COBIZ INC - 10-Q Quarterly Report

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002.
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-24445

CoBiz Inc.
(Exact name of registrant as specified in its charter)

COLORADO		84-0826324
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

821 17th Street Denver, CO		80202
(Address of principal executive offices)		(Zip Code)

(303) 293-2265
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

There were 13,240,949 shares of the registrant's Common Stock, $0.01 par value per share, outstanding as of November 14, 2002.

CoBiz Inc.

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K	25
SIGNATURES		28

Item 1. Financial Statements

CoBiz Inc.

Consolidated Statements of Condition

September 30, 2002 and December 31, 2001

(unaudited)

			September 30, 2002		December 31, 2001
ASSETS
Cash and due from banks			$	38,542,000	$	18,879,000
Investments:
	Investment securities available for sale (cost of $270,610,000 and $196,373,000, respectively)			272,824,000		198,180,000
	Investment securities held to maturity (fair value of $2,489,000 and $3,176,000, respectively)			2,451,000		3,121,000
	Other investments			7,666,000		6,595,000

		Total investments		282,941,000		207,896,000

Loans and leases, net				768,943,000		674,044,000
Goodwill				8,341,000		8,341,000
Intangible assets				535,000		479,000
Investment in operating leases				587,000		1,447,000
Premises and equipment, net				5,053,000		3,963,000
Accrued interest receivable				3,794,000		3,612,000
Deferred income taxes				3,310,000		3,351,000
Other				3,354,000		3,398,000

TOTAL ASSETS			$	1,115,400,000	$	925,410,000

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
	Demand		$	196,280,000	$	164,578,000
	NOW and money market			283,127,000		236,775,000
	Savings			6,518,000		5,957,000
	Certificates of deposit			307,091,000		247,882,000

		Total deposits		793,016,000		655,192,000
Federal funds purchased				17,450,000		5,000,000
Securities sold under agreements to repurchase				110,364,000		83,596,000
Advances from Federal Home Loan Bank				60,630,000		86,200,000
Accrued interest and other liabilities				35,765,000		4,619,000
Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures				20,000,000		20,000,000

		Total liabilities		1,037,225,000		854,607,000
Minority Interests				6,000		—
Shareholders' equity:
	Cumulative preferred, $.01 par value; 2,000,000 shares authorized; None outstanding			—		—
	Common, $.01 par value; 25,000,000 shares authorized; 13,240,949 and 13,109,351 issued and outstanding, respectively			132,000		131,000
	Additional paid-in capital			45,889,000		45,167,000
	Retained earnings			30,777,000		24,386,000
	Accumulated other comprehensive income net of income tax of $843,000 and $688,000, respectively			1,371,000		1,119,000

		Total shareholders' equity		78,169,000		70,803,000

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	1,115,400,000	$	925,410,000

See notes to consolidated financial statements.

CoBiz Inc.

Consolidated Statements of Income and Comprehensive Income

(unaudited)

			Three months ended September 30,					Nine months ended September 30,
			2002			2001		2002			2001
INTEREST INCOME:
	Interest and fees on loans and leases		$	13,229,000		$	12,779,000	$	38,027,000		$	37,796,000
	Interest and dividends on investment securities:
		Taxable securities		2,668,000			2,960,000		7,892,000			8,239,000
		Nontaxable securities		59,000			58,000		185,000			125,000
		Dividends on securities		80,000			77,000		233,000			222,000
	Federal funds sold and other			22,000			37,000		37,000			417,000

		Total interest income		16,058,000			15,911,000		46,374,000			46,799,000
INTEREST EXPENSE:
	Interest on deposits			3,410,000			4,910,000		10,103,000			15,562,000
	Interest on short-term borrowings and FHLB advances			699,000			1,183,000		2,244,000			3,868,000
	Interest on mandatorily redeemable preferred securities of subsidiary trust			500,000			500,000		1,500,000			1,500,000

		Total interest expense		4,609,000			6,593,000		13,847,000			20,930,000
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES				11,449,000			9,318,000		32,527,000			25,869,000
Provision for loan and lease losses				850,000			700,000		1,990,000			1,835,000

NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES				10,599,000			8,618,000		30,537,000			24,034,000

NONINTEREST INCOME:
	Service charges			503,000			462,000		1,552,000			1,294,000
	Operating lease income			134,000			346,000		649,000			1,220,000
	Trust and fiduciary fees			176,000			157,000		502,000			512,000
	Insurance revenue			508,000			244,000		1,180,000			803,000
	Investment banking revenues			211,000			877,000		2,253,000			877,000
	Other income			410,000			234,000		1,349,000			1,169,000

		Total noninterest income		1,942,000			2,320,000		7,485,000			5,875,000

NONINTEREST EXPENSE:
	Salaries and employee benefits			5,152,000			3,914,000		14,854,000			10,362,000
	Occupancy expenses, premises and equipment			1,574,000			1,228,000		4,426,000			3,472,000
	Depreciation on leases			116,000			312,000		525,000			1,004,000
	Amortization of intangibles			41,000			127,000		120,000			364,000
	Other			1,652,000			1,516,000		4,741,000			4,205,000

		Total noninterest expense		8,535,000			7,097,000		24,666,000			19,407,000

MINORITY INTERESTS				(5,000	)		3,000		(3,000	)		3,000
INCOME BEFORE INCOME TAXES				4,011,000			3,838,000		13,359,000			10,499,000
Provision for income taxes				1,528,000			1,520,000		5,115,000			4,138,000

NET INCOME			$	2,483,000		$	2,318,000	$	8,244,000		$	6,361,000

UNREALIZED (DEPRECIATION) APPRECIATION ON INVESTMENT SECURITIES AVAILABLE FOR SALE, net of tax				(310,000	)		632,000		252,000			1,368,000

COMPREHENSIVE INCOME			$	2,173,000		$	2,950,000	$	8,496,000		$	7,729,000

EARNINGS PER SHARE:
	Basic		$	0.19		$	0.18	$	0.63		$	0.50

	Diluted		$	0.18		$	0.17	$	0.60		$	0.48

CASH DIVIDENDS PER SHARE:			$	0.05		$	0.05	$	0.14		$	0.13

See notes to consolidated financial statements.

CoBiz Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2002 and 2001

(unaudited)

			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	8,244,000		$	6,361,000
Adjustments to reconcile net income to net cash provided by operating activities:
	Net amortization of securities			304,000			179,000
	Depreciation and amortization			2,117,000			2,632,000
	Provision for loan and lease losses			1,990,000			1,835,000
	Deferred income taxes			(114,000	)		(1,235,000	)
	Minority interests			(3,000	)		—
	Gain on sale of premises and equipment			(36,000	)		(400,000	)
Changes in:
	Accrued interest receivable			(182,000	)		16,000
	Other assets			(115,000	)		(1,028,000	)
	Accrued interest and other liabilities			35,000			1,580,000

		Net cash provided by operating activities		12,240,000			9,940,000
CASH FLOWS FROM INVESTING ACTIVITIES:
	Net change in other investments			(1,071,000	)		(827,000	)
	Purchase of investment securities available for sale			(102,448,000	)		(101,278,000	)
	Maturities of investment securities held to maturity			665,000			948,000
	Maturities of investment securities available for sale			59,315,000			68,775,000
	Loan and lease originations and repayments, net			(96,876,000	)		(117,762,000	)
	Purchase of premises and equipment			(2,370,000	)		(1,493,000	)
	Purchase of intangible asset			(176,000	)		—
	Purchase of minority interest			—			(200,000	)
	Acquisition of subsidiary			—			(976,000	)
	Proceeds from sale of premises and equipment			325,000			1,128,000

		Net cash used in investing activities		(142,636,000	)		(151,685,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net increase in demand, NOW, money market, and savings accounts			78,615,000			38,008,000
	Net increase in certificates of deposit			59,209,000			64,060,000
	Net increase in federal funds purchased			12,450,000			5,075,000
	Net increase in securities sold under agreements to repurchase			26,768,000			28,653,000
	Advances from the Federal Home Loan Bank			320,500,000			249,500,000
	Repayments of advances from the Federal Home Loan Bank			(346,070,000	)		(251,800,000	)
	Proceeds from exercise of stock options			440,000			337,000
	Dividends paid on common stock			(1,853,000	)		(1,548,000	)

		Net cash provided by financing activities		150,059,000			132,285,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				19,663,000			(9,460,000	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				18,879,000			35,995,000

CASH AND CASH EQUIVALENTS, END OF PERIOD			$	38,542,000		$	26,535,000

See notes to consolidated financial statements.

