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 June 30, 2003.
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)

 

 

(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

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes   ý            No   o

 

There were 13,684,983 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding as of July 25, 2003.

 

 

CoBiz Inc.

 

PART I.  FINANCIAL INFORMATION

 

Item 1.	Financial Statements
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 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
SIGNATURES

 

 

Item 1.  Financial Statements

 

CoBiz Inc.

Consolidated Statements of Condition

June 30, 2003 and December 31, 2002

(unaudited)

 

		June 30, 2003			December 31, 2002
		(in thousands)
ASSETS
Cash and due from banks		$	51,137		$	33,252
Investments:
Investment securities available for sale (cost of $278,351 and $257,888, respectively)		284,983			262,237
Investment securities held to maturity (fair value of $1,924 and $2,282, respectively)		1,877			2,245
Other investments		8,110			7,806
Total investments		294,970			272,288
Loans and leases, net		840,346			788,481
Goodwill		13,059			8,341
Intangible assets		3,720			489
Investment in operating leases		108			443
Premises and equipment, net		5,952			5,337
Accrued interest receivable		4,006			3,893
Deferred income taxes		1,712			2,537
Other		10,593			3,588
TOTAL ASSETS		$	1,225,603		$	1,118,649
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand		$	287,249		$	212,987
NOW and money market		331,117			305,954
Savings		8,318			6,950
Certificates of deposit		312,784			331,074
Total deposits		939,468			856,965
Federal funds purchased		4,000			8,700
Securities sold under agreements to repurchase		129,267			115,517
Advances from Federal Home Loan Bank		35,490			30,560
Accrued interest and other liabilities		4,140			4,900
Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures		20,145			20,000
Total liabilities		1,132,510			1,036,642
Minority Interests		—			3
Shareholders’ equity:
Cumulative preferred, $.01 par value; 2,000,000 shares authorized; None outstanding		—			—
Common, $.01 par value; 25,000,000 shares authorized; 13,674,831 and 13,271,999 issued and outstanding, respectively		137			133
Additional paid-in capital		51,430			46,284
Retained earnings		37,421			32,895
Accumulated other comprehensive income net of income tax of $2,527 and $1,657, respectively		4,105			2,692
Total shareholders’ equity		93,093			82,004
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,225,603		$	1,118,649

 

See notes to consolidated financial statements.

 

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CoBiz Inc.

Consolidated Statements of Income and Comprehensive Income

(unaudited)

 

		Three months ended June 30,						Six months ended June 30,
		2003			2002			2003			2002
		(in thousands)
INTEREST INCOME:
Interest and fees on loans and leases		$	13,191		$	12,469		$	25,933		$	24,518
Interest and dividends on investment securities:
Taxable securities		2,637			2,994			5,461			5,504
Nontaxable securities		69			62			140			126
Dividends on securities		68			80			135			153
Federal funds sold and other		4			6			8			15
Total interest income		15,969			15,611			31,677			30,316
INTEREST EXPENSE:
Interest on deposits		2,577			3,251			5,499			6,693
Interest on short-term borrowings and FHLB advances		685			770			1,238			1,545
Interest on mandatorily redeemable preferred securities of subsidiary trust		279			500			588			1,000
Total interest expense		3,541			4,521			7,325			9,238
NET INTEREST INCOME BEFORE PROVISION FOR LOAN AND LEASE LOSSES		12,428			11,090			24,352			21,078
Provision for loan and lease losses		652			552			1,070			1,140
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES		11,776			10,538			23,282			19,938
NONINTEREST INCOME:
Service charges		620			519			1,231			1,049
Operating lease income		22			254			58			515
Trust and advisory fees		668			166			866			326
Insurance revenue		1,990			376			2,506			672
Investment banking revenues		849			1,541			1,031			2,042
Other income		441			317			803			939
Total noninterest income		4,590			3,173			6,495			5,543
NONINTEREST EXPENSE:
Salaries and employee benefits		7,070			5,232			12,813			9,702
Occupancy expenses, premises and equipment		2,017			1,472			3,756			2,852
Depreciation on leases		17			190			60			409
Amortization of intangibles		114			44			160			79
Other		2,031			1,599			3,718			3,089
Total noninterest expense		11,249			8,537			20,507			16,131
MINORITY INTERESTS		—			5			(3		)	2
INCOME BEFORE INCOME TAXES		5,117			5,169			9,273			9,348
Provision for income taxes		1,892			1,979			3,393			3,587
NET INCOME		$	3,225		$	3,190		$	5,880		$	5,761
UNREALIZED APPRECIATION ON INVESTMENT SECURITIES AVAILABLE FOR SALE, net of tax		1,787			1,170			1,413			562
COMPREHENSIVE INCOME		$	5,012		$	4,360		$	7,293		$	6,323
EARNINGS PER SHARE:
Basic		$	0.24		$	0.24		$	0.44		$	0.44
Diluted		$	0.23		$	0.23		$	0.42		$	0.42

 

See notes to consolidated financial statements.

 

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CoBiz Inc.

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2003 and 2002

(unaudited)

 

		2003			2002
		(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	5,880		$	5,761
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of securities		347			207
Depreciation and amortization		1,589			1,422
Provision for loan and lease losses		1,070			1,140
Deferred income taxes		(21		)	(539		)
Minority interests		(3		)	2
Gain on sale of premises and equipment		(56		)	(11		)
Changes in operating assets and liabilities, net of acquisitions:
Accrued interest receivable		(113		)	(297		)
Other assets		(577		)	177
Accrued interest and other liabilities		(1,366		)	2,062
Net cash provided by operating activities		6,750			9,924
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other investments		(304		)	(1,000		)
Purchase of investment securities available for sale		(71,061		)	(61,126		)
Maturities of investment securities held to maturity		365			483
Maturities of investment securities available for sale		50,254			40,355
Net cash paid in acquisition of ACMG		(1,277		)	—
Net cash paid in acquisition of FDL		(2,140		)	—
Purchase of bank owned life insurance		(6,000		)	—
Loan and lease originations and repayments, net		(52,930		)	(57,793		)
Purchase of premises and equipment		(2,089		)	(1,373		)
Proceeds from sale of premises and equipment		772			40
Net cash used in investing activities		(84,410		)	(80,414		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand, NOW, money market, and savings accounts		100,793			28,446
Net (decrease) increase in certificates of deposit		(18,290		)	38,690
Net decrease in federal funds purchased		(4,700		)	—
Net increase in securities sold under agreements to repurchase		13,750			23,211
Advances from the Federal Home Loan Bank		485,000			285,500
Repayments of advances from the Federal Home Loan Bank		(480,070		)	(295,570		)
Proceeds from exercise of stock options		416			196
Dividends paid on common stock		(1,354		)	(1,188		)
Net cash provided by financing activities		95,545			79,285
NET INCREASE IN CASH AND CASH EQUIVALENTS		17,885			8,795
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		33,252			18,879
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	51,137		$	27,674

 

See notes to consolidated financial statements.

