CoBiz Financial Reports Second Quarter 2008 Results

2008-07-24 18:31:00

CoBiz Financial Reports Second Quarter 2008 Results

    DENVER, July 24 /EMWNews/ -- CoBiz Financial Inc. (Nasdaq:

COBZ), a financial services company with $2.5 billion in assets, reported

second quarter 2008 diluted earnings per share (EPS) of $0.18, compared to

$0.07 for the first quarter 2008 and $0.23 diluted EPS a year ago. Net

income was $4.2 million in the second quarter of 2008 versus $1.6 million

for the first quarter of 2008 and $5.7 million for the second quarter of

2007. For the six months ended June 30, 2008, net income was $5.8 million

versus $11.5 million for the comparable period in 2007.




Financial Performance -- Second Quarter 2008 -- Net income of $4.2 million, or $0.18 per diluted share, versus $0.07 for the first quarter of 2008 (linked-quarter). -- 55.9% increase in fee income on a linked-quarter basis; strong fee income from both the bank and fee-based companies. -- Noninterest income as a percentage of operating revenues was 33.0% for the second quarter. -- Net interest margin on a linked-quarter basis expanded to 4.11% in the second quarter of 2008 from 4.01% in the first quarter. -- Quarterly loan growth of $85.9 million or 18.4% annualized; year-over-year loan growth of $281.4 million, or 16.8%. -- Deposit and customer repurchase agreements (Customer Repos) decreased by $149.4 million from the first quarter and $34.3 million from June 2007. Driving the decrease was the reduction of $80.3 million of brokered deposits during the quarter. -- Provision for loan losses of $6.0 million (pre-tax) for the current quarter, as compared to $5.0 million for the first quarter of 2008 and $1.0 million for the second quarter of 2007. -- Net loan charge-offs of $3.6 million for the second quarter, or 0.19% of average loans. -- Nonperforming assets to total assets of 0.89%. -- Allowance for loan and credit losses (Allowance) increased to 1.32% of total loans. "I was very pleased with the increase in our earnings during the second quarter," said Chairman and CEO Steve Bangert. "We were able to post an $0.11 improvement in diluted EPS, while continuing to build our allowance for loan losses. "We had anticipated stronger operating results during the second quarter off of a seasonally soft first quarter," said Bangert. "Our second quarter benefited from solid loan generation and strong fee income, particularly investment banking revenue. Our earnings were further bolstered by an expansion of our net interest margin. As with the industry in general, credit has weighed on our recent earnings; however, asset quality metrics were relatively stable. Overall, we were very pleased with the underlying strength of our core operating earnings for the quarter." Loans Loans [for Colorado Business Bank and Arizona Business Bank (collectively, the Bank)] ended the period just under $2.0 billion, an increase of $281.4 million, or 16.8%, over the same period in 2007. After a seasonally low first quarter for loan production, the Bank had a strong second quarter with net growth of $85.9 million, or an annualized rate of 18.4%. Over half of the growth came from Commercial and Industrial (C&I) loans in Colorado. Overall, Colorado drove our second quarter loan growth; loan outstandings were up $65.2 million, or 20.9% annualized. Arizona loans were up $20.7 million, or 11.7% annualized, for the quarter. Although the Company experienced robust growth in the second quarter, we anticipate the growth rate will temper in the second half of the year. Deposits and Customer Repo Balances Deposit and Customer Repo balances ended the period at $1.8 billion, a decrease of $34.3 million from the same period in 2007. On a linked-quarter basis, Deposit and Customer Repo balances were down $149.4 million. The majority of the decrease is attributed to a reduced reliance on brokered deposits in the Bank's funding mix, as the Bank shifted out of brokered deposits into FHLB advances and Fed Funds Purchased. Brokered deposits totaled $21.5 million as of June 30, 2008, down from $101.7 million as of March 31, 2008, and $120.1 million as of June 30, 2007. Brokered funding represents only 1.30% of total deposits as of the current quarter, versus 7.63% a year earlier. As of June 30, 2008, $446.1 million, or 27.0%, of our deposits were noninterest-bearing, down from 29.2% as of the second quarter of 2007. 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 addition to the reduction of brokered deposits during the quarter, the Company experienced outflows from three large depository relationships totaling $60.0 million late in the quarter. None of these were the result of a loss of customer relationship. In general, the Company's deposit rates have been set to retain deposits (and protect the margin), but not at a level necessary to attract new deposits. Based on continued loan demand, the Company intends to strengthen its focus on core deposits which may increase its marginal funding cost and place modest pressure on the net interest margin. Allowance for Loan and Credit Losses and Credit Quality Total nonperforming assets (NPAs) increased to $22.8 million at June 30, 2008, from $17.8 million at March 31, 2008. NPAs to total assets remain under 1.0%, and totaled 0.89% as of June 30, 2008, up from 0.73% as of the end of the first quarter. Nonperforming loans (NPLs) were $20.2 million as of June 30, 2008, or 1.03% of total loans. Our nonperforming loan levels continue to compare favorably with peer banks. 