United Western Bancorp, Inc. Reports 2009 Third Quarter Results
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-- Company completed public offering of 20,000,000 shares of common stock
at a price of $4.00 per share for net proceeds of $74.4 million, which
were received on September 22, 2009. On October 14, 2009, Company issued
an additional 1,961,325 shares and received net proceeds of $7.4
million, total of $81.8 million raised.
-- Company's leverage ratio increased to 7.43% at September 30, 2009, from
4.51% at December 31, 2008.
-- Company contributed $62.1 million of offering proceeds to United Western
Bank(R), which increased capital ratios: core capital to 8.77%, total
risk based capital to 11.07%.
-- Net loss for the third quarter of 2009 of $8.7 million, compared to net
income of $4.0 million for the second quarter of 2009.
-- Community bank deposits increased 100%, or $193 million, and total
deposits including custodial escrow balances are up over $289 million
since year end 2008.
-- Liquidity held in cash and due from banks was $569 million at September
30, 2009.
-- Net interest margin contracted to 2.84% for the third quarter of 2009
due to higher levels of liquidity maintained on the balance sheet.
Excess liquidity reduced the net interest margin an estimated 47 basis
points in the third quarter of 2009.
-- Community bank held for investment nonperforming loans remained
unchanged at $24.6 million, or 2.31% of the community bank held for
investment loans portfolio.
-- Community bank held for investment allowance for credit losses increased
$1.8 million to $26.4 million; $10.1 million provision for credit losses
expense, net of charge-offs during the quarter, increased allowance as a
percentage of the entire held for investment portfolio to 2.21%.
-- Total nonperforming asset ratio grew slightly to 1.59% at September 30,
2009, compared to 1.34% at June 30, 2009.
DENVER--(BUSINESS WIRE)-- United Western Bancorp, Inc. (NASDAQ: UWBK) (the "Company"), a Denver-based holding company whose principal subsidiary, United Western Bank(R) (the "Bank"), is a community bank focused on expansion across Colorado's Front Range market and selected mountain communities, announced results for its 2009 third quarter.
For the third quarter of 2009, the Company incurred a loss from continuing operations of $8.7 million. On September 22, 2009, the Company issued 20 million shares of its common stock in a public offering. Had these shares been outstanding for the entire third quarter, the loss per share for the quarter would have been $(.30). Based on the weighted average number of shares that were outstanding during the period the loss was $(.95) per share. The loss was attributable to three principal factors: (i) $10.1 million of provision for credit losses, or $6.3 million net of tax, (ii) a net other-than-temporary impairment charge on non-agency mortgage backed securities of $2.8 million, or $1.7 million net of tax, and (iii) during the third quarter, the Company held approximately $370 million of short term liquidity on its balance sheet, which resulted in an approximate 47 basis point reduction in net interest margin for the period. The Company reported a loss from continuing operations for the second quarter of 2009 of $33.7 million, or ($4.71) per share, and income from continuing operations for the third quarter of 2008 of $1.5 million, or $.21 per diluted share. See Appendix I to this earnings release for a reconciliation of our adjusted core earnings and weighted average shares outstanding.
Scot T. Wetzel, President and Chief Executive Officer said: "During the third quarter, we successfully raised $74.4 million, net of expenses, in a common stock offering, and together with an over-allotment option exercised in October, we raised a total of $81.8 million net of expenses. Our community bank deposits increased $193 million, or 100%, during the first nine months of the year, as consumers and businesses seek a solid community banking franchise for their funds. We were cautious in the utilization of this liquidity, which resulted in high cash balances on our balance sheet that negatively impacted our net interest margin. We continue to focus on working diligently and strategically for our customers and shareholders."
William D. Snider, Chief Financial Officer, said: "We continued with our efforts to strengthen the balance sheet and plan for the future. The balance sheet strengthening actions in the third quarter included increasing capital, increasing liquidity, and risk reduction through increased reserves, a decline in exposure to construction and development loans and increasing core community bank deposits. We increased the Company's leverage ratio by almost 300 basis points to 7.43% with our equity raise, reduced exposure to land loans, and added to the allowance which grew to 2.21% in total and 2.47% for community bank loans. At September 30, 2009, nonperforming community bank loans held for investment were $24.6 million. Net charge-offs for the third quarter of 2009 were $8.4 million. Net interest margin declined 48 basis points to 2.84% for the third quarter of 2009 compared to 3.32% for the second quarter of 2009. This was principally due to a decline in the yield on interest earning assets caused by higher levels of liquidity that we maintained on our balance sheet."
Net Interest Income, Yield on Assets, Cost of Liabilities
Quarter Ended
September 30, 2009 June 30, 2009 September 30, 2008
(Dollars in thousands)
Interest and dividend $ 25,236 $ 25,975 $ 29,151
income
Interest expense 8,202 7,595 8,109
Net interest income
before $ 17,034 $ 18,380 $ 21,042
provision for credit
losses
Yield on assets 4.20 % 4.69 % 5.51 %
Cost of liabilities 1.48 % 1.50 % 1.73 %
Net interest spread 2.72 % 3.19 % 3.78 %
Net interest margin 2.84 % 3.32 % 3.99 %
-- Average community bank loans increased $35.2 million in the third
quarter of 2009 to $1.167 billion as compared to $1.132 billion for the
second quarter of 2009. The yield on community bank loans declined eight
basis points to 5.34% for the third quarter as compared to 5.42% for the
second quarter as a result of an increase in the average balance of
nonperforming construction and development loans, which reduced interest
income approximately $259,000. The yield on community bank loans in the
year ago quarter was 6.19%, when the average prime rate of interest was
175 basis points higher than for the quarter ended September 30, 2008.
