDING AT PERIOD END (in thousands) 23,056 23,865 BOOK VALUE PER COMMON SHARE $8.33 $7.96 PERIOD END BALANCES Total Assets $2,449,298 $2,137,308 Loans (net) 1,851,944 1,550,875 Deposits 1,781,406 1,486,985 Junior Subordinated Debentures 72,166 72,166 Common Shareholders' Equity 192,114 189,919 Interest-Earning Assets 2,251,986 1,981,827 Interest-Bearing Liabilities 1,809,121 1,485,021 BALANCE SHEET AVERAGES Average Assets $2,397,638 $2,115,922 Average Loans (net) 1,832,244 1,539,798 Average Deposits 1,773,337 1,432,238 Average Junior Subordinated Debentures 72,166 72,166 Average Common Shareholders' Equity 194,750 180,890 Average Interest-Earning Assets 2,219,703 1,959,825 Average Interest-Bearing Liabilities 1,764,746 1,481,281 CoBiz Financial Inc. March 31, 2008 (unaudited) Quarter Ended March 31, (in thousands) 2008 2007 PROFITABILITY MEASURES Net Interest Margin 4.01% 4.38% Efficiency Ratio 74.33% 66.35% Return on Average Assets 0.27% 1.13% Return on Average Common Shareholders' Equity 3.29% 13.19% Noninterest Income as a Percentage of Operating Revenues 25.25% 23.99% CREDIT QUALITY Nonperforming Loans Loans 90 days or more past due and still accruing interest $4,825 $- Nonaccrual loans 12,974 4,303 Total nonperforming loans $17,799 $4,303 Repossessed Assets 5 - Total nonperforming assets $17,804 $4,303 Charge-offs (1,739) (33) Recoveries 5 24 Net Charge-Offs $(1,734) $(9) ASSET QUALITY MEASURES Nonperforming Assets to Total Assets 0.73% 0.20% Nonperforming Loans to Total Loans 0.95% 0.27% Allowance for Loan and Credit Losses to Total Loans 1.28% 1.19% Allowance for Loan and Credit Losses to Nonperforming Loans 134.37% 433.67% CoBiz Financial Inc. March 31, 2008 (unaudited) Investment Investment (in thousands, except per Commercial Banking Advisory share amounts) Banking Services and Trust Net interest income Quarter ended March 31, 2008 $23,449 $7 $2 Quarter ended December 31, 2007 24,403 29 1 Annualized quarterly growth (15.7)% (305.1)% 402.2% Quarter ended March 31, 2007 $22,329 $39 $- Annual growth 5.0% (82.1)% 100.0% Noninterest income Quarter ended March 31, 2008 $1,760 $293 $1,676 Quarter ended December 31, 2007 2,587 2,240 1,205 Annualized quarterly growth (128.6)% (349.6)% 157.2% Quarter ended March 31, 2007 $1,426 $1,423 $1,152 Annual growth 23.4% (79.4)% 45.5% Net income Quarter ended March 31, 2008 $3,446 $(439) $(107) Quarter ended December 31, 2007 7,051 116 (90) Annualized quarterly growth (205.6)% (1,924.3)% (76.0)% Quarter ended March 31, 2007 $7,184 $(83) $44 Annual growth (52.0)% (428.9)% (343.2)% Earnings per share (diluted) Quarter ended March 31, 2008 $0.15 $(0.02) $- Quarter ended December 31, 2007 0.30 - - Annualized quarterly growth (201.1)% - - Quarter ended March 31, 2007 $0.29 $- $- Annual growth (48.3)% (100.0)% .0% Corporate (in thousands, except per Support and share amounts) Insurance Other Consolidated Net interest income Quarter ended March 31, 2008 $1 $(1,481) $21,978 Quarter ended December 31, 2007 1 (1,545) 22,889 Annualized quarterly growth .0% 16.7% (16.0)% Quarter ended March 31, 2007 $(1) $(1,352) $21,015 Annual growth 200.0% (9.5)% 4.6% Noninterest income Quarter ended March 31, 2008 $3,623 $71 $7,423 Quarter ended December 31, 2007 2,238 38 8,308 Annualized quarterly growth 248.9% 349.3% (42.8)% Quarter ended March 31, 2007 $2,630 $1 $6,632 Annual growth 37.8% 7,000.0% 11.9% Net income Quarter ended March 31, 2008 $- $(1,305) $1,595 Quarter ended December 31, 2007 (177) (1,426) 5,474 Annualized quarterly growth 402.2% 34.1% (285.0)% Quarter ended March 31, 2007 $(12) $(1,250) $5,883 Annual growth 