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. Our Arizona bank's NPLs were $12.7 million, or 1.79% of its total loans as of June 30, 2008. In addition, the Arizona bank recorded $2.6 million of Other Real Estate Owned (OREO) in the second quarter. The majority of Arizona's problem loans continue to be concentrated within its Land Acquisition and Development (A&D) portfolio. Approximately 64% of our total loans are within Colorado, and that portfolio continues to perform well. Colorado's NPLs totaled $7.5 million at the end of the current quarter or 0.60% of its total loans. (Over half of Colorado's NPLs are attributed to a single credit which was also included in our first quarter NPLs). The Company actively monitors the quality of its loan portfolio, and has heightened scrutiny of land A&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. While the Company believes it has identified and reserved for the current loss exposure within its loan portfolio, we remain cautious due to increased nonperforming asset levels announced by a number of lenders in our markets that could adversely affect property values as banks begin to liquidate collateral over the near term. During the second quarter 2008, we recorded a $6.0 million loan loss provision, as compared to $5.0 million for the first quarter of 2008, and $1.0 million for the second quarter of 2007. In addition, the Company reduced its Allowance for Credit Losses (recorded as a liability account) by crediting (reducing) noninterest expense by $0.4 million in the second quarter of 2008. By comparison, the Company made no adjustment to the Allowance for Credit Losses during the first quarter of 2008, and had a charge of $0.2 million in the second quarter of 2007. The Company charged-off (net of recoveries) $3.6 million in loans during the second quarter of 2008, and $5.3 million for the six months of 2008. For the year, the Company has provided $5.3 million more in provision for loan and credit losses than it charged-off. As a result, the Allowance has increased to $26.0 million as of June 30, 2008, from $20.6 million as of December 31, 2007. Including $0.2 million of Allowance for Credit Losses (recorded as a liability), the Company's combined Allowance for Loan and Credit Losses to total loans increased to 1.32% as of June 30, 2008, from 1.28% as of March 31, 2008, and 1.12% December 31, 2007. 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 is 128.7% of NPLs. 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 real estate conditions continue to deteriorate, an elevated level of loan loss provisioning may be required in the future. Shareholders' Equity and Regulatory Capital As of the end of the second quarter, total Shareholders' Equity was $192.4 million, or $8.33 per share. The Company's total tangible equity was $140.7 million, and its tangible equity to tangible asset ratio was 5.63%. Even with the increased level of provision for loan losses recorded during the latest quarter, the Company is still generating capital from its operating earnings. Total Risk-Based Capital for the consolidated company increased by $5.3 million during the second quarter. As of June 30, 2008, the Bank was well-capitalized with an expected Tier 1 Capital ratio of 9.98%, and Total Capital ratio of 11.13%. 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 June 30, 2008 is expected to be 8.98%, and its Total Capital ratio 10.34%. The Board reaffirmed its quarterly common stock dividend, currently at $0.07 per share. Net Interest Income & Margin Net interest income for the second quarter of 2008 increased to $23.5 million from $22.0 million for the first quarter of 2008. Net interest income was $21.7 million for the second quarter of 2007. During the second quarter, our net interest margin widened by 10 basis points to 4.11% from 4.01% as of March 31, 2008. The net interest margin was 4.32% for the prior year second quarter. Average earning asset balances grew by $95.7 million on a linked-quarter basis, mainly due to $67.3 million in average loan growth. The net increase in earning assets was primarily funded by an increase in average other short-term borrowings of $119.7 million, offset by a decrease in average CDs of $55.4 million (primarily brokered deposits). Average noninterest-bearing demand deposits were up $19.0 million from the prior linked quarter. Yields on average earning assets decreased 59 basis points (0.59%) from the first quarter of 2008 to the second quarter of 2008; while rates paid on average interest-bearing liabilities decreased 89 basis points (0.89%). Although the Company focuses on maintaining balance between interest-rate-sensitive assets and liabilities and repricing frequencies, historically, we have maintained a slightly asset-sensitive position. As a general rule, asset-sensitive banks are more likely to be susceptible to declines in net interest income in periods of falling interest rates, while liability-sensitive banks are more likely to experience declines in net interest income in periods of rising interest rates. Since June 2007, the Federal Open Market Committee (FOMC) lowered its target for the federal funds rate by 325 basis points. Although the Company maintains a relatively balanced 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 by 21 basis points from the second quarter of 2007. Additional margin compression over this period was mitigated by our success in reducing rates paid on deposit accounts as the federal funds rate has dropped. However, our future net interest margin (excluding the impact of any future rate movements) will depend on the rates we may be required to pay to attract new deposits, as loan production has significantly outpaced deposit generation in the current year. Noninterest Income Noninterest income improved significantly during the second quarter of 2008 to $11.6 million, from $7.4 million for the first quarter of 2008, an increase of 55.9%. Noninterest income increased by $5.2 million, or 82.9%, from the second quarter of 2007. For the six months ended June 30, 2008, noninterest income was $19.0 million, a 47% increase over the comparable 2007 period. Operating results for 2008 include noninterest income of $3.3 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 2008 totals, but not in any prior periods reported. As a percentage of total operating revenue, noninterest income was 33.0% in the second quarter of 2008 versus 22.6% for the prior year quarter. Insurance Insurance revenues increased to $4.2 million in the second quarter from $3.6 million in the first quarter of 2008, and $2.4 million in the second quarter of 2007. Year to date, insurance revenues totaled $7.8 million versus $5.1 million for the prior year period.
