Search the web
Welcome, Guest
[Sign Out, My Account]

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
COBZ > SEC Filings for COBZ > Form 10-Q on 25-Oct-2013All Recent SEC Filings

Show all filings for COBIZ FINANCIAL INC



Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q. Certain terms used in this discussion are defined in the notes to these financial statements. For a description of our accounting policies, see Note 1 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2012. For a discussion of the segments included in our principal activities, see Note 8 of the Notes to the Condensed Consolidated Financial Statements.

Executive Summary

CoBiz Financial Inc. is a $2.8 billion financial holding company offering a broad array of financial service products to its target market of professionals, small and medium-sized businesses, and high-net-worth individuals primarily in Arizona and Colorado. Our operating segments include: Commercial Banking, Investment Banking, Wealth Management and Insurance.

Earnings are derived primarily from our net interest income, which is interest income less interest expense, and our noninterest income earned from fee-based business lines and banking service fees, offset by noninterest expense. As the majority of our assets are interest-earning and our liabilities are interest-bearing, changes in interest rates impact our net interest margin, the largest component of our operating revenue (defined as net interest income plus noninterest income). We manage our interest-earning assets and interest-bearing liabilities to reduce the impact of interest rate changes on our operating results. We also have focused on reducing our dependency on the net interest margin by increasing our noninterest income from complementary financial service activities including investment banking, wealth management and insurance brokerage.

Industry Overview

At the September 2013 meeting, the Federal Open Market Committee (FOMC) kept the target range for federal funds rate at 0-25 basis points. The FOMC noted that while some indicators of labor market conditions have shown improvement, the unemployment rate remains elevated. The FOMC currently anticipates that the low range of the target federal funds rate will remain appropriate for as long as the unemployment rate is above 6.5% and inflation is projected to be no more than a half percentage point above the Committee's 2% goal. The FOMC also stated that the downside risks to the

41 | Page

Table of Contents

outlook of the economy and the labor market have diminished since last fall, while at the same time economic activity and labor market conditions have improved. However, the FOMC decided to continue purchasing additional agency mortgage backed and longer-term Treasury securities at a combined pace of $85 billion each month. This is intended to keep downward pressure on longer-term interest rates, support mortgage markets and help make broader financial conditions more accommodative. The FOMC intends to await more evidence that economic activity and labor market improvements will be sustained before adjusting the pace of its purchases.

Labor markets have improved in 2013 with the national unemployment rate decreasing to 7.3% in August, down from respective averages of 8.1% and 8.9% in 2012 and 2011 and the lowest level since November 2008. Between August 2012 and August 2013, Colorado and Arizona were two of the states noted as having statistically significant employment increases at 2.5% and 2.0%, respectively.

In the second quarter of 2013, FDIC insured commercial banks and savings institutions reported combined earnings of $42.2 billion, 23% higher than the second quarter of 2012. This was the 16th consecutive quarter that earnings registered a year-over-year increase. However, the average Return on Assets (ROA) of 1.17% for the second quarter of 2013 remains below the average ROA of 1.27% for the industry between 2000-2006. Earnings for the industry continue to be restrained by a diminishing net interest income. Net interest income for the industry fell for the third consecutive quarter and for the fourth time in the past five quarters. Higher noninterest income and lower noninterest expense helped improve earnings on a year-over-year basis.

On July 2, 2013, one year after issuing notices of proposed rulemaking, the Federal Reserve Board approved a final rule to implement the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The FDIC and the Office of the Comptroller of the Currency subsequently approved the final rule on July 9, 2013. The rule becomes effective for large banks subject to the advanced approaches risk-based capital rules on January 1, 2014. Non-advanced approaches banks will implement the final rule beginning January 1, 2015, the implementation date for the Company. The final rule minimizes the impact on smaller, less complex financial institutions. Key highlights of the final rule for non-advanced approaches banks such as the Company include:

A provision of a one-time opt-out from the recognition of AOCI unrealized gains and losses in regulatory capital. This will reduce potential volatility in regulatory capital ratios.

The residential mortgage risk-weighting approach in the notice of proposed rulemaking was removed in the final rule. Institutions will continue to use the existing risk-weighting approach.

Institutions with less than $15 billion in assets will be allowed to include certain non-qualifying capital instruments in regulatory capital that were issued prior to May 19, 2010. The Company's $70.0 million of TPS issued by its wholly-owned trusts will continue to be included in regulatory capital.

Inclusion of a number of deductions and adjustments from regulatory capital. These include, for example, deferred tax assets dependent upon future taxable income, and investments in equity issued by nonconsolidated financial entities above certain thresholds. The Company estimates that application of the new requirements would result in significant deductions from regulatory capital due to the Company's investment in bank trust preferred and subordinated debt securities. However, these deductions will be phased in over a three-year period beginning in 2015, which will allow the Company to mitigate the impact of the deduction through a reduction in the impacted securities portfolio through calls, maturities and sales.

Overall, minimum requirements will increase for both the quantity and quality of capital held by institutions.

Financial and Operational Highlights

As discussed in Note 1 to the Condensed Consolidated Financial Statements, the Company sold its wealth transfer division that focused on high-end life insurance and closed its trust department during the fourth quarter of 2012. The results of operations related to these areas have been reported as discontinued operations. The prior period disclosures in the following section of this report have been adjusted to conform to the new presentation. Noted below are some of the Company's significant financial performance measures and operational results for the first nine months of 2013:

The Company exceeded the small-business loan growth threshold of 10% required under the SBLF program to achieve the lowest dividend tier on its Series C Preferred Stock. The dividend rate on the Series C Preferred Stock will be fixed at 1% through the end of 2015.

Net income and earnings per share improved for the three and nine months ended September 30, 2013 over the prior year.

42 | Page

Table of Contents

  Add COBZ to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for COBZ - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.