100.0% (4.4)% (72.9)% Earnings per share (diluted) Quarter ended March 31, 2008 $- $(0.06) $0.07 Quarter ended December 31, 2007 (0.01) (0.06) 0.23 Annualized quarterly growth 402.2% .0% (279.8)% Quarter ended March 31, 2007 $- $(0.05) $0.24 Annual growth .0% (20.0)% (70.8)% (in thousands) Consolidated Total loans At March 31, 2008 $1,875,284 At December 31, 2007 1,846,326 Annualized quarterly growth 6.3% At March 31, 2007 $1,568,737 Annual growth 19.5% Total deposits and customer repurchase agreements At March 31, 2008 $1,933,086 At December 31, 2007 1,911,025 Annualized quarterly growth 4.6% At March 31, 2007 $1,744,840 Annual growth 10.8% CoBiz Financial Inc. March 31, 2008 (unaudited) For the Quarter ended March 31, 2008 Investment Investment Commercial Banking Advisory (in thousands) Banking Services and Trust Income Statement Total interest income $37,347 $7 $3 Total interest expense 13,898 - 1 Net interest income 23,449 7 2 Provision for loan losses 5,031 - - Net interest income after provision 18,418 7 2 Noninterest income 1,760 293 1,676 Noninterest expense 7,883 927 1,695 Income before income taxes 12,295 (627) (17) Provision for income taxes 4,575 (237) 4 Net income before management fees and overhead allocations $7,720 $(390) $(21) Management fees and overhead allocations, net of tax 4,274 49 86 Net income $3,446 $(439) $(107) For the Quarter ended March 31, 2008 Corporate Support and (in thousands) Insurance Other Consolidated Income Statement Total interest income $4 $36 $37,397 Total interest expense 3 1,517 15,419 Net interest income 1 (1,481) 21,978 Provision for loan losses - - 5,031 Net interest income after provision 1 (1,481) 16,947 Noninterest income 3,623 71 7,423 Noninterest expense 3,410 7,990 21,905 Income before income taxes 214 (9,400) 2,465 Provision for income taxes 93 (3,565) 870 Net income before management fees and overhead allocations $121 $(5,835) $1,595 Management fees and overhead allocations, net of tax 121 (4,530) - Net income $- $(1,305) $1,595 For the Quarter ended December 31, 2007 Investment Investment Commercial Banking Advisory Banking Services and Trust Income Statement Total interest income $40,091 $29 $1 Total interest expense 15,688 - - Net interest income 24,403 29 1 Provision for loan losses 1,469 - - Net interest income after provision 22,934 29 1 Noninterest income 2,587 2,240 1,205 Noninterest expense 9,199 1,990 1,239 Income before income taxes 16,322 279 (33) Provision for income taxes 6,090 111 (8) Net income before management fees and overhead allocations $10,232 $168 $(25) Management fees and overhead allocations, net of tax 3,181 52 65 Net income $7,051 $116 $(90) For the Quarter ended December 31, 2007 Corporate Support and Insurance Other Consolidated Income Statement Total interest income $2 $41 $40,164 Total interest expense 1 1,586 17,275 Net interest income 1 (1,545) 22,889 Provision for loan losses - - 1,469 Net interest income after provision 1 (1,545) 21,420 Noninterest income 2,238 38 8,308 Noninterest expense 2,325 6,099 20,852 Income before income taxes (86) (7,606) 8,876 Provision for income taxes (21) (2,770) 3,402 Net income before management fees and overhead allocations $(65) $(4,836) $5,474 Management fees and overhead allocations, net of tax 112 (3,410) - Net income $(177) $(1,426) $5,474 For the Quarter ended March 31, 2007 Investment Investment Commercial Banking Advisory Banking Services and Trust Income Statement Total interest income $36,277 $39 $- Total interest expense 13,948 - - Net interest income 22,329 39 - Provision for loan losses 29 - - Net