-- The segment was positively affected by the addition of CoBiz Insurance-AZ, which contributed $2.3 million in revenue during 2008. -- The Group Employee Benefits area continues to see steady revenue growth, and has improved revenues year to date by 12.4% over the same period in 2007. -- Revenue for the wealth transfer division increased significantly in the second quarter to $1.6 million, from $0.8 million in the first quarter, and $0.9 million for the second quarter of 2007. 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 2008 results to significantly improve over its 2007 results. Investment Banking Investment banking revenues were $3.2 million for the second quarter, as compared to $0.3 million in the first quarter of 2008 -- translating into an improvement of $0.06 per diluted share on a linked-quarter basis. The segment contributed $0.04 per diluted share in the second quarter of 2008, as compared to a net loss of $0.02 for the first quarter. Year to date, Investment Banking recognized $3.5 million in revenues versus $2.4 million for the same period in 2007. The segment continues to have a diversified backlog of engaged transactions, however, a greater number of engaged deals are being placed on hold. While Management believes that middle market M&A activity during 2008 will remain good for quality businesses, deal activity appears to be moderating. Restricted credit markets will continue to have an impact on both volume and multiples in middle-market transactions. However, middle-market deals will continue to close as financial buyers look to put the large amounts of capital raised in previous years to work and strategic buyers capitalize on attractive valuations. The sharp decline in housing prices coupled with rising commodity prices continue to pressure the economic environment and place strain on middle-market businesses. Sellers of middle-market businesses continue to feel valuation pressure due to uncertain economic conditions, a tighter lending environment and an increase in supply of businesses as baby-boomers begin to consider liquidity in anticipation of retirement. Investment Advisory & Trust The segment's revenues were $1.7 million in the second quarter, 46% greater than the second quarter of 2007, and up slightly from the first quarter of 2008. For the six months ended June 30, 2008, the segment's revenues were $3.4 million, as compared to $2.3 million for the six months ended June 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 $1.0 million in revenues to the segment in 2008. Discretionary Assets under Management (AUM) were $896.8 million as of June 30, 2008. Total AUM, including custody and advisory assets, were $1.6 billion (including a very significant advisory client base on which we receive an hourly consulting fee, as opposed to a basis-point-fee on AUM). In general, a decline in the broader equity market has negatively impacted the segment's AUM levels. Existing discretionary assets have decreased due to negative equity returns and attracting new assets is proving to be difficult given general market conditions. Continued pressure on AUM levels may mute current-year revenue growth.
