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Decemhe:t22,2010
Philip A,. Gerbick
Regional Pirectot .
Office of Thrift
WestemRegional office.
225 'E. John Carpenter Suite SOO
Irving, TX7S062-2326
SENT VIA EMAIL ANDOVERNIGHTMA.IL
Re: UilitedWeSterii Bank
Deat Mr. Gerbitk:
. R. Pei>p1c:s
&.Chief ExecUtive .officer
Bank:
720;9:5:6;6576
iPeoplesuwbMk.con1..
Pursuanttothe July 15, 2010; letter from Philip A. Gerbick,Regional Office of Thrift
Supervision ("'OTS"),to the .. U,rtited WesternB.au (the "B.anlc") requited to
notIfy the OTsif anY one of a group of depositors . advises the Bank that such depositor intends.
to move more than 5% of its client deposits out of the Bank.' Moreover; pursuant to a recent OTS .
Directive. the Bank .is . required to conduct a reView. or all . .plan deposits" 011- .
c:leptlsit at fJllddetermine howto bring tbeBaruc into compliance' with 12 nS.C.Section
1821 e/ seq. (the "FDIALimitatiOJi").
After.' revieWing theFDIA Limitation with our customer,.base,. Matrix Settlement and Clearance
Services, Inc. (''MSCS'') has the Bank that MSCS and its affiliates ate moving posthaste
address the FDJA .Limitation. Specifically, MSCS. advised the BIU'ik that on December 20,2()1 Q,
it rer.noved $29 million indepo$its from. its accounts atflIe Ballk and on December 21, 2010, it
r.emoved an additional $50 million in deposits. 'Moreover, over the next number
intends;. to. cause fm;thet' amounts (up ttl and inc1qding the. attioUllt.it its 0),1
I This lei!.er.lIIldthe CQnfideilti"l of United Western aankand it$ holding
comjJanyUmted Western BIIIlCOl'J), Inc. that 'is not in the. pilbJic . domaitt This letter is being to the. federal bank
I'f,lglil!ltOl'l;lofUt!itec:\ Ba'Qk in capac<ity. oyer the Bank and. gtantedcoufidei:!tilll
trea,tnient pursuant tothe confidential' commercial infoiniation alid bankexaminationaild supervision Cl(emptlooB.tdtheFreeddin
QfJnfonnatiol) ACt. AccordiXlgly, wer(lquest;PUf1\uant to S and (b)(8), confideJitialtreapttent lie this fetter.
D9tifYllll if anyc>iie aJ;reedom of hll'G.rmatioti Actrequesl for a copy of this letter.
Uitited WestrnFin'ancia\ Center
700 SevefiteenthStteet Den:ver, C:Qlotadg 80202
tel:30.3.$95.989'1-f'aJ( 303.390;0952 .
WWW:llwbartcorn.Cotn
2242
Mr. Philip Gerbick
Office of Thrift Supervision, WesterilRegion
becember 22, 2010
Page. 2 00
depositatthe Bank at this dlOlte, $105,900;000, including the $50 million. referen.ced above) to be
transferred toone or more third party banks.
In addition, CPl QUalified Plan Consultants, Inc, ("CPI")hasadviscd the Bank that it is
arranging for the withdrawal of approximately $30.4 million of eprs client deposits as
expeditiously as possible to address the FDIA Limitation.
The Bank has sufficient liquidity to address these withdrawals. Accordingly, the Bank is 110t
threatened with any liquidity. issue due to these withdrawals, all. of whith will be If.tadeon an
orderly basis.
,
For your further infOlmation and consideration please be advised that the Bank's current
business plan does not aSsume that any material portion of the MSCS orCPI client deposits will
be on deposit at the Bank past 2011. The Bank does not expect that the reduction of the MSCS
and CPlc1ient relationships to have any impact on the Bank's openlticllls.
If you have any questions or concerns, please call the Bank's Chief Operating Officer, Thomas J.
Kientz; at 720:956;6548.
Sincerely,
James R.Peoples
cc: Kristie Elmquist, Acting Regional FDIC
Nicholas Dyer, Assistant Director, OTS
Lawrence D. KapIM, . Esq, Paul Hastings
2243
TabC
Exhibit 84
2244
James R. Peoples
Chairnlaa., President at CEO
Tel: 720-956-6576
Fax: 720-946-1186
jpeopleS@UwbaaL:om
CONFlDBNTW, TllB4TMBNlRBQUBSTBlY
December 30, 2QI0
Philip A. Gerbick
Regional Director
Office ofThrlft Supervision
Western Regional Office
225 B. John Carpenter Freeway, Suite 500
Irving, TX 75062-2326
Re: United Western BaDk; Response to Office ofThrlfl: Supervision ("'OTS") Request for
Clarification of December 29, 2010
Dear Mr. Gerbick:
This letter is the United Westem Bank. (the "Bank'') response to the letter the Bank Board
ofDire'btors received from Assistant Director Nicholas Dyer on December 29,2010, transmitted at
approximately 8 p.m. centml time, requiring a written response no later than 5 p.m. central time on
December 30.2010. We have set out our responses numbered to correspond to the OTS request for
olariflC8.1:ions
. Response to OTS Request For ClarificatiOD 1
As of December 29,2010 the Bank has deposits from Legem of $225.7 million at the Bank. Also
as of December 29, 2010 there are dopOsits available atLegent Clearing, LLC of$482.S million.
1 This letter contains confideDtial busiDas information of Umtect West:etn Bank and its holding company United. Western
Bmcotp.W. ("UWBI") that is not 111 the public: dOlmdn. This letter is belag provided to the federal bank :regulators of
united Western Balik in their supervisory capacity over the Bauk u.d. therefore should be putecl cmUidemia1 treatment
pursuant to the confidential. commercial wo.rmation and bank examiIlation and supe:rvision exemptions to tbcFreed.om of
Information lu:t. Accordingly. we request, pursuant to 5 U.s.C. 552(b}(4) and (b}(8), cosWdential t:rea.tmem of this letter.
Please notify us if anyone submit! a Freedom of hIfonnatiOl1 Act request for a oopy of this letter.
United Western Financial Center
700 Seventeenth Street, Suite 2100
Denver, Colorado 80202
www.uwbaok.com
2245
I .
I
' ~ "
Mr. Philip Getb1ck
December 30, 2010
Page 2
. Subtracting balances over $250,000, and having verified that none of the deposits are employee
benefit plan deposits, total depOsits available to the Bank are approximately $350 million.
Under the existing Legent agreement that was submitted to you on December 28, 2010, in
accordance.with Section 6 "Target Balance and Maximum Balance", the agreement includes a
maximum amount of deposits the Bank would be willing to accept was 5350 million. Attached to
this response as Exhibit. A. is the Second Amendment to Subaccounting Agreement dated
December 30, 2010 in which Section 6 of the agreement between the Bank and Legem has been
revised to a Target Balance of$225 million, an increase of $55 million over the previous
agreement ofS170 million, and to specify a new maximum amount of $550 million, or $200
million greater than the previous agreement ofS350 million.
Accordingly, we confirm. that Legent has entered into a binding commitment to provide deposits
to the Bank in excess of the "Target Bahmce" $170 million minimum amount cutrently required
by the Subaccounting Agreement between the BanI( and Legem dated August 18, 2010. The
conditions applicable to this agreenlent are set forth in the agreement attached. Further the Bank
has entered into a written modification of the "Maximum Balance" amount ofS550 million.
The Bank. thus believes that inclucting Legant Clearing deposits as an additional source of
additional liquidity is a viable option to handle demands for withclnlwals of other institutional
based on the pending purchase ofLegent Clearing by the Bauk or UWBI and the
wi1lingnessthat Legem has consistently shown in woddngwith the Bank.
Response to OTS Request For Clarification 2
The Bauk cummtly has $268 million outstanding on its line of credit with FHLB. These
advances were made as foJlows: $158 million on December 22, 2010 and $110 million at
December 29. 2010. The line of credit is a short-term liquidity source established for a one-year
term with automatic annual renewals, The advances are prepayab1e at any time without a :fee.
The rate on these advances changes daily and the current mte is 0.26%. Based upon our review
of the ''Member Products and Service Guide" and as followed up with discussions with Mr. Dan
_ Hess, Vice President ofFlU.J3 on December 30, 2010. the FBLB has no intentions of refusing to
honor our bonowing capacity. In the discussion we covered what happens nthe m.arket value of
collateral declines, to which Mr. Hess responded tbat1he Bank would reeeive a phone cdl
requesting that additional colJateral be ple4ged or th.e line reduced to 1he Bank's borrowing
As the Bank is on deHvery of its collateral, meaning the FHLB is holding all eligible
collateral, the Bank's collateral is valued in its entire\Y on at a monthly basis, With securities
being valued daily. Mr. Hess indicated that based on the FHLBs review of our which
occurred after the Bank. drew upon the substantial majority of its remaining capacity on
December 29.2010, the Bank is in compliance with the requirements of the FHLB and no actions
2246
Mr. Philip Gerbick
December 30, 2010
Page 3
by Fffi..B are contemplated. Mr. Hess did indicate a representative of the FHLB would contact
the OTS directly to notify the DrS of our borrowings and to confirm that the FHLB is committed
to the support of the Bank's borrowing needs subject to the collateral requirements of
theFHLB.
The Bank is taking steps to further enhance its availability at the FHLB as follows:
a. The Bank is in the process ofpurcbasing loans from Matrix Financial Services Corporation
("MFSC"), the Bank's wholly owned. subsidiary, which are loans MFSC purch.ased. from its
GNMA servicing portfolio when the option to purchase such loans was 1rlggered. These
loans will be pledged to FHLB with estimated collateral value of in excess of $4 million.
b. The Bank will an additional $5 million GNMA security and pledge this instrument
to the FHLB to allow for repayments of existing securities that would otherwise reduce the
collateral value maintained by the Bank at the F:m...B.
c. The Bank continues to clear up exceptions the FHLB identified when the Bank delivered
certain single family loan collateral when the pertinent information is received from the
servicer, county, or other source.
d. The Bankis in the process of reviewing a portfolio of over $100 million of commercial loans
for eligibility to pledge at either the Fm,B or the Federal Reserve Bank of Kansas City
(''FRB''). This process should be completed next week.
e. The Bank continues to review land loans that can be pledged to the FRB. A portfolio of
approximately $27.9 million of will be delivered to the FRB on Friday December 31, .
2010. This portfolio is expected to provide approximately $12 million of eligible collateral.
The Bank is then reviewing a portfolio of construction loans that were previously eligible at
FIlLB, which no longer accepts these. We anticipate delivery of $20.4 million of these loans
to FRB also on December 31, 2010 with estimated collateral value of$12.8 million.
f. The Bank has a small portfolio of approximately $10 million, of land loans that is in process
of being reviewed, with potential estimate of collateral value of approximately $2 million.
These loans will be reviewed next week to determine if the Bank: believes these are eligible
and if so they will be delivered.
g. With respect to e. and f. above, we would anticipate the FRB may take approximately two
weeks to review the collateral prior to providing the Bank with additional borrowing
capacity.
Response to OTS Request For Clarification 3
The Bank acquired $11.9 million, net of maturities and late wires, in QwickRate deposits on
December 29, 2010, and approximately $5.8 million through 1:00 p.m. on December 30, 2010. The
Bank expects thatthe amounts for December 31, 2010 will be lower given year end. For the month of
2247
Mr. pbillp Gerbick
December 30, 2010
Page 4
January 2011, the Bank anticipates additional QwickRate deposits (including National CD Rateline,
other similar non.-brokered deposit services) as shown in the table:
Estimated
QwickRate Qw1ekBate
Inflow Maturities QwlckRate Net
1st week of January 2011 S 40,000,000 $ 1,902,000 S 38,098,000
2nd week ofJam.iary2011
40,000,000 250,000 39,750,000
3rd week ofJatlUlIIY2011
40,000,000 0 40,000.000
4th week of January 2011 . 40
2
00,000 38,258
2
000
S $ S
The Bank determined this level of deposits as being reasonable based on its historical e'lqJerience in .
attracting such deposits and in consideration ofthtsnumber of banks that nationally participate in
Qwicl.tRate. The Bank is in the process of evaluating National CD Rateline to make a better estimate
of the amount of deposits it can expect to attract :from this source. The Bank: is also exploring the .
pOSSl'bility of attracting direct from consumer non.-brok.ered deposits.
Response to OTS 'Request For Clarlfication Number 4
For ease of atmlysis, we are restating the 01'8 request:
"As detailed in our Directive 21, 2010, the Equity Trost Company Deposit
Agreement cans for the tenninationofthe contract within 10 days of a determination that
it violates any statute or regulation. Provide an assessment of the condition under which
Equity Trust mightmake that deten:nination. the probabiJi1;y of that eventuality, and the
. actions that United WestemBank could take to meet such a demand for funds. Please
identify any contractual provisions or other agreements that would require ETC to
withdraw 1ts funds oVer six months or otherwise oVer an extended period oftime in t:bc
event the contract were teIIninated. other than pursuant to Section 9 oftbe contract."
At the outset, we wish to point out that the language we believe OTS is referring to in the fourth request
for clarification is the following:
-'In addition, upon receipt by any party of any written instruc1ion, enforcement or other
action by any regulatory agency with enforcement autb.ori1;y over either Bank, Companies
or ETC, indicating that this Agreement.. in Whole or in part, violates any applicable
regulation to which either Company, ETC or Bank. is subject, now or at any time during
the term oftbis Agreement, this Agreement shall terminate upon the expiration often
(10) days after receipt of such written instruotion, order or notice by any Party."
2248
Mr. Philip Gubick
December 30, 2010
Page 5
Assuming we are correct in understanding ofwmch language OTS is referring to, as a party to the
Subaccounting Agreement, as well as a participant in its drafting, we have the following responses:
a. We believe OTS is misreading the applicable sentence in Section 11. The provisions does not
authorize Equi1iY Trust to make the detennination that the Sub accounting Agreement is in
violation of statute or regulation, but clearly requires such determination to be made by a
"regulatory agency with enforcement authority over either the Company, ETC or Bank."
Further, we know of no such determination by any regulatory agency at this date. Nor do we
know of any applicable statute or regulation that would be violated by the maintenance of the
Equity Trust client deposits at the Bank. in light of the Equity Trust relationship being restructured
to mirror the arrangements in FDIC Advisory Opinion OS"()2 (Februaty 5, 2005). Consequently,
we have concluded that it is highly unlikely that this sentence would come into effect via the
determination of a regulatory agency with enforcement authority over Equity Trust or its
affiliates. '
b. The second portion of Request for Clarification 4 requires an interpretation of the Amended and
Restated Subaccounting Agreement by and between United Western Bank, Equity Trust
Company and others as ofJune 27. 2010, as amended (the "Subaccounting Agreement"). OTS's
particular concern appears to revolve around the question of how much of the client monies on
deposit at the Dank may be withdrawn at the direction of Equity Trust or its affiliates upon a
termination of the Subaccounting Agreement pursuant to Section 11 of the Subaccounting
Agreement, as amended.
a. Since the Subaccounting Agreement was executed, there have been numerous fonnal
amendments as well as letter agreements that have the affect of amending the
Subaccounting Agreement (collectively,. the "Amendments"). The Amendments are:
1. First Amendment to Amended and Restated Subaccounting Agreement effective February
24,2010;
ii. Second Amendment to Amended and Restated Subaccounting Agreement effective May 27,
2010;
iii. Letter Agreement dated October 26, 2010; and
iv. Third Amendment to Amended and Restated Subaccounting Agreement effective
'December, 2010
Set forth below, we consider the terms and conditions of the Subaccounting Agreement as wen as
each of the Amendments as they impact the question at hand.
2249
Mr. Philip Gerbick
December 30, 2010
Page 6
Co Subaccounting .Agreement
Section 9 of tho SubaccountingAgreem.ent provides in relevant part:
In the event the Companies terminate this Agreement [the Subaccounting
Agreement]. as provided for in this Section 9, then for a period of six (6) months
following such Termination Date, the Companies [Bqui1;y Administrative
Services, Inc. and. SterJingAdministrative Services, LLC] and ETC may
withdraw up to one-sixth of the aggregate balances in the Bank Accounts
i
existing as of the Tennination Date at the end of each calendar month following
the Termination Date. Any balances remaining in the Bank Accounts after such
six-month period may be withdrawn at any time thereafter. Notwithstanding any
termination of this Agreement. all rights, obligations, terms and conditions of
tl,ia .Agreement shall In effect with respect to. any cash baltlllCl!S In tI,e
Bank Accounts until lucl, balances have beenfuU, withdrawn 01' distributed.
[emphasis added] .
'Ibis portion of Sub accounting Agreement Section 9 was carefully negotiated by the Bank in
2009 in order to protect the Bank's liquidity in the event of a termination of the Subaccounting
Agreement. The question is whether or not any other provision of the Subaccounting Agreement
overrides language.
SpeciticallY:
i. Section 1 of the SubacC01l1l1ing Agreement clearly provides that either of the Companies or
Equity Trust may withdraw up to $100 million. in aggregate, for deposit to a financial
institution controlled by certain Desich family members, but even hele tho withdrawals may
not exceed $25 million per month. This section does not impinge on the Section 9 language
limiting the amount and timing of withdrawals from the Bank;
ii. Section 10 describes the term of the Subaccounting Agreement as "for a period beginning on
[June 27. 2009] and continuing until the later of (a) [June 27. 2014] or (b) the date all .
. amounts owing under the Seller Financin/ (as defined in the Purchase Agreem.en.t') have
been paid in :fWl (tho '"'Term")
a. Seotion 10 operates in two time frames; the first three years of the Subaccounting
AgreementTerm and the time after the first three years of the Subaccounting Agreement
Term. In the first three years of the agreement (June 27. 2009 through and including June
26.2012) Section 10 requires the and Equity Trost to direct 10OOA. of all of
their client t\mds for deposit at the Baftkiv. Following June 26. 2012. the Companies and
Equity Trost are only required to mabltam the Final Deposit amount (by definition under
the terms of the Purchase Agreement, an amount equal to $323 million) for the remainder
of the Subaccounting Agreement Term. Section 10 defines how mUch the aggregate
2250
."
Mr. PJailip Getbick
December JO, 2010
Page 7
deposits to the Bank Accounts must be; it does not, however, instruct the parties with
respect to how may deposits may leave those accounts or when any amounts may leave
the BaokAccounts. I
b. Section 10 has other provisions, none ofwhich we believe to be germane to the
questionS he OTS has posed.
iii. Section 11 provides for termination of the Subaccoantlng Agreement upon the happening of
certain events. For example, if the Bank receives an IDC Financial Publishlng Inc. rating of
74 or lower, the Companies or Equity Trust inay terminate the Subaccounting Agreement
upon 30 days written notice to the Bank.
iV. Section 11 does have a limiting phrase at its beginning, "notwithstanding Sections 9 or 10
above." which may lead the casual reader to conclude that the withdrawal limitation language
of Section 9, which we have quoted above, is abrogated in the event that a Section 11
termination is declared by either tho Companies or Equity Trust. The terms of any provision
of any agreement caunot be read in isolation. CertainlY. the better reading of the last sentence
of Section 9 (as highlighted above) can be read to override a the limiting phrase of Section 11
as the Sec:tion 9 language reads on "any tennination." However. the clear intent of Section 11
is to appiy to tenDina:tion in the case of special events, so the better reading of the Section 11
limiting phrase would appear to limit the language reading on the term of tho Subaccounting
Agreement as discussed in Sections 9 and 10. Given the reasonable combination of the tbree
paragraphs, no other reading is appropriate from which the parties could conclude that the
ultimate sentence of Seotion 9 would control with regard to the timing of the removal of
deposits from the Bank Accounts upon any termination.
v. No other sections of tho Subaccounting Agreement read on the question at hand.
d. The .Amendments
We also reviewed the various Amendments with respect to impacting the proper reading of the
Subaccountins Agreement in its original form.
The First Amendment to Amended and Restated Subaccounting Agreement effective Febtwuy 24, 2010
a.lIi.ends Section 10 of the Subaccounting Agreement in its entirety and replaces the last sentence of
Section 11 in its entirety. The additions of this new language. too long to quote in detail here, but does not
impact our conclusion.
The Second Amendment to Amended and ~ d Subaccoun1ing Agreement, effective May 27, 2010,
amends the aggregate amount that the Companies and Equity Trust may.cause to be held for 'their clients
in the Bank accounts reducing that amount from $1 billion to $700 million, but this amendment has no
effect on the Section 91imit on witbdrawalsfollowing a. termination. This amendment, however, does
amend Section 10 by a.dcling a. third para.gmph giving Equity Trust and the Companies the unilatera.1 right
2251
Mr.Phlli.p Gerbick
December 30, 2010
PageS
to redirect up to $150 million away from the Bank Accounts to any third party bank or banks. A fair
reading of this right would seem. to override the Section 9 withdrawal limitations quoted above.
The October 26, 2010 Letter Agreement limits the right of the Companies and Equity Trust to terminate
the Sub accounting Agreement under Section 11, as amended. The terms of the letter agreement do not
affect our earlier conclusions. .
The Third Amendment to Amended and R.estated Subaccounting Agreement effective December, 2010
replaces Section 6 of the Subaccounting Agreement in its entirety for the two year period beginning on
December 1.2010 and changes certain terms in Section 10 of the Subaccounting Agreement as well as
amending the fonn of Exhibit A to the Subaccounting Agreement. As none of these changes read on the
question at hand, this amendment has no affect on our conclusion.
e. Conclusion
As a result of the above review, as a party to the Subaccounting Agreement and as a participant in the
negotiation of the Subaccounting Agreement, we believe that the appropriate reading of the
Subaccounting Agreement, as amended, is that the withdrawal limitations expressed in Section 9 of the
Subaccounting Agreement control upon any termination of the Subaccounting Agreement. We do note
that notwithstanding this provision, the Equity Trust parties may withdraw up to $150 tnillion at any time
to redirect those amounts to a third party bank. In combination with the Equity Trust parties right to
withdraw monies to fund a Desich controlled bank (not a reality at the current time) the maximum one
time withdrawal of funds from the Bank Accounts is limited to $175 million in anyone month. Since the
Bank has more than enough liquidity to manage the contractually mandated withdrawals of the Equity
Trust related client deposits,' we believetb.e Bank is adequately protected against this eventuality.
In addition, we have attached the letter agreement received today from Equity Trust as Exhibit B
acknowledging that it will not act to remove its client deposits from the Bank in the event that the Bank is
''undercapitalized'" as defined in 12 C.F.R. Section 565.4(b)(4) and (5) until February 15, 2010. We
believe that this cJearly demonstrates the Equity Trust intent to work with the Bank as it fulfills its
recapitalization plan. This evidence should comfort the OTS that Equity Trust is, as 8Iways, willing to
work with the Bank to maintain its liquidity.
I am available to discuss thls with you at any time.
Cordially,
James R.. Peoples
Chairman of the Board and Chief Executive Officer
2252
Mr. Philip Gerbick
December 30, 2010
Page 9
enclosures
co:
Guy A. Gibson
James R. Peoples
Nicholas Dyer
Clay T. Coon, Esq.
Lawrence D. Kaplan. Esq.
Andrew L. Sandler, Esq.
Liana Prieto, Esq
1 The Subaa:ounting Agreemeat defines "Bank Aa:ounts" as various 2I:COun.ts mainuined at the BIJIk for the benefit of c:emin clients of the
COlnpa.nies and Equity T tUSt. .
n This refers to the purchase money financing note executed by the Equity TtuSt partif:S pursuant to the Purchase Agreement descrjbed in the
next IIOte.
r .. This agreement was made by and between Sterling Trust Company, United Western Bancorp. Inc. Equity Trust and the Compames on
April 7,2009 IIIld pemins to the sale of c:ett'aia account agreemenu colltrolled by Ste:r1il1g Ttust Company to Equity Ttust and the
Companies. A dt:sctiption of the Purchase Agreement is Aot necessary to the conclusions reached in this memorendum.
i .. Section 10 does contempktc clw: my individuti customer can at any time direct the removal of funds from the Bank :a:s the Companies and
Equity Trust are only agents fot their climts, but this issue is not re1evmt to this discussion as we Wlderstand the on il1quiry to be the
qumioll of what impact a termination by the Companies and Equity Trust will nave on Bank liquidity
2253
TabC
Exhibit 84 A
See Tab C, Exhibit 54 C(j)
2254
TabC
Exhibit 84 B
See Tab C, Exhibit 72 E.
2255
TabC
Exhibit 85
2256
FDII
Federal Deposit Insurance Corporation
Dallas Regional Office
1601 Bryan Street, Dallas, Texas 75201
(800) 568-9161 FAX (972) 7612082
Mr. James R. Peoples
Chainnan of the Board
CEO and President
United Western Bank
700 17th Street, Suite 100
Denver, CO 80202
Re: De.posit Agreements
Dear Mr. Peoples:
Division of Supervision and Consumer Protection
Memphis Area Office
5100 Poplar Avenue, Suite 1900, Memphis, Tennessee 38137
(901)685-1603 FAX (901)821-5308
May 24, 2010
This letter is to notify the Bank that the FDIC has determined that the Bank's deposits 'from
seven institutional relationships described below are brokered deposits. The seven institutional
depositors facilitate the placement of deposits of their respective customers by opening omnibus
accounts at the Bank. These accounts, which consist ofMMDA's, non-interest bearing accounts
and NOW accounts, are typically opened in the name of the institutional depositor for the benefit
of their customers. In turn, the institutional depositors maintain detailed records at the account
level of each of their customers' ownership interest in each omnibus account. The FDICrealizes
the impact that this detennination bas on the Bank. JJarticularly in light of the bank's current
"Adequately Capitalized" position under the Prompt Corrective Action provisions of Section 38
of the Federal Deposit Insurance Act, 12 U.S.C. 18310. The current J'Adequately Capitalized"
position triggers the requirement that adequately capitalized insured depository institutions may
not accept. renew or roll over any brokered deposit unless it has applied for and been granted a
waiverby the FDIC. Accordingly. the FDIC stands ready to consider the Bank's strategies to
gradually eliminate these brokered deposits. until such time as the Bank. becomes well
capitalized and not subject to any Federally issued written agreement containing a "'meet and
maintain" capital provision. Please note that since it is the individual customers who own the
deposits in the omnibus accounts, the maturity date of tbe deposits is not the contractual maturity
date of the contracts between the institutional depositors and the Bank, but tbe maturity date of
the deposit instruments comprising the omnibus accounts.
In connection with FDIC's brokered deposits detennination, the FDIC's Division of Supervision
and Consumer Protection and the Legal Division reviewed numerous agreements, legal opinions
and other documents. including the following:
1. Amended and Restated Subaccounting Agreement between Bank, Equity Trust Company
("ETC"), E q ~ t y Administrative Services, Inc. (<lEAS") and Sterling Administrative
2257
Services;LLC ("SAS',). with an effective date of June 27 but with no year provided,' as
revised by the First Amendment to Amended and Reslated Subaccounting Agreement
dated February 24, 2010 ("ETC Agreement'');
2. Third Amended and Restated Administrative Services Agreement between Bank. Matrix
Settlement and Clearance Services. L.L.C. f'MSCS"} and MG Colorado Holdings, Inc.,
dated July 5.2007, as revised by Amendment to The Third Addendum, dated February
11,2010 ("MSCS Agreement'');
3. Sub accounting Agreement between Lincoln Trust Company ("Lincoln'') and Bank. with
.an effective date of February 1. 2010 ("Lincoln Agreement");
4. Program Bank Fee Agreement between Bank and Legent Clearing LLC ("Legent''). dated
November 24, 2008, as amended by Amendment Number One To Program Bank Fee
Agreement. dated January 25. 2010 ("Legent Agreement''). We were also provided with
three other agreements pertaining to Legent: Legent Insured Deposits Bank and Broker-
Deader Agreement between Bank and Legent,dated May 11,2006; Broker-Dealer
Money Market Deposit Account Agreement dated November 18. 2008, between
Deutsche Bank Trust Company Americas ("DBTCA") and Legent; and Program Bank
Money Market Deposit Account Agreement, dated June 2006, between and
Bank;
5. Subaccounting Agreement between Matrix Capital Bank, Constellation Trust Company
and Gemini Fund Services, LLC ("GFS"). dated May 11, 2005 ("'Constellation Trust
Agreement");
6. Subaccolillting Services Agreement between Matrix Capital Bank and Trust
Management, Inc. ("TMr,), dated May 10,1999 (''TMI Agreement"); and
7. Amended and Restated Omnibus Subaccounting Agreement between Bank and UW Trust
Company ("UWTC"), dated June 26, 2009 eUWTC Agreement").
8.. Four Bank counsel legal opinions from Luse Gorman Pomerenk & Schick ("Luse
Gorman''). February 23,2010;
9. Two Luse Gorman legal opinions dated March 8,2010;
10. Bank counsel legal opinion from Buckley Sandler LLP. dated March 10, 2010;
11. United Western Bank Core Deposit Management Strategic Planning and Regulatory
Positions, dated March 8, 201 0 ("White Paper");
12. "Legent and the Clearing Industry" Memorandum from. Guy A. Gibson, Michael J.
McCloskey and Michael A. Stallings, to the Board of Directors of United Western
Bancorp, Inc. and United Western Bank, dated January 7. 2010 ('"Legent
Memorandum");
13. The Equity Trust Company Application For Traditional, Roth. and SEP Accounts;
14. "Legent FDIC Insured Deposits," from www.1egentclearing.comlps_cms.php;
15. Sterling Trust Company Self-Directed IRA Application Kit; and
16. Equity Trust Company Traditional and Roth, mA Custodial Account Agreements and
Disclosure Statements.
A summary of our assessment of each of the seven deposit agreements reviewed is set forth
below.
I This agreement cites other agreements executed in 2009.
2
2258
Equity Trust Company Agreement
According to the White Paper. ETC "is a self directed IRA custodian that offers custodial and
managerial. business seIVices to individual participants' accounts in employee benefit plans,
individual retirement plans and other qualified plan accounts thereby providing its clients with
the ability to invest in real estate, private placements, tax liens and other non-traditional assets
within a self-directed IRA or 401 (k) plan" and has been a Bank client since 2000. Each
individual retirement account, the White Paper indicates. maintains certain liquidity that is
typically less than 10% of the total assets in such account. This liquidity is deposited in multiple
omnibus accounts at the Bank. Under the ETC Agreement, ETC has agreed to place deposits
with the Bank in order to obtain the benefits of pass through deposit insurance coverage under 12
C.F.R. 330.5 for the benefit of its customers. ETC represents in the agreement that as
custodian it "provides custodial and business services to individual participants' accounts in
employee benefit plans, individual retirement plans and other qualified accounts." The other two
parties to the agreement, EAS and SAS, which are affiliates orETC, agree to also open accounts
at the Bank in order to secure pass through deposit insurance coverage for the benefit of ETC's
custodial account holders. EAS, SAS and the Bank further agree under the contract that EAS
and SAS, as agents for the Bank, will provide the Bank with account holder and record-keeping
. services for the custodial account holders. The agreement is for a tenn consisting of the later of
five years, or the date all amounts owing under the "Seller Financing," as defined in the Purchase
Agreement of April 1, 2009, pursuant to which ETC and SAS agreed. to acquire from SAS its
individual retirement and qualified plan business. Following this initial tenn, the agreement
automatically renews on a yearly basis, unless a party provides a 60-day notice of tennination
before the next renewal date.
Based on the foregoing, ETC, EAS and SAS meet the definition of a deposit broker since they
have facilitated the placement of deposits of third parties with insured depository institutions.
The next step in the analysis is to detennine whether these entities meet any of the exceptions
from the deposit broker definition as set forth in 12 C.F.R. 337.6(a)(5){ii). In the Luse Gonnan
legal opinion of February 23, 2010, on this contract, the Bank contends that ETC. "as a
custodian, provides custodial and business services to individual participants' accounts in
employee benefit plans, individual retirement accounts, and other qualified plan accounts."
Bank counsel further indicates that although ETC "does not exercise any investment discretion
over the accounts ofits customers, it perfonns managerial and administrative functions for its
customers by. for example. collecting rents, paying taxes, collecting reports and annual
evaluations of the assets maintained in the customers/accounts and the like." Bank counsel
concludes that ETC should not be deemed a deposit broker because ETC ''is acting as a plan
administrator for its customers and perfonns a managerial function for its customers." Luse
Gonnan makes a similar conclusion in its March 8, 2010, opinion on this contract. and the
Buckley Sandler LLP legal opinion of March 10,2010, on this contract also reaches a similar
conclusion.
The FDIC interprets the plan administrator exception to require that the entity be the plan
administrator for a pension plan or other employee benefit plan and that such entity perfonn
managerial functions with respect to the plan. Accordingly, the Bank has not proven that ETC
3
2259
meets the '"plan administrator" exception since the Bank has not proven that ETC is the plan
administrator of a pension plan or other employee benefit plan.
In the legal opinion, Bank counsel also contends that since ETC's customers have investment
discretion over their accounts "the primary pmpose of the deposit accounts is to facilitate the
customers' exercise of that investment discretion.,tl Although not specifically contended in the
legal opunon, this statement ftom Bank counsel appears to be an attempt to bring ETC under the
primarypmpose exception of 12 C.F.R. 337.6(aXS). .
FDIC Advisory Opinion No. 05-02 explains the ""primary pmpose exception" by referencing
previous FDIC ?ginions where the phIase "primary pwpose" is deemed synonymous with
'"primary intent' The FDIC Advisory Opinions clarify that the '"primary purpose exception"
applies to an agent who pJacesfimds into a depository institution when the agent's primary
intention is something other than obtaining deposit insurance coverage for a customer or to
provide the customer with a deposit placement service. For example, in Advisory Opinion No.
94-13,4 a credit card bank assisted would-be cardholders in placing security deposits at another
bank. The FDIC staff detennined that the ''primary purpose exception" was applicable because
the "primary pUrpose" of the credit card bank was "to obtain a perfected security interest in
to provide a deposit-placing service to its customers." In Advisory Opinion No.
94-39,s a registered broker-dealer placed client funds into an account at a bank in order to satisfy
a reserve requirement enfoICed by the SEC. In that case, the "primary pmpose exception" was
applicable because the broker-dealer's "primary purpose" was to satisfy the SEC rule, not to
provide a deposit-placement service. . . .
In FDIC Advisory Opinion 05-02,6 the FDIC applied the primary purpose exception to a sweep
program into money market and transaction accounts at two aftiliated banks provided by
Company on behalf of its customers for whom Company provided securities'services. The
FDIC detennined that such a program would qualify for the primary purpose exception if the
following criteria were met: .
1. The swept funds should not exceed lOOAt of the total assets being handled for the
customerS ("peDnissible ratio'.); .
2. The 10% limit should be applied on a monthly basis (the "monthly ratio");
3. The permissible ratio is not exceeded on consecutive months, or the permissible ratio is
. not exceeded for three months during any 12.,month period; and
4. The fees paid by the depOSitory institution to Company were for recordkeeping and not
payment for the placement of deposits. .
The fact that ETC's customers possess investment discretion does not mean that ETC can not be
a "deposit broker." In fact, investment discretion is possessed by many. ifnot most depositors
2 Luse Gorman logal opinion of February 23, 2010.
] See, e.g., AdyisDO' OJ)inion No. 90:21 (May 29. 1990); Advisol)' Opinion No. 9+13 (March 11, 1994); and
Advisory Ooinion No. 94-39 (August!7. 1994). .
4 bttp:llwww.fdie.gov/reguiationsllawslrulesl40Q0-8SS0.btml.
5littp:lfwww.fdie.gov/regula1ionsllawslrules /4000-9110.html
. /I bttp:lI/www.fdic.govheguiations/JaWS/ru1csl4000-103S0.btml.
4
2260
who use the services of deposit brokers. Moreover, when a cnstomerexercises discretion to
place fimds into deposit accounts, no distinction exists between &&facilitating the customer's
exercise of invesbnent discretion" and "facilitating the customer's placement of deposits." In
both cases, the facilitator is a "'deposit broker"'who does not qualifY for the "prilnary purpose
exception." In addition, even assuming that "facilitating the exercise of investment discretion
might be the type ofpwpose covered by the "primary purpoSe we do not beHeve that
this exception is applicable in this case.
Despite Bank contention, there is substantial evidence in the agreement that
contravenes the contention that the primary purpose of the deposit accounts is to facilitate the
customers' exercise of that investment discretion. First. under numbered paragmph 1 of the
agreement, ETC, BAS and SAS may withdraw from and move these deposits to another financial
institution up to 5100 million should they desire to do so in the event certain individuals were to
acquire control of this other fmancial institution. 7 These individuals own a controlling interest in
ETC. Accordingly, this provision in the agreement tends to show that the selection of the Bank
was not to facilitate an investment discretion, but to benefit the conuol1ing shareholders of ETC
by allowing them the option to transfer $100 million to an institution these shareholders might
control.
;
Second, the fees paid by the Bank to at least BAS and SAS for certain administrative services
might not be directly related to the administrative services provided. Under the ETC Agreement, ...
the parties agree to pay BAS and SAS ("Companiesj a fee "based upon the number of Custodial
Accowrts at Bank and the aggregate monthly balance of such Custodial Accounts in light of the
amount of recordkeeping services and other associated services to be provided by the Companies
with respect to the Custodial Accounts." Specifically, under numbered paragraph 6.ofthe
agreement, the Bank pays EAS andSAS a monthly fee ofS40 times the number of active . deposit
accounts placed by ETC and the Companies with the Bank. Furthermore. this sum is subject to a
maximum cap. which is tied to the interest yield paid by the Bank. on these deposit accounts. By
tying the maximum compensation that BAS and SAS may receive for theirrecordkeepingand
other services to the balance on the deposit accounts, the Bank appears to be compensating BAS
and SAS for placing these deposits in the Bank.
In FDIC Advisory Opinion 04-04 (July 28, 2004), the FDIC discussed how fees charged by a
listing service might result in the listing service being deemed a deposit broker: .
""although the staff did not articulate the rationale for this distinction, the rationale is inferable:
compensation based on the amount of deposits placed through a "listing service' may create a
motivation on the part of the service to 1?ecome involved in the placement of deposits. Indeed,
such compensation strongly suggests that the service is involved in some manner in placing
Therefore. the existence of such compensation will result in the classification of the
'listing service' as a "deposit broker.'It . .
Similarly, in this agreement, the compensation the Bank paid the Companies was tied to the
number of deposit accounts and the balance in these accounts placed by these entities with the
7 The three individuals identified in the ETC Agreement are Jefftcy A. Desicb.Richard Desich and Richard A
Desich.
5
2261
Bank. There is present therefore a motivation on the part ofEAS, ETC and SAS to place more
customer deposits and to create more customer deposit accounts with the Bank.
Thirdly, under the 2010 revision to the ETC Agreement, the Bank. ETC and the Companies may
agree to participate out deposits in the bank. accounts with a third party bank. If such third party
bank pays interest, subaccounting or other administrative fees to ETC and the Companies that
exceed the Contract Variable Rate the Bank pays under the ETC Agreement, the parties agree to
split on a SO-50 basis the suxplus fee. Additionally, if the Contract Variable Rate exceeds the
Third party Rate. the Bank agrees to make ETC and the Companies whole. Clearly. this
provision evidences that the primary purpose of this agreement is for the placement of funds with
8
depOSItOry InstltunoDS.
Fourthly, ETC and the Companies, under the 2010 revision to the contract, may tenninate the
agreement if the Bank files it. financial report reflecting that the Bank is neither "well capitalized"
nor "adequately capitalized" Having this provision in the agreement is an indicia that the
deposits in question are brokered deposits because a bank that is undercapitalized can not accept.
renew, or roll over any brokered deposit. 12 C.F.R. 337.6(b)(ii)(B)(3)(ii).
Finally, under the 2010 revision to the ETC Agreement. the parties acknowledge that despite the
fact Custodial Account Holders have the right to direct Companies and ETC to deposit their
funds at another institution, the Companies and ETC agree "to use commercially reasonable
efforts to have cash balances relating to Custodial Accounts retained at the Bank." This
provision of the agreement shows that the placement of the deposits in the Bank by the
Companies and ETC was not to facilitate the customers' exercise of their investment discretion
since the Companies and ETG agreed to used their best efforts to keep their customers' funds in
the Bank, presumably even if the Customers wanted to move the funds to another depository
institution.
Based on the foregoing analysis, the FDIC detennined that the deposits from the ETC
Agreement are brokered deposits.
MSCS Agreement
In this agreement MSCS facilitates the clearing of purchase and redemption trades of various
mutual fund shares for its customers by placing these funds on deposit with the Bank:. According
to the agreement, the funds '"are generally qualified. employee benefit plan participant funds held
in a fiduciary capacity by a custodian or other third parties." According to the Luse Gorman
opinion of February 23,2010, MSCS seIVes more than 300 MSCS customers by servicing S100
billion in assets through the MSCS platform .. In 2009, MSCS kept approximately $260 million
ofMSCS customers' deposits with the Bank. Under the terms of the agreement, MSCS is acting
as a deposit broker since it is facilitating the placement of deposits with an insured depository
institution.
B Recently, ETC requested permission for the OTS to exercise this provision in the contract.
6
2262
In their legal opinions, Bank counsel contend MSCS qualifies for the primary purpose exception
and cite FDIC Advisory Opinion 05-02 in support of this position. Specifically, Bank counsel
assert the following in support of this position:
1. MSCS' primary business is the clearing of the purchase and redemption trades of various
mutual funds for MSCS customers;
2. MSCS' deposits are placed at the Bank primarily to facilitate MSCS' clearing activities
for its customers;
3. The funds placed at the Bank are a small percentage of the total amount of funds MSCS
handles . for its customers; and
4. The Bank does not pay a fee to MSCS for the placement of the funds with the Bank:.
Despite the Bank's arguments, there are several reasons why the MSCS Agreement does not
meet the primary purpose exception. First, even excluding the issue of the fee the Bank: pays to
MSCS, Bank counsel was unable to show that MSCS met the first three factors of the FDIC
Advisory Opinion 05-02. Instead, Bank counsel has contended that ""the funds placed at the
Bank are a small percentage of the total amount of funds MSCS handles for MSCS customers"
Also, in the March 10,2010. Buckley Sandler LLP opinion. counsel argues: ''Based on the
infonnation provided to us, it also appears that the amount of cash in the MSCS accounts at the
Bank are well below the permissible ratio. These contentions by Bank: counsel, at best, only
satisfY the permissible ratio factor of FDIC Advisory Opinion 05-02. Bank counsel's legal
opinions do not address the monthly ratio factor nor the fact that the permissible ratio is not
exceeded on consecutive months or for three months during any 12-month period.
On the other hand, if one were to asswne that MSCS met the first three factors of FDIC Advisory
Opinion 05-02, the fourth factor is not met as the fees paid to MSCS appear to have been paid for
the placement of deposits. The fees tbat the Bank pays to MSCS for its administrative services
on the deposit accounts MSCS opens at the Bank for MSCS' customers are tied to the balance of
these deposits. Paragraph 4(d) of the agreement provides as follows: "As such the Bank desired.
to limit the fees paid to MSCS pursuant to this Agreement to an amount based upon the actual
deposits generated by MSCS furnishing Administrative Services to those Customers who have
chosen to deposit their funds with the Bank." In Exhibit "At> to the MSCS Agreement, these fees
are tied to the amount on deposit at the Bank. This type of compensation for services rendered
based on the amounts deposited is a clear indication that MSCS is acting as a deposit broker.
Furthermore, unlike the parties in Opinion 05-02, MSCS and the Bank are not affiliated.
The MSCS Agreement commenced on July 5,2007, and terminates on July 5,2010, but is
subject to two automatic one-year renewals, unless certain conditions occur. Interestingly, one
of these conditions is MSCS' notification to the Bank. of nits intent to solicit bids from other
depositories." Upon such notification, MSCS is given 45 days to get "bona fide offers from
independent financial institutions of the tenDS upon which such financial institutions desire to
provide the Administrative Services." The Bank is then given 30 days to match any such bona
fide bid. These provisions clearly show that MSCS is a deposit broker since it is bidding out its
deposits to the highest bidder who will pay MSCS the most for the Administrative Services
MSCS provides.
7
2263
The MSCS Agreement is subject to tennination if the Bank is not adequately capitalized
. (numbered paragraph 5(b )(i. As discussed in the ETC Agreement analysis above, such a
provision is an indicia that the deposits in question are brokered deposits because a bank that is
not adequately capitalized can not accept, renew or roll over any brokered deposit. 12 C.F.R
337.6(b)(2)(B}(3)(ii).
Finally, two other reasons why the primary putpose of the agreement appears to be the placement
of funds with the depository institution are the provision that lists as a cause for termination of
the agreement bl MSCS if the Bank refuses to renew a certain line of credit to MG Trust
Company, LLC and the provision that allows the Bank to terminate the agreement ifMSCS'
customers fail to maintain at anytime a minimum deposit level of$I,OOO.OOO.
For the reasons set forth above. the FDIC concluded that MSCS'deposits are brokered deposits.
Lincoln Trust Agreement
Lincoln is described in the agreement as a Colorado industrial bank with trust powers. The tenn
of the agreement is for one year, with yearly renewals, unless either party provides a 9O-day
notice of termination. Under the agreement, Lincoln will deposit with the Bank funds of its
clients that Lincoln holds in a custodial capacity. The Bank wiU properly designate these deposit
accounts so that they will receive pass. through deposit insurance coverage. Lincoln is therefore
acting as a deposit broker under this agreement since it is facilitating the deposits ofthe funds of
its customers.
The Bank has provide4 a legal opinion concerning t h i ~ agreement. The opinion summarizes
Bank counsel's understanding of the facts as follows:
"Lincoln Trust Company is an industrial bank, with trust powers, that is chartered under the laws
of the State of Colorado ("LTC"). LTC, in its capacity as a custodian, provides custodial and
related services to employee benefit plans, individual retirement accounts, and other qualified
plan accounts ("Customers"). LTC does not exercise any investment discretion over the
accounts of its Customers. However, it perfOtnlS certain managerial and administrative functions
for its Customers (for example, collecting rents, paying taxes, collecting reports and annual
evaluations ofthe assets maintained in the Customers accounts and the like). LTC has entered
into an agreement with the Bank to establish various custodial deposit accounts at the Bank for
the benefit of the underJyingCustomer. The Bank does not pay the TLC (sic) a fee for placing
these custodial deposit accounts at the Bank. The Bank, however, pays TLC (sic) a fee for
providing certain administrative services on behalf of the Bank to its Customers:'
Based on these facts, Bank counsel concluded as follows: "It is apparent from the above that
TLC (sic) is acting as a plan administrator for its Customers and perfonns a managerial function
for its Customers."
9 According to the MSCS Agreement, this line of credit was guaranteed by MG Colorado Holdings (sic) to which
entity the line of credit was provided for liquidity purposes. MG Colorado Holdings, Inc. owns MSCS.
10 Luse Oonnan opinion ofFebIUary 23.2010.
8
2264
As discussed in the ETC Agreement analysis above, FDIC interprets the regulatory exception for
a plan administrator to require that the entity claiming this exception be the actual plan
administrator for a pension plan or other employee benefit plan and that such person perfonn
managerial functions with respect the plan. The Bank has not provided any evidence showing
that Lincoln is such a plan administrator.
The Lincoln Agreement provides that Lincoln is either "(a) a directed trustee of a pension or
other employee benefit plan, with respect to fimds of the plan; (b) a person acting as a plan
administrator or an investment adviser in connection with a pension plan or other employee
benefit plan provided that that person is perfonning managerial functions with respect to the
plan; or (c) a trustee or custodian of a pension or profit sharing plan qualified under section
401 (d) or 403(a) of the Internal Revenue Code of 1986; or (d) an agent or nominee whose
primary purpose is not the placement of funds with depository institutions." Despite these
provisions in the agreement, the only exception to the brokered deposit definition which the
Bank: argued was the one for a plan administrator discussed above.
lt
The Bank does not argue in its legal opinions that the primary purpose exception is applicable in
this case. Were the Bank to argue this exception, the terms of the agreement contravene this
possibility. First, under paragraph 3.2 the Bank agreed to pay Lincoln a fee for record-keeping
, services based upon the aggregate monthly balance in the accounts of Lincoln's customers: "In
addition to the Rate being paid by Bank: with respect to the Deposit Account, Bank shall pay
LTC a monthly fee equaling an annual percentage rate of 0.75% (75 basis points) of the average
collected balance of the Deposit Account." As previously discussed above, tying the
compensation to the amount deposited is a clear indication that Lincoln is acting as a deposit
broker. In the Buckley SandIer LLP opinion, Bank counsel concedes that the fee that the Bank
pays to Lincoln is based on the deposit balance: "The LTC (Lincoln) subaccounting relationship
is similar to the ETC subaccounting relationship wherein LTC provides subaccounting and
record-keeping services for Bank and Bank pays a fee to LTC for such services, based on the
level of deposits:,12
In light of the foregoing reasons, the FDIC concluded that Lincoln's deposits were brokered
deposits.
11 In the White Paper the Bank indicated that the main line of business of the trust companies ("Trost Companies")
for which the Bank has opened transaction accounts (e.g. money market and demand deposit accounts) is "serving as
an IRe qualified custodian for IRAs providing administration and managerial services for those accounts as a named
custodian for sucb accounts." The White Paper goes on to state: "They may, from time to time, serve as custodian.
trustee or plan administrators for other qualified retirement plans under IRC Sections 401 or 403, but we leave those
services aside because of this discussion since the vast majority of retirement plan accounts administered by the
Trust Companies' are IRAs." See p. 15 of White Paper.
12 In its legal opinions submitted, the Bank did not argue that Lincoln qualified under the deposit broker exception
for "a tIUstee or custodian ofa pension or profit-sharing plan qualified under section 401(d) or 403(a) of the Internal
Revenue Code of 1986 (26 U.S.C. 401(d) or 403(a." 12 C.F.R. 337.6(5)(ii)(H). Instead, the Bank made the
statement set forth in footnote 16, supm.
9
2265
average monthly customer deposits maintained at Bank (five basjs points of the 1.10% is paid to
CI
. ,. ) .. 13
Legent eanng s customers .' .
Furthennore, Bank counsel acknowledges that the Legent Agreement does not meet aU the
parameters of 05-02: "While the arrangements between the Bank and MSCS and Legeot differ
from the particular facts presented by the bank seeking advice in Opinion 05-02, we believe
viewing MSCS and Legent as within the exception from the definition of<&deposit broker" in 12
U.S.C. , 1831f(g)(2)(I) and 12 C.F.R. , 337.6(a){S)(ii)(l) is consistent with the principles
underlying Opinion 05-02 and the brokered deposit rules. ,,14
From the foregoing, it is evident that Legent is a deposit broker since it places its clients' funds
in an omnibus account at the Bank and none of the deposit broker exceptions apply to Legent. In
the DBTCA-Legent Broker-Dealer Money Market Deposit Account Agreement of June, 2006, it
is noteworthy that under section 11 (g) a "Program Bank" where DBTCA places the' funds of
Legent's customers becomes ineligible ''in the event that the program bank has insufficient
capital or is otherwise ineligible under the regulations of the Federal Deposit Insurance
Corporation from receiving brokered deposits. to Such a contractual provision, as discussed
above, tends to show that the parties may have viewed the deposits made by DBTCA on
Legenes bebalfto constitute bIokered deposits.
The FDIC concluded, for the reasons set forth above, that Legent's deposits were brokered
deposits.
Constellation Trust Agreement
In this agreement Constellation Trust Company (,'Constellation") agrees to place on deposit with
Bank funds for which it acts as custodian and emanate from designated accounts such as
employees benefit plans and retirement plans. 'IJ1e agreement mentions that insurance in excess
0[SI00,000 is obtainable ifthere is a relationship that can be ascertainable from either the
records of the insured bank or the records of the account customer. The agreement further
provides that Constellation wants the custodial funds it deposits with the Bank: to be "insured to
the fullest extent provided by law." Constellation is therefore acting as a deposit broker since it
is facilitating the placement of deposits with the Bank so as to obtain pass through deposit
insurance coverage for Constellation's customers. Although the initial teno of this agreement
ended on May II, 2008, the agreement continues in existence as it automatically renews on a
yearly basis, unless one of the parties provides written notice of termination. 30 days before tbe
renewal date. The Bank has not provided a legal opinion on this agreement. On the face of the
agreement there is no exception cited that precludes the conclusion that Constellation is a deposit
broker and that the funds deposited under this agreement are brokered deposits.
TM1 Agreement
This agreement is very similar to the Constellation Trust Agreement and the analysis and
conclusion are practically identical. In this agreement TMI seeks to obtain additional insurance
13 While Paper, pp. 35-36.
14 Buckley Sandler LLP legal opinion of March 10, 2010.
11
2267
beyond SI00,OOO on the deposit accounts it holds at the Bank on behalf of its customClS. As a
result, Bank agrees under the terms of the agreement to provide that TMI's funds are being held
in a custodial capacity by TMI and that the records reflecting the separate interests ofTMI's
customers hi these accounts are maintained by J'MI. This provision by the Bank enables TMrs
customers to receive pass through deposit insurance under 12 C.F.R. 330.5. The Bank bas not
provided a Jegal opinion on this agreement On the f8.ce of the agreement there is no exception
cited that precludes the conclusion that TMI is a deposit broker and that the funds deposited
under this agreement are brokered deposits.
VWTC Agreement
This agreement is nearly identical to the TMI agreement and the analysis and conclusiOn are the
same. In this agreement, UWTC sought pass through deposit insurance for its customers on
whose behalf it opened deposit accounts at the Bank.. The Bank: agreed to properly designate
UWTC's accounts to show that uwrc's deposits are held in a custodial capacity and that the
separate intereSts ofUWTC's customcIS are maintained by UWTC .. Such an indication on its
record by the Bank: enables UWTC to obtain pass through deposit insurance for its customers.
UWTC is therefore acting as a deposit broker since it is facilitating the placement of deposits
with the Bank so as to obtain pass through deposit insurance coverage for its customers. In the
agreement, the Bank agrees to pay UWTC a fee for certain recordkeepiug services on the
accounts ofUWTC"s customers on whose behalfUWTC is depositing funds with the Bank. The
fee is the greater of a flat fee ofS3.00 "per record-keeping non-Zero balance account (with the
number of accounts and activity be measured doym to the individual investor level)," or a 1%
annual fixed rate on the average daily deposit balanced kept by UWTC at the Bank. Since the
payment of these fees by the Bank is tied to the amount on deposit by UWTC. this constitutes,
under previously cited advisory guidance by FDIC, a strong indication that UWTC acted as a
deposit broker . The Bank bas not provided a legal opinion on this agreement. On the face of the
.greement. there is no exception cited that precludes the conclusion that UWTC is a deposit
broker and that the funds deposited under this agreement are.brokered deposits.
If you have any questions regarding this letter, please contact Assistant Regional Director Joseph
A. Meade, (972) 761-2068, or Case Manager Thomas L. Trujillo, (972) 761-2255.

Kristie K. Elmquist
Acting Regional Director
,.
2268 .
12
TabC
Exhibit 86
2269
Paul Hastings
AIIanll
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Frankf1IIt
Hang Kong
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MIlan
New York
OI8llg8Cou11\y
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Paris
San DIego
San FI8IICJsco
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YlasbingtGn. DC
1(202} 551-1829
lawrencekaplan@pauJhastings.com
Decembe.t 6, 2010
VIA B-MAIL AND UPS NEXT DAY AIR
Kristie K. Bhnquist
Acting Regional Directof .
Federal Deposit Insw:ance Cotpomtion
1601 Btyan Street
Dallas, TX 75201 .
Paul, HastIngs, JanofsI\Y at Walker lJ.P
875151h $IIae1, N.W.
Ias\lII9on. DC 2DIlO5 ..
1eIephone2G2-1i51-1700' facslmUe 202-651-1705 \WNI.pau1hasllngs.com
Re: United Western Bank - R.esttuctw:ing of Deposit Amngemen.ts; silpp1erneo.tal
infounation conceming Mattix Settlement and Clearance Services, Inc.
Dear Ms. Elmquist:
By lette.t dated Novembe.t 5, 2010 addressed to James R. Peoples, Chaitmao. of the Boatd, .
Chief Executive OffiCe.t and Ptesident ofUni.ted Westem Bd (the "Bank',) on behalf of
the Fede.tal Deposit Insurance Co.tporation (the "FDIC,) you notified the Bank that
various institutional depositoJ:s at the Bank (each a e'Nominee'') wete deemed to be
"deposit broken" for pmposes of Section 29 of the Fedetal Deposit Insurance Act
\cFDIA") and Section 337.6 of the:rules and regulAIions of the POIC. As tepeatedly
noted on page 6 of the November 5, 2010 letter, the FDICs conclusion 0J: the majority
of the institutional depositor analyzed was primarily a &llute to confotm. with the
pammetets of FDIC Advisoty Opinion 05..()2 (pebnwy 3,2005) ("Advisoty Opinion 05-
O2j. In the remaining cue of Matrix and Settlement Qearance Setvices, LLC \'MSCS").
the FDIC's conc:lusion. tested on a lack of evidence frotn the Bank that demonstrated the
til1IIinitIntr nature of the CWltomers cash in the omnibus account maintained for the MSCS
clients.
I This letter contains infounation conc:eming United Western 'Bancorp. Inc. ("UWBK") aod
United Western Bank (the "Bank"') and is not in the public domain. This information is being pxovided to
the Office oE11uift Supervision and Fedetal Deposit Insnrance Cm:pontioa. the agencies respons1Dle for
the xeguJation and supemsioll ofUWBK and the Bank as matetials telatedto the examination and
operationS oUWBK and the:Bank as well 811 under Fedem1lW1e ofBvideoce 408. Any public disc:loeuie of
confidential infoDnt.tion could esult in IIUbstantial hum toUWBK and the Bank. .Ac:coalingly. confidential
treatment of this letter. p\'IDutAt to 5 U.s.c. S SS2(b)(4) and (8). is mquestecL. .
2270
Paul Hastings
Kristie 1(. Ehnquist
Federal Deposit lnsw:ance' Cotpotation
December 6, 2010
Page 2
'The Bank strongly disa.grees with the conclusion set forth in the November 2010 letter
and has provided the FDIC with notice of its intentto exercise its appeal rights in
accordance with the policy and ptocedutes of the FDIC.
a
Nevertheless, as representatives
of the Bank discussed with you and Philip A. Gerbick, Regional Director of the Office of
Thrift Supervision ("OTSj on November 30, 2010, the Bank and each remaining
Nominee, other than MSCS,l1nalyzed in the November 5, 2010 letter has, or will shortly,
amended the various contmctual Ul:llngements so as to mitror the attangements described
in Advisory Opinion 0S-02.
3
We have included the fonn of atnended agreement for
United Western Tmst Company ('''OW Legent Clearing,ILC ("Legent Clearing"),
for Equity Tmst Company Trustl and Lincoln Trust Company CLincoln
Trust") herewith.
It is our understanding that the Bank has conducted extensive investigation into each of
the Nominees and the Bank is satisfied, based on detailed information received from each
Nominee over the coutSe of a decade of relationships. that none of the Nominees meets
the definition of the term "deposit broket" under Section 29(&)(1) of the FDIA ..
Futthet, while the Bank itself cannot obsetve in FDIC Advisory Opinion 05-02 the
concept that each Nominee must "invoke the 10% rule, .. 4 it is our understanding the Bank
has asked each of OW Trust, Legent Clearing, Equity Trust and Lincoln Trust whether
they wish to make such an invocation and each company has responded affirtnatively.
Accordingly. to the extent t:ha.t the FDIC requites a fonnal invocation to be made, the
FDIC should consider it made by each of UW Trust, Legent Cleating, Equity Trust and
Lincoln Trust.
As a result of the enclosed amendments, each Nominee (other than MSCS which is
discussed below) now satisfies the FDIC's of the so-called "primary
purpose exclusion" to the term deposit broker" as set forth in Section 29 of the FDIA
and Section 337.6 of the roles and regulations of the FDIC. as interpreted by FDIC
Advisory Opinion 05-02. Without agteeing to the FDIC conclusion as expressed in your
2 Further. Ms. Serena L. Owens. Associate Director, Division of Supemsion and Consumer Protection,
FDIC, has assured the Bank's litigation counsel that FDIC would not take any action with regaEd to the
determination made in your November 5, 2010 lette1: until after the Bank has exhausted its administrative
appeals within the FDIC.
3 Trust Mllrulgement Inc. and Constellation Trust Company no longer maintain client deposit relationships
at the Bank.
4 Letter of Kristie K. Elmquist, Acting Regional Dh:ector, FDIC, to James R. Peoples, Chainnan 9f the
Board and Chief Executive Officer. United Westem Bank, of November 5, 2010 at page 6. We note that
AO 05 02 does not constitute a tegu1ation or 11. role fonnally adopted by the FDIC pursuant to any fedetal
administrative procedutes act no!: may any party rely on AO 05 02 pw:suant to FDIC policy.
2271
PautHastlngs
~ K. E1mqui$t.
Fedeml Deposit Insumnce Cotpo:ation
December 6, 2010
Page 5
This infonna.tion should put to test any concerns about the status of MSCS as a deposit
broket, but the Bank stands ready, wiDing and able to provide more data to the FDIC, if
necessuy. We believe it is conclusive on its face that MSCS is not a deposit broker.
As each of the Nominees. other than MSCS which is demonstl:ably not a deposit btoket
as described above, has m effect "invoked the 10% rule" in Adviso.ty Opinion 05-02. and
the fee sttucture for the varioUs arrangements has been or wi1l be modified to a flat fee
based upon services xendered to the Bank. there.remains no basis fotthe various
conclusions set forth in the FDIC's November 5, 2010 letter, whic:b we request be
promptly withdmwn as it has been.tendered moot. MO%eOvet, we expect that there no
longer exists any challenges or obstacles to pteVent the FDIC from immediately te$1lDling
the processing of the OPe:ating subsidiary application filed by the Bank on August 10,
2010 with respect to the proposed acquisition of Legent Clearin& ll.C. as the basis for
the suspension set fotth in. a letter dated October 26. 2010 addressed to James R. Peoples
bas also been tendered moot.
As we have tepea.tedly advised the FpIC and ors, a prlvate-sector recapitaJizadOn of the
Bank. benefits all concerned constituencies, including the FDIC, O'I'S and the public.
'Ib%ough the assiduous efforts' by the Bank's management and boud of diEectors. working
titelessly, despite the odds and increased challenges, the Bank and its patent have done
evetytbing possible to bring the $200 million capital-mise to the finish line as well as avoid
a liquidity event. Tune te1n9lns shott to consumsnate the proposedttansaction by
December 31. 2010. 'The success or failnte of this effective pmte-sector resolution to
the challenges &.cing the 'Bank depend on the actions to be taken by the FDIC and O'I'S
in. the neat-term. Management and rep.tesentatives of the Bankue available to assist the
FDIC and OTS with any questions the agencies may have as we all work together towards
a successful private-sector recapitalization.
Should you have any questions regarding the foregoing or require any further infotmation.
please contact the undetsigned 2.t 202-551-1829. . .
Sincerely, .
~
for PAUL, HA.STlNGS,JANOFSKY & WALKER ILP
2274 .
Paul Hastings
Kristie 1<. Elmquist
Federal Deposit Insurance Corporation
December 6, 2010
Page 6
Enclosures
cc: Thomas A.Bames
Debomh Dakin, Esq.
Susan L Chomicz. Esq.
Phillip A.Getbick
Michael Simone
Lori Quigley
Nicholas Dyer
Kevin A. Corcoran. Esq.
Brian A. Steffey, Esq.
Clay Coon, Esq.
Richard Ostemwl, Esq.
Serena L Owens .
Joseph Meade
Andrew L Sandler, Esq.
Liana Ptieto. Esq.
2275
TabC
Exhibit 86 A
See Tab C, Exhibit 54C (p)
2276
TabC
Exhibit 86 B
See Tab C,Exhibit 54 C (g)
2277
TabC
Exhibit 86 C
See Tab C, Exhibit 54 C (e)
. 2278
. TabC
Exhibit'S6 D
See Tab C, Exhibit 54 C (j)
. 2279
TabC
Exhibit 86 E
2280
STATE OF COLORADO
DIVISION OF BANKING
ALL DOLLAR AMOUNTS ON ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS
("000" OMITTED). UNLESS OTHERWISE INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF
THE LAST BUSINESS DAY OF THE QUARTER.
1. Cash and balances due from depositolY Institutions
2. Fee receivables
a. Receivables (From Schedule A)
b. LESS: Reserve for bad debt
3. Securities (From Schedule B. Column A)
4. Premises and fixed assets (Net of depreciation)
5. Capital leases
6. Investments In unconsolidated subsidiaries and associated companies
7. Prepaid expenses
8. Intangible assets
9. Other assets (From Schedule C)
10. TOTAL ASSETS (Sum of Items 1 through 9)
11. Accounts Payable
12. Notes and debentures payable
13. Obligations under capitalized leases
14. Other borrowed money
15. Not applicable
16. Other liabilities (From Schedule 0)
2281
Book Value
.' '.'
$ 5,427
17. TOTAL LIABILITIES (Sum of Items 11 through 16)
18. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
19. Perpetual preferred stock and related surplus
20. Common Stock
21. Surplus
22. a. Retained earnings
b. Accumulated other comprehensive income
23. Other equity capital components
24 . TOTAL EQUITY CAPITAL (Sum of Items 19 through 23)
25. TOTAL LIABILITIES AND EQUITY CAPITAL (Sum of Items 17, 18 & 24)
a. Discretionary account assets
b. Non-discretionary account assets
27. Number of Fiduciary Accounts (Actual)
2. Past due 30-69 days and still accruing
3. Past due 90 or more days and still accruing
4. Non-accrual
5. TOTAL FEE RECEIVABLES (Must equal Report of Condition Item 2a)
1. U.S. Treasury securities
2. U.S. Government agencies and corporation obligations
3. Securities issued by state and political subdivisions In the U.S.
4. Other debt securities
5. Equity Securities
2282
Charter Number:
~ ~ ~ ~
$
5.4271
"
6. Investment in mutual funds
7. TOTAL (Sum of Items 1-6, must ~ u a l Report of Condition Item 3)
2. Other (Itemize amounts greater than $25,000 that exceed 25
percent of Item 3 of this schedule)
Accrued interest on CD & cash balances
Operational AIR clears Oct 10
IIC receivable due from MSCSIMFS
Miscellaneous
3. TOTAL (Sum ,of itemS 1 & 2 must equal Report of Condition Item 9)
":1-;:;::--- -
t! -a j:' .... - - - ~ ---
1. Expenses accrued and unpaid (Includes accrued. interest
payable and Income taxes)
2. Net deferred.tax liabilities (Ifaredit balance)
3. Not applicable
4. Other (Itemize amounts greater than $25,000 that exceed 25
percent of Item 5 of this schedule)
Deferred Income
IIC Payable to MFSIMSCS
Admin Fee Payable
5. TOTAL (Sum of Items 1-4 must equal Report of Condition Item 16)
1. FIduciary Assets Capital Calculation
2283
$ 2,002 $ 2.002
$ 2,002 $ 2,002
Charter Number: 300016
d. Ftduciiuy Capital (Column 1c not to exceed $5,000,000) 1$ 5,000 I
2.
MINIMUM REQUIRED CAPITAL is equal to the greater of 1d or $750,0'00. 5,0001
1. Total equity capital from Report of Condition Item 24
2. Qualfying minority interests In consolidated subsidiaries
3. Other additions to total capital
4. Deductions from capital
a. Goodwill and other non-qualifylng intangible assets
b. Investments in unconsolidated banking and finance subsidiaries
c. Reciprocal holdings of capital instruments
d. Other
5. TOTAL CAPITAL AVAILABLE (Sum of Items 1 through 3 less Item 4)
Charter Number: 300015
2284
$ 250
a. Personal trusts
b. Employee benefrt accounts
$
c. Corporate accounts
d. Other. ______________________________ ______
2. Interest and dividend income earned (Corporate)
3. Other Income (Provide details)
4. TOTAL INCOME (Sum of Items 13)
6. Occupancy expenses
7. Contracted outside seNicing expenses (Provide details)
8. Other expenses
9. Provisions for uncollected fees
10. TOTAL EXPENSES (Sum of Items 5-9)
11. Net income (Loss) before taxes. extraordinary items. and other adjustments
12. Gains (or Losses) from securities sold
13. Applicable income taxes
2285
14. Other adjustments (Describe)
Charter Number: 300015
15. NET INCOME (lOSS)
16. LESS: Other charges (credits) to undMded profits
a. Cash dividends declared
b. Other (describe)
$
17. INCREASE (DECREASE) in undivided profits (Item 15 less Item 16)
Ranch
Financial Officer
Denver
Officer
Clifton O'Amalo
2286
Nell Q. Gabriele
New York. NY
Paula G. Mcinerney
New York, NY
John H. Moody
Uttleton
Scott Pearson
Hlahlands Ranch
Charter Number: 300015
I, the undersigned officer, do hereby declare that this Report of Condition (Including the supporting schedules) has been prepared in
. conformance with the instructions issued by the Colorado Division
of Banking and is true to the best of myknowledae and belief.
720-956-5420
Joseph Matarazzo Chler Financial Officer
Name and THIe of PerSon to Whom Inquiries May be Directed
Area CodefTelephona Number
, Scott Pearson
720-956-5497
Signature of Officer Authorized to Sign Report
. Area CodeITelephone Number
Date Signed - MonthiDay/Year
Please Prtnt Name and TItle of Officer Authorized to Sign Report
We, ihe undersigned directors. attest to the correctness of this Report of Condition (lnciudlng the supporting schedules) and
declare that It has been examined by us ancl. to the best of our knOWledge and belief, has been prepared In conformance. with
the instructions and Is true and correct.
R. Clifton D'Amato
Signature of Manager
John H. Moody
Signature of Manager
Neil Q. Gabriele
Signature of Director
2287
TabC
Exhibit 87
2288
UWBK 10-K 12/31/2009
Section 1: 10-K (FORM 10-K)
2289
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMIO-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiseal year ended December 31, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ___ _
Commission file number: 0-21231
UNITED WESTERNBANCORP, INC.
(Exact name of registrant as specified in its.charter)
Colorado
(State or other jurisdiction of incorporation or organization)
700 17th Street, Suite 2100, Denver, Colorado
(Address of principal executive offices)
84-1233716
(I.R.S. Employer Identification No.)
80202
(Zip Code)
Registrant's telephone number, including area code: (303) S9S-9898
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $.0001 per share
Preferred Share Purchase Rights
Name of each exchange on which Registered
The NASDAQ Global Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes 0 No Ii1I
Indicate by check mark if the registrant is not required to file reports pursuant to Section I3 or Section IS(d) of the Act.
YesONoli1l
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or lS( 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 It! No 0
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation SoT (232.405 oftbis chapter) during
the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes 0 No 0
Indicate by check mark if disclosure of delinquent filers pursuant to Item 40S of Regulation S-K (229.40S) is not contained herein
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form IO-K. 0
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of "large accelerated filer, "accelerated filer" and "smaller reporting company" in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer 0 Accelerated filer It! Non-accelerated filer 0 Smaller reporting company 0
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 0 No It!
The aggregate market value of common stock held by non-affiliates of the registrant, based on the closing sales price of such
stock on the NASDAQ Stock Market on June 30, 2009, the close of the registrant's most recently completed second quarter was
$69,380,000. For purposes of this computation, all executive officers, directors and 10% beneficial owners of the are
deemed to be affiliates. Such determination should not be deemed an admission that such executive officers, directors and 10%
beneficial owners are affiliates. As of March 11,2010, 29,358,S80 shares of the registrant's common stock were outstanding,
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company's definitive proxy statement for the Annual Meeting of Shareholders to he held May 13, 2010 are
incorporated by reference into Part III of this Form 10-K.
2290
TABLE OF CONTENTS
Item 1. Business
Item 1 A. Risk Factors
Item lB. Unresolved Staff Comments
Item 2. Properties
Item 3. LegaIProceedings
Item 4. Removed and Reserved
Item 5. Market for Registrant's Common Equity. Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions. and Director Independence
Item 14. Principal Accountant Fees and Services
lIem 15. Exhibits and Financial Statement Schedules
Exhibit 21
Exhibii23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 3 1.3
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
- 1 -
2291
Page
2
20
34
34
34
37
40
43
80
81
81
81
82
82
82
82
82
82
82
Table of Contents
PART I
Item 1. !!!!.!!lliln
The disclosures set forth in this item are qualified by Item IA. "Risk Factors" and Item 7. "Management's
Discussion and Analysis - Forward Looking Statements" and other cautionary statements setforth elsewhere In this report.
United Western Bancorp, Ine.
GeneraL United Western Bancorp, Inc., headquartered in Denver, Colorado, is a unitary thrift holding company. The
words "United Western Bancorp," "us," "we," or the "Company" refer to United Western Bancorp, Inc. and its wholly owned
subsidiaries, unless we indicate otherwise. Through our principal subsidiary, United Western Bank, ("United Western Bank" or
the "Bank") we are focused on expanding our community-based banking network across Colorado's Front Range market and
selected mountain communities by strategically positioning banking offices in those locations. The Colorado Front Range area
spans the eastern slope of Colorado's Rocky Mountains, from Pueblo to Fort Collins, and includes the metropolitan Denver
marketplace, as well as certain mountain communities. As of December 31,2009, we had eight full service banking locations in the
Colorado Front Range marketplace (downtown Denver, Cherry Creek, Hampden, Centennial, Boulder, Loveland, Fort Collins and
Longmont), and a loan production office servicing the Aspen and Roaring Fork Valley market areas. We plan to continue to grow
the United Western Bank network in a more cost effective manner, including potentially through branch acquisitions. In addition
to the community-based banking operations of United Western Bank, we also offer cost effective deposits and deposit services
on a national basis to a variety of customers, including those involved in the processing services industries (e.g., securities
settlement, mortgage banking, custodial), as well as escrow and paying agent and trust account management services through our
wholly owned subsidiary, UW Trust Company.
United Western Bancorp, Inc. was incorporated in Colorado in June 1993. Until September 9, 2006, we were known as
"Matrix Bancorp, Inc." The trading symbol for our common stock on the NASDAQ Global Marketis "UWBK."
Community Bank Business Strategy
We have completed the fourth year of our community bank business strategy. This strategy has included the
development of a branch network within the Colorado Front Range and selected mOl\ntain community markets and building a
balance sheet that includes community bank loan and deposit products. We are developing a service-focused business that
serves the community in which our management team and employees work and live. As we view the landscape oftoday's deposit
marketplace we believe the competition for community banking deposits, both retail and business, will be substantial and will
continue to increase as the dominant national banks. increase their branch presence further, and as retail and business customers
migrate away from bank branches to other platforms. In this regard, we have continued to capitalize on our longstanding core
deposit base through the development of processing and trust deposit relationships (which includes securities clearing and
settlement, custodial, trust and escrow) that provide a stable, long-lived and inexpensive alternative to the traditional branch
banking concept. We anticipate that our management will evaluate various additional sources to this deposit gathering strategy,
and in the future, we may consider acquiring deposits from processing businesses that have significant deposit generating
capacity that is incidental to their primary purpose.
In addition, we believe that opportunities in the community bank sector for increased growth of quality assets may
become more restricted due to the protracted nature of the current United States economic downturn. As a consequence, we are
considering additional growth in our Small Business Administration ("SBA") Division loan origination business. The SBA
Division is a participant in the national preferred lenders program ("PLP") of the United States Small Business Administration.
With national PLP status, the Bank is able to participate in the PLP nationwide, which encompasses 68 districts spanning all 50
states. We anticipate targeted growth of quality commercial and industrial loans given our outlook for the state economy and our
current market share. Additionally, we may consider adding to our origination, holding and servicing of single family residential
loans.
Our objective is to increase franchise value by: (i) expanding o ~ r community banking and lending activities through the
recruitment of experienced community bankers who are knowledgeable about and well-known in the Colorado Front Range and
mountain community markets; (ii) developing a branch network within such markets; (iii) building a balance sheet consisting of
originated loan products; (iv) leveraging our management experience in developing and managing processing businesses'
deposits and (v) maintaining a strong credit oversight with respect to our lending products.
-2-
2292
Table of Contents
We believe the banking industry will significantly consolidate in the United States and in Colorado in the future. While
we have capitalized on an organic growth plan to date since starting our community banking business plan, we may consider the
strategic acquisition of like-minded banking organizations,. or acquisitions of community bank deposits, in our targeted markets as
part of our business plan going forward.
Regulatory Issues
Effective December 10, 2009,. the Company and the Bank, each entered into separate informal Memorandums of
Understanding ("Informal Agreements") with the Office o( Thrift Supervision (the "OTS"). The Informal Agreement between the
Bank and the OTS provides, among other things, that the Bank's Board of Directors will (i) adopt a written Capital Plan for the
Bank for the OTS Regional Director's review and cOlJl!1lent, and such plan shal1 address how the Bank will achieve and maintain
by June 30, 2010 a Tier 1 core capital ratio of 8% and a total risk-based capital ratio of 12% (as of December 31,2009, the Bank's
Tier 1 core capital and total risk-based capital ratios were 7.7% and 10.1%, respectively); and; (ii) approve a written Liquidity
Contingency Plan to ensure the Bank maintains adequate short-term and long-term liquidity, with such plan to specifical1y
address deposit concentrations and plans to reduce or manage such concentrations. The Informal Agreement also requires the
Bank to reduce certain concentrations in construction and land lending and non-agency mortgage backed securities. In addition,
the Informal Agreement places restrictions on the level of brokered deposits maintained by the Bank including deposits obtained
by our regional banking teams from our community banking customer base offered through the Promontory lnterfinancial
Network, LLC, known as Certificate of Deposit Account Registry Service ("CDARS"). See additional discussion at Item 1.
"Business - Regulation and Supervision - Regulatory Informal Agreement - Memorandum of Understanding."
The OTS and the FDIC conducted a joint field visit atthe Company and the Bank, which commenced January 10, 2010.
Subsequently, theOTS has provided additional supervisory limitations on the Bank. These limitations include: (i) the Bank may
not increase its total assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities without
prior written notice of non-objection from the OTS; and (ii) the OTS has directed the Bank not to rollover or renew exiting
brokered deposits, or accept new brokered deposits without the prior written non-objection from the OTS.
As a result of the Informal Agreements and the additional supervisory limitations, the Company is looking to further
increase its capital position by focusing on expense reductions, optimizing the balance sheet for both loans and deposits and risk
weighting of assts, as well as evalnating opportunities for margin improvement and improving the overall earnings power of the
Company. This may not be sufficient to meet the of Agreements, so the Company is also looking at
various strategic alternatives for the Company to accelerate Its comphance WIth terms of the Informal Agreement.
While management believes that they are instituting the appropriate plans to meet the requirements of the Informal
Agreements, as well as the additional supervisory limitations, tbere is no certainty that the Company can successfully execute on
all of the above and meet the capital requirements of the OTS by June 30,2010. If the Company is unable to comply with the
Informal Agreements or additional supervisory limitations the OTS could take additional actions, including issuing an
enforcement action.
As we move forward, we may augment our community banking business plan strategy with various alternatives
designed to enhance our overall liquidity position and to achieve profitability. These plans may include, but are not limited to, the
acquisition or development of processing and other businesses that provide direct or indirect access to consumer and business
deposits. We believe this strategy will compliment our deposit growth strategy inherent in our branch network. We are also
evaluating alternatives related to single family mortgage loan origination that may assist the Bank in maintaining its asset levels
under the qualified thrift lender test (See Item I. "Business - Regulation and Supervision" as well as provide additional
community banking opportunities for the Company. We expect to continue to explore these and other alternatives on a regular
basis, although there is no certainty that any proposed business augmentation will be executed and we cannot determine with any
degree of certainty if and when we might engage in any acquisition or development of any processing or other business or
expanded asset class. Given the current conditions surrounding our informal agreement with the OTS, we expect that any and all
such plans and initiatives will require the non-objection or concurrence of the OTS and, perhaps, the FDIC, which has retained
regulatciry powers over our Bank.
-3-
2293
Table of Contents
The Subsidiaries
Our core business operations are conducted through operating subsidiaries as described below.
United Western BanJ@. United Western Bank, wholly-owned by the Company, is a federal savings bank that originates
commercial real estate, multifamily, single tenant,. commercial and industrial, residential and commercial construction and
development, and consumer loans. Within certain of these loan types, the Bank also originates Small Business Administration
loans under section 7(a) of the Small Business Act ("7(a) loans") and section 504 of the Small Business Investment Act ("504
loans") and loans through the utilization of New Markets Tax Credits. United Western Bank also offers personal and business
depository banking, as well as treasury services.
At December 31, 2009, the Bank had total assets of $2.5 billion, deposits including custodial escrow balances of
$2.0 billion, loans of $1.4 billion, and capital of $188.4 million. The Bank's deposit base includes $464.9 million of community bank
deposits. Additionally, the Bank's deposit base includes interest-bearing negotiable order of Withdrawal ("NOW") and money
market accounts administered by UW Trust Company, the deposits resulting from transactions in which the Bank acts as the
clearing bank for clients of a fonner joint venture partner, Matrix Financial Solutions, Inc., and non interest-bearing custodial
escrow deposits related to the residential mortgage loan portfolio serviced by Matrix Financial Services Corporation. These
additional deposits, as well as other processing and trust deposits, comprise $1.3 billion of the total deposits at the Bank. We
anticipate our mix of deposits will change over the course of 2010 as we comply with regulatory requirements. See additional
discussion at Item 1. "Business - Regulation and Supervision - Regulatory Informal Agreement - Memorandum of
Understanding" and Item IA. "Risk Factors - Regulatory Risk."
UW Trust Company and Discontinued Operations. UW Trust Company ("UW Trust"), formerly known as Sterling
Trust Company, wholly-owned by the Company and headquartered in Waco, Texas, is a Texas non-bank trust company. On
June 27, 2009, UW Trust consummated the sale of certain of its assets. These assets were associated with UW Trust's self-
directed individual retirement account and qualified employee benefit plan administration business. In addition to the assumption
of certain UW Trust liabilities, the purchase price for these assets was $61.4 million, of which UW Trust received approximately
$15.3 million in cash from the buyers at the closing of the transaction. The remaining portion of the purchase price was financed
pursuant to a loan agreement. In connection with the sale, we recorded a pretax gain on the sale of $56.0 million, or approximately
$36.1 million net of tax. The operating results ofUW Trust Company, which are included in the Company's custodial and advisory
services segment, and which was attributed to the custodial IRA and qualified employee benefit plan businesses sold by UW
Trust are presented as discontinued operations. UW Trust has retained and will continue to operate its custodial escrow, paying
agent and trust administration lines of business, which management deems a core operation, and thus, UW Trust will continue to
be included in segment reporting.
Matrix Financial Sel'1lices Corporation. Since 2004, Matrix Financial Services Corporation ("Matrix Financial
Services"), a wholly-owned subsidiary of the Bank, services, through a third party subservicer, acquired mortgage servicing
rights on a nationwide basis through purchases in the secondary market and retention of originated mortgage servicing rights. As
of December 31, 2009, Matrix Financial Services was responsible for servicing approximately 13,000 borrower accounts
representing $766 million in principal balances. As a servicer of mortgage loans, Matrix Financial Services generally is required to
establish custodial escrow accounts for the deposit of borrowers' payments. These custodial accounts are maintained at the
Bank. At December 31, 2009, the custodial escrow account balances related to our servicing portfolio maintained at the Bank were
$11.8 million.
UW Investment Sel'1lices, Inc_ UW Investment Services, Inc. ("UWIS"), formerly known as First Matrix Services Corp.,
a wholly-owned subsidiary of the Company, is registered with the Financial Industry Regulatory Authority ("FINRA") as a fully
disclosed broker-dealer, with its headquarters in Denver, Colorado. Previously, UWIS brokered the sale of fixed income securities
to processing and trust clients and focused on the acquisition, brokering, securitization and sale of SBA loans and loan pools and
interest only strips associated with the SBA loans and loan pools. SBA loans were acquired by United Western Bank through the
brokerage activities ofUWIS. UWIS exited the business of brokering fixed income securities after its entire Memphis, Tennessee
staff was hired by another firm entering the SBA pooling and securitization business in 2006. In the future, UWIS will provide
services that complement our overall community banking business plan, which services may include securities brokerage
services, retirement account management and other services.
Other Subsidiaries. The Company has formed certain single purpose subsidiaries that have issued trust preferred
securities, which are discussed in Note 11 to the consolidated financial statements. The Company also has subsidiaries that are
involved in the New Markets Tax Credits program as discussed below in "Community Bank Lending - New Markets Tax Credits
Lending." The Company also has various other subsidiaries that are not significant to the consolidated entity at this time.
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Table of Conten!!
Please see Note 21 to the consoUdated financial statements for further financial iofonnation about our opemting
segments.
Lending Activities
Genera1. United. Western Bank's lending activities are principaUy comprised of originated community bank loans in the
Rocky Mountain region, national lending in conjunction with our Preferred Lender Program ("PLP',) status with the SBA and the
admlnistmtion of previously purchased loans. Community bank loans principally consist of commercial real estate, residential and
commercial construction and development ("C&D"), commercial and industrial ("C&l") and consumer loans. Commercial real
.estate loans are also originated by the Bank's SBA division, which originates conventionsl 504 loans and 7(a) loans. In addition,
the Bank has three operating subsidiaries, Community Development FlUlding I, LLC ("CDF 1"), Charter Facilities Funding IV, LLC,
("CFF lV'') and Charter Facilities FlUlding 5, LLC ("CFF 5"). CDF I and CFF IV have originated loans under the New Markets Tax
Crc:dits progmm discussed below in "Community Bank Lending-New Markets Tax Credits Lending." WI:< intend to originate
additional loans in 2010 within CFF 5 under the New Markets Tax Credits program. Purchased loans consist primarily of single-
family residential loans, which the Company has not purchased since September 2005, and purchased guaranteed portions ofSBA
7(a) loans, which it has not purchased since March 2006.
The majority of the loans and loan balances the Bank originates are variable mte and genemlly fluctuate with tbe prime
mte as published in the Wall Street Journsl or with LIBO.R. In the current declining interest mte environment, the Bank also
endeavors to price loau with a floor rate with the objective of enhancing our net interest income and margin. The Bank does make
some fixed rate loans, on a selective basis, but also endeavors to structure tbe fixed pricing on these facilities not to exceed five to
seven years. Variations from this fixed price alternstive usually are relsted to the government guaranteed SBA loan products and
New Markets Tax Credits lending. The pricing of the Bank's loan products is impacted by the competitive environment in which
the Bank operates and as such it is the objective of United Western Bank to price all loan obligations in conjunction with cruss
selling opportunities and relationship deposits.
The Bank manages the risks of its community bank lending in a number of ways. First, loan approvals are subject to
approval guidelines and the dollsr amount is stepped by size to Executive and Director Loan Committees and ultimately to the full
board of directors of the Bank. Business development and underwriting are separate business functions and loan policies set
exposure and concentration limits by borrower, loan and product type, in addition to geographic location of aggregate collateral
and portfolio concentrations. The Bank's loan policies and portfolio monitoring guidelines give specific direction on the
underwriting of all loan types, portfolio concentrations and regulstory requirements. See additional discussion of risk
management related to lending activities at Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Loan Portfolio, .. "Asset Quality" and "Allowance fur Credit Losses" in this report.
Community Bank Lending
Commerci,,' Re,,' Est"te Lending. United Western Bank originates commercial real estate loans ("CRE'') that are
generally secured by one or more of the following kinds of properties: multifamily residential property, owner and non-owner
occupied commercial, retail and industrial income property, and single tenant property. The owner occupied component of these
loans also includes SBA S04 loans and 7(a) loans. The Bank's CRE loans are generally made at variable mtes that change daily or
quarterly based on changes in the prime mte or UBOR, although some are made at fixed mtes. Terms of up to 25 years are offered
primarily OD SBA loans, but most loans are structured with a balloon payment at the end of approximately five years or amortized
over a period of up to ten years. In decidiqg whether to. make a commercial real estate loan, the Bank considers, among other
things, the experience and qualifications of the borrower as well as the value and anticipated cash flow of the underlying property
due from its tenant mix. Among the additional underwriting factors considered are net opemting income of the property before
debt service and depreciation, the debt service coverage ratio (the ratio of the property'sfi'ee cash flow to debt service
requirements), the mtio of the loan amount to the appmised value and cost, and the recourse to the overall creditworthiness of the
prospective borrower and guarantor. The Bank's commercial real estate loans typically range in size from $100,000 to $15 million,
with an avemge balance 0$919,OOO. The Bank's legal lending limit is approximately $28 million. Loans greater than $15 million, are
not often granted and require full Bank board of director approval. See additional discussion at Item I. "Business - Regulstion
and Supervision - Regulatory Informal Agreement - Memorandum
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Commercial real estate typically involves higher principal amounts than the other types of loans we make.
Moreover, the repayment of the 10ans generally is dependent, in large part, from the cash flow generated from the successful
operations of the property collateralizing the loan or the business conducted on the owner occupied property collateralizing the
obligation. Secondary sources of repayment are usually the sale or refinance of the subject property with credit enhancement also
required in the form of personal guarantees from the majority owners of the subject collateral. Asa result, these loans may be
more susceptible and adversely affected by conditions in the real estate markets or in the economy in general. example, if the
cash flow from a borrower's project is reduced due to leases not being obtained or renewed, the borrower's ability to repay the
loan may be impaired. In addition, because many commercial real estate loans have balloon payments due at maturity instead of
being fully amortized over the term of a loan, a borrower's ability to repay may depend on being able either to refinance the loan or
sell the underlying property. We monitor the level of commercial real estate loans in the Bank's loan portfolio individually and in
the aggregate. Our.internal guideline is to maintain eRE loans at 2SO";" or less of the Bank's Tier I capital plus the allowance for
credit losses. At December 31, 2009. CRE loans represented 224% of the Bank's Tier I capital plus the allowance for credit losses.
Rellident;,,1 ""d Commerc;"l Constrllction ""d Development Lendillg. United Western Bank provides construction
and development loans ("C&D") for the development of land and vertical construction of one-to-four family. multifamily and
condominium residences. Loans are also provided for the development of and vertical construction for retail, office. and
. other commercial purposes. Underwriting guidelines for C&D facilities generally require presa1e or preleasing requirements in
addition to personal guarantees of the project's owners or development partners. Land development and construction loans share
many of the same risks as discussed above with commercial real estate loans with respect to sale or refinance repayment
alternatives. In addition, C&D lending also involves construction related risks because funds are advanced incrementally based
on a preapproved construction budget or a percent complete calculation. The loan is secured by the "to be completed" project,
which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, the
market value of the completed project and the effects of governmental regulation of real property. it can be difficult to evaluate
accurately the total funds required to complete a project and the related loan-to-value and loan-to-cost ratios. If the appraisal of
the value of the completed project proves to be overstated, the Bank may have inadequate security for the repayment of the loan
upon completion of construction of the project and may require collateral re-margin requirement to protect against Ii potential loss.
Accordingly. the Bank generally requires a personal guaranty on al\ residential and commercial construction and development
lending. We monitor the level of C&D loans in the portfolio individually and in the aggregate. Our internal guideline is to maintain
C&D loans at ISO% or less of the Bank's Tier I capital plus the allowance for credit losses. At December 31,2009, C&D loans
represented 102% of the Bank's Tier I capital plus the allowance for credit losses. See additional discussion at Item 1. "Business
- Regulation and Supervision - Regulatory Informal Agreement Memorandum of Understanding."
Commercilll .nd IlIdlllltrilll Lending. United Western Bank makes commercial and industrial loans ("C&I") to small
and middle market businesses. C&I borrowers tend to be privately owned operating companies and are generally service
providers. distributors, and manufacturers. The loan products offered are primarily working capital and term loans (secured with
real estate facilities and equipment) and lines of credit that help customers finance trsding assets including accounts receivable
and inventory. These loans are typically guaranteed by the owners of the business and subject to underwriting guidelines that .
include borrowing base parameters and compliance with financial covenants. The collateral securing C&I loans may depreciate
over time, may be difficult to appraise. and may fluctuate in value based on the success of the business and the volatility of the
underlying cash flow; In addition, in the case of loans secured by accounts receivable, the availability offunds for the repayment
of these loans may be substantially dependent upon the ability of the borrower to collect the amounts due from its customers.
Accordingly, the Bank inakes commercial loans primarily based on the identified cash flow and capital adequacy of the borrower
and secondarily \1n the underlying collateral provided by the borrower. Commercial loans are made at vari8ble rates that fluctuate
with the prime rate. In the future, the Bank anticipates making C&I loans to small to mid sized energy companies, including coal.
oil, gas, and "green" oriented businesses like solar and wind power. .
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Small Business Administration Lending. The Bank's SBA division is a participant in the national preferred lenders
program ("PLP") of the United States Small Business Administration. With national PLP status, the Bank is able to participate in
tbe PLP nation wide, wbich encompasses 68 districts spanning all 50 states. The Bank originates SBA 504 loans and 7(a) loans.
Under the SBA 504 program, the Bank provides, in conjunction with a Certified Development Company ("CDC"), a conventional
loan collateralized by a first lien on commercial real estate or equipment. The SBA 504 program provides for an SBA guarantee of
debentures issued for up to a maximum of 40% of the eligible project costs and is subordinated to the primary mortgage originated
by the Bank. Pursuant to the American Recovery and Reinvestroent Act of 2009 ("ARRA"), which became effective February 17,
2009, additional funding of$730 million, was provided for SBA-backed loans. Oftbis additional funding, $375 million was directed
to temporarily eliminating fees on SBA-backed loans and raising SBA's guarantee percentage on SBA's 7(a) Program loans
originated after the effective date to 90% with a maximum guarantee of$1.5 million. This funding was exhausted on February 19,
2010, and thus the SBA guarantee on loans approved after February 19,2010, under the 7(a) Program for loans of this size reverts
to 75%. Management believes that additional funding is likely and that the program will be extended through the end of the
government's fiscal year ending in 20\0; however, this is subject to approvals by Congress and the President. Generally, this
guarantee may become invalid only if the loan does not meet the SBA underwriting, documentation, and servicing guidelines.
SBA 7(a) loans, collateralized by real estate, have terms of to 25 while loans collateralized by equipment and working
capital have terms of up to ten years and seven years, respecbvely. A mlDlmum down payment of 10% is required on most 504
loans, but a larger down payment may be required when financing a start up business and the real estate collateral consists of a
special purpose or single use property, such as a motel or service station.
New Markets Tax Credits Lending. New Markets Tax Credits ("NMTC") are awarded under a program administered by
the Community Development Financial Institutions Fund, a division of the United States Department of Treasury. The NMTC
program permits taxpayers/investors to claim a credit against federal income taxes for each qualified equity investroent ("QEI")
made to a designated community development entity. The investor receives a 39% tax credit over a seven year period, in the
amount of 5% in years one through tbree, and 6% in years four througb seven. In 2004, the Bank acquired $4.9 million tax credits
through a $12.6 million qualifying equity investroent it made to its 99.99% owned subsidiary, Community Development Funding "
LLC ("CDF '''). CDF , used the investment proceeds to originate loans eligible under the NMTC program through the Bank. In
2005, tbe Bank invested $11.0 million in Charter Facilities Funding IV, LLC, another 99.99% owned subsidiary of the Bank ("CFF
IV") and received tax credits of $4.3 million. CFF IV used the investment proceeds to originate loans eligible under the NMTC
program through the Bank. In 2006, the.Bank made an additional investroent of $10 million to CFF IV, making the Bank eligible for
an additional $3.9 million of'tax credits .. The additional investroent proceeds are being used by CFF IV to make eligible NMTC
loans through the Bank. In May 2009, a wholly owned subsidiary of the Company was awarded an allocation of$20 million of New
Markets Tax Credits authorized by the U.S. Treasury through its Community Development Financial Institutions Fund. These tax
credits were acquired by the Bank, and tbe Bank invested $20 million in its newly created 99.99% owned subsidiary, Charter
Facilities Funding 5, LLC, ("CFF 5.") Tax credits of $7.8 million are expected to be realized over the seven year period ending in
2015.
At December 31, 2009, the Bank bas $30.6 million of NMTC loans outstanding. NMTC loans are generally commercial
real estate loans in designated community development areas (low-income areas or economic enterprise zones) made in
accordance with the Bank's and community development entities' lending policies and in accordance with the rules of the NMTC
program. Generally these loans are fixed rate and there is a concession in the rate as compared to the remainder of the Bank's
community bank loan portfoli.o. loans have longer terms, 25 to years, an initial seven years of interest only
payments followed by amortIzation to matunty. These loans are \Deluded wltb commerCIal real estate loans in our tables and
financial statements and the underlying collateral is commercial property.
Consumer Lending. The Bank's consumer lending portfolio is primarily focused on individual wealth management and
private bank investment and lending products as opposed to blanket underwriting and funding objectives to compete with the
mass retail marketplace. The Bank offers home equity lines of credit and to a limited extent, home equity tenn loans, auto, and
unsecured consumer loans. Home equity lines of credit mar be extended up to 90% of the appraised value of tbe property, less
existing liens, genemlly at variable interest .rates based on the Board Target Rate for overnight borrowings,
or L1BOR. In addition, most consumer loans are structured WIth floor pncmg and Incorporate underwriting guidelines that include
minimum credit score requirements and aggregate liquidity and debt service guidelines. The Bank uses the same underwriting
standards for home equity lines of credit as it uses for residential real estate loans. Consumer loans typically have shorter terms
and lower balances with higher yields as compared to residential real estate loans, but generally carry higher risks of default.
Consumer loan collections are dependent on the borrower's continuing financial stability, and thus, are more likely to be affected
by adverse personal circumstances. Furthennore, the application of various federal and state laws, including bankruptcy and
insolvency laws, may limit tbe amount that can be recovered on these loans.
Otber Lending
Single-family Residence Lending. At December 31, 2009, United Western Bank owns approximately $278.6 million of
single-family residential whole loans. While the overwhelming majority of these loans were purchased by the Bank in the
secondary market, a portion were originated by Matrix Financial Services prior to February 2003, and approximately five percent of
these loans represent loans purchased from Matrix Financial Services' servicing portfolio.
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Prior to our cbange in business strategy, the Bank regularly reviewed residential loan portfolios for prospective
acquisition; however, the Bank has not purchssed any such loan portfolios since September 2005., These portfolios were typically
first lien priority loans secured primarily by l-to-4 family residential properties. Most were adjustable rate loans. The Bank would
purchase packages of residential loans from various sellers who had either originated the loans or acquired the loans from others
in bulk purchases: The Bank would consider several factors prior to a purchase, including the product type, the current loan
balance, the current interest mte environment, the seasoning of the mortgage loans, payment histories, geographic location of the
underlying collateral, price, yield, the current liquidity of the Bank and the product mix in its existing portfolio. In
addition, the various sellers were evaluated for their ability to perform under the representations and warmnties that would he
provided to the Bank at the time of purchase. .
The Bank performed due diligence on each residential loan portfolio that it desired to purchase. These underwriting
procedures consisted of analyzing all or, in some instances, a representative sample of the loans in the portfolio and were
typically performed by Bank employees, but occasionally were outsourced to third party contractors. The underwriter took into
account many factors and statistica in analyzing the loans in the subject portfolio, including; the general economic conditions in
the geogmphic ares or aress in which the underlying properties were located; the credit. score of the borrower; the
loan-to-value mtios and quality of the valuations on the underlYing loan collateml; and the payment histories of the borrowers, as
well as their income and debt to income levels. In addition, the underwriter attempted to veri,tY that each sample loan conformed to
the standards for losn documentation set by the secondary market for investment grade mortgages. In cases where a significant
portion of the sample loans contained nonconforming documentation, the Bank assessed the additional risk involved in
purchasing those loans. This process helped the Bank determine whether the mortgage loan portfolio met its investment criteria
and, if it did, the moge of pricing that was appropriate.
Purelulsed SBA Guartllltud Ltnms. At December 31, 2009, United Westem Bank owns approximately $71 million of
guamnteed portions of SBA 7(a) loans that it acquired in the secondary market. These loans are adjustable mte and genemlly
reset quarterly with changes in the prime mte. The Bank purchssed these guamnteed portions of SBA loans from various sellers,
typically the originator of the loan who retained the unguaranteed portion and continues to service the loan:
Otller Activities Related to, Lend1Dg
Sales 01 Loans. In the normal course of business, the Bank sells certain of the SBA loans it originates in the secondary
market. The Bank hss sold residentiallosns outright and has sold securities backed by residential loans after securitization with a
governmental sponsored agency. During 2009, the Bank sold approximately $33.0 million of originated SBA loans. The Bank may
sell SBA loans from time'to time to manage industry exposures, interest mte risk and for current income. The sale of loans may
generate a gain or loss for the Bank. Gains or losses result primarily from two factors; First, the Bank may make a loan to a
borrower at an interest mte that is higher or lower than the prevailing or the expected mte in the market resulting in a price
difference when the loan is sold in the secondary market These price differences occur primarily as a result of competitive pricing
conditions in the market place. Second, gains or losses may result from changes in interest mtes that consequently change the
market value of loans originated for sale. '
Deposits
Deposits. The Bank offers a variety of deposit accounts with a ninge of interest mtes and terms. The Bank's core
deposits consist of retail, business, processing and trust checking accounts, NOW accounts, money market accounts, savings
accounts and certificates of deposit These deposits, along with short-term and long-term borrowings, and to a lesser extent
brokered deposits, are used to support our asset base. Community bank deposits are obtained predominantly from the geogmphic
trade areas surrounding our community office locations. Processing and trust deposits are obtained nationally.
Processing and trust deposits comprise approximately 77% and 89% of total deposits at December 31, 2009 and 2008, respectively.
Given the fact that, historically, the Bank's processing and trust deposit base has been less expensive than community bank
deposits, the Bank will continue to utilize its expertise to expand upon and to continue to diversitY our processing and trust
deposit base, while also increasing its traditional community bank deposit base over time, With the matumtion of the Bank's
branch distribution system and opemtions now being conducted out of eight open locations, the Bank will continue to use its
critical mass and gr\lwing reputation as a Colorado banking leader to launch future deposit campaigns. See additional discussion
in Note 8 of the financial ststements included in this report, Item IA. "Risk Factors," and Item 7. Discussion and
Analysis - Liquidity - Bank Liquidity" and Item 7. "Management's Discussion and Analysis of Financial Condition-
Deposits" for further discussion.
'0
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Total deposits, includin8 custodial escrow balances, increased $271.0 million between December 31, 2009 and
December 31, 2008. This increase was caused by growth of $272.9 million of community bank deposits from our eight open
banking offices. This growth includes $214.9 million obtained through the certificate accounts offered through the CDARS
progrsm. The CDARS program provides full Federal Deposit Insurance Corporation ("FDIC") coverage on deposit balances
greater than posted FDIC limits by exchanging larger depository relationships with other CDARS members. Depositors' funds are
, broken into amounts below FDIC insurance limits and placed with other banks that IIR! member$ of the CDARS network. Each
member bank issues certificate accounts in denominations beloW the FDIC insured limit, resulting in full FDIC insurance for the
entire deposit. CDARS accounts are considered by regulation to be brokered deposits. The OTS has directed the Bank not to
rollover or renew existing brokered deposits, or accept new brcikered deposits without prior written non-objection of the OTS.
Accordingly, prospectively the existing CDARS deposits, which totsIed $246.5 million at December 31, 2009, will at maturity be
transferred to other accounts at the Bank or withdrawn. CDARS deposits mature through December 22, 2011. See additional
discussion at Item 1. "Business - Regulation and Supervision - Regulatory Informal Agreement - Memorandum of
Understsnding. ..
Community bank deposits represent deposits attracted by our regional banking teams. In addition to the methods
described above, the Bank has a wide variety of deposit products designed to attract business clients. Our Treasury Advisory
Services team offers business clients remote deposit capture, lockbox, sweep products, and ACH and wire services. The Bank is
also participating in the FDIC's Temporary Liquidity Guarantee Program ("1LGP"). The FDIC has created TLGP to strengthen
confidence and encOurage liquidity in the banking system by gusranteeing newly issued senior unsecured debt of banks, thrifts,
and certain holding companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of
dollar amount through June 30, 2010.
Custodial Escrow, Paying Agent and Trnst Administration Services
Self-Directed Trust lind ellStody Serviees. The Company's custodial escrow, paying agentand trust administration
lines of business are provided through UW Trust. These services are marketed oil a nationwide basis to intermediaries such as
law firms, tax.professionals, broker-dealers and others as well as on a direct basis to consumers of these services. UW Trust will
compete with numerous other independent third parties in the provision of these services. .
Brokerage Services
UW Invesllnent Seniees, 1m:. UWIS is registered with FINRA asa fully disclosed broker-dealer, headquartered in
Denver, Colorado. UWIS previously provided brokerage services through SSA pooling and structured finance transactions.
UWIS, as agent for United Western Bank, purchased the guaranteed portion of SBA 7(a) loans from bank and non-bank lenders
around the country. These loans were assembled and later pooled into SBA securities that were sold into the secondary market to
processing and trust companies and sophisticated investors. In addition, UWIS brokered the sale of fixed income securities to
processing and trust clients. Prospectively, UWIS will provide services that complement our ovemll community banking business
plan, which services may include securities brokerage services and retirement account management and other services. At this
time, UWIS is not active in providing any services to any third party clients.
Mortgage Servielng Activities
Residentilll Mortgllge LOlln Se1'J1lcing. Historically, we conducted our residential mortgage loan servicing activities
through Matrix Financial including the residential mortgage loan servicing that Matrix Financial Services. provided as
subservicer for United Western Bank's servicing portfolio. In 2004, Matrix Financial Services transferred all of its servicing
functions to a third party subservicer. The s.ervicing transfer was done in an effort to lower the overall cOst of servicing by
eliminating many of the fixed costs of servicing the loans in-house. Matrix Financial Services now pays the subservicer a fixed fee
per loan that varies based on whether the loan is a fixed mte or adjustable rate, or if the loan is delinquent. As part of the
agreement, the custodial deposits are maintained at United Western Bank. We have retained a small staff of six people at Matrix
Financial Services primarily to monitor the servicing activities of the subservicer. At December 31, 2009, including loans owned by
Matrix Financial Services and United Western Bank, Matrix Financial Services serviced approximately $766 million of mortgage
loans through the subservicer.
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Servicing mortgage loans involves a contractual right to receive a fee for collecting, processing and administering
mortgage loan payments. This processing involves collecting monthly mortgage payments on behalf of investors and remitting
collected payments to investors on a periodic basis, reporting information to those investors on a monthly basis and maintaining
custodial escrow accounts for the payment of principal and interest to investors and property taxes and insurance premiums on
behalf of borrowers. These payments are held in custodial escrow accounts at United Western Bank.
As compensation for its mortgage servicing activities, Matrix Financial Services receives servicing fees, plus any late
charges collected from delinquent borrowers and other fees incidental to the services provided .. In the event of default by the
borrower, Matrix Financial Services receives no servicing fees until the default is cured. At December 31, 2009, Matrix Financial
Services annual weighted-average servicing fee was 0.413% ofthe unpaid principal balance outstanding on each mortgage.
Servicing is provided on mortgage loaits on a recourse or nonrecourse basis. Matrix Financial Services' policy was to
accept only a limited number of servicing assets on a recourse basis. As of December 31, 2009, on the basis of outstanding
principal balances, approximately 0.69% of its owned mortgage servicing contracts involved recourse servicing with credit risk
exposure in the event of underlying mortgagor default to Matrix Financial Services. Additionally, many of its nonrecourse
mortgage servicing contracts require Matrix Financial Services to advance all or part of the scheduled payments to the owner of
the mortgage loan in the event of a default by the borrower. Many owners of mortgage loans also require the servicer to advance
insurance premiums and tax payments on schedule even though sufficient escrow funds may not be available. Therefore, Matrix
Financial Services must bear the funding costs associated with making such advances. If the delinquent loan does not become
current, these advances are typically recovered at the time of the foreclosure sale. Foreclosure expenses, which may include legal
fees or property maintenance expenses, are generally not fully reimbursable by Fannie Freddie Mac or Ginnie Mae, for which
agencies Matrix Financial Services provides significant amounts of mortgage loan sefVIcing. As of December 31, 2009, Matrix
Financial Services had advanced approximately $5.6 million in funds on behalf of third party investors. Matrix Financial Services
may incur normal curtailments of certain advances on loans serviced for Ginnie Mae and Fannie Mae. Generally advances on
behalf of private investors are fully collectible. For the Veteran Affairs ("VA") loans sold and serviced for Ginnie Mae, which are
sold on a nonrecourse basis, the VA loan guarantees may not cover the entire principal balance and, in that case, Matrix Financial
Services is responsible for the losses that exceed the VA's guarantee. Estimated losses related to foreclosure and other servicer
advances are estimated and reserved for, and are included in the consolidated financial statements as a reduction of the amount of
other receivables.
Competition
United Western Bank faces substantial competition from a variety of competitors in all phases of its operations,
including loan and deposit account originations. There is significant competition among commercial banks in the Bank's market
area. As a result of the deregulation of the financial services industry (see "Regulation and Supervision - Gramm-Leach-Bliley"
below), the Bank also competes with other providers of financial such as credit unions, consumer finance companies,
securities firms, insurance companies, insurance agencies, commercial finance and leasing companies, full service brokerage firms
and discount brokerage firms. Some of the Bank's competitors have greater resources and, as such, may have higher lending
limits and may offer other services that are not provided by the Bank. The Bank generally competes on the basis of customer
service and responsiveness to customer needs, available loan and deposit products, the rates of interest charged on loans, and
the rates of interest paid for deposits and other funds. The Bank does not compete by lessening its credit quality standards.
UW Trust Company faces considerable competition in all of the services and products that it offers. UW Trust's
services are marketed on a nationwide basis to intermediaries such as law firms, tax professionals, broker-dealers and others as
well as on a direct basis to consumers of these services. UW Trust will compete with numerous other independent third parties in
the provision of these services.
To the extent that UWlS re-enters the brokerage services and other business lines normally associated with securities
brokerage (e.g., retirement account management, wealth management, and other services), it will face substantial competition from
larger and better capitalized market participants. The Company believes that UWIS will be able to compete effectively because of
the trusted relationships developed with clients ofUW Trust and United Western Bank, but there can be no assurance that UWIS
will be able to effectively compete in the provision of traditional brokerage services.
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Employees
At December 31, 2009, the Company bad 224 employees. We believe that relations with our employees are good. The
Company is not party to any collective bargaining agreement. The number of employees will vary as the Company continues to
implement its community banking strategy but also as the company looks for additio.nal operating efficiencies.
Regulation and Supervision
Set forth below is a brief description of various laws, regulatory authorities and associated regulations affecting our
operations. The description of laws and regulations contained in this document does not purport to be complete and is qualified
in its entirety by reference to applicable laws and regulations. Also, such statutes, regulations and policies are continually under
review by Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or
regulatory policies applicable to United Western Bancorp and its subsidiaries could have a material effect on the business of the
Company.
Emergency Economic Stabilization Act of 2008. The Emergency Economic Stabilization Act of2008 (the "EESA") was
enacted on October 3, 2008. The EESA provided the United States Department of the Treasury ("Treasury") authority to take
certain actions to restore liquidity and stability to the U.S. banking markets. Based upon its authority in the EESA, a number of
programs to implement EESA have been announced by the Treasury. Those programs include the following;
Capital Purchase Program ("CPP"1. Pursuant to this program, Treasury on behalf of the US Government,
purchased preferred stock along wIth warrants to purchase common stock, from certain financial institutions,
including bank holding companies, savings and loan holding companies and banks or savings associations not
controlled by a holding company. The investment has a dividend rate of5% per year, until the fifth anniversary of
the Treasury's investment and a dividend of 9% thereafter.
On November 7, 2008, the Company submitted an application to Treasury to participate in the Treasury's CPP
Program. During the fourth quarter of 2009, after reviewing the terms and conditions of the governing documents
pertaining to the CPP and observing the manner in which the CPP is administered by the Treasury, the Company
determined that it was in its best interests to withdraw its CPP application. On December 10, 2009, the Company
requested to withdraw from consideration for participation in the CPP. This will provide the Company with the
opportunity to participate in the extended tax-loss carry back provisions made available to corporations in 2009
under recent revisions to the Internal Revenue Code of 1986, as amended.
Temporary Liquidity Guarantee Program (,"fLGP"). This program contained both (i) a debt guarantee component
("Debt Guarantee Program"), whereby the FDIC will guarantee until June 30, 2012, the senior unsecured debt
issued by eligible financial institutions between October 14, 2008 and October 31, 2009; and (ii) a transaction
account guarantee ("TAG") component ("TAG Program"), whereby the FDIC will insure 100% of noninterest
bearing deposit transaction accounts held at eligible financial institutions, such as payment processing accounts,
payroll accounts and working capital accounts through December 31, 2009.
United Western Bank elected to participate in both parts of the TLGP. The FDIC will only guarantee a participant's
newly issued unsecured debt in a total amount not to exceed 125% of the par or face value of such participant's
senior unsecured debt outstanding as of September 30, 2008 and scheduled to mature on June 30, 2009. If there
was no unsecured senior debt outstanding at September 30, 2008, the amount available under the program is
limited to two percent of total liabilities as of September 30, 2008. As the Company did not have any unsecured
senior debt outstanding as of September 30, 2008, the conclusion of the Debt Guarantee Program on October 31,
2009 bad no impact on the Bank or Company.
On August 26,2009, the FDIC approved the final rule extending the TAG Program for six months until June 30,
2010, and increased the applicable TAG assessment fees during that six month period. The Company did not opt
out of the TAG program extension, which is expected to increase future FDIC insurance costs.
Temporary increase in deposit insurance coverage. Pursuant to the EESA, the FDIC temporarily increased the
amount of deposit coverage for deposits at banks, thrifts and credit unions for deposits that are subject to deposit
insurance provided by the FDIC from $100,000 to $250,000 per applicable depositor. The EESA provided that the
basic deposit insurance limit will retorn to $\00,000 after December 31,2009. The temporary increase in the basic
limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor has been extended through
December 31, 2013, but is permanent for certain retirement accounts (including IRAs).
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Fede,,11 L"ws. As. a publicly helll company, various aspects of o.ur public disclosure, corporate governance
principles andintemal control environment are subject to the Securities Exchange Act of 1934, the Sarbanes- 0x1ey Act of 2002
and related regulations and rules of the SEC and the Nasdaq Stock Ml!I'ket Any change in applicable laws, regulations or
regulatory policies may have a material effect on our business, operations and prospects. .
ODice .of Thrift Supervision. We are a unitsry savings and loan holding company within the meaning of the Home
Owners' Loan Act of 1933, as amended. As such, we are subject to the OTS regulation, examination, supervision and reporting
requirements. In addition, the OTS has enforcemettt.authority over us and our savings bank and non-savings bank subsidiaries.
Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the
financial safety, soundness or stability of our subsidiary savings institution, United Western Bank. In addition, United Western
Bank must notii)' the OTS at least 30 days before declariBg any capital distribution (e.g., dividends or other) to us.
As a unitary savings and loan holding company that has been in existence prior to May 4, 1999, we generally are not .
restricted under existing laws as to the types of business activities in which we may engage, provided that the Bank continues to
be a "qualified thrift lender" under the Home Owners' Loan Act To maintain its status as a qualified thrift lender, the Bank must
maintain a minimum percentage of its assets in qualified thrift investments unless the OTS grants an exception to this requirement
In general, qualified thrift investments include certain types of residential mortgage loans, mortgage backed securities and certain
loans to small businesses. If we acquire control of another savings association as a separate subsidiary, we would become a
multiple, rather than a unitsry, savings and loan holding company. Multiple savings and loan holding companies may only
engage in those activities permissible for a financial holding company under the Bank Holding Company Act ("BHC Act").
Generally, finaocial holding companies may only engage in activities such as banking, insurance and securities activitieS, as well
as merchant banking .activities under certain circumstances. In addition, if the Bank fails to maintain its status as a qualified thrift
lender, within one year of its failure, we would be required to convert the Bank to a commercial bank and to register as a bank
holding company under the BHC Act, as amended
Under certain circumstances, which include among other factors our current Informal Agreements, the FDIC may
participate actively with the OTS in providing regulatory supervision of the Bank. This includes direct participation by the FDIC
in on-site and oft'-site supervision, direct influence in various ratings and in the overall supervision of the Bank. See additional
information in Item 1. "Business - Regulation and Supervision - Insurance of Accounts and Regulation by the Federal
Insurance Corporation." .
See also our discussion below under Item I. "Business - Regulation and. Supervision - Regulatory Informal
Agreemerlt - Memorandum of Understanding."
Cha"ge ;" B""k Co"trol Act The Change in Bank Control Act of 1978, as amended, provides that no person, acting
directly or indirectly or through or in concert with one or more other persons, may acquire control of a savings association unless
the OTS has been given 60 days prior written notice. The Home Owners' Loan Act provides that no company may acquire control
of a savings association without the prior approval of the OTS. Any company that acquires such control becomes a savings and
loan holding company subject to registration, examination and regulation by the OTS. Pursuant to. federal regulations, control of a
savings association (which includes its holding company) is conclusively deemed to have been acquired by, among other things,
the acquisition of more tban 25% of any class of voting stock of the association or the ability to control the election of a majority
of the directors of the association. Moreover, control is presumed to have been aequired, subject to rebuttal, upon the acquisition
of more than 10010 of any class of voting stock, but less than 25% of any class of stock of a savings association, where certain
enumerated control factors are also present in the acquisition. The OTS may prohibit an acquisition of control if it would result in
a monopoly or substantially lessen competition, the financial condition of the acquiring penon might jeopardize the financial
stability of the association, or the competence, experience or integrity of the acquiring person indicates that. it would not be in the
interest of the depositors or the public to permit the acquisition of control by such person.
Grllmm-Ltlllch-BIUey. The Gramm-Leach-Bliley Act of 1999, as amended (also known as the Financial Services
Modernization Act) ("Gramm-Leach-Bliley") eliminated many federal and state law barriers to affiliations among banks, securities
firms, insurance companies and other financial service providers. The law revised and expanded the BHC Act to permit a bank
holding company to engage in a full range of financial activities by electing to be treated by the Federal Reserve Board as a
"Financial Holding Company." "Financial is broadly defined to include not only banking, insurance and securities
activities, but also mercbant banking and additional activities that the Federal Reserve Board, in consultation with the Secretsry of
the Treasury, determined to be financial in nature, incidental to such financial activities, or complementary activitieS that do not
pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
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Gramm-Leach-Bliley prohibits unitary savings and loan holding companies formed after May 4, 1999 from engaging in
non-financial activities. Since we are a grandfatbered unitary savings and loan holding company, Gramm-Leach-Bliley has not had
a material adverse effect on our operations. However, because banking law permits banks, securities firms and insurance
companies to affiliate with one another there is a continuing trend in the financial services industry toward consolidation. As a
result,Gramm-Leach-Bliley could lead to an increasing amount of competition from larger institutions and other types of
companies offering financial products, many of which may have substantially more financial resources.
Anti-Money Laundering and USA Patriot Act. A major focus of governmental policy on financial institutions in recent
years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001, as amended (the
"Patriot Act"), substantially broadened the scope of United States anti-money laundering laws and regulations by imposing
significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial
jurisdiction of the United States. Treasury has issued and, in some cases, proposed a number of regulations that apply various
requirements of the Patriot Act to financial institutions such as United Western Bank and its subsidiaries. These regulations
impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report
money laundering and terrorist financing and to verifY the identity of their customers. Certain ofthose regulations impose specific
due diligence requirements on financial institutions that maintain correspondent or private banking relationships with non-U.S.
financial institutions or persons. Failure of a financial institution to maintain and implement adequate programs to combat money .
laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious adverse
consequences forthe institution.
Office of Foreign Assets Control Regulation. The United States has imposed economic sanctions that affect
transactions with designated foreign countries, nationals and others. These are sometimes referred to as the "OFAC" rules based
on their administration by the Treasury's Office of Foreign Assets Control ("OFAC"). The OFAC-administered sanctions take
many different fonns. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or
investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned
country and prohibitions on "U.S. persons" engaging in financial transactions relating to making investments in, or providing
investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or
specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S.
jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits)
cannot be paid out, withdrawn, set off or tmnsferred in any manner without a license from OFAC. Failure to comply with these
sanctions could have serious legal and reputational consequences.
Transactions with Affiliates. Sections 23A and 23B of the Federal Reserve Act of 1913, as amended, and its
implementing regulations govern transactions between depository institutions and their affiliates. These provisions are made
applicable to savings associations, such as United Western Bank, by the Home Owners' Loan Act Section 23A limits the extent
to which the savings association or its subsidiaries may engage in certain transactions with its affiliates. These tmnsactions
include, among other things, the making of loans or other extensions of credit to an affiliate and the purchase of assets from an
affiliate. Genemlly, such transactions between a savings association and anyone affiliate cannot exceed 10% of the savings
association's capital stock and surplus, and such transactions between the savings institution and all of its affiliates cannot in
the aggregate, exceed 20% of the savings institution's capital stock and surplus. Section 23A also establishes specific collat;ml
requirements for loans or extensions of credit to an affiliate, and for guarantees or acceptances on letters of credit issued on
behalf of an affiliate. Applicable regulations prohibit a savings association from lending to any affiliate engaged in activities not
pennissible for a bank holding company or for the purpose of acquiring the securities of most affiliates. Section 23B requires that
transactions covered by Section 23A and a broad list of other specified transactions be on tenns and under circumstances
substantially the same, or no less favorable to the savings association or its subsidiary, as similar transactions with non-affiliates.
In addition to the restrictions on transactions with affiliates that Sections 23A and 23B. of the Fedeml Reserve Act impose on
depository institutions, the regulations of the OTS also generally prohibit a savings association from purchasing or investing in
securities issued by an affiliate. Whenever United Western Bank engages in transactions with its affiliates, the tmnsactions are
structured with the intent of complying with these regulations.
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Feden" Stillings Btlnk Opertltions. United Western Bank is subject to extensive regulation, examination and
supervision by the OTS, as its primary federal regulator, and potentially by the FDIC, which insures its deposits up to applicable
limits. Such regulation and supervision:
establishes a comprehensive framework of activities in which United Western Bank can engage;
limits the types and amounts of investments permissible for United Western Bank;
limits the of United Western Bank to extend credit to any given borrower;
significantly limits the transactions in which United Western Bank may engage with its affiliates;
requires United Western Bank to meet a qualified thrift lender test that requires United Western Bank to invest in
, qualified thrift investments, which include primarily residential mortgage loans and related investments;
places limitations on capital distributions by savings associations, such as United Western Bank, including cash
dividends;
imposes assessments to the OTS to fund their operations;
establishes a,continuing and affirmative obligation, consistent with United Western Bank's safe and sound operation
to belp meet the credit needs of its community, including low and moderate income neigbborhoods; ,
requires United Western Bank to maintain certsin reserves against its transaction accounts;
establishes various capital categories resulting in various levels of regulatory scrutiny applied to the institutions in a
particular category; and' ,
establishes standards for safety and soundness. r
The Bank must submit annual financial reports audited by independent auditors to federal regulators. The auditors
must receive eXamination reports, supervisory agreements and reports of enforcement actions. In addition, an attestation by the
auditor regarding the statements of management relating to the internal controls must be submitted to the .oTS. The Bank's audit
committee must include members with experience in banking or financial management, must have access to outside counsel and
must not include representatives of large customers. Any change in these regulations, whether by the OTS, the FDIC or
Congress, could have a material impact on United Western Bank and its operations. '
United Western Bflnk's ClIPitfl'Req,lIirements. Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to savings institutions that do not meet minimum capital requirementa.
For these purposes, the law estsblishes five categories: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. The OTS has adopted regulations to implement the prompt corrective action
legislation. An institution is deemed to be:
"well capitalized" ifit has a totsl risk-based capital ratio of 10% IIr grester and a core capital ratio ofS% or greater;
"adequately capitalized" if it has a total risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or
greater and generally a core capital ratio of 4% or greater;
"undercapitalized" if it has a total risk-based capital ratio of less than 8%, a Tier I risk-based capital ratio of less than
4%, or generally' a core capital ratio of less than 4%; ,
"significantly undercapitalized" if it has a total risk-based capital ratio of less than 6%, a Tier I risk-based capital ratio of
less than 3%, or a core capital ratio ofless than 3%; and ,
"critically undercapitalized" ifit has a ratio of tangible equity (as defined in the regulations) to total assets that is
to or less than 2%. .
As of December 31, 2009, United Western Bank was a ''well capitalized" institution.

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The following table indicates United Western Bank's regulatory capital ratios:
/
Disallowed assets
....
Additional capital items:
.....'"">< .
Low-level recourse and residual interests
.< ....,.)
Minimum capital requirement as reported to the OTS
.... ' ............................ .