CoBiz Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

(unaudited)

1. Consolidated Condensed Financial Statements

The accompanying consolidated condensed financial statements are unaudited and include the accounts of CoBiz Inc. ("Parent"), and its subsidiaries CoBiz Connect, Inc., CoBiz Insurance, Inc., Colorado Business Bankshares Capital Trust I, American Business Bank, N.A. (the "Bank"), Colorado Business Leasing, Inc. ("Leasing"), and Green Manning & Bunch, Ltd. ("GMB"), all of which are wholly owned except GMB, which has a 2% minority interest. Parent and its subsidiaries are collectively referred to as the "Company" or "CoBiz".

On March 8, 2001, CoBiz completed the acquisition of First Capital Bank of Arizona ("First Capital"). First Capital was an Arizona state-chartered commercial bank with two locations serving Phoenix and the surrounding area of Maricopa County, Arizona. As a result of the merger, each outstanding share of First Capital common stock was converted into 3.399 shares of CoBiz common stock, resulting in the issuance of 2,484,887 shares of CoBiz common stock to the former First Capital shareholders. In addition, CoBiz assumed approximately 366,000 options that had been issued to First Capital employees. This transaction was accounted for as a pooling of interests.

On September 7, 2001, the Bank's legal name was changed from Colorado Business Bank, N.A. to American Business Bank, N.A. First Capital was then merged into American Business Bank. The Bank continues to operate in the Colorado market as Colorado Business Bank ("CBB") and in Arizona as Arizona Business Bank ("ABB").

On March 1, 2001, CoBiz completed its acquisition of Milek Insurance Services, Inc ("Milek"). The agency, which was renamed CoBiz Insurance, Inc., provides commercial and personal property and casualty insurance brokerage, as well as risk management consulting services to small- and medium-sized businesses and individuals. The shareholders of Milek received 67,145 shares of CoBiz common stock as consideration for the acquisition. This transaction was also accounted for as a pooling of interests.

Under the pooling of interests method of accounting, the recorded assets, liabilities, shareholders' equity, income and expenses of CoBiz, First Capital and Milek give retroactive effect to the merger.

On March 19, 2001, the Bank acquired all of the outstanding common stock of Leasing held by minority stockholders, thereby making Leasing a wholly-owned subsidiary of the Bank.

On July 10, 2001, the Company acquired GMB, an investment banking firm based in Denver, Colorado. The acquisition of GMB, which is a limited partnership, was completed through CoBiz GMB, Inc., a wholly owned subsidiary that was formed in order to consummate the transaction. In the acquisition, (i) the corporate general partner of GMB was merged into CoBiz GMB, Inc., with the shareholders of the general partner receiving a combination of cash, shares of common stock, and the right to receive future earn-out payments, and (ii) CoBiz GMB, Inc. acquired all of the limited partnership interests of GMB in exchange for cash, shares of CoBiz GMB, Inc. Class B Common Stock (the "CoBiz GMB, Inc. Shares") and the right to receive future earn-out payments. The CoBiz GMB, Inc. Shares represent a 2% interest in CoBiz GMB, Inc. (and a 2% indirect interest in GMB) and have no voting rights. After two years, or sooner under certain circumstances, the holders of the CoBiz GMB, Inc. Shares have the right to require the Company to exchange the CoBiz GMB, Inc. Shares for shares of our common stock. After three years, or sooner under certain circumstances, the Company can require the holders of the CoBiz GMB, Inc. Shares to exchange such shares for shares of the Company's common stock. The transaction was accounted for as a purchase. Goodwill of $4,976,000 was recorded in connection with the transaction. The contingent consideration resulting from the

earn-out payments will be treated as an additional cost of the acquisition and recorded as goodwill, if met. The contingent consideration is to be paid if GMB's revenues and earnings exceed certain targeted levels through 2005. The Company has not recorded this liability as of September 30, 2002 as the outcome of the contingency is not probable.

All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to prior balances to conform to the current year presentation. These financial statements and notes thereto should be read in conjunction with, and are qualified in their entirety by, our Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the Securities and Exchange Commission.

The consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2002.

2. Earnings per Common Share

Income available to common shareholders and the weighted average shares outstanding used in the calculation of Basic and Diluted Earnings Per Share are as follows:

		Three months ended September 30,					Nine months ended September 30,
		2002			2001		2002			2001
Income available to common shareholders		$	2,483,000		$	2,318,000	$	8,244,000		$	6,361,000
Income impact of assumed conversions:
	Convertible CoBiz GMB, Inc. Class B shares		(5,000	)		3,000		(3,000	)		3,000

Income available to common shareholders plus assumed conversions		$	2,478,000		$	2,321,000	$	8,241,000		$	6,364,000

Weighted average shares outstanding—basic earnings per share			13,223,043			12,943,195		13,179,380			12,736,025
Effect of dilutive securities			567,279			718,287		602,688			618,545

Weighted average shares outstanding—diluted earnings per share			13,790,322			13,661,482		13,782,068			13,354,570

As of September 30, 2002 and 2001, 190,937 and 7,060 options, respectively, were excluded from the earnings per share computation solely because their effect was anti-dilutive.

3. Stock Dividend

On July 18, 2001, the Board of Directors approved a three-for-two stock split that was effected through a stock dividend for shareholders of record as of July 30, 2001, payable August 13, 2001. As a result of the dividend, 4,320,371 additional shares of CoBiz common stock were issued, with fractional shares paid in cash. All shares and per share amounts included in this report are based on the increased number of shares after giving retroactive effect to the stock split.

4. Recent Accounting Pronouncements

The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as of January 1, 2001. The adoption of this statement did not have a material impact on the consolidated financial statements of the Company.

In July 2001, SFAS No. 141, Business Combinations was issued. SFAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. The adoption of SFAS No. 141 did not have a material impact on the consolidated financial statements of the Company.

In July 2001, SFAS No. 142, Goodwill and Other Intangible Assets, which was effective January 1, 2002 was issued. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles currently included in goodwill, reassessment of the useful lives of existing recognized intangibles, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS No. 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. Upon adoption of SFAS No. 142 on January 1, 2002, the Company determined that goodwill was not impaired and reclassified a $150,000 intangible asset from goodwill into other assets. For additional discussion on the impact of adopting SFAS No. 142, see Note 6.

In August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets was issued. SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, but retains the requirements relating to recognition and measurement of an impairment loss and resolves certain implementation issues resulting from SFAS No. 121. SFAS No. 144 became effective January 1, 2002 and did not have a material impact on the Company's consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires that a liability, for a cost associated with an exit or disposal activity, be recognized when the liability is incurred rather than when management commits to an exit plan (as currently required under EITF No. 94-3). This Statement also establishes that fair value is the objective for initial measurement of the liability. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. Based on current circumstances, management believes the application of the new rules will not have a material impact on the Company's consolidated financial statements.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions, an amendment of FASB Statement No.72 and 144 and FASB Interpretation No.9." This Statement provides guidance on the accounting for the acquisition of a financial institution. SFAS No. 147 states that the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination represents goodwill and should be accounted for under SFAS No. 142 and thus the specialized accounting guidance in SFAS No. 72 will no longer apply after September 30, 2002. SFAS No. 147 became effective October 1, 2002 and will impact how the Company accounts for future acquisitions.

5. Comprehensive Income

Comprehensive income is the total of (1) net income plus (2) all other changes in net assets arising from non-owner sources, which are referred to as other comprehensive income. Presented below are the changes in other comprehensive income for the periods indicated.

	Three months ended September 30,						Nine months ended September 30,
	2002			2001			2002			2001
Other comprehensive income, before tax		(501,000	)		1,022,000			407,000			2,215,000
Tax benefit (expense) related to items of other comprehensive income		191,000			(390,000	)		(155,000	)		(847,000	)

Other comprehensive income, net of tax	$	(310,000	)	$	632,000		$	252,000		$	1,368,000

6. Goodwill and Intangible Assets

As discussed in Note 4, the Company adopted SFAS No. 142 in January 2002, which requires companies to stop amortizing goodwill and certain intangible assets. Instead, SFAS No. 142 requires that goodwill and intangible assets with an indefinite life be reviewed for impairment upon adoption (January 1, 2002) and annually thereafter.

