Common Stock Offering September 2009
Guy A. Gibson-Chairman of the BoardScot T. Wetzel – President and Chief Executive Officer
William D. Snider – Vice Chairman and Chief Financial Officer
22
ForwardForward--looking Statement looking Statement Disclaimer and Prospectus DisclosureDisclaimer and Prospectus DisclosureCertain statements contained in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include information concerning our liquidity, exposure to C&D loans, exposure to non-agency, residential-mortgage-backed-securities, management of nonperforming loans, and community bank implementation and business strategy. These statements often include terminology such as “may,” “will,” “expect,” “anticipate,” “predict,” “plan,” “estimate,” “continue,”“could,” “should,” “would,” “believe,” “intend,” “projects,” or the negative thereof or other variations thereon or comparable terminology and similar expressions. As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to: the successful implementation of our community banking strategies; the ability to secure, timing of, and any conditions imposed thereon of any regulatory approvals or consents for new branches or other contemplated actions; the availability of suitable and desirable locations for additional branches; the continuing strength of our existing business, which may be affected by various factors, including but not limited to interest rate fluctuations, level of delinquencies, defaults and prepayments, increased competitive challenges, and expanding product and pricing pressures among financial institutions; changes in financial market conditions, either internationally, nationally or locally in areas in which we conduct our operations, including without limitation, reduced rates of business formation and growth, commercial and residential real estate development, real estate prices and other recent problems in the commercial and residential real estate markets; demand for loan products and financial services; unprecedented fluctuations in markets for equity, fixed-income, commercial paper and other securities, including availability, market liquidity levels, and pricing; increases in the levels of losses, customer bankruptcies, claims and assessments; the extreme levels of volatility and limited credit currently being experienced in the financial markets; changes in political and economic conditions, including the economic effects of terrorist attacks against the United States and related events; legal and regulatory developments, such as changes in fiscal, monetary, regulatory, trade and tax policies and laws, including policies of the U.S. Department of Treasury and the Federal Reserve Board; our participation, or lack thereof, in governmental programs implemented under the Emergency Economic Stabilization Act (the “EESA”), including without limitation the Troubled Asset Relief Program (“TARP”), and the Capital Purchase Program (the “CPP”), and the impact of such programs and related regulations on our business and on international, national, and local economic and financial markets and conditions.
Additional information concerning these and other factors that may cause actual results to differ materially from those anticipated in forward-looking statements is contained in the “Risk Factors” section of the prospectus referred to below, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and in the Company’s other periodic reports and filings with the Securities and Exchange Commission. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this presentation.
Any forward-looking statements made by the Company speak only as of the date on which the statements are made and are based on information known to the Company at that time. The Company does not intend to update or revise the forward-looking statements made in this presentation after the date on which they are made to reflect subsequent events or circumstances, except as required by law.
The Company has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Company has filed with the SEC for more complete information about the Company and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it from Sandler O’Neill & Partners, L.P., 919 Third Avenue, 6th Floor, New York, NY 10022, or toll free at 866-805-4128.
3
United Western Bancorp, Inc.
NASDAQ: UWBK
Follow-on Public Common Stock Offering
$80 Million (excluding over-allotment option)
15%
Support growth and regulatory capital needs of United Western Bank and repayment of debt, with any remainder for strategic acquisitions and general corporate purposes
Sandler O’Neill + Partners, L.P.