 

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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 wholly owned subsidiaries:  Alexander Capital Management Group (“ACMG”), Financial Designs, Ltd. (“FDL”, formerly CoBiz Connect, Inc.), CoBiz Insurance Inc., Colorado Business Bankshares Capital Trust I, CoBiz Bank, N.A. (the “Bank,” previously named American Business Bank, N.A.), the Bank’s equipment leasing subsidiary, Colorado Business Leasing, Inc. (“Leasing”), and CoBiz GMB, Inc. (98% owned).  The Bank operates in its Colorado market areas under the name Colorado Business Bank (“CBB”) and in its Arizona market area under the name Arizona Business Bank (“ABB”).

 

The Bank is a commercial banking institution with eight locations in the Denver metropolitan area, one in Edwards, Colorado, and four in the Phoenix Metropolitan area.  Leasing provides equipment leasing primarily to mid-market companies.  ACMG provides investment management services to institutions and individuals.  FDL 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 GMB, Inc. provides investment banking services to middle-market companies through its wholly owned subsidiary, Green Manning and Bunch, Ltd. (“GMB”).

 

All significant intercompany accounts and transactions have been eliminated. 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, 2002, 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 six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003.

 

2.                                      ACQUISITIONS

 

On April 1, 2003, the Company acquired ACMG, an SEC registered investment adviser firm based in Denver, Colorado. The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of ACMG’s operations have been included in the consolidated financial statements since the date of purchase.  The acquisition of ACMG was completed through a merger of ACMG into a wholly owned subsidiary that was formed in order to consummate the transaction and then a subsequent contribution of the assets and liabilities of the merged entity into a newly formed limited liability company called Alexander Capital Management Group, LLC.

 

The aggregate purchase price was $3,130,000, consisting of 107,220 shares of CoBiz Inc. common stock valued at $1,500,000, $1,277,000 in cash, $264,000 in net liabilities assumed and

 

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$89,000 in direct acquisition costs (consisting primarily of external legal fees).  Goodwill of $2,785,000, which is not expected to be deductible for tax purposes, was recorded as part of the purchase price allocation.  Intangible assets consisting of customer account relationships, employment agreements and non-solicitation agreements totaling $346,000 were also recorded with an average useful life of 14 years.

 

The terms of the merger agreement provide for additional earn-out payments to the former shareholders of ACMG for each of the calendar years 2003 through 2005.  The earn-out payments are based on a multiple of earnings before interest, taxes, depreciation and amortization, as defined in the merger agreement, and are payable 40% in cash and 60% in CoBiz common stock. In addition to the earn-out, the former shareholders of ACMG were issued 200,000 Profits Interests Units, representing a 20% interest in the future profits and losses of ACMG.

 

On April 14, 2003, the Company acquired FDL, a provider of wealth transfer and employee benefit services based in Denver, Colorado. The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of FDL’s operations have been included in the consolidated financial statements since the date of purchase.  The acquisition of FDL was completed through a merger of FDL into CoBiz Connect, Inc., a wholly owned subsidiary of CoBiz that has provided employee benefits consulting services since 2000.  The surviving corporation will continue to use the FDL name.

 

The aggregate purchase price was $5,406,000, consisting of 222,315 shares of CoBiz, Inc. common stock valued at $3,210,000, $2,140,000 in cash, and $56,000 in direct acquisition costs (consisting primarily of external legal fees).  Goodwill of $1,933,000, which is not expected to be deductible for tax purposes, was recorded as part of the purchase price allocation.  Intangible assets consisting of customer account relationships, employment agreements and non-solicitation agreements totaling $3,045,000 were also recorded with an average useful life of 10 years.

 

The terms of the merger agreement provide for additional earn-out payments to the former shareholders of FDL for each of the calendar years 2003 through 2006.  The earn-out payments are based on a multiple of earnings before interest, taxes, depreciation and amortization, as defined in the merger agreement, and are payable 50% in cash and 50% in CoBiz common stock.

 

The earn-out payments for both the ACMG and FDL transactions, if made, will be treated as additional costs of the acquisitions and recorded as goodwill.

 

3.                                      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:

 

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		Three months ended June 30,						Six months ended June 30,
		2003			2002			2003			2002
		(in thousands, except share amounts)
Income available to common shareholders		$	3,225		$	3,190		$	5,880		$	5,761
Income impact of assumed conversions:
Convertible CoBiz GMB, Inc. Class B shares		—			5			(3		)	2
Income available to common shareholders plus assumed conversions		$	3,225		$	3,195		$	5,877		$	5,763
Weighted average shares outstanding - basic earnings per share		13,625,712			13,173,766			13,454,917			13,156,957
Effect of dilutive securities - stock options		448,152			609,312			463,820			620,686
Weighted average shares outstanding - diluted earnings per share		14,073,864			13,783,078			13,918,737			13,777,643

 

As of June 30, 2003 and 2002, 517,590 and 32,890 options, respectively, were excluded from the earnings per share computation solely because their effect was anti-dilutive.

 

4.             Recent Accounting Pronouncements

 

Effective December 15, 2002, the Company adopted SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” an amendment of FASB Statement No. 123.  SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation.  It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation.  Finally, it amends APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information.

 

If the fair value based method of accounting under SFAS No. 123 had been applied, the Company’s net income available for common shareholders and earnings per common share would have been reduced to the pro forma amounts indicated below (assuming that the fair value of options granted during the year are amortized over the vesting period):

 

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		Three months ended June 30,						Six months ended June 30,
		2003			2002			2003			2002
		(in thousands, except per share amounts)
Net income, as reported		$	3,225		$	3,190		$	5,880		$	5,761
Less: stock-based compensation determined under the fair value method		(127		)	(253		)	(335		)	(506		)
Pro forma net income		$	3,098		$	2,937		$	5,545		$	5,255
Earnings per share:
As reported - basic		$	0.24		$	0.24		$	0.44		$	0.44
As reported - diluted		$	0.23		$	0.23		$	0.42		$	0.42
Pro forma - basic		$	0.23		$	0.22		$	0.41		$	0.40
Pro forma - diluted		$	0.22		$	0.21		$	0.40		$	0.38

 

In May, 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”  This Statement establishes standards for how to measure and classify certain financial instruments with characteristics of both liabilities and equity. It requires three categories of financial instruments be classified as liabilities rather than equity and be measured and reported at fair value.  It was immediately effective for financial instruments entered into or modified after May 31, 2003, and applies to existing financial instruments at the beginning of the first interim period after June 15, 2003.  The adoption of this Statement did not have a material effect on the Company’s consolidated financial statements.

 

Effective January 1, 2003, the Company adopted FASB Interpretation No. 45 (“FIN No. 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”  FIN No. 45 considers standby letters of credit, excluding commercial letters of credit and other lines of credit, a guarantee of the Company.  The Company enters into a standby letter of credit to guarantee performance of a customer to a third party.  These guarantees are primarily issued to support public and private borrowing arrangements.  The credit risk involved is represented by the contractual amounts of those instruments.  Under the standby letters of credit, the Company is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met.  The adoption of FIN No. 45 did not have a material impact on the Company’s consolidated financial statements.