'
Minimum capital requirements
As of December 31, 2009
Core Risk-Based
Capital Capital

:f
,(64) " ....' (64)

'4. ' .. -":.)';'\":;
. '(51,406) .'.
'Jl(ii669."
1 00,400 l:i8:382
']: '33;Z'8't .. '
7.68%
""S;9O"Ji'
4.00"...&
10.07%
"1ll9O"4

Regulatory Informal Agreement - Memorandum of Understanding. Effective as of December 10, 2009, the Company
and the Bank, each entered into separate infonnal Memorandums of Understanding ("Informal Agreements") with the Office of
Thrift Supervision (the "OTS"). The Infonnal Agreements are not "written agreements" for purposes of Section 8 of the Federal
Deposit Insurance Act, as amended.
The Informal Agreement between the Company and the OTS provides, among other things, that the Company, acting
through its Board of Directors, will (i) support the Bank's compliance with the Informal Agreement it entered into with the OTS;
(ii) not declare or pay dividends or any other capital distribution or redeem any capital stock of the Company, or take dividends
representing a reduction in the capital from the Bank, without the prior written non-object!on of the Regional Director of the OTS;
and (iii) not incur, issue, renew, repurchase, make payments on or rollover' any debt, mcrease any current lines of credit, or
guarantee the debt ofany entity without receiving the prior written approval of the OTS Regional Director. Pursuant to the terms
of the Company's Credit Agreement with JPMorgan Chase Bank, N.A. ("JPMorgan"), entering into the Informal Agreements was
considered an event of default; however, JPMorgan and the Company entered into an Amendment and Forbearance Agreement
dated December 14, 2009 wherein JPMorgan agreed to forbear from declaring the amounts owing under the Credit Agreement
immediately" due and payable as a result of the Company and the Bank executing the Informal Agreements and any events of
default resulting therefrom. Since the effective date of the Infonnal Agreements, the Company has requested and received the
non-objection of the OTS to make certain payments due on its outstanding debt. We will be required to make additional requests
for non-objection from the OTS with respect to future payments on our outstanding debt. However, the Company is continually
evaluating its cash flow resources available to satisfY such debt repayments, and all such repayments are subject to continued
non-objection from the OTS; accordingly, the Company may be required to suspend certain debt payments.
The Informal Agreement between the Bank and the OTS provides, among other things, that the Bank's Board of
Directors will (i) adl)pt a written Capital Plan for the Bank for the OTS Regional Director's review and comment, and such plan
shall address how the Bank will achieve and maintain by June 30, 2010 a Tier I core capital ratio of 8% and a total risk-based
capital ratio of 12% (as of December 31, 2009, the Bank's Tier I core capital and total risk-based capital ratios were 7.7% and
10.1 %, respectively, as shown above); and; (ii) approve a written Liquidity Contingency Plan to ensure the Bank maintains
adequate short-term and long-term liquidity, with such plan to specifically address deposit concentrations and plans to reduce or
manage such concentrations. The Informal Agreement also requires the Bank to reduce certain concentrations in construction
and land lending and non-agency mortgage backed securities. In addition, the Informal Agreement places restrictions on the level
of brokered deposits maintained by the Bank including deposits obtained by our regional banking teams from our community
banking customer base offered through CDARS. The Company believes that it has satisfied a number of the conditions of the
Informal Agreement and has commenced the steps necessary to resolve any and all remaining matters presented therein.
The Informal Agreements remain effective until modified, suspended or terminated by the OTS Regional Director.
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The OTS and the FDIC conducted a joint field visit at the Company and the Bank, which commenced January 10,2010.
Subsequently, the OTS has provided additional supervisory limitations on the Bank. These limitations include: (i) the Bank may
not increase its total assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities without
prior written notice of non-objection from the OTS; and (ii) the OTS has directed the Bank not to rollover or renew exiting
brokered deposits, or accept new brokered deposits without the prior written non-objection from the OTS.
As a result of the Informal Agreements and the additional supervisory limitations, the Company is looking to further
increase its capital position by focusing on expense reductions, optimizing the balance sheet for both loans and deposits and risk
weighting of assts, as well as evaluating opportunities for margin improvement and improving the overall earnings power of the
Company. This may not be sufficient to meet the requirements of the Informal Agreements, so the Company is also looking at
various strategic alternatives for the Company to accelerate its compliance with terms ofthe Informal Agreement
While management believes that they are instituting the appropriate plans to meet the requirements of the Informal
Agreements, as well as the additional supervisory limitations, there is no certainty that the Company can successfully execute on
all of the above and meet the capital requirements of the OTS by June 30,2010. If the Company is unable to comply with the
Informal Agreements or additional supervisory limitations the OTS could take additional actions, including issuing an
enforcement action.
Insurance of Accounts and Regulation by the Federal Deposit Insurance Corporation. The deposits of the Bank are
insured up to applicable limits by the Deposit Insurance Fund, which is administered by the FDIC,and backed by the full faith and
credit of the U.S. Government. As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, FDIC-
insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious threat to the FDIC. The FDIC also has the authority to initiate enforcement actions against
savings associations, after giving the OTS an opportunity to take such action ..
The FDIC amended its risk-based assessment system for 2007 to implement authority granted by the Federal Deposit
Insurance Reform Act of 2005, as amended (the "Reform Act"). Under the revised system, insured institutions are assigned to one
of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. An institution's
assessment rate depends upon the category to which it is assigned. Risk Category I is the lowest risk category while Risk
Category IV is the highest risk category. For 2007 and 2008, the Bank qualified for Risk Category I. Risk Category I generally
includes banks that are "well capitalized" and that receive a composite CAMELS rating of2 or higher. For banks under $10 billion
in total assets in Risk Category I, the 2007 and 2008 deposit assessment ranged from five to seven basis points oftotal qualified
deposits. The actual assessment is dependent upon certain risk measures as defined in the final rule. In 2009, the Bank had its risk
category change as a result of its regularly scheduled regulatory examination.
The Reform Act also provided for a one-time credit for eligible institutions based on their assessment base as of
December 31,1996. The Bank's one-time credit was $177,000, which was recognized in 2007.
In addition to the. assessment for deposit insurance, institutions are required to make payments on bonds that were
issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. The current annualized
assessment rate is 1.06 basis points, or approximately 0.265 basis points per quarter. These. assessments will continue until the
Financing Corporation bonds mature in 2019.
In an effort to restore capitalization levels and to ensure the Deposit Insurance Fund will adequately cover projected
losses from future bank failures, the FDIC adopted a revised risk-based deposit insurance assessment schedule on February 27,
2009, which raised deposit insurance premiums. Changes in the risk-based assessment system included increasing premiums for
institutions that rely on excessive amounts of brokered deposits, including CDARS, increasing premiums for excessive use of
secured liabilities, including Federal Home Loan Bank advances, and lowering premiums for smaller institutions with very high
capital levels. For the first quarter of 2009 only, the FDIC increased all FDIC assessments by seven basis points. These rates
ranged from 12 to 14 basis points for Risk Category I institutions to 50 basis points for Risk Category IV institutions. Beginning
April 1, 2009 the Dew initial base assessment rates were 12 to 16 basis points for Risk Category I institutions, to 45 basis points for
Risk Category IV institutions. After applying all possible adjustments, the bases assessment rates range from 7 to 77.5 basis
points. On May 22, 2009, the FDIC adopted a final rule imposing a five basis point special assessment of each insured depository
institution's assets minus Tier 1 capital as of June 30,2009, but no more than 10 basis points times the institution's assessment
base for the second quarter of 2009. This special assessment was collected on September 30, 2009. Additional special
assessments may be imposed by the FDIC for future periods.
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On November 12, 2009, the FDIC adopted a final rule requiring insured institutions to prepay approximately three years
of estimated insurance assessments. The pre-payment allowed the FDIC to strengthen the capital level of the Deposit Insurance
Fund immediately without impacting earnings of the industry. Payment of the prepaid assessment, along with the payment of
institutions' regular third quarter assessment was due on December 30, 2009. The Bank received an exemption from prepaying its
FDIC insurance premiums.
. FDIC insurance expense, inclusive of assessments for the Financing Corporation bonds, totaled $4.9 million in 2009,
$1.0 million in 2008, and $818,000 in 2007.
Insurance of an institution's deposits may be terminated by the FDIC upon a finding that the institution has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS.
Under certain circumstances, which include among other factors the existence of an Informal Agreement, the FDIC may
participate actively with the OTS in providing regulatory supervision of the Bank. This includes direct participation by the FDIC
in on-site and off-site supervision, direct influence in various ratings and in the overall supervision of the Bank. The FDIC may
impose additional or independent actions upon management, the Board of Directors and the Bank. The FDIC is currently
participating in our regulatory supervision with the OTS.
FHLBank System. United Western Bank is a member of the Federal Home Loan Bank ("FHLBank") system, which
consists of twelve regional FHLBanks. The FHLBank provides a central credit facility primarily for member associations and
administers the home financing credit function of savings associations. FHLBank borrowings must be secured by specified types
of collateral. The FHLBank funds its operations primarily from proceeds derived from the sale of consolidated obligations of the
FHLBank system. United Western Bank, as a member ofthe FHLBank system, must acquire and hold shares of capital stock in its
regional FHLBank in an amount equal to the greater of 1 % of the aggregate principal amount of its unpaid residential mortgage
loans and similar obligations at the beginning of each year, 0.2% of total assets, or 5% of its borrowings from !be FHLBank. Prior
to relocating its domicile, United Western Bank was " member of the FHLBank of Dallas. Effective March 25, 2002, United
Western Bank became a member of the FHLBank of Topeka. At December 31, 2009, United Westem Bank was in compliance with
the FHLBank system capital stock requirement based on its combined investment in FHLBank of Dallas and FHLBank of Topeka
stock totaling $9.4 million.
Brokered Deposits. Under the FDIC regulations governing brokered deposits, well capitalized associations, such as
United Western Bank, are not subject to brokered deposit limitations, while adequately capitalized associations are subject to
certain brokered deposit limitations and undercapitalized associations may not accept brokered deposits. At December 31, 2009,
United Western Bank had $575.7 million of hrokered deposits. Included in this total were $246.5 million of CDARS deposits
acquired through our community banking customer base by our regional banking teams; $104.6 million of traditional brokered
deposits obtained through a national brokerage firm; and $224.6 million of other deposits that are deemed to be brokered deposits
by regulatory definition. Subsequent to year end, the OTS directed the Bank not to rollover or renew existing brokered deposits,
or accept new brokered deposits without prior written non-objection of the OTS. Accordingly, the CDARS brokered deposits on
deposit at the Bank inay be transferred to certificate accounts or other deposit accounts or withdrawn at maturity. The CDARS
maturity dates run through December 22, 2011, traditional brokered deposits mature $50 million on June 30, 2010 and $50 million on
July 1, 2010, and other deposits deemed to be brokered deposits by regulatory definition of $224.6 million will be withdrawn prior
to March 31, 2010. Since December 31,2009, the Bank has accumulated cash on its balance sheet of over $1 billion, and thus has
the liquidity necessary to fund these brokered deposit withdrawals. In the event United Western Bank is not permitted to accept
brokered deposits in the future, it would have to find replacement sources of funding. It is possible that such alternatives may not
be available, or if available, would result in a higher cost of funds.
Federal Reserve System. The Federal Reserve Board regulations require all depository institutions to maintain reserves
at specified levels against their transaction accounts (primarily NOW and regular checking accounts). At December 31,2009,
United Western Bank was in compliance with the Federal Reserve Board's reserve requirements. Savings associations, such as
United Western Bank, are authorized to borrow from the Federal Reserve Bank's "discount window." The Bank is deemed by the
Federal Reserve to be generally sound and thus is eligible to obtain primary credit from its Federal Reserve Bank. Generally,
primary credit is extended on a very short-term basis to meet the liquidity needs of the institution. Loans must be secured by
acceptable collateral and carry a rate of interest of 50 basis points above the Federal Open Market Committee's federal funds
target rate. As a tertiary source of liquidity, (see Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity - Bank Liquidity'') at December 31,2009, the Bank had pledged approximately $22.9 million of
the guaranteed portions of purchased SBA loans to the Federal Reserve Bank of Kansas City, as collateral for potential
borrowings from the "discount window."
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Mortgage Banking Operations. Our mortgage banking opemtions are conducted through Matrix Financial Services.
The rules and regulations applicable to our mortgage banking operations establish underwriting guidelines that, among other
things, include anti-discrimination provisions, require provisions for inspections, appraisals and credit reports on prospective
borrowers and fix maximum loan amounts. Moreover, we are required annually to submit audited financial statements to the U.S.
Department of Housing and Urban Development ("HUD"), Fannie Mae, Freddie Mac and Ginnie Mae, and each regulatory entity
maintains its own financial guidelines for determining net worth and eligibility requirements. Matrix Financial Services operations
are also subject to examination by HUD, Fannie Mae, Freddie Mac and Ginnie Mae at any time to assure compliance with the
applicable regulations, policies and procedures. Mortgage loan origination activities are subject to, among other laws, the Equal
Credit Opportunity Act, the Federal Truth-in-Lending Act and the Real Estate Settlement Procedures Act of 1974, and the
regulations promulgated under these laws that prohibit discrimination and require the disclosure of certain basic information to
mortgagors concerning credit terms and settlement costs. Moreover, the OTS, as primary regulatory authority over the Bank (the
parent of Matrix Financial Services), also examines the Matrix Financial Services mortgage banking operations as well.
Regulation of UW Trust Company. UW Trust Company provides custodial escrow, paying agent and trust
administration services. UW Trust Company is chartered under the laws of the State of Texas, and as a Texas trust company i$
subject to supervision, regulation and examination by the Texas Department of Banking. Under applicable law, a Texas trust
company, such as UW Trust, is subject to virtually all provisions of the Texas Banking Act as if the trust company were a state
chartered bank. The activities of a Texas trust company are limited by law to acting as a trustee, executor, administrator, guardian
or agent for the performance of any lawful act, and to lend and accumulate money when authorized under applicable law. In
addition, a Texas trust company with capital of $1.0 million or more, such as UW Trust, has the power to: .
purchase, sell, discount and negotiate notes, drafts, checks and other evidences of indebtedness;
purchase and sell securities;
issue subordinated debentures and promissory notes; and
exercise powers incidental to the enumerated powers of Texas trust companies as set forth in the Texas
Banking Act.
A Texas trust company, such as UW Trust, is generally prohibited from accepting demand or time deposits if not
insured by the FDIC.
Limitation on Capital Distributions. The Texas. Finance Code prohibits a Texas trust company from reducing its
outstanding capital and certified surplus through redemption or other capital distribution without the prior written approval of the
Texas Banking Commissioner. During the year ended December 31, 2009, UW Trust paid the Company a dividend of$38.3 million.
A Texas trust company is generally obligated to maintain an amount equal to 40% of its capital and
surplus in investments that are readily marketable and that can be converted into cash within four business days. So long as it
complies with those requirements, a Texas trust company generally is permitted to invest its corporate assets in any investment
otherwise permitted by law. Generally, a Texas trust company cannot invest an amount in excess of 15% of its capital and certified
surplus in the securities of a single issuer.
Branching. The Texas Finance Code permits a Texas trust company to establish and maintain branch offices at any
location within the state if it first obtains written approval of the Texas Banking Commissioner.
Transactions with Related Parties. The Texas Finance Code prohibits .the sale or lease of an asset of a Texas trust
company, or the purchase or lease of an asset by a Texas trust company, where the transaction involves an officer, director
principal shareholder or affiliate, unless the transaction is approved by a disinterested majority of the board of directors or
written approval of the Texas Banking Commissioner is first obtained. In no event, however, maya Texas trust company lease real
property in a transaction involving an officer, director, principal shareholder or affiliate without the prior approval of the Texas
Banking Commissioner.
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Enforcement. Under applicable provisions of the Texas Finance Code, the Texas Banking Commissioner has the power
to issue enforcement actions against a Texas trust company or any officer, employee or director of a Texas trust company. In
addition, in certain circumstances, the Texas Banking Commissioner may remove a present or former officer, director or employee
of a Texas trust company from office or employment, and may prohibit a shareholder or other persons participating in the affairs of
a Texas trust company from such participation. The Texas Banking Commissioner has the authority to assess civil penalties of up
to $500 per day against a Texas trust company (penalties against individuals may be higher) for violations of a cease and desist,
removal or prohibition order. The Texas Banking Commissioner may also refer violations of a cease and desist order to the
attorney general for enforcement by injunction.
The Texas Banking Commissioner may pursue an order of supervision or conservatorship if:
the Texas Banking Commissioner determines that the Texas trust company is in a hazardous condition and that the
continuation of business would be hazardous to the public or to the shareholders or creditors of the Texas trust
company;
the Texas Banking Commissioner determines that the Texas trust company has exceeded its powers;
the Texas trust company has violated the law; or
the Texas trust company gives written consent to supervision or conservatorship.
The Texas Banking Commissioner also has the authority to pursue the appointment of an independent receiver for a
Texas trust company.
Capital Requirements. UW Trust is required by the Texas Banking Commissioner to maintain minimum restricted capital
of at least $2 million. In addition, a Texas trust company may not have at anytime outstanding liabilities in an amount that exceeds
five times its capital stock and surplus, except that with the approval of t h ~ T e x ~ s Banking Commissioner, a Texas trust company
may have outstanding liabilities in an amount that does not exceed ten limes Its capital stock and surplus. The Texas Banking
Commissioner may require additional capital of a Texas trust company if the Texas Banking Commissioner determines it necessary
to protect the safety and soundness of such company. If the Texas Banking Commissioner were to do so, or in the event uw
Trust fails to maintain capital of at least $2 million, there is no assurance that UW Trust would be able to restore its capital or meet
such additional requirements. In either case, the Texas Banking Commissioner could pursue various enforcement actions for
inadequacy of capita I, such as appointing either a conservator or a receiver. As of December 31, 2009, UW Trust. is in compliance
with all capital requirements under Texas law.
Regulation of UW Investment Services Inc. UWIS is a securities broker-dealer that is subject to the Securities and
Exchange Commission's net capital rule, Rule 15c3-1, promulgated under the Securities Exchange Act of 1934. The net capital rule
is designed to measure the general financial condition and liquidity of a broker-dealer. Net capital generally is the net worth of a
broker or dealer (assets minus liabilities), less deductions for certain types of assets. If a firm fails to maintain the required net
capital, it may be subject to suspension or revocation of registration by the Securities and Exchange Commission and suspension
or expulsion by FINRA, and could ultimately lead to the firm's liquidation. The net capital rule also limits the ability of broker-
dealers to transfer large amounts of capital to parent companies and other affiliates. At December 31, 2009, UWIS was in
compliance with these requirements with net capital of $244,000, which was approximately $239,000 in excess of its required net
capitalof$5,OOO.
Available Information
Under the Securities Exchange Act of 1934, the Company is required to file annual, quarterly, and current reports, proxy
statements and other infonnation with the Securities and Exchange Commission ("SEC"). You may read and copy any document
the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may call
the SEC at 1-800-732-0330 fur further infonnation about the Public Reference Room. The SEC maintains a website at www.sec.gov
which contains reports, proxy and information statements, and other infonnation regarding the Company that we file electronically
with the SEC.
The Company maintains a website at www.uwbancorp.com. On our website, investors and other interested persons
may access free of charge, among other things, any of the reports that we file with or furnish to the SEC, including this annual
report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Fonn 8-K as soon as reasonably practicable after
such reports are filed with or furnished to the SEC. The Company's website also includes the charters of our Audit
Compensation, Nomination and Governance Committees and other corporate governance documents. '
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Item IA. Risk Factors
Ownership bfthe common stock orother securities including debt and debt securities of the Company involves certain
risks. Holders of. the Company's securities and prospective investors in those securities should carefully consider the following
risk factors and uncertainties described below together with all of the other infonnation included and.incorporated by reference in
. this report, in evaluating an investment in the Company's securities. If any of the risks and uncertainties discussed below actually
occur, our business, financial condition and results of operations could be materially adversely affected. In addition, other risks
and uncertainties of which we are not currently aware, including those relating to the banking and financial services industries in
general, regulatory supervision and actions, or which we do not now believe are material, may cause earninga to be lower, or
.impair our future financial condition or results of operations. The value or market price of our common stock could decline due to
any of these identified or other risks, and you could lose all or part of your investment
Risks Related to Our Busines.
Our business hIlS been IUId -y continue to be lIIlversely affected by conditions in the financial iIIarkets IUId
economic conditions generally. During 2008 and 2009, the financial services industry and the securities markets generally have
been materially and adversely affected by significant declines in the economy and values of nearly all asset classes and by a
serious lack ofliquidity and a lack of financing for many investors. Unemployment has also increased significantly.
Market conditions have also led to the failure or merger of a number of prominent insured depository institutions. In
addition, many fmancial institutions, including us, have experienced declines in the performance of their loans and non-agency
mortgage-backed securities. Increases in defaults on mortgages including residential loans, construction and land loans, and
commercial real estate loans coupled with declining asset values and the lack of market and investor confidence, as well as other
factors, have all combined to negatively impact financial services participants such as us.
As a result, there is a potential for new federal or state laws and regulations regarding lending and funding practices
and liquidity standards, and bank regulatory agencies have been and are expected to continue to be aggressive in their
supervision of banks and in responding to matters identified in examinations, including the issuance of informal or formal
enforcement actions or orders. The impact of the legislation in. response to these developments may negatively impact our
operations by restricting our business operations, including our ability to originate or sell loans, and adversely impact our
financial performance or our stock price.
Further, sdditional negative market developments may affect consumer confidence levels which could cause changes in
payment performance,. leading to increases in delinquencies and default rates that could impact our charglKlffs and provision for
credit losses. A worsening of these conditions would likely extend the impact of these difficult market conditions on us and
others in the financial services industry.
Our financial performance generally, and in particular the ability of our borrowers to pay interest on and repay principal
of outstanding loans and the value of collateral securing those loans, is highly dependent upon the business environment in the
markets where we operate in the State of Colorado and in the United States as a whole. Continued deterioration in the business
environments could adversely affect the credit quality of the Bank's loans, the value of our company's investment securities, and
our overall results of operations and financial condition.
Regulatory RIsks
We are subject to informal agreements and other determinations by the OTS that restricts certain of our actions.
Effective as of December 10, 2009, the Company and the Bimk each entered into separate informal Memorandums of
Understanding ("Informal Agreements") with the. Office of Thrift Supervision (the "OTS"). The Informal Agreements are not
"written agreements" for purposes of Section 8 ofthe Federal Deposit Insurance Act, as amended.
The Informal Agreement between the Company and the OTS provides, among other things, that the Company, acting
through its Board of Directors, will (i) support the Bank's conipliance with the Informal Agreement it entered into with the OTS.
(ii) not declare or pay dividends or any other capital distribution or redeem any capital stock of the Company, or take
representing a reduction in the capital from the Bank, without the prior written non-objection of the Regional Director of the OTS;
and (iii) not incur, issue, renew, repurchase, make payments on or rollover any debt, increase any cutrent lines of credit, or
guarantee the debt of any entity without receiving the prior written approval of the OTS Regional Director. Pursuant to the terms
of the Company's Credit Agreement with JPMorgan, entering into the Informal Agreements was considered an event of default.
however, JPMorgan and the Company entered.into an Amendment and Forbearance Agreement dated December 14, 2009
JPMorgan agreed to forbear from declaring the amounts owing under the Credit Agreement immediately due and payable as a
result of the Company and the Bank executing the Informal Agreements and any events of default resulting therefrom.
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The Informal Agreement between the Bank and the OTS provides, among other things, that the Bank's Board of
Directors will (i) adopt a written Capital Plan for the Bank for the OTS Regional Director's review and comment, and such plan
shall address how the Bank will achieve and maintain by June 30, 2010 a Tier 1 core capital ratio of 8% and a total risk-based
capital ratio of 12% (as of December 31,2009, the Bank's Tier I core capital and total risk-based capital ratios were 7.7% and
10.1 %, respectively); and (ii) approve a written Liquidity Contingency Plan to ensure the Bank maintains adequate short-term and
long-term liquidity, with such plan to specifically address deposit concentrations and plans to reduce or manage such
concentrations. The Informal Agreements remain effective until modified, suspended or terminated by the OTS Regional Director.
There can be no assurance that the terms and conditions of the Informal Agreement will be met or that the impact or effect of such
terms and conditions will not have a material adverse effect with respect to our financial condition, results of operations and
future prospects.
If as a result of its review or examination of the Bank, the OTS or the FDIC should determine that the financial condition,
capital resources, asset quality, liquidity, earnings ability, or other aspects of its operations have worsened or that it or its
management is violating or has violated the Informal Agreement or any law Or regulation, various additional remedies are available
to the OTS and the FDIC. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action
to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced,
to direct an increase in capital, to restrict our growth, to assess civil monetary penalties, to remove officers and directors, and
ultimately to terminate our deposit insurance, which would result in the seizure of the Bank by its regulators.
We may elect or be compelled to seek additional capital, but that capital may not be available or it may be dilutive.
We are required by the Informal Agreement with the OTS, to achieve and maintain a Tier 1 core capital ratio of 8% and a total risk-
based capital ratio of 12% by June 30, 2010. These capital level requirements are above our current capital levels and our current
earnings are not expected to be sufficient to allow us to achieve these required rates by the dates specified. Prospectively we will
look to further strengthen our capital position via multiple avenues, including focused expense reductions, optimizing our balance
sheet for loans and deposits and increasing net interest income and ultimately improving the overall earnings of the Company.
We are also considering certain strategic alternatives for the Company to accelerate our compliance with terms of the Informal
Agreement. We raised $81.7 million of capital, net of offering expenses, in the second half of 2009 and a number of financial
institutions have recently raised considerable amounts of capital as a result of deterioration in their results of operations and
financial condition arising from the negative impact of the mortgage loan market, non-agency mortgage-backed security market,
and deteriorating economic conditions, which may diminish our ability to raise additional capital.
Our ability to raise capital will depend on conditions in the capital markets, which lire outside our control, and on our
financial performance. Accordingly, we cannot be assured of our ability to raise capital when needed, on favorable terms or at all.
If we cannot raise additional capital when needed, we will be subject to increased regulatory supervision and the imposition of
restrictions on our growth and business. These outcomes could negatively impact our ability to operate or further expand our
operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses
and reductions in revenues that could have a material adverse effect on our financial condition and results of operations. In
addition, in order to raise additional capital, we may need to issue shares of our common stock that would dilute the book value of
our common stock and reduce our shareholders' percentage ownership interest to the extent they do not participate in future
offerings. Also, if we are unable to raise additional capital, we may be required to take alterative actions which may include the
sale of income-producing assets to meet our capital requirements, which could have an adverse impact on our operations and
ability to generate income.
As a regulated entity, the Bank must maintain certain required levels of regulatory capital that may limit our
operations and potential growth. The Bank is subject to various regulatory capital requirements administered by the OTS.Failure
to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Bank's and our Company's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance sheet commitments as
calculated under these regulations.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum
amounts and defined ratios of total and Tier 1 capital to risk-weighted assets and of Tier I capital to total assets. For the Bank,
Tier I capital consists of shareholder's equity excluding unrealized gains and losses on certain securities, less a portion of the
Bank's mortgage servicing asset that is for capital. For the Bank, total capital consists of Tier 1 capital plus the
allowance for credit losses less a deduction for low level recourse obligations. In the capital calculation for the Bank, the
allowance for credit losses is limited to 1.25% of risk-weighted assets and, accordingly, the Bank does not receive a capital benefit
for $14.1 million, which is disallowed in its capital calculation.
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At December31, 2009, the Bank was required to establish a deferred tax valuation allowance of $14.5 million. In
assessing the realizability of deferred tax assets, management considers whether it is more likely tban not that some portion or all
of the deferred tax assets will not be realized. Assessing the need for, or the sufficiency of, a valuation allowance requires
management to evaluate all available evidence, both negative and positive. Positive evideilce necessary to overcome the negative
evidence includes whether future taxable income in sufficient amounts and character within the carryback and carryforward
periods is available under the tax law. WIlen negative evidence (e.g., cumulative losses in recent years) exists, more positive
evidence than negative evidence will be necessary. If the positive evidence is not sufficient to exceed the negative evidence a
valuation allowance for deferred tax assets is established. The deferred tax valuation allowance reduced the Bank's
deferred tax asset of $27.9 million by 52% to $13.5 million. The establishment of this deferred tax valuation allowance had a
negative impact to the Bank's financial condition, results of operations and capital ratios. The incurrence of additional losses or
reduction of positive evidence related to the portion of the deferred tax asset that remains cOllld result in additioilal valuation
'allowance of the balance of the deferred tax balances.
Many factors may affect the Bank's capital and its ability to maintain required capital ratios. For example, loan grading
decisions, loan impairments, recognized loan losses, declines in the ratings of certain i1on-agency mortgage backed securities or
other factors leading to impairments of these securities, increased operating expenses and other factors, may combine to decrease
the Bank's capital and reqllire liS to contribute additioDlil capital to the Bank. Conversely, positive operatioilal results, such as the
sale of assets at value in excess of our amortized cost, expense savings programs and other factors may increase the Bank's
capital, thereby improving its regUlatory capital ratios under OTS guidelines.
As of December 31, 2009, the Bank was "well capitalized" under applicable capital requirements, including a total risk-
based capital ratio of 10.1%. See Item 1- "Business - Regulation and Supervision- United Western Bank's Capital
Requirements." If our total risk-based capital ratio drops below 10.00% at any quarter, we would be classified as "adequately
capitalized," and could be subject to increased regulatory supervision and requirements, which could have a material adverse
effect on our financial condition and results of operation, including resulting in an event of defsult under the Company's senior
credit agreement.
LIquidity Risks
Liqllidity -,.isk could impact Ollr ope1'lltions and ollr reslllts of ope1'lltioM. If the Bank 01' Company were llnable to
borrow fllnds thro"gh access to the marketplace, we IIIIIJ' not be able to meet the cash /low ,reJt"irements of ollr depositors,
creditors, and borrowers, or the operating cash needed to fllnd corporate expansion and other corporate activities. Liquidity is
the ability to meet cash flow needs ona timely basis at a reasonable cost Liquidity is essential to our business.
United Western Bank relies on processing and trust deposits, which, if one or more processing and trust relationship
was terminated, such termination could negatively impact our liquidity, profitability and results of operations. A significant
portion of the total deposits of our principal subsidiary, United Western Bank, are funds deposited as a result of unaffiliated
processing and trust relationships maintained by the Bank. At December 31, 2009, four Unaffiliated processing and trust
relationships accounted for $1.04 billion, or 51.6%, of our total deposits, which includes custodial, escrow deposits. Included in
these four unaffiliated processing and trust relationships is one processing and trust relationship with a balance of$934 million at
Decemher31, 2009, which accounts for 46.1% of the Bank's total deposits at December 31,2009. The Bank's future success in
retaining and attractinli: processing and trust depositors depends, in part, on its ability to offer competitive rates and services.
With the unprecedented events in the financial markets in the United States over the past two years, deposit concentrations are
an increasing risk to all depository institutions and to our company. Although our processing and trust deposit relationships are
evidenced by an agreement between the Bank and the institution, some of the agreements may be terminated by the institution at
any time, upon prior notice, for any reason. Further, an institution may elect not to renew the agreement or to terminate the
deposit relationship for various reasons, including, but not limited to, if there is a serious impairment to the Bank's fmlincial
condition or if the Bank fails to be well capitalized, adequately capitalized, or other covenants, including regulatory directives or
agreements. If the Bank loses one or more of these processing and trust relationships, our IiqlJidity, and results of
operations may be significantly and adversely affected.
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Pursuant to an asset purchase agreement dated April 7. 2009, Equity Trust Company and Sterling Administrative
Services, LLC ("the Buyers") purchased from us the assets of UW Trust associated with its self-directed individual retirement
account and qualified employee henefit plan administration business. The Buyers, and their affiliate, Equity Administrative
Services, Inc., have agreed to maintain all of their custodial deposits with the Bank for a three-year period. These deposits are
included in the amounts set forth in the paragraph above. Notwithstanding the terms of the asset purchase agreement, if the
Buyers transfer these deposits to another depository institution, our liquidity, profitability, and results of operations may he
significantly and adversely affected.
Effective January 15,2010, the Company amended its credit agreement with its senior credit facility provider. The terms
of the amendment provide, among other things: (i) for the extension of the maturity date from December 31,2009 to June 30, 2010
(the note had a balance of$20 million at December 31,2009); (ii) that the Company make a principal reduction payment on the note
of $2.5 million upon execution of the amendment, which payment the Company has made, and another principal reduction
payment on the note of $1.25 million on or before March 31,2010. Additionally. the lender agrees to continue to forbear from
declaring all outstanding amounts on the note to be immediately due and payable as a result of the Company and, United Western
Bank each executing Informal Agreements with the OTS. The Company and one of its nonbank subsidiaries pledged certain non-
agency mortgage-backed securities as additional collateral to the lender. Unless we further amend, or obtain a waiver under the
senior credit facility, we will need to receive the written non-objection from the OTS to make the principal payment due at maturity.
The Company intends to renew and extend the maturity of this debt, which will require the non-Objection from the OTS and
approval from its senior credit facility provider; however, there can be no assurance that we will be successful in securing the
required non-objection and approval.
In the event we fail to make such payments, or to comply with other restrictive debt covenants under our senior credit
facility, we may not be able to obtain the necessary amendments or waivers, and our lender could accelerate the payment of all
outstanding amounts due under that arrangement. In addition to the risk of non-payment described above, our ability to meet the
nonperforming assets plus real estate owned ratio, or NP A Plus REO Ratio, contained in our senior credit facility and otherwise
comply with our covenants may be affected by various events, including those that may be beyond our control. In addition to the
financial covenants pertaining to the Bank maintaining its categorization as "well capitalized" as described in the OTS regulations,
our financial covenants require that the Bank, at all times, maintain an NPA Plus REO Ratio of not greater than 6.50%, which the
Bank complied with at December 31, 2009 (as the ratio was 5.73%). The NPA Plus REO Ratio means the ratio of the sum of
nonperforming assets (less nonperforming assets guaranteed as to principal repayment by the U.S. government or one of its
agencies) plus real estate owned, to the sum of total loans and repossessed assets plus real estate owned. Prospectively, we may
not be able to continue to meet these and other ratios, tests and covenants. If we were to breach any of these covenants, ratios,
tests or restrictions, as applicable, in the future; it could result in an eyent of default, which would allow our lender to declare all
amounts outstanding to be immediately due and payable. If the lender accelerates the payment of our indebtedness, we may not
be able to repay in fun the amounts then outstanding. Further, as a result of any breach and during any cure period or
negotiations to resolve a breach or expected breach, our lenders may refuse to make further loans to us, which could affect our
liquidity and results of operations. Even if we are successful in waivers or entering into any such amendments, we
could incur substantial costs in doing so, our borrowing costs could IDcrease, and we may be subject to mOre restrictive
covenants than the covenants under our existing facility. Any of the foregoing events could have a material adverse impact on
our business and results of operations, and there can be no aSSurance that we would be able to obtain the necessary waivers or
amendments on commercially reasonable terms, or at all.
United Western Bank relies on wholesale funding sources for secondary and contingent liquidity sources. The Bank
utilizes borrowings from the Federal Home Loan Bank, or FHLBank, system, brokered certificates of deposits and repurchase
agreements for secondary and contingent sources of liquidity. The Bank also has capacity to borrow from the Federal Reserve
Discount Window. Also, from time to time, the Bank utilizes these sources to capitalize on market opportunities to fund
investment and loan initiatives. To the extent such wholesale sources depend upon collateralized borrowings, declines in asset
quality or the fair value ofthe'underlying instruments could reduce our wholesale borrowing capacity. If the Bank were unable to
obtain or maintain our access to funding or if adequate funding is not available to accommodate future growth at acceptable
interest rates, it would have to find alternative sources of liquidity, which, if available, would probably be at a higher cost and on
terms that do not match the structure of our liabilities as well as the existing wholesale funding sources. In addition, our Company
relies on wholesale bank funding for parent company funds. If such funds were not available from the banking sector, securing
alternative funding could cause disruption to our business. Factors that could detrimentally impact our access to liquidity sources
include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are
concentrated or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific
to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial
services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.
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At December 31, 2009, we had outstanding indebtedness to FHLBank Topeka in the amount of $180 million. FHLBank
Topeka currently limits our ability to pledge non-agency mortgage-backed securities as collateral against our borrowings from
them to securities rated AA by at least one NRSRO. If the rating agencies were to downgrade any of the eligible securities that we
have pledged to FHLBank Topeka to an unacceptable rating, our borrowing capacity would be reduced by $53.2 million as of
December 31, 2009. If FHLBank Topeka reduced our borrowing capacity, and we were not able to replace the financing on similar
terms, our liquidity could be materially and adversely affected It may be difficult to secure replacement financing in the current
credit markets.
We are significantly dependent upon brokered deposits as a source of liquidity, and are cu"ently under significant
restrictions in our ability to use them in the future. At December 31, 2009, we had outstauding brokered deposit balances in the
amount of $575.6 million. Our Informal Agreement with the OTS prohibits us from increasing brokered deposits. Subsequent to
year end, the OTS provided additional supervisory limitations on the Bank. These limitations restrict us from rolling over,
renewing or entering into any new brokered deposits without the prior non-objection of the OTS. Based on factors such as our
financial performance, the capital markets generally, and the increased regulatory supervision to which we are subject, we can
offer no assurance that we will be successful in obtaining these alternative sources of liquidity in a timely manner, if required. At
December 31, 2009, the Bank had cash on hand of$586 million and since year end this has grown to over $1 billion, and thus the
withdrawal of these balances will not have a material adverse impact on the Bank. If the OTS or FDIC were to impose further
limitations on brokered deposits or classify otber deposits as brokered, this could materially impact our liquidity.
Our ability to service our debt and pay dividends is subject to our ability to receive dividends from Our subsidiaries.
We are a separate legal entity from our subsidiaries and do not have significant operations of our own. We currently depend on
our cash, mortgage-backed securities, credit facilities and liquidity as well as dividends from our subsidiaries to pay our operating
expenses and service our debt. There is no assurance that our subsidiaries will continue to have tbe capacity to pay us the
necessary dividends to satisfy our obligations. In particular, the availability of dividends from the Bank is limited by various
statutes and regulations. Currently, our Informal Agreement with the OTS prohibits the payment of dividends from the Bank to
the Company. Depending upon the financial condition of the Bank and other factors, it is possible that the OTS could assert that
the payment of dividends Of other payments by the Bank are an unsafe or unsound practice. There can be no assurance of
whether or when we will be able to cause the Bank to pay a dividend to the Company in the future.
If the Bank or our other subsidiaries continue to be unable to pay dividends sufficient to satisfy our obligations, or if
we are. unable to access the marketplace to refinance our outstanding senior debt facility we may not be able to service our debt.
pay our obligations as they become due or pay dividends on our common stock.
Risks Associated with Non-Agency Mortgage Backed Securities
Continued deterioration in the underlying performance of our investment securities backed by mortgage loans
could create losses in our investment portfolio. Although we sold mortgage-backed securities on June 30, 2009 that represented
100% of our exposure to mortgage-backed securities collateralized by option-adjustable-rate mortgage loans, a majority of the
Bank's investment portfolio is comprised of securities where mortgages are the underlying collateral. These securities include
agency-guaranteed mortgage-backed securities and non-agency mortgage-backed securities and collateralized mortgage
obligations. With the national downturn in residential real estate markets and the rising mortgage delinquency and foreclosure
rates, investors are increasingly concerned about these types of securities, which have negatively impacted the prices of such
securities in the marketplace.
Continued negative trends in the loans underlying the mortgage-backed securities, as well as negative trends in horne
prices in tbe markets in which the collateral for these loans are located, negative trends in unemployment, and other
macroeconomic factors, could all lead to additional material other-than-temporary impairment charges in the future.
The determination of other-than-temporary impairment is a significant estimate and is susceptible to change
prospectively. If credit losses on those loans were to exceed the subordinated tranches designed to credit-enhance our securities,
we would not receive the full stated interest due on the securities or our full principal balance, or both. Our Company and the
Bank own both senior and subordinated tranches of these securities. If we were to conclude there were unrealized losses which
were otheNhan-temporary - which we evaluate. by among other factors, considering estimates of recoverability, as well as the
duration and severity of the unrealized loss --c- we would be required under GAAP to reduce the carrying amount of the securities
to fair value and record a corresponding charge to earnings for the portion determined to be due solely to credit, and reduce the
remainder of the securities to fair value via a corresponding charge to other comprehensive income. The portion of the charge due
to credit losses would also reduce our regulatory capital and negatively impact the Bank's capital ratios. These negative impacts
could significantly impair the Bank's ability to borrow funds under credit arrangements, as well as negatively impact our material
processing and trust depository arrangements and relationships. In addition, if the Bank determined it was more likely than not
that it would sell a security or that it was more likely than not that it would be required to sell a security, such impainnents would
be realized through earnings as other-than-temporary impairments.
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Temporary impairments on available for sale securities and the portion of impairments on held to maturity securities in
which we have identified as other-than-temporary impairment that is not directly related to credit factors also reduce our book
value per share as the changes in the value reduce shareholders' equity. Although OTS regulations do not prescribe capital ratio
levels for the Company per se, additional impairments could reduce capital levels further and below levels our management deems
prudent.
Many of the loans underlying the non-agency mortgage-backed securities we own have one or more characteristics
increasing the risk of default by the borrowers. These characteristics include, among others, declining real estate values that have
reduced the prices of many one-to-four family residences below the amount of the outstanding mortgage debt, limited
underwriting documentation at mortgage origination which may have permitted borrowers to become mortgagors of obligations
beyond their economic means, declining in the United States, and other factors.
Declines in the credit and residential housing markets could result in further losses on our mortgage-backed
securities. Credit markets in many sectors have experienced dramatic reductions in liquidity and increases in required returns by
investors in credit-sensitive assets. These conditions began in 2007 in the SUb-prime mortgage market, but expanded in 2008 to
include virtually all non-agency mortgage-backed securities and many other asset-backed markets. At December 31, 2009,
approximately 13.7% of our assets were mortgage-backed securities and approximately 89.9% of those securities were non-agency
securities. Recent transactions by distressed sellers, and expectations of further distressed sales, have exacerbated market
discounts for mortgage-backed securities and generally removed the majority of typical participants from transactions in non-
agency securities. As a result, it is difficult to determine fair values for those securities and would likely be difficult to sell
securities in the current market at all. We estimate the fair value of the non-agency securities we own was below amortized cost
after giving effect to other-than-temporary impairment charges for the year ended December 31, 2009, by approximatel;
$65.4 million, or 21 %, at December 31, 2009. Though the Company does not intend to sell and it is not more likely than not that the
Company would be required to sell the securities if it became necessary for uS to sell non-agency securities, any sales would
almost certainly be at a significant discount to par value which would have a negative effect on our operating results and capital
position. Due to current market conditions, we may be unable to sell our non-agency mortgage-backed securities when or if
required to meet capital demands.
If any additional of the Bank's subordinate-tranche, non-agency, mortgage-backed securities were to be
downgraded below investment grade by one or more of the nationally recognized securities rating organizations, or NRSROs,
w/Jich rate the securities, we could be required to maintain additional capital. We hold a number of subordinate-tranche, non-
agency, mortgage-backed securities which were rated AAA by one or more NRSROs when the Bank acquired them. If any of
these securities were to be downgraded two or more grades below investment grade by anyone NRSRO, as described below, we
will be required to maintain additional risk-based capital in support of such securities if the Bank elects to continue to hold such
securities. The additional amount of risk-based capital required may be as great as the outstanding principal amount of the
security. If this were to occur, and the Bank did not have enough risk-based capital to meet its required risk-based capital ratios,
the Bank may have to raise additional capital or sell assets in order to maintain its required risk-based capital ratios. If additional
capital was not available to the Bank when needed, the Bank would have to consider other alternatives for downgraded
subordinate-tranche securities or implement other capital planning strategies to maintain its required capital ratios. These
alternatives or other strategies could negatively affect our results of operations, cash flows and financial position. With the
distress in the United States mortgage market ensuing since Spring 2008, many of our subordinate-tranche, non-agency,
mortgage-backed securities, formerly rated investment grade, have been downgraded to two or more grades below investment
grade by one or more NRSROs.
As of December 31, 2009, we held subordinate-tranche, non-agency, mortgage-backed securities with an amortized cost
of $116.9 million, of which $42.8 million in amortized cost to us were rated investment grade or one grade below investment grade.
With regard to. the $42.8 million in amortized cost of subordinate-tranche, non-agency, mortgage-backed securities, we were
required to maintain regulatory risk-based capital of$3.1 million to hold such securities at December 31, 2009. The remainder of our
subordinate-tranche, non-agency, mortgage-backed securities, $74.1 million in amortized cost, were rated two or more grades
below investment grade at December 31, 2009, and the Bank was required to maintain $65.8 million of regulatory risk-based capital
in order to hold such securities and maintain a total risk-based capital ratio of at least 10%.
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Subsequent to December 31, 2009; approximately $1.4 million of the $42.8 million of subordinate-tranche, non-agency
mortgage-backed securities were downgraded to two or more grades below investment grade by at least one NRSRO. Assuming
no other changes prior to Decemb.er 31,2009, this downgrade would have required the Bank to allocate an estimated $720,000 of
additional capital to these securities in order to maintain a total risk-based capital ratio of 10% at December 31, 2009, .
We are unable to predict with any degree of accuracy when or if any of our remaining subordinate-tranche, non-
agency, mortgage-backed securities with an amortized cost of $42.8 million may be downgraded to two or more grades below
investment grade by any NRSRO. Any additional downgrades by the NRSROs to two or more grades below investment grade
could cause us to fall below "well capitalized" status under applicable regulations, and have other material adverse effect on our
financial condition.
Risks Related to Lending
Our allowance for credit losses may be insufficient. We maintain an allowance for credit losses, which is a reserve
established through a provision for credit losses charged to expense, that represents the Company's best estimate of probable
inherent losses within the existing portfolio ofloans. The allowance, in the judgment of our Company, is necessary to reserve for
estimated credit losses and risks inherent in our loan portfolio. The level of the allowance reflects the Company's continuing
evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic,
political and regulatory conditions and unidentified losses inherent in the c\lrrent loan portfolio, and has been increasing as the
economy worsens. The determination of the appropriate level of the allo:-vance for credit losses inherently involves a high degree
of subjectivity and requires the Company to make significant estimates of current credit risks and inherent and as-yet-unidentified
losses in the portfolio, all of which may undergo material changes. In addition, the OTS periodically reviews our allowance for
credit losses and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on
judgments different than those of the Company. In light ofthe current economic environment, significant additional provisions for
credit losses may be necessary to supplement the allowance for credit losses in the future. If charge-offs in future periods exceed
the allowance for credit losses, we will need additional provisions to increase the allowance for credit losses. We cannot assure
you that we will not increase the allowance for credit losses further or that the OTS will not require the Bank to increase its
allowance, either of which could adversely affect our Company. Any increases in the allowance for credit losses will result in a
decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of
operations and hinder our ability to make payments on the outstanding obligations of our Company.
A significant portion of our loan portfolio is secured by real estate, and a continued downturn in the economy
witllin the markets we serve could significantly hurt our business and prospects for growth. Real estate lending (including
commercial, construction, land development, and residential) remains a large portion of the Bank's loan portfolio. These
categories constituted $1.3 billion, or approximately 89% of the Bank's total loan portfolio as of December 31, 2009. Real estate
values are generally affected by changes in economic conditions, fluctuations in interest rates and the availability of loans to
potential purchasers, changes in tax and other laws and acts of nature. A downturn in the real estate markets in which the Bank
originates, purchases and services mortgage and other loans hurt our business because these loans are secured by real
estate. In addition, even though the Bank's real property collateral IS currently located throughout the United States, we believe
that the amount of such collateral in Colorado, which at December 31, 2009 was $798 million, or 55% of our total loan portfolio, is
likely to increase as a result of our community banking strategy. A continuation of the downturn in the real estate markets where
the Bank has loans could have a material adverse effect on our business, financial condition and results of operations.
Current market conditions include an over-supply of land, lots, and finished homes in many markets including those
where we do business. At December 31, 2009, approximately 11.0% of our assets were single-family mortgage loans. We had
approximately $3.9 million of nonperforming, single-family mortgage loans in our held for investment portfolio and $9.8 million of
nonperforming single-family mortgage loans in our held for sale portfolio at December 31,2009. !fhousing markets in our market
areas continue to deteriorate, we may experience a further increase in loans, provisions for credit losses, charges
to reduce the carrying value of loans held for sale to the lower of cost or fair value, and charge-offs. While it is difficult to predict
how long these conditions will exist and which markets, products or other segments of our loan and securities portfolio might
ultimately be affected, these factors could adversely affect our ability to grow our earning assets or affect our results of
operations.
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The residential and commercial real estate sectors of the U.S. economy experienced an economic slowdown that has
continued in 2009. Specifically, the values of residential and commercial real estate located in our market areas have declined, and
these declines may continue in the future. If the loans that are collateralized by real estate become troubled during a time when
market conditions are declining or have declined, then we may not be able to realize the full value of the collateral that we
anticipated at the time of originating the loan, which could require us to increase our provision for credit losses and adversely
affect our financial condition and results of operations.
We are sabJect to risk related to our concentration of construction and land development and commercial real
estate loans. As of December 31, 2009, we had $251 million of construction loans and $92 million ofland development loans, of
which $295 million, or 86% of the aggregate of such loans, are for projects located in Colorado. Construction loans are subject to
risks during the construction phase that are not present in standard residential real estate and commercial real estate loans. These
risks include:
the viability of the contractor;
the value of the project being subject to successful completion;
the contractor's ability to complete the project, to meet deadlines and time schedules and to stay within cost
estimates; and
concentrations of such loans with a single contractor and its affiliates.
Real estate construction loans may involve the disbursement of substantial funds with repayment dependent, in part,
on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan and also present risks of
default in the event of declines in property values or volatility in the real estate market during the construction phase. Our
practice, in the majority of instances, is to secure the personal guaranty of individuals in support of our real estate construction
loans which provides us with an additional source of repayment. At December 31,2009, we had ten nonperforming construction
and development loans that totaled $21.7 million and another $11.7 million of assets that have been foreclosed. If one or more of
our larger borrowers were to default on their construction and development loans, and we did not have alternative sources of
repayment through personal guarantees or other sources, or if any of the aforementioned risks were to occur, we could incur
significant losses.
At December 31, 2009, we had $519.6 million of commercial real estate loans. Bank regulatory authorities have issued
guidance regarding high concentrations of commercial real estate loans within bank loan portfolios to remind banks that their risk
the Company practices and capital levels should be co.mmensurate with the level and nature of their commercial real estate
concentration risk. Banks with higher levels of commercial real estate loans are expected to implement improved underwriting,
internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for credit losses and
capital levels as a result of commercial real estate lending growth and exposures. If there is deierioration in our commercial real
estate portfolio or if the OTS concludes that we have not implemented appropriate risk management policies and practices, it
could adversely affect our business and result in a requirement of increased capital levels, and such capital may not be available
at that time.
Tile mortgage loans tllat tl,e Bank 1I0ids are subject to risks of delinquency, foreclosure and loss, wllicll could result
in losses to us. The residential and commercial mortgage loans held in the Bank's loan portfolio are secured by residential and
commercial properties and are subject to risks of delinquency, foreclosure and loss of principal and interest. The ability o{a
borrower to repay a loan secured by residential property typically is dependent primarily upon the income or assets of the
borrower. In addition,other factors that affect the risk of our mortgage loan portfolio include:
property location and condition;
competition and demand for comparable properties;
changes in zoning laws for the property or its surrounding area;
environmental contamination at the property;
the occurrence of any uninsured casualty. at the property;
changes in national, regional or local economic conditions;
declines in regional or local real estate values;
increases in interest rates andlor real estate tax rates;
changes in governmental rules, regulations and fiscal policies, including environmental legislation and tax laws;
and
other events such as acts of God, natural disasters, war, terrorism, social unrest and civil disturbances.
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In the event of the bankruptcy of a mQrtgage loan borrower, the mortgage loan to such borrower will be deemed to be
secured only to the extent of the value of the underlying collateral at the time of bankruptcy, as determined by the bankruptcy
court. The lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-
possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can be an expensive and
lengthy process that can have a substantial negative effect on our originally anticipated return on the foreclosed mortgage loan.
Prospectively, it is possible there will be changes in bankruptcy laws, as well as other rules and regulations that impact delinquent
mortgage loan borrowers that could negatively impact the total recovery we realize on mortgage loans.
rhe Bank has invested in loan portfoliOS, pooled securities and mortgage-backed obligations, which may lead to
volatility in cash flow and market risk. The Bank's asset portfolio contains large portfolios of single-family residential loans
acquired through bulk purchases and purchased SBA loans and pools. Our investment portfolio largely consists of mortgage-
backed securities primarily secured by pools of mortgages on single-family residences. When the Bank acquires such mortgage-
backed securities and loans, we anticipate that the underlying notes will prepay at a projected rate, thereby generating an
expected yield. Prepayment rates generally increase as interest rates fall and decrease when interest rates rise, but changes in
prepayment rates are difficult to predict. Some of the Bank's mortgage-backed securities and many of our bulk single-family loan
purchases and purchased SBA loans and pools were acquired at a premium purchase price. In accordance with applicable
accounting rules, we will write-off such premiums when necessary due to loan prepayments with respect to our held for sale loan
portfolio and amortize such premiums over the expected lives of our mortgage-backed securities and loans held for investment. If
the underlying assets that the Bank acquired or that secure our mortgage-backed securities prepays more rapidly than anticipated,
we would have to write-off or amortize the premium on an accelerated basis, which would adversely affect our profitability.
We must effectively manage our credit risk. There are risks inherent in making any loan, including risks inherent in
dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and
risks resulting from changes in economic and industry conditions. The Bank attempts to minimize its credit risk with prudent loan
application approval procedures, including an analysis of the credit risk, a valuation of the underlying collateral, monitoring of
loan concentration within specific industries and geographic 10catiolls and periodic independent reviews of outstanding loans by
our loan review and audit departments. Nevertheless, we are exposed to significant credit risks, including possible errors in the
Bank's credit analysis, the uncertainty of the borrower's ability to repay the loans, the uncertainty of future economic conditions
and the possibility of loan defaults.
Other Risks Related to our Business
Our FDIC deposit insurance premiums have increased and could increase further, which could have a material
adverse impact on earnings in the future. The FDIC insures deposits at FDIC insured financial institutions, including the Bank.
The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund at a certain level. Recent
insured depository institution failures, as well as deterioration in banking and economic conditions, have significantly increased
the loss provisions of the FDIC, resulting in a decline in the designated reserve ratio of the FDIC to historical lows. The FDIC
expects a higher rate of insured depository institution failures in the next few years compared to recent years; thus, the reserve
ratio may continue to decline. In addition, the deposit insurance limit on FDIC deposit insurance coverage generally has increased
to $250,000 through December 31, 2013. These developments will cause the premiums assessed on us.by the FDIC to increase and
materially increase our noninterest expense.
Our FDIC insurance related costs were $4.9 million for the year ended December 31,2009 compared to $1.0 million and
$818,000 for the years ended December 31, 2008 and 2007, respectively. We are unable to predict the impact in future periods,
including whether and when additional special assessments will occur, in the event the economic crisis continues.
We also participate in the FDIC's Temporary Liquidity Guarantee Program, or TLGP, for noninterest-bearing transaction
deposit accounts. Banks that participate in the TLGP's noninterest-bearing transaction account guarantee will pay the FDIC an
annual assessment of 10 basis points on the amounts in such accounts above the amounts covered by FDIC deposit insurance.
To the extent that these TLGP assessments are insufficient to cover any loss. or expenses arising from the TLGP program, the
FDIC is authorized to impose an emergency special assessment on all FDIC-insured depository institutions. The FDIC has
authority to impose charges for the TLGP program upon depository institution holding companies as well .. These actions could
significantly increase ournoninterest expense for the foreseeable future.
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Our busln_ is subject to interest me risk. Our -Company's earnings and cash flows are largely dependent upon our
net interest income. Net interest income is the difference between interest income earned on interest,eaming assets such as loans
and Securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are
highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various
governmental and regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System. Changes in
nionetary policy, including changes in interest rates, could influence not only the interest we reCeive on loans and securities and
the amount of interest we pay on deposits and borrowings, but such changes could also affect:
our Company's ability to originate loans and obtain deposits;
the fair value of our Company's financial assets and liabilities;
the average duration of our Company's mortgage-backed securities portfolio; and
other mortgage and servicing assets
If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates (CCeived on
loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Our earnings could also
be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on
deposits and other borrowings. Although our mansgement believes it has implemented effective asset and liability management
strategies to reduce the potential effects of changes in interest rates on our Company's results of operations, any substantial,
unexpected, prolonged change in market interest rates could have a material adverse effect on our Company's financial condition
and results of operations.
Continued declines -in interest rIItes would likely h"rt o"r ellrnings.. The decline in market interest rates that occurred
in 2008 and in particular in the fourth quarter of 2008 that continued into 2009 negatively impacted our net interest income. While
we believe that the continued implementation of our community bank business plan,and its expected change in asset and liability
mix, will partially mitigate the impact of lower market rates, any additional declines in interest rates are expected to have a negative
impact on net interest income, net interest spread, net interest margin, and overall results of operations.
As II slIvlngs blink, PIlrSUllnt to the Home Owners' LOIln Act, or HOLA, the Blink is req"aed to mllintllin II certllin
percentllge of its totlll assets In 10ilM lind investments, which limits o"r IIsset mix lind could signifWllntly
restrict o"r IIbiUty to sell certllin IIssets to obtllin Oq"llIity. A savings bank or thrift differs from a commercial bank in that it is
required to maintain at least 65% of its total assets in HOLA-qualifYing loans and investments, such as loans for the purchase,
refinance, construction, improvement, or repair of residential real estate, home equity loans, educational loans and small business
loans. To maintain our thrift charter we have to pass the Qualified Thrift Lender test, or QTL test, in 9 out of 12 oftbe immediately
preceding months. The QTL test limits the extent to which we can grow our commercial loan portfolio. However, a loan-that does
not exceed $2 million (including a group of loans to one borrower) and is for commercial, corporate, business, or agricultural
purposes is not so limited. We may be limited in our ability to change our asset mix and increase the yield on our earning assets
by growing our commercial loan portfolio. At December 31, 2009, the Balik complied with the QTL test
In addition, if we continue to grow our commercial loan portfolio and our single-family loan portfolio declines, it is_
possible that in order to maintain our QTL status; we could be forced to buy mortgage-backed securities or other HOLA-
qualifYing assets at times when the terms might not be attractive. Alternatively, we could find it necessary to pursue different
structures, including converting the Bank'g thrift charter to a commercial bank charter.
Our q"lIrterly results ""'Y jl"ct""te. Our fioancial results are subject to significant quarterly f1uctwitions as a result of,
among other things, our loan production, opening of new branch locations, development of new products and services, premium
-amortization caused by prepayments of certain assets, such as our single-family mortgage loans, guaranteed SBA loans and
pooled securities and cbanges in interest rates. Our operating results will fluctuate significantly in the future as a result of a
variety of factors, some of which are outside of our control, including general_ economic conditions, economic conditions in the
financial industry, the effects of governmental regulations and regulatory changes, capital expenditures and other costs relating
to the expansion of operations, the introduction of new services by us or our competitors and the mix of services sold. In
response to a changing competitive environment, we may elect from time-to-time to make certain pricing, service, or marketing
decisions or enter into strategic alliances or make investments that could have a material adverse effect on our business, results of
operations, finsncia:1 condition and cash flow. Accordingly, our results of operations for- any particular quarter are not necessarily
indicative of the results that may be achieved for any succeeding quarter or for the full fiscal year.
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If we sell mortgage loans or mortgage servicing rights and the underlying loan defaults. we may be liable to tire
purchaser for unpaid principal and interest on the loan. In the ordinary course of selling mortgage loans or mortgage servicing
rights and in accordance with industry standards, we make certain representations and warranties to purchasers. If a loan defaults
and there has been a breach of representations or warranties and we have no recourse against a third party, we may become liable
for the unpaid principal and interest on the defaulted loan. In such a case, we may be required to repurchase the mortgage loan
and bear any subsequent loss on the loan. When we purchased mortgage servicing rights or mortgage loans, we also may have
been exposed to liability to the extent that an originator or other seller of the servicing rights is unable to honor its representations
and warranties to us. Our Company has established a reserve for repurchases that may be required in connection with loans we
originated and sold in connection with the sale of our production platform in 2003.
Curtailment of government guaranteed loan programs could affect our SBA business. The Bank's small business'
department relies on originating, purchasing, pooling and selling government guaranteed loans, in particular those guaranteed by
the SBA. From time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee
loans for a period oftime. In addition, these agencies may c h a ~ g e their rules for loans or legislation may discontinue or change
the programs. If changes occur, the volumes of loans that quahfy for government guarantees could decline, which could in tum
reduce the profitability ofthe Bank's small business department.
We are exposed to risk of environmental liabilities. If we foreclose and take title to real estate, we could be subject to
environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for
property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental
contamination, or we may be required to investigate or clean up hazardous or toxic substances. In addition, if we are the owner or
former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from the property.
Failure in our automated systems and controls could subject lis to increased operating or otheiliabilities"We
depend heavily upon our automated systems and controls for our business and operations. These systems and controls support
the evaluation, acquisition, monitoring, collection and administration of our loan and servicing portfolios, depository, general
accounting and other management functions. The failure of the automated systems, including a failure of data integrity or
accuracy, could have a material adverse effect on our business and financial condition.
In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure
utilized by us against damage from physical break-ins, security breaches and other disruptive problems caused by the Internet or
other users. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted
through our computer systems and network infrastructure, which may result in significant liability to us and deter potential
customers. Although we, with the help of third-party service providers, intend to continue to implement security technology and
establish operational procedures to prevent such damage, there can be no assurance that these security measures will be
successful. A failure of such security measures could have an adverse effect on our financial condition and results of operations.
Breaches of our computer and network security systems muy result in customer information being compromised
and/or identity theft. We maintain personal and financial information about our current, past and potential customers on our
computer systems and network infrastructure, such as customer names, addresses, social security numbers, tax identification
numbers, bank account numbers, information on loan applications and other sensitive personal and financial information. In
addition, our customers may use the Internet to connect to the Bank's website to retrieve information about their accounts and to
conduct online transactions, such as online bill payments. If the security of our encrypted computer systems and network
infrastructure responsible for storing our customers' personal and financial data and information or the security of our online
banking Internet services is breached, then customer information could be stolen and misused. Such misuse could include the
loss of privacy resulting from the disclosure of the information to third parties, credit fraud or other consequences of identity theft
to the customer.
While we believe that our current encrypted systems meet or exceed all commercial standards for network security, new
criminal schemes or capabilities could compromise or breach our systems and network infrastructure. If our security measures fail
to protect our customer's information, our existing and future customer base may be adversely affected, we may become subject
to customer claims or lawsuits, our public image may be diminished, and our results of operations and financial condition could be
adversely affected.
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We may be adversely affected by changes in laws and regulations and the regulatory environmenL In June 2009, the
U.S. Department of the Treasury, or Treasury, issued a "white paper" containing several federal legislative proposals that, if
enacted into law, would make substantial changes to the present U.S. financial services regulatory framework. One legislative
proposal would eliminate the OTS and the federal savings bank or "thrift" charter, subject to "reasonable transition
arrangements." One ofthese transition arrangements might involve conversion of the federal thrift charter into a natjonal bank
charter, which would result in the Office of the Comptroller of the Currency (or successor thereto) having principal regulatory and
supervisory authority over former thrift institutions. The Bank conducts its business pursuant to a federal thrift charter.
In response to the U.S. Treasury Department's proposal, various bills were introduced by the Financial Services
Committee of the U.S. House of Representatives, which were ultimately consolidated into the Wall Street Reform and Consumer
Protection Act of 2009, passed by the U.S. House of Representatives in December 2009. Among other things, this legislation
establishes a new Consumer Financial Protection Agency to regulate products like home mortgages, car loans and credit cards,
and consolidates the OTS into the Office of the Comptroller of the Currency. As with the U.S. Treasury Department's proposal,
under the House legislation savings institution holding companies would be subject to supervision and regulation by the Federal
Reserve Board.
In November 2009, Senate Banking Chairman Christopher Dodd introduced a financial regulatory reform bill entitled the
Restoring American Financial Stability Act of 2009 which further builds on the Treasury proposal. That legislation, if enacted,
would remove bank and bank holding company regulatory powers from the Board of Governors of the Federal Reserve System,
eliminate both the Office of Thrift Supervision and the Office of the Comptroller of the Currency, and establish a single bank and
bank holding company regulator known as the Financial Institutions Regulatory Administration. Under this proposal, savings and
loan holding companies that were regulated by the Office of Thrift Supervision would become subject to supervision and
regulation by this new regulator. The Senate bill would also establish an independent Consumer Financial Protection Agency,
under which consumer protection responsibilities currently handled by the bank and credit union regulators and the Federal
Trade Commission would be consolidated.
Although it is impossible to predict which of these proposals, if any, may be adopted by the full Congress and signed
into law, these pending proposals may significantly affect the Company and the Bank. If the reforms contained in the U.S.
Treasury Department or House Financial Service Committee proposals are fully enacted, the Company would become a bank
holding company subject to supervision by the Board of Governors of the Federal Reserve System as opposed to the Office of
Thrift Supervision, and we expect we would become subject to the Federal Reserve's regulations, including holding company
capital requirements, that the Company is not subject to as a savings and loan holding company. Holding company capital
requirements could reduce capital available for dividends and sbare repurchases. In addition, under the reforms contained in the
Senate proposal,. the Company would become subject to supervision and regulation by the Financial Institutions Regulatory
Administration, a riew federal regulatory agency. Compliance with new regulations and being supervised by one or more new
regulatory agencies could increase our expenses and affect the conduct of our business. In addition, the proposals could lead to
heightened restrictions being placed upon institutions and activities that increase systemic risk. Such restrictions would likely
relate to liquidity, capital, and leverage requirements.
Any change in the laws or regulations applicable to us, or in supervisory policies or examination procedures of banking
regulators, whether by the OTS, the FDIC, the Treasury, the FHLBank System, the United States Congress, the Texas Department
of Banking, or other federal or state regulators, could have a material adverse effect on our business, financial condition, results of
operations and cash flows. In addition, bank regulator;: auth':lrities have discretion i": the exercise of their supervisory
and enforcement powers. They may, among other thmgs, Impose restrictions on the operatton of a banking institution, the
classification of assets by such institution and such institution's allowance for credit losses, require changes in other significant
accounting estimates including the determination of the fair value of assets and other-than-temporary impairment. Additionally,
bank regulatory authorities have the authority to bring enforcement actions against banks and their holding companies for unsafe
or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation, any conditi.Jn imposed in
writing by the appropriate bank regulatory agency or any written agreement with the agency. Possible enforcement actions
against us could include the issuance of a cease-and-desist order that could be judicially enforced, the imposition of civil
monetary penalties, the issuance of directives to increase capital or enter into a strategic transaction, whether by merger or
otherwise, with a third party, the appointment of a conservator or receiver, the tennination of insurance of deposits, the issuance
of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or
restraining orders.
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Regulatory and law enfOrcement authorities also have wide discretion and extensive enforcement powers under various
consumer protection and civil rights laws, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing
Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Truth-in-Saving Act, the Federal Trade
Commission Act and Colorado's deceptive tmde practices act. These laws also permit private individual and class action lawsuits
and provide for the recovery of attorneys fees in certain instances.
We lire ,ubject to exllmllUlti"ns IIild clulllenges by tu IIlIIthorlties. We are subject to fedeml and state income tax
regulations. Income tax regulations are often complex and require interpretation. Changes in income tax regulations could
negatively impact our results of opemtions. In the normal course of business, we are subject to examinations and challenges from
federal and state tax authorities regarding the amount of taxes due in connection with investments we have made and the
businesses.in which we have engaged. Recently, federal and state taxing authorities have become increasingly aggressive in
challenging tax positions tsken by financial institutions. These tax positiQpll may relate to tax compliance, sales and use, gross
receipts, property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax
authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among
tax JUrisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on
our financial condition and results of opemtions.
Restriction on use of tu attributes fl'Dm tfIX IIIw "ownership chllnge." As of December 31, 2009, we had
approximately $80 million of net unrealized built in losses ("NUBIL "), which for tax purposes represent the amount by which the
adjusted tax basis of our assets exceeds their fair market value. Section 382 of the Internal Revenue Code imposes limitations on a
corporation's ability to use its NUBIL and other tax attributes, such as net operating loss and tax credit carryforwards, when it
undergoes a 50"At "ownership change" over a designated testing period (not to exceed three years). We regularly monitor
ownership changes.<as calculated for purposes of Section 382) based on available information and, as of December 31, 2009, our
analysis indicated that we were below the 50% ownership change threshold that would limit our ability to utilize our NUBIL and
other tax attributes. However, taking into account the common stock offerings in 2009, we expect we are close to the 50%
ownership change level. As a result, any future transaCtion or tmnsactions and the timing of such transaction or tmnsactions
could trigger an ownership change under Section 382. Such transactions may include, but are not limited to, additional
repurchases or issuances of common stock, or acquisitions or sales of shares of our stock by certain holders of our shares
including persons who have held, currently hold or may accumulate in the future 5% or more of our outstanding common stock
("5% Holders") for their own account.
If an ownership change were to occur for purposes of Section 382, we would be required to calculate an annual
limitation on the amount of our taxable income that may be offset by losses arising from the recognition of NUBIL or other tax
attributes which existed at the time of such ownership change. That limitation would apply to built in losses recognized during a
five-year period after the date of the ownership change. The annual limitation would be calculated based upon the fair market
value of our equity at the time of such ownership change, multiplied by a federal long-term tax exempt rate (currently 4.03%), and
the annual restriction could eliminate our ability to use a substantial portion of our NUBIL or other tax attributes to offset future
taxable income." "
UW Trust Compllny Is subject to regullltion liS II trust comJHIny lind could be the subject of third JHlrIJ! fictions. As a
Texas chartered t r u ~ t Company, UW Trust is subject to supervision, regulation and examination by the Texas Department of
Banking. UW Trust's activities are limited by applicable law generally to acting as a trustee, executor, administrator, guardian or
agent for the perfurmance of any lawful act, and to accumulate money when authorized under applicable law.
UW Trust has been in the past, and may be in the future, subject to claims by third parties regarding breach of contract,
breach of fiduciary duty, or similar claims alleging violation of duty or law. While we believe applicable law supports our view of
UW Trust's duties, or lack thereot in that regard, there can be no assurances that we will prevail in any litigation or other
proceeding challenging the matter.
Signlfrellnt Ieglll IIctlons could subject our ComJHIny to lIubstflntiflllloblllties. We are from time to time subject to
various legal claims related to our operations. These claims and legal actions, including potential supervisory actions by our
Company's regulators, could involve large monetary claims and significant defense costs. As a result, we may be exposed to
substsntial liabilities, which could adversely affect our results of operations and financial condition.
Risks Related to our Business Strategy
We 1IfIIY" be unllble to fully implement our community blinking business strlltegy. We are 48 montha into our
community bank transition, and in order to complete the execution of Ibis stmtegy we must, among other things:
attract sufficient commercial business and community bank deposits;
attract and maintain"business banking relationships with businesses in the markets in which we serve;
attract and retain experienced and successful commercial and community bankers;
identifY and pursue suitable opportunities for opening new branches in the Colorado Front Range and selected
mountain community markets;
maintain adequate regulatory capitsl and comply with applicable federal and state regulations; and
originate community bank loans and mainiain adequate asset quality.
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Failure to achieve these strategic goals could adversely affect our ability to fully implement our community banking
business strategies as well as our overall financial condition and results of operations.
We may not be able to effectively manage our proposed growth. Our business strategy contemplates, in part, an
increase in our franchise value by expanding into additional communities in the Colorado Front Range and selected mountain
communities through a branch network for the Bank. To the extent that we undertake additional branch openings, we are likely to
experience the effects of higher operating expenses relative to operating income from our expansion efforts. for a period of time.
We may acquire or lease other sites for future expansion. While we are committed to this strategy, our expansion could
significantly burden our infrastructure or we may be unable to manage this growth. In addition, we may enter new lines of
business or pursue other strategies intended to complement our community banking business plan implementation. To the extent
we undertake such actions, we may experience higher operating costs and these new activities may not be successful.
We may not be able to attract and retain key personnel Our business strategy requires us to attract and to retain
management experienced in community banking and financial services that live in the communities we serve. Our ability to retain
our existing executive officers, regional presidents, and community banking staff is important to the successful implementation of
our strategy. The unexpected loss of key personnel or the inability to recruit and retain qualified personnel in the future could
bave a material adverse effect on our business.
Adverse economic conditions in the Colorado Front Range and our mountain community markets could impair the
execution of our business strategy. The success of our business strategy depends primarily on the general economic conditions
in our markets because local economic conditions will materially affect commercial real estate, including construction and land
development, and residential loans originated, the ability of the borrowers to repay these loans and the value of the collateral
securing these loans.
Risks Relating to Ownership of Onr Common Stock
The trading volume of our stock ;s low. The low trading volume in our common shares on the NASDAQ Global Market
means that our shares may have less liquidity than other publicly traded companies. We cannot ensure that the volume of trading
in our common shares will increase in the future. Furthermore, to the extent shares are concentrated in a relatively small group of
holders, a seller could be subject to significant adverse price volatility and price fluctuation. At December 31,2009, based on
filings made by third parties with the Securities and Exchange Commission, we believe that eleven holders owned 47.3% of our
outstanding common stock. This includes shares held by our Chairman of the Board, Guy A. Gibson, who owns 1,335,305 shares,
or 4.55% of our outstanding common stock.
We may issue additional shares of common or prefe"ed stock, which may cause dilution and other risks. Our board
of directors may authorize the issuance of common or preferred stock in connection with future equity offerings,
acquisitions of securities or assets of other compames or to be used as compensation for our executive officers. Furthermore,
there are significant implementation risks associated with the and integration of another entity into our Company that
could adversely impact our financial condition and results of operations. Our board may also classifY or reclassity any unissued
preferred stock and set the preferences, rigbts and other terms of the classified or reclassified shares, including the issuance of
preferred stock with preference rights over the common stock with respect to dividends, liquidation, voting and other matters. In
any event, the issuance of additional shares of our common stock could be dilutive to shareholders who do not invest in future
offerings. Moreover, to the extent that we issue options, warrants or similar instruments to purchase Our common stock in the
future and those options, warrants or similar instruments are exercised or we issue restricted stock which subsequently vests, our
shareholders may experience future dilution.
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Table of Contents
The mtl1'ket price of ollr common stock mq jluetllGte signijiCGntly. The market price and liquidity of the market for
shares of our common stock may be significantly affected by numerous factors, including some that are beyond our control and
that may not be directly related to our operating performance. These factors include the following:
. changes in earnings estimates or recommendations by analysts who cover our common stock;
variations in our quarterly operating results or the quarterly financial results of companies .perceived to be
competitors or similar to us;
changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by
our shareholders or the incurrence of additional debt; and
changes in general economic and market conditions.
Item lB. Unresolved Staff Comments
None.
Item 1. Properties
We believe that all of our present facilities are adequate for our current needs and that additional space is available for
future expansion on acceptable.terms. The following table sets fortb certain information concerning the real estate that we own or
lease:
(1)
The Company gllarantees an addltional23,171 square feet of office space at the Denver location (700 17th Street, Denver CO
80202) pursuant to the sale and leaseback of the building, which closed on September 29, 2006. See Note 17 t ~ the
consolidated financial statements in this report.
Item 3. Legal Proceedings
GenerGL We are from time to time party to various litigation matters, in most cases involving ordinary and routine
claims incidental to our business. We accrue for contingent liabilities with respect to litigation matters in accordance with the
requirements of generally accepted accounting principles ("GAAP"), which generally requires the Company to acerue a loss for a
litigation matter involving a contingent liability if the loss is probable and the amount of the loss is reasonably estimable. In order
to determine whether the two conditions necessary for accrual are met, mansgement necessarily makes a number of judgments
and assumptions. Because the outcome of most litigation matters is inherently uncertain, the Company will generally only accrue
a loss for a pending litigation matter if, for example, the parties to the matter have entered into definitive settlement agreements or
a final judgment adverse to the Company has been entered.
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In many cases, these settlements or final judgments are not material to the consolidated financial position, results of
operations or cash flows of the Company. Nevertheless, an adverse decision in certain matters, as described below, may have a
material, adverse impact on our consolidated financial position, results of operations or cash flows.
United Western Bancorp, Inc. United Heritage Financial Group. Inc. and United Heritage Life Insurance Company
v. First Matrix Investment Services Corporation et a!. On October 27, 2006, a complaint was filed against the Company and First
Matrix, along with two former employees of First Matrix, Messrs. Curd and Snodgrass, in Idaho State District Court alleging
violations of state securities laws, the Idaho Consumer Protection Act and fraud arising from the sale of an approximately
$1.70 million mortgage backed bond from First Matrix to one of the plaintiffs. The case, which was subsequently removed to the
U.S. District Court in Idaho on December 12, 2006, is based on the plaintiffs' claims that First Matrix should have made certain
disclosures regarding the risk of the withdrawal of a USDA government guarantee of the bond, which withdrawal subsequently
occurred and the bond went into default. On September 30, 2009, the Court granted in part the Company's, First Matrix's and
Messrs. Curd's and Snodgrass' Motion for Summary Judgment. In granting partial summary judgment for the defendants, the
court agreed to dismiss (i) plaintiffs' Idaho Consumer Protection Act claim; (ii) the claims by United Heritage Financial Group
("UHF(l"), the parent of United Heritage Life Insurance Company ("UHI.JC') against the defendants since UHLIC sold all but a
$425,000 interest in the subject bond to UHFG, thereby reducing UHLIC's claim from $1.70 million to $425,000; in addition,
UHLIC's claim was further reduced to $212,500 since UHLIC and UHFG sold their entire interest in the bond to a third party for
fifty cents on the dollar and (iii) Messrs. Curd and Snodgrass from the matter. On December IS, 2009, the parties entered into a
settlement and release agreement to fully settle the litigation. Under the terms of the settlement and release agreement, First Matrix
agreed to pay $100,000 to the plaintiffs (of which 85% was covered by insurance) and the plaintiffs agreed to d i s m i ~ s the lawsuit
with prejudice.
United. Western Bancorp, Inc. and UW Trust Company. William R. and Carolyn Richoz, et al. v. United Western Trust
Company flkla Sterling Trust and United Western Bancorp. Inc. In October of 2009, plaintiffs filed an amended class action
complaint in the United States District Court for the Northern District of Illinois, Eastern Division, against United Western Trust
Company f/kla Sterling Trust and United Western Bancorp, Inc. The plaintiffs allege that they were damaged when they invested
proceeds from their self-directed individual retirement accounts with InvestForClosures and other related entities using UW Trust
Company as custodian for such investments. Plaintiffs claim UW Trust Company breached its fiduciary duties owed to plaintiffs
as custodian of individual retirement accounts set up through UW Trust Company by plaintiffs. Plaintiffs also allege that UW
Trust Company knew that these investment were part of a Ponzi scheme to defraud investors, that UW Trust Company's actions
violated the Texas Securities Act, Illinois securities laws and the Illinois Consumer Fraud Act and that UW Trust was unjustly
enriched in excess of $5 million, should pay compensatory damages of $5 million and exemplary damages.in the amount of
$20 million. On December 28,2009, the parties filed a stipUlation with the court voluntarily dismissing the action without prejudice.
United Western Bank. Ward En(erprises. LLC v. Daniel E. McCabe et al. including United Western Bank. In
February 2008, the plaintiff filed a complaint in Colorado District Court for the City and County of Denver seeking damages from
the holders of a processing and trust account at the Bank, the Bank, and a former employee of the Bank, for breach of fiduciary
duties due to the plaintiff and aiding and abetting the conversion of approximately $1.84 million of plaintiffs funds by the holder
of the processing and trust account maintained at the Bank. On December 28, 2009, the Court agreed to dismiss the action with
prejudice.
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Table of Contents
United Western Bank. Anita Hunter et. al. v. Citibank. N.A. et al. including Uniied Western Bank. The Bank received
this class action complaint in July of 2009 brought by seven named plaintiffs on behalf of a class of approximately 330 similarly
situated people residing throughout the United States, each of whom lost substantial sums. of money ("Exchange Funds")
entrusted to seven qualified intermediaries ("QIs") to facilitate their respective Internal Revenue Code Section I 031 Exchanges.
According to the complaint, the Qls were controlled by an individual named Edward Okun and certain other individuals who
would gain access to the Exchange Funds and convert the Exchange Funds for their own use for personal gain. The plaintiffs seek
class certification for all similarly situated plaintiffs who lost Exchange Funds when they placed such funds using the QIs. One of
the Qls maintained accounts at the Bank for the purpose of holding Exchange Funds. With respect to plaintiffs' claims against the
Bank,plaintiffs alleged, among other things, that the Bank knowingly aided and abetted breaches of fiduciary duties by Mr. Okun
by facilitating wire transfers of Exchange Funds from accounts at the QI at the Bank to accounts controlled by Mr. Okun and his
related entities at other financial institutions. On October 2, 2009, the Bank filed a Motion to Dismiss with the court requesting the
court to dismiss all plaintiffs' claims against the Bank since the Bank successfully initiated ihe QI's wire transfers, and therefore,
the Bank cannot be held liable under U.C.C. Article 4-A. On February 3, 2010, the court granted the Bank's Motion to Dismiss
agreeing with the Bank that the .Bank cannot be held liable under U.C.C. Article 4-A; and furthermore, that all common law claims
against the Bank are preempted by U.C.C Article 4-A. While the court dismissed the Bank from the action, it granted the plaintiffs
with leave to amend the complaint. On March 3, 2010, the plaintiffs filed a second amended complaint with the court against the
Bank and other defendants, making the following allegations specifically against the Bank: (i) aiding and abetting a breach of
fiduciary duty by means of non -electronic transfers; (ii) aiding and abetting fraud by means of non -electronic transfers; (iii) aiding
and abetting fraud; (iv) conversion and aiding and abetting conversion by means of non-electronic transfers; (v) conversion;
(vi) aiding and abetting a conversion; (vii) contractual interference; (viii) negligence and (ix) violations of U.C.C. Article 4-A.
While the Bank's liability, if any, to the plaintiffs claims in this case is uncertain at this time, the Company believes that the Bank
has meritorious defenses to the plaintiffs' claims.
United Western Bank. Highpoint Vista. LLC et 01. v. United Western Bank et 01. In July 2009, ihe plaintiffs, who are
borrowers and/or guarantors on a $20.5 million loan secured by real estate, filed a complaint in the Colorado District Court for the
City and County of Denver against the Bank and an officer of the Bank, seeking damages in excess of $1 o million dollars against
the Bank for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duties and negligent
misrepresentation. The plaintiffs allege that the Bank entered into an agreement with the borrowers whereby the Bank would issue
a letter of credit to a third party, extend the maturity date on the real estate loan and approve the recording of a second deed of
trust on the real estate securing Ihe Bank's loan and that the Bank failed to execute such letter of credit, extend the maturity date
and approve the recording of a second deed of trust on the real estate, thereby causing damages to plaintiffs. On September 15,
2009, the plaintiffs agreed to dismiss the Bank's loan officer from the matter. On January 4, 2010, the parties to the action agreed to
stipulate to dismissing the action without prejudice.
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Table of Contents
PARTn
Item 5. Market for Registrant's Common Equity. Related Stockholder Matters and Issuer Purchases of Eguity Securities
Common Stock Market Prices and Dividends
Our common stock, $0.0001 par value, is traded on the NASDAQ Global Market under the symbol "UWBK." The
following table sets forth the quarterly market price for our common stock and cash dividends paid per share of our common stock
for 2009 and 2008:
." "
December 31, 2009
,,' "
June 30, 2009
"
December 31, 2008
.'
June 30, 2008
"",
$
Market Price
High Low
Divideuds Paid
4.29 $
Hi.17
10.85
9.98 "
2.17 $
,; :t7i
4.44
, 4,4(1'
()i(jl
0.06
, (I,W
0.06

I).oi;
q;()
At March 11, 2010, there were 29,358,580 shares of the Company's common stock outstanding held by 149 holders of
record, which excludes beneficial owners who hold their shares through nominees or in "street" name. The closing price per share
of common stock on December 31, 2009, the last trading day oftke Company's fiscal year, was $2.76.
Dividends
Given current economic conditions the board of directors reduced the dividend to $.01 in the third quarter of 2009.
Given the continuation of the difficult economic conditions as well as our results of operations, the Company and the board of
directors have decided to suspend our quarterly cash dividends. Additionally, in accordance with the Informal Agreement
between the Company and the OTS, the Company is required to obtain the prior written non-objection of the OTS prior to the
declaration of a dividend or other capital distribution or redemption of any common stock. There can be no assurance as to future
dividends because they are dependent on the Company's future earnings, capital requirements and financial conditions. Further,
if the scheduled payments on our junior subordinated debentures and trust preferred securities have not been made the Company
would be prohibited from the payment of dividends. See Item 7. "Management's Discussion and Analysis of Financial Conditions
and Results of Operations - Liquidity and Capital" in this report and Notes 13 and 14 to the financial statements. The ability of
UW Trust, UWIS and United Western Bank to pay dividends to United Western Bancorp may be restricted due to certain
regulatory requirements. See Item 1. "Business - Regulation and Supervision" in this report.
- 37-
2327
Table of Contents
Issuer Purchases of Equity Securities
The following table provides information with respect to purchases made by the Company of the Company's common
stock during 2008 and 2007. There were no purchases made by the Company of the Company's common stock during 2009.
Total Number of Maximum Number
. Shares Purchased of Shares that may
Total Number of Average Price as part ofPubliely yet be purchased
Shares Purchased Paid per Share A.uounced PlaD uDder the Piau

.. ;.;Y:;':;:,,;r ";:2,4;;(S,i? ',;::;;;
lune I throughlune 30,2008 100,000 li79 100,000 26018'
.. """;' . '.' ;c;;:,:t:(' ,,\)1'<: "}/;;'H;;'; 7, :0:"
Total 113,900 S 14.09 113.900 265,018
Total Number of Maximum Number
. Shares Purchased of Shares that may
Total Number of Average PrIce as part ofPubUely yet be purchased
Shares Purchased Paid per SlIare AUDouuced Plan UDder the PIa.
,;'.':;.l";,' J.,:, AF;,"O' ',hZ, m .'"", .". "", ,.,:
August! through August 31, 2007' ,.",' '"':25.ooo"'""'''':l'i:S4:'''''' "':";""'25:000"'; '" .... ,.,
i..';rt;'.;!1i ;::;::i
December 1 through December 31, ;2007 35,200 20.23 35,200 ;J78,918
"1',, .,., ..: .., ...'.:.:..... :;.. :; .. iii: .:C.:'
In November 2006, the Company's Board of Directors authorized the repurchase ofup to five percent of the Company's
outstanding common stock. On August 2. 2007, the Company's Board of Directors authorized the repurchase of up to an
additional five percent of the outstanding shares of the Company's common stock. The repurchases of the Company's common
stock was made pursuant to those authorizations. Although there were 265.018 remaining available shares that were authorized for
repurchase, the Company did not repurchase any shares during 2009. As shown in the table above. the Company discontinued
the repurchase of its commOD shares by Iune 2008, and the Company has no further plans to repurchase additional shares of its
common stock, which would require the non-objection of the OTS. .
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Table of Contents
Performance Grapb
The performance graph below compares the cumulative total shareholder return on United Western Bancorp, Inc.
common stock with the cumulative total return on the equity securities of companies included in the SNL $l billion to $5 billion
Thrift Index and the Russell 2000 Index. The graph assumes an investment of $100 on December3l, 2004 and reinvestment of
dividends on the date of payment without commissions. The performance graph represents past performance and should not be
considered to be an indication of future performance.
Cunlllative Total Returns
on $100 InvestnImt IlItde Decenilerl1. 2004
-+-\Inial \'dIs1em Banaarp. me
-tl-SNL $18-$511 MIIlIIex
..... Ruml2000
2.10
..
115
j
i5()

]! 125
100
75
5()
25
D,
12131104 llJ31!ll5 1213tlOO 12131107 12131JOe
Index 1213112004 1213112005 12/3112006
'
SNL $1B-$5BThrift index
'$\<lOJlO ,$ , ',' '$
'100.00 " 99.12 'ii4.01 ,.
1213112007
,$ 161.S7
" 88.94

''iOO.OO ' ')Q4.5S' .' ....

-39-
2329
1213112008
'$ .. ?6.?9;
75.87

1213112009
$
63.69
, '1i}2.Sif
Table of Contents
Item 6. Selected Financial Data
SELECTED CONSOLlDA TED FINANCIAL AND OPERATING INFORMATION
The following selected consolidated financial data and operating infonnation of United Western Bancorp, Inc. and
subsidiaries should be read in conjunction with the consolidated financial statements and notes thereto and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations," each of which is included elsewhere
in this report.
Infonnation presented in this table is from continuing operations. This information excludes, for all periods presented,
the results associated with the assets ofUW Trust associated with custodial IRA and qualified employee benefit plan businesses,
which we sold on June 27, 2009, the results of Matrix Bancorp Trading, Inc., a former brokerage subsidiary, which we sold certain
assets and the operations of effective March 31, 2006, and ABS School Services, LLC, our fonner school services subsidiary,
which we sold to former executive officers of the Company on May 5, 2006. We concluded that substantial benefit could be
received by the Company by executing a sale of the UW Trust custodial IRA and qualified employee benefit plan businesses. The
dispositions of Matrix Bancorp Trading, Inc. and ABS School Services, LLC, were part of our strategy to divest certain non-core
operations of the Company. All three divestitures are reported as discontinued operations. The results from continuing
operations as reflected herein are not necessarily reflective of the financial results that might have occurred had. the dispositions
referred to above actually been completed on the indicated date, and are not indicative of any future results.
.
fnterest and dividend income
...... . .. ..... .... ..' ... .
Net interest income before provision
for credit losses

Net interest income after provision for
credit losses
N'onlntel'estincomei
Custodial, administrative and escrow
services
Lpan J ... '.'
Gain on sale of loans held for sale
..
(Loss) gain on sale of available for
sale investment securities

.;'..: '.. .. .'.
Portion oflossrecognized in other .
comprehensive income (before
taxes)
Nei
...... ....x.. ............... .
Gain on sale of investment in Matrix
Financial Solutions, Inc.
OilhiPllsaliiot'a$sets . .
Litigation settlements
bther
Total non interest (loss) income

(Loss) income from continuing
?perations btlfore income. taxes
l!:\C(Jl11etail . .
(Loss) income from continuing
operations


(Loss) income from continuing
operations per share - assuming
dilution (I)

......... ' .....
Weighted common shares -
assuming dilution
13,139,070 7,164,598 7,256,484 7,791,516 7,035,948
-40-
2330
Table of Contents

..... .. .... . .. .... .
Cuslo!iialescrowbaiailces


subs,idilli'ttf!1sis
Unite.d W
........ ..' .' .':
Total shareholders' equity(3)
9pe ..
A verageequity to average total assets(4)
Yie,IIiPtlllSseis . ....
Cosi df liabilities'
.....>..i, .......
Return from continuing operations on average
assets(4 )
ayerage
: 'equjty(4).,..: . ....... '. . .
Operating efficiency ratio(4) and (6)

Including interest on deposits

Total Loan Performance Ratios and Data
....................
N loans/totalloans(8)
.. '
Net loan charge-offs/average loans(4)
$
Lllilnsheldfor'InveSttDenti'ilrforJbilneeRatlosand.
....... ' ............ ". " ..... " ..
Allowance for credit losses $
, .'.
Nonperforming loans held for investment Itotal
loans held for investment(8)

. jnvestlllell1> .... .. '.: .'. :..... ................... .
for creditlosses/nonperforming loans
held for investment
2009
,. .. . 1344.
. '1,993:513 '
jj,9P5
180,607
30M:! .
78:635
'3Q,ji!Jti
159,651
NMF
IVr.1r
NMF
NMF
NMF
54;290 . $
3.760/.
>2;$0'
". 1.33 .
34,669 $
... .
56.99
As of and for tbe Year Ended December 31,
2008 2007 2606
9,496
1,724,672
..... 29;691"
226,721 .
pll,44f"
81,265
38,()()(!'"
101,949
0.46
.. 9.21
72.57
. "::-':-.--':":-:-,",:,,- .
i.:l8X
tQ9
21,899
1.42%
. 1;17
0.04
123.87
n;971 ..... :'
1,385.481 1,345,681
34J12 "40,017 .
. 4()6,129 . . 519,431

76,428
.ZJ;OOOc' .
113,421
1.25X
.1,51
11l,m .'. ...
O,S3%
0:65
0.07
188.19
.
50,000
\O,lJ
. 107,753
1.24X
>t)S.
IIMs,l
0.72%
'();(i4
0.11
0.51%
0.87
169.55
2065

1,124,044
. M,qllS
...
'>61,m
2MlJ
'180,728
1.03X
.l,IlS
\6,894
1.24%
"UI3
0.46
2.23%
50.08
(I) Net (loss) income per common share assuming dilution is based on the weighted average number of common shares
outstanding during each period and the dilutive effect, if any, of stock options and restricted stock outstanding. There are
no other dilutive securities.
(2) At December 31, 2009, 2008, 2007, 2006 and 2005, the total balance of brokered deposits was $575.7 million, $229.4 million,
$13.0 million, $25.7 million, and $42.5 million, respectively.
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(3) Total Shareholders' Equity at December 31, 2009 included approximately $81.7 million in net proceeds from the
September 2009 public offering. See Note 23 to the financial statements. Total Shareholders' Equity at December 31,2005
included approximately $87.0 million in proceeds from the private offering completed in December 2005. The Company used
approximately $79.5 million of the proceeds in January 2006 to complete the issuer tender offer and purchase shares of the
Company's common stock. This use of proceeds reduced total shareholders equity in January 2006.
(4) Calculations are based on average daily balances where available and monthly averages otherwise. In some instances, the
results are reported as "NMF" meaning "not a meaningful figure" since the reported results would otherwise have reflected a
negative number due to the operating loss realized in the period.
(5) Net interest margin has been calculated by dividing net interest .income from continuing operations before provision for
credit losses by average interest-earning assets.
(6) The operating efficiency ratio has been calculated by dividing noninterest expense from continuing operations, excluding
amortization of mortgage servicing rights, by operating income from continuing operations. Operating income from
continuing operations is equal to net interest income before provision for credit losses plus noninterest income.
(7) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income from continuing operations
before taxes plus interest and rent expense. Fixed charges consist of interest and rent expense.
(8) See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Asset Quality" for a
discussion of the level of non performing loans.
Fourth Quarter Results
Loss from continuing operations for the fourth quarter of2009 was $40.6 million or $(1.40) per diluted share compared to
loss from continuing operations of $8.7 million for the third quarter of 2009 or $(0.95) per diluted share. The Company reported
income from continuing operations of $2.4 million or $0.33 per diluted share in the fourth quarter of2008. The results of the fourth
quarter of 2009 were significantly impacted by the current economic environment.
Comparing the fourth quarter to the third quarter of 2009, net interest income declined $809,000, as a result of the
change in asset mix caused principally by excess liquidity We have maintained on our balance sheet. Total interest income for the
fourth quarter of 2009 declined by $1.1 million, to $24.2 million as compared to $25.2 million for the third quarter of 2009. Interest
income on community bank loans decreased $584,000 due to the $41.6 million decrease in average community bank loans between
the periods. Interest income from other loans and securities declined $726,000 between the third and fourth quarter of 2009. This
decline was the result of (i) higher levels of premillm amortization on purchased SBA loans and securities of $166,000, and (ii)
overalliower.average other loans and securities in the fourth quarter of 2009, of $44.9 million which was principally due to payoffs.
Interest income from other earning assets increased $246,000 between the third and fourth quarter of 2009, on an average increase
of $327.9 million ofthe principal balance of such assets. We maintained this additional liquidity on our balance sheet based on our
decision to assess fourth quarter provision for credit loss levels and potential for other-than-temporary impainnent charges prior
to reducing this balance. Overall these items impacted the fourth quarter of 2009 yield on interest-earning assets which was 3.66%
compared to 4.2% for the third quarter of 2009. Interest declined $255,000 in the fourth quarter which was prinCipally the
resultofa decline in the rates paid on certificate of deposIts accounts. In the fourth quarter the cost of fonds was 1.31% compared
to 1.48% for the tlIird quarter of 2009.
Net interest income was $16.2 million for the fourth quarter of 2009 compared to $20.8 million for the fourth quarter of
2008. The yield on interest-earning assets was 3.66% for the fourth quarter of 2009 compared to 5.35% for the fourth quarter of
2008. The cost of interest bearing liabilities was 1.31% for the fourth quarter of 2009 compared to 1.64% for the fourth quarter of
2008. Between the periods, interest rates declined due to the economic environment that was prevalent in 2009, which resulted in
declines in the yield on assets and liabilities. Runoff of other loans and securities from repayment resulted in declines in interest
income from those assets. Interest expense declined principally as a result of the declining interest rate environment.
Net interest income before provision for credit losses totaled $16.2 million for the quarter ended December 31 2009
compared to $17 million for the quarter ended September 30, 2009. Our net interest margin was 2.47% for the fourth quarter
compared to 2.84% for the third quarter of 2009. The 37 basis point decline in net interest margin between the third and fouith
quarters 0[2009 was due to the factors discussed For the quarter ended December 31, 2008 net interest margin was 3.88%;
the 141 basis point decrease in the net interest margm from the fourth quarter of 2008 and 2009 was prinCipally due to higher levels
of liquidity maintained on the balance sheet and an 81 basis points decrease in the average prime rate.
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Provision for credit losses expense increased $4.4 million between the third and fourth quarters of 2009. The provision
for credit losses expense of $14.5 million for the fourth quarter of 2009 was principally related to an increase in nonperforming
loans in the period. Provision for credit losses was $2.4 million in the fourth quarter of 2008 as a result oU64 million of growth, net
of repayments in the community bank loan portfolio, an increase in specific impairments of $189,000 for one commercial loan, and
approximately $1.7 million related to other existing loans that demonstrated signs of weakness for which the loan grade was
reduced as well as a continued decline in general economic conditions.
Noninterest (loss) income was ($30.9) million for the quarter ended December 31, 2009, compared to $41,000 for the
quarter ended September 30, 2009. The Company incurted $33.2 million of other-than-temporary impairment ("am") charges on
13 of its non-agency residential mortgage-backed securities in the fourth quarter of 2009 due to continued deterioration in the
underlying performance of the mortgage collateral of these securities. The OTTI charges were predominately in older vintage'
securities with approximately 80"10 from 2005 and earlier-date issued securities. In addition, the OTT! is largely in securities that are
support securities, or securities that are not the most senior securities in a structure. The non-agency residential mortgage-backed
securities market continues to be substantially illiquid. and therefore the evaluation for impairment and the determination of fair
value remains highly complex and is dependent upon the assumptions applied. As part of the evaluation, the Company completes
an analysis of estimated cash flows for these securities, which incorporates, but is not limited to, an estimate of the level of
voluntary repayments, both known and projected defaults on the underlying mortgage collateral, and an estimate of loss severity.
Based on the continued deterioration of the underlying collateral performance during the fourth quarter of 2009 and into the first
quarter of 2010, including substantial downgrades in the first quarter of 2010, as well as the protracted nature of the current
financial crises in the U.S. in general and the U.S. housing market in particular, for the fourth quarter of 2009 management changed
its estimate of future cash flows, by applying a more conservative estimate of future defaults than in previous quarters.
Noninterest income was $2.0 million for the quarter ended December 31, 2008 in which period there were no OTTI charges.
Noninterest expense was $20.9 million for the quarter ended December 31, 2009 compared with $21 million for the quarter
ended September 30, 2009. In comparing the fourth quarter and the third quarter 2009, noninterest expense was relatively
unchanged as management reduced controllable expenses including compensation, professional fees, public relations and
marketing compared to the earlier quarter. Noninterest expense was $17.3 million for the quarter ended December 31, 2008.
Between the fourth quarters of 2009 and 2008, the principal factor contributing to the $3.6 million increase in noninterest expense
was a $2.8 million increase in subaccounting fees. Subsequent to the sale of certain assets ofUW Trust at the end of June 2009,
the Company has incurred subaccounting fees on the custodial deposits transferred to the buyer. The remaining increase is a
result of increases in deposit insurance expense, loan collection expenses, and real estate owned expenses.
Income tax (benefit) expense from continuing operations was ($9.4) million for the quarter ended December 31, 2009,
compared to ($5.4) million for the quarter ended September 30, 2009. Our tax rate was (18.8%) and (38.2%) for those same periods,
respectively. The effective income tax rate for the fourth quarter of 2009 was impacted by the establishment of a $10.2 million
deferred tax valuation allowance. Due to the loss incurred in the fourth quarter of 2009 and for the year then ended, the Company
was unable to conclude that it is more likely than not that we will generate sufficient taxable income in the foreseeable future to
realize all of our deferred tax assets. In evaluating the level of valuation allowance needed the Company considered the amount of
net operating loss carryback potential, which approximated $12.2 million, after consideration of the impact on the utilization of
various tax credits in those periods. In addition, management evaluated various tax planning strategies which could be utilized to
support a portion of the deferred tax asset. Some of the tax planning strategies considered, which would not substantially impact
the business, were sale-leaseback of facilities, redemption of life insurance, and the sale of certain lines of business Or assets.
Based on the carryback potential and tax planning strategies, management determined that a valuation allowance of$10.2 million
was appropriate. At December 31, 2009, the net deferred tax asset was $14.2 million. Income tax expense from continuing
operations in the quarter ended December 31,2008 was $766,000 and our tax rate was 24.4%.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is management's analysis to assist in the understanding and evaluation of our financial
position and results of operations of the Company. It should be read in conjunction with the information set forth under Item IA.
"Risk Factors," and our consolidated financial statements and.notes thereto included in Item 8 in this report.
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The Company's primary sources of revenue, through the Bank, are net interest income (predominately from loans and
deposits, and also from investment securities and other funding sources), and noninterest income, including loan administration
income, gains on sale of originated SBA loans, and other noninterest income. Volumes ofloan originations and pricing decisions
are key determinants in revenue potential, and these tend to be impacted by overall economic factors, including market interest
rates, overall business levels, economic growth, consumer confidence, and competitive conditions.
The Company experienced significant challenges during 2009 as the deteriorating economic and credit environments
negatively affected the Company's results. In June 2009, the Bank sold 100".4 of its available-for-sale mortgage-backed securities
collateralized by option adjustable rate res\dentialloans with an unpaid principal balance of $47.3 million. We realized a loss of$47
million, or $29.2 million, net of tax from the sale. Each of the five securities was rated AA by recognized rating agencies
at acquisition. However, in the period from April 2008 through June 2009, the securities were progressively downgraded until they
were graded significantly below investment grade. As a result of the downgrades of the securities, and because the securities
were lower tranche securities in relation to other securities issued in the same security structure, the Bank was required to assign
large amounts of capital for the purposes of determining the Bank's regulatOry risk-based capital ratio. Consequently'the Bank
elected to sell the securities, which provided regulatory capital relief to the Bank in spite of the loss incurred. This loss from
operations was substantially offset by a gain on sale, which was reported as discontinued operations in the statement of
operations, from the sale ofUW Trust assets. We realized a gain of $36.1 million, net of tax from that transaction. In addition to the
two items referenced above, we also were impacted by increased levels of om and provisions for credit losses. DUring 2009, the
Company recognized om charges, of $36.6 million on its non-agency mortgage backed securities portfolio due to continued
declines in the performance of the underlying residential loans that collateralize such securities. In addition, the Company made
provisions for credit losses of $35 million in 2009 to maintain the allowance at a level we felt was appropriate based on the
economic challenges facing our borrowers.
Since mid-2007 the banking industry and the securities markets have been materially and adversely affected by
significant declines in the fair value of nearly all asset classes and by a lack of liquidity. In addition, the U.S. economy has been in
a recession. The Company's financial perfonnance generally, and in particular the ability of borrowers to pay interest on and
repay principal of outstanding loans and the fair of collateral securing those loans, is highly dependent on the economy in
our markets. The current market conditions continue to present difficult asset quality issues for the banking industry (including
ongoing effect of current economic conditions and lower residential and commercial real estate values) and for the Company
(including higher net charge offs and higher levels of nonperforming assets as compared to our historical experience). In the
current' real estate market, the value of the collateral securing the loans has become one of the most important factors in
determining the appropriate amount of allowance for credit losses to record at the balance sheet date. Additionally, the
performance and value of the loans that collateralize our non-agency mortgage-backed securities and our outlook on market
cooditions has sigilificantly impacted the determination of OTT!. Based on these factors, and others, during the third and fourth
quarter of 2009 the Company raised net proceeds of approximately 581.7 million by issuing 22 million shares of common stock
through a public stock offering. '
During 2009, we focused on asset quality issues and the corresponding decline in the Company's credit quality metrics
of both loans and non-agency mortgage backed securities. During 2009, the Company hired a new loan review executive,
enhanced many of its lending policies and procedures. These enhancements included reducing the advance rates on many real
estate related loan types and including increasing loss factors for various loan types based on actual credit losses realized and
impairments on other loans as such impairments were incurred. Overall the increase in: the allowance for credit losses was based '
on and consistent 'with the deterioration in performance of 10 construction and land development loan relationships, and 1'0
commercial real estate loan relationships. A record level of provision for credit losses and charge offs resulted for 2009.
Management expects 20 I 0 provision for credit losses and charge off amounts will also be elevated compared to historical levels.
During the fourth quarter of 2009, the Company recognized an OTTI charge in earnings of $33.2 million, across 13
securities. For the securities subject to OTTI in the fourth quarter of 2009, the collateral coverage ratio (the amount of support
tranches underlying the Company's position in the security relative to loans 60 days or more past due) declined between 14% and
100%, and on a weighted llverage basis the decline was 28%. The average credit support (the amount of support tranches
tinderlying the Company's position in the security relative to less senior tranches) for these 13 securities declined from 5.3% at
September 30, 2009 to 3:5% at December 31, 2009, due to losses incurred by support tranches. The cumulative level of
delinquencies in these securities continued to increase in the fourth quarter of 2009 despite the losses incurred by support
tranllhes thus the pipeline of problem loans has not declined with the losses incurred. At December 31, 2009 the collateral
coverage ratio for the \3 securities subject to om during the fourth quarter ranged from zero to 0.77%, with an average below
one-half percent In addition, on February 22, 20 10, Standard & Poor's ("S&P") ratings services cut the ratings on 2,861 classes
, underlying' 354 residential mortgage-backed securities transactions. S&P said that because of higher delinquencies, credit
enhancements for the classes in question will likely not be enough to cover projected losses. Included in the S&P February
ratings declines were 22 securities owned by the Company. In total approximately 47.5% of the Company's portfoiio was
downgraded, wateh listed, or in a few cases the rating was affirmed subsequent to January 31, 2010.
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The continued economic downturn and the poor economic indicators including continued declines in home prices,
continued high unemployment, and continued erosion of mortgage equity that occurred in the fourth quarter of 2009 and the early
first quarter of2010 concerned us, especially in connection with the downgrades in securities. Over the past year it had appeared
that the rating agencies were being more conservative and reacting more timely, but these downgrades showed the rating
agencies were sti11lagging. During the off-cycle field visit by our regulators beginning in January 2010, we discussed with the
OTS and FDIC our assumptions regarding the determination of OTTI and the fair value of securities, our observations of the
performance of the loans underlying our non-agency mortgage backed securities, and the macroeconomic factors discussed
above, as well as our regulators' views of how these securities have been performing for other industry participants. Though
ongoing discussions were being held throughout January and February 2010, the Company was required by law to file the Thrift
Financial Report on January 30, 2010, which we did. Based on an extensive review of all of the information available, we
determined that we should re-evaluate the default assumptions used to determine the expected cash flows to be received from the
securities for the period ended December 31, 2009.
One of the inputs that management uses for estimating cash flows on our mortgage backed securities is an estimated
default rate on the underlying loan portfolio. Through September 30, 2009, and for the prior four quarters we had utilized an
estimate for defaults from our third party provider that projected the estimated lifetime cumulative defaults based on loan level
actual historical default performance for the specific pool. This analysis was supported by observed behavior that weaker loans
go bad earlier and older paying loans have superior credit performance to more recently originated loans with similar underwriting
criteria and show fewer weaknesses. Our own historical mortgage origination business resulted in weaker loans becoming
delinquent early in the life ofthe instrument and the overall performance of the loans generally improved over time with additional
seasoning. We expected this would also be the case with the mortgage-backed securities portfolio. This assumption was true with
respect to the mortgage origination business, and still appeared to be true through the third quarter of 2009, as the residential
home market was improving. The results of the fourth quarter of 2009 and the early first quarter of2010 show that the length and
severity of the recession, as well as home price depreciation is continuing, and as such, even these older loans have more risk. As
a result, we determined that a cash flow estimate based on loan level default performance alone was no longer producing results
that match the expectations that management believes are applicable to the underlying performance of the securities owned by the
Company as of December 31, 2009. The change in the default assumption used in our cash flow estimate impacted both the
amount of OTT! and the timing ofOTTI recognition.
Accordingly, the Company has concluded its former default assumption was no longer indicative of the Company's
best estimate of cash flows. The Company worked with our third party provider to select an alternative default assumption based
on an enhanced trend analysis in order to estimate cash flows that we believe better reflect the continued deterioration of the
underlying collateral performance discussed previously and the protracted nature of the current financial crisis in the U.S. in
general and the U.S. housing market in particular.
The new default assumptions contain two factors, first, an earlier forecast of when a loan will default, and secondly, an
absolute increase in default levels. The earlier time-period forecast of default results in earlier recognition by the Company of
OTT! through earnings. The accounting recognition can and does occur well before a loss (sometimes refelTed to as a principal
break) is realized by actuaI security owned by the Company. Since such events are forecast up to 30 years in the future significant
forecast error can occur. U.S. economic and financial factors that impact housing, as well as public policy and government
actions, can and will impact such long-range forecasts.
For the year ended December 31, 2009, loss from continuing operations was $79.6 million or $(6.06) per diluted share
compared to income from continuing operations of $10. I million or $1.39 per diluted share for the year ended December 31, 2008.
The loss for 2009 was attributed to four principal factors, (i) $47.0 million loss on the sale of available-for-sale mortgage-backed
securities collateralized by payment option adjustable rate mortgage loans, or $29.2 million net oftax; (ii) $35.0 million of provision
for credit losses, or $24.9 million net of tax, (iii) a net other-than-temporary impainnent charge on non-agency mortgage backed
securities of $36.6 million, or $26.0 million net of tax and (iv) during 2009 the Company held approximately $320 million of short
tenn liquidity on its balance sheet, which negatively impacteq net interest income and net interest margin for the period.
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On June 29, 2009, the Company completed the sale of certain assets ofUW Trust Company (fonnerly known as Sterling
Trust Company) to Equity Trust Company and its affiliate, Sterling Administrative Services, LLC (together, the "Buyers"), for a
purchase price of $61.4 million, subject to adjustment as provided for in the definitive purchase agreement governing the
transaction. The assets sold were associated with the custodial IRA and qualified employee benefit plan businesses ofUW Trust.
Under the terms ofthe sale, UW Trust received 25% of the purchase price in cash, $15.3 million, and financed the remaining 75%
through a purchase money note, $46.0 million. The purchase money note is secured by all the assets of the Buyers as well as an
assignment of the subaccounting agreement inclusive of all contract rights and fees relating to them. The note provides for level
principal payments over the seven year term and may be prepaid without penalty at any time. The rate of Interest is the prime rate,
currently 3.25%, with a floor and a cap of 2.25% and 4.25%, respectively. Management engaged a third party to assess the value
of the purcbase money note received from the sale and concluded that a discount of 4.2% was required to reflect the fair value of
the note. Accordingly, tbe gain on sale was reduced by $1.9 million, which will be amortized into income as a yield adjustment on .
tbe note over its term.
As a result of the sale, tbe Company recorded an after tax gain of approximately $36.1 million for the year ended
December 31, 2009, which is included in discontinued operations for the period. The operating results associated with the sale of
UW Trust assets have been retrospectively presented as discontinued operations beginning January 1,2007.
Total assets at December 31, 2009 were $2.53 billion, which represented an increase of $267 million from December 31,
2008. Loan and security repayments togetber with deposit growth were principally invested in cash and due from banks.
Between 2008 and 2009, net interest income before provision for credit losses decreased by $11.7 million and our net
interest margin decreased 96 basis points from 3.96% for 2008 to 3.00% for 2009. Increasing net interest income from an
appropriate mix of growtb in loans and management of our processing and trust deposit base represents the Company's best
opportunity for 2010 earnings growth. However, this is subject to various risks, 'such as competitive pricing pressures for the
types of loan products we will seek, overall decreased loan demand, bigher levels of nonperfonning loans, disciplined pricing, and
challenges to our processing and trust deposit base as discussed further below. Specifically, we expect net interest margin to
improve prospectively from the following actions: (i) future reductions in our processing and trust deposit base in order to reduce
excess liquidity; (ii) continued disciplined loan pricing; and (iii) a 200 basis point reduction in tbe effective interest rate paid on
$180 million of borrowings from FHLBank of Topeka.
Total loans declined $95.6 million, or 6.2%, between December 31, 2009 and 2008, including a $26.6 million decline in
construction loans and a $31.1 million decline in land loans. We continued to execute our planned reduction of exposure to this
loan class, which is consistent with the Infonnal Agreement we entered into in December 2009. Additionally, we modestly reduced
commercial real estate loans during 2009;
Total deposits grew $271 million, or 15.5% between the end of2009 and 2008. All of this growtb can be attributed to the
success of our community banking teams as community bank deposits increased by 142% to $465 million. The growth in
community bank deposits was principally in certificate accounts offered through tbe CDARS network; bowever, we also grew
community bank noninterest bearing deposits and money market and now accounts. In total, community bank deposit accounts
increased by over 1,000 and reached 2,353 at December 3 I, 2009. Managing our processing and trust deposit base is a key factor
to improving our net interest income and net interest margin prospectively. We elected to maintain additional liquidity on our
balance sheet based on our decision to assess year end 2009 proviSion for credit loss levels and potential for other-tban-
temporary impairment cbarges prior to reducing tbis balance. We anticipate it will be the second quarter of 2010 before we can
fully reduce selected processing and trust deposit balances to correspond to our anticipated liquidity requirements and goals for
tbe year.
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2336
Table of Contents
Results of Operations
Loss from continuing operations for 2009 was $79.6 million, or $(6.06) per diluted share compared 10 income from
continuing operations of $10.1 million, or $1.39, per diluted share, for 2008 and $10.2 million or $1.39 per diluled share for 2007.
Details oflhe changes of the various components of income from continuing operations are further discussed below.
Net Interest Ineome
The following table sets forth for the periods and as ofthe dates indicated, information regarding our average balances
of assets and liabilities, as well as the dollar amounts of interest income from interest-earning assets and of interest expense on
interest-bearing liabilities and the resultant yields or costs. Ratio, yield and rate information are based on average daily balances
where available; otherwise, average monthly balances have been used. Nonaccrual loans are included in the calculation of
average balances for loans for the periods indicated.
A
Interest-eaming assets:
Average
Balance
2009
Average
Interest Rate
Year Ended December 31,
Average
Balance
2008
Average
Interest Rate

2007
Average Average
Balance Interest Rate

Conumiii\tyJi,lIiklollils; .. .. .....
Commercial real estate . $ 40(,454 23,445 5.84%$ 312,299 20,082 6:43%$ 172,7\(; 12,750 7.38%
17,:i16 ;4.17i 321,4101Mso. 5.94 .151;196 9,1f
151,543 8,482 5.60 113,430' 8,3407.3596,8489;136 9.43
Milltifllll1ilY.44.!!:H $,99 4$,906 $,911 .... .'6:51
Commercial 1:24,207 6,931 5.58 112,i39 7,122 6.35 4,707 8.59
.13;154;. .482.. .3.66. 4,419 ...281 .. 6.49
Total community bank loans 1,138,106 61,116 5.37 nl,438 58,033 6.30 542,008 "44:889 --s:28
OthedoaDs and' securities:,:' ".. ::.-",--:.: ' ....,. .-' ..:-: .. ",:."
Resideniialniortgage loans "Jo5,s(riI4.036 4.59 385,908 20,503 5.31 '517,720 27,882 5.39
S,\09 16;393.,4;81
Mortgage-backed securiiit,s . , . . 445,439 23,281 . 5.23 '560;039 29,894 5.'34 663,379 3S.:h:i 5.31
8?S,02539,?134.48 MIl3.S'tS}5.596 . 5.03 13,508 5,27
Interest-eaming deposits
JiHLBIlrik SlUe\(
319,592 678 0.21 18,454 345 1.84 20,382 1,012 4.90
20,224 . j4jj j ,68 ... .34,291\ ... 1;133 . .3>30 .39,297 ..... iJso ... sA'
Total interest-earning assets 2.355:947 101,507 ---;j3j% 2,078,06S"""ii5,iii7 --'-5:54% 1,996,097 121,559 6.09%

Cash .
.....
Premises and equipment
bthi'as.;ejs
Total non-interest bearing assels .
Toia! assets
Liabilities and Sbareholders'
Equity
.
Savings aCCoUiiis .
)\40l\eima"keiati# NOW IiqcQi)riiS
Certificates of deposit

Repurchase agreementS ..
$ 62,601
(26,i345
25,646 ..
. .....9\1,455
152,468

==-=-=
$
;7,525
. 285,863 7,040
114,8$ J ... .9,,39.
79,195 .. 3.666
.$ i9,239
.(13;$00)
. .. 21,662
......
114,734

==-======
0.5}/ 1;238,SW
2.46 59,718
.. 1i,2? '. .
4.57 ... 78,934
ii),316
2,284

i,975
18,720
(9.2;311)
11,321
.... 82,$85
103,388
..
====
i
.jj:84 .... l,i98;094 .25,759

.. subordil1ated.debeiiiUres
3.82 . 32;369 .. 1,381
3;5:3' 'r,086
3:ii 72,354 3,494
, .. . 68;14?, . ..... 5.24 ;. .. <i64i 59,1424,995.S
2,\32,614 31,193 1.45% 1,815.022 33,032 1.80%t:7i3:9s5' 52:"7i7 Total interest-bearing liabilities
liabllities(
Demand deposits (including custodial
escrow balances)
Othin'l!abi\ities
215,824
. .J9,()96
Total non-interest bearing liabilities 234,920
Sbilreholdei(c9,ulty . ... 140,8&1
Total liabilities and shareholders'
equity
filet interest iMOip.\!!lef(Jie proVis!"n
forcteditJos$es . .
Interest rate spread
Ratio of average interest-earning assets
to average interest bearing liabilities
2.86%
110.47%
- 47-
246,064
.21,831
267,895

249,356
.. '22,321
271,683
... 1l3.$47.
$2,192,799 $2,099,485
==== ===
$ 68,84i
=======.
114.49% 116.46%
2337
Table of Contents
Volume and Rate Analysis of Net Interest Income
The following table presents the extent to which changes in volume and interest rates of interest earning assets and
interest bearing liabilities have affected our interest income and interest expense during tbe periods indicated. Infonnation is
provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior
period rate), (ii) changes attributable to changes in rates (cbanges in rates multiplied by prior period volume) and (iii) cbanges
attributable to a combination of changes in rate and volume (change in rates multiplied by the cbanges in volume). Changes
attributable tothe combined impact of volume and rate have been allocated proportionately to the changes due to volume and the
changes due to rate.
.
Community bank loans:
f;9mnii'ciill
developmlmt
loans
$BA.i9ailS
Multifamily loans
Commerolal 1,.oaDS
and other loans
Otberl6ansaridseclIrlties:
Residential loans . .
l'ufchase(iSakloansai1.d '.
secUrities'
... ..... ' ..
.' .
FHLBank stock
..

. $avings ......... .
Money market and NOW
accounts

FHLBank borrowings
. '.'
Borrowed money
.
Change in net interest income
Year ended 2009 versus 2008 Year ended 2008 versus 2007
Increase (Decrease) Due to Change in Increase (Decrease) Due to Change in
Volume Rate Total Volume Rate Total
2,337
"'2,407
(225)
719

. (3,91'i)
.. .
(6,008)
'887"
(3M)
2,1!if
1,785
.;5,832
(6,888)

841
.),$81

thousands) ---- ----
(4,041)
(2,265j .
(414)
(9jO)
231
(2,5.50) .
(2,195)'
(605)
{S54}
(432)
(lS,7()6)
(1,704) 11,017
142" . "1;413
(639) (405)
(l?i) 3.900
2,i 12 365
(6,467) . (6,973)

(6,613) (5,536)
'. ....' .(81)
(793)(247)
. .i(),294'
(4,636) (2,851) 847
(1,076) 4;156 .. l.Q6l
2,458 (4,430) 1,446
... .681. "69t .311)"
. (845)' ___ (4)
. '(3;420) (U!39j.,. . .. ),199.
$ (11,671)
(6,331)
(2,209)'
(283)
'(1.4'85) .
(170)
(406) .
.
197
..........