FBR Capital Markets and Sterne Agee
Offering TermsOffering TermsIssuer:
Exchange/Ticker:
Offering:
Transaction Size:
Over-allotment Option:
Use of Proceeds:
Lead Manager:
Co-Managers:
4
Offering ObjectivesOffering ObjectivesOffering size guided by:
In-depth stressing of loan portfolio
Determination of capital required to carry non-agency MBS to market recovery
Capital for organic growth and FDIC-assisted and other acquisitions
Significantly strengthens capital position and allows the Company to effectively manage its securities portfolio
UW Bank capital ratios (pro forma at June 30, 2009):Core Capital Ratio of: 9.82%
Total Risk Based Capital Ratio of: 13.82%
Company capital ratio (pro forma at June 30, 2009):Tangible Common Equity of: 7.86%
5
Investment HighlightsInvestment HighlightsLeading community bank franchise in demographically attractive state
Experienced management team
14 consecutive quarters of profitability for shareholders
Attractive valuation
6
Franchise OverviewFranchise Overview3rd largest federal savings bank in the Western United States
$2.4 billion asset franchise focused on Colorado’s Front Range – Pueblo to Fort Collins including
Denver
Traditional community bank –target business first, consumers second
Other services:National Preferred SBA Lender Treasury managementNational trust servicesFINRA member firm to provide brokerage and related services
7
Deposit Franchise OverviewDeposit Franchise Overview4th largest market share of Colorado based banks and thrifts
Source: SNL Financial
Colorado
2008 Rank Institution Type
2008 Number of
Branches
2008 Total
Deposits in Market
(000)
2008 Total
Market Share
(%)
2 FirstBank Holding Company (CO) Bank HC 121 7,655,933$ 9.48
7 Alpine Banks of Colorado (CO) Bank HC 41 2,181,867 2.70
9 Guaranty Bancorp (CO) Bank 33 1,708,185 2.12
12 United Western Bancorp Inc. (CO) Thrift 8 1,486,448 1.84
13 Community Bankshares Inc. (CO) Bank HC 39 1,449,378 1.79
15 CoBiz Financial Inc. (CO) Bank 12 1,265,585 1.57
All other top 15 banks 720 42,587,062 52.74
Total For All Institutions In Market 1,685 80,756,315$ 100.00
888
Colorado: Among Strongest Economies in USColorado: Among Strongest Economies in USUnemployment RateUnemployment Rate Median Home Price Appreciation (Median Home Price Appreciation (YoYYoY))
Case-Shiller®: (15.4%) Denver: (3.6%)Boulder: (4.6%)Ft. Collins: (2.3%)Aspen/Roaring Fork (13.1%)
Nationwide: 9.7%Colorado: 7.8%Denver: 8.0%Boulder: 6.6%Ft. Collins: 6.5%
Notes:Nationwide unemployment data is for August 2009. Colorado and the Colorado MSA’s unemployment data is for July 2009; Case-Shiller® data for the month of June 2009. Colorado cities and regional Median Home Price Appreciation data provided by Trulia: May-July information.Sources: CO Department of Labor & Employment, S&P/Case-Shiller®, Trulia
Colorado’s Front Range includes 82% of the state population
Colorado’s employment base is the 3rd most highly educated in the U.S.
Strong employment concentrations in aerospace, bioscience, software, information technology, renewable energy and energy research
Better than national average projected population growth, medianhousehold income and projected household income change
9
Experienced Management TeamExperienced Management Team
TitleYears at UWBK
Years Experience Previous Employers
Guy A. Gibson Chairman of Board Founder 22 Legent Clearing, United Financial, Lincoln Financial, PaineWebber
Scot T. Wetzel President and Chief Executive Officer
4 21 Compass Bank, Key Bank (Society Bank) Huntington Bank (National Bank of Commerce)
William D. Snider Vice Chairman and Chief Financial Officer
4 36 Legent Clearing, Native American Bank; CoBank; TransOhio Bank;
Continental Bank Corporation
Michael J. McCloskey Executive Vice President and Chief Operating Officer
4 32 Legent Clearing, Triumph Capital Partners, Recycling Industries, Stone Pine Capital, PaineWebber, E.F Hutton & Company
Gary G. Petak Chief Credit Officer, UW Bank 3 30 Key Bank, US Bank, Omnibank,Wells Fargo (First Interstate Bank)
10
Proven Execution of Business ModelProven Execution of Business ModelEstablished community bank business plan in 2006
Redirected legacy company into community banking