 

In January 2003, the FASB issued Interpretation No. 46 (“FIN No. 46”), “Consolidation of Variable Interest Entities,” which addresses consolidation by business enterprises of variable interest entities.  FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  The Company does not expect the requirements of FIN No. 46 to have a material impact on its consolidated financial statements.

 

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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 June 30,						Six months ended June 30,
		2003			2002			2003			2002
		(in thousands)
Other comprehensive income, before tax:
Unrealized gain on available for sale securities arising during the period		$	2,887		$	1,890		$	2,283		$	908
Tax benefit related to items of other comprehensive income		(1,100		)	(720		)	(870		)	(346		)
Other comprehensive income, net of tax		$	1,787		$	1,170		$	1,413		$	562

 

6.                                      Goodwill and Intangible Assets

 

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 estimates 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 analysis.  As of the most recent annual evaluation, the estimated fair value of all reporting units exceeded their carrying values and goodwill impairment was not deemed to exist.

 

A summary of goodwill, adjustments to goodwill and total assets by operating segment as of June 30, 2003 is as follows:

 

		Goodwill									Total Assets
		December 31, 2002			Acquisitions and adjustments			June 30, 2003			June 30, 2003
		(in thousands)
Colorado Business Bank		$	4,360		$	1,415		$	5,775		$	977,377
Arizona Business Bank		255			236			491			229,197
Investment Banking Services		3,486			—			3,486			4,782
Trust and advisory services		—			1,810			1,810			2,716
Insurance		240			1,257			1,497			7,137
Corporate Support and Other		—			—			—			4,394
Total		$	8,341		$	4,718		$	13,059		$	1,225,603

 

8

 

As of June 30, 2003 and December 31, 2002, the Company’s intangible assets and related accumulated amortization consisted of the following:

 

		Customer List			Lease Premium			Customer Contracts & Relationships			Employment & Non-Solicitation Agreements			Total
		(dollars in thousands)
December 31, 2002		$	207		$	83		$	199		$	—		$	489
Acquisition of ACMG		—			—			316			30			346
Acquisition of FDL		—			—			2,995			50			3,045
Amortization		(37		)	(33		)	(90		)	—			(160		)
June 30, 2003		$	170		$	50		$	3,420		$	80		$	3,720

 

The Company recorded amortization expense of $114,000 related to intangible assets during the three months ended June 30, 2003, compared to $44,000 (excluding goodwill) in the same period of 2002.  Amortization expense for the six months ended June 30, 2003 totaled $160,000 and $79,000 for the same period in 2002.  Amortization expense on intangible assets for each of the five succeeding years is estimated as follows (in thousands):

 

2004		$	510
2005		450
2006		398
2007		396
2008		355
Total		$	2,109

 

7.                                      Derivatives

 

In January 2003, the Company entered into an interest rate swap agreement with a notional amount of $20,000,000.  The swap effectively converted the Company’s fixed interest rate obligation under the trust preferred securities to a variable interest rate obligation, decreasing the asset sensitivity of the Company’s statement of condition by more closely matching our variable rate assets with variable rate liabilities.  The swap has a notional amount equal to the outstanding principal amount of the related trust preferred securities, together with the same payment dates, maturity date and call provisions as the related trust preferred securities.  Under the swap, the Company pays interest at a variable rate equal to a spread over 90-day LIBOR, adjusted quarterly, and the Company receives a fixed rate equal to the interest that the Company is obligated to pay on the related trust preferred securities.  The interest rate swap is a derivative financial instrument and has been designated as a fair value hedge of the trust preferred securities.  Because the critical terms of the interest rate swap match the term of the trust preferred securities, the swap qualifies for “short-cut method” accounting treatment under SFAS No. 133.  The fair market value of the swap totaling $145,000 at June 30, 2003 is included in Other Assets in the Consolidated Statement of Condition.  The Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Subordinated Debentures has been adjusted by a similar amount.

 

8.                                      Segments

 

Our principal areas of activity consist of commercial banking, investment banking, trust and advisory services, insurance and corporate support and other.  As of December 31, 2002, our trust and

 

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advisory services and insurance segments were combined and reported as one segment, titled Other Fee Based Services.  With the acquisitions of ACMG and FDL, these business lines will now be reported separately.

 

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 eight in the Denver metropolitan area and one in Edwards, just west of Vail. ABB is based in Phoenix, Arizona and has branch offices in Surprise, Tempe and Scottsdale, Arizona.

 

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 trust and advisory services segment consists of the operations of ACMG and CoBiz Private Asset Management.  ACMG is an SEC registered investment management firm that manages stock and bond portfolios for individuals and institutions.  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.

 

The insurance segment includes the activities of FDL and CoBiz Insurance, Inc. FDL provides employee benefits consulting, wealth transfer planning and preservation for high net worth individuals and executive benefits and compensation planning. 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.

 

 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.  The results of operations and selected financial information by operating segment are as follows:

 

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		Colorado Business Bank			Arizona Business Bank			Investment Banking Services			Trust and Advisory Services			Insurance Services			Corporate Support and Other			Consolidated
		(in thousands)
		For the three months ended June 30, 2003
Income statement
Total interest income		$	12,553		$	3,159		$	2		$	3		$	2		$	250		$	15,969
Total interest expense		2,051			615			—			3			—			872			3,541
Net interest income		10,502			2,544			2			—			2			(622		)	12,428
Provision for loan and lease losses		575			202			—			—			—			(125		)	652
Net interest income after provision for loan and lease losses		9,927			2,342			2			—			2			(497		)	11,776
Noninterest income		725			212			850			670			2,088			45			4,590
Noninterest expense and minority interest		2,513			1,286			944			648			1,551			4,307			11,249
Income before income taxes		8,139			1,268			(92		)	22			539			(4,759		)	5,117
Provision for income taxes		2,972			482			(35		)	9			207			(1,743		)	1,892
Net income before management fees and overhead allocations		$	5,167		$	786		$	(57	)	$	13		$	332		$	(3,016	)	$	3,225
Management fees and overhead allocations, net of tax		2,062			348			24			28			46			(2,508		)	—
Net income		$	3,105		$	438		$	(81	)	$	(15	)	$	286		$	(508	)	$	3,225
		For the six months ended June 30, 2003
Income statement
Total interest income		$	24,664		$	6,175		$	4		$	7		$	4		$	823		$	31,677
Total interest expense		4,214			1,302			—			3			—			1,806			7,325
Net interest income		20,450			4,873			4			4			4			(983		)	24,352
Provision for loan and lease losses		818			377			—			—			—			(125		)	1,070
Net interest income after provision for loan and lease losses		19,632			4,496			4			4			4			(858		)	23,282
Noninterest income		1,442			350			1,036			868			2,610			189			6,495
Noninterest expense and minority interest		5,163			2,490			1,774			858			1,952			8,267			20,504
Income before income taxes		15,911			2,356			(734		)	14			662			(8,936		)	9,273
Provision for income taxes		5,872			895			(278		)	6			254			(3,356		)	3,393
Net income before management fees and overhead allocations		$	10,039		$	1,461		$	(456	)	$	8		$	408		$	(5,580	)	$	5,880
Management fees and overhead allocations, net of tax		3,868			708			40			54			79			(4,749		)	—
Net income		$	6,171		$	753		$	(496	)	$	(46	)	$	329		$	(831	)	$	5,880
		At June 30, 2003
Balance sheet
Total assets		$	977,377		$	229,197		$	4,782		$	2,716		$	7,137		$	4,394		$	1,225,603
Total gross loans and leases		681,010			167,716			—			—			—			2,945			851,671
Total deposits and customer repurchase agreements		872,756			195,318			—			661			—			—			1,068,735