-- Average wholesale assets declined $76.8 million in the third quarter of
2009 to $838.5 million as compared to $915.2 million in the second
quarter of 2009. The yield on wholesale assets declined eighteen basis
points to 4.42% in the third quarter of 2009 as compared to 4.60% in the
second quarter of 2009. The principal cause of the decline in the yield
was due to adjustable rate residential loans that have repriced to
current rates. In the year ago period, average wholesale assets were
$1.1 billion and yielded 4.99%.
-- Average other interest earning assets increased $209.4 million based on
our decision to maintain additional liquidity on our balance sheet in
the current environment together with strong deposit growth. The average
balance of other interest earning assets was $382 million for the third
quarter, compared to $172.7 million for the second quarter. The yield
was 26 basis points for the third quarter compared to 36 basis points in
the second quarter.
-- The Company's cost of interest-bearing liabilities declined two basis
points to 1.48% for the third quarter, compared with 1.50% for the
second quarter. This decrease can be primarily attributed to the decline
in rates paid on certificates of deposit. The average balance of
interest bearing liabilities increased $172.7 million, which caused
interest expense to increase over the second quarter level. In the year
ago period the cost of interest-bearing liabilities was 1.73%.
-- We expect net interest margin to improve prospectively from the
following actions: (i) future reductions in our institutional deposit
base in order to reduce excess liquidity, (ii) continued disciplined
loan pricing and (iii) fourth quarter 2009 maturities of certain
higher-cost wholesale funding.
Provision for Credit Losses
Quarter Ended
September 30, 2009 June 30, 2009 September 30, 2008
(Dollars in thousands)
Net interest income
before provision $ 17,034 $ 18,380 $ 21,042
for credit losses
Provision for credit 10,106 6,278 2,203
losses
Net interest income after
provision $ 6,928 $ 12,102 $ 18,839
for credit losses
-- In the third quarter of 2009, provision for credit losses was $10.1
million, compared with $6.3 million for the second quarter of 2009 and
$2.2 million for the third quarter of 2008.
-- Net charge-offs of community bank loans held for investment for the
quarter ended September 30, 2009, were $8.3 million, compared to
$842,000 for the second quarter of 2009, and $13,000 for the third
quarter of 2008. There were four relationships in our C&D portfolio that
accounted for $6.9 million of the net charge-offs in the third quarter
of 2009, including the complete charge-off of one out-of-market loan,
and another loan that the Bank successfully moved to real estate owned
as part of its classified asset management strategy.
-- Overall at September 30, 2009, our allowance for credit losses as a
percent of loans held for investment increased to 2.21%, as compared to
2.02% at June 30, 2009, and 1.16% at September 30, 2008.
-- The allowance for loan losses attributed to community bank loans as a
percent of community bank loans for the periods shown above was 2.47%,
2.26%, and 1.33%, respectively.
-- Based on constant review of our loan portfolio, the current level of
delinquencies and our outlook for the economic environment in the short
run, we considered it prudent to continue to build our reserves in the
quarter.
Noninterest Income
Quarter Ended
September 30, 2009 June 30, 2009 September 30, 2008
(Dollars in thousands)
Custodial, administative
and escrow $ 101 $ 171 $ 174
services
Loan administration 1,070 1,038 1,175
Gain on sale of loans 1,244 331 418
held for sale
Loss on sale of available
for sale - (46,980 ) -
securities
Total
other-than-temporary (3,244 ) (892 ) (4,110 )
impairment ("OTTI")
losses
Portion of OTTI losses
recognized in
other comprehensive 443 289 -
income before
taxes
Net OTTI losses
recognized in (2,801 ) (603 ) (4,110 )
earnings
Other 427 642 1,115
Total noninterest income $ 41 $ (45,401 ) $ (1,228 )
(loss)
-- The Company incurred OTTI charges on three of its non-agency
mortgage-backed securities in the third quarter of 2009. Two securities
subject to OTTI were the same securities for which OTTI was incurred in
the second quarter of 2009 and third quarter of 2008. The other security
subject to an OTTI charge in the third quarter of 2009 was a security
that demonstrated weaknesses in performance similar to the other OTTI
securities; the charge was $2 million for this other security.
-- Gain on sale of SBA originated loans improved in the third quarter and
there is evidence of a recovery of this market activity. We believe it
is possible that this business sector will allow for increased levels of
sales in future quarters.
Noninterest Expense
Quarter Ended
September 30, 2009 June 30, 2009 September 30, 2008
(Dollars in thousands)
Compensation and employee $ 6,995 $ 6,554 $ 6,764
benefits
Subaccounting fees 6,377 3,983 4,365
Lower of cost or fair
value adjustment on 300 252 610
loans held for sale
Occupancy and equipment 895 823 716
Other 6,459 8,187 4,473
Total noninterest expense $ 21,026 $ 19,799 $ 16,928
-- Compensation and employee benefits increased $441,000 to $7.0 million in
the third quarter compared with $6.6 million in the second quarter. The
increase in the third quarter of 2009 compared to the second quarter of
2009 was the result of an increase in incentive compensation related to
loan originations, deposit growth and loan sales for the period and
modestly higher medical insurance costs.