Launched United Western brand
Transitioning balance sheet to community banking from wholesale mortgage business
Capitalized on dynamic Colorado banking environment and growing economy
Recruited veteran bankers disenfranchised by banking consolidation
Built exceptional “local” banking centers – regional banking model
Historically stable deposit base and predictable deposit rates
11
0.08%
0.48% 0.48% 0.46%0.62%
0.00%
0.50%
1.00%
2005 2006 2007 2008 6 Mo 09
ROAA
1.61%
9.34% 8.92% 9.21%
13.38%
0%
5%
10%
15%
20%
2005 2006 2007 2008 6 Mo 09
ROAE
Proven Execution of Business ModelProven Execution of Business Model
$2,079$2,157
$2,096
$2,259
$2,422
$1,500
$1,750
$2,000
$2,250
$2,500
$2,750
2005 2006 2007 2008 6/30/2009
Total Assets
$181$250 $341 $377
$614
$280
$1,036
$213
$1,086
$180
$100
$350
$600
$850
$1,100
$1,350
2005 2006 2007 2008 6/30/2009
Loans Held for Investment
Wholesale Community
(Dollars in millions)(Dollars in millions)
12
2.51%
2.72%2.64% 2.66%
2.92% 3.11%3.38%
3.64%
3.73%4.05%
3.92%3.99%
3.88%
3.48% 3.32%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09
Net Interest Margin
Proven Execution of Business ModelProven Execution of Business Model
1313
Focused Branch NetworkFocused Branch Network“Best” locations – break-even target of 14 months
Smaller distribution network – 10-12 banking centers, not 100 branches
Average tenure of in-market senior bankers is 20 years
Eight full-service locations open in the Front Range and a private banking focused office serving Aspen and the Roaring Fork Valley
14
Deposit Franchise OverviewDeposit Franchise Overview(Dollars in millions)
June 30, December 31,2009 2008
NOW and DDA Accounts $582 $624Money Market Deposit Accounts & Savings 1,008 959Certificate Accounts 270 142
Total Deposits $1,860 $1,725
Weighted average rate at period end 0.78% 0.79%
NOW and DDA Accounts31.3%
Certificate Accounts
14.5%
Money Market Deposit Accounts
& Savings54.2%
15
Source of DepositsSource of Deposits(Dollars in millions)
June 30, December 31, June 30,2009 2008 2008
Equity Trust Company (1) 842$ 823$ 766$
Other Institutional Deposits - nonbrokered 351 308 44
Community Bank Deposits 293 192 109
Matrix Financial Solutions, Inc. 209 203 252
Legent Clearing, LLC 95 120 206
Brokered Deposits 80 35 2
Matrix Financial Services Corp. (2) 19 14 23
Other Wholesale Deposits 8 27 16
UW Trust Company (2)5 32 62
Deposits & Custodial Escrow Balances 1,902$ 1,754$ 1,480$
Notes:
(2) Companies wholly owned by UWBK or UW Bank.
(1) December 2008 and June 2008 were restated for sale of UW Trust Company assets in June 2009; contractually committed until at least June 2014.
1616
Disciplined Credit CultureDisciplined Credit CultureOur philosophy-lend to people we know
Loan administration/workout team created 2006
Multi-tiered committee based credit approval
Sound lending practicesTraditional/community bank-business credit focusColorado focusedTangible collateral lenderRecourse/co-borrower structures on most credits
17
Loan Portfolio SummaryLoan Portfolio Summary
Loan Portfolio Composition Loan Portfolio Summary
Total Gross Loans: $1.3 BillionNotes:Information is for Held for Investment loan portfolioData as of June 30, 2009Source: Company documents
Commercial Real Estate ,
35.8%
Commercial, 12.7%
Multifamily, 2.0%
Consumer, 3.4%
Residential, 8.2%
SBA Purchased Loans -
Guaranteed, 5.6%
Construction & Development,
32.3%
(Dollars in millions)June 30,
Loans Held for Investment 2009
Community Bank Loans:Commercial Real Estate 453$ 35.8%Construction & Development 408 32.3%Commercial 161 12.7%Multifamily 25 2.0%Consumer 43 3.4%Premium and unearned fees (5) -0.4%
Total Community Bank Loans 1,086 85.8%
Total Wholesale Loans 180 14.2%
Total Gross Loans 1,266$ 100.0%
18
CRE and C&D Loan Portfolio SummaryCRE and C&D Loan Portfolio SummaryCRE Loan Portfolio Composition
Total CRE and Multi-Family Loans: $478 Million
All Others 10.5%
Other Commercial Real Estate
8.8%
Medical Use 4.7%
Hospitality 5.9%
Warehouse & Industrial Property
6.8%
Multi-Family Property 7.4% Restaurant, Bar,
Nightclub 8.3%
1-4 Family Property 10.4%
Retail Building 14.6%
Office Building 22.5%
Data as of June 30, 2009