Under SFAS No. 142, goodwill impairment is deemed to exist when the carrying value of a reporting unit exceeds its estimated fair value. The Company's reporting units are generally consistent with the operating segments identified in Note 8. The Company estimated the fair value of the reporting units using multiples of comparable entities, including recent transactions, or a combination of multiples and a discounted cash flow methodology. As of the date of adoption, the estimated fair value of all reporting units exceeded their carrying values and goodwill impairment was not deemed to exist.

A summary of goodwill and total assets by operating segment as of September 30, 2002 is as follows:

	September 30, 2002
	Goodwill		Total Assets
Colorado Business Bank	$	4,360,000	$	926,108,000
Arizona Business Bank		255,000		174,470,000
GMB		3,486,000		5,423,000
Insurance and Private Asset Management		240,000		2,289,000
Corporate		—		7,110,000

Total	$	8,341,000	$	1,115,400,000

The reported 2001 results do not reflect the provisions of SFAS No. 142 which eliminated the amortization method for goodwill. Had the Company adopted SFAS No. 142 as of January 1, 2001, net income and basic and diluted earnings per share for the three and nine months ended September 30, 2001 would have been as follows:

	Three months ended September 30, 2001						Nine months ended September 30, 2001
	Net income		Earnings per basic common share		Earnings per diluted common share		Net income		Earnings per basic common share		Earnings per diluted common share
Net income, as reported	$	2,318,000	$	0.18	$	0.17	$	6,361,000	$	0.50	$	0.48
Add: goodwill amortization		110,000		0.01		0.01		329,000		0.03		0.02

Adjusted	$	2,428,000	$	0.19	$	0.18	$	6,690,000	$	0.53	$	0.50

As of September 30, 2002 and December 31, 2001, the Company's intangible assets and related accumulated amortization consisted of the following:

	September 30, 2002							December 31, 2001
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets subject to amortization:
Customer list	$	293,000	$	(68,000	)	$	225,000	$	293,000	$	(12,000	)	$	281,000
Lease premium		216,000		(116,000	)		100,000		216,000		(66,000	)		150,000
Customer contracts and relationships		236,000		(26,000	)		210,000		60,000		(12,000	)		48,000

Total	$	745,000	$	(210,000	)	$	535,000	$	569,000	$	(90,000	)	$	479,000

On July 1, 2002, CoBiz Insurance, Inc. purchased the book of business of an insurance brokerage business in the Denver, Colorado metropolitan area. The initial purchase price payment and acquisition costs of $176,000 have been allocated to Customer contracts and relationships and will be amortized over its useful life of 6 years. The Company recorded amortization expense of $120,000 related to intangible assets during the nine months ended September 30, 2002, compared to $35,000 (excluding goodwill) in the same period of 2001. Amortization expense on intangible assets for each of the five succeeding years is estimated as follows:

2003	$	191,000
2004		141,000
2005		82,000
2006		30,000
2007		29,000

Total	$	473,000

7. Supplemental Cash Flow Disclosures

In connection with the Company's initial public offering in 1998, the Company issued to its underwriter a warrant to purchase 150,000 shares of common stock (the "Warrant"). The Warrant was exercisable at a price equal to 120% of the initial public offering price ($9.60 per share). The Warrant was exercisable commencing one year from the date of the offering and will remain exercisable for a period of four years after such date. The warrant includes a net exercise provision pursuant to which the holder may convert the Warrant by, in effect, paying the exercise price using shares of Common Stock underlying such Warrant valued at the fair market value at the time of conversion. During 2002, 120,000 shares were exercised pursuant to the net exercise provision, resulting in the issuance of 51,346 shares of common stock.

For federal income tax purposes, the Company receives a tax deduction upon the exercise of non-qualified stock options for the difference between the exercise price and the fair value of the stock. During 2002, the Company recognized a tax benefit of $283,000 related to the exercise of non-qualified stock options.

8. Segments

Our principal areas of activity consist of commercial banking, investment banking, insurance, private asset management and corporate support and other.

The Company distinguishes its commercial banking segments based on geographic markets served. Currently, our reportable commercial banking segments are CBB and ABB. CBB is a full-service business bank with nine Colorado locations, including six in the Denver metropolitan area, two in Boulder and one in Edwards, just west of Vail. ABB has two Arizona locations, including one in Phoenix and one in Surprise, Arizona, a suburb of Phoenix near Sun City. On July 10, 2002, the Company announced it had hired three bank presidents and will add one location in the metropolitan Denver area, bringing the number of Colorado Business Bank locations to 10, and two in metropolitan Phoenix, increasing the number of Arizona Business Bank locations to four.

The investment banking segment consists of the operations of GMB, which provides middle-market companies with merger and acquisition advisory services, institutional private placements of debt and equity and other strategic financial advisory services.

The insurance and private asset management segment includes the activities of CoBiz Connect, Inc., CoBiz Insurance, Inc. and CoBiz Private Asset Management. CoBiz Connect, Inc. provides employee benefits consulting, insurance brokerage and related administrative support to employers. CoBiz Insurance, Inc. provides commercial and personal property and casualty insurance brokerage, as well as risk management consulting services to small- and medium-sized businesses and individuals. CoBiz Private Asset Management is a separate business division within the Bank that offers wealth management and investment advisory services, fiduciary (trust) services and estate administration services.

Corporate support and other consists of activities that are not directly attributable to the other reportable segments. Included in this category are the activities of Leasing, centralized bank operations, the Company's treasury function (i.e., investment management and wholesale funding), and activities of Parent and Colorado Business Bankshares Capital Trust I.

The financial information for each business segment reflects that information which is specifically identifiable or which is allocated based on an internal allocation method. Arizona Business Bank was acquired in 2001, and was not subject to parent company and central service fees until 2002. The GMB transaction was treated as a purchase, and accordingly, the results of their operations are only included in our consolidated results for the period subsequent to the consummation date in July 2001. The results of operations and selected financial information by operating segment are as follows:

		Colorado Business Bank		Arizona Business Bank		GMB			Insurance and Private Asset Management			Corporate Support and Other			Consolidated
			For the three months ended September 30, 2002
Income statement
	Total interest income	$	12,335,000	$	2,346,000	$	10,000		$	8,000		$	1,359,000		$	16,058,000
	Total interest expense		2,445,000		840,000		2,000			1,000			1,321,000			4,609,000

	Net interest income		9,890,000		1,506,000		8,000			7,000			38,000			11,449,000
	Provision for loan and lease losses		115,000		40,000		—			—			695,000			850,000

	Net interest income after provision for loan and lease losses		9,775,000		1,466,000		8,000			7,000			(657,000	)		10,599,000
	Noninterest income		712,000		89,000		220,000			697,000			224,000			1,942,000
	Noninterest expense and minority interest		2,397,000		1,045,000		643,000			679,000			3,766,000			8,530,000

	Income before income taxes		8,090,000		510,000		(415,000	)		25,000			(4,199,000	)		4,011,000
	Provision for income taxes		3,355,000		199,000		(157,000	)		9,000			(1,878,000	)		1,528,000

	Net income before management fees and overhead allocations	$	4,735,000	$	311,000	$	(258,000	)	$	16,000		$	(2,321,000	)	$	2,483,000

	Management fees and overhead allocations, net of tax		982,000		259,000		11,000			40,000			(1,292,000	)		—

	Net income	$	3,753,000	$	52,000	$	(269,000	)	$	(24,000	)	$	(1,029,000	)	$	2,483,000

			For the nine months ended September 30, 2002
Income statement
	Total interest income	$	35,357,000	$	6,434,000	$	13,000		$	18,000		$	4,552,000		$	46,374,000
	Total interest expense		7,361,000		2,521,000		6,000			1,000			3,958,000			13,847,000

	Net interest income		27,996,000		3,913,000		7,000			17,000			594,000			32,527,000
	Provision for loan and lease losses		704,000		260,000		—			—			1,026,000			1,990,000