 

11

 

		Colorado Business Bank			Arizona Business Bank			Investment Banking Services			Trust and Advisory Services			Insurance Services			Corporate Support and Other			Consolidated
		(in thousands)
		For the three months ended June 30, 2002
Income statement
Total interest income		$	11,856		$	2,125		$	—		$	4		$	—		$	1,626		$	15,611
Total interest expense		2,363			812			4			—			—			1,342			4,521
Net interest income		9,493			1,313			(4		)	4			—			284			11,090
Provision for loan and lease losses		310			85			—			—			—			157			552
Net interest income after provision for loan and lease losses		9,183			1,228			(4		)	4			—			127			10,538
Noninterest income		682			91			1,541			165			386			308			3,173
Noninterest expense		2,110			865			1,108			195			377			3,887			8,542
Income before income taxes		7,755			454			429			(26		)	9			(3,453		)	5,169
Provision for income taxes		2,667			170			159			(10		)	4			(1,011		)	1,979
Net income before management fees and overhead allocations		$	5,088		$	284		$	270		$	(16	)	$	5		$	(2,442	)	$	3,190
Management fees and overhead allocations, net of tax		1,012			256			15			16			21			(1,320		)	—
Net income		$	4,076		$	28		$	255		$	(32	)	$	(16	)	$	(1,121	)	$	3,190
		For the six months ended June 30, 2002
Income statement
Total interest income		$	23,022		$	4,088		$	3		$	9		$	1		$	3,193		$	30,316
Total interest expense		4,916			1,681			4						—			2,637			9,238
Net interest income		18,106			2,407			(1		)	9			1			556			21,078
Provision for loan and lease losses		589			220			—			—			—			331			1,140
Net interest income after provision for loan and lease losses		17,517			2,187			(1		)	9			1			225			19,938
Noninterest income		1,623			187			2,042			326			683			682			5,543
Noninterest expense		4,361			1,650			1,809			391			702			7,220			16,133
Income before income taxes		14,779			724			232			(56		)	(18		)	(6,313		)	9,348
Provision for income taxes		5,342			272			88			(21		)	(6		)	(2,088		)	3,587
Net income before management fees and overhead allocations		$	9,437		$	452		$	144		$	(35	)	$	(12	)	$	(4,225	)	$	5,761
Management fees and overhead allocations, net of tax		2,185			473			24			30			40			(2,752		)	—
Net income		$	7,252		$	(21	)	$	120		$	(65	)	$	(52	)	$	(1,473	)	$	5,761
		At June 30, 2002
Balance sheet
Total assets		$	843,995		$	150,825		$	5,785		$	450		$	729		$	11,298		$	1,013,082
Total gross loans and leases		611,441			111,086			—			—			—			9,997			732,524
Total deposits and customer repurchase agreements		681,925			122,619			—			440			—			—			804,984

 

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, 2002. For a discussion of the segments included in our principal activities, see Note 8 of Notes to Consolidated Financial Statements.

 

Critical Accounting Policies

 

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  In making those critical accounting estimates we are required to make assumptions about matters that are highly uncertain at the time of the estimate.  Different estimates we could reasonably have used, or changes in the assumptions that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

 

12

 

The allowance for loan and lease losses is a critical accounting policy that requires subjective estimates in the preparation of the consolidated financial statements.  The allowance for loan and lease losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibilty of loans and leases in light of historical experience, the nature and volume of the loan and lease portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.  Refer to the Provision and Allowance for Loan and Lease Losses section for further discussion on management’s methodology.

 

We also have other policies that we consider to be key accounting policies; however, these policies, which are disclosed in Note 1 of Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2002, do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are difficult or subjective.

 

Financial Condition

 

The following table sets forth the balance of loans and leases and deposits as of June 30, 2003, December 31, 2002 and June 30, 2002 (in thousands):

 

		June 30, 2003					December 31, 2002					June 30, 2002
		Amount			% of Portfolio		Amount			% of Portfolio		Amount			% of Portfolio
Total Loans and Leases:
Commercial		$	271,778		32.3	%	$	254,389		32.3	%	$	224,587		31.1	%
Real estate – mortgage		386,839			46.0	%	366,841			46.5	%	340,196			47.1	%
Real estate – construction		125,989			15.0	%	114,753			14.6	%	109,602			15.2	%
Consumer		55,427			6.6	%	50,853			6.4	%	43,331			6.0	%
Municipal leases		8,698			1.0	%	6,219			0.8	%	4,820			0.7	%
Small business leases		2,940			0.4	%	5,814			0.7	%	9,988			1.3	%
Loans and leases		$	851,671		101.3	%	$	798,869		101.3	%	$	732,524		101.4	%
Less allowance for loan and lease losses		(11,325		)	(1.3	)%	(10,388		)	(1.3	)%	(9,819		)	(1.4	)%
Net loans and leases		$	840,346		100.0	%	$	788,481		100.0	%	$	722,705		100.0	%
Total Deposits and Customer Repurchase Agreements
NOW and money market accounts		$	331,117		31.0	%	$	305,954		31.5	%	$	253,426		31.5	%
Savings		8,318			0.8	%	6,950			0.7	%	6,834			0.8	%
Certificates of deposit under $100,000		126,139			11.8	%	117,155			12.0	%	114,428			14.2	%
Certificates of deposit $100,000 and over		186,645			17.5	%	213,919			22.0	%	172,144			21.4	%
Total interest-bearing deposits		$	652,219		61.1	%	$	643,978		66.2	%	$	546,832		67.9	%
Noninterest-bearing demand deposits		287,249			26.9	%	212,987			21.9	%	175,496			21.8	%
Customer repurchase agreements		129,267			12.0	%	115,517			11.9	%	82,656			10.3	%
Total deposits and customer repurchase agreements		$	1,068,735		100.0	%	$	972,482		100.0	%	$	804,984		100.0	%

 

Our total assets increased by $107.0 million to $1.23 billion as of June 30, 2003, from $1.12 billion as of December 31, 2002.  A consistent focus on internal growth allowed our loan and lease portfolio (net) to increase by $51.9 million, to $840.3 million as of June 30, 2003, from $788.5 million at December 31, 2002. Total investments were $295.0 million as of June 30, 2003, compared to $272.3 million as of December 31, 2002. Investments represented 24% of total assets at June 30, 2003 and December 31, 2002.  The increase in investments was driven by strong growth in deposits and customer repurchase agreements.