C&D Loan Portfolio Composition
Total C&D Loans: $408 Million
Commercial 31.4%
Multifamily 14.1%
1-4 Consumer 4.4%
Land Development 21.9%
Undeveloped Land 2.8%
Undeveloped Land - Consumer
0.3%
1-4 Family 25.2%
19
Commercial Loan Portfolio Summary Commercial Loan Portfolio Summary Commercial Loan Portfolio Composition *
Total Commercial Loans: $161.3 Million
*Graphic depiction excludes note receivable of $46 million from Equity Trust Company, received as part of sale of UW Trust assets in June 2009.Data as of June 30, 2009
Construction14.7%
Information13.4%
Service Companies11.5%
Manufacturing11.2%
RE - Rental & leasing10.9%
Wholesale Trade9.2%
Accommodation & Food Services
3.2%
Professional Services
3.1%
Others11.1%
Financial Services 11.7%
20
Single Family Residential PortfolioSingle Family Residential Portfolio
$302 million aggregate size across HFI and HFS portfolios
Weighted average loan age-8 years
Average loan size $130,000
Geographically diverse
Average FICO scores at origination-over 700
21
Asset Quality Asset Quality –– Community Bank HFICommunity Bank HFI
31.84% 51.89%
273.94%
423.11%
329.84%
100.02%
0%
100%
200%
300%
400%
500%
2004 2005 2006 2007 2008 6mo 2009
Reserves/NPLs
Reserves/NPLs
0.35%
0.52%
0.21%
0.02% 0.02%
0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2004 2005 2006 2007 2008 6mo 2009
NCOs/Avg CB Loans
NCOs/ Average Community Bank Loans
8.90%
4.28%
0.58%0.28% 0.45%
2.26%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
2004 2005 2006 2007 2008 6mo 2009
NPLs/CBL
NPLs/Community Bank Loans
1.94%
1.55%1.34%
1.03%
1.47%
2.26%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2004 2005 2006 2007 2008 6mo 2009
Reserves/CB Loans
Reserves/Community Bank Loans
2222
Community Bank Community Bank NPLsNPLs
Community Bank NPLs: $26.1 million
Note: Community Bank NPLs include held for investment Community Bank loans and a held for sale multi-family loan. Source: Company records as of June 30, 2009
Community Bank NPLs by LocationCommunity Bank NPLs Composition
Construction45.1%
Real Estate, Rental & Leasing27.1%
Private Households10.9%
Health Care8.7%
Arts, Entertainment & Recreation
3.6%
Manufacturing2.8%
All other1.8%
Denver Metro52.9%
Other Colorado15.8%
Utah11.1%
Arizona5.8%
Georgia5.6%
Florida2.8%
Texas0.5%
North Eastern CO
5.5%
23
NonNon--Performing Assets SummaryPerforming Assets Summary
Data as of June 30, 2009
(Dollars in Thousands)June 30, March 31, December 31,
2009 2009 2008Held for Investment
Residential 3,867$ 3,804$ 3,238$ SBA Purchased - 791 791 Commercial Real Estate 9,164 5,547 1,311 Construction & Development 14,258 12,207 2,900 Commercial & Industrial 1,036 1,151 283 SBA Originated 101 299 124
Total Non-Performing Loans 28,426 23,799 8,647 REO 3,920 3,752 4,417
Total - Held for investment 32,346 27,551 13,064 Held for Sale
Residential 8,849 7,870 6,493 Multifamily 1,511 6,759 6,759
Total - Held for sale 10,360 14,629 13,252
Total Non-Performing Assets 42,706$ 42,180$ 26,316$
2424
Asset Quality MigrationAsset Quality Migration
(Dollars in thousands)
Loan Type 12/31/2008 3/31/2009 6/30/2009 12/31/2008 3/31/2009 6/30/2009 12/31/2008 3/31/2009 6/30/2009 12/31/2008 3/31/2009 6/30/2009Loans held for investment:
Commercial real estate 6,596$ 12,242$ 19,041$ -$ 7,803$ 870$ -$ -$ -$ 1,388$ 5,808$ 9,260$ Construction and development 3,484 3,706 37,623 - 663 1,768 - - - 2,900 12,207 14,258 Single family (1) 2,424 3,101 1,687 1,558 119 670 10 198 200 3,238 3,804 3,867
Total real estate 12,504 19,049 58,351 1,558 8,585 3,308 10 198 200 7,526 21,819 27,385 C&I 614 74 184 10 - 1,360 29 131 124 330 1,189 1,041 Guaranteed portion of SBA purchased 315 600 724 - - - 596 - - 791 791 - Consumer - - - - - - - - - - - -
Total held for investment 13,433 19,723 59,259 1,568 8,585 4,668 635 329 324 8,647 23,799 28,426 Loans held for sale (1) 6,962 7,499 5,711 3,947 2,999 4,575 5,878 6,079 6,401 13,252 14,629 10,360 Total 20,395$ 27,222$ 64,970$ 5,515$ 11,584$ 9,243$ 6,513$ 6,408$ 6,725$ 21,899$ 38,428$ 38,786$
90 Days Past Due60-89 days Past Due Nonaccrual Loans30-59 days Past Due
(1) Loans over 90 days past due that remain on accrual are guaranteed as to principal and interest by HUD.