4,686
(196)
(688)
2,4)5
195
... (7,379)

(5,339)
(667)
_il!!!Zl
.(6,$42)
(16,230) (15,383)
(I 59} 903:
(4,763) (3,317)
. (g29)
(1,369)
. ...... ....... 19,6$$)
$ 6,048 $ 13,143
==
Net Interest Income. Net interest income before provision for credit losses decreased $11.7 million, or 14.2%, to
$70.3 million for the year ended December 31, 2009, as compared to $82.0 million for 2008. Our net interest margin decreased 96
basis points, to 3.00% for 2009 from 3.96% for 2008. Interest income declined $\3.5 million to $\01.5 million for 2009 compared to
$115 million for 2008.
Interest income on community bank loans increased $3.1 million on a $216.7 million increase in average volume partially
offset by a 93 basis point decline in tbe average rate. The increase in average volume of $216.7 million resulted in additional
interest income of$12.5 million. For 2009, the yield on community bank loans was 5.37% compared to 6.30% for 2008. This 93 basis
point decrease in yield contributed to an offsetting reductiop of $9.4 million in interest income. The increase in volume was due
principaUy to loans originated in the second half of 2008 that were outstanding for aU of 2009. A significant portion of our
community bank loans are variable rate and during 2009, the 93 basis point decline in the yield of these loans was attributed to the
decline in the average prime rate of interest which averaged 5.08% for 2008 compared to 3.25% for 2009. Although the average
prime rate declined by 183 basis points and the Company experienced an increase in its level of nonperforming loans during the
year ended December 31, 2009, we were able to offset approximately one-half of the anticipated decline in interest income
attributed to a change in rate due to disciplined pricing of our loan products.
-48-
2338
Table of Contents
Interest income on other loans and securities intcrest-bearing balances declined by $ 16.1 million based on a
$225.9 million decline in average volume and a 55 basis point decrease in the yield on such assets. The decline in average other
loans and securities interest bearing. balances was consistent with our plans to allow these assets to decline tbrough repayment
over time as we add additional traditional community bank assets. The yield on residentialloana an4 mortgage-backed securities
declined to 4.48% for 2009as compared to 5.03% for 2008. The decrease in the yield on these assets was due principally to the
decreases in market interest rates. The majority of the other loans and securities are also variable rate including the purchased
gulll'llliteed portions of SBA 7(a) loans, which are tied to prime, and the residential mortgage loans for which the significant
majority have reached their initial reset date and now fluctuate at least annually.
Interest expense decreased $1.8 million to $31.2 million for 2009 as compared to $33.0 million fur 2008. This decrease was
caused by a decline in the average rate paid on interest-bearing liabilities of35 basis points to 1.45% for 2009 compared to 1.80010
for 2008 due to changes in market rates, change in product mix, and mansgement actions. Additionally, the decline in both LIBOR
and Federal Funds mtes that occurred from the start of 2008 through the end of 2009 contributed to .the overall decline in rates
paid. The decline in mtes contributed $3.4 million to the decline in interest expense for 2009. Average interest-bearing liabilities
increased $318 million between 2009 and 2008 and this increase in avenge balance offset the decline in rate by $1-.6 million. .
Nct interest income before provision for credit losses increased $13.1 million, or 19.1%, to $82.0 million for the year
ended December 31,2008, as compared to $68.8 million for 2007. Our net interest margin increased 50 basis points, to 3.96% for
2008 from 3.46% for 2007.
The increase in net interest margin for 2008 was due to a 126 basis' point decrease in the average rate paid on our
interest bearing liabilities, which decreased to 1.80% for 2008 compared to 3.06% for 2007. The average rate paid for our interest
bearing liabilities declined due to changes in market rates and management actions. The decline in rates contributed $22.9 million
to the decline in interest expense for 2008. Average interest-bearing liabilities increased $101.1 million between 2008 and 2007 and
this increase in average balance offset the decline in rate by $3'.2 million.
Interest income on community bank.1oans iii 2008 increased $13.1 million on a $379.4 million increase in volume partially
offset by a 1.98% decline in the average rate. The increase in volume was due to the continued execution of our business plan, the
decline in rates was due to market factors. A significant portion of our community bank loans are variable rate and during 2008,
the prime rate of interest declined 4.00% from 7.25% at December 31,2007 to 3.25% at December 31, 2008.
Interest income on other assets and securities interest-bearing balances in 2008 declined by $18.0 million based on a
$290.5 million' decline in volume and a 24 basis points decrease in the yield on such assets. The decline in these assets was
consistent with our plans to allow these assets to decline through repayment The decrease in the yield on these assets was due
principally to the decreases in market interest rates. The majority of the other assets and securities are also variable rate including
the purchased guarsnteed portions of SBA 7(a) loans, which are tied to prime, and the residential mortgage loans for which the
significant majority have reached their initial reset date and now fluctuate at least annually.
Provision for Credit LDsses. The provision for credit losses is determined by the Company as the amount to be added
to the allowarice for credit losses after net charge-offs have been deducted to bring the allowance to a level that is the Company's
best estimate of probable incurred credit losses inherent in the held for investment loan portfolio. The provision for credit losses
totaled $35.0 million in 2009 compared to $8.6 million in 2008 and $2.3 million in 2007. The provision for 2009 was in part due to an
increase in nonperforming loans, higher levels of net charge-offs, which were 1.33%, and the weak economic conditions that have
resulted in declining collateral values on several real estate related projects that are considered classified loans. These collective
mctors also caused us to increase the loss factors that we apply in our allowance for credit loss model, in particular to
construction and development loans, commercial real estate loans, and certain residential loans to reflect the higher risk
associated with those loans. The provision for 2008 was the result of the $413 million of net new community bank loana added to
the portfolio, an increase in specific impairments associated with loans that became nonperforming during the year, other loana
that demonstrated signs of weakness for which the loan grade was reduced and a decline in the general economic conditions. The
provision for 2007 was principally due to the growth of the community bank loan portfolio that occurred. See the section
captioned "Allowance for Credit Losses" elsewhere in this discussion for further analysis of the provision for credit losses.
-49-
2339
Table of Contents
Noninterestlncome. An analysis ofthe components of non interest income is presented in the table below:
...<i . .:..> ..............
Custodial, administrative and escrow
services
l,0;ll1.8IlntWisl'iatjon . .. ..
Gain on sale ofloaDS held for sale
..
. .,
. Total other-than-Iemporary impairment
losses
.....
.
Net impairmenllosses recognized in
earnings
...
.l'ina:IiQial .
Litigaliorisettlements ... .
... . .......
Total noninterest (loss) income
Years Ended December 31, 5 Change % Change
2008 2007 20092008 2008-2007 20092008 2008.2007
---(Dollars in
$ 491 $ 864 $ 606 $
",9146.m
..... 764 . 2,124
(373) $
(6+4)
... 1,484
'. - --,"',""
98 . (46,980)
(42,790) (4,1I0) (38,680)
. (},197.
6;197
(36,593) (4,110) (nA83)
r
f55
2.45f) .3,72'1 (22)
$(70,527) $ 5,504
.....".......-
$ 13,023
--
$ (76,031) $
258
(1;391)
(1,360)
""., -'-""-'-"'-",.
'(98) ...
(4,110)
..
(4,110)
(iSS)
(7)
(7,519)
(43)%
'(13)
194
100
941
100
790

(1,381)%
43%
(2l)
(64)
(Hlo)
100
(100)

(58)%
Custodial and Administration Services. Service fees for custodial and administration services fees decreased $373 000
or 43%, to $491,000 for the year ended December 31, 2009, as compared to 5864,000 for the year ended December 31, 2008. '
Service fees for custodial and administration services fees increased $258,000 or 43%, to 5864,000 for the year ended
December 31, 2008, as compared to $606,000 for the year ended December 31, 2007. The increase was due to increases in the
volume of administrative activity as well as increases in all fees associated with these services.
In the fourth quarter of 2007, the Company elected to restructure our relationship with one life settlement agent for
special asset acquisitions and administration and terminate certain elements of business with respect to this large life settlement
agent account. As a result of this decision, there has been a corresponding decline in revenues relating to the escrow
administration business. On June 27, 2009, UW Trust transferred substantially all ofits contractual relationships for custodial and
administrative services pertaining to individual retirement accounts and other tax qualified retirement plans in an exchange for
value to Equity Trust Company pursuant to a purchase and sale agreement (the "PSA"). The PSA provided that, until June 27,
2014, UW Trust may not, .with certain exceptions: (i) serve as a custodian or trustee for self-directed individual retirement
accounts in which customers have the ability to invest through such accounts in certain alternative investments; or (ii) act as a
custodian or administrator for certain tax qualified retirement plans. UW Trust is in the process of implementing its revised
business plan in light of these restrictions and intends to focus the majority pf its business on providing administrative and
escrow services prospectively.
-so-
2340
Table Df CDntents
Loan Administration. Loan administration income represents service fees earned from servicing loans for various
investors, which are based on a contractual percentage of the outstanding principal balance plus late fees and other ancillary
charges. Loan administration fees decreased $624,000, or 130/0, to $4.3 million in 2009 as compared to $4.9 million in 2008. Our
mortgage loan servicing portfolio decreased to an average balance of $831 million for 2009 as compared to an average balance of
$975 million for 2008, resulting in the overall decline in loan administration income. The average service fee (including all ancillary
income) was 0.46% in 2009 versus 0.47% in 2008, which is a function of the loans that remain in the servicing portfolio and level of
delinquencies. As we move forward we may augment our community banking business plan strategy with various alternatives
that would be designed to enhance our overall liquidity position and to achieve profitability. These plans may include, in
conjunction with a strategic partner, the acquisition of a relatively modest level of mortgage servicing assets that would generate
additional noninterest income for the Company. We continue to explore these and other alternatives on a regular basis, although
there is no certainty that any will be executed.
Loan administration fees decreased $1.4 million, or 22%, to $4.9 million in 2008 as compared to $6.3 million in 2007. Our
mortgage loan servicing portfolio had decreased to an average balance of$975 million for 2008 as compared to an average balance
of $1;2 billion for 2007. The average service fee (including all ancillary income) was 0.47% in 2008 versus 0.50% in 2007, which is a
function ofthe loans that remain in tbe servicing portfolio and level of delinquencies.
Gain on Sale of Loans Held for Sale. Gain on sale ofloans held for sale increased $1.5 million, or 194%, to $2.3 million
for the year ended December 31, 2009 compared to $764,000 for 2008. The gain reported for 2009 was from the sale of originated
SBA loans witb an unpaid principal balance of $33 million, compared to $23.2 million of loan sales in 2008. These loan sales were
part of our management of industry concentrations, interest rate risk, and regular sales of the. guaranteed portion of SBA-
originated loans. The increase in gain on sale of loans held for sale between 2008 and 2009 was related to improved market
conditions for government guaranteed assets and the resultant higber premiums offered by purchasers. Gains on sale of loans
held for sale are part of our ongoing business plan. We expect such gains will fluctuate from period to period based on a variety
of factors, such as the current interest rate environment, the supply and mix of loans available in the market, the particular loans
we elect to sell, overall volume of securitization activity for these loan types, and other market conditions.
Gain on sale of loans held for sale declined $1.4million, or 64%, to $764,000 for the year ended December 31, 2008
compared to $2.1 million for 2007. The decline in gain on sale of loans h ~ l d for sale between 2008 and 2007 was related to market
conditions, including market participants lower levels of liquidity, and resultant lower premiums offered by purchasers.
(Loss) Gain on Sale of Available for Sale Investment Securities. In 2009, we realized a $47.0 million loss from the sale
of 100% of OUf available-for-sale mortgage-backed securities collateralized by option adjustable rate residential loans with an
unpaid principal balance of $47.3 million. Each ofthe five securities sold was rateil AA by nationally recognized rating agencies at
acquisition. However, in the period from April 2008 througb June 2009, the securities were progressively downgraded until they
were graded significantly below investment grade. As a result of the downgrades of the securities, and because the securities
were lower tranche securities in relation to other securities issued in the same security structure, the Bank was required to assign
large amounts of capital for the purposes of determining the Bank's regulatory risk-based capital ratio. Consequently, the Bank
elected to sell the securities, which provided regulatory capital reliefto the Bank in spite of the loss incurred. We did not sell any
available-for-sale investment securities in 2008. In 2007 we sold three available-for-sale investment securities and realized a gain of
$98,000.
Otlrer-than-temporary Impairment ("OTTI',). The Company incurred $36.6 million of OTT! charges on 13 of its non-
agency mortgage-backed securities in 2009 due to continued deterioration in the underlying performance of the mortgage
collateral of these securities, as well as negative trends in general economic conditions. The non-agency residential mortgage-
backed securities continue to be substantially illiquid, and their evaluation for impairment and the determination of fair value
remains highly complex and is dependent upon the assumptions applied. As part of the evaluation, the Company completes an
analysis of estimated cash flows for these securities, which incorporates, but is not limited to, an estimate of the level of voluntary
repayments, both known and projected defaults on the underlying mortgage collateral, and an estimate of loss severity. Based on
the continued deterioration ofthe underlying collateral performance, and the protracted nature of the current financial crisis in the
U.S. in general and the U.S. housing market in particular, tbe Company revised its default assumptions used in our cash flow
estimate, which is a more conservative estimate of future defaults than were previously used. See additional discussion at Item 7.
"Management's Discussion and Analysis - Balance Sheet - Investment Securities." The Company believes that in the current
economic conditions, that it is reasonably possible the Company will incur future OTT! charges on its non-agency mortgage
backed securities.
For 2008 OTT! of $4.1 ';'iIIion was incurred on two non-agency collateralized mortgage obligations issued in 2005 and
2006 with total amortized cost of $9.4 million prior to the impairment write-down. Since the end of 2008 we have received principal
repayments on these securities of $1.1 million and all scheduled interest payments. Included in the OTT! charges for 2009 was
$2.0 million related to these two securities. Beginning in the third quarter of 2009 one of these securities has incurred a principal
loss, and the other security incurred its first principal loss in December 2009. .
- 51 -
2341
Table of Contents
Gain on Sale of Investment. During 2009, the Company completed the sale of 269,792 shares of Matrix Financial
Solutions, Inc. for $16.00 per share resulting in aggregate proceeds of $4.3 million. The transaction was negotiated between the
Company and the purchaser and the Company believes the exchange value per share represented the fair market value of such
shares as of the sale date. The Company's basis in the shares was $750,000, resulting in a gain on the sale of$3.6 million. Matrix
Financial Solutions, Inc. is the successor to the Company's former joint venture interest in Matrix Settlement and Clearance
Services. The Company and Matrix Financial Solutions, Inc. have ongoing business relationships pursuant to which certain cash
accounts under the control of Matrix Financial Solutions, Inc. are placed on deposit at the Bank. We did not sell any cost-method
investments in 2008 or 2007.
Other Income. Other income for 2009 was $2.5 million, a $622,000, or 20% decline from 2008. Other income in 2009
principally includes settlement of a representation and warranty claim the Bank made against a large nationally recognized loan
originator, from which the Company realized revenue of $370,000, income earned on bank-owned life insurance of $949,000,
prepayment penalties on loans and other loan fees not recognized as part of yield on loans of $111 ,00.0, rental income of $200,000
on a property owned by a non-core subsidiary that was sold in June 2.0.09, and other miscellaneous items. The decrease from 2.008
to 2009 was a result of 2.0.08 other income including non-recurring dividends from cost-method investments, a full year of rental
income related to the property that was sold in June 2009, and reduction in other loan fees received from other institutions based
on declining lending activity resulting from current market conditions
Other income for 2008 was $3.1 million, a $657,000, or 18%, decline from 2.0.07. Other income in 2.008 included income
earned on bank owned life insurance of $954,00.0, dividends from cost-method investments of$540,DOD, prepayment penalties on
loans and other loan fees not recognized as part of yield on loans of $405,00.0, rental income from a parcel of property that was
sold in June 2009 of$415,OOO and other miscellaneous items that totaled $758,000.
In 2007, other income from these same items was $937,0.00 earned on bank owned life insurance. Dividend income from
cost-method investments was $405,0.0.0 in 20.07; the increase for 2008 was related to the improved performance of the company's
results and the resulting dividends declared by their management. Prepayment penalties and loan fees not recognized as part of
yield on loans was $1.1 million in 20.07; the decline that occurred in 2008 was related to a reduction in other loan fees received from
other institutions based on declining lending activity reSUlting from current market conditions. Income on the rental property that
was sold in June 2.009 was $414,000 relatively unchanged between the periods. Other miscellaneous items of other income for 2007
were approximately $87.0,00.0 versus $758,000 for 2.008.
Noninterest Expense. Noninterest expense increased $10.8 million to $76.9 million for the year ended December 31, 2009
from $66.1 million for 2.008. Noninterest expense was $66.1 million for the year ended December 31,2007. The following table
details the major components of noninterest expense for the periods indicated:
...
Compensation and
employee benefits

Amortization of mortgage
servicing rights

.
heldfcirsl!!e

e!luipment
.
Postage and
Years Ended December 31,
2009 2008 2007

$25,417 $ 24,868
2P,447 '. '17.9H '
2,507 .. .2,635
586
$ 21,892 $

.3,489
"':'i'
122'
7,697
$66085

- 52-
549
2;S2!F
5,051
$ 2,976
(4.\131)
555
2342
61 7
Table of Contents
Compensation and employee benefits increased $549,000 million, or 2%, to $25.4 million for tbe year ended December 31,
2009 compared to $24.9 million for tbe year ended December 31,2008. The head count was down slightly, with 224 employees at
December 31, 2009 compared to 230 employees at December 31, 2008. The principal cause of the increase in compensation expense
,between the periods was higher medical insurance costs and an increase in compensation related to. the deferred direct loan
origination costs. Between 2008 and 2009, loan growth declined and, as such, there was less compensation deferred as part of the
cost to originate loans. Equity based compensation was $1.5 million for 2009 and 2008. Please see Note 14 to the consolidated
fmancial statements for further information about the impact of stock based compensation to our results from operations.
Compensation and employee benefits increased $3.0 million, or 14%, to $24.9 million for the year ended December 31,
2008 compared to $21.9 million for the year ended December 31, 2007. This increase was primaJ,ily the result of the increase in full-
time equivalent employees at United Western Bank as we continued to implement our community bank business plan as well as
normal compensation increases for job performance. In 2008 we added a total of 30 employees and total employees were 230 at
December 31, 2008 compared to 200 at December 31,2007. This increase included 27 additional employees at the Bank principally
for positions added to complete the regional banking teams for the Longmont and Hampden Avenue branches that we opened in
2008, staff the leasing, energy banking, and community bank lending teams, and additional personnel in SBA lending and credit
administration. The increase for 2008 also includes an increase of $475,000 of equity based compensation, which was $1.5 million
for 2008 versus $1.0 million in 2007. The increase is.attributable to the increase in the number of eligible employees who participate
in the equity based compensation plans.
Subaccounting fees increased $2.5 million or 14%, to $20.4 million in 2009 compared to $17.9 million in 2008.
Subaccounting fees for 2008 declined $4,9 million, or 22%, from $22.9 million in 2007. Subaccounting fees represent fees paid to
third parties to service depository accounts on our behalf and are incurred at United Western Bank for custodial and processing
and trust deposits. The increase in subaccounting fees for 2009 was a result 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, which accounted for
substantially all the increase between 2009 and 2008 and offset the decrease related to the decline in the underlying index upon
which the subaccounting fees are tied. The decrease in subaccounting fees for 2008 was due to a decrease in the interest rates to
which the subaccounting fees are related, partially offset by a $17 million increase in the average balance of deposits for which
subaccounting fees are incurred. The average rate was 0.16%, 2.09%, and 5.05% in 2009, 2008, and 2007. The average balance of
custodial and processing and trust deposits that are subject to subaccounting fees were $1.1 billion for 2009, 2008, and 2007.
Amortization of mortgage servicing rights decreased $128,000, or 5%, to $2.5 million for the year ended December 31,
2009 compared to $2,6 million for 2008. We have not added significantly to our mortgage servicing portfolio since we exited the
mortgage production business at Matrix Financial Services in February 2003. Our amortization of mortgage servicing rights
fluctuates principally based on the prepayment rates experienced with respect to the underlying mortgage loan portfolio. For the
year ended December 31, 2009, . our mortgage servicing rights portfolio experienced average prepayment speeds of 16.2%
, compared to 16.8% for the year ended December 31, 2008. The average mortgage servicing rights portfolio in 2009 declined to
$831 million compared to $975 million fur 2008.
Amortization of mortgage servicing rights decreased $854,000, or 24%, to $2.6 million for the year ended December 31,
2008 compared to $3.5 million for 2007. For the year ended December 31, 2008, OUf mortgage servicing rights portfolio experienced
average prepayment speeds of 16.8% compared to 19.3% fOf the year ended December 31,2007. The average mortgage servicing
rights portfolio in 2008 declined to $975 million compared to $1.2 billion for 2007.
Lower of cost or fair value adjustments were $586,000, $2.8 million, and $722,000 for the years ended December 31, 2009,
2008 and 2007, respectively. These non-cash charges represent a valuation allowance charged to earnings to record our held-for-
sale loan portfolios at the lower of cost or fair value ("LOCOFV"). The held-for-sale portfolios are comprised of residential
mortgage loans, multifamily loans and originated SBA loans. The $2.2 million decrease in the LOCOFV charge for 2009 was a result
of a stabilization of interest rates which reduced the required levels of charges to reduce the loans held for sale to LOCOFV. In
addition, an increase in the value of certain assets and approximately $21.7 million of payoffs of the residential held for sale
portfolio between 2009 and 2008 that eliminated the valuation associated with such loans. The $2.1 million increase in the
LOCOFV charge for 2008 was a result of the market environment and lack of liquidity available for held for sale assets which
resulted in a decline in fair value of loans held-for-sale. In addition, two multifamily loans held for sale became nonperforming in
2008 requiring additional LOCOFV write down. The charges incurred for 2007 were based primarily on the residential mortgage
loan portfolio.
- 53-
2343
Table of Contents
Occupancy and equipment expense was $3.4 million for 2009, which represents an increase of $660,000, or 24%, as
compared to the $2.7 million of occupancy and equipment expense for 2008. Occupancy and equipment expense was $2.3 million
for 2007. We recognized $1.1 million of amortization of deferred gain as a reduction of occupancy expense for each of 2009 2008
and 2007. This amount represents a reduction in our occupancy expense for the period from the recognition of the
resulting from the sale-leaseback of the United Western Financial Center, which is being amortized into income over the ten-year
tenn of the lease. The increase in occupancy expense from 2008 to 2009 was related to the opening of the Centennial branch
location between the periods and having a full year of occupancy expense in 2009 for the Longmont and Hampden branch
locations that opened during the fourth quarter of 2008. The increase from 2007 to 2008 was related to the opening of the
Longmont and Hampden branch locations between the periods and having a full year of occupancy expense in 2008 for the
Loveland branch location and Aspen loan production office that opened during the last four months of2007.
Deposit insurance increased $3.9 million, or 379%, to $4.9 million for the year ended December 31, 2009 compared to
$1.0 million for 2008. The increase in deposit insurance expense was due to increases in the fee assessment rates during 2009 and
a special assessment applied to all insured institutions as of June 30, 2009, which for the Company was $1.1 million. See Item I.
"Business - R.egulation and Supervision - Insurance of Accounts and Regulation by the Federal Deposit Insurance
Corporation" for additional infonnation as to the changes of and the composition of the deposit insurance incurred by United
Western Bank. The Company cannot provide any assurance as to .the ultimate amount or timing of any such emergency special
assessments, should such special assessments occur, as such speCial assessments are dependent upon a variety of factors which
are beyond the Company's control.
Deposit insurance increased $209,000 million to $1.1 million for 2008 compared to $818,000 for 2007 due to higher
deposit balances and an increase in the assessment rate.
The remainder of noninterest expense, which includes postage and communication expense, professional fees
mortgage servicing rights subservicing fees, and other general and administrative expenses increased $5.5 million, or 39%
$19.7 million for 2009, as compared to $14.2 million 2008. An increase of $710,000 in professional fees was related to an $844,000
increase in legal fees and a $69,000 increase in other professional fees, which were partially offset by a $203,000 decrease in audit
fees. The increase in legal fees was the result of various strategic alternatives the Company evaluated during the year as well as
for litigation and loan collection costs. The increase in other general and administrative expenses was principally due to the
following: a $1.8 million loss on the disposition of assets owned by a non-core subsidiary, a $672,000 loss at the UWBK Colorado
Fund incurred on a loan related to a loan that paid off in full at the an increase of $1.3 million in real estate owned expenses,
and an increase of $1.3 million in loan collection expenses. These mcreases were offset by a decrease in charges for asset
servicing issues at Matrix Financial. During 2008, $1 million of charges were incurred to reduce loan servicing advances at the
Bank and Matrix Financial Services to their realizable value and a charge to increase the recourse servicing allowance at Matrix
Financial Services.
The remainder of noninterest expense, which includes postage and communication expense, professional fees,
mortgage servicing rights subservicing fees, and other general and administrative expenses increased $218,000, or 2% to
$14.2 million for 2008, as compared to $14.0 million for 2007. Absent the $1.5 million expense related to the redemption of the junior
subordinated debentures during 2007, the increase from 2007 to 2008 was $1.7 million, which was primarily due to the following
items: a $1.2 million increase in professional to $3.3 million for 2008 as a. result our decision to change independent public
accountants in the fourth quarter of 2008 and IDcreased legal expenses associated With routme legal matters and loan collectiOT!
issues; $\.O million of charges were incurred to reduce loan servicing advances at the Bank and Matrix Financial Services to their
realizable value and a charge to increase the recourse servicing allowance at Matrix Financial Services.
- 54-
2344
Table of Contents
Income Taxes. The following table presents our income tax (benefit) expense for the periods indicated:
Current:

.$,ate ..
Deferred:
Fedimi!' .
State
..
Income tax (benefit) provision from continuing operations

Years ended December 31,
2009 2008 2007
(Dollars in thousands)
'f (17,014) $ .

(1,989)

. -:, " ::, '-'
6,696 $
P49'"
(4,900)'"
(410)

. ili8'

(124)
$ (32,567) ,;;.$..... -:;2;;;:,6;;;;;35 $ 3,315
'$, 'zo;liio i;l ... (9?t ..... $
Income tax (benefit) provision from continuing operations was ($32.6) million for 2009, $2.6 million for 2008, and
$3.3 million for 2007. Our effective tax rate from continuing operations was (29.0%) for 2009, 20.7% for 2008, and 24.6% for 2007.
Our effective tax rate varies from our expected tax rate of approximately 37.93% (35% federal ,and 2.93% state, net of federal
benefit) due to several factors. For the year ended December 31, 2009, our effective tax rate varied from our expected tax rate
principally due to the loss incurred from continuing operations, New Markets Tax Credits of $3.0 million, and tax exempt income.
For the year ended December 3 I, 2008, our effective tax rate varied from our expected tax rate principally due to $986,000 of tax
exempt income, income tax credits from the utilization of New Markets Tax Credits of $1.9 million, and the resolution of uncertain
tax positions, which directly reduced income tax expense by $454,000. For 2007, our effective tax rate was lower than the expected
tax rate due to $968,000 of tax exempt income, utilization of New Markets Tax Credits of $1.8 million, and the resolution of an
uncertain tax position, which directly reduced income tax expense by $474,000.
Balance Sheet
Total assets increased $267 million, or 11.8%, to $2.53 billion at December 31, 2009 from $2.26 billion at December 31
2008. Loan and security repayments together with deposit growth were principally invested in cash and due from banks. '
Total liabilities increased by $209 million, or 9.7%, to $2.37 billion at December 31, 2009 from $2.16 billion at
December 31, 2008. The change in liabilities was the result of an increase in deposits of $269 million, which was partially offset by
decreases in borrowed money of$10.6 million and FHLBank borrowings of$46 million. Total deposits including custodial escrow
balances, grew by $271 million, or 15.5%, to $2.03 billion during 2009. This increase was the result of the continued concerted
Bank wide deposit gathering effort. During 2009, community bank deposits increased $273 million, or 142%, to $465 million.
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Investment Securities. The following table sets forth infonnation regarding contractual maturities and the weighted average yields of our investment securities available
for sale and held to maturity at December 31, 2009, 2008 and 2007.
December 31, 2009
December 31,2008 December 31, 2007
Due After Five
Due After Five
Years through Ten Years
Weighted
Average
Due after Ten Years
Weighted
Average
Years through Ten Years
Weighted
Average
Due after Ten Years
Weighted
Average
Due After Five
Years through Ten Years
Weighted
Average
Yield
Due after Ten Years
Weighted
Average
Yield
Balance Yield
Balance Yield Balauce Yield Balance Yield Balance Balance
Total-
available
for sale
flelilt"

Mortgage-
backed
securities
740 ....... 3.46 32,391
securities
.. .. 24,S.$} .. i:3.6S ...
Total AFS and
HTM
Securities $ 25,321
=
3.67% $ 408,454
====
3.05
-. -. -.. -.. -, .. ,-, ....
.....
5.58% $ 31,840
===
5.42 .... 21,749
... ...5.42 461;05
5.40% $ 525,717
====== ======
4.76
. .... . . 5.39 ... 6,3&7
8.35 56,480 7.74
..... 567.118 .. ....:5;51;
5.57%
====
The contractual maturities of the Company's investment securities portfolio is considerably longer than the expected lives due to repayments anticipated from the
mortgagors that represent the underlying collateral ofthe securities.
At December 31, 2009, the Company's mortgage-backed investment security portfolio had an amortized cost of$346.7 million and consisted ofthree classes of securities:
agency securities, prime obligations and Alt-A CMOs .. The for sale. investment security portfolio was
comprised of instruments with an esltmated faIr value of $33.1 nullton and the held to matunty portfolio was compnsed of secunties WIth an amortized cost of $311.9 million, both as
shown in the table below:
Available for sale

CMO - Prime
CMO-'eAlt7"'A.
Held to maturity
Ageiicy#t9rtgaile-pll.Ssiiiiollgh .
Mortgage pass through
tMPpl'rllll.
cMo":"':i\it-A
$
Total
17,2Jt:
18,875 c'
1,9:23
33,010
Total
.'
3;290
ZSIl,398
38,750 .
311;893 ...
Based on lowest rating assigned by credit rating agency at December 31, 2009
(Dollars in thousands)
$ 12;212 $ .$ $
'-'--
$ 12,212 $ $ $
Based on lowest rating assigned by credit rating agency at December 31, 2009
Agency/AAA AA A BBB
,$ .YM55 $
1.

1,352 3,129
$ $9,898 $ $ 21,9').1
-56-
2346
$
$
$
<BBB
18,875
1.923]
20,798
<BBB
tm;i)48
34,269
181;'111
Table of Contents
Based on the highest rating assigned, approximately 46% of the portfolio is investment grade at December 31, 2009.
Available for sale agency mortgage pass through is comprised of substantially all securities issued through Federal
national Mortgage Association ("Fannie Mae") and includes a mix of both variable rate and fIXed rate securities that were
acquired principally to collateralize public deposits and certain sweep accounts.
Available for sale CMO-Prime is comprised of securities with underlying hybrid adjustable rate mortgages, which
initially reset in mid-20lO. These securities have 8.5% weighted-average credit support at December 31, 2009. Current credit
support was greater than two times foreclosure levels at December31, 2009. On a weighted average basis, for !ranches
subordinated to those owned by the Company, cumulative losses were 1.85%.
A vailab\e for sale CMO - Alt - A is comprised of one fixed rate security with 3.1 % credit support at December 31,
2009. This security has paid down 90%, and is expected to pay down completely before delinquencies exceed its credit support,
due to its position as the first in a sequential issue. The underlying loan collateral bad a weighted average loan to value of71%.
This security is the most senior tranche in the issue, and there well,l no cumulative losses in the security to date.
Held to maturity agency mortgage pass through is comprised of securities issued through Federal Home Loan
Mortgage Corp ("Freddie Mac'') and Fannie Mae and are all fixed rate securities acquired to assist the Bank in fulfilling its
Community Reinvesbnent Act responsibilities.
Held to maturity mortgage pass through is comprised of four securities issued through the Colorado Housing and
Finance Authority, are fixed rate securities acquired to assist the Bank in fulfilling its Cummunity Reinvestment Act
responaibilities.
Held to maturity CMO - Prime is comprised of securities with 7.2% weighted-average credit support at December 31,
2009 and moderate levels of delinquencies in total. Credit support levels remain more than several times in excess of cumulative
losses recognized to date, and are expected to increase as subordinate tranches of these securities payoff. Three of the securities
in this population were subject to other-than-temporary impairment charge in 2009 due to the extent and duration of the decline in
market value below 'amortized cost, given consideration to current illiquidity in the marketplace and uncertainty of a recovery of
expected future cash flows.
Held to maturity CMO A1t-A is comprised of securities with 5.8% weighted-average credit support at December 31, 2009
and moderate and stable levels of delinquencies. We expect delinquency statistics in all classes of these securities to moderate
over time, and roll rates from delinquency to foreclosure to REO to be reduced by private industry loan restructuring programs, as
well as the Homeowner Affordability and Stability Plan recently signed into federal law. .
The held to maturity portfolio is comprised of the securities shown above and, based on the lowest rating assigned,
19% of this portfolio continues to be rated AA or higher and 40% invesbnent grade or higher. Based on internal analyses and
analyses performed by independc:nt third parties, we believe the decline in fair value on the remaining securities is a temporary
impairment due to inactive markets.
Management reviews tbe estimated cash flows of each security at least quarterly. In addition, management receives
pricing from two widely known pricing services. Management has engaged an independent consultant that provides estimated
cash flows for securities identified by management as requiring additional analysis in order to ascertain fair value in 'accordance
the accounting literature. Management obtains the fair value indications from the pricing service in the ordinary course of
business. Management reviews the fair value indications for reasonableness given the ratings, decline in fair value as indicated
by the general pricing services, and other credit factors.
For the period ended December 31, 2009, for purposes of. assessing om management requested'its independent
consultant to provide cash flow.estimates based on the following parameters, all securities with at least one rating below
invesbnent grade, or a collateral coverage ratio of less than or equal to 1.00. The collateral coverage ratio is calculated as .the
current credit support divided by 40% of the sum of loans that are 60 days delinquent times 60%, plus loans 90 days delinquent
times 70% plus foreclosures and REO. These two populations substantially overlapped. The cash flow estimates received from
our independent consultant are reviewed by the Bank's asset/liability committee and at Bank investment committee meetings,
board of director meetings, and regular portfolio monitoring meetings. The review includes an analysis of all securities owned by
the Company and various metrics for each security, including original and current ratings, collateral characteristics, repayment
rates, cumulative loss rates and other factors. ) .
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The continued economic downturn and. the poor economic. indicators continued declines in home prices,
continued high unemployment, and continued erosIon of mortgage equIty that occurred m the fourth quarter of 2009 and the early
first quarter of 2010 concerned us, especially in connection with the downgrades in securities. Over the past year it had appeared
that the rating agencies were being more conservative and reacting more timely, but these downgrades showed the rating
agencies were still lagging. During the off-cycle field visit by our regulators beginning in January, we discussed with the OTS and
FDIC our assumptions regarding default rates, our observations of the performance of the loans underlying our non-agency
mortgage back securities, and the macroeconomic factors discussed above, as well as our regulators' views of how these
securities have been performing for other industry participants. Based on an elltensive review of all of the information available
we determined that we should re-evl!luate the assumptions used to determine the ellpected cash flows to be received from
securities for the period ended December 31, 2009.
One of the inputs that management uses for estimating cash flows on our mortgage backed securities is an estimated
default rate on the underlying loan portfolio. Through September 30, 2009, and for the prior four quarters we had utilized an
estimate for defaults from our third party provider that projected the estimated lifetime cumulative defaults based on loan level
actual historical default performance for the specific pool. This analysis was supported by observed behavior that weaker loans
go bad earlier and older paying loans have superior performance to originated with similar underwriting
criteria and show fewer weaknesses. Our own hlstoncal mortgage ongmahon bus mess resulted 10 weaker loans becoming
delinquent early in the life of the instrument and the overall performance of the loans generally improved over time with additional
seasoning. We ellpected this would also be the case with the mortgage-backed securities portfolio. This assumption was true with
respect to the mortgage origination business, and still appeared to be troe through the third quarter of 2009, as the residential
home market was improving. The results of the fourth quarter of 2009 and the early first quarter of 20 10 show that the length and
severity of the recession, as well as home price depreciation, are continuing, and as such, even these older loans have more risk
and we determined that this cash. flow estimate is no longer results that match the expectations that the Company
believes are applicable to the underlying performance of the secunhes owned by the Company as of December 31, 2009.
Accordingly, the Company has concluded its former default assumption was no longer indicative of the Company's
best estimate of cash flows. The Company worked with our third party service provider to select an alternative default assumption
based on enhanced trend analysis in order to estimate cash flows that we believe better reflect the continued deterioration of the
underlying collateral performance discussed previously and the protracted nature. of the current financial crises in the U.S. in
general and the U.S. housing market in particular.
In the event securities demonstrate additional deterioration through an increase in defaults or loss severity that indicate
the Company will not recover its anticipated cash flows or if the duration of relatively significant impainnents in these securities
does not reverse, the Company will incur other-than-temporary impairments, which may result in material charges to earnings in
future periods. In addition, if current economic conditions, including housing prices and homeowner equity,
deteriorate, we may again re-evaluate our estimates of future cash flows, whIch could also result in additional OTTI.
Loan Portfolio .our major interest-earning asset is our loan portfolio. A significant part of our asset and liability
management involves monitoring the composition of our loan portfolio, including the corresponding maturities. Community bank
loans include commercial real estate loans, construction and development loans, commercial loans, multifamily loans and
consumer loans. Other loans include legacy purchased residential loans and purchased guaranteed portions ofSBA 7(a) loans.
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2348
Table of Contents
The table below presents the break down of the components of community bank loans and other loans between loans
held for investment and loans held for sale as we view and manage these assets between community bank assets and other
assets, which generally were assets purchased in the secondarY marketplace.
As .fDeeember 31,
2009 2008 2007 2006 2005
. -59-
2349
Table of Contents
. The following' table sets forth the composition of our loan portfolio by loan type as of the dates indicated. The amounts
in the table below are shown net of premiums, discounts, other deferred costs and fees and the valuation allowance to reduce
loaas held for sale to the lower of cost or fair value.
2009 2008
A. of D ember 31,
2007 2006
2005
(7,231)
.
Other loans:

guaranteed portions 70,684 20.4 87,194 20.6 116.084 20.8 156,425 20.5 193,788 17.6
8611',";: U' ;,'" " ,2;'9')
345,879 100% 422,985 100% 558,943 100% 762,495
Loans decreased $95.6 million in 2009, which was comprised ofa decrease of$18.5 million in community bank loans, and
. a decrease of $77 .1 million of other loans. The decrease for 2009 in community bank loans was consistent with our balance sheet
management plan implemented in 2008. Based on the current economic environment, we expect a smaller increase in the
community bank portfolio in 2010 than in prior years. We also anticipate a continued change in the loan mix prospectively with a
potential increase in commercial and industrial loans and consumer loans including residential mortgage loans and continued run.
oft'through repayment of certain other loans. The decrease for 2009 in other loans was a result of repayments of mortgage and
SBA loans, as well as sales of SBA originated guaranteed portions loans. We note that repayments of mortgage loans for 2009
were lower than our historical experience at 18.0%, and believe a lower leve! of repayments is reasonable to expect prospectively.
The following tsble presents the detsils of the construction and development ("C&D") portfolio for the periods
indicated:
December 31,
Z009 Z008.
(Dollars in thousands)
'1;(:;': "'if;'; ,; ,'v;
Construction - 1-4 family $ 87,595 $ 89,434
;".,,':;;ir,,;''!fIU.';

Total construction 250,975 277,614
C,'i, ..... ; ,,',"< '"ii'."
.0!;
Undeveloped land (consumer) 824 1,09Z
.", .. , .21'S'::::;;"}';:;;" "1::: ':D;.,::' .. ' '.,
Total construction and development $ 343,223 $ 401,009
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The C&D poitfulio decreased $57.8 million in 2009 to $343.2 million at December 31,2009, and represents 29.0% of our
total held for investment loan portfolio and 31.2% of our community bank portfolio. As shown in the table above, construction
loans were $251.0 million at December 31, 2009, or 22.S% of our community bank portfolio and land loans were $92.2 million or
8.4% of our community bank portfolio. Within the construction portfolio the loan breakdown is approximately 34% 1-4 family, 44%
commercial, 18% multifamily and 4% consumer. With few exceptions, the land loans that have been underwritten are based on
marketability ofthe lots or were made in anticipation of vertical construction. Land loans have an identified source of repayment
other than the. resale of raw land. The Bank has been very selective in the origination of loans in this asset class, and has no
community bank land loans without personal recourse as a part of its underWriting.
There are additional risks associated with C&D lending as compared to our other lending as discussed above in Item I.
"Business - Community Banking Lending - Residential and Commercial Construction and Development Lending." To address
and mitigate these risks, we regularly review the C&D portfolio. The C&D portfolio is monitored for total overall concentration
levels for which OUf goal is to reduce C&D loans to 25% of the held for investment portfolio and maintain C&D loans below 150%
ofthe Tier I capital plus the allowance for credit losses at the Bank. We also monitor geographic breakdown, and the overall C&D
portfolio speculative to pre-sale ratios as well as the factors that are relevant to all loans.
At December 31, 2009, we have defined nine geographic regions for our C&D portfolio, eight in Colorado and one
region for loans outside Colorado. Within Colorado, four of the defined geographic regions account for $239 million, or 70% of the
C&D portfolio, as shown in the table below. Our speculative to pre-sale ratio is approximately 67% to 33% at December 31,2009.

Denver Metro
Colill"\ido Col\llls ....................... > ...........
M?untainCommunities __ Aspen, Valley
..
Other Colorado Areas
Qytside CoiQrado
Total
December 31,2009 December 31,2008
Outstanding Percent Outstandins Percent
(Dollars in thousands)
$
108,706
4(),092
72,149
tS,()lS
56,038
48,Z20:
343,223
31.8% $ 181,505<
10% S2,()62
21.0% 62,726
570%
16.3% 44,043
.
== __ __
45.2%
...
15.6%
6.3%
11.0%
8.9%

. Commercial real estate loans, including multifamily loans increased to $556.0 million at December 31,2009 as compared
to $529.3 million at December 31, 2008. As we reduced our lending on construction and development loans we initially increased
emphasized commercial real estate lending based on our expertise, relative market conditions, and other factors. The commercial
real estate portfolio is geographically located as follows: Denver metropolitan area 40%; 1-70 corridor and mountain communities
9%; Fort Collins, 11%; other Colorado areas 4%; and outside Colorado 36%. There is a higher percentage of the commercial real
estate portfolio located outside of Colorado due to our national SBA lending footprint, and from older multifamily and single
tenant loans that were originated prior to 2006.
Residential loans declined $60.6 million during 2009 and declined $106.1 million during 200S. The residential loan
portfolio represents loans that primarily were purchased in the secondary market prior to September 2005, at which time we
stopped purchasing such assets. SBA purchased guaranteed portions represent the guaranteed portions of SBA 7(a) loans we
acquired prior to March 2006. SBA purchased loans declined $16.5 million during 2009 and $28.9 million during 2008 due to
repayment and loan sales. We believe it is possible that the balance of residential loans may increase prospectively given our
management experience in this business line, the requirement to maintain our Qualified Thrift Lender ratio, and based on our
outlook for the economy. We anticipate the balance ofSBA purchased loans to decline prospectively through repayment.
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Table of Contents
The following table presents the aggregate maturities of loans in each major category of our loan portfolio as of
December 31, 2009, excluding the allowance for credit losses. Actual maturities may differ from the maturities shown below asa
result of renewals and prepayments or the timing ofloan sales.
Less than
One Year
As of December 31, 1009
One to Five Over Five
Yean Yean
(Dol/ars in thousands)
Total
Other loans:
. :)'/ ;t,: (. 17\;: ',"W
Total loans $ 552,366 $ 293,801 $ 599,364 $ 1,445,531
Loans, excluding the allowance for credit losses, which are contractually due in one or more years, are split between
fixed and adjustable rates as follows:
Less than
One Year
As of December 31, 1009
One to Five Over FIVe
Yean Yean
(Dol/ars in thousands)
Total
'::$'';.:
Adjustable 471,804 153,109 508,353 . 1,133,266
..;;;:t.7'r;:;"!<. ,'," ......;;;;;:,>.; 'i' ;.,) . ;:i'$
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Table of Contents
Asset Quulity. As part of our asset quality function, we monitor all nonperforming assets on a regular basis. Loans are
placed on nonaccrual when full payment of principal or interest is in doubt or, except for government guaranteed sponsored
loans, when they are past due 90 days as to either principal or interest. During the ordinary course of business, management may
become aware of borrowers that may not be able to meet the contmctual requirements of loan agreements. These loans are placed
under close supervision with consideration given to placing the loan on non-accrual status, increasing the allowance for credit
losses and (if appropriate) partial or full charge-off. Non-accrual loans are further classified as impaired when underlying collateral
is not sufficient to cover the loan balance and it is probable that we will not fully collect all principal and interest. After a loan is
placed on non-accrual status, any interest previously accrued but not yet collected is reversed against current income. Jf interest
payments are received on non-accrual loans, these payments will be applied to principal and not taken into income. Loans will not
be placed back on accrual status unless back interest and principal payments are made. For certain government-sponsored loans
such as FHA insured and VA guaranteed loans, we continue to accrue interest when the loan is past due 90 or more days, if and
to the extent that the interest on these loans is insured by the federal government. The aggregate unpaid principal balance of
government-sponsored accruing loans that were past due 90 or more days was $9.9 million, $6.5 million, and $5.4 million at
December 31,2009,2008 and 2007, respectively. The growth between 2008 and 2009 is the result of additional purchases of
government insured loans out of our servicing portfolio. These accruing loans are not included in the balances of nonperforming
loans.
Foreclosed real estate represents properties acquired through foreclosure or other proceedings and are initially
recorded at fair value, less estimated selling costs when acquired, establishing a new cost basis, Foreclosed real estate is
evaluated regularly to ensure that the recorded amount is supported by its current fair value. Direct charges to the basis of the
asset that reduce the carrying amount to fair value less estimated costs of disposal are recorded as necessary. Revenues and
expenses from the operations of real estate owned and charges for necessary write downs are included in other income and other
expenses on the statement of operations.
Given current economic conditions, we anticipate that unless there is an increase in overall economic activity in the
State of Colorado and nationally, nonperforming loans may continue to increase prospectively over current levels. In such a case
additional allowance for credit losses would be required, which would in turn negatively impact our results of operations. '
At December 31, 2009, the Company owned $262,000 of mortgages that met the regulatory definition of "sub prime" at
the date of purchase or origination, of which one loan totaling $28,000 was nonperforming. In prior years, the Company originated
subprime mortgages through its mortgage banking subsidiary, and occasionally the Bank also purchased subprime mortgages.
These activities ceased several years ago, and the Company's current holdings represent the remainder of such activities. The
Company is not now active in the subprime market and has no intention of becoming involved in the future.
The following table sets forth our nonperforming assets held for investment as, of the dates indicated:
, .. , ,"', .. ' ,..$
Construciion and
,.,' .'.. ,' ,",' "'. ,",
SBA originated,
.
Residential
. , ..
Total other
,RE9
Total nonperforming assets held
for investment $
2009
3,916
3,916

60,833
As of December 31,
2008 2007
(Dollars in thousands)
.$ Pit, $ 'J,15Z $
2,900

124 . 557
. .,..,.",.="",:,::,:
4;6\1l !,11.l9.
$
3;238
'19i' .
4,029
4.4t7,
13,064
1,649
893'
2,542

7,360 $
2006
l4()
645
151)'
1,()17 .
i,96i
1,136
$1f
1,714
. ,s,4(jl
9,078 $
2005
3P4S'
'120
373'
4,206' .
1,744\
.1,857
1,857

14,127
Nonperforming held for investment assets of $60.8 million at December 31,2009 reflected an increase of $47.8 million
from the $13.1 million level that existed at December 31, 2008. REO increased to $16.4 million at December 31, 2009 compared to
$4.4 million at December 31, 2008. The increase for 2009 was principally related to foreclosures from the construction and
development portfolio. At December 31,2009 REO was comprised of$I!.7 million from the C&D portfolio, $1.4 million from the
multifamily portfolio, $1 million from the commercial real estate portfolio and the remainder of $!.9 million from the residential
portfolio. The increase in REO is consistent with the current economic conditions primarily in Colorado. In total, nonperforming
held for investment community bank loans represent 3.96% of the community bank portfolio at December 31, 2009, compared to
0.45% at December 31,2008. Management analyzes and reviews nonperforrning loans by loan type. Nonperfonning community
bank loans totaled $40.6 million and $4.6 million at Decemher 31, 2009 and December 31, 2008, respectively. Nonperforming
community bank loans increased in 2009 due to the current economic conditions. At December 31, 2009, there were 10 commercial
real estate relationships greater than $100,000 that accounted for $15.3 million of the nonperforming commercial real estate loans.
, Of this population, eight relationships totaling $12.5 million were loans originated by our SBA division. Included in nonperforming
construction and development loans were 10 relationships greater than $ I 00,000 that totaled $21.7 million of the nonperforrning
construction and development loans.
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The Company's current lending standards for commercial real estate and construction and development lending are
determined by property type and specifically address many factors including: maximum loan amounts, maximum loan-to-value
debt service coverage ratios, requirements for pre-leasing or presales, minimum borrower cash equity, and maximum loan
to cost. Currently, the maximum guideline for LTV is 80%, for a presold residential construction loan with lower limits established
for all other real estate "loan types. The Company's LTV guidelines are generally more conservative than regulatory supervisory
limits. In most cases, for construction and development loans, the loan amounts used to determine LTV include interest reserves,
which are built into the loans in a sufficient amount to see the project through construction and lease up or sell out.
Residential nonperforming loans represent assets acquired through purchase prior to 2006. The balance of
nonperforming residential loans increased $678,000 at December 31, 2009, compared to December 31, 2008. Overall, nonperforming
residential loans totaled $3.9 million and $3.2 million at December 31, 2009 and December 31, 2008, respectively. This represents
4.33% and 2.58% of the residential portfolio for those respective periods. The increase in nonperforming residential loans as a
percentage of the residential portfolio is due to the current economy and continued repayments of the remaining performing
portion of the portfolio. The Company's level of nonperforming residential loans is generally consistent with the national
marketplace based on information published by the Mortgage Bankers Association. The Company's wholesale residential
portfolio is geographically dispersed. The average loan size of the residential loan portfolio is approximately $131,000 and consists
of loans that on average are approximately 8.6 years seasoned at December 31, 2009, were underwritten to Bank policy
requirements at the time of acquisition, and bore average FICO scores over 700 with reasonable loan-to-value and debt-to-income
ratios. We believe the risk of loss associated with this portfolio is considerably lower than losses associated with other types of
lending, which is evidenced by our historical loss experience from the residential portfolio. We expect future levels of
nonperforming loans in the residential portfolio to be generally consistent within the national and regional economic markets in
which the loans are located.
The following table sets forth our nonperforming loans held for sale as of the dates indicated:
As of December 31,
2009 2008 2007 2006 2005
(Dollars in thousands)
ResidentiltI .$, 6,493
t
6224 >$ 4,723 '$ 1,046 ,"" ,
School financing 247
Tolilfotiier

6;214
;.

1;Z?3,
Multifamily 6,759
blink
." 6,7S9 ....,.
"" .
Total nonperforming loans held for
sale $ 9,807 $ 13,252 $ 6,224 4,723 $ 7,293
Nonperforming loans held for sale decreased by $3.4 million during 2009. Nonperforming residential loans increased
$3.3 million reflecting the general economic conditions for residential mortgage loans nationally. These loans share the
characteristics discussed above for residential loans held for investment. Multifamily nonperforming loans held for sale decreased
by $6.8 million as the Bank accepted short sale payoffs for both loans that comprised the balance at December 2008.
Allowance for Credit Losses. The Company believes the allowance for credit losses is critical to the understanding of
our financial condition and results of operations. Selection and application of this "critical accounting policy" involves
judgments, estimates, and uncertainties that are susceptible to change. In the event that different assumptions or conditions were
to occur, and depending upon the severity of such changes, materially different financial condition or results of operations is a
reasonable possibility.
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Table of Contents
We maintain our allowance for credit losses at a level that the Company believes is adequate to absorb probable losses
inherent in the existing loan portfolio based on an evaluation of the collectibility of loans, underlying collateral, geographic and
other concentrations, and prior loss experience. We use a risk rating system to evaluate the adequacy of the allowance for credit
losses. With this system, each loan, with the exception of those included in large groups of smaller-balance homogeneous loans,
is risk rated between one and ten, by the originating loan officer, credit administration, loan review or loan committee, with one
being the best case and ten being a loss or the worst case. Estimated loan default factors are multiplied against loan balances and
then multiplied by a historical loss given default rate by loan type to determine an appropriate level for the allowance for credit
losses. A specific reserve may be needed on a loan by loan basis. Loans with risk ratings between six and nine are monitored more
closely by the loan officer, credit administration, and the asset quality committee, and niay result in specific valuation allowances.
The allowance for credit losses also includes an element for estimated probable but undetected losses and for imprecision in the
loan loss models discussed above.
The following table sets forth information. regarding changes in our allowance for credit losses for the periOdS'
indicated. The table includes the allowance for both other loans and community bank loans held for investment ("HFr').

tlfYe8r ..
Cbarge-offs:

C(Jm1l1erd'lreai .
.
Commercial
N"Wa\1llfY
Consumer
'tofcill
Recoveries:
Resideiitill.l'
Commercial real estate
.
Commercial
ConsUmer
..............
Provision for credit losses ciiarged to .
operations
.
Ratio of net charge-offs to average
loans
A.v
ye."
Net charge offs to average residential
loans HFI

. .. .
Allowance as a percentage of loans
HFI
.. of
't1tIllPerfoPJlingloallS
2009

$
:Ii
...
(3,178)
n7.l42t.
(1,063) .
(iuj
35,032

1.33%
,c,.':,',_' . ",.
1,241),299.
0.19"10
2.93
$
$:
As of and for the Year Ended December 31,
2008 2007 2006
(Dollars in thousands)
'(435) ....
(25)
\(227)'
(67)
:,..
(128)
... (i43)
(2)
"{411!)
8,599
16Jlij
0.04%
i,099,\!44
0.30%
1.30
$
$
(34)
2,312
8,000
0.07%
"'--" ...., .
820,755
0.30%
(5iJ{)
(115)

(7$$)
2,019
$
0.1 1%
h.,
'.
$
0.40%
.,. ..... .. ... ... O ... ,3;;.,i;9
0.90 0.87
f
$
2005

(292)

(223)
..
(2()(j)
(65)
891
4;SOIlP
0.46%
;

0.90%
qiL
1.12
. 50.08
Net charge-offs were $16.5 million for 2009, an increase of $16.1 million from the $416,000 of net cbarge-offs incurred in
the year ended December 31, 2008. Charge-offs in the commercial real estate portfolio were principally related to four loans and
these cbarge-offs totaled $3.0 million; two of these four loans were SBA originated loans with charge-offs of $1.3 million. In the
C&D portfolio there were seven relationships that accounted for $1 1.3 million of the $12.1 million of C&D charge-offs; two of the
relationships charged-off related to shared national credit loans and totaled $4.3 million. The majority of the commercial cbarge-
offs was related to one lease transaction in which the borrower was forced into involuntary bankruptcy. All of the real estate
related cbarge-offs were the result of deteriorating economic conditions and declining collateral values. Loans charged-off are
subject to continuous review, and our credit administration team takes specific actions to achieve maximum recovery of principal,
accrued interest and related expenses.
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Net charge-oftSwere $416,000 for 2008, a decline of $127,000 from the $543,000 of net charge-offs incurred in the year
ended December 31, 2007. Of the $416,000 in net charge-offs for 2008, $194,000 were related to residential loans.
The provision for credit losses was $35.0 million for 2009 compared to $8.6 million for 2008 and $2.3 million for 2007. The
provision is based on tbe results of our quarterly analyses of the loan portfolios and change in the mix of the loan portfolios. The
provision for 2009 was in part due to higher levels of net charge-offs on loans, which in tum increases the loss factors that we
apply to the remaining loans in our portfolio. Other factors included the weak economic conditions that resulted in collateral
performance and declining collateral values ,on several real estate related projects that are considered classified loans. The
provision for 2008 was due to loan growtb of $356 million in the held for investment loan portfolio primarily related to commercial
real estate, construction and development and commercial loans which have a higher inherent risk, asset quality issues and the
current economic conditions. The provision for credit losses in 2007 was comprised of held for investment loan portfolio growth
of $176 million and to a lesser extent asset quality issues associated with a handful of loans. The provision made in 2006 was due
to community bank loan growth and our reevaluation of loss factors related to loan loss reserve levels associated with our loan
portfolio. During the first quarter 2006, our credit risk management team revised the estimated loss factors that are applied to
certain loans to reflect our experience with inherent losses in these types of loans. The provision for 2005 was related to the other
loan assets and asset quality issues in those periods.
The following table shows information regarding the components of our allowance for credit losses as of the dates
indicated:
2009
Percentage of
Loans in each
Category to
Amount Total LoaDS
ru;.identiJjj'$
SSA .....
guaranteed
purchased
Commercial
real
Subtotal
community
bank
2008
Percentage of
Loans in each
Category to
Amount Total Loans
As of December 31,
2007
Percentage of
Loans in each
Category to
Amount Total Loan.
(Dollars in thousands)
1006
Percentage of
Loans in each
Category to
Amount Total Loans
200S
Percentage of
Loans In each
Category to
Total Loans
allowance 33,642 15,232 7,231 5.372 4,018
. ..
The increase in the allocations of the allowance for loan losses to the Commercial real estate, Construction and
Development and Commercial portfolios was primarily a result of the charge-offs taken in tbese categories during 2009. This
impacted the historical loss factors used in the migration analysis, as well as there was an overall increase in the subjective
factors, thus more of the allowance was allocated to these components.
The ratio ofthe allowance for credit losses to total loans held for investment was 2.93% at December 31, 2009, 1.30% at
December 31,2008,0.90% at December 31,2007,0.87% at December 31,2006, and 1.12% at December 31, 2005. The balance of the
allowance for credit losses increased in 2009 based on our analysis of the allowance required to maintain the allowance at an
adequate level given current economic conditions and probable losses inherent in the portfolio. Generally, residential loans are
becoming a smaller portion of the held for investment loan portfolio as such loans are repaying, and being replaced by community
bank loans which have a higher inherent risk.
The allowance for credit losses on residential loans held for investment was l.1O%, 0.72%, and 0.44% at December 31,
2009,2008 and 2007, respectively. The increase in the allowance for credit losses for residential loans is reflective of the increasing
trend over the past three years in nonperforming residential loans and declining property values. The reserve in prior years was
impacted by the activities at Matrix Financial Services.
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The ratio of the allowance for credit losses for community bank loans to total community hank loans held for
investment was 3.29%,1.47%, and !.I8%, at December 31, 2009, 2008 and 2007, respectively. The increase in the mtio of the
allowance between 2008 and 2009 is principally due to an increase in nonperforming and classified community bank loans.
During 2009 the overall increase in the allowance for loan losses was primarily a result of an increase in !be overall loss
migration factors associated with the homogenous pools of Residential loans and Commercial loans, as a result of the charge-offs
incurred during the year, as well as an increase in subjective factors, based on the increase in nonperforming loans and declining
trends in the portfolio. At December 31, 2009, the amount allocated to these components combined approximated $32.6 million as
compared to $13.7 million at December 31, 2008. The amount of the allowance allocated to impaired loans decreased from
$1.7 million at December 31,2008 to $1.2 million at December 31, 2009. This decrease was a result of partial charge-offs taken on
the impaired credits of $2.5 million. The unallocated portion of the allowance for credit losses remained unchanged at $800,000 at
December 31, 2009 and December 31, 2008, as we have increased the subjective factors in the loss migration analysis and as such
the amount allocated to these components takes into account some of the imprecision included in this component. This
component has been maintained though as a result of the volume of commercial real estate, construction and development, and
commercial loans, which have a higher inherent risk in the portfolio, for uncertainties in the fair value of the underlying collateral,
as well as the overall real estate concentration in the portfolio both nationally and in Colorado.
As of December 31, 2009, we believe that the allowance, when taken as a whole, is adequate to absorb probable
incurred losses inherent in the loan portfolio. Our results from operations could be affected if management's estimate of the
allowance for credit losses is subsequently materially different, requiring additional or less provision for credit losses to be
recorded. Management carefully considers many quantitative and qualitative factors in arriving at the allowance for credit losses.
While management uses currently available information to recognize losses on loans, further adjustments to the allowance for
credit losses may be necessary based on updated appraisals, financial statements, deterioration of cash flows, and changes in
economic conditions that affect our customers. Additionally, larger credit relationships (defined by management as over
$9 million) do not inherently create more risk, but can create wider fluctuations in net charge offs and asset quality measures
compared to the Company's historical trends. As an integral part of their examination process, regulatory agencies, principally the
OTS, also review the allowance for credit losses. These regulatory agencies may require that certain loan balances be classified
differently or charged off when their credit evaluations differ from those of management, based on their judgments about
information available to them at the time of their examination.
Mortgage Servicing Rig/Its. The following table sets forth certain information regarding the composition of our
mortgage servicing portfolio, excluding loans subserviced for others, as of the dates indicated:

Conventional loans
(jt!icji')oarul ................... .
Total mortgage servicing portfolio
....
Adjustable rate loans
.... . 'I'o(aflIlorlga.ge
As of December 31,
2009
2008
2007
...... (Dollars in thousands)
$; . .' $ . '$ .
451,486 530,210
408;191.
.. 628,139
..... J$jii. ":2l;8ij
$ 766,155 $ 901,750 $
. '24;788;
1,061,118
"1
$

'185,588
.

209,085
. / $ 'm;l22:
245,996"
$1,061;11$
The balances of our mortgage servicing portfolio declined $136 million, or 15.1%, to $766 million at December 31,2009
compared to $902 million at December 31, 2008, and $1.1 billion at December 31, 2007. The decrease is due to prepayments
underlying loans. In 2003, we sold the production platform al Matrix Financial Services and at that time significantly reduced
additions to the mortgage servicing portfolio.
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The following table shows the delinquency statistics for the loans serviced through Matrix Financial Services, excluding loans su&serviced for others, as of the
dates presented. Delinquencies and foreclosures for the mortgage loans serviced by us generally exceed the natioilal average due to high rates of delinquencies and foreclosures on
certain bulk loan and bulk servicing portfolios. The higher levels of delinquencies result in a higher cost of servicing; however, a portion of the higher cost is oflSet by the collection of
,late fees.
The following table seta forth certain information regarding the number and aggregate principal balance of the mortgage loans serviced through Matrix Financial Services
including both fixed and adjustable rate loans, excluding loans subserviced for others, at various interest rates: . '
Rate
Number of
Loans
Z009
Aggregate
Principal
Balance
'Percentage of
Aggregate
Principal
Balance
Number of
Loans
All of Deeember 31,
Z008
Percentage of
Aggregate Aggregate
Principal Principal
Balance Balance
(Dollars in thousands)
Number of
Loans
Z007
Aggregate
Principal
Balance
Percentage of
Aggregate
Principal
Balance
... " ..... ".. . ...
Total' 13,005 $ 766,155 100.00% 15,581 $ 901,750 100.00% 18,876 $ 1,061,1l8 100.00%
. Loan administration fees decrease as the principal balance on the outstanding loan decreases and as the remaining time to maturity of the loan shortens. The following
table sets forth certain information regarding the remaining contractual matority of the mortgage loans serviced through Matrix Financial Services, excluding loans subserviced for
others, as ofthe dates shown.
Z009
Maturity
Percentage
Number of of Number
Loans of Loans
Unpaid
Principal

Percentage
Unpaid
Principal
Amount
As of December 31,
Z008
Percentage Unpaid
Numberof ofNumber Principal
Loans of Loans Amount
Percentage
Unpaid
. Principal
Amount
Z007
Percentage
Number of of Number
Loans of Loans
Unpaid
Principal
Amount
Percentage
Unpaid
Principal
Amount
(Dollars in thousands)

The Company's servicing activity is diversified throughout 50 states with concentrations at December 31, 2009, in Missouri, Texas, New Mexico, Illinois and California of
approximately 15%, 13%, 13%, 12%, and 8%, respectively, based on aggregate outstanding unpaid principal balances of the mortgage loans serviced at December 31, 2009.
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A significant risk of owning mortgage servicing rights is that the underlying loans prepay at a rate faster than predicted
at acquisition. During periods of declining interest rstes, prepayments of mortgage loans usually increase as homeowners seek to
refinance at lower interest rstes, resulting in a decrease in the value of the servicing portfolio. Mortgage loans with higher interest
rstes and/or higher principal balances are more likely to result in prepayments because the cost savings to the borrower from
refinancing can be significant. Although prepayments may increase with the decline in the interest rates that has occurred and
other government actions, the Company's portfolio is comprised of loans with an aversge age of 11.5 years, average balance of
$58,900 and aversge rste of 7.02%. Thus actual prepayment speeds have tended to be lower than national averages for several
years.
The following table shows the annualized prepayment rste for each quarter and the annual average prepayment rate
experience on the mortgage loans serviced by Matrix Financial Services, excluding loans subserviced by and for others:
For the Years Ended December 31,
2009 2008 2007
,I,,>;;;,';";;lL'X.'::, :,L;';' ",l,",:::::, :J,:/,,,g<:'!'''' ",
';i;::';,>,:in", ;:<;:;.i!;:Jt';;;'; j:;T';j> :';:: .;,
i,i.,;.';;: ',? ,y.;:::,;;::"., ':iL\c, ,,' i/'16A2,;:: <:,:;, ,';:::., "':;;:zo;1{;1
__ ..;1;,;;6.;;;;,3% 16.8% 19.3%
Annual average
VIIIRlltioll of Serviclllg Rights. Our servicing portfolio is accounted for in accordance with GAAP using the
amortization method. Under the amortization method, we are required to record our investment in mortgage servicing rights
("MSRs") at the lower of cost or fair value. The estimated fair value of MSRs is determined by reference to the diacounted future
servicing income, as stratified in accordsnce with one or more predominant risk characteristics of the underlying loans. The
Company strstifies its MSRs by product type, interest rate and investor to reflect the predominant risk characteristics. To
determine the estimated fair value of MSRs, the Company uses a valuation model that calculates the present value of discounted
future cash flows. In using this valuation model, the Company incorporstes assumptions that market participants would use in
estimating future net serVicing income, which includes estimates of the cost of servicing per loan, including incremental interest
cost of servicer advances, foreclosure expenses and losses, the discount rste, float value, an inflation rste, ancillary income per
loan, prepaymfl
nt
speeds and default rates. For purposes of performing an impairment analysis on MSRs, the Company estimates
fair value using the following primary assumptions: aversge prepayment speeds of.17.04 CPR, (Constant Prepayment Rate, a
prepayment speed measurement) ranging from 1.9 CPR to 38.35 CPR; an aversge discount rate of 11.48%; with diacount rates
ranging from 11.00".4 to 18.82%; and aversge delinquency of 9.30".4, with default rstes rariging from 0% to 100%. At December 31,
2009, the Company's residential servicing portfolio consists of seasoned loans with an approximate 11.5 year avemge age, an
aversge balance of$58,900 and a weighted aversge note rste of7.02%
During the years elided December 31, 2009 and December 31, 2008, we did not record any permanent impairment During
the year ended December 3'1, 2007, we recorded a permanent impairment of$I.1 million. Our impairment reserve as of December 31,
2009 was $860,000. Further decreases in interest rstes, or other factors that result in an increase in anticipated future prepayment
speeds, may cause additional impairment charges in future periods. It is possible to hedge the risk associated with declines in the
value of MSRs with derivatives; however, based on the underlying characteristics of our portfolio, and our decision not to
increase our investment in mortgage servicing; we do not currently anticipate that we will enter into any future hedge specific to
our current investment in MSRs.
Risk Mllllllgemellt Acdvldesfor MSRs. Ownership ofMSRs exposes the Company to impairment of the value ofMSRs
in certain interest rste environments. The incidence of prepayment of a mortgage loan genemlly increases during periods of
declining interest rates as the homeowner seeks to refinance the loan to a lower interest rate. If the level of prepayment on
segments of the Company's mortgage servicing portfolio achieves a level higher than projected by the Company for an extended
period of time, then impairment in the asaociated basis in the MSRs may occur.
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Sources of Funds. Deposits. short-term and long-term borrowings. including junior subordinated notes owed to
unconsolidated subsidiaries; loan and investment security repayments and proceeds from the sale of securities, and cash flows
generated from operations are the primary sources of our funds for lending. investing, and other general purposes. Loan
repayments are a relatively predictable source of funds except during periods of significant interest rate declines. while deposit
flows tend to fluctuate with prevailing interests rates. money markets conditions. general economic conditions and competition.
Deposits. United Western Bank offers a variety of deposit accounts with a range of interest rates and terms. The Bank's
core deposits consist of community bank and processing and trust checking accounts, NOW accounts. money market accounts.
and community bank savings accounts and certificates of deposit. These deposits. along with brokered deposits. and short-term
and long-term borrowings. are used to support our asset base. Community bank deposits are obtained predominantly from the
geographic trade areas surrounding our regional office locations. Processing and trust deposits are obtained nationally. The Bank
relies primarily on customer service and relationships with customers to attract and retain community bank deposits; however.
market interest rates and rates offered by competing financial institutions significantly affect our ability to attract and retain
deposits.
United Western Bank will focus on generating traditional deposits from its expansion of community banking services
through the opening of branch locations along the Colorado Front Range and selected mountain communities. Over time these
deposits are anticipated to fund a significant portion of our liquidity needs for our community banking strategy.
The following table sets forth the balances for each major category of the Company's deposit accounts and the
weighted-average interest rates paid for interest-bearing deposits for the periods indicated:
'.' .. ' ....
NOW and DbA accounis

Subtotal
......
Total Deposits
December 31,2009 December 31,2008
December 31, 2007
Amount
<$, .360
583,976
'...937.082
1,521.418
...., ... , ...., "'472;09$,;:

Weighted
Average Rate
Weighted
Amount Average Rate

<t'l.25% $,299 '. . .. 'P,2!i% ,$148'
Weighted
Average Rate
.. oji)" 624,064 0.17686,867
, . 958;83.1 ....
..,@4%
0.47
1.t9
1.32
0.28 1,583,200 0.55 1.355.498
"\4h472'
__ ....;0;;.5;;,9% 0.79% $1.385,481
1.05%
Total deposits increased $269 million between December 31, 2009 and 2008. This increase was caused by growth of
$273 million of community bank deposits from our eight open banking offices. This growth includes $215 million obtained through
the certificate accounts offered through the Certificate of Deposit Account Registry Service ("CDARS") program. The CDARS
program provides full FDIC insurance on deposit balances greater than posted FDIC limits by exchanging larger depository
relationships with other CDARS members. Depositor's funds are broken into amounts below FDIC insurance limits and placed
with other banks that are members of the CDARS network. Each member bank issues certificate accounts in denominations below
the FDIC insured limit, resulting in full FDIC insurance for the entire deposit. For regulatory reporting purposes, CDARS are
considered brokered deposits. The Bank has been notified by the OT8 that it may not rollover or renew any existing brokered
deposits or accept new brokered deposits without prior written non-objection of the OTS. ACCordingly. the Company anticipates
that such deposits will be transferred into other aCCQunt types at the Bank or withdrawn as such deposits mature which will occur
through December 22, 2011.
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The following table sets forth the balances for categories of deposits and custodial escrow balances' of the Company
by source for the periods indicated:
Community bank deposits represent deposits attracted by our regional banking teams. The growth in the past three
,years is consistent with expectations and a part of our community b ~ n g strategy. .
Brokered deposits are comprised oUIOS million of traditional brokered deposita which mature July 1,2010, $225 million,
of other deposits deemed brokered by regulation, which will be withdrawn byMarch 31, 2010. AtDecember 31, 2009, the Bank had
cash on hand ofSS86 million and since year end this has grown to over $1 billion, and thus the withdrawal of these halances will
not have a material adverse impact on the Bank.
UW Trust and Matrix Financial Services are our wholly owned subsidiaries. Due to the UW Trust asset sale, discussed
in Note 25 - "Discontinued Operations - Sale of UW Trust Assets," the custodial rights sold are presented retrospectively.
Accordingly, the decline of deposits from UW Trust is related to an account for one life settlement agent for special asset
acquisitions and administration with a balance of $732,000, $30,404,000, and $103,830,000, at December 31, 2009, Deci:mber31,
2008, and December 31, 2007, respectively. In the fourth quarter of 2007, management elected to restructure this relationship and
tenninate certain elements of business with respect to this life settlement agent account The restructured reiationship will now
allow the Company to pursue business in the same industry on a non-exclusive basis subject to prior approval by the Texas
Department of Banking, UW Trust's principal regulator. If UW Trust cannot replace this business with deposits from other
clients, the aggregate deposits directed to the Bank by UW Trust will decline further in 20 I O.
Matrix Financial. Solutions, Inc. ("MFSr') are deposits that represent customer assets under administration by MFSI.
During the first quarter of 2009, the Company completed the sale of 269,792 shares of MFSI. As part of the sale agreement,
deposits will continue to be maintained by MFSI at the Bank. This agreement was renewed in 2007 and matures on July 5, 20 I O.
The balance of these deposits over the three years is associated with the overall growth in business experienced by MFSI as well
as current economic conditions.
Legent Clearing, LLC deposits, are deposits that represent processing and trust deposits received through Legent
Clearing, LLC, that are in NOW and money market accounts. The Company's Chainnan of the Board holds an indirect minority
interest in Legent Clearing, LLC. Deposit concentrations are deposits that. represent deposit funds from four, six and three
processing and trust relationships maintained by United Western Bank as of December 31, 2009, 2008 and 2007, respectively. Due
to the UW Trust asset sale, discussed in Note 2S - "Discontinued Operations - Sale ofUW Trust Assets," the custodial rights
sold are presented retrospectively.
Included in deposit concentrations is one processing and trust relationship with balances of $933.9 million,
$822.8 million, and $749.5 million at December 31,2009,2008 and 2007, respectively. This relationship is contractual and matured
June 30,2009. This contract was renewed in 2009. As part of the UW Trust asset sale, (discussed in Note 2S - "Discontinued
Operations - Sale of UW Trust Assetsj Equity .Trust Company and Sterling Administrative Services, LLC, the Buyers, and
Equity Administrative Services I n c ~ (an affiliate of the Buyers), agreed that the Bank shall be the sole depository of custodial
deposits for a perind of three years; thereafter, the Buyers agreed, for the remaining term of the agreement (which is the later of
five years from the date of the subaccounting agreement or until the seller note is repaid in full) to maintain an amount of custodial
deposits at the Bank in a minimum amount equal to the amount of custodial deposits transferred to the Buyer at the closing of this
transaction. See Item IA. "Risk Factors - Risk Related to Our Business" in this report and Note 8 - "Deposits" to the financial
statements.
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Table of Contents
. The following table sets forth the amount of United Western Bank's certificates of deposit thnt are greater than
$100,000 by time remaining until maturity as of December 31, 2009:
Weighted Average
Amount Rate Paid

Over three months months 4,230 1.94

Over twolve months 13,007 3.61
.
Borrowings. We have access to Ii variety of funding sources and use various instruments both short-term and long-
term to support our asset base. Borrowings include securities sold under agreements to repurchase, FHLBank borrowings, Federal
Reserve Discount Window borrowings and a line of credit with a third party financial institution. At December 31, 2009, short-tenn
borrowings consisted 0($23.6 million of borrowings with a maturity during 2010, which includes a $20 million line of credit with a
third party financial institution and 53.6 million of customer repurchase agreements. On Ianuary 15, 2010, United Western Bank
exchanged $180 million of outstanding FHLBank of Topeka advances for $180 million in neW advances. Specifically, the Bank
exchanged 14 separate advances, totaling $180 million, with yields ranging from 2.77% to 4.800/0, with a weighted average yield of
4.15% and an avemge remaining term of 29 months, and with fina1 maturities scheduled 16 to 52 months into the future. The
exchange required the payment ofa prepayment fee to the FHLBank in the amount 0($12.4 million, this amount together with the
face rate of the new instruments will result in an effective interest rate of2.1S% for the first twelve months.
period:
The followirig table sets forth a summary ofliurborrowings during 2009, 2008 and 2007 and as of the end of each such
At or for the year ended December 31,
2007:
Amount
Outstanding
at Year-End
Average
Amount
Outstanding
Daring the
Year (1)
MaDmum
Outstanding
at any
Month-End
Weighted
Average
Interest Rate
During the
Year
Weigllted
Average
Interest Rate
atYear-End

Totsl at December 31, 2007 $ 503,557
(1) Calculations are based on daily averages wbere available and monthly averages otherwise.
(2) A total of $180 million of the FHLBank borrowings outstanding at December 31,2009 were borrowed under short option
advance agreements with the FHLBank. The interest rates on the short option advance borrowings ranged from 2.77% to
4.80% at December 31, 2009 and their possible call dates varied from Ianuary 2010 to April 2010. Additionally, $607,000 of the
FHLBank borrowings outstanding at December 31, 2009 are fixed-term/rate advances, which were to offset specific loans
originated by United Western Bank. The principal amount of these fixed-term/rate advances adjusts monthly based on an
amortization schedule. The interest rate on the fixed-term/rate advances was 5.84%, and their maturity dste is June 2014.
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(3) A total of $206.0 million of the FHLBank borrowings outstanding at December 31, 2008 were borrowed under short option
advance agreements with the FHLBank. The interest rates on the short option advance borrowings ranged from 2.77% to
5.63% at December 31,2008 and their possible call dates varied from January 2009 to September 2009. Of these advances,
$26 million will reach final maturity, $19 million in November and $7 million December 2009, with a rate of 5.40% and 5.63%,
respectively. A total of $20.0 million of the FHLBankborrowings outstanding at December 31, 2008 were borrowed under
fixed rate advance agreements. The interest rates on these advances ranged are 2.71 % and 4.30% at December 31, 2008 and
their maturity dates were February 2009 and November 2009, respectively. Additionally, $721,000 of the FHLBank borrowings
outstanding at December 31, 2008 are fixed-term/rate advances, which were to offset specific loans originated by United
Western Bank. The principal amount of these fixed-term/rate advances adjusts monthly based on an amortization schedule.
The interest rate on the fixed-term/rate advances was 5.84%, and their maturity date is June 2014.
(4) A total of $206.0 million of the FHLBank borrowings outstanding at December 31, 2007 were borrowed under short option
advance agreements with the FHLBank. The interest rates on the short option advance borrowings ranged from 3.27% to
5.63% at December 31, 2008 and their possible call dates varied from January 2008 to September 2009. A total of $20.0 million
of the FHLBank borrowings outstanding at December 31, 2007 were borrowed under fixed rate advance agreements. The
interest rates on the advances ranged from 3.92% to 4.30% at December 31,2007 and their maturity dates were May 2008 and
November 2009. Additionally, $829,000 of the FHLBank borrowings outstanding al December 31, 2007 are fixed-term/rate
advances, which were to offset specific loans originated by United Weslern Bank. The principal amount of these fixed-
term/rate advances adjusts monthly based on an amortization schedule. The interest rate on the fixed-term/rate advances
was 5.84%, and their maturity date is June 2014.
Borrowings were $289.2 million at December 31, 2009 compared to $346.0 million at December 31,2008 and $503.6 million
at December 31,2007. The decrease in borrowings between 2009 and 2008 and 2008 and 2007 was primarily due the $269 million
and $339 million increases in deposits during those years.
Junior Subordinated Debentures. Junior subordinated debentures owed to unconsolidated subsidiary trusts include
debentures we sold to Matrix Bancorp Capital Trusts II, VI and VIII in connection with the issuance of their preferred securities in
2001, 2004 and 2005, respectively. As of December 31, 2009 and December 31, 2008,our junior subordinated debentures owed to
unconsolidated subsidiary trusts were $30.4 million. See "Liquidity - Company Liquidity" below and Note II to the consolidated
financial statements for further analysis.
Capital
Capital. See ltem I. "Business-Regulation and Supervision-United Western Bank's Capital Ratios" for a discussion
about the capital ratios and required capital ratios of United Western Bank. United Western Bank and UW Trust are restricted in
certain instances from paying dividends to United Western Bancorp due to certain regulatory requirements: See Item I.
and Supervision."
At December 31,2009, shareholders equity was $159.7 million compared to $101.9 million at December 31,2008. The
increase was principally the result of our September 2009 capital raise of $81.7 million, net of direct offering expenses, and a
$17.0 million decrease in accumulated other comprehensive loss. Offsetting the increases were $42.0 million of net loss and
dividends of $943,000. The Company paid quarterly dividends of $.06 per common share during the first and second quarter of
2009, $.01 during the third quarter of 2009, and $0 during the fourth quarter of 2009.
TbeCompany's stock repurchase plan, as authorized by the Company's board of directors, is discussed in Note 14 to
the financial statements. All purchases of common stock were made pursuant to the Company's announced open market stock
repurchase plan. On November 13, 2006, the Company's Board of Directors authorized the repurchase of up to five percent of the
Company's outstanding common stock. There were 7,556,573 shares outstanding al the time the repurchase was approved, which
resulted in 377,829 shares available for repurchase. There were 300,000 shares of this authorization utilized in 2006. On August 2,
2007, the Company's Board of Directors authorized the repurchase of up to 5% of the outstanding shares of the Company's
common stock, which represented a total of361,289 additional shares. Although there are 265,018 remaining available shares that
were authorized for repurchase, the Company has no further plans to repurchase additional shares of its common stock.
During the fourth quarter of 2002, the Company executed a Shareholder Rights Plan at which time the Board of Directors
of the Company declared a dividend of one preferred stock purchase right ("Rights") for each outstanding share of the
Company's common stock. Each of these Rights, which are not immediately exercisable, entitles the holder to purchase one one-
thousandth of a share of the Company's newly designated Series A Junior Participating Preferred Stock at an exercise price of
$40.00. The Rights are not exercisable until certain events occur, are not detachable from the Company's common stock and do
not have any immediate value to shareholders. The Rights distribution was made on November 15,2002, payable to shareholders
of record on that date. The Rights will expire on November 5, 2012.
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Liquidity
Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a
financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage
of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its
balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The Company seeks to
ensure its funding needs are met by maintaining a l e ~ of liquid funds through asset/liability management.
Bank Liquidity. Liquidity management is monitored by an Asset/Liability Management Committee ("ALCO"),
consisting of members of management and the board of directors o( United Western Bank, which reviews historical funding
requirements, current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional
funds, and anticipated future funding needs, including the level of unfunded commitments.
Our primary sources of funds are community bank, commercial and processing and trust deposits, advances from
FHLBank and other borrowings and funds generated from operations. Funds from operations include principal and interest
payments received on loans and securities. While maturities and scheduled amortization of loans and securities provide an
indication of the timing of the receipt of funds, changes in interest rates, economic conditions and competition strongly influence
mortgage prepayment rates and deposit flows, reducing the predictability of the timing on sources of funds.
United Western Bank has an internal policy that requires certain liquidity ratios to be met. Our current policy requires
that we maintain a set amount of liquidity on the balance sheet at all times and that we have off balance sheet liquidity readily
available to the Bank to meet the day-to-day liquidity requirements of the Bank and its customers. The Bank is a member of the
FHLBank of Topeka and has the ability to borrow up to 40% of the assets of the Bank. At December 31, 2009, the Bank had
unused borrowing capacity at FHLBank borrowings of approximately $222.8 million. Also, at December 31, 2009, the Bank had
unused borrowing capacity at the Federal Reserve Bank of Kansas City of approximately $22.9 million.
At December 31, 2009, the Bank had outstanding letters of credit, loan origination commitments and unused commercial
and community bank lines of credit of approximately $103 million. We anticipate that the Bank will bave sufficient funds available
to meet current origination and other lending commitments. Certificates of deposit that are scheduled to mature within one year
totaled $443 million at December 31,2009 including brokered deposits. Although no assurance can be given, we expect that the
Bank will retain a substantial majority of community bank certificates of deposits and that the Bank has adequate liquidity to fund
brokered deposits as they mature.
Company Liquidity. Our main sources of liquidity at the holding company level are existing cash and notes receivable,
cash flows from $6.1 million of book value of non-agency mortgage-backed securities, dividends and tax payments from our
subsidiaries. Company cash on deposit at the Bank at December 31, 2009, was $9.6 million and there was approximately $2.7 million
of available cash for dividend to the Company from unregulated subsidiaries.
The Company is reliant on dividend and tax payments from its subsidiaries in order to fund operations, meet debt and
tax obligations and grow new or developing lines of business. A longctenn inability of a subsidiary to make dividend payments
could significantly impact the Company's liquidity. Historically, United Western Bank has made the majority of the dividend
payments received by the Company. For the year ended December 31, 2007, the Company received dividends from Matrix Bancorp
Trading of$1.4 million, UW Asset Corp. of$1.2 million and United Western Bank of$7.4 million. For the year ended December 31,
2008 the Company received dividends of $8.6 million, of which $6.8 million was from the Bank, $509,000 was from UW Trust and
the balance, $1.3 million, was from non-core subsidiaries. For the year ended December 31, 2009 the Company received a dividend
of$38.3 million from UW Trust. The Infonnal Agreement the Company entered into with the OTS on December 10, 2009, requires
the Company to obtain written non-objection of the Regional Director of the OTS prior to receiving a dividend from the Bank, we
currently anticipate the Bank; therefore, will not pay dividends to the Company during 2010. For 2010 the Company anticipates
dividends from UW Trust and dividends from non-core subsidiaries of approximately $3.0 million to $4.0 million, and the principal
source ofthese dividends will be cash flows from non-agency mortgage-backed securities owned by a non-core subsidiary.
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Effective January 15, 2010, the Company entered into an Amendment to Credit Agreement, Note Modification and
Forbearance Agreement (the "Amendment") to that certain Credit Agreement dated as of June 29, 2007, as amended by that
certain Amendment to Credit Agreement dated June 30,2007, that certain Amendment to Credit Agreement dated June 29,2009,
that certain Amendment to Credit Agreement dated September 30, 2009, and that certain Amendment and Forbearance Agreement
dated December 14, 2009 (collectively, the "Credit Agreement'') with JPMorgan. The terms of the Amendment provide, among
other things: (i) for the extension of the maturity date on the $25 million line of credit note dated September 30, 2009 (the "Note")
from December 31,2009 to June 30,2010 (the Note had a cuttent principal balance of $20 million); (ii) that the Company make a
principal reduction payment on tbe Note of $2.5 million upon execution of the Amendment (which payment the Company made),
and another principal reduction payment on the Note of $1.25 million on or before March 31, 2010; (iii) that JPMorgan agrees to
continue to forbear from declaring all outstanding amounts on the Note to be immediately due and payable as a result of the
Company and the Bank each executing Informal Agreements with the OTS effective on December 10, 2009; and (iv) that the
Company and one of its nonbank subsidiaries pledge certain securities as additional collateral to JPMorgan.
The Company has sponsored three trusts with remaining balances outstanding at December 31, 2009 - Matrix Bancorp
Capital Trusts n, VI and VIII (the "Trusts"). The Company owns 100% of the common equity of each of the Trusts. The Trusts
were formed for the purpose of issuing corporation-obligated mandatorily redeemable capital securities (the "capital securities")
to third-party investors and investing the proceeds from the sale of such capital securities solely in junior subordinated debt
securities of the Company. The debentures held by each Trust are the sole assets of that Trust. Distributions on the capital
securities issued by each Trust are payable either quarterly or semiannually at a rate per annum equal to the interest rate being
earned by the Trust on the debentures held by that Trust. The capital securities of the Trusts are subject to mandatory
redemption, in whole or in part, upon repayment of tbe debentures. The Company has entered into agreements which, taken
collectively, fully and unconditionally guarantee the capital securities subject to the term of each of the guarantees. See Note 11
to the financial statements.
Statement of Cash Flows
Operating Activities. Cash flows from operating activities primarily include income from continuing operations for the
year, adjustments for items in net income that did not impact cash and activities related to loans held for sale. Net cash from
operating activities decreased by $16.9 million to $60.5 million for the year ended December 31, 2009 compared to $77 million for
2008 and a $93 million for 2007. The decrease in 2009 versus 2008 was due to lower repayments on loans held for sale. The
decrease in 2008 versus 2007 was due to an increase in the deferred income tax asset.
Investing Activities. Cash flows from investing activities reflect the impact of loans and investments acquired for the
Company's interest-eaming asset portfolios, as well as cash flows from asset purchases and dispositions and security purchases
and sales. Net cash from investing activities increased $484 million to $215 million for 2009, as compared to uses of cash of $269
million for 2008 and $5 million for 2007. The increase in cash from investing activities in 2009 versus 2008 was due to a $445 million
decrease in the amount of loans originated and purchased for investment and a $28 million increase in proceeds from held to
maturity securities. In 2008, we originated community bank loans and incurred draws on existing commitments that totaled
$867 million, an increase of $162 million as compared to 2007. Other factors contributing to the decline in cash from investing
activities for 2008 included an absence of a sale of securities during 2008 as compared to 2007 and lower repayments of held to
maturity and available for sale securities due to current economic conditions.
Financing Activities. Cash flows from financing activities include transactions and events whereby cash is obtained
from depositors, creditors or investors. Net cash from financing activities increased $121 million to $295 million as compared to
$174 million for 2008 and a use of cash of$70 million for 2007. The increase in 2009 versus 2008 was due to our capital raise and a
$133 million decrease in FHLBank borrowing repayments, which were partially offset by a $70 million decrease in deposit inflows.
The increase in 2008 versus 2007 was due to an increase in cash flows deposits of $299 million in 2008 compared to 2007. Deposit
inflows of $339 million allowed the Company to reduce FHLBank borrowings by $179 million. The decline in cash from financing
activities between 2006 and 2007 in the period was due to lower increases in processing and trust deposits and net declines in
FHLBank borrowings due to the overall decline in the size of our balance sheet.
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Off-BalanCe Sbeet Arrangements, Confi'aetual Obligations, Commitments, and Contingent Liabilities.
The following table presents, as of December 31,2009, the Compsny's sigDificant fixed and determinable contractual
obligations by payment date. The payment amounts represent tbose amounts contractually due to the recipient and do not
include any unamortized premiums or discounts, other similar carrying value adjustments or interest. Further discussion of the
nature of each obligation is included in the financial statements in the foolnnte identified in the "Note Reference" column of the
table helow. '
As of December 31, 2009
Note 1 Year or Ito 3 3 to 5 Over 5
Reference Les. Years Years Years Total
. --- (Dollars in thousands)
...
Deposits (savings, NOW and .

Junior subordinated debentures ................................... .
owed to unconsolidated
;,?{ ..
The following table presents, for the periods shown, the Company's schedule of significant commitments. Loan
commitments and stsndby letters of credit are presented at contractual amounts; however, since many of these commitments are
expected to expire unused or only partially used, the total amount of these commitments dO not necessarily reflect future cash
requirements. .
December 31,
Flnancilll Instruments with 0ff-Bfllance-Sheet RIBIe. In normal course of business, the Company enters into
various transactions, which in accordance with generally accepted accounting principles in the United States, are not included in
its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These
transactions incl"de commitments to extend credit and standby letters of credit, which involve elements of credit risk and interest
rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss
under these comDutJnents by subjecting them to credit approval and monitoring procedures. The Company also holds certsin
assets that are not included in its consolidated balance sheets including the custodial assets held by UW Trust on behalf of its
customers.
Commitmentr to' Extend Credit. The Company enters into contractual commitments to extend credit, generally with
fixed expiration dates or ternlination clauses, at specified rates .and for specific purpOses. Substantially all of the Company's
commitments to extend credit are contingent upon customers maintaining specific credit standards, which are determined at the
moe the Compsny enters into the commitment. The $224.1 million dec!\l8Se in commitments to extend credit is a result ofa $127.6
decrease in construction and development commitments and a $78.7 million decrease in loans secured by mortgages commitments.
The decrease in these real estate collateralized loan commitments is in response to our decision to reduce our exposure to real
estate lending in the current economic environment. Such commitments are not necessarily an indication of future growth of such
lending, since these loans have shorter life spans and generally tum over more rapidly than other forms of lending.
Standby Letters 0/ Credit. Standby letters of credit are conditional commitments issued to guarantee the performance
of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform
according to the terms of the underlying contract with the third party.
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Commitments lind Contingent Liabilities. The Company may also have liabilities under certain contractual agreements
contingent upon the occurrence of certain events. A discussion of the significant contractual arrangements under which the
Company may be held contingently liable, including guarantee arrangements, is included in Note 17 of the consolidated financial
statements.
The Company maintains a liability for estimated recourse obligations for certain loans in connection with the 2006 sale
of ABS School Services, LLC. Pursuant to the sales agreement, the Company guaranteed, for a five year period, the repayment of
the loans sold to the purchaser. At December 31,2009, and 2008, the liability for estimated recourse obligations was $192,000 and
$445,000, respectively, and was included in other liabilities on the consolidated. balance. sheet. During the year ended
December 31, 2009, the Company paid $253,000 of claims against its recourse obligation. Assets that continue to be indemnified
total $14.5 million. Based on the analysis the Company prepares, we believe the remaining liability is adequate for the inherent
losses that may be incurred on our recourse obligation. However, an increase in claims under our Obligation could result in an
additional charge up to the aggregate amount of our guamntee.
The Company maintains a liability for estimated losses on loans expected to be repurchased or on which
indemnification is expected to be provided and regularly evaluates the adequacy of this repurchase liability based on trends in
repurchase and indemnification requests, actual loss experience, and other relevant factors including economic conditions. Total
loans repurchased during the years ended December31, 2009, 2008 and 2007 were $196,000, $1,301,000, and $1,037,000,
respectively. Loans indemnified that remain outstanding at December 31, 2009 totaled $5,320,000, of which loans totaling
$2,089,000 are guaranteed as to principal by FHA. Losses charged against the liability for estimated losses on repurchase and
indemnification were $292,000, $606,000, and $97,000, for 2009, 2008, and 2007, respectively. At December 31,2009 and 2008, the
liability for estimated losses on repurchase and indemnification was $891,000 and $1,195,000, respectively, and was included in
other liabilities on the consolidated balance sheets.
Impact of InDation .and Changing Prices
The Company's financial statements included herein have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). GMP presently requires the Company to measure financial
position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or
recession are geilemlly not considered. The primary effect of inflation on the operations of the Company is reflected in increased
operating costs. In the Company's opinion, our financial condition is affected much more. by changes in interest rates than by
changes in the inflation rate. While interest rates are certainly influenced by inflation rates,. interest rates do not necessarily
change at the same mte or in the same proportion as the inflation rate. Interest rates are highly sensitive to many factors beyond
the control of the Company, including changes in the expected mte of inflation, influence of general and local economic
conditions and the monetary and fiscal policies of the United States government, and various other governmental regulatory
authorities, among other things. See Item 1. "Business - Regulation and Supervision" in this report.
Critical Accounting Policies
The Company and its subsidiaries have established various accounting policies which govern the application of
accounting principles generally accepted in the United States of America in the prepamtion and presentation of the Company's
consolidated financial statements. The significant accounting policies of the Company are described in Note 2 of the financial
statements and along with the disclosures presented in the other financial statement notes, provide information on how
significant assets and liabilities are valued in the financial statements and how those values are determined. Certain accounting
policies involve significant judgments, assumptions and estimates by management that have a material impact on the carrying
value of certain assets and liabilities, which management considers to be critical accounting policies. The judgments, assumptions
and estimates used by management are based on historical experience, knowledge of the accounts and other factors, which are
believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by
management, actual results could differ from these judgments and estimates, which could have a material impact on the carrying
values of assets and liabilities and the results of operations of the Company.
Allowllnce for Credit Losses. The Company currently views the determination of t h ~ allowance for credit losses as a
critical accounting policy that requires significant judgments, assumptions and estimates used in preparation of its consolidated
financial statements. The allowance for credit losses is management's estimate of probable incurred credit losses tbat are inherent
in the loan portfolios. Management takes into consideration various factors, such as the fair value of the underlying collateral and
the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based
on historical loss experience, the collective experience of our credit risk management team and consideration of current economic
trends and conditions.
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The allowance for credit losses consists of four components: (I) pools of homogeneous single-family loans with similar
risk characteristics; (2) pools of homogenous community bank Joans with similar risk characteristics (i.e., multifamily, residential
and commercial construction and development, commercial real estate and commercial); (3) individually significant loans that are
measured for impairment; and (4) a component representing an estimate of inherent, but probable undetected losses, which also
contemplates the imprecision in the various credit risk models utilized to calculate the other components of the allowance as well
as the uncertainty of underlying collateral fair values. . .
Pools of homogeneous single-family loans with similar risk chamcteristics are assessed for probable losses based on
loss migmtion analysis where loss factors are updated regularly based on actual experience. The loss migration analysis examines
historical loss experience and the related intemal gradings of loans charged off. The analysis also considers inherent but
undetected losses within the portfolio.
Pools of homogeneous community bank loans with similar risk characteristics (i.e., multifamily, residential and
commercial construction and development, commercial real estate and commercial) are likewise assessed for probable losses
Iissed on loss migmtion analysis, where loss factors are updated regularly based on our own loss experience as well as the
collective experience of our credit risk management team, loss rates at selected peer community banks and industry data. The
analysis for community bank loans also incorporates the related intemal gradings of loans charged off and other factors including
our asset quality trends and national and local economic conditions.
The portion of the allowance established for loans measured for impairment reflects expected losses resulting from
analyses developed through specific allocations for individual loans. We consider a loan impaired when, based on current
i/lformation and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the
loan. Estimated fair value is typically measured using the fair value of collateml, as such loans are usually collateml dependent,
but may be measured using either the present value of expected future cash flows discounted using the loan rate, or the market
price of the loan. All loans considered impaired are included in nonperforming loans. We generally evaluate our residential loans
coilectively due to their homogeneous nature. The last component of the allowance for credit losSes is a portion which represents
the estimated inherent but undetected probable losses, and the imprecision in the credit risk models utilized to calculate Ibe
aUowance. This component oflbe allowaoce is primarily associated with community bank loans and is reflective of the uncertainty
related to the recent growth in the community bank loan portfolio, general economic conditions and ongoing .uncertainty with
respect to a small number of individually large loans.
Loan losses are charged against the allowance when the loan is considered uncollectible.
There are many factors affecting the allowance for credit losses; some are quantitative while others require qualitative
judgment. Although management believes its process for determining the allowance adequately considers all of the potential
factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to
significant change. To the extent actual outcomes differ frOm management estimates, additional provision for credit losses could
be required that could adversely affect earnings or our financial position in future periods.
Valulllion LOlllls Held for Sale. The Company also considers its lower-of-cost-or-market ("LOCOM") valuations which
apply to loans held for sale to be a critical accounting policy that requires use of judgments, assumptions and estimates. The
Company classified $260.g million of loan assets as held for sale at December 31,2009. The majority of these loans consist of
single-family residential loans of approximately, $1 87.9 million, commercial real estate of $55.3 million, SBA Originated loans of
$4.4 million, and multifamily loans ofS17.4 million. Loans held fur sale are carried at the lower of cost or market in accordance with
ASC Subtopic 948-35-1, "Loans Held for Sale." Many of the loans owned by the Company either do not trade in an active market
or trade in inefficient markets. As such, the market value of loans without available market prices is estimated by loan type using
interest rates for reasonably comparable assets found in the secondary marketplace. Other factors including delinquency
existence of govemment guarantees, and other economic factors are considered in estimating the fair value of loans held for sale:
MaiIlIgement has compilred its fair value estimates and assumptions to observable market data where available and to recent
market activity and based on that comparison believes the fair values and related assumptions are. comparable to those used by
other market participants. A rising interest rate environment may possibly result in declines in the market value. of the loans held
for sale, which may adversely affect earnings or our financial position in future periods. The Company mitigates risk associated
with declines in the estimated fair value of its loans held for sale by predominately holding loans with variable interest rates that
tend .to be less market sensitive to interest rate. fluctuations than long-term fixed rate loans. See Note 18 to the financial
statements.
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Temporary vs. Other-Than-Temporary Impairment. The Company views the determination of whether an investment
security is temporarily or other-than-temporarily impaired as a critical accounting policy, as the estimate is susceptible to
significant change from period to period because it requires management to make significant judgments, assumptions and
estimates in the preparation of its consolidated financial statements. We assess individual securities in our investment securities
portfolio for impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant. An
investment is impaired if the fair value of the security is less than its carrying value at the financial statement date. When a
security is impaired, we then determine whether this impairment is temporary or other-than-temporary. Management also evaluates
all of its investment securities with one rating below investment grade from a Nationally Recognized Securities Ratings
Organization ("NRSRO") for other-than-temporary impairment ("Om") at least on a quarterly basis as well as securities with a
collateral coverage ratio of less than or equal to 1.0 (these populations are substantially the same). In estimating other-than-
temporary impairment losses, management assesses whether it intends to sell, or it is more likely than not that it will be required to
sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire
difference between amortized cost and fair value is recognized in earnings. For securities that do not meet the aforementioned
criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related
to other factors is recognized in other comprehensive income. Management utilizes cash flow models to segregate impairments
principally on selected non-agency mortgage backed securities to distinguish between impairment related to credit losses and
impairment related to other factors. To assess for OTT!, management considers, among other things, (i) the severity and duration
of the impairment; (ii) the ratings of the security; (iii) the overall transaction structure (e.g., the Company's position within the
structure, the aggregate, near term financial performance of the underlying collateral, delinquencies, defaults, loss severities,
recoveries, prepayments, cumulative loss projections, and discounted cash flows); and (iv) the timing and magnitude of a break in
modeled cash flows.
The material effect, if any, on the consolidated financial statements related to these critical accounting areas is also
discussed below.
Income Taxes. The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations,
and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that
future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management's
current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. For
financial reporting purposes, a valuation allowance has been recognized at December 31,2009, to offset deferred tax assets related
to the Company's credit carryforwards, state net operating loss carryforwards of certain subsidiaries and the remaining balance of
the deferred tax asset for which management determined it was not more likely than not that the deferred tax asset could be
realized. The Company believes the tax assets and liabilities are properly recorded in the consolidated financial statements. ,
However, there is no guarantee that the tax benefits associated with the remaining deferred tax assets will be fully realized. We
have concluded that ii is more likely than not that the tax benefits associated with the remaining deferred tax assets will be
realized. See Note 1, "Summary of Significant Accounting Policies," and Note 12, "Income Taxes," of the notes to consolidated
financial statements."
Real Estate Owned. Real estate owned or other foreclosed assets acquired through loan foreclosure are initially
recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment al'the time of foreclosure is
recorded through the allowance for credit losses. Due to the subjective nature of establishing the fair value when the asset is
acquired, the actual fair value of the real estate owned or foreclosed asset could differ from the original estimate. If it is determined
that fair value declines subsequent to foreclosure, a direct charge is recorded through noninterest expense to further reduce the
cost basis of the asset. Operating costs associated with the assets after acquisition are also recorded as noninterest expense.
Gains and losses on the disposition of real estate owned and foreclosed assets are netted and included in other noninterest
expense.
Recent Accounting Pronouncements
Note 22 to the financial statements discusses new accounting policies adopted by the Company during 2009 and the
expected impact of accounting policies recently issued or proposed but not yet required to be adopted. To the extent the adoption
of new accounting standards materially affects financial condition, results of operations, or liquidity, the impacts thereof are
discussed in the applicable section(s) of this discussion and the notes to the consolidated financial statements.
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Forward-Looldng Statements
. Certain statements included in this report contaio "folWard-looking statements" within the meaning of the Private
Securities Litigation Refunn Act of 1995 that are subject to significant risks and uncertainties. FOlWard-looking statements include
infoonation concerning our futore results, interest rates, loan and deposit growth, operations, community bank implementation
and business strategy. These statements often included tenninology such as "may," "win," "expect," "anticipate," ''predict,''
"believe," ''plan, " "estimate" or "continue" or the negative thereof or other variations thereon or comparable tenninology. As you
consider forward-looking statements, you sh!luld understand that these statements are not guarantees of perfollllance or results.
They involve risks, uncertainties and assumptions that could cause actual. results to differ materially from those in the fotWard-
looking statements. These factors include but are not limited to: the successful implementation of our community banking
strategies, the timing of regulatory approvals or consents for new branches or other contemplated actions; the availability of
suitable and desirable locations fur 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, general
economic conditions, competition, legal and regulatory developments and the risks and uncertainties discussed herein or
elsewhere andlor set forth from time to time in our other periodic reports filings and public statements.
Any fulWBrd-looking statements made by the Company speak only as of the date on which the statements are made.
New risks and uncertainties come up from time to time, and it is impossible for us to predict these eventa or how they may affect
us. We have no duty to, and do not intend to, update or revise the forward-looking statements after the date on which they are
made. In light of these risks and uncertainties, any forward-looking statement made in this document or elsewhere may not reflect
actual results. Our risk factors are discussed in greater detail in Item IA. "Risk Factors" in this report.
Item 7 A. Quantitative and Quillitative DIselosures about Market RIsk
Market Risk. Market risk refers to the risk of loss arising from adverse changes in interest rates and other relevant
market rates and prices. The risk of loss can be assessed from the perspective of adverSe changes in fair values, cash flows, and
futore earnings. Due to the nsture of its operations, the Company is exposed to both interest rate risk and, liquidity risk.
Interest Rate Risk. Interest rate risk on the Company's balance sheet consists of reprice, option, and basis risks.
Reprice risk results' from differences in the maturity, or repricing of asset and liability portfolios. Option risk arises from embedded
options present in many financial instruments such as loan prepayment options, deposit early withdrawal options, interest rate
options, and options we embed in various instruments such as FHLBank borrowings and repurchase agreements. These options
allow customers or the holders opportunities to benefit when market interest rates change, which typically results in higher costs
or lower revenue for the Company. Basis risk refers to the potential for changes in the underlying relationship between market
rates and indices, which subsequently result in a narrowing of the profit spread on an earning asset or liability. Basis risk
principally impacts the Company through certain liabilities that are tied to LmOR, while the majority of the community bank loans
are tied to prime.
Asset Liability MantlgemenL United Western Bank has established an Asset Liability Committee ("ALCQ"). Through
ALCO, the Company seeks to avoid excessive fluctuations in its net interest margin and to maximize its net interest income before
provision for credit losses within acceptable levels of risk through periods of changing interest rates. Accordingly, the
Company's interest rate sensitivity and liquidity are monitored on an ongoing basis by ALCO, which oversees the risk
management and establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effect
on net interest income and capital.
The Company utilizes an earnings simulation model as the primary qU:antitative tool in measuring the amount of interest
rate risk associated with changing market rates. The model quantifies the effect of various interest rate alternatives on projected
net interest income and net income over the next 12 months. The model measures the impact on net interest income relative to a
base case alternative of hypothetical fluctuations in interest rates over the next 12 months. These simulations incorporate
assumptions regarding b81ance sheet growth, continued community bank conversion, changes in liability mix, and pricing. The
impact of interest rate derivatives, such as embedded options contained in certain liabilities. is also included in the model. Other
interest rate-related risk such as prepayment, basis and option risk are also considered.
ALCO regularly monitors and manages the balance between interest rate-sensitive. assets and liabilities .. The objective
is to manage the impact of fluctuating market rates on net interest income within acceptable levels. In order to meet this objective,
management may lengthen or shorten the duration of assets or liabilities or enter into derivative contracts, either directly or
embedded in other financial instruments, to mitigate potential market risk.
-so-
2370
Table of Contents
Based on simulation modeling, which assumes immediate parallel changes in interest rates at December 31,2009, we
believe ihat our net interest income and net income would change over a one-year period due to changes in interest rates as
follows:
Immediate Shifts
Changes in Levels of
Interest Rates
(in basispoints) ..
::200/
irio
$.
Change in Net Interest Income
Donar Change Percentage Change
(dollars in thousands)
. .. .. .14,336
4;668.
(l,iJ39)
Based on simulation modeling, which assumes immediate parallel changes in interest rates at December 31, 2008, we
believe that our net interest income and net income would change over a one-year period due to changes in interest rates as
follows:
Immediate Shifts
Changes 10 Levels of
Interest Rates
.
200.: .
i06
Change In Net Interest Income
Dollar Change Percentage Change
(dollars in thousands) .
. ................................ 4,j07.
1,607
(1,483)
$:69%'
2.12 ..
At December 31, 2009, management believes the Company's interest rate risk position is modestly asset sensitive. This
means the results of the Company's net interest income and net income would be expected to improve modestly if interest rates
increased from current levels. Management also believes that continued interest rate declines from the Federal Open Market
Committee would have a negative impact on the results of operations. The continued execution of our business plan is expected
to mitigate the impact of the current interest rate environment' if rates remain stable or decline further.
The assumptions used in all of onr interest rate sensitivity simulations discussed above are inherently uncertain. As a
result, the simulations cannot precisely measure net interest income or net income or precisely predict the impact of cbanges in
interest rates on net interest income and net income. Actual results will differ from simulated results due to timing, magnitude and
frequency of interest rate changes as well as changes in market conditions and management strategies.
See Item IA "Risk Factors," and Item 7. "Management's Discussion and AnalYSis of Financial Condition."
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on page F-l.
nem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls aod Procedures
(a) Evaluation of Disclosure Controls and Procedures.
We have established disclosure controls and procedures ("Disclosure Controls") to ensure that information
required to be disclosed in the Company's reports filed under the Securities Exchange Act of 1934, as amended is
recorded, processed, summarized and reported within the time periods specified in the U.S. Securities
Commission's rules and forms. Disclosure Controls are also designed to ensure that such information is accumulated
and communicated to management, including the Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO") and
Chief Accounting Officer ("CAO"), as appropriate to allow timely decisions regarding required disclosure. Our
Disclosure Controls were designed to provide reasonable assurance that the controls and procedures would meet their
objectives. Our management including the CEO, CFO and CAO, does not expect that our Disclosure Controls will
prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only
reasonable assurance of achieving the designed control objectives and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations include the realities that jUdgments in
decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by
management override of the control. Because of the inherent limitations in a cost-effective, maturing control system,
misstatements due to error of fraud may occur and not be detected.
- 81-
2371
Table of Contents
As of the end of the period covered by this Fonn 10-K, we evaluated the effectiveness of the design and
operations of our Disclosure Controls. The controls evaluation was done under the supervision and with the
participation of management, including our CEO, CFO and CAO. Based on this evaluation, our CEO, CPO and CAO
have concluded our Disclosure Controls were effective as of the end of the period covered by this Annual Report on
Form lOoK.
(b) Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such tenn is defined in Exchange Act Rules 13a-\5(f). Under the. supervision and with the participation of management,
including our CEO, CFO and CAO, we conducted an evaluatIon of the effectiveness of our internal control over
financial reporting based on the framework in "Internal Control- Integrated Framework" issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") as of December 31.2009.
Based on our assessment, management concluded that, as of December 31, 2009, the Company's internal control
over financial reporting was effective based on the criteria set forth by COSO.
The Company's external auditors, Crowe Horwath, LLP, an independent registered public accounting finn, have
issued an audit report on the effectiveness of the Company's internal control over financial reporting, which is included
on page F-2 of this report.
(c) Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2009, there were no changes that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item U. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Infonnation required by these Items is incorporated herein by reference to the Company's Proxy Statement
(Schedule 14A) for its 2010 Annual Meeting of Shareholders. which will be filed with the Commission on or before March 31. 2010.
PART IV
Item IS. Exhibits aod Financial Statement Schedules
(a) (1) and (a) (2) Financial statements and financial statement schedules
See Index to Financial Statements on page F-l.
(b) Exhibits
See Exhibit Index on page 84.
(c) Financial Statement Schedules
None.
- 82-
2372
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or IS(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalfby the undersigned, thereunto duly authorized on the 15th day of March, 201 O.
Dated: March 15,2010
Dated: March 15,2010
Dated: Marcq 15,2010
UNITED WESTERN BANCORP, INC.
lsi ScotT. Wetzel
Scot T. Wetzel
President and Chief Executive Officer
(principal Executive Officer)
lsi William D. Snider
William D. Snider
Chief Financial Officer
(Principal Financial Officer)
lsi Benjamin C. Hirsh
Benjamin C. Hirsh
Chief Accounting Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf ofthe registrant and in the capacities and on the dates indicated.
Signatures
lsi Scot T. Wetzel
Scot T. Wetzel
lsi Guy A. Gibson
Guy A. Gibson
lsi William D. Snider
William D. Snider
lsi Michael J. McCloskey
Michael J. McCloskey
lsi Robert T. Slezak
Robert T. Slezak
lsi Lester Ravitz
Lester Ravitz
lsi Dr. James Bullock
Dr. James Bullock
lsi Jeffrey R. Leeds
Jeffrey R. Leeds
lsi Bernard C. Darre
Bernard C. Darn!
Title
President, Chief Executive Officer and a Director
(Principal Executive Officer)
Chairman of the Board
Vice Chairman, Chief Financial Officer and a Director
(principal Financial Officer)
Executive Vice President, Chief Operating Officer
and a Director
Director
Director
Director
Director
Director
- 83-
2373
Date
March 15,2010
March 15,2010
March 15, 20 I 0
March 15,2010
March 15,2010
March 15,2010
March 15,2010
March 15,2010
March 15,2010
Table of Contents
..
'S,.J: B
INDEX TO EXHIBITS
Registrant's registration statement on Form S-1 333-10223), filed by the Registrant with the Commission on
August IS, 1996, as amendedbyForm S-lIA, filed by the Registrant with the Commission on September 27,
1996.
,..
Amended and Restated Declaration of Trust of Matrix Bancorp Capital Trust 11, dated as of March 28, 2001,
incorporated by reference to Exhibit 10.6 to Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 2001, filed b the Re istrant with the Commission on Ma 15,2001.
.. ...... . .. : WI.. ..... ........... ,;.: <;'.:";"'.:\.::<;. :':";:: .... ,, ,.:.;::,: ..;.::t .. :';,,>:,<:: '::.
Capital Securities Guarantee Agreement of the Registrant, dated as of March 28, 2001, incorporated by
reference to Exhibit 10.8 to Registrant's quarterly report on Form 10-Q for the quarter ended March 31, 2001,
filed by the Registrant with the Commission on May IS, 2001.
-84-
2374
'.,
Table of Contents
trustee,
of June 30, 2005, incorporated by reference to 10.1 to Registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 2005, filed b the Registrant with the Commission on Au ust.3.,2oo5. .

Agreem . Bancorp apl , dated as of 30,
to Exhibit 10.3 to Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2005, filed by the
with the Commission on 2005.
Rate Subordinated Debt Security due 2014, incorporated by reference to 4.32 to Rel.i.,tr.".'.
report on Form 10-K for the fiscal year ended December 31, 2003, filed by the Registrant
on March 12, 2004.
J ':::'"' ;1:
:".1; "16:{ , "'Amendment to Assignment aodAssumption Agreement, dated as of August 13, 2002, by aiidamong Mariartcj'
C. DeCola, William M. Howdon, R. James Nicholson and Matrix Funding Corp. incorporated by reference to
Exhibit 10.2 to Registrant's annual report on Form lOoK for the fiscal year ended December 31, 2002, filed by the
ant with the Commission on March 14,2003.
jill. .... .
among
Mcinerney/Gabriele Family Limited Partnership, R. Clifton D'Amato, John H. Moody, MSCS Ventures, Inc.,
Matrix Bancorp, Inc., Matrix Capital Bank, Optech Systems, Inc., Let Lee and MG Colorado Holdings, Inc.,
incorporated by reference to Exhibit 10.1 to Registrant's report on Form 8-K filed by the Registrant with the
Commission on December 6, 2004.
-85-
2375
Table of Contents
10;7 ....
!().g;'
.".itt!I}
lo.Ti

10.14
JO.is
10.18
10.20
'lO.it

.
....... . ' ......... . ........ . ..... .
" . ..
'.' i.....>.>.' .. :"
The Reglstration ofDecember 9,2005, by and between Inc., . "
Friedman, Billings, Ramsey &, Co., Inc. and the other parties thereto, incorporated by reference to Exhibit 4.1 to
Registrant's re ort on by the with.theSommission on December 13,2005.
...... dated ."
.MliIlr.ets. t ..... .' ... ' .lI!!r.,LL .. ' .. '. . ......... r lfo!<,\ingc:;:
., ..' . LL9,inc\l ...... '. . ....... . ....
..... 'colllll!issiojjnn ,ApJ'j ..... ............ , .. :, ......',, ..........' ", ....... ,...:........ '...... . : .........: ... : .:; .
. . Purchase Agreemeni, dated as of May 5, 2006, between SKS Ventures, LLC and Equi-Mor Holdings,inc.,
incorporated by reference to Exhibit 10.1 to Registrant's report on Form 8-K filed by the Registrant with the
Co.mmission May 10, 2006.
i. . .
' . i(i \l11 fll.im fi.&fill:d l>y the c . ;.
RegiStrallt Willi IIIF :.<..., '.<:i.. ......... ...... .. .......
License Agreement, dated as of September i9, 2006, between Legent Cltiiring, LLC arid United
Bancorp, Inc., incorporated by reference to Exhibit 10.1 to Registrant's report on Form 8-K filed by the
with the Commission on Oct?ber 5, 2006 .
. FirstA;lllclidplentWl.i;<'\llte .
'Weste . ' .. ' .... . . .... JPl!!illij;ltJl!,l4 fjl\l411y'
the'R!: . lssiIlI\On . .... ,.QO!J. . .."i .... .. ... :/....... ... .. / ...
Revolving Loan Agreement, dated as of September 29, 2006, between Legen! Group, LLC and United W istem '.
Bank, in the amount of $5,000,000, incorporated by reference to Exhibit 10.2 to Registrant's report on Form 8-K
filed by the . nt \Vith the on Octob;T 5, 2006 .
. ,
aDd Un ..' ... c '.' .. ' ." ...... . ...........
............. : .................
Form of Office Lease, dated as of October 1,2006, between 700 I7lh Street Operating, LLCandUnited Wesiem
Bank, incorpnrated by reference to Exhibit 10.3 to Registrant's report on Fonn 8-K filed by the Registrant with
the Commission on October 5, 2006 .
.. '.' ........
c.naru<,. 10, It? S-l{ liythe'i{egj,s!r!lI1I'
with We. luly 2; 2007,. . ...... ,. ......, .... < ..., .',. .;". .' '.. !.>.,;
Employment Agreement, dated December 31, 2008, and effective as of October 15, 2008, by and between
United Western Bancorp, Inc. and Scot T. Wetzel, incorpnrated by reference to Exhibit.1 0.1 to Registrant's
report by the Registrant withtheCmnmission on January 7,2009.. .' .... .'.
. . ' ...
, .. . iO:l ...
27,2009;..:.... ...........: .................. "", . ,< .............. i . ' ' ..!"\': ';...;!
Asset Purchase Agreement, dated April 7, 2009, by and among the Registrant, Sterling Trust Company; Equity
Trust Company. and Sterling Administrative Services, LLC incorporated by reference to Exhibit 10.1 to
Registrant's report on F"rm. 8-I( filed by the Registrant with 2009:
.. 'i"i!1eofCredit datij<,\ iune2.9, 2009iill behveen .......... ' ...
Bancl!rp. J O. ".
olil',,!ffi '. '.'...>' .......:.: ....
Amendment to Credit Agreement, dated June 29. 2009, by and between United Western Bancorp:lnc: and
lPMorgan Chase Bank, NA incorporated by reference to Exhibit 10.2 to Registrant's report on Form 8"K filed
by the. Registrant with the0fi,lmission 91lJulle26, ........ ' ....... '.'
. 'Loa!! all' . .. ' .. ..
...' .... , .. S!erling ...... " .......... ... .
referim . Fonn8-KfiledbYlhe Cnllll)iij;siohOil' . '.'
....' . .... .......... ... .: .. ; ..... ,.:.. . .... : '.' ..' .. , .
- 86-
2376
Table of Contents
10.24 Amended and Restated Subaccounting Agreement, dated June 27, 2009, by and among United Western Bank,
Equity Trust Company, Equity Administrative Services, Inc., and Sterling Administrative Sprvices, LLC,
incorporated by reference to Exhibit 10.2 to Registrant's report on Form 8-K filed by the Registrant with the
Commission on June 29, 2009.
";1P.25 ... . . .
. \. .. til ExljillillOj
10.26
. . 10.28
..... ..c.. "'J</ ...< .
Amendment to Credit Agreement, dated September 30, 2009, by and between United Wesierti Bancorp, Inc.
and IPMorgan Chase Bank, NA incorporated by reference to Exhibit 1 0.2 to Registrant's report on Form 8-K
filed by the on October 6, 2009,
F
....... Exhib.lt IP .. F ()riitll.
16i2PQ9'i' . . .. <: .. .. >. ......j. ......... .... ... .....: .
Amendment to Credit Agreement, Note Modification and Forbearance Agreement, dated January 15,2010, by
and between United Western Bancorp, Inc. and JPMorgan Chase Bank, NA incorporated by reference to
Exhibit 10.1 to Registrant's report on Form 8-K med by the Registrant with tlieCommission on January 22,
2010.
and Resta\ei\ .24;.zlllo<
.. OJ'rosle Uiinistrative&l1'iffl8j lnc.; IlndSWling./.
. . .. til. Regislrlilll's report on Fotm.$-Kf4ll!i
. .. . ..
21* Subsidiaries of the Registrant.
. ..... .. t;1!.
23.2* Consent of Crowe Horwath LLP .
. 31.1* .. ..
....... ... .. ... ..,.. .... ........,.. .... .,' , ... <
31.2" Certification by William D. Snider pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 3020f
32.1*
the Sarbanes-Oxley Act of2002.
.
.: . ' ....... '..... .. .......... ' .. :..: ........ :...... .: .. '.... ... : ... ;:.... : .... :: ..... ,
Certification by D. Scot T. Wetzel pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of ..
the Sarbanes-Oxley Act of 2002.
.
.. ..,.... ... ': . ....: .., . '. ... .. .'. :. " .... :."./'.. .. "i'
Certification by Benjamin C. Hirsh pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Compensation Agreement
Filed herewith
- 87-
2377
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of United, Western Bancorp, Inc. and Subsidiaries
Report on Management's Ass,essment'ofInternal Contl'Ol over Financial Reporting. December 31. 2009
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements.
December 31. 2009 and 2008
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements.
December 31. 2007
Consolidated Balance Sheets-December 31. 2009 and 2008
Consolidated Statements of Operations-for the years ended December 31. 2009. 2008 and 2007
Consolidated Statements of Shareholders' E9uity and Comprehensive Income/(Loss) for the years ended
December 31. 2009.2008 and 2007
Consolidated Slatements of Cash Flows-for the years ended December 3 t. 2009. 2008 and 2007
Notes to Consolidated Financial Statements
F-I
2378
F-2
F-3
F-S
F-6
F-7
F-9
F-lO
F-12
Table of Contents
Rep!lrt on Management's Assessment of Internal Control over Financial Reporting
The management of United Western Bancorp, Inc. and subsidiaries (the "Company") is responsible for establishing
and maintaining adequate internal control over financial reporting.
The Company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America, The Company's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in n;asonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of in accordance with acc?unting principles generally
accepted in the United States of Amenca, and that receIpts and expendItures of the Company are bemg made only in accordance
with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All
internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the
circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only
reasonable assurance with respect to financial statemenf preparation. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31
2009, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
Internal Control-Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2009, the
Company's internal control over financial reporting is effective based on the criteria established in Internal Control-Integrated
Framework.
The effectiveness of the Company's internal control over financial reporting as of December 31,2009, has been audited
by Crowe Horwath LLP, an independent registered public accounting firm, as stated in their attestation report, which expresses an
unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31,2009. See
"Report ofIndependent Registered Public Accounting Firm."
F-2
2379
Table of Conteats
Report of Independent RegIstered Public Accouutiug Firm
To the Board of Directors and Shareholders
United Western 8ancorp, Inc.
We have audited the accompanying conaolidated balance sheets of United Western Bancorp, Inc. and subsidiaries as of
December 31, 2009 and 2008 and t1!e related conaolidated statementa of operations, shareholders' equity and comprehensive
income /(loss) andcssh flows for the two years then ended. We also have audited United Western Bancorp Inc. and subsidiaries
intemal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control- Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). United Western Bancorp
Inc. 's management is responsible for these financial statements, for msintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of intemal control over financial reporting, included in the accompanying
Management's Report on Internal Controls Over Financial Reporting. Our responsibility is to express an opinion on these
financial statements and an opinion on the effectiveness of the company's internal control over financial reporting based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial. reporting was mainWned in all
material respects. Our audit of the financial statements included examining, on a test bssis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management
and evaluating the overall financial statement presentation. Our audit ofinternal control. over financial reporting included
obtaining an understanding of internal control over financial reporting, aSsessing the .risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions. .
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparntion of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detectil!n of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements. .
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also
projections of any evaluatlonof effectiveness to future periods are subject to the risk that controls niay become
because of changes in conditions, or that the degree of compliance with the polides or procedures may deteriorate.
F-3
2380
Table of Contents
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of United Western Bancorp, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of its operations and its cash
flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, United Western Bancorp, Inc. and subsidiaries' maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on criteria established in Internal Control- Integrated Framework issued
by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO).
As discussed in Note 2 to the consolidated financial statements United Western Bancorp retrospectively adopted new
accounting literature under ASC Topic 260, "Earnings Per Share." All previously reported earnings per common share data has
been adjusted to conform to the new computation methodology. As discussed in Note 25 - Discontinued Operations - Sale of
UW Trust Assets, the Company retrospectively applied accounting guidance related to discontinued operations, and accordingly
reclassified the operating results associated with the sale of UW Trust assets as discontinued operations for all periods
presented.
Sherman Oaks, California
March 15, 2010
lsi Crowe Horwath LLP
F-4
2381
Table of Contents
Report oflndependent Registered Public Accounting FIrm
To the Board of Directors and Shareholders
United Western Bancorp, Inc.
We have audited the accompanying consolidated statements of operations, shareholders' equity and comprehensive income, ande
cash flows for the year ended December 31,2007 of United Western Bancorp, Inc. and subsidiaries. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstaiement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and Significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of
operations and cash flows of United Western Bancorp, Inc. and subsidiaries forthe year ended December 31, 2007, in conformity
with U.S. generally accepted accounting principles. '
As discussed in Note 2 to the consolidated financial statements, United Western Bancorp and subsidiaries retrospectively
adopted new authoritative accounting guidance related to earnings per share. As discussed in Note 25, the consolidated financial
statements have been revised to reflect certain retrospective adjustments related to discontinued operations.
lsi McGladrey & Pullen, LLP
Denver, Colorado
March 6, 2008 (August 7, 2009 as to Notes 2, 3 and 25)
F-S
2382
Table of Contents
United Western Bancorp. Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in /hollsands. except share information)
See accompanying notes /0 consolida/edjinanciai statements.
F-6
2383
Table of Contents
Interest ex ense:
United Western Bancorp, Inc. and'Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands. except share information)
Yean Ended December 31,
Totalinterest expense . 31,193 33,032 52,717
..
Provision for credit losses 35,032 8,599 2,312

Noninterest income:
..
Loan administration . 4,290 4,914 ... 63 n"
...
. Total other-than-temporary impairment losses (42,790) (4,110 ...... " -. ..,. , ... co"'
;,'
Net impairment losses recognized in earnings (36,593) (4,110)
.'"'" ':: .k .. , ':",::::qf..:,::i" "."
"":"" " F>:"O)'.'i}Y'.i[l:r0i?" ''';',!',;'j'';';,.:'.
Total noninterest (loss) income (70,527) 5,504 13,023
See accompanying notes to consoliddtedfinancial statements.
F-7
2384
Table of Contents
United Western Bancorp, inc. and Subsidiaries
Consolidated Ststements OfOperatiODS (continued)
(Dollars in thousands. except share ilJ/ormation)
, Yean Ended December 31,
Z009 .. Z008 Z007

(Loss) income from continuing operations per share - assuming dilution $ (6.06) $ 1.39 $ 1.39

Net (loss) income -.:. assuming dilution $ (3.20) S 1.37 $ 1.39

Weighted average shares - assuming dilution 13,139,070 7,164,598 .. , "''''7.2S6,4S;f'
u}'
See accompanying notes to consolidatedjinancia/ statements.
F-8
'2385
Table of Contents
United Western Bancorp, Inc: and Subsidiaries
Consolidated Statements of Shareholders' Equity and Comprehensive Income/(Lo,s)
(Dol/ars in thousands, except share in/ormation)
Additional Accumulated Otber
Common Stock Paldln Retained. Comprebeallve Comprehenllve
. . Sharel Amonat Capital Earalalll . I.come (lOll) Total IDcomtil(lolO)

Dividends paid (50.24 per share) (1,747) (t,747)
. tte; H'f::'!> !:":'X2 ;igj
Stock repurch... (60,200) (1.251) (1,251)
. ..... ,';. ''''3';;
Issuance of stock to employee
stock purcha .. plso 18,308 399 399
:;:e!}; .. ';.; ';:f42lE:;;;'''T;/:,''::i<;:';'' .);:"';;;-:
Share-based .compensation
expense 886 886

",>,,,,-.,! :""''!':;;T;S'J'F.;:;;.;'j, ,C, ... , .v;:' "; '" .," ' " . "'i,t.Y';"' ..... ':C.'"'.'''
i,'>.>:' . ::,:,,;,:;:; :.}:.';,. '';;';':' ., .. ,:" "", (2;834) " (2,834). '<ii<,
Comprehensive income . $ 7,307

Cumulative .djustmentto apply
ASC 715.60 .,," (226) """,""""'", (226)
. [,;;;;:'0;;>:'<1;6;;;5>: :.; i."; ;< .. ::'
"''', . ,';,
Issusnce of stock to employee
337 337
stock purch.se plso 26,634
:rtr 'S .... '.''''';.' "";;;; ,:,." ",.;::';:;:.::,:/'t'.' ,:;:; ;.;,};;.
Share-blOod compensation
1.261
Net income _ _ - .9,952 2
::;;< .. ::i't"" , .... ,,'.\
:u, ;;i: .. ';:;;1;,",. .. ,
:'i';
Cumulative effect of change in
accounting principle,
adoption of ASC 320-10 (net
Issuance
387
public offering (net of
offering costo 0($6,099) 21.961,325 81,746
;< .... .. . _.i' .. ' ,. ... ' ... "., .. , .'.,,.. ...,.'.:.:.:;:.', ..: .','.' ..,.',. ;.".' ....." .... '- ..'.' .. '.;.'., .... ',<,'.:,".;.";';'.: ";' .. -. .' .. '.',,', . ... '" ':"''c' .. '.;'.... '.:.. '.... '> .. :.:.,.r..,.' .,;' .:.,.' ... :.<,' ;;.;;.",... , .... ,' ...... ..,., ;,.'.<.' 44: ,'."" ..
81,744
.. ;,;.;""'!;.., ....... ,:;., ...... ." , .. .... .. ' ;;....,;;.".;;,,;, ,:;'::'i?:
expense
.. ;:;:.:.3)
Netloso
1,290
.
Compreheosive loss 5 (24,662)
D .. ,il. .....m.'.'.' ....' . , .... d ..'. ' ... ,... ..... ..... , ....' ... hCi'. '..,'.'..l .. .1 .. .2 ... ..""", .. , ........','........ ; .. ... ....;'. 'IS. ;5 .. : ... ... ,.,' ..$. ','.'5'1. ;1 ...'4' .. :'1.<.' ..:.''''.:.' .. :ii;..:..:.X:.'.;.".:';';". t.": "'I'59'1)"1''''! ".
. ....." .' . .' ., ., ,"''-'''::'. '>;;.;.;/,1
(I) Net ofincome tax (benefit) provision of(SI.460). ($12,228) aod $11,702 for 2007,2008, and 2009 respectively.
See accompanying notes toconsolidatedfinancial statements.
F9
2386
Table of Contents
United Western Bancorp, Inc. and .subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Yan Ended December 31,
2387
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years Ended December 31,
2009 2008 2007
..,.
Net increase in deposits
... : .
Net decrease in FHLBaok borrowings
Bom:.wedDr()"ey'-f:rrepaYtUentli.ot)p*oceensfl'omrep1.l1:chasll'.,,,.' ., .... , ...... ,., ...
. F> / ....... , ......' }} ...... . .. . .. i.::X:. .. .. .. .. .... < ......
Borro.wed (repayements of) line, nel
..... . ....
c:apitaI secu.rities .trust
". '. .... . ....
Dividends paid
, ....................................
Proceeds from issuance of common stock, net

Cash flows from discontinued oDt!raliioDIS:
f1wi( .
Investing cash flows
."
Net cash from discontinued operations
. ....
Cash and cash equivalents at beginning oftbe period
.
Supplemental disclosure of non-casb activity
..
Loans securitized and transferred 10 securities available for sale
.. ..
N ole receivable received in sale of assets of discontinued operations

flow
Casb.pil@fofi!ltfttest .. . ;. .
Cash paid for income taxes
."
$
.$
$
$
$'
$
$
$
$
. 268,841 $
2;ZO$
,<46,114)
..
(8,000)
,
(1J43) .
81,814 .
liJ5.11i)'
"7,934)."
353
(7.581)

22.880

21.1!1
46.050
,.179
)Q,ilS3
1,256
$
$:',
$
$
$
$.'
$
$
See accompanying notes to consolidatedfinancial statements.
F-ll
2388
339.191 $
(4,475)
(179,408)

.17.000.
174.QIO
. 7Q4'
(1,240)
(536)
,
40,806
. . <$
6.9()1
'$
18.003 $
$
$
139 $

$
7,529 $
..
39.800
(5;84$)
(113,302)

5.000
6;00(}:
(25/774)

(1.747)
rtf
3ft
<inf"
(1,104)
(186)

23.754
40.$()6
4,(iSl
.itA3!)