interest income after provision 22,300 39 - Noninterest income 1,426 1,423 1,152 Noninterest expense 6,470 1,520 1,000 Income before income taxes 17,256 (58) 152 Provision for income taxes 6,329 (19) 51 Net income before management fees and overhead allocations $10,927 $(39) $101 Management fees and overhead allocations, net of tax 3,743 44 57 Net income $7,184 $(83) $44 For the Quarter ended March 31, 2007 Corporate Support and Insurance Other Consolidated Income Statement Total interest income $1 $40 $36,357 Total interest expense 2 1,392 15,342 Net interest income (1) (1,352) 21,015 Provision for loan losses - (29) - Net interest income after provision (1) (1,323) 21,015 Noninterest income 2,630 1 6,632 Noninterest expense 2,458 6,937 18,385 Income before income taxes 171 (8,259) 9,262 Provision for income taxes 78 (3,060) 3,379 Net income before management fees and overhead allocations $93 $(5,199) $5,883 Management fees and overhead allocations, net of tax 105 (3,949) - Net income $(12) $(1,250) $5,883 CoBiz Financial Inc. March 31, 2008 (unaudited) Quarter ended March 31, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST INCOME Deposit service charges $939 $684 $255 37% Other loan fees 197 184 13 7% Investment advisory and trust income 1,676 1,152 524 45% Insurance income 3,623 2,630 993 38% Investment banking income 293 1,423 (1,130) (79%) Other income 695 559 136 24% Total noninterest income $7,423 $6,632 $791 12% Quarter ended March 31, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST EXPENSES Salaries and employee benefits $14,550 $12,166 $2,384 20% Stock based compensation expense 423 280 143 51% Occupancy expenses, premises and equipment 3,137 2,830 307 11% Amortization of intangibles 203 118 85 72% Other operating expenses 3,592 2,991 601 20% Total noninterest expenses $21,905 $18,385 $3,520 19% March 31, 2008 December 31, 2007 % of % of (in thousands) Amount Portfolio Amount Portfolio LOANS Commercial $572,008 30.9% $576,959 31.6% Real Estate - mortgage 907,962 49.0% 874,226 47.9% Real Estate - construction 308,756 16.7% 309,568 17.0% Consumer 73,078 3.9% 71,422 3.9% Other 13,480 0.7% 14,151 0.7% Gross loans 1,875,284 101.3% 1,846,326 101.1% Less allowance for loan losses (23,340) (1.3%) (20,043) (1.1%) Net loans $1,851,944 100.0% $1,826,283 100.0% March 31, 2008 December 31, 2007 % of % of (in thousands) Amount Portfolio Amount Portfolio DEPOSITS AND CUSTOMER REPURCHASE AGREEMENTS NOW and money market accounts $697,965 36.1% $631,391 33.0% Savings 11,699 0.6% 11,546 0.6% Eurodollar 96,069 5.0% 77,444 4.1% Certificates of deposits under $100,000 114,275 5.9% 126,478 6.6% Certificates of deposits $100,000 and over 430,523 22.3% 456,754 23.9% Total interest-bearing deposits 1,350,531 69.9% 1,303,613 68.2% Noninterest-bearing demand deposits 430,875 22.3% 439,076 23.0% Customer repurchase agreements 151,680 7.8% 168,336 8.8% Total deposits and customer repurchase agreements $1,933,086 100.0% $1,911,025 100.0% March 31, 2007 % of (in thousands) Amount Portfolio LOANS Commercial $480,339 31.0% Real Estate - mortgage 727,109 46.9% Real Estate - construction 291,971 18.8% Consumer 56,014 3.6% Other 13,304 0.9% Gross loans 1,568,737 101.2% Less allowance for loan losses (17,862) (1.2%) Net loans $1,550,875 100.0% March 31, 2007 % of (in thousands) Amount Portfolio DEPOSITS AND CUSTOMER REPURCHASE AGREEMENTS NOW and money market accounts $562,594 32.2% Savings 12,191 0.7% Eurodollar - 0.0% Certificates of deposits under $100,000 100,866 5.8% Certificates of deposits $100,000 and over 368,031 21.1% Total interest-bearing deposits 