25
Third Party Loan ReviewThird Party Loan ReviewThe third party loan review estimates below are based on 18-month cumulative loss assumptions and represent a hypothetical “what-if” scenario that involves an economic outcome that is more adverse than expected; these estimates are not forecasts or projections of expected losses or revenues. Management believes potential loan losses will be lower than assumed in the third party loan review based on significantly lower default rate and severity rate experience in the Bank’s loan portfolio than implied by the third party loan review.Loan types and amounts are reflective of third party classifications and not representative of the classifications in the Company’s financial statements.Federal SCAP Test analysis is shown in the appendix.
* Data based on review conducted by third party consultant. Loan types reflective of third party consultant report. Indicative loss rates based on third party consultant report conducted to review Company’s HFI and HFS loan portfolios and based on the consultant’s understanding of the stress tests administered to the 19 largest banks by federal banking regulators adjusted for our loan portfolio characteristics. In conducting this review, the consultant applied its understanding of the US Treasury assumptions to estimate credit losses for our loan portfolios, assessed the resources available to absorb those losses and any necessary additions to capital that would be required under the “more adverse”scenario.
Balance as of 6/30/09 Indicative Loss Rates (%) Potential Loan Losses ($000)
Loan Type * ($000) (%) Baseline More Adverse Baseline More Adverse
Construction & Development 408,408$ 26.5 1.82 2.60 7,423$ 10,633$ Commercial Real Estate 522,724 33.8 0.75 1.06 3,934 5,522First Lien Mortgages 356,820 23.1 0.19 0.27 693 949Second/Junior Lien Mortgages 18,994 1.2 0.00 0.00 0 0Commercial & Industrial 163,037 10.6 0.89 1.23 1,458 2,013Other Consumer 6,414 0.4 0.00 0.00 0 0Other Loans (includes SBA Guaranteed, net purchase premiums and unearned fees)
69,357 4.4 0.00 0.00 0 0
Total Loans 1,545,754$ 100.0 0.87% 1.24% $13,509 $19,117% of Total Loans 0.87% 1.24%
The third party loan review “More Adverse” default and severity rates are higher than the Company’s current experience and expectations
26
Pro Forma Capital Under Loss ScenariosPro Forma Capital Under Loss Scenarios
Source: Company filings(1) Based on June 30, 2009 reserves for held for investment loan portfolio.(2) Pre-Tax Pre-Provision net revenue based on second quarter 2009 revenue of $4.3 million (see “Reconciliation of Non-GAAP earning disclosure” in UWBK 2nd quarter earnings release); assumed over
18 months).(3) Reserve build of 1.00% on existing loans, excluding loans held for sale; reserve build netted against pre-tax pre-provision earnings for losses over current reserve.(4) Pro forma for net common equity proceeds of $74.1 million at the Company; pro forma capital of $69.1 million provided for UW Bank from the offering.(5) Pro forma for net common equity proceeds, baseline projected loan losses under third party review, the benefit of pre-tax pre-provision net revenue and reserve build.(6) Management believes that potential loan losses will be lower than assumed in the stress test based on lower default rates and severity rate experience in the UWBK loan portfolio than implied by the
third party review.