	Net interest income after provision for loan and lease losses		27,292,000		3,653,000		7,000			17,000			(432,000	)		30,537,000
	Noninterest income		2,335,000		276,000		2,262,000			1,706,000			906,000			7,485,000
	Noninterest expense and minority interest		6,758,000		2,695,000		2,452,000			1,771,000			10,987,000			24,663,000

	Income before income taxes		22,869,000		1,234,000		(183,000	)		(48,000	)		(10,513,000	)		13,359,000
	Provision for income taxes		8,697,000		471,000		(69,000	)		(18,000	)		(3,966,000	)		5,115,000

	Net income before management fees and overhead allocations	$	14,172,000	$	763,000	$	(114,000	)	$	(30,000	)	$	(6,547,000	)	$	8,244,000

	Management fees and overhead allocations, net of tax		3,167,000		732,000		35,000			111,000			(4,045,000	)		—

	Net income	$	11,005,000	$	31,000	$	(149,000	)	$	(141,000	)	$	(2,502,000	)	$	8,244,000

			At September 30, 2002
Balance sheet
	Total assets	$	926,108,000	$	174,470,000	$	5,423,000		$	2,289,000		$	7,110,000		$	1,115,400,000
	Total gross loans and leases		646,674,000		124,592,000		—			—			7,539,000			778,805,000
	Total deposits		656,930,000		135,210,000		—			876,000			—			793,016,000

		Colorado Business Bank		Arizona Business Bank		GMB		Insurance and Private Asset Management			Corporate Support and Other			Consolidated
			For the three months ended September 30, 2001
Income statement
	Total interest income	$	11,873,000	$	2,276,000	$	3,000	$	7,000		$	1,752,000		$	15,911,000
	Total interest expense		3,966,000		1,101,000		—		1,000			1,525,000			6,593,000

	Net interest income		7,907,000		1,175,000		3,000		6,000			227,000			9,318,000
	Provision for loan and lease losses		623,000		—		—		—			77,000			700,000

	Net interest income after provision for loan and lease losses		7,284,000		1,175,000		3,000		6,000			150,000			8,618,000
	Noninterest income		574,000		71,000		877,000		401,000			394,000			2,317,000
	Noninterest expense		2,040,000		701,000		623,000		479,000			3,254,000			7,097,000

	Income before income taxes		5,818,000		545,000		257,000		(72,000	)		(2,710,000	)		3,838,000
	Provision for income taxes		2,259,000		208,000		98,000		(27,000	)		(1,018,000	)		1,520,000

	Net income before management fees and overhead allocations	$	3,559,000	$	337,000	$	159,000	$	(45,000	)	$	(1,692,000	)	$	2,318,000

	Management fees and overhead allocations, net of tax		1,375,000		—		—		14,000			(1,389,000	)		—

	Net income	$	2,184,000	$	337,000	$	159,000	$	(59,000	)	$	(303,000	)	$	2,318,000

			For the nine months ended September 30, 2001
Income statement
	Total interest income	$	35,356,000	$	6,858,000	$	3,000	$	24,000		$	4,558,000		$	46,799,000
	Total interest expense		13,238,000		3,539,000		—		3,000			4,150,000			20,930,000

	Net interest income		22,118,000		3,319,000		3,000		21,000			408,000			25,869,000
	Provision for loan and lease losses		1,233,000		446,000		—		—			156,000			1,835,000

	Net interest income after provision for loan and lease losses		20,885,000		2,873,000		3,000		21,000			252,000			24,034,000
	Noninterest income		1,611,000		628,000		877,000		1,316,000			1,440,000			5,872,000
	Noninterest expense		6,133,000		1,869,000		623,000		1,522,000			9,260,000			19,407,000

	Income before income taxes		16,363,000		1,632,000		257,000		(185,000	)		(7,568,000	)		10,499,000
	Provision for income taxes		6,359,000		633,000		98,000		(109,000	)		(2,843,000	)		4,138,000

	Net income before management fees and overhead allocations	$	10,004,000	$	999,000	$	159,000	$	(76,000	)	$	(4,725,000	)	$	6,361,000

	Management fees and overhead allocations, net of tax		3,785,000		—		—		41,000			(3,826,000	)		—

	Net income	$	6,219,000	$	999,000	$	159,000	$	(117,000	)	$	(899,000	)	$	6,361,000

			At September 30, 2001
Balance sheet
	Total assets	$	730,895,000	$	130,444,000	$	4,903,000	$	1,305,000		$	17,877,000		$	885,424,000
	Total gross loans and leases		530,243,000		93,533,000		—		—			17,835,000			641,611,000
	Total deposits		542,725,000		101,681,000		—		595,000			—			645,001,000

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

This discussion should be read in conjunction with our consolidated financial statements and notes thereto included in this Form 10-Q. For a description of our accounting policies, see Note 1 of Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2001. For a discussion of the segments included in our principal activities, see Note 8 of Notes to Consolidated Financial Statements.

Financial Condition

The following table sets forth the balance of loans and leases and deposits as of September 30, 2002, December 31, 2001 and September 30, 2001 (in thousands):

		September 30, 2002					December 31, 2001					September 30, 2001
		Amount			% of Portfolio		Amount			% of Portfolio		Amount			% of Portfolio
Total Loans and Leases:
Commercial		$	246,232		32.0	%	$	201,598		29.9	%	$	219,580		34.7	%
Real estate—mortgage			368,465		47.9	%		303,555		45.0	%		265,527		41.9	%
Real estate—construction			102,974		13.4	%		119,022		17.7	%		100,386		15.9	%
Consumer			48,007		6.2	%		40,840		6.1	%		36,051		5.7	%
Municipal leases			5,595		.8	%		3,216		.5	%		2,424		.4	%
Small business leases			7,532		1.0	%		14,685		2.1	%		17,643		2.7	%

Loans and leases		$	778,805		101.3	%	$	682,916		101.3	%	$	641,611		101.3	%
Less allowance for loan and lease losses			(9,862	)	(1.3	)%		(8,872	)	(1.3	)%		(8,426	)	(1.3	)%

Net loans and leases		$	768,943		100.0	%	$	674,044		100.0	%	$	633,185		100.0	%

Total Deposits
NOW and money market accounts		$	283,127		35.7	%	$	236,775		36.1	%	$	232,049		36.0	%
Savings			6,518		.8	%		5,957		.9	%		5,713		.9	%
Certificates of deposit under $100,000			133,925		16.9	%		80,667		12.3	%		90,815		14.1	%
Certificates of deposit $100,000 and over			173,166		21.8	%		167,215		25.6	%		158,414		24.5	%

	Total interest-bearing deposits	$	596,736		75.2	%	$	490,614		74.9	%	$	486,991		75.5	%
Noninterest-bearing demand deposits			196,280		24.8	%		164,578		25.1	%		158,010		24.5	%

	Total deposits	$	793,016		100.0	%	$	655,192		100.0	%	$	645,001		100.0	%

Our total assets increased by $190.0 million to $1.1 billion as of September 30, 2002, from $925.4 million as of December 31, 2001. A consistent focus on internal growth and sustained loan demand allowed our loan and lease portfolio (net) to increase by $94.9 million, to $768.9 million as of September 30, 2002, from $674.0 million at December 31, 2001. Total investments were $282.9 million as of September 30, 2002, compared to $207.9 million as of December 31, 2001. The increase in investments was driven by strong growth in deposits and customer repurchase agreements.

Deposits increased by $137.8 million to $793.0 million as of September 30, 2002, from $655.2 million as of December 31, 2001. Securities sold under agreements to repurchase were $110.4 million at September 30, 2002 and $83.6 million at December 31, 2001. Of the $110.4 million outstanding at September 30, 2002, $100.6 million were repurchase agreements transacted on behalf of our customers and are not considered a wholesale borrowing source. Overall, the increase in total deposits and customer repurchase agreements is attributed to an increased emphasis on deposit generation included in banker production goals.

Advances from the Federal Home Loan Bank of Topeka and the Federal Home Loan Bank of San Francisco (collectedly referred to as "FHLB") were $60.6 million at September 30, 2002, compared to $86.2 million at December 31, 2001. The decrease in FHLB borrowings was possible because of the strong deposit growth in the nine months ended September 30, 2002.

Results of Operations

Overview

The following table presents the condensed statements of income for the three and nine months ended September 30, 2002 and 2001.