Deposit Service Charges Deposit service charges are up 30.6% from the prior-year quarter, mainly due to treasury management analysis fees. Year to date, deposit service charges have increased by 33.8%. 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. Other Income Other income is comprised of increases in the cash surrender value of BOLI, earnings on equity method investments, merchant charges, bankcard fees, wire transfer fees, foreign exchange fees, safe deposit income and fees collected in conjunction with our customer hedge program. Other income was $1.2 million during the second quarter of 2008, an increase of $0.5 million over the first quarter of 2008 and $0.3 million over the comparable period in 2007. The increase was mainly attributed to earnings on equity method investments and the sale of interest-rate swaps to our customers. Earnings on our equity method investments are primarily impacted by the mezzanine funds' sale of portfolio companies they own an interest in, the timing of which may vary period-to-period. Fees collected on our customer hedge program are also transactional in nature. Operating Expenses Operating expenses totaled $22.5 million for the second quarter of 2008, an increase of $0.6 million from the first quarter of 2008 and $4.5 million from the second quarter of 2007. Our 2008 noninterest expenses were affected by the acquisitions of Wagner and CoBiz Insurance-AZ. Combined, they added $1.5 million in operating expenses for the current quarter, and $2.9 million for the first six months of 2008. Without Wagner and CoBiz Insurance-AZ, noninterest expense increased 14.1% in 2008 over 2007. Contributing to the increase 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 11.7% year over year, but was down 2.6% on a linked-quarter basis; -- variable compensation expense (including discretionary bonuses and commissions) was up $1.7 million (excluding Wagner or CoBiz Insurance-AZ) from the second quarter of 2008 to 2007, and up $1.4 million, or 50.7% on a linked-quarter basis due to the strong fee income recognized in the second quarter; -- An increase in occupancy costs of 12.9%, due in part to two new bank offices scheduled to open in the third quarter of 2008; and -- expenses related to the company-wide branding project, most of which were not incurred until after the first quarter of 2007. For the second quarter of 2008, our efficiency ratio increased to 64.1% from 63.5% 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). Year to date, the efficiency ratio was 68.8% versus 64.9% for the comparable 2007 period. The year-to-date ratio was negatively impacted by the first quarter results that were marked 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 we initiate cost containment measures and see the contribution from the fee-based businesses increase. Economic Conditions Colorado's economy remains strong, growing non-farm employment by 1.5% between May 2007 and 2008. Nationwide over-the-year employment gains slowed to 0.1% in May. The state's continuing strength was recognized in a recent ranking by CNBC, which placed Colorado among the top five states for business in 2008. Arizona continues to struggle, posting a 0.6% decrease in nonfarm jobs between May 2007 and May 2008. Most of the losses in Arizona stem from the weakness in the housing and construction industries, which will likely linger in the state past the end of 2008. Long-term prospects for both markets, however, remain favorable. The Intermountain West, which has been the fastest-growing region in the country for the past two decades, is projected to add 12.7 million residents and 8 million jobs in its metropolitan areas by 2040. If the projections by the Brookings Institution are correct, the region comprising Colorado, Arizona, Nevada, Utah and New Mexico will double in population and experience an estimated $3 trillion in housing and nonresidential development. The growth will be powered by continued migration to the region and a young population -- the Western states' average age of 34 is about two years younger than the national average -- having families. In addition, both Arizona and Colorado are expected to benefit from the job and capital outflow from California. Summary "I am pleased with the performance of our company and am optimistic about what we can accomplish in the second half of this year," said Chairman and CEO Steve Bangert. "We continue to succeed because all parts of our company contribute, not only in terms of driving revenue but also in taking market share from our competitors. "We are very fortunate to operate in two markets that have balanced one another extremely well. A few years ago, the Arizona bank became a significant contributor as the Colorado economy was late to exit the last recession; we're now experiencing the reverse with growing momentum from our Colorado franchise. I am encouraged by the company's ongoing ability to manage our asset quality and anticipate a return to more historical earnings performance." Earnings Conference Call In conjunction with this release, you are invited to listen to the Company's conference call on Friday, July 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=49356 or by telephone at 877.493.9121, (conference ID #52858755). 