$3;376
4,589
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Organization
United Western Bancorp, Inc. (the "Company"), is a unitary thrift holding company and, through its subsidiaries, a diversified
financial services company headquartered in Denver, Colorado. The Company's operations are conducted primarily through
United Western Bank ("United Western Bank" or the "Bank"), UW Trust Company, formerly Sterling Trust Company ("UW
Trust"), Matrix Financial Services Corporation ("Matrix Financial"), UWBK Fund Management, Inc., ("Fund Management"), and
UW Investment Services Inc. ("VWIS"), all of which are wholly-owned subsidiaries ofthe Company.
Subsidiaries
United Western Bank is a federally chartered savings bank that originates commercial real estate, commercial, residential and
commercial construction and development, multifamily, leasing, energy and consumer loans. Within certain of these loan types
the Bank also originates Small Business Administration ("SBA") loans under the 504 and 7(a) programs and loans through the
utilization of New Markets Tax Credits. The Bank also offers personal and business depository banking, treasury management,
item processing and trust services. At December 31,2009, the Bank has eight branches in the Colorado Front Range marketplace
(downtown Denver, Boulder, Cherry Creek, Loveland, Fort Collins, Longmont, and two in South Denver) and a loan production
office serving Aspen and the Roaring Fork Valley.
UW Trust is a non-bank trust company that operates custodial escrow, paying agent and trust administration lines of business.
The Company's mortgage banking business is primarily conducted through Matrix Financial, and was established with the
primary objective of originating, acquiring and servicing residential mortgage loans. Matrix. Financial has not originated loans
since 2003. All servicing functions previously performed by Matrix Financial have been performed by a third party sub-servicer
since December 2004. .
2. Significant Accounting Policies
Accounting Standards Codijication. The Financial Accounting Standards Board's ("FASB") Accounting Standards Codification
("ASC") became effective on July 1, 2009. At that date, the ASC became FASB's officially recognized source of authoritative U.S.
generally accepted accounting principles ("GAAP") applicable to all public and non-public non-governmental entities,
superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force ("EI1F') and related
literature. Rules and interpretive releases ofthe SEC under the authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way
companies refer to U.S. GAAP in financial statements and accounting policies. Existing GAAP prior to the effective date of the
ASC was not altered in compilation of the ASC. Citing particular content in the ASC involves specifYing the unique numeric path
to the content through the Topic, Subtopic, Section and Paragraph structure.
Basis of Presentation. The consolidated financial statements include the accounts of the Company and all other entities in which
the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in
consolidation. The accounting and reporting policies of the Company and its subsidiaries conform, in all material respects, to
accounting principles generally accepted in the United States of America.
F-12
2389
Table of Contents
United Western Bsncorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Ownership interests of 20% or more" in non-controlled affiliates are accounted for by the equity method. Other investments are
recorded at cost. The Company follows the accounting guidance in ASC Topic 810, "Consolidation" for accounting for the
Company's three variable interest entities ("VIEs"), in the form of its wholly-owned subsidiary trusts that issued capital securities
to third-party investors and to certain direct and indirect interests in investment partnerships, commonly referred to as trust
preferred securities, discussed more fully in Note 11. As the Company is not the primary beneficiary of these VIEs, the accounts
ofthese entities are not included in the Company's consolidated financial statements.
Use of Estimates. The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions at the date of the consolidated
financial statements that affect the amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. The
Company believes that the allowance for credit losses, the fair values of financial instruments, lower of cost or market adjustment
on loans held for sale, foreclosed assets, deferred tax assets and liabilities and the determination of temporary vs. other-than-
temporary impairments are particularly subject to change.
Reclassifications. Certain reclassifications have been made to prior years' consolidated financial statements and related notes to
conform to the current year presentation including the effects of discontinued operations. See Note 25 - "Discontinued
Operations - Sale ofUW Trust Assets" for a discussion of the impact of the sale of UW Trust assets.
Included in the reclassifications made to prior years' consolidated financial statementS was a retrospective change in the
presentation of the valuation allowance to reduce loans held for sale to the lower of cost or fair value in two components, one an
allowance for credit losses that separately and one valuation allowance that separately
considered market risk factors. Management has reclassIfied pnor penod financIal statements to reflect the valuation allowance to
reduce loans held for sale at the lower of cost or fair value as one valuation allowance balance. This revision to our presentation,
reduced provision for credit losses for the year ended December 31, 2007 to $2,312,000 from the previous presentation of
provision for credit losses of $2,451,000 for 2007. Offsetting the reduction in provision for credit losses, was an increase in other
expense - lower of cost or fair value adjustment. The lower of cost or fair value adjustment for the year ended December 31, 2007
was $583,000 and is now presented as $722,000 for the same period. This reclassification and other reclassifications made to these
financial statements had no impact on total assets, shareholders' equity, or net income for any period.
Cash Flow Reporting. Cash equivalents, for purposes of the consolidated statements of cash flows, consist of cash, federal
funds sold and interest-earning deposits with banks with original maturities, when purchased, of three months or less. Net cash
flows are reported for deposit, including custodial escrow balance transactions, FHLBank borrowings and borrowed money _
revolving lines of credit.
Concentrations and Restrictions on Cash and Cash Equivalents. The Company maintains deposits with other financial
institutions in amounts that exceed federal deposit insurance coverage. Furthermore, federal funds sold are essentially
uncollateralized loans to other financial institutions. Management regularly evaluates the credit risk associated with the
counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on cash and
cash equivalents.
The Bank was required to maintain $2,337,000 and $3,186,000 of vault cash or balances with the Federal Reserve Bank of Kansas
City to meet regulatory reserve and clearing requirements at December 31, 2009 and 2008, respectively. These deposits with the
Federal Reserve Bank do not earn interest.
F-13
2390
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Dividend Restriction. The regulations under which our significant subsidiaries operate require maintaining certain capital levels.
Accordingly, such regulations may limit the amount of dividends paid by the Bank or by UW Trust to the Company or by the
Company to shareholders. Effective as of December 10, 2009, the Company entered into an informal Memorandum of
Understanding ("Infonnal Agreements") with the Office of Thrift Supervision (the "OTS"). The Informal Agreement between the
Company and the OTS provides, among other things, that tbe Company not declare or pay dividends or any other capital
distribution or redeem any capital stock of the Company, or take dividends representing a reduction in the capital from tbe Bank,
without the prior written non-objection of the Regional Director of the OTS. See Note 13 for additional details related to the
Informal Agreemeots.
Investment' Securities. Securities available for sale include mortgage backed securities and a nominal amount of Small Business
Administration pooled securities ("SBA securities"). Securities are classified as available for sale when management
has the intent and ability to hold suchsecurities for an indefinite period of time, but not necessarily to maturity. Any decision to
sell investment securities available for sale would be based on various factors, including, but not limited to, asset/liability
management strategies, changes in interest rates or prepayment risks, liquidity needs, or regulatory capital considerations.
Securities available for sale are carried at fair value with tbe change in unrealized gains and losses reported in other
comprehensive income/(loss), net oCtax, which is included as a separate component in shareholders' equity. Realized gains and
losses on the sale of available for sale securities are recognized on trade date and are detennined using the specific identification
method.
. Securities held to maturity include mortgage backed securities and SBA securities. Securities are classified as held to maturity
when management has the positive intent and ability to bold the securities to maturity. Securities beld to maturity are earned at
amortized cost
Interest income includes amortization of purchase premiums and discounts. Premiums and discounts on securities are amortized
on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are
anticipated.
Temporary VS. Other-Than-Temporary Impairment
Tbe Company views the determination of whether an investment security is temporarily or other-than-temporarily impaired as a
critical accounting policy, as tbe estimate is susceptible to significant change from period to period because it requires
management to make significant judgments, assumptions and estimates in the preparation of its consolidated financial statements.
We assess individual securities in our investment securities portfolio for impairment at least on a quarterly basis, and more
frequently when economic or market conditions warrant. An investment is impaired iftbe fair value ofthe.security is less than its
carrying value at the financial statement date. When a security is impaired, we then detennine whether this impairment is
temporary or other-than-temporary. In estimating other-than-temporary impainnent ("OITI") losses for debt securities
management assesses whether it intends to sell, or it is more likely than not that it will be required to sell a security in an
unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between
amortized cost and fair value is recognized in earnings. For securities that do not meet the aforementioned criteria, the amount of
impainnent recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is
recognized in other comprebensive income. Management utilizes cash flow models to segregate impairments principally on
selected non-agency mortgage backed securities to distinguish between impainnent related to credit losses and impairment related
to other factors. To assess for OTT!, management considers, among other things, (i) the severity and duration of the impainnent;
(ii) the ratings of the security; (iii) the overall transaction structure (e.g., the Company's position within the structure, the
aggregate, near tenn financial performance of the underlying collateral, delinquencies, defaults, loss severities, recoveries,
prepayments, cumulative loss projections, and discounted casb flows); and (iv) the timing and magnitude of a potential break in
modeled cash flows.
F-14
2391
Table of Contents
United Western Baneorp, (ne. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Loans Held for Investment. Loans that management has the intent and ability to hold for the foreseeable future or until maturity
or payoff are clas'sified as loans held for investment. These loans are reported at the principal balance outstanding net of
unearned discounts and purchase premiums. Interest income is accrued on the unpaid principal balance. Loan origination fees,
net of certain direct origination costs and purchase premiums, are deferred and recognized in interest income using level-yield
method without anticipating prepayments and includes amortization of deferred loan fees, purchase premiums and costs over the
loan term. Net loan commitment fees or costs for commitments are deferred and amortized into fee income or other expense on a
straight-line basis over the commitment period.
The accrual of interest on loans is discontinued when, in management's opinion, the borrower may be unable to meet payment
obligations as they become due, as weIt as when required by regulatory provisions and Company policy. After a loan is placed on
non-accrual status, any interest previously accrued, but not yet collected, is reversed against current income. Generally, all
subsequent payments are applied to reduce the principal balance. Loans will not be placed back on accrual status unless back
interest and principal payments are made, and future payments are reasonably assured.
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to
collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and
interest payments. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties,
are considered troubled debt restructurings and classified as impaired. Impairment is evaluated in total for smaller-balance loans of
a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if
necessary, so that the loan is reported net, at the fair value of collateral if repayment is expected solely from the collateral, or the
present value of estimated future cash flows using the loan's existing rate. Interest payments on impaired loans are typically
applied to principal unless collectibility of the principal amount is reasonably assured, in which case interest is recognized on a
cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.
Loans Held for Sale. Loans originated or purchased without the intent to hold for the foreseeable future or until maturity are
carried at the lower of net cost or fair value on an aggregate portfolio basis. The amount, by which cost exceeds fair value, if any,
is accounted for as a loss through a valuation allowance. Changes in the valuation allowance are included in the determination of
income in the period in which those changes occur and are reported in the Consolidated Statements of Operations - Noninterest
expense as lower of cost or fair value adjustment.
The accrual of interest on loans held for sale is discontinued when, in management's opinion, the borrower may be unable to meet
payment obligations as they become due, as well as when required by regulatory provisions and Company policy. After a loan is
placed on non-accrual status, any interest previously but not yet is reversed against current income. Generally,
all subsequent payments are applied to reduce the pnnclpal balance. Loans Will not be placed back on accrual status unless back
interest and principal payments are made, and future payments are reasonably assured.
F-15
2392
Table of Contents
United Western Bancorp, Ine. and Subsidiaries
Notes to ConsoUdated Financial Statements (eontlnued)
Loans are considered sold when the Company surrenders control over the transferred assets to the purchaser, with standard
representations and warranties, and when the risks and rewards inherent in owning the loans have been transferred to the buyer.
At such time, the loan is removed from the general ledger and a gain or loss is recorded on the sale. Gains and losses on 10lIn
sales are determined based on the difference between the allocated cost basis of the assets sold and the proceeds, which includes
. the fair value of any assets or liabilities that are newly created as a result of the transaction. Losses related to recourse provisions
are accrued as a liability at the time such additional losses are determined, and recorded as part of noninterest expense. Losses
related to asset quality are recorded against the allowance for credit losses when the loan is considered ull\lollectible.
Community Btlnk Loans. Community bank loans include commercial real estate loans, construction and development loans,
commercial loans, multifamily loans and cOnsumer loans. Within this population are loans originated by the Bank's SBA division.
The majority of community bank loans are originated as assets held for investment and are further discussed in Note S. Loans-
Loans held for Investment. We intend to hold for the foreseeable future or to maturity all community bank loans except SBA S04
loans and the guaranteed portion ofSBA 7a loans. We generally sell selected SBA 504 loans and the guaranteed portion ofSBA
7a loans on a routine basis. Certain broker-originated multifamily loans that are considered community bank loans continue to be
classified as loans held for sale. At December 31, 2009 and 2008 community bank loans included multifamily and SBA originated
loans totaling $77,147,000 and $83,652,000, respectively that were classified as held for sale.
Other Loans. Other loans include purchased residential loans and purchased guaranteed portions of SBA 7a loans. We did not
acquire any other loans in 2009 or 2008 other than . loans we are required to repurchase from our Government National Mortgage
Association ("Ginnie Mae") mortgage servicing portfolio. Such loans are government guaranteed as to principal and lnterest. At
December 31, 2009 and 2008, other loans included residential loans totaling $187,895,000 and $212,083,000, respectively that were
classified as loans held for sale. See Note 5: Loans for a break out of all other loans.. .
Allowtlnce for Credit Losses. The allowance for credit losses is a reserve established through a provision for credit losses
charged to expense, which represents management's best estimate of probable incurred credit losses inherent in the loan held for
investment portfolio ("loan portfolio'). The allowance, in the judgment of management, is necessary to reserve for estimated
losses inherent in the loan portfolios. The allowance for credit losses includes allowance allocations calculated in accordance with
ASC Subtopic 450-20, "Loss Contingencies, .. and ASC Subtopic 310-35-2, "Loan Impairment . .. The level of the allowance reflects
management's continuing evaluation ofloan loss experience, specific credit risks, current loan portfolio quality, industry and loan
type concentrations, economic arid regulatory conditions and unidentified losses inherent in the loan portfolios, as well as trends
in the foregoing. .
The allowance for credit losses consists of four components: pools of homogeneous residential loans with similar risk
characteristics, commercial loans with similar risk characteristics (e.g., multifamily, construction and development, commercial real
estate and commercial), individual loans that are measured for impainnent, and a component representing an estimate of inherent,
probable incurred but undetected losses, which also contemplates the imprecision in the credit risk models utilized to calculate the
allowance.
Pools of homogeneous residential loans with similar risk characteristics are assessed for probable iricurred losses based on loss
migration analysis where loss factors are updated regularly based on actual charge offs and impainnents incurred. The analysis
examines historical loss experience, impairments, and the related internal gradings of loanS charged off. The loss migration
analysis also considers inherent but undetected losses within the portfolio.
F-16
2393
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Commercial loans with similar risk characteristics (e.g., multifamily, construction and development, commercial real estate and
commercial) are assessed for probable losses based on loss migration analysis where loss factors are updated regularly based on
our own loss experience, the collective experience of our credit risk management team, and industry data. The analysis also
incorporates the related internal gradings of loans charged off, impairments, and other factors, including our asset quality trends
and national and local economic conditions.
The portion of the allowance established for loans measured for impairment reflects expected losses resulting from analyses
developed through specific allocations for individual loans. The Company considers a loan impaired when, based on current
information and events, it is probable that it will be unable to collect all amounts due according to the contractual terms of the
loan. Loss on impaired loans is typically measured using the fair value of collateral, as such loans are usually collateral dependent,
but may be measured using either the present value of expected future cash flows discounted using loan rate, or the market price
ofthe loan. All loans considered impaired are included in nonperforming loans. The Company generally evaluates its residential
loans collectively due to their homogeneous nature; however, individual residential loans may be considered for impairment
based on the facts and circumstances of the loan. Accordingly, potentially impaired loans ofthe Company may include residential
loans, commercial loans, real estate construction loans, commercial real estate mortgage loans and multifamily loans classified as
nonperforming loans.
The last component of the allowance for credit losses is a portion which represents the estimated inherent but undetected
probable losses and the imprecision in the credit risk models utilized to calculate the allowance. This component of the allowance
is primarily associated with commercial loans (i.e., multifamily, construction and development, commercial real estate and
commercial). The unallocated portion of the allowance for credit losses reflects the Colorado concentration in commercial real
estate, construction and development loans, national multifamily and certain commercial real estate loans for which the migration
analysis does not yet reflect a complete credit cycle due to the overall seasoning of such loans and ongoing uncertainty with
respect to other loans in our community bank and other lending portfolios.
Portions of the allowance may be allocated for specific credits; however, t h ~ entire allowance is available for any credit that, in
management's judgment should be charged off. Loan losses are charged agamst the allowance when management considers the
loan uncollectible. While management uses its professional judgment and the information available, the ultimate adequacy of the
allowance is dependent upon a variety of factors beyond the Company's control, including the performance of the Company's
loan portfolios, national and Colorado economic conditions, changes in interest rates and other factors. .
FHLBank Stock. As a member of the Federal Home Loan Bank system ("FHLBank"), United Western Bank is required to own
FHLBank stock. The Company carries FHLBank stock at cost, which is equal to its redemption value. FHLBaok stock is classified
as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Dividends are credited
to interest and dividend income when declared by the FHLBank.
Mortgage Servicing Rights. The Company recognizes mortgage servicing rights ("MSRs") as an asset separate from the
underlying originated mortgage loan at the time of sale. Upon sale of a loan, the Company measures retained MSRs at their
estimated fair values. Purchased MSRs were initially recorded at cost. MSRs are carried at the lower of cost (allocated cost for
originated MSRs), less accumulated amortization, or estimated fair value. MSRs are amortized in proportion to and over the period
of the estimated future net servicing income.
F-17
2394
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated FInancial Statements (continued)
The estimated fair value ofMSRs is determined by reference to the discounted future servicing income, as stratified in accordance
with one or more predominant risk characteristics of the underlying loans. The Company stratifies its MSRs by product type,
interest rate and investor to reflect the predominant risk characteristics. To determine the estimated fair value of MSRs, the
Company relies on a third party that uses a valuation model that calculates the present value of discounted future cash flows. In
using this valuation model, the Company incorporates assumptions that market participants would use in: estimating future net
servicing income, which includes estimates of the cost of servicing per loan, including incremental interest cost of servicer
advances, foreclosure expenses and losses, the discount rate, float value, an inflation rate, ancillary income per loan, prepayment
speeds and default rates. For P)ltposes of performing an impainnent analysis on MSRs, the Company estimates fair value using
the following primary assumptions at December 31, 2009: average prepayment speeds ?f 17.04 CPR, (Constant Prepayment Rate, a
prepayment speed measurement) ranging from 1.9 CPR to 38.35 CPR; an average discount rate of 11.48%, with discount rates
ranging from 11.0oolo to 18.82%; and average delinquency of 9.30%, with default rates ranging from (lOA. to 100%. At. December 31,
2008, the estimate of fair value was determined USing the following assumptions: average prepayment speeds of 13.6 CPR, which
ranged from 1.3 CPR to 43.3 CPR; an average discount rate of 11.56%; with discount rates ranging from 11.000/0 to 47.12%; and
average delinquency of 8.09%, with default rates ranging from oolo to 100010. At December 31, 2009, the Company's residential
servicing portfolio consisted of seasoned loans with an approximate 11.5 year average age, an average balance of $58,900 and a
weighted average note rate of 7.02%. At December 31, 2008 the Company's residential servicing portfOlio consisted of seasoned
loans with an approximate 10.6 years average age, an average balance of $58,000 and a weighted averaged note rate of 7.23%. .
MSRs are evaluated for impairment based on the factors discussed in the paragraph above. If temporary impairment exists within a
risk stratification tranche, a valUation allowance is established through a charge to income equal to the amount by which the
carrying value exceeds the fair value. If it is later determined that all or a portion of the temporary impairment no longer exists for a
particular tranche, the valuation allowance i.s reduced through a credit to noninterest expense.
MSRs are also reviewed for other-than-temporary impairment. Otber-than-temporary impairment exists when the recoverability of a
recorded valuation allowance is determined to be remote, taking into consideration historical and Projected interest rates and loan
pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-
down to the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying
value ofthe MSRs and the valuation allowance, preventing subsequent recoveries.
As of December 31, 2009 and 2008, a valuation allowance of $860,000 was established, and the fair value of the aggregate MSRs
was approximately $7,344,000 and $9,496,000, respectively. . .
Gain on sale of MSRs is recorded when title to MSRs and the risks and rewards inherent in owning the MSRs have been
transferred to the buyer.
Premises lind Equipment. Land is carried at cost. Buildings, leasehold improvements, office furniture and equipment are carried at
cost less accumulated depreciation and amortization. Depreciation and amortization is computed by the straight-line method over
the estimated usefililives of the assets. Usefililives range from two to five years for software, office furniture and equipment, and
five to 40 years for buildings and building improvements. Leasehold improvements are amortized over the term of the related lease
or the estimated useful lives of the improvements, whichever is shorter. Maintenance and repairs are charged to expense as
incurred, while major improvements are capitalized and amortized to operating expense over their identified useful lives.
F-18
2395
Table of Contents
United Western Bancorp,lnc. and Subsidiaries
Notes to Consolidated Financial Statements (condnued)
Foreclosed Real Estate. Residential or commercial assets acquired through loan foreclosure or deed in lieu of loan foreclosure are
held for sale and are initially recorded fair value, less estimated selling costs when acquired, establishing a new cost basis. Costs
after acquisition are generally expensed. If the fair value of the asset declines, a write-down is recorded through expense.
Bank Owned Life Insurance. The Bank has purchased life insurance policies to insure the lives of certain officers and directors of
the Bank. Life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date,
which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Earnings are
credited to the balance and recorded as part of other income in the consolidated statements of income.
Impairment or Disposal of Long-Lived Assets. The Company reviews long-lived assets to be held and used for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recllverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net
undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Repurc"ase Agreements. The Company has sold certain securities under agreements to repurchase. The agreements are treated
as collateralized financing transactions and the obligations to repurchase securities sold are reflected as a liability in the
accompanying consolidated balance sheets.
Custodial and Administration Services Income. Custodial and administration services income represents fees earned related to
services provided for custodial escrow, paying agent and trust administration accounts. Revenue is recognized over the contract
period in proportion to when the services are performed.
Loan Administration Income. Loan administration income represents service fees and other income earned from servicing loans
for various investors. Loan administration income includes service fees that are based on a contractual percentage of the
outstanding principal balance plus late fees and other ancillary charges. Service fees on loans and all other income are recognized
when the related payments are received.
New Markets Tax Credits. Monetization of New Markets Tax Credits ("NMfC") is included in other income. Utilization of New
Markets Tax Credits by the Company reduces our income tax expense. NMTC are awarded under a program administered by the
Community Development Financial Institutions Fund, a division of the United States Department of Treasury. NMTC projects
promote economic development and contribute to the enhancement of the communities served by the projects. The NMTC
Program permits the Company to claim a credit against fede",1 income taxes for each qualified equity investment made to a
designated community development entity. The Company receives a 39% tax credit over a seven year period. In 2009. the Bank
made a $20 million qualifying equity investment in a 99.99% owned subsidiary, Charter Facilities Funding 5, LLC ("CFF 5"). In 2005
and 2006, the Bank made $11 million and $\0 million, respectively, qualifying equity investments in a 99.99% owned subsidiary,
Charter Facilities Funding IV, LLC ("CFF IV"). In 2004, the Bank made a $12.6 million qualifying equity investment in a 99.99%
owned subsidiary, Community Development Funding I, LLC ("CDF In). The financial position and results of operations of CDF J,
CFF IV and CFF 5 are included in the Company's consolidated financial statements. In connection with the qualified equity
investments, the Company claimed net federal income tax credits of$2.0 million, $1.2 million, and $1.1 million, for the years ended
December 31,2009,2008, and 2007, respectively, which are included as a reduction to the income tax provision in the consolidated
income statements.
F-19
2396
Table of Contentl
United Western Baneorp,lne. and Subsidiaries
Notes to Consolidated Flnaneial Statements (continued)
NMTC may also be monetized via sale to third parties. The Company bas established subsidiary LLC entities that serve as single
pUtpDSe vehicles to facilitate the timding of NMTC eligible loans to qualified entities. The Company created Charter Facilities
Funding I, LLC, Charter Facilities Funding II, LLC and Charter Facilities Funding V, Ltc, ("CFF I, II and V") of which the Company
is the 0.01% owner and managing member and an unrelated party is the 99.99% owner and non-managing member. The Company
accounts for cFF I, II and V u.nder the equity method of accounting as CFF I, II and V do not meet the criteria under ASe Topic
810, "Consolidation." CFF I, II and V are accounted for under the equity method because the non-managing member bas
approved the selection and compensation of the managing member, and has certain termination rights. The non-managing member .
has the authority to not only approve operating and capital decisions, the non-managing member has identified and continues to
service the sole investment made by the entity. Any and all future investments require approval from the non-managing member.
Finally, profits and losses are allocated to the members in accordance with. their respective percentage ownerships and the
managing member does not have the unlimited liability that a general partner in a limited partnership would incur. -
The Company received a structuring fee in connection with the monetization of the NMTC and also receives ongoing
management fees in equal installments over the seven year tax credit period. The Company recOgnized ongoing managemenHees
0($126,000, $126,000, and $94,000, for the years ended December 31, 2009, 2008, and 2007, respectively. These fees were included
in other noninterest incOn1e. The Company recognizes the strueturing fee as received as the NMTC transferred to the purchaser
has value to the buyer on a standalone basis and there is objective and reliable evidence of the fair value of the remaining
ongoing services to be performed. After the structuring of the transaction, the ongoing obligation of the Company is to prepare
and file tax returns, obtain an annual audit, maintain the tax qualification of the entity, and prepare regulatory filings.
Stock-Based Compensation. Compensation cost is recognized ~ o r stock options and restricted stock grants issued to directors,
executive officers and employees, based on the fair value of these awards at the date of grant. A trinomiallattice-based model is
utilized to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is
used for restricted stock grants. Compensation cost is recognized over the required service period, generally defined as the
vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite
service period for the entire award.
Subtlccounting Fees. Subaccounting fees represent fees paid to a third party to service depository accounts on behalf of the
Bank. Such fees are paid to third parties that provide processing and trust deposits to the Bank.
Income from D,iscontlnlled Operations, net 0/ Income TIlXes. Income from discontinued operations, net ofincorne taxes for 2009,
2008 and 2007 includes the results of UW Trust Company, which is discussed in Note 25 - "Discontinued Operations - Sale of
UW Trust Company Assets."
Income TllXes; Income tax (benefit) expense is the total of the current year income tUx due or retimdable and the- change in
deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to components of other comprehensive
income). Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible
temporary differenCes and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their
tax bases. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
ahility to carryback losses to prior taxable years, the generation of future taxable income and tax planning strategies which will
create taxable income during' the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income, and as necesaary, tax planning strategies in making
this assessment At December 31, 2009 and December 31, 2008, management established a deferred tax asset valuation allowance
of $1 0.2 million and $0, respectively, based on its assessment of the amount of net deferred tax assets tbst are more likely tbsn not
to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
F-20
2397
Table of Contents
United Western BaBeorp, lae. aad Subsidiaries
Notes to Couolidated Flnanelal Statements (eoutiBued)
The Company and its subsidiaries file consolidated federal and state income tax returns. The subsidiaries are charged for the taxes
applicable to their profits calculated on the' basis of filing separate income tax returns. The Bank qualifies as a savings and lOan
association fur income tax purposes. The consolidated effective tax rate is affected by the resolution of uncertain tax positions
identified under ASC Topic 740 .. "Income Taxes," the level of utilization of New Markets Tax Credits and the level of tax-exempt
interest income in proportion to the level of net income.
When tax returns are tiled, it is highly certain that some positions taken would be sustained upon examination by the taxing
authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would
ultimately be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on
all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and
not offset or aggregated with other positions. Tax positions that meet the more-likely-tban-not recognitipn threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicab1etaxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount'measured as described above is
reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and
penalties that would be payable to the taxing authorities upon examination. ,
Interest and penalties associated with unrecognized tax benefits are classified as income tax expense in the consolidated
statement of income and accrued in other liabilities.
Segments 0/ an Enterprise and' Related In/ormation. The Company operates as three segments - banking, custodial and
administrative services, and mortgage banking. The chief decision-makers for these subsidiaiy entities monitor the revenue
streams of the various products and services, 'monitor operations 'and financial performance and report to the Company's
executive management team and board of directors. Discrete financial information for branches is not available other than on a
bank wide basis.
Income Per Common Share. Effective January 1,2009, the Company adopted new authoritative accounting guidance under ASC
Topic 260, "Earnings Per Share, .. which provides that unvested share-based payment awards that contain non-forfeitable rights
to dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings
per share pursuant to the "two-class" method. The two-class method is an earnings allocation methodology that determines
earnings per share separately for each class of stock and participating security. Participants in our equity compensation plan who
are granted restricted stock are allowed to retain cash dividends paid on nonvested shares, and therefore, the Company's
nonvested restructured stock awards qualifY as participating securities under ASC Topic 260. All previously reported earnings
per common share data has, been retrospectively adjusted to conform to the new computation methodology.
F-21
2398
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
CQmprehensive Income/(Loss). Comprehensive income/(loss) includes all changes in shareholders' equity during a period, except
those resulting from transactions with shareholders. Besides net income (loss), other components of the Company's
comprehensive income includes after tax effect of change in net unrealized gains and losses on securities available-for-sale and
the amount of OTTI not related to credit, for securities held to maturity. Comprehensive income/(loss) is reported as a separate
component of shareholders' equity on the consolidated balance sheet and in the statements of changes in shareholders' equity.
Derivative Financial Instruments. The Company's hedging policies permit the use of various derivative financial instruments to
manage interest rate risk or to hedge specified assets and liabilities. At December 31, 2009 and 2008, there were no stand alone
derivative financial instruments and no instruments that required bifurcation from the underlying host contract, which would have
required reportil1g such instruments at fair value on the Company's balance sheet. The Company may be required to recognize
certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the
definition of a derivative.
Fair Value Measurements. In general, fair value of financial instruments is based upon quoted market prices, where available. If
such 'Iuoted market prices are not available, fair value is based upon third party models that use, as inputs, to the extent available,
observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair
value. These adjustments may include amounts to reflect unobservable parameters, among other things. Any such valuation
adjustments are applied consistently overtime. Fair value estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the estimates.
3. Net (Loss) Income Per Share
(Loss) earnings per common share is computed using the two-c!ass method. Basic (loss) earnings per share is computed by
dividing net (loss) earnings allocated to common stock by the wetghted-average number of common shares outstanding during
the applicable period, excluding outstanding participating securities. Participating securities include nonvested stock awards.
Nonvested stock awards are considered participating securities because holders of these securities receive non-forfeitable
dividends at the same rate as holders of the Company's common stock. All previously reported earnings per share data has been
retrospectively adjusted to conform to the net computation method. The application of the two-class method did not have a
material impact on the results for the periods shown below.
F-22
2399
Table of Contents
United Western BBncorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following table sets forth the calculation of (loss) earnings per share. Earnings allocable to participating securities were
included with (loss) income from continuing operations:

Income (loss) from discontinued operations
N"el(LOss)illcorl'ie ....
Earnings allocable to participating securities
....
Weighted average shares - basic

Common stock options

Years Ended December 31,
2009 2008 2007
(Dollars in thousands)
l(79,$1Q)$
37,525
IQ;12S. >*
(173) .
f
(147)
$. (42,Q4$) $. 9,805 >$
...... _-
13,139,070 7,164,250
'j4r
!o,lSf
. (12)
)lil,!4i'
(60)
1O,OSI.
7,247,636
8,848
Stock options for 1,072,422, i ,034, 187, and 880,332 shares of common stock were not considered in computing diluted earnings per
common share for 2009,2008, and 2007, respectively, because they were antidilutive.
4. Investment Securities
Investment securities available for sale were as follows:
private/residential
...
. ;. > ,.
private/residential .
SBA securities
December 31,2009
Gross Gross
Amortized Unrealized .Unrealized Amortized
47,386
December 31, 2008
Gross Gross
Unrealized Unrealized
Gains
. 15,934
::::-"><'::.i:",":!
. . 20;797>37,JS" '.</);
. 122 ___ .,.....".,._",(1) 121 226 (3)223
$ .... ?4;9$9 ..... $. . X.I . 41i$ (35,907fl.)9;S1j
Gross gains were SO, $0, and $98,000 for the years ended December 3 1,2009, 2008 and 2007, respectively. Gross losses were
$46,980,000, $0, and $0 for the years ended December 31; 2009, 2008, and 2007, respectively. During 2009, the Company sold 100%
of its available-for-sale mortgage-backed securities collateralized by option adjustable rate residential loans (Mortgage-backed
securities - privatelresidential in the above table), which securities were considered direct credit substitute securities for
regulatory capital purposes. Proceeds were S373,000 which resulted in the substantial loss on sale. The tax (benefit) provision
related to the realized gains and losses was $(17,780,000), $0 and $24,000, respectively.
F-23
2400
Table of Contents
United Western Bancorp, Ioe. and Subsidiaries
Notes to Consolidated Financial Statements (eontinued)
Investment securities held to maturity were as follows:
December 31, 2009 December 31, 2008
Gross Gross Gross Gross
Amortized . Unrealized Unrealized Amortized Unrealized Unrealized
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
. ([)ollarsin/housands)

..
'C ' , ",".
. , .. ' - - . - .
.>
. . $
. :,';

Mortgage-backed
securities -
private/residential
Collateraliiedliiorigage

... .
SBA securities

45,175
$J$l,{)(iS.$

(31.782) 69,852 145,515 1.663 (30,664)
.::-,:',;",'-:": . .--',.::.:-:
116.514
.. (3I#11) W;,913 Z78,633'(38,zsh
i

(1,879) . 43,296 53,098 (2,557) 50,541
.14911,464 ..
..
The amortized cost andestimated fair value of investment securities by contractual maturity at December 31, 2009 are as follows:
year

After 5 years through 10 years
......... .
Subtotal
.
After 5 years through 10
....
Subtotal
Total'
"-'-......... .. "".t....,14mM3249;11l!
. __ ...:3:.:.3,:::.01;..:0 ",,",-...:.c..'::'24:':'9.t.:..17L::8
$ ... 34,959: ... $ .. ..33,131 $ . )57,{)(;8."$ . 292,414

Securities not due at a single maturity date, primarily mortgage-backed securities and SBA securities are shown separately.
At December 31, 2009, the Company .owned mortgage-backed securities from 16 issuers, excluding U.S. Treasury and federal
agency debentures and other U.S. Government sponsored agency securities. There were eight ofthese 16 issuers in which the
Company owned eight securities with an unpaid principal balance in excess of 10% of its equity capital. Due to consolidation of
several large financial institutions during 2008, at December 31, 2009, the Company owned securities in which the parent company
of the issuer is Bank of America or JP Morgan Cbase with an unpaid principal balance of $96 million and $38.8 million,
respectively.
At December 31,2009 and 2008, mortgage-backed securities with a carrying value of $2,908,000 and $8,871,000, respectively. were
pledged to secure public deposits and for other purposes required or permitted by law.
F-24
2401
Table of Contents
United Westera Bancorp, Ine. and Subsidiaries
Notes to Coa80lidated Flalaelal Statements (continued)
The following table prescnta information pertaining to securities available for sale and held to maturity with gross unrealized
losses aggregated by investment category and length of time that individual securities have been in continuous loss position as
follows: .
De.ember 31, 2009 De.ember 31, 2008
Less than 12 months 12 months or more Le .. than 12 months 12 months or more
Estimated Unrealized EslimaiCd Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses Fair Value i.oases
(i5Oi&i;;'1n thousanlll)
.:: . .:. ..".: r '
- 20,797 (2,056) 23,018 .(3,497) 4,769 (732)

securities-private 54,586 .. YI,782) 54,236 (11,104) 55,793 (19,560)

SBA securities - - 4 ,296 (1,8) - - 50,541 (2 SS7)
,;,. ..
Management evaluates all of the investment securities with one rating below investment grade from a Nationally Recognized
Securities Ratings Organization ("NRSRO") for other-than-temporary impainnent ("Om") at least on a quarterly basis. As part of
its evaluation of securities for om we consider our intent to sell each security. and whether it is more likely than not that we will
be required to sell the security before its anticipated recovery. If either of these conditions is met, we recognize an om charge to
earnings equal to the entire difference between the security's amortized cost basis and its fair value at the balance sheet date. For
securities with a rating below investment grade from an NRSRO we perform analyses to determine if any of these securities are
other-than-temporarily impaired. See further discussion at Note 2. "Significant Accounting Policies - Temporary vs. Other-than-
Temporary Impairment"
Management has the intent and ability to hold the securities classified as held to maturity. until they mature, at which time the
Company expects to receive full value for the securities. Furthermore, at Decemher 31,2009, management also had the intent and
ability to hold the seCurities classified as available for sale for a period of time sufficient for a recovery of cost.
Mortgage-backed Securities - Non-agency
The Company's mortgage-backed securities portfolio includes 74 non-agency securities, of which S8 were in an unrealized loss
position, with a fair value of $208 million which had gross unrealized losses of approximately $6S million. At December 31, 2009,
based on the carrying value and the lowest rating assigned, the securities portfolio consisted of24% securities rated A or higher,
9% BBB rated securities and 67% securities rated below investment grade. Based the highest rating assigned, approximately
40% of the portfolio was investment grade. At December 31, 2008, based on the carrymg value and the lowest rating assigned, the
securities portfolio consisted of 74% securities rated A or higher, 8% BBB rated securities and 18% securities rated below
investment grade. Based on the highest rating assigned, approximately 95% of the portfolio was investment grade. At
December 31,2009, management expects full recovery as the securities approach their maturity date or repricing date or if market
yield for such investments decline.
F-2S
2402
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
During 2009 the Company incurred OTTI on 13 private-label held to maturity collateralized mprtgage obligations. Of these 13
securities, two of the securities had been subject to OTTI charges in 2008 by the Company. These 13 securities had an unpaid
principal balance of $84.2 million at December 31, 2009, were written down tu the estimated fair value of $39.0 million, representing
a cumulative OTTI of$45.3 million, of which $36.6 million was a charge to operations during 2009. Two of these securities, which
had fair values of $123,000 and $936,000 and bases of 5.4% and 20.2%, respectively, at December 31, 2009, incurred principal
curtailments during 2009. Our estimates of the future cash flows to be received from these two securities indicate the carrying
values are reasonable. The other securities subject to OTTI were current with respect to principal and interest payments in
accordance with the terms of those securities as of December 31, 2009. These securities were deemed to be other-than-temporarily
impaired based on the estimate of future cash flows expected to be received at December 31, 2009.
During 2008, the Company incurred an other-than-temporary impairment wriloHlown on two, private, held-to-maturity,
collateralized mortgage obligations, which had an amortized cost of $9.4 million. The securities were written down to the estimated
fair value of $5.3 million, representing an other-than-temporary impairment charge of $4.1 million. All principal and interest
payments have been made to date in accordance with the terms of each security. Although the securities have continued to
perform in accordance with their terms, the securities were other-than-temporarily impaired based on the extent and duration ofthe
decline in fair value below amortized cost given consideration to liquidity in the marketplace at the time and uncertainty of a
recovery of expected future cash flows. The charge is included in the statements of income in noninterest income. At the time of
the impairment, these securities were unlike other securities in our securities portfolio. In reviewing and analyzing the cash flow
model reports we received from the third party that prepares fair value estimates, in comparison to all other securities owned by
the Company that have been subject to our analysis, no other securities had on a percentage basis a magnitude of potential loss
of principal and interest that is equal to the amounts forecasted for these securities. In addition, the timing and the probability of
the potential losses was nearer in time and higher when compared to other securities. The combination of factors taken as a
whole, caused management to conclude the securities were other-than-temporarily impaired. At December 31, 2008 based on
management's review of the analysis performed by our independent third party, these securities did not indicate further
impairment. The other securities that were analyzed as of December 31, 2008 by the independent third party indicated the
probability of principal loss was remote and thus management concluded that there is no other-than-temporary impairment on the
remaining securities.
As discussed more fully in Note 18. Fair Value Estimates, management has engaged an independent third party to prepare cash
flow projections that are used to estimate fair value and to assist management in the evaluation of OTT!. As part of the
evaluation, the Company completes an analysis of estimated cash flows for these securities, which incorporates, but is not limited
to, an estimate of the level of voluntary repayments, both known and projected defaults on the underlying mortgage collateral,
and an estimate of loss severity. Based oil the continued deterioration of the underlying collateral performance during the fourth
quarter and into 2010and the protracted nature of the current financial crises in the U.S. in general and the U.S. housing market in
particular, management utilized a more conservative estimate of future defaults in the fourth quarter of 2009 than in previous
quarters. An additional value estimate was also provided by this third party and analyzed by management in order to determine
the portion of impairment due to credit which should be recognized in the statement of operations, and the portion to be
recognized through other comprehensive income.
F-26
2403
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Included in mortgage-backed securities - private, held to maturity, were securities that are collateralized primarily by prime hybrid
mortgages at December 31, 2009, these securities have a total amortized cost of$1O 1.6 million, of which $98.8 million, or 97%, have
received one or more ratings declines by the ratings agency since acquisition. This category includes five securities collateralized
by Alt-A mortgages totaling $13 million, while the bulk of the underlying collateral ($89 million) consists of prime mortgages.
Payments continue to be made for all of these securities with the exception of two prime securities in which the Company has
recorded OTTI beginning in 2008. In addition to these securities previously designated as OTT!, the Company designated an
additional seven securities as OTTI in the fourth quarter of 2009, based on our analysis and review of independent analyses
performed by an independent third party. The total OTTI recognized on nine securities in. this category for 2009 was
approximately $19.6 million. Based on our analysis and our review of the independent analyses performed by a third party on
these securities and other securities in Our portfolio, the Company believes the decline in fair value of securities deemed
temporarily impaired is mainly due to current temporary conditions in the marketplace. While $65.3 million of these securities has
had a fair value price estimate below amortized cost for twelve months or more, current credit support levels have increased from
5.5% at origination to 7.1 % at December 31, 2009. Such support tranches are expected to continue to increase as subordinate
tranches to these securities payoff and cash flows are allocated within the CMO structure.
Included in collateralized mortgage obligations - private, held to maturity were securities that are collateralized by prime CMO
securities at December 31, 2009, these securities have an amortized cost of$161.7 million of prime securities and $26 million of Alt-
A securities, of which $150.8 million, or 90%, has received one or more ratings declines by rating agencies since acquisition. The
remainder of this category remains AAA rated by at least one agency. Payments continue to be made for each ofthese securities.
Four of these securities were designated other-than-temporarily impaired at December 31, 2009 and a fair value impairment of
approximately $20 million was recognized on these securities during 2009. For the remainder of the securities in this category,
based on our analysis and our review of the independent analyses performed by a third party on these securities and other
securities in our portfolio, the .Company believes the decline in fair value of securities is due to current temporary conditions in
the marketplace. For the $143 million of securities in this category with fuir value price estimates below amortized cost for twelve
months or more, 1.35% cumulative losses have been realized to date. Credit support for these securities has increased from 4.94%
at origination to 5.8% at December 31,2009. The vast majority of this category consists of prime loans, with a weighted average
loan-to-value of 68.7% at origination. Overall delinquencies for this subcategory increased during the quarter ended December 31,
2009, which is reflective of the overall u.S. mortgage market. Management expects these delinquency levels to level off
prospectively based on their performance to date, and on the expected effects of loan restructuring programs underway. At
December 31, 2009, management expected full recovery as the securities approach their maturity date or repricing date or if market
yield for such investments decline.
Other Securities
The Company's SBA pooled securities consist of 16 securities each of which was in an unrealized loss position. Such securities
are guaranteed as to principal by the SBA. Because the decline in fair value is attributable to changes in interest rates and
illiquidity, and not credit quality, and because the Company does not have the intent to sell these SBA pooled securities and it is
likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these
securities to be other,than-temporarily impaired at December 31, 2009.
F-27
2404
Table of Contents
United Wester. Baneorp,lnCo and Subsldiariel
Now to CODIOUdated FIn.Dela! StatemeDts (eo.tlDned)
The table below presents a roll forward of the credit losses recOgnized in earnings for debt securities held and not intended to be
sold: .
Othe .... thu-tempor.ry
Lon Recognized as
Credit Los. In
Earnings
In the event securities demonstrste additional deterioration through an increase in defaults or loss severity that indicate the
Company will not recover its anticipated cash flows or if the duration of relatively significant impairments in theae securities does
not reverse, the Company will i!lCur other-tban-temporary impairments, which may result in material charges to earnings in future
periods.
S.Loaos
LOtUIS Held/or Stile
Loans held for sale consist of the following:
F-28
2405
Table of Contents
United Western Bancorp, Ine. and Subsidiaries
Notes to CODlOlidated Flnanelal Statements (continued)'
Activity in the valuation allowance to carry loans held for sale at the lower of cost or fair value is summarized as follows:
Yean Ended December 31,
1009 1008 1007

p(ovlsiii'ii to'reduce till; carrying value of loans held for sale to the lower of ' "',.. . ....... .... , ..... "'
cost or fair value . S86 2,793 722
.. """ "';: .. ::" .. (1.8
3
1 : : .... "

Lotlns Held/or In_tment
Loaos held for investment consist of the following:
Yean Ended December 31,
F-29
2406
Table of Contents
United Western Baneorp, Inc. Bod Subsidiaries
Notes to Consolidated Financial Statements (continued)
Tbe following lists infonnation related to non-accrualloans:
.,........ ."."
Loans held .

December 31,2009 December 31, 2008
(Dollars in thousands)
, .. $' "',. .......

$54;296 ;;,$....
The Company places loans on nonaccrual status when payments are past due 90 or more days or there is doubt as to the
collection of principal and interest in accordance with the contractual terms of the note. unless there is a government guarantee as
to the principal and accrued interest. The aggregate unpaid principal balance of government-sponsored accruing loans that w"re
past due 90 or more days was $8.0 million and $6.5 million at December 31, 2009 and December 31, 2008, respectively. These
accruing loans are not included in the balances of nonperforming loans above.
Impaired loans are loans in which management has concluded that based on current infonnation and events; it is probable that the
Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. In addition, loans in
which the Company has granted the borrower a concession, such as a lower than market rate of interest are also identified as
impaired. Such loans totaled $27,888,000 and $3,344,000 at December 31,2009 and December 31,.2008, respectively. The allowance
allocated to impaired loans was $2,838,000 and $1,686,000 at December 31, 2009 and December 31, 2008, respectively. Of the
$27,888,000 at December 31, 2009, $7,157,000 of this balance has been reduced via partial charge-off during 2009 of $2,477,000.
Other impaired loans at December 31, 2009 that were on nonaccrua1 totaled $9,519.000. There was no interest income recognized
during the periods on loans while they were considered impaired. Also included in impaired loans at December 31, 2009, was one
loan totaling $11,212,000 which was identified as impaired due to a concessionary rate granted to the borrowing. This loan is
performing under its revised terms and remains on accrual. For the years ended December 31,2009.2008 and 2007 the average of
individually impaired loans during the year excluding troubled debt restructurings was $13,552,000, $2,358,000, and $19,000,
respectively.
Concentrations of Credit. Tbe Bank's residential loans are located throughout 47 states with concentrations above 5.0% at
December 31, 2009 in California. Georgia, Illinois, Florida, aod Texas of approximately 37%, 8%, 7%, 5% and 5%, respectively,
based on aggregate outstanding unpaid principal balances of the loans. Loans in which real estate is the primary source of
collateral total $1.253 billion, or 86%, of the total loan portfolio. Most of the Company's ongoing lending activity occurs within the
State of Colorado, including principally the Colorado Front Range and selected mountain communities. At December 31, 2009,
loans originated with Colorado collateral totaled approximately $798 million, or 55%, of the total loan portfolio. At December 31
2009 and 2008, there were no concentrations ofloans related to any single industry in excess of 10% of total loans. '
F-30
2407
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notesto Consolidated Financial Statements (continued)
6. Mortgage Servicing Rights
The activity in the mortgage servicing rights (UMSRs") is summarized as follows:
Years Ended December 31,
2009 2008 2007
.....

Balance at beginning of year . is
.. i0,356
$\2,831$
16f).
J2,635)
['7;349 .
6F
(3,489>
9tigitiatiilps .
Amortizaiioti .
. . .....
.. MSR'if . '.. . ..>. '.' .'. . .... , ..... .
,.- .. -, .'.,.,., _ ... ",', --- "'.'-"""--' ---,-,-, ...
Balance before valuation allowance at end of year
fori!Dpai-gjieni .

..... Applic"il\lii(jfvliluatlonai1liw
... '.. .... ........... . .... ', ...... .
Balance at end of year
. 35$ ..
(2,507) .
: : ,; -. - - : , : ; ,.. ,
:',':-- '.',
- '"':"="';
8,204
,-- '.' --- ;
(860)
.':"",'.:';

(860)
10,356
(1;09.0)
12,831
(1,950)
1;096\
.. . '.' >$.
The estimated aggregate amortization of the Company's MSR's for each of the next five years ending December 31, 2010, 2011,
2012, 2013, and 2014 is $2,267,000, $1,575,000, $1,265,000, $1,022,000, and $833,000 respectively. The. estimated amortization is
based on several assumptions as of December 31, 2009 with the most significant being the anticipated prepayment speeds of the
underlying mortgages. The actual prepayment speeds of the underlying mortgage loans may differ materially from the estimated
prepayment speed, so that the actual amortization may be significantly different than the amounts estimated.
The Company's servicing portfolio (excluding subserviced loans) is comprised of the following:

Fannie Mae
tli.ruiieMlla. .' ..... '
'itA, FHA, conventionlll and
portfolio
December 31,2009
December 31, 2008
Number
of Loans
.J,339
"4,839
3,71\1
3,108

Principal
Balance Number
Outstanding of Loans
Prineipal
Balance
Outstanding
(Dollars in thousands)
l .
255,964 5,842 308,019
4,747 .251.435
252,771 3,550 279,091
$. 166,15$"15;$05< $ 9QI,7,O,
The Company's servicing activity is diversified throughout 50 states with concentrations at December 31, 2009, in. Missouri,
Texas, New Mexico, Illinois, and California of approximately 15%, 13%, 13%, 12%, and 8% respectively, based on aggregate
outstanding unpaid principal balances of the mortgage loans serviced. As of December 31, 2009, and 2008, the Company
subserviced loans for others of approximately $3,.876,000 and $5,015,000, respectively.
The Company's custodial escrow balances shown in the accompanying conSOlidated balance sheets at December 31,2009 and
2008 pertain to payments held in escrow in respect of taxes and insurance and the float on principal and interest payments on
loans serviced and owned by the Company. The custodial accounts are maintained at the Bank in noninterest-bearing accounts.
The balance of the custodial accounts fluctuates from month to month based on the pass-through of the principal and interest
payments to the ultimate investors and timing of taxes and insurance payments.
F-31
2408
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Finantial Statements (continued)
7. Premises and Equipment
Premises and equipment consist of the following:
Lllnd
Buliciings ..
....
Office furniture and equipment
December 31,
2009 2008
(Dollars
$./I.9p9 . ...... $.. .. .. .. 4,909.
16,371 .. .. . i4.081
I.OSf },6W
__ 1:.;:0!:::.38::;:.9 iO;395
3Z;7S{ ". )0,448'<
.".,...,.."..,:82::,6:;::90 . 7,084

Included in occupancy and equipment expense is depreciation expense of premises and of approximately $1,873,000,
$1,508,000, and $1,202,000 for the years ended December 31, 2009, 2008, and 2007, respecltvely.
8. Deposits
Deposit account balances are summarized as follows:
December 31, 2009
December 31, 2008

NOW and DDA acc()unts

Subtotals

Total deposits
Amount
$ . 360
583,976
93.t.osf ..
1,521,418
4n;Of/$

Weighted
Average
Percent Rate Amount
Percent
Weighted
Average
Rate
(Dollars in thousands)
. O.Qz% ... .... Q.2S'U;$ . )99'
29.29' 0.10 624,064 . 36.18 . 0.17
.4t01 0,3.9... .. " ......... .0.79
76.32 0.28 1,583,200 91.80
..... . .. .......... ..1.58 . ..141A7t.8.2(Y.
100.00% 100.00%
========
0.55
'3.53
0.79%
=
Included in Negotiable Order of Withdrawal ("NOW") and Demand Deposit ("DDA") accounts are noninterest-bearing DDA
accounts of$192,482,000 and $177,941,000 at December 31,2009 and 2008, respectively.
Included in deposits are apprOldmately $575,647,000 and $229,389,000 of brokered deposits as of December 31, 2009 and
December 31, 2008, respectively. See additional discussion related to our brokered deposits limitation in Note 13 - Regulatory.
F-32
2409
Table of Contents
United Western B8ncorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Contractual maturities of certificate accounts as of December 31, 2009 are as follows:
4.004.99% .
5.00..5.99%
Under 12 montbs 12 to 36 montbs 36 to (i() montbs
(Dollars in thousands)
'$' $
Total
216,715 1,520
. .'.13\);637 H,()jf'
3,051 3,965
30:r'!,\53
.' 709
.. " ....
. ,,..., ''$, '. ?1;S!2!
218,235

. 7,456
709
The following table presents concentrations of deposits at the Bank for the periods presented:
.. /
Matrix Financial Solutions, Inc.
.......... " '.'
Other Deposit Concentrations
December 31,2009 December 31, 2008
. (Dollarsi'! thousands)
....... '4425'$: .. ' ............ ,
155:.1.
56
' .....
1,644,706

203,329
......129 ...118
967:993
UW Trust Company - represents fiduciary assets under administration by UW Trust, a wholly owned subsidiary of the Company,
that are in NOW, demand and money market accounts. As a result of the sale ofUW Trust assets, which is discussed in Note 25-
"Discontinued Operations - Sale of UW Trust Company Assets," the amounts included in the table above represent
retrospective disclosure of the amount of deposits at the Bank from UW Trust. Included in this balance at UW Trust is a series of
accounts for one life settlement agent for special acquisitions and administration with a balance of $732,000 and $30,404,000
at December 31, 2009 and December 31, 2008, respectively.
Matrix Financial Solutions, Inc. ("MFSI") - represents customer assets under administration by MFSI that are in NOW and money
market accounts. The Company sold its approximate 7% interest in MFSI, during the first quarter of 2009.
Legent Clearing, LLC - represents processing and trust deposits received through Legent Clearing, LLC, that are in NOW and
money market accounts. Certain officers of the Company hold an indirect minority interest in Legent Clearing, LLC.
Other Deposit Concentrations - represents deposit funds from four and six processing and trust relationships maintained by the
Bank as of December 31, 2009 and 2008, respectively. Included in other deposit concentrations are processing and trust balances
from Equity Trust, with balances of $933.9 million and $822.8 million at December 31, 2009 and 2008, respectively. The balances
from Equity Trust are subject to the subaccounting agreement that requires Equity Trust to maintain all of their custodial deposits
with the Bank for a three-year period ending June 27, 2012. For the following two years, Equity Trust is required to maintain
approximately $323 million to the later of June 27, 2014 or the date the seller financed note to Equity Trust is paid in full. The
balances from Equity Trust include the custodial deposits associated with the UW Trust asset sale, wbich is discussed in Note 25
- "Discontinued Operations - Sale ofUW Trust Assets."
F-33
2410
Table of Contents
United Western Boncorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Interest expense on deposits is summarized as follows:
Years Ended December 31,
2009 2008 2007

NOW accounts
. '.'
Certificate accounts
(Dollars in thousands)
\J' ... .IrI;,$
946 1,869
.
.,."..,,.,,.,...,,..:7:..,04,;.;:0 2,284
$14,366 5. $
, ... :Jf
4,621

1,381
The aggregate amount of certificate accounts with a balance greater tban $100,000 (excluding brokered deposits) was
approximately $78,668,000 and $40,127,000 at December. 31, 2009 and 2008. respectively.
9. Borrowed Money
Borrowed money is summarized as follows:
..., ....., .. ... .. ;,.!. ....... .. C ................................................................ '.. .......... ..........? ............. ,
Revolving line of credit to a third-party financial institution, througb June 30, 2010,
collateralized by the common stock of the Bank and certain nonagency mortgage-
backed securities of a non-bank subsidiary; interest at 30-day LIBOR plus 5%; (5.23%
31, 2009), $OavailableM 2009 $ ...
...
,200g), mllt\\rjng febl'l,l3fy13, 4' . .

. CompllnY.st!'uc!uredreP1Jrc!iAAe
Customer repurchase aglreem.:m.
.........
December 31,
2009 2008
(Dollars in/hous<;',nds)
20,000$
lQ,l){)(j
1s,(j{j(i
3,635
28,000
j();000

6,265
The revolving line of credit facility is with JP Morgan and is collateralized by all of the outstanding stock ofthe Bank and certain
nonageney mortgage-backed securities of the Company and a non-core subsidiary. The Company must comply with certain
financial and other covenants related to the foregoing credit agreement including, among other things, the maintenance by the
Bank of specific asset quality ratios, and "weIl capitalized" regulatory capital ratios. Also, the credit agreement limits the
Company's ability to incur additional debt above specified levels. At December 31, 2009, the Company was in compliance with all
such covenants. Effective January 15, 2010, the Company entered into an amendment to this credit facility. The terms of the
amendment provide, among otber things: (i) for tbe extension of the maturity date from December 31, 2009 to June 30, 2010; (ii) that
the Company make a principal reduction payment on too credit facility of $2.5 million upon execution of the amendment, which
payment the Company has made, and another principal reduction payment on tbe credit facility of $1.25 million on or before
March 31,2010; (iii) that JPMorgan agrees to continue to forbear from declaring all outstanding amounts on the credit facility to
be immediately due and payable as a result of the Company and United Western Bank each executing Infonnal Agreements with
the Office of Thrift Supervision effective on December 10, 2009; and (iv) that the Company and one of its nonbank subsidiaries
pledge certain nonagency mortgage-backed securities with a book value of $23.7 million as of December 31,2009, as additional
coIlateral.
F-34
2411
Table of Contents
United Western Baneorp. Inc. and Snbsldlarles
Notes to ConlOlidatedFlnaae\al Statements (contlnned)
Assets sold under agreements to repurchase are agreements in which the Company acquires funds by selling securities to
another party under a simultaneous agreement to repurchase the same securities at a specified price and date. The Company's
structured repurchase agreements each contain an option that is held by the counterparty to terminate the agreement on the call
date or quarterly thereafter. The Company enters into repurchase agreements and all!O offers a demand deposit account product
to customers that sweeps their balances in excess of an agreed upon target amount into overnight repurchase agreements.
The Company structured repurchase agreements at December 31, 2009 are as follows:
..
"nv':'i\:.t
j
' i, .. ;,;,' .......
:;:Lfi[L'rt
At December 31, 2009 the base interest rate shown is the rate that will accrue under these agreements until maturity. At
December 31, 2009, CMO securities held to maturity with a current balance of $48.4 million were pledged to collateralize these
repurchase agreements. None of these repurchase agreements have been called as of the date the financial statements were
issued.
As of December 31, 2009, the maturities of borrowed money are as follows:
10. FBLBank Borrowings
United Western Bank obtains FHLBank borrowings from FHLBank of Topeka, which is the FHLBank that serves Denver,
Colorado, and utilizes FHLBank of Topeka as its primary correspondent bank. Prior to the Bank's change of domicile in 2002
borrowings were obtained from FHLBank of Dallas. Certain long-term borrowings that existed at that time with FHLBank
are still outstanding under their origiruil terms. '
F-3S
2412
Table of Contents
United Western Bancorp, IDC. and Subsidiaries
Notes to CODsolldated Financial Statements (contiDued).
The balances ofFHLBank borrowings are as follows:
December 31,
1009' 1008

FHLBank of Dallas borrowings 607 26,721'

At December 31, 2009 and 2008, borrowings were borrowed under Convertible Advance ("CA") and Short Option
Advance ("SOA'') agreements with the FHLBank. BorrowlRgs of 50 and 520,000,000 at December 31, 2009 and 2008 were under
fixed rate agreements. The CA and SOA borrowings require the payment of interest monthly and principal at maturity. The CA
and SOA bOlTowings have interest rates that range from 2.77% to 4.80% at December 31, 2009 and 2.77% to 5.63% at December 31,
2008. These CA and SOA borrowings are callab1equarterly at the option ofthe FHLBank beginning after a six month to three year
lockout period depending on the particular CA and SOA borrowing. If FHLBank of Topeka exercises its call option on a CA or
SOA borrowing, they are required to offer replacement funding to United Western Bank at a market rate of interest for the
remaining tenn of the CA or SOA borrowing. If FHLBank of Dallas exercises its call option, the borrowing would have to be
repaid At December 31, 2009, the possible call dates varied from January 26, 2010 to April 22, 2010. At December 31, 2009 and
2008, community investment advances of 5607,000 and 5721,000, respectively, were borrowed under a fixed tenn and rate and
June 2,2014. All advances are secured by first lien mortgage loans, pledged mortgage backed and SBA pooled securities
the FHLBank stock owned by United Western Bank and any funds on deposit with the FHLBank. '
As ofDecernber 31, 2009, the stated ofFHLBank borrowings are as follows:
The Bank is on blanket collateral status at FHLBank of Topeka, which requires the Bank'to identify yet maintain in its possession
loan collateral pledged at FHLBank of Topeka. As of December 31, 2009, first lien residential mortgages of $216,325,000 were
pledged to FHLBank of Topeka. Mortgage-backed and SBA pooled securities.in the custody of FHLBank of Topeka with'a
current balance of $180,383,000 were also pledged for borrowings. Total FHLBank of Topeka borrowings at December 31, 2009
were 5180,000,000 and the Bank had available unused borrowing capacity from FHLBank ofTopeka of approximately 5222,818,000.
The Bank is on full custody status at FHLBank of Dallas, which requires the Bank to place loan collateral at the FHLBank of
Dallas. Aa of December 31, 2009, first lien residential mortgages of $13,702,000 were pledged for 5607,000 outstanding FHLBank of
Dallas borrowings.
F-36
2413
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On January 15, 2010, United Western Bank e1{changed $180 million of outstanding FHLBank of Topeka. (FHLB) advances for
$180 million in new advances. The Bank e1{changed 14 sepamte advances, totaling $180 million, with yields mnging from 2.77% to
4.80%, with a weighted average yield of 4.15% and an average remaining term of 29 months, and with final maturities scheduled 16
months to 52 months into the future. These advances were e1{changed for four new advances totaling $180 million of five-year
convertible advances with a coupon rate fixed for at least the first 12 months. The FHLBank has the option after the first year to
convert the fixed coupon rate to the FHLBank one-month advance rate, which may reset monthly, and the Bank has the option to
prepay the advance if the FHLBank exercises its option to convert the coupon rate to the FHLBank one-month advance rate. For
the first twelve months from the date of the exchange, the Bank will incur an all-in rate of approximately 2.15%. The Bank recorded
a $12.4 million charge related to the e1{change, which charge will be recognized over the five-year term of the new advances. The
amortization of the deferred charge is considered in the all-in prospective rate of2.15%. Should an advance be extinguished prior
to its scheduled maturity, any remaining unamortized exchange charge would be accelerated and recognized in the period the debt
is extinguished.
11. Junior Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts and Corporation-Obligated Mandatorily
Redeemable Capital Securities of Subsidiary Trusts Holding Solely Debentures of the Company .
At December 31, 2009 the Company has three trusts, which hold debentures of the Company including, Matrix Bancorp Capital
Trust II, Matrix Bancorp Capital Trust VI and Matrix Bancorp Capital Trust VIII, of which 100% of the common equity is owned by
the Company_ The trusts were formed for the purpose of issuing corporation-obligated mandatorily redeemable capital securities
(the "capital securities") to third-party investors and investing the proceeds from the sale of such capital securities solely in
junior subordinated debt securities of the Company (the "debentures"). The debentures held by. each trust are the sole assets of
that trust. Distributions on the capital securities issued by each trust are payable semiannually or quarterly at a rate per annum
equal to the interest rate being earned by the trust on the debentures held by that trust. The capital securities are subject to
mandatory redemption, in whole or in part, upon repayment of the debentures. The Company has the option to defer interest
payments on the debentures from time to time for a period not to exceed,five consecutive years. The Company has entered into
agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of each of the
guarantees. The debentures held by the trusts are redeemable as noted below. Junior Subordinated Debentures Owed to
Unconsolidated Subsidiary Trusts and Corporation.Qbligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts
Holding Solely Debentures of the Company are summarized as follows:
.. .. l!ji4fi!fY Tius*, .........
Junio;' subordinated debentures o\vel to Matrix Bancorp Capital Trust II, 10.18% jllDiol"
subordhlated payable JuneS,. 2031

...
..... ; ............ ,. . .......... ; .........
Junior subordinated debentures owed to Matrix Bancorp Capital Trust VlIl, interest fixed at
5.86% through 2010, then three-month L1BOR plus 1.69%, junior subordinated
debentures unsecured and maturing July 7, 2035
tilial
F-37
2414
December 31,
2009 2008
(Dollars in thousands)
12,400 $ 12,400
"/' :i'-:: ,: ;:",,::,>'::':'-":.:
IO,3J(J.;
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On March 28, 2001, Matrix Bancorp Capital Trust II ("Trust n"), a Delaware business trust formed by the Company, completed the
sale of $12,000,000 of 10.18% preferred securities. Trust II also issued common securities to the Company and used the net
proceeds from the offering to purchase $12,400,000 in principal amount of 10.18% junior subordinated debentures oftbe Company
due June 8, 2031. The preferred securities accrue and pay distributions semi-annually at an annual rate of 10.18% of the stated
liquidation amount of$I,OOO per preferred security. The Company has fully and unconditionally guaranteed all of the obligations
of Trust II under the preferred securities. The guarantee covers the semi-annual distributions and payments on Iiquidation or
redemption of the preferred securities, but only to the extent of funds held by Trust II. The preferred securities are mandatorily
redeemable upon the maturity of the junior subordinated debentures or upon earlier redemption as provided in the indenture. The
Company has the right to redeem the junior subordinated debentures, in whole or in part, on or after June 8,2011, at a redemption
price specified in the indenture plus any accrued but unpaid interest to the redemption date.
On August 30, 2004, Matrix Bancorp Capital Trust VI ("Trust VI"), a Delaware business trust fonned by the Company, completed
the sale of $10,000,000 of preferred securities bearing a fixed rate (6.425%) until the interest payment date in October 2009, and
then a floating rate (three-month UBOR plus 2.50%.) Trust VI also issued common securities to the Company .and used the net
proceeds from the offering to purchase $10,310,000 in principal amount junior subordinated debentures bearing a fixed rate
(6.425%) through the interest payment date in October 2009 and then a floating rate (three-month LIBOR plus 2.50%), junior
subordinated debentures of the Company due October 18, 2034. The preferred securities accrue and pay distributions quarterly at
the rate as described above of the stated liquidation amount of $1,000 per preferred security. The Company has fully and
unconditionally guaranteed all of the obligations of Trust VI under the preferred securities. The guarantee covers the quarterly
distributions and payments on liquidation or redemption of the preferred securities, but only to the extent of funds held by Trust
VI. The preferred securities .are mandatorily redeemable upon the maturity of the junior subordinated debentures or upon earlier
redemption as provided in the indenture.
On June 30, 2005, Matrix Bancorp Capital Trust VIn ("Trust VIn"), a Delaware business trust fonned by the Company, completed
the sale of $7,500,000 of preferred securities bearing a fixed rate (5.86%) through the interest payment date in July 2010, and then a
floating rate (three-month LIBOR plus \.69%). Trust VIII also issued common securities to the Company and used the net
proceeds from the offering to purchase $7,732,000 in principal amount of fixed rate (5.86%) through the interest payment date in
July 2010, then a floating rate (three-month LlBOR plus 1.69%) junior subordinated debentures of the Company due July 7,2035.
The preferred securities accrue and pay distributions quarterly at the rate as described above of the stated liquidation amount of
$1,000 per preferred security. The Company has fully and unconditionally guaranteed all of the obligations of Trust VIII under the
preferred securities. The guarantee covers the quarterly distributions and payments on liquidation or redemption of the preferred
securities, but only to the extent of funds held by Trust VIII. The preferred securities are mandatorily redeemable upon the
maturity of the junior subordinated debentures or upon earlier redemption as provided in the indenture. The Company has the
right to redeem the junior subordinated debentures, in whole or in part, on or after July 7,2010, at a redemption price specified in
the indenture plus any accrued but unpaid interest to the redemption date.
All of the junior subordinated debentures owed to unconsolidated subsidiary trusts mature in periods greater than five years from
December 31, 2009.
F-38
2415
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Income Taxes
The income tax (benefit) provision consists of the following:
(Benefit) provision from continuing operations
....
Years ended December 31,
2009 2008 2007
(Dol/orr in Ihousof!ds)
$ (17,014) 6,696
..
$
A reconciliation of the (benefit) provision for income taxes with the expected income taxes based on income from continuing
operations and the statutory federal income tax rate follows:
.........................;: :,'."
State pr?vision,
'.' .
New Markets Tax Credits
.. .
Addition I (Resolution)
Other ...... ' ...... ' . . .. ' ' .. '.' ... "
(Benefit) provision for income taxes
$
Years ended December 31,
2009 2008 2007

(39,248),$ '. 4;466' '$.'
(1,822) 356
' ..
(1,960) '.' (1,186)
,4,114
458
." (3ll?)
(1,117)
.. ...
454 (454)" (474)
'.'tzl . (Z19).: 73 .
(32,567) $ 2,635 $--._.;.3,-=3 ;;;,15
The actual tax (benefit) provision differs from the expected tax (benefit) expense (computed by applying the applicable United
States Federal corporate tax rate of 35% and the composite state tax rates, which range from 4.5% to 8.0%) to the (loss) income
before taxes for the years ended December 31, 2009, 2008 and 2007. The difference from the expected tax (benefit) expense is
principally due to the recognition of tax credits under the New Markets Tax Credits Program, tax-exempt interest income earned on
bank owned life insurance and other tax-exempt instruments, deferred tax valuation allowance, and resolution of uncertain tax
positions. Partially offsetting these reductions are items that are not deductible for tax purposes, including portions of donations
and certain meals and entertainment expenses.
During 2004, the Company acquired $12,600,000 of New Markets Tax Credits allocation. Under the program, the Company funded
qualifying loans and the Company receives Federal income tax credits that will be recognized over seven years, with 2004 being
the first year for this allocation. In 2004, the Company received an additional $50,000,000 allocation of New Markets Tax Credits. In
the fourth quarter of 2005, the Company utilized $11,000,000 of this allocation. In the fourth quarter of 2006, the Company utilized
approximately $10 million of this allocation. The remaining $29,000,000 of the allocation was monetized through unaffiliated third
party investors, In May 2009, a wholly owned subsidiary of the Company was awarded an allocation of $20 million of New
Markets Tax Credits. These tax credits were acquired by the Bank, and the Bank invested $20 million in a newly created 99.99%
owned subsidiary. Tax credits of$7.8 million are expected to be realized over the seven year period ending in 2015. The tax credit
recognized under the allocations was $1,960,000, $1,186,000, and $1,117,000 for the years ended December 31, 2009, 2008, and 2007,
respectively.
F-39
2416
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Deferred tax assets and liabilities result from the tax effects of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes shown below.
iJef'eired J#,ii$setSi < ., .. . ..,.. . ...., .}'.'
Allowance for loan and valuation losses

Deferred fees
. . Stale olliffiidng
.. " ...,., ,., ....., ...... , .....,.,."' ......,."
... , ........' ......... ..y.< .<
........ > .. , ...... , ........ '.'
.....
Other' .. .. . .
Valuation allowance
l'
Deferred tax liabilities:

New Markets Tax Credits

FHLB dividends .
Qtller
Total deferred tax liabilities
Net dererrlidtn asset
$
December 31,
2009 2008

$ 9.119
1;526
2,457
. j,$03
873
.
"252 .

.. '(1%13)" '.' "(2,12$)
(3::U I) (2,537)
.. , (82);
(861) (2.416)
(['II} ... (71)
(21,486) (7.231)
$14,187/ ""$..... .,,;2;;,41,;,.10,;;.0
A valuation allowance for deferred tax assets is recorded when it is more likely than not that some 'portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income and tax planning strategies which will create taxable income during !be periods in which !bose temporary differences
become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income,
NOL carryback potential and as necessary. tax planning strategies in making this assessment. Some of the tax planning strategies
considered, which would not substantially impact the business. were sale-leaseback of facilities, and the sale of certain lines of
business or assets. At December 31, 2009 and December 31. 2008. management established a deferred tax asset valuation
allowance of$IO.2 million and $0 based on its assessment of the amount of net deferred tax assets that are more likely !ban not to
be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
At December 31, 2009, the Company had state net operating loss carryforwards expiring in 2029.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and local
jurisdictions. The material income tax returns the Company files are the U.S. federal income tax. return which has a three year
statule of limitations, and the Colorado state income tax return, which has a four year statute of limitations. Accordingly, the U.S.
federal return for tax years ended on or after December 31. 2006 and !be Colorado return for tax years ended on or after
December 31, 2005 are subjectto examination by !be relevant taxing authority.
F-40
2417
Table or Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
During 2008, the Company identified uncertain tax positions under ASC Topic 740, "Income Taxes," which resulted in
unrecognized tax benefits of $1.2 million that were previously included in deferred income tax liabilities being reclassified to other
liabilities in the balance sheet
The Company has three positions that give rise to unrecognized tax benefits. One of the items relates to a position where only the
timing of a deduction is in question and the only effect on the Company's statement of operations relates to interest accrued on
this matter. The second item relates to various fees paid to third parties which management is uncertain as to the deductibility of
such fees. The third item relates to the difference in book and tax basis of an asset that was sold in 2004 for which management
believes the tax basis was greater than reflected in the t8X records of the Company. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows:
1, .... ......... . ....... Y'. >.<>. '.,
Additions based tothecurrent year
.... .
Reductions due to the statute of limitations
Qalance atDecl'lIIbepl,
2001) 2008
2007
........ ' .. (I?(j/lars in th(jusands)
"26. . ....
... 76
(454j .. (474)
... $' .... $ ..... ,;.; .. .... $""'., ...... ".,.7,;;.,26
During 2009, 2008, and 2007, the Company realized $0, $454,000, and $474,000, respectively, of unrecognized tax benefits as a result
of the lapse of the applicable statute of limitations, which was related to portions of the items discussed above that, arose in 2004,
2003 and 2002, respectively.
Due to the net operating loss carry-back to 2004, which re-opens the 2004 tax return for the above mentioned sec.ond and third
items, the Company re-instated these two positions during the fourth quarter of 2009.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in other expense. At December 31
2009 and 2008, the Company had an accrued liability for unrecognized benefits of approximately $245,000 and $245,000:
respectively, which is included in other liabilities on the consolidated balance sheet.
13. Regulatory
The Company. The Company is a unitary tbrift holding company and, as such, is subject to the. regulation, examination and
supervision of the Office of Thrift Supervision ("OTS").
United Western Bank. The Bank is subject to various regulatory capital requirements administered by the OTS. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's and the consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective aetton, the Bank must meet specific capital guidelines
that involve quantitative measures of the Bank's assets, liabilities and certain off-balance sheet commitments as calculated under
regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors. .
F-41
2418
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and
ratios (set forth in the following table) oftotal and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined
in the regulations), and of Tier 1 capital (as defined in the regulations) to total assets (as defined in the regulations). Management
believes, as of December 31, 2009 and 2008, the Bank met all applicable capital adequacy requirements required at this time, but the
Bank did not meet the prospective June 30, 2010 requirements of the Memorandums of Understanding, discussed more fully
below.
As of December 31, 2009, the most recent notification from the OTS categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action provisions. To be categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. Management believes that there have been no
conditions or events since. the OTS notification that have changed this categorization.
As . t009. . ..
TiitliiCapital (to Risk Weighted
Assets)
. .\djhifte4raliiWle .....
.. ;\sseis) ....................................
Tier 1 Capital (to Risk Weighted
Assets)
..............
Total Capital (to Risk Weighted
Assets)

.. .. .> .........
Tier 1 Capital (to Risk Weighted
Assets)
$
$
Actual
Amount Ratio
161,669 10.1%
',:;'-'
192,839 n
192,839 8.8
189,536 10.6%
:'::,,-'-,::'" ,,,,:,:".:.,:,;-,,-:>
".1 F4Jfl4.<
174,034 9.7
For Capital Adequacy
PUrposes
Amount Ratio
. (Dollars in thous:,ntL<)
$ 128,,382
<1.00.400
N/A
$ 143,719
Wl49
N/A
8.0%
4 . .fl
. N/A
8.0%
..4.Q
N/A
To Be WeD Capitalized
Under Prompt Corrective
Action Provisions
Ratio
$ 160,476
10.0%
,.;.;
";:6';
96,285
$ 179,648
"'--"-,.-.- .. ,.
. <J13;Sg;
107,811
6.0
1?0%
<\s.tf
6.0
The various federal banking statutes to which the Bank is subject include limitations regarding the nature ofthe transactions in
which it can engage or assets it may hold or liabilities it may incur.
Matrix Financial. As a wholly-owned subsidiary of the Bank, Matrix Financial is also subject to OTS regulation. In addition,
Matrix Financial is also subject to examination by various regulatory agencies involved in the mortgage banking industry. Each
regulatory agency requires the maintenance ofa certain amount of net worth, the most restrictive of which required Matrix
Financial to maintain a net worth of $771,000 at December 31,2009 and $863,000 at December 31, 2008. At December 31 2009 and
2008, Matrix Financial was in compliance with these regulatory requirements. '
UW Investment Services. UW Investment Services, headquartered in Denver, Colorado, a wholly-owned subsidiary of the
Company, is a broker-dealer registered with the SEC under Securities Exchange Act Rule 15c3-3(k)(2)(ii). UW Investment Services
is subject to the SEC's Net Capital Rule that requires the maintenance of minimum net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined by the regulations, shall not exceed 15 to 1. At December 31,2009, UW
Investment Services had net capital of $244,000, which was $239,000 in excess of its required net capital of $5,000. UW Investment
Services' aggregate indebtedness to net capital ratio was 0.08 to 1.
UW Trust Company. As a Texas trust company, UW Trust is required by the Texas Banking Commissioner to maintain minimum
restricted capital of at least $2,000,000, and may be required to maintain additional capital if the Texas Banking Commissioner
determines that it is necessary to protect the safety and soundness of UW Trust. At December 31,2009, UW Trust was in
compliance with capital requirements under Texas law. See discussion of the sale ofUW Trust assets, which is discussed in Note
25- "Discontinued Operations - Sale ofUW Trust Company Assets." .
F-42
2419
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Fiuancial Statements (continued)
Memorandums of Understanding with the Office of Thrift Supervision. Effective as of December 10, 2009, the Company and the
Bank, each entered into separate informal Memorandums of Understanding ("Informal Agreements") with the Office of Thrift
Supervision (the "OTS"). The Informal Agreements are not "written agreements" for purposes of Section 8 ofthe Federal Deposit
Insurance Act, as amended.
The Informal Agreement between the Company and the OTS provides, among other things, that the Company, acting through its
Board of Directors, will (i) support the Bank's compliance with the Informal Agreement it entered into with the OTS; (ii) not
declare or pay dividends or any other capital distribntion or redeem any capital stock of the Company, or take dividends
representing a reduction in the capital from the Bank, without the prior written non-objection of the Regional Director of the OTS'
and (iii) not incur, issue, renew, repurchase, make payments on or rollover any debt, increase any current lines of credit, 0;
guarantee the debt of any entity without receiving the prior written approval of the OTS Regional Director. Pursuant to the terms
of the Credit Agreement with JPMorgan, entering into the Informal Agreements is considered an event of default; however,
JPMorgan and the Company entered into an Amendment and Forbearance Agreement dated December 14, 2009 wherein
JPMorgan agreed to forbear from declaring the amounts owing under the Credit Agreement immediately due and payable as a
result of the Company and the Bank executing the Informal Agreements and any events of default reSUlting therefrom.
The Informal Agreement between the Bank and the OTS provides, among other things, that the Bank's Board of Directors will
(i) adopt a written Capital Plan for the Bank for the OTS Regional Director's review and comment, and such plan sball address how
the Bank will achieve and maintain by June 30, 2010 a Tier 1 core capital ratio of 8% and a total risk-based capital ratio of 12% (as
of December 31,2009, the Bank's Tier 1 core capital and total risk-based capital ratios were 7.7% and 10.1%, respectively); and
(ii) approve a written Liquidity Contingency Plan to ensure the Bank maintains adequate short-term and long-term liquidity, with
such plan to specifically address deposit concentrations and plans to reduce or manage such concentrations.
The Informal Agreements remain effective until modified, suspended or terminated by the OTS Regional Director.
Subsequent to December 31, 2009, the OTS has provided additional supervisory limitations on the Bank. These limitations
include: (i) the Bank may not increase its total assets during any quarter in excess of an amount equal to net interest credited on
deposit liabilities without prior written notice of non-objection from the OTS; and (ii) the OTS has directed the Bank not to
rollover or renew exiting brokered deposits, or accept new brokered deposits without the prior written non-objection from the
OTS.
As a result of the Informal Agreements and the additional supervisory limitations, the Company is looking to further increase its
capital position by focusing on expense reductions, optimizing the balance sheet for both loans and deposits and risk weighting
of assets, as well as evaluating opportunities for margin improvement and improving the overall earnings power of the Company.
This may not be sufficient to meet the requirements of the Informal Agreements, so the Company is also looking at various
strategic alternatives for the Company to accelerate its compliance with terms of the Informal Agreement.
While management believes that they are instituting the a p p r o p r i a t ~ plans to meet the requirements of the Informal Agreements,
as well as the additional supervisory limitations, there is no certamty that the Company can successfully execute on all of the
above and meet the capital requirements of the ors by June 30, 2010. If the Company is unable to comply with the Informal
Agreements or additional supervisory limitations the OTS could take additional actions, including issuing an enforcement action.
F-43
2420
Table of Contents
United Western Bancorp,lnc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. Shareholders' Equity
Stock Option Plans
The Company has three equity incentive plans, the 2007 Equity Incentive Plan (the "2007 Plan"), the 2006 Special Stock Option
Plan ("2006 Plan") and the 1996 Amended and Restated Stock Option Plan ("1996 Stock Option Plan"), which are administered by
the compensation committee of the board of directors (the "Compensation Committee"). The 2007 Plan provides a variety oflong-
term equity based incentives to officers, directors, employees and other persons providing services to the Company. While the
1996 Stock Option Plan provides only for granting of stock options, the 2007 Plan authorizes the Compensation Committee to
grant other forms of equity based incentive compensation, such as restricted stock awards, stock appreciation rights, performance
units and supplemental cash payments, in addition to stock option grants. In light of the approval of the 2007 Plan by the
Company's shareholders on May 17. 2007, the Company does not intend to grant any additional stock .options under the
Company's 1996 Stock Option Plan. During 2009, grants of 37,887 options, 76,043 restricted shares and 25,606 shares to outside
directors have been issued under the 2007 Plan, net of forfeitures. Thus the Company considers there are 499,181 shares available
for future grants.
The 2006 Plan was adopted by the board of directors and approved by the shareholders in order to grant stock options to two
. members of executive management in amounts greater than the 100,000 maximum amount of shares which could be granted to any
one person in a year under the Company's 1996 Stock Option Plan. Under the 2006 Plan, 107,143 stock options were granted,
which have substantially similar terms as those options granted under the Company's 1996 Stock Option Plan. There are no
further shares reserved for issuance under the 2006 Plan.
The options granted under the 1996 Stock Option Plan and the 2006 Plan provide that, in most instances, an option must be
exercised by the optionee within 30 days after the termination of employment, if and to the extent such option was exercisable on
the date of such termination. Under the 2007 Plan, in most instances, an option must be exercised by the optionee no later than the
date of termination of employment, if and to the extent such option was exercisable on the date of such termination.
All options governed by the Company's equity incentive plans that are outsta.nding as of December 31, 2009 and 2008, are
nonqualified options that vest ratably over a five year term and have a 10-year hfe. Each award from all plans is evidenced by an
award agreement that specifies the option price, the duration of the option, the number of shares to which each the option
pertains, and such other provisions as the Compensation Committee determines. The option price for each grant is at least equal
to the fair market value of a share of United Western Bancorp, Inc. common stock on the date of grant. Upon a change in control
of the Company, as defined in the plans, the Compensation Committee is authorized to accelerate vesting or modifY other terms of
exercise that in its sole discretion it deems equitably warranted.
The Company has granted 76,043 restricted stock awards, net of forfeitures at December 31, 2009. These awards vest 20%
annually on the anniversary date of the grant over a five year period.
F44
2421
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
A summary of the Company's stock option activity and related infonnalion is as follows:
Non-Vested Restricted Stock Awards
Outstanding Stock Options Outstanding

Shares Available Grant - Date of Weighted Average
for Grant Number of Shares Fair Value Number of Shares Exercise Price
-':'-'.-'-I,""02""7'"",?O=7 ',Hl4,248 W84 Ji 19.37
. (i70;i78)86,3489.44 .. ' 83,830 ". iU8


Granied .. ................. "
ForreitedOi'cancelled
Vested awards

Fully vested and sbares expected to vest total approximately 1,010,000 at December 31, 2009 and the related intrinsic value of such
shares was approximately $1,600.
Other infonnation regarding options outstanding at December 31, 2009 is as follows:
. '.
$0.00- 8.89
8.90';':.13.00, .
1},01-- 18.00
l$J)i ;';10.00
20.01- 21.00
.
22.01- 23.00
'.
Options Outstanding
Weigbted Average
Remaining
Weighted Average Contractual Life in
Options Exercisable
Number of Shares Exercise Price . years Number of Shares
Weighted Average
Exercise Price
41,300 $ 2.91 9.94
.94,14Q. . 11).61"
. 74,444 16.72 ....... 8.37
. 5}5;585(.. . '6J4
128,780 20.25 7.22
4$,'16421.30 " 7.17
j 10,676 22.83 6.41
Y5g,1)3 :.;,"",' =",-'",," '..::23::.:3z,.::t ............. ""'''''';''''.-..; "",6.=43.'
1,072,422 $ 18.37 6.94
Proceeds from stock option exercises totaled $0 in 2009 and 2008, and $12,000 in 2007. Shares issued were from available
authorized shares. There were 508,749 options exercisable at December 31, 2009, including those granted to the Company's board
of directors and consultants. The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money
exercisable stock options were $1,600 and $0, respectively, at December 31,2009.
F-45
2422
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Stock-Based Compensation Expense
Stock-based compensation expense from continuing operations totaled $1,475,000 in 2009, $1,487,000 in 2008, and $1,012,000 in
2007. Stock-based compensation expe1l5e is recognized ratably over the requisite service period for all awards. Stock-based
compensation expense for 2009 was incurred as follows: $776,000 for stock options, $496,000 for non-vested stock awards, and
$179,000 for shares issued to the independent members of our board of directors, and $24,000 in connection with the Company's
Employee Stock Purchase Plan. Stock-based compensation expense for 2008 was incurred as follows: $790,000 for stock options
$433,000 for non-vested stock awards, $139,000 for shares issued to the independent members of our board of directors, and
$125,000 in connection with the Company's Employee Stock Purchase Plan. Stock-based compensation expense for 2007 was
incurred as follows: $760,000 for stock options, $102,000 for non-vested stock awards, $62,000 for shares issued to the
independent members of our board of directors, and $88,000 in connection with the Company's Employee Stock Purchase Plan.
Unrecognized stock-based compensation related to stock options totaled $1.5 million at December 31, 2009. At such date, the
weighted_average period over which this unrecognized expense was expected to be recognized was 2.3 years. Unrecognized
stock-based compensation expense related to non-vested stock awards was $1.8 million at December 31, 2009 . .At such date, the
weighted-average period over which this unrecognized expense was expected to be recognized was 3.4 years.
Valuation o/Stock-Based Compensation
The fair value of the Company's stock options granted is estimated on the measurement date, which, for the Company, is the date
of grant The Company estimates the fair value of stock options granted using the Hull-White model, an enhanced trinomial
lattice-based valuation model which takes into account certain dynamic assumptions about interest rates, expected volatility,
expected dividends, employee exercise patterns, forfeitures and other factors. Accordingly, management believes the Hull White
model provides a better fair value estimate than other models available.
The weighted-average fair value of stock options granted during 2009, 2008 and 2007, estimated using a trinomial lattice-based
valuation model was $1.91, $2.98, and $4.48, respectively. The assumptions used to determine the fair value of options granted
during 2009, 2008 and 2007 are detailed in the table below:
...... .
divide.nd yield
...... .
Expectedterm( in years) ..

Options granted
..
2009
/55.30%-"715Q%
.. .. 2.54% - 4:i8%
2?!J"i.!':":j,12% .
. 6.19 - 6.58 ..

83,830
(45,943)
Years Ended December 31,
2008
51,00,%
j .2'7% -2:iO% .
2j;7%.2.3.l)9%
. 6.18':':6.9i
...
170,880

2007
ZS,70% -.27.4(1% .
0'<)30/.':': t:i9%
4.m"
5.50-7.00 ..
53. iF $5.5i
. 186,052 .
(i,M3f
Expected volatility is based primarily on historical volatility (estimated using Ii rolling five-year weekly average) of the closing
price of the Company's common stock, and other factors. In estimating the expected dividend yield, the Company used the
dividends declared in the calculation of the fair value stock option awards. Prospectively, the Company will revise the estimate of
dividends that are included in stock option aWlirds to conform to the level of dividends declared by the Board of Directors, if any.
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant with term equal to the life of the
option. In estimating the fair value of stock options under the trinomial lattice-based valuation model, separate groups of
employees that have similar historical exercise behavior are considered separately. The expected term of options granted is
derived using the lattice model and represents the period of time that options granted are expected to be outstanding. The range
of expected term and estimated forfeitures (employee exit rate) results from certain groups of employees exhibiting different
behavior. Options forfeited impact the amount of compensation expense recognized in the consolidated income statements. Share-
based compensation expense is based on awards that are ultimately expected to vest; accordingly, share-based compensation
expense may be impacted if actual forfeitures differ from estimated forfeitures.
F46
2423
Table of Contents
Employee Stock Purchase Plan
United Western lancorp, Ine. and Subsidiaries
Notes to CouoDdated FInancial Statements (contlnned)
In 1996, the board of directors adopted and the shareholders approved an Employee Stock Purchase Plan ("Purchase Plan") and
authorized, as amended, 400,000 shares of common stock ("ESPP Shares") for issuance thereunder. The price at which ESPP
Shares are sold under the Purchase Plan is 85% of the lower of the fair market. value per share of common stock on the enrollment
date or the purchase date. During the year ended December 31,2009, the Company issued 29,157 ESPP Shares to participants in
the Purchase Plan compared to 26,634 shares for 2008, and 18,308 s ~ for 2007. Included in stock-based compensation, the
Company incurred 524,000 of expense in 2009, 5125,000 in 2008, and 588,000 in 2007 associated willi the Purchase Plan. As of
Decemher 31, 2009, there were 115,848 ESPP Shares available for future issuance.
Stock Repurchase Plan
During 2009, the Coinpany did not fIlllurchase any of its common shares. During 2008, the Company repurchased 113,900 of its
common shares for $1.61 million. During 2007, the Company repurchased 60,200 of its common shares for 51.25 million. The
Company does not anticipate the repurchase of additional common shares. In accordance with Colorado law all shares were
retired. .
15. Defined Contribution Plan
The Company has a 401 (k) defined contribution plan ("Plan") covering all employees twenty-one years of age andolder who have
elected to participate in the Plan. Each participant may make pretsx contributions to the Plan up to the lesser of the amount
allowed by the Internal Revenue Code or 100% of such participant's earnings. The Company matches 50% of participant
contributions on the first 6% of compensation deferred, not to exceed 3% of the participant's compensation. The Plan was
amended in 2007 to provide for vesting of matching contributions over a three year period; 20% after one year, 40% after two
years and 100"10 after three years. In prior years the Plan provided for vesting of matching .contributions ratably over a five year
period. The Company contributed approximately $361,000, $375,000, and 5252,000 during the years ended December 31, 2009, 2008
and 2007, respectively, which were recorded in compensation and employee henefits expense in the consolidated statements of
operations.
F47
2424
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
16. Total Comprehensive Inrome
The fDIIDwing table presents the cDmpDnents DfDther cDmprehensive incume (IDSS) and tDtal cumprehensive incume (Iuss) fur the
years ended December 31, 2009, 2008, and 2007.
.'< ..................... "
...................... ' ......... . > .......
.. , . ,: ..: ........... .... j.> ........................
N
.
'.' . . , . .
Net (IDsses)
... ..
Other cDmprehensive incDme (loss)
'" .
Year Ended December 31,
2009 2008 2007
' .. $
(Dollars thousands)
. 9.95Z..$'.io;r4j
. ....
(6,197)
..
28.006 (31,558)
'01;970)'
.".,.,.,."..,:.:.17,::::,3;::.83 (19,588)
""$'('24;62)! , ... .......... '$
. (93)
(4,566)
'iOt732)'
(2,834)
17. Commitments, Contingencies, Ofl:.Balnnce-Sheet Arrangements and Related Party Transactions
Sale-leaseback of United Western Financial Center
On September 29, 2006, the Company sold the United Western Financial Center, a high rise office tDwer located in downtuwn
Denver, CDIDradu. The CDmpany sold the building for $27.3 million and received net proceeds Df $26.5 million net of cDmmissiuns
and costs. The CDmpany's basis in the building was $14.8 milliDn, resulting in a gross deferred econumic gain Df$12.1 milliun. In
cunnectiun with the sale, the Company and the Bank agreed to lease back approximately 62,487 square feet of office space in the
building fDr a term Df 10 years. In additiun, the Company guaranteed certain third-party lease DbligatiDns on approximately 23,171
square feet Df Dffice space fDr 10 years (such third parties being fonner subsidiaries of the CDmpany). Management estimated and
accrued an obligatiDn Df $840,000 fDr the third party space based un the existing lease tenns and Dther factors related to. thDse
leases and the CDmpany's guarantee. This guarantee was recDrded pursuant to the provisiuns uf ASC Topic 460, Guarantees. "
which requires proceeds from the sale Df assets to. be allDcated between the guarantee and prDceeds from the sale, thus impacting
the gain Dn the transaction. Changes in the guarantee will be recognized currently in
F-48
2425
Table of Contents
United Western Bancorp,IDC. aDd Subsidiaries
Notes to Consolidated Financial Statements (contiDued)
earnings as changes in the value oflhe guarantee occur. After its guarantee obligation, the Company has a net deferred economic
gain of approximately $11.2 million. Due to the requirements of ASC Topic 840, "Leases, .. which provides accounting guidance for
sale leaseback transactions, the Company is recognizing the gain at a rate of approximately $1.1 million annually, pre-tax, as a
reduction in lease expense over the IO-year term of the lease. In the years ended December 31, 2009, 2008, and 2007 the Company
recognized $1.1 million, $1.1 million, and $1.1 million, respectively, as a reduction in lease expense, which is included in occupancy
and equipment expense on the statements of income. The table below provides information regarding the lease as follows:
2010 '.
2011
2lni
2013
2014
Thereafter
.
Cash Accrual Deferred
Rent (1) Rent (2) Rent (3)
(Dol/ars in thousands)
$ liH4 $1;367 $ . ...... . , .. l
1,357 1,367 io
"'1,399" '
1,442 1:367 . . (75)
.IM! '" . . (1m
Deferred
Gain (4)

1,123

1,123

1,962
, .. 2,697 . ..,..,."".,...,.,.:;2"",39:.,.:4 (303)
'$ "$'" '\M29 $ . '(4!i4).l<
(I) The cash rent reflects the future minimum lease payments required to be paid under the terms of the lease.
Net Rent
Expense (5)
.$.... f44<
244

244

432
(2) GAAP requires when a lease has an escalation clause the rent must be accrued on a straight line basis over the lease term or
eltpected life of tbe lease.
(3) The deferred rent represents the difference between columns (I) and (2). Deferred rent accumulates in the first half of the
lease and then reverses over the later part of the lease.
(4) The deferred gain represents the recognition oftbe remaining $7.6 million economic gain over the life of the lease.
(5) The prospective effect of the reduction in the Company's net rent expense from realization of the annual deferred gain
amortization will be substantially offset by the rental income tbat was previously earned by Matrix Tower Holdings, LLC.
Leases
The Company leases other office space and certain equipment under noncancelable operating leases. Annual amounts due under
the office and equipment leases as of December 31,2009 are approximately as follows:
Total rent expense aggregated approximately $1,120,000, $917,000, and $920,000 for. the years ended December 31, 2009, 2008 and
2007, respectively, and is recorded in occupancy and equipment expense.
Financial Instruments with Off-Balance-Sheet Risk
In the nonnal course of business the Company enters into various transactions which are not included in its consolidated balance
sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include
commitments to extend credit and standby leiters of credit, which involve elements of credit risk and interest rate risk in excess of
the amounts recognized in the consolidated financial statements. The Company minimizes its exposure to loss under these
commitments by subjecting them to credit approval and monitoring procedures.
F-49
2426
Table of Coateats
Valted Westen Baacorp, Iae. aad Subsidiaries
Notes to CoalOUdated Flnanelal Statements (continued)
Commitments to extend. credit are agreements to lend to, or provide 'a credit guarantee for, a customer as long as there is no
violation of any condition established in the contract The Company enters into contractual commitments to extend credit,
generally with fixed expiration dates or termination clauses, at specified rates and for specific purposeS. These commitments
generally require the payment of a fee. Because many of these instruments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements. Commitments to extend credit totaled
$103 million and $327 million at December 31, 2009 and 2008, respectively. .
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby
letters of credit generally are contingent upon the failure of the cuatomer to perform according to the terms of the underlying
contract with the third party. Standby letters of credit totaled $8.5 and $12.1 million at December 31, 20(l9 and 2008, respectively.
Contingencies - Liabilities and Guarantees
In the period between 2000 and 2003, Matrix Financial originated imd sold approximately $8.9 billion of residential mortgage loans. .
Since that time the Bank has periodically sold residential mortgage loans. These loans were and are sold to investors in the normal
course of business. These I!greements usually require certain representations and warranties concerning credit information, loan
documentation, collateral, and insurability. On occasion, investors have requested the Bank or Matrix Financial to repurchase
loans or to indemnifY them against losses on certain loans which the investors believe do not comply with applicable
representations. Upon completion of its own investigation regardilig the investor claims, the Bank and Matrix Financial generally
repurchase or provide indemnification on certain loans, as appropriate.
The Company maintains a liability for estimated losses on loans expected to be repurchased or on which indemnification is
expected to be provided and regularly evaluates the adequacy of this repurchase liability based on trends in repurchase and
indemnification requests, actual loss experience, and other relevant factors including eConomic conditions. Total loans
repurchased during the years ended December 31, 2009, 2008 and 2007 were $196,000, $1,301,000, and $1,037,000, respectively.
Loans indemnified that remain outstanding at December 31, 2009 totaled $5,320,000, of which $2,089,000 are guaranteed as to
principal by FHA. Losses charged against the liability for estimated losses on repurchase and indemnification were $292,000,
$606,000, and $97,000, for 2009,2008, and 2007, respectively. At December 31,2009 and 2008, the liability for estimated losses on
repurchase and indemnification was $891,000 and $1,195,000, respectively, and was included in other liUbilities on the
consolidated balance sheets. .
In connection with the sale of ABS School Services, LLC, on May 6, 2006, the Company's recourse obligation for certain loans,
which was $5,400,000 at March 31, 2006, was transferred to the purchaser. Pursuant to the sales agreement, the Company
guarantees, for a five year period, the repayment of the loans sold to the purchaser up to an aggregate amount of $1,650,000,
which created a new recourse obligation for the Included in other general and administrative expenses for the year
ended December 31, 2006 was a charge of $950,000 to reflect in the Company's consolidated financial statements the estimated
liability related to this recourse obligation. This charge was included in other noninterest expense. At December 31,2009, and
2008, the liability for estimated recourse obligations was $192,000 and $445,000, respectively, and was included in other liabilities
on the consolidated balance sheet During the year ended December 31, 2009 the Company paid $253,000 of claims against its
recourse obligation. Assets that continue to be indemnified were $14.5 million and $17.8 million at December 31,2009 and 2008,
respectively.
F-SO
.2427
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Contingencies - Legal
The Company and its subsidiaries are from time to time party to various litigation matters, in most cases involving ordinary and
routine claims incidental to its business. The Company accrues liabilities when it is probable that the future costs will be incurred
and such costs can be reasonably estimated. Such accruals are based upon developments to date, the Company's estimates of
the outcome of these matters and its experience in contesting, litigating and settling other matters. Because the outcome of most
litigation matters is inherently uncertain, the Company will generally only accrue a loss for a pending litigation matter if, for
example, the parties to the matter have entered into definitive settlement agreements or a final judgment adverse to the Company
has been entered. Based on evaluation of the Company's litigation matters and discussions with internal and external legal
counsel, management believes than an adverse outcome on one or more of the matters set forth below, against which no accrual
for loss has been made at December 31, 2009 unless otherwise noted, is reasonably possible but not probable.
United Western Bancorp, Inc. United Heritage Financial Group, Inc. and United Heritage Life Insurance Company
v. First Matrix Investment Services Corporation et al. On October 27, 2006, a complaint was filed against the Company and First
Matrix, along with two former employees of First Matrix Messrs. Curd and Snodgrass, in Idaho State District Court alleging
violations of state securities laws, the Idaho Consumer Protection Act and fraud arising from the sale of an approximately
$1.70 million mortgage backed bond from First Matrix to one of the plaintiffs. The case, which was subsequently removed to the
U.S. District Court in Idaho on December 12,2006, is based on the plaintiffs' claims that First Matrix should have made certain
disclosures regarding the risk of the withdrawal of a USDA government guarantee of the bond, which withdrawal subsequently
occurred and the bond went into default. On September 30, 2009, the Court granted in part the Company's, First Matrix's and
Messrs. Curd's and Snodgrass' Motion for Summary Judgment. In granting partial suinrnary judgment for the defendants, the
court agreed to dismiss (i) plaintiffs' Idaho Consumer Protection Act claim; (Ii) the claims by United Heritage Financial Group
("UHFG"), the parent of United Heritage Life Insurance Company ("UHLIC") against the defendants since UHLlC sold all but a
$425,000 interest in the subject bond to UHFG, thereby reducing UHLlC's claim from $1.70 million to $425,000; in addition,
UHLIC's claim was further reduc.ed to $212,500 since UHLlC and UHFG sold their entire interest in the bond to a third party for
fifty cents on the dollar and (iii) Messrs. Curd and Snodgrass from the matter. On December 15, 2009, the parties entered into a
settlement and release agreement to fully settle the litigation. Under the terms or the settlement and release agreement, First Matrix
agreed to pay $100,000 to the plaintiffs (of which 85% was covered by insurance) and the plaintiffs agreed to dismiss the lawsuit
with prejudice.
United Western Ballcorp, Inc. and UW Trust Company. William R. and Carolyn Richoz. et al. v. United Western Trust
Company pic/a Sterling Trust and United Western Bancorp. Inc. In October of 2009, plaintiffs filed an amended class action
complaint in the United States District Court for the Northern District of Illinois, Eastern Division, against United Western Trust
Company flkla Sterling Trust and United Western Bancorp, Inc. The plaintiffs allege that they were damaged when they invested
proceeds from their self-directed individual retirement accounts with InvestForClosures and other related entities using UW Trust
Company as custodian for such investments. Plaintiffs claim UW Trust Company breached its fiduciary duties owed to plaintiffs
as custodian of individual retirement accounts set up through UW Trust Company by plaintiffs. Plaintiffs also allege that UW
Trust Company knew that these investment were part of a Ponzi scheme to defraud investors, that UW Trust Company's actions
violated the Texas Securities Act, Illinois securities laws and the Illinois Consumer Fraud Act and that UW Trust was unjustly
enriched in excess of $5 million, should pay compensatory damages of $5 million and exemplary damages in the amount of
$20 million. On December 28,2009, the parties filed a stipulation with the court voluntarily dismissing the action without prejudice.
F-51
2428
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
United Western Bank. War4 Enterprises, LLC v. Daniel E. McCabe et 01. including United Western Bank In
February 2008, the plaintiff filed a complaint in Colorado District Court for the City and County of Denver seeking damages from
the holders of an processing and trust account at the Bank, the Bank, and a former employee of the Bank, for breach of fiduciary
duties due to the plaintiff and aiding and abetting the conversion of approximately $1.84 million of plaintiffs funds by the holder
of the processing and trust account maintained at the Bank. On December 28, 2009, the Court agreed to dismiss the action with
prejudice.
United Western Bank. Anita Hunter et. 01. v. Citibank, N.A. et 01. including United Western Bank. The Bank received
this class action complaint in July of 2009 brought by seven named plaintiffs on behalf of a class of approximately 330 similarly
situated people residing throughout the United States, each of whom lost substantial sums of money ("Exchange Funds")
entrusted to seven qualified intermediaries ("QIs") to facilitate their respective Internal Revenue Code Section 1031 Exchanges.
According to the complaint, the QIs were controlled by an individual named Edward Okun and certain other individuals who
would gain access to the Exchange Funds and convert the Exchange Funds for their own use for personal gain. The plaintiffs seek
class certification for al\ similarly situated plaintiffs who lost Exchange Funds when they placed such funds using the QIs. One of
the QIs maintained accounts at the Bank for the purpose of holding Exchange Funds. With respect to plaintiffs' claims against the
Bank, plaintiffs alleged, among other things, that the Bank knowingly aided and abetted breaches of fiduciary duties by Mr. Okun
by facilitating wire transfers of Exchange Funds from accounts at the QI at the Bank to accounts controlled by Mr. Okun and his
related entities at other financial institutions. On October 2, 2009, the Bank filed a Motion to Dismiss with the court requesting the
court to dismiss all plaintiffs' claims against the Bank since the Bank successfully initiated the QI's wire transfers, and therefore,
the Bank cannot be held liable under UC.C. Article 4-A. On February 3,2010, the court granted the Bank's Motion to Dismiss
agreeing with the Bank that the Bimk cannot be held liable under U.C.C. Article 4-A; and furthermore, that all common law claims
against the Bank are preempted by U.C.C Article 4-A. While the court dismissed the Bank from the action, it granted the plaintiffs
with leave to amend the complaint On March 3, 2010, the plaintiffs filed a second amended complaint with the court against the
Bank and other defendants, making the following allegations specifically against the Bank: (i) aiding and abetting a breach of
fiduciary duty by means of non-electronic transfers; (Ii) aiding and abetting fraud by means of non-electronic transfers; (iii) aiding
and abetting fraud; (iv) conversion and aiding and abetting conversion by means of non-electronic transfers; (v) conversion;
(vi) aiding and abetting a conversion; (vii) contractual interference; (viii) negligence and (ix) violations of U.C.C. Article 4-A.
While the Bank's liability, if any, to the plaintiffs claims in this case is uncertain at this time, the Company believes .that the Bank
has meritorious defenses to the plaintiffs' claims.
United Western Bank. Highpoint Vista, LLC et 01. v. United Western Bank et 01. In July 2009, the plaintiffs, who are
borrowers and/or guarantors on a $20.5 million loan secured by real estate, filed a complaint in the Colorado District Court for the
City and County of Denver against the Bank and an officer of the Bank, seeking damages in excess of $10 million dollars against
the Bank for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duties and negligent
misrepresentation. The plaintiffs allege that the Bank entered into an agreement with the borrowers whereby the Bank would issue
a letter of credit to a third party, extend the maturity date on the real estate loan and approve the recording of a second deed of
trust on the real estate securing .the Bank's loan and that the Bank failed to execute such letter of credit, extend the maturity date
and approve the recording of a second deed of trust on the real estate, thereby causing damages to plaintiffs. On September IS,
2009, the plaintiffs agreed to dismiss the Bank's loan officer from the matter. On January 4, 2010, the parties to the action agreed to
stipulate to dismissing the action without prejudice,
F-S2
2429
Table of Contents
Related Party Transactions
Ualted Western Baaeorp,l/!c. aad Subsidiaries
Notes to CoalOlldated Flaudal Statemeats (eoatiJlued)
On September 29, 2006, the Company entered into a co-location license agreement (the "Agreement") with Legent Clearing, LLC
("LC') to share office space with LC located in Thornton, Colorado. The company uses the office as a business continuity site.
The Agreement was renewed in 2007 and currently matures April 30, 2010 at $3,000 per month. The Bank also extended a $5 million
line of credit (the "Loan'') to Legent Group, LLC ("W'). LC is a wholly-owned subsidiary of LG. Because Guy A. Gibson, the
Company's Chairman of the Board and largest shareholder, founded LC in 2001, is currently an indirect 7% shareholder ofLG and
serves on LG's Board of Directors, the Company's Audit Committee (which is responsible fur reviewing and approving all related
party transactions) reviewed both the Agreement and the Loan. The Audit Committee determined that the monthly payments to
LC pursuant to the Agreement were at market rates for the space to be used and, accordingly, that the terms of the Agreement are
as fair as would have been obtained from an unaffiliated third party. The Audit Committee .Iso determined that the Loan was tair
and equitable and in the best interest of the Compll!lY. Based oil these determinations, the Committee approved both transactions
and waived any potential violatiOns of the provisions of the Company's Business Conduct and Ethics.
18. Fair Value
In the Company's financial statements fair value is defined as the price that would be received to sell an asset or paid to transfer
liability (exit price) in the principal or most advantageous market for the asset in an orderly transaction between market
participants at the measurement date. The price in the principal (or most advantageous) market used to measure the fair value of
. the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to
the marlcet for a period prior to the measurement date to allow for marketing activities tlu\t are usual and customary for
transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgesble, (iii) able to transact, an<\ (iv) willing to transact.
To determine fair value often requires the use of valuation techniques that are consistent with the market approach, the income
approach, and/or the cost approach. The market approach uses prices and other relevant infurmation generated by market
transactions involving identical or comparable assets and liabilities .. The income approach uses valuation techniques to convert
future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on
the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques
should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in
pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions that market participants would
use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning
those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the circumstances. In that regard the accounting literature
has established a fair value hierarchy that gives the highest priority to quoted prices in active markets fur assets or liabilities and
the lowest priority to unobservable .inputs. The fair value hierarchy is as follows:
Levell: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.
A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure tair
value whenever available.
Leve12: Inputs to the valuation methodology !Dclude quoted prices for similar assets or liabilities in active markets; inputs tu
the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not
active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable
market data by correlation or other means.
F-53
2430
Table of Contents
Ualted Western Bancorp, InCo d Subsldi.rIes
Notes to ConsoUdated Fla clal Statements (continued) .
Leve13: Inputs to the valuation methodology are unobservable and significant to the fair value Level 3 assets
and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as
well as instruments for the determination of fair value requires significant management judgment or estimation.
A description of the valuation methodologies. used for instruments measored at fair value, as well as the general classification of
such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the
Company's financial assets carried at fair value or the lower of cost or fair value.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value
is based upon internally developed models .or obtained from third parties that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be inade to ensure that financial instruments are recorded at fair value, or the lower of cost
or fair value. These may include unobservable parameters. Any such valuation adjustments have been applied
consistently over time. The Company's valuation methodologies may produce a fair value calculation that may not be indicative
of net realizable value or reflective of future fair values. While management believes the Company's valuation methodologies are
appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore the
reported fair value amounts have not been comprehensively revalued since the presentation dates, and. therefore, estimates of fair
value after the balance sheet date may differ significantly from the amounts presented herein.
Financial asset and financial liabilities measured at fair value on a recorring basis include the following:
Available for sale securities. Securities available for sale are comprised of agency securities and nonagency securities (private
label) collateralized by mortgage obligations.
Agency securities lire reported at fair value using Level I inputs. Management believes Level I is appropriate for
agency securities due to the relative availability of pricing transparency for such securities in the marketplace.
N onagency securities (private label) collateralized by mortgage obligations are reported at fair value using Level 2
inputs. Management believes Level 2 is appropriate for these securities because the Company obtains fair value
measurements from three primary sources. Two are. widely known pricing services including an independent pricing
service that is utilized by the FHLBank of Topeka. The other is an third party that provides management
with fair market valuations for securities identified by management as requiring additional analysis in order to ascertain
fair value in accordance with ASC Topic 820, "Fair Value Measurements and Disclosures . .. Management has direct
observable data for these securities based on this pricing service and based on other market data that is available. This
data that is available includes market research of various well known firmS and includes information on yield, duration,.
repayment, defaults, delinquency and other factors. Management is comfortable with the data utilized by the pricing
service based on our review of documentation and discussion with personnel from these entities.
F-S4
2431
Table of Contents
United Western Baneorp, lilt. and Snbsidiaries
Notes to Consolidated Financial Statements (continued)
Generally, if a security has received one rating from a Nationally Recognized Securities Ratings Organization
("NRSRO") that is below investment grade or the security has a collateral coverage ratio of less than or equal to 1.0
(these populations are substantially the same) we obtain a fair market value estimate from the independent consultant.
The independent consultant provides estimated cash flows from which fair value and OTT! are determined. These cash
flow estimates are most significantly impacted by assumptions about voluntary repayments, the level of defaults, and
loss severity.
At December 31, 2008 the Company owned nonagency securities collateralized by payment-option-adjustable-rate
mortgages, which were reported at fair value using Level 3 inputs. The fair value of payment-option-adjustable-rate
mortgages were determined through an independent third party using cash flow models and assumptions as to the
future performance of the. underlying loan pools. Management concluded that this value was based on unobservable
market data because the fair value was determined through proprietary cash flow models. While management believes
the assumptions used by the third party were reasonable, since the cash flow models were based on assumptions about
future events and future performance of the underlying collateral, they were based on unobservable market data.
Further, management believes the valuation. of payment-option-adjustable-rate mortgage backed securities was less
certain due to the age of the securities as these were a 2006 vintage origination and the behavior of these instruments
was comparatively unknown as compared to other mortgage-backed securities that did not have performance history in
stressed markets. These securities were sold during 2009.
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. These instruments are not
measured at fair value on an ongoing basis but are subject to fair value adjustments in circumstances (for example, when there is
evidence of impairment). Financial assets and liabilities measured at fair value on a non-recurring basis include the following:
Loans held for sale. Loans held for sale include residential, multifamily and SBA originated loans, which are reported in the
aggregate at the lower of cost or fair value using Level 3 inputs. For these loans, the Company obtains fair value using a cash flow
model. The fair value measurements consider observable data that may include loan type, spreads for other similar whole loans
and mortgage-backed securities, prepayment speeds, servicing values, index values, and when applicable, outstanding investor
commitments. Management makes certain adjustments to the data inputs tbat it believes other market participants would consider
in estimating tbe fair value of the Company's residential held for sale portfolio including: delinquency, existence of government
guarantees, seasoning, loan to value ratios, FICO scores, foreclosure levels, loss severities, among other factors. During 2009,
interest rates and spreads on residential loans held for sale contracted, which favorably impacted valuations of residential loans
held for sale; however, an increase in delinquencies substantially offset the impact of interest rates and spreads. In 2009, the
Company recorded a charge of $586,000 to its previously established valuation allowance, compared to $2.8 million in 2008. The
remaining change in value from December 31,2008, wben the balance was $212,083,000, was due to repayments of $21.7 million
and $3.8 million transferred to real estate owned.
Mortgage servicing rights. Mortgage servicing rights are reported at the lower of cost or fair value using Level 3 inputs.
Management eng!lges an independent third party to perform. a valuati.on of its mortgage servicing rights periodically. Mortgage
servicing rights are valued using discounted cash flow modeltng techmques that reqUire management to make estimates regarding
future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates,
servicing costs, and other economic factors. Certain adjustments to inputs are made to reflect the specific characteristics of the
Company's portfolio. During 2009, the change in value of the asset versus December 31, 2008, was substantially all due to
amortization.
F-55
2432
Table of Contents
United Western Bantorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (tontinued)
Impaired securities. Held to Maturity securities deemed other-than-temporarily impaired are reported at the estimated fair value of
the security using Level 3 inputs. Level 3 is appropriate for these securities as there is very little trading volume of such securities
and, as a result, the Company relies upon a valuation of these securities using a tash flow forecast model that incorporates
elements of market participants prepared by an independent third party. The methodology used to determine estimated fair value
is identical to the methodology discussed above in Available for sale securities and that is subject to the same levels of review.
Impaired loans. Certain impaired loans are reported at the fair value of the underlying collateral if management concludes
repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based on observable market
data or Level 3 inputs based on customized discounting criteria. During the year ended December 31,2009, impaired loans were
remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for credit losses based
upon the fair value of the underlying collateral. Impaired loans with a carrying value of $27.9 million had been previously reduced
by a partial charge off of $2.5 million and were further reduced by allowance for credit loss allocations totaling $2.8 million to a
total reported fair value of $25.1 million utilizing Level 3 valuation inputs. Provision for credit losses of $6.3 million was made
during 2009 for impaired loans.
The following represents assets measured at fair value on a recurring basis as of December 31, 2009 and December 31, 2008. The
valuation methodology used to measure the fair value of these securities is described earlier in this Note (There are no liabilities
measured at fair value);
.

SBA securities

Total investment securities available-for-sale
20il8
.

SBA securities
CoUalflfajizCldllioi'!gage'obtigatlolls
Mortgage-backed securities collateralized by option
arm mortgage loans

Quoted Prices in Signifkant Significant
Active Markets for Other Observable Other Unobservable
Total
Fair
$
Identical Assets Inputs Inputs
(Levell) (Level 2) (Level 3)
F-56
.. .. {poUarsin
$
.... 121
, .. = l'
223

""'l,IbiP
Iii
"""$' :i$.62jj'
. 223
15,934 15,934
Z8,(llJ ::$""'".",-",-,.., ...... 59,513

2433
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The table helow presents a reconciliation of the securities measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for 2009.

Loss realized in eimiings

Settlements
ill an(lloibuiiJf.J;ievel.3'i
Balance December 31, 2009
Investment securities
The following table represents financial assets measured at fair value on a nonrecurring basis as of December 31, 2009 and
December 31, 2008. The valuation methodology used to measure the fair value of these assets is described earlier in the Note.
Assts.*DecemQ.edl,Z()(j9:';
Loans hilldforsale . .
'.


Assets at December 31, 2008:
...... .
Impaired loans
.' .
Other-than-temporarily impaired
Quoted Prices
inActive
Markets for
Identical Assets
(Levell)
"...;;+:
F-57
Significant
Other Significant
Observable Unobservable
Total
Fair
Value
Inputs Inputs
(Level 2) (Level 3)
(Dollars in thousands) . .. ,'. ,

2434
260,757' . $ 260,757 .

7,344 .. 7:344
.
.... " ..... 291,620
. 1,658 . 1,658
M9<i 9,49
6,581 6,581
Table of Contents
United Western Baneorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Nonfinancial assets measured on a nonrecurring basis are summarized below:

Foreclosed real estate, net
Quoted Prices
in Active
Markets for
Identical Assets
(Levell)
Significant
Otber Significant
Observable Unobservable
Inputs Inputs
(Level 2) (Level 3)
(Dollars in thousands)
,'" '-.-- - ",.,_ _-'-'.<' ... "'J"
$ 16,350
Total
Fair
Value
$ 16,350
Foreclosed real estate consists of residential or commercial assets acquired through loan foreclosure or deed in lieu of loan
foreclosure. When assets are transferred to foreclosed real estate such assets are held 'for sale and are initially recorded at fair
value, less estimated selling costs when acquired, establishing a new cost basis. Fair value is generally detennined via appraisal.
Costs after acquisition are generally expensed. If the fair value of the asset declines, a write-down is recorded through expense,
During 2009, the Company incurred charges of$5.0 million to reduce real estate owned to fair value.
During 2009 there were no transfers out of Level 3 financial assets.
The Company is required to disclose the fair value of financial assets and financial liabilities, including those financial assets and
financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The carrying
amounts and estimated fair value of financial instruments are as follows:
.......... . ,'.'t ....
... cash equivale,nts
.
securities _. held to maturity
.........
. Loan;'held for investment, net
FHLBankstock'
) ..ccruedlnterest receivable

...............

FHLBank borrowings
... .> '.
Junior subordinated debentures
..
Carrying
Amount
2009
December 31,
Estimated Carrying
Fair Value Amount
..... .
2008
Estimated
Fair Value
$ 586,380 $ '586,380'
... ?3,13J"
292A74
$ 22,880 . f 22,880
$
33,13t
357,068'
.
1,150,105

7,023 \
1,993,513 $
'Jf90:r''
IflO:6()7
.
30,442
4,218
F-58
.
1,i29,007
... . N/A
7,023
1,994,066
/:\1,905'"
i90,792
11J,1$8'
16,726
2;21$
2435
$
5?m< . 5M73 ,
498,464' 429,526

1,233,301 1,239,399
29,046 N!A
8,973 8,973
1,724,672 . $.
29697'
226:721 ..
iJ9,l6$
3(),442
.. I.9P7
i,727,182
... .22.91':
242,620
tZ4,630
1
. 29,759
. ,,90t',.
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following methods and assumptions were used by the Company in estimating the fair value of the financial instruments:
The estimated fair value approximates carrying value for cash and cash equivalents and accrued interest.
It was not practicable to determine the fair value ofFHLBank stock due to restrictions placed on its transferability.
The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with "DO significant change
in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by
discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers
of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.
The estimated fair value approximates carrying value for demand deposits (e.g., interest and noninterest checking, savings and
money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying
amounts). The estimated fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a schedule of aggregated expected periodic maturities on time
deposits.
The fair value disclosed for FHLBank borrowings and borrowed money and junior subordinated debentures is estimated using a
discounted cash flow calculation that applies interest rates currently being offered on FHLBank borrowings and borrowed money
and junior subordinated debentures.
The Company's lending commitments are predominately variable-rate and have clauses that if the customer's credit quality
deteriorates, we are not obligated to fund the commitment Accordingly, the fair values of these items are not material and are not
included in tbe table above.
F-59
2436
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
19. Parent Company Condensed Financial Information
Condensed financial information of United Western Bancorp, Inc. ("Parent") is as follows:
'.
Assets;
Cash ". ......'>.,,,.,,'., ..
. securities- held to maturity .
. '.' . , .' .........
.. ... ... .
.
Other assets
... .. il1 'an(j
Total assets
Total liabilities
'\:q4ity:
Common stock

. Retained earnings
,
Total shareholders' equity
.
$
December 31,
2669 2668
(D()llars in.lhouscmds)
'4U)
i,i5'! . 1,889

242,851 $ 177,271
...., ...............
W1;VH .'
57,747 .
(5).6i)f'
159,651
..
'100,348 .
22,256)
101,949
(a) See Note 9 and Note II for additional information regarding debt.
(b) Other liabilities includes $2.1 million of deferred revenue, $2.1 million of accounts payables and accrued liabilities, $4.8 million
of deferred tax liabilities, and $13.8 million of taxes owed to subsidiaries, substantially all of which will be repaid upon receipt
of the Company's tax refund from its NOL carryback. .
F-60
2437
Table of Contents
United Westera Bancorp. Inc. ud Subsidiaries
Notes to CouoDdated FIn.ndal Statements (continued)
Yean ended December 31,
2009 2008 2007

Income:
Total (loss) income (11,643) 79 1\7

Income taxes (a)

(20,225) 19,816,' 22,247 '
," ""':'>;'t:::"':',:,;,,,;,;' ;'
(a) The Company's tax sharing agreement requires each entity to calculate its income taxes on a stand alone Generally
subsidiaries pay the Parent an amount equal to its individual current income tax provision calculated on the basis of the
subsidiary filing a separate return. The Parent, as it carries debt for the benefit of all subsidiaries net operating losses.
F-61
2438
Table of Contents
United Weitern Bancorp,lnCo aDd Subsidiaries
Notes to Consolidated FiBandal Statements (eontinued)
Yean endec. Deeember 31,
1009 1008 Z007
. ::;t;:f,":ij

Adjustments to reconcile net income to net cash from operating
activities:

Dividends from subsidiaries' 14,535' 8,612 9,966

Write-down on other-than-temporary impaIrment ofsecuflties 12,697

" "unreaiiiedloss on securities available for side . ... .'. "'''''(2;834)
\;;: .. : ;.;;<i;' 'j '.,.",";;" ' , ',: .;0 "::', " "", '"
Increase (decrease) in other liabilities .,',;;,';' 'i.,;;'! ," '''i:i'ti,;r ..:,.,., ...... -." ....... :.:.,." .... .. .. ::,e,.".5. >.),:'
.:.'::(lOl'4;1'';); \ , UIiO<,:' !t:""".,
Net cash from operating activities 22,737 6,039 ' (6,211)
:.i:,"',::;:;;';';;'::,:;:;:,',:: ..:.,:'.{;":'l;::;i".'i .. "';,":{?"":,i<
Loan transfeiTCiifio.a'iiubsldiary ofihe parent in exchange for
. held-to-maturity securities _$__ ;:;,$__ ...;
$
10. Quarterly Financial Data (Unaudited)
Net interest income during 2009 was impacted.by increased liquidity maintained on the balance sheet Provision expense in the
third quarter and fourth quarter of 2009 was greater than the previous quarters due to increases in nonperfonning loans and
deterioration oCcollateral val\les due to the economic conditions. The Company incurred $33.2 million ofOTTI charges on 13 of its
non-agency residential mortgage-backed securities in the fourth quarter of 2009 due to continued deterioration in the underlying
performance of the mortgage collateral of these securities. ,In the second quarter of 2009 the Company realized a $47 million loss
from the sale of 100% of our available-for-sale mortgage-backed securities collateralized by option adjustable rate residential loans
with an unpaid principal balance of $47.3 million. Each of the five securities sold was rated AA by nationally recognized rating
agencies at acquisition. However, in the period from April 2008 through lune 2009, the securities were progressively downgraded
until they were graded significantly ,below investment grade. As a result of the downgrades of the securities, and because the
securities were lower tranche securities in relation to other securities issued in the same security structure, the Bank was required
to assign large amounts of capital for the purposes of detennining the Bank's regulatory risk-based capital ratio. Consequently,
the Bank elected to sell the securities, which provided regulatory capital relief to the Bank in spite of the loss incurred. Also in the
second quarter of 2009, the Company completed the sale of certain assets of UW Trust Company to Equity Trust Company and
its affiliate, Sterling Administrative Services, LLC for a purchase price of $61.4 million, and the Company recorded an after tax gain
on the sale of approximately $36. I million, which is included in discontinued operations.
,
F-62
2439
Table of Contents
United Western Bancorp, IDe. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
During the third quarter of 2008 the Company recognized a $4.1 million other-than-temporary impairment charge on two
investment securities.
;"<:> ,'<' ,"".,.. <,.' . ; .... > ', ... '.,', ....