	Three months ended September 30,									Nine months ended September 30,
					Increase (decrease)									Increase (decrease)
	2002		2001		Amount			%		2002		2001		Amount			%
	(Dollars in thousands)
Interest income	$	16,058	$	15,911	$	147		1	%	$	46,374	$	46,799	$	(425	)	(1	)%
Interest expense		4,609		6,593		(1,984	)	(30	)%		13,847		20,930		(7,083	)	(34	)%

Net interest income before provision for loan and lease losses		11,449		9,318		2,131		23	%		32,527		25,869		6,658		26	%
Provision for loan and lease losses		850		700		150		21	%		1,990		1,835		155		8	%

Net interest income after provision for loan and lease losses		10,599		8,618		1,981		23	%		30,537		24,034		6,503		27	%
Noninterest income		1,942		2,320		(378	)	(16	)%		7,485		5,487		1,998		36	%
Noninterest expense and minority interests		8,530		6,724		1,806		27	%		24,663		18,350		6,313		34	%

Income before income taxes		4,011		4,214		(203	)	(5	)%		13,359		11,171		2,188		20	%
Provision for income taxes		1,528		1,663		(135	)	(8	)%		5,115		4,394		721		16	%

Net income prior to nonrecurring charges	$	2,483	$	2,551	$	(68	)	(3	)%	$	8,244	$	6,777	$	1,467		22	%

Nonrecurring charges, net of tax		—		233		(233	)	—			—		416		(416	)	—
Reported net income	$	2,483	$	2,318	$	165		7	%	$	8,244	$	6,361	$	1,883		30	%

Net income was $2.5 million for the quarter ended September 30, 2002, compared with $2.3 million for the quarter ended September 30, 2001. Net interest income before provision for loan and lease losses increased by $2.1 million to $11.4 million for the quarter ended September 30, 2002, from $9.3 million for the quarter ended September 30, 2001. Earnings per share on a fully diluted basis for the third quarter were $0.18, versus $0.17 for the same period a year ago. Annualized return on average assets was .95% and 1.07% for the third quarter of 2002 and 2001, respectively. Annualized return on average common shareholders' equity was 12.70% for the quarter ended September 30, 2002, versus 13.81% for the quarter ended September 30, 2001.

We completed our acquisitions of First Capital and Milek in the first quarter of 2001. In addition, we restructured Leasing's back-office operations during 2001, transferring its support functions to the Commercial Banking department in order to improve profitability. Non-recurring expenses in the third quarter of 2001 related to the mergers were $0.2 million on an after-tax basis. Adjusting for these non-recurring items, combined operating earnings available to common shareholders were $2.6 million, or $0.19 per share.

Reported net earnings for the nine months ended September 30, 2002 and 2001 were $8.2 million and $6.4 million, respectively. Net interest income before provision for loan and lease losses increased by $6.7 million to $32.5 million for the nine months ended September 30, 2002, from $25.9 million for the nine months ended September 30, 2001. Earnings per share on a fully diluted basis for the nine months ended September 30, 2002 were $0.60 versus $0.48 for the same period a year ago. Return on average assets was 1.11% and 1.06% for the first nine months of 2002 and 2001, respectively. Return on average common shareholders' equity was 14.83% for the nine months ended September 30, 2002, versus 13.46% for the nine months ended September 30, 2001.

Net non-recurring expenses for the nine months ended September 30, 2001 related to the mergers and the Leasing restructuring were $0.4 million on an after-tax basis. Normalized operating earnings adjusted for these non-recurring items were $6.8 million, or $0.51 per share on a fully diluted basis.

Net Interest Income

Net interest income before provision for loan and lease losses was $11.4 million for the quarter ended September 30, 2002, an increase of $2.1 million, or 23%, compared with the quarter ended September 30, 2001. Yields on our interest-earning assets decreased by 128 basis points to 6.40% for the three months ended September 30, 2002, from 7.68% for the three months ended September 30, 2001. Yields paid on interest-bearing liabilities decreased by 165 basis points during this same period. The net interest margin was 4.62% for the quarter ended September 30, 2002, up from 4.56% for the quarter ended September 30, 2001.

For the first nine months of 2002, net interest income before provision for loan and lease losses was $32.5 million, an increase of $6.7 million compared with the same period in 2001, primarily due to decreased yields on interest-bearing deposits. Yields on our interest-earning assets decreased by 167 basis points to 6.48% for the nine months ended September 30, 2002, from 8.15% for the nine months ended September 30, 2001. Yields paid on interest-bearing liabilities decreased by 214 basis points during this same period. The net interest margin was 4.61% for the nine months ended September 30, 2002, up from 4.57% for the nine months ended September 30, 2001.

The Bank, being slightly asset sensitive, was negatively affected in the short-term by the significant decrease in interest rates during 2001. The prime rate dropped by 125 basis points to 4.75% as of September 30, 2002, from 6.00% at September 30, 2001. However, a stable prime rate during 2002 has allowed the cost of funds to decline to a level that allowed the margin to improve for the nine months ended September 30, 2002, compared to the same period in 2001. In addition, contributing to the improvement in our net interest income was an increase in average earning assets of $186 million to $943 million for the first nine months of 2002, from $757 million for the first nine months of 2001.

The following tables set forth the average amounts outstanding for each category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts and the average rate earned or paid for the three and nine months ended September 30, 2002 and 2001.

				For the three months ended September 30,
				2002							2001
				Average balance			Interest earned or paid		Average yield or cost(1)		Average balance			Interest earned or paid		Average yield or cost(1)
				(Dollars in thousands)
ASSETS:
Federal funds sold and other				$	2,794		$	22	3.08	%	$	4,105		$	37	3.53	%
Investment securities(2)					234,851			2,807	4.68	%		207,356			3,095	5.84	%
Loans and leases(3)					755,023			13,229	6.86	%		606,944			12,779	8.24	%
Allowance for loan and lease losses					(10,167	)		—	0.00	%		(8,203	)		—	0.00	%

	Total interest-earning assets				982,501			16,058	6.40	%		810,202			15,911	7.68	%
Noninterest-earning assets:
	Cash and due from banks				28,451							26,535
	Other				23,323							22,193

			Total assets	$	1,034,275						$	858,930

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
	NOW and money market accounts			$	271,332		$	902	1.32	%	$	236,411		$	1,676	2.81	%
	Savings				6,645			13	0.78	%		5,680			23	1.61	%
	Certificates of deposit:
		Under $100,000			127,161			1,122	3.50	%		90,043			1,229	5.42	%
		$100,000 and over			175,788			1,373	3.10	%		153,042			1,982	5.14	%

	Total interest-bearing deposits				580,926			3,410	2.33	%		485,176			4,910	4.02	%
Other borrowings:
	Securities and loans sold under agreements to repurchase and federal funds purchased				105,253			373	1.39	%		92,075			722	3.07	%
	FHLB advances				55,239			326	2.31	%		47,515			461	3.80	%
	Company obligated mandatorily redeemable preferred securities				20,000			500	10.00	%		20,000			500	10.00	%

			Total interest-bearing liabilities		761,418			4,609	2.40	%		644,766			6,593	4.05	%
Noninterest-bearing demand accounts					190,670							143,857

			Total deposits and interest-bearing liabilities		952,088							788,623
Other noninterest-bearing liabilities					4,595							3,700

			Total liabilities and preferred securities		956,683							792,323
Shareholders' equity					77,592							66,607

			Total liabilities and shareholders' equity	$	1,034,275						$	858,930

Net interest income							$	11,449						$	9,318

Net interest spread									4.00	%						3.64	%
Net interest margin									4.62	%						4.56	%
Ratio of average interest-earning assets to average interest-bearing liabilities					129.04	%						125.66	%

(1): Average yield or cost for the three months ended September 30, 2002 and 2001 has been annualized and is not necessarily indicative of results for the entire year.
(2): Yields do not include adjustments for tax-exempt interest because the amount of such interest is not material.
(3): Loan fees included in interest income are not material. Nonaccrual loans and leases are included in average loans and leases outstanding.