1,043,682 59.8% Noninterest-bearing demand deposits 443,303 25.4% Customer repurchase agreements 257,855 14.8% Total deposits and customer repurchase agreements $1,744,840 100.0% CoBiz Financial Inc. March 31, 2008 (unaudited) For the quarter ended March 31, 2008 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $10,580 $106 4.01% Investment securities 386,591 5,042 5.22% Loans 1,843,781 32,398 7.03% Allowance for loan losses (21,249) Total interest earning assets $2,219,703 $37,546 6.77% Noninterest-earning assets Cash and due from banks 41,630 Other 136,305 Total assets $2,397,638 Liabilities and Shareholders' Equity Deposits NOW and money market $676,053 $4,369 2.60% Savings 11,242 49 1.75% Eurodollar 92,668 612 2.61% Certificates of deposits Under $100,000 118,842 1,356 4.59% $100,000 and over 453,524 5,152 4.57% Total Interest-bearing deposits $1,352,329 $11,538 3.43% Other borrowings Securities sold under agreements to repurchase and other short-term borrowings 340,251 2,630 3.09% Junior subordinated debentures 72,166 1,251 6.93% Total interest-bearing liabilities $1,764,746 $15,419 3.51% Noninterest-bearing demand accounts 421,008 Total deposits and interest- bearing liabilities 2,185,754 Other noninterest-bearing liabilities 17,134 Total liabilities 2,202,888 Shareholders' equity 194,750 Total liabilities and shareholders' equity $2,397,638 Net interest income $22,127 Net interest spread 3.26% Net interest margin 4.01% Ratio of average interest-earning assets to average interest-bearing liabilities 125.78% For the quarter ended March 31, 2007 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $8,457 $116 5.49% Investment securities 414,251 5,324 5.14% Loans 1,555,098 31,068 7.99% Allowance for loan losses (17,981) Total interest earning assets $1,959,825 $36,508 7.45% Noninterest-earning assets Cash and due from banks 44,611 Other 111,486 Total assets $2,115,922 Liabilities and Shareholders' Equity Deposits NOW and money market $555,667 $4,219 3.08% Savings 11,101 43 1.57% Eurodollar - - - Certificates of deposits Under $100,000 94,099 1,076 4.64% $100,000 and over 336,018 4,086 4.93% Total Interest-bearing deposits $996,885 $9,424 3.83% Other borrowings Securities sold under agreements to repurchase and other short-term borrowings 412,230 4,523 4.39% Junior subordinated debentures 72,166 1,395 7.73% Total interest-bearing liabilities $1,481,281 $15,342 4.18% Noninterest-bearing demand accounts 435,353 Total deposits and interest- bearing liabilities 1,916,634 Other noninterest-bearing liabilities 18,398 Total liabilities 1,935,032 Shareholders' equity 180,890 Total liabilities and shareholders' equity $2,115,922 Net interest income $21,166 Net interest spread 3.27% Net interest margin 4.38% Ratio of average interest-earning assets to average interest-bearing liabilities 132.31% CoBiz Financial Inc. March 31, 2008 (unaudited) Reconciliation of Non-GAAP Measure to GAAP The following table includes Non-GAAP financial measurements related to tangible equity and tangible assets. These items have been adjusted to exclude goodwill and intangible assets. March 31, December 31, 2008 2007 Shareholders' equity as reported - GAAP $192,114 $189,270 Goodwill and intangible assets (52,008) (45,498) Tangible equity ( Non-GAAP) $140,106 $143,772 Total assets as reported - GAAP $2,449,298 $2,391,012 Goodwill and intangible assets (52,008) (45,498) Total tangible assets ( Non-GAAP) 2,397,290 $2,345,514 Shareholders' equity to total assets as reported - GAAP 7.8% 7.9% Tangible equity to total tangible assets as reported - Non-GAAP 5.8% 6.1%