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 $2.5 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 "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. June 30, 2008 (unaudited) Three Months Ended Six Months Ended (in thousands, except per share June 30, June 30, amounts) 2008 2007 2008 2007 INCOME STATEMENT DATA Interest income $35,639 $38,286 $73,036 $74,643 Interest expense 12,143 16,581 27,562 31,923 NET INTEREST INCOME BEFORE PROVISION 23,496 21,705 45,474 42,720 Provision for loan losses 5,986 1,037 11,017 1,037 NET INTEREST INCOME AFTER PROVISION 17,510 20,668 34,457 41,683 Noninterest income 11,570 6,325 18,993 12,957 Noninterest expense 22,477 18,005 44,382 36,390 INCOME BEFORE INCOME TAXES 6,603 8,988 9,068 18,250 Provision for income taxes 2,420 3,328 3,290 6,707 NET INCOME $4,183 $5,660 $5,778 $11,543 EARNINGS PER COMMON SHARE BASIC $0.18 $0.24 $0.25 $0.49 DILUTED $0.18 $0.23 $0.25 $0.47 WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 23,068 23,955 23,043 23,735 DILUTED 23,207 24,504 23,244 24,356 COMMON SHARES OUTSTANDING AT PERIOD END 23,095 24,004 BOOK VALUE PER COMMON SHARE $8.33 $8.14 PERIOD END BALANCES Total Assets $2,548,171 $2,280,112 Loans (net) 1,935,450 1,660,907 Goodwill and Intangible Assets 51,824 42,183 Deposits 1,651,933 1,573,684 Junior Subordinated Debentures 72,166 72,166 Common Shareholders' Equity 192,492 195,687 Interest-Earning Assets 2,339,079 2,102,942 Interest-Bearing Liabilities 1,889,499 1,600,471 BALANCE SHEET AVERAGES Average Assets $2,450,269 $2,150,275 Average Loans (net) 1,869,449 1,569,450 Average Deposits 1,763,047 1,463,802 Average Junior Subordinated Debentures 72,166 72,166 Average Common Shareholders' Equity 194,772 187,199 Average Interest-Earning Assets 2,267,530 1,995,257 Average Interest-Bearing Liabilities 1,807,583 1,511,632 CoBiz Financial Inc. June 30, 2008 (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2008 2007 2008 2007 PROFITABILITY MEASURES Net Interest Margin 4.11% 4.32% 4.06% 4.35% Efficiency Ratio 64.07% 63.47% 68.75% 64.90% Return on Average Assets 0.67% 1.04% 0.47% 1.08% Return on Average Common Shareholders' Equity 8.64% 11.74% 5.97% 12.43% Noninterest Income as a Percentage of Operating Revenues 32.99% 22.57% 29.46% 23.27% CREDIT QUALITY Nonperforming Loans Loans 90 days or more past due and accruing interest $1,096 $ - Nonaccrual loans 19,078 2,096 Total nonperforming loans $20,174 $2,096 OREO and Repossessed Assets 2,580 - Total nonperforming assets $22,754 $2,096 Charge-offs (5,362) (83) Recoveries 29 33 Net Charge-Offs $(5,333) $(50) ASSET QUALITY MEASURES Nonperforming Assets to Total Assets 0.89% 0.09% Nonperforming Loans to Total Loans 1.03% 0.12% Allowance for Loan and Credit Losses to Total Loans 1.32% 1.16% Allowance for Loan and Credit Losses to Nonperforming Loans 128.66% 927.24% CoBiz Financial Inc. June 30, 2008 (unaudited) Investment Investment (in thousands, except per share Commercial Banking Advisory amounts) Banking Services and Trust Net interest income Quarter ended June 30, 2008 $24,606 $12 $(4) Quarter ended March 31, 2008 23,449 7 2 Annualized quarterly growth 19.8% 287.3% (1,206.6)% Quarter ended June 30, 2007 $23,043 $27 $1 Annual growth 6.8% (55.6)% (500.0)% Noninterest income Quarter ended June 30, 2008 $2,502 $3,196 $1,739 Quarter ended March 31, 2008 1,760 293 1,676 Annualized quarterly growth 169.6% 3,984.9% 15.1% Quarter ended June 30, 2007 $1,723 $959 $1,192 Annual growth 45.2% 233.3% 45.9% Net income Quarter ended June 30, 2008 $4,659 $901 $(79) Quarter ended March 31, 2008 3,446 (439) (107) Annualized quarterly growth 141.6% 1,227.7% 105.2% Quarter ended June 30, 2007 $7,182 $(62) $17 Annual growth (35.1)% 1,553.2% (564.7)% Earnings per share (diluted) Quarter ended June 30, 2008 $0.20 $0.04 $(0.00) Quarter ended March 31, 2008 0.15 (0.02) - Annualized quarterly growth 136.1% 1,183.0% - Quarter ended June 30, 2007 $0.29 $ - $ - Annual growth (30.8)% 100.0% (100.0)% Investment Investment Commercial Banking Advisory (in thousands) Banking Services and Trust Total loans At June 30, 2008 At March 31, 2008 Annualized quarterly growth At June 30, 2007 