				For the nine months ended September 30,
				2002							2001
				Average balance			Interest earned or paid		Average yield or cost(1)		Average balance			Interest earned or paid		Average yield or cost(1)
				(dollars in thousands)
ASSETS:
Federal funds sold and other				$	1,948		$	37	2.50	%	$	11,783		$	417	4.67	%
Investment securities(2)					223,085			8,310	4.91	%		182,722			8,586	6.20	%
Loans and leases(3)					727,988			38,027	6.89	%		569,954			37,796	8.74	%
Allowance for loan and lease losses					(9,682	)		—	—			(7,657	)		—	—

	Total interest-earning assets				943,339			46,374	6.48	%		756,802			46,799	8.15	%
Noninterest-earning assets:
	Cash and due from banks				27,338							27,195
	Other				23,403							20,649

			Total assets	$	994,080						$	804,646

LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
	NOW and money market accounts			$	257,727		$	2,610	1.35	%	$	224,799		$	5,684	3.38	%
	Savings				6,734			39	0.77	%		5,331			76	1.91	%
	Certificates of deposit:
		Under $100,000			112,670			3,230	3.83	%		81,592			3,486	5.71	%
		$100,000 and over			172,127			4,224	3.28	%		148,464			6,316	5.69	%

	Total interest-bearing deposits				549,258			10,103	2.46	%		460,186			15,562	4.52	%
Other borrowings:
	Securities and loans sold under agreements to repurchase and federal funds purchased				109,480			1,225	1.48	%		77,885			2,291	3.88	%
	FHLB advances				60,274			1,019	2.23	%		43,663			1,577	4.76	%
	Company obligated mandatorily redeemable preferred securities				20,000			1,500	10.00	%		20,000			1,500	10.00	%

			Total interest-bearing liabilities		739,012			13,847	2.50	%		601,734			20,930	4.64	%
Noninterest-bearing demand accounts					176,649							136,280

			Total deposits and interest-bearing liabilities		915,661							738,014
Other noninterest-bearing liabilities					4,105							3,430

			Total liabilities and preferred securities		919,766							741,444
Shareholders' equity					74,314							63,202

			Total liabilities and shareholders' equity	$	994,080						$	804,646

Net interest income							$	32,527						$	25,869

Net interest spread									3.98	%						3.52	%
Net interest margin									4.61	%						4.57	%
Ratio of average interest-earning assets to average interest-bearing liabilities					127.65	%						125.77	%

(1): Average yield or cost for the nine months ended September 30, 2002 and 2001 has been annualized and is not necessarily indicative of results for the entire year.
(2): Yields do not include adjustments for tax-exempt interest because the amount of such interest is not material.
(3): Loan fees included in interest income are not material. Nonaccrual loans and leases are included in average loans and leases outstanding.

Noninterest Income

The following table presents noninterest income for the three and nine months ended September 30, 2002 and 2001.

		Three months ended September 30,									Nine months ended September 30,
						Increase (decrease)									Increase (decrease)
		2002		2001		Amount			%		2002		2001		Amount			%
		(Dollars in thousands)
Deposit service charges		$	503	$	462	$	41		9	%	$	1,552	$	1,294	$	258		20	%
Operating lease income			134		346		(212	)	(61	)%		649		1,220		(571	)	(47	)%
Other loan fees			202		91		111		122	%		494		287		207		72	%
Trust and fiduciary fees			176		157		19		12	%		502		512		(10	)	(2	)%
Insurance revenue			508		244		264		108	%		1,180		803		377		47	%
Investment banking revenue			211		877		(666	)	(76	)%		2,253		877		1,376		157	%
Other income			144		138		6		4	%		701		442		259		59	%
Gain on sale of other assets			64		5		59		1,180	%		154		440		(286	)	(65	)%

	Total noninterest income	$	1,942	$	2,320	$	(378	)	(16	)%	$	7,485	$	5,875	$	1,610		27	%

Noninterest income for the second quarter of 2002 was $1.9 million, compared to noninterest income of $2.3 million for the second quarter of 2001. Noninterest income for the first nine months of 2002 was $7.5 million versus $5.9 million for the same period in 2001. We are continually looking for opportunities to expand into fee-based business lines that are complementary to our existing market niche. In March 2000, we opened CoBiz Connect, Inc., an employee benefits brokerage and consulting firm specializing in the needs of small- to mid-sized employers. In March 2001, we acquired CoBiz Insurance, Inc., a property and casualty insurance agency. In July 2001, we acquired GMB, expanding our product line to include investment banking services. We believe offering such complementary products allows us to both broaden our relationships with existing customers and attract new customers to our core business. We believe the fees generated by these services will increase our noninterest income and reduce our dependency on net interest income. Noninterest income as a percentage of operating revenues was 15% and 19% for the three and nine months ended September 30, 2002, respectively, versus 20% and 19% for the same periods in 2001.

Deposit service charges for the three and nine months ended September 30, 2002 were $0.5 million and $1.6 million, respectively, compared to $0.5 million and $1.3 million for the same periods in 2001. The increase was driven primarily by an increase in cash management analysis fees.

There was a net decrease in operating lease rentals, which is the result of concentrating our marketing efforts on originating loans, rather than leases. The interest spreads on loans have been more favorable than our leases. Net investment in operating leases was $0.6 million at September 30, 2002, compared to $1.8 million at September 30, 2001.

Other loan fees, consisting primarily of letter of credit, mortgage origination and loan documentation fees have also shown growth due to higher loan volumes.

Trust and fiduciary fees from our Private Asset Management division are down slightly year over year. The overall decline in the stock market has adversely impacted the division's revenues, as their fees are based on the market valuation of the accounts they manage.

Insurance commissions for the three and nine months ended September 30, 2002 were $0.5 million and $1.2 million, respectively. When compared to the same periods in 2001, insurance revenues grew by $0.3 million for the three months ended September 30, 2002 and by $0.4 million for the nine months

ended September 30, 2002. Included in the third quarter of 2002 insurance revenue is $0.1 million related to an insurance brokerage business that was purchased on July 1, 2002. Included in the first quarter of 2001 insurance revenue was a one-time gain of $0.1 million related to a contingency refund from an insurance underwriter. Overall, commissions from CoBiz Connect and CoBiz Insurance have shown steady growth as they continue to expand their client base.

In July 2001, CoBiz completed its acquisition of GMB. The transaction was accounted for as a purchase. Accordingly, only GMB's revenues since the purchase date are included in the consolidated results for CoBiz. In the three and nine months ended September 30, 2002, GMB recognized $0.2 million and $2.3 million, respectively in investment banking fees. During the second quarter of 2002, GMB completed a significant deal in Arizona with a fee of approximately $1.4 million.

Included in the $0.7 million of other income reported for the nine months ended September 30, 2002 was $0.2 million of excess recovery over the amount of a loan charged off in 1997 and a $0.1 million gain on the exercise of warrants taken in connection with a loan transaction.

Noninterest Expense

The following table presents noninterest expense for the three and nine months ended September 30, 2002 and 2001.

		Three months ended September 30,									Nine months ended September 30,
						Increase (decrease)									Increase (decrease)
		2002		2001		Amount			%		2002		2001		Amount			%
		(Dollars in thousands)
Salaries and employee benefits		$	5,152	$	3,914	$	1,238		32	%	$	14,854	$	10,362	$	4,492		43	%
Occupancy expenses, premises and equipment			1,574		1,228		346		28	%		4,426		3,472		954		27	%
Depreciation on leases			116		312		(196	)	(63	)%		525		1,004		(479	)	(48	)%
Amortization of intangibles			41		127		(86	)	(68	)%		120		364		(244	)	(67	)%
Other operating expenses			1,652		1,140		512		45	%		4,741		3,145		1,596		51	%
Nonrecurring expenses			—		376		(376	)	—			—		1,060		(1,060	)	—

	Total other expense	$	8,535	$	7,097	$	1,438		20	%	$	24,666	$	19,407	$	5,259		27	%

Total noninterest expense was $8.5 million for the three months ended September 30, 2002 and $24.7 million for the nine months ended September 30, 2002. Noninterest expenses were $7.1 million and $19.4 million for the three and nine months ended September 30, 2001, respectively. Included in the 2001 third quarter noninterest expense were $0.4 million of nonrecurring expenses related to the First Capital acquisition. Nonrecurring expenses for the first nine months of 2001 were $1.1 million. The year-to-date 2002 noninterest expense includes a full year of GMB overhead of $2.5 million, compared to $0.6 million for the same period in 2001

Depreciation on operating leases decreased by $0.2 million and $0.5 million, respectively, for the three and nine months ended September 30, 2002 compared to the same periods in 2001. As discussed above, management dedicated fewer resources to originating leases in 2001. The decrease in depreciation expense mitigates part of the decline in operating lease rental income.