 

Deposits increased by $82.5 million to $939.5 million as of June 30, 2003, from $857.0 million as of December 31, 2002. Securities sold under agreements to repurchase were $129.3 million at June 30,

 

13

 

2003 and $115.5 million at December 31, 2002.  All of the repurchase agreements outstanding at June 30, 2003 were transacted on behalf of our customers and are not considered a wholesale borrowing source. The increase in deposits and customer repurchase agreements is attributable, in part, to the bear market as investors have pulled out of equities and into safer harbors such as certificates of deposit, money market accounts and real estate.  The implementation of a new wire system has allowed us to serve high volume wire customers, such as title companies and investment exchange accommodators, which has resulted in a significant increase in our deposit base.  An increased emphasis on deposit generation included in banker production goals has also impacted our deposit growth.

 

Advances from the Federal Home Loan Bank of Topeka (“FHLB”) were $35.5 million at June 30, 2003, compared to $30.6 million at December 31, 2002.  Advances from the FHLB are used as part of our liquidity management strategy and can fluctuate based on the Company’s cash position.

 

Results of Operations

 

Overview

 

The following table presents the condensed statements of income for the three and six months ended June 30, 2003 and 2002.

 

		Three months ended June 30,											Six months ended June 30,
								Increase (decrease)											Increase (decrease)
		2003			2002			Amount			%		2003			2002			Amount			%
		(in thousands)
Interest income		$	15,969		$	15,611		$	358		2	%	$	31,677		$	30,316		$	1,361		4	%
Interest expense		3,541			4,521			(980		)	(22	)%	7,325			9,238			(1,913		)	(21	)%
Net interest income before provision for loan and lease losses		12,428			11,090			1,338			12	%	24,352			21,078			3,274			16	%
Provision for loan and lease losses		652			552			100			18	%	1,070			1,140			(70		)	(6	)%
Net interest income after provision for loan and lease losses		11,776			10,538			1,238			12	%	23,282			19,938			3,344			17	%
Noninterest income		4,590			3,173			1,417			45	%	6,495			5,543			952			17	%
Noninterest expense and minority interests		11,249			8,542			2,707			32	%	20,504			16,133			4,371			27	%
Income before income taxes		5,117			5,169			(52		)	(1	)%	9,273			9,348			(75		)	(1	)%
Provision for income taxes		1,892			1,979			(87		)	(4	)%	3,393			3,587			(194		)	(5	)%
Net income		$	3,225		$	3,190		$	35		1	%	$	5,880		$	5,761		$	119		2	%
Nonrecurring charges, net of tax		—			—			—			—		—			—			—			—
Reported net income		$	3,225		$	3,190		$	35		1	%	$	5,880		$	5,761		$	119		2	%

 

Net income was $3.2 million for the three months ending June 30, 2003 and 2002.  Earnings per share on a fully diluted basis for the second quarter were $0.23 for both 2003 and 2002.  Annualized return on average assets for the three and six months ended June 30, 2003 was 1.11% and 1.03%, respectively, versus 1.28% and 1.19% for the three and six months ended June 30, 2002.  Annualized return on average common shareholders’ equity for the three and six months ended June 30, 2003 was 14.54% and 13.80%, versus 17.32% and 15.99% for the three and six months ended June 30, 2002.

 

Net Interest Income

 

Net interest income before provision for loan and lease losses was $12.4 million, a $1.3 million, or 12% increase from the same period a year ago.  For the six months ended June 30, 2003, net interest income before provision for loan and lease losses was $24.4 million, a $3.3 million, or 16% increase from the same period a year ago.  Yields earned on our interest-earning assets decreased by 81 basis points to 5.71% for the three months ended June 30, 2003 and 78 basis points to 5.84% for the six months ended June 30, 2003, as compared to the same periods a year ago.  Interest paid on interest-bearing liabilities decreased by 72 basis points for the three months ended June 30, 2003 and 77 basis points for the six months ended June 30, 2003 as compared to the same periods a year ago. The net

 

14

 

interest margin was 4.51% for the quarter ended June 30, 2003, down from 4.70% for the quarter ended June 30, 2002.  For the six months ended June 30, 2003 the net interest margin was 4.49% compared to 4.60% for the same period a year ago.

 

The Bank has historically maintained an asset-sensitive interest rate profile, and was negatively impacted by the 50 basis point decrease in the prime rate during the fourth quarter of 2002.  An additional 25 basis point decrease at the end of the second quarter of 2003 could further impact our net interest margin in future periods.  Mitigating the impact from the decrease in the prime rate was an interest rate swap the Company entered into in January of 2003.  The swap effectively converted our 10% fixed rate trust preferred securities into a variable rate liability based on a spread over three month LIBOR, for a combined rate of 5.55% for the quarter ending June 30, 2003 and 5.95% for the six months ended June 30, 2003.

 

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 six months ended June 30, 2003 and 2002.

 

		For the three months ended June 30,
		2003								2002
		Average balance			Interest earned or paid			Average yield or cost (1)		Average balance			Interest earned or paid			Average yield or cost (1)
		(in thousands)
ASSETS:
Federal funds sold and other		$	828		$	4		1.91	%	$	1,393		$	6		1.70	%
Investment securities (2)		280,049			2,774			3.92	%	232,030			3,136			5.35	%
Loans and leases (3)		835,974			13,191			6.24	%	722,933			12,469			6.82	%
Allowance for loan and lease losses		(11,003		)	—			0.00	%	(9,701		)	—			0.00	%
Total interest-earning assets		1,105,848			15,969			5.71	%	946,655			15,611			6.52	%
Noninterest-earning assets:
Cash and due from banks		28,761								27,274
Other		32,790								23,322
Total assets		$	1,167,399							$	997,251
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Deposits:
NOW and money market accounts		$	308,969		$	637		0.83	%	$	253,731		$	835		1.32	%
Savings		8,777			11			0.50	%	6,952			13			0.75	%
Certificates of deposit:
Under $100,000		129,155			883			2.74	%	109,331			1,024			3.76	%
$100,000 and over		171,437			1,046			2.45	%	175,830			1,379			3.15	%
Total interest-bearing deposits		618,338			2,577			1.67	%	545,844			3,251			2.39	%
Other borrowings:
Securities and loans sold under agreements to repurchase and federal funds purchased		136,216			466			1.35	%	121,798			455			1.48	%
FHLB advances		52,600			219			1.65	%	55,384			315			2.25	%
Company obligated mandatorily redeemable preferred securities		19,885			279			5.55	%	20,000			500			10.00	%
Total interest-bearing liabilities		827,039			3,541			1.71	%	743,026			4,521			2.43	%
Noninterest-bearing demand accounts		247,259								176,755
Total deposits and interest-bearing liabilities		1,074,298								919,781
Other noninterest-bearing liabilities		4,141								3,581
Total liabilities and preferred securities		1,078,439								923,362
Shareholders’ equity		88,960								73,889
Total liabilities and shareholders’ equity		$	1,167,399							$	997,251
Net interest income					$	12,428							$	11,090
Net interest spread								4.00	%							4.09	%
Net interest margin								4.51	%							4.70	%
Ratio of average interest-earning assets to average interest-bearing liabilities		133.71		%						127.41		%