-- After the completion of the sale of certain assets of UW Trust at the
end of June 2009, the Company incurred subaccounting fees on the
custodial deposits transferred to the buyer. During the third quarter of
2009, the increase of $2.4 million in subaccounting fees was the result
of this sale. Between the third quarter of 2009 and the third quarter of
2008, the fee increased as a result of the sale of certain assets of UW
Trust, adjusted for decline in the underlying index upon which the
subaccounting fees are tied.
-- The fair value adjustment on loans held for sale increased $48,000
between the third quarter of 2009 and the second quarter of 2009. During
the third quarter, an increase in the level of delinquencies required an
addition to the valuation account.
-- Other expense decreased $1.7 million between the third quarter of 2009
and the second quarter of 2009. During the second quarter of 2009, the
Company incurred a $1.8 million loss on the disposition of legacy assets
owned by a non-core subsidiary, and a $672,000 loss at the UWBK Colorado
Fund LLC, incurred on a loan that paid off in full at United Western
Bank. In addition, between the second quarter of 2009 and the third
quarter of 2009, there was an $888,000 decline in FDIC assessments,
principally the result of the $1.2 million special assessment incurred
during the second quarter. Partially offsetting these declines was an
increase in real estate owned expense and loan collection expenses of
approximately $1.3 million.
Income Taxes. For the quarter ended September 30, 2009, the Company's effective tax rate was (38.2%). The Company's tax rate was 25.5% for the second quarter of 2009 and (118.2%) for the third quarter of 2008.
Balance Sheet. The Company's assets were $2.63 billion at September 30, 2009, compared with $2.26 billion at December 31, 2008, and $2.24 billion at September 30, 2008. Assets grew $368 million in the first nine months of 2009 due to $289 million of deposit growth, including escrow balances, our equity capital raise, and our decision to maintain increased liquidity on our balance sheet.
Loan Portfolio
The table below includes loans held for investment:
September 30, June 30, 2009 December 31, September 30,
2009 2008 2008
(Dollars in thousands)
Community bank
loans:
Commercial real $ 476,319 $ 453,283 $ 434,399 $ 417,780
estate
Construction 277,143 306,732 277,614 243,401
Land 98,527 101,676 123,395 122,332
Commercial 155,787 161,308 134,435 131,128
Multifamily 18,663 25,223 20,381 20,128
Consumer and 44,140 43,150 49,440 44,481
mortgage
Premium, net 186 192 216 223
Unearned fees (4,896) (5,333) (3,565) (3,407)
Total community 1,065,869 1,086,231 1,036,315 976,066
bank loans
Wholesale
loans:
Residential 94,400 101,824 125,630 132,632
SBA purchased
loans - 68,193 71,149 80,110 84,677
guaranteed
Premium on SBA
purchased, 6,162 6,348 7,084 7,548
guaranteed
portions
Premium, net 154 324 345 106
Total wholesale 168,909 179,645 213,169 224,963
loans
Total loans $ 1,234,778 $ 1,265,876 $ 1,249,484 $ 1,201,029
-- At September 30, 2009, community bank loans held for investment
increased $30 million from December 31, 2008, inclusive of the $43.1
million note received in connection with the UW Trust asset sale. Absent
the UW Trust asset sale note, community bank loans decreased a modest
$14 million in the first nine months of 2009, which is consistent with
our balance sheet management plan implemented in 2008.
-- We are reducing our exposure to construction and development ("C&D")
loans. As a percentage of the total held for investment loan portfolio,
C&D loans decreased to 30.4% at September 30, 2009, compared to 32.1% at
December 31, 2008. In addition, our land loan exposure declined $24.9
million in that same period. We have established a goal to reduce C&D
loans to 25% of our total held for investment loan portfolio.
Commitments to fund C&D loans declined to $42.8 million at September 30,
2009 compared to $151.2 million at December 31, 2008.
-- In the first nine months of 2009, wholesale loans declined $44.3 million
as a result of repayments.
Asset Quality
The following table sets forth our nonperforming assets from our held for investment portfolio as of the dates indicated:
September 30, June 30, 2009 December 31, 2008 September 30,
2009 2008
(Dollars in thousands)
Residential $ 3,729 $ 3,867 $ 3,238 $ 2,425
SBA purchased
loans - - - 791 728
guaranteed
Total 3,729 3,867 4,029 3,153
wholesale
Commercial 7,583 9,164 1,311 885
real estate
Construction
and 16,239 14,258 2,900 4,713
development
Commercial
and 756 1,036 283 146
industrial
SBA
originated, 50 101 124 88
guaranteed
portions
Total
community 24,628 24,559 4,618 5,832
bank
Total
nonperforming
loans held 28,357 28,426 8,647 8,985
for
investment
REO 13,325 3,920 4,417 2,693
Total
nonperforming $ 41,682 $ 32,346 $ 13,064 $ 11,678
assets
Nonperforming
residential
to 3.95 % 3.80 % 2.58 % 1.83 %
residential
loans
Nonperforming
community
bank to 2.31 % 2.26 % 0.45 % 0.60 %
community
bank
loans
Total
nonperforming
HFI loans to 2.30 % 2.25 % 0.69 % 0.75 %
total HFI
loans
Total
nonperforming 1.59 % 1.34 % 0.58 % 0.52 %
assets to
total assets
-- Total nonperforming assets have increased as shown in the table above.
During the third quarter, there was a modest decline in nonperforming
wholesale loans partially offset by a modest increase in community bank
nonperforming, and in total nonperforming loans declined slightly in the
third quarter of 2009 as compared to the second quarter of 2009. We
continue to manage these problem loans with anticipatory actions
including conducting regular reviews of loans, obtaining current
independent appraisals, and taking other appropriate actions to work
with our customers to a satisfactory resolution.