Annual growth Total deposits and customer repurchase agreements At June 30, 2008 At March 31, 2008 Annualized quarterly growth At June 30, 2007 Annual growth (in thousands, except per share amounts) Corporate Support and Insurance Other Consolidated Net interest income Quarter ended June 30, 2008 $(2) $(1,116) $23,496 Quarter ended March 31, 2008 1 (1,481) 21,978 Annualized quarterly growth (1,206.6)% 99.1% 27.8% Quarter ended June 30, 2007 $ - $(1,366) $21,705 Annual growth (100.0)% 18.3% 8.3% Noninterest income Quarter ended June 30, 2008 $4,153 $(20) $11,570 Quarter ended March 31, 2008 3,623 71 7,423 Annualized quarterly growth 58.8% (515.5)% 224.7% Quarter ended June 30, 2007 $2,440 $11 $6,325 Annual growth 70.2% (281.8)% 82.9% Net income Quarter ended June 30, 2008 $83 $(1,381) $4,183 Quarter ended March 31, 2008 - (1,305) 1,595 Annualized quarterly growth - (23.4)% 652.6% Quarter ended June 30, 2007 $(134) $(1,343) $5,660 Annual growth 161.9% (2.8)% (26.1)% Earnings per share (diluted) Quarter ended June 30, 2008 $0.00 $(0.06) $0.18 Quarter ended March 31, 2008 - (0.06) 0.07 Annualized quarterly growth - 3.3% 633.5% Quarter ended June 30, 2007 $(0.01) $(0.05) $0.23 Annual growth 135.8% (19.0)% (21.6)% Corporate Support and (in thousands) Insurance Other Consolidated Total loans At June 30, 2008 $1,961,177 At March 31, 2008 1,875,284 Annualized quarterly growth 18.4% At June 30, 2007 $1,679,765 Annual growth 16.8% Total deposits and customer repurchase agreements At June 30, 2008 $1,783,650 At March 31, 2008 1,933,086 Annualized quarterly growth (31.1)% At June 30, 2007 $1,817,941 Annual growth (1.9)% CoBiz Financial Inc. June 30, 2008 (unaudited) Three Months Ended June 30, 2008 Investment Investment Commercial Banking Advisory (in thousands) Banking Services and Trust Income Statement Total interest income $35,597 $12 $ - Total interest expense 10,991 - 4 Net interest income 24,606 12 (4) Provision for loan losses 5,986 - - Net interest income after provision 18,620 12 (4) Noninterest income 2,502 3,196 1,739 Noninterest expense 7,546 1,679 1,703 Income before income taxes 13,576 1,529 32 Provision for income taxes 5,031 588 22 Net income before management fees and overhead allocations $8,545 $941 $10 Management fees and overhead allocations, net of tax 3,886 40 89 Net income $4,659 $901 $(79) Corporate Support and (in thousands) Insurance Other Consolidated Income Statement Total interest income $ - $30 $35,639 Total interest expense 2 1,146 12,143 Net interest income (2) (1,116) 23,496 Provision for loan losses - - 5,986 Net interest income after provision (2) (1,116) 17,510 Noninterest income 4,153 (20) 11,570 Noninterest expense 3,839 7,710 22,477 Income before income taxes 312 (8,846) 6,603 Provision for income taxes 130 (3,351) 2,420 Net income before management fees and overhead allocations $182 $(5,495) $4,183 Management fees and overhead allocations, net of tax 99 (4,114) - Net income $83 $(1,381) $4,183 Three Months Ended March 31, 2008 Investment Investment Commercial Banking Advisory 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) Corporate Support and 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 Three Months Ended June 30, 2007 Investment Investment Commercial Banking Advisory Banking Services and Trust Income Statement Total interest income $38,217 $27 $1 Total interest expense 15,174 - - Net interest income 23,043 27 1 Provision for loan losses 1,037 - - Net interest income after provision 22,006 27 1 Noninterest income 1,723 959 1,192 Noninterest expense 6,090 998 1,026 Income before income taxes 17,639 (12) 167 Provision for income taxes 6,567 (2) 86 Net income before management fees and overhead allocations $11,072 $(10) $81 Management fees and overhead allocations, net of tax 3,890 52 64 Net income $7,182 $(62) $17 Corporate Support and Insurance Other Consolidated Income Statement Total interest income $1 $40 $38,286 Total interest expense 1 1,406 16,581 Net interest income - (1,366) 21,705 Provision for loan losses - - 1,037 Net interest income after provision - (1,366) 20,668 Noninterest income 2,440 11 6,325 Noninterest expense 2,468 7,423 18,005 Income before income taxes (28) (8,778) 8,988 Provision for income taxes (4) (3,319) 3,328 Net income before management fees and overhead allocations $(24) $(5,459) $5,660 Management fees and overhead allocations, net of tax 110 (4,116) - Net income $(134) $(1,343) $5,660 CoBiz Financial Inc. June 30, 2008 (unaudited) Three Months Ended June 30, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST INCOME Deposit service charges $972 $744 $228 31% Other loan fees 337 151 186 123% Investment advisory and trust income 1,739 1,192 547 46% Insurance income 