Provision for credit losses
'
N oninteres! expense

. . . ' ...
Inc'ome ...
.
Discontinued operations:
InCOMe
'itlc6iJie'til)( ... , .... , .......... " ............ ' ................ ' ... , .
Net (loss) income

Basic
2008
OPerapoiis:..' .. .. i.< .'j,:.' ,.', ... .,.' ..............;" .
N,et, in.c?me
PtovisioiI.i'orcredit i05SeS '. .. . . '.. .
Noninlerest income

from continuingoperations before taxes
.' .. . .
Income from continuing operations
.........i.\.>, ..... .
(Loss) income from discontinued operations. net of
income taxes
Netincomel'er share data:
.. ' ............ . .. .
Diluted
Fourth
Quarter
Third Second First
Quarter Quarter Quarter
.
',';',.', :-":"0:."',

14.467
'(30,$I!5) .
20.916
t1;034
10.106
41
21.026
l tS,3I!Q ".$'
6,278

19.799
18,61$
4,181
?,698.
15,151
. ,'",' ",". -',' ',:':'-""'-" ':"":':-.. "-.,'- "':'.: :.:,.::.,:::".".: "-::'

.. (9,398) (5,363)
(S3,098)
(i9.360j .'
.
1,554
,., ,$ .(@,62.5} 'S'
$ (40,625) (8,694)
: -::,: ;, ...:
$20.84;{$
.:i.37:f ' ..
1.973
\7,315
3,132
'>,.166
2,366
21,042
t2(jj'
(1.228) ..
$
i$"1).2!!
$ 0.28
F-63
$
'H>;92'i
682
(801)
1.489
$. .. )(j,ii
0.21
2440
", "":.-:".,,-,-,, .., .. , ...
..' '(:l.h)'
.. $ _....;;3:.;,.99;,;;8 .. $ __ 3 ... ,27,..6


2,222
. 1'5;100,
4,276
rJsf
$ 2,995 $
'-"".-.-.
iO,21()
.. QWr:
2,537
16;186
4,670
.
3,275
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
21. Segments of the Company and Related Information
The Company has three reportable segments under ASC Topic 280, "Segment Reporting:" a thrift subsidiary, a custodial and
administrative services subsidiary, and a mortgage banking subsidiary. The thrift is the Bank, our community banking subsidiary
that pr01ddes lending and deposit services to its customers. On June 27, 2009, the Company completed the sale of certain assets
ofUW Trust as more fully discussed in Note 25 - "Discontinued Operations - Sale ofUW Trust Assets." The assets sold were
associated with the custodial IRA and qualified employee benefit plan business lines of UW Trust. Accordingly, only the
custodial escrow, paying agent and trust administration lines of business remain for UW Trust;which management deems a core
operation and thus UW Trust will continue to be included in segment reporting. The mortgage banking subsidiary, Matrix
Financial, owns residential MSRs and services the mortgage loans underlying those MSRs. The remaining subsidiaries are
included in the "all other" category for purposes of ASe Topic 280 disclosures and consists primarily of the parent company
operations.
F-64
2441
Table of Contents
Ualted 'Western Baaeorp,lDe, and Subsidiaries
Notes to Consolidated Financial Statements (eontinued)
The Company e ~ a l u a t e s performance and allocates resources based on operating profit or loss before income taxes. Accordingly,
the infonnation presented in this table is from continuing operations, which excludes the operations of UW Trust related to
certain assets they sold, as discussed in Note 25. The accounting policies of the reportable segments are the same as those
described in the summary of signifiCant accounting policies. For the years ended December 31:
Segment assets 2,447,456 2,303 30,923
45,490 '2,526,172
Segment assets 2,271,592 2,467 6,143 133,051 2,413,253
Segment assets 2,119,178 3,946 46,355 ,126,311
2,295,790
F-6.S
2442
Table of Contents
United Western Bancorp,lnc. and Subsidiaries
Notes to Consolidated Financial Statements (eontinned)
22. New Accounting Standards
Recently Issued Accounting Standards
As discussed in Note 1 - Basis of Presentation and Significant Accounting Policies, on July 1, 2009, the Accounting Standards
Codification became FASB's officially recognized source of authoritative U.S. generally accepted accounting principles applicable
to all public and non-public non-governmental entities, superseding existing F ASB, AICPA, EITF and related literature. Rules and
interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC
registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer
to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique
numeric path to the content through the Topic, Subtopic, Section and Paragraph structures.
ASC Topic 320, "Investments - Debt and Equity Securities . .. New authoritative accounting guidance under ASC Topic 320,
"Investments - Debt and Equity Securities," (i) changes existing guidance for determining whether an impairment is other than
temporary to debt securities and (ii) replaces the existing requirement that the entity's management assert it has both the intent
and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to
sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under ASe
Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be
other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The
amount of the impairment related to other factors is recognized in other comprehensive income. The Company adopted the
provisions of the new authoritative accounting guidance under ASe Topic 320 during the second quarter of 2009. Through the
period ended March 31, 2009, the Company recognized cumulative other-than-temporary impairment ("Om") charges of $4.1
million for two securiti.es. The Company adopted the new literature effective April 1, 2009 and reversed $624,000 for the non-credit
portion of the cumulative OTTI charge. The adoption was recognized as a cumulative effect adjustment that increased retained
earnings and decreased accumulated other comprehensive income $387,000, net of tax of $237,000, as of April 1,2009. As a result
of implementing the new standard, the amount of OTT! recognized in earnings for the second quarter of 2009 was $603,000. See
Note 3 - Investment Securities to the consolidated financial statements for additional information.
ASC Topic 805, "Business Combinations." On January 1, 2009, new authoritative accounting guidance under ASC Topic 805,
"Business Combinations," became applicable to the Company's accounting for business combinations closing on or after
January 1,2009. ASe Topic 805 applies to all transactions and other events in which one entity obtains control over one or more
other businesses. ASC Topic 805 requires an acquirer, upon initially obtaining control of another entity, to recognize the assets,
liabilities and any non-controlling interest in the acquiree at fair value as of the acquisition date. Contingent consideration is
required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that
consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process
required under previous accounting guidance whereby the cost of an acquisition was allocated to the individual assets acquired
and liabilities assumed based on their estimated tilir value. ASC Topic 805 requires acquirers to expense acquisition-related costs
as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under prior
accounting guidance. Assets acquired and liabilities assumed in a business combination that arise from contingencies are to be
recognized at fair value if fair value can be reasonably estimated. If fair value of such an asset or liability cannot be reasonably
estimated, the asset or liability would generally be recognized in accordance with ASC Topic 450, "Contingencies." Under ASC
Topic 805, the requirements of ASC Topic 420, "Exit or Disposal Cost Obligations," would have to be met in order to accrue for a
restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-
contractual contingency that is not likely to materialize, in which case, nothing should be recognized in p\1rchase accounting and,
instead, that contingency would be subject to the probable and estimable recognition criteria of ASC Topic 450, "Contingencies."
The new authoritative accounting guidance did not have a significant impact on the Company's financial statements.
F-66
2443
Table of Contents
United Western Baneorp, Inc. and Snbsldlaries
Notes to Consolidated Financial Statements (continned)
ASC Topic 810. "Consolidation. "New authoritative accounting guidance under ASC Topic 810, "Consolidation," amended prior
guidance to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation ofa subsidiary. Under ASC Topic 810, a non-controlling interest in a subsidiary, which is sometimes referred to
as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the
consolidated financial statements. Among other requirements, ASC Topic 810 requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on
the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. The new authoritative accounting guidance under ASC Topic 810 became effective for the Company on
January I, 2009 and did not have a significant impact on the Company's financial statements.
Further new authoritative accounting guidance under ASC Topic 810 amends prior guidance to change how a company
determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be
consolidated. The detennination of whether a company is required to consolidate an entity is based on, among other things, an
entity's purpose and design and a company's ability to direct the activities of the entity that most Significantly impact the entity's
economic perfonnance. The n ~ w authoritative accounting guidance requires additional disclosures about the reporting entity's
involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its
affect on the entity's financial statements. The new authoritative accounting guidance under ASC Topic 810 will be effective
January I, 2010 and is not expected to have a significant impact on the Company's financial statements. .
ASC Topic 820. "Fair Value Measurements and Disclosures. " New authoritative accounting guidance under ASC Topic
820,"Fair Value Measurements and Disclosures," affums that the objective of fair value when the market for an asset is not active
is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for
detennining whether there has been a significant decrease in market activity for an asset when the market for that asset is not
active. ASC Topic 820 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the
evidence. The new accounting guidance amended prior guidance to expand certain disclosure requirements. The Company
adopted the new authoritative accounting guidance under ASe Topic 820 during the first quarter of2009. See Note 18 _ Fair Value
Measurements for additional infonnation.
Further new authoritative accounting guidance (Accounting Standards Update No. 2009-5) under ASC Topic 820 provides
guidance for measuring the fair value of a liability in circumstances in which a quoted price in an active market for the identical
liability is not available. In such instances, a reporting entity is required to measure fair value utilizing a valuation technique that
uses (i) the quoted price of the identical liability when traded as an asset, (Ii) quoted prices for similar liabilities or similar liabilities
when traded as assets, or (iii) another valuation technique that is consistent with the existing principles of ASC Topic 820, such
as an income approach or market approach. The new authoritative accounting guidance also clarifies that when estimating the fair
value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the
existence of a restriction that prevents the transfer of the liability. The forgoing new authoritative accounting guidance under
ASC Topic 820 became effective for the Company's financial statements beginning October I, 2009 and did not have a significant
impact on the Company's financial statements.
F-67
2444
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Additional new authoritative accounting guidance (Accounting Standards Update 2010-(6) under ASe Topic 820 provides
guidance for disclosures about significant transfers into and out of Levels I and 2 and separate disclosures about purchases,
sales, issuances and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of
disaggregation requiring entities to provide such disclosures for each class of assets and liabilities and .about inputs and
valuation techniques used to measure fair value. The guidance is effective for the first reporting period (including interim periods)
beginning after December IS, 2009, except for the requirement to provide Level 3 activity on a gross basis, which will be effective
for fiscal years beginning after December IS, 2010 (including interim periods). In the period ofinitial adoption, entities will not be
required to provide the amended disclosures for any previous periods presented for comparative purposes. The adoption of this
new accounting guidance is not expected to have a material impact on the Company's financial statements.
ASC Topic 825 "Financial Instruments . .. New authoritative accounting guidance under ASC Topic 825,"Financial Instruments,"
permits entities to choose to measure eligible financial i.nstruments at fair value at specified election dates. The fair value
measurement option (i) may be applied instrument by instrument, with certain exceptions; (Ii) is generally irrevocable; and (iii) is
applied only to entire instruments and not to portions of instruments. Unrealized gains and losses on items for which the fair
value measurement option has been elected must be reported in earnings at each subsequent reporting date. The forgoing
provisions of ASC Topic 825 became effective for the Company on January 1,2008. See Note 18 - Fair Value Measurements.
ASC Topic 860, "Transfers and Servicing . .. New authoritative accounting guidance under ASC Topic 860, "Transfers and
Servicing," amends prior accounting guidance as follows: (i) eliminates the concept of a qualified special purpose entity
("QSPE"); (ii) requires a transferor to consider all arrangements made contemporaneously with or in anticipation of a transfer
when determining whether derecognition is appropriate; (iii).clarific:s requirement that a transferred financial asset be legally
isolated from the transferor and any of its consolidated affiliates; (IV) mtroduces the concept of a participating interest which is
applied to transfers of portions of financial assets to determine derecognition eligibility; (v) modifies the conditions required for a
transfer of financial assets to qualify as a sale; (vi) changes the initial measurement guidance for asset transfers that qualifY as
sales: and (vii) stipulates that guaranteed mortgage securitizations ("GMS") that fail to meet the conditions for sale accounting
will result in the continued classification ofthe securitized mortgage loans as loans and will not enable a transferor to recognize a
servicing asset or liability. The new authoritative accounting guidance under ASC Topic 860 will be effective January 1,2010 and
is not expected to have a significant impact on the Company's financial statements.
23. Public Offering of Common Stock
On September 22, 2009, the Company completed a public offering. of sbares of stock, $0.0001 par value per
share. The common stock was sold at $4.00 per share. In the publtc offermg, the Company raIsed an aggregate of $80.0 million;
less offering expenses charged against the proceeds which totaled $5.6 million. The net funds raised of $74.4 million were
deployed as follows: $62.1 million was contributed as capital to United Western Bank, which increased the Bank's capital ratios,
$5 million was used on October I, 2009 to reduce the outstanding balance on the Company's revolving line of credit with another
institution and $7.3 million was retained by the Company for general corporate purposes. On October 14, 2009, the underwriter
exercised a portion of their over"allotment option for 1,961,325 shares of common stock. The Company raised $7.9 million, less
offering expenses of$500,OOO. These funds were retained by the Company for general corporate purposes.
F-68
2445
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Flnandal Statements (continued)
24. Sale of Interest in Matrix Settlement and Clearances Services, LLC
In 2004, the Company, through certain of its subsidiaries, entered into definitive agreements to sell its former 45% membership
interest in Matrix Settlement & Clearance Services, LLC, ("MSCS"), as well as all of the .assets of the trust operations of the Bank,
to Matrix Financial Solutions, Inc. ("MFSI"), which is an entity controlled by the princIpals of Optech Systems, Inc., one of the
original co-owners ofMSCS along with the Company.
In consideration of the sale of the 45% membership interest in MSCS, and the sale of the assets of the trust operations of the
Bank, the Company received approximately 7% of the outstanding common stock of MFSI. During the first quarter of 2009, the
Company completed the sale of 269,792 shares of Matrix Financial Solutions, Inc. for $16.00 per share resulting in aggregate
proceeds of $4.317 million. The transaction was negotiated between the Company and the purchaser and the Company believes
the exchange value per share represented the fair market value of such shares as of the sale date. The Company's basis in the
shares was $750,000, resulting in a gain on the sale of $3.567 million. For the years ended December 31,2009, 2008, and 2007, the
Company received dividends of $0, $540,000, and $405,000, respectively, from its investment in MFSI. These dividends were
included in other non interest income in the statements of income.
As part of the sale agreement, deposits continued to be maintained by MFSI at the Bank. At December 31, 2009, deposits
maintained by MFSI at the Bank totaled approximately $155.2 million. This agreement was renewed in 2007 and matures on July 5,
2010.
25. DIscontinued Operations - Sale i1f UW Trust Assets
On June 27,2009, the Company completed the sale of certain assets of UW Trust Company to Equity Trust Company and its
affiliate, Sterling Administrative Services, LLC (together, the "Buyers"), for a purchase price 0$61.4 million, subject to adjustment
as provided for in the definitive purchase agreement governing the transaction. The assets sold were associated with the
custodial IRA and qualified employee benefit plan businesses of UW Trust. Under the terms of the sale, UW Trust received 25%
of the purchase price in cash, $15.3 million, and financed the remaining 75% through a purchase money note, $46.0 million. The
purchase money note is collateralized by all the assets acquired by the Buyers as well as a pledge of the subaccounting
agreement inclusive of all contract rights and fees relating to them. The note provides for level principal payments over the seven
year term and may be prepaid without penalty at any time. The mte of interest is the prime rate, currently 3.25%, with a floor and a
cap of 2.25% and 4.25%, respectively. Management engaged a third party to assess the value of .the purchase money note
received from the sale and concluded that a discount of 4.2% was required to reflect the fair value of the note. Accordingly, the
gain on sale was reduced by $1. 9 million, which will be amortized into income as a yield adjustment on the note over its term. In
connection with the sale, Sterling Trust, has changed its name to UW Trust Company, and will retain and continue to operate its
custodial escrow and paying agent lines of business.
F-69
2446
Table of Contents
United Western Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
As a result of the sale, the Company recorded an after tax gain on the sale of approximately $36.1 million, which is included in
discontinued operations. The operating results associated with the sale of UW Trust assets have been retrospectively presented
as January 1, 200? The results of previous.'y included in the Company's
custodial and adVISory serviCeS segment, and now IDcluded ID IDcome from dlscontlDued operatIOns, net of income taxes are
presented in the table below.
Year Ended December 31,
2009 2008 2007
(Dollars in thousands, except share in/ormation)

N oninterest income

Operating income (loss) before taxes from discontinued operations
1I1
c
()pteta)t I'Toyls@t(benfll'\t) . . . ............. .
income (loss)from ogerations

proyiSiollllfS19,8Sl,$I)! .
Income (loss) from discontinued operations, net of income taxes
J opeta;tiods oftlW Tjiis!, .
. .... .. . ....... ... ......... .... .... .. . ...... .
Income (loss) from discontinued operations of UW Trust, per share -
assuming dilution
$.
.....
7,410
'5,2$6
2,154
76$
1,386.
36i139
$ 37,525
$
$ 2.86
.$
....;.,
9,357
9;6Z9/
(272)
(99)
. ..... (l?3)

$ (173)
.. $
(o;o71
$ (0.02)
.
$
$
;;;.,;;...
7,960
.7.97?
(19)
(7)
..(12)
(12)
Premises and equipment with a book value of $2,596,000, and $1,659,000 at December31, 2008 and December31, 2007
respectively, were included in other assets and carried at the lower of cost or fair value. These assets were sold to the Buyers
connection with the sale ofUW Trust assets.
F-70
(Back To Top)
Section 2: EX-21 (EXHIBIT 21)
EXHIBIT 21
United Western Baneorp, Inc. (d/b/a United Western Bancorp)
Subsidiaries of the Registrant
1. United Western Bank - Organized Pursuant to a Federal Savings and Loan Charler
2. Matrix Tower Holdings, LLC - Formed in Delaware
3. Matrix Financial Services Corporation (d/b/a Matrix Home Loan Center, Matrix Capital Mortgage and Matrix Capital
Mortgage Corporation) -Incorporated in Arizona
4. Matrix Insurance Services Corporation - Incorporated in Arizona
5. The Vintage Group, Inc. - Incorporated in Texas
6. Vintage Delaware Holdings, Inc. - Incorporated in Delaware
7. UW Trust Company (f/k/a Sterling Trust Company) - Incorporated in Texas
8. MSCS Ventures, Inc. - Incorporated in Colorado
9. UW Asset Corp. - Incorporated in Colorado
10. Matrix Bancorp Trading, Inc. - Incorporated in Colorado
11. UW Investment Services, Inc. - Incorporated in Texas
12. First Matrix, LLC - Organized in Colorado
13. Matrix Funding Corp. - Incorporated in Colorado
14. Equi-Mor Holdings, Inc. - Incorporated in Nevada
15. New Century Acadeniy Property Management Group, LLC - Organized in Arizona
16. Charter Facilities Funding, LLC - Organized in Minnesota
17. Charter Facilities Funding IV, LLC - Organized in Colorado
2447
18. Charter FacilitiesFunding 5, LLC - Organized in Colorado
19. Community Development Funding I, LLC - Organized in Minnesota
20. UWBK Fund Management, Inc. -Incorporated in Colorado
21. DCC Holdings, LLC - Organized in Colorado
22. Western Communities, Inc. -Incorporated in Colorado
23. Matrix Bancorp Capital Trust II - Organized Under Delaware Law
24. Matrix Bancorp Capital Trust VI- Organized Under Delaware Law
25. Matrix Bancorp Capital Trust VIII - Organized Under Delaware Law
(Back To Top)
Section 3: EX-23.1 (EXHIBIT 23.1)
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference In Registration Statement (Nos. 333-143096, 333-135570, 333-135566,
and 333-135567) on Forms S-8 and Registration Statement (No. 333-130550) on Form 5-3 of United Western Bancorp,
Inc. and subsidiaries of our report dated March 6, 2006 (August 7, 2009 as to Notes 2, 3 and 25) relating to oUr audit of
the consolidated statements Qf operations, shareholders' equity and comprehensive Income, and cash flows forthe year
ended December 31,2007 of United Western Bancorp, Inc. and subsidiaries., which appears in the Annual Report on
Form 10-K of United Western Bancorp. Inc. as of and for the year ended December 31,2009. Our report dated March 6,
2008 (August 7, 2009 as to Note 2, 3 and Note 25) relating to the consolidated financial statements expresses an
unqualified opinion and includes an explanatory paragraph relating to the retrospective adoption of new authoritative
accounting guidance related to earnings per share and certain retrospective adjustments related to discontinued
operations.
lsI McGladrey & Pullen, LLP
Denver, Colorado
March 15. 2010
(Back To Top)
Section 4: EX-23.2 (EXIDBIT 23.2)
Exbibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-143096, 333-135570, 333-
135568, and 333-135567) and registration statement (No. 333-130550) on Form S-3 of United Western Bancorp, Inc. and
subsidiaries of our report dated Marcb IS, 2010, with respect to the consolidated financial statements of United Western Bancorp,
Inc. and subsidiaries and the effectiveness of internal control over financial reporting, which report appears in this Annual Report
on Form 10-K of United Western Bancorp, Inc. and subsidiaries for the year ended December 31, 2009.
Sherman Oaks, California
March 15, 201 0
(Back To Top)
/sl Crowe Horwath LLP
Section 5: EX-31.1 (EXIDBIT 31.1)
Exhibit 31.1
CERTIFICATION
I, Scot T. Wetzel, President and Chief Executive Officer of United Western Bancorp, Inc. (the "Registrant"), certify that:
1. I have reviewed this report on Form 10-K of United Western Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
2448
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading as with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the
periods presented in this report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Ac.t Rules 13a-15(e) and ISd-15(e and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(1) and ISd-1S(I) for the Registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report in being prepared;
b. designed such internal control over financial reporting or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in. accordance with
generally accepted accounting principles; .
c. evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the Registrant's internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting; and .
5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors:
(Back To Top)
a. all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant's internal controls over financial reporting.
lsi Scot T. Wetzel
Scot T. Wetzel
President and Chief Executive Officer
(Principal Executive Officer)
March 15,2010
Section 6: EX-31.2 (ExmBIT 31.2)
Exhibit 31.2
CERTIFICATION
I, .william D. Snider, ChiefFinaucial Officer of United Western Bancorp, Inc. (the "Registrant"), certify that:
1. I have reviewed this report on Form JO-K of United Western Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light o ~ the circumstances under which such statements were made, not
misleading as with respect tothe period covered by thiS report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the
periods presented in this report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules l3a-15(e) and ISd-15(e and internal control over fiuaucial reporting (as
defined in Exchange Act Rules 13a-15(f) and ISd-15(f) for the Registrant and have: .
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, partiCUlarly during the period
in which this report in being prepared;
designed such internal control over financial reporting or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
finandal reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
disclosed in this report any change in the Registrant's internal control over financial reporting that occurred
2449
during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors:
(Back To Top)
a. all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material"that involves management or other employees who have a significant role
in the Registrant's internal controls ove'r financial reporting.
lsi William D. Snider
William D. Snider
Chief Financial Officer
(Principal Financial Officer)
March 15,2010
Section 7: EX-31.3 (EXIDBIT 31.3)
Exhibit 31.3
CERTIFICATION
I, Benjamin C. Hirsh, Chief Accounting Officer of United Western Bancorp, Inc. (the "Registrant"), certify that:
1. I have reviewed this report on Form I O-K of United Western Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to s t a t ~ a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made not
misleading as with respect to the period covered by this report; .'
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the
periods presented in this report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules l3a-15(e) and 15d-15(e aDd internal control over financial reporting (as
defmed in Exchange Act Rules 13a-15(1) and 15d-15(1) for the Registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report in being prepared;
b. designed such internal control over financial reporting or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the Registrant's internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officers and I have diSClosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrant's auditors and the audit committee ofthe Registrant's Board of Directors:
(Back To Top)
a. all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
b, any fraud, whether or not material, that involves management or other employees who have a significant role
, in the Registrant's internal controls over financial reporting.
lsi Benjamin C. Hirsh
Benjamin C. Hirsh
Chief Accounting Officer
(Principal Accounting Officer)
March IS, 2010
2450
Section 8: EX-32.1 (EXIUBIT 32.1)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of United Western Bancorp, Inc. (the "Company") on Form 100K for the year ended
December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scot T. Wetzel,
President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
I. The report fully complies with the requirements of Section 13(a) or lS(d) of the Securities and Exchange Act of 1934;
and
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 15,2010
(Back To Top)
lsI Scot T. Wetzel
Name: Scot T. Wetzel
Title: President and
Chief Executive Officer
(Principal Executive Officer)
Section 9: EX-32.2 (EXIDBIT 32.2)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of United Western Bancorp, Inc. (the "Company") on Forni 10-K for the year ended
December 31,2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William D. Snider,
Chief Financial Officer of the Company, certify, pursuant to IS U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
I. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934;
and
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 15,2010
(Back To Top)
lsI WilliamD. Snider
Name: William D. Snider
Title: Chief Financial Officer
(principal Financial Officer)
Section 10: EX-32.3 (EXIUBIT 32.3)
Exhibit 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of United Western Bancorp, Inc. (the "Company") on Form 100K for the year ended
December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bel1iarnin C. Hirsh,
Chief Accounting Officer oflhe Company, certify, pursuant to 1 g U.S.C. Section 1350, as adopted pursuant to Section 906 oflhe
Sarbanes-Oxley Act of2002, that:
1. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934;
and
2451
2. The information contained in the report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 15,2010
(Back To Top)
lsi Benjamin C. Hirsh
Name: Benjamin C. Hirsh
Title: Chief Accounting Officer
(Principal Accounting Officer)
2452
TabC
Exhibit 88
2453
Decembet2,.2010
PeoPle$ .
Chairman. &: CEO
Tel: 720;.956-6576
Fax:
jpeoples@uwhank.com
Phili" A. Gerbick
.. p ."
Regional Director
KnstielCE]J:nq1list
Acting Regional Director
Office ofThiift Supen1Sion
Western Regiona10ffice .
225 E. John Carpenter Suite 500
. Irving; TX 75062':2326
J?edeta1 Dep911it O>tpbtation,
1601 Bryan street
DaIks,.Tx 75201
United WestemBank
Dear Ms. Mr. Gerbiclo
i.am. pleased to advise you that the NASDAQ OMX has granted United
Bancprp, Inc. rc:lie( undt Market Listing Rule 5635(f). PUCSuatlt to this
'relief, the Company can issue additional shares of common stock to be sold. pursuant to the
Inves.ttn.ent Agreement excutedl:>r and. Oa:k Hill Capital Partners 1.Il,LP,
October 28,2010 as wett as similar agreeOlents without the prior approvaI of the

Receipt of the NASDAQ OMXJnterptetation letter facilitates the timing oiont
and will us to rapidly cl()se the the final
offundsandthe ofagency actions that United
both the Office of Thrift Supetyision and the Federiil Deposit It'lstltane COrpQratioti.
A copy of the NASDAQ OMXintett?retation lettel'is attached
1 Tliis businf!lls of: hOldi.i:tg C;OI11pa1ly United
Inc. ciirrentIYlnihepublic domain. This leti:ct is being provideQ .tome fe;!let'al banktcguJators of United WeliremBlilik in
their supCrvisoa:yt:apacity over the Bank therefore be granted .contldentilil
commercial infonnation and baltk eiWnirullion and supervision exemptions tathe Freedoin of Infonnation AI:t. Accordingly; we
reql,lest, pursuant to 5U.S,CS 552(b)(4)an? (b)(8), cQnfidentiAitreatm!l oftbi$ letter. Pleas.e 110tify us if an)'Oncsqbinits a Freedom
of Irtonnation ACt i"jucst fot a ropy of ihis letter. .
WeStern Financial Center
70Q Street. Suite 2.100
. Denver. .
WW\v.uwbank.qiln
2454
Ms. Kristie Elmqt.tist
Mr. Philip Gerbick
December 2, 20iO.
Page 2
We continue to discuss the Company's stock sale with interested, capable and well
capitalized investors and believe thatwe continue to make excellentprogres$ toward a private
market solution to the Company's and the Bank's current capital challenges.
If you have any questions regarding the NASDAQ OMX interpretation or the
recapitalization, please prompdy contact the undersigned at 720-956-6576 or jpeoples@uwbank.coln
or our regulatory counsel Lawrence Kaplan of Paul, Hastings, Janofsky & Walke.r, LLP at 202-551-
1829 or
Sincerely,

James R. Peoples .
cc: John E. Bowman, Acting Director
Thomas A Barnes
Deborah Dakin, Esq.
Susan L. Chomicz,Esq.
Phillip A. Gerbick
Michael Simone
Lori Quigley
Nicholas Dyer
Kevin A. Corcoran, Esq.
Frances Augello, Esq.
Brian A. Steffey, Esq.
Richard Ostennan, Esq.
Serena L. Owens
Andrew L. Sandler, Esq.
Liana Prieto, Esq.
2455
TabC
Exhibit 88 A
2456
0
Guy A"Qibson
Chaifu'latt of the. Board
Inc.

.
llcn:v.el;
RE: tlllifCd Inc"
Dear Mr,
NAS. .. .. 'a .. lAq ..' .. , ...... :. "; ...
. . ' ... ' . ' ... "; : .' ........ :. ".:
loisi'll to' YO-ur .. l\'P1U tbe.
. ..... ullder Listing Rtile5(j35(n<! with respect ton. t.lf ;((he
1'F<iUlia.ctfoA ;',. .
'rhe as.ther to u$;,und l'P011'whidl We h&vebnSctl
cQnsideration allhis' '. .
CtJ.l'I1pttOY. conduCts bankiugO.petations'thtiQuglt its pfiilcipaloperating',
(and,. CQti$eql1rttl., the C;o....,:p;toy) 'by
cOJlqilrpn:s: amI :e:xw&d to dbWt,1.(u,rn in,
As a result, the 'ContpaJ.lY ;$,.:bsntnthtl lus.ses. fr<lrt.tQQ'ntinufQg tor 'f(i(lst
recently year and in to
ltllpafrnli:litcl1argesDn cet'tainGf Hank"s .o1her Iwn,;,perJtlrnling
;assel';S 1osssandloan;;ptineipat ,
Due 'to' its fi,rtariciaJstlU1l$. tb, Bank eXp.rit.n:ced de.p(}slts.,
tbat. unless it in .. may fi.I11Q$'
ehiewhete. further weakening the 'finanCial con(:lition'Qf both 111
th' COi\lpany force to susp.endinteresfpaymen(son its :outstandiilg trust
.. til agteefiint.
ha$ t() :eqUltY aqJuil( tQ tnaterbdlYl1114
adverselyaffuct c911JPlhlfltic
jJ.itrsuarttto Cease' and Desist' Orders (the "Or(je,sfj, the..barj.khlg i1l1pQ;t\d
reqtdrin,gthe CQropi!lliy:and the BanlHo illise capitalln the
, .or IJdditiOhaJ thEl t,eell {(fraise tIle mounter
i II,Ii! letlrotp N.ovember 9" iOlr1t. November attd Novemb'et24; 20 fO.
in pnrtJhat, be made uponapplfettlon to Nasdaq w.hen adcll1Y
.' nppi'6ValwQuld 'seriOu$lyjeopalrdi:r.ertUe fi118ncial'vhibillty tit thelll(t!tptise. '
.. -' ---------_._--, .. ,------- ._ ....-
2457
Guy A.,GibSOll
2010

capital under the Orders. and 'as a re$ult, witilccrtain
pitlvisjons 6fthe Orders. TlreCompatty also,expeets thatatthe end of the. current year. the Bah.k
will fan bIQwthele,vell"eql.llredtQ be adequateIYapitaHzerl,absel1tthProposedTl'm1sattioll. Asa
Bank woulrlbe mJablf.'} accpunt fQtQver 75% ()f
totali.'teposits)andwQuld a liql)lditycrisis- that it believes would lead to the reguJator
recommending tlie of the Bank, res.tjldng in the tIle Company. TheCompany
belie'Ves thatti1e Proposed Transaction istheonty viable, option available to it.
Ynt, stqu:d thl'\t is the result of an ptOC'e$S P,QfS:l,IMt the
over 30 Inthe
PrpPQsed the Company would .issue shares QrCommollstpc.k and warrailts exet'dsah}e
Wilhoutthe .. reqnestedcxception. shareholder appt()val wOldd be \'cquit'd
pUl'$l.Ia11tt:Q tbtill!5 Rule Sq3.$(b),'as:tlil$suartce l,tu'$JJanl t();
List,ing the iSSWll1cec w041d ex.ceed 20% at
a pl'ice less than the greater ofbo9k or lllarJ(elvaJ.U.
The, CriittpallyeXf!cts that asa tesullof the it would satisfy the applicable
ba.nkingi'eg\ila.t()ty re.quirements, rurd would no kmger fiu::e.the prospector the, Bank being seized or
the Cl;lmpa\lY bei)igliqui'9ti.ted. lfia;dditio.n. the th4l fqll()'Vil1g th.c of the
Proposed it would meet therQqldrel1)ent$ f()r continued listing, on With the'
possible e.,'{ceptiOllofthe'bidpriCe' In tbat regard, the Company plans tocol1iplele a
I'vetsc stock split, ifhecessa.ry. at II ratiosuffideht to. cOIriply with thal requirement
d()es. not tbethne prtheability th delay In
Proposed Trlill!)ridtiort that would from.seeJdng shi;lreholderapproval' aJ1d
that. viithout the reqllested exception., its ongoing. prospects would be dire, lClldillg the Company' to
file for protection Under the federal bankruptcy laws and probably resulting ill a total loss to the
CorrlpilnysShMehOlders.
Bnsedonoul' review of e;tescl'j:bed in your correspondence and on your,
representations rgarding theCOmp(J11Y's tlnandal. con<litlon. we have., debmllined that Nasdaq
sholltd grailt the requested,exception to theshareholderapprova} rules. "ThiS determination is hased
upon your tepr$ntationstllat the Company Tleerlsto quitklyprbceed \-vith the Proposed Transactiol1
10 avoidth$eb:ure oflhe Bankand thepossib.l liquidation iJfth Company, hiordr to rely upon
the Cotnpymust l11&i1 to all l10tlater ten (:lays befotethe issuance
of any ser,mritis, a" descrihii1g the Pi"QPost;:d TnUlsactiolltl,l1dalt2l#o,gshm'ehofdel's to. the
omission 'to seek ll1eJr otlwrwise required approvaL The letter mu.st indit;:ate that the audit
committee, 01' a comparable .independent body of the board of directors; has exprcsslyapproved
l'ellatJce oil this ex.ception. ,'l'heCompany must also make a by filing a Forh'!
teqllited by rules of the SEC. or by issuing a press release. tlie same
)P:qtSllant I.Js.tjng R\lle is whet' theissu.ilnce m' pofentialiss,UlIllce pfsec,:urities
mayresvlt In a thaQge
is in c:!)nrielion with
thana Qf(erilig of i:;suilllceby the c,QttJpany of stQ!;k (Pfsecuritie:;4::pnyenible hMIJr
.f9i'CQ.l'llmQIl stQpk)eqiJal to '.m p,erceilt,qr 1l10re of the COm!l)()li, stock or v(l(iilg
befote theissLIat)<:e for less than, the greatorofbQok or market VfilueoJ t!w
2458
Guy A, GibsOIl
December-2, 2010
PageS
illiQrnll'1tiQrt ..})$r.equh'ed in promptly 'a$possible but not latei' tJ\(ll1 ten 44Y$. before t.he:
issl,Iqnce ofthjspurilie$; .
Th tQl'egoing conclUsions are based solely ti}l9R il). YQuts\i'bmissi6nand
l$hould fiQtb for arty Qthefmatter, ti'ectiveifthereare
al1Y 0tni$sj0\1S . cha.ngc$ io the facts or ccm4itions pil!!'tjllted in ),01,l(
correspondence ... The in letterfl]'fl Nasdaq Rules and
policies and notberelied upon should there inNa'ldaq's tistiilgc.riteria.
FUlihemiote. this exception. relates 6nly to tbe specified Nasdaqr(us . and dos lJpt
,'pr$i1l alegai(;(}nclusion .l"egafding Qfothet NasdAA $labtto.ry .or
prQvision$ .of federal.Qr securities. laws.. '. Pla$e note (hat to
transpltl'CllCY in the ofQJJr Nasdaq willpttbH$h a .Qf this lefterwithout the
legend on the Lega.land Compliance s.ection ofNasclaq' s. website.
If You please. c()iitatt lTii;:. at + J .3Q1 918S(l26;
'if}f} ... ..... .. , I .. '7 .'. '.'
"XJ..
David CoJhpton
2459
TabC
Exhibit 89
2460
Paul Hastings
Kristie K.. Elmquist
Federal Deposit Insuran.ceCorporation
January 13,2011
PageS
increasing the amount of deposits flowing through the Bank in accotdance with its
Subaccouo.ting Agteement with the Bank, which was restmctuted to cotnply with FDIC
Advisoty Opinion 05-02.
Pin8Ily, resolution of the Bank's curtetlt appeal of the Brokered.Deposit .
Determination issued OD November 5, 2010 ii necessaty before the FDIC can take
action on the Filing. "
The Bank .regrets this new movement in the "goal posts" by the FDIC. We note that by
lettet dated Oc.tober 26, 2010, the FDIC advised the Bank. that the Bank's application to
acquire Legent Cleating u.c would be acted upon of the Bank's
broketed deposit waive:t application. The FDIC was subsequently advised on Decembet
6,2010 that the deposits subject to btoketed deposit waiver have been testtoctttted so as
not to be plac:ed by a deposit broke.r, as the xelationship between Legent Cleag and the
Bank mittoted the relationship in FDIC Acmsoty Opinion 05-02. Accotdingly, the
impediment set fo.rth on Octobe:t 26, 2010 was essentially tendered
As the FDIC is wen aware, the acquisition ofl.egent cunently .is a key com.poilent in the
private-secto.r recapitalization of the Bank and the cu.r.rent investment agreements with the
anchor investors in the .recapitatization ttansac.tiorr have a cCdrop-dead" date of Januaty 31,
2011. By imposing a new itnpediment-.tequiring a final detennination by the FDIC's
SupetVisoty Appeal Review CoJll!nittee ("SARC"), the FDIC staff is imprudently acting to
jeopa:cdize the priva.te-sector recapitalizatibn without any legitimate supe:tvisO!y purpose .
. FDIC guidance on appeals imposes a 45-day deadJine fot initial first-step Division
Ditector deternxinations.
2
Expi.ration of the 4S-day deadline will occuJ: aftet the cunent
January 31, 2011 t'drop-dead" date in the ptivate-sect:o.t recapitalization investment
agteement. An. appeal of an adveme dete:tmination to the SARC would require an even
longe:t timeframe. As"a result. the FDIC appears to bave created a new
resolution of which is outside the conttol of the Bank. Accordingly, in accordance with
FDIC's obligations to prope.tly administer the Deposit Insurance Fund, the Bank tequests
that the FDIC reconsider this unfortunate and inllpptOpriate new impedimen.tor else
accept respollS1bility for adversely impacting the private sector recapitslization.
/
2 See FDIC Appeals ofMatorial Supervisory Determinations: Guidelines &; Decisions .
2465
Paul Hastings
Kristie K. Elmquist
Federal Deposit Insurance Corporation
January 13,2011
Page 6
If you hve any futthet questions teguding the Legent application Ot the recapitalization
twlsaction. please promptly contact the undetsigned at (202) 551-1829 or
Jawrencekap1an@paulhastings.com.

awrence D. Kaplan
For PAUL. HASTINGS.JANOFSKY & WALKER LLP
cc: Philip A. Getbick
Regional Director
Office of 'Thrift Supervision
Western. Office
225 E. John Ca.rpentet Freewa.y, Suite 500
Itv.ing, 'IX 75062-2326
Applications Filing Room
Office of Thrift SupeJ:Vi.sion
1700 G Street, N.W.
Washington, D.C. 20552
Ftances Augello, Esq.
I<:aten Matcotte
01"8--Washington
Bowma.nLee
OTS--Daly City
Joseph Meade
FDIC--Dallas
James R..Peoples
Theodore J. Abatiotes, Esq.
United Western Bank
2466
TabC
Exhibit 90
2467
.
.. BANCORP
JanuaryU,2011
Philip A. Gerbick
Regional Director
Office of Thrift Supervision
WestemRegionalOffice
225 E. John Catpenter Freeway, Suite 500
Irving,TX 7

ExecutlveVice President and
Chid Operating Officer
Tel: 72()-932-4282
mn1cdoske)r@u\vbank.cotn
CONFIDENTIAL TREATMENT REQUESTED;
Rristie :rCElmqllist
Acting Regional Director
Fedetal Deposit Insurance Corporation
1601 Bryan Street
Dallas, TX 75201
Re: United Western Bancorp, Inc. - UpdatedCapitalFottnation Efforts and Results
Dear Ms. Ebnquistand Mr. Oerbick:
. WecanllOW confinn to you that Auda International Life Partners ("Auda"),
through jts Allda Alternative Investments affiliate, has approved a non..;conttolling investtnent, in
a dollar amount of $23.5 million at the minimum to. $25.0. million at the maximum, in United
Western Bancotp, Inc. (the "CompanY") comnion stock as part of our capital fornlation efforts.
Audais now reviewing a proposed lnvestmentagreement and is committed to executing it on a
timely basis as soon as Goldman Sachs advises them that the $200 miUionminimurn offering hal)
been achieved. Auda has reqllested the right to observe board meetings of the Company's board
of directors,but not have a voting member serve on either the Company or Bank's boards of
directors. Wcexpect this provision to be fonnalized as part of their investment agreement,
which Wl11 be forwarded to the Office of Thrift Supervision and Federal DepositInsurance
Cotporation as soon 88 it is available.
United Western FihanCial Center
, 70Q Seventeenth Street, Suite 2100
Denver,Colorado 80202
""I.vw,U\vbank.com
2468
MI!. Kiiitic='Elmquist
W. Philip Getbick
lanpary II, 20U
Pagel
This hrings the committed portion of our capital to date,. to $136.6 million or
67% of tbe $205 million offering. Moreover? based upon out ongoing discussions With potemiat
and Goldman Sachs; OUf investment advisor, we t4at Olympus Partners will
, commit to a non-controlling investment of approximately $465 million end which
will bring us to $183 ,million in the aggregate MOl'eovei", itt consultation with
Goldman Sachs, we believe the of the (;I:lpital' form(:ltiollwill be confirmed quickly
thereafter;
The. Company'scurrelli conversations Withcapitalprovidersare summarized below. You
will note that the William Blair mutUal funcls and FTVhave. dropped out since our letter dated
January 10,2011. . .
.... osion DI.ln,,*1; In ""' ...... cGl\flmll'\Ion' i'
, ...--.-'--" .. -'--".,---.. -, .... -.. ,----....... --''1----'(-'-------r-----.... ,'-.. ..r" .... "- ..." ..., ......." ..T .... -....................... -...,,,. -.. "" .."" .... _."._ ..--' ... ".
&;:iStWGlaUP 21,QOO.OOO .[204.1)45.000 ' 9lI.53% .
2469
Ms. Kristie Elmquist
Mr. Philip Gerbick
January 11,2011
Page 3
The table above represents the Company's best estimate at this time and is subjectto revision
based on changes in CirC1.1mstances. All ofthe investors' obligations are, or will be. subject to
conditions precedent as we have discussed with you in the past. The Company continues to
discuss possible investment with other investors as well in order to properly explore all avenues
of any possible recapitalizatiOil.
we are currently reviewing the advisability of having all of the currently
committed investors and Olympus Partners increase their investments to bring the total to the
$200 million without regard to whether or not the still uncommitted investors eventually commit.
We will advise further if we reach a consensus opinion on this strategy. .
Finally, we note that two of our anchor investors,Oak-Hill Capital
remain as the tWo largest proposed shareholders in the Company after completioll of the current
capital raise, thereby, triggering the rebuttable control determinations set forth in the ors's
Acquisition of Control Regulations, 12 C.F.R 574.4(b). As,. to the best of our knowledge, none
of the subsequent investors possess a control factor under Section 574.4(c), rebuttals of control
will not be required as these subsequent investors are not deemed to exercise rebuttable control
of the Company underthe rules and regulations ofthe OTS. Accordingly, the $200 million
capital raise will be eligible to be closed upon the OTS's acceptance of the pending rebuttals of
control filed by Oak-Hill Capital and Lovell-Minnick. As these rebuttals have been pending
since November 8, 2010, we request prompt OTS action on these filings.
1 am available to discuss this with you at any time.
Cordially,
Michael J, McCLoskey
Executive Vice President and Chief Operating Officer
cc: John E. Bowman, Acting Director
Thomas A. Barnes, Deputy Director
Susan L Chomicz, Esq.
Michael Simone
Lori Quigley
Nicholas Dyer
Kevin A. Corcoran, Esq.
2470
Ms. Kristie Elmquist
Mr. Philip Gerbick
January 11,2011
Page 4
Frances Augello, Esq.
BrianA. Steffey, Esq.
Catherine Toppings, Esq.
Serena Owens
Joseph A. Meade
Guy A. Gibson
James R. Peoples
Lawrence D. K.aplan, Esq.
Andrew L: Sandler, Esq;
Liana Prieto, Esq
i This letter !:ontains contidenual business information o(United \VestL"lll :Bank and its holding company United \1Veste1'llBancorp,
Inc. nolin the public domain. TIlisletter is being provided to the federal hru\.k i:egulittors of United Western Bank in their
supervisOl"}' capacity over the Bank and should be. granted confidential treatlliettt pursuant to the confidential commercial
information and bank eXllminarion and supe.tV1slon eli;emptlons tq the Freedom of InfCirmation Act.. Accordingly, we request,
pursualltto5 U.S.c. 552(1:.)(4) and (b)(8), confidentia:1 treatment of this letter. Please notil'rus if anyone submits a Freedom of
lnfomlation Act request for a cop}' of this letter.
2471
TabC
Exhibit 91
2472 .
05:47 01/28/2010
Section
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Denver, CO
CHARTER: DIF-Ins Federal Stock
Table of Contents
Page
Number
A. Summary Statement ........................................... . 1-2
B. Detailed Income Statement ($000) ............................... 3-4
Detailed Income statement (%Avg.TA) ............................. 5-6
C.Analysis of Net Interest Income: Composition of IEA & ICL ...... 7
Analysis of Net Interest Income: Yields and Spreads ............ 8
D. Detailed Balance Sheet ($000) .................................. 9-11
Detailed Balance Sheet (%TA) .................................... 12-14
E.Asset Quality ($000) ........................................... 15
Asset Quality (%) . 16
F.Allowances ($000 & %) .......................................... 17-19
G.Capital AccoUhts and Reguirements ($000 & %) .................... 20
Tota.l Assets by Risk Category ($000 & %) ................. 21
H.Changes in Financial Condition ($000) .......................... 22
Changes in Financial Condition (%) .............................. 23
I.Lending, Investment, Foreclosure, and Restructuring ($000) ...... 24
Lending, Investment, Foreclosure, and Restructuring (%) ......... 25
J.Questions, Strategies, New Deposit Yields ...................... 26
K.composition and Off-Bal.Sheet Positions of CMR Portfolio ($000) .'27-29
composition and Avg.Contract Yields of CMR Portfolio (%) ..... 30-32
L.Interest Rate Risk Information ................................... 33
M.Exam Ratio Information .......................................... 34
N.Asset Quality - Supplemental Detail ............................ 35-36
Peer Group Definitions:
Group 1
Group 2
Group 3
Group 4
Group 5
Group 9
Group 6
Assets less than $50 million
Assets between $50 million and $100 million
Assets between $100 million and $300 million
Assets between $300 million and, $1 billion
Assets between $1 billion and $5 billion

2473
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT.FOR QUARTER ENDED 200909
SUMMARY STATEMENT, Part 1
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA A$ OF: 01/28/2010 CMR STATUS: COMPLETE
PAGE 1
--!!t Prior Qtr 2nd Prior Qtr 3rd PriorQtr % Change
S&L Median Pct S&.L Median Pct S&L Median Pct S&L l'Qt;=='iYe;;=
200909 -= 200906 =- ==== 20'0903 === === 20m2 -= .==== 20090'9
YRMO, Period End .....
S&LS in Peer Group
SUMMARY BALANCE SHEET:
85 80 82 80 200909
1.1 Cash,Dep.+lnv.Secur. 23.71 7.64
2.2 Mortgage Backed Secur. 13.96 11.11
2. 10.63 2.05
permMtg,1-4 Dwel.Units 13.89 29.86
PermMtg,5+ Dwel.Units 1.58 1.91
permMtg,Nondresidential
PermMtg,Lan . -.JO
Other:IR+AdvTI-contras 58.80
86
56
14.15
16.55
94 12.67
15 15.68
47 1. 99
84 22.59
73 4.25
19 -.57
39 56.61
47 7.14
65 .26
7.93 75 6.16
12.03 62 21.64
2.46
29.33
1.96
11.63
1.14
-.26
58.81
96 13.04
20 17.27
50 2.13
85 23.85
75 4.94
24 -.44
44 60.79
48 5.83
56 .25
7.21
12.50
2.4.9
29.28
1.99
11.36
1.19
-.26
60.10
44
71
3.40
22.64
95 12.29
27 17.13
54 2.21
87 25.03
75 5.50
26 -.38
56 61. 78
46 6.60
62 .31
4.70
11.07
34
74
2.52 91
29.49 27
2.01 53
11. 79 91
1.26 76
-.21 29
60.24 51
B2.3
-8;2
-B.7
-3.6
-13.9
4.1
-3.1
51.9
-2.5
-3.7
674.5
-30.7
14.6
-8.2
-18.4
3.4
-19.4
254.7
-2.0
12.6
123.0
3.1 6.32 7.72
1:g :88
41 .00
7.70
.20
.00
.84
41 .00
7.21
.12
.00
.82
40 .00
8.91 45
.12 64
.00 40
.89 79
.99 48
152.1
NA
.6
-2.2
NA.
5.1 EqlnvNtSbjctFASB Nol15 .47 .81
25 .51
5.5 Office Prernis.es + Eq. .88 1.05
39 .98 1.05
2.68
100.00
5.8 Other Assets 3.36 2.29
Total Assets. 100.00 100.00
66 3.78
50 100.00
7.0 Total Liabilities:
7.1 Deposits and Escrows

Subtotal of 7.0
8.0 Total Equity Capital:
perpetual Pref.Stk
CommonStk +Paid-InCap.
UnrlGain/LossAvail4Sal
Gains/LosscashFlwHedge
Other
Retained Earnings
Other Components
subtotal
NonCntrnlnt Cnsld Sub.
Total Equity Capital
Total Liabilities + Equity
79.23 75.48
11.39 11.65
.66 .83
63
48
34
66 91.28 90.66
.00
6.22
-.08
.00
.00
2.58
.00
8.72
.00
8.72
100.00
.00 46
4.94 58
.02 19
.00 53
.00 64
4.22 32
.00 58
9.34 33
;00 86
9.34 33
100.00 50
79.76 73.87
12.40 13.76
.67 .84
92.83 90.89
.00 .00
4.16 4.31
-.07 .01
.00 .00
.00 .00
3.08 4.79
.00 .00
7.17 9.07
.00 .00
7.17 9.11
100.00 100.00

71 3.00
50 100.00
69 78.89
44 13.11
37 .70
86 92.70
47 .00
49 3.65
25 -.90
53 .00
63 .00
34 4.55
58 .00
13 7.30
86 .00
13 7.30
50 100.00
1.03
2.48
100.00
77 1.30
49 .98
56 2.98
50 100.00
73.46 66
14.81. 46
.87 40
90.91 81
.00
4.28
.00
.00
.00
4.86
.00
9.09
.00
9.09
100.00
47
48.
9
53
62
46
58
19
B6
18
50
78.84
13.78
.60
93.23
.00
3.28
-.99
.00
.00
4.49
.00
6.77
.00
6.77
100.00
2.70 54
100.00 50
72.82 70
14 .69 48
.78 28
90.96 85
.00
4.16
-.01
.00
.00
4.52
.00
8.95
.00
8.95
100.00
47
41
11
52
62
49
56
16
83
16
50
-3.2
B.B
8.1
.0
8.0
7.0
NA
62.B
24.5
NA
NA
-8.8
NA
32.4
66.7
32.4
B.8
-57.4
17.5.
19.B
17.0
27.0
-34.0
12.6
13.8
NA
163.1
-90.7
NA
NA
-31.0
NA
65.2
25.0
65.2
17.0
Group 5 Group 5 Group 5 Group 5 Group 5
YRMO, Period End ....
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
-200909 =======20'0906 200903 =============
85 BO B2 200Bn

2,599,251 2,388,137 2,262,332 2,240,378 2,222,116
FIRREA CAPITAL COMPLIANCE:
core capital(%Adj Tang TAl 8.77 8.85 47 7.21
Risk Based capital (%RWTA) 11.07 13.21 12 10.17
11 3ij
8.44 14
12.65 12
Core Capital ($000) 228,228
172,367 184,993 174,034
192,671 201,229 189,536
158,621
170,994
Risk Based capital ($000) 205,78B
Core Cap surplus ($000)
RiskBasedcap.Surplus ($000)
FDICIA PCA CAPITAL RATIOS:
Total Risk-Based
Tier 1 lcora) Risk-Based
Tier 1 Core) Leverage
11.07
9.B2
B.77
124,158
57,094
13.21 12
11.96 16
8.85 47
10.17
9.07
7.21
76,756
41,072
13.14
11.83
8.68
6 10 .. 45
6 9.60
17 8.06
93,207
.47,175
13.59
12.32
8.B6
6
12
31
10.55
9.68
7.65
82,985
45,817
13.19
12.05
8.45
14 10.64
17 9.82
30 '1.03
68,357
42,396
12.65
11.59
8.44
12
22
14
INTEREST EARNING ASSETS:
lEA/ICL
109.20 109.20
50 104.32 109.56 20 105.24 109.12 22 104.75 108.45 17 105.01 108.94 18
CONSOLIDATED ASSET QUALITY1REND:
Non-Performing Loans 1.77 1.6B
Repossessed Assets, Gross .60 .21
Repossessed Assets,Net SVA .60 .21
Total NonPerforrn. Assets 2.37 1.94
TDR Loans + Reposs'd TDR 1.03 .64
CLASSIFICATION OF ASSETS:
substandard
Doubtful
Loss
Total Classified
Total Classified/NPA
Sub+Doubt / CoreCap+GVA
Sub+Doubt/RBC+ExcessGVA
special Mention Assets
ALLOWANCES FOR LOAN & LEASE
Mtg Loan ALLL, % Mtg LnS

Tot.GenAllow+ALLL,% (Cl-Los)
5.38
.13
.00
5.51
232.56
55.61
69.55
1.42
4.31
.01
.00
4.43
163.56
41.23
42.45
1.30
LOSSES:
1.91
1.21
46.32
20.38
1.03
1. 76
41.25
22.27
52
65
65
55
62
(% of Total Assets)
1.69 1.49 55 1.92
.26 .20 56 .25
.26 .20 56 .25
1.94 1.78 53 2.17
.73 .31 64 .75
61 3.88
79 .11
49 .00
63 4.00
72 205.72
63 49.04
73 49.56
51 .31
83 1.35
37 1.26
58 46.91
47 23.44
3.15 58
.01 74
.00 49
3.26 59
148.32 72
33.97 66
33.,97 67
1.56 24
.94 74
1.56 37
42.64 54
24.95 45
3.00
.11
.00
3.11
143.02
34.59
34.95
.52
1.03
1.4B
35.86
26.03
1.25
.12
.12
1.45
.30
68 1.16
62 .31
62 .31
65 1.47
66 .31
2.69 54
.01 78
.00 50
2.69 54
151. 41 47
28.36 60
28.36 60
1.24 31
.91 63
1. 54 46
47.17 36
30.98 41
2.43
.06
.00
2.48
169.15
29.09
29.36
.51
.97
1.07
50.42
31.07
1.01 54
.12 64
.12 64
1.10 54
.25 53
1. 98 55
.00 74
.00 50
2.01 56
141.08 66
21.81 59
20.32 59
.94 35
.97
.31
.31
1.28
.31
.81
.12
.12
.88
.15
1.07 1.66
.06 .01
.00 .00
1.13 1.73
88.09 129.28
14.46 16.23
14.67 15.60
.94 .74
.84 59 .81 .81
1.29 33 1.03 1.27
60.66 43 49.40 60.49
34.69 42 58.88 39.23
53
68
6B
57
59
40
76
49
40
9
48
48
55
50
36
41
61
EFFICIENCY RATIO:
% G&A/(NIM+Fees+FHLB Div)
96.75 71.46 88 77.71 75.07 60 66.21 69.68 43 60.90 68.17 34 60.91 66.78 36
2474
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
SUMMARY STATEMENT, Part 2
05:47 01/28/2010
United Western Bank
PAGE 2
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
3rd Prior Qtr
4th Prior Qtr
=========-======= =====--=========== =================
================= =================
Groul' 5
Pct
Groul' 5 Groul' 5
Groul' 5
Groul' 5
S&L Med1an S&L Med1an Pct S&L Med1an Pct
S&L Med1an Pct
S&L Med1an Pct
===== ====== === ===== ===== ===
==== ===== == =====
===== ===
Months in Period 3 3 3
3
3
YRMO, Period End .... 200909 200906 200903
200812
200809,
SUMMARY INCOME STATEMENT: (% of Average Total Assets)
1.1 Interest&Dividnd Income 3.94 4.81 13 4.41 4.92 18 4.64 5.04 22 5.17 5.32 39 5.30 5.46 38
2.1 Interest Expense, 1.16 1. 78 16 1.16 1.92 9 1.18 2.21 9 1.27 2.39 6 1. 32 2.50 5
3.1 Net Interest Marg1n 2.78 3.02 36 3.26 3.00 75 3.46 2.87 86 3.89 2.91 91 3.98 2.99 92
3.2 Net Prov.for lEA Losses 1.95 .60 76 1.14 .64 66 .74 .54 61 .58 .63 46 1.22 .46 68
3.3 Net Int.After lEA Loss
.83 2.16 23 2.12 2.28 41 2.72 2.27 78 3.31 Provision: (3.1)-(3.2)
2.17 92 2.76 2.40 71
4.0 Noninterest Income .22 .61 22 -7.67 .59 1 .24 .56 26 -.01 .49 9 .23 .57 24
5.1 Noninterest Expense 2.82 2.65 55 2.63 2.68 48 2.39 2.47 48 2.45 2.49 46 2.55 2.50 53
6.0 Income Before Income Taxes
19 .46 .57 (3.3)+(4.0)-(5.0) -1. 77 .47 -8.19 3 .51 54 .85 .47 69 .43 .53 45
7.1 Income Taxes -.74 .12 10 -3.18 .11 2 .15 .13 54 .26 .05 66 .09 .12 45
8.0 Net Inc.Before Extraord
-1.03 .35 20 -5.00 .42 .42 .35 55 .59 Items: (6.0)-(7.0)
.41 66 .34 .34 50
8.1 Extraordinar
1
Items .00 .00 50 .00 .00 49 .00 .00 50 .00 .00 50 .00 .00 50
9.1 ROM: (8.0)+ 8.1) -1.03 .35 20 -5.00 .42 4 .42 .35 55 .59 .41 66 .34 .34 50

Annualized w/o Compounding)
Return on E(UitO
(ROE) -12.94 3.13
5.93. 3.22 67 9.11 3.02 80
5.35 3.36 62
Net Income $00) -6,434 -29,319
2,350 3,291
1,863
Avg Assets 2,486,797 2,343,794 2,248,321
2,234,723 2,188,271
Avg Equity 198,941 168,160 158,449
144,501 139,187
PROFITABILITY ANALYSIS:
4.19 5.24 9 4.73 5.32 16 4.90 5.40 16 5.47 lEA Yield
5.66 34 5.59 5.89 28
COF (with Cap. Int.) 1.31 2.13 13 1.30 2.39 9 1.32 2.65 8 1. 41 2.86 6 1. 46 3.05 5
Spread, lEA Yld-COF 2.88 3.13 3e 3.43 2.99 80 3.58 2.78 85 4.06 2.85 91 4.13 2.88 90
Net Int. Marg. (NIM) 2.78 3.02 36 3.26 3.00 75 3.46 2.87 86 3.89 2.91 91 3.98 2.99 92
Fee Income .11 .40 18 .10 .40 20 .09 .37 21 .07 .35 17 .15 .47 18
Goodwill Expense (GDW) .02 .01 68 .01 .01 62 .01 .00 63 .02 .01 64 .02 .01 63
G&A Expense 2.79 2.54 60 2.61 2.58 50 2.35 2.44 46 2.41 2.42 49 2.52 2.49 54
NIM/G&A Expense (%) 99.57 121. 03 24 124.70 114.68 60 147.28 127.85 69 161.17 127.34 79 158.19 124.88 74
Core Inc befor Prov .07 1. 07 12 .73 .ee 41 1.18 1.02 59 1.54 1.07 77 1. 60 1.18 76
ROM -1.03 .35 20 -5.00 .42 4 .42 .35 55 .59 .41 66 .34 .34 50
Return on E(uitO (ROE)
-12.94 3.13 19 -69.74 3.83 4 5.93 3.22 67 9.11 3.02 80 5.35 3.36 62
Net Income $00) -6,434 -29,319 2,350
3,291 1,863
MORTGAGE LOAN ACTIVITY: (% Total Assets at Start of Period)
Mtge Loans Originated 3.74 3.91 47 3.97 4.54 43 4.32 3.92 51 6.01 3.49 69 8.45 4.67 75
Mtge Loans Purchased .09 .00 74 .09 .00 69 .16 .00 77 .06 .00 67 .09 .00 64

.60 .82 47 .34 2.20 38 .16 .67 42 .17 .24 45 .58 .36 55
3.23 1.84 73 3.72 2.60 70 4.32 2.67 75 5.89 2.83 88 7.96 3.55 83
Other Changes (by diff.) -4. 67 -2.83 13 -4.75 -3.23 19 -4.72 -2.71 20 -4.10 -2.48 17 -3.88 -3.02 35
Net Change in Mtg. Lns. -1. 44 -.19 34 -1.02 -.43 34 -.40 .01 36 1.79 .56 75 4.09 .61 90
CHANGES IN FINANCIAL COND.:
11.65 .02 97 8.78 .41 93 2.82 .8e 72 1.1 Cash,Dep.+lnv.Secur.
-.15 .03 39 -.66 -.20 31
2.2 Mortgage Backed Secur. -1.36 -.03 15 -4.17 -.11 4 -.78 .00 16 -.75 .06 13 -1.41 -.02 11
2.6

-1. 44 -.19 34 -1. 02 -.43 34 -.40 .01 36 1.79 .56 75 4.09 .61 90
3.1 -.26 -.03 36 1.71 .00 93 -.71 .00 12 .09 .05 54 .42 .12 68
4.0 Repossessed Assets .39 .00 90 .02 .02 49 -.06 .00 2 .00 .01 43 .10 .00 71
4.5 Real Estate Invest. .00 .00 56 .00 .00 53 .00 .00 54 .00 .00 54 .00 .00 54
5.1 No115 .00 .00 89 -.75 .00 1 .00 .00 77 .01 .00 67 .01 .00 66
5.5 o fice Premises + Eq. -.02 -.01 24 .01 .00 74 .06 .00 91 .11 .00 86 .07 .00 89
5.8 Other Assets -.12 -.02 29 .99 .03 93 .05 .00 65 -.28 .03 17 .48 .06 88
Total Assets 8.84 -.28 93 5.56 .65 88 .98 1.73 42 .82 1.70 35 3.11 .94 77
7.1 Deposits, NetofYld Adj 6.47 .53 91 5.31 1.31 87 .82 2.74 22 6.53 2.47 82 6.25 .14 85
7.2 Borrowings .00 -.11 61 -.02 -.23 60 -.54 -.58 51 -6.28 -.03 4 -2.97 .00 10
7.5 Other Liabilities .05 .00 66 .00 .02 37 .11 .01 74 -.08 .01 29 .02 .01 53
7.9 NonCtrl Int.Consl.Sub .00 .00 96 .00 .00 51 .00 .00 50 .00 .00 6 .00 .00 94
8.0 Perpetual Pref.Stk .00 .00 49 .00 .00 48 .00 .00 49 .00 .00 50 .00 .00 48
CommonStk +Paid-InCap. 2.61 .00 96 .74 .00 95 .41 .00 87 .55 .00 81 .01 .00 72
UnrlGain/LossAvai14Sal -.02 .05 8 .83 .00 98 .08 .02 71 -.04 .00 23 -.21 -.01 12
Retained Earnings -.27 .05 24 -1.30 .07 4 .10 .08 56 '.15 .04 75 .02 .06 41
Other Components , .00 .00 41 .00 .00 43 .00 .00 41 .00 .00 43 .00 .00 44
Total Liabilit1es + Eau1ty 8.84 -.28 93 5.56 .65 88 .98 1.73 42 .82 1.70 35 3.11 .94 77
Chng Tot Liab.+ Eq. ($ 00) 211,114 125,805 21,954
18,262 67,098
MORTGAGE PRINCIPAL REPAYMENTS:
(Non-Annualized %

Mtg. Backed Sec.)
1. On Mortgage Backed Sec. -8.50 -6.45 20 -10.62 -7.24
65 ,- .23 -3.23 49 -6.03 -4.44 24
(Non-Annualized % of Avg. Interest
Earn1ng Mtg. Loans)
2. On Mortgage Loans .00 .00 50 .00 .00 50 .00 .00
50 .00 .00 50 .00
.00 50
OTHER RATIOS:
(Actual Thrift Investment

QTL Test: 1st Mth of Qtr 71. 66 80.88 18 73.69 80.65 26 12 70.77 81. 02 16 72.68 82.20 16
2nd Mth of Qtr 70.79 80.83 15 73.56 80.56 25 70.10 82.01 12 70.13 81.28 11 72.57 81. 60 16
Qtr. End 70.13 80.43 12 71.00 80.43 18 70.42 81. 94 13 70.30 81.54 12 71.43 81.81 12
IRS Domestic Bldg&Loan Test .00 .00 48 .00 .00 48 .00 .00 48 .00 .00 48 .00 .00 48
Total Lns I Deposits 71. 95 92.37 23 79.93 95.96 30 84.45 96.01 32 86.73 102.46 28 91.92 104.66 33
Total Lns+MBS 7 Deposits 89.57 112.69 18 100.68 113.50 28 111.88 117.48 42 115.44 121.70 39 124.23 124.27 49
2475
05: 47 01/28/2010
Months in Period
YRMO, Period End ....
DETAILED INCOME STATEMENT
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED INCOME STATEMENT
($000)
United Western Bank
06679 TFR STATUS: COMPLETE
DOCKET:
DATA AS OF:
01/28/2010 CMR STATUS: COMPLETE
1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
================= =================
Current Quarter
3
200909
3
200906
3
200903
3
200812
1.1 Interest and Dividend Income:
Deposits &.Invmt.Secur.
Mtge Backed Sec.
Mtge Loans
Mtg Loan Serv, Fees
NOnMtg Commr.Ln&LeaSe
Commercial Loan Fees
NonMtg Consm.Ln&Lease
Consumer Loan Fees
NonMtg Loans, Total
FHLB Stock Dividends
Other Dividends
Subtotal of 1.1
2.1 Interest Expense:
Deposits
Interest on Escrows
Advances from FHLBank
Subordinated Debentures
Mtg Collaterized Secur.
Other Borrowed Money
Less: Capitalized Int.
Subtotal of 2.1
3.1 Net Int. Before lEA Loss
Provision: (1.1)-(2.1)
3.2 Net Provision for lEA
Losses
3.3 Net Int.After lEA Loss
Provision: (3.1)-(3.2)
4.0 Noninterest Income:

Other Fees and Charges
Net Income (Loss) From:
Sales:Assets Held4Sale
Sales:Lns&LeasHeld4Sale
Sales:OthrAssetsHld4Sal
OTT ImpairmntChgOnDebt
REO Operations&Sales
LOCOM Adj.Held4Sale
Sale: SecurHeld2Mat
Sale: LoansHeld4Inv
Sale: OthAssets4Inv
GainonTradingAssets
Oth.Nonlnter.Income
Subtotal of 4.0
5.1 Noninterest Expense:
All Personnel Exp.
Legal Expense
Office Occupancy&Equip.
Marketing &Oth.ProfServ
Loan Servicing Fees
Oth.Nonlnterest Expense
Subtotal, G&A Expense
Less Godwll&IntglbeExps
NetProv,NonlEALosses
Subtotal of 5.1
6.0 Income Before Inc Taxes
7.1 Income Taxes:
Federal
State, Local, and Other
Subtotal of 7.1
8.0 Net Inc.Before Extraord
Income: (6.0) - (7 .1)
8.1 Extraord.lncome
Netlnc(-)Atrbl To Inst/Nctl
Netlnc(-)Atrbl To Noncntrol
Netlnc(-)Atrbl To Sav lnst.
ANALYSIS OF CORE INCOME:
Net Int.BeflEA LossProv
Mtg Loan Servicing Fees
Serv Amort.&Value Adj
Other Fees and Charges
Less G & A Expense
Less Goodwll&IntglbeExps
Core Inc. BefProvisns
Aft Provisns
Sale of Avai14Sale Secrties
Core+Profi tAH4 S
452
4,821
17,007
13
2,056
o
103
.0
2,159
77
o
24,516
3,927
1
2,39
6
o
923
o
7,242
17,274
12,108
5,166
836
-565
387
o
1,244
o
o
-587
-248
o
o
o
o
299
1,366
5,109
583
805
444
503
9,905
17,349
150
58
17,557
-11,025
-4,59
6
-4,591
-6,434
o
-6,434
o
-6,434
17,274
836
-565
387
17,349
150
433
12,166
-11,733
o

335
6,027
17,628
19
1,670
o
98
o
1,768
93
o
25,851
3,480
8
2,366
o
o
915
o
6,769
19,082
6,687
12,395
802
-582
390
-46,980
331
o
o
-88
169
o
o
o
o
1,011
-44,947
5,087
332
812
417
537
8,117
15,302
84
23
15,409
-47,961
-18,642
o
-18,642
-29,319
o
-29,319
o
-29,319
19,082
802
-582
390
15,302
84
4,306
6,710
-2,404
-46,980
-49,384
2476
285
6,626
17,310
16
1,721
o
31
o
1,752
94
o
26,067
3,308
11
2,381
o
o
905
o
6,605
19,462
4,181
15,281
880
-789
405
48
NA
NA
o
-94
586
o
o
o
o
317
1,353
5,173
208
758
464
529
6,082
13,214
84
156
13,454
3,180
830
o
830
2,350
o
2,350
o
2,350
19,462
880
-789

84
6,660
4,337
2,323
48
2,371
575
7,135
18,720
155
2,213
o
104
o
2,317
114
o
28,861
3,593
11
2,668
o
o
851
o
7,123
21,738
3,236
18,502
843
-755
322
21
NA
NA
NA
-149
-746
o
o
o
o
390
-74
5,099
464
731
480
601
6,113
13,488
84
111
13,683
4,745
1,454
o
1,454
3,291
o
NA
NA
3,291
21,738
843
-755
322
13,488
84
8,576
3,347
5,229
21
5,250
PAGE 3
579
7,264
18,587
29
2,220
o
93
o
2,313
277
o
29,020
2,940
11
3,64
6
o
647
o
7,243
21,777
6,678
15,099
902
-484
404
418
NA
NA
NA
-128
-231
o
o
o
o
362
1,243
5,274
297
663
345
524
6,663
13,766
84
127
l3,977
2,365
502
o
502
1,863
o
NA
NA
1,863
21,777
902
-484
404
13,766
84
8,749
6,805
1,944
418
2,362
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
NOTES TO DETAILED INCOME STATEMENT
($000)
United Western Bank
06679 TFR STATUS: COMPLETE
01/28/2010 CMR STATUS: COMPLETE
DOCKET:
DATA AS OF:
1st Prior Qtr 2nd Prior Qtr
=================
Current Quarter

3rd Prior Qtr
Months in Period
YRMO, Period End ....
3
200909
Memo: LARGEST COMPONENTS OF OTHER NONINTEREST
Other Nonlnterest Income Items:
Amount 239
Code (S0489) 15
Amount 13
Code (50495) 99
Amount 42
Code (S0497) 99
Other Nonlnterest Expense Items:
6,491 Amount
Code (50581) 99
Amount 949
Code (S0583) 99
Amount 988
Code (50585) 1
SERVICING DATA:
llO,644 Loans Serviced for Others
Loan Servo Fee Income 836
Servo by Others Expense 503
MUTUAL FUND & ANNUITY SALES:

0
0
ANALYSIS OF PERSONNEL EXPENSE:
End of Period FTEs-Actual # 177
Average # FTEs 176
Personnel Expense 5,109
ACCOUNTING CLASSIFICATIONS:
0 Trading Account Assets
Avail-4-Sale Securities
Assets Held-4-Sale
0
36,641
Avg.AssetsHeld4Sale 281,543
Codes:
01 - No longer used
S0489, S0495 and S0497:
02 - Interest income from income tax refunds
3
200906
3
200903
=================
3
200812
INCOME AND OTHER NON INTEREST
EXPENSE
236
233
236
15
15
15
701
47
7
99
99
99
70
33
147
99
99
99
4,534
3,969
4,359
99
99
99
594
688
470
99
1
99
1,877
509
280
1
99
1
96,471
89,252
87,045
802
880
843
537
529
601
($000 During Period)
0
0
0
0
0
0
175
181
191
178
186
190
5,087
5,173
5,099
0
0
0
38,360
59,152
59,577
284,534
300,776
297,198
0
0
0
48,756
59,365
61,393
292,655
298,987
298,796
PAGE 4
4 th Prior Qtr
=================
3
200809
241
15
10
99
111
99
4,842
99
530
99
255
1
77,555
902
524
0
0
189
187
5,274
0
63,209
300,394

68,665
308,043
03 - No longer used .
04 - Net income (loss) from leasing or subleaslng,space in the association's quarters,future quarters and parking lots
05 - Net income (loss) from real estate held for lnvestment
06 Net income (loss) from investments in unconsolidated subordinate organizations and pass-through investments,
accounted for using the equity method, after the elimination of intercompany profits
07 - Net income (loss) from leased property
08 - Net income (loss) allocable to minority shareholders
09 - Net income from data processing equipment leased or services provided to others
10 - No longer used
11 - Adjustments to prior periods
12 - Income received on real estate acquired through foreclosure or deed in lieu of foreclosure on VA or FHA loans
pending conveyance to the insuring agency
13 - No longer used
14 - Income from interest-only strip receivables and certain other instruments reported on SC655
15 - Income from Corporation-owned Life Insurance
19 - Realized and unrealized gains on derivatives, where such gains are not included in interest income or expense
99 - other
S0581, S0583 and S0585:
01 - Deposit Insurance premiums
02 - OTS assessments
03 - Interest income on income taxes
04 - Interest expense on Treasury tax and loan accounts administered under the note option
05 - Forfeited commitment fees on FHLBank advances not taken down by the association
06 - Supervisory examination fees
07 Office supplies, printing and postage
08 - Telephone, includlng data lines
09 - Noncapitalized loan origination expenses, including appraisal reports, credit reports, etc.
10 - ATM expenses
11 - Adjustments to prior peri9ds , .
12 - Acquisition and organlzatlon costs, lncludlng mergers and branch office acquisitions
13 - Miscellaneous taxes other than income taxes and real estate taxes
14 - Losses from fraud
15 - Foreclosure expenses
16 - Web site expenses
17 - Charitable contributions
18 - Net Income allowable to minority Shareholders
19 Realized and unrealized gains on derivatives, where such losses are not included in interest income or expense
99 - Other
2477
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED INCOME STATEMENT
(% of Average Total Assets of S&L, Annualized w/o compounding)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
PAGE 5
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
S&L Pet S&L Pct
Months in Period
YRMO, Period End ....
DETAILED INCOME STATEMENT:
1.1 Interest and Dividend Income:
Deposits & Invrnt.Secur. .07
Mtge Backed Sec. .78
Mtge Loans 2 .74
Mtg Loan Servo Fees .00
NonMtg Comrnr.Ln&Lease .33
Commercial Loan Fees .00
NonMtg Consm.Ln&Lease .02
Consumer Loan Fees .00
NonMtg Loans! Total .35
FHLB Stock D1vidends .01
Other Dividends .00
Subtotal of 1.1 3.94
2.1
3.1
3.2
3.3
Interest Expense:
Deposits
Interest on Escrows
Advances from FHLBank
Subordinated Debentures
Mtg Co1laterized Secur.
Other Borrowed Money
Less: Capitalized Int.
Subtotal of 2.1.
Net Int.Before lEA Loss
Provision: (1.1)-(2.1)
Net Provision for lEA
Losses
Net Int.After lEA Loss
Provision: (3.1)-(3.2)
4.0 Noninterest Income:

Other Fees and Charges
Net Income (Loss) From:
Sales:Assets He1d4Sale
Sa1es:Lns&LeasHeld4Sale
Sales:OthrAssetsH1d4Sal
OTT ImpairrnntChgonDebt
REO operations&Sales
LOCOM Adj.Held4Sale
Sale: SecurHeld2Mat
Sale: LoansHeld4Inv
Sale: OthAssets4lnv
GainonTradingAssets
Oth.Nonlnter.Income
Subtotal of 4.0
5.1 Noninterest Expense:
All Personnel EXp.
Legal Expense
Office occupancy&Equip.
Marketing &Oth.ProfServ
Loan Servicing Fees
Oth.Nonlnterest Expense
Subtotal, G&A Expense
Less Godwll&IntglbeExps
NetProv,NonlEAIosses
Subtotal of 5. 1
6.0 Income Before Inc Taxes
7.1 Income Taxes:
Federal
State, Local, and Other
Subtotal of 7.1
.63
.00
.38
.00
.00
.15
.00
1.16
2.78
1. 95
.83
.13
-.09
.06
.00
.20
.00
.00
-.09
-.04
.00
.00
.00
.00
.05
.22
.82
.09
.13
.07
.08
1.59
2.79
.02
.01
2.82
-1. 77
-.74
.00
-.74
8.0 Net Inc.Before Extraord
Income: (6.0)-(7.1) -1.03
8.1 Extraord.lncome
NetInc (-)Atrbl To Inst/Nctl
Netlnc(-)Atrbl To Noncntrol
Netlnc(-)Atrbl To Say lnst.
ANALYSIS OF CORE INCOME:
Net Int.BeflEA LossProv
Mtg Loan Servicing Fees
Serv Arnort.&Value Adj
Other Fees and Charges
Less G & A Expense
Less Goodwill Expense
Core Inc. Bef Provisns
LossProv
Core Inc. Aft Provisns
Profit:AssetsHeld4Sale
Sale of Avai14Sale Secrties
Avg Assets
.00
-1. 03
.00
-1. 03
2.78
.13
-.09
.06
2.79
.02
.07
1. 96
-1.89
.00
-1.89
3
200909
.06
.52
3.18
.01
.21
.00
.06
.00
.52
.01
.00
4.81
1.35
.00
.30
.00
.00
.02
.00
1. 78
3.02
.60
2.16
54
66
34
19
61
17
31
18
44
60
47
13
10
83
54
46
50
77
48
16
36
76
23
.01 80
.00 18
.40 13
.00. 29
.00 80
.00 50
.00 62
-.01 18
.00 4
.00 50
.00 48
.00 51
.00 52
.05 52
.61 22
1. 25 20
.02 89
.44 9
.12 25
.00 91
.48 95
2.54 60
.01 68
.00 79
2.65 55
.47 19
.06
1.03
3.01
.00
.29
.00
.02
.00
.30
.02
.00
4.41
.59
.00
.40
.00
.00
.16
.00
1.16
3.26
1.14
2.12
.14
-.10
.07
-8.02
.06
.00
.00
-.02
.03
.00
.00
.00
.00
.17
-7.67
.87
.06
.14
.07
.09
1.39
2.61
.01
.00
2.63
-8.19
.11
.01
.12
9 -3.18
31 .00
10 -3.18
.35 20 -5.00
.00 50
.35 20
.00 50
.35 20
3.02 36
.01 80
.00 18
.40 13
2.54 60
.01 68
1. 07 12
.62 76
.32 18
.00 29
.34 17
2,486,797
.00
-5.00
.00
-5.00
3.26
.14
-.10
.07
2.61
.01
.73
1.15
-.41
-8.02
-8.43
3
200906
.07 41
.64 72
3.31 44
.01 23
.20 58
.00 19
.05 32
.00 15
.48 46
.00 72
.00 47
4.92 18
1.45
.00
.36
.00
.00
.02
.00
1. 92
3.00
.64
2.28
.00
.00
.38
.00
.01
.00
.00
-.02
.00
.00
.00
.00
.00
.07
.59
1.26
.02
.41
.11
.00
.62
2.58
.01
.00
2.68
.46
.10
.00
.11
.42
6
91
55
46
50
76
46
9
75
66
41
80
11
12
1
59
49
64
50
97
49
48
52
46
75
1
22
81
11
24
93
91
50
62
82
48
3
1
34
2
.00 49
.42 4
.00 49
.42' 4
3.00 75
.00 80
.00 11
.38 12
2.58 50
.01 62
.86 41
.65 66
.18 33
.00 1
.22 3
2,343,794
2478
.05
1.18
3.08
.00
.31
.00
.01
.00
.31
.02
.00
4.64
.59
.00
.42
.00
.00
.16
.00
1.18
3.46
.74
2.72
.16
-.14
.07
.01
NA
NA
.00
-.02
.10
.00
,00
.00
.00
.06
.24
.92
.04
.13
.08
.09
1.08
2.35
.01
.03
2.39
.57
.15
.00
.15
.42
.00
.42
.00
.42
3.46
.16
-.14
.. 07
2.35
.01
1.18
.77
.41
.01
.42
=== ====== === ====== ====== ===
3
200903
.08
.59
3.29
.01
.18
.00
.06
.00
.46
.00
.00
5.04
1. 58
.00
.34
.00
.00
.01
.00
2.21
2.87
.54
2.27
36
75
42
19
61
20
25
16
45
72
47
22
6
96
57
46
50
75
47
9
86
61
78
.00 87
.00 15
.40 16
.06 39
NA NA
NA NA
.00 60
-.01 43
.00 97
.00 50
.00 47
.00 51
.00 48
.06 50
.56 26
1. 28 24
.02 77
.43 9
.1l 34
.00 93
.41 87
2.44 46
.00 63
.00 87
2.47 48
.51 54
.11
.01
.13
55
28
54
.35 55
.00 50
.35 55
.00 48
.35 55
2.87 86
.00 87
.00 15
.40 16
2.44 46
.00 63
1. 02 59
.56 61
.28 56
.06 39
.59 44
2,248,321
.10
1. 28
3.35
.03
.40
.00
.02
.00
.41
.02
.00
5.17
.64
.00
.48
.00
.00
.15
.00
1.27
3.89
.58
3.31
.15
-.14
.06
.00
NA
NA
NA
-.03
-.13
.00
.00
.00
.00
.07
-.01
.91
.08
.13
.09
.11
1.09
2.41
.02
.02
2.45
.85
.26
.00
.26
.59
.00
NA
NA
.59
3.89
.15
-.14
.06
2.41
.02
1.54
.60
.94
.00
.94
3
200812
.09
.50
3.54
.01
.23
.00
.07
.00
.55
.01
.00
5.32
1. 74
.00
.37
.00
.00
.01
.00
2.39
2.91
.63
2.17
55
79
46
72
62
20
38
16
43
67
46
39
3
93
58
47
50
76
48
6
91
46
92
.00 90
.00 14
.40 12
.02 46
NA NA
NA NA
NA NA
.00 34
.00 2
.00 50
.00 48
.00 49
.00 51
.05 60
.49 9
1. 25 28
.02 91
.43 8
.14 23
.00 93
.39 87
2.42 49
.01 64
.00 88
2.49 46
.47 69
.01 72
.00 40
.05 66
.41 66
.00 50
NA NA
NA NA
.41 66
2.91 91
.00 90
.00 14
.40 12
2.42 49
.01 64
1. 07 77
.63 46
.30 72
.02 46
.38 71
2,234,723
.11
1. 33
3.40
.01
.41
.00
.02
.00
.42
.05
.00
5.30
.54
.00
.67
.00
.00
.12
.00
1.32
3.98
1.22
2.76
.16
-.09
.07
.08
NA
NA
NA
-.02
-.04
.00
.00
.00
.00
.07
.23
.96
.05
.12
.06
.10
1.22
2.52
.02
.02
2.55
.43
.09
.00
.09
.34
.00
NA
NA
.34
3.98
.16
-.09
.07
2.52
.02
1.60
1.24
.36
.08
.43
3
200809
.ll
.42
3.84
.01
.21
.00
.08
.00
.50
.03
.00
5.46
1. 83
.00
.50
.00
.00
.02
.00
2.50
2.99
.46
2.40
.01
.00
.44
.00
NA
NA
NA
-.01
.00
.00
.00
.00
.00
.05
.57
1.28
.02
.44
.12
.00
.37
2.49
.01
.00
2.50
.53
.10
.02
.12
48
79
41
29
62
18
33
14
46
71
45
38
2
93
66
47
50
68
48
5
92
68
71
85
12
12
68
NA
NA
NA
36
5
49
48
49
52
57
24
25
80
6
15
93
90
54
63
88
53
45
49
25
45
.34 50
.00 50
NA NA
NA NA
.34 50
2.99 92
.01 85
.00 12
.44 12
2.49 54
.01 63
1.18 76
.46 67
.55 48
.00 68
.46 49
2,188,271
-.
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
NOTES TO DETAILED INCOME STATEMENT
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: . COMPLETE
PAGE 6
current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
= ...... 20090j
YRMO, Period End ..
Memo: LARGEST COMPONENTS OF OTHERNONINTEREST INCOME AND OTHER NONINTEREST EXPENSE
Other NonInterest Total Assets of S&L, Annualized w/o Compounding)
Jlmount .04 .03 59 .04 .04 49 .04 .03 59 .04 .02 60
15
.00 45
99
.00 88
99
.04
.00
.02
Code (S0489) 15 15 15
JImount .00 .01 40 .12 .01 95 .01 .00 59 .00
Code (S0495) 99 99 99
Jlmount .01 .00 7969 .01 .00 8
9
19 .01 .00 7979
.03
Code (S0497)
other NonInterest Expense Items:
Jlmount 1. 04
Code (S0581)
Jlmount
Code (S0583)
Jlmount
Code (S0585)
SERVICING DATA:
Lns Serv for others/Assets
Loan Servo Fee Income
Fees % Avg. Servicing
Servo by Others
MUTUAL FUND & ANNUITY SALES:

.15
.16
4.26
.13
3.23
.08
.00
.00
ANALYSIS OF PERSONNEL EXPENSE:
Labor intensity .71
Salary & benefits level
ACCOUNTING cLASSIFICATIONS:

Assets Held-4-Sale
116.11
.00
1.34
10.72
.13
.07
.07
95
99
83
99
82
1
3.90 52
.01 80
.25 98
.. 00 91
.00 47
.00 50
.77
.10
.32
4.04
.14
3.45
.09
96
99
.09 56
99
91
1
.27
.07
3.87 50
.0080
.24 98
.00 93
.71
.12
.09
3.95
.16
3.99
.09
.05
92
99
.06 79
1
74
99
.10
2.83 53
.00 87
.24 98
.00 93
.78
.08
.05
3.89
.15
4.10
.11
(i Total Assets, Beginning of Period)
.00 .00 46 .00 .00 46 .00
.00 .00 50 .00 .00 26 .00
.09 93
99
.06 76
99
.05 53
1
3.10 51
.00 90
.24 98
.00 93
.00 46
.00 27
.89
.10
.05
3.49
.16
5.13
.10
.00
.00
(Avg. Full-Time EmPloyees/$10 Million of Avg. Assets)
1.86 15 .76 1.82 16 .83 1.77 18 .85 1.85 18 .85
(Avg. Personnel Expense per $OOO/Full-Time Employee)
73.89 88 114.31 75;32 87 111.25 77.98 80 107.35 69.61 83 113.12
(i of Total Assets)
.00 45 .00 .00 45 .00 .00 46 .00 .00 45 .00
10.13. 19 1.61 10.49 24 2.61 11.10 28 2.66 10.20 30 2.84
.08 94 11.91 .21 95 13.29 .10 96 13.27 .02 95 13.52
.00 45 .00 .00 45. .00 .00 45 .00 .00 45 .00
.03
.00
.00
.09
.06
.04
3.17
.01
.25
.00
.00
.00
1.89
72.52
.00
8.36
.07
.00
(.) Av.TradingAccontAssets
TradingAssets Gain/Loss
Av.Avai14saleSecurity
(*) Av.AssetHld4Sale
.00
NA
(i of Avg. Trad1ng Assets, not Annualized)
3.34 NA NA 2.16 NA NA -.03 NA NA -11.84 NA NA -1. 80
Profit+LOCOM on Hld4S
See page 4 for Codes.
1. 47
11.32
-.09
(t of Total Assets)
10,06 19 2.08 10.99 28 2.64 11.65 30 2.75 9.65 29 3.14
(t of Total Assets)
;21 94 12.49 .24 95 13.30 .08 96 13.37 .07 96 14.08
(i of Avg. Assets Held for Sale, not Annualized)
.81 7 -16.00 .13 3 .. 21 6.66 16 -.24 4.67 10 .06
2479
8.27
.06
4.85
61
15
42
99
85
99
97
99
81
99
54
1
50
85
98
93
46
25
15
87
46
31
97
45
NA
32
97
21
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ANALYSIS OF NET INTEREST INCOME BEFORE PROVISION FOR lEA LOSSES: Composition of lEA & ICL
05:47 01/28/2010
United Western Bank
DOCKET:
06679 TFR STATUS: COMPLETE
PAGE 7
DATA AS OF:
Current Quarter

01/28/2010 CMR STATUS: COMPLETE
1st Prior,Qtr 2nd :=!or Qtr 3rd Prior Qtr
YRMO, Period End .
1. INTEREST EARNING ASSETS:
Net
Cash & Non-IE Depos1ts {A2
Accrued Int.Rec. ,(A3
Subtot:{A=A1-A2-A3+A4)
NetMBS IB1
Accrued Int.Receiv. B2
Total Allowances B3
Subtot: {B)-{B1-B2+B3
, Net Mtg Lns {C1
Accrued Int.Receiv. IC2
Non-Accruing Mtg Lns C3
Total Allowances MTGLns C4
Subtot:
Net NonMtg Lns ID1
Accrued Int.Receiv. , D2
Non-Accruing NonMtg Lns D3
Total Allow. (NonMortLns {D41
Subtot: {D)={D1-D2-D3+D4
Eqtylnv NotSbjctFASB115 (E)
Loan servicing Rights {FI
Total lEA: (G) = {A+B+C+D+E+F
200909
616,165
22,609
287
593,269
362,871
1,57
6
361,300

38:090
26,498

565
565
2 008
165:220
12,311
7,791
2,440,948
($OOO
200906
at End of
338,015
12,926
297
324,792
395,310
1,926
o
393,384
1,352,018
5,322
32,H2
19,603

432
851
2,173
171,495
12,234
8,187
2,243,719
200903
139,421
14,329
311
124,781
489,637
2,141
o
487,496
1,375,196
5,062
35,687
15,646
1,350,093
132,007
445
1,387

29,140
8,714
2,132,384
200812
76,277
22,285
458
53,534
507,176
2,226
o
504,950
1,384,127
5,804
18,837
14,994
1,374,480
147,915
562
529
1,596
148,420
29,046
9,496
2,119,926
200809
79,555
20,332
470
58,753
523,863
2, 328
521,534
1,344,280

12,538
1,337,795
145,953
624
218
1 527
146: 638
28,933
10,249
2,103,902
2. INTEREST COSTING LIABILITIES: ($OOO at End of Period)
Deposits-Nonlnt.DemandD {HI 1,939,180 1,854,697 1,729,713 1,715,051
1,555,131
366, 34fi Advances from FHLBank {J 216,636 216,665 216,693 226,721
subordinated. Debentures {K 0 0 0 0
Mtg Co11aterized Secur. {LI 0 0 0 0
2 2 82,004
Memo: Nonlnt. Demand Dep '120:078 ' 50:161 55,025
o
82,007

100,415
3. NET lEA, lEA-ICL: (E-N) 205,692 92,901 106,098 96,150
. ==-== =--===-=-= =--==-=-==-==== -===
Group 5 Group 5 Group 5 Group 5 Group 5
S&L Median Pct S&L Median Pct S&L Med1an Pct S&L Med1an Pct S&L Median Pct
=--=== -====- --== -==-== -== ====-= -=-- -=== -- ======= ==- == === ==
(t of Total AsSets at End of Period) ,
4. lEA & ICL BALANCES:
Total lEA
Total ICL
93.91 92.40 55 93.95 93.19 59 94.26 93.55 61 94.62 93 65 67 94 68 93 80 61
86.00 84.70 55 90.06 85.31 82 89.57 85.55 80 90.33 86:14 85 90:16 85:82 '89
4.3 NON - ICL BALANCES:
8.72 9.34 33 7.17 9.11 13 7.30 9.09
Total Equity cali tal
18 6.77 8.95 16 6.18 9.19 5
Other {by d1ff.
5.28 4.55 55 2.77 4.16 34 3.14 3.96 38 2.89 4.25 30 3.66 4.10 45
Total Non-ICL (TA-N)
1.4.00 15.30 44 9.94 14.69 17 10.43 14.45 19 9.67 13.86 14 9.84 14 .18 10
4.6 NON - lEA BALANCES:
.77 1.20 40 .51, 1.12 39 .17 1.05
'13
lEA Adjs. (A1+ ... +D1-E)
25 -.20 .77 -.46 .87 18
Assets
.60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
.00 .00 41 .00 .00 41 .00 .00 40 .00 .00 40 .00 .00 39
Other (by diff.)
4.72 4.85 46 5.28 5.03 55 5.32 4.97 59 5.26 5.06 55 5.47 4.99 61
Total Non-lEA (TA-E)
6.09 7.60 44 6.05 6.81 40 5.74 6.45 38 5.38 6.35 32 5.32 6.20 38
-=======-""'-=====-=-=---=-=---
=-=-=-====--===-=-===-=-----===-=====-=====--===-=-
Current Quar;;:.. ..2
nd
Prior Qtr
3rd Prior Qtr 4th Prior Qtr
========
Months in Period 3
YRMO, Period End.... 200909
5. AVERAGE INTEREST EARNING ASSETS:
Dep&Inv.sec:{a1)={avg of A) 459,031
Mtg Bckd Sec{b1)={avg of B) 377,342
Mtg Lns: (c1)={avg of C) 1,317,342
MBS&ML {bc,={avg of BCI 1,713638',435198
NonMtg Lns: (dl)={avg of D
Eqtylnv Not SbjctFASB No115 12
7
,2
9
7
8
3
9
Lns ser (F) ,
Total 'IEA: (gl)={avg Of E) 2,342,334
6. AVERAGE INTEREST COSTING LIABILITIES:
Deposits: (h11=lavg of H) 1,896,939
FHLBank Adv: (j1 = avg of J) 216,651
Subord.Debn:{k1 - avg of K) 0
0
Mt gCltrzdsec{ll!=lavg of L)
OthBorrwing: (m1 = avg of M) 2 17993,404387
Total ICL: (n1 - avg of N) "
7. AVG.NET lEA: (gl-n1) 149,297
==-==-==-==
8. AVG.lEA & ICL BALANCES:
Average Total lEA
Average Total ICL
Average Net lEA
Pct
94.19 92.91 62
88.19 85.43 72
6.00 7.62 30
3
200906
($OOO Average Balance
224,787
440,440
1,341,860
1,874,939
151,828
.20,687
8,451
2,188,052
{$OOO Average Balance
1,792,205 '
216,679
o
o
79,668
2,088,5.52
3
200903
During Period)
89,158
496,223
1,362,287
1,891,965
140,290
29,093
9,105
2,126,155
3
200812
56,144
513,242
1,356,138
1,871,892
147,529
28,990
9,873
2,111,914
3
200809
64,335
536,660
1,293,849
1,828,775
142,183
28,795
10,451
2,076,271
During Period)
1,722,382 1,635,091 1,493,078
221,707 296,535 398,863
o 0 0
o 0 0
80,942 82,006 81,544
2,025,031 2,013,632 1,973,484
____ 98,283 102,787
Group 5
99,500
S&L Median Pct S&L Median Pct S&L Med1an Pct
====== === - -====-
93.36 93.03 51 94.57 93.68 59 94.50 94.28 54 94 88 94 61 54
81:fiB Ii II'
2480
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ANALYSIS OF NET INTEREST INCOME BEFORE PROVISION FOR lEA LOSSES: Yields and Spreads
United Western Bank
DOCKET:
06679 TFR STATUS: COMPLETE
PAGE 8
. DATA AS OF:
Current Quarter
01/28/2010 CMR STATUS: COMPLETE
1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
Months in Period
YRMO, Period End ...
=================
3
200909
================; ================3 ================3 ================3
200906 200903 200812 200809
9. INTEREST & DIVIDEND INCOME
FROM: ($000 During Period)
Deposits &lnvrnt.Secur. (a2)
452 335 285 575 579
Mtge Backed Sec. (b2)
4 821 6,027 6,626 7,135 7,264
Mtge Loans (c2)
17; 007 17,628 17,310 18,720 18,587
Loans, Net (d2)
2,159 1,768 1,752 2,317 2,313
Sub otal:(f2)=(a2+ .. +d2)
24,439 25,758 25,973 28,747 28,743
Eqtylnv NotSbjctFASB115 (e2)
77 93 94 114 277
Total lEA: (g2)= (f2)
24,516 25,851 26,067 28,861 29,020
10. INTEREST EXPENSE ON:
($OOO

Deposits
(h2) 3,927 3,308 3,593 2,940
Escrows (i2)
1 8 11 11 11

2,39
6
2,366 2,381 2,668 3,645
0 0 0 0
Mtg Col laterized Secur. (12)
0 0 0 0 0
Ot er Borrowed Money (m2)
923 915 905 851 647
Subtotal,(n2)=(h2+ ... +m2)
7,242 6,769 6,605 7,12
6
7,.24
6
capitalized Interest (02)
0 0 0
Total ICL, (r2=n2-o2)
7,242 6,769 6,605 7,123 7,243
11. IMPACT OF lEA/ICL IMBALANCES:
17,274 19,082
NetlntBefIEALOSSprov5NIM)
($000
19,462 21,738 21,777
Spread*AvgIEA*Months 12
During Period)
=(S2)=(g3-r3)*(31)
16,781 18,760 19,132 21,390 21,400
493 322 330 348 377
Adj.if IEA<>ICL: (by iff.
================= ================= ================= =================
S&L Pct S&L Pct S&L Pct S&L Pct S&L Pct
12. YIELDS ON AVERAGE lEA
Dep.&Invrnt.Secur: (a3=a2/a1) .39 1.81 15 .60 1.94 20 1.28 2.25 34 4.10 3.23 64
Mtge Backed Sec (b3=b2/bl) 5.11 4.39 80 5.47 4.52 84 5.34 4.86 79 5.56 4.95 82
Mtge Loans: (c3=c2/cl) 5.16 5.66 19 5.25 5.71 17 5.08 5.77 13 5.52 5.99 14
NonMtg Loans: (d3=d2/d1) 5.13 6.08 22 4.66 5.87 15 5.00 5.91 21 6.28 6.19 55
Equity Invest: (e3=e2.e1) 2.51 .87 65 1.80 .19 67 1.29 .02 68 1.57 1.90 42
subtotal: (f3)=(f2/f1) 4.17 5.23 9
lEA Yield (g3=g2/g1) 4.19 5.24 9 4.73 5.32 16 4.90 5.40 16 5.47 5.66 34
3.60
5.41
5.75
6.51
3.85
5.54
5.59
13. YIELDS ON AVERAGE ICL COMPONENTS: (% of Various Liabilities, Annualized w/o compounding)
Deposits: (h3=h2/h1) .82 1.93 6 .78 2.14 4 .78 .36 6 .87 2.63 2 .78
FHLBank Adv: (j3=j2/jl) 4.38 3.78 79 4.38 3.95 78 4.36 3.91 78 3.58 3.78 44 3.64
Subord.Deben: (k3=k2/k1) NA 5.26 NA NA 6.58 NA NA 6.06 NA NA 6.51 NA NA
Mtg Cltrzd Sec.: (13=12/11) NA NA NA NA NA NA NA NA NA NA NA NA NA
Other Borrowing: (m3=m2/m1) 4.61 2.45 86 4.61 2.57 82 4.53 2.08 89 4.13 2.56 78 3.16
Subtotal: (n3)=(n2/n1) 1.31 2.13 13 6 1.46
Capitalized Int. (03=02/n1) .00 .00 48 .00 .00 48 .00 .00 47 .00 .00 48 .00
COF w/o Cap.lnt. (r3=r2/n1) 1.31 2.13 13 1.30 2.39 9 1.32 2.65 8 1.41 2.86 6 1.46
COF w/Cap. Int. : (r4=r3+o3) 1.31 2.13 13 1.30 ?39 9 1.32 2.65 8 1.41 2.86 6 1.46
Note: COF+caplnt-Escrowlnt to
14. lEA-ICL YIELD SPREADS: (Yield Spreads)
Annualized: (u3)=(g3-r4) 2.88 3.13 38 3.43 2.99 80
3.58 2.78 85 4.06 2.85 91 4.13
15. IMPACT OF lEA/ICL IMBALANCES:
Average Total Assets, Annualized
Netlnt.Bef. lEALossProv (NIM) 2.78 3.02 36 .26 3.00 75 3.46 2.87 86

3.98
Spread*Avg.IEA= (g3-r3)*gl
2.71 2.90 37 3.20 2.83 81 3.39 2.62 87 3.84 2.68 92 3.92
Adj.if lEA<>ICL: (by diff.)
.07 .15 22 .06 .18 14 .08 .22 18 .05 .20 16 .06
16. COMPOSITION OF AVG. lEA:
(% of Average IEA)
Dep and Inv Sec 19.60
6.33 82 10.27 5.87 66 4.19 5.48 43 2.66 3.42 38 3.10
Mtg Backed Sec 16.11
13.04 59 20.13 13.43 67 23.34 12.83 69 24.30 10.54 74 25.85
Mtg Loans 56.24
61.97 41 61.33 62.17 45 64.07 64.02 50 64.21 63.95 50 62.32
Non Mtg Loans 7.19
8.36 46 6.94 8.44 46 6.60 8.31 46 6.99 9.44 44 6.85
Eqtylnv Not SbjctFASB No115 .52
.90 25 .95 .95 50 1.37 .93 77 1.37 .93 76 1.39
Lns ser (F) .34
.02 80 .39 .02 81 .43 .01 85 .47 .01 87 .50
17. COMPOSITION OF AVG.
ICL:
(% of Average ICL)
Deposits
86.50 85.16 54 85.81 82.69 55.85.05 83.18 54 81.20 81.88 49 75.66
FHLBank Adv.
9.88 10.60 46 10.37 11.78 46 10.95 12.45 43 14.73 12.85 55 20.21
Subord. Deben.
.00 .00 45 .00 .00 46 .00 .00 45 .00 .00 46 .00

.00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00
3.62 1.59 60 3.81 2.12 60 4.00 2.09 62 4.07 1.20 69 4.13
2481
3.61
4.96
6.14
6.63
3.95
5.86
5.89
49
77
10
45
48
28
28
2.78 .1
3.88 40
5.45 NA
NA NA
2.95 53
3.05
.00
3.05
3.05
Dist.
NA
2.88
2.99
2.68
.23
3.35
9.97
65.29
8.41
.99
.01
79.49
15.48
.00
.00
1. 54
5
48
5
5
COF)
NA
90
92
93
11
45
77
42
46
74
85
37
68
46
50
70
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: ASSETS, Part 1 of 2
($000 Balance at End of Period)
05:47
United Western Bank
PAGE 9
DOCKET: 06679 TFR STATUS:
COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS:
COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
3rd Prior Qtr 4th Prior Qtr
================= ====--======= ===:::========
================= =============--===
YRMO, Period End .... 200909 200906
200903
200812
200809
DETAILED BALANCE SHEET ASSETS:
1.1 Cash,Dep.&Inv.Secur.:
22,609 12,926
14,329
Cash &Non-Int.EarningDep.
22,285 20,332
USGov&Agency Securities 47,305 49,060
51,159
53,276
54,569
Sec. Subject to FASB 115 0 0
0 0
0
Int.-EarningDep.inFHLBs 4,621 4,679
8,538
213 4,138
Other Int.-EarningDep. 541,36
271,016
65,045
0

Fed Funds Sold&Repos *


0
State &Muni Obligations 0 0
0 0
0
Securties Bkd NonMort Lns 0 0
0


Other Invest.Securities 36 37
39 45
46
Subtotal,IEDep&MiscSec. 545,964 275,732
73,622
258 4,184
Accrued Int. Recei vable 287 297
311 458
470
Subtotal of 1.1 616,165 338,015
139,421
76,277
79,555
2.2 Mortgage Bckd.Secur.
Pass Through:
12,660 13,076
14,230
Guaranteed By USGov/Ag.
15,628
16,688
Oth PassThru Securities 121,765 130,034
180,256
182,762
188,852
Subtotal Pass Through 134,425 143,110
194,486
198,390
205,540
Other MortBkd Securit1es
by FNMA/FHLMC/GNMA 0


0

Col laterized by MaS 0

0

0
other 226,875 250,274
293,010
306,560
315,994
Subtotal Other MaS 226,875 250,274
293,010
306,560
315,994
Accrued Int. Receivable 1,571 1,926
2,141
2,226 2,329
General Allowances 0




Subtotal of 2.2 362,871 395,310
489,637 507,176
523,863
2.6 Mortgage Loans
Residential Construction Loans:
1-4 Dwelling Units 111,966 120,616
123,821
113,190
97,750
5+ Dwelling Units 46,572 53,861
55,159
62,049
50,663
Subtotal, Res.Property 158,538 174,477
178,980 175,239
148,413
Non-Res.Property Constr. 117,877 128,113
116,095 100,197
. 92,855
Subtot., Gross Constr.Lns 276,415 302,590
295,075
275,436
241,268
Residential Permanent Mortgages:
1-4 Dwelling Units:
18,392 20,410
20,304
Revolving,Open-EndLns
20,066
19,665
All Other
Secured by First Liens 341,102 352,498
368,765
361,968
372,184

1,587 1,646
1,661
1,714
1,682
361,081 374,554
390,730 383,748
393,531
5+ Dwelling Units 40,948 47,580
48,091 49,623
50,189
Subtotal, Res.Property 402,029 422,134
438,821
433,371
443,720
Non-Res. (Except Land) 561,506 539,423
539,477
560,655
543,068
Land Perm. Mort. 98,465 101,584
111,702 123,182
122,096
Subtotal, Permanent Mtg. 1,062,000 1,063,141
1,090,000
1,117,208
1,108,884
Gross Subtotal of Mtg Lns

1,365,731
1,385,075
1,392,644
1,350,152
Accrued Inter.Receivable 5,322
5,062 5,804
6,024
Advances for Taxes&Insur. 732 568
705 673
642
ALLL 26,498 19,603
15,646
14,994
12,538
Subtotal of 2.6 1,317,585 1,352,018
1,375,196
1,384,127
1,344,280
3.1 Nonmortgage Loans
Commercial Loans:
146,006 150,659 Secured, Oth.than Mtgs
107,863
128,162
124,323
Unsecured 11,586 12,800
17,533 17,703
19,693
Financing Leases 827 1,525
1,758 1,300
1,031
Subtotal,Commercial Lns 158,419 164,984
127,154
147,165
145,047
Consumer Lns:
874 887 Loans on Deposits
461 462
324
Home Improvement Loans

0

0

Education Loans 0 0
0


Auto Loans 808 767
185
148 152
Mobile Home Loans 91 93
51 64
25
Credi t Cards 0


0 0
Other, Including Leases 5,593 5,615
5,696 1,110
1,308
Consumer Loans: Subtotal 7,366 7,362
6,393
1,784
1,809
Subtotal, NonMtg Loans 165,785 172,346
133,547 148,949
146,856
Accrued Int.Receivable 565 432
445
562
624
ALLL 2,008 2,173
1,985
1,596
1,527
Subtotal of 3.1 164,342 170,605
132,007
147,915
145,953
2482
05: 47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: ASSETS, Part 2 of 2
($000 Balance at End of Period)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
================= ================= =================
YRMO, Period End .... 200909 200906 200903 200812
DETAILED BALANCE SHEET ASSETS:
4.0 Net Repossessions
, Repossessed Assets:
6,897 0 Construction
0 354
1-4 Dwelling Units 2,957 1,579
1,698
1,983
5+ Dwelling Units 0 0
0 0
Nonresidential 1,241 71
103
103
Land 2,230 2,270
1,951
1,977
USGov Guar or Ins REO 2,236 2,253
1,939 -2,608
Subtotal, REO 15,561 6,173
5,691
7,025
Other Repossessions 0 0
0 0

15,56
6
6,173
5,691
7,025
0
0 0
Net Repossessed Assets 15,56
6
6,173
5,691 7,025
Real Est. Held4Investmt 0
0 0
Net Repos'ns & REI 15,561 6,173
5,691 7,025
No115
12,311 12,234
29,140
29,046
12,31
6
12,234
29,140
29,046
Other 0
0
0
5.5 Office Premises and Eq. 22,992 23,500
23,318 22,000
5.8 Other Assets 87,424 90,282
67,922
66,812
Bank Owned Life Insurance:
Life Insurance
0 0
0 0
25,942 25,703
25,467
25,233
Intangible Assets
Servicing Assets On:
7,699 8,121
8,667
Mortgage Loans
9,444
Non-Mortgage Loans 92 66
47
52
Goodwill and Oth.Intang. 844 729
813 889
10 Strip Rec.&Oth lnstrum 0 0
0
0
Other Assets 53,509 56,273
33,603
31,894
General Allowance 662 610
675 700
TOTAL ASSETS 2,599,251 2,388,137
2,262,332
2,240,378
Memo: Loans in Process on:
42,782 80,633 Mortg. Construction Loans
130,172
151,195
Other Mortg. Loans 783 1,739
1,068
462

43,565 82,372
131,240
151,657
123 123
124
243
Memo: Detail of Other Assets: (Largest Components of Other Assets)
Amount 21,998 18,905
7,927
8,446
Code (SC691) 3 3
9 9
Amount 10,646 18,522
4,120 1,335
Code (SC693) 14 14
14 14
Amount 12,307 10,349
20,548
20,841
Code (SC697) 4 4
4 4
COMMITMENTS OUTSTANDING:
($000 at End of Period) To Originate:
1-4 Mortgages a 0
0 158
5+ Mortgages 0 0
0 0
All Other RE 30,682 54,440
47,360
106,395
Non-Mortgage Loans 3,491 5,303
5,958 4,710
To Purchase:
0 0 Loans
0
0
MBS 0 0
a 0
Inv. Securities 0 0
0
0
To Sell:
a 0 Loans
0 0
MBS 0 0
0
0
Inv. Securities 0 0
0 0
2483
PAGE 10
4th Prior Qtr

200809
354
2,020
0
129
190
4,286
6,979
0
6,979
0
6,979
0
6,979
28,933
28,933
0
19,568
72,985
0
24,997
10,192
57
973
0
37,466
700
2,222,116
184,23&
184,234
280
7,
9,050
14
18,955
4
a
0
133,929
20,900
0
0
a
0
0
0
05: 47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: LIABILITIES & CAPITAL
($000 Balance at End of Period)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
YRMO, Period End.... ===========;00909 =========--200906 ===========200903 ===========200812
DETAILED BALANCE SHEET LIABILITIES & CAPITAL:
7.1 Deposits and Escrows:
Deposits'
Escrows*
Subtotal of 7.1
7.15 Unamortized Yld Adj
7.2 Borrowings:
Advances from FHLBank
Reverse REPOs+FFunds Pur*
Subordinated Debentures

All Other Borrow1ngs
Subtotal of 7.2
7.5 Other Liabilities:
Accrued Int.Payable:Depos
Accrued Int.Payable:Other
Accrued Taxes
Deferred Income Taxes

TOTAL LIABILITIES
8.0 Total Equity Capital:
Perpetual Preferred Stock
Cumul. Perp. Prefstk

Paid in Excess of Par
Retained Earnings
Accum Oth. Compo Income
UnrealGain/Loss Avail4Sal
Gains/Loss Cash Flow Hdg
Other
Other Components
Subtotal
NonCtrl Int.Consl.Sub
Total Equity Capital
TOTAL LIABIL.+ EQUITY CAP.
Memo: Equity - Goodwill
SUPPLEMENTAL DEPOSIT DATA:
Accnts w/Bal belw InsLimt
Accnts w/Bal abve InsLimt
AvgBal DepAct belw InsLimit
AvgBal DepAct abve InsLimit
AvgBa1: All Deposit Accts
BrokerOrigDep, Fullylnsurd
Other BrokerOrig.Deposits
Total Broker orig.Deposits
Uninsured Deposits

Non-Interest Demand Dep.
Memo: Detail of Other Liabilities:
Amount
Code (SC791)
Amount
Code (SC794)
Amount
Code (SC797)
CONTINGENT LIABILITIES:
Unused Lines of Credit:
Open-End Consumer Lines
Commercial Lines
Letters of Credit:
Commercial
1,953,157
106,377
2,060,282
-276
216,636
78,513
o
a
927
296,076
748
1,057
412
15,018
17,235
2,372,569
o
a
o
113
161,482
67,081
-1,999
-1,999
a
a
226,677
5
226,682
2,599,251
225,838
(Average
821,514
1,238,768
91,841
3,450,607
221,440
264,075
o
264,075
324,825
1,734,43
5
120,078
3,939
5
992
16
850
22
2,546
44,815
a
8,783
1,773,658
131,380
1,905,761
-180
216,665
78,529
o
o
927
296,121
723
1,053
368
a
13,815
15,959
2,216,938
o
a
a
113
99,174
73,515
-1,606
-1,606
o


171,196
3
171,199
2,388,137
170,470
Deposits in Real
729,206
1,176,555
92,351
530,219
188,409
174,384
a
174,384
245,253
1,659,605
o
50,161
4,079
5
1,769
22
1,082
16
3,172
46,346
Obligations & Direct
Total Principal
Credit Substitutes:
7,129
a
9,880
6,308
Direct Credit Sub.
Recourse Obligations
Amt whr Recourse<=120Days
Amt whr RecQurse<=120Days
Other Contingent Liab.
Contingent Assets
* Excludes depOSits from FDIC-insured
a
7,129
5,909
1,220
a
o
subsidiaries
a
6,308
5,022
1,286
a
2484
1,595,851
188,961
1,785,387
-74
216,693
79,413
o

467
296,573
575
1,053
1,957
a
12,316
15,901
2,097,212
o
a
a
113
82,541
102,835
-20,372
-20,372
o


165,117
3
165,120
2,262,332
164,307
Dollars)
655,680
1,129,707
99,180
560,093
206,929
99,758
o
99,758
301,396
1,483,342
55,025
4,220
5
548
99
1,119
16
3,566
52,053
o
10,141
6,225

6,225
NA
NA
a

1,621,751
144,702
1,766,837
-66
226,721
81,265
o
739
308,725
384
1,111
409
o
11,581
13,485
2,088,597
a
a
a
113
73,436
100,485
-22,256
-22,25g
o
a
151,778
3
151,778
2,240,378
150,889
635,482
1,131,355
15,434
578,698
40,965
66,522
o
66,522
231,699
1,534,688
o
51,336
4,361
5
1,196
16
522
99
3,574
60,409
o
12,077
6,555
a
6,555
NA
NA

a
PAGE 11
4th Prior Qtr
200809
1,442,679
178,431
1,621,843
-63
366,349
81,44
6
o
565
448,356
533
1,360
465
a
12,948
15,306
2,084,689
a
o
a
113
61,314
97,194
-21,398
-21,398
o
o

137,223
4
137,223
2,222,116
136,250
629,104
992,739
15,379
503,417
37,825
48,667
o
48,667
271,288
1,349,939
o
66,096
4,475
5
463
99
1,339
16
4,286
55,570
a
9,966
7,502
a
7,502
NA
NA
o
a
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: ASSETS, Part 1 of 2
(% of Total Assets at End of Period)
05: 47 01/28/2010
United Western Bank
PAGE 12
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
3rd Prior Qtr
4th Prior Qtr
===='::=--========= ================= ============9===
============
=================
Groul? 5
Pct
Groul? 5 Groul? 5
Groul? 5
Groul? 5
S&L S&L Pct SoL Medun Pct S&L Medlan Pet SoL Pct
====== === ====== ===== === ===== =====
===== ;;===
====== ===
YRMO, Period End .... 200909 200906 200903
200812
200809
DETAILED BALANCE SHEET ASSETS:
1.1 Cash,Dep.&Inv.Secur.:
.87 .91 46 .54 .90 25 .63 .92 31 .99
Cash &Non-Int.EarningDep.
.94 56 .91 .97 45
USGov&Agency Securities 1. 82 .58 68 2.05 '.34 74 2.26 .34 80 2.38 .41 79 2.46 .42 79
Sec. Subject to FASB 115 .00 .00 25 .00 .00 25 .00 .00 25 .00 .00 26 .00 .00 26
Int.-EarningDep.inFHLBs .18 .02 68 .20 .03 66 .38 .03 75 .01 .04 37 .19 .11 58
Other Int.-EarningDep. 20.83 .58 96 11.35 .36 96 2.88 .10 77 .00 .03 19 .00 .00 25
Fed Funds Sold&Repos * .00 .00 34 .00 .00 33 .00 .00 31 .00 .00 32 .00 .00 27
State &Muni Obligations .00 .01 23 .00 .02 23 .00 .00 24 .00 .02 23 .00 .00 25
Securties Bkd NonMort Lns .00 .00 44 .00 .00 43 .00 .00 44 .00 .00 45 .00 .00 44
Other Invest.Securities .00 .01 46 .00 .01 48 .00 .03 43 .00 .02 43 .00 .01 46
Subtotal,IEDep&MiscSec. 21.00 4.03 91 11.55 3.54 85 3.25 3.91 42 .01 2.32 3 .19 1. 90 16
Accrued Int.Receivable .01 .01 50 .01 .01 49 .01 .01 53 .02 .01 58 .02 .01 62
Subtotal of 1.1 23.71 7.64 86 14 .15 7.93 75 6.16 7.21 44 3.40 4.70 34 3.58 4.50 38
2.2 Mortgage Bckd.Secur.
Pass Through:
.49 4.69 20 .55 5.19 19 .63 5.32 21 .70
Guaranteed By USGov/Ag.
5.19 23 .75 4.01 25
Oth PassThru Securities 4.68 .00 97 5.44 .00 97 7.97 .00 97 8.16 .00 97 8.50 .00 97
Subtotal Pass Through 5.17 4.95 52 5.99 6.10 49 8.60 6.19 59 8.86 5.56 62 9.25 4.63 70
Other MortBkd Securitles
.00 28 .00 .00 29 .00 .00 by FNMA/FHLMC/GNMA .00
28 .00 .00 29 .00 .00 28
Collaterized by MBS .00 .00 37 .00 .00 37 .00 .00 38 .00 .00 38 .00 .00 38
Other 8.73 .05 88 10.48 .03 90 12.95 .00 93 13.68 .00 93 14.22 .00 94
Subtotal Other MBS 8.73 1.29 73 10.48 1.13 77 12.95 1.18 79 13.68 1.39 86 14.22 1.40 88
Accrued Int. Receivable .06 .04 63 .08 .05 67 .09 .05 69 .10 .05 74 .10 .04 80
General Allowances .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 49
Subtotal of 2.2 13.96 11.11 56 16.55 12.03 62 21. 64 12.50 71 22.64 11.07 74 23.57 8.93 76
2.6 Mortgage 'Loans
Residential Construction Loans:
91 5.47 Dwelling Units 4.31 .78 91 5.05 .93 1. 01 90 5.05 1.18 85 4.40 1. 40 74
5+ Dwelling Units 1. 79 .08 94 2.26 .07 93 2.44 .07 95 2.77 .03 96 2.28 .06 93
Subtotal, Res.Property 6.10 1.25 94 7.31 1.31 93 7.91 1.35 92 7.82 1.57 91 6.68 1.94 85
Non-Res.Property Constr. 4.54 .73 93 5.36 .85 93 5.13 , .79 91 4.47 .77 88 4.18 .66 88
Subtot., Gross Constr.Lns 10.63 2.05 94 12.67 2.46 96 13.04 2.49 95 12.29 2.52 91 10.86 3.04 89
Residential Permanent Mortgages:
1-4 Dwelling Units:
.71 2.44 27 .85 2.36 29 .90 2.22 31 .90 2.38
Revolving,Open-EndLns
32 .88 2.28 29
All Other
13.12 22.21 29 14.76 22.02 34 16.30 22.12 38 16.16
Secured by First Liens
22.44 37 16.75 23.90 37
Secured br Junior Liens: .06 1. 30 13 .07 1.39 14 .07 1.38 16 .08 1. 46 16 .08 1. 54 16
Subtota ,1-4 Units 13.89 29.86 15 15.68 29.33 20 17 .27 29.2B 27 17.13 29.49 27 17.71 30,.16 24
5+ Dwelling Units 1.58 1. 91 47 1. 99 1. 96 50 2.13 1.99 54 2.21 2.01 53 2.26 1.97 57
Subtotal, Res.Property 15.47 38.78 13 17.68 38.48 18 19.40 36.94 19 19.34 40.84 19 19.97 40.55 18
Non-Res. (Except Land) 21. 60 12.80 84 22.59 11.63 85 23.85 11.36 87 25.03 11.79 91 24.44 11.26 93
Land Perm. Mort. 3.79 1.17 73 4.25 l.14 75 4.94 1.19 75 5.50 1.26 76 5.49 1. 66 74
Subtotal, Permanent Mtg. 40.86 55.30 23 44.52 54.42 29 48.18 53.79 37 49.87 55.27 39 49.90 56.96 32
Gross Subtotal of Mtg Lns 51. 49 59.39 39 57.19 59.26 45 61.22 60.57 53 62.16 60.97 51 60.76 62.35 46
Accrued Inter.Receivable .19 .21 40 .22 .21 54 .22 .22 55 .26 .22 59 .27 .24 55
Advances for Taxes&Insur. .03 .00 79 .02 .00 79 .03 .00 84 .03 .00 83 .03 .00 87
ALLL 1.02 .59 76 .82 .55 74 .69 .52 72 .67 .48 72 .56 .47 59
Subtotal of 2.6 50.69 58.80 39 56.61 58.81 44 60.79 60.10 56 61.78 60.24 51 60.50 61. 97 46
3.1 Nonmortgage Loans
Commercial Loans:
5.62 1. 96 69 6.31 2.02 72 4.77 1. 90 67
Secured, Oth.than Mtgs
5.72 2.19 71 5.59 2.19 68
Unsecured .45 .26 61 .54 .25 70 .77 .22 75 .. 79 .24 76 .89 .22 77
Financing Leases .03 .00 87 .06 .00 88 .08 .00 89 .06 .00 88 .05 .00 87
Subtotal, Commercial Lns 6.09 3.65 62 6.91 3.41 65 5.62 3.25 61 6.57 3.69 62 6.53 4.14 63
Consumer Lns: Closed-End
.04 47 .04 .04 51 .02 .03 Loans on Deposits .03
42 .02 .03 40 .01 .03 36
Home Improvement Loans .00 .00 41 .00 .00 40 .00 .00 40 .00 .00 38 .00 .00 40
Education Loans .00 .00 40 .00 .00 41 .00 .00 42 .00 .00 41 .00 .00 42
Auto Loans .03 .04 46 .03 .05 45 .01 .04 37 .01 .05 37 .01 .09 35
Mobile Home Loans .00 .00 75 .00 .00 75 .00 .00 73 .00 .00 71 .00 .00 66
Credi t Cards .00 .00 35 .00 .00 35 .00 .00 35 .00 .00 33 .00 .00 32
Other, Including Leases .22 .13 54 .24 .12 56 .25 .1l 60 .05 .12 34 .06 .14 37
Consumer Loans: Subtotal .28 .77 39 .31 .64 41 .28 .49 42 .08 .84 20 .08 .81 20
Subtotal, NonMtg Loans 6.38 7.79 46 7.22 7.72 48 5.90 7.26 46 6 .. 65 9.00 44 6.61 7.35 48
Accrued Int.Receivable .02 .03 41 .02 .03 40 .02 .03 44 .03 .04 40 .03 .03 45
ALLL .08 .12 36 .09 .10 46 .09 .09 48 .07 .10 43 .07 .09 42
Subtotal of 3.1 6.32 7.72 47 7.14 7.70 48 5.83 7.21 46 6.60 8.91 45 6.57 7.31 48
2485
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: ASSETS, Part 2 of 2
('II of Total Assets at End of Period)
05:47.01/28/2010
United Western Bank
PAGE 13
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE

Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
====-==--=-===
= 5-- s===
S&L Pct S&L Med an Pct S&L Med1an Pct S&L Med1an Pct S&L Med1an Pct
==-=-=== =-==== --
--=== ==-= == -===-
200903 - -- 2008U -= - 200809 ==
YRMO, Period End
200909 200906
DETAILED BALANCE SHEET ASSETS:
4.0 Net Repossessions &REI:
Repossessed Assets:
.27 .00 87 .00 .00 33 .00 .00 34 .02
Construction
.00 74 .02 .00 76
1-4 Dwelling Units
.11 .05 62 .07 .06 55 .08 .04 59 .09 .03 61 .09 .04 67