Prior to 2002, quarterly goodwill amortization of $0.1 million was included in noninterest expense. However, in accordance with SFAS No. 142, the goodwill recognized in connection with our original acquisition in 1994 is no longer being amortized. We continue to recognize quarterly amortization expense of $0.02 million related to the buyout of the minority interest of Leasing. In addition, we

recorded approximately $0.5 million of intangible assets related to the purchase of a customer list in November 2001 and an insurance book of business in July of 2002.

Overall, the increases in noninterest expenses reflect our ongoing investment in personnel, technology and office space needed to accommodate internal growth and the expansion of our business through acquisitions.

Provision and Allowance for Loan and Lease Losses

The provision for loan and lease losses was $0.9 million for the three months ended September 30, 2002, compared to $0.7 million for the three months ended September 30, 2001. For the first nine months of 2002, the provision for loan and lease losses was $2.0 million compared to $1.8 million for the same period in 2001. Included in the first quarter 2001 charge was a $0.4 million provision primarily to reflect the downgrade of one large credit in ABB's portfolio. Management believes the downgrade is an isolated case and is not indicative of an overall deterioration in credit quality. Key indicators of asset quality have remained favorable, while average outstanding loan amounts have increased to $728.0 million for the first nine months of 2002, up from $570.0 million for the first nine months of 2001. As of September 30, 2002, the allowance for loan and lease losses amounted to $9.9 million, or 1.27% of total loans and leases, compared to 1.31% at September 30, 2001. During 2002, the Company had net charge-offs of $1.0 million, of which $0.7 million was in Leasing's portfolio, or 74% of the 2002 net charge-offs. This portfolio represents less than 1% of total loans and leases.

The allowance for loan and lease losses represents management's recognition of the risks of extending credit and its evaluation of the quality of the loan and lease portfolio. We maintain an allowance for loan and lease losses based upon a number of factors, including, among others, the amount of problem loans and leases, general economic conditions, historical loss experience, and the evaluation of the underlying collateral and holding and disposal costs. In addition to unallocated allowances, specific allowances are provided for individual loans when ultimate collection is considered questionable by management after reviewing the current status of those loans that are contractually past due and considering the net realizable value of the collateral for the loans. Management actively monitors our asset quality and will charge off loans against the allowance for loan and lease losses when appropriate and will provide specific loss allowances when necessary. Although management believes it uses the best information available to make determinations with respect to the allowance for loan and lease losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the initial determinations. In addition, the determination of the allowance for loan and lease losses is subject to review by our regulators, as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of

information available to them at the time of their examination. The following table presents, for the periods indicated, an analysis of the allowance for loan and lease losses and other related data.

			Nine months ended September 30, 2002			Year ended December 31, 2001			Nine months ended September 30, 2001
			(Dollars in thousands)
Balance of allowance for loan and lease losses at beginning of period			$	8,872		$	6,819		$	6,819

Charge-offs:
	Commercial			(493	)		(119	)		(80	)
	Real estate—mortgage			(65	)		(72	)		(45	)
	Real estate—construction			—			—			—
	Consumer			(69	)		(44	)		(39	)
	Direct financing leases			(847	)		(179	)		(147	)

		Total charge-offs		(1,474	)		(414	)		(311	)

Recoveries:
	Commercial			354			55			54
	Real estate—mortgage			7			16			16
	Real estate—construction			—			—			—
	Consumer			3			18			13
	Direct financing leases			110			16			—

		Total recoveries		474			105			83

Net charge-offs				(1,000	)		(309	)		(228	)
Provisions for loan and lease losses charged to operations				1,990			2,362			1,835

Balance of allowance for loan and lease losses at end of period			$	9,862		$	8,872		$	8,426

Ratio of net charge-offs to average loans and leases(1)				(.18	)%		(.05	)%		(.05	)%
Average loans and leases outstanding during the period			$	727,988		$	591,741		$	569,954

(1): The ratios for the nine months ended September 30, 2002 and 2001 have been annualized. The September 30, 2002 ratio is not necessarily indicative of the results for the entire year.

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans and leases, restructured loans and leases, past due loans and leases, repossessed assets and other real estate owned. Nonperforming assets were $3.5 million as of September 30, 2002, compared with $2.2 million as of December 31, 2001 and

$2.6 million as of September 30, 2001. The following table presents information regarding nonperforming assets as of the dates indicated:

			At September 30, 2002			At December 31, 2001			At September 30, 2001
			(Dollars in thousands)
Nonperforming loans and leases:
	Loans and leases 90 days or more delinquent and still accruing interest		$	740		$	32		$	87
	Nonaccrual loans and leases			2,735			2,206			2,512

		Total nonperforming loans and leases		3,475			2,238			2,599
Repossessed assets				35			—			15

		Total nonperforming assets	$	3,510		$	2,238		$	2,614

Allowance for loan and lease losses			$	9,862		$	8,872		$	8,426

Ratio of nonperforming assets to total assets				0.31	%		0.24	%		0.30	%
Ratio of nonperforming loans and leases to total loans and leases				0.45	%		0.33	%		0.41	%
Ratio of allowance for loan and lease losses to total loans and leases				1.27	%		1.30	%		1.31	%
Ratio of allowance for loan and lease losses to to nonperforming loans and leases				283.80	%		396.43	%		324.20	%

Liquidity and Capital Resources

Our liquidity management objective is to ensure our ability to satisfy the cash flow requirements of depositors and borrowers and to allow us to sustain our operations. Historically, our primary source of funds has been customer deposits. Scheduled loan and lease repayments are a relatively stable source of funds, while deposit inflows and unscheduled loan and lease prepayments, which are influenced by fluctuations in general levels of interest rates, returns available on other investments, competition, economic conditions and other factors, are relatively unpredictable. Borrowings may be used on a short-term basis to compensate for reductions in other sources of funds (such as deposit inflows at less than projected levels). Borrowings may also be used on a longer term basis to support expanded lending activities and to match the maturity or repricing intervals of assets.

We use various forms of short-term borrowings for cash management and liquidity purposes on a limited basis. These forms of borrowings include federal funds purchases, securities sold under agreements to repurchase, the State of Colorado Treasury's Time Deposit program, and borrowings from the FHLB. The Bank has approved federal funds purchase lines with six other banks with an aggregate credit line of $92.0 million. In addition, the Bank may apply for up to $61.8 million of State of Colorado time deposits. The Bank also has lines of credit from the FHLB that are limited by the amount of eligible collateral available to secure the lines. Borrowings under the FHLB lines are required to be secured by unpledged securities and qualifying loans. At September 30, 2002, we had $120.2 million in unpledged securities and qualifying loans available to collateralize FHLB borrowings and securities sold under agreements to repurchase.

We also use dividends paid by the Bank to provide cash flow. However, the approval of the Office of the Comptroller of the Currency is required prior to the declaration of any dividend by the Bank if the total of all dividends declared by the Bank in any calendar year exceeds the total of its net profits of that year combined with the retained net profits for the preceding two years. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 provides that the Bank cannot pay a dividend if it will cause the Bank to be "undercapitalized". CoBiz's ability to pay dividends on its

common stock depends upon the availability of dividends from the Bank, and upon CoBiz's compliance with the capital adequacy guidelines of the Board of Governors of the Federal Reserve System.

During the first nine months of 2002, cash and cash equivalents increased by $19.7 million. This increase was primarily the result of $150.1 million provided by financing activities (mainly customer deposits) and net cash of $12.2 million provided by operating activities, offset by $142.6 million net cash used by investing activities (mainly loan originations and security purchases).

During the first nine months of 2001, cash and cash equivalents decreased by $9.5 million. This decrease was primarily the result of $151.7 million used by investment activities (mainly security purchases and loan originations), net cash of $9.9 million provided by operating activities, and $132.3 million net cash provided by financing activities (mainly customer deposits).

Effects of Inflation and Changing Prices

The primary impact of inflation on our operations is increased operating costs. Unlike most retail or manufacturing companies, virtually all of the assets and liabilities of a financial institution such as the Bank are monetary in nature. As a result, the impact of interest rates on a financial institution's performance is generally greater than the impact of inflation. Although interest rates do not necessarily move in the same direction, or to the same extent, as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. Over short periods of time, interest rates may not move in the same direction, or at the same magnitude, as inflation.