4,153 2,440 1,713 70% Investment banking income 3,196 959 2,237 233% Other income 1,173 839 334 40% Total noninterest income $11,570 $6,325 $5,245 83% Six Months Ended June 30, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST INCOME Deposit service charges $1,911 $1,428 $483 34% Other loan fees 534 335 199 59% Investment advisory and trust income 3,412 2,344 1,068 46% Insurance income 7,776 5,070 2,706 53% Investment banking income 3,489 2,382 1,107 46% Other income 1,871 1,398 473 34% Total noninterest income $18,993 $12,957 $6,036 47% Three Months Ended June 30, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST EXPENSES Salaries and employee benefits $15,616 $11,587 $4,029 35% Stock based compensation expense 462 428 34 8% Occupancy expenses, premises and equipment 3,247 2,845 402 14% Amortization of intangibles 186 118 68 58% Other operating expenses 2,957 2,813 144 5% Loss/(Gain) on sale of other assets and securities 9 214 (205) (96%) Total noninterest expenses $22,477 $18,005 $4,472 25% Six Months Ended June 30, Increase/(decrease) (in thousands) 2008 2007 Amount % NONINTEREST EXPENSES Salaries and employee benefits $30,165 $23,753 $6,412 27% Stock based compensation expense 886 708 178 25% Occupancy expenses, premises and equipment 6,384 5,675 709 12% Amortization of intangibles 389 237 152 64% Other operating expenses 6,497 5,761 736 13% Loss/(Gain) on sale of other assets and securities 61 256 (195) (76%) Total noninterest expenses $44,382 $36,390 $7,992 22% June 30, 2008 December 31, 2007 % of % of (in thousands) Amount Portfolio Amount Portfolio LOANS Commercial $618,677 32.0% $576,959 31.6% Real Estate - mortgage 929,949 48.0% 874,226 47.9% Real Estate - construction 323,554 16.7% 309,568 17.0% Consumer 76,457 4.0% 71,422 3.9% Other 12,540 0.6% 14,151 0.8% Gross loans 1,961,177 101.3% 1,846,326 101.1% Less allowance for loan losses (25,727) (1.3%) (20,043) (1.1%) Net loans $1,935,450 100.0% $1,826,283 100.0% June 30, 2007 % of (in thousands) Amount Portfolio LOANS Commercial $513,817 30.9% Real Estate - mortgage 788,212 47.5% Real Estate - construction 305,525 18.4% Consumer 58,749 3.5% Other 13,462 0.8% Gross loans 1,679,765 101.1% Less allowance for loan losses (18,858) (1.1%) Net loans $1,660,907 100.0% June 30, 2008 December 31, 2007 (in thousands) % of % of Amount Portfolio Amount Portfolio DEPOSITS AND CUSTOMER REPURCHASE AGREEMENTS NOW and money market $626,500 35.1% $631,391 33.0% Savings 10,726 0.6% 11,546 0.6% Eurodollar 100,771 5.6% 77,444 4.1% Certificates of deposits under $100,000 105,400 5.9% 126,478 6.6% Certificates of deposits $100,000 and over 362,391 20.3% 456,754 23.9% Total interest-bearing deposits 1,205,788 67.6% 1,303,613 68.2% Noninterest-bearing demand deposits 446,145 25.0% 439,076 23.0% Customer repurchase agreements 131,717 7.4% 168,336 8.8% Total deposits and customer repurchase agreements $1,783,650 100.0% $1,911,025 100.0% June 30, 2007 % of (in thousands) Amount Portfolio DEPOSITS AND CUSTOMER REPURCHASE AGREEMENTS NOW and money market $587,272 32.3% Savings 11,290 0.6% Eurodollar 0 0.0% Certificates of deposits under $100,000 127,882 7.0% Certificates of deposits $100,000 and over 387,497 21.3% Total interest-bearing deposits 1,113,941 61.3% Noninterest-bearing demand deposits 459,743 25.3% Customer repurchase agreements 244,257 13.4% Total deposits and customer repurchase agreements $1,817,941 100.0% CoBiz Financial Inc. June 30, 2008 (unaudited) For the Three Months Ended June 30, 2008 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $7,492 $59 3.15% Investment securities 420,826 5,431 5.16% Loans 1,911,062 30,311 6.34% Allowance for loan losses (24,020) Total interest earning assets $2,315,360 $35,801 6.18% Noninterest-earning assets Cash and due from banks 42,674 Other 144,866 Total assets $2,502,900 Liabilities and Shareholders' Equity Deposits NOW and money market $676,456 $3,227 1.92% Savings 10,969 34 1.25% Eurodollar 108,345 553 2.02% Certificates of deposit Under $100,000 109,089 1,035 3.82% $100,000 and over 407,912 3,764 3.71% Total Interest-bearing deposits $1,312,771 $8,613 2.64% Other borrowings Securities sold under agreements to repurchase 155,267 715 1.82% Other short-term borrowings 310,217 1,849 2.36% Junior subordinated debentures 72,166 966 5.30% Total interest-bearing liabilities $1,850,421 $12,143 2.62% Noninterest-bearing demand accounts 439,986 Total deposits and interest- bearing liabilities 2,290,407 Other noninterest-bearing liabilities 17,699 Total liabilities 2,308,106 Shareholders' equity 194,794 Total liabilities and shareholders' equity $2,502,900 Net interest income $23,658 Net interest spread 3.56% Net interest margin 4.11% Ratio of average