.00 .00 37 .00 .00 40 .00 .00 41 .00 .00 41 .00 .00 43
.05 .00 66 .00 .00 56 .00 .00 63 .00 .00 69 .01 .00 68
Land .
.09 .01 68 .10 .00 70 .09 .00 74 .09 .00 74 .01 .00 59
USGov Guar or Ins REO
.09 .00 98 .09 .00 97 .09 .00 98 .12 . 00 98 .19 .00 98
Subtotal, REO
.60 .21 65 .26 .20 59 .25 .11 63 .31 .12 66 .31 .12 70
Other
.00 .00 31 .00 .00 32 .00 .00 32 .00 .00 31 .00 .00 33

.60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
.00 .00 48 .00 .00 47 .00 .00 47 ,DO .00 46 .00 .00 47
Net Repossessed Assets
.60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
Real Est. Held4Investmt
.00 .00 41 .00 .00 41 .00 .00 40 .00 .00 40 .00 .00 39
Net Repos'ns & REI
.60 .21 63 .26 .20 55 .25 .12 57 .31 .12 61 .31 .12 67
5.1 EQInvNtSbactFASB No115
.47 .81 25 .51 .84 25 1.29 .82 77 1.30 .89 79 1.30 .97 75
FHLBank stoc
.47 .79 27 .51 .81 27 1.29 .79 78 1..30 .79 80 1.30 .85 75
Other
.00 .00 32 .00 .00 33 .00 .00 33 .00 .00 35 .00 .00 35
5.5 Office Premises and Eq.
.88 1.05 39 .98 1.05 46 1.03 1.03 49 .98 .99 48 .88 1.04 40
5. 8 Other Assets
3.36 2.29 66 3.78 2.68 71 3.00 2.48 56 2.98 2.70 54 3.28 2.64 59
Bank Owned Life Insurance:
.00 .00 37 .00 .00 37 .00 .00
Life Insurance
37 .00 .00 38 .00 .00 37
1.00 .00 70 1.08 .00 72 1.13 .00 73 1.13 .00 74 1.12 .. 00 74
Intangible Assets
Servicing Assets On:
.30 .01 79 .34 .01 80 .38 .01 84 .42
Mortgage Loans
.01 87 .46 .01 85
Non-Mortgage Loans
.00 .00 98 .00 .00 97 .00 .00 97 .00 .00 97 .00 .00 97
Goodwill and oth.Intang.
.03 .07 46 .03 .04 48 .04 .03 51 .04 .04 49 .04 .06 48
10 Strip Rec.&Oth Instrum
.00 .00 48 .00 .00 48 .00 .00 48 .00 .00 49 .00 .00 49
Other Assets .
2.06 .94 82 2.36 .92 86 1.49 .86 75 1.42 .88 72 1.69 .71 84
General Allowance
.03 .00 98 .03 .00 98 .03 .00 98 .03 .00 98 .03 .00 98
TOTAL ASSETS
100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50
Memo: Loans in Process on:
1.65 .70 76 3.38 .78 93 5.75 .81
Mortg. Construction Loans
96 6.75 .95 97 9.29 1.15 97
Other Mortg. Loans

.. 03 47 .07 .07 50 .05 .09 44 .02 .07 48 .00 .07 22
Total Mong .. Loans
.90 70 3.45 1.03 87 5.90 1.24 92 6.77 1.27 95 9.29 1.61 96
Nonmortgage Loans
.00 .00 65 .01 .00 64 .01 .00 63 .01 .00 62 .01 .00 63
Memo: Detail of Other Assets: (Largest

of Other Assets)
Amount .95 .42
.38 77 .35 .39 45 .38 .40 44 .36 .39 46
(SC691) .41 .13
3 3 9 9 9
91 .79 .15 85 .18 .12 69 .06 .14 24 .41 .13 88
Code (SC693)
14 14 14 14 14
Amount
.47 .08 87 .43 .07 98 .91 .08 91 .93 .06 92 .95 .06 93
Code (SC697)
4 4 4 4 4
COMMITMENTS OUTSTANDING:
('II Total Assets, End of Period)
To Originate:
1-4 Mortgages
.00 .39 6 .00 .87 7 .00 .64 9 .01 .38 17 .00 .52 9
5+ Mortgages
.00 .00 30 .00 .00 32 .00 .00 33 .00 .00 35 .00 .00 33
All Other RE
1.18 .12 88 2.28 .12 95 2.09 .15 95 4.75 .31 97 6.03 .37 97
Non-Mortgage Loans
.13 .00 65 .22 .00 70 .26 .00 74 .21 .03 74 .94 .02 88
Net Purch (Sale) Commit.
NA NA. NA NA NA NA NA NA NA NA NA NA NA NA NA
/
2486
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
DETAILED BALANCE SHEET: LIABILITIES & CAPITAL
(% of Total Liabi1. & Cap. at End of Period)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
PAGE 14
Current Quarter 1st Prior Qtr 2nd Prior Qtr
====--============
3rd Prior Qtr 4th Prior Qtr
8&L Pet S&L Pet S&L Pct
=================
YRMO, Period End .... 200909
DETAILED BALANCE SHEET LIABILITIES & CAPITAL:
7.1 Deposits and Escrows:
Deposits
Escrows*
Subtotal of 7.1
7.15 Unamortized Yld Adj
7.2 Borrowings:
Advances from FHLBank
Reverse REPOs+FFunds Pur*
Subordinated Debentures
MtgCollaterizedSec.Issued
All Other Borrowings
Subtotal of 7.2
7.3 Other Liabilities:

Accrued Taxes
Deferred InCOme Taxes
AccntsPay.,Oth.L.&Def.lnc
Subtotal of 7.3
TOTAL LIABILITIES
8.0 Total Equity Capital:
Perpetual Preferred Stock
Cumul. Perp. Prefstk

Paid in Excess of Par
Retained Earnings
Accum Oth. Compo Income
UnrealGain/Loss Avail4Sal
Gains/Loss Cash Flow Hdg
Other
Other Components
Subtotal
NonCtrl Int.Consl.Sub
Total Equity Capital
75.14 74.76
4.09 .25
79.26 75.52
-.01
8.33
3.02
.00
.00
.04
11.39
.03
.04
.02
.00
.58
.66
91.28
.00
8.03
.00
.00
.00
.02
11.65
.04
.03
.03
.00
.59
.83
90.66
.00 .00
.00 .00
.00 .00
.00 .00
6.21 4.94
2.58 4.22
-.08 .01
-.08 .02
.00 .00
.00 .00
.00 .00
8.72 9.34
.00 .00
8.72 9.34
53 74.27
96 5.50
62 79.80
12
51
74
45
50
54
48
46
58
38
38
47
34
66
-.01
9.07
3.29
.00
.00
.04
12.40
.03
.04
.02
.00
.58
.67
92.83
46 .00
50 .00
46 .00
65 .00
59 4.15
32 3.08
31 -.07
19 -.07
53 .00
64 .00
58 .00
33 7.17
86 .00
33 7.17
200906
73.46 54 70.54
.25 95 8.35
74.02 69 78.92
.00 13
8.97 50
.00 76
.00 46
.00 50
.00 58
13.76 44
.04
.04
.02
.00
.58
.84
90.89
46
55
44
38
50
37
86
.00 47
.00 50
.00 47
.00 61
4.14 50
4.79 34
.00 32
.01 25
.00 53
.00 63
.00 58
9.07 13
.00 86
9.11 13
.00
9.58
3.51
.00
.00
.02
13.11
.03
.05
.09
.00
.54
.70
92.70
.00
.00
.00
.00
3.65
4.55
-.90
-.90
.00
.00
.00
7.30
.00
7.30
200903
72.68
.27
73.55
.00
9.57
.00
.00
.00
.00
14.81
.04
.03
.03
.00
.54
.87
90.91
.00
.00
.00
.00
4.16
4.86
.00
.00
.00
.00
.00
9.09
.00
9.09
42
98
66
16
50
78
46
50
60
46
42
59
72
42
51
40
81
47
50
47
62
48
46
9
9
53
62
58
19
86
18
8&L Pct S&L Pct
72.39
6.46
78.86
.00
10.12
3.63
.00
.00
.. 03
13.78
.02
.05
.02
.00
.52
.60
93.23
.00
.00
.00
.01
3.28
4.49
-.99
-.99
.00
.00
.00
6.77
.00
6.77
200812
72 .20
.22
73.03
.00
10.95
.00
.00
.00
.00
14.69
.05
.04
.02
.00
.51
.78
90.96
.00
.00
.00
.00
4.08
4.52
-.04
-.01
.00
.00
.00
8.95
.00
8.95
50 64.93
97 8.03
70 72.99
20
44
77
46
50
58
48
30
60
49
43
53
28
85
47
50
47
61
43
49
11
11
52
62
56
16
83
16
.00
16.49
3.67
.00
.00
.03
20.18
.02
.06
.02
.00
.58
.69
93.82
.00
.00
.00
.01
2.76
4.37
-.96
-.96
.00
.00
.00
6.18
.00
6.18
200809
70.40
.30
71.62
.00
12.49
.00
.00
.00
.00
17.98
.06
.04
.02
.00
.53
.86
90.73
.00
.00
.00
.00
3.56
4.76
-.07
-.04
.00
.00
.00
9.19
.00
9.19
28
98
58
19
63
76
46
50
61
59
33
63
51
42
54
37
96
47
50
47
61
42
38
10
9
51
59
57
5
83
5
TOTAL LIABIL.+ EQUITY CAP. 100.00 100.00 50 100.00 100.00
44 7.14 8.70
50 100.00 100.00
16 7.26 8.64
50 100.00 100.00 50 100.00 100.00 50
7
8.69 8.98 Merna: Equity - Goodwill
SUPPLEMENTAL DEPOSIT DATA:
Accnts w/Bal belw InsLirnt 31.61
Accnts w/Bal abve InsLimt 47.66
AvgBal DepAct belw InsLimit 91.84
AvgBal DepAet abve InsLimit3450.61
AvgBal: All Deposit Aceta 221.44
61.22
11. 67
12.90
628.59
16.52

94 49.27 25.71 93 49.94
98 92.35 10.69 98 99.18
96 530.22 220.94 92 560.09
97 188.41 16.58 98 206.93

Total Broker Orig.Deposits
Uninsured Deposits
Insured Deposits
Preferred Deposits
Non-Interest Demand Dep.
10.16
.00
10.16
12.50
66.73
.00
4.62
1.33
.00
1.33
7.59
65.49
.00
3.11
76
41
76
67
53
28
65
7.30
.00
7.30
10.27
69.49
.00
2.10
Memo: Detail of Other Liabilities:

5
.04 44
16
.02 66
22
Amount .15
Code (SC791)
Amount .04
(SC794) .03
Code (SC797)
CONTINGENT LIABILITIES:
Unused Lines of Credit:
Open-End Consumer Lines
Commercial Lines
Letters of Credit:
commercial
.10
1.72
3.49
.95
.00 .00
.34 .08 Standby
OBS Recourse Obligations
Total Principal
& Direct Credit
Direct Credit Sub.
Recourse Obligations
Amt whr Recourse<=120Days
Amt whr Recourse<=120Days
Other Contingent Liab.
contingent Assets
.27 .00
.00 .00
.27 .00
.23 .00
.05 .00
.00 .00
.00 .00
9 .13
56 1. 94
41 .00
74 .41
Substitutes:
68 .26
44 .00
84 .26
93 .21
84 .05
47 .00
48 .00
* Excludes deposits from FDIC-insured subsidiaries
1. 06
.00
1. 06
13.11
58.45
.00
2.96
3.50
.87
.00
.07
.00
.00
.00
.00
.00
.00
.00
76 4.41
42 .00
75 4.41
39 13.32
77 65.57
30 .00
39 2.43
9
64
43
79
69
45
82
91
83
45
50
.16
2.30
.00
.45
.28
.00
.28
NA
NA
.00
.00
2487
48.02
23.72
10.81
220.80
16.15
1.10
.00
1.10
13.51
57.35
.00
3.00
18
13
91
97
90
97
67
40
63
49
69
30
44
3.07 14
.87 68
.00 42
.07 81
.00 75
.00 48
.00 85
NA NA
NA NA
.00 46
.00 49
6.73
28.36
50.50
15.43
578.70
40.97
2.97
.00
2.97
10.34
68.50
.00
2.29
.19
.05
.02
.16
2.70
.00
.54
.29
.00
.29
NA
NA
.00
.00
8.32
47.16
22.93
10.55
220.91
15.52
.98
.00
.98
12.66
56.18
.00
3.13
.17
.03
.02
17 6.13
9 28.31
92 44.68
72 15.38
90 503.42
85 37.82
61 2.19
40 .00
59 2.19
40 12.21
81 60.75
29 .00
37 2.97
51
5
59
16
67
99
.20
.02
.06
3.83 13
.94 71
.19
2.50
.00 41
.06 83
.00 75
.00 47
.00 86
NA NA
NA NA
.00 46
.00 48
.00
.45
.34
.00
.34
NA
NA
.00
.00
8.32
45.99
22.23
10.11
225.03
15.23
.41
.00
.49
12.47
54.24
.00
3.07
.17
.03
.01
11
89
76
88
85
63
42
61
49
59
29
48
55
5
38
99
85
16
4.02 12
1.14 62
.00 42
.08 77
.00 75
.00 47
.00 87
NA NA
NA NA
.00 46
.00 49
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ASSET QUALITY ($000)
United Western Bank
DOCKET: 06679 TFR, STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current QUarter 1st Prior Qtr 2nd Prior Qtr
200909 '200906
3rd Prior Qtr
YRMO, Period End
1. LOANS PAST DUE 30-89 DAYS AND STILL ACCRUING:
Construction Loans 5,130
PermMtg,1-4 Unit 14,940
PermMtg,5+Unit 2,131
PermMtg,NonResBldg 20,106
PermMtg,Land 16,425
Total Mtg. Loans 58,732
NonMtg COIIIllIercial Loans 1,402
Loans on Deposits 0
Home Loans 0
Education Loans 0
Auto Loans 0
Mobile Home Loans 0
Credit Cards 0
Other 0
60,132

2. LOANS PAST DUE 90+ DAYS AND STILL ACdmING:
Construction Loans 0
PermMtg,1-4 Unit 7,204
PermMtg,5+Unit 0
PermMtg,NonResBldg 0,
PermMtg,Land 0
Total Mtg. Loans 7,204
NonMtg COIlUIlercial Loans 124
Loans on Deposits 0
Home Loans 0
Education Loans 0
Auto Loans 0
Mobile Home Loans 0
Credit Cards 0
Other 0
Loans 7,
Guaranteed by USGov Aqncy 7,204
Subtot PD90+ less GovGuar 124
3. NONACCRUING LOANS:
Construction Loans
PermMtg,1-4 Unit
PermMtg,5+Unit
PermMtg,NonResBldg
PermMtg,Land '
Total Mtg. Loans
NonMtg COIlUIlercial Loans
Loans on Deposits
Home Improv. Loans
Education Loans
Auto Loans
Mobile Home Loans
Credi t Cards
Other
Loans
Guaranteed by USGov Agncy
Subtot NonAcrl less GovGuar
4. ,NONPERFORMING LOANS: (a)
Sum of Subtotals 2 and 3

5. NONPERFORMING ASSETS:
NonPerformLns'(Subtot 4) (a)
REO: Construction
REO:I-4 Dwelling Units
REO:5 or More Dwelling U.
REO:Nonresidential Bldgs
REO: Land
USGov Guar or Ins REO
'Subtotal, Gross REO
Othr Reposs'd Assets,Gross

Guaranteed USGov Agncy

7. CLASSIFICATION OF ASSETS:
Classified Substandard
Classified Doubtful
Classified Loss
Total Classified Assets
Special Mention Assets '
LoansInProcs of Foreclosure
Construction Loans
1-4 Unit SecrdBy open-End
1-4 Unit SecrdBy 1st Lien
1-4 Unit SecrdBy Jr Liens
MultiFamily
NonResidential Property
Land Loans
Total Loans
14,557
13,393
1,511
7,339
1,290
38,090
565
o
o
o
o
o
o
o
o
38,655
66
38,589
45,983

45,983
6,897
'2,957
o
1,241
2,230
2,236
15,561
o
15,561
61,544
9,506
, 52,038
26,773
139,715
3,41
6
143,126
36,887
2,369
o
12,183
o
1,511
5,466
346
21,875
($000 Period)
12,643
o
19,911
12,431
71,325
2,267
o
o
o
o
o
o
o
o

67,462
o
6,601
o
o
o
6'rgl
o
o
o
o
o
o
o
o
6,725
6,725
o
10,313
12,621
1,511
7,881
346
32,672
851
o
o
o
o
o
o
o
o
33,523
103
33,420
40,248
9,081
33,420
40,248
o
1,579
o
71
2,270
2,253
6,173
o

9,081
37,340
17,386
92,764
2,733
o
95,497
7,513
758
o
8,416
268
o
5,361
o
14,803
2488
3,237
13,71B
o
20,045
1,132
38,132
674
o
o
o
o
o
o
o
o
38,806
11,695
27,111
o
6,277
o
o
o
6,277
131
o
o
o
o
o
o
o
o
6,408
6,40B
o
10,355
11,456
6,173
7,384
319
35,687 '
1,387
o
o
o
o
o
o
o
o
37,074
6,639
30,435
43,482
14,986
30,435
43,482
o
1,69B
o
103
1,951
1,939
5,691
o
5,691
49,173
1'4,9B6'
34,187
16,904
67,856
2,473
o
70,329
11,727
NA
NA
NA
NA
NA
NA
NA
NA

200812
2,695
14,891
o
6,596
789
24,971
939
o
o
o
o
o
o
o
o
25,910
12,003
13,907
o
5,8BB
o
o
o
5,8BB
625
o
o
o
o
o
o
o
o
6,513
6,484
29
1,403
9,469
6,173
1,792
o
18,837
529
o
o
o
o
o
o
o
o
19,366
1,850
17,516
25,879
10,942
17,545
25,879
354
1,983
o
103
1,977
2,608
7,025
o
7,025
32,904
10,942
21,962
7,025
54,388
1,268
o
55,656
11,355
NA
NA
NA
NA
NA
NA
NA
NA
PAGE 15
4th Prior Qtr
200B09
6,369
12,634
6,759
5,994
276
32,
o
o
o
o
o
o
o
o
32,926
6,32B
26,598
726
6,009
o
o
944

o
o
o
o
o
o
o
o
8,275
6,605
1,670
1,403
7,950
337
1,496
1,813
12,999
218
o
o
o
o
o
o
o
o
13,217
1,715
11,502
21,492
12,606
13,172
21,492
354
2,020
o
129
190
4,286
6,979
o
6,979
28,471
12,606
15,865
6,979
23,666
1,414
o
25,080
20,777
NA
NA
NA
NA
NA
NA
NA
NA
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ASSET QUALITY (%)
05:47 01/28/2010
United Western Bank
PAGE 16
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
4th Prior Qtr
================= ================= =================
=================
Groul? 5
Pct
Groul? 5 Groul? 5 Groul? 5
Groul? 5
5&L Med1an S&L Med1an Pct 8&L Med1an Pct S&L Med1an Pct 8&L Med1an Pct
====== ====== === ====== ====== === ====== ====== === ====== ======
===== =====
YRMO, Period End .... 200909 200906 200903 200812
200809
1. DELINQUENCY LOAN RATES BY LOAN CATEGORY - LOANS PAST DUE 30-89 DAYS AND STILL ACCRUING
Construction Loans
1.86(%
.98 .11 59 2.64 .03 74
Pe rmMTG , 1-4 Unit 4.14 1.16 91 3.38 1.12 93 3.51 1.13 92 3.88 1.08 92 3.21 .89 90
PermMTG, 5+ Unit 5.20 .00 86 .00 .00 28 .00 .00 26 .00 .00 28 13.47 .00 94
PerrnMTG,NonResBldg 3.58 .50 87 3.69 .47 90 3.72 .55 90 1.18 .59 70 1.10 .22 73
Pe rmMTG , Land 16.68 .44 97 12.24 .57 95 1.01 .33 60 .64 .49 54 .23 .35 46
Total Mtg. Loans 4. 39 1.08 91 5.22 1.12 96 2.75 1.22 81 1.79 .92 67 2.37 .97 83
NonMtg Commercial Loans .88 .41 66 1.37 .38 75 .53 .38 56 .64 .64 50 .62 .37 65
Loans on Deposit .00 .00 34 .00 .00 35 .00 .00 39 .00 .00 40 .00 .00 36
Home Improv. Loans NA .00 NA NA .00 NA NA .00 NA NA .00 NA NA .00 NA
Education Loans NA .00 NA NA .00 NA NA .00 NA NA .00 NA NA .00 NA
Auto Loans .00 .84 16 .00 .71 15 .00 .68 13 .00 .95 14 .00 .69 14
Mobile Home Loans .00 .00 29 .00 .00 29 .00 .00 28 .00 .. 14 25 .00 .00 27
Credi t Cards NA 1. 46 NA NA 1.50 NA NA 1.38 NA NA 1.63 NA NA .70 NA
Other .00 .81 12 .00 .79 10 .00 .80 12 .00 .89 10 .00 .98 11

.00 1.14 8 .00 .94 7 .00 .90 8 .00 1.18 7 .00 1.01 6
4.06 1.17 91 4.83 1.16 97 2.57 1.15 80 1. 69 1.05 66 2.21 .99 81

.44 .00 96 .40 .00 96 .78 .00 97 .78 .00 97 .42 .00 97
3.61 1.14 88 4.43 1.02 96 1.80 1.15 68 .91 1.04 42 1.78 .99 73
2. DELINQUENCY LOAN RATES BY LOAN CATEGORY - LOANS PAST DUE 90+ DAYS AND NONACCRUAL
(%


Construction Loans 5.27
.51 2.76 34 .88 1.57 37
PermMtg,1-4 unit 5.70 1. 75 86 5.13 1.56 89 4.54 1.26 88 4.00 .98 87 3.55 .89 90
PerrnMtg, 5+Uni t 3.69 .51 78 3.18 .31 77 12.84 .19 94 12.44 .08 95 .67 .00 68
PermMtg, NonRes.Bldg. 1.31 2.11 35 1.46 1.03 54 1.37 1.13 54 .32 .73 37 .28 .64 36
PerrnMtg, Land 1.31 7.47 30 .34 5.55 27 .29 4.75 33 .00 2.78 18 2.26 .89 56
Total Mtg. Loans 3.38 2.72 56 2.88 2.40 58 3.03 1. 94 69 1. 78 1.65 57 1.53 1.34 54
NonMtg Loans .43 1.03 37 .59 .66 46 1.19 .65 58 .78 .54 60 .56 .40 55
Loans on Deposlts .00 .00 43 .00 .00 45 .00 .00 43 .00 .00 46 .00 .00 46
Home Improv. Loans NA .00 NA NA .00 NA NA .00 NA NA .00 NA NA .00 NA
Education Loans NA .00 NA NA .00 NA NA .00 NA NA .00 NA NA .00 NA
Auto Loans .00 .06 18 .00 .05 21 .00 .05 22 .00 .04 21 .00 .04 21
Mobile Home Loans .00 .00 29 .00 .00 32 .00 .00 33 .00 .00 31 .00 .00 32
Credi t Cards NA .38 NA NA .56 NA NA .55 NA NA .36 NA NA .08 NA
Other .00 .18 18 .00 .15 20 .00 .04 25 .00 .24 19 .00 .12 20

.00 .28 12 .00 .33 12 .00 .37 14 .00 .27 12 .00 .25 12
3.10 2.41 60 2.64 2.19 60 2.88 1.95 70 1. 69 1.47 57 1. 44 1.22 58
Guaranteed by USGov Agncy .64 .00 95 .60 .00 94 .99 .00 98 .71 .00 96 .85 .00 97
Subtot PD90+ less GovGuar 2.61 2.41 53 2.19 2.16 51 2.02 1. 95 55 1.15 1. 44 41 .88 1.17 40
3. NON-PERFORMING ASSET RATES (Non-Performing Loans and Repossessed Assets by

construction Lns, Net LIP 7.57 6.72 55 3.41 3.83 48 3.51 2.84
1.89 43 1.03 1.23 48
PerrnMtg,1-4 Unit 6.47 2.03 86 5.53 1. 93 88 4.95 1.52 85 4.50 1.24 86 4.04 1.05 85
PerrnMtg,5+Unit 3.69 .52 76 3.18 .30 76 12.84 .04 93 12.44 .00 96 .67 .00 70
PermMtg,NonRes.Bldg. 1.52 2.27 41 1. 47 1.12 54 1. 39 1.13 55 .34 .56 40 .30 .50 41
Land 3.50 7.27 41 2.52 6.60 41 2.00 2.56 46 1. 58 2.04 48 2.41 1.22 54
Tota Mtg. Loans 4.38 3.39 60 3.16 3.00 51 3.30 2.33 62 2.09 1.99 57 1. 73 1.73 50
Non-Mortgage Loans .42 .97 40 .57 .63 44 1.14 .63 63 .77 .51 62 .55 .42 59
Subtotal, D90+NnAc+Repos'd 4.05 2.86 65 3.01 2.70 60 3.23 2.08 67 2.12 1.79 59 1. 89 1. 39 57
Guaranteed by USGov Agncy .63 .00 95 .59 .00 94 .99 .00 98 .71 .00 96 .84 .00 97
subtot NonAcrl less GovGuar 2.58 2.05 54 2.19 2.01 56 2.01 1. 83 58 1.14 1.35 44 .77 .92 40
4. ASSET QUALITY SUMMARY: (% of Total Assets)
1. 69 NonPerformLns(Subtot 4) 1.77 1.68 52 1. 49 55 1.92 1.25 68 1.16 1.01 54 .97 .81 53
REO: Construction .27 .00 87 .00 .00 33 .00 .00 34 .02 .00 74 .02 .00 76
REO:1-4 Dwelling Units .11 .05 62 .07 .06 55 .08 .04 59 .09 .03 61 .09 .04 67
REO:5 or More Dwelling U. .00 .00 37 .00 .00 40 .00 .00 41 .00 .00 41 .00 .00 43
REO:Nonresidential Bldgs .05 .00 66 .00 .00 56 .00 .00 63 .00 .00 69 .01 .00 68
REO: Land .09 .01 68 .10 .00 70 .09 .00 74 .09 .00 74 .01 .00 59
USGov Guar or Ins REO .09 .00 98 .09 .00 97 .09 .00 98 .12 .00 98 .19 .00 98
Subtotal, Gross REO .60 .21 65 .26 .20 59 .25 .11 63 .31 .12 66 .31 .12 70
Othr Reposs'd Assets,Gross .00 .00 31 .00 .00 32 .00 .00 32 .00 .00 31 .00 .00 33

.60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
2.37 1. 94 55 1. 94 1. 78 53 2.17 1. 45 65 1.47 1.10 54 1.28 .88 57
Classified Substandard 5.38 4.31 61 3 .. 88 3.15 58 3.00 2.69 54 2.43 1. 98 55 1. 07 1. 66 40
Classified Doubtful .13 .01 79 .11 .01 74 .11 .01 78 .06 .00 74 .06 .01 76
Classified Loss .00 .00 49 .00 .00 49 .00 .00 50 .00 .00 50 .00 .00 49
Total Classified Assets 5.51 4.43 63 4.00 3.26 59 3.11 2.69 54 2.48 2.01 56 1.13 1.73 40
Special Mention Assets 1.42 1.30 51 .31 1.56 24 .52 1. 24 31 .51 .94 35 .94 .74 55
Sub+Doubt / CoreCap+GVA 55.61 41.23 63 49.04 33.97 66 34.59 28.36 60 29.09 21. 81 59 14 .46 16.23 48
5. CONSOLIDATED ASSET QUALITY TREND:
52 1. 69
(% of Total Assets)
Non-Performing Loans 1.77 1.68 1.49 55 1.92 1.25 68 1.16 1.01 54 .97 .81 53
Repossessed Assets, Gross .60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
Repossessed Assets,Net SVA .60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 68
Total NonPerform. Assets 2.37 1.94 55 1. 94 1. 78 53 2.17 1. 45 65 1.47 1.10 54 1.28 .88 57
TDR Loans + Reposs'd TDR 1.03 .64 62 .73 .31 64 .75 .30 66 .31 .25 53 .31 .15 59
LoansInProcs of Foreclosure
.86 .47 54 .25 .33 49 NA Construction Loans NA NA NA NA NA NA NA NA
1-4 Unit SecrdBy Open-End .00 .00 27 .00 .00 27 NA NA NA NA NA NA NA NA NA
1-4 Unit SecrdBy 1st Lien 3.57 .97 85 2.39 .76 82 NA NA NA NA NA NA NA NA NA
1-4 Unit SecrdBy Jr Liens .00 .00 25 16.28 .00 98 NA NA NA NA NA NA NA NA NA
Mul tiFamily 3.69 .00 89 .00 .00 30 NA Nh NA NA NA NA NA NA NA
NonResidential Property .97 .31 67 .99 .09 74 NA NA NA NA NA NA NA NA NA
Land Loans .35 .48 48 .00 .71 22 NA NA NA NA NA NA NA NA NA
Total Loans 1.63 1.00 68 1. 08 .91 60 NA NA NA NA NA NA NA NA NA
2489
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ALLOWANCES
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
PAGE 17
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
.Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
-- -===- _...... === =---== === ===-- ......- .
Months in period .
YRMO, Period End ....
3 3
200909 200906
1. TOTAL ALLOWANCES:
Balance
. Net Provision for Loss
Add Recoveries on:
Recoveries
Acquisitions
Deduct: Charge-offs+Sales
Ending Balance
1a. TOTAL GENERAL ALLOWANCES:
Balance
provisi()n for Loss
Transfers
Recoveries

Ending Balance
28,609
12,166
129
o
10,462
30,442
22,385
10,321
288
129
o
3,956
29,167
lb .. TOTAL SPECIFIC ALLOWANCES:
Beginning Balance 6,224
Provision for Loss 1,845
Transfers -28g
6,506
Ending Balance 1,275
2. ALLOCATION .OFENDING ALLOWANCE BALANCE:
Cash, Deposits, & Inv.Sec.:
Loans:
Nonmortgage Loans:
ALLL
Repossessed Ass.ets:.
General Allow.ance .
Mortgage Backed Secur1ties:
General Allowance
Other:
General Allowance
All Assets:
General Allowance+ALLL

26,498
2,008
o
o
662
29,167

($000 at Start of Period)
23,979
($000 Period)
. 6, 10
35
0
($000 at
2,115
periodf End of
28,609
18,307
($000 Period)
5, 76
0
35
0

($000
5,672

0
0
782
6.224
19,603
2,173
0
0
610
22,385
6,224
28,609
3
200903
20,166
4,337
124
0
648
23,979
17 ,291
1,482
-46
124
0
544
18,307
2,.875
2,855
46
0
104
5,672
15,646
1,985
0
0
675
18,307
5,672
23,979
3
200812
16,941
3,347
227
o
349
20,166
14,766
2,491
o
227
o
193
17,291
2,175
856
o
o
156
2,875
14,994
1,596
o
o
700
17,291
2,875
20,166
3
200809
14,681
6,805
37
o
4,582
16,941
13,270
5,919
o
37
o

1,411
886
o
o
122
2,175
12,538
1,527
o
o
700

16: 941

Group 5 S&L Pct Group .5 Gro;p 5
::t S&L Med1an Pct S&L Median Pct S&L Median Pct
3. GEN. ALLOWANCE+ALLL ALLOCATED TO: 83 (% of
Mortgage Loans + LIP 1. 91 1. 03 1. 35 .94 74 1. 03 .91 6.j .97 .84 59 .81 81 50
Nonmortgage Loans + LIP 1.21 1.76 37 1.26 1.56 37 1.48 1;54 46 1.07 1.29 33 1.03 1'27 36
Repossessed Assets .00 .00 48 .00 .00 47 .00 .00 47 .00 .00 46 .00 '00 47
MPS .00 .0050 .00 .0050 .00 .0050 .00 .0050 .00 '0049
Other Assets NA NA NA NA NA NA NA NA NA NA NA NA NA 'NA NA
All Assets (Net of LIP) 1.13 .83 66 .95 .77 65 .82 .74 56 .79 .73 51 68 70 48
GA+ALLL4Lns+REo,%Lns+REO 1.88 1.2377 1.41 1.1568 1.16 1.0856 1.07 1.0452 '94 '9844
GA+ALLL4LnS+REO
t
%(NPA-SVA) 46.32 41.25 58 46.91 42.64 54 35.86 47.17 36 50.42 60.66 43 49'40 60:49 41
Tot.GA+ALLL, (iC sfd-Loss) 20.38 22.27 47 23.44 24.95 45 26.03 30.98 41 31.07 34.69 42 58:88 39.23 61
2490
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
GVA CHARGE-OFFS AND CHANGE IN SVAs
. ($000)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st P+ior Qtr 2nd Prior Qtr 3rd Prior.Qtr
Months in period ===--=====3 =--=-=-=====)
YRMO, Period End.... 200909 200906 200903
4. NET GVA CHARGE-OFFS AND CHANGES IN SVAs ($000 During Period)
Deposits & Inv. Sec.
MPS
Mortgage Loans:
Construction: .
1-4 Dwell Unit
5+ Dwell Unit
NonResidential
T.otal Constr.
Permanent:
1-4 Closed End
1-4 open End
Total 1-4 Perm.
5+ Dwell. Unit
Nonresidential
Land
Total Perm. Mtg.
Total Mortgage Loans
Loans:
Consumer:
Loans on Deposits
HILs
Education Loans
Auto Loans
Mobile Home Loans
Credit Cards
Other
Total Consumer Loans
Total Non-Mortgage Loans
Repossessed Assets:
Real Estate:
Construction
1-4 Dwell. Unit
5+ Dwell. unit
Nonresidential
Land
Total .Repos'ed RE
Other Repos'ed Assets
Total Repossessions
RE Held for Investment
Inv. in Subordinate Firms
Other Assets
Total Assets
o 0
1,958
681

3,103
27 .
o
27
-47
-1
o
-21
3,082
335
o
o
o
o
o
o
3
3
338
o
o
o
o
o
o
o
o
o
o
6
5,384
o
101
o
1,125
1,226
60
o
60
228
391
o
679
1,905
631
o
o
o
o
o
o
8
8
639
o
o
o
o
o
o
o
o
o
O.
88
2,632
2491
o
o
o
235
1,676
1,911
82
o
82
o
1,083
o
1,165
3,076
64
o
o
o
o
o
o
o
o
64
o
o
o
o
o
o
o
o
o
o
181
3,321
3
200812
o
o
o
o
o
o
-73
o
-73
586
o
o
513
513
197
o
o
o
o
o
o
o
o
197
o
o
o
o
o
o
o
o
o
o
112
822
PAGE 18
4th Prior Qtr
3
200809
o
4,110
o
540
o
540
519
o
519
o
13
o
532
1,072
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
127
5,309
05:47 01/28/2010
United Western Bank
06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current O!!!;;;;" Prior Prior Qtr
Months in period 3 3 3
YRMO, Period End.... 200909 200906 200903
5. RATES OF GVA CHARGE-OFFS AND Changes in SVAs (% of category)
Deposits & Inv. Sec.
MPS

1-4 Dwell Unit
5+ Dwell Unit
NonResidential
Total Constr.
Permanent:
1-4 Closed End
1-4 Open End
Total 1-4 Perm.
5+ Dwell. Uld t
Nonresidential
Land
Total Perm. Mtg.
Total Mortgage Loans
Loans:
Deposits
HILs
Education Loans
Auto Loans
Mobile Home Loans
. Credit Cards
Other
Total Consumer Loans
Total Non-Mortgage Loans
Repossessed Assets:
Real Estate:
Construction
1-4 Dwell. Unit
5+ Dwell. uni t
Nonresidential
Land
Total Repos'ed RE
Other Repos'ed Assets
Total Repossessions
RE Held for Investment
EqtyInv Not SbjctFASB115
Other Assets
Total Assets
.00 .00 50 .00 .00 50
.52
.59
3.55
.52
1.07
.01
.00
.01
-.11
.00
.00
.00
.?3
.21
.00
NA
NA
.00
.00
NA
.05
.04
.20
.00
.00
NA
.00
.00
.00
NA
.00
NA
.00
NA
.22
.00 98
.00 71
.00 90
.00 86
.00 76
.05 26
.00 29
.07 20
.00 6
.02 7
.00 33
.11 2
.15 62
.12 55
.00 47
.00 NA
.00 NA
.08 28
.00 45
.84 NA
.54 29
.27 28
.29 46
.00 40
.00 37
.00 NA
.00 40
.00 33
.00 35
.00 NA
.00 36
.00 NA
.00 50
NA NA
.13 62
.00
.08
.00
.92
.41
.02
.00
.02
.48
.07
.00
.06
.14
.43
.00
NA
NA
.00
.00
NA
.14
.12
.42
NA
.00
NA
.00
.00
.00
NA
.00
NA
.00
NA
.11
.00 50
.00 55
.00 39
.00 90
.07 64
.04 38
.00 27
.06 26
.00 88
.00 71
.00 27
.08 42
.13 56
.06 78
.00 49
.00 NA
.00 NA
.00 34
.00 51
.82 NA
.38 38
.28 32
.17 69
.00 NA
.00 38
.00 NA
.00 40
.00 32
.00 35
.00 NA
.00 36
.00 NA
.00 50
NA NA
.09 56
2492
.00
.00
.00
.40
1.55
.67
.02
.00
.02
.00
.20
.00
.11
.23
.05
.00
NA
NA
.00
.00
NA
.00
.00
.05
.00

.00
.00
.00
NA
.00
NA
.00
NA
.15
.00 48
.00 48
.00 33
.00 93
.00 95
.00 76
.03 40
.00 33
.05 3,
.00 40
.00 79
.00 30
.08 58
.10 69
.03 52
.00 49
.00 NA
.00 NA
.00 34
;00 46
.73 NA
.27 17
.26 16
.16 34
.00 32
.00 37
.00 NA
.00 45
.00 35
.00 35
.00 NA
.00 36
.00 NA
.00 50
NA NA
.09 63
PAGE 19
3rd Prior Qtr 4th Prior Qtr
.00
.00
.00
.00
.00
.00
-.02
.00
-.02
1.17
.00
.00
.05
.04
.13
.00
NA
NA
.00
.00
NA
.00
.00
.13
.00
.00
NA
.00
.00
.00
NA
.00
NA
.00
NA
.04
====--=====--;
200812 200809
.00 50
.00 45
.00 31
.00 44
.00 40
.00 31
.03 1
.00 35
.04 1
.00 98
.00 36
.00 29
.05 48
.10 44
.09 56
.00 48
.00 NA
.00 NA
.05 '23
.00 46
.33 NA
.57 13
.30 11
.28 37
.00 39
.00 41
.00 NA
.00 46
39
.00 40
.00 NA
.00 40
.00 NA
.00 50
NA NA
.15 22
.00
.77
.00
1.07
.00
.24
.14
.00
.13
.00
.00
.00
.05
.08
.00
.00
NA
NA
.00
.00
NA
.00
.00
.00
.00
.00
NA
.00
.00
.00
NA
.00
NA
.00
NA
.24
-
.00 48
.00 91
.00 35
.00 88
.00 50
.00 76
.01 79
.00 35
.02 '18
.00 43
.00 66
.00 32
.04 56
.05 56
.00 36
.00 50
.00 NA
.00 NA
.00 37
.00 46'
.47 NA
.25 19
.15 16
.14 20
.00 34
.00 36
.00 NA
.00 39
.00 45
.00 36
.00 NA
.00 36
.00 NA
.00 50
NA NA
.10 64
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
CAPITAL REQUIREMENTS AS CALCULATED BY S&L
United Western. Bank
. DOCKET: 06679 TFR STATUS: COMPLETE
PAGE 20
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr . 4th Prior Qtr
-===-== ...... == "'?"= --=-======--=-= -=====--=====--== ===============--
YRMO, Period End
1. TIER 1 (CORE) CAPITAL:
Invin&AdvTo&NonCntrlng Non.
to Noninclud. (k)
Goodwill and Oth.lntang.
Disallowed Service Assets
Other
Add:
AccLoss/Gns:Sec/CF Hedg-tax
Qualifying Intangble Depsts
MinorityInt. inInclud. Subs.
Other
Tier 1 (Core) Capital (b)
Allow.supplement.capital
Assets Reg.to be Deducted
Low Level Rec Deduction
Adjusted Risk-Based Cap. (c)
2. ADJUSTED TOTAL ASSETS:
Total Assets
Deduct:
NoninclSub.Assets
(1)

Other
Add:
ACCum Loss/Gns:Sec/CF
Qualfyng Intngible Asse s
Other
Adjusted Total Assets (e)
3. CORE CAPITAL REQUIREMENTS:
Core Cap.Reg: (g)=(e)*(j)
4.
RISK-BASED CAPITAL REQUIREMENT:
TOTAL UNWEIGHTED ASSETS
Total R-W Assets
Excess ALLL
Total R-W Assets - Ex. ALLL
R-B Cap Reg before (1)or(2)
(2) Low level Recourse Ded.
Risk-based Capital Reg.
200909 200906 200903 200812 200809
($000 at End of Period)
226,682 171,199 165,120 151,778 137,223
0 0 0
0 0 0
453 438 499
0 0
0 0
0 0
0 0 0 0 0
l,99g
1,606
0
20,372
0
22,256
0
21,398
0
0 0 0
0 0 0
0 0
0 0
228,228
23,23
5
172,367
20,718
0
184,993
16,318
0
174,034

158,621
13,080
0
45,673 414 82
205,788 192,671 201,229
60 707
189,536 170,994
2,599,251 2,388,137 2,262,332 2,240,378 2,222,116
.0 0 0 0 0
0 0 0 0 0
453 438 499
0 0 0
0 0
0 0
2,96
5
2,587 32,822
O 0
0 0 0
35,85
6
34,474
0
0 0
2,601,761 2,390,286 2,294,655 2,276,235 2,256,590
104,070 95,611 91,786 91,049 90,264
3,080,462 2,955,804 2,588,140
1,858,67
6
1,894,988 1,925,68
5
0
2,473,590 2,386,093
1,796,48
5
1,607,480
0
1,858,677

1,925,681
148,69g 154,054
0 0
148,694 151,599 154,054
1,796,483 1,607,480
143,71g 128,598
0
143,719 128,598
- 5 5 Group 5
S&L Median Pct S&L Med1an Pct S&L Med1an Pct S&L Med1an Pct S&L Median Pct
==----=---===
5. FIRREA CAPITAL
COMPLIANCE: == ===== =- Total Adj,;st;d'A;s;t-; at ==-= =-
Core Cap.Reg: j)
Core Capital !b)
Core cap.Surplus: (b)- J)
Core cap.surp($OOO):(b)- g)
8.77 8.85 47 7.21 8.68 17 8.06 8.86 31 7.65 8.45 30 7.03 8.44 14
4.00 4.00 53 4.00 4.00 54 4.00 4.00 53 4.00 4.00 54 4.00 4.00 54
4.77 4.85 47 3.21 4.68 17 4.06 4.87 30 3.65 4.45 30 3.03 4.45 14
124,158 76,756 93,207 82,985 68,357
('II of Total Assets at End of periodi
Adjusted Risk-Based Cap. ICj
11.07 13.21 12 10.17 13.14 6 10. 5 13.59 8 10.55 13.19 4 10.64 12.65 12
Risk-based Reg. h
8.00 8.00 50 8.00 8.00 50 8.00 8.00 49 8.00 8.00 49 8.00 8.00 50
RiskBasedCap. ugglS:(C)- h)
3.07 5.21 12 2.17 5.14 6 2.45 5.51 8 2.55 5.14 16 2.64 4.65 12
R-B Cap surp($OO ): (c)-(h)
57,094 41,072 47,175 45,817 42,396
6. ASSET BALANCES:
('II of Total Assets at End of periodb
Adjusted Total Assets(e)
100.10 99.65 84 100.09 99.72 83 101.43 99.85 91 1 1.60 99.89 90 101.55 99.95 93
Total R-W Assets - Ex.ALLL
71.51 69.61 55 79.35 69.34 72 85.12 68.45 87 80:19 68.61 75 72.34 68.18 58
Total Unweighted Assets
118.51 102.90 95 123.77 102.65 98 114.40 102.76 95 110.41 103.13 93 107.38 102.53 B5
7. FDICIA PCA CAPITAL RATIOS:
B.21 12 10.17 13.14 6 10.45 13.59
Total Risk-Based 11. 07
B 10.55 13.19 14 10.64 12.65 12
Tier 1 lcorej Risk-Based 9.B2
11.96 16 9.07 11.83 .6 9.60 12.32 12 9.68 12.05 17 9.82 11.59 22
Tier 1 Core Leverage B.77
B.B5 47 7.21 .8.68 17 8.06 B.86 31 7.65 8.45 30 7.03 8.44 14
2493
,0.5: 47 0.1/28/20.10.
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 20.0.90.9
COMPOSITION OF RISK-WEIGHTED ASSET CATEGORIES
($0.0.0. Balance at End of Period)
United Western Bank
DOCKET: 0.6679 TFR STATUS: COMPLETE
PAGE 21
DATA AS OF: 0.1/28/20.10. CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior,Qtr 3rd Prior Qtr 4th
20.0909 --2'000 ==-'"2OoBii -
Prior Qtr
YRMO, Period End ..
1. ASSETS IN 0.% R-W,CATEGORY,
'Cash
U.S.Gov.securities
Notes&Obligations FDIC
Other
Subtotal, 0.% R-W Categ.
2. ASSETS IN 20.% R-W CATEGORY,

State/Local Gen.Oblig.
on DOmestDepInst
subtotal,2C% R-W Categ.
3. ASSETS IN 50.% R-W CATEGORY,
Qualif.1-family ResMtg

State/Local Rev. Bonds
Other
Subtotal,5C% R-W Categ.
UNWEIGHTED:
1,386
122,24
5
523,331
646,962
UNWEIGHTED:
73,748
12,32g
43,80.4
35,215
165,0.93
UNWEIGHTED:
, 323,61g
561,883
0.
885,498
4. ASSETS IN 10.0.% R-W CATEGORY,

UNWEIGHTED:
137,511
1,245,398
1,382,90.9
subtotal,lCC% R-W categ.
5. ALL R-W CATEGORIES, UNWEIGHTED: '
Subtotal (1+ . +4) 3,0.80.,462
Other Adj. (by diff.) -481,211
Total Consol.Assets 2,599,251
LowLevel Recourse Ded. 0.
Current Quarter
($0.0.0. at End of
1 573
127;168
0.
267,539
396,280.
156,615
12, 258
24,296
32 672
225;833
330,11
6
637, 628
0.
967,739
65,159
1,300.,793
1,365,952
2,955,80.4
-567,667
2,388,13
6
1st Prior Qtr
Period)

' 0.
74 721
20.7;476
247,947
29,17
6
11,683
34 525
323;334
354,625
0
38,0.08
0
392,631
455,253
1,20.9,446
1,664,699
2,588,140.
-325,80.8

2nd Prior Qtr 3rd
1,20.8
141,47
6
20.,537
163,222
315,180.
29,25
6
540.
31,950
376,929,
348,71
6
75,96
6
0.
424,684
0.
1,50.8,755
1,50.8,755
2,473,590.
-233,212
2,240., 373
Prior Qtr 4th
20.0.80.9
1,0.79
147,838
0.
18,836
167,753 \
444,926
33,0.7
6
417
28 284
50.6;698
362,85
6
48,149
0.
0.
411,0.0.3
0.
1,30.0.,639
1,30.0.,639
2,386,0.93
-163,977
2,222',116 ,
0.
Prior Qtr
==-=-=-========-==== ====--=-====
-=-== =_-===Ii!=-= =====-=--==-===-====
S&L Pct
S&L Pct
Grou{' 5
S&L Pct S&L Pct S&L
--== ======- =-- ====-= =--= = ===== ====- = === --= -== --=- ====
YRMO, Period End ..
20.0.90.9
20.0.90.6 20.0.903
1. ASSETS IN 0.% R-W CATEGORY, UNWEIGHTED:
(% of Total Assets)
.07 .32 22 .06 .34
Cash .05 .31 20
U.S.Gov.Securities 4.70 .54 87
5.32 .53
Notes&Obligations FDIC .0.0 .00 48
.00 .00
Other 20.13 .52 97
11.20. .20.
subtotal, 0% R-W Categ. 24.89 3.42 97
16.59 2.15
2. ASSETS IN 20.% R-W CATEGORY, UNWEIGHTED:
6.56 7.11
High QuaHt
9L
MBS 2.84, 7.02,
34
Claims on F Bs .47 1.23
13 ;51 1. 43
State/Local Gen.Oblig. .00. .0.0
27 .0.0 .00.
Claims on DomestDeplnst 1.69 .62
70. 1.02 .81
Other 1. 35 1. 53
46 1.37 1.20
subtotal,20% R-W Categ. 6.35 15.49
18 9.46 16.37
3. ASSETS IN 50% R-W CATEGORY, UNWEIGHTED:
13.82 21.81
Qualif.1-family ResMtg 12.45, 22.24 25
Qualif.MultFam .00 .00 27
.0.0 .00.
Other MeS BackBy Qua Mtg 21.62 .00. 98
26.70 .00
State/Local Rev. Bonds .00. .00 36
.00 .0.0
other .00 .00 35
.00 .00
subtotal,50% R-W Categ. 34.07 25.86 65
40.52 25.74
4. ASSETS IN 100% R-W CATEGORY
Z
UNWEIGHTED:
2.73 .00
Notes/Obligtns FDIC RW 5. 9 .00. 95
All Other Assets 47.91 47.91 50
54.47 48.21
Subtotal,100% R-W Categ. 53.20 49.81 54
57.20 49.46
5. ALL R-WCATEGORIES, UNWEIGHTED:
subtotal (1+ +4) 118.51 102 .90.
Other Adj. (by diff.) -18.51 -2.90.
Total Consol.ASsets 100.00 100.00
LowLevel Recourse Ded., .00 .00.
95 123.77 102.65
4 -23.77 -2.65
50 100.00. 100.00
45 .00 .00.
91 5.80. .26
48 .00 .00
97 3.30. .20.
96 9.17 1.90.
45 10..96 9.18
13 1.29 1.29
27 .0.0. .00
60 .52 .63
56 1.53 1.22
29 '14 .29 17.44
30 15.'68 22.40
29 .0.0. .00
98 1.68 .00
35 .00 .00
33 .00 .00.
76 17.36 26.60
88 20.12 .00
60 53.46 43.27
61 73.58 47.03
98 114.40. 10.2.76
1 -14.40. -2.76
50. 100.00 100.00
46 .00. .0.0
2494
20.0812
25 .0.5 .37
91 6.31 .0.9
49 .00 .00
78 .92 .13
86 7.29 1.42
53 14.07 7.60
50 1.31 1.30.
28 .0.0. .0.0.
39 .02 .74
61 1.43 1.15
40 16.82 16.83
34 15.57 23.57
29 .00 .00
92 3.39 .00
37 .00 .00
35 .0.0. .00
32 18.96 26.42
96 .00 .00
61

45.75
90. 47.50.
95 110..41 10.3.13
4 -10..41 -3.13
50. 100..0.0. 100..0.0.
48 .0.0. .0.0
20.0809
24 .0.5 .32
91 6.65 .0.8
50 .00 .00
74 .85 .0.5
86 7.55 .99
62 20..02 7.44
50. 1.49 1.47
29 .00 .00
12 .02 .71
56 1.27 1.16
49 22.80 16.28
37 16.33 24.71
30 .00. .00
96 2.17 .00
38 .00 .00
32 .00 .0.0
34 18.50 28.17
37 .00 .00.
76 58.53 48.26
75 58.53 48.26
93 10.7.38 102.53
6 -7.38 -2.53
50 100.00. 10.0.00
48 .00 .00
Pct
24
94
50
84
93
74
50.
28
10
54
67
32
28
94
38
33
33
42
67
66
85
14
50
48
05: 47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
CHANGES IN FINANCIAL CONDITION ($000)
United Western Bank
06679 TFR STATUS: COMPLETE
01/28/2010 CMR STATUS: COMPLETE
DOCKET:
DATA AS OF:
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr

Months in Period
YRMO, Period End ....
CHANGES IN ASSETS:
1.1 CASH,DEP.&INV.SECUR.
2.2 MORTGAGE BACKED SECUR.
2.6 MORTGAGE LOANS:
Const.Lns,1-4 Unit Res
Const.Lns,5+ Unit Res
const.LnsiNonresid.
Subtota , Canst.
Perm.Mtgs,1-4 Unit Res
Perm.Mtgs,5+ Unit Res
Perm.Mtgs, Land .
Perm.Mtgs, NonResld.
subtotal,Perm.Mtgs
Other (by diff.)
Subtotal, Mtg Lns
3.1 NONMORTGAGE LOANS:
4.0
4.1
5.1
5.5
5.8
Repossessed Assets
Real Estate Invest.
Subtotal Repo.Ast.+REI
EqtylnvNotSbj ctFASB1l5
Offlce premises & Eq.
Other Assets:
Goodwill
Asts
TOTAL ASSETS
CHANGES IN LIABILITIES + CAPITAL:
7.1 LIABILITIES:
DEPOSITS AND ESCROWS:
NetNewDepositsRecvd
IntCreditedDeposits
subtotal
other Changes
Net Change
DepActs Belw InsLmts
DepActs Abve InsLmts
BORROWINGS:
Net Change
FHLBank Advances
Reverse REPOS
Subord.Debentures
Mtgcoll.Sec.Issued
All Other Brwg
7.5 Other Liabilities
Total Liabilities
NonCntrol IntConsldtd subsr
8.0 EQUITY CAPITAL:
Perpetual Pref.Stk
cumul. Perp. Prefstk
NonCum.Perp. Prefstk
CommonStk &Paid-InCap.
UnrlGain/LossAvai14Sal
Gains/LossCashFlwHedge
Other ,
Retained Earnings
Other components
Subtotal
Total Equity Capital
TOTAL LIABILITIES & EQUITY
CHANGES TO EQUITY CAPITAL:
Net Income
Less:Cash Div on Pref
Less:Cash Div on ComStk
Subtotal
Stock Issued
Stock Retired
New Basis Acctg Adj
Oth Adjustments (by diff)
Net Change in Equity Cap
3
200909
278,150
-32,439
-8,650
-7,289
-10,236
-26,175
-13,473
-6,632
-3,119
22,083
-1,141
-7,117
_34,433
-6,263
9,388
o
9,388
77
-508
115
-396
-2,577
211,114
o
3,902
3,902
149,321
153,223
92,308
62,213
-45
-29
-16
o

o
1,276
155,631
2
o
o
o
62,308
-393
o
o
-6,434
o
55,481
55,483
211,114
':'6,434
o
o
-6,434
o
o
o
61,917
55,481
=================
3
200906
198,594
. -94,327
-3,205
-1,298
12,018
7,515
-16,176
-511
-10,118
-54
-26,859

-23,178
38,598
482
o
482
-16,906
182
-84
-527
22,971
125,805
o
3,333
3,333
115,785
119,118
73,526
46,848
-452
-28
-884
o
o
460
58
119,726
o
o
o
o
16,633
18,766
o
o
-29,320
o
6,079
6,079
125,805
-29,319
o
o
-29,319
o
o .
o
35,398
6,079
2495
3
200903
63,144
-17,539
10,631
-6,890
15,898
19,639
6,982
-1,532
-11,480
-21,178
-27,208
-1,362
-8,931
-15,908
-1,334
o
-1,334
94
1,318
-76
-782
1,968
21,954
o
3,114
3,114
15,331
18,445
20,198
-1,648
-12,152
-10,028
-1,852
o
o
-272
2,416
8,615
o
o
o
o
9,105
1,884
o
o
2,350
o
13,339
13,342
21,954
2,350
o
o
2,350
o
o
o
10,992
13,339
=================
3
200812
-3,278
-16,687
15,440
11,386
7,342
34,168
-9,783
-566
1,086
17,587
8,324
-2,645
39; 847
1,962
46
o
46
113
2,432
-84

-5,336
18,262
o
3,750
3,750
140,219
143,969
6,378
138,616
-139,631
-139,628
-177
o
o
174
-1,821
3,708
-1
o
o
o
12,122
-858
o
o
3,291
o
14,555
NA
18,262
3,291
o
o
3,29
6
o
o
11,264
14,555
PAGE 22
4th Prior Qtr
3
200809
-14,157
-30,337
15,452
78
11,916
27,446
5,658
1,126
7,587
47,302
61,673
-1,060
88,059
9,056
2,253
o
2,253
277
1,599
-84
-404
10,836
67,098
o
2,034
2,034
131,687
133,721
94,812
40,583
-64,101
-65,027
904
o
o
22
345
71,025
o
o
a
122
-4,523
o
o
473
a
-3,928
NA
67,098
1,863
o
1,390
473
o
o
o
-4,401
-3,928
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR ENDED 200909
CHANGES IN FINANCIAL CONDITION ( TA at start of period)
05: 47 01/28/2010
United Western Bank
PAGE 23
POCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr .2nd Prior Qtr
3rd Prior Qtr 4th Prior Qtr
=-==-= --===-===
-
=-=-=====-= =--=====-=-
S&L Pet
Group 5
S&L Pet
Group 5
S&L Pet
S&L Medun Pet
S&L Medl.an Pct
-=-=== -=- =- =--=--= -==-=! =-= ===-
-=== =- =--=-= -===-- =- -====- --= ===-
Months in Period 3 3 3
3 3
YRMO, Period End ... 200909 200906 200903
200812 200809
CHANGES IN ASSETS: (% of Total. Assets at Start of Period, not Annualized)
1.1 CASH,DEP.&INV.SECUR. 11.65 .02 97 8.78 .41 93 2.82 .88 72 -.15 .03 39 -.66 -.20' 31
2.2 MORTGAGE BACKED SECUR. -1.36 -.03 15 -4.17 - . 11 4 ..,.78 .00 16 -.75 .06 13 -1.41 -.02 11
2.6 MORTGAGE LOANS:
-.36 -.01 17 -.14 -.10 43 .47 -.04 97 Const.Lns,1-4 Unit Res .69 -.06 96 .72 -.04 93
Const.Lns,5+ Unit Res -.31 .00 4 -.06 .00 8 -.31 .00 2 .51 .00 97 .00 .00 72
Const.Lns,Nonresid. -.43 .00 11 .53 .00 95 .71 .00 96 .33 .00 81 .55 .01 89
Subtotal, Const. -1.10 . -.03 8 .33 -.09 95 .88 -.06 96 1.54 .00 97 1.27 .00 93
Perm.Mtgs,1-4 Unit Res -.56 -.24 39 -.72 -.28 32 .31 .00 69 -.44 .21 16 .26. .41 42
Perm.Mtgs,5+ Unit Res -.28. .00 6 -.02 .00 33 -.07 .00 18 -.03 .01 19 .05 .00 72
Perm.Mtgs,Land -.13 -.01 30 -.45 -.01 8 -.51 .00 7 .05 .00 81 .35 .00 93
Perm.MtgsiNonResid. .92 .01 84 .00 .04 32 -.95 .01 2 .79 .27 69 2.19 .18 90
subtotal,Perm.Mtgs -;05 -.07 51 -1.19 -.24 23 -1.21 .16 22 .37 .90 35 2.86 .69 85
Other (bE diff.) -.30 -.02 12 -.17 -.02 12 -.06 -.02 33 -.12 -.03 19 -.05 -.01 25
Subtotal, M g'Lns -1.44 -.19 34 -1.02 -.43 34 -.40 .01 36 1.79 .56 75 4.09 .61 90
3.1 NONMORTGAGE LOANS: -.26 -.03 36 1.71 .00 93 -.71 .00 12 .09 .05 54 .42 .12 68
4.0 Repossessed Assets .39 .00 90 .02 .02 49 -.06 .00 2 .00 .01 43 .10 .00 71
4.5 Real Estate Invest. .00 .00 56 .00 .00 53 .00 .00 54 .00 .00 54 .00 .00 54
Subtotal ReEo.Ast.+REI .39 .00 90 .02 .02 48 -.06 .00 2 .00 .01 43 .10 .00 71
5.1 . jctFASB115
.00 .00 89 -.75 .00 1 .00 .00 77 .01 .00 67 .01 .00 66
5.5 o f ee PremJ.ses & Eq. -.02 -.01 24 .01 .00 74 .06 .00 91 .11 ;00 86 .07 .00 89
5.8 Other Assets:
.00 .00 95 .00 .00 27 .00 .00 Goodwill 30 .00 .00 30 .00 .00 31
Asts
-.02 .00 8 -.02 .00 4 -.03 .00 1 -.03 .00 13 -.02 .00 9
-.11 -.02 30 1.02 .03 95 .09 .00 71 -.24 .12 7 .50 .05 88
TOTAL ASSETS 8.84 -.28 93 5.56 .65 88 .98 1. 73 42 .82 1.70 35 3.11 .94 77
CHANGES IN LIABILITIES + CAPITAL:
7.0 LIABILITIES:
7.1 DEPOSITS AND ESCROWS:
.00 .00 50 .00 .00 50 .00
.00 50 .00 .00 50 .00 .00 50
IntCredi edDeposits .16 .29 18 .15 .32 13 .14 .35 14 .17 .40 11 ;09 .42 6
Subtotal .16 29 18 . .15 .32 13 .14 .35 14 .17 .40 .11 .09 .42 6
Other Changes 6.25 .13 93 5.12 1.03 88 .68 2.12 27 6.31 1.63 82 6.11 -.37 85
<$100K+Ese
6.42 .44 93 5.27 1.35 90 .82 2.41 25 6.48 2.10 82 6.21 .06 85
3.n 12.91 12 3.25 -.02 90 .90 .54 53 .29 .74 45 4.40 .54 76
w/Bal>$100
2.61 -12.72 98 2.07 1.30 65 -.07 1.87 12 6.24 1.35 87 1.88 -.42 84
7.2
.00 -.11 61 -.02 -.23 60 -.54

-.58 51 -6.28 -.03 4 -2.97 .00 10
.00 -.03 58 .00 -.05 59 -.45 -.13 45 -6.28 .00 3 -3.02 .00 11
Reverse REPOs
,00 .00 18 -.04 .00 17 -.08 .00 18 -.01 .00 22 .04 .00 79
Subord.Debentures .00 .00 48 .00 .00 49 .00 .00 50 .00 .00 50 .00 .00 49
Mt1Coll.sec.Issued .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50
Al Other. Brwg .00 .00 53 .02 .00 82 -.01 .00 19 .01 .00 86 .00 .00 87
7.5 Other Liabilities .05 .00 66 .00 :02 37 .11 .01 74 -.08 .01 29 .02 .01 53
Total Liabilities 6.52 -.12 91 5.29 .32 88 .38 1. 47 34 .17 2.03 30 3.30 1.14 77
8.0 EQUITY CAPITAL:
.00 .00 49 .00 .00 48 .00 .00 Perpetual Pref.Stk 49 .00 .00 50 .00 .00 48
Cumul. Perp. Prefstk .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50
Prefstk .PO .00 49 .00 .00 48 .00 .00 49 .00 .00 50 .00 .00 48
CommonStk & aid-InCap. 2.61 .00 96 .74 .00 95 .41 .00 87 .55 .00 81 .01 .00 72
UnrlGain/LossAvail4Sal -.02 .05 8 .83 .00 98 .08 .02 71 -.04 .00 23 -.21 -.01 12
Gains/LossCashFlwHedge .00 .00 50 .00 .00 46 .00 .00' 48 .00 .00 51 .00 .00 51
Other .00 .00 52 .00 .00 48 .00 .00 48 .00 .00 57 .00 .00 50
Retained Earnings -.27 .05 24 -1.30 .07 4 .1.0 .08 56 .15 .04 75 .02 .06 41
Other components .00 .00 41 .00 .00 43 .00 .00 41 .00 .00 43 .00 .00 44
Subtotal 2.32 .19 96 .27 .17 66 .60 .19 81 .66 .16 82 -.18 .03 28
NonCntrolIntCnsldtdsSu .00 .00 96 .00 .00 51 .00 '.00 50 .00 .00 6 .00 .00 94
Total Equity Capital 55483.00 3137.00 96 6079.00 2439.50 72 13342.00 3278.50 77 NA NA NA NA NA NA
TOTAL LIABILITIES & EQUITY 8.84 -.28 93 5.56 .65 88 .98 1.73 42 .82 1.70 35 3.11
.94 77
CHANGES TO EQUITY CAPITAL:
-3.76 .79
(% of Equity not Annualized)
Net Income 19 -17.76 .9 4 1.5 ;81 69 2 40
.76 80 1.32 .84 62
Less:CashDiv on Pref .00 .00 48 .00 .00 48 .00 .00 47 :00
.00 45 .00 .00 48
Less:Cash Div on ComStk .00 .00 40 .00 .00 40 .00 .00 40 .00
.00 39 .98 .00 77
Subtotal -3.76 .50 22 -17.76 .66 4 1.55 .64 73 2.40
.45 87 . 34 .65 42
Stock Issued .00 .00 48 .00 .00 48 .00 .00 48 .00
.00 47 .00 .00 46
Stock Retired .00 .00 49 .00 .00 49 .00 .00 48 00
.00 49 .00 .00 50
New Basis Aeet1 Ada
.00 .00 50 .00 .00 50 .00 .00 50 :00
.00 49 .00 .00 50
oth Changes by iff) 36.17 .99 96 21.44 .37 98 7.24 .95 79. 8.21
.26 86 -3.12 -.01 6
Net Change Equity Cap 32.41 1.63 96 3.68 1.35 71 8.79 1.55 84 10.61
1.28 86 -2.78 .42 22
2496
05: 47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
LENDING, INVESTMENT, FORECLOSURE, AND RESTRUCTURING ACTIVITY ($000)
United Western Bank
06679 TFR STATUS: COMPLETE
01/28/2010 cMR STATUS: COMPLETE
DOCKET:
DATA AS OF:
1st Prior Qtr 2nd Prior Qtr

Current Quarter
3rd Prior Qtr
Months in Period
YRMO, Period End ....
1.1 CASH, DEPOSITS, & INVESTMENT
Net BS ChngInCsh,Dep,&InvSc
2.2 MORTGAGE BACKED SECURITIES:
Pass-Through:
Purchases
Sales

Other Mortgage Backed Securities:
Purchases
Sales
Other Balance Changes
Net Subtotal (other MBS)
Net Subtotal (Total MBS)
Net Other Chngs (by diff.)
Net BS Chng in MtgBckdSec
2.6 MORTGAGE LOANS:
Constr. Lns. Closed: 1-4 Res
Constr; Lns. Closed:5+ Res.
Constr. Lns. Closed:Nonres.
Perm. Mtgs. Closed: 1-4 Res.
Perm. Mtgs. Closed:5+ Res.
Perm. Mtgs. Closed:Nonres.
Perm. Mtgs. Closed:Land
Total New Originations
Refinancing Loans(b)
Mtg Purchases: 1-4 Dwelling
Mtg Purchases: 5+ Dwelling
MtgPurchases: Nonres.
Total Mtg Purchases
Noncash Trans,excl.Frcl+NCO
TotalDebits:Orig+Prch+NnCsh
Total. Mtgs Sold
Mtgs Sold:1-4 Dwell
Mtgs Sold:5+ Dwell
Mtgs Sold:Nonres
Cash Repayment of Principal
Foreclosures (Frcl)
Net Charge-offs (NCO)
Additions to Allowances
Total Credits:Sales+Misc.
Net Subtotal
Net Other Chngs (by diff.)
Net BS Chng in Mtge Loans
3.1 NONMORTGAGE LOANS:
Commer.Lns Closed or Purch.
Consmr Lns Closed or Purch.
Net Subtotal
Net Other Chngs (by diff.)
Net BS Chng in NonMtge Lns
4.0 REPOSSESSED ASSETS:
Foreclosures
ChgOffs on Repos' d (VA60)
Chg in VA (Chg in SC440)
Oth:BS Chg+COs+ChgAll.
Net BS Chng Repo'd Assets
5.8 OTHER ASSET CHANGES:
Net BS Chng in Total Assets
DEBT RESTRUCTURING ACTIVITY:
Cmplince
3
200909
SECURITIES:
278,150
o

-8,685
-8,685
o
o
-23,399
-23,399
-32,084
-355
-32,439
15,663
3,342
13,908
8,441
395
43,031
4,469
89,249
o
2,263


2,263
-9,821
81,691
14,430

o
14,430
o
11,409
1,588
8,483
35,910
45,781
-,80,214
-34,433
18,148
347
18,495
-24,758
-6,263
11,409

o
-2,021
9,388
-3,289
211,114
11,409
26,773
MORTGAGE LOAN FORECLOSURE ACTIVITY:
Construction
Permanent Loans:
1-4 Family

Land
Total
6,897
3,310

1,202

11,409
3
200906
198,594
o
47,347
-4,029
-51,376
o
o
-42,736
-42,736
-94,112
-215
-94,327
12,580
3,953
21,673
15,613
5,863
25,916
4,244
89,842
o
2,035
o
o
2,035
-1,649
90,228
7,645
2,916
o
4,729
o
2,255
606
4,563
15,069
75,159
-98,337
-23,178
23,343
969
24,312
14,286
38,598
2,255
o

-1,773
482
5,636
125,805
13,729
17,386

2,255
o
o
o
2,255
2497
3
200903
63,144
o
o
-3,904
-3,904
o

-13,549
-13,549
-17,453
-86
-17,539
19,958
2,946
17,888
21,311
102
29,441
5,085
96,731
o
3,522
o
o
3,522
-1,786
98,467
3,515
864
o
2,651
o
2,107
321
973
6,916
91,551
-100,482
-8,931
32,948
4,905
37,853
-53,761
-15,908
2,107
o
o
-3,441
-1,334
2,522
21,954
13,354
16,904
o
2,107
o
o
o
2,107
=================
3
200812
-3,278
o
o
-7,150
-7,150
o
o
-9,437
-9,437
-16,587
-100
-16,687
25,141
15,893
25,917
8,758
1,413
47,131
9,354
133,607
o
1,261
o
o
1,261
-3,742
131,126
3,879
2,155
o
1,724
o
3,669
-73
2,383
9,858
121,268
-81,421
39,847
41,094
779
41,873
-39,911
1,962
3,669
o
o
-3,623
46
-3,628
18,262
3,833
7,025
o
3,669

o

3,669
PAGE 24
4th Prior Qtr
=================
3
200809
-14,157
2,134

-15,319
-13,185
o
o
-17,067
-17,067
-30,252
-85
-30,337
29,980
11,028
20,006
25,946
1,447
80,596
13,165
182,168
o
1,901
o
o
1,901
-2,150
181,919
12,479
1,115
o
11,364
o
2,455
305
1,642
16,881
165,038
-76,979
88,059
59,807
1,039
60,846
-51,790
9,056
2,455

o
-202
2,253
12,224
67,098
4,288
6,979

2,455
o
o

2,455
OFFICE OF. THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
01/28/2010
LENDING, INVESTMENT, FORECLOSURE, AND RESTRUCTURING ACTIVITY
(%)
05:47
United Western Bank
PAGE 25
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
3rd Prior Qtr 4th Prior Qtr
================= ================= =================
=================
Groul? 5 Groul? 5 Graul? 5
Groul? 5 Graul? 5
S&L Medlan Pct S&L Medlan Pct S&L Medlan Pct
S&L Medlan Pct S&L Medlan Pct
====== ====== === ====== ====== === ====== ===== ==
===== === ===::.::1= ===== ===
Months in Period 3 3
3 3 3
YRMO, Period End .... 200909 200906 200903
200812 200809
1.1 CASH, DEPOSITS, & INVESTMENT SECURITIES: (% of Total Assets at Start of Period, not Annualized)
Net BS ChngInCsh,Dep,&InVSC 11. 65 .02 97 8.78 .41 93 2.82 .88
72 -.15 .03 39 -.66 -.20 31
2.2 MORTGAGE BACKED SECURITIES:
Pass-Through:
.00 .00 29 .00 .00 25 .00 .00 28 .00 Purchases
.00 27 .10 .00 61
Sales .00 .00 37 2.09 .00 92 .00 .00 45 .00 .00 43 .00 .00 44
Other Balance changes -.36 -.37 52 -.18 -.44 64 -.17 -.23 57 -.32 -.11 37 -.71 -.17 20
Net Subtotal (Pass Trough) -.36 -.10 32 -2.27 -.19 6 -.17 -.01 33 -.32 -.01 19 -.61 -.03 16
Other Mortgage Backed Securities:
.00 30 .00 .00 35 .00 .00 34 Purchases .00
.00 .00 33 .00 .00 37
Sales .00 .00 43 .00 .00 44 .00 .00 46 .00 .00 46 .00 .00 47
Other Balance Changes -.98 -.06 12 -1.89 -.09 4 -.60 -.03 16 -.42 -.03 20 -.79 -.04 10
Net Subtotal (Other MBS) -.98 .00 8 -1.89 .00 3 -.60 .00 8 -.42 .00 13 -.79 .00 9
Net Subtotal (Total MBS) -1.34 -.03 15 -4.16 -.11 4 -.78 .00 15 -.75 .00 16 -1.40 -.02 11
Net Other Chngs (by diff.) -.01 .00 12 -.01 .00 24 .00 .00 21 .00 .00 14 .00 .00 23
Net BS Chng in MtgBckdSec -1.36 -.03 15 -4.17 -.11 4 -.78 .00 16 -.75 .06 13 -1. 41 -.02 11
2.6 MORTGAGE LOANS:
.66 .08 86 .56 .09 82 .89 .09 Constr. Lns. Closed: 1-4 Res 91 1.13 .13 87 1.39 .27 83
Constr. Lns. Closed:5+ Res. .14 .00 87 .17 .00 92 .13 .00 89 .72 .00 95 .51 .00 90
Constr. Lns. Closed:Nonres. .58 .03 91 .96 .01 95 .80 .02 95 1.17 .04 96 .93 .06 90
Perm. Mtgs. Closed: 1-4 Res. .35 2.13 13 .69 3.09 20 .95 2.25 32 .39 1.53 16 1.20 2.59 23
Perm. Mtgs. Closed:5+ Res. .02 .01 58 .26 .01 82 .00 .01 49 .06 .04 55 .07 .04 55
Perm. Mtgs. Closed:Nonres. 1.80 .30 93 1.15 .41 80 1.31 .27 81 2.12 .51 90 3.74 .59 92
Perm. Mtgs. Closed:Land .19 .00 86 .19 .01 87 .23 .01 81 .42 .02 86 .61 .06 85
Total New Originations 3.74 3.91 47 3.97 4.54 43 4.32 3.92 51 6.01 3.49 69 8.45 4.67 75
Refinancing Loans (b) .00 .66 16 .00 1.23 16 .00 .83 16 .00 .48 16 .00 .50 16
Mtg Purchases: 1-4 Dwelling .09 .00 77 .09 .00 74 .16 .00 84 .06 .00 75 .09 .00 70
Mtg Purchases: 5+ Dwelling .00 .00 44 .00 .00 44 .00 .00 44 .00 .00 45 .00 .00 45
Mtg Purchases: Nonres. .00 .00 43 .00 .00 43 .00 .00 42 .00 .00 43 .00 .00 42
Total Mtg Purchases .09 .00 74 .09 .00 69 .16 .00 77 .06 .00 67 .09 .00 64
Noncash Trans, excl'. Frcl+NCO -.41 -.01 11 -.07 -.01 30 -.08 .00 24 -.17 .00 20 -.10 .00 32
TotalDebits:Orig+Prch+NnCsh 3.42 4.25 44 3.99 4.91 43 4.40 4.28 53 5.90 3.82 67 8.44 5.18 70
Total Mtgs Sold .60 .82 47 .34 2.20 38 .16 .67 42 .17 .24 45 .58 .36 55
Mtgs Sold:1-4 Dwell .00 .71 13 .13 1. 76 33 .04 .66 34 .10 .17 45 .05 .23 41
Mtgs Sold:5+ Dwell .00 .00 48 .00 .00 46 .00 .00 47 .00 .00 45 .00 .00 46
Mtgs Sold:Nonres .60 .00 96 .21 .00 93 .12 .00 91 .08 .00 90 .53 .00 94
Cash Repayment of Principal .00 .00 50 '.00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50
Foreclosures (Frcl) .48 .05 83 .10 .05 65 .09 .03 63 .17 .03 74 .11 .03 61
Net Charge-offs (NCO) .07 .03 63 .03 .01 60 .01 .02 46 .00 .01 1 .01 .01 54
Additions to Allowances .36 .06 83 .20 .06 76 .04 .06 42 .11 .05 64 .08 .04 63
Total Credits:Sales+Misc. 1.50 1. 30 52 .67 2.31 34 .31 1. 08 37 .44 .54 44 .78 .68 51
Net Subtotal 1.92 1.25 56 3.32 2.21 67 4.09 2.46 77 5.46 2.75 85 7.66 3.48 83
Net Other Chngs (by diff.) -3.36 -2.26 20 -4.35 -2.84 16 -4.49 -2.19 15 -3.66 -2.06 16 -3.57 -2.52 28
Net BS Chng in Mtge Loans -1. 44 -.19 34 -1.02 -.43 34 -.40 .01 36 1.79 .56 75 4.09 .61 90
3.1 NONMORTGAGE LOANS:
.76 .36 59 1.03 .49 61 1. 47 Commer.Lns Closed or Purch. .62 69 1.85 .58 72 2.78 .57 76
Consmr Lns Closed or Purch. .01 .07 26 .04 .09 39 .22 .09 62 .04 .09 37 .05 .10 40
Net Subtotal .77 1.03 44 1.07 1.10 48 1.69 1.13 59 1.88 1.55 53 2.82 1.28 63
Net Other Chngs -1.04 -1.14 54 .63 -.90 97 -2.40 -1.13 33 -1.80 -.78 39 -2.40 -1.11 33
Net BS Chng in No tge Lns -.26 -.03 36 1.71 .00 93 -.71 .00 12 .09 .05 54 .42 .12 68
,4.0 REPOSSESSED ASSETS:
.48 .05 83 .10 .05 65 .09 .03 Foreclosures 63 .17 .03 74 .11 .03 61
ChgOffs on Repos'd (VA60) .00 .00 43 .00 .00 42 .00 .00 43 .00 .00 45 .00 .00 42
Chg in VA (Chg in SC440) .00 .00 51 .00 .00 50 .00 .00 50 .00 .00 49 .00 .00 51
Ot :BS Chg+COs+ChgAll. -.08 -.04 36 -.08 -.02 27 -.15 -.01 18 -.16 -.02 17 -.01 -.02 57
Net BS Chng Repo'd Assets .39 .00 90 .02 .02 49 -.06 .00 2 .00 .01 43 .10 .00 71
5.8 OTHER ASSET CHANGES: -.14 -.04 33 .25 .04 80 .11 .01 71 -.16 .06 23 .57 .10 87
Net BS Chng in Total Assets 8.84 -.28 93 5.56 .65 88 .98 1.73 42 .82 1.70 35 3.11 .94 77
DEBT RESTRUCTURING ACTIVITY:
.48 .22 63 .61 .14 81 .60 TOR During period .11 78 .17 .09 58 .20 .08 61
Amt incld SedSC in Cmplince 1.12 .45 70 .77 .29 72 .75 .20 72 .32 .24 56 .32 .14 59
MORTGAGE LOAN FORECLOSURE ACTIVITY:
.00 95 .00 .00 36 .00 Construction .29 .00 38 .00 .00 40 .00 .00 40
Permanent Loans:
.14 .02 82 .10 .02 83 .09 .01 1-4 Family 79 .17 .01 86 .11 .01 77
5+ Dwelling Units .00 .00 43 .00 .00 46 .00 .00 46 .00 .00 44 .00 .00 46
Nonresidential .05 .00 89 .00 .00 39 .00 .00 40 .00 .00 40 .00 .00 41
Land .00 .00 33 .00 .00 33 .00 .00 38 .00 .00 35 .00 .00 38
Total .48 .05 83 .10 .05 65 .09 .03 63 .17 .03 74 .11 .03 61
2498
05:47 01/28/2010
Months in Period
YRMO, Period End ....
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
QUESTIONS, BUSINESS STRATEGIES, AND NEW DEPOSIT YIELDS
United Western Bank
06679 TFR STATUS: COMPLETE
01/28/2010 CMR STATUS: COMPLETE
DOCKET:
DATA AS OF:
1st Prior Qtr 2nd Prior Qtr
=================
Current Quarter
3rd Prior Qtr
3
200909
3
200906
3
200903
=================
3
200812
PAGE 26
4th Prior Qtr
3
200809
SUPPLEMENTARY QUARTERLY QUESTIONS:
(O=NO, l=Yes in One Qtr. of Period, 2=Yes in Two Qtrs. of Period, Etc.)
Did reporting association acquire any asset
5
through merger? 0
As a result of a branch or bulk deposit purchase, were assets or liab.included in
sheet for the first time? 0 0
Has there been a change in control of

Has there been a merger accounted for underothe purchase methgd?

o
reporting association's balance
o
o
o
(O=Not 9ther=Restatement Date Formated as MMDDYY)
o
o
o
o
If reportin9 association's ba1.sheet is restoated for the flrst
o
tlme using PUSh-doown accounting, enoter the date of
the reorgamzation (MMDDYY) . 0
Reporting association's fiscal year-end 12
Code representing nature of work to be performed by independent public
for the current fiscal yea;- " 10 . 10
Did the reporting assoclatlon change ltS lndependent publlC accountant
quarter?
12
accountants
10
during the

12
10
1
Did the reporting association or its consolidated subsidiaries have outstanding futures or options
posi tions at quarter-end? 0
Does the reporting association have a Subchapter S election in effect for Federal income tax purposes
for the current tax year? 0 . 0
EXTENSIONS OF S&L CREDIT TO ITS DIRECTORS, AND RELATED INTERESTS:
Aggregate amount ,<$000)
No.w/Large Borrowlngs
5,000 5,000 5,000 5,000
1 1 1 1
2499
12
10
o

o
5,000
1
,.
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR. QUARTER ENDED 200909
05:47 01/28/2010
COMPOSIT.ION AND OFF-SAL. SHEET POSITIONS OF SECTION CMR PORTFOLIO / Part 1 of 3 ($000)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
========-===-=-= & ........ ==-=---
YRMO, Period End .
200909 200906 200903
1. COMPOSITION OF SECTION CMR ASSETS:
SF 1st Mtges & MBS, Fixed Rate:
30YrMtgLns
15YrMtglns
All Fix
30YrSeCMtgConventional
30YrSeCMtgFHA/VA
15YrSeCMtg
BalloonSeCMtg
SF 1st Mtg Sec, All Fix
SF 1st Fix, All Lns+Sec
30YrMtg:Lns+Sec
15YrMtg:Lns+Sec
BalloonMtg:Lns+Sec
SF Rate:
NonTeaser ARMs,Currlndx
NonTeaser ARMs,LagIndx .
'teaser ARMs
Teaser ARMs,Currlndx
Teaser ARMs,LagIndx
SF ARMS, 'teaser+NonTeaser
Securitized ARMS
Non-Securitized ARMS
SF 1st MtgLns+MBS: Fix+Adj
MultiFam+NResLns&Sec:
ARM Balloons

Fix.Rate FullyAmortizing
Subtotal
Const. &LandLns, Adj. Rate
Const.&LandLns, Fix.Rate
2ndMtgLns, Adj.Rate
2ndMtgLns, Fix.Rate
Total Mtg Lns, Adi.+Fixed
Total Stg Lns, Adj.Rate
Total Mtg Lns, Fixed Rate
NonMtg Commerical Lns,Adj.
NonMtg Commercial Lns,Fixed
NonMtg Consumer Lns,Adj.
NonMtg Consumer Lns,Fixed
Total NonMtg Loans
Total Loans
Co1laterized Mortgage Obligations:
Floating Rate
Fixed Rate: Total
F/R: Remaining WAL <=5y
F/R: Remaining WAL 5-10y
FIR: Remaining Wa1>10y

Other
Total CMOs
CMO Residuals
Interest-Only Stripped MBS
Principal-Only Strlpped MBS
Total Mtg Der. Sec.
Low-Risk MtgDerSec.
High-Risk MtgDerSec.
54,374
13,986
1,156
69,516
20,16g


20,169
89,685
74,543
13,986
1,156
368,421
310,994
57,42
6


368,421
116,533
251,888
458,106
116,277
323,361
9,147
141,283
590,068
317,334
42,097
19,553
408
1,427,566

137,815
20,541
6,035
1,327
165,718
1,593,284
168,160
61,955
54,251
7,704
o
o
o
o
230,11
5

o
230,115
60,481
169.634
($000 at End of Period)
54,909
17,463

72,372


o
21,166
93,538
76,075
17,463


60,52
5
o

383,528
122,111
261,417
477,066
108,555

144,756
574,337
3i3:8n
21,637
416
1,467,490

142,839
21,606
6,061
1,300
171,806
1,639,296
180,147
72,895
72,895



o
o

o
o
253,042
112,368
140,674
2500
61,718
19,725

81,443
22,588
o
o
o
22,588
104,031
84,306
19,725
o
475,507
412,551


o
475,507
205,064
270,443
579,538
101,081
316,141
5,187
146,289
568,698
363,280
33,466
21,637
325
1,566,944
1,277,646
289,298
102,517
22,167
5,872
522
131,078
1,698,022
211,533
85,359
85,359





296,892
o


296,892
196,757
100,135
3rd Prior Qtr
=--====-===-===----
200812
61,671
18,365

80,036
23,020

o
o
23,020
103,056
84,691
18,365
o
479,127
415,794
63,333
o

o
479,127
211,240
267,887
582,183
100,836
336,328
4,997
154,400
596,561
357,438
40,671

1,598,629
1,295,179
303,450
122,711
23,247
1,286
502
147,746
1,746,375
219,886
90,969
90,969


o
o
o
310,855

o
o
310,855
240,158
70,697
PAGE 27
Uh Prior Qtr

200809
63,460
18,767

82,227
24,055


o
24,055
106,282
87,515
18,767
o

65,256
o
o

494,732
216,563
278,169
601,014
84,421
340,695
5,028
155,983
586,127
318,878
40,472
19,662
o
1,566,153
1,258,388
307,765
120,118
23,628 .
1,466
341
145,553
1,711,706
226,922
92,897
92,897
o
o
o
o
o
319,819
o
o
o
319,819
319,81
5
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
COMPOSITION AND OFF-8AL.SHEET POSITIONS OF SECTION CMR PORTFOLIO / Part 2 of 3 ($000)
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
================= ================= =================
YRMO, Period End.... 200909 200906
200903
1. COMPOSITION OF SECTION CMR ASSETS-continued: ($000 at End of Period)
Cash, Deposits & Securities:
Csh,NnInDp,OvNightFF&Repo
Equity Securities (a)
Zero-Coupon Securities
Gov't + Agency
TermFF&Repo+IE Depos1ts
Structured Securities
Other Securities
Total Cash, Dep.& Sec.
568,808
o
o
124
15
43,373
o
612,321
ITEMS RELATED TO MTG LNS+SEC
Nonperforming Mtgs
Accrued Mtg Int.Receiv.
Advs. for Taxes and Insur
45,976
6,507
732
Unamortized Yld Adj
Total Allowance
Unreal.Gains (Losses)
Total Other Mtg Assets
1,299
26,179
-2,962
22,775
ITEMS RELATED TO NON-MTG LNS+SEC
Nonperforming NonMtg Lns
Accrued NonMtgLn Int.Recei.
Unamortized Yld Adj
Total Allowance
Unreal.Gains (Losses)
883
565
a
2,816
o
-1,376 Total Other NonMtgLn Assets
ITEMS RELATED TO INVESTMENT
Unamortized Yld Adj
Total Allowance
Unreal.Gains (Losses)
Total Other Inv.Sec.Assets
Real Estate Investments
Repossessed Assets
Unconsol.Subs.lnv.
Office Premises and Equip.
Other Assets (b)
Total Consolidated Assets
(a)
(b)
Mtge MutualFunds MktVal
Other Equity Sec.MktVal
Equities: MrkVal-Book
Purch+Excess SrvngRghts
Total Bal of Mtgs Srvcd
ARMs, Curr.Mrkt Indx
ARMs, Lagg.Mrkt Indx
F/R, Coup <8%
F/R, 8<=Coup<=8.99
FIR, 9<=Coup<=9.99
F/R,10<=Coup<=10.99
F/R,ll<=Coup
SECURITIES
-3,846
o
-1
3,845
o
15,561
o
22,992
99,735
2,599,251
o
o
o
7,791
641,018
62,897
14,392
4,615
56,760
199,278
157,824
145,252
2. COMPOSITION OF SCHEDULE CMR LIABILITIES:
FixedRate, FixedMaturity Deposits:
Orig.Maturity<=12Mos
13<=Orig.Maturity<=36Mos
Dep.
8al.Matur.in <= 3 Mos
Bal.Matur.in 4-12 Mos
Bal.Matur.in 13-36Mos
Bal.Matur.in 37+ Mos.
Other Deposits:
Transaction Accounts
MMDAs
Passbook Accts
Non-lnt Bearing DemandDep
Total Deposits
F/M F/R 8rwgs: Total
PM FR Brw Matur.0-3 Mos
PM FR Brw Matur.4-36 Mos
PM FR Brw Matur.36+ Mas
F/M VIR Brwgs: Total
PM VR Brw Position 1
PM VR Brw Position 2
PM VR FHLB Advances
Other FM VR Borrowings
Total Borrowings
Escrows for Assets Held
Escrows for Mtgs serviced
Other Escrows
Unamrtzd Yld Adj On Dep.
Unamrtzd Yld Ad] On BrW.
Other Liabilities
Total Liabilities
Minority lnt.Consol.Subs

351,211
17,009
12,094
380,314
104,008
249,009
16,541
10,756
366,551
1,085,812
403
120,078
1,953,158
11,563
10,927
o
636
284,513
o
o
284,513
o
296,076
1,246
15,980
89,151
-276
o
17,235
2,372,570
5
226,677
2,599,253
288,902
o
o
176
16
44,976
o
334,070
44,932
7,248
568
-1,227
24,594
-2,585
26,796
1,165
432
147
2,651
o
-1,201
-3,950
o
-3
3,947
o
6,173
o
23,500
102,516
2,388,139
o
o
o
8,187
669,569
65,625
14,876
4,668
58,847
208,934
164,687
151,932
243,832
14,714
11,107
269,653
141,738
104,589
14,189
9,137
443,400
1,009,984
459
50,161
1,773,657
11,592
927
10,000
665
284,529
o
o
284,529

296,121
1,440
17,588
112,352
-180
o
15,959
2,216,937
3
171,196
2,388,136
2501
88,18
6
o
179
39
46,950
o
135,352
46,986
7,202
705
1,050
20,028
-32,818
997
1,718
445
-20
1,254
o
929
-4,07
6
-4
4,069
o
5,69
6
23,318
97,062
2,262,332

o
o
8,714
704,478
68,437
15,386
4,645
61,449
221,573
nvm
154,081
10,956
9,747
174,784
39,523
117,409
10,349
7,503
410,279
955,431
332
55,025
1,595,851
11,160
467
10,000
693
285,413
o
o
285,413
o
296,573
1,019
19,831
168, III
-74
o
15,901
2,097,212
3
165,117
2,262,332
3rd Prior Qtr
====--============
200812
22,743
o
o
182
213
48,926

72,064
27,224
B,030
673
1,547
16,707
-35,854
-18,181
1,154
562
-457
2,004
o
169
-4,215
o
-3
4,212
o
7,025
o
22,000
95,854
2,240,373
o
o

9,496
739,347
71,436
15,929
4,798
63,473
233,747
181,712
168,252
129,482
3,958
8,033
141,473
2B,439
104,034
3,213
5,787
463,296
965,347
299
51,336
1,621,751
21,460
10,739
10,000
721
287,265
o
o
287,265

308,725
720
15,363
12B,619
-66
o
13,485
2,088,597
3
151,777
2,240,377
PAGE 28
4th Prior Qtr
=================
200809
20,802
o
o
219
4,138
50,085

75,244
22,402
8,354
642
492
14,262
-34,475
-17,831
947
624
-484
1,660
o
395
-4,312
o
1
4,313
o
6,979
o
19,568
101,918
2,222,111
o
o
10,249
766,137
74,265
16,416
4,996
64,707
241,267
18B,019
176,467
107,639
6,560
2,513
116,712
20,156
93,588
2,746
222
447,085
812,806
179
66,096
1,442,B78
150,914
140,165
10,000
749
297,442
o
o
297,442

448,356
1,474
20,929
156,028
-83
o
15,305
2,OB4,887
4
137,222
2,222,113
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
COMPOSITION AND OFF-BAL. SHEET POSITIONS OF SECTION CMR PORTFOLIO / Part 3 of 3 ($000)
DOCKET:
DATA AS OF:
Current Quarter
YRMO, Period End ....
3. Off-Balance Sheet Positions
Off-Bal.Sheet Position 1
Off-Bal.Sheet Position 2
Off-Bal.Sheet Position 3
off-Bal.Sheet Position 4
Off-Bal. Sheet Position 5
Off-Bal. Sheet position 6
Off-Bal. Sheet Position 7
Off-Bal.Sheet Position 8
Off-Bal.Sheet Position 9
Off-Bal.Sheet Position 10
Off-Bal.Sheet Position 11
Off-Bal.Sheet Position 12
Off-Bal.Sheet Position 13
Off-Bal.Sheet Position 14
Off-Bal. Sheet Position 15
Off-Bal. Sheet position 16
No.Positions Listed Above

4. SF 1st ARM Bal.w/Lifetime Caps
LifeCap-Coupon <=200bp
201bp<= LfCp-Cpn <=400bp

Subtotal, w/LifetimeFloor
Subtotal, w/o LftmCaps
Subtotal, w/o LftmFloors
5. SF 1st ARM Bal.w/Periodic Caps
Subtotal, w/Periodic Caps
Subtotal, w/PeriodFloors
Subtotal,w/o PeriodicCaps
Subtotal,w/o PeriodFloors
6. MF+NR ARMs w/LCap-Yd<300BP
200909
2216
4002
9512
and Floors
o
o
o
o
o
o
o
o
o
o
o
o
o
3
o
o
o
o
331,578
331,578
NA
36,842
NA
and Floors
331,578
331,578
36,843
36,843
United Western Bank
06679 TFR STATUS: COMPLETE
01/28/2010 CMR STATUS: COMPLETE
1st Prior Qtr 2nd Prior Qtr
================= ===========--=====
200906
(Contract Code)
2216
4002
9512
o
o
o
o
o
o
o
o
o
o
o
o
o
3
o
o
o
o
345,175
345,175
NA
38,352
NA
345,175
345,175
38,353
38,353
o
2502
200903
2216
4002
9512
o
o
o
o
o
o
o
o
o
o
o
o
o
3
o
o
o
o
427,958
427,958
NA
47,551
NA

47,549
47,549
o
3rd Prior Qtr
=================
200812
2216
4002
9512
o
o
o
o
o
o
o
o
o
o
o
o
o
3
o
o
o
o
431,214
431,214
NA
47,912
NA
431,213
431,213
47,914
47,914
o
PAGE 29
4th Prior Qtr
=================
200809
2216
4002
9512
o
o
o
o
o
o
o
o
o
o
o
o
o
3
o
o
o
o
445,260
445,260
NA
49,474
NA
445,260
445,260
49,472
49,472
o
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
COMPOSITION AND CONTRACT YIELDS OF SECTION CMR PORTFOLIO / Part 1 of 3 (%)
05:47 01/28/2010
United Western Bank
PAGE 30
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
current Quarter 1st Prior Qtr
Qtr 3rd Prior Qtr 4th Prior Qtr
-============ == =====-====
-,....
Grou{l 5
S&L
Grou{l 5
S&L Pct S&L Pct
S&L Pct Median Pct Pct S&L
=__ ======== -=:II ==--= =---== ==-== ===-= ==== ==--=-= ===- -- ====== ==
YRMO, Period End
200909 200906 200903 200812 200809
1. COMPOSITION OF SECTION CMR ASSETS:
(% Total Assets at End of Period)'
SF 1st Mtzes & MaS, Fixed Rate:
4.83 27 2.30 5.54 29 2.73
30YrMtg ns 2.09
5.22 38 2.75 3.85 39
.
3.53 46
15YrMtgLns .54
2.73 24 .73 2.40 27 .87 2.51 28 .82 2.13 33 2.22 28
BallooilMtgLns .04
.41 27 .00 .54 10 .00 .55 11 .00 .54 11 .00 .61 11
SF 1st Mtg Lns, All Fix 2.67
9.55 13 3.03 10.19 16 3.60 10.61 19 3.57 9.66 18 3.70 9.91 21
30YrSecMtgConventional
.78 .14 68 .89 .18 67 1.00 .13 71 1.03 .08 75 1.08 .11 75
30YrSecMtgFHAlVA
.00 .00 31 .00 .00 30 .00 .00 31 .00 .00 33 .00 .00 31
15YrSecMtg
.00 1.19 12 .00 .76 12 .00 .62 14 .00 .64 14 .00 .47 15
BalloonSecMtg
.00 .00 34
.00 . .00 35 .00 .00 35 .00 .00 34 .00 .00 34
SF 1st Mtg Sec, All Fix .78 2.67 32 .89 2.47 35 1.00 2.44 38 1.03 2.45 40 1.08 1.86 42
SF 1st Fix, All Lns+Sec
3.45 13.32 10 3.92 14.32 11 4.60 14.51 13 4.60 13.82 16 4.78 14.76 18
30YrMtg:Lns+Sec
2.87 6.41 27 3.19 6.20 29 3.73 5.80 38 3.78 5.37 40 3.94 5.28 44
15YrMtg:lns+Sec
.54 5.76 17 .73 6.18 17 .87 4.75 16 .82 4.17 19 .84 4.55 19
Bal10onMtg:Lns+Sec
.04 .76 19 .00 .90 9 .00 .91 9 .00 1.01 8 .00 .94 7
SF Rate: 14.17 10.74 65 16.06 10.72 70 21.02 8.43 83 21.39 9.83 82 22.26 9.86 84
NonTeaser ARMs,Currlndx
11.96 10.25 60 13.53 8.62 62 18.24 8.05 75 18.56 8.88 72 19.33 9.36 72
NonTeaser ARMs, LagIndx
2.21 .01 95 2.53 .01 95 2.78 .01 95 2.83 .01 95 2.94 .01 94
Teas.ARM subj2Intro.Rates
.00 .00 43 .00 .00 42 .00 .00 43 .00 .00 41 .00 .00 40
Teaser ARMs,currIndx
.00 .00 43 .00 .00 42 .00 .00 43 .00 .00 41 .00 .00 41
Teaser ARMs,Laglndx
.00 .00 50 .00 .00 50 .00 00 50 . .00 .00 50 .00 .go 49
SF ARMS, Teaser+NonTeaser
14.17 10.87 65 16.06 10.98 70 21.02 8.43 83 21.39 9.91 81 22.26 9. 6. 82
Securitized ARMS
4.48 .27 79 5.11 .27 79 9.06 .19 85 9.43 .16 87 9.75 .18 89
Non-Securitized ARMS
9.69 6.25 61 10.95 5.55 67 11.95 5.36 69 11.96 6.05 66 12.52 6.78 64
SF 1st MtgLns+MaS: Fix+Actj
17.62 31.75 19 19.98 32.42 25 25.62 33.34 38 25.99 33.60 35 27.05 34.75 36
Mu1tiFam+NResLns&Sec:
4.47 1.45 67 4.55 1.70 70 4.47 1.40 69
ARM Balloons .
4.50 .99 70 3.80 1.26 '65
ARM Ful1yAmortizing
12.44 2.26 86 13.11 2.28 90 13.97 1.98 92 15.01 2.75 91 15.33 2.78 90
. Fix.Rate Balloons .
.35 1.89 38 .33 1.88 37 .23 1.87 34 .22 1.43 35 .23 1.72 31
Fix.Rate Fu1lyAmortizing
5.44 1.72 83 6.06 1.74 85 6.47 1.80 87 6.89 1.61 90 7.02 1.47 90
Subtotal
22.70 16.31 72 24.05 15.81 72 25.14 14.42 74 26.63 14.63 77 26.38 14.63 80
Const.&LandLns, Adj.Rate
12.21 1. 64 93 14.82. 1.83 95 16.06 2.02 93 15.95 1.80 91 14.35 2.19 88
Const.&LandLns, Fix.Rate
1.62 .61 76 1.68 .62 76 1.48 .71 69 1.82 .51 71 1.82 .80 64
2ndMtgLns, Adj.Rate
.75 2.81 29 .91 2.53 30 .96 2.36 32 .96 2.62 32 .88 2.49 32
2ndMtgLns, Fix.Rate
.02 1.41 13 .02 1.49 8 .01 1.46 10 .01 1.61 11 .00 1.64 5
Total.Mta Lns, AdidtFixed
54.92 65.07 22 61.45 64.23 35 69.26 65.72 61 71.36 68.13 60 70.48 69.12 52
Total tg Lns, J. Rate
44.05 28.05 79 49.45 30.98 83 56.47 31.55 90 57.81 32.41 87 56.63 34.11 85
Total Mtg Lns, Fixed Rate
10.87 29.81 10 12.00 29.90 12 12.79 29.90 14 13.54 29.25 16 13.85 29.71 15
NonMtg commerical Lns, J;Uij ..
5.30 1.76 81 5.98 1.87 81 4.53 1.90 74 5.48 2.29 76 5.41 2.20 78
NonMtg Commercial
.79 .99 45 .90 .92 49 .98 .87 54 1.04 .90 54 1.06 .87 57
NonMtg Consumer Lns,Adj.
.. 23 .05 73 .25 .05 76 .26 .04 77 .06 .04 54 .07 .04 57
NonMtg Consumer Lns,Fixed
.05 .44 20 .05 .56 23 .02 .41 19 .02 .58 19 .02 .59 15
Total NonMtg Loans
6.38 7.76 46 7.19 8.06
. 45
5.79 8.21 44 6.59 9.01 44 6.55 7.73 47
Total Loans
61.30 78.91 13 '68.64 80.21 28 75.06 79.95 33 77.95 83.22 35 77.03 84.08 32
Col laterized Mortgage
Obligations:
.00 89 7.54 .00 93 9.35
Floating Rate
6.47
.00 93 9.81 .00 93 10.21 .00 93
Fixed Rate: Total
2.38 .95 65 3.05 .87 64 3.77 .66 69 4.06 .76 75 4.18 .58 77
F/R: Remaining WAL <=5
0
2.09 .45 65 3.05 .38 67 3.77 .34 71 4.06 .22
.
4.18 .05 77
F/R: Remaining WAL 5-1 Y
.30 .00 84 .00 .00 38 .00 .00 40 .00 .00 .00 .00 38
F/R: Remaining WAL >10y
.00 .00 45 .00 .00 45 .00 .00 45 .00 .00 48 .00 .00 44
Superfloaters
.00' .00 50 .00 .00 50 .00 .00 .49 .00 .00 49 .00 .00 49
InverseFloaters+SuperPOs
.00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50
other
.00 .00 50 .00 .00 49 .00 .00 49 .00 .00 49 .00 .00 49
Total CMOs
8.85 1.14 75 10.60 1.13

13.12 1.18 81 13.B8 1.27 86 14.39 1.24 86
CMO Residuals
.00 .00 50 .00 .00 .00 .00 50 .00 .00 50 .00 .00 50
Interest-Onli MaS
.00 .00 48 .00 .00 4B .00 .00 4B .00 .00 48 .00 .00 48
Y Str pped MaS
.00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50 .00 .00 50
Tota Mtg Der. Sec.
8.85 1.14 75 10.60 1.13 81 13.12 1.18 81 13.88 1.27 B6 14.39 1.24 86
Low-Risk
2.33 1.05 62 4.71 .81 66 8.70 .88 77 10.72 1.00 86 14.39 .89 89
High-Risk M gDerSec.
6.53 .00 96 5.89 .00 95 4.43 .00 90 3.16 .00 90 .00 .00 31
2503
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
COMPOSITION AND CONTRACT YIELDS OF SECTION CMR PORTFOLIO /
Part 2 of 3 (%)
05:47 01/28/2010
United Western Bank
PAGE 31
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS: COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
4th Prior Qtr
-================ ===--===--========= ================= =================

Groul? 5 Groul? 5 Groul? 5 Groul? 5
Groul? 5
S&L Med1an Pct SoL Med1an Pct SoL Med1an Pct SoL Med1an Pct SoL Med1an Pct
====== ====== === ====== ====== === ====== ====== === ====== ===== l::::==
YRMO, Period End .... 200909 200906 200903 200812
200809
1. COMPOSITION OF SECTION CMR ASSETS-continued: (% Total Assets at End of Period)
Cash, Deposits & Securities:
3.90 1.36 Csh,NnInDp,OyNightFF&RepO 21.86 1.16 95 12.10 1.29 92 72 1.02 1.26 39 .94 1. 42 35
Equity Securlties .00 .00 27 .00 .00 27 .00 .00 27 .00 .00 29 .00 .00 28
Zero-Coupon Securities .00.00 44 .00 .00 43 .00 .00 44 .00 .00 43 .00 .00 42
Gov't + Agency Securities .00 .03 44 .01 .01 46 .01 .01 51 .01 .01 49 .01 .01 50
TermF&Repo, Int.earn.dep. .00 1.25 16 .00 .62 16 .00 .51 16 .01 .26 27 .19 .31 44
structured Securities 1.67 .09 70 1.88 .11 75 2.08 .11 75 2.16 .09 77 2.25 .04 80
Other securities .00 .10 16 .00 .12 17 .00 .12 16 .00 .12 16 .00 .12 17
Total Cash, Dep.& Sec. 23.56 7.64 87 13.99 8.14 77 5.98 7.20 40 3.22 5.04 27 3.39 4.79 34
ITEMS RELATED TO MTG LNS+SEC
1. 46 55 1. 88 1. 42 70 2.08 Nonperforming . 1.77 1.19 74 1.22 .85 66 1. 01 .66 61
Accrued Mtg Int. ecelV. .25 .29 36 .30 .29 53 .32 .30 57 .36 .32 65 .38 .33 69
Advs. for Taxes and Insur .03 .00 79 .02 .00 79 .03 .00 84 .03 .00 83 .03 .00 86
Unamortized Yld Adj .05 .00 67 -.05 .00 37 .05 .00 65 .07 .00 70 .02 .00 64
Total Allowance 1.01 .61 69 1. 03 .61 75 .89 .55 75 .75 .50 72 .64 .49 65
Unreal. Gains (Losses) -.11 .04 5 -.11 .05 4 -1.45 .04 4 -1. 60 .00 4 -1.55 .00 2
Total Other Mtg Assets .88 1.20 37 1.12 1.00 54 .04 .96 15 -.81 .58 7 -.80 .49 5
ITEMS RELATED TO NON-MTG LNS+SEC
Nonperforming NonMtg Lns .03 .05 43 .05 .06 45 .08 .04 66 .05 .04 58 .04 .04 59
Accrued NonMtgLn Int.Recei. .02 .05 36 .02 .06 35 .02 .06 39 .03 .06 37 .03 .05 40
Unamortized Yld Adj .00 .00 79 .01 .00 79 .00 .00 33 -.02 .00 23 -.02 .00 26
Total Allowance .11 .15 41 .11 .12 45 .06 .11 36 .09 .12 44 .07 .10 43
Unreal.Gains (Losses) .00 .00 48 .00 .00 46 .00 .00 49 .00 .00 51 .00 .00 51
Total OthrNonMtgLnAsts -.05 .00 29 .00 27 .04 .00 62 .01 .00 60 .02 .00 59
ITEMS RELATED TO INVESTMENT SECURITIES
20 .00 .00 29 .00 Unrealized Gains (Losses) .00 .00 .00 33 .00 .00 32 .00 .00 81
Unamortized Yield Adj -.15 .00 2 -.17 .00 3 -.16 .00 3 -.19 .00 2 -.19 .00 2
Total Allowance .00 .00 50 .00 .00 49 .00 .00 49 .00 .00 49 .00 .00 49
Total OthrlnvSecAssets .15 .00 68 .17 .00 91 .18 .00 96 .19 .00 93 .19 .00 97
Real Estate Investments .00 .00 41 .00 .00 41 .00 .00 40 .00 .00 40 .00 .00 39
Repossessed Assets ,60 .21 65 .26 .20 56 .25 .12 62 .31 .12 64 .31 .12 66
Unconsol.Subs.Inv. .00 .00 33 .00 .00 33 .00 .00 33 .00 .00 35 .00 .00 34
Office Premises and Equip. .88 1.05 39 .98 1.05 46 1. 03 1.03 49 .98 .99 48 .88 1.07 39
Other Assets (b) 3.84 3.67 53 4.29 3.84 65 4.29 3.64 66 4.28 3.43 62 4.59 3.50 69
Total Consolidated Assets 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50
(a) Mtge MutualFunds MktVal .00 .00 41 .00 .00 41 .00 .00 42 .00 .00 41 .00 .00 42
Ot er Equity Sec.MktVal .00 .00 30 .00 .00 30 .00 .00 30 .00 .00 32 .00 .00 32
Equities: MrkVal-Book .00 .0.0 50 .00 .00 50 .00 .00 50 .00 .00 49 .00 .00 50
(b) Purch+Excess SrvngRghts .30 .01 79 .34 .01 60 .39 .01 84 .42 .01 87 .46 .01 85
Wtg.Avg.Srvng Fee (BP) 50.91 25.68 96 51.03 25.81 96 50.92 25.72 94 51.01 25.65 96 50.80 25.57 98
(% Total Balance Serviced at End of Period)
(b) Purch+Excess srvngRghts .30 .01 79 .34 .01 80 .39 .01
84 .42 .01 87 .46 .01 65
ARMs, Curr.Mrkt In x 9.61 .34 80 9.80 .39 77 9.71 .52 77 9.66 .64 77 9.69 .93 75
ARMs, Lagg.Mrkt Indx 2.25 .00 98 2.22 .00 96 2.18 .00 98 2.15 .00 98 2.14 .00 96
F/R, Coup <8% .72 12.68 16 .70 11. 67 20 .66 10.10 20 .65 3.48 36 .65 3.55 32
FIR, 8<=Coup<=8.99 8.85 42.75 14 8.79 41.51 15 8.72 41.01 17 8.59 39.65 17 8.45 38.22 19
FIR, 9<=Coup<=9.99 31.09 21.91 78 31.20 23.36 70 31. 45 2B.68 58 31. 62 33.80 43 31. 49 33.85 46
F/R,10<=Coup<=10.99 24.62 3.75 85 24.60 3.88 84 24.56 4.37 86 24.58 4.90 84 24.54 5.95 62
F/R,l1<=Coup 22.66 .68 95 22.69 .73 94 22.68 .66 91 22.76 .63 92 23.03 .69 92
2. COMPOSITION OF SCHEDULE CMR LIABILITIES:
FixedRate, FixedMaturity Deposits:
15.34 37 10.21 17.72 20 6.81 18.72 Orig.Maturity<=12Mos 13.51 12 5.78 18.88 12 4.84 16.24 9
13<=Orig.Maturity<=36MOs .65 10.25 5 .62 10.10 6 .48 9.76 7 .18 9.74 7 .30 10.09 5
.47 3.15 8 .47 2.85 8 .43 2.52 9 .36 2.41 11 .11 2.43 5
Subto aI, F/R F/M Dep. 14;63 35.88 6 11.29 36.06 7 7.73 36.98 8 6.31 37.63 9 5.25 35.44 5
Bal.Matur. in <=3Mos LOO 9.37 13 5.94 10.40 20 1.75 8.84 9 1.27 9.93 7 .91 8.66 7
Bal.Matur.in 4-12 Mos 9.58 16.67 22 4.38 15.40 6 5.19 16.35 10 4.64 16.92 12 4.21 16.46 9
Bal.Matur.in 13-36Mos .64 5.12 8 .59 4.65 8 .46 4.58 7 .14 4.75 8 .12 4.25 3
Bal.Matur. in 37+ Mos. .41 1.06 20 .38 1.12 19 .33 1.25 19 .26 1. 07 17 .01 .86 5
Transaction Accounts 14.10 4.99 90 18.57 4.70 96 18.14 5.00 96 20.68 5.10 96 20.12 5.26 94
MMDAs 41. 77 10.87 93 42.29 10.48 92 42.23 9.90 92 43.09 9.66 91 36.58 10.20 92
Passbook Accts .02 6.56 8 .02 6.20 9 .01 6.38 8 .01 6.11 8 .01 6.07 6
Non-Int Bearing DemandDep 4.62 3.28 59 2.10 3.02 33 2.43 3.01 43 2.29 2.92 39 2.97 3.11 47
Total Deposits 75.14 73.56 58 74.27 72.93 58 70.54 71.80 45 72 .39 70.94 54 64.93 69.39 30
F/M FIR Brwgs: Total .44 6.88 15 .49 6.69 13 .49 7.02 14 .96 8.03 16 6.79 7.79 42
FM FR Brw Matur.0-3 Mos .42 .90 40 .04 1.03 32 .02 .52 39 .48 1.55 39 6.31 1. 75 80
FM FR Brw Matur.4-36 Mos .00 2.59 12 .42 2.27 29 .44 2.31 32 .45 2.77 33 .45 2.70 31
FM FRBrw Matur.36+Mos .02 .30 39 .03 .61 34 .03 .34 37 .03 .31 40 .03 .26 40
F/M VIR Brwgs: Total 10.95 2.94 77 11. 91 3.05 76 12.62 2.87 78 12.82 2.66 79 13.39 3.25 78
FM VR Brw position 1 .00 .00 36 .00 .00 35 .00 .00 35 .00 .00 36 .00 .00 36
FM VR Brw position 2 .00 .00 44 .00 .00 44 .00 .00 46 .00 .00 . 46 .00 .00 46
FM VR FHLB Advances 10.95 2.10 80 11.91 2.16 81 12.62 2.35 80 12.82 2.35 81 13.39 2.94 81
Other FM VR Borrowings .00 .00 40 .. 00 .00 41 .00 .00 41 .00 .00 41 .00 .00 40
Total Borrowings 11.39 13.86 45 12.40 14.17 41 13.11 15.11 45 13 .. 78 15.44 45 20.18 18.45 59
Escrows for Assets Held .05 .13 38 .06 .12 38 .05 .10 36 .03 .08 34 .07 .13 36
Escrows for Mtgs Serviced .61 .00 88 .74 .00 87 .88 .00 92 .69 .00 91 .94 .00 89
Other Escrows 3.43 .00 96 4.70 .00 97 7.43 .00 97 5.74 .00 96 7.02 .00 97
Unamrtzed Yld AdjOn Dep. -.01 .00 12 -.01 .00 14 .00 .00 16 .00 .00 20 .00 .00 19
Unamrtzed Yld Ad] on Brw. .00 .00 48 .00 .00 47 .00 .00 47 .00 .00 46 ;00 .00 47
Other Liabilities .66 .87 33 .67 .86 34 .70 .87 40 .60 .67 25 .69 .88 36
Total Liabilities 91.26 90.62 67 92.83 90.69 86 92.70 90.91 81 93.23 90.96 .85 93.82 90.75 96
Minority Int.Consol.Subs .00 .00 86 .00 .00 66 .00 .00 66 .00 .00 83 .00 .00 82
Equity 8.72 9.38 32 7.17 9.07 13 7.30 9.09 19 6.77 8.95 16 6.18 9.13 5
Total Canso Liab.+Cap. 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50 100.00 100.00 50
2504
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
COMPOSITION AND CONTRACT YIELDS OF SECTION CMR PORTFOLIO / Part
3 of 3 (%)
05:47 01/28/2010
United Western Bank
PAGE 32
DOCKET: 06679 TFR STATUS: COMPLETE
DATA AS OF: 01/28/2010 CMR STATUS:
COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
================= ==============--== =================
=================
Grou" 5
Pct
Grou" 5 Grou" 5 Grou" 5 Grou" 5
S&L S&L Medlan Pct S&L Medlan Pct S&L Medlan Pct ,S&L Medlan Pct
====== ====== === ====== === ====== ====== === ====== ====== ===
====== ===-== ===
YRMO, Period End .... 200909 200906 200903 200812 200809
3. AVERAGE CONTRACT YIELDS: (Average Contract Yield

at End of Period)
SF F/R 1st Mtgs, 30-Year 6.46 5.93 81 6.49 5.92 86 6.41
72 6.40 6.27 61
SF F/R 1st Mtgs, 15-Year 5.81 5.64 62 5.88 5.64 62 5.91 5.71 55 5.81 5.89 44 5.78 6.02 35
SF F/R 1st Mtgs, Balloons 6.46 6.19 66 NA 6.20 NA NA 6.26 NA NA 6.32 NA NA 6.39 NA
SF F/R Convention'l 30Y MBS 5.48 5.50 44 5.48 5.54 40 5.49 5.55 39 5.50 5.54 46 5.50 5.54 46
SF NonTeas.ARMs:Curlndx 4.74 5.05 31 4.95 5.19 38 4.68 5.30 10 4.89 5.44 10 5.16 5.70 20
SF NonTeas.ARMs:LagIndx 4.39 5.40 20 4.75 5.66 25 4.94 5.75 22 4.96 5.87 19 4.99 6.12 13
SF Teaser ARMs: Curlndx NA 5.24 NA NA 5;54 NA NA 5.49 NA NA 5.64 NA NA 5.64 NA
SF Teaser ARMs: Laglndx NA NA NA NA NA NA NA NA NA NA NA NA NA 2.70 NA
MultiFam&NonRes BalloonARMs 83001.7200 83001.9000 83001.9500 83001. 9900 83002.5700
MultiFam&NonRes FulAmtzARMs 83001.2000 8300l. 2400 83001.1000 83001.0300 83000.8700
MultiFam&NonRes FIR Balloon 6.81 6.29 81 6.50 6.34 65 7.31 6.41 92 7.36 6.45 91 7.37 6.45 88
MultiFam&NonRes F/R FulAmtz 6.40 6.44 44 6.48 6.45 54 6.32 6.48 36 6.36 6.54 34 6.39 6.56 34
Const. &LandLns, Fix. Rate 5.46 6.11 17 5.87 6.17 26 5.89 6.35 23 5.84 6.53 20 6.25 6.75 23
Const.&LandLns, Adj.Rate 83000.9200 83000.7900 83000.7400 83000.6700
83000.4900
2ndMtgLns, Fix. Rate 7.23 6.97 66 7.22 6.96 64 7.61 7.03 75 7.63 7.03 75 NA 7.08 NA
2ndMtgLns, Adj.Rate 83000.1100 83000.0500 83000.0500 83000.0400 82999.8400
Lns, Fix.R 6.38 6.30 52 6.40 6.27 54 6.49 6.40 52 6.83 6.69 60 6.96 6.74 59
NonMtgCommercial Lns, Adj.R 83000.5100 83000.5000 83000.5000 83000.5700 83000.5000
Consumer Lns, Fixed Rate 6.42 7.35 32 6.40 7.32 30 7.00 7.30 40 7.03 7.46 37 7.11 7.37 43
Consumer Lns, Adj.Rate 83000.1700 83000.1600 83000.1300 83000.4300 83000.2600
Securities .00 .00 44 .00 .00 43 .00 .00 44 .00 .00 43 .00 .00 42
USGov't+ gency securities .79 1.12 47 .78 1. 04 45 .78 .53 50 2.11 1. 96 51 2.54 2.30 51
TermFF+Repos +.I?deposits .01 .20 19 .01 .15 19 .03 .14 25 .47 .29 56 2.81 1. 67 84
Other IE Securltles .00 3.35 16 .00 3.31 17 .00 3.37 16 .00 3.63 16 .00 3.60 18
DP:F/M F/R Bal.Matur .. 0-3mo 1.46 2.56 10 2.92 2.70 61 2.49 3.04 25 2.45 3.30 10 3.60 3.60 52
DP:F/M FIR Bal.Matur.4-12mo 1. 74 2.25 18 1.88 2.65 7 3.56 3.11 86 3.78 3.46 83 3.84 3.54 81
DP:F/M FIR Bal.Matr.13-36mo 3.00 3.11 39 2.99 3.34 15 3.05 3.61 5 3.59 3.84 14 4.26 3.93 83
DP:F/M F/R Bal.Matur.37+ rna 2.77 3.68 4 2.91 3.93 3 3.02 4.16 3 4.03 4.35 21 4.29 4.45 36
DP:Transaction Accounts .15 .48 15 .25 .57 27 .25 .58 30 .25 .70 25 .42 .91 26
DP:MMDAs .63 1.05 18 .65 1.16 16 .70 1.26 17 .79 1.59 13 .96 2.07 6
DP:Passbook Accounts .25 .69 16 .25 .74 14 .25 .79 12 .25 .96 8 .81 1.03 38
BW:F/M F/R Brwg Mat.0-3 Mos 3.94 2.44 75 .01 2.19 2 .01 1. 82 1 2.52 1.29 71 2.73 2.59 58
BW:F/M FIR Brwg Mat.4-36 Mo NA 3.63 NA 4.30 3.81 71 4.30 3.89 65 4.30 4.04 63 2.61 4.09 1
BW:F/M F/R Brwg Mat.36+ Mas 5.84 3.98 83 5.84 4.13 85 5.84 4.37 87 5.84 4.46 84 5.84 4.47 83
BW:F/M VIR Borrowings,Pos 1 NA NA
NA NA
NA
BW:F/M VIR Borrowings,Pos 2 NA NA
NA NA
NA
BW:F/M VIR Borrowings,Pos 3 NA NA NA NA
NA
BW:F/M VIR Borrowings,Other NA NA NA NA
NA
4. SF 1st ARM Bal.w/Lifetime

and Floors
LifeCap-Coupon <=200b .00 25 .00 .00 30 .00 .00 30 .00 .00 25 .00 .01 20
201bp<= LfCp-Cpn <=40 bp .00 .06 11 .00 .12 10 .00 .13 10 .00 .16 8 .00 .29 6
400bp< LifeCap-Coupon 12.76 8.50 66 14.45 6.75 69 18.92 6.79 80 19.25 6.89 77 20.04 7.07 78
Subtotal, w/LifetimeCaps 12.76 9.04 65 14.45 7.92 69 18.92 8.06 79 19.25 8.52 77 20.04 8.67 77
subtotal,w/LifetimeFloor NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Lag.I.ARMs,% w/LifeCaps 90.00 100.00 26 90.00 99.93 27 90.00 99.96 27 90.00 99.90 29 90.00 99.79 27
Curr.I.ARMs,% w/Lifecaps 90.00 98.99 21 90.00 99.53 21 90.00 99.60 21 90.00 99.63 24 90.00 98.88 22
5. SF 1st ARM Bal.w/Periodic and Floors
14.45 7.90 Subtotal,wl PeriodicCap 12. 6 8.71 66 71 18.92 7.91 80 19.25 8.16 79 20.04 8.42 80
Subtotal,wl Period FIrs 12.76 6.75 68 14.45 4.77 74 18.92 5.49 81 19.25 6.79 79 20.04 6.05 80
Lag.I.ARMs,% w/PeriodCap 90.00 95.76 38 90.00 98.25 34 90.00 98.26 34 90.00 98.45 37 90.00 95.15 41
Cur.I.ARMs,% w/PeriodCap 90.00 96.80 33 90.00 97.09 34 90.00 97.48 29 90.00 97.10 32 90.00 97.15 30
Av.PeriodicCap(BP),LagI 125.81 184.00 23 125.82 190.00 15 125.82 192. 00 15 125.83 194.07 16 125.84 190.00 19
Av.PeriodicCap(BP),CurI 176.37 200.00 19 176.29 200.00 16 176.15 200.00 19 176.67 200.00 17 176.74 200.00 20
6. MF+NR ARMw/LCap-Yd<300BP .00 .00 25 .00 .00 25 .00 .00 25 .00 .00 25 .00 .05 23
7. WtAv Months to Next Reset for Selected Adj.Rate Items
30 SF NonTeas.ARMs:Curlndx 13.90 18.19 29 14.52 20.30 14.98 22.03 32 15.87 20.10 34 16.76 20.55 33
SF NonTeas.ARMs:LagIndx 11.98 7.00 76 11.99 7.00 76 11. 99 7.00 72 11. 99 8.00 72 11.99 8.00 70
SF Teaser ARMs: CurIndx NA 15.00 NA NA 15.32 NA NA 21.72 NA NA 15.00 NA NA 15.00 NA
SF Teaser ARMs: LagIndx NA NA NA NA NA NA NA NA NA NA NA NA NA 1.00 NA
MF+NR BalloonARMs 37.00 2.00 80 37.00 1.00 79 37.00 1.00 83 37.00 2.00 79 33.00 3.00 76
MF+NR FulAmtzARMs 7.00 12. 00 43 8 . .00 12.00 44 7.00 12.00 44 6.00 12.00 43 15.00 12.00 59
8. WARM (months) for selected Fixed-Rate Items
SF F/R 1st Mtgs, 30-Year 263.60 320.10 6 264.69 321. 57 6 269.68 321.50 273.20 319.48 10 275.90 321. 96 11
SF FIR 1st Mtg+MBS,15Yr 61. 34 134.97 5 57.32 139.13 2 56.30 132.86 66.14 127.12 8 72.27 128.76 12
SF F/R IstMg+MBS,Balloon 14.82 59.64 6 NA 56.53 NA NA 62.96 NA NA 61.00 NA NA 64.95 NA
SF F/R Convent'l 30Y MBS 317.30 312.54 62 318.27 313.92 60 321.93 311.57 67 324.76 306.28 74 328.94 309.27 80
MultiFam&NR F/R Balloon 43.00 35.00 56 49.00 40.00 64 55.00 38.00 71 58.00 39.00 71 61.00 40.00 75
MultiFam&NR F/R FulAmrtz 8.00 72.00 12 184.00 73.50 91 46.00 72.50 24 47.00 68.00 29 49.00 69.50 31
Zero-Coupon Securities .00 .00 44 .00 .00 43 .00 .00 44 .00 .00 43 .00 .00 42
USGov't+Agency Secur., 174.00 3.00 98 175.00 2.50 98 172.00 1.50 98 175.00 2.5.0 97 185.00 2.00 98
TermFF+Repos 1.00 1.00 52 1.00 1.00 54 1.00 1.00 51 1.00 1.00 51 1.00 1.00 53
Other IE Securltles .00 29.00 16 .00 33.00 17 .00 29.50 16 .00 34.50 16 .00 23.00 18
DP:F/M F/R Matur.37+ mo 37.00 50.00 5 39.00 50.00 6 41.00 50.00 9 54.00 50.00 80 57.00 49.00 90
BW:F/M FIR Matur.36+ Mas 56.00 49.00 63 59.00 50.00 62 62.00 50.00 67 65.00 50.00 65 68.00 51.00 66
2505
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
INTEREST RATE RISK INFORMATION
05:47 01/28/2010
From OTS Interest Rate Risk Model
United Western Bank
DOCKET: 06679 TFR STATUS:
DATA AS OF: 01/28/2010 CMR STATUS:
COMPLETE
COMPLETE
PAGE 33
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4th Prior Qtr
-S&L GMrOeduP-anS=pc=t ===== Group '5 - -= GrouPS==
I S&L Median Pct S&L Med1an Pct S&L Med1an Pct S&L Median Pct
NW2s AFTER: ==== 200909 -= -== 200906 === =-== 20090j ==- ====== 200812 -= -=-- 200809
Upward Shock 300bp 11.05 11.05 48 9.0
2
6 1101 5078 233
7
10.85 10.50 56 9.18 9.35 44 12.19 9.22 74
Upward Shock 200bp 11.06 11.43 41 9. 1 10.72 10.87 43 9.29 10.05 43 12.58 10.25 72
it
Dwnwrd Shock 200bp .00 .00 50 'NAOO .00 50 .00 .00 50 .00 .00 50 .00 .00 50
Dwnwrd Shock 300bp NA NA NA NA NA NA NA NA NA NA NA NA NA NA
SP CHANGE IN NPV AFTER:
Upward Shock 300bp
Upward Shock 200bp
Upward Shock 100bp
.91 -1.10 88
.92 -.23 S8
.55 -.05 84
-.33 -1. 04 70
-.18 -.48 61
-.17 -.19 51
100bp
Dwnwrd Shock 200bp
Dwnwrd Shock 300bp
CHANGE IN NPV AS A % OF
BASE CASE NPV AFTER:
Upward Shock 300bp
Upward Shock 200bp
Upward Shock 100bp
100bp
Dwnwrd Shock 200bp
Dwnwrd Shock 300bp
CHANGE IN NPV AS A % OF
BASE CASE PV' ASSETS AFTER:
Upward Shock 300bp
Upward Shock 200bp
Upward Shock 100bp
No change
Dwnwrd Shock 100bp
Dwnwrd Shock 200bp
Dwnwrd Shock 300bp
-.22
.00
NA
9.15
9,47
5.66
-2.10
.00
NA
.93
.96
.57
-.21
.00
, NA
10.14
Post Shock NPV (%) 9. 92
Sensitivity Meas:Decline NPV .22
SELECTED MARKET RATES OF INTEREST
U.S. Treasury Bills (c):
3 month
6 month
Notes&Bonds (d):
2 year
3 year
5 year
7 year
10 year
30 year
Prime Rate
FHLMC Net