 

15

 

			For the six months ended June 30,
			2003								2002
			Average balance			Interest earned or paid			Average yield or cost (1)		Average balance			Interest earned or paid			Average yield or cost (1)
			(in thousands)
ASSETS:
Federal funds sold and other			$	1,167		$	8		1.38	%	$	1,518		$	15		1.99	%
Investment securities (1)			280,901			5,736			4.12	%	220,918			5,783			5.28	%
Loans and leases (2)			822,652			25,933			6.36	%	710,433			24,518			6.96	%
Allowance for loan and lease losses			(10,776		)	—			—		(9,435		)	—			—
Total interest-earning assets			1,093,944			31,677			5.84	%	923,434			30,316			6.62	%
Noninterest-earning assets:
Cash and due from banks			29,831								26,772
Other			28,252								23,444
Total assets			$	1,152,027							$	973,650
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Deposits:
NOW and money market accounts			$	301,941		$	1,289		0.86	%	$	250,812		$	1,708		1.37	%
Savings			8,159			22			0.54	%	6,780			26			0.77	%
Certificates of deposit:
Under $100,000			133,482			1,906			2.88	%	105,304			2,107			4.03	%
$	100,000 and over		180,831			2,282			2.54	%	170,266			2,852			3.38	%
Total interest-bearing deposits			624,413			5,499			1.78	%	533,162			6,693			2.53	%
Other borrowings:
Securities and loans sold under agreements to repurchase and federal funds purchased			134,228			811			1.22	%	111,628			852			1.54	%
FHLB advances			46,282			427			1.86	%	62,834			693			2.22	%
Company obligated mandatorily redeemable preferred securities			19,941			588			5.95	%	20,000			1,000			10.00	%
Total interest-bearing liabilities			824,864			7,325			1.79	%	727,624			9,238			2.56	%
Noninterest-bearing demand accounts			237,288								169,523
Total deposits and interest-bearing liabilities			1,062,152								897,147
Other noninterest-bearing liabilities			3,942								3,856
Total liabilities and preferred securities			1,066,094								901,003
Shareholders’ equity			85,933								72,647
Total liabilities and shareholders’ equity			$	1,152,027							$	973,650
Net interest income						$	24,352							$	21,078
Net interest spread									4.04	%							4.06	%
Net interest margin									4.49	%							4.60	%
Ratio of average interest-earning assets to average interest-bearing liabilities			132.62		%						126.91		%

 

(1)                                  Average yield or cost for the three and six months ended June 30, 2003 and 2002 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.

 

16

 

 

Noninterest Income

 

The following table presents noninterest income for the three and six months ended June 30, 2003 and 2002 (in thousands).

 

		Three months ended June 30,											Six months ended June 30,
								Increase (decrease)											Increase (decrease)
		2003			2002			Amount			%		2003			2002			Amount			%
Noninterest income:
Deposit service charges		$	620		$	519		$	101		19	%	$	1,231		$	1,049		$	182		17	%
Operating lease income		22			254			(232		)	(91	)%	58			515			(457		)	(89	)%
Other loan fees		201			127			75			59	%	360			292			68			23	%
Trust and advisory income		668			166			502			302	%	866			326			540			166	%
Insurance revenue		1,990			376			1,614			429	%	2,506			672			1,834			273	%
Investment banking revenue		849			1,541			(692		)	(45	)%	1,031			2,042			(1,011		)	(50	)%
Other income		249			136			113			84	%	387			557			(169		)	(30	)%
Gain (loss) on sale of other assets		(9		)	54			(64		)	(117	)%	56			90			(35		)	(38	)%
Total noninterest income		$	4,590		$	3,173		$	1,417		45	%	$	6,495		$	5,543		$	952		17	%

 

Noninterest income for the second quarter of 2003 was $4.6 million, compared to noninterest income of $3.2 million for the second quarter of 2002.  For the six months ended June 30, 2003, noninterest income was $6.5 million, a $1.0 million, or 17% increase from the same period a year ago.  Focusing our strategy on expanding our non-interest income, 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. (which was merged into Financial Designs, Ltd. on April 14, 2003), 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.  In April 2003, we acquired ACMG, an SEC-registered investment management firm that manages stock and bond portfolios for individuals and institutions. Also in April 2003, we acquired Financial Designs Ltd. a leading provider of wealth transfer and employee benefit services for individuals and companies in the Rocky Mountain region.

 

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 eventually reduce our dependency on net interest income.  Noninterest income as a percentage of operating revenues was 27% and 21% for the three and six months ended June 30, 2003, compared to 22% and 21% for the same periods in 2002.  A consistent focus on originating loans and a shift away from the lease portfolio has significantly decreased operating lease income.  Noninterest income as a percentage of operating revenues, excluding operating lease income, was 27% and 21% for the three and six months ended June 30, 2003, compared to 21% and 19% for the same periods in 2002.  The percentage of noninterest income to operating revenues has increased, while at the same time operating revenues have increased 19% and 16% for the three and six months ended June 30, 2003, when compared to the year ago periods.

 

Deposit service charges for the three and six months ended June 30, 2003 were $0.6 million and $1.2 million, compared to $0.5 million and $1.0 million for the same periods in 2002. The increase was driven primarily by an increase in cash management analysis fees.

 

There was a net decrease in operating lease rentals for the three and six months ended June 30, 2003 compared to the same periods in 2002, 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 on our leases.  Net investment in operating leases was $0.1 million at June 30, 2003, compared to $1.0 million at June 30, 2002.

 

17

 

Other loan fees, consisting primarily of letter of credit, mortgage origination and loan documentation fees have increased due to the growth in the loan and lease portfolio.

 

Trust and advisory fees are up $0.5 million for both the three and six months ended June 30, 2003 compared to the same periods in 2002.  The increase is directly related to the acquisition of ACMG, which earned $0.4 million in trust and advisory fees for the second quarter of 2003.  As of June 30, 2003, discretionary assets under management for both ACMG and CoBiz Private Asset Management were $366.0 million.

 

Insurance revenue for the three and six months ended June 30, 2003 was $2.0 million and $2.5 million, compared to $0.4 million and $0.7 million for the same periods in 2002.  The increase is primarily attributed to insurance revenue earned since the April 14, 2003 acquisition of FDL.  Insurance revenue from FDL (including the operations of CoBiz Connect, Inc., which was merged with FDL at the acquisition date) for the three and six months ended June 30, 2003 was $1.6 million and $1.7 million, respectively.  This is a significant increase over the revenue reported for the three and six months ended June 30, 2002 of $0.2 million and $0.1 million, respectively.  Insurance revenue for the second quarter of 2003 includes $0.3 million in commissions earned for selling bank owned life insurance to CoBiz Bank, N.A, a related company.