-- During the third quarter of 2009, we moved the largest nonperforming
asset as of June 30, 2009, into real estate owned, which resulted in a
$6.9 million increase in REO. In addition, we moved two other former
community bank loans totaling $2.2 million at September 30, 2009, into
real estate owned. The balance of the increase was due to wholesale
residential foreclosures during the period.
The table below shows the nonperforming loans that are held for sale which are subject to the fair value adjustment for loans held for sale:
September 30, June 30, 2009 December 31, 2008 September 30,
2009 2008
(Dollars in thousands)
Residential $ 9,663 $ 8,849 $ 6,493 $ 5,786
Total wholesale 9,663 8,849 6,493 5,786
Multifamily 1,511 1,511 6,759 337
Total community 1,511 1,511 6,759 337
bank
Total
nonperforming $ 11,174 $ 10,360 $ 13,252 $ 6,123
loans
held for sale
-- Nonperforming residential loans increased $814,000 in the third quarter.
This increase is generally consistent with delinquency trends in the
national marketplace. There were no residential charge-offs from the
held for sale portfolio during the period.
-- Multifamily nonperforming loans held for sale did not change for the
third quarter and represents one loan in the process of foreclosure.
Investment Securities
-- At September 30, 2009, the Company's held to maturity mortgage-backed
investment security portfolio had an amortized cost of $363 million. The
Company's available for sale mortgage-backed investment security
portfolio had a fair value of $35 million, or approximately $3 million
below cost.
-- As shown above in noninterest income, the Company incurred $2.8 million
net other-than-temporary impairment charges ("OTTI") on three private
label mortgage-backed securities during the third quarter of 2009. To
date these securities have been written down to 39% of the remaining
unpaid principal balance, which represents our best estimate of
anticipated recovery.
-- Our exposure to non-agency mortgage-backed securities decreased $33
million from repayments in the third quarter and decreased $134 million
since December 31, 2008, as a result of the previously disclosed sale of
$47 million of mortgage-backed securities secured by
option-adjustable-rate mortgage loans during the second quarter and
year-to date repayments. At September 30, 2009, risk based capital
regulations required the Bank to allocate $86.9 million of capital to
support the $333.2 million book value of non-agency mortgage-backed
securities portfolio, of which $77.1 million of capital was allocated to
$138.0 million of nonagency mortgage-backed securities subject to the
direct credit substitute methodology.
-- The level of repayments has positively impacted the values of non-agency
mortgage-backed securities in the third quarter of 2009 as well as
resulting in a corresponding reduction in risk of loss related to those
repayments. However, a continued increase in the levels of
delinquencies, foreclosures and incurred losses by the underlying loans
that collateralize mortgage-backed securities owned by the Company may
result in additional OTTI charges prospectively.
Deposits. At September 30, 2009, deposits, including custodial escrow balances, increased $289 million to $2.04 billion, as compared with $1.75 billion at December 31, 2008. Community bank deposits increased $92 million, or 32%, in the third quarter of 2009 to $385 million at September 30, 2009, versus $293 million at June 30, 2009. During the third quarter of 2009, community bank deposits increased as a result of successful marketing efforts which resulted in higher money market account balances and certificates of deposit.
Capital. At September 30, 2009, after completion of the Company's common equity raise, the Company's equity leverage ratio was 7.43% compared with 5.35% at June 30, 2009. At September 30, 2009, the Bank's Tier-1 core capital, total risk-based and Tier-1 risk-based capital ratios were 8.77%, 11.07% and 9.82%, respectively, all of which are in excess of regulatory requirements of 5%, 10% and 6%, respectively.
The Office of Thrift Supervision ("OTS") conducted a regularly scheduled examination of the Company's and Bank's condition as of March 30, 2009. Upon completion of the examination the OTS found certain matters that required the attention of management and the Company's and the Bank's Board of Directors. The Bank has received a proposed memorandum of understanding from the OTS and although the memorandum of understanding has not yet been finalized, once finalized and executed the memorandum of understanding could require the Company and the Bank to take certain actions concerning capital, dividends, debt and stock redemptions, and asset and liability concentrations. The Company expects that the terms of the memorandum of understanding will be finalized in the near future.
Conference Call
Any investor or interested individual can listen to the teleconference, which is scheduled to begin at 9:00 a.m. MST (11:00 a.m. EST) on Thursday, November 5, 2009. To participate in the teleconference, please call toll-free 1-877-941-2333 (or 1-480-629-9692 for international callers) approximately 10 minutes prior to the start time. You may also listen to the teleconference live on the Company's website, www.uwbancorp.com, and accessing the Investor Relations tab, or by accessing http://www.talkpoint.com/viewer/starthere.asp?Pres=128492. The teleconference may include forward-looking statements.
For those unable to attend, an archive of the conference call will be hosted on our website.
About United Western Bancorp, Inc.
Denver-based United Western Bancorp, Inc. is focused on developing its community-based banking network through its subsidiary, United Western Bank, by strategically positioning branches across Colorado's Front Range market and certain mountain communities. This area spans the eastern slope of the Rocky Mountains - from Pueblo to Fort Collins, and from metropolitan Denver to the Roaring Fork Valley. United Western Bank plans to grow its network to an estimated ten to twelve community bank locations over the next three to five years. In addition to community-based banking, United Western Bancorp, Inc. and its subsidiaries offer deposit services to institutional customers and custodial, administrative, and escrow services through its wholly owned subsidiary, UW Trust Company. For more information, please visit our website at www.uwbancorp.com.
