CoBiz Financial Inc. Reports Operating Results (10-Q)
CoBiz Inc. is a 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 Private Asset Management; 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 Alexander Capital Management Group; and employee and executive benefits consulting and wealth transfer services through Financial Designs. Cobiz Financial Inc. has a market cap of $166.92 million; its shares were traded at around $4.62 with and P/S ratio of 0.93. The dividend yield of Cobiz Financial Inc. stocks is 0.87%. Cobiz Financial Inc. had an annual average earning growth of 17.1% over the past 10 years. GuruFocus rated Cobiz Financial Inc. the business predictability rank of 5-star. Highlight of Business Operations: Total assets at September 30, 2009 were $2.5 billion, a decrease of $146.6 million or 5.5% from December 31, 2008, due primarily to a decrease in the loan portfolio of $151.3 million, an increase in the allowance for loan losses of $38.6 million and a goodwill impairment of $46.2 million, offset by increases in Fed Funds Sold of $50.4 million, and an increase in OREO of $16.5 million and deferred taxes of $14.6 million. Through the third quarter of 2009, loan pay downs and maturities coupled with the increase in the allowance for loan losses from December 31, 2008, have outpaced new credit extensions of $173.9 million and loan advances of $295.8 million.
Investments. The Company manages its investment portfolio to provide interest income and to meet the collateral requirements for public deposits, our customer repurchase program and wholesale borrowings. The overall increase in the investment portfolio of $0.2 million during the first nine months of 2009 to $500.3 million was the result of purchases totaling $79.7 million offset by paydowns and maturities of $83.6 million and a $14.1 million increase in unrealized gains. Also factoring into the change was the sale of $7.9 million in Federal Home Loan Bank (FHLB) stock and net losses of $1.9 million related to OTTI and security sales. Purchases during the first three quarters of 2009 consisted of: $35.9 million in mortgage-backed securities; $25.0 million in short-term U.S. government agency debentures; $18.5 million in corporate debt securities issued by publicly traded companies; and, $0.3 million in a municipal bond. Maturing investments were largely high-grade government-backed mortgage-backed securities (MBS) but also included $7.5 million in calls of corporate debt securities.
Loans. The Company has seen a decline in loan demand from qualifying prospective borrowers as well as current clients through the first three quarters of 2009. Gross loans held for investment decreased by $153.1 million or 7.5% to $1.88 billion at September 30, 2009 compared to December 31, 2008. The decrease was fairly distributed on a dollar-basis between our two markets, Arizona (48%) and Colorado (52%). The decrease in our loan portfolio through the first nine months of 2009 is mainly attributed to our Commercial loans, accounting for $69.4 million or 45.4% of the change but also contributing to the year to date change were the Real Estate term and Real Estate construction loans, decreasing by $37.1 million and $43.1 million, respectively, from December 31, 2008. Management has worked to reduce exposure in the real estate construction portfolio by actively working with borrowers, proceeding with foreclosure actions and recording charge-offs for uncollectible credits. Management continues to be cautious in extending new credit to that portion of the portfolio and has tightened credit standards on new credits. Since September 30, 2008, the real estate construction portfolio has declined by $82.0 million to $223.9 million or 12% of the total loan portfolio.
Other Real Estate Owned. OREO increased by $16.5 million to $22.5 million at September 30, 2009 from $5.9 million at December 31, 2008. During the first three quarters of 2009, the Company took possession of an additional $28.9 million in OREO and disposed of $11.9 million in OREO. At September 30, 2009, $7.8 million or 35% of OREO was in Arizona while the remaining $14.6 million or 65% was in Colorado. The Company held a total of 14 properties at September 30, 2009, of which 10 were located in Arizona and four in Colorado.
Other Assets. Other Assets increased by $5.5 million to $32.2 million at September 30, 2009, from $26.7 million at December 31, 2008. The increase was primarily attributed to a $9.1 million increase in taxes receivable offset by decreases of $2.2 million in the fair value of derivative instruments, $0.8 million in the value of private equity partnership investments and $0.7 million in accrued fees receivable.
Deposits. Deposit growth has been accelerated in the first three quarters of 2009 with total deposits increasing by $294.4 million to $1.93 billion at September 30, 2009 from $1.64 billion at December 31, 2008. Customer funding, which includes customer repurchase agreements (Customer repos) and excludes wholesale brokered deposits, increased $317.8 million from December 31, 2008. Certificates of deposit increased $220.7 million (excluding brokered deposits) largely attributable to a higher FDIC limit and our attractive deposit rates. Brokered deposits declined $31.2 million through the first three quarters of 2009 to $35.4 million and was attributable to the general growth in deposits and overall paydown on the loan portfolio, reducing the Companys need for wholesale funding.
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