 

CoBiz Insurance has also shown steady growth as it continues to expand its client base, growing insurance revenue 39% to $0.4 million for the three months ended June 30, 2003 and 51% to $0.8 million for the six months ended June 30, 2003.  Insurance revenue for the same periods in 2002 was $0.3 million and $0.5 million, respectively.

 

Investment banking revenue for the three months ended June 30, 2003 and 2002 was $0.8 million and $1.5 million, respectively.  Investment banking revenue for the six months ended June 30, 2003 and 2002 was $1.0 million and $2.0 million, respectively.  Investment banking revenue for the three and six months ended June 30, 2002 included a success fee from the closing of a significant deal that represented 49% of the total investment banking revenue earned in 2002.

 

Other income for the three and six months ended June 30, 2003 was $0.2 million and $0.4 million, respectively.  Other income for the three and six months ended June 30, 2002 was $0.1 million and $0.6 million, respectively.  Included in other income for the first six months of 2002 were non-recurring gains of $0.2 million on an 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 six months ended June 30, 2003 and 2002 (in thousands).

 

		Three months ended June 30,											Six months ended June 30,
								Increase (decrease)											Increase (decrease)
		2003			2002			Amount			%		2002			2001			Amount			%
Noninterest expenses:
Salaries and employee benefits		$	7,070		$	5,232		$	1,838		35	%	$	12,813		$	9,702		$	3,111		32	%
Occupancy expenses, premises and equipment		2,017			1,472			545			37	%	3,756			2,852			904			32	%
Depreciation on leases		17			190			(173		)	(91	)%	60			409			(349		)	(85	)%
Amortization of intangibles		114			44			70			159	%	160			79			81			103	%
Other operating expenses		2,031			1,599			432			27	%	3,718			3,089			629			20	%
Total other expense		$	11,249		$	8,537		$	2,712		32	%	$	20,507		$	16,131		$	4,376		27	%

 

18

 

The increase in salaries and employee benefits in 2003 from 2002 was due primarily to the additional staff from the acquisitions of FDL and ACMG.  These acquisitions accounted for $1.1 million in additional salaries and employee benefits for the three and six months ended June 30, 2003.  The hiring of additional personnel required to accommodate the Company’s growth, as well as cost of living and performance raises awarded to employees effective January 1, 2003 has also contributed to the increase.  The Company’s full time equivalent employees were 337 and 277 at June 30, 2003 and 2002, respectively.

 

The decrease in depreciation on operating leases was a result of dedicating fewer resources to originating leases and it is expected that depreciation will continue to decrease. The decrease in depreciation expense mitigates part of the decline in operating lease rental income.

 

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 $0.6 million and $1.1 million for the three and six months ended June 30, 2003, compared to $0.5 million and $1.1 million for the three and six months ended June 30, 2002.  Key indicators of asset quality have remained favorable, while average outstanding loan amounts have increased to $822.6 million for the first six months of 2003, up from $710.4 million for the first six months of 2002. As of June 30, 2003, the allowance for loan and lease losses amounted to $11.3 million, or 1.33% of total loans and leases, compared to 1.34% at June 30, 2002.

 

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.

 

19

 

		Six months ended June 30, 2003			Year ended December 31, 2002			Six months ended June 30, 2002
					(in thousands)
Balance of allowance for loan and lease losses at beginning of period		$	10,388		$	8,872		$	8,872
Charge-offs:
Commercial		(185		)	(552		)	(224		)
Real estate — mortgage		(2		)	(65		)	(65		)
Consumer		(7		)	(75		)	(59		)
Direct financing leases		(63		)	(903		)	(279		)
Total charge-offs		(257		)	(1,595		)	(627		)
Recoveries:
Commercial		8			371			348
Real estate — mortgage		—			17			7
Consumer		25			3			—
Direct financing leases		91			130			79
Total recoveries		124			521			434
Net charge-offs		(133		)	(1,074		)	(193		)
Provisions for loan and lease losses charged to operations		1,070			2,590			1,140
Balance of allowance for loan and lease losses at end of period		$	11,325		$	10,388		$	9,819
Ratio of net charge-offs to average loans and leases (1)		(0.03		)%	(0.15		)%	(0.05		)%
Average loans and leases outstanding during the period		$	822,652		$	737,151		$	710,434

 

(1)                                  The ratios for the six months ended June 30, 2003 and 2002 have been annualized. The June 30, 2003 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 $1.4 million as of June 30, 2003, compared with $2.4 million as of December 31, 2002 and $3.0 million as of June 30, 2002.  At June 30, 2003, 57% or $0.8 million of nonperforming assets consisted of three lending relationships with $0.4 million in specific reserves.  The following table presents information regarding nonperforming assets as of the dates indicated:

 

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		At June 30, 2003			At December 31, 2002			At June 30, 2002
					(in thousands)
Nonperforming loans and leases:
Loans and leases 90 days or more delinquent and still accruing interest		$	—		$	8		$	—
Nonaccrual loans and leases		1,442			2,434			2,989
Total nonperforming loans and leases		1,442			2,442			2,989
Repossessed assets		—			6			—
Total nonperforming assets		$	1,442		$	2,448		$	2,989
Allowance for loan and lease losses		$	11,325		$	10,388		$	9,819
Ratio of nonperforming assets to total assets		0.12		%	0.22		%	0.30		%
Ratio of nonperforming loans and leases to total loans and leases		0.17		%	0.31		%	0.41		%
Ratio of allowance for loan and lease losses to total loans and leases		1.33		%	1.30		%	1.34		%
Ratio of allowance for loan and lease losses to to nonperforming loans and leases		785.37		%	425.39		%	328.50		%

 

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 $106.0 million. In addition, the Bank may apply for up to $63.23 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 June 30, 2003, we had $130.3 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.

 

21

 

Net cash provided by operating activities totaled $6.7 million and $9.9 million for the six months ended June 30, 2003 and 2002, respectively.  The principal component of net cash provided by operating activities is net income adjusted by depreciation and amortization, provision for loan losses and changes in other assets and liabilities.

 

Net cash used in investing activities totaled $84.4 million and $80.4 million for the six months ended June 30, 2003 and 2002, respectively.  The increase in cash used in investing activities is primarily related to the purchase of bank owned life insurance ($6.0 million) and the acquisitions of ACMG and FDL ($1.3 million and $2.1 million, respectively), offset by a $4.9 million decrease in net loan and lease originations and repayments.

 

Net cash provided by financing activities totaled $95.5 million and $79.3 million for the six months ended June 30, 2003 and 2002, respectively.  The increase in net cash provided by financing activities is primarily attributed to an increase in total deposits during the first six months of 2003 as compared to 2002.  The implementation of a new wire system has allowed us to serve high volume customers, such as title companies and investment exchange accommodators, which has resulted in a significant increase in our deposit base.

 

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

 

Effective December 15, 2002, the Company adopted SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” an amendment of FASB Statement No. 123.  SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation.  It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation.  Finally, it amends APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information.

