CoBiz Financial, Inc. Earnings Analysis: 2015 By the Numbers

CoBiz Financial, Inc. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of CoBiz Financial, Inc. – Western Alliance Bancorporation, Guaranty Bancorp, Glacier Bancorp, Inc., Cullen/Frost Bankers, Inc., First Interstate BancSystem, Inc. Class A, Zions Bancorporation, National Bank Holdings Corporation Class A, Pinnacle Financial Partners, Inc. and KeyCorp (WAL-US, GBNK-US, GBCI-US, CFR-US, FIBK-US, ZION-US, NBHC-US, PNFP-US and KEY-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 73.72% to 76.90% compared to the same period last year.
  • Net loan assets changed 12.04% compared to same period last year and 12.04% from previous period, total deposits changed 10.01% compared to same period last year and 10.01% from previous period.
  • Year-on-year change in operating cash flow of 25.13% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 132.1 123.79 125.93 140.64 141.33
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 33.46 23.91 26.98 28.57 25.81
Earnings Growth (YOY) 247.82 -28.54 12.84 5.9 -9.67
Net Margin 25.33 19.32 21.43 20.32 18.26
EPS 0.76 0.55 0.66 0.7 0.62
Return on Equity 13.42 8.84 9.68 9.49 8.75
Return on Assets 1.39 0.94 0.99 0.97 0.8

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Earnings Growth Analysis

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 76.67% to 72.36%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 73.72% to 76.90%. For comparison, net interest income margins were 73.72% and net interest income after provisions margins 76.67% in the immediate last period.

Net Interest Income Margin Versus Loan Loss Provisions Margin
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 12.04% compared to the same period last year and 12.04% from the previous period. Total deposits changed 10.01% compared to the same period last year and 10.01% from the previous period.

Cash Versus Earnings – Sustainable Performance?

COBZ-US‘s change in operating cash flow of 25.13% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 31.44% to 24.36% and (2) One-time items that contributed to a decrease in pretax margins from 31.40% to 25.29%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

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Company Profile

CoBiz Financial, Inc. operates as a diversified financial services company. The company operates through three business segments: Commercial Banking, Fee-Based Lines and Corporate Support & Other. The Commercial Banking segment consists of the operations of Colorado Business Bank and Arizona Business Bank, which offers real estate banking, private banking, interest-rate hedging, depository products and treasury management. The Fee-Based Lines segment divided into three segments those are Investment, Wealth Management and Insurance. The Investment Banking segment consists of the operations of Green Manning & Bunch, 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 Wealth Management segment consists of the operations of CoBiz Investment Management, LLC. and CoBiz Trust and Financial Designs Ltd., which offers customized client investment policy, proprietary bond and equity offerings, tailored asset allocation strategies, trust administration, estate and business succession planning, carefully vetted investment options utilizing external managers, investment management, estate settlements, financial planning and family office services. The Insurance segment consists of the operations of CoBiz Insurance, Inc. and Financial Designs Ltd., which offers employee benefits and retirement planning, executive compensation and benefits planning, individual benefits, commercial lines, professional lines, private client and risk management services. The Corporate Support & Other segment is composed of activities of the parent company; non-production, back-office support operations; and eliminating transactions in consolidation. The non-production, back-office operations include human resources, accounting and finance, information technology, and loan and deposit operations. CoBiz Financial was founded on February 19, 1980 and is headquartered in Denver, CO.

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