Forward-Looking Statements
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include information concerning our liquidity, exposure to C&D loans, management of nonperforming loans, and community bank implementation and business strategy. These statements often include terminology such as "may," "will," "expect," "anticipate," "predict," "believe," "plan," "estimate," "continue," "could," "should," "would," "intend," "projects," or the negative thereof or other variations thereon or comparable terminology and similar expressions. As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to: the successful implementation of our community banking strategies; the ability to secure, timing of, and any conditions imposed thereon of any, regulatory approvals or consents for new branches or other contemplated actions; the availability of suitable and desirable locations for additional branches; the continuing strength of our existing business, which may be affected by various factors, including but not limited to interest rate fluctuations, level of delinquencies, defaults and prepayments, increased competitive challenges, and expanding product and pricing pressures among financial institutions; changes in financial market conditions, either internationally, nationally or locally in areas in which we conduct our operations, including without limitation, reduced rates of business formation and growth, commercial and residential real estate development, real estate prices and other recent problems in the commercial and residential real estate markets; demand for loan products and financial services; unprecedented fluctuations in markets for equity, fixed-income, commercial paper and other securities, including availability, market liquidity levels, and pricing; increases in the levels of losses, customer bankruptcies, claims and assessments; the extreme levels of volatility and limited credit currently being experienced in the financial markets; changes in political and economic conditions, including the economic effects of terrorist attacks against the United States and related events; legal and regulatory developments, such as changes in fiscal, monetary, regulatory, trade and tax policies and laws, including policies of the U.S. Department of Treasury and the Federal Reserve Board; our participation, or lack thereof, in governmental programs implemented under the Emergency Economic Stabilization Act (the "EESA"), including without limitation the Troubled Asset Relief Program ("TARP"), and the Capital Purchase Program (the "CPP"), and the impact of such programs and related regulations on our business and on international, national, and local economic and financial markets and conditions.
Additional information concerning these and other factors that may cause actual results to differ materially from those anticipated in forward-looking statements is contained in the "Risk Factors" section included in the Prospectus filed with the Securities and Exchange Commission pursuant to Rule 424 (b) (4) on September 17, 2009, and in the Company's other periodic reports and filings with the Commission. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this press release.
Any forward-looking statements made by the Company speak only as of the date on which the statements are made and are based on information known to us at that time. We do not intend to update or revise the forward-looking statements made in this press release after the date on which they are made to reflect subsequent events or circumstances, except as required by law.
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, December 31,
2009 2008
Assets
Cash and due from banks $ 568,581 $ 22,332
Interest-earning deposits 351 548
Total cash and cash equivalents 568,932 22,880
Investment securities - available for sale, at 34,920 59,573
estimated fair value
Investment securities - held to maturity, at 410,530 498,464
amortized cost
Loans held for sale - at lower of cost or fair 272,142 291,620
value
Loans held for investment 1,234,778 1,249,484
Allowance for credit losses (27,254 ) (16,183 )
Loans held for investment, net 1,207,524 1,233,301
FHLBank stock, at cost 12,311 29,046
Mortgage servicing rights, net 7,791 9,496
Accrued interest receivable 7,318 8,973
Other receivables 20,384 15,123
Premises and equipment, net 24,406 23,364
Bank-owned life insurance 25,942 25,233
Other assets, net 7,453 13,839
Deferred income taxes 14,599 24,100
Foreclosed real estate 13,325 4,417
Total assets $ 2,627,577 $ 2,259,429
Liabilities and shareholders' equity
Liabilities:
Deposits $ 2,005,442 $ 1,724,672
Custodial escrow balances 37,603 29,697
FHLBank borrowings 216,636 226,721
Borrowed money 118,513 119,265
Junior subordinated debentures owed to 30,442 30,442
unconsolidated subsidiary trusts
Income tax payable - 1,140
Other liabilities 23,763 25,543
Total liabilities 2,432,399 2,157,480
Shareholders' equity:
Common stock 3 1
Additional paid-in capital 99,376 23,856
Retained earnings 98,372 100,348
Accumulated other comprehensive loss (2,573 ) (22,256 )
Total shareholders' equity 195,178 101,949
Total liabilities and shareholders' equity $ 2,627,577 $ 2,259,429
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share information)
Quarter Ended Nine Months Ended
September September June 30, September September
30, 30, 30, 30,
2009 2008 2009 2009 2008
Interest and
dividend income:
Community bank loans $ 15,717 $ 15,439 $ 15,301 $ 45,983 $ 42,451
Wholesale 3,185 5,004 3,793 11,054 15,619
residential loans
Other loans 360 576 389 818 2,241
Investment 5,721 7,779 6,339 18,961 24,487
securities
Deposits and 253 353 153 519 1,327
dividends
Total interest and 25,236 29,151 25,975 77,335 86,125
dividend income
Interest expense:
Deposits 3,919 2,921 3,470 10,671 9,086
FHLBank borrowing 2,391 3,645 2,366 7,138 11,101
Other borrowed money 1,892 1,543 1,759 5,437 4,800
Total interest 8,202 8,109 7,595 23,246 24,987
expense
Net interest income
before provision for 17,034 21,042 18,380 54,089 61,138
credit losses
Provision for credit 10,106 2,203 6,278 20,565 6,226
losses
Net interest income
after provision for 6,928 18,839 12,102 33,524 54,912
credit losses
Noninterest income:
Custodial,
administrative and 101 174 171 388 697
escrow services
Loan administration 1,070 1,175 1,038 3,265 3,833
Gain on sale of 1,244 418 331 1,622 742
loans held for sale
Loss on sale of
available for sale - - (46,980 ) (46,980 ) -
investment
securities
Total
other-than-temporary (3,244 ) (4,110 ) (892 ) (4,136 ) (4,110 )
impairment losses
Portion of loss
recognized in OCI 443 - 289 732 -
(before taxes)
Net OTTI losses
recognized in (2,801 ) (4,110 ) (603 ) (3,404 ) (4,110 )
earnings
Gain on sale of
investment in Matrix - - - 3,567 -
Financial Solutions,
Inc.