 

If the fair value based method of accounting under SFAS No. 123 had been applied, the Company’s net income available for common shareholders and earnings per common share would have been reduced to the pro forma amounts indicated below (assuming that the fair value of options granted during the year are amortized over the vesting period):

 

22

 

		Three months ended June 30,						Six months ended June 30,
		2003			2002			2003			2002
		(in thousands, except per share amounts)
Net income, as reported		$	3,225		$	3,190		$	5,880		$	5,761
Less: stock-based compensation determined under the fair value method		(127		)	(253		)	(335		)	(506		)
Pro forma net income		$	3,098		$	2,937		$	5,545		$	5,255
Earnings per share:
As reported - basic		$	0.24		$	0.24		$	0.44		$	0.44
As reported - diluted		$	0.23		$	0.23		$	0.42		$	0.42
Pro forma - basic		$	0.23		$	0.22		$	0.41		$	0.40
Pro forma - diluted		$	0.22		$	0.21		$	0.40		$	0.38

 

In May, 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”  This Statement establishes standards for how to measure and classify certain financial instruments with characteristics of both liabilities and equity. It requires three categories of financial instruments be classified as liabilities rather than equity and be measured and reported at fair value.  It was immediately effective for financial instruments entered into or modified after May 31, 2003, and applies to existing financial instruments at the beginning of the first interim period after June 15, 2003.  The adoption of this Statement did not have a material effect on the Company’s consolidated financial statements.

 

Effective January 1, 2003, the Company adopted FASB Interpretation No. 45 (“FIN No. 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”  FIN No. 45 considers standby letters of credit, excluding commercial letters of credit and other lines of credit, a guarantee of the Company.  The Company enters into a standby letter of credit to guarantee performance of a customer to a third party.  These guarantees are primarily issued to support public and private borrowing arrangements.  The credit risk involved is represented by the contractual amounts of those instruments.  Under the standby letters of credit, the Company is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met.  The adoption of FIN No. 45 did not have a material impact on the Company’s consolidated financial statements.

 

In January 2003, the FASB issued Interpretation No. 46 (“FIN No. 46”), “Consolidation of Variable Interest Entities,” which addresses consolidation by business enterprises of variable interest entities.  FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  The Company does not expect the requirements of FIN No. 46 to have a material impact on its consolidated financial statements.

 

23

 

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 June 30, 2003, 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 year ended December 31, 2002.

 

Item 4.           Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures.  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-15(e) as of June 30, 2003.  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 limitation, 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.

 

Changes in Internal Control.  There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

24

 

PART II.  OTHER INFORMATION

 

Item 4.                    Submission of Matters to a Vote of Security Holders

 

At the Annual Meeting of Shareholders held on May 21, 2003, the following proposals were adopted by the margins indicated:

 

1.              To elect nine directors for a one-year term.

 

		Number of Shares
		For		Withheld
Steven Bangert		11,784,505		20,841
Jerry W. Chapman		11,785,205		20,141
Alan R. Kennedy		11,617,587		187,759
Mark S. Kipnis		11,785,205		20,141
Thomas M. Longust		11,785,205		20,141
Jonathan C. Lorenz		11,785,205		20,141
Evan Makovsky		11,784,737		20,609
Noel N. Rothman		11,785,205		20,141
Timothy J. Travis		11,785,205		20,141

 

2.               To ratify the selection of Deloitte & Touche, LLP as the Company’s independent auditors for the fiscal year ending December 31, 2003.

 

		Number of Shares
For		11,792,841
Against		3,660
Withheld		8,845

 

 

3.               Recommendation to the Board of Directors to cease using any form of executive compensation, including executive stock options, unless the costs of such compensation are included as an expense in the annual income and expense statements.

 

		Number of Shares
For		1,636,139
Against		8,083,683
Withheld		19,077
Not voted		2,066,447

 

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)		3.1	Amended and Restated Articles of Incorporation of the Registrant.
(3)		3.2	Amendment to Articles of Incorporation.

 

25

 

(10)		3.3	Amendment to Articles of Incorporation
(2)		3.4	Amended and Restated Bylaws of the Registrant.
(9)		3.5	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 at November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
+(2)		10.5	Contract Modification, dated at November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
+(2)		10.6	Computer Software Maintenance Agreement, dated at November 19, 1997, by and between Jack Henry & Associates, Inc. and Colorado Business Bank, N.A.
(2)		10.7	Employment Agreement, dated at March 1, 1995, by and between Equitable Bankshares of Colorado, Inc. and Jonathan C. Lorenz.
(2)		10.8	Employment Agreement, dated at May 8, 1995, by and between Equitable Bankshares of Colorado, Inc. and Virginia K. Berkeley.
(2)		10.9	Employment Agreement, dated at January 3, 1998, by and between CoBiz Inc. and Richard J. Dalton.
(5)		10.10	Lease Agreement between Kesef, LLC and CoBiz Inc.

 

26

 

(6)		10.11	Employment Agreement, dated January 1, 2000, by and between Colorado Business Bankshares, Inc. and Lyne Andrich.
(7)		10.12	First Amendment to Lease Agreement between Kesef, LLC and Colorado Business Bankshares, Inc. dated May 1, 1998.
(8)		10.13	2000 Employee Stock Purchase Plan.
(9)		10.14	2002 Equity Incentive Plan
(10)		21	List of subsidiaries
		31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
		31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
		32.1	Section 1350 Certification of the Chief Executive Officer
		32.2	Section 1350 Certification of the Chief Financial Officer

 

(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-Q for the quarter ended June 30, 2000, as filed on May 12, 2000.
(7)		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.
(8)		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.

 

27

 

(9)		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.
(10)		Incorporated herein by reference from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, as filed on May 14, 2003.
+		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

 

On April 16, 2003 we filed a current report on Form 8-K under Item 5. Other Events, reporting that we issued a press release on April 1, 2003 announcing that we had we acquired Alexander Capital Management Group, Inc. (“ACMG”), an SEC registered investment adviser firm based in Denver, Colorado.

 

On April 17, 2003 we filed a current report on Form 8-K under Item 5. Other Events, reporting that we issued a press release on April 14, 2003 announcing that we had acquired Financial Designs Ltd. (“FDL”), a provider of wealth transfer and employee benefit services based in Denver, Colorado.

 

On April 21, 2003 we filed a current report on Form 8-K under Item 9. Regulation FD Disclosure, reporting that we issued a press release on April 17, 2003 with the financial results for the quarter ended March 31, 2003.

 

On May 21, 2003 we filed a current report on Form 8-K under Item 9. Regulation FD Disclosure, reporting that we had presented information at an Annual Meeting of Shareholders on May 21, 2003.

 

On May 29, 2003 we filed a current report on Form 8-K under Item 5. Other Events, reporting that we issued a press release on May 27, 2003 announcing a management restructuring.

 

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:	August 14, 2003		By	/s/ Steven Bangert
			Steven Bangert, Chief Executive Officer and Chairman
Date:	August 14, 2003		By	/s/ Lyne B. Andrich
			Lyne B. Andrich, Executive Vice President and
			Chief Financial Officer

 

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