Ylds (e):
11th District COFI
-.18 41
.00 50
NA NA
-.02
.00
NA
-.01 49
.00 50
NA NA
-12.41
-5.91
-1.44
86 -4.44 -13.07 70
86 -2.64 -6.29 64
84 -2.27 -2.26 49
-.83 38' .16 .53 43
.00
NA
50 .00 .00 50
NA NA NA NA
-1. 45 89
-.59 88
-.12 86
-.10 41
.00 50
NA NA
12.21 29
11.41 34
.74 13
(b) :
0.14
0.18
0.40
0.95
1.45
2.31
2.93
3.31
4.03
3.25
4.69
5.62
1.41
-.42
-.25
-.21
.01
.00
NA
9.38
9 . 21
.18
-1.46
-.69
-.27
72
64
51
.07 43
.00 50
NA NA
11.48 23
10.78 33
.90 7
0.19
0.35
0.56
1.11
1. 64
2.54
3.19
3.53
4.32
3.25
5.03
6.23
1.83,
1.09
.96
.51
-.55
.00
NA
-.80 85
-.31 84
-.03 81
-.18 22
.00 50
NA NA
11.11 -10.10 86
9.99 -4.33 86
5.32 -.99 84
-5.71
.00
NA
1.08
.98
.52
-.56
.00
NA
9.76
9.21
.55
-1.23 16
.00 50
NA NA
-1. 08 86
-.46 86
-.12 81
,-.13 22
.00 50
NA NA
10.84 34
10.35 38
.71 37
0.21
0.43
0.57
0.81
1.15
1.67
2.28
2.71
3.56
3.25
4.40
6.00
2.00
.46 -1.08 74
.57 -.50 75
.32 -.14 74
-.33 -1.81
.06 -1.12
.15 -.47
83
84
81
-.58
.00
NA
-.21 23
.00 50
NA NA
-.39
.00
NA
,4.90 -14.23 75 -3.25
6.48 -6.13 76 .26
3.70 -1.63 '76 1.16
-6.75 -1.36 17 -3.24
.00
NA
.00 .00 50
NA NA NA
.43 -1.32 75 -.41
.56 -.62 75 .03
.32 -.21 75 .15
-.59
.00
NA
8 . 72
8.14
.58
-.16 22
.00 50
NA, NA
- . 41
.00
NA
9.96 30 12.52
9.35 37 '12.1'3
.82 29 .39
"0.11
0.27
0.37
0.76
1.00
1.55
1.87
2.25
2.69
3.25
4.49
6.01
3.13
.24 12
.00 50
NA NA
-18.27 84
-11.82 85
-4.97 82
3.11 11
.00 50
NA NA
-2.20 85
-1.29 85
-.57 82
.34 10
.00 50
NA NA
11.04 64
10.25 71
1.12 16
0.92
1.60
1. 78
2.00
2.28
2.98
3.38
3.85
4.31
5.00
5.84
7.03
2.69
Notes: Interest Rate Risk data is delayed.by at least one day 'due to system constraints. Please refer to the
Interest Rate Risk System for current data.
(a) If the 3 month T-Bill rate less than 3.00%, Downward Shock #3 is one-half the 3 month T-Bill rate. Otherwise,
Downward Shock #3 is 300 baS1S points.. ' .
,(b) All rates are as of the last daY,of quarter for the period presented. Exception: COFI is a weighted
average of the cost of funds for sav1ngs 1nstftutions in the 11th FHLS District and is for the last month of the
period presented. ' . ,.'
(c) Quoted on discount bas1s and annua11zed uS1ng a 360 day year.
(de! Yields on actively traded issues adjusted,to constant maturities.
( FHLMC Required Net yields for 30 day .
(f Under a propietary agreement with Fann1e Mae, OTS cannot d1s1ose these rates.
2506
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
EXAM RATIO INFORMATION
United Western Bank
DOCKET: 06679 TFR STATUS: COMPLETE
PAGE 34
DATA AS OF: 01/28/2010 CMR STATUS: C9MPLETE
Current Quarter 1st Prior Qtr 2nd pr10r Qtr 3rd Prior Qtr 4th Prior Qtr

Months in Period
YRMO, Period End ....
S&Ls in Peer Group
200909 200906 200903 200812 200809
85 80 82 80 76
CAPITAL ADEQUACY - PCA REQUIREMENTS:
Total Risk-Based capital
Tier 1 Risk-Based Capital
Tier 1 Leverage Cap (Core)
Tangible Equity Capital
205,788
228,228
228,228
228,228
EARNINGS:
Interest&Dividend Income
Interest Expense
Net Interest Income

Fee Income
Corelnc:Before Loss Prov
Provisions for Loss
Corelnc:After Loss Prov
Net Non-Core Income
Income Before Tax
Income Tax
IncTax Before extr Item
Extraordinary items
Netlnc(-)Atrbl To Inst/Nct
Netlnc(-)Atrbl To Nonentro
Netlnc(-)Atrbl To Sav. Inst
24,516
7,242
17,274
17,349
150
658
433
12,166
-11,733
708
-11,025
-4,591
-6,43
6
'-6,434
o
-6,434
Current Quarter
Groul? 5
S&L Med1an Pct
YRMO, Period End. . . . 200909
CAPITAL ADEQUACY - PCA REQUIREMENTS:
Total Risk-Based Capital 11.07 13.21 12
Tier 1 Risk-Based capital 9.82 11.96 16
Tier 1 Lever Capital (Core) 8.77 8.85 47
7.03

EARNINGS: (as a % of Avg. Assets)
Interest & D1 vid",nd Income 3 . 94
Interest Expense 1. 16
Net Interest Income 2 .78
G&A Expense 2.79
Goodwill Amortization .02
*Fee Income ;11
Corelnc:Before Loss Prov .07
Provisions for Lo",s 1.96
Corelnc:After Loss Prov -1.89
Net Non-Core Income .11
Income Before Tax -1.77
Income Tax -.74
IneTax Before Extra Item -1.03
Extraordinary Items .00
Netlnc(-)Atrbl To Inst/Nctl -1.03
Netlnc(-)Atrbl To Noncntrol .00
Netlnc(-)Atrbl To Sav lnst. -1;03
3.55
19.32
8.23
4.81
1. 78
3.02
2.54
.01
.40
1.07
.62
.32
.09
.47
.12
.35
.00
.35
.00
.35
78
61
90
13
16
36
60
68
18
12
76
18
56
19
10
20
50
20
50
20
192,671
172,367
172,367
172,367
25,851
6,769
19,082
15,302
84
610
4,306
6,710
-2,404
-45,557
-47,961
-18,642
-29,319
o
-29,319
o
-29,319
201,229
184,993
184,993
184,993
26,067
6,605
19,462
13,214
84
496
6,660
4,337
2,323
857
3,180
830
2,350
o
2,350
o
2,350
1st Prior Qtr 2nd Prior Qtr
================= =================
S&L Pct S&L Pet
10.17
9.07
7.21
7.37
23.84
37.79
4.41
1.16
3.26
2.61
.01
.10
.73
1.15
-.41
-7.77
-8.19
-3.18
-5.00
.00
-5.00
.00
-5.00
====== === ====== ===
200906
13.14 6
11. 83 6
8.68 17
3.48
17.83
7.39
4.92
1. 92
3.00
2.58
.01
.40
.88
.65
.18
.17
.46
.11
.42
.00
.42
.00
.42
84
65
95
18
9
75
50
62
20
41
66
33
1
3
2
4
49
4
49
4
10.45
9.60
8.06
5.40
24.19
19.09
4.64
1.18
3.46
2.35
.01
.09
1.18
.77
.41
.15
.57
.15
.42
.00
.42
.00
.42
200903
13.59 8
12.32 12
8.86 31
3.26 76
13.75 67
8.07 81
5.04 22
2.21 9
2.87 86
2.44 46
.00 63
.37 21
1. 02 59
.56 61
.28 56
.14 51
.51 54
.13 54
.35 55
.00 50
.35 55
.00 48
.35 55
189,536
174,034
174,034
174,034
28,86.1
7,123
21,738
13,488
84
410
8,576
3,347
5,229
-484
4,745
1,454
3,29
6
NA
NA
3,291
3rd Prior Qtr
Graul? 5
S&L Medlan Pet
10.55
9.68
7.65
3.34
17 .20
13.54
5.17
1.27
3.89
2.41
.02
.07
1.54
.60
.94
-.09
.85
.26
.59
.00
NA
NA
.59
200812
13.19 14
12.05 17
8.45 30
2.96 57
11.25 60
7.06 71
5.32 39
2.39 6
2.91 91
2.42 49
.01 64
.35 17
1. 07 77
.63 46
.30 72
.09 12
.47 69
.05 66
.41 66
.00 50
NA NA
NA NA
.41 66
170,994
158,621
158,621
158,621
29,020
7,243
21,777
13,766
84
822
8,749
6,805
1,944
421
2,365
502
1,863
o
NA
NA
1,863
4th Prior Qtr
================
Groul? 5
S&L Med1an Pet
10.64
9.82
7.03
3.62
16.42
18.99
5.30
1.32
3.98
2.52
.02
.15
1. 60
1. 24
.36
.08
.. 43
.09
.34
.00
NA
NA
.34
200809
12.65
11.59
8.44
12
22
14
2.31 76
8.98 62
7.13 83
5.46 38
2.50 5
2.99 92
2.49 54
.01 63
.47 18
1.18 76
.46 67
.55 48
.06 51
.53 45
.12 45
.34 50
.00 50
NA NA
NA NA
.34 50
Int EA/lnt Brng Liablties 109.20 109.20 50 104.32 109.56 20 105.24 i09.12
22 104.75 108.45
17 105.01 108.94 18
LIQUIDITY/ASSET LIABILITY MANAGEMENT:
** Pre-Shock NPV % PVof Asset 10.14 12.21
** Post-ShoekNPV Ratio 9.92 11.41
** Sensitivity Meas:Decline NPV .22 .74
2.95
Total Nonint Exp./Avg.Assets 2.82
Net Income/Avg Total Equity -12.94
Net Losses/Avg.TotILns&Lease .91
Earn Coverage of Net Losses 3.21
ALLL/Total Loans & Leases 1.92
NonperfLoans & Leases/ALLL 161.31
3.27
2.65
3.13
.75
5.27
1.24
215.13
29
34
13
9.38
9.21
.18
36 3.49
55 2.63
19 -69.74
52 .67
37 7.25
77 1.43
41 184.83
11.48
10.78
.90
3.21
2.68
3.83
.62
7.24
1.18
199.83
23
33
7
9.76
9.21
.55
74 3.66
48 2.39
4 5.93
54 .83
50 5.86
68 1.17
46 246.62
** Displayed as NA if the institution has not filed section CMR.
2507
10.84
10.35
.71
3.06
2.47
3.22
.53
6.90
1.09
159.76
34
38
37
8.72
8.14
.58
81 4.12
48 2.45
67 9.11
61 .19
46 26.45
56 1. 08
67 155.99
9.96
9.35
.82
3.11
2.49
3.02
.59
4.20
1. 05
141.16
30
37
29
12.52
12.13
.39
90 4.20
46 2.55
80 5.35
21 .30
88 4.10
52 .94
52 152.80
11.04
10.25
1.12
3.17
2.50
3.36
.31
5.17
.98
124.65
64
71
16
89
.53
62
45
45
45
57
OFFICE OF THRIFT SUPERVISION - MIDWEST. SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ASSET QUALITY - SUPPLEMENTAL DETAIL
05:47 01/28/2010
United Western Bank
PAGE 35
DOCKET: 06679 TFR STATUS:
DATA AS OF: 01/28/2010 CMR STATUS:
COMPLETE
COMPLETE
Current Quarter 1st Prior Qtr 2nd Prior Qtr
===========200909 ===========200906
=================
YRMO, Period End ....
SINGLE-FAMILY LOAN DELIQUENCY LOAN CHARGE-OFF DETAIL
LOANS PAST DUE 30-89 DAYS AND STILL ACCRUING: ($000 at End of Period)
12,643 PermMtg,1-4 Unit 14,940
0
Revo1v Open End
First Liens 14,94
0
0
Junior Liens
o
12,643
o
LOANS PAST DUE 90+ DAYS AND
PermMtg,l-4 Unit
Revolv Open End
STILL ACCRUING: ($000
7,20&
at End of Period)
6,601
o
6,601 First Liens
Junior Liens
NONACCRUING LOANS:
PermMtg,1-4 Unit
Revolv Open End
First Liens
Junior Liens
NET GVA CHARGE-OFFS
PermMtg,1-4 Unit
Revolv Open End
First Liens
Junior Liens
($000 at End of
7,204
o
Period)
13,
13,
& CHANGES IN SVA'S ($000
27
o
27
o
o
12,621
o
12,621
o
During Period) 60
o
60
o
200903
13,718
o
13,718
o
6,277
o
6,277
o
11,456
o
11,456
o
82
o
82
o
Current Quarter 1st Prior Qtr 2nd Prior Qtr
================= =================
===== ==== === ==== == --==== ==
YRMO, Period End.... 200909 200906 200903
SINGLE-FAMILY LOAN DELIQUENCY LOAN CHARGE-OFF
LOANS PAST DUE 30-89 DAYS AND STILL ACCRUING:
PermMtg,l-4 Unit 4.14 1.16 91
Revolv Open End .00 11
First Liens 4.38 1.15 91
Junior Liens .00 .54 12
LOANS PAST DUE 90+
PermMtg,1-4 Unit
Revolv Open End
First Liens
Junior Liens
DAYS AND NON ACCRUING:
5.70 1.75
RATES OF GVA CHARGE-OFFS
PermMtg,1-4 Unit
Revol v Open End
First Liens
Junior Liens
.00 .45
86
13
80
15
6.04 2.13
.00 .61
AND CHANGES
.01
.00
.01
.00
IN SVA'S:
.07 20
.00 29
.05 30
.00 31
RATES
3.38
.00
3.59
.00
5.13
.00
5.45
.00
.02
.00
.02
.00
(% of Outstanding
Gross Loans
1.12 93 3.51 1.13 92
.48 14 .00 .55 13
1.00 91 3.72 1.11 89
.48 16 .00 .37 15
1.56 89 4.54 1.26 88
.43 12 .00 .34 16
1.87 87 4.81 1. 48 81
.41 18 .00 .29 19
.06 26 .02 .05 37
.00 27 .00 .00 33
.03 39 .02 .02 48
.00 31 .00 .00 31
3rd Prior Qtr 4th Prior Qtr
================= =================
200812 200809
14,891 12,634
0 0
14,891 12,634
0 0
5,888 6,009
0 0
5,888 6,009
0 0
9,469 7,950
0 0
9, 468 7,950
0
-73 519
0 0
-73
519
0 0

S&L Pet 8&L Pct
====== ====== === ======
200812
200809
in Each Category)
3.B8 1.08 92 3.21 .89 90
.00 .50 12 .00 .51 13
4.11 1.12 89 3.39 .81 90
.00 .58 15 .00 .23 15
4.00 .98 87 3.55 .89 90
.00 .23 17 .00 .21 15
4.24 1.09 80 3.75 .90 83
.00 .17 21 .00 .14 21
-.02 .04 1 .13 .02 78
.00 .00 35 .00 .00 35
-.02 .02 1 .14 .01 83
.00 .00 31 .00 .00 33
Current Quarter 1st Prior Qtr 2nd Prior.Qtr 3rd Prior Qtr 4th Prior Qtr
=============200909============200906============200903============200812============200809
YRMO, Period End ....
PAST DUE LOANS: GNMA BUY-BACKS, US GUARANTEED,
30-89 DAYS PAST DUE:
GNMA BuyBckLNS 2,524
Held for Sale 14,385
USGuar Ex GNMA BB 3,552
All Lns 30-89 Days PD 60,134
90+ DAYS PAST DUE:
5,254 GNMA BuyBckLns
Held for Sale 7,010
USGuar Ex GNMA BB 1,778
All Lns 90+ Days PD 7,328
NONACCRUAL:
0 GNMA BuyBckLns
Held for Sale 11,174
U8Guar Ex GNMA BB 50
All NonAccrual Lns 38,655
AND HELD-FOR-SALE ($000
1,950
10,286
3,751
73,592
4,743
6,401
1,636
6,725
0
10,325
101
33,523
2508
End of Period)
2,157
10,498
3,233
38,806
4,448
6,079
1,630
6,408
0
14,042
1,090
37,074
901
10,909
3,951
25,910
4,236
5,878
2,177
6,513
53
12,631
915
19,366
1,263
17,934
4,353
32,926
5,274
5,998
1,326
8,275
o
6,088
816
13,217
05:47 01/28/2010
OFFICE OF THRIFT SUPERVISION - MIDWEST SUPERVISORY REGION
5-QUARTER UTPR REPORT FOR QUARTER ENDED 200909
ASSET QUALITY - SUPPLEMENTAL DETAIL
United western Bank
DOCKET: 06679 TFR S'rATUS:
DATA AS OF: 01/28/2010 CMR STATUS:
COMPLETE
COMPLETE
1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr
PAGE 36
4th Prior Qtr
Current Quarter
=
====-======== ===r=======--== ___ =====
Group '5
5&L
Group 5 Group 5 Group 5 Group 5
S&L Median Pet Median Pet S&L Median Pet S&L Median Pet S&L Median Pet
-==-= ===- === -===== =- =-- ===-= -==- __ = ====== = ==--=== ====-== ==
200903 200812 200809
YRMO, Period End .
200909 200906
PAST DUE LOAN RATES:
GNMA BUY-BACK,
US GUARANTEED, AND ('II of Total Assets)
30-89 DAYS PAST ,DUE:
.10 .00 96 .08 .00 96 .10 .00
GNMA BuyBeksLns
96 .04 .00 96 .06 .00 96
Held for Sale
.55 .00 97 .43 .00 98 .46 .00 98 .49 .,00 98 .81 .00 98
USGuar Ex GNMA BB
.14 .00 98 .16 .00 98 .14 .00 98 .18 .00 98 .20 .00 98
Tot All Loans 30-89 Days PO 2.31 .83 91 3.08 .68 95 1.72 .82 75 1.16 .65 65 1.48 .66 75
90+ DAYS PAST DUE:
.20 .00 96 .20 .00 96 .20 .00 96
GNMA BuyBeksLns
.19 00 96 .24 :00 96
Held for Sale
.27 .00 98 .27 .00 98 , .27 .00 98 .26 .00 98 .27 .00 98
USGuar Ex GNMA BB
.07 .00 98 .07 .00 98 .07 .00 98 .10 .00 98 .06 .00 98
Tot All Loans 90+ Days PD .28 .00 81 .28 .01 82 .28 .00 90 .29 .00 87 .37 .00 93
NONACCRUAL:
.00 49 .00 .00 49 .00
GNMA BuyBeksLns
.00
.00 49 .00 .00 97 .00 .00 49
Held for Sale
.43 .00 97 .43 .00 98 .62 .00 98 .56 .00 98 .27 .00 98
USGuar Ex GNMA BB
.00 .00 81 .00 .00 83 .05 .00 95 .04 .00 95 .04 .00 9'3
Tot All NonAeerual Lns 1.49 1.51 47 1.40 1.35 53 1.64 1.20 65 .86 .90 48 .59 .69 41
ASSET QUALITY SUMMARY EXCLUDING US GUARANTEED PORTION OF DELINQUENT' LOANS AND GNHA BUY-BACK LOANS:(%
Total 30-89 Days PD 2.08 .83 88 2.84 .65 93 1.48 .82 75 .94 .65 64
Total 90+ Days PD .01 .00 59 .01 .00 56 .01 .00 59 .00 .00 58
Total Nonaeerual 1.49 1.51 47 1.40 1.35 53 1.59 1.19 63 .82 .90 44
Total NP Loans 1.54 1.58 48 1.45 1.49 48 1.68 1.25 65 .94 .99 45
of Total Assets)
1.23 .66 74
.08 .00 75
.56 .69 41
.71 .76 48
GENERAL ALLOWANCE AND ALLL AS A PERCENT OF NONPERFORMING ASSETS LESS US GUARANTEED
PORTION OF LOANS AND 44.00 47.17 43 72.40 61.66 55 83.88 68.55 56
GENERAL ALLOWANCE AND ALLL AS A ,PERCENT OF NONPERFORMING ASSETS LESS LOANS HELD FOR
SALE IN NONPERFORMING 41.25 70 79.35 42.64. 70 65.03 49.84 60140.75 61.66 74 116.25 64.99 65
lEA/lCL SUMMARY ADDING BACK US GUARANTEED PORTION OF LOANS AND GNMA BUY-BACKS IN
NONACCRUAL STATUS OF THE N\lMERATOR: '
lEA less LnsrvRghts/ICL 109.11 115.56 23 104.13 114.41 12 105.00 114 95 12 104.48 114.81
9 104.63 114.04 11
lEA+BOLI+I/O/ICL
110.62 116.96 23 105.71 114.99 8 106.69 115.62 14 106.19 115.50 12 106.39 115.19 11
PURCHASED IMPAIRED LOANS HELD FOR INVESTMENT ACCOUNTED FOR UNDER SOP03-3:
YRMO, Period End ..
Current Quarter 1st Prior Qtr 2nd Prior Qtr 3rd Prior Qtr 4thPr;ior Qtr
200809

($000 End of Period)
0 0
0 a
0 a
S&L Median Pet 5&L Median Pet S&L

=== ====-= =-==-_ =so
.00
.00
.00
.00 46
.00 46
.00 48
(%
.00
.00
.00
of Total Assets)
.00 46
.00 46
.00 48
2509
.00
.00
.00
== ======= ==- --=
200903 200812
a 0 0
0 0 0
0 a 0
Median Pet S&L Median pet S&L Median Pet
===- --= --====
==--= == =---=:III ___ =-=
.00 46
.00 46
.00 48
.00
.00 '
.00
.00 46
.00 46
.00 48
.00
.00
.00
.00 46
.00 46
.00 48
TabC
Exhibit 92
2510

J
. . .... lamesB..lieophls
Chaim:usn,.Presldent& CbiellkeeutlveOInaer
, UlliteQ'WestemBIdc;
. . .
BANCORP
,
ianuary tl,,20n
Mt.Philip A",Gerbiek
&glonal Pit.tot
Attention:Mt.NieholasJlYer
As$istantDlteQtOt
omce Repon
.
2001Junipero Serra,Boulevard
Stilt" 65P
DalyCity, CA.9401+lB97
720.956.6576
ji1lt1"b@
k
Cbtn.
Jhn
and Desistregardiq United
;r.r.. ",


:lanuat '10. 2011. -(the' .Agreement'!) WeStetJi ,InC" (the
:EQ.\ii",MQt InQy. (l.he Qbase,el':P)lOl1SM")
sixth thin8$. 1)Iat m
f'btbar ftom d&Jlt$ the. LQM .. Documents (as .defUtedin,tJ1e:
F
' ..... i.."'., ......... 'A .-........... _'t) o' 'n" "', ........... fttoffue'g:"''' ,Fo .... PiII:rG'ricel')isol ........ .;. n"':fa" . {" ..... .;1. .. r .. , tb" 'S
. '. '.' . . . ..
:ForbearanGe
.' untn t11e P:ft
(iJ-ihtertd, ofbusirie.Ss,onFebruaf)t 2011. or (ii)the occurrence' other than the Sixth
au:YQf LPM..
to, be.entered intC) bytheSiXthFOrbeantnce
JPido.rgaIl; mw .au.
Willi at least two ihvestPri, on or Wfore 31f 2010 Withsu:dt agreement
......... t' Jf. . '" . '':''':v' eShYimt ' .... sueh anchotwvestots' of no less than, ih9,1': .... !1U, , .. 'd'.. "11 iI4. ... k,. .'
pJ. V. V .wug .1.01' . . U.' .... '.', ...... .... . . , .. ' , ...... ... "." ,."" .:4W ec""tv:!';1"'.7.
$2QOmUIion..Ofne.w iJiQJ)ey ..
A$youmow
t
the.
JII.. LoP; P.
(bUe.otive1Y;ctlie "Oak Hill Anchbt In:vestot")" LOvell MbtilickEqtrltyPattnets: m LP .and Lovell
JIi7A:LP \ile
lhe Oak HUi ArichOtlri,VesfOf. the "U::.atiAtlobb.iI1ivest6rS'tt)" LLC (the
l;U1d llenry C'i Gr:()UP'
<each!>! the- OakHiUAti.eM'f'Inwswt" the. Lovell Mibniek Anohor Inve$t(it and, the. 'DUques AliehOf'
vw.:w.! dmtet

.teb ;i &.t'303J9();Q"-2 .

Messrs,.G.erbick and Dyer
OfficeotThrlftSupervision.;Western Region
january IIi loll
page2of3
ati tuve$tors;,). PmSl,Uirtt to
Agreement,the Company will seek to raise in the aggregate at least $200,000;000 but not more than
$20$,000,1300, and the.U;lac1 AfichorJuvestors Will each ofcO)::\lIQon
par value $0.0001 per . share; of the Company (the "Common.StoclC') for $0.40 per share, for afofal
irlvestmel1tof$94,OQ(),OOO (the AncborI:Qvest.rrtent").'l'he will PJirchase7,SQO, QQO
shares of Common. Stock for $0040. per share, foratotal.investment Duques. will
putohast':lS,OOO,OOO sl@:elOofCotmnQnStockfor $0040 per share, for
In addition; each Anchor Investor will.each receive warrants to purchase 10.0% of the number of shares
of Common Stock that theYP'\lrchased nnc:ietthe Inye.stn'Hmt
ThCOrlJ.P$Y prevIQ\l.sly provided you :with a non-objectionlettet 9, 2011. wllet eitiU1e
Company sought your non-objection to the Company. making the Fiftll Forbearance Interest Payments
and th as such tel'fq!) defin;edjn the Fif1:h:Forbeatance Agreenlegt; .A$ ()
the date of this letter,the Compan;y-hasnotreceived any.response. to its I1ori-{)bjectionrequest.
The Company now requests essentially the same it previouslymadeJn its November 9,
20Urton-pbjectiqn letter--tp make interest only payments for the rtlonthsofNovernbcr
2010 and January 2011 arid to. pay the CapitalProceeds Payment (as defl11ed in both the Fifth
Forbi.lJ'auceAgteerne.nt atid Sixth Parbearane Agteetnent).
Pursllatit to Section 5,A,. of Ute Sixth l"orbe.arahce A,greemenf;the Cornparty witt pay Jl'Mqrganmonth!y
interest payments for the months of Noverilberand December of2010tind Jaliuary of2011 (the"SiXth
Fotbearance Interest h()wever. that the Sixth Forbearance Interest Payments are
subject to the Company's prior receipt of the writtennCllliobjection of the Office of Thrift Supervision
(the "dTS").
'Th.CQrnp@y hereby qgain reqtleststh written l1011-9bjegtiol1 ft9111 file .ors for the CompaJlyt.otnake
interest only for the monthSofNoVertiberandDec.enibet2010 and January 1011.
Section 5:G.ofthe Sixth Forbearance Agreementl'i'Ovidesthat the COnlPany wilt cause tbeproceeds of
. Stated Gapital Ra,ise(a$ qefi11ed in the Sixtl,1 land wl1i.ch .incluqes th,e.
proceeds raised by contemplated offermgpMr:mantto the!ri.veSfnlent Agreement
descdbed above) to be used;fitst .artd foremost; to pay off aU the Liabilities (as defmed in the Sixth
Forbearance Agreement) the Cornpanyowes to JPMotgan uI1c1er the Loan DocunieI1tS. provided,
howe.ver,thattbe Liabilities untJer the Loan Docutnents qeemedto if:{AJ on. or
before .February 15, 2011. the Company pays toJPMorganan amount from.the. proceeds of the Stated
Capital Raise equal to the sUm of: (which a$5,687.500discount off the
curtent outstaridingprincipal balance). (ii) all accrued but unpald interest dlle under the Loan DoCufuents
.ati4(jiijallother fees, costs . and expense& tbe:r..oan .Documeuts {(i);. (ii) and
the "Capital Proceeds Payment"); and (B) no Forbearance Defallit (as defU1d in the Forbearance
Agreemem} Occurs prior to receipt oftlteCapita,l PtoceedSPaYlrient.. The payment by theColllpany (lfthe
CapitalProeeedsPayrnent to JPMorgan is subject to prior receiptoftbe written non'"
objection of the Ot'S.
the Company lterebyreq'!lests yourwtlttennon-objection:to the COqIpany tnakingthe CapiuiJ,Proceecls
Paymentto JPMorgan which is $ubjectto thecortipletionofthe offering pursuant to the ternis. and
conditions hl
2512
Messt'!!.OerbickandDyer
Office of Thrift .supervision. Western Region
Januaryllj2011
page30f3
The. Company!s securing of JPMorgan?sagreement to extend the. forbearanceperioduntil.February 15,
2011 will Company with the add#ion:al U1,lleitlgetnng the
the Investment Agreementcompleted. We look forward to working with you on that endeavor;
Sincerely,
lamesR. Pe()ples
Chaiman,Presideritand CEO
Bank.
00: GuyA Gibson
Theodore ;r. A,ba,riQtes
EnclosUre
2513
TabC
Exhibit 92 A
2514
a ~ . : - . .',. a" : ~ . ~ , ' , ~
i
r
2515
Principal ... i-,,,. ,." Ii." "" ....,.-; ...................... l.' t,., , ....... jI . '''-'_'!J
I:Q..te.test . . '- .'.",.: :.." . ...;.
TOTA!., ........... " .............................................. .
$ 16,250,OO().QO
$
$
D. ," under the Credit Agreemel1t and LOCNote are secured,
without limitation,pUrstiantto that certain! (i)Coi1t.inuiDgPle(ige Agreemetl'4dated 29,
2007, execu.tc1 by Bott()werinfavor'ofLender, bytlleCoUateraLasdefined therein, including;
WesteolBankstock (the UUWBStockPledge Al;Veernenf');
(ii)ContiD:UingPledge Agretrtm. i4t.tec:la,s of J8.1luary 15,201 Q,execllted by Borrower in favor or
Lnder, by the Collateral asdefine4therein, includin&without limitation; AceountNo;80492211
held at First SouthwestCoffipa11y (as amended the Securities
Agre<lPlent");a'Q.d(iii).ContinuingPlellge 15, 20lQ"executed by
Equi,.Mo! Holdings, Inc. in favor of by the Collateral as defined threin,. inclu..dID.g, Wiilitlut
AccountNo. 29718794 SouthwestCOttlpany (as the '!Equi-Mor
Secu:dties ,ACCqunt }'iledgtl Agreement").
E. ,First Southwest .L.ender;.and ot Pledgor {}iSappliaple )entered
iIito that certs,in.:(i) Conttol dated Janl.\atY .15, 201 with respect to AccountN6,
80492211 held at First Southwest Company (asamendedth ''Borrower SeC1lrl,ties Control
Agreement");a.nd,(i.i) CQntrolAgreement,datedJanuary 15, to Accoll11iNo,
i9718794 bel<l atFitst S()1.lthwestCompany{as amended the .. Mor Securities Conttol
Agreement"). .
F. 'Th Credit AmendmenWorbeatlUJ.ce LOC
Notes,UWB
Securities AccountPledge Agr(m1ent,]}otrower SectttitiesContrQl Agreement. Atlf1
Control Agreement, and all other instruments, agreements aruldocumentsreferenced in
Qrexecutedanddelivered mconnectionwithariyof including all amet1i:hnellVl and
. renewals thereOf, ate collectively hereiilafter (efeued to as ,
G. . . Borrower previollslydefaulted underthe terms oIthe Credit Agreement /:lsaresult of
entry into Memorandums OfUndetstandingwiththe ()fftceofThrlft SuperviSioIi .
Bon'oW(!t and oneofitssubsiQiarles., Defaults"). Borrower and
Lender entered into the First Forbea.ra:nce & Fourth Cl:ed.itAsresnnent Alfindment})tlts\l8.1lt to
. wlrlchBorrowe:r and Lender l.1laQeceJ:'taln agreements,acknowledgentents and LoanDoeument
without Lender'sagreetnent to forbeatftomexercising remedies
on account oftheMOU Defaults Uf1.tilthe earlierofmatllrlty datof iheLOCN"ote. Which was
Decembe.r31. 20Q9, ortbe occu.nence of anyadditionaldefHUlt thereunder or under atlyof the other
Loan Doc'UUlents.
H. ",' The forbearanepe:riod 1ll1drFirstFo"t'bearance & Fourth, Credit Agreement
AmeJ1
dment
Agreemen.t expired. .Borrower and Lender entered into the Second
Forbearance. N oteModificittiol1 & Fifth to which
Borrower and Lendertnade certain ackllowledgemen1s and Loan DocUtl1ent
atnendments
t
including, withontlimitation, Lender's (i) modify the LOC Note by
extending the maturity date of the LOC Note to JU]le 30. 2010; (ii)forbear nom
onacCQunt ofi:hedefaults set forth theremll11til the earlier of June 30, 2010, or the occurrC11ce of
any adc.litionaldefault thereunder or under anyoftheotber Loan Docurnents;and (iii) modify the
I;JNALlldtlG
2
2516
... ;' '"" !o
, i
, . ~
2517
MoOn October29,2010,.Borrower requested thaf Lender continue to forbear from
its rights and remedies on@otintpftheFifth
Foi'bearanceDjsclosedPefal.l1ts (a$deftned.m t\leFIfth. Forbearanccand AmendmentAgreemertt),
aQd]3orr
o
'WElf ,Pledgorand Lender entered into the Fifth Forbearance and Ame.n<hnent
l'utSuant to which.the Lender agreed to sucl)teque$<; but only on the terms. and conditionS set fQrth
thetein.
N.
expite at the end <>fllusiness on. Januar:Y14 2011 has requested thatLender eontiilue.to
fotbear:trom exercisingits rights and remedies Ullder the LoanDoctuneiitsatismg on liccoUiltof (i)
the Fifth Forbeata,nceDisclosd,Defaultsan4 (li) the followi.ng additionaldefau,lts: (a) failing to
cause th.eBankto maintam atalltimesacapitalizatlon categorization which isnotbelow .
"Adequately Capitalized" as defuledby
Authority,pursUlmt to Section S,C oIthe Fifth Forbearance .and Amendment Agreement; and (b)
defaults1inder
UDitedWesttD (the "aatlk") at all 31, 2009 tom.ainUiin.a Non;.
Plus OREOJ;{atio oinot greater than six and one-ha1fpercent (6.5%), meaSured
for the third arid fourth quarters.of2010 (collectlvlly, (i) an(\ the
I:>Uchrights and remedies tmill the Termination
Date (as de:fln()dbelow}on the terms and conditioDSsetforthhereiIt.
NQW,THEREl,10R::ainconsiderationoftheRecitais,whichare deemed a material pattof
this Agreement,.and for other goo,d and valuable consideratioll, the repeipt nJl4suf,tlciencyofwhich
.are hereby aclo1owledged,it is agreed as1bllows: .
,1, lhcollsideration for theagreemettt ofLende:rto fothear frOmexetcisIngcettain
Iernedies on account oftheSixtb until tbeTennit).ation Pate. (as
:B.orrQW'er agrees to the Recitals set forth above andto.p.erforrhtheobligations set
forth below.
2. . ... In @nsiderationfor t\le.agteements anel representations madehel'ein, provide(j that
:B6ttQWet and Pledgor f't.1Uyandtime1ysatisfyall obligationssetfortb in.'this Agreement and
Loan Documents (as. may be ltI.0dified Lertd;er agrees to forbear froti1eXrismg
its rights and remedies un.der the I,.oanDocuments on accounl oftheSixthForbearance Disclosed
Defaults (which are not waived butexptesslypreserved) fromllie Effective Datel.lntiI the earlier of:
(i) the end of business on Febrtuuy 15, 2011;01:(i1) the ocqurrence pf a default other thantheSixth
Defa.ults,lJllder any of the Loan this Agteement.oranyother
agre.ement required to be .entered into by this .Agreement WithOut any notice or grace period(the
earlierof(i}and(U) beiIlgreferted to as the 'TermitUlPon Date"andtheperiod of time from the
Effective Date of this Agreement to the Termination Date beingteferredtoas the "Sixth
Forbearance Peri6d");
4
2518
-l .',' : . .. ,., ... "
3. . The forbarance by Lellderset forthinParagt'aph 2 abQVtfshai[beconditionedupon,
and shall not become effectivettntiL satisfaction of the follQwtng cOllQitions on or
14
t
2011 (the date UPOll cOIlditiQns are s\tisfiedshaltherein berefetted to'
provided such Effective.Date occtn'Son or:priQr 2011):
. . . .. ,.".... ,'. . . '. ' . ' .
B.
Pledgor havedtLly $d;delivered.$is
.inforrn a.n4 substance inits sole discreuontand the Agreemellt
iscxecuted.by Lender; . .'
shall an investment agreement with at least two anchor
investors in connection with the Stated QIl.
for the investm(?nt. by such anchor investors OfllO
less than $91 willion anilcollectively, an invest1nentof' approximately $200 million
of new money capital milie Borrower, Botrowclshallprovii!eLelldetwi1h a copy of
stichagre(@etn 01lOt 1:lefote Octt.Jber31. 201 O(the.uInvestment Agreement"),atld
shall provide Lender evidence that BOlTower;s directo:t:'s
the InvestinentAgteem.ent and this Agreentent;and
E1(ecutk>nby}lQrrower and/or Pledgor anddelivetyto Lenderofsuch other and
furtherdocume1itation as tend!' deem necessary tQf),Cco11)plishthe
tetJns, agreements $etforthherem,. which
documents shall be inform andsubstancereasonablyaccptabletoLendetln its sole
discretion.
4. M al1l.aterial this Agreement, Borrower and
IlPpropriate relative to their respective obligations) eachsp$.1:ately tepresentattd
wartantthat:
and any oithe.documents reqUiIedheteinWili
upon execution and delivery, .
the Botrpwer and in accordance with theirrespective. terms;
B.The execution,delivery, attdpeIformance oftllls Agreement, and. any Qther
dOCUllleI1t i& Within tl:tecotporatpowets of Borrower and Pledgor,
has been duly authorized by necessaryaruiapprop,nateactiol1; whetheroorpomre
or regulatory mDature (othet than therequirementofnon-objeOtion :frotntheOTS
withrespeet to the:m.oD,tbly blterestPayIllents set forthinSections 5(A) and5(B)
belQW and the Capital llr0ceedsPayment (as defined below) setforthiiiSeetion 5(0)
below)! and does not and will not; (i)teqllh'e any 01' approval of the: bOax'd of
direotor;; of Pledgor; (ii}yioIate any provision of the articles of mcm:poration of
BorrowerorPledgor,theirrespeclive bylaWs,. any other docUlIlent of'cQrporate
goyebuulce, Qratiylaw;rt!le, rgulation.order, writ; jlldgm.ent, dectee,
in effect bavingapplicabilityto Bortoweror
l.lWB &AMm!DM!!NTAljRlt!jMRNTl1lNALIl ,iIoC. .
5
2519
"J.
c.
D.
E.
F.
o.
a.
."'.; . :.,'.;;' .. ,I.
(iii)reqtdretlieconsent Qf approvalof,or regiStration any
governmental QtalJ.thotity (eXQel1l
(a)mfl1dllg ttlonthly intert}st 'and., 5 (B) below and
(b) thf.'Capital Proceeds .Payment (asdefineLibelow)set fort1imSection5(O) below,
both{a) ahd(b) wbichtequirethepporvmttett'l1c:nr.9bJection oftheOTS); (iv) cat,lSe'
any breach of, or constitute a defauiiunder,any indenture cuother . , ,
agreementorinstrumentundet which: BOn.'owet orplt\goris party orbYwbich it
or it$ be bound Of Or (v}resultmthe imposition of any
charge or ,encutnbtallCeUpooany propetf.yofBorrowet Ql" Pledgor
herein;
:Each statementssetforthin the Recltais aretrtie and cotrectinallrespects,
includin$, witltoutJimitatioll, the Qlllount Liabilities ofBottQweroWlng t()
and Lender:!)laY rely on the accuracy thereof; ,
BotTOwer and Pledgor acknowledge that: (i) asatesmt
DisulosedDefaults tenderbastl:te without furtherrtofice, toenfotceits rights
Loan Documents and applicable lawand,excepf as
specificallysetforthhereilit Ms nQ obligation toforbeai froIil enfor,cilJ.g sub.riglll$
and,remedies; tJild{U) Le1.1dt fuls4ulY perfotme!:l till of it$ obligations 1inderthe
Loa,n'Documents;
The Loan Doctllli(mts cOnstitute and btndjngagteentents oftl:te BPi'l:owex:
enfQrceab.ltl in,accordmwe with their respective termS;
Neither 'Borrower not ..
ofCEJ.USes a,ny ldtld with respect to
any oftIle Loan Documents or Liabilities or to the validity and pet.fectiOi1.of
Lender's security interests arid its as setfc;rth i.:ttihe
Loan.Pocuttlem$;, '$11, of which hereby wlllived, released, and
:relinqUished, 'wbetherlm<rWn or\.l.1lkn.ovvn; ,
ExcePtfot the SixtliFQl'peatanceDisclosd])efalllts;Borrower have
LoanDocuments. 'lli.ereisl1o
.condition,event, aet. ,or omisSion. that eXiSts which could constitute a dei'ault()r
the Lollfi Documents; amino
Qmissiontbat has occurred and 'iscOntilluing that with the giving of notice or the
passageortime Qr would constitute a.defa;u1t
DOOtltl1ents, other thflllthe Sixth Forbea:rance Disclosed Defaults;
All representations and warratltfesset forth in the LoanOOcuments ate we and
correct as of the dateoftbis Agreement, ,$tellltedtQ the
DisQlosed
2520
\
,
L
J.
K.
L.
... " ." '.:. " .-', .-;. .' '.
Withtes}lecttothe outStmdingsl1ates of the ownedby .
physical share certificates havebeentransferred,and.no phySical share
certificates have not been tta.t1sfeird., by tQLenderpursuantto the UWB
Stool!
1'hesecwi.ty:iJlterests grantedto Lender by Bortowetand :Plec!'got. respectively,
pmsu$tto theappliable LOM 1Owl:UQA Borrower or Pledgo1;,as
applicable, is .aparty constitute valld and perfected fitst priority security interests in
the Collateral describedtherem;
Borrower hat; engagedGtlldnunt S@hs&s its investmentbanker to.aBsistBorrower in
raising capital from 'outsideinvestors Stated Capital Raise"); In the
event that a'transactloti Qt. series of ttansactiousare '$I" a result of
Borrower's Stated Capital shalLcausesuch proceedS to be
'and foremost, iOsatisfy tb. Liabilitiesbefote being 1,J.tili,zed fot any m.
accorqance wlthSecti01;15(G) belpw;and ..
As parloftheSecondCtedit Agreement the consents provided by
Lender to the Request (a:; dQtmed.ili4etelIl) did nlilt pertain totlie
underlying the OTS Findings OfFaciwhich concemtheDisputed.Detaults as
defmed in the Fourth Fotbeatance and SiXth were
tepre/:\e:tited and warranted by :Borrower to Lender to be in with all
applicable Legal Reqttireinents,iitcludll1g,. withoutlim1tation, all applicable
regulations ..
5. agrees with Lender' (in additionto, butl10t in
limitation of unless expressly anY terms,conditiol1s, covemmts set o.tth in
tbe Loan Documents), frQ11l an.d aftertbe d{rte hereof,. to the following:
A. Upon receipt by Borrower of the written l1on.;objection from ihe0TSor in the event
such non-objection is no. longer . a Legal Requirement, BOrt'()wet shliU pay Lender
monthly interest payments for tb.e lllonths of November and
Januaryof20Uon the last day' of each inonthperthe terms of the LOCNote (the .
"Sixth Forbearance mterest Payments"); provi4ed (i}if a;t-a:o.ytime. such
the ens with respect to suchpayment
has hot then s\chamountssballconti.n.1le to accruand BO!rowet
accrueti atn.ountstoLender immediately upon receipt of
objection ftomthe and (ii) if non,.objection from the OTS is not received
befote the.tllnetheCapital Proceeds P&ytnent is due p1l!Silltiltto the
but llll,pai,dinterestshall beprud toLenderatthe trme
and as part of, the CapitalProcee<is,Paytnent;
7
2521
j'
i
!
.,
I
B.
c.
AS soon8S hereof, B01ToW$"snatkO,)request
'written nOh-objecti6nfromtneOTS witb.rt:\spectto Lenl;it\t9f the
SiXth Payxnent$ and
provide Lender With Written o0n:firmauon ofil$making stJchteq\l.est
as well as any respomle :from req'Ue$t;' ..
tinieSj\ capitallzaticmcategorizauon
which ianot by theregu\atiotl$ o(the ,Barik's
prlm3110oven:fl:ll,ental Authority; .
Witbfufive(5) business dRys of tbe.receiptthereof,BotroVY'er shalltotheeXte1lt
'allowed by provide toLhder (i)
injunctions,
civiLmonetary penalties, articles ofatp'ement,'fJ;l,etP,():n'mdmns oIq:J14ersianclirig.
capital.ditect!ves,.capitaltestoratic>J1p imposed by any'.. '.' .
GoveOlmental Authority on Borrower or the Bank, other thau the B()rr.ower
Borrower ors StipUlation, BaJikG&D Ol'dert OTS StiPUlation

Orders"); aild(ij) executed wrttte:n
QI;)J:n.tl1itiI16rtt$or res1;rict1Pfifiagreedto by Bqn:ower or the Bank and any
or reqUited by any Go'VerornentalAuthontyof
Borrowerot theB8.t1'k e'RegUlatoryAgretnert't$''); .
K' Within nve (5) l1usinessdays after providing any of the following documents .any
Governmental Authority pursuant toeiiber the Borrower C&D Order or the Bank
C&D Order, Borrower sbiill, to tbf.' 'byJaWtprov,idea(XjPY (Jfs:u.c4
. dOCl.Ul1ents to Lender: (i) capital plans. for both Bottoweia:ndthe Bank and monthly
variance reports prepar(ld by thtl rega.tding the Bank's
compHancewith (ii)theBank'scontingency plans; (iii)the
Bank's busmess plans. and quartetly business pIan vdliance:repl;ltt:s prepared by
regaxdingcQll1pliaIlcwitbtbe:Ban1(sbusiness plan; (i1) the
asset reductionplan;{v) concentratioIlreduction plan;
(vi) s liquidity any cbangs. stlbmitted to 8.1+)'
Govetn1fintalAuthority relating to any pfthe aforeqrellti()nedplans; (Vili) notices
provided to any GovemmentalAuthority; and (bc.}requests made byB.orrowet of any
GovennnentalAutliodtr. includ,i:Q.g. Wi:tbOtlt linti.U).tion,atlyreqllestsfor consent or .
o.on.--objectioll 1;roIIl the OTS; .
F, Borrawer shall comply with, and shall cause the Bank to comply witl\ ib..a11 matetlli\L
:respeetS, and not breach iIl,anYDlaterialrespect,the tenns of any
Regulatory whether ine;ffect on., at
after the .EffectiYe with tes.pect t.o
SectioIls3, 33a.nd 350 'Ule G&D. OrdeJ: 12 of the Borrower C&D
2522
, .
1
..... t I 1"
G.
2523
1,
J.
L.
Cotltemporaneow;lywiththe lXlaking
releasing oftlieCQUawtaland tb feei}lt pyBQttQwerofthe
$1dPledgotacl:i tluitRshall automatically,onaseparateand mdeperu:lertt
basis, release, discharge, and I:i$tee to hold bilt.mlss LIidot:l$(;iits
agelltS, employee$,a1fotI1eYs; directors, parents;affi1iates, assigns . insurers,
assigns (collectivelyJthe "Lender Rele8$ed
Parties'')ftOmI:lIlY aildall affn.tna'tive setoffs;
Causes of action, suits,conttoversies,
liabilities anddem.andsinlaw whether :k:AoWllor Ut:i1dl,own
the "Clain.1i,) which Borrower Clr Pledgor ever had; now or may hereafter have
date of the Capital.Ptoceds
Paymentwhioh relatet9 oranseoqtoftheLQap, DQcumentsor the transactions
described therein., the Lhtbilities
1
Lender1J'adrninistratiOtl of the LoainDoClmlents
and/or itsba.n1drig relationships WithBotrowetand/Qr thePledgOJ;,
.As SOQ)tl)S praotlcahle after the Ei!ectiveDaw hereof; Borrower sha11provide
with:. fbr the replac.emllt.Ol'sUccessQr
reportifnotatbP:ftflmtn,c;.ial report} for third quarter period of 20 10; l1Jld (ii) the
'Il.lllludjted and related statements ofoperatlons of Pledgor prepared in
accOrdance withGAAPas of SepteIhber 30,2010. certified hytheChiefFitiailCiai
Officer of Pledgor as beingtru?nd accurate to the Pest of its knowledge audbelief
ancl prepared in. good faith;
LeilderhasnofUrtheroplig'a1iotltotnAke any Advances theL(jCNoteat:1d
Bon'OWer. fuisno right to'request fu:rtherAdvances under theLOC Note, regardless
of whether payments have beeil made to reduce outstanding amo\lD1s oWiUg under
theLOC Not(;KaIid ..
Uponthe'occurrencegftheEffective Date,. BottOwer.and Lelidetshaii atnendthe
Borrower SecurltiesCOnt!:Ql Agreement. Mdshall $l$First
Southwest such among other things,the
foUowingsectiom
l)istributlons.ThePledgorshall be. en.tiilecltoreceiVl': all cash flows
'ftomthe Coilaterai .. including all interest, dividends, principal and other incOme
distributions (other than liquidating dividends anel c1isttiQutio:o's)frQril the Accoli1ttin.
an aggregate MlotuLt not t" $3,000,000.00 :from the date Qfthis f\greement
thr()ugb andjncluding January14,20UY
.and the following section$ha1l Pc inserted jnits place:
"(c) mcomeDisWbuti;oIl,s. 'The Pledgor he . entitled' to receive. all. caSh flows
from the Collateral, including all interest,. income
distributions aT1d4istribu:t1ons)ftom the Account in
10
2524
. o.}
ftom. lliiUaty
and mcluding.Febtuaty 15,201t
tJ
- "
M. U:{3Qn.,the
Eqqi"Mor SeeuritiesControl ..Agreement; ai1d Shall wotk..penrti'Vely to.
to,

"(0) Income; DistribuuoJ$.. The We(igor shall. cash. flpW$
fiom. . .. tmd .. other" income
(ij,1rlbutions(other than liqilidatina in
.. ' .. " . " ...... atl!!atnQ .... li.(jt :to exceed $3''000 000.00 ftom. :':,'f.;.", f4:W"i.._. .'
an aggr '"'r""'" - ..... Wol" ...... .... ...... .... ., .... . .... ' .. '. O.!WI'-
14,,201t/' .
'.' 0
... d.j.1.;,"" . '. ..: ........ sh" alI be 1l1' .. """'''; . .:1 in its'1'l1:"_."" ":
e . .. . .. ...
',0) the Ple4go;rshill.. b.e. ent.ijled f'lc;rws

distnbutbL . .. ' .,. . . . ..... stP'" . ..... fl:QQl jh
tbtot
andincludhig Fe'biUatY 1 S, 2.oU." . . .
2525
.-
f
t
,.
',' .':"",' R'. ,.,.
the oc()l.'lttence of a E'OrbearanceDefault without.any :furthet(lraddltiQn81:tu:i-tlceQl; grace period tQ
Borrower Q!PledgQr.
lJ. .. . andagreethab (i) the amounts selforili
in RecitalCabove are outstanding andowb:tg; (ii)theLiabilities ate Q'WingandnQtsubjecttoatiY
claittt, CQlmterclaim.;defense or affinnative defense I)fany kind; (iii) the. Liabilities remain,.
the continuingandindiYidualobligationsofBorrower, subject to tbeseCUlity interests granted by
Borrowetand Pledgor,U1ltU.atJ, @1ounts d.uethei.Wnder, inclu,Q.ing attPJDeYs' fees and costs
i1:l.CUfted by Lender in connection with this Agreementorenforcementofthe are
paid in fullf subject to Section5.llabove;
(iv) $ecunty mterests grlit1ted to Lender by Borrower and Pledsorareand remain valid
security interests in the assetssubjecttheteto;and(v) as ofthe date hereoft. each of the Borrower
andPledgot separatelyrele8$cs, and agrees to hola,hll1llllesstheLeI),der
any and allClaims which Borrower or Pledgor now w,or .niay hereafter
have againstortelatedtothe Lender of;this AgreementJela.fulgto
or /llising out of the Loan transactipns described. or the .
administration by Lender of the LOan Documentst however,.notWithstandirtg the
Pledg;orare releaaing$eLender Released, Parties with, respect toiheir
obliga.ifons pertaining to the Collateral (as defined in the following agreements) pledged to Lender
pursuantto the tennsoftheBQrroWer Secu.rlties AccotlPt Pldge
Secutities.Accow;it pledge1\greementand the Bank stock;
1 O.Pledgor separatelyacknowledges and agteestO the authenticity and
enforceabilitY-of the Eqlli .. Mor Securities Account Pledge Agreemel'ltnotwithstanciing the
agreem:entsset.forth and reaffirms Securities
AccoullfPledge Agreement in its entirety, C()nfll'ms itscpntjntJ:in.s validity that it shall
fo;tce and effect Lettderand. alltemttining
obligations of Borrower and Pledgor to Lenderl.itldet: the Loan DOcUlllents and this Agre.ement have
beenfuUy paid the satisfaction of LeIid,er toll, teductlQn in
principal if paymentislJll'lde pursUanttp Section5( G) above. The Equi"M:or Securities Account
Pledge Agreement is incorporated herein by reference.
11, Pledgor separately agreeS that, as of the <hl:tehereof,it ha$noclahns Of defenses of
any .kind by . way of offset or otherwise. to satisfaction in full oillie obligations to Lender pursuant to
the Equi-Mor Securities AcCountPledge Agreement. To the ex.1entthat any sucn clainl or defense
may presently exisi otmay arise in the Pledgor expressly waives any .. and all daittlS or
defenses against ant of the LeIlderReleased Parties that noWot hereafter existbyreasonofJ among
other t/J.ings, and withoqt (i) anyru;td all@l.en<4P.ents otl11OcUficationso;f anY Loan
Documents Or related agreement or instrument; (U)anyand all accelerations, .extensions
orothet.cbanges inthe .tune or manner of payment Liabilities; (iii) any and aU
in.cteasesor d.ecreases in the tate ofjnterest or other charges; (iv) tlre release, substitution or
aclditionofany collateral or anyShareholdetorthecorporation; (v) any failureofLehdetto give
notice of dfault tofiorrower, rlet,igor ,arMY $hareholder; (vi) anyfailure oflA:n@t.' to pUt:sue
Bottower) Pled,gor, or.an.y of their property with duediUgence; or (yu) any failure of Lender to
resort to the oollateral or to rei1iedies wbichmay he available to it.
12
2526
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i
t
12. .Tll . agreements set forth herein shallnot CQIlstitute 11 novatiol'1pf anypf the Loan
Documents.E1tceptas speclficaUy set shalll'emainin
full force fUld ef'feet hereby ratitie4attd conf
mne
d. Totheextenlthatanyprovision of this
A,greementconfllcts with any ternlS 6r conditions set. forthlntb. toan
of and control. )3otrowerand Pledgor shall contlnue to comply 'With
'and representations set forthintheLOanDocuments to the extent hot
modified in this Agreement .E:l5.ceptAS pr.:ovided herti14 and
perfonnanc
e
of thlsAgteementm:d anydocumentreqijired by thiS AgreementshaU not: (i)
con$ti.iute anexteIlsioIl, .. waiver ohny .a,spect .of 1her,oanPoct1tlleti,'tS9ra.ny tight
or remedy thefeunder; extettd thetennsoftheLoa.nDocumentsorthedue of any ofthe
19atl
ss
etforththerein;(iii)establish a course of dealingbetweenLendet,onthe and
Borrowerand/orPledgot, on the otherlmnd,or.giverise to allY on the pa,rt or Lender tp
extend,moc:lifyor waiyeanyterm or condition olthe Loan DOculllents;Or (Iv) .giverlseto any
defensesorcounterelaimStO .the right ofL.ender to compelpaymentofan,y lQilnortQ
emorceltsrlgbts IU,td:reil:ledies .
13. . Borrower and hasbeenteptesented, Of
had the oppottUni:tYtQ be. represented, ,by itsO'WI).lega1 conn,ectionwitb the L01t(l .
])ocurn.ents.tbis)\greemellt. and,anyagreemen,ts or documents requiredby this Agreement;
lncluding,withoutJimitatioil, withrespecttothereleases and waivers. set forihhetein; (ii)has
fudepeliQentjudgment with to the LoanPOC'lll11ents, this
agreelllents.()rdocum.entsrequired by this Agreement; (iii) has not relied on Lender Or its counsel
for anyadvicewithrespeottotheLoanDOcum.ents, this Agreement. orimY OJ.'
docwnellts by this Agreement; and(iv) ha$had a reasonable OPportunity to consider
whethertherelllay be future damages, injuries, claims.obUgatlOllS,orliabilitis whichptesettt1yate
'lltlknoWJ.1., Uilforeseen or not yet in intendstQteleasethem:aasedupon
the {oregoinginc1ruleofcontractconstruction, ormte:tpretationshaUbeeniployed to constrilethls
AgreetnentmOte strietly against one party or the other; .
14. rblsAgrementhllSbeen anddeHveredin the State of
Colol'adOand shal1be deemed tohave been made inthe Stateol Colorado. 'Thevalidityof1his
'Agreement, its cotl$tt'Uctioft, 'Well