Other 427 1,115 642 1,880 2,369
Total noninterest 41 (1,228 ) (45,401 ) (39,662 ) 3,531
income
Noninterest expense:
Compensation and 6,995 6,764 6,554 19,804 19,153
employee benefits
Subaccounting fees 6,377 4,365 3,983 13,800 14,066
Amortization of
mortgage servicing 570 491 587 1,951 1,872
rights
Lower of cost or
fair value 300 610 252 (25 ) 1,175
adjustment on loans
held for sale
Occupancy and 895 716 823 2,510 1,923
equipment
Postage and 222 237 247 692 676
communication
Professional fees 1,017 880 944 3,056 2,032
Mortgage servicing
rights subservicing 330 389 344 1,042 1,288
fees
Other general and 4,320 2,476 6,065 13,146 6,631
administrative
Total noninterest 21,026 16,928 19,799 55,976 48,816
expense
(Loss) income from
continuing (14,057 ) 683 (53,098 ) (62,114 ) 9,627
operations before
income taxes
Income tax (benefit) (5,363 ) (807 ) (19,360 ) (23,169 ) 1,869
provision
(Loss) income from
continuing (8,694 ) 1,490 (33,738 ) (38,945 ) 7,758
operations
Discontinued
operations:
Income from
operations, net of
income tax provision - 2 37,736 37,525 162
of $0, $2, $20,727,
$20,620, and $91,
respectively
Net (Loss) Income $ (8,694 ) $ 1,492 $ 3,998 $ (1,420 ) $ 7,920
(Loss) Income from
continuing $ (0.95 ) $ 0.21 $ (4.71 ) $ (4.97 ) $ 1.07
operations per share
- basic and diluted
Income from
discontinued - - 5.26 4.79 0.02
operations per share
- basic and diluted
Net (Loss) Income
per share - basic $ (0.95 ) $ 0.21 $ 0.55 $ (0.18 ) $ 1.09
and diluted
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEET
(Unaudited)
Nine Months Ended September 30,
2009 2008
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Assets
Interest-earning
assets
Community bank
loans:
Commercial real $ 393,037 $ 17,231 5.86 % $ 288,637 $ 14,289 6.61 %
estate
Construction and 378,932 13,629 4.81 305,303 14,049 6.15
development
Originated SBA 148,572 6,289 5.66 107,118 6,081 7.58
loans
Multifamily 47,257 1,786 5.04 50,148 2,403 6.39
Commercial 120,217 5,005 5.57 108,077 5,250 6.49
Consumer and other 54,436 2,043 5.02 10,231 379 4.95
loans
Total community 1,142,451 45,983 5.38 % 869,514 42,451 6.52 %
bank loans
Wholesale assets:
Residential 313,684 11,054 4.70 392,684 15,619 5.30
mortgage loans
Purchased SBA loans 129,717 1,633 1.68 162,596 3,977 3.27
and securities
Mortgage-backed 463,079 18,146 5.22 575,180 22,751 5.27
securities
Total wholesale 906,480 30,833 4.54 % 1,130,460 42,347 4.99 %
assets
Interest-earning 186,574 254 0.18 16,551 307 2.44
deposits
FHLBank stock 22,977 265 1.54 36,099 1,020 3.77
Total
interest-earning 2,258,482 $ 77,335 4.57 % 2,052,624 $ 86,125 5.60 %
assets
Non-interest
earning assets
Cash 54,700 18,896
Allowance for (24,761 ) (12,276 )
credit losses
Premises and 26,088 20,588
equipment
Other assets 90,238 84,682
Total non-interest 146,265 111,890
bearing assets
Total assets $ 2,404,747 $ 2,164,514
Liabilities and
Shareholders'
Equity
Interest-bearing
liabilities:
Passbook accounts $ 342 $ 1 0.25 % $ 253 $ 2 0.81 %
Money market and 1,441,578 5,653 0.52 1,191,489 8,076 0.91
NOW accounts
Certificates of 236,028 5,017 2.84 33,934 1,008 3.97
deposit
FHLBank borrowings 219,273 7,138 4.29 419,934 11,101 3.47
Repurchase 79,489 2,743 4.55 78,361 2,124 3.56
agreements
Borrowed money and
junior subordinated 69,775 2,694 5.09 51,906 2,676 6.77
debentures
Total
interest-bearing 2,046,485 23,246 1.50 % 1,775,877 24,987 1.86 %
liabilities
Noninterest-bearing
liabilities:
Demand deposits
(including 218,701 254,867
custodial escrow
balances)
Other liabilities 19,098 21,759
Total non-interest 237,799 276,626
bearing liabilities
Shareholders' 120,463 112,011
equity
Total liabilities
and shareholders' $ 2,404,747 $ 2,164,514
equity
Net interest income
before provision $ 54,089 $ 61,138
for credit losses
Interest rate 3.07 % 3.74 %
spread
Net interest margin 3.21 % 3.99 %
Ratio of average
interest-earning
assets to average 110.36 % 115.58 %
interest-
bearing liabilities
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEET
(Unaudited)
Three Months Ended September 30,
2009 2008
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Assets
Interest-earning
assets
Community bank
loans:
Commercial real $ 415,695 $ 6,092 5.81 % $ 349,329 $ 5,561 6.33 %
estate
Construction and 363,819 4,239 4.62 335,165 4,912 5.83
development
Originated SBA 157,490 2,316 5.83 119,417 2,082 6.94