Recent Accounting Pronouncements

In July 2001, SFAS No. 142, Goodwill and Other Intangible Assets, which was effective January 1, 2002 was issued. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles currently included in goodwill, reassessment of the useful lives of existing recognized intangibles, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS No. 142 also requires the Company to complete a transitional goodwill impairment test nine months from the date of adoption. Upon adoption of SFAS No. 142 on January 1, 2002, the Company reclassified an intangible asset totaling $150,000 from goodwill into other assets and determined that goodwill was not impaired. For additional discussion on the impact of adopting SFAS No. 142, see Note 6.

activity, be recognized when the liability is incurred rather than when management commits to an exit plan (as currently required under EITF No. 94-3). This Statement also establishes that fair value is the objective for initial measurement of the liability. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. Based on current circumstances, management believes the application of the new rules will not have a material impact on the Company's consolidated financial statements.

Forward Looking Statements

The discussion in this report contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect our operations, financial performance and other factors as discussed in our filings with the Securities and Exchange Commission. These risks include the impact of economic conditions and interest rates, loan and lease losses, risks related to the execution of our growth strategy, the possible loss of key personnel, factors that could affect our ability to compete in its trade areas, changes in regulations and government policies and other factors discussed in our filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of September 30, 2002, there have been no material changes in the quantitative and qualitative information about market risk provided pursuant to Item 305 of Regulation S-K as presented in our Form 10-K for the period ended December 31, 2001.

Item 4. Controls and Procedures

Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic Securities and Exchange Commission filings. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without imitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

(a): Exhibits

Exhibits and Index of Exhibits.

(1)	2	Amended and Restated Agreement and Plan of Merger dated November 28, 2000.
(2)(3)	3.1	Amended and restated Articles of Incorporation of the Registrant, as amended.
(2)	3.2	Amended and restated Bylaws of the Registrant.
(13)	3.3	Amendment to Articles of Incorporation
(13)	3.4	Amendment to Bylaws
(4)	4.1	Form of Indenture
(4)	4.2	Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1)
(4)	4.3	Certificate of Trust
(4)	4.4	Form of Trust Agreement
(4)	4.5	Form of Amended and Restated Trust Agreement
(4)	4.6	Form of Capital Securities Certificate (included as an exhibit to Exhibit 4.5)
(4)	4.7	Form of Capital Securities Guarantee Agreement
(4)	4.8	Form of Agreement of Expenses and Liabilities (included as an exhibit to Exhibit 4.5)
(2)	10.1	CoBiz Inc. 1998 Stock Incentive Plan.
(2)	10.2	Amended and Restated CoBiz Inc. 1997 Incentive Stock Option Plan.
(2)	10.3	Amended and Restated CoBiz Inc. 1995 Incentive Stock Option Plan.
+(2)	10.4	License Agreement, dated as of November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
+(2)	10.5	Contract Modification, dated as of November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
+(2)	10.6	Computer Software Maintenance Agreement, dated as of November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
(2)	10.7	Employment Agreement, dated as of March 1, 1995, by and between Equitable Bankshares of Colorado, Inc. and Jonathan C. Lorenz.
(2)	10.8	Employment Agreement, dated as of May 8, 1995, by and between Equitable Bankshares of Colorado, Inc. and Virginia K. Berkeley.
(2)	10.9	Employment Agreement, dated as of January 3, 1998, by and between CoBiz Inc. and Richard J. Dalton.
(2)	10.17	Retail Lease, dated as of April 1, 1991, by and between Southbridge Plaza, L.P. and Equitable Bank of Littleton, N.A.
(2)	10.18	First Amendment to Retail Lease, dated as of January 4, 1996, by and between Southbridge Plaza, L.P. and Colorado Business Bank, N.A., formerly known as Equitable Bank of Littleton, N.A.

(2)	10.19	Office Lease, dated as of December 2, 1996, by and between Elliott Kiowa, Inc. and Colorado Business Bank, N.A.
(2)	10.20	Lease, dated as of December 1, 1997, by and between Spencer Enterprises and Colorado Business Bank, N.A.
(2)	10.21	Office Lease, dated as of February 23, 1996, by and between Colorado Business Leasing, Inc. and Denver Place Associates Limited Partnership.
(5)	10.22	Lease Agreement between Kesef, LLC and CoBiz Inc.
(5)	10.23	Office Lease Between SFP Realty, Ltd., L.L.P. and Colorado Business Bank of Boulder National Association
(5)	10.24	Office Building Lease between Hanover Resources Inc. and Colorado Business Bank, N.A.
(6)	10.26	Lease Agreement between Edwards Interchange II, LLC and Colorado Business Bank, National Association
(6)	10.27	Office Lease between Bank One, Colorado, N.A., as Trustee for the Frank G. Jamison Trust, dated September 2, 1956 and Colorado Business Bank, N.A.
(7)	10.28	Lease, dated July 27, 1999, between Joan H. Travis and Colorado Business Bank, N.A.
(9)	10.31	Employment Agreement, dated January 1, 2000, by and between Colorado Business Bankshares, Inc. and Lyne Andrich.
(9)	10.32	Promissory note between American National Bank and Trust Company of Chicago and Colorado Business Bankshares, Inc.
(10)	10.33	First Amendment to Lease Agreement between Kesef, LLC and Colorado Business Bankshares, Inc. dated May 1, 1998.
(11)	10.34	2000 Employee Stock Purchase Plan.
(13)	10.35	2002 Equity Incentive Plan
(12)	21	List of subsidiaries

(1): Incorporated herein by reference from the Registrant's Registration Statement on Form S-4 (File No. 333-51866).
(2): Incorporated herein by reference from the Registrant's Registration Statement on Form SB-2 (File No. 333-50037).
(3): Incorporated herein by reference from the Registrant's Current Report on Form 8-K, as filed on March 23, 2001.
(4): Incorporated herein by reference from the Registrant's Registration Statement on Form S-1 (File No. 333-37674).
(5): Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998, as filed on November 13, 1998.
(6): Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999, as filed on May 17, 1999.
(7): Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999, as filed on November 12, 1999.

(8)

Incorporated herein by reference from the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1999, as filed on March 30, 2000.

(9)

Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, as filed on May 12, 2000.

(10)

Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, as filed on November 14, 2000.

(11)

Incorporated herein by reference from the Registrant's Proxy Statement filed in connection with its 2000 annual meeting of shareholders, as filed on April 19, 2000.

(12)

Incorporated herein by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001, as filed on April 1, 2002.

(13)

Incorporated herein by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed on August 14, 2002.

+

Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions of exhibit. Such portions have been redacted.

(b)

Reports on Form 8-K

1.: On July 31, 2002 we filed a current report on Form 8-K dated July 9, 2002 reporting that the company's transfer agent is Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COBIZ INC.
Date: November 14, 2002	By:	/s/ STEVEN BANGERT Steven Bangert, Chief Executive Officer and Chairman
Date: November 14, 2002	By:	/s/ RICHARD J. DALTON Richard J. Dalton, Executive Vice President and Chief Financial Officer

Certification

I, Steve Bangert, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of CoBiz, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.: The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002

/s/ STEVEN BANGERT

Steven Bangert
Chief Executive Officer and Chairman

Certification

I, Richard J. Dalton, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of CoBiz, Inc.;

2.

3.

4.

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

d): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
e): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.: The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002

/s/ RICHARD J. DALTON

Richard J. Dalton
Chief Financial Officer

Certification

Pursuant to 18 U.S.C. § 1350, the undersigned officer of CoBiz Inc. (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2002

/s/ STEVEN BANGERT

Steven Bangert
Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

Certification

Dated: November 14, 2002

/s/ RICHARD J. DALTON

Richard J. Dalton
Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

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CoBiz Inc.

Item 1. Financial Statements

CoBiz Inc. Consolidated Statements of Condition September 30, 2002 and December 31, 2001 (unaudited)
CoBiz Inc. Consolidated Statements of Income and Comprehensive Income (unaudited)
CoBiz Inc. Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2002 and 2001 (unaudited)
CoBiz Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (unaudited)

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

SIGNATURES
Certification
Certification