governed accordailcewiththcmternallaws ofthe State of Colorado (without
regard to iWpon1Jifof
15.. . . Each provisionofthlsAgreementsl1all be severable from every otberptoVision of
thisAgreement for the Pur.P.ose'of thelegaleilfoq;cabili,ty
16. 'This the herein contain the entire
agreement between any ofthern, with rspect to the subjectl11.attet
bereof C01J;lnJ,unlcatiotlSandnegotiations. For the $t\keof clarity, J.,ender
Lendertoacceptthecolla
tera1
pledged under the
Borrower Securities AccnUntPledge.Agreetnentand Equl-MorSecutities AQc9uutPledge
2527
I
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!
!
AgreeIllent ittej(cbangef9tsati&i'action of the Litibillties. No repreSentation, prOmise,
or .conditionconcel'i'1ingthesubject.mattcthereofShrulbe biliding tlPonLend.erume$S pleat!y .
expressed in Of i:rl the otherdoc\.llllenta. Any disc'ussionsand
cottespondenceahout the terms Qfany Qr
the Loan Documents deeQloo to be in fue11ature ofsettlementnegQtiations. Accordingly,
$y sucn.diacussi<>t\sand willnm beadnllssihlein any legal or administrative
proceedingsandsha11not theory<:if1a.w Qfmilized for AAyputpqse wlti;.out
thecotIsentof I;ilJ. parties. No tlgreer'l\cn"t which isreacl+edherein shall give rise to any Claim or<cause
of a,ction except for breach of the ex.ptessplovlsic\IiSofalegallybiu.<ii1lS writtenagrcemf:Ilt.
17.'Nofb.in.g conWitediil.th;.sj-\greementot atlyo:ther hyor referred
to,lierein, not MY action takenpursuanthereto ottb.ereto',shallbe,cOnStrued as: (1) pertnittingot
obligating Lendetto aetas financial COt1S1l1tEUlt.tq Botrower or Pl(l(igo:r; (ii)
otobligatingLertder W COAttol.or to QQnd1;tct the Qperations of Borrower or Pledgor; {iii}
creatio,g or (iv) causing
Borrower ageIltofLeQ.der. . .
. 18.., This be executed inanynUIllberofcotmtetparlS,.alrof which taken
together of th pa1.'tieshetet<>1l!AY CXC9l.ite this Agrelnen,t by
Signing,. Whether by ototherwise;:at\Y such counterpart.
19. BORROWER AND PLEDOORI-IEREBYCONSENr TO THE EXCtUSI\TB
ruruSDICTlONOFANY stATE OR .J:I'EDERAL COURT SITUATED IN DENVER,
COLORAPO, AND VI AIVEANYQBJECTIONBASEDON LACK OFPERSONAL
;JUIUSDICTION,IMPROPERVENUE OR FORUM NQNQONVENIENS. WITUREGAR1JT()
ANY ACTIONS, CLAlMS* D1SPt.J"mS Olt:pROCEPDlNQS RBLATThTGTOTI-iiS . .
AQItEEMENT, ANY OF THE LOAN DOCUMENTS, ORANYD.OCUMENT OR
AORlmMENTDELlVEREP HEREUNPER OR REQtJIRED IN CONNEcnONxtaREW1TII,
OltANY TRANSACTIONARISIN(J FRQMOR CQNNECTED TO ANY OF THE FOREGOING.
BORROWER AND PLEDGOR WAIVE PERSONAL8ERVICEOF ,ANY;\NDALL PROCESS
uPON THEM, ANJ)CONSENTTO ALL $U01I8ERVICeOF PROCES$MADE BYMAILOR
BY MESSENGER DIRECTED TO ANY OF THEM ATTHEADDRESSESSPEClFIED IN THE
LOAN DOCUMENTS. NOTFtINOHEREIN SllALL AFFEGTTHE RlG1rrQFLENDERTO
SERVEJ'ROCESS IN ANYMANNJlR OR LIMIT THE RIGHT OF
LENDEltTOBRINGPROCEEDINGSAGAINST BORROWER, PI..EDOOR. OR ANY OF
THEIRPROPERTYORJ\SSETS INTHJ3, C.OMPETENTCotJRTS QFANY 01HER
JpRlSDICTIONOR .n.nuSDICTlOINS.
20. BORROWER ANIl pLEDGOR HE.REBYWA.lVEANY AND ALI, RlGI-lT TO
TlUALBY
ANOFTHELOANDOCUMENTS, ANY DOCUMENT DELIVERED. HEREUNDER OR
REQUIRED IN CONNECTION EEEEWTfHt OR Am. 'I'RANSACTlONAruSlNO
CONNECTEPTOANY OF T,HBFOl{EGOIN(}. BORROWER AND PLEDGORREPRBSENT
VOLUNTARJLY GJ,VEN.
1.4
2528
j
!
(
21. BORROWER AND PLEDGOR WAIVEANYRlGHT ANY OF THEM MAY
NOW OR HEREAFTER HA VB TO CLAIM OR RECOVER FROM LBNDERANY
CONSEQUENTIAL, .EXEMPLARY, OR PUNITIVE DAMAGES.
22. This Agreement shall be binding upon, and shall inure solely to the benefit of,
Borrower, Pledgor, Lender and each of their respective successors, assigns and affiliates. No other
third-party, person or entity shall have any rights or benefits under this Agreement
23. Capitalized tenus used but not otherwise defmed herein shall ha"Ve the meanings
ascribed to such tenns in the Credit Agreement.
[Remainder of Page Intentionally Left Blank]
15
2529
By:.------"'---'-'---"'--------
Its:
.
. ar..
ItS! lfitc;:L .1;6 ....
BQtJI-MORHOLDINGS, INC.
16
2530
JPMORGAN CHASE BANK, N.A.
By: AAJt?Ydiu
~
UNITED WESTERN BANCORP, INC.
By:
- - ~ - - - - - - - - - - - - - - - - - -
Its:
Its:
----------------------
EQUI-MOR HOLDINGS, INC.
By:
- - - - - - ~ - - - - - - - - - - - - - -
Its:
-----------------------
16
2531
TabC
Exhibit 93
2532
FDII
Federal Deposit Insurance Corporation
Dallas Regional Office
1601 Bryan Street, Dallas, Texas 75201
(214) 754-0098 FAX (972) 761-2082
Mr. James R. Peoples
Chairman of the Board
CEO and President
United Western Bank
700 17
th
Street, Suite 100
Denver, CO 80202
Division of Supervision and Consumer Protection
Memphis Area Office
5100 Poplar Avenue, Suite 1900, Memphis, Tennessee 38137
(901)685-1603 FAX (901) 821-5308
January 7,2011
Subject: Bank's Proposed Filing to Acquire Legent Clearing, LLC, Omaha, Nebraska
("Filing")
In connection with the referenced Filing, the FDIC needs additional information.
Specifically,please provide information demonstrating Legent Clearing's ability to grow
the correspondent business to provide the deposit growth projected in the December 20,
2010, correspondence. Further, also demonstrate how Legent Clearing will maintain
compliance with the 10 percent limitation outlined in FDIC Staff Advisory Opinion 05-
02. Finally, indicate why Legent Clearing would believe these deposits will necessarily
only flow to United Western Bank, as opposed to other institutions which may offer
better services and/or higher interest rates. In addition, please be advised that resolution
of the Bank's current appeal of the Brokered Deposit Determination issued on November
5,2010, is necessary before the FDIC can take action on the Filing .
. We would appreciate a response by January 14,2011. After we review your response,
we will advise you if additional information is needed. If you have any questions, please
call Case Manager Barry Aldridge at (972) 761-2065. Correspondence may be addressed
to Kristie K. Elmquist, Acting Regional Director, Dallas Regional Office, 1601 Bryan
Street, Dallas, Texas 75201.
Sincerely,
1 . . . , ~ a p 1 ~
Joseph A. Meade
Acting Deputy Regional Director
Cc: Office of Thrift Supervision
2533
TabC
Exhibit 94
2534
DATE: January 18,2011
MEMORANDUM FOR: Grovetta N. Gardineer, Managing Director
Corporate & International Activities
FROM: Philip A. Gerbick, Regional Director i&) J
, Western Region ~
SUBJECT: United Western Bank (OTS No. 06679)
Denver, Colorado
NATS No. R4-2010-0228
Application to Establish an Operating Subsidiary
to Engage in Securities Clearing & Related Services
via Acquisition of Legent Clearing LLC
PROPOSED TRANSACTION
Western Region
United Western Bank (Bank) filed an application pursuant to Section 18(m) of the Federal Deposit
Insurance Act and 12 C.F.R. 559,11 (Application), requesting approval to establish an operating
subsidiary to engage in securities cleSring and related services via the acquisition ofLegent Clearing
LLC (Legent). Legent is a FINRA member broker-dealer that provides securities clearing and
settlement serVices to its correspondent broker-dealers and their clients. The Application was re-filed on
a non-delegated basis on November 5, 2010, following an initial filing made in the Region as a 30-day
Notice on July 30, 2010.
THE TRANSACTION PARTIES
United Western Bank
The Bank is a troubled institution with total assets of $2.1 billion, total deposits of $1.7 billion, and total
equity of $121 million as of September 30, 2010. Headquartered in Denver, Colorado, with seven other
branch offices and 161 full-time employees, the Bank has pursued a community banking strategy,
originating primarily construction, land, commercial real estate,commercial and industrial, and Small
Business Administration loans. It also maintains a large portfolio of non-agency mortgage backed
2535
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 2
January 18,2011
securities (MBS), and is heavily dependent on institutional deposits and FHLB advances for funding.
The economic and real estate crisis that began in late 2007 had a severe impact ort the Bank, resulting in
substantial deterioration of its asset quality, including its MBS portfolio, necessitating large write-downs
and reserves that impacted earnings. It is Undercapitalized as of September 30, 2010, with PCA capital
ratios of Core 6.20 percent, Tier 1 Risk Based 6.53 percent, and Total Risk Based 7.80 percent. The
Bank is CAMELS-rated 51544553 based on its most recent Type 46 examination transmitted on
December 29,2010; its most recent Compliance and CRA ratings were "2" and "Satisfactory,"
respectively. Due to its troubled condition, the Bank was placed under a Consent Order to Cease and
Desist (C&D) effective June 25, 2010, that focused on capital, business plan, asset qualitylconcentration,
and liquidity.
The Bank is wholly owned by United WestemBancorp, Inc., Denver, Colorado (OTS H-2192, hereafter
referred to as Bancorp). While Bancorp holds and operates other subsidiaries, the Bank's assets
comprise virtually all of the parent company's consolidated assets. Like its subsidiary bank, Bancorp
was also rated "5" in connection with its most recent examination transmitted on December 20,2010,
designated in Troubled Condition, and operates under a C&D.
Legent Clearing. LLC
Legent is a registered broker-dealer and FINRA member firm with total assets of $31 0 million as of
June 30, 2010, and is headquartered in Omaha, Nebraska, with offices in Chicago, New York, and
Denver. Legent provides securities clearing and other services to correspondent FINRA broker-dealer
member firms, including transactional, clearing, and settlement services as well as operations
outsourcing services; operations outsourcing services include a variety of clearing, record-keeping, and
custody related functions, including order entry, trade matching, and settlement services. It is licensed
to conduct business in all 50 states and various U.S. territories under applicable state securities
regulations. Legent's correspondent roster includes some 70 broker-dealers; during 2010, it processed
an average of over 590,000 transactions per month arid maintained over 270,000 individual accounts.
Legent is currently 100 percent owned by Legent Group, Inc. (Legent Group), which was formed in
2005 by Henry C. Duques (former Chairman/CEO of First Data Corporation) for the express purpose of
acquiring Legent. Legent has undergone a series of ownership changes as follows: Guy A. Gibson
(Chairman of Bancorp and Vice Chairman of the Bank) founded Legent Holdings, Inc; (Legent
Holdings), in 2002, which in turn formed Legent to acquire the securities clearing operations of
Kirkpatrick Pettis, a subsidiary of Mutual of Omaha Insurance Company. In February 2005, Legent
Holdings sold Legent to Legent Group. At the time of sale, the fOmier Legent Holdings, by then known
as 02 Holding Company (02), retained about 10 percent interest in Legent Group, and Mr. Oibson was
appointed to the board of directors (BOD) of Legent Group. In March 2010, Mr. Gibson resigned from
the BOD of Legent Group, and G2 sold its remaining interest in Legent to Legent Group/Henry C.
Duques later that month. The Bank entered into a binding purchase agreement in June 2010 to purchase
100 percent interest in Legent from Legent Group/Henry C. Duques (following negotiations and a non-
binding letter of intent that was entered into back in December 2009).
2536
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest.
Page 3
January 18,2011
MATERIAL TERMS OF THE TRANSACTION
Bancorp, the Bank, Legent Group, and Henry C. Duques entered into a Purchase Agreement on June 9,
2010, that provides for the Bank's purchase of Legent from Legent Group. The purchase consideration
will beaconibmation of equity and cash- the equity portion will be in the form of 2,419,688 shares of
anticipated new Bancorp stock issuance (estimated value of $2.7 million) and the cash portion would be
equal to an adjusted book value of Legent at closing (estimated at $1 j million). The cash portion will be
subject to an escrow holdback of $3.0 million to satisfy various legal liabilities and indemhification
obligations. Also, the Bank will advance approximately $18 million (including almost $1.5 million in
accrued interest payable) to Legent in order to retire its subordinated debt owed to Legent Group.
The Applicant states the acquisition will provide, the following benefits to the Bank: (I )access to lower-
cost client deposits as a source of liquidity, reducing reliance on third-party institutional deposits;
(2) provide a new, low-risk securities margin lending product line to diversify the Bank's loan portfolio
mix; (3) increased access to the idle cash balances of the, correspondent customers; (4) potential for
attractive fee revenue; (5) increased synergies for the Bank's online banking products and allow for
online product line expansion; and (6) expected revenue contributions to the Bank's earnings within 12
months of closing.
The proposed acquisition of Legent was approved on June 3,2010, by the BODs of Bancorpand the
Bank, respectively. Keefe, Bruyette & Woods has opined in afaimess opinion dated June 3, 2010, to
the BOD of Bancorp that "the consideration is fair, from afmancial point of view, to United Western."
PROPOSED BUSINESS PLAN
The Bank presented two business plan scenarios - optimistic and pessimis:tic.The optimistic scenario
assumes that: (1) Bancorp has successfully completed a $200 million capital raise; (2) $155 million of
the capital raise proceeds is contributed to the Bank; (3) all non-agencyMBS have been eliminated; and
(4) the Bank will experience significant deposit growth from Legent's activities within 24 months of
consummation based upon the securing of numerous new correspondents following loss of Trade King
business. The projections are as follows (no capital ratios were projected):
2537
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 4
January18,2011
The pessimistic scenario assumes: (1) no capital raise by Bancorp and no capital infusion to the Bank;
(2) loss of TradeKing correspondent business; and (3) lio new correspondent growth during the three-
year business plan period. The projections are as follows:
On a stand-alone basis, Legent's projected operating results under both scenarios are as follows:
At least initially, it is contemplated that Legent will continue to substantially operate under its current
business model, albeit with the financial and resource support of the Bank. cessation of any business
. activities that would not be authorized for an FSB, and taking advantage of business synergies with the
Bank. Legent has an experienced management team in place that will continue to run its operations after
the acquisition. Further, members of the Bank/Bancorp directorate or management have a background
in the clearing industry (including Guy Gibson, Michael McCloskey, and Jeffrey Sime, who
were formerly executives ofLegent andlor Legent Holdings). Further, Bancorp directors Robert Slezak
and Lester Ravitz were formerly Chief Financial Officer of Ameritrade Securities, Inc., and Chief
Operating Officer of First Clearing LLC (subsidiary of Wells Fargo Bank), respectively.
The anticipated total investment by the Bank in Legent would be approximately $43.7 million,
consisting of the estimated $15.7 million purchase price, the estimated $18 million payoff of Legent
subordinated indebtedness, and an estimated $10 million of additional capital that will allow Legent to
meet its SEC net capital requirements for registered broker-dealers.
As further discussed below, we have reservations as to whether the proposed business plan is fully
attainable or acceptable, and believe the proposal will pose supervisory concerns.
2538
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 5
January 18, 2011
REGULATORY FACTORS FOR OPERATING SUBSIDIARY APPROVAL
The OTS Subordinate Organization Regulations, at 12 C.F.R. 559.1(a), provide that OTS may at any
time, limit a savings association's investment in an operating subsidiary, or refuse to permit an activity
of an operating subsidiary, for supervisory, legal, or safety and soundness reasons.'
Based upon our review of the proposed transaction, we have a number of serious supervisory and safety
and soundness concerns regarding the Bank's future earnings prospects, concentration of deposits, asset
growth, compliance of Legent's clearing operations, and Legent's business prospects:
Future Earnings Prospects
The securities clearing business is sensitive to financial market conditions. Legent's business has
suffered sharp downturns in revenues and profits as the recent credit crisis triggered a significant drop
in the volume of activity in the equity markets. Interest and dividend revenues had declined
precipitously since the recession and lower interest rate environment began in 2007, resulting in
operating losses for the company. As reported, Legent incurred losses of $1.4 million, $8.4 million,and
$2.9 million for its fiscal years ended June 30, 2008, June 30, 2009, and fiscal April 30,
2010, respectively. While Legent, on a stand-alone basis, is projected to resume profitability again
during the next three years under the optimistic business plan, we note under the pessimistic scenario
that continued losses of$2.5 million, $4.6 million, $4.6 million, and $4.2 million are projected for the
calendar years 2010, 2011, 2012, and 2013, respectively.
On a basis, both the Bank and Legent have been severely impacted by the
economic and real estate downturn, have not been able to operate profitably in the recent years, and both
appear likely to continue operating at a loss, notwithstanding the optimistic business plan projections .
submitted with the Application. Accordingly, we have significant concerns as to whether the Bank's
proposed acquisition of Legent and entering into a new line of business at this time is advisable or can
be conducted in a safe and sOUfld manner.
Concentration of Deposits
Based upon Daily Liquidity Reports provided by the Bank, institutional deposits from
trust companies and clearing firms totaled $1.147 billion at December 31, 2010, representing 74.0
percent of total deposits. Equity Trust Company alone represents 46.1 percent, while Legent is the
second largest source of such deposits at 14.6 percent. Despite the establishment ofa branch network in
the recent years, only $204 million, or 13.2 percent of total deposits, are truly retail deposits. As noted
in BOD/management deliberations and due diligence materials submitted in the Application, the
perceived chief advantage or purpose for acquiring Legent is the $680 million of customer sweep
deposits it controls, which are anticipated to grow to over $813 million by yearend 2012. As further
noted in the projections submitted, following the acquisition oftegent, the level ofinstitutional deposits
1 The Subordinate Organization regulations set forth additional standards that OTS reviews in determining whether to
approve an operating subsidiary application. In light of our conclusion with respect to supervisory and safety and soundness
considerations, we do enot address these additional standards.
2539
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 6
January 18,2011
is anticipated to constitute between 72 percent and 81 percent of total deposits, representing a further
increase in deposit concentration.
Liquidity risk is of heightened concern because of the Bank's significant concentration in institutional
deposits as a funding source, especially in light of the Bank's recent deterioration to Undercapitalized
status, and the Bank's continuing asset quality problems. The Bank's concentration in institutional
deposits presents significant liquidity risks, and the Bank's Undercapitalized status greatly raises the
level of risk at the Bank. Further, the Bank also relies substantially on borrowings from FHLB
advances, the Federal Reserve Discount Window, and reverse repurchase agreements for funding, and
these funding sources may become restricted when the financial condition of the bank borrower
becomes distressed or falls below Well or Adequately Capitalized status.
We do not believe that maintaining and increasing the already-high concentration of institutional
deposits by the Bank upon acquisition of Legent is acceptable from a safety and soundness perspective.
Bank Asset Growth
Under the optimistic business plan scenario, which assumes a successful capital raise by Bancorp, an
infusion of capital into the Bank, and the acquisition ofLegent, we note that the Bank proposes a sharp
increase in asset size. Specifically. it projects a 58 percent increase in total assets over three years from
$2.7 billion at yearend 2010 to $4.2 billion by yearend 2013. This proposal implicitly assumes that OTS
will remove or waive the provision in the Bank's C&D that restricts growth in total assets to no more
than net interest credited on deposits. As previously noted, the level and type of asset growth proposed
in connection with the transaction relies upon an increase to the Bank's already-excessive concentration
of institutional deposits. We do not intend to remove the subject C&D provision in the near future. We
further fmd this rapid level of asset growth to be unacceptable in light of the Bank's poor examination
ratings, troubled condition, high level of problem assets, inadequate liquidity plan in light of its
asset/liability mix,and poor earnings.
. . .
. Compliance of Legent's Clearing Operations
FINRA had recently charged several broker-dealers, including Legent, with inadequate anti-money
laundering (AML) measures in connection with failing to detect and report suspicious penny stock
transactions despite obvious red flags. The suspect trades included the liquidations and deposits of
penny stocks connected to parties with histories of stock manipulation and/or securities fraud.
Specifically, Legent had cleared improper trades by permitting customers to sell securities in cash
accounts prior to making full cash payments, in violation of Regulation T. FINRA further contended
that Legent failed to develop and implement an adequate AML program reasonably designed to achieve
and monitor its compliance with the Bank Secrecy Act (BSA) requirements; its AML program did not .
consider its business risks and failed to consider money laundering risks presented by some of its
correspondent clients that had extensive disciplinary histories. As a result, Legent was censured and
ordered to pay a fmeof$350,000 in early-2009.
Legent was again cited by FINRA via letter dated March 9, 2010, for violations of rules, laws, and
regulations relating to AMUBSA compliance, including failure to: fully implement its AML
2540
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 7
January 18,2011
Compliance Program, file required reports, establish adequate written procedures, and maintain accurate
information and supporting documentation. FlNRA indicated in the letter that it has "made a
preliminary determination to recommend that disciplinary action be brought against Legent Clearing."
Further, in its Exit Meeting Report dated September 28,2010, FINRA again indicated that Legent has
vIolated various SEC and NASD rules, including those related to customer protection and net capital
requirements for broker-dealers.
Due to the repeated instances of violations of rules, laws, and regulations, we have substantial
reservations as to the compliance mindset and ability of Legent management, as well as the adequacy of
Legent's compliance programs.
Legent's Business Prospects
Legent's contract with Kane Reid Securities (dba TradeKing) represents by far its single largest
correspondent client relationship - a relationship that produced a net revenue contribution during 2010.
As of May 31, 2010, TradeKing accounted for 68 percent of all correspondent accounts and 60 percent
of all correspondent trades. TradeKing has indicated plans to terminate this relationship by the end,of
2010, which the Applicant concedes "will have significant impacts to Legent Clearing's monthly
operating numbers, including, but not limited to the number of accounts, trading activity, average un-
invested customer client credit balances, and total credit and debit balances." LegeIit is currently
negotiating with correspondent broker-dealers in an attempt to restore the business that will be lost with
TradeKing's imminent departure and intends to re-price existing client contracts and implement other
cost-saving measures to become profitable again. There is no assurance that this restoration of business
will in fact occur.
OTHER PRIOR REGULATORY APPROVALS
The Bank's initial and subsequent operating subsidiary filings were made concurrently with OTS and
the FDIC. To date, the FDIC has not taken action to approve the Legent application filed by the Bank.
In addition, Legentfiled an application with FINRA on August 6,2010, for approval of the sale of
Legent to the Bank; any decision rendered by FINRA has not yet been provided to us. The SEC must
approve Legent's repayment of its subordinated debt and related transfer of collateral; such filing has
not yet been made as of the time of the subject Application.
CONCLUSIONIRECOMMENDATION
In summary, we believe the proposed acquisition of Legent poses serious supervisory and safety and
soundness concerns and would not result in a viable, safe and sound bUsiness model for the Bank. The
prospects of positive earnings in the near future for the Bank: or Legent on a stand-alone basis are
uncertain, let alone for the combined entity. The business plan submitted provides for an increase m the
already-high level of concentration in institutional deposits to fuel rapid asset growth - both of which
are unacceptable from a safety and soundness standpoint. Further, we have concerns with respect to the
compliance aspect of Legent's operations, as well as its ability to compete effectively within the
securities clearing industry. .
2541
Grovetta N. Gardineer
UnitedWestem Bank Operating Subsidiary Digest
PageS
January IS, 2011
Accordingly, we recommend that the Application to establish an operating subsidiary to engage in
securities "clearing and related services via the acquisition of Legent be denied.
cc: F. Augello
C. Coon
K. Corcoran
D. Dwyer
N.Dyer
S. Harris
J. Hendriksen
B.Lee
K. Marcotte
J. Miller '
W. Santos
G. Scott
Y. Sosa
K. Swanson
K. Walter
2542"
Grovetta N. Gardineer
United Western Bank Operating Subsidiary Digest
Page 9
January 18,2011
United Western Bank Operating SUbsidiary Application
Legent Clearing. LLC
Western Region Index of Relevant Documents
1) 3/30/09: OTS March 30, 2009 Report of Examination for United Western Bank (Applicant)
2) 1111110: OTS January 11, 2010 Report of Examination for Applicant: Ratings Downgrade to
. "4"/or Capital, Asset Quality, Management, and Earnings; Ratings Downgrade to "3" for
Sensitivity
3) 9/30/10: Applicant S-Quarter UTPR for the Quarter-Ended 201009
4) 6122/10: Applicant ROE; Downgrades Liquidity Rating to "5"
5) 6/25/10: Applicant Order to Cease and Desist (WN-I0-019)
.6) 6/25110: United Western Bancorp, Inc. (Bancorp) Order to Cease and Desist (WN-I0-020)
7) 07/3011 0: Initial Application, initially filed as a 30-Day Notice to Region, dated July 27, 2010,
and received July 30, 2010 with filing fee
8) 08/06/10: Region letter to Applicant advising that Notice is being escalated to Application status
due to supervisory c o n c e r n s ~ requiring additional fees
9) 0811 Oil 0: Submission to Region of additional filing fees to initiate Application review, dated
August 10,2010, and received August 10,2010 .
10) 09/0911 0: Region comment letter to Applicant requesting additional information
11) 09/30/10: Applicant Thrift Docket Print
12) 09/30/10: Bancorp Holding Company Docket Print
13) 10112110: Applicant response to Region comment letter, dated October 8, 2010, and received
October 12,2010
14) 10/27110: Region comment letter to Applicant requesting additional inf<?rmation
15) 1110411 0: Region letter to Applicant advising that Application will be processed on non-
delegated basis due to significant issues oflaw or policy; requested filing toOTS-D.C. AFR
16) 11105/10: Applicant filed copies of Application materials to DC AFR, received November 5,
2010
17) 11118/10: Applicant response to October 27,2010 Region comment letter, dated November 17,
201O,and received in OTS-D.C. and OTS Western Region November 18, 2010
18) 12/06/10: OTS-D.C. comment letter to Applicant requesting additional information
19) 12/21110: Letter from OTS (Gerbick) to BOD (Peoples), Applicant; Directive Relating to
Liquidity Contingency Plan
20) 12123/10: Applicant response to December 6,2010 DC comment letter, elated December 22,
2010, and received in OTS-D.C. and OTS Western Region December 23, 2010
21) 12/28/10: Letter from Applicant (Peoples) to OTS (Gerbick); Revised LiqUidity Contingency
Plan
22) 12/29/10: Letter from OTS (Gerbick) to BOD (peoples), Applicant; Ratings Downgrade to "5"
23) 12/29/10: Letter from OTS (Gerbick) to BOD (Gibson), Bancorp; Ratings Downgrade to "5"
24) 12/31/10: Applicant Daily Liquidity Analysis
25) 1110/11: FDIC infonnation request to Applicant, dated January 7, 2011, and received in OTS-
D.C. and OTSWestern Region January 10,2011
26) 1/13/11: Applicant response to 1110111 -FDIC infonnation request, dated January 13,2011, and
received in OTS-D.C. and OTS Western Region January 13,2011
2543
,TabC
Exhibit 94 A
See Tab C, Exhibit 3
2544
TabC
Exhibit 94 B .
See Tab C, Exhibit 8
2545
TabC
Exhibit 94 C
See Tab C, Exhibit 28
2546
TabC
Exhibit 94 D
See Tab C, Exhibit 17 A
2547
TabC
Exhibit 94 E
See Tab C, Exhibit 18
2548
TabC
Exhibit 94 F
See Tab C, Exhibit 19
2549
TabC
Exhibit 94 G
2550
HUNTON&
WILLIAMS
July 27, 2010
Philip A. Gerbick
Regional Director
Office of Thrift Supervision
Dallas Regional Office
225 E. John Carpenter Freeway, #500
Irving, Texas 75062-2326
Kristie K. Elmquist
Acting Regional Director
Federal Deposit Insurance Corporation
Dallas Regional Office
1601 Bryan Street
Dallas, Texas 75201
. :,
11
/f
. .. . ' ... .,.
HUNTON & WILLIAMS LLP
FOUNTAIN PLACE
1445 ROSS AVENUE
SUITE 3700
DALLAS, TEXAS 75202-2799
TEL 2149793000
FAX 2147407108
MICHAEL J. BLAYNEY
DIRECT DIAL: 214-468-3307
EMAIL: mblayney@hunton.com
FILE NO: 76676.1
OTS/WNR CORPORATE ACTIVITIES
ANALYST: BOWMAN LEE
(650) 746-7029
Re:
United Western Bank -- Notice Pursuant to 12 U.S.C. 1828(m), 12 C.F.R.
362.15 and 12 C.F.R. 559.11 for an acquisition and conduct of a new
activity in an operating subsidiary
Dear Mr. Gerbick and Ms. Elmquist:
On behalf of our client United Western Bank, Denver, Colorado, a federal savings bank
(the "Bank"), this letter is sent to provide prior written notice to the Office of Thrift Supervision
(the "OTS") and the Federal Deposit Insurance Corporation (the "FDIC") of the Bank's
proposed acquisition of Legent Clearing, LLC, a Delaware limited liability company ("Legent
Clearing" or "Legent"),and of its intent to conduct new activities through an operating
subsidiary of the Bank after consummation of the
1. Description of Transaction and Activity to be Conducted
On June 9, 2010, United Western Bancorp, Inc. (the "Company"), the Bank, Legent
Group, LLC, a Delaware limited liability company ("Legent Group"), and Henry C. "Ric"
Duques, the controlling member of Legent Group and the fonner Chainnan of the Board of First
Data Corporation ("Duques" and, together with Legent Group, the "Sellers"), entered into a
Purchase Agreement (the "Purchase Agreement") pursuant to which, among other things, the
ATLANTA AUSTIN BANGKOK BEIJING BRUSSELS CHARLOTTE DALLAS HOUSTON LONDON LOSANGELES
McLEAN. MIAMI NEW YORK NORFOLK RALEIGH RICHMOND SAN FRANCISCO SINGAPORE WASHINGTON
www.hunton.com
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The AcqUisition is expected to increase synergies for the Bank's online banking product
and to allow for material product-line expansion.
Management of the Bank expects the Acquisition to be accretive to earnings within 12
months. of closing, with the replacement of higher cost liabilities with Legent Clearing
client deposits.
Legent Clearing also presents attractive organic and acquisition-based growth
opportunities.
Terms of Acquisition
The purchase price to be paid by the Bank for Legent Clearing under the Purchase
Agreement consists of a combination of equity and cash. The equity portion of the purchase
price will be in the form of 2,419,688 shares of the Company's common stock in an exempt
issuance under Section 4(2) of the Securities Act. This number was determined by dividing
$2,700,000 by the volume weighted average price of the Company's common stock for the 10
tradingdays immediately prior to the June 9, 2010 date of execution of the Purchase Agreement.
The cash portion of the purchase price will be equal to the greater of (a) $13,000,000 or
(b) the adjusted book value (based on a formula set forth in the PurchaSe Agreement) of Legent
Clearing as of the last day of the month immediately preceding the closing (the ''Closing'') of the
transactions contemplated by the Purchase Agreement (the "ABV"). However, if the ABV is
less than $10,000,000, then the cash portion of the purchase price Will be equal to $13,000,000
minus the product of 1.3 times the amount by which the ABV is less than $10,000,000. For
example, if the ABV is determined to be $9,000,000, then the cash portion of the purchase price
will be equal to $11,700,000, as deteImbied by SUbtracting the product of 1.3 times $1,000,000
from $13,000,000. The cash portion of the purchase price will be paid at the Closing based on
an estimate of ABV provided by Legent Group, and will be subject to increase or decrease, as
the case may be, based upon the actual ABV determined after the Closing in accordance with
certain procedures set forth in the Purchase Agreement.
The cash portion of the purchase price will be subject to an escrow holdback in the ..
amount of $6,000,000, pursuant to the Escrow Agreement described below. The escrowed funds
will be used to satisfy certain indemnification obligations of the Sellers under the Purchase
Agreement.
As part of the transactions cpntemplated by the Purchase Agreement, the Sellers have
agreed that, for a period of two years following the Closing, they will not, directly or indirectly
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On the two-year anniversary of the Closing, the escrow agent will disburse to Legent
Group an amount equal to (a) the remaining amount of the escrowed funds (including all interest
or other income earned thereon) minus (b) the sum of (i) the amount estimated by certain
representatives of the Bank to be needed as a reserve for certain litigation .. based claims existing
as of that date plus (ii) all escrowed funds reserved as of that date for pending, unresolved or
unpaid indeIlUlification claims. -
Once all of the litigation-based claims referenced above and all pending indemnification
claims that existed as of the two-year anniversary of the Closing have been resolved, any
remaining escrowed funds, including all interest or other income thereon, will be disbursed to
Legent Group.
Registration Rights Agreement. At the Closing, the Company and Legent Group will
enter into a registration rights agreement (the ''Registration Rights Agreement"), pursuant to
which the Company will grant certain registration rights to -Legent Group with respect to the
2,419,688 shares of the Company's common stock to be issued to Legent Group at the Closing
(collectively, the ''Registrable Securities") as part of the consideration for the acquisition by the
Bank of all of the outstanding equity interests of Legent Clearing as contemplated by the
Purchase Agreement.
Pursuant to the Registration Rights Agreement, the Company agrees to prepare and file
with the Securities and Exchange Commission, as soon as practicable following the Closing but
in any event no later than 60 days thereafter, a Registration Statement on Form S-3 (the
"Mandatory Shelf Registration Statement'') providing for the resale of all of the Registrable
Securities pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). The Company also agrees to use its commercially reasonable efforts to cause
such Mandatory Shelf Registration Statement to be declared effective under the Securities Act as
promptly as practicable thereafter (but in no event later than 90 days after. the Closing) and to
keep the Mandatory Shelf Registration Statement continuously effective until such time as all of
the Registrable Securities registered under such Mandatory Shelf Registration Statement have
been sold. If the Company is not eligible to use Form S-3 as of the Closing, then it will be
obligated to file the Mandatory Shelf Registration Statement if and when it becomes eligible to
use Form S-3.
If the Company is not eligible to use Form S-3 as of the Closing and does not become
eligible to use Form S-3 on or prior to December 31, 2010, then at any time commencing con
January 1, 2011 and up.to a maximum of two times during the tbree-year term of the Registration
Rights Agreement, the holders of at least 50% of the Registrable Securities then outstanding may
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request registration under the Securities Act of their Registrable Securities (each, a "Demand
Registration") on Form S-l (or such other form as the Company is then eligible to use).
Following receipt of such a request for a Demand Registration, the Company shall file the
requested registration statement (the "Demand Registration Statement") with the Securities and
Exchange Commission as promptly as practicable, but in any event no later than 45 days after
the date such request for a Demand Registration is made, and shall use its commercially
reasonable efforts to cause the Demand Registration Statement to be declared effective under the
Securities Act as promptly as practicable thereafter (but in no event later than 120 days after the
filing thereof) and to keep the Demand Registration Statement continuously effective until such
time as all of the Registrable Securities registered under such Demand Registration Statement
have been sold.
With respect to any particular Registrable Securities, such shares will cease to be
Registrable Securities when (a) a registration statement covering such Registrable Securities has
been declared effective under the Securities Act by the Securities and Exchange Commission and
such Registrable Securities have been disposed of pursuant to such effective registration
statement, or (b) the entire amount of such Registrable Securities may be sold in a single sale
without any limitation as to volume or manner pursuant to Rule 144 promulgated under the
Securities Act.
Other Transactions Between the Parties
On September 29, 2006, the Company entered into a co-location license agreement (the
"LC Agreement") with Legent Clearing to share office space with Legent Clearing located in
Thornton, Colorado. The Company used the office as a business continuity and disaster recovery
site (BCPIDRP site). The LC Agreement provided, among other things, for an initial term of
seven months at $3,000 per month, and a month-to-month basis thereafter at the same rate. The
LC Agreement expired as of April 30, 2010 and the Company has subsequently entered into a
three-year lease with the landlord for the BCPIDRP site.
On the same date, the Bank extended a $5 mil1ionline of credit (the "Loan") to Legent
Group. Proceeds of the Loan provided additional regulatory capital to Legent Clearing. The
Loan is secured by the personal guarantees of Legent Group's two largest shareholders, in
addition to a security interest and pledge of 100% of the stock of Legent Group. The Loan was
renewed in October 2008 and extended through October I, 2010, and is currently a performing
loan on the books of the Bank.
The Company's Audit Committee (which is responsible for reviewing and approving all
.related party transactions) and the Bank's Board of Directors and Audit Committee reviewed
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both. the LC Agreement and the Loan. The Audit Committee detennined that the monthly
payments to Legent Clearing pursuant to the LC Agreement were at market rates for the space to
be used andt accordinglYt that the terms of the LC Agreement were as fair as would have been
obtained from an unaffiliated third party. The Audit Committee also determined that the Loan
was fair and equitable and in the best interests of the Company. Based on these determinations,
the Audit Committee approved both transactions and waived any potential violations of the
provisions of the Company's Code of Business Conduct and Ethics.
Legent Holdings, Inc. ("Legent Holdings"), the predecessor parent ftrm of Legent
Clearing, was founded by Mr. Guy Gibson, Chairman. of the Board of the Company, in 2002.
Legent Holdings acquired Legent Clearing from Mutual of Omaha's wholly-owned FINRA
member firm in June 2002. Mr. Gibson indirectly held a controlling interest in Legent Clearing
from June 2002 until February 2005, when Legent Clearing was sold to Legent Group. At the
time of the sale to Legent Group, the former Legent Holdings, now G2 Holdings Corp., a
Colorado limited liability company ("G2 Holdings"), retained an approximate 10% interest in
Legent Group. Subsequently, G2 Holdings' interest was diluted to an approximate 7% due to
later ftnancing rounds conducted by Legent Group after the February 2005 closing.
G2 Holdings is owned in part by Guy Gibson, William D. Snider, Michael J. McCloskey
and Michael Stallings, who are directors and/or officers of the Company. In addition, Mr.
Gibson served on Legent Group's Board of Directors. In March 2010, Mr. Gibson resigned as a
director of Legent Group and G2 Holdings sold its entire investment in Legent Group to Mr.
Duques.
2. Business Plan
The proposed business plan of the Bank for the operation of Legent Clearing after
consummation of the Acquisition, including projected fmancial statements showing the Bank's
anticipated investment in the activity, is attached hereto on a confidential basis as Confidential
Exhibit F. No specific capital ratio or investment percentage limitation detailed in 12 C.F.R.
362 subpart C or D is applicable to this transaction.
3. Authority to Conduct Activity
Under 12 C.F.R. 559.3(e)(1), an operating subsidiary of a federal savings association
may engage in any activity that its parent federal savings association may conduct directly. The
OTS Chief Counsel has issued a legal opinion, dated November 28, 2006 (the "Chief Counsel
Opinion"), which provides that a federal saving association may conduct clearing and settlement
services, including transactions involving securities beyond those in which the federal savings
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association is authorized to. invest under Section 5(c) of the Home Owners Loan Act (''HOLAn),
including the following express and incidental powers:
custodial services, such as receipt, custody, and delivery of brokerage customers'
securities and funds;
margin lending;
delivery of trade orders to specific market centers for execution;
recordkeeping services;
securities lending to fund brokerage customers' margin loans, stock borrowing, and
conduit securities . lending;
serving as a clearing member of a securities clearinghoUse; and
other related or incidental services of a type often performed by clearing broker-dealers.
- Further, the Chief Counsel Opinion provides that a registered broker-dealer operatiJi
y
subsidiary of a federal savings association may pay interest on customers' free credit balances
without violating the HOLA prohibition against paying interest on demand accounts.
The activities in which Legent Clearing will engage after consummation of the
ACquisition are of a type often performed by clearing broker-dealers and come within the
provisions of the Chief Counsel Opinion. A copy of the Chief Counsel Opinion is attached
hereto as Exhibit B.
1 Free credit balances are defined as cash held by a broker in .a customer's margin account that can be Withdrawn by the
customer at any time without restriction. Within a margin account. the credit balance of the account includes not only the cash
remaining in the account. but also proceeds. from short sales along with money used to meet margin requirements, and excess
margin and buying power. Because the credit balance of a margin account includes both unrestricted amounts and restricted
amounts, the term "free credit balance" is created to determine the total amount that can be Withdrawn by the account holder at
any time without restriction. The account holder may elect to reCeive the free credit balance each month or may direct the
brokerage firm to make certain investments With it. including the investment in. money market mutual funds.
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4. Management Expertise
The Bank and the Company have a wealth of experience upon which to draw in
connection with the operation of Legent Clearing after consummation of the Acquisition:
Guy Gibson, Chairman of the Board of the Company, founded Legent Clearing in 2002;
Legent Holding, controlled by Mr. Gibson, sold Legent Clearing to Legent Group in
2005.
Michael McCloskey, Director, Executive Vice President, General Counsel and Chief
Operating Officer of the Company, was Executive Vice President of Legent Holding,
LLC from 2003 to 2005.
Robert Slezak, Director of the Company, was formerly Chief Financial Officer of
Ameritrade Securities, Inc. (now TD Ameritrade, Inc.), a registered securities broker-
dealer. At the time TO Ameritrade, Inc owned its own self-clearing settlement fIrm, TO
Ameritrade Clearing, Inc.
Lester Ravitz, Director of the Company, was formerly Chief Operations Officer of First
Clearing, LLC, an affIliate of Wells Fargo.
Jeffrey Sime, Senior Vice President of the Bank, was formerly a co-founder and served
as Chief Executive Officer and President of Legent Clearing. Mr. Sime will become
Chief Operating Officer of Legent Clearing upon closing. Mr. Sime has over 19 years of
experience in the securities industry. He co-founded Legent Clearing and served in
various executive officer positions, most recently as its President, from 2002 through
2007. Prior to Legent, for over nine years, Mr. Sime served as Chief Financial Officer,
Chief Administrative Officer and Financial and Operations Principal for Kirkpatrick
Pettis, the broker dealer subsidiary of Mutual of Omaha Insurance Company. His
responsibilities at Kirkpatrick Pettis included the overall supervision of operations,
accounting/regulatory reporting, risk management, information technology and human
resources. He started a clearing division at Kirkpatrick Pettis. Most recently he was the
President of Nunami Services LLC. NunaIili provided outbound, low latency, order
routing services for other broker dealers and exchanges including the New York Stock
Exchange. Mr. Sime began his career at Deloitte and Touche conducting audits in the
financial services area.
In addition, Legent Clearing has an extremely experienced and capable management
team:
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Christopher Frankel - Chief Executive Officer. Christopher Frankel serves as the
Chief Executive Officer of Legent Clearing. Mr. Frankel served as the Chief Operating
Officer of GunnAllen Financial, Inc. from July 2006 to 2009. Mr. Frankel is a seasoned
fmancial service professional with more than: fifteen years of experience at a senior
management level. From 1994 to 2006, Mr. Frankel has served in various management
capacities with the Sterne, Agee & Leach Group. Prior to joining GunnAllen Financial,
he served as Chief Executive Officer of Sterne, Agee Capital Markets, Inc., and Chief
Executive Officer of Sterne Agee Financial Services, Inc. While at Sterne Agee, he
served as the Chief Executive Officer of two of the fmns' broker-dealers and President of
the third. Mr. Frankel has extensive industry experience in correspondent clearing,
wholesale execution, bank securities operations and institutional sales. He began his
career at Alex Brown & Sons, Inc. He is a frequent speaker on securities industry matters
specifically pertaining to securities operations and bank securities activities. Most
recently, in April200S and 2006 Mr. Frankel chaired the Securities Industry Association
Independent Finns Conferences in Atlanta, GeOrgia, and Ft. Lauderdale, Florida. He has
also been a member of both the SIA Independent Firms Committee and the Securities
Traders Association Market Structure. Committee. Mr. Frankel is a graduate of Florida
State University. .
Raymond Maratea President. Ray Maratea oversees all operations, business
development, client services, relationship management and marketing/sales activities for
Legent Clearing. Mr. Maratea has over 3S+ years experience in executive management
within the brokerage clearing services industry. Ray served as Senior Vice President and
Managing Director of Operations for BNY Clearing Service LLC, a Bank of New York
Company, Senior Vice President and Director of Operations, EVEREN Clearing, Senior
Vice President, Branch Administration, Security PacificlBank of America. His
background encompasses all aspects of operations, sales and administration. Ray serves
as a member of the Board of Regents for Lewis University.
David Brant Chief Financial Officer. David Brant oversees various fmancial
management, accounting and cash management functions. Prior to. joining Legent
Clearing, Mr. Brant served as Vice President and Controller in the Independent
Brokerage Group at Wachovia Securities, which included the correspondent clearing
division, First Clearing, LLC. He is a Certified Public Accountant and has over 10 years
of securities industry experience.
Craig Black - Executive Vice President, Risk/Compliance. Craig Black oversees
compliance, risk management and internal aUditfunctlons. Mr. Black brings over 30+
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. July 27, 2010
Page 11
years of securities industry experience to Legent Clearing. Prior to joining Legent
Clearing Mr. Black served as executive vice president and managing director 'of BNY
Clearing Services. His experience covers all aspects of clearing oPerations as well as
trading, risk management and compliance.
David Jarvis Executive Vice President and General CounseL David Jarvis is
Executive Vice President and General Counsel of Legent Clearing, and a member of its
Senior Management Team. David was born in Detroit, Michigan in 1963. He is a cum
laude graduate of the University of Michigan and earned his Juris Doctorate in 1990 from
the University of Detroit School of Law where he was an associate editor of the National
Jewish Law Review. Prior to joining Legent Clearing, David was Executive Vice
President and General Counsel of Gunn Allen Holdings, Inc., the parent of a diversified
fmancial services firm. Prior to Gunn Allen, David spent over five years as a Senior Vice
President of Wachovia Securities (now known. as Wells Fargo Advisors) where he was
the de/acto General Counsel to Wachovia Securities Financial NetwoIk and additionally
supported First Clearing LLC, Wachovia's clearing finn. David began his legal career
with law firms in Michigan and New York, where his practice focused, almost in entirety,
on securities litigation, securities regulation and securities arbitration. David is a.frequent
author, speaker and commentator on matters impacting the financial services industry.
Jean Luther Senior Vice President, Operations. Jean LUther oversees all of the
operational units including execution services, P&S, settlements, margin, asset
management, mutual funds, corporate actions, stock loan, tax reporting andlRAs. Ms.
Luther brings over 30 years of securities industry experience to Legent Clearing. Prior to
joining Legent Clearing Ms. Luther served as vice president of BNY Clearing Services
and held a position on DTCC's Corporate Actions Advisory Board. Her overall
experience covers many aspects of clearing operations including securities and futures
correspondent clearing.
5. Resolutions of the Board of Directors of the Bank and the Company
Resolutions of the Board of Directors of the Bank and the Company approving the
Purchase Agreement and the Acquisition are attached hereto as Confidential Exhibit D.
6. Financial Statements of the Bank
Financial statemeItts for the Bank as of and for the three-month period ending March 31,
2010 are attached hereto as Exhibit C.
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7. Other Information
Other information pertinent to this Notice is attached hereto on a confidential basis as
Confidential Exhibit G.
The Bank. hereby requests confidential treatment for the information contained in the
confidential exhibits to this Notice. The information and materials contained in the confidential
exhibits to this Notice constitute privileged and confidential commercial and financial
information, proprietary in nature, that is not available to the public from any other source.
Disclosure of this information to the public would provide competitors and others with
information about the fmancial and business projections of the Bank. and Legent Clearing. Such
information has traditionally and consistently been afforded confidential treatment. If the OTS
or FDIC considers disclosure of this information, we request that it contact us before making that
decision.
If you have any questions or comments or require additional information, please contact
the undersigned, Michael Stallings, Senior Vice President at (720) 932-4280 or Ted Abariotes,
General Counsel at (720) 932-4216. The Bank wishes to consummate the Acquisition at the
earliest possible time, and therefore your prompt attention to this Notice is appreciated.
Enclosures
cc: Michael Stallings
Ted Abariotes
Allen McConnell (fIrm)
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A
EXlDBIT A
Purchase Agreement, Form of Escrow Agreement, and
Form of Registration Rights Agreement
2564
70352.000001 EMF_US 31156628vl
PURCHASE AGREEMENT
by and among
UNITED WESTERN BANK
UNITED WESTERN BANCORP, INC.
LEGENT GROUP, LLC
and
HENRY C. DUQUES
DATED: June 9, 2010
2565
Execution Version
PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE ANI) SALE OF UNITS ................................................................................. 1
2. CONSIDERATION; PAYMENT ........................................................................................ 1
2.1 Consideration ........................................................................................................... 1
2.2 Payment of Consideration ........................................................................................ 1
2.3 Determination of Adjusted Book Value and Final Cash Purchase Price ................. 3
3. REPRESENTATIONS AND WARRANTIES OF SELLERS ............................................ 5
3.1 Legent Clearing ........ : ............................................................................................... 5
3.2 Sellers ...... ; ......... ~ ....................................................................... ; .............................. 6
3.3 Title .......................................................................................................................... 7
3.4 No Violation ............................................................................................................. 7
3.5 Financial Statements ................................................................................................ 8
3.6 Accounting Controls ................................................................................................ 8
3.7 Tax Matters .............................................................................................................. 8
3.8 Accounts Receivable .............................................................................................. 10
3.9 Invoices .................................................................................................................. 10
3.10 Securities ................................................................................................................ 10
3.11 Absence of Certain Changes ................................. ~ ................................................ 11
3.12 Absence of Undisclosed Liabilities. .. .................................................................... 12
3.13 Litigation ................................................................................................................ 13
3.14 Compliance With Laws and Orders ....................................................................... 13
3.15 Title to and Condition of Properties ............................ : .......................................... 15
3.16 Insuran.ce ................................................................................................................ 15
3.17 Contracts and Commitments .................................................................................. 16
3.18 Labor and Employment Matters ............................................................................ 18
3.19 Employee Benefit Plans ......................................................................................... 18
3.20 Employment Compensation ........................................... ; ....................................... 21
3.21 Agreements Binding on Employees ....................................................................... 21
3.22 Intellectual Property ........... , ................................................................................... 21
3.23 Technology Systems .............................................................................................. 22
3.24 Major Customers and Vendors .............................................................................. 23
3.25 Bank Accounts ....................................................................................................... 23
3.26 Transactions with Affiliates ................................................................................... 24
3.27 Assets Necessary to Business ................................................................................ 24
3.28 No Brokers or Finders ............................................................................................ 25
3.29 Investment Intent ................................................................................................... 25
3.30 Distribution of Consideration. " ............................................................................. 25
3.31 Restricted Securities ................................................................................................ 25
70352.000001 EMF_US 31156628vl
4. REPRESENTATIONS AND WARRANTIES OF BUYER ............................................. 26
4.1 . Corporate ................................................................................................................ 26
4.2 Authorization; Validity .......................................................................................... 26
4.3 No Brokers or Finders ............................................................................................ 26
4.4 No Violation ................................................................... , ....................................... 26
4.5 Inves1ln.ent Intent. .................................................................................................. 27
4.6 Financing ................................................................................................................ 27
5. REPRESENTATIONS AND WARRANTIES OF PARENT ........................................... 27
5.1 Corporate ................................................................................................................ 27
5.2 Authorization; Validity .......................................................................................... 27
5.3 No Brokers or Finders ............................................................................................ 27
5.4 No Violation ........................................................................................................... 28
5.5 Subject Shares ........................................................................................................ 28
6. COVENANTS ................................................................................................................... 28
6.1 Noncompetition; Confidentiality ........................................................................... 28
6.2 General Releases .................. , ................................................................................. 30
6.3 Conduct of Legent Clearing Prior to Closing ........................................................ 30
6.4 Negative Covenants ................................................................................................ 31
6.5 Notice of Certain Events ........................................................................................ 33
6.6 Access to Information and Records ....................................................................... 34
6.7 Consultants ............................................................................................................. 35
6.8 Employees and Employee Plans/Agreements ........ ~ .............................................. .35
6.9 Corporate Name Change ........................................................................................ 35
6.10 Preparation of Tax Returns .................................................................................... 35
6.11 LegentClearing Organization Credits .................................................................. .35
6.12 Repayment of Outstanding Debt; Transfer of Certain Assets ............................... 35 .
6.13 Advance by Buyer .................................................................................................. 36
6.14 Distribution of Subject Shares ............................................................................... 36
6.15 Required Approvals ............................................................................ ~ .................. 36
6.16 No Negotiation ....................................................................................................... 36
6.17 Audit ...................................................................................................................... 37
6.18 Commercially Reasonable Efforts ......................................................................... 37
7. INDEMNIFICATION ........................................................................................................ 37
7.1 By Member and Duques ........................................................................................ 37
7.2 By Member ............................................................................................................ 38
7.3 By Buyer ................................................................................................................ 39
7.4 By Parent. ............................................................................................................... 39
7.5 Indemnification of Third-Party Claims ................................................................. .39
7.6 Payment; Satisfaction from Escrowed Funds ....................................................... .40
7.7 Tax Effect. .............................................................................................................. 41
7.8 Limitations on Indemnification .............................................................................. 41
7.9 No Waiver of Contractual Representations and Warranties ................................. .43
70352.000001 EMF_US 31156628vl
8. CLOSIN"O .......................................................................................................................... 44
8.1 Documents to be Delivered by Sellers ................................................................... 44
8.2 Documents to be Delivered by Buyer or Parent. .................................................. .45
8.3 Conditions Precedent to Obligations of Buyer and Parent .................................... 46
8.4 Conditions Precedent to Obligations of Sellers .................................................... .47
9. TERMlN'A TION ................................................................................................................ 48
9.1 Termination ............................................................................................................ 48
9.2 Effect of Termination ............................................................................................. 49
9.3 Waiver of Conditions to Closing .......................................................................... .49
9.4 Expenses upon Termination ................................................................................... 49
10. RESOLUTION OF DISPUTES ......................................................................................... 50
10.1 Arbitration. .............................................................................................................. 50
10.2 Arbitrators .............................................................................................................. 5 0
10.3 Procedures; No Appeal. ......................................................................................... 50
10.4 Authority ................................................................................................................ 50
10.5 Entry of JudgtDent. ............................... ' .................................................................. 50
10.6 Confidentiality ....................................................................................................... 51
10.7 Continued Performance. . ....................................................................................... 51
10.8 Tolling .................................................................................... , ................................ 51
II. MISCELLANEOUS .......................................................................................................... 51
11.1 Disclosure Schedules ............................................................................................. 51
11.2 Further Assurance .................................................................................................. 51
11.3 Disclosures and Announcements ........................................................................... 52
11.4 Assignment; Parties in Interest .............................................................................. 52
11.5 Law Governing Agreement. ................................................................................... 52
11.6 Waiver; Remedies Cumulative ......... ~ .................................................................... 52
11.7 Amendment and Modification ............................................................................... 52
11.8 Notice ..................................................................................................................... 53
11.9 Expenses ................................................................................................................ 54
11.10 Entire Agreement. .................................................................................................. 55
11.11 Counterparts ........................................................................................................... 55
11.12 Headings ................................................................................................................ 55
11.13 Knowledge ............................................................................................................. 55
11.14 Glossary of Terms .................................................................................................. 55
Exhibits
Exhibit 2.2(a)
Exhibit 2.2( c)
Exhibit 6.2
Exhibit S.I(t)
Exhibit 8.1(g)
Exhibit 8.2(d)
Exhibit 8.2(t)
70352.000001 EMF_US 31156628vl
Form of Escrow Agreement
Form of Registration Rights' Agreement
Form of Release
Form of Closing Certificate of Member
Form of Closing Certificate ofDuques
Form of Opinion of Parent's In-House Counsel
Form of Closing Certificate of Buyer and Parent
256W
Schedules
Schedule 3. 1 (c)
Schedule 3 .1 (d)
Schedule 3.1 ( e)
Schedule 3.I(f)
Schedule 3.4
Schedule 3.5
Schedule 3.7(a)
Schedule 3.8
Schedule 3.10
Schedule 3.11
Schedule 3.12
Schedule 3.13
Schedule 3. 14(a)
Schedule 3. 14(b)
Schedule 3.15(a)
Schedule 3. 15(b)
Schedule 3.15(d)
Schedule 3.16
Schedule 3.17(b)
Schedule 3. 17(f)
Schedule 3.17G)
Schedule 3.18
Schedule 3.19(a)
Schedule 3.21
Schedule 3.22
Schedule 3 .24( a)
Schedule 3.24(b)
Schedule 3.25
Schedule 3.26(a)
Schedule 3.26(b)
Schedule 3 .26( c)
Schedule 6.2
Schedule 6.4
Schedule 6.12
70352.000001 EMF_US 31156628vl
Foreign Qualifications
Interests in Other Entities
Managers & Officers
Capitalization
Violation, Conflict, Default
Financial Statements
Certain Tax Matters
Accounts Receivable (Aged Schedule)
Securities Held by Legent Clearing as of May 15, 2010
Certain Changes
Off-Balance Sheet Liabilities
Litigation Matters
Non-Compliance with Laws
Licenses
Liens
Fixed Asset List
Real Property Leases
Insurance
Personal Property Leases
Loan Agreements
Other Material Contracts
Labor Matters
Employee Plans/Agreements
Agreements Binding on Employees
Intellectual Property
Major Customers
Major Vendors
Bank Accounts
Contracts with Affiliates
Adverse Interests
Obligations of and to Affiliates
Persons to Deliver Releases
Certain Permitted Actions
Outstanding Subordinated Indebtedness
tV
2569
PURCHASE AGREEMENT
TIllS PURCHASE AGREEMENT (this "Agreemenf') is made and entered into
as of June 9, 2010, by and among UNITED WESTERN BANK., a federal savings bank
("Byyer''), UNITED WESTERN BANCORP, INC., a Colorado corporation and the sole
stockholder of Buyer ("Parent',), LEGENT GROUP, LLC, a Delaware limited liability company
("Member''), and HENRY C. DUQUES, the controlling member of Member (''Dugyes'' and,
together with Member, ''Sellers'').
RECITALS
A. Member, through its wholly-owned subsidiary, Legent Clearing, LLC, a
Delaware limited liability company ("Le&ent Clearin&',), is engaged in the business of providing
clearing services to broker-dealers (the "Business"). Member owns all of the issued and
outstanding common units of membership interest in Legent Clearing (collectively, the "Units'').
B. Duques is an Affiliate (as defined in Section 3.26(a of and controls
Member, and as a result of such relationship is receiving, and will receive, substantial direct and
indirect benefits from the consummation of the transactions contemplated hereby, and Buyer has
required that Duques enter into this Agreement as a material inducement for Buyer to enter into
this Agreement and to perform. its obligations hereunder.
C. Buyer desires to purchase the Units from Member and Member desires to
sell the Units to Buyer, upon the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows ..
1. PURCHASE AND SALE OF UNITS
Subject to the terms and conditions of this Agreement, at the Closing (as
hereinafter defined), Sellers shall sell or cause to be sold to Buyer, and Buyer shall purchase, all
of the Units.
2. CONSIDERATION;PAYMENT
2.1 Consideration.
The consideration payable for the Units (collectively, the "Consideration'') shall
consist of cash in the amount of the . Final Cash Purchase Price (as hereinafter defined),
plus the shares of Parent's common stock, par value $0.0001 per share (the ''Parent
Common Stock''); contemplated bySection2.2(c) (collectively, the "Subject Shares'').
2.2 . Payment of Consideration.
. The Consideration shall be paid by Buyer as follows:
70352.000001 EMF_US 31lS6628vl
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(a) Cash to Escrow Agent. At the Closing (as hereinafter defined), Buyer
shall deliver to Wells Fargo Bank, National Association (or such other bank. as may be
mutually agreed by Buyer and Member), as escrow agent (the "Escrow Agent''), pursuant
to an Escrow Agreement substantially in the form of Exhibit 2.2(a) attached hereto (the
"Escrow Agreement"), the sum of $6,000,000 (the "Escrowed Funds"). The parties
acknowledge and agree that the Escrowed Funds shall be held in escrow for the
satisfaction of all amounts, if any, due to Buyer pursuant to Section 2.2( d) or Article 7, all
as set forth in the Escrow Agreement.
(b) Cash to Member. At the Closing, Buyer shall deliver to Member a sum of
cash equal to the Estimated Cash Purchase Price (as hereinafter defined) less the amount
of the Escrowed Funds delivered to the Escrow Agent pursuant to Section 2.2(a). Not
less than three business days prior to the Closing Date, Member shall deliver to Buyer a
statement setting forth: (i) Member's reasonable estimate of Adjusted Book Value,
together with a projected consolidated balance sheet, as of the Month-End Date, of
Legent Clearing (the "Estimated Balance Sheet"), together with schedules setting forth in
reasonable detail all adjustments thereto required by Section 2.3Q; (ii) based thereon,
the estimated Final Cash Purchase Price due at Closing (the "Estimated Cash Purchase
Price"); and (iii) wire transfer instructions for the payment of the Estimated Cash
Purchase Price and instructions with respect to the delivery of the Subject Shares.
(c) Issuance of Subject Shares to Member. At the Closing, Parent shall issue
and deliver to Member the Subject Shares, consisting of 2,419,688 shares of Parent
Common Stock. The registration rights associated with the Subject Shares shall be as set
forth in a Registration Rights Agreement substantially in the form of Exhibit 2.2(c)
attached hereto (the "Registration Rights Agreement").
(d) Adjustment to Final Cash Purchase Price. On or before the fifth business
day following the fmal determination of the Final Balance Sheet (as hereinafter defmed)
(such date being hereinafter referred to as the "Settlement Date"):
(i) If the Final Cash Purchase Price (as defined in Section 2.3(c)(iii))
is greater than the Estimated Cash Purchase Price, then Buyer shall pay to
Member the amount of such excess, together with interest on such amount from
the Closing Date to the date of such payment at a rate per annum equal to 3%.
(ii) If the Final Cash Purchase Price is less than the Estimated Cash
Purchase Price (such deficit, the "Overpayment Refund"), then Buyer and
Member shall instruct the Escrow Agent to disburse to Buyer a portion of the
Escrowed Funds equal to the amount of the Overpayment Refund, together with
interest on such amount from the Closing Date to the date of such payment at a
rate per annum equal to 3%; provided, however, that if the amount of the
Overpayment Refund exceeds $350,000, then Member shall be obligated to
immediately remit to the Escrow Agent, in replenishment of a portion of the
Escrowed Funds disbursed to Buyer pursuant to this Section 2.2(d)(ii). cash in the
amount by which the Overpayment Refund exceeds $350,000.
70352.000001 EMF_US 31156628vl
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(e) ,Method of Payment All payments :under this Section 2.2 shall be made in
the form of certified or bank cashier's check payable to the order of the recipient or, at
the recipient's option, by wire transfer of immediately available funds to an account
designated by the recipient not less than 48 hoUl'S prior to the time for payment specified
herein.
2.3 Determination of Adjusted Book Value and Final Cash Purchase Price.
(a) Definition of Book Value. The term "Book Value" shall mean the
consolidated book value of Legent Clearing as of the last day of the month immediately
preceding the month in which the Closing Date occurs (the ''Month-End Date''),
determined in accordance with United States generally accepted accounting principles
("GAAP'').
(b) Defmition of Adjusted Book Value. The term "Adjusted Book Value"
shall mean Book Value less the sum of the following items, in each case to the extent
such items are not already reflected in Book Value:
(i) the carried value as of the Month-End Date of: (A) 195 shares of
Class B non-voting common stock in Newbridge Securities Corporation (with a
carry value at cost of $750,000, --to the extent the foregoing have}leen transferred
from Legent Clearing to any other individual, corporation (including any non-
profit corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental or
Regulatory Entity (as defined in Section 3.4) or other entity (each, a "Person',) on
or after June 30, 2009; and (C) certain debt owed to Legent Clearing by
Newbridge Securities Corporation (with a carry value of $911,000 and shown on
the Recent Balance Sheet as ''Receivables-Sundry'') with respect to which Legent
Clearing bas applied to the Financial Industry Regulatory Authority for
conversion from qualified subordinated debt into 521 shares of Class B non-
voting common stock in Newbridge Securities COIporation;
(ii) a reserve for contingent liabilities in the amount of $200,000;
(iii) any expenses of Legent Clearing after the Month-End Date and
prior to the Closing Date other than ordinary course exPenses of the Business;
. (iv) any costs incurred by Legent Clearing in connection with the
transactions contemplated by this Agreement, including, without limitation, legal
fees and expenses in negotiating this Agreement and closing the transactions
contemplated hereby; and
(v) all severance costs, if any, incurred by Legent Clearing since the
Month-End Date.
(c) Calculation of Adjusted Book Value. The final balance sheet ofLegent
Clearing as of the Month-End Date shall be certified by a firm of independent
70352.000001 EMF_US 31156628vl
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accountants engaged by Buyer ("Buyer's Accountants") at Buyer's sole cost and expense,
and the calculation of Adjusted Book Value shall be prepared as follows:
(i) Within 90 days after the Closing Date, Buyer shall deliver to
Member a balance sheet of Legent Clearing, prepared in accordance with GAAP
from the books and records of Legent Clearing, on a basis consistent with the
accounting principles theretofore followed by Legent Clearing in the preparation
of the EstimatedBalance Sheet and in accordance with this Section 2.3, and fairly
presenting Adjusted Book Value. The balance sheet shall be accompanied by (A)
detailed schedules of the adjustments to the Estimated Balance Sheet and (B) a
statement (I) certifying that the balance sheet has been prepared in accordance
with GAAP, on a basis consistent with the accounting principles theretofore
followed by Legent Clearing, (ll) setting forth the final calculation of Adjusted
Book Value, and (TIl) setting forth the amount of any adjustment to be paid on the
Settlement Date pursuant to Section 2.2(d}.
(ii) Within 30 days following the delivery of the balance sheet referred
to in Section 2.3(c}(i}, Member or a firm of independent accountants engaged by
Member ("Member's Accountants") may object to any of the information
contained in said balance sheet or accompanying schedules which could affect the
necessity or amount of any adjustment pursuant to Section 2.2(d). Any such
objection shall be made in writing and shall state Member's determination of the
amount of Adjusted Book Value.
(iii) In the event of a dispute or disagreement relating to the balance
sheet or schedules which Buyer and Member are unable to resolve, either party
may elect to have all such disputes or disagreements resolved by an accounting
firm of nationally recognized standing (the "Third Accounting Finn") to be
mutually selected by Member and Buyer or, if no agreement is reached, by
Buyer's Accountants and Member's Accountants. The Third Accounting Firm
shall make a resolution of the calculation of Adjusted Book Value, which shall be
final and binding for purposes of this Article 2. The Third Accounting Finn shall
be instructed to use every reasonable effort to perform its services within 15 days
of submission of the balance sheet to it and, in any case, as soon as practicable
after such submission. The fees and expenses for the services of the Third
Accounting Firm shall be shared by Buyer and Member as follows: Member shall
pay a percentage of such fees and expenses equal to AI(A+B) and Buyer shall pay
a percentage of such fees and expenses equal to B/(A+B), where A is equal to the
absolute value of the difference (in dollars) between Adjusted Book Value as
finally determined by the Third Accounting Finn and Adjusted Book Value as
reflected in the objection prepared and delivered by Member in accordance with
Section 2.3(c)(ii), and B is equal to the absolute value of the difference (in
dollars) between Adjusted Book Value as finally determined by the Third
Accounting Firm and Adjusted Book Value as reflected in the report prepared and
delivered by Buyer in accordance with Section 2.3(c)(i). As used in this
Agreement, the term "Final Balance Sheef' shall mean the balance sheet of
Legent Clearing reflecting Adjusted Book Value as ftnally determined for
70352.000001 EMF_US 31156628vl
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2573
purposes of this Article 2. whether by acquiescence of Member in the figures
suppliedby Buyer in accordance with Section 2.3(c)(i). by negotiation and
agreement of the parties or by the Third Accounting Firm in accordance with this
Section 2.3(c)(iii). and the term "Final Cash Purchase Price" shall mean the
greater of (A) $13,000,000 or (B) the amount of Adjusted Book Value as finally
determined in accordance with this Section 2.3(c) based on the Final Balance
Sheet; provided. however, that if the amount of Adjusted Book Value as finally
determined in accordance with this Section 2.3(c) is less than $10,000,000, then
the Final Cash Purchase Price shall be an amount eq1ial to (I) $13,000,000 minus
(IT) the product of (x) 1.3 times (y) the amount by which the Adjusted Book Value .
. is less than $10,000,000.
(iv) . Buyer agrees to permit Member, Member's Accountants and their
respective representatives, duriitg normal business hoW'S, to have reasonable .
access to, and to examine and make.copies of, all books and records ofLegent
Clearing, including but not limited to the books, records, work papers
and audit programs of Buyer and Buyer's Accountants, and access to
representatives of Buyer's accountants, which documents and access are
reasonably necessary to review .. tielivered by Buyer in
accordance with this Section 2.3(c). .' ....
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
The following representations and warranties are made to Buyer and Parent:
(a) by Member and Duques, jointly and severally, solely with respect to the representations and
warranties setfortb in Section 3.1 ["Legent Clearing"], Section 3.2 ["Sellers''], Section 3.3
.[''Title''] and Section 3.700 ["Tax Classification"] (collectively, the "Fundamental Rems''); and
(b) by Member only, with respect to all other representations and warranties set forth in this
Article 3. Each of the representations and warranties set forth in this Article 3, whether IIiade by
Member and Duques, jointly and severally, or by Member only, as set forth above, is true and
correct, shall survive the Closing and is subject to the qualifications and exceptions set forth in
the Disclosure Schedules (as hereinafter defined). Any reference in this Article 3 to Legent
Clearing shall include any predecessor entities, including Legent Clearing Corp, a Nebraska
corporation.
3.1 Legent Clearing,
(a) Organization. Legent Clearing is a limited liability company duly
organized, vaJidlyexisting and in good standing under the Laws of the State .of Delaware.
(b) Power. Legent Clearing has all requisite limited liability company power
and authority to own, operate and lease its properties and to carry on its business as and
where such is now being conducted.
(c) Oualification. Legent Clearing is duly licensed or qualified to do business
as a foreign limited liability company,.and is in good standing, in each jurisdiction
wherein the character of the properties owned or leased by it, or the nature of its business,
70352.000001 EMF_US 31lS6628vl
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2574
makes such licensing or qualification necessary. The jurisdictions in which Legent
Clearing is licensed or qualified to do business are listed in Schedule 3. 1 (c).
(d) No Subsidiaries. Legent Clearing does not own, directly or indirectly, or
otherwise control, securities or other interests having the power to elect any member of
the board of directors, board of managers or similar governing body, or otherwise have
the power to direct the business and policies of, any other Person. Except as set forth in
Schedule 3. 1 (d) or with respect to entities in which Legent Clearing has an indirect
interest solely as a result of securities positions held in customer accounts, Legent
Clearing does not own, directly or indirectly, any capital stock or other equity securities
of any corporation (other than client securities held in a custodial or fiduciary capacity) or
have any direct or indirect equity or other ownership interest in any entity or business.
(e) Organizational Documents. The copies of the Certificate of Formation
and Operating Agreement ofLegent Clearing, including any amendments thereto, which
have been delivered by Legent Clearing to Buyer are true, correct and complete copies of
such instruments as presently in effect. The minute book and stock records ofLegent
Clearing which have been furnished to Buyer for inspection are true, correct and
complete and accurately reflect all material corporate action taken by Legent Clearing.
The managers and officers ofLegettt Clearing are listed in Schedule 3.l(e).
(t) Capitalization of Legent Clearing. Member owns all the issued and
outstanding Units described in Schedule 3.1(f), which are the only authorized equity
interests ofLegent Clearing. All such Units are validly issued, fully paid and non-
assessable. There are no outstanding (a) securities convertible into or exchangeable for
any Units or other securities of or profit sharing rights in Legent Clearing; (b) options,
warrants or other rights to purchase or subscribe to Units or other securities of or profit
sharing rights in Legent Clearing or securities which are convertible into or exchangeable
for Units or other securities of or profit sharing rights in Legent Clearing; or (c) contracts,
commitments, agreements, understandings or arrangements of any kind relating to the
issuance, sale or transfer of any Units or other securities of or profit sharing rights in
Legent Clearing, any such convertible or exchangeable securities or any such options,
warrants or other rights. .
3.2 Sellers.
(a) Organization. Member is a limited liability company duly organized,
validly existing and in good standing under the Laws of the State of Delaware. Duques is
an individual currently residing in the State of New York.
(b) Power. Sellers have full power, legal right and authority to enter into,
execute and deliver this Agreement and the other agreements, instruments and documents
contemplated hereby (such other documents sometimes referred to herein as "Ancillaty
Instruments"), and to carry out the transactions contemplated hereby.
(c) Authorization. The execution and delivery of this Agreement and the
Ancillary Instruments, and the consummation of the transactions contemplated hereby
70352.000001 EMF_US 31156628vt
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and thereby, have been duly authorized by Member and its board of managers, and no
other or :further cOrporate action on the part of such board of managers is necessary
therefor. No approval by the members of Member is required in connection with the
execution and delivery of this Agreement and the Ancillary Instruments or the
consummation of the transactions contemplated hereby and thereby.
(d) Validity. This Agreement has been duly and validly executed and
delivered by Sellers and is, and when executed and delivered each Ancillary Instrument
will be, the legal, valid and binding obligation of each Seller, enforCeable in accordance
with their respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally, and by .
general equitable principles.
3.3 Title.
At the Closing, Buyer will acquire good and marketable title to all the Units, free
and clear of all Liens (as hereinafter defined) including, without limitation, voting trusts or
agreements, proxies and marital or community property interests.
3.4 No Violation.
Except as set forth in Schedule 3.4, and except for any consents or approvals
required by federal or state commercial banking regulatory authorities, with respect to which
Buyer has made its own evaluation, neither the execution and delivery of this Agreement or the
Ancillary Instruments nor the consummation by Sellers and Legent Clearing of the transactions
contemplated hereby and thereby: (a) will violate any statute, law, ordinance, rule or regulation
of the United States or any state thereof (collectively, ''Laws'') or any order, writ, injunction,
judgment, plan, decree, agreement or memorandum of understanding (collectively, "Ordefs'') of
or with any court, arbitrator,. department, commission, board, bureau, agency, authority,
instrumentality or other body located in the United States, whether federal, state, municipal or
other, or any stock exchange or any other self-regulatory body having jurisdiction over or
charged with the regulation of the business of brokers-dealers or of Legent Clearing, or any
clearing agency or securities depository in whicb Legent Clearing is a member or member
organization (collectively, "Governmental or Regulatoty Entities''); (b) will require any
authorization, consent, approval, exemption or other action by or notice to any Governmental or
Regulatory Entity (including, without limitation, under any ''plant-closing'' or similar law); or (c)
subject to obtaining the consents referred to in Schedule 3.4, will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both, would constitute a
defaUlt) under, or will result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the assets of Legent Clearing (or any of the Units)
under, any term or provision of the organizational documents of Legent Clearing or of any
contract, commitment, understanding, arrangement, agreement or restriction of any kind or
character to which Legent Clearing or Member is a party or by which Legent Clearing or
Member or any of its or their assets or properties may be bound or affected.
7 0 . ~ S 2 . 0 0 0 0 0 1 EMF_US 31lS6628vl
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3.5 Financial Statements.
Included as Schedule 3.5 are true and complete copies of the consolidated
financial statements of Legent Clearing, consisting of (a) audited balance sheets ofLegent ,
Clearing as of June 30, 2009 and 2()O8, and the related statements of income and cash flows for
the fiscal years then ended (including the notes contained therein or a n n ~ e d thereto), which
, financial statements have been reported on, and are accompanied by, the signed, unqualified
opinions ofDeloitte & Touche LLP, independent auditors for Legent Clearing for such fiscal
, years, and (b) an unaudited balailce sheet of Legent Clearing as of April 30, 2010 (the "Recent
Balance Sheet"), and the related unaudited statements of income and cash flows for the ten
months then ended. All of such financial statements (including all notes and schedules contained
therein or annexed thereto) are true, complete and accurate, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, for the absence of footnote disclosure)
applied on a consistent basis, have been prepared in accordance with the books and records of
Legent Clearing, and fairly present, in accordance with GAAP, the assets, liabilities and financial
,position, the results of operations and cash flows of Legent Clearing as of the dates and for the
years and periods indicated.
3.6 Accounting Controls.
To the knowledge of Member, Legent Clearing has devised and maintained, and
has not received any management letter or other communication from its auditors that would
indicate that it had failed to devise and maintain, systems of internal accounting controls
sufficient to provide reasonable assurance that (a) all material transactions are executed in
accordance with management's general and specific authorization; (b) all material transactions
are recorded as necessary to permit the preparation of financial statements in conformity with
GAAP consistently applied with respect to broker-dealers and any other criteria applicable to
such statements; (c) access to the material property and assets ofLegent Clearing is permitted
only in accordBnce with management's general or specific authorization; and (d) the recorded
accountability for items is compared with the actual levels at reasonable intervals and
appropriate action is taken with respect to any differences.
3.7 Tax Matters
(a) Tax Returns. Except as set forth in Schedule 3.7(a): (i) Legent Clearing
has filed all Tax Returns that it was required to file; (il) all such Tax Returns were correct
and complete in all material respects; and (iii) Legent Clearing has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, member or other third party, and all
Forms W-2 and 1099 required with respect thereto have been properly completed and
timely filed. All Taxes due and owing by Legent Clearing (whether or not shown on any
Tax Return) have been paid. Legent Clearing is not currently the beneficiary of any
extension of time within which to file any Tax Return. There are no Liens for Taxes
(other'thanTaxes not yet due and payable) upon any of the assets ofLegent Clearing.
/
703Sl,OOOOOl EMF_US 311S6628vl
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(b) Tax Disputes. There is no material dispute or claim concerning any Tax
liability of Legent Clearing either (i) claimed or raised by any authority in writing or Oi)
as to which Member or any of the directors or officers ofLegent Clearing has knowledge.
(c) Tax Return Copies: Statute of Limitations. Member has delivered to
Buyer, or made available via Member's internal electronic data site created in connection
with the transactions contemplated by this Agreement (the ''Data Site''), correct and
complete copies of all income Tax Returns, other material Tax Returns, examination
reports and statements of deficiencies assessed against, or agreed to by, Legent Clearing.
Legent Clearing has not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.
(d) Tax Sharing Agreement Legent Clearing is not a party to ot bound by
any Tax allocation or Tax sharing agreement, other than an agreement entered into in the
ordinary course of business.
(e) Provision For Taxes. The provision made for Taxes on the Recent
Balance Sheet (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) is sufficient for the payment of all Taxes,
whether or not disputed, at the date of the Recent Balance Sheet and for all years and
periods prior thereto. Since the date of the ],tecent Balance Sheet, Legent Clearing has
not incurred any Taxes other than Taxes incurred in the ordinary course of business
consistent in type and amount with past practices of Legent Clearing, and the provision
for Taxes (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) remains sufficient for the payment of all
Taxes.
(f) Classification. Legent Clearing is, and has been since the date of its
formation, classified for federal income Tax purposes as an S corporation under Section
1361(a)(1) of the Code.
(g) No Obligation. Legent Clearing has no obligation (i) to indemnify another
Person for any Tax liability imposed on such Person; or (ii) otherwise to assumeor
succeed to the Tax liability of another Person.
(h) Reportable Transaction. Legent Clearing is notand has not been a party to
any ''reportable transaction," as defined in Section 6707 A( c)(l) of the Code and Treasury
Reglilation Section 1.6011-4(b).
(i) Definitions: For purposes of this Agreement, the following terms shall
have the following meanings:
(i) ''Code'' means the Internal Revenue Code of 1986, as amended.
(ii) ''Tax'' or ''Taxes'' means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, w i n ~ profits, environmental (including taxes under
Code S9A), customs duties, capital stock, franchise, profits, withholding, social
70352.000001 BMF;..us 31l56628vl
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security (or similar), unemployment, disability, payroll, ad valorem, real property,
personal property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
(iii) ''Tax Return" means any return (including any information retilm),
declaration, report, statement, schedule, notice, form, claim for refund or other
document filed with or submitted to, or required to be :tiled with or submitted to,
any Governmental or Regulatory Entity in connection with the determination,
assessment, collection or payment afany Tax or in connection with the
administration, implementation or enforcement of or compliance with any Laws
relating to any Tax, including any schedule, exhibit or other attachment thereto.
3.8 Accounts Receivable.
All accounts receivable ofLegent Clearing reflected on the Recent Balance Sheet,
and as incurred in the normal course of business since the date thereof: represent arm's length
transactions actually made in the ordinary course of business and the reserve shown on the
Recent Balance Sheet for doubtful accounts was prepared in accordance with GAAP and, to the
knowledge of Member, are collectJ.ble in the ordinary course of business without the necessity of
commencing legal proceedings; are subject to no counterclaim or setoff; and are not in dispute.
Schedule 3.8 contains an aged schedule of acC()unts receivable included in the Recent Balance
Sheet .. All accounts receivable of Legent Clearing reflected on the Final Balance Sheet will
represent arm's length transactions actually made in the ordinary course of business and will be
collected (net of the reserve shown on the Final Balance Sheet for doubtful accounts) in the
ordinary course of business without the necessity of commencing legal proceedings and will be
subject to no counterclaim or set-oit and will not be in dispute.
3.9 Invoices.
All invoices to customers or former customers conformed when issued to the
requirements of such customers' contracts, and such customers were accurately billed for
services performed in compliance with such contracts.
3.10 Securities.
Set forth in Schedule 3.10 is a complete and accurate list and description of all
securities held by Legent Clearing as of May 15,2010, along with a good faith estimate of the
fair value of each such security under GAAP. Legent Clearing has good and marketable title to,
and physica1possession of, all securities held by it (except securities sold under repurchase
agreements or held in any fiduciary or agency capacity), free and clear of all Liens, except to the
extent such securities are pledged in the ordinary and usual course of business consistent with
prudent business practices to secure obligations ofLegent Clearing. Such securities are properly
valued on Legent Clearing's books in accordance with GAAP.
70352.000001 EMF_US 31156628vl
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3.11 Absence of Certain Changes.
Except as and to the extent set forth in Schedule 3.11. since Aprll30, 2010 there
bas not been:
(a) No Adverse Change. Any adverse change in the financial condition,
assets, liabilities, business, prospects or operations ofLegent Clearing;
(b) No Damage. Any loss, damage or destruction, whether covered by
insurance or not, affecting Legent Clearing's business or properties;
(c) No Increase in Compensation. Any increase in the compensation, salaries
or wages payable or to become payable to any employee or agent of Legent Clearing
(including, without limitation, any increase or change pursuant to any bonus, pension,
profit sharing, retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued., other than any annual increase or bonus to non-officer
employees in amounts consistent with past practice;
(d) No Labor Disputes. Any labor dispute or disturbance, other than routine
individual grievances which are not material to the business, financial condition or results
of operations ofLegent Clearing;
(e) No Commitments. Any commitment or transaction by Legent Clearing
(including, without limitation, any borrowing or capital expenditure) involving
consideration or other expenditure in excess of $50,000;
(t) No Dividends. Any declaration, setting aside, or payment of any dividend
or any other distribution in respect of the Units; any redemption,purchase or other
acquisition by Legent Clearing of any of the Units, or any security relating thereto; or any
other payment to any holder of any of the Units as such, except as expressly
contemplated hereby;
(g) No Disposition ofPrQperty. Any sale, lease or other transfer or
disposition of any properties or assets ofLegent Clearing, except for the sale of securities
in the ordinary course of business and except as expressly contemplated hereby;
(h) NoIndebtedness. Any indebtedness for borrowed money incurred,
assumed or guaranteed by Legent Clearing, other than pursuant to margin loans made in
the ordinary course of business, consistent with past practice, provided that such margin
loans are made in compliance in all material respects with existing policies of Legent
Clearing and applicable Law;
(i) No Liens .. Any Lienp1aced on any of the properties or assets ofLegent
Clearing other than (i) Liens for current Taxes, assessments or governmental charges or
levies on property not yet due or delinquent, or being contested in good faith; (ii) Liens
incurred in the ordinary course of business consistent in type and amount with past
practices of Legent Clearing; (iii) all imperfections of title and encumbrances that do not
materially interfere with the present use or value of the underlying property; and
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(iv) those Liens that are specifically identified as Permitted Liens in Schedule 3.11
(collectively, uPermitted Liens'');
(j) No Amendment of Contracts. Any entering into, amendment or
termination by -Legent Clearing of any contract, 'or any waiver of material rights
thereunder, other than in the ordinary course of business;
(k) Loans and Advances. Any loan or advance (other than (i) . advances to
employees in the ordinary course of business for travel and entertainment in accordance
with past practice and (ii) margin loans made iri the ordinary course of business,
consistent with past practice, provided that such margin loans are made in compliance in
aU material respects with existing policies of Legent Clearing and applicable Law) to any
Person including, but not limited to, any Affiliate;
(1) Credit. Any grant of credit to any customer on terms or in amounts more
favorable than those which have been extended to such customer in the past, any other
change in the terms of any credit heretofore extended or, except in the ordinary course of
business ofLegent Clearing, any other change of policies' or practices with respect to the
granting of credit; or
(m) No Unusual Events .. Any other event or condition not in the ordinary
course of business ofLegent Clearing.
3.12 Absence of Undisclosed Liabilities.
E1tcept as and to the extent specifically disclosed in the Recent Balance Sheet or
in Schedule 3.12, Legent Clearing does not have any liabilities, commitments or obligations
- (secured or unsecured, and whether accrued, absolute, contingent, direct, indirect or otherwise),
other than commercial liabilities and obligations incurred since the date of the Recent Balance
Sheet in the ordinary course of business and consistent with past practice and none of which has
or would reasonably be expected to have a Material Adverse Effect. Except as and to the extent
described in the Recent Balance Sheet or in Schedule 3.12, to the knowledge of Member, there is
no basis for the assertion against Legent Clearing of any liability, ,and there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which may give rise to
liabilities, except commercial liabilities and obligations incurred in the ordinary course of the
business and consistent with past practice. For purposes of this Agreement, the term ''Material
Adverse Effect" shall mean (a) a material adverse effect (or any development which, insofar as
reasonably can be foreseen, is reasonably likely to have a material adverse effect) on the
business, financial condition or results of operations ofLegent Clearing, taken as a whole; (b) a
material adverse change in the ability of Sellers to consummate the transactions contemplated by
this Agreement; or (c) the existence of any Litigation not described on Schedule 3.13 as of the
mite of this Agreement that (i) is pending or, to the knowledge of Member, threatened against
Legent Clearing, its directors, officers or employees (in such capacity), its business or any of its
assets as of the Closing Date; and (ii) otherwise satisfies clause (a) or clause (b) above; provided.
however, that the following shall riot constitute a Material Adverse Effect for purposes of this
. Agreement: (A) changes, effects, events, occurrences or circumstances that generally affect the
United States or the global economy or the industry in which Legent Clearing operates, except to
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the extent such changes, effects, events, occurrences or circumstances have a disproportionate
impact on Legent Clearing relative to other participants in such industry; (B) changes in GAAP,
except to the extent such changes have a disproportionate impact on Legent Clearing relative to
other participants in the industIy in which Legent Clearing operates; (C) changes in Laws or any
interpretation thereof, except to the extent such changes have a disproportionate impact on
Legent Clearing relative to other participants in the industry in which Legent Clearing operates; .
(D) the engagement by the United States in hostilities, whether or not pursuant to the declaration
of a national emergency or war, or the occurrence of any military or terrorist attack upon the
United States, or any of its territories, possessions or diplomatic or consular offices or upon any
military installation or personnel of the United States; (E) changes, effects, events, occurrences
or circumstances resulting from the entry into this Agreement by Member or the announcement
of the transactions contemplated thereby; (F) changes, effects, events, occurrences or
circumstances resulting from any action taken by Buyer, Parent or any of their Affiliates; or
(G) changes, effects, events, occurrences or circumstances resulting from the taking of any action
required or permitted by this Agreement or consented to in writing by Buyer (including, without
limitation, by any such consent Buyer is deemed to have provided pursuant to Section 6.3 or
Section 6.4).
3.13 Litigation.
Except as set forth in Schedule 3.13, there is no action, suit, arbitration,
proceeding, investigation or inquiry, whether civil, criminal, administrative or by any
Governmental or Regulatory Entity ("Litigation"), pending or, to the knowledge of Member,
threatened against Legent Clearing, its directors, officers or employees (in such capacity), its
business or any of its assets, nor, to the knowledge of Member, is there any basis for any such
Litigation. Except as set forth in Schedule 3.13, neither Legent Clearing nor its business or
assets, or any of its directors, officers or employees (in such capacity), is subject to any Order of
any Governmental or Regulatory Entity. Schedule 3.13 also identifies all Litigation to which
Legent Clearing or any of its directors, officers or employees (in such capacity) have been parties
since inception.
3.14 Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 3.14(a), Legent Clearing
(including.each and all of its operations, practices, properties and assets) and its directors,
officers and employees in their capacities as such is in compliance with all applicable
Laws and Orders, including, without limitation, those applicable to broker-dealers and
their associated Persons. Except as set forth in Schedule 3. 14(a), Legent Clearing has not
received notice of any violation or alleged violation of any Law or Order or raising any
questions with respect to Legent Clearing's capital adequacy or any business practice of
Legent Clearing, and Legent Clearing is not subject to any Liability for past or continuing
violation of, any Laws or Orders by Legent Clearing or any of its directors, officers or
employees. All filings, reports and returns and all amendments thereto required to be
filed by Legent Clearing with any Governmental or Regulatory Entity, including but not
limited to Form BD, have been timely filed, and were accurate and complete when filed.
Legent Clearing has furnished Buyer with true and complete copies of such filings. To
the knowledge of Member, all Forms T -4 with respect to margin loans extended by
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Legent Clearing prior to the Closing Date are truthful, and all such credits extended were
not purpose credits within the meaning of Regulation T.
(b) Licenses. Legent Clearing and all of its directors, officers and employees
have all registrations, licenses, permits, approvals, memberships, authorizations and
consents of all Governmental and Regulatory Entities required for the conduct ofLegent
Clearing's business (as presently conducted) and operation ofLegent Clearing's
properties (collectively, "Licenses"). All such. Licenses are described in Schedule
3.l4(b), are in full force and effect and, to the knowledge of Member, will not be affected
or made subject to loss, limitation or any obligation to reapply as a result of the
transactions contemplated hereby. Legent Clearing has not received any notice
threatening the revocation or suspension of any such Licenses or seeking to restrict any of
the business activities ofLegent Clearing or its directors"officers and employees. Except
as set forth in Schedule 3. 14(b), Legent Clearing (including its operations, properties and
assets) and its directors, officers and employees is and has been in compliance with all
such Licenses.
(c) Environmental Matters. Legent Clearing (including each and all of its
operations, practices, properties and assets) and its directors, officers and employees in
their capacities as such is in compliance with all applicable Environmental Laws. For
purposes of this Agreement, "Environmental Laws" means all Laws relating to pollution
or protection of the environment, including Laws relating to emissions, discharges,
generation, releases or threatened releases of pollutants, contaminants, chemicals
or industrial, toxic, hazardous or petroleum or petroleum-based substances or wastes
(''Waste') into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts. Without limiting the generality of the
foregoing provisions of this Section 3.14, Legent Clearing is in full compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. There is no Litigation nor any
demand, claim, hearing or notice of violation pending or, to the knowledge of Member,
threatened against Legent Clearing relating in any way to the Environmental Laws or any
Order issued, entered, promulgated or approved thereunder. There are no past or present
(or, to the knowledge of Member, future) events, conditions, circumstances, activities,
practices, incidents, actions, omissions or plans which may interfere with or prevent
compliance or continued compliance with the Environmental Laws or with any Order'
issued, entered, promulgated or approved thereunder, or which may give rise to any
liability, including, without limitation, liability under CERCLA or similar state orlocal
Laws, or otherwise form the basis of any Litigation, hearing, notice of violation, study or
investigation, based on or related to the manufacture, processing, distribution, use,
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treatment, storage, disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Waste.
3.15 Title to and Condition of Properties.
(a) Marketable Title. Legent Clearing has good and marketable title to all of
its assets, business and properties, including, without limitation, all such properties
(tangible and intangible) reflected in the Recent Balance Sheet, except for securities
disposed of in the ordinary course of business since the date of the Recent Balance Sheet,
free and clear of all mortgages, liens (statutory or otherwise), security interests, claims,
pledges, licenses, equities, options, conditional sales contracts, assessments, levies,
easements, covenants, reservations, restrictions, rights-of-way, exceptions, limitations,
charges or encumbrances of any nature whatsoever (collectively, "Liens") except those
described in Schedule 3.15(a). Except as set forth in Schedule 3.15(a), none ofLegent
Clearing's assets, business or properties are subject to any restrictions with respect to the
transferability thereof, and Legent Clearing's title thereto will not be affected in any way
by the transactions contemplated hereby.
(b) Fixed Asset List. Schedule 3 . 15(b) sets forth a true and complete list as of
the date hereof of each asset ofLegent Clearing with a book value of more than $5,000,
together with the book value thereof as of the date of the Recent Balance Sheet.
(c) Condition. To the knowledge of Member, all property and assets owned
or utilized by Legent Clearing are in good operating condition and repair, free from any
defects (except such minor defects as do not interfere with the use thereof in the conduct
of the normal operations of Legent Clearing), have been maintained consistent with the
standards generally followed in the industry and are sufficient to carry on the business of
Legent Clearing as conducted during the preceding 12 months. To the knowledge of
Member, all buildings and other structures owned or otherwise utilized by Legent
Clearing are in good condition and repair and have no structural defects or defects
affecting the plumbing, electrical, sewerage, or heating, ventilating or air conditioning
systems.
(d) Real Property. Legent Clearing does not own any real property. Schedule
3 .IS( d) sets forth, with respect to each parcel of real property leased or otherwise
occupied by Legent Clearing, the material terms of such lease, each of which remains in
full force and effect.
( e) No Condemnation or Expropriation. Neither the whole nor any portion of
the property or any other assets ofLegent Clearing is subject to any Order to be sold or is
being condemned, expropriated or otherwise taken by any Governmental or Regulatory
Entity with or without payment of compensation therefor, nor to the knowledge of
Member has any such condemnation, expropriation or taking been proposed.
3.16 Insurance.
Set forth in Schedule 3.16 is a complete and accurate list and description, as of the
date hereof, of all fidelity bonds, policies offire, liability, product liability, workers
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compensation, health, business interruption, securities dealers blanket bond and other forms of
. insurance in effect with respect to the business and properties of Legent Clearing, true and
correct copies of which have heretofore been delivered to Buyer. Schedule 3.16 includes,
without limitation, the carrier, the description of coverage, the limits of coverage, retention or
deductible amounts, amount of annual premiums, date of expiration and the date through which
premiums have been paid with respect to each such policy, and any pending claims in excess of
$10,000. To the knowledge of Member, all such policies are valid, outstanding and enforceable
policies. Such policies provide insurance coverage for the properties, assets and operations of
Legent Clearing of the kinds, in the amounts and against the risks customarily maintained by
organizations similarly situated. To the knowledge of Member, no such policy (nor any previous
policy) provides for or is subject to any currently enforceable retroactive rate or premium.
adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or
partially out of events arising prior to the date hereof. Schedule 3.16 indicates each policy as to
which (x) the coverage limit has been reached or (y) the total incurred losses to date equal 75%
or more of the coverage limit. No notice of cancellation or termination has been received with
respect to any such policy, and to the knowledge of Member there has been no act or omission of
Legent Clearing which could result in cancellation of any such policy prior to its scheduled
expiration date. Except as disclosed on Schedule 3.16, Legent Clearing has not been refused any
insurance with respect to any aspect of the operations of its business nor, to the knowledge of
Member, has its coverage been limited by any insurance carrier to which ithas applied for
insurance or with which it has carried insurance since its inception. Legent Clearing has duly
and timely made all claims it has been entitled to make under each policy of insurance. All
general liability policies maintained by or for the benefit of Legent Clearing have been
"occurrence" policies and not "claims made"policies. There is no claim by Legent Clearing
pending under any such policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies, and, to the knowledge of Member, there is no basis for denial
of any claim under any such policy. Legent Clearing has not received any written notice from or
on behalf of any insurance carrier issuing any such policy that insurance rates therefor will
hereafter be substantially increased (except to the extent that insurance rates may be increased
for all similarly situated risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing deductible) or
nomenewal of any such policy. Such policies are sufficient in all material respects for
compliance by Legent Clearing with all requirements of Law, with all requirements established
by any applicable Governmental or Regulatory Entity and with the requirements of all material
contracts to which Legent Clearing is a party.
3.17 Contracts and Commitments.
The representations and warranties set forth in Sections 3.17(a) through 3.17(j)
below are made only as of the date of this Agreement.
(a) Real Property Leases. Except as set.forth in Schedule 3. 15(d), Legent
Clearing has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule 3 . 17(b), Legent
Clearing has no leases of personal property involving consideration or other expenditure
in excess of$I,OOO or involving performance over a period of more than 12 months.
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( c) Customer Commitments. Legent Clearing has no customer contracts or
commitments involving consideration or other expenditure in excess of $50,000.
(d) Powers of Attorney. Legent Clearing has not given a power of attorney,
which is currently in effect, to any Person for any purpose whatsoever.
(e) Collective Bargaining Agreements. Legent Clearing is not a party to any
collective bargaining agreement with any union, guild, shop committee or other
collective bargaining group.
(f) LoanAgreements. Except as set forth in Schedule 3.17(0, Legent
Clearing is not obligated under any loan agreement, promissory note, letter of credit,
capitalized lease or other evidence of indebtedness as a signatory, guarantor or otherwise.
(g) Guarantees. Legent Clearing has not guaranteed the payment or
performance of any Person, agreed to indemnify any Person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the obligations of any
Person.
(h) Contracts Subject to Renegotiation. Legent Clearing is not a party to any
contract with any Governmental or Regulatory Entity that is subject to renegotiation.
(i) , Restrictive Agreements. Legent Clearing is not a party to, nor is it bound
by, any agreement requiring it to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting it from competing in any business or
geographical area or soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world.
0) Other Material Contracts. Legent Clearing has no lease, contract or
commitment of any nature involving consideration or other expenditure in excess of
$1,000, or involving performance over a period of more than 12 months involving
consideration or other expenditure in excess of $1,000, or which is otherwise individually
material to the operations of Legent Clearing, except as set forth in Schedule 3.170> or in
any other Schedule.
(k) No Default. Legent Clearing is not in default under any lease, contract or
commitment, nor has any event or omission occurred which through the passage of time
or the giving of notice, or both, would constitute a default thereunder or cause the
acceleration of any of its obligations or result in the creation of any Lien on any of the
assets owned, used or occupied by it. To the knowledge of Member, no third party is in
default under any contract or commitment to which Legent Clearing is a party, nor has
any event or omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof.
(1) True and complete copies of all documents disclosed in Schedules 3.17 (a)
through 3.170) have been furnished to Buyer, or made available via the Data Site.
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3.18 Labor and Employment Matters.
Legent Clearing has not experienced any labor dispute, union organization
attempt or work stoppage due to labor disagreements in connection with its business. Except to
the extent set forth in Schedule 3.18, (a) Legent Clearing is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of employment
and wages and hours, and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice charge or complaint against Legent Clearing pending or, to the knowledge of Member,
threatened; (c) there is no labor strike, dispute, request forrepresentation,slowdown or stoppage
actually pending or, to the knowledge of Member, threatened against or affecting Legent.
Clearing; (d) no question concerning representation has been raised or is threatened respecting
the employees ofLegent Clearing; (e) no grievance which might have a Material Adverse Effect,
nor any arbitration proceeding arising out of or under collective bargB:ining agreements, is
pending and no such claim therefor exists; and (f) there are no administrative charges or court
complaints against Legent Clearing concerning alleged employment discrimination or other
employment related matters pending or, to the knowledge of Member, threatened before the U.S.
Equal Employment Opportunity Commission or any Govemm.entalor Regulatory Entity.
3.19 Employee Benefit Plans.
(a) Disclosure. Schedule 3.19(a) sets forth a list of all pension, thrift, savings,
profit sharing, retirement, incentive bonus or. other bonus, medical, dental, life, accident
insurance, benefit, employee welfare, disability, group insurance, stock purchase, stock
option, stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans, programs and
arrangements, and any employment or consulting contracts,. "golden parachutes,"
noncompetition agreements, collective bargaining agreements, severance agreements or
plans, vacation and sick leave plans, programs, arrangements and policies, including,
without limitation, all "employee benefit plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all
employee manuals, and all written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for the benefit of, or relate
to,any Persons currently or formerly employed by Legent Clearing. The items described
in the foregoing sentence are hereinafter sometimes referred to collectively as "Employee
Plans! Agreements," and each individually as an "Employee Plan! Agreement." Each of
the Employee Plans/Agreements is identified in Schedule 3.l9(a), to the extent
applicable, as one or more of the following: an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), a "defined benefit plan" (as defined in Section 414 of
the Code), an welfare benefit plan" (as defined in Section 3(1) of ERISA)
and/or a plan intended to be qualified under Section 401 of the Code. No Employee
Plan! Agreement is a plan" (as defined in Section 4001 of ERISA), and
Legent Clearing has not ever contributed or been obligated to contribute to any such
multiemployer plan.
(b) Absence of Certain Plans. No Employee Plan! Agreement is subject to
Title IV of ERISA or the funding requirements of Section 3026fElUSA or Section 412
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of the Code, nor does Legent Clearing have any liability, contingent or otherwise, with
respect to any such plans.
(c) Prohibited Transactions. There have been no ''prohibited transactions"
within the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code for
which a statutory or administrative exemption does not exist with respect to any
Employee Plan/Agreement, and no event or omission has 0CCUII'ed in connection with
which Legent Clearing or any of its assets or any Employee Plan! Agreement, directly or
indirectly, could be subject to any liability under ERISA, the Code or any other Law or
Order 'applicable to any Employee Plan/ or under any agreement, instrument,
Law or Order pursuant to or under which Legent Clearing has agreed to indemnify or is
required to indemnify any Person against liability incurred under any such Law or Order.
(d) Full Funding. The funds available under each Employee Plan! Agreement
which is intended to be a funded plan equal or exceed the amounts required to be paid, or
which would be required to be paid if such EmPloyee Plan!Agreement were terminated,
on account of rights vested or accrued as of the Closing Date (using the actuarial methods
and assumptions then used by Legent Clearing's actuaries in connection with the funding
of such Employee Plan! Agreement).
(e) Controlled Group: Leased Employees. There are no other entities that,
together with Legent Clearing, are treated as a single employer pursuant to Sections
4l4(b), 4l4(c) or 4l4(m) of the Code, nor has any other entity been treated as a single
employer with Legent Clearing Under such provisions at any time prior to the date of this
Agreement. There are not and never have been any leased employees within the meaning
of Section 4l4(n) of the Code who perform services for Legent Clearing, and no
individuals are expected to become leased employees with the passage of time.
(f) Payments and Compliance. With respect to each Employee
Plan/Agreement, (i) all payments due from Legent Clearing to date have been made and
all amounts properly accrued to date as liabilities ofLegent Clearing which have not been
paid have been properly recorded on the books ofLegent Clearing and are reflected in the
Recent Balance Sheet; (ii) Legent Clearing has complied with, and each such Employee
Plan! Agreement conforms in form and operation to,' all applicable Laws, including but
not limited to ERISA and the Code, in all respects and all reports and information relating
to such Employee Planl Agreement required to be filed with any Governnlental or
Regulatory Entity have been timely filed; (iii) all reports and information relating to each
such Employee Plan/Agreement required to be disclosed or provided to participants or
their beneficiaries have been timely disclosed or provided; (iv) each such Employee
PlanlAgreement which is intended to qualify under Section 401 of the Code has received
a favorable determination letter from the Internal Revenue Service with respect to such
qualification, its related trust has been determined to be exempt from taxation under
Section 50 1 (a) of the Code, and nothing has occurred since the date of such letter that has
or is likely to adversely affect such qualification or exemption; (iv) there are no actions,
suits or claims pending (other than routine claims for benefits) or, to the knowledge of
Member, threatened with respect to such Employee Plan! Agreement or against the assets
of such Employee Plan! Agreement; and (v) no Employee PlanI Agreement is a plan which'
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is established and maintained outside the United States primarily for the benefit of
individuals substantially all of whOiD. are nonresident aliens.
(g) Post-Retirement Benefits. No Employee Plan/Agreement provides
benefits, including, without limitation, death or medical benefits (whether or not insured)
with respect to current or former employees of Legent Clearing beyond their retirement
or other termination of service other than (i) coverage mandated by Part 6 of Title I of
ERISA (COBRA), (ii) death or retirement benefits under any Employee PlanIAgreement
that is an employee pension benefit plan, (iii) deferred compensation benefits accrued as
liabilities on the books of Legent Clearing (including the Recent Balance Sheet), (iv)
disability benefits under any Employee PlanI Agreement that is an employee welfare
benefit plan and which have been fully provided for by insurance or otherwise or (v)
benefits in the ~ t u r e of severance pay.
(h) No Triggering of Obligations. The collSUlilmation of the transactions
contemplated by this Agreement will not (i) entitle any current or former employee of
Legent Clearing to severance pay, unemployment compensation or any other benefit or
payment, except as expressly provided in this Agreement, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation or benefits due to any such
employee or former employee or (iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(i) Delivery of Documents. There has been delivered to Buyer, or made
available via the Data Site, with respect to each Employee Plan/Agreement, a true and
complete copy of each of the following:
(i) all of the documents constituting the Employee Plans/Agreements,
including all amendments thereto;
(ii) a ~ p y of the annual report, if required under ERISA, with respect
to each such Employee Plan! Agreement for the last two years;
(iii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect to such
Employee Plan/Agreement, all material employee communications relating to
such Employee Plant Agreement, and, unless the Employee Plant Agreement is
embodied entirely in an insurance policy to which Legent Clearing is a party, a
copy of such Employee Plan! Agreement;
(iv) if the Employee Plan/Agreement is funded through a trust or any
third party funding vehicle (other than an insurance policy), a copy of the trust or
other funding agreement and the latest financial statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Employee Plan/Agreement that is intended
to be a "qualified plan" under Section 401 of the Code.
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With respect to each Employee P1an/ Agreement for which an annual report has been filed
and delivered to Buyer pursuant to clause (ii) of this Section 3.19(i), no material adverse
change has occurred with respect to the matters covered by the latest such annual report
since the date thereof.
(j) Future Commitments. Legent Clearing has not announced any plan or
legally binding commitment to create any additional Employee Plansl Agreements or to
amend or modify any existing Employee Plan! Agreement Each Employee
Plan! Agreement can be amended or terminated at any time without approval from any
Person, without advance notice, and without any liability other than for benefits accrued
prior to such amendment or termination.
3.20 Employment Compensation.
Buyer has been provided a true and correct list of all employees, and in the case
of salaried employees, such list identifies the current annual rate of base compensation and bonus
opportunity for each employee (together with incentive compensation) and in the case of hourly
or commission employees identifies certain reasonable ranges of rates, the number of employees
falling within each such range and the average annual hours and wages (including any incentive
compensation) paid to each, Buyer has been provided a schedule setting forth all accrued but
unpaid vacation for each employee as of the date of the Recent Balance Sheet
3.21 Agreements Binding on Employees.
To the knowledge of Member, no employee of Legent Clearing is in violation of
any employment agreement, non-competition agreement or other agreement relating to the
relationship of such employee with Legent Clearing or any other party because of the nature of
the business conducted by Legent Clearing. Each of such agreements is listed on Schedule 3.21,
and true and complete copies of each such agreement have been furnished to Buyer.
3.22 Intellectual Property.
Schedule 3.22 lists all Intellectual Property (as defmed below) in which Legent
Clearing now has any interest, specifying whether such Intellectual Property is owned,
controlled, used or held (under license or otherwise) by Legent Clearing, and also indicating
which of such Intellectual Property is registered. All Intellectual Property shown as registered in
Schedule 3.22 has been properly registered, all pending registrations and applications have been
properly made and filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current. Legent Clearing does not, in order to conduct its
business as such is currently being conducted, require any Intellectual Property that it does not
already have. Except as set forth on Schedule 3.22, Legent Clearing is not infringing and has not
infringed any Intellectual Property of another in the operation of Legent Clearing's business, nor,
to the knowledge of Member, is any other Person infringing the Intellectual Property ofLegent
Clearing. Legent Clearing has not granted any license or made any assignment of any
Intellectual Property listed in Schedule 3.22, nor, except as set forth in Schedule 3.22 does
Legent Clearing pay any royalties or other consideration for the right to use any Intellectual
Property of others. There is no Litigation pending or, to the knowledge of Member, threatened
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to challenge Legent Clearing's right, title and interest with respect to its continued use. and right
to preclude others from using any of its Intellectual Property. All Intellectual Property 9f Legent
Clearing (other than licensed software, as to which Member has no knowledge, except for Legent
Clearing's interest in such licensed software) is valid, enforceable and in good standing, and
there are no equitable defenses to enforcement based on any act or omission ofLegent Clearing.
The consummation of the transactions contemplated hereby will not alter or impair any
Intellectual Property owned or used by Legent Clearing. As used herein, the term ''Intellectual
Property" shall mean and include: (a) all trademark rights, business identifiers, trade dress,
service marks, trade names and brand names, all registrations thereof and applications therefor
and all goodwill associated with the foregoing; (b) all copyrights, copyright registrations and
copyright applications, and all other rights associated with the foregoing and the underlying
works of authorship; (c) all patents and patent applications, and all international proprietary
rights associated therewith; (d) all rights granted under contracts or agreements granting any
right, title, license or privilege under the intellectual property rights of any third party; (e) all
inventions, mask works and mask. work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of intellectual property; and (f) all
claims for infringement or breach of any of the foregoing; but excludes any such items that are
the subject of so-called "shrink wrap" license agreements.
3.23 Technology Systems.
(a) The electronic data processing, information, record keeping,
communications, telecommunications, hardware, third party software, networks,
peripber81s and computer systems, including any outsourced systems,services and
processes, and Intellectual Property that are used by Legent Clearing (collectively,
. "Technology Systems") are adequate for the operation of its business as currently
conducted. There has not been any material malfunction with respect to any of the
Technology Systems that (i) has had a material effect on Legent Clearing's provision of
services to its customers; (ii) was within Legent Clearing's reasonable control; and (iii)
has not been remedied or replaced or is not in the process of being remedied or replaced
in all material respects.
(b) There is no existing pattern or repetition of customer complaints in excess
of that which would reasonably be expected to exist given the nature ofLegent Clearing's
business regarding the material functionality or performance of the Technology Systems
(i) where such complaints relate to a material effect on Legent Clearing's provision of
services to its customers and (ii) where the cause of such complaints were within Legent
Clearing'S reasonable control. Legent Clearing's engineers (or those of its suppliers or
independent contractors) have not currently identified any repeating. adverse impact on
the material functionality or performance of the Technology Systems (A) where such
impacts relate to a material effect on Legent Clearing's provision of services to its
customers and (B) where such impacts were within LegentClearing's reasonable control.
The Technology Systems have not suffered any material unplanned disruption that(l) has
had a material effect on Legent Clearing's provision of services to its customers and
(ll) was within Legent Clearing's reasonable control.
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(c) Legent Clearing bas taken measures reasonable under the circumstances to
protect the internal and external security and integrity of the Technology Systems owned
and controlled by Legent Clearing and the data that such Technology Systems contain
including, without limitation: (i) procedures designed to prevent unauthorized access; (ii)
procedures designed to prevent the introduction of a virus; and (iii) the taking and storing
.on-site and off-site of back-up copies of the critical data of Legent Clearing.
3.24 Major Customers and Vendors.
(a) Major Customers. Schedule 3.24(a) contains a list of the top 25 (by
revenue) clearing customers ofLegent Clearing for each of the two most recent fiscal
years and. for the ten months ended April 30, 2010, showing the total net revenues from
each such customer during each such year or period, as applicable. No such customer is
engaged in any material dispute with Legent Clearing or has terminated, cancelled or
materially changed, or to the knowledge of Member, threatened to terminate, cancel or
materially change, any ongoing business relationship with Legent Clearing. Member has
no knowledge or information of any facts indicating, nor any other reason to believe, that
any of the customers listed in Schedule 3.24(a) will not continue to be customers of
Legent Clearing after the Closing at substantially the same or higher level of transactions
and revenue as heretofore. To the knowledge of Member, no customer ofLegent
Clearing has any right to any credit or refund for services rendered or to be rendered by
Legent Clearing pursuant to any contract with or practice of Legent Clearing. .
(b) Major Vendors. Schedule 3;24Cb) contains a list of the top 25 (by
expense) vendors ofLegent Clearing for each of the two most recent fiscal years and for
the ten months ended April 30, 2010, showing the total eXpenses paid to each such
vendor during each such year or period, as applicable. No such vendor is engaged in any
material dispute with Legent Clearing or has terminated, cancelled or materially changed,
or to the knowledge of Member, threatened to terminate, canCel or materially change, any
ongoing business relationship with Legent Clearing. Member has no knowledge or
. information of any facts indicating, nor any other reason to believe, that any of the
vendors listed in Schedule 3.24Cb) will not continue to be vendors to the business of
Legent Clearing after the Closing and will not continue to supply the business with
substantially the same quantity and quality of goods or services at competitive prices.
3.25 Bank Accounts.
Schedule 3.25 sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which Legent Clearing maintains
a safe deposit box, lock box or checking, savings, custodial or other account of any nature, the
type and number of each such account and the signatories therefore, a description of any
. compensating balance arrangements, and the names of all Persons authorized to draw thereon,
make withdrawals therefrom or have access thereto. Schedule 3.25 sets forth with respect to
each such financial institution at which Legent Clearing maintains interest-bearing deposits, the
. name of such institution, the average monthly balances on deposit with such institution during
the last two years, the interest rates paid and the dates on which the interest rates are adjusted, the
terms of any contract with such institution, how such contract may be terminated and the notice
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required for termination. True and complete copies of all contracts documenting Legent
Clearing's relationship with each such financial institution have been furnished to Buyer, or
made available via the Data Site, other than standard documentation customarily entered into by
banks in the ordinary course of business. Member has no knowledge or information of any facts
indicating, nor any other reason to believe, that any of such financial institutions with which
Legent Clearing maintains interest-bearing deposits will not continue to deal with Legent
Clearing after the Closing on substantially the same or better terms than as heretofore.
3.26 Transactions with Affiliates.
(a) Contracts with Affiliates of Member. All leases, contracts, agreements or
other arrangements between Legent Clearing and Member or any of its Affiliates are
described in Schedule 3.26(a) and, except as set forth in Schedule 3.26(a), all such leases,
contracts, agreements or other arrangements are cancelable by Legent Clearing on notice
of not longer than 30 days without liability, penalty or premium of any nature or kind
whatsoever. True and complete copies of all of such documents have been furnished to
Buyer. For purposes of this Agreement: (i) the term "Affiliate" ofa Person shall mean
and include any other Person controlling, controlled by or under common control with
such Person; provided, that with respect to Member, the term "Affiliate" specifically
includes, without limitation, Duques; further provided, that with respect to Member and
solely for purposes of this Section 3.26(a), the term "Affiliate" also specifically includes,
without limitation, Guy A. Gibson, William D. Snider, Lisa Snider, Michael J.
McCloskey, Constance J. McCloskey, Michael A. Stallings and any of their respective
direct family members; and (ii) as used in this definition of the term "Affiliate" and
elsewhere herein with respect to any Affiliate of any Person, "control" (including the
terms "controlled by" and ''under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management policies of a
Person, whether through the ownership of voting securities, by voting trust, contract or
similar arrangement, as trustee or executor or otherwise.
(b) No Adverse Interests. Except as set forth in Schedule 3.26(b), no Affiliate
of Member or ofLegent Clearing has (i) any direct or indirect interest in any entity which
does business with Legent Clearing or is competitive with Legent Clearing's business,
which interest provides such Affiliate with control over such entity, or (ii) any direct or
indirect interest in any property, asset or right which is used by Legent Clearing inthe
conduct of its business.
( c) Obligations. All obligations of any Affiliate to Legent Clearing, and all
obligations ofLegent Clearing to any Affiliate, are listed in Schedule 3.26(c). True and
complete copies of all writings giving rise to or evidencing such obligations have been
furnished to Buyer, or made available via the Data Site.
3.27 Assets Necessary to Business.
Legent Clearing presently has and at the Closing will have good, valid and
marketable title to all property and assets, tangible and intangible, and all leases, licenses and
70352.000001 E M F ~ U S 31156628v1
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other agreements, necessary to permit Buyer to carry on the business ofLegent Clearing as
presently conducted in the United States.
3.28 . No Brokers or Finders.
Neither any Seller nor Legent Clearing, nor any of their respective directors,
officers, employees; members or agents have retained, employed or used, or have incurred any
obligation or liability (contingent or otherwise) to, any broker or finder in connection with the
transaction provided for herein or in conneCtion with the negotiation thereof.
3.29 Investment Intent.
The Subject Shares are being acquired by Member for investment only and not
with the view to resale or other distribution other than the distribution contemplated by Section
6.14.
3.30 Distribution of Consideration.
Except as expressly contemplated by this Agreement, no holder of any direct or
indirect equity interest in Member shall receive, directly or indirectly, any cash, securities or any
other form of consideration in connection with the transactions contemplated by this Agreement
other than a sbare of the Consideration proportionate to such holder's direct or indirect equity
interest in Member. ..
3.31 Restricted Securities.
Member understands that (a) the Subject Shares will not be registered under the .
federal or any state securities Laws; (b) the Subject Shares will be ''restricted securities" within
the meaning of Rule 144 promulgated under the Securities Act of 1933, as' amended, and any
applicable state securities Laws; and (c) the Subject Shares may not be sold, pledged or
otherwise disposed of unless they are subsequently registered under the Securities Act of 1933,
as amended, and any applicable state securities Laws, or unless an exemption from such
registration is available.
NOTWITHSTANDING ANY OTHERWISE EXPRESS REPRESENTATIONS AND
WARRANTIES MADE BY MEMBER OR SELLERS IN TInS AGREEMENT, NEITHER
MEMBER NOR SELLERS MAKE ANY REPRESENTATION OR WARRANTY TO BUYER
WITH RESPECT TO ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE
DELIVERED TO BUYER, OR MADE AVAILABLE VIA THE DATA SITE, OF FUTURE
REVENUES, EXPENSES OR EXPENDITURES OR FUTURE RESULTS OF OPERATIONS.
EXCEPT AS EXPRESSLY SET FORTH IN TIllS AGREEMENT OR IN AN ANCll.LARY
INSTRUMENT, NO SELLER MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLffiD, AT LAW OR IN EQUITY; IN RESPECT OF THE BUSINESS OR
. THE UNITS. BUYER HEREBY ACKNOWLEDGES ,AND AGREES THAT, EXCEPT TO
THE EXTENT SPECIFICALLY SET FORTH IN TIllS AGREEMENT, BUYER IS
. PURCHASING LEGENf CLEARING, THE BUSINESS AND THE UNITS ON AN "AS-IS,
WHERE-IS" BASIS.
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4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties, each of which is true
and correct and shall survive the Closing, to Sellers.
4.1 Cotporate ..
(a) Organjzation. Buyer is a federal savings bank duly organized, validly
existing and in good standing under the Laws of the United States.
(b) COIporate Power. Buyer has all requisite corporate power to enter into
this Agreement and the other documents and instruments to be executed and d e l i v e r ~ by
it, and to carry out the transactions contemplated hereby and thereby.
4.2 Authorization: Validity.
(a) Authorization. The execution and delivery of this Agreement and the
Ancillary. Instruments to be executed and delivered by Buyer pursuant hereto, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by the board of directors of Buyer, and no other or further cotpOrate action on
the part of Buyer, its board of directors or Parent (as its sole stockholder) is necessary
therefor.
(b) Validity. This Agreement has been duly and validly executed and
delivered by Buyer and is, and when executed and delivered each Ancillary Instrument to
be executed and delivered by Buyer pursuant hereto will be, the legal, valid and binding
obligation of Buyer, enforceable in accordance with their respective terms, except as such
enforceability may be limited by bimkruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
4.3 No Brokers or Finders.
Neither Buyer nor any of its directors, officers, employees or agents has retained,
employed or used, or has incurred any obligation or liability (contingent or otherwise) to, any
broker or finder in connection with the transactions contemplated hereby or in connection with
the negotiation thereof.
4.4 No Violation.
Neither the execution and delivery of this Agreement or the Ancillary Instruments
to be executed and delivered by Buyer pursuant hereto nor, assuming receipt of all necessary
regulatory and other approvals and expiration of all mandatory waiting periods, the
consummation by Buyer of the transactions contemplated hereby and thereby will violate or
contlict with, or constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or accelerate the
performance required by any term or provision of the organizational documents of Buyer or of
any contract, commitment, understanding, arrangement, agreement or restriction of any kind or
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character to which Buyer is a party or by which Buyer or any of its assets or properties may be
bound or affected.
4.5 Investment Intent.
The Units are being acquired by Buyer for investment only and not with the view
to resale or other distribution.
4.6 Financing.
Buyer has sufficient funds available for it to pay the Final Cash Purchase Price to
Member as contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent makes the following representations and warranties, each of which is true
and correct and shall survive the Closing, to Sellers.
5.1 Comorate.
( a) Organization. Parent is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Colorado.
(b) Comorate Power. Parent has all requisite corporate power to enter into
this Agreement and the Registration Rights Agreement, and to carry out the transactions
contemplated hereby and thereby.
5.2 Authorization: Validity.
(a) Authorization. The execution and delivery of this Agreement and the
Registration Rights Agreement by Parent, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by the board of directors of
Parent, and no other or further corporate action on the part of Parent, its board of
directors or its stockholders is necessary therefor.
(b) Validity. This Agreement has been duly and validly executed and
delivered by Parent and is, and when executed and delivered the Registration Rights
Agreement will be, the legal, valid and binding obligation of Parent, enforceable in
accordance with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
5.3 No Brokers or Finders.
Neither Parent nor any of its directors, officers, employees or agents has retained,
employed or used, or have incurred any obligation or liability (contingent or otherwise) to, any
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broker or finder in connection with the transactions contemplated hereby or in connection with
the negotiation thereof.
5.4 No Violation.
Neither the execution and delivery of this Agreement or the Registration Rights
Agreement nor, assuming receipt of all necessary regulatory and other approvals and expiration
of all mandatory waiting periods, the consummation by Parent of the transactions contemplated
hereby and thereby will violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by any term. or provision of the organizational
documents of Parent or of any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Parent is a party or by which Parent or any of its
assets or properties may be bound or affected. ...
5.5 Subject Shares.
All of the Subject Shares will be, upon issuance thereof at the Closing, validly
issued, fully paid and nonassessable, and tree and clear of any Liens, other than any Liens that
may be Created by: (a) Member; (b) any direct or indirect holder of Member's equity interests to
whom any of the Subject Shares may be distnbuted in accordance with Section 6.14; or (c) any
applicable securities Laws. ..
6. COVENANTS
6.1 Noncompetition: Confidentiality.
Subject to the Closing, and as an inducement to Buyer to execute this Agreement
and complete the transactions contemplated hereby, and in order to preserve the goodwill
associated with the business ofLegent Clearing being acquired pursuant to this Agreement, each
Seller hereby covenants and agrees as follows:
(a) Covenant Not to Compete. In return for Buyer's payment of the
Consideration to Member, among other things, each Seller agrees that for a period of two
years from the Closing Date (the "Restricted Period"), no Seller will, directly or
indirectly, through one or more Affiliates or otherwise:
(i) engage in, continue in or carry on any business which competes
with the Business as conducted by Legent Clearing as of the Closing Date, or is
substantially similar thereto, including owning or controlling any financial interest
in any corporation, partnership, firm or other form of business o r g ~ t i o n which
is so engaged; .
(ii) consult with, advise or assist in any way, whether or not for
consideration, any corporation, partnership, firm or other business organization
which is now or becomes a competitor ofLegent Clearing in any aspect with
respect to the Business as conducted by Legent Clearing as of the Closing Date,
including, but not limited to, soliciting customers or otherwise serving as an
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intermediary for any such competitor; loaning money or rendering any other form
of financial assistance to or engaging in any form of business transaction on other.
than an arm's length basis with any such competitor;
(iii)' offer employment to an employee ofLegent Clearing who is
employed as of the Closing Date and has not been tenninated without cause by
Legent Clearing, without the prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete;
provided however, that the foregoing shall not prohibit (x) the beneficial ownership by
Duques ofhis proPQrtionateshare of the Subject Shares (as distributed to him in
accordance with Section 6.14) or of not more than 9.9% of the total total number of
issued and outstanding shares of Parent Connnon Stock (including, without limitation, as
a result of the receipt by Duques ofhis proportionate share of the Subject Shares); or (y)
without increasing or duplicating the amounts permitted under clause (x) above in the
case of Duques, the ownership of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market in an amount which
shall not exceed 5% of the outstanding shares of any such corporation. The parties
specifically acknowledge that the Business conducts its affairs throughout the United
States, and thus agree that the geographic scope of this covenant not to compete shall
extend throughout the United States; and further, that this non-compete shall encompass
every statistical metropolitan area (as defined by the Office of Management and Budget)
in which Legent Clearing has conducted the Business in the two year period immediately
preceding the Closing Date. The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any Person that purchases all
or part of the business ofLegent Clearing. In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are excessively broad as to
duration, geographical scope or activity, it is expressly agreed that this covenant not to
compete Shall be construed so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such over broad provisions shall be deemed,
without further action on the part of any Person, to be modified, amended and/or limited,
but only to the extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) Covenant of Confidentiality. No Seller shall, and Member will cause its
directors, officers, managers, employees, agents, advisors and other representatives not
to, and Duques will cause his agents, advisors and other representatives not to, at any
time subsequent to the Closing, except as explicitly requested by Buyer, (i) use for any
purpose, (ti) disclose to any Person, or (iii) keep or make copies of documents, tapes,
disks or programs containing, any confidential information concerning Legent Clearing
or the Business; provided. that Member shall not be required to cause the destruction or
return of any client files retained by its counsel, provided. that Member shall not obtain
return of or access to any such files except in the event of threatened or actua1litigation.
For purpOses hereof" "confidential information" shall mean and include, without
limitation, the terms of this transaction, all Intellectual Property in which Legent Clearing
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bas an interest, all customer lists and customer information, and all other information
concerning Legent Clearing's processes, services and marketing methods, not previously
disclosed to the public directly by Legent Clearing. '
(c) Eqpitable Relief for Violations. Each Seller agrees that the provisions and
restrictions contained in this Section 6.1 are necessary to protect the legitimate continuing
interests of Buyer in acquiring Legent Clearing, and that any violation or breach of these
provisions will,result in irreparable injury to Buyer for which a remedy at law would be
inadequate and that, in addition to any relief at law which may be available to Buyer for
such violation or breach and regardless of any other provision contained in this
Agreement, Buyer shall be entitled to injunctive and other equitable relief as a court may
grant after considering the intent of this Section 6.1, without posting any bond or
security. If any Seller violates the restrictive covenant set forth in this Section 6.1, then
the Restricted Period shall automatically be extended for a period of time equal to (i) the
length of time during which such violation occurred; plus (il) the length of time during
which any court proceedings necessary to stop such violation were ongoing.
(d) Tax Allocation. The parties agree that no portion of the Final Cash
Purchase Price or the Subject Shares shall be allocated to this covenant not to compete
for Tax purposes.
6.2 General Releases.
At the Closing, Member shall deliver, and shall cause each Person listed on
Schedule 6.2 attached hereto to deliver, general releases to Buyer, substantially in the form of
Exhibit 6.2 attached hereto (each, a "Release" and, collectively, the ''Releases''), releasing
Legent Clearing and its-directors, officers, agents and employees from all claims with respect to
Legent Clearing arising on or before the Closing Date, except (i) as may be described in written
contracts disclosed in the Disclosure Schedules and expressly described and excepted from such
Releases, and (ii) in the case of Persons who are employees of Legent Clearing, compensation
for current periods expressly described and excepted from such Releases. Such Releases shall
also contain waivers of any right of contribution or other recourse against Legent Clearing with
respect to representations, warranties or covenants made herein by Legent Clearing.
6.3 Conduct of Legent Clearing Prior to Closing.
From the date hereof through the Closing Date, Member covenants and agrees to
use its reasonable best efforts to cause Legent Clearing to conduct its business in the ordinary
course and in accordance with past practice and not to take any action inconsistent therewith,
except as otherwise permitted or required by this Agreement, as consented to by Buyer in writing
(such consent not to be unreasonably withheld, conditioned or delayed; provided. that Buyer
shall be deemed to have provided consent to any particular action if Buyer does not object in
writing to Member's written request for consent to such action within 5 business days after
Buyer receives such request) or as required by applicable Law. Without limiting the generality
of the foregoing, except'as otherwise permitted or required by this Agreement, as consented to
by Buyer in writing (such consent not to be unreasonably withheld, conditioned or delayed;
provided. that Buyer shall be deemed to have provided consent to any particular action if Buyer
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does not object in writing to Member's written request for consent to such action within 5
business days after Buyer receives such request) or as required by applicable Law, Member shall
cause Legent Clearing to: (a) maintain its books and recorQs,inall material respects in the usual,
regular and ordinary manner and consistent with past practices; (b) maintain in full force and
effect the material insurance policies heretofore maintained with respect to Legent Clearing and
its business and properties and all material Licenses and other material rights or interests that are
required for Legent Clearing to carry on its business; (c) take such commercially reasonable
action as may be necessary to preserve the assets and properties of Legent Clearing in all
material respects in good condition (ordinary wear and tear excepted), including performing any
commercially reasonable repairs and maintenance on such assets and properties; (d) use its
commercially reasonable efforts to preserve the business of Legent Clearing intact and preserve
for Buyer the existing goodwill ofLegent Clearing, as well as the employees, suppliers,
customers, Governmental or Regulatory Entities and others having significant business relations
with Legent Clearing in the conduct of its business; ( e) comply in all material respects with all
Laws, Orders and Licenses applicable to Legent Clearing in the conduct of its business;
(t) perform all of its material obligations under contracts and leases to which it is a party or by
which any of its material assets or properties are bound, except such obligations as Legent
Clearing may in good faith reasonably dispute; (g) timely file all reports required to be filed with
Governmental or Entities; (h) timely file or properly request an extension for filing
all material Tax Returns required to be filed by Legent Clearing and promptly pay all material
Taxes, assessments, governmental charges, duties, penalties, interest and fines that become due
and payable, except those being contested in good faith by appropriate proceedings; (i) withhold .
from each payment made to each of its employees the amount of all Taxes required to be
withheld therefrom and pay the same to the proper Tax receiving officers when due; G) maintain
its capital levels at the minimum levels required by all applicable Governmental or Regulatory
Entities; and (k) notify Buyer of any material claim that is brought or, to the knowledge of
Member, threatened against Legent Clearing by any third party or any Governmental or
Regulatory Entity. From the date hereof through the Closing, Member shall promptly advise
Buyer in writing of (i) any loss or, to the knowledge of Member, threatened loss of any
significant customer or any material assets or properties of Legent Clearing; (li) any Material
Adverse Effect that has occurred or that Sellers reasonably believe may occur and (iii) any
breach of any representation, warranty or covenant made by any Seller herein.
6.4 Negative Covenants.
In furtherance and not in limitation of the provisions of Section 6.3, from the date
hereof through the Closing Date, Member covenants and agrees to prevent Legent Clearing,
directly or indirectly, from doing any of the following, except as otherwise permitted or required
by this Agreement (including Section 6.3), as consented to by Buyer in writing (such consent not
to be unreasonably withheld, conditioned or delayed; provided. that Buyer shall be deemed to
have provided consent to any particular action if Buyer does not object in writing to Member's
written request for consent to such action within 5 business days after Buyer receives such
request), as required by applicable Law or as set forth in Schedule 6.4:
(a) amend or otherwise change its of formation or operating
agreement;
70352.000001 EMF_US 31156628vl
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(b) issue, sell, grant, pledge, dispose of or encumber, or authorize the
issuance, sale, grant, pledge, disposition or encumbrance of, any equity interests of any
class, or any options, warrants, convertible securities or other rights of any kind to
acquire any such equity interests or any other ownership interest in Legent Clearing;
(c) sell, lease, transfer or otherwise dispose of any of its properties or assets,
except in the ordinary course of business conSistent with past practice;
(d) acquire any interest in any corporation, partnership or other business
organization or division thereof; or make any material investment whether by purchase of
stock or securities, contribution of capital or property transfer; or purchase all or
substantially all of the property or assets of any other Person;
(e) increase the compensation, salary or wages payable or to become payable
to any of its officers, directors, managers, employees or agents (including, without
limitation, any increase or change pursuant to any Employee Plan/Agreement), other than
annual merit increases consistent with past practices in both the timing and ainount
thereof, or grant any material bonus" severance or termination pay to, or enter into any
material bonus, employment or severance agreement with, any of its directors, officers,
managers, employees or agents, or any bonus or other employee benefit granted, made or
accrued, other than annual bonuses consistent with past practices in both the timing and
amount thereof;
(t) incur, assume or guarantee any obligation, commitment, capital
expenditure or indebtedness for borrowed money, other than pursuant to margin loans
made in the ordinary course of business, consistent with past practice, provided that such
margin loans are made in compliance in all material respects with existing policies of
Legent Clearing and applicable Law;
(g) make any declaration, setting aside or payment of any dividend or any
other distribution (other than (i) Tax distributions consistent with past practice; or (ii)
cash distributions in an aggregate amount not to exceed $100,000) in respect of the equity
interests of Legent Clearing; or any redemption, purchase or other acquisition of any
equity interests ofLegent Clearing, or any security relating thereto; or any other payment
to any holder of any of equity interest ofLegent Clearing as such;
(h) enter into any 'contract that would have been required to be disclosed
pursuant to Section 3.17 had such contract been entered into prior to the date hereof: or
amend or terminate any such contract or any contract disclosed pursuant to Section 3.17,
or waive any material rights thereunder, other than in the ordinary course of business
consistent with past practice;
(i) introduce any new material method of management or operation;
(j) intentionally take or fail to take any action that would cause or permit the
representations and warranties made in Article 3 to be inaccurate at the time of the
Closing;
70352.000001 EMF_US 311S6628vl
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(k) engage in any transaction with any Affiliate;
(I) make any capital expenditures, capital additions or betterments in excess
of $250,000 in the aggregate;
(m) make or acquiesce with any change in any accounting methods, principles
or material practices, except as required by GAAP or any Governmental or Regulatory
Entity having jurisdiction over Legent Clearing; or
(n) enter into any agreement that requires Legent Clearing to do any of the
acts prohibited by paragraphs (a)-(m) above.
6.5 Notice of Certain Events.
(a) From and after the date hereof through the Closing, Sellers shall promptly
notify Buyer of:
(i) the occurrence, or failure to occur, of any event subsequent to the
date hereof that renders or would render any representation, warranty or statement
of Member or Sellers in this Agreement or the Disclosure Schedules to be untrue
or inaccurate at any time from the date hereof to the Closing Date or that results
or may result in the failure to satisfy any of the conditions specified in Article 8.
No notice under this clause (i) shall be deemed to avoid or cure any
misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement or the Disclosure
Schedules; provided. however, that if: (A) such notice relates to an event
occurring subsequent to the date hereof (without breach of Section 6.3 or Section
6.4); (B) Sellers acknowledge in such notice that Buyer has the right to terminate
this Agreement pursuant to Section 9.1(1: as a result of the information disclosed
in such notice; (C) Buyer has been provided with all information under the
custody and control of Sellers that is reasonably necessary to enable Buyer to
assess the effects of such event; and (D) Buyer does not exercise such termination
right promptly following delivery by Sellers of the information contemplated by
clause (C) above, then the information disclosed in such notice shall constitute an
amendment of the Disclosure Schedules and the representations, warranties or
statements of Member or Sellers, as applicable, in this Agreement to which such
information relates for purposes of Article 7 and Article 8; further provided, that
in the event such occurrence has been consented to by Buyer pursuant to Section
6.3 or Section 6.4, then the information related thereto shall constitute an
amendment to the Disclosure Schedules and the representations, warranties, or
statements of Member or Sellers, as applicable, in this Agreement to which such
information relates for purposes of Article 7 and Article 8; or
(ii) Any failure of any Seller to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such Seller under this
Agreement.
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(b) From and after the date hereof through the Closing, Buyer shall promptly
notify Member of:
(i) the occurrence, or failure to occur, of any event subsequent to the
date hereof that renders or would render any representation, warranty or statement
of Buyer or Parent in this Agreement to be untrue or inaccurate at any time from
the date hereof to the Closing Date or that results or may result in the failure to
satisfy any of the conditions specified in Article 8. No notice under this clause (i)
shall be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty or statement in this
Agreement; provided, however, that if (A) such notice relates to an event
occurring subsequent to the date hereof in the ordinary coUrse of business of
Buyer; (B) Buyer acknowledges in such notice that Member has the right to
terminate this Agreement pursuant to Section 9 .Ie c} as a result of the information
disclosed in such notice; (C) Member has been provided with all information
under the custody and control of Buyer that is reasonably necessary to enable
Member to assess the effects of such event; and (D) Member does not exercise
such termination right promptly following delivery by Buyer of the information
contemplated by clause (C) above, then the information disclosed in such notice
shall constitute an amendment of the representations, warranties or statements of
Buyer or Parent, as applicable, in this Agreement to which such information
relates for purposes of Article 7 and Article 8; or
(ii) any failure of Buyer or Parent to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under this
Agreement.
6.6 Access to Information and Records.
During the period prior to the Closing, Legent Clearing shall, and Member shall
cause Legent Clearing to, give Buyer and its counsel, accountants and other representatives:
( a) access to all of the properties, books, records, contracts and documents of Legent Clearing for
the purpose of such inspection, investigation and testing as Buyer deems appropriate (and Legent
Clearing and Member shall furnish or cause to be furnished to Buyer and its representatives all
information with respect to the business and affairs of Legent Clearing as Buyer may request);
(b) access to employees, agents and representatives for the purposes of such meetings and
communications as Buyer reasonably desires; and (iii) access to vendors, customers and others
having business dealings with Legent Clearing. In furtherance and not in limitation of the
foregoing, as promptly as practicable after the date hereof, and again approximately ten (10) days
prior to the anticipated Closing Date, Legent Clearing shall, and Member shall cause Legent
Clearing to, grant such access as may be reasonably requested by, and otherwise cooperate with,
Buyer and its counsel, accountants and other representatives in conducting an audit of the
securities listed in Schedule 3.10 and the valuation of such securities as are reported on Legent
Clearing's books.
70352.000001 EMF_US 31156628vl
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6.7 Consultants.
Upon CIQSing, Buyer shallluive no obligation to retainDuques, or any Affiliate of.
Legent Clearing or any member of Member, in any capacity, including, Without limitation, as an
executive officer, employee or consultant, unless mutually agreCd in writing by the parties.
6.8 Employees and Employee Plansl Agreements.
(a) Promptly subsequent to Closing, Member and Buyer shall deliver a joint
communication, in. form and substance mutually agreed to by Buyer and Member, to each
participant (or any employee who previously participated) in any option plan or similar
plan of Legent Clearing. .
(b) Within 30 days after the date hereof, Member smill deliver to Buyer a
compliance audit with respect to Member's 401{k) plan.. Member and Buyer shall each
bear one half of the fees and.expenses of the preparation of such compliance audit.
6.9 Comomte Name Change.
Immediately following the Closing, Member and each of its Affiliates, as
applicable, shall change its name to delete ''Legent'' from its corporate name.
6.10 Preparation of Tax Returns.
Buyer covenants to timely file Tax Returns with respect to Legent Clearing for
the tax years ended December 31, 2009 (to the extent not already filed) and on the Closing Date,
subject to the approval of Member, such Tax Returns to be prepared by Deloitte & Touche LLP,
or such other independent accounting finil as reasonably engaged by Buyer. Buyer shall make
available, at no cost to Member, appropriate personnel that such accounting :firm may request in
order to provide to Member drafts of such filings no later than 30 days after the Closing Date.
Member covenants to pay the fees and expenses of the preparation of such Tax Returns by such
accounting firm, in proportion to the duration of its . ownership of Legent Clearing.
6.11 Legent Clearing Organization Credits.
Legent Clearing is entitled to rebates and/or assessments with respect to its
membership in Depository Trust & Clearing Corporation ("DTC'') and The Options Clearing
Corporation ("OCC'').Promptly upon such rebate or assessment: (a) Legent Clearing will pay
to Member (i) any acc rebate, less any pass through to independent correspondents, with
respect to the. month of December, 2009 and (ti) any DTC rebate, less any pass through to
independent correspondents, with respect to the calendar year 2009; and (b) Member will pay to
Legent Clearing (i) any acc assessment with respect to the month of December 2009 and (ti)
any DTC assessment with respect to the calendar year ended December 31, 2009.
6.12 R.e,payment of Outstanding Debt: Transfer of Certain Assets.
At the Closing, Member shall cause Legent Clearing to: (a) repay the outstanding
subordinated indebtedness (including all accrued interest thereon) set forth in Schedule 6.12;
70352.000001 EMF_US 31156628vl
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provided. however, that any cash portion of any prepayment penalties incurred in connection
with such repayment of subordinated indebtedness shall be deducted from the Final Cash
Purchase Price on adollar for dollar basis; (b) transfer to RIDA WN N, LLC, a Florida limited
liability company, all of the collateral held by Legent Clearing that secures repayment of that
certain Secured Demand Note Collateral Agreement, with an effective date of April 22, 2009,
between Legent Clearing and RIDA WN N, LLC, and related Secured Demand Note, dated
April 22, 2009, in the original principal amount of $6,000,000, as amended by that certain
Amendment to Previously Approved Subordination Agreement, dated May 20, 2010; and
(c) transfer to Member all equity interests in Newbridge Securities Corporation held by Legent
Clearing.
6.13 Advance by Buyer.
At the Closing, Buyer shall advance to Legent Clearing cash in an amount
sufficient to permit Legent Clearing to make the repayment of the cash portion of the
subordinated indebtedness (including aU accrued interest thereon) set forth in Schedule 6.12.
6.14 Distribution of Subject Shares.
Immediately after the Closing, Member shall distribute the Subject Shares to the
direct and indirect holders of its equity interests in a manner so as to ensure that that each such
holder shall receive that number of the Subject Shares that is proportionate to such holder's
direct or indirect equity interest in Member.
6.15 Required Approvals.
(a) As promptly as practicable after the date of this Agreement, Sellers will,
and will cause Legent Clearing to, make all filings required by Law to be made by them
in order to consummate the transactions contemplated by this Agreement. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause Legent Clearing
to, cooperate with Buyer with respect to all fIlings that Buyer elects to make or is
required by Law to make in connection with the transactions contemplated by this
Agreement.
(b) As promptly as practicable after the date of this Agreement, Buyer and
Parent will make all filings required by Law to be made by them in order to consummate
the transactions contemplated by this Agreement. Between the date of this Agreement
and the Closing Date, Buyer and Parent will cooperate with Member and Legent Clearing
with respect to all filings that Member or Legent Clearing elects to make or is required by
Law to make in connection with the transactions contemplated by this Agreement.
6.16 No Negotiation.
Until such time, if any, as this Agreement is terminated pursuant to Article 9,
Sellers will not, and will cause Legent Clearing and each of its directors, officers, managers,
employees, agents, advisors and other representatives not to, directly or indirectly, solicit, initiate
or encourage any inquiries or proposals from, discuss or negotiate with or provide any non-
public information to, any Person (other than Buyer) relating to any transaction involving the
70352.000001 EMF_US 31156628vl
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sale of the business or assets (other than in the ordinary course of business consistent with past
practice) ofLegent Clearing, or any of the Units, or any merger, consolidation, business
combination or similar transaction involving Legent Clearing.
6.17 Audit
If it becomes available prior to the Closing, then as soon as practicable after its
receipt thereof, Member shall deliver to Buyer a copy of the audited balance sheet ofLegent
Clearing as of June 30, 2010, and the related statements of income and cash flows for the fiscal
year then ended (including the notes contained therein or annexed thereto), which financial
. statements shall have been reported on, and shall be accompanied by a copy of, the signed,
unqualified opinion of Deloitte & Touche LLP, independent auditors for Legent Clearing for
such fiscal year.
6.18 Commercially Reasonable Efforts.
Between the date of this Agreement and the Closing Date, Member or Buyer, as
the case may be, will use their respective commercially reasonable efforts to consummate the
transactions contemplated by this Agreement, including, in the case of Member, by causing the
conditions set forth in Section 8.3 to be satisfied ~ d , in the case of Buyer, by causing the
conditions set forth in Section 8.4 to be satisfied.
'"
7. INDEMNIFICATION
7.1 By Member and Duques.
Subject to the terms and conditions of this Article 7, from and after the Closing,
Member and Duques, jointly and severally, agree to indemnify, defend and hold harmless Buyer
and its Affiliates (inclUding, without limitation, after the Closing, Legent Clearing), and their
respective directors, managers, officers, employees, agents and controlled and controlling
Persons (collectively, the "Buyer Indemnitees") frmn and against all Claims asserted against,
resulting to, imposed upon or incurred by any Buyer Indemnitee, directly or indirectly, by reason
of, arising out of or resulting from (collectively, the "Special Indemnity Claims''):
(a) the inaCcuracy or breach orany representation or warranty of Sellers
contained in any of the Fundamental Reps;
(b) the breach of any covenant of Member or Duques set forth in Section 6.1
[''Noncompetition; Contidentiality'1 or Section 6.16 [''No Negotiation'1;
(c) any Claim by any Person purporting to be the holder (other than Member)
of any Units or other securities of or profit sharing rights in Legent Clearing, or any
. option, contract or other right to acquire any Units or other securities of or profit sharing
rights in Legent Clearing;
(d) any fines, penalties, interest or costs resulting from a disciplinary action,
enforcement action or similar proceedings before the Financial Industry Regulatory
70352.000001 EMF_US 3115662Sv1
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2606
Authority or similar regulatory bodies arising out of conduct of the Business which
occurred prior to Closing (collectively, ''Regulatory Claims''); or
(e) any matter covered by a Release.
As used in this Article 7,the term "Claim" shall include (i) all debts, liabilities
and obligations; (ii) all losses, damages (including, without limitation, consequential damages),
judgments, awards, settlements, costs and expenses (including, without limitation, interest
(including prejudgment iitterest in any litigated matter), penalties, court costs and attorneys fees
and expenses); and (iii) all demands, claims, suits, actions, arbitrations, costs of investigation,
causes of action, }lfOCeedings and assessments, whether or not ultimately determined to be valid.
7.2 By Member.
Subject to the terms and conditions of this Article 7, from and after the Closing,
and in addition to its joint and several indemnification obligations pursuant to Section 7.1,
Member agrees to indemnify, defend and hold harmless the Buyer Indemnitees from and against
all Claims asserted against, resulting to, imposed upon or incurred by any Buyer Indemnitee,
directly or indirectly, by reason of, arising out of or resulting from:
(a) the inaccuracy or breach of any representation or warranty of Sellers, or
either of them, contained in or made pursuant to this Agreement;
(b) . the breach of any covenant of Sellers, or either of them, contained in or
made pursuant to this Agreement; .
(c) any Litigationset forth on Schedule 3.13 under the sub-heading "Specified
Litigation Matters" (such Litigation, together with any Litigation that should have been
set forth on Schedule 3.13 in order to make such schedule accurate as of the date of this
Agreement, the "Specified Litigation Matters'') or any Claim (other than Regulatory
Claims covered by Section 7.1ed by any Person arising out of actions occuning prior to
the Closing and that is based on or related to the same subject matter as any Specified
Litigation Matter (collectively, "Litigation Claims',);, provided that, by way of example
and not limitation, a Claim'shall be deemed to be based on or related to the same subject
matter as a Specified Litigation Matter if there exists between such Claim and any
Specified Litigation Matter a substantially similar or common set of facts or
circumstances surrounding the business relationship or relationships out of which the
theories of liability against Legent Clearing in such Claim arise, whether such Claim is
made by one or more customers of a clearing customer or vendor ofLegent Clearing, any
receiver appointed to act on behalf of any such customers, any Governmental or
Regulatory Entity or any other Person; further provided. that the term ''Litigation Claims
n
shall not include any Claim arising out of or resulting from any Litigation that is not
pending, or threatened in writing, on or before the second anniversary of the Closing
Date; or
(d) any fines, penalties, interest or costs resulting from any fines assessed
against Legent Clearing by the Internal Revenue Service for filing informational returns
with incorrect and/or incomplete taxpayer identification numbers (''TIN's'') for any
70352.00001)1 EMF_US 31l56628vl
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period between February 9, 2005 and the Closing Date, including, without limitation, the
penalty of approximately $99,600 assessed against Legent Clearing in connection with its
2007 Form 1099 filings (collectively, "Special Tax Claims").
7.3 By Byyer.
Subject to the terms and conditions of this Article 7, from and after the Closing,
Buyer agrees to indemnify, defend and hold harmless Member and the members of Member
(collectively, the "Seller Indemnitees") from and against all Claims asserted against, resulting to,
imposed upon or incurred by any Seller Indemnitee, directly or indirectly, by reason of or
resulting from (a) the inaccuracy ,or breach of any representation or warranty of Buyer contained
in or made pursuant to this Agreement; or (b) the breach of any covenant of Buyer contained in
or made pursuant to this Agreement.
7.4 By Parent.
Subject to the terms and conditions of this Article 7, from and after the Closing,
Parent agrees to indemnify, defend and hold harmless the Seller Indemnitees from and against all
Claims asserted against, resulting to, imposed upon or incurred by any Seller Indemnitee,
directly or indirectly, by reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of Parent contained in or made pursuant to this Agreement; or (b) the
breach of any covenant of Parent contained in or made pursuant to this Agreement.
7.5 Indemnification of Third-Party Claims.
The obligations and liabilities of any party to indemnify any other under this,
Article 7 with reSpect to Claims relating to third parties shall be subject to the following terms
and conditions:
(a) Notice and Defense. The party or parties to be indemnified (whether one
or more, the "Indemnified PartY'') will give the party from whom indemnification is
sought (the "Indemnifying PartY'') written notice of any such Claim, and the
Indemnifying Party will undertake the defense thereofby representatives chosen by it.
Failure to give such notice shall not affect the Indemnifying Party's duty or obligations
under this Article 7. except to the extent the Indemnifying Party is prejudiced thereby.
So long as the Indemnifying Party is defending any such Claim. actively and in good faith
and can periodically demonstrate the financial resources to continue the defense and pay
the Claim if unsuccessful in the defense, the Indemnified Party shall not settle such
Claim. The Indemnified Party shall make available to the Indemnifying Party or its
representatives all records and other materials required by them and in the possession or
under the control of the Indemnified Party, for the use of the Indemnifying Party and its
representatives in defending any such Claim, and shall in other respects give reasonable
cooperation in such defense.
(b) Failure to Defend If the Indemnifying Party,' within a reasonable'time
after notice of any such Claim, fails to defend such Claim actively and in good faith or
fails to demonstrate adequate financial resources to maintain the defense and pay the
Claim if unsuccessful, the Indemni:fied,Party will (upon further notice) have the right to
70352.000001 ~ _ u s 31l56628vl
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undertake the defense, compromise or settlement of such Claim or consent to the entry of
a judgment with respecttosuchClaim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no right to
challenge the Indemnified Party's defense, compromise, settlement or consent to
judgment therein.
(c) Indemnified Party's Rights. Anything in this Section 7.S to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may materially and
adversely affect the Indemnified Party other than as a result of money damages or other
money payments, the Iildemnified Party shall have the right to defend, compromise or
settle such Claim, and (il) the Indemnifying Party shall not, without the written consent of
the Indemnified Party, settle or compromise any Claim or consent to the entry of any
judgment which dpes not i n c l ~ as an unconditional term thereof the giving by the.
claimant or the plaintiff to the Indemnified Party of a release from all liability in respect
of such Claim.
(d) . Management of Proceedings relating to Litigation Claims . Special Tax
Claims and ReguiatOJy Claims. Anything in this Section 7.S to the contrary
notwithstanding, Buyer, acting in good faith, shall have sole authority with respect to the
management of all proceedings with respect to which Litigation Claims, Special Tax
Claims or Regulatory Claims may be made under this Article 7, including, without
limitation, all decisions with respect to the prosecution, defense, compromise or
settlement thereof, and whether or not to consent to the entry of, or appeal, any j1,1dgment
of a court of competent jurisdiction having the authority to determine the amount thereof
and liability with respect thereto (each, a "Judicial Order',), and Buyer shall not be
required to comply with the provisions of subsections (a) through (c) of this Section 7.S
. in connection therewith; provided. however, that (i) Buyer shall not settle or compromise,
or consent to the entry of any Judicial Order with respect to, any such proceeding relating
to any Litigation Claim. or Regulatory Claim. and with respect to which Member is named
as a co-defendent unless Buyer has first used its commercially reasonable efforts to
include as an unconditional term thereof the giving by the claimant or the plaintiff to
Member of a release from all liability in respect of such proceeding; (ii) Member shall be
entitled to participate in any such proceeding relating to any Litigation Claim, Special
Tax Claim or Regulatory Claim with counsel of its choice and at its own sole cost and
expense; and (iii) Buyer shall keep Member reasonably apprised as to the status, defense,
negotiation or settlement of any such proceeding relating to a Litigation Claim, Special .
Tax Claim or Regulatory Claim with respect to which Member is not participating as
contemplated by clause (ii) above, including by promptly responding to any reasonable
inquiries or requests from Member for documents and other information relating thereto ..
..
7.6 Payment: Satisfaction from Escrowed Funds.
(a) Subject to Section 1.6(b), the Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 7. Upon judgment, determination,
settlement or compromise of any third party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified Party in
reimbursement of any amount theretofore required to be paid by it, the amount so
70352.000001 EMF_US 311S6628vl
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determined by judgment, determination, settlement or compromise and all other Claims
of the Indemnified Party with respect thereto, unless in the case of a judgment an appeal
is made from the judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the security or bond
to stay execution of the judgment pending appeal. Upon the payment in full by the
Indemnifying Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against the third party
who made such third party Claim.
(b) Sellers acknowledge and agree that the Escrowed Funds shall be deposited
with the Escrow Agent in accordance with the terms of the Escrow Agreement to help
assure the indemnification obligations of Sellers under this Article 7. The
indemnification obligations of Sellers pursuant to this Article 7 shall be satisfied first
from the Escrowed Funds, in accordance with the Escrow Agreement (but such recovery
shall not limit the amount of any additional indemnification to which the Buyer
Indemnitees may be entitled pursuant this Agreement), and second, if such funds are not
sufficient or are no longer available to satisfy such obligations, then the Buyer
Indemnitees may, subject to the other provisions of this Article 7, assert their
indemnification Claims against Sellers.
7.7 Tax Effect.
The indemnification obligation of an Indemnifying Party shall be adjusted so as to
give effect to any net reduction in federal, state, local or foreign income or franchise tax liability
actually realized at any time by the Indemnified Party in connection with the satisfaction by the
Indemnifying Party of the Claims with respect to which indemnification is sought hereunder.
Any Claims payable by the Indemnifying Party to the Indemnified Party hereunder shall include
the federal, state, local or foreign income or franchise tax liability which the Indemnified Party
will incur upon receipt of payment in respect of such Claims (taking into account any net
operating loss, capital loss or credit carryover of the Indemnified Party). With respect to any
Claims for which the Indemnified Party (but for the operation of this sentence) is entitled to
indemnification hereunder, there shall be disregarded any tax liabilities arising by reason of
(a) any reduction or disallowance of deductions from taxable income in one taxable year, to the
extent such reduction or disallowance results in a corresponding increase in allowable deductions
from income in another taxable year, (b) the shifting of items of income from one taxable year to
another, or ( c) the capitalization of amounts which were expensed, but only if such capitalized
amounts are subject to amortization or depreciation or recovery in operating expenses, except
insofar as such reduction, disallowance, shifting or capitalization would only result in the
increase of any unutilized net operating loss, capital loss or credit carryover.
7.8 Limitations on Indemnification.
Except for any fraudulent breach or misrepresentation, as to which claims may be
brought without limitation as to time or amount:
70352.000001 EMF_US 31156628vl
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(a) Time Limitation. No claim or action shall be brought under this Article 7
for breach of a representation or warranty after the lapse of 15 months following the
Closing. Regardless of the foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on Special Indemnity Claims
(except as set forth below with respect to Regulatory Claims), Litigation Claims,
Special Tax Claims or any claims or actions brought for breach of any
representation or warranty (A) made by Member in or pmsuant to Section 3. 14(c)
["Environmental Matters'1, Section 3.19, [''Employee Benefit Plans"] or Section
3.28 ["No Brokers or Finders'1, and Sellers hereby waive all applicable statutory
limitation periods with respect thereto that would adversely affect any Buyer
Indemnitee's rights hereunder; (B) made by Buyer in or pursuant to Section 4.1
["Corporate'1, Section 4.2 ["Authorization; Validity"] or Section 4.3 [''No
Brokers or Finders"], and Buyer hereby waives all applicable statutory limitation
periods with respect thereto that would adversely affect any Seller Indemnitee's
. rights hereunder; or (C) made by Parent in or pursuant to Section 5.1
["Corporate"], Section 5.2 ["Authorization; Validity"], Section 5.3 [''No Brokers
or Finders'1 or Section 5.5 ["Subject Shares"], and Parent hereby waives all
applicable statutory limitation periods with respect thereto that vvould adversely
affect any Seller Indemnitee's rights hereunder. .
(ii) Any claim or action brought for breach of any representation or
warranty made by Sellers in or pursuant to Section 3.7 ("Tax Matters'') may be
brought at any time until the underlying tax obligation is barred by the applicable
period of limitation under federal and state laWs relating thereto (as such period
maybe extended by waiver).
(iii) Any Regulatory Claim shall be commenced prior to the second
anniversary of the Closing Date, and any such Regulatory Claim shall be deemed
to have been waived if not commenced pnor to such second anniversary of the
Closing Date.
(iv) Any Claim, including, without limitation, any Regulatory Claim,
made bya party hereunder prior to the termination of the survival period for such
. claim shall be preserved despite the subsequent termination of such survival.
period.
(v) If any act, omission; disclosure or failure to disclose shall form the
basis for a claim for breach of more than one representation or warranty, and such
claims have different periods of survival hereunder, the termination of the -
survival period of one claim shall not affect a party's right to make a claim based
on the breach of representation or warranty still surviving.
(b) Amount Limitation.
(i) Except with respect to any Special Indemnity Claims, Litigation
Claims, Special Tax Claims or claims for breaches of representations or
70352.000001 EMF_US 31156628vl
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warranties contained in Section 3.28 ["No Brokers or Finders"], Section 4.1
["Corporate"], Section 4.2 ["Authorization; Validity"], Section4.3 ["No Brokers
or Finders"], Section 5.1 ["Corporate"], Section 5.2 ["Authorization; Validity"],
Section 5.3 [''No Brokers or Finders"] or Section 5.5 ["Subject Shares"], for
which no such limitations shall apply, an Indemnified Party shall not be entitled to
indemnification under this Article 7 for breach of a representation or warranty (A)
until the aggregate of the Indemnifying Party's indemnification by the
Indemnified Party pursuant to this Article 7 (but for this Section 7.8(b exceeds
$100,000, but in such event the Indemnified Party shall be entitled to
indemnification in full for all breaches of representations and/or warranties, it
being the intent of the parties that such minimum amount constitute a threshold
and not a deductible; or (B) to the extent the aggregate amount of all
indemnification claims exceeds $6,000,000.
(ii) With respect to Regulatory Claims, Member shall indemnify the
Buyer Indemnitees for: (A) 100% of any amounts up to $350,000, (B) 50% of any
amounts between $350,001 and $700,000 and (C) 0% of any amounts in excess
thereof.
(iii) With respect to Litigation Claims,Member shall indemnify the
Buyer Indemnitees for: (A) 75% of all amounts for legal fees and expenses or
other out-of-pocket costs and expenses (in each case, other than amounts
described in clauses (B) and (C) below) paid by any Buyer Indemnitee in
connection with any Litigation Claims; (B) 85% of all amounts paid by any Buyer
Indemnitee with respect to any Litigation Claim pursuant to any binding
settlement arrangement with respect to which Buyer has fulfilled its obligation set
forth in Section 7.5(d)(i); and (C) 85% of all amounts paid by any Buyer
Indemnitee pursuant to any Judicial Order that is not being appealed by such
Buyer Indemnitee.
( c) Tax Limitation. Indemnification for breaches of the representations
contained in Section 3.7 shall be limited to Taxes ofLegent Clearing for taxable p e r i o ~
ending on or prior to the Closing Date and the pre-Closing portion of any taxable period
that begins before but does not end on the Closing Date.
7.9 No Waiver of Contractual Representations and Warranties.
Sellers have agreed that Buyer's rights to indemnification for the express
representations and warranties set forth herein are part of the basis of the bargain contemplated
by this Agreement, and, except to the extent specifically set forth in the Disclosure Schedules,
Buyer's rights to indemnification (as specifically set forth in and limited by this Article 7) shall
not be affected or waived by virtue of (and Buyer shall be deemed to have relied upon the .
express representations and warranties set forth herein notwithstanding) any knowledge on the
part of Buyer of any untruth of any such representation or warranty of Sellers expressly set forth
in this Agreement, regardless of whether such knowledge was obtained through Buyer's own
investigation or through disclosure by Sellers or any other Person, and regardless of whether
such knowledge was obtained before or after the execution and delivery of this Agreement
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Without limiting the generality of the foregoing, the closing of the transactions contemplated by
this Agreement liihall not constitute a waiver by any party of its rights to indemnification
hereunder, regardless of whether the party seeking indemnification has knowledge of the breach,
violation or failure of condition constituting the basis of the Claim at or before the Closing.
8. CLOSING
The closing of the transactions contemplated by this Agreement (the "Closing'')
shall take place at the offices of Hunton & Williams LLP, Dallas, Texas, at 9:00 a.m. on a date
agreed to by Buyer arid Member, but in no event later than the third business day after the
conditions set forth in SeCtion 8.3 and Section 8.4 have been satisfied or waived, or at such other
time and place as may be agreed upon by Buyer and Member (the date on which the Closing
actually occurs is referred to in this Agreement as the "Closing Date'').
8.1 Documents to be Delivered by Sellers ..
At the Closing, Sellers shall deliver to Buyer the following documents, in each
case duly executed or otherwise in proper form reasonably acceptable to Buyer:
(a) Units. Such documentation evidencing the transfer to Buyer of the Units
by each holder thereof as Buyer reasonably requests.
(b) Registration Rights Agreement. The Registration Rights Agreement, duly
executed by Member.
(c) Escrow Agreement. The Escrow Agreement, duly executed by Member
arid the Escrow Agent.
(d) Certified Resolutions. Certified copies of the resolutions of the board of
managers of Member, authorizing and approving this Agreement and the consummation
of the transactions contemplated hereby.
(e) Organizational Documents. A copy of the Operating Agreement of each
of Legent Clearing and Member, certified by their respective secretaries, and a copy of
the Certificate of Formation and good standing certificates of each of Legent Clearing
and Member, certified by the Secretary of State of the applicable state of organization.
(t) Closing Certificate of Member. A certificate of the President of Member,
substantially in the form of Exhibit 8.1ID attached hereto, certifying fulfi11ment of the
matters referred to in paragraphs (a) through (d) of Section 8.3 and containing certain
representations regarding Member as of the Closing Date as set forth therein ..
(g) Closing Certificate of Dugues. A certificate of Duques, substantially in
the form of Exhibit 8.1 (g) attached hereto, certifying fulfi11ment of the matters referred to
in paragraphs (a) through (d) of Section 8.3. .
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(h) Incumbency Certificate. Incumbency certificates relating to each Person
executing (as a corporate officer or otherwise on behalf of another Person) any document'
executed and delivered to Buyer pursuant to the terms hereof.
(i) General Releases. The Releases, duly executed by the Persons listed on
Schedule 6.2.
(j) Subordinated Debt Pay-off. Evidence, satisfactory to Buyer, of payment
of the outstanding subordinated indebtedness set forth in Schedule 6.12 .
. (k) Other Documents. All other documents, instruments or writings required
to be delivered to Buyer at or prior to the Closing pursuant to this Agreement and such
other certificates of authority and documents as Buyer may reasonably request;'
8.2 . Documents to be Delivered by Buyer or Parent.
At the Closing, Buyer or Parent, as applicable, shall deliver to Member the
following documents, in each case duly executed or otherwise in proper form:
(a) Estimated Cash Purchase Price. Certified or bank cashier's checks (or
wire transfers) as required by Sections 2.2(a) a n d ~ .
(b) Subject Shares. Certificates representing the Subject Shares as required
by Section 2.2(c), together with the Registration Rights Agreement, duly executed by
Parent.
(c)
Parent.
Escrow Agreement. The Escrow Agreement, duly executed by Buyer and
(d) Opinion of Parent's In-House Counsel. A written opinion of Parent's in-
house legal counsel, dated as of the Closing Date, addressed to Member and its members,
substantially in the form of Exhibit 8.2(d) attached hereto.
(e) Certified Resolutions. Certified copies of the resolutions of the Boards of
Directors of Buyer and Parent authorizing and approving this Agreement and the
consummation of the transactions contemplated hereby.
(t) Closing Certificate. Certificates of the Presidents of Buyer and Parent,
each substantially in the form of Exhibit 8.2(t) attached hereto, certifying fulfillment of
the matters referred to in paragraphs (a) through (b) of Section 8.4;
(g) Incumbency Certificate. Incumbency certificates relating to each Person
executing (as a corporate officer or otherwise on behalf of another Person) any document
. executed and delivered to Member pursuant to the terms hereof.
(h) Other Documents. All other documents, instruments or writings required
to be delivered to Member at or prior to the Closing pursuant to this Agreement and such
other certificates of authority and documents as Member may reasonably request.
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8.3 Conditions Precedent to Obligations of Buyer and Parent.
Each and every obligation of Buyer or Parent to be performed on the Closing Date
shall be subject to the satisfaction, or written waiver by Buyer, prior to or at the Closing of the
following express conditions precedent:
(a) No Material Adverse Effect shall have occurred;
(b) (i) the representations and warranties of Sellers contained in the
Fundamental Reps shall be true and correct in all respects when made and at and as of the
Closing Date with the same force and effect as if those representations and warranties had
been made at and as of the Closing Date and (ii) each other representation and warranty
of Member contained in Article 3 shall be true and correct in all material respects when
made and at and as of the Closing Date with the same force and effect as if those
representations and warranties had been made at and as of the Closing Date, in each case
except (A) to the extent such representations and warranties speak as of a specified earlier
date; and (B) as otherwise contemplated or permitted by this Agreement; provided,
however, that for purposes of clause (ii) above, any qualifications relating to materiality,
including the term ''Material Adverse Effect," contained in any representation or
warranty shall be disregarded and given no effect;
( c) Sellers shall in all material respects have performed all obligations and
complied with all covenants necessary to be performed or complied With by them on or
before the Closing Date, including, without limitation, the delivery of all items required
to be delivered pursuant to Section 8.1;
(d) Sellers shall have obtained all consents set forth in Schedule 3.4;
( e) Buyer shall have obtained all governmental and regulatory approvals and
consents necessary for the consummation of the transactions described in this Agreement
on terms and conditions satisfactory to the Buyer, including, without limitation, to the
extent required, (i) the approval of the Office of Thrift Supervision, the Federal Deposit
Insurance Corporation and any other applicable bank regulatory authority, and (ii) the
approval of any Governmental or Regulatory Entities, for the Buyer to acquire the Units
and control ofLegent Clearing, and all applicable waiting periods shall have expired.
(f) Buyer shall have obtained approval from the Office of Thrift Supervision
that Legent Clearing's margin loans and other comparable assets would be classified as
Regulation T assets and will be approved for treatment as 20% or lower risked-weighted
category for the purpose of Buyer's risked-weighted asset calculation;
(g) Buyer shall have received evidence,satisfactory toBuyer in its reasonable
discretion, that each material issue reported in the compliance audit obtained by Member
pursuantto Section 6.8(b) has been resolved without any further liability to Legent
Clearing;
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(h) no statute, rule or regulation shall have been enacted or promulgated by
any.Governmental or Regulatory Entity which prohibits, restricts or makes illegal this
Agreement or the transactions contemplated hereby;
(i) no Litigation shall be pending or threatened before any court or
Governmental or Regulatory Entity that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby, or that otherwise questions the validity or legality of this
Agreement or the consummation of the transactions contemplated hereby; and
G) Seller shall have obtained executed UCC-3 Termination Statements or
other releases, each in form and substance reasonably satisfactory to Buyer, to evidence
the release of the Liens listed in Schedule 3.l5(a).
8.4 Conditions Precedent to Obligations of Sellers.
Each and every obligation of Sellers to be performed on the Closing Date shall be
subject to the satisfaction, or written waiver by Member, prior to or at the Closing of the
following express conditions precedent:
( a) (i) the representations and warranties of Buyer contained in Section 4.1
["Corporate"], Section 4.2 ["Authorization; Validity"], Section 4.3 ["No Brokers or
Finders"] and Section 4.6 ["Financing"] shall be true and correct in all respects when
made and at and as of the Closing Date with the same force and effect as if those
representations and warranties had been made at and as of the Closing Date; (ii) each
other representation and warranty of Buyer contained in Article 4 shall be true and
correct in all material respects when made and at and as of the Closing Date with the
same force and effect as if those representations and warranties had been made at and as
of the Closing Date; (iii) the representations and warranties of Parent contained in
Section 5.1 ["Corporate"], Section 5.2 ["Authorization; Validity"], Section 5.3 [''No
Brokers or Finders"] and Section 5.5 ["Subject Shares"] shall be true and correct in all
respects when made and at and as of the Closing Date with the same force and effect as if
those representations and warranties had been.made at and as of the Closing Date; and
(iv) each other representation and warranty of Parent contained in Article 5 shall be true
and correct in all material respects when made and at and as of the Closing Date with the
same force and effect as if those representations and warranties had been made at and as
of the Closing Date, in each case except (A) to the extent such representations and
warranties speak as of a specified earlier date; and (B) as otherwise contemplated or
permitted by this Agreement;
(b) Buyer and Parent shall in all material respects have performed all
obligations and complied with all covenants necessary to be performed or complied with
by them on or before the Closing Date, including, without limitation, the delivery of all
items required to be delivered pursuant to Section 8.2;
(c) Member shall have obtained all consents and approvals from any
Governmental or Regulatory Entities necessary for the consummation of the transactions
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contemplated hereby, on terms and conditions reasonably satisfactory to Member,
including, without limitation, the approvalofthe Financial Industry Regulatory
Authority; .
(d) no statute, rule or regulation shall have been enacted or promUlgated by
any Governmental or Regulatory Entity which prohibits, restricts or makes illegal this
Agreement or the transactions contemplated hereby; and
(e) no Litigation shall be pending or threatened before any court or
Governmental or Regulatory Entity that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby, or that otherwise questions the validity or legality of this
Agreement or the consummation of the transactions contemplated hereby_
9. TERMINATION
9.1 Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of all of the parties hereto; or
(b) by written notice from Buyer to Member, if any Seller (i) fails to perform
in any material respect its covenants or agreements contained in this Agreement and
required to be performed on or prior to the Closing Date, or (ii) materially breaches any
representation or warranty contained in this Agreement, which failure or breach is not
cured within 10 days after Buyer has notified Member of its intent to terminate this
Agreement pursuant to this Section 9.1M; provided, however, that to the extent that any
such covenant, agreement, representation or warranty contains a qualification relating to
materiality, including the term "Material Adverse Effect," then for purposes of this
Section 9.1 (b), such qualification shall be disregarded and given no effect; or
(c) by written notice from Member to Buyer, if Buyer or Parent (i) fails to
perform in any material respect its covenants or agreements contained in this Agreement
and required to be performed on or prior to the Closing Date, or (ii) materially breaches
any representation or warranty contained in this Agreement, which failure or breach is
not cured within 10 days after Sellers have notified Buyer of their intent to terminate this
Agreement pursuant to this Section 9.l(c); or
(d) by written notice from Buyer to Member upon the occurrence of any
Material Adverse Effect; or
(e) by written notice from Buyer to Member, or from Member to Buyer, as
the case may be, if the Closing has not occurred on or prior to October 31, 2010 (the
"Drop Dead Date'') for any reason other than delay or nonperformance of the party
seeking such termination; provideg, however, that if any consent or approval required to
be obtained from any banking regulatory agency or any Governmental or Regulatory
Entity with respect to the transactions contemplated hereby has not been obtained by such
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date, then the Drop Dead Date shall be automatically extended to November 30,2010 or
such later date as may be mutually agreed upon by Buyer and Member; or
(f) by written notice from Buyer to Member if Buyer reasonably determines,
in good faith and after consulting with counsel, that there is a. substantial likelihood that
any necessary approval by any banking regulatory agency or any Governmental or
Regulatory Entity will not be obtained or will be obtained only upon a condition Or
conditions that make it inadvisable in Buyer's discretion to proceed with the transactions
contemplated by this Agreement; or
(g) by written notice from Member to Buyer if Member reasonably
determines, in good faith and after consulting with counsel, that there is a substantial
likelihood that any necessary approval by any banking regulatory agency or any
Governmental or Regulatory Entity will not be obtained or will be obtained only upon a
condition or conditions that would reasonably be expected to materially and adversely
affect Member should Member proceed with the transactions contemplated by this
Agreement; or
(h) by written notice from Buyer to Member, or from Member to Buyer, as
the case may be, if there shall be any applicable Law that makes the consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if consummation of
the transactions contemplated hereby would violate any final, non-appealable Order of
any Governmental or Regulatory Entity having competent jurisdiction.
, .
9.2 Effect of Termination.
If this Agreement is terminated as permitted by Section 9.1, such termination. shall
be without liability of any party (or any owner, member, director, manager, officer, employee,
agent, consultant or representative of any party) to the other parties to this Agreement; provided,
however, that nothing herein shall relieve any party from liability for any willful breach or
failure to perform its obligations under this Agreement.
9.3 Waiver of Conditions to Closing.
If any of the conditions set forth in Section 8.3 hereof have not been satisfied,
Buyer may nevertheless elect to waive (to the extent permitted by applicable Law) such
conditions and proceed with the consummation of the transactions contemplated hereby. If any
of the conditions set forth in Section 8.4 have not been satisfied, Sellers may nevertheless elect to
waive (to the extent permitted by applicable Law) such conditions and proceed with the
consummation of the transactions contemplated hereby.
9.4 Expenses won Termination.
Except as otherwise expressly provided herein, Buyer will pay its own legal fees
and expenses in negotiating this Agreement and closing the transactions contemplated hereby,
and Sellers will pay their own legal fees and expenses in negotiating this Agreement and closing
the transactions contemplated hereby, whether or not the transactions contemplated hereby are
consummated.
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10. RESOLUTION OF DISPUTES
10.1 Arbitration.
Any dispute, controversy or claim arising out of or relating to this Agreement or
any contract or agreement entered into pursuant hereto or the performance by the parties of its or
their terms shall be settled by binding arbitration held in Denver, Colorado, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in effect, except
as specifically otherwise provided in this Article S.4(e). Notwithstanding the foregoing, Buyer
may, in its discretion, apply to a court of competent jurisdiction for equitable relief from any
violation or threatened violation of the covenants of Sellers under Section 6.1 of this Agreement.
10.2 Arbitrators.
If the matter in controversy (exclusive of attorney fees and expenses) shall appear,
as at the time of the demand for arbitration, to exceed $1,000,000, then the panel to be appointed
shall consist of three neutral arbitrators; otherwise, one neutral arbitrator.
10.3 Procedures: No Appeal.
The arbitrator(s) shall allow such discovery as the arbitrator(s) determine
appropriate under the circumstances and shall resolve the dispute as expeditiously as practicable,
and if reasonably practicable, within 120 days after the selection of the arbitrator(s). The
arbitrator(s) shall give the parties written notice of the decision, with the reasons therefor set out,
and shall have 30 days thereafter to reconsider and modify such decision if any party so requests
within 10 days after the decision. Thereafter, the decision of the arbitrator(s) shall be fmal,
binding, and nonappealable with respect to all Persons, including (without limitation) Persons.
who have failed or refused to participate in the arbitration process. The arbitrators shall be
empowered only to choose between the position taken on the issue by the Indemnified Party, or
the position taken by the Indemnifying Party, and shall not be empowered to render any other
decision.
10.4 Authority.
The arbitrator(s) shall have authority to award relief under legal or equitable
principles, including interim or prejiminary relief, and to allocate responsibility for the costs of
the arbitration and to award recovery of attorneys fees and expenses in such manner as is
determined to be appropriate by the arbitrator(s).
10.5 Entry of Judgment.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having in personam and subject matter jurisdiction. Buyer, Parent, Member and Duques
hereby submit to the in personam jurisdiction of the Federal and State courts in Colorado, for the
purpose of confirming any such award and entering judgment thereon.
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10.6 Confidentiality.
All proceedings under this Article 10, and all evidence given or discovered
pursuant hereto, shall be maintained in confidence by all parties.
10.7 Continued Performance.
The fact that the dispute resolution procedures specified in this Article 10 shall
have been or may be invoked shall not excuse any party from performing its obligations under
this Agreement and during the pendency of any such procedure all parties shall continue to
perform their respective obligations in good faith, subject to any rights to .terminate this
Agreement that may be available to any party.
10.8 Tolling.
All applicable statutes oflimitation shall be tolled while the procedures specified
in this Article 10 are pending. The parties will take such action, if any, as may be required to
effectuate such tolling.
11. MISCELLANEOUS
11.1 Disclosure Schedules.
The Schedules referred to in this Agreement have been compiled in a bound
volume (the "Disclosure Schedules"), executed by Member and Duques and dated and delivered
to Buyer on the date of this Agreement. Information set forth in the Disclosure Schedules
specifically refers to the article and section of this Agreement to which such information is
responsive and such information shall not be deemed to have been disclosed with respect to any
other article or section of this Agreement or for any other purpose, unless disclosure to such
other article or section is clear on its face. The Disclosure Schedules include a table of contents
and/or index to all of the information and documents contained therein. The Disclosure
Schedule shall not vary, change or alter the language of the representations and warranties
contained in this Agreement other than providing exceptions to statements therein. Seller may,
from time to time prior to or at the Closing, supplement or amend the Disclosure Schedules only
to the extent and in the manner provided in Section 6.5(a); and all references to any Schedule
that has been properly supplemented or amended in accordance with Section 6.5(a) shall for all
purposes after the Closing be deemed to be a reference to such Schedule as so supplemented or
amended.
11.2 Further Assurance.
From time to time, at Buyer's request and without further consideration, Legent
Clearing and Member will execute and deliver to Buyer such documents and take such other
action as Buyer may reasonably request in order to consummate more effectively the transactions
contemplated hereby.
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11.3 Disclosures and Announcements.
Announcements concerning the transactions provided for in this Agreement by
Buyer, Parent, Legent Clearing or Member shall be subject to the approval of the other parties,
which approval shall not be unreasonably withheld. Member and Duques agree not to disclose
the terms of this transaction except as required by Law. Notwithstanding the foregoing, any
party or its applicable Affiliates shall be permitted to make such public filings with respect to
this Agreement and the transactions contemplated hereby as may be required by Law or by
obligations pursuant to any listing agreement with any national securities exchange or inter-
dealer quotation system.
11.4 Assignment; Parties in Interest.
( a) Assignment. Except as expressly provided herein, the rights and
obligations of a party hereunder may not be assigned, transferred or encumbered without
the prior written consent of the other parties. .
(b) Parties in Interest. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the respective successors and permitted assigns of the
parties hereto. Nothing contained herein shall be deemed to confer upon any other
Person any right or remedy under or by reason of this Agreement.
11.5 Law Governing Agreement.
This Agreement may not be modified or terminated orally, and shall be construed
and interpreted according to the internal laws of the State of Delaware, excluding any choice of
law rules that may direct the application of the laws of another jurisdiction.
11.6 Waiver: Remedies Cumulative.
The rights and remedies of the parties hereto under this Agreement are cumulative
and not alternative. Neither any failure nor any delay by any party in exercising any right, power
or privilege under this Agreement or any of the Ancillary Instruments will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. To the maximum extent permitted by applicable
Laws, ( a) no claim or right arising out of this Agreement or any of the Ancillary Instruments can
be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of that party or of the right of the party
giving such notice or demand to take further action without notice or demand as provided in this
Agreement or any of the Ancillary Instruments.
11.7 Amendment and Modification.
Buyer and Member may amend, modify and supplement this Agreement in such
manner as may be agreed upon in writing between Buyer and Member.
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IL8 Notice.
(a) All notices, requests, demands and other communications hereunder shall
be given in writing and shall be: (a) personally delivered; (b) sent ,by telecopier, facsimile
transmission or other electronic means of transmitting written documents;. or (c) sent to
the parties at their respective addresses indicated herein by registered or certified u.s.
mail, return receipt requested and postage prepaid, or by private overnight mail courier
service. The respective addresses to be used for all such notices, demands or requests are
as follows:
(i) If to Buyer or Parent, to:
UnitedWestem Bank
700 17th Street, Suite 2100
Denver, CO 80202
Attention: Theodore J. Abariotes
Facsimile: (303) 390-0952
(with a copy to)
Hunton & Williams LLP
1445 Ross Avenue, Suite 3700
Dallas, TX 75202
Attention: Allen McConnell, Esq.
Facsimile: (214) 740-7147
or to such other Person or address as Buyer or Parent may furnish to Member in writing.
(ii) If to Member:
Legent Group, LLC
1239 North 138th Circle
Omaha, Nebraska 68154-5100
Attention: David P. Baitis
Facsimile: (402) 964-0192
(with a copy to)
Sidley Austin LLP
1 South Dearborn Street
Chicago, lllinois 60603
Attention: Frederick C. Lowinger
Luke J. Valentino
Facsimile: (312) 853-7036
or to such other Person or address as Member shall furnish to Buyer in writing.
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In addition, any notice to Legent Oearing given prior to Closing shall also be given in the
same manner to Member; and any notice to Legent Clearing given after Closing shall also
be given in the same manner to Buyer.
(b) Ifpersonally delivered, such commllnication shall be deemed d e l i v ~
upon actual receipt; if electronically transmitted pursuant to this Section 11.8. such
communication shall be deemed delivered the next business day after transmission (and
sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to
this Section 11.8, such communication shall be deemed delivered upon receipt; and if
sent by U.S. mail pursuant to this Section 11.8. such commllnication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the purposes
of this Agreement by giving notice thereof in accordance with this Section 11.8.
11.9 E!penses.
Regardless of whether or not the transactions contemplated hereby are
consummated:
(a) Brokerage. Member and Buyer each represent and warrant to each other
that there is no broker involved or in any way connected with the transactions provided
for herein on their behal( respectively (and Member represents and warrants that there is
no broker involved on behalf of Legent Clearing), and each agrees to hold the other
harmless from and against all other claims for brokerage commissions or finder's fees in
connection with the execution of this Agreement or the transactions provided for herein.
(b) Transfer Taxes. Member shall pay any sales, use, excise, transfer or other
similar tax imposed with respect to the transactions provided for in this Agreement, and
any interest or penalties related thereto.
( c) Legent Clearing EXpenses. All expenses ofLegent Clearing in connection
with the transactions contemplated hereby shall be deducted from the calculation of
Adjusted Book Value as provided in Section 2.3(b).
(d) Other. Except as otherwise provided herein, each of the parties shall bear
its own expenses and the expenses of its counsel and other agents in connection with the
transactions contemplated hereby.
( e) Costs of Litigation. The parties agree that the prevailing party in any
action brought with respect to or to enforce any right or remedy under this Agreement
shall be entitled to recover from the other party or parties all reasonable costs and
expenses of any nature whatsoever incurred by the prevailing party in connection with
such action, including without limitation attorneys' fees and prejudgment interest.
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11.10 Entire Agreement.
This instrument embodies the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and there have been and are no agreements,
representations or warranties between the parties other than those set forth or provided for
herein.
11.11 Counterparts.
This Agreement may be executed in one or more countexparts (incluc.ting, without
funitation, by facsimile or portable document format.(pDF), each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.
11.12 Headings.
The headings in this Agreement are inserted for convenience only and shall not
constitute a part hereof.
11.13 Knowledge.
Wherever the term. "knowledge" is used herein, it shall mean the actual
knowledge of the applicable Person; provided, however, that the ''knowledge'' of Member shall
mean the actual knowledge of Duques, Christopher L. Frankel, Raymond J. Maratea, David
Brant, David Jarvis, Jean E. Luther, Craig Black:, Leon Stafford, Gayann Henn, Stephanie Ripp,
Donna Dorst, Steve Oripchack:, Sandy Antonoff, Roxanna Guinan, Brian Strasser, Maren
Palmer, Steve Harper, Ginnie Wikoff, Chris Dorst, Shawn Brown, Robin Hawley,Ted deWit,
Jobn Riddell, Jeanette Douglas, Jamie Coffey, Cathy Davis, Christine Hansen or any individual
who at any time after the date hereof and prior to the Closing occupies the office of Chief
Executive Officer, President, Chief Financial Officer, Executive Vice President,
Risk/Compliance or Senior Vice President, Operations, or any equivalent office, of Member or
Legent Clearing.
11.14 Glossary of Terms.
The following sets forth the location of definitions of capitalized terms defined in
the body of this Agreement (where any group or category of items or matters is defined
collectively in the plural number, any item or matter within such definition may be referred to
using such defined term. in the singular number):
"Adjusted Book Value" - Section 2.3(b)
"Affiliate" - Section 3.26(a)
"Agreement" - Introductory Paragraph
"Ancillary Instnunents" - Section 3.2(a)
''Book Value" - Section 2.3(a)
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"Business" - Recital A
''Buyer'' - Introductory Paragraph
"Buyer Indemnitees" - Section 7.1
"Buyer's Accountants" - Section 2.3( c)
"CERCLA" - Section 3. 14(c)
"Claim" - Section 7.1
"Closing" - Preamble to Article. 8
"Closing Date" -Article 8
"Code" - Section 3.7(i)(i)
"Consideration" - Section 2.1
"Control" - Section 3.26(a)
"Data Site" - Section 3.7(c)
''DBTCA'' - Section 8.4(e)
"Disclosure Schedules" - Section 11.1
''Drop Dead Date" - Section 9 .1( d)
"DTC" - Section 6.11
"Duques" - Introductory Paragraph
"Employee PlansIAgreement(s)" - Section 3. 19(a)
"Environmental - 3. 14(c)
''ERISA'' - Section 3. 19(a)
"Escrow Agent" - Section 2.2(a)
"Escrow Agreement" - Section 2.2(a)
"Escrowed Funds" - Section 2.2(a)
"Estimated.Balance Sheet" - Section 2.2(b)
''Estimated Cash Purchase Price" - Section 2.2(b)
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''Final Balance Sheet" - Section 2.3( c )(iii)
''Final Cash Purchase Price" - Section 2.3(c)(iii)
''Fundamental Reps" - Preamble to Article 3
"GAAP" - Section 2.3(a)
"Governmental or Regulatory Entities" - Section 3.4
"Indemnified Party" - Section 7.5( a)
"Intellectual Property" - Section 3.22
"Judicial Order" - Section 7.5( d)
"Laws" - Section 3.4
"Legent Clearing" - Recital A
"Licenses" - Section 3 .14(b)
"Liens" - Section 3. 15(a)
"Litigation" - Section 3.13
''Litigation Claims" - Section 7 .2( c)
''Material Adverse Effect" - Section 3.12
"Member" - Introductory Paragraph
"Member Litigation Matters" - Section 3.13
''Member's - Section 2.3(c)(ii)
''Month-End Date" - Section 2.3(a)
"OCC" - Section 6.11
"Orders" - Section 3.4
"Overpayment Refund" - Section 2.2( d)(ii)
''Parent Common Stock" - Section 2.1
"Person" - Section 2.3(b)(i)
"Recent Balance Sheet" - Section 3.5
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"Registration Rights Agreement" - Section 2.2( c)
"Regulatory Claims" - Section 7.1(d)
"Release" - Section 6.2
"Restricted Period" - Section 6. 1 (a)
"Seller Indemnitees" - Section 7.3
''Sellers'' - Introductory Paragraph
"Settlement Date" - Section 2.2( d)
"Special Indemnity Claims" - Section 7.1
"Special Tax Claims" - Section 7 .2( d)
"Specified Litigation Matters" - Section 3.13
"Subject Shares" - Section 2.1
"Tax" or "Taxes" - Section 3.7(i)(ii)
"Tax Return" - Section 3.7(i)(iii)
''Tecbnology Systems" - Section 3.23(a)
"Third Accounting Firm" - Section 2.3( c )(iii)
"Units" - Recital A
''Waste'' - Section 3. 14(c)
[REMAINDER OF PAGE.INTENTIONALLY LEFT BLANK]
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Jun 08 10 06:08p
Ric Duque.
2128380444
p.5
IN WITNESS WHEREOF, the parties have executed this Agreement,. of1b.e date and
year first above written,
BuYER:
UNITED WESTERN BANK
By:. __ ~ __ ~ __________________ ___
Name: James R.. Peoples
TItle: Otief Executive Officer
PARENT:
UNITED WESTERN BANCORP, INC.
By:. __ ~ ______________________ __
Name: Guy A. Gibson
Title: Cbaianan orthc Board
:MEMBI.R:
LEGENT GROUP, LLC
DUOJJES:
I
('\
C .. ~
ques
)'- c\
L. V
DUQUES,lndivid
[SignllUre Pap to Purohaso Ar;reemeat]
2628
IN WITNESS WHEREOF, the parties have executed this AgreeQlent as of the date and
year first above written,
BUYER:
UNITED WESTERN BANK
rry:d. ~ , ~
Na&'e: James R. Peoples
Title: Chief Executive Officer
PARENT:
UNITED WESTERN BANCORP, INC.
MEMBER:
LEGENT GROUP, LLC
By:, __________________ ~ - - - - - - - - -
Name: Henry C. Duques
Title: President
DUOYES:
HENRY C. DUQUES, Individually
[Signature Page to Purchase Agreement1
2629
EXHIBIT lol(a)
FORM OF
ESCROW AGREEMENT
TInS ESCROW AGREEMENT (this "Agreemenf') is made and entered into as of
____ ---/) 2010 (the "Effective Date',), by and among United Western Bank, a federal
savings bank ("Buyer''), United Western. Bancorp, Inc., a Colorado corporation and the sole
stockholder QfBuyer (''Parenf'), Legent Group, LLC, a Delaware limited liability company
("Member''), and [WeDs Fargo Bank, National Association], as escrow agent (the "Escrow
Agenf').
WHEREAS, Buyer, Parent, Member and Henry C. Duques, an individual and the
controlling member of Member (''Duques1, have entered into that certain Purchase Agreement,
dated as of June 9, 2010 (the ''Purchase Agreemenf'), pursuant to which, among other things,
Buyer is purchasing from Member all of the .issued and outstanding units of membership interest
of Legent Clearing LLC, a Delaware limited liability company;
WHEREAS, the Purchase Agreement contemplates that Buyer will deposit a portion of
theCasb Purchase Price with the Escrow Agent in order to secure certain obligations of Member
and Duques under the Purchase Agreement, such amount to be held by the Escrow Agent in
accordance with the terms and conditions hereof; and
WHEREAS, capitalized terms used herein which are not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement
NOW, THEREFORE, in consideration of the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
ESTABLISHMENT OF ESCROW
1.1 Upon execution hereof, Buyer hereby delivers to the Escrow Agent the amount of
$6,000,000 (such amount, together with any interest, dividends and other income earned thereon,
the "Escrowed Funds',), in immediately available funds. The Escrow Agent hereby
acknowledges receipt of the Escrowed FUnds.
1.2 Buyer, Parent and Member hereby appoint the Escrow Agent, and the Escrow
Agent hereby agrees to serve, as the escrow agent subject to the terms and conditions set forth
herein. The Escrow Agent agrees to hold the Escrowed Funds ina separate and distinct acc9unt
(the "Escrow Account'') in accordance with the terms and conditions of this Agreement. The
Escrow Agent shall not distribute or release any of the Escrowed Funds except in accordance
with the express terms and conditions of this Agreement
CHI S309S77v.1 2630