loans
Multifamily 43,412 583 5.37 49,457 802 6.49
Commercial 142,473 1,957 5.45 120,811 1,864 6.14
Consumer and other 43,893 530 4.79 18,106 218 4.79
loans
Total community 1,166,782 15,717 5.34 992,285 15,439 6.19
bank loans
Wholesale assets:
Residential 294,737 3,185 4.32 376,561 5,004 5.32
mortgage loans
Purchased SBA loans 124,383 635 2.03 151,608 1,081 2.84
and securities
Mortgage-backed 419,332 5,446 5.19 543,678 7,274 5.35
securities
Total wholesale 838,452 9,266 4.42 % 1,071,847 13,359 4.99 %
assets
Interest-earning 369,798 176 0.19 15,410 76 1.93
deposits
FHLBank stock 12,235 77 2.50 28,659 277 3.85
Total
interest-earning 2,387,267 $ 25,236 4.20 % 2,108,201 $ 29,151 5.51 %
assets
Non-interest
earning assets
Cash 90,087 20,046
Allowance for (30,647 ) (14,052 )
credit losses
Premises and 24,692 22,741
equipment
Other assets 80,075 90,072
Total non-interest 164,207 118,807
bearing assets
Total assets $ 2,551,474 $ 2,227,008
Liabilities and
Shareholders'
Equity
Interest-bearing
liabilities:
Passbook accounts $ 342 $ - 0.25 % $ 250 $ 1 0.85 %
Money market and 1,472,807 1,842 0.50 1,249,288 2,504 0.80
NOW accounts
Certificates of 353,714 2,077 2.33 42,959 416 3.85
deposit
FHLBank borrowings 216,837 2,391 4.31 427,431 3,645 3.34
Repurchase 78,741 923 4.59 80,045 647 3.16
agreements
Borrowed money and
junior subordinated 70,442 969 5.38 52,806 896 6.64
debentures
Total
interest-bearing 2,192,883 8,202 1.48 % 1,852,779 8,109 1.73 %
liabilities
Noninterest-bearing
liabilities:
Demand deposits
(including 202,592 245,763
custodial escrow
balances)
Other liabilities 12,101 22,283
Total non-interest 214,693 268,046
bearing liabilities
Shareholders' 143,898 106,183
equity
Total liabilities
and shareholders' $ 2,551,474 $ 2,227,008
equity
Net interest income
before provision $ 17,034 $ 21,042
for credit losses
Interest rate 2.72 % 3.78 %
spread
Net interest margin 2.84 % 3.99 %
Ratio of average
interest-earning
assets to average 108.86 % 113.79 %
interest-
bearing liabilities
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
OPERATING RATIOS AND OTHER SELECTED DATA
(Unaudited)
(Dollars in thousands, except share information)
Quarter Ended Nine Months Ended
September 30, September 30, June 30, September 30, September 30,
2009 2008 2009 2009 2008
Income from
continuing
operations $ (0.95 ) $ 0.21 $ (4.71 ) $ (4.97 ) $ 1.07
per share -
basic
Income from
continuing
operations $ (0.95 ) $ 0.21 $ (4.71 ) $ (4.97 ) $ 1.07
per share -
assuming
dilution
Income from
discontinued
operations $ - $ - $ 5.26 $ 4.79 $ 0.02
per share -
basic
Income from
discontinued
operations $ - $ - $ 5.26 $ 4.79 $ 0.02
per share -
assuming
dilution
Net income
per share - $ (0.95 ) $ 0.21 $ 0.55 $ (0.18 ) $ 1.09
basic
Net income -
assuming $ (0.95 ) $ 0.21 $ 0.55 $ (0.18 ) $ 1.09
dilution
Weighted
average 9,186,806 7,198,398 7,182,516 7,834,636 7,178,169
shares -
basic
Weighted
average
shares - 9,186,806 7,198,398 7,182,516 7,834,636 7,181,124
assuming
dilution
Number of
shares
outstanding 27,345,564 7,224,111 7,341,827 27,345,564 7,224,111
at end of
period
Operating
Ratios &
Other
Selected Data
(1)
Return on
average NM 5.61 % NM NM 9.23 %
equity
Operating
efficiency NM 82.96 % NM NM 72.59 %
ratios (3)
Book value
per share $ 7.14 $ 13.90 $ 17.66 $ 7.14 $ 13.90
(end of
period)
Yield on 4.20 % 5.51 % 4.69 % 4.57 % 5.60 %
assets
Cost of 1.48 % 1.73 % 1.50 % 1.50 % 1.86 %
liabilities
Net interest 2.84 % 3.99 % 3.32 % 3.21 % 3.99 %
margin (2)
Asset Quality
Information
(1)
Community
bank $ 26,350 $ 13,021 $ 24,564 $ 26,350 $ 13,021
allowance for
credit losses
Allowance to
community 2.47 % 1.33 % 2.26 % 2.47 % 1.33 %
bank loans(4)
Residential
allowance for $ 867 $ 886 $ 917 $ 867 $ 886
credit losses
Allowance to
residential 0.92 % 0.67 % 0.90 % 0.92 % 0.67 %
loans(4)
Allowance for $ 27,254 $ 13,952 $ 25,520 $ 27,254 $ 13,952
credit losses
Allowance for
credit losses 2.21 % 1.16 % 2.02 % 2.21 % 1.16 %
to total
loans(4)
Community
bank net $ 8,333 $ 13 $ 842 $ 9,455 $ 80
charge offs
(4)
Residential
net charge 39 - - 39 194
offs (4)
Commercial
nonperforming 24,628 5,832 24,559 24,628 5,832
loans (4)
Residential
nonperforming 3,729 2,425 3,867 3,729 2,425
loans (4)
Commercial
guaranteed 50 88 101 50 88
nonperforming
loans (4)
Nonperforming
loans held 28,357 8,985 28,426 28,357 8,985