interest-earning assets to average interest-bearing liabilities 125.13% For the Three Months Ended June 30, 2007 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $5,946 $122 8.21% Investment securities 425,068 5,420 5.10% Loans 1,617,030 32,883 8.13% Allowance for loan losses (18,255) Total interest earning assets $2,029,789 $38,425 7.49% Noninterest-earning assets Cash and due from banks 47,872 Other 106,587 Total assets $2,184,248 Liabilities and Shareholders' Equity Deposits NOW and money market $561,376 $4,546 3.25% Savings 11,320 50 1.77% Eurodollar - - 0.00% Certificates of deposit Under $100,000 119,583 1,448 4.86% $100,000 and over 371,179 4,637 5.01% Total Interest-bearing deposits $1,063,458 $10,681 4.03% Other borrowings Securities sold under agreements to repurchase 250,787 2,390 3.77% Other short-term borrowings 155,238 2,101 5.41% Junior subordinated debentures 72,166 1,409 7.81% Total interest-bearing liabilities $1,541,649 $16,581 4.30% Noninterest-bearing demand accounts 431,562 Total deposits and interest- bearing liabilities 1,973,211 Other noninterest-bearing liabilities 17,599 Total liabilities 1,990,810 Shareholders' equity 193,438 Total liabilities and shareholders' equity $2,184,248 Net interest income $21,844 Net interest spread 3.19% Net interest margin 4.32% Ratio of average interest-earning assets to average interest-bearing liabilities 131.66% For the Six Months Ended June 30, 2008 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $9,036 $166 3.67% Investment securities 403,708 10,473 5.19% Loans 1,877,421 62,708 6.68% Allowance for loan losses (22,635) Total interest earning assets $2,267,530 $73,347 6.47% Noninterest-earning assets Cash and due from banks 42,152 Other 140,587 Total assets $2,450,269 Liabilities and Shareholders' Equity Deposits NOW and money market deposits $676,255 $7,597 2.26% Savings 11,105 83 1.50% Eurodollar 100,507 1,165 2.29% Certificates of deposits Under $100,000 113,965 2,391 4.22% $100,000 and over 430,718 8,916 4.16% Total Interest-bearing deposits $1,332,550 $20,152 3.04% Other borrowings Securities sold under agreements to repurchase 152,510 1,622 2.10% Other short-term borrowings 250,357 3,572 2.82% Junior subordinated debentures 72,166 2,217 6.08% Total interest-bearing liabilities $1,807,583 $27,563 3.05% Noninterest-bearing demand accounts 430,497 Total deposits and interest- bearing liabilities 2,238,080 Other noninterest-bearing liabilities 17,417 Total liabilities and preferred securities 2,255,497 Shareholders' equity 194,772 Total liabilities and shareholders' equity $2,450,269 Net interest income $45,784 Net interest spread 3.42% Net interest margin 4.06% Ratio of average interest-earning assets to average interest-bearing liabilities 125.45% For the Six Months Ended June 30, 2007 Interest Average Average earned yield (in thousands) Balance or paid or cost Assets Federal funds sold and other $6,118 $238 7.78% Investment securities 419,689 10,745 5.12% Loans 1,587,569 63,951 8.06% Allowance for loan losses (18,119) Total interest earning assets $1,995,257 $74,934 7.57% Noninterest-earning assets Cash and due from banks 47,327 Other 107,691 Total assets $2,150,275 Liabilities and Shareholders' Equity Deposits NOW and money market deposits $558,537 $8,765 3.16% Savings 11,211 93 1.67% Eurodollar - - 0.00% Certificates of deposits Under $100,000 106,911 2,524 4.76% $100,000 and over 353,696 8,724 4.97% Total Interest-bearing deposits $1,030,355 $20,106 3.94% Other borrowings Securities sold under agreements to repurchase 243,873 4,580 3.74% Other short-term borrowings 165,238 4,433 5.34% Junior subordinated debentures 72,166 2,804 7.73% Total interest-bearing liabilities $1,511,632 $31,923 4.24% Noninterest-bearing demand accounts 433,447 Total deposits and interest- bearing liabilities 1,945,079 Other noninterest-bearing liabilities 17,997 Total liabilities and preferred securities 1,963,076 Shareholders' equity 187,199 Total liabilities and shareholders' equity $2,150,275 Net interest income $43,011 Net interest spread 3.33% Net interest margin 4.35% Ratio of average interest-earning assets to average interest-bearing liabilities 131.99% CoBiz Financial Inc. June 30, 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.
June 30, 2008 Shareholders' equity as reported - GAAP $192,492 Goodwill and intangible assets (51,824) Tangible equity - Non-GAAP $140,668 Total assets as reported - GAAP $2,548,171 Goodwill and intangible assets (51,824) Total tangible assets - Non-GAAP $2,496,347 Shareholders' equity to total assets as reported - GAAP 7.55% Tangible equity to total tangible assets as reported - Non-GAAP 5.63%

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