for
investment
Nonperforming
loans held 11,174 6,123 10,360 11,174 6,123
for sale
Real estate 13,325 2,693 3,920 13,325 2,693
owned
Total
nonperforming 52,856 17,801 42,706 52,856 17,801
assets and
REO
Total
residential
loans
allowance to 23.25 % 36.54 % 23.71 % 23.25 % 36.54 %
nonperforming
residential
loans (4)
Ratio of
allowance for
credit losses 96.11 % 155.28 % 89.78 % 96.11 % 155.28 %
to total
nonperforming
loans
Total
nonperforming
residential
loans to 3.95 % 1.83 % 3.80 % 3.95 % 1.83 %
total
residential
loans (4)
Total
nonperforming
community
bank loans to 2.31 % 0.60 % 2.26 % 2.31 % 0.60 %
total
community
bank loans
(4)
Total
nonperforming
assets and 1.59 % 0.52 % 1.34 % 1.59 % 0.52 %
REO to total
assets(5)
NM - Not Meaningful
(1) Calculations are based on average daily balances where available and monthly averages otherwise, as applicable.
(2) Net interest margin has been calculated by dividing net interest income before credit losses by average interest earning assets.
(3) The operating efficiency ratios have been calculated by dividing noninterest expense, excluding amortization of mortgage servicing rights, by operating income. Operating income is equal to net interest income before provision for credit losses plus noninterest income. Such ratios are not meaningful for the quarter and nine months ended September 30, 2009 due to the loss on sale of available for sale investment securities.
(4) Excludes loans held for sale.
(5) Excludes nonperforming loans held for sale.
UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP EARNINGS DISCLOSURE
(Unaudited)
(Dollars in thousands)
Appendix I
Three Months Ended Nine Months Ended
September 30, September 30, June 30, September 30, September
30,
2009 2008 2009 2009 2008
(Loss)
income from $ (8,694 ) $ 1,490 $ (33,738 ) $ (38,945 ) $ 7,758
continuing
operations
Income tax
(benefit) (5,363 ) (807 ) (19,360 ) (23,169 ) 1,869
expense
(Loss)
income from
continuing (14,057 ) 683 (53,098 ) (62,114 ) 9,627
operations
before
taxes
Provision
for credit 10,106 2,203 6,278 20,565 6,226
losses
Loss on - - 46,980 46,980 -
securities
Loss on
disposition
of legacy
assets - - 1,785 1,785 -
owned by
non-core
subsidiary
Loss at
UWBK - - 672 672 -
Colorado
Fund
FDIC
Special - - 1,080 1,080 -
Assessment
OTTI Losses 2,801 4,110 603 3,404 4,110
Gain on
sale of - - - (3,567 ) -
investment
(1)
Adjusted
core $ (1,150 ) $ 6,996 $ 4,300 $ 8,805 $ 19,963
earnings
(1) Represents nonrecurring gain on sale of investment in first quarter of 2009.
Adjusted core earnings (earnings before income taxes, provision for credit losses, loss on securities, loss on disposition of legacy assets owned by non-core subsidiary, loss at UWBK Colorado Fund, FDIC special assessment, OTTI losses and gain on sale of investment) is not a measure of financial performance under generally accepted accounting principles, or GAAP, but is used by some investors to determine a company's ability to generate core earnings from operations. The Company presents adjusted core earnings as it believes that it provides useful information to both management and investors by excluding specific revenues, costs and expenses that the Company believes are not indicative of core operating results. The presentation of adjusted core earnings should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. The reconciliation set forth above is provided in accordance with Regulation G and reconciles (loss) income from continuing operations with adjusted core earnings. This may not be comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted core earnings is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.
Weighted Loss from
Average Continuing Loss per
Shares Operations Share
Outstanding
(Dollars in thousands, except per share data)
Weighted Average Shares
Outstanding During 9,186,806 $ (8,694 ) $ (0.95 )
the Period:
Less Weighted Average Shares
Outstanding
Related to the September 22, 2009 (659,341 ) - -
Public
Offering:
Weighted Average Shares
Outstanding During
the Period Related to the Public 20,000,000 - -
Offering
Assuming it Occurred on July 1,
2009:
Total Weighted Average Shares
Outstanding 28,527,465 $ (8,694 ) $ (0.30 )
During the Period:
Source: United Western Bancorp, Inc.
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