UWBK should have sufficient capital to cover projected loan losses under the third party review baseline scenario.6
(Dollar in thousands)AssumptionsAssumes Capital Raise of $80 million $80,000Risk-Weighting for Use of New Capital 25.0%Current Reserves(1) $25,520Third Party Review Baseline Losses $13,509Third Party Review "More Adverse" Losses $19,117Baseline Projected Loss, net of Reserves $0More Adverse Projected Loss, net of Reserves $018-Months Cumulative Pre-Tax Pre-Provision Net revenue(2) $25,800Reserve Build(3) $12,659
Current Current Pro Forma with6/30/2009 Pro Forma (4) Baseline Losses(5)
Company:Equity / Assets 5.35% 8.16% 8.46%Tangible Common Equity Ratio 5.03% 7.86% 8.16%
UW Bank:Core Capital Ratio 7.21% 9.82% 10.12%Tier 1 Risk-based Capital Ratio 9.07% 12.72% 13.01%Total Risk Based Capital Ratio 10.17% 13.82% 14.09%
27
MBS: Non-Agency27.9%
MBS-Agency6.8%
SBA Securities
10.2%
CMOs: Non-Agency55.1%
Investment Securities PortfolioInvestment Securities Portfolio
Total HTM Securities: $443 millionTotal AFS Securities: $38 million
Data as of June 30, 2009
28
Investment Securities PortfolioInvestment Securities Portfolio
Fair values are long-term held to maturity values
Regulatory capital requirements
Portfolio credit risk
29
Investment Securities PortfolioInvestment Securities Portfolio
Note: Excludes RMBS with amortized cost of $39.3 million at June 30, 2009 held by United Western Bancorp, Inc. and its affiliates other than United Western Bank.This presentation includes both HTM and AFS securities and categorizes the Bank’s securities based on type and regulatory capital treatments.
(Dollars in thousands)
Amortized CostNet Unrealized Gains/(Losses) Fair Value
Federal agency RMBS 32,501$ 748$ 33,249$ SBA 49,100 (2,347) 46,753 Senior tranche and equivalent non-agency RMBS 224,685 (19,550) 205,135 Senior subordinate tranche non-agency RMBS 138,783 (34,332) 104,451
Total portfolio 445,069$ (55,481)$ 389,588$
June 30, 2009
30
Regulatory Capital RequirementsRegulatory Capital RequirementsNon-Agency RMBS: United Western Bank
At June 30, 2009, excludes securities with book value of $39.3 million held at United Western Bancorp and non-bank affiliates.
(Dollars in thousands)
DateSupport Tranche
Ratings Based
Senior Tranche Total
Support Tranche
Ratings Based
Senior Tranche Total
12/31/2008 150,183$ 90,020$ 171,387$ 411,590$ 9,916$ 1,800$ 12,779$ 24,495$
3/31/2009 145,340 83,702 165,602 394,644 14,879 1,674 17,929 34,482
6/30/2009 138,783 71,106 153,579 363,468 31,002 1,647 8,198 40,847
8/31/2009 - Current 134,949 61,874 147,037 343,860 74,542 1,450 8,530 84,522
Book Value Regulatory RBC
31
NonNon--Agency RMBS Agency RMBS Possible RiskPossible Risk--Based Capital Recovery ScenariosBased Capital Recovery Scenarios
Actual coupon prepayment rates could be less or greater than the rates shown in the above possible scenarios Possible capital recovery in these scenarios is solely dependent on coupon prepayment rates as shown in the chart above
Possible Scenarios for Risk- Based Capital Recovery for Non-Agency RMBS Portfolio
6458
51
41
30
18
7470
64
55
42
26
79
7672
64
53
34
88
85
41
34
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Mar-0
9Ju
n-09
Sep-09
Dec-09
Mar-1
0Ju
n-10
Sep-10
Dec-10
Mar-1
1Ju
n-11
Sep-11
Dec-11
Mar-1
2Ju
n-12
Sep-12
Dec-12
Mar-1
3Ju
n-13
Sep-13
Dec-13
Mar-1
4Ju
n-14
Sep-14
Dec-14
Mar-1
5Ju
n-15
Sep-15
Dec-15
($ M
illio
ns)
10 CPR 15 CPR 20 CPR
32
Investment Securities PortfolioInvestment Securities Portfolio
Portfolio Run-Off: Non-agency RMBS
Reductions average $11.9 million per month for first eight months of 2009
From December 31, 2008 through August 31, 2009, the portfolio declined $142.3 million, of which $47.3 million was due to sales and $95 million due to portfolio pay downs.
Portfolio run-off frees up balance sheet and risk-based capital
33
Opportunities for GrowthOpportunities for Growth
Selective expansion of branch network within local markets
Continued ability to attract “disenfranchised” bankers from larger competitors
Branch acquisitions from larger bank overlap/closures
Opportunistic acquisitions of troubled institutions, deposit franchises and other as FDIC continues to liquidate troubled institutions
34
Investment ConsiderationsInvestment Considerations
Top performing bank in attractive market - opportunity to grow
Management team track record
Temporary support of regulatory capital to hold our performing non-agency RMBS securities portfolio
Sticky deposit franchise
Performing loan portfolio
Attractive valuation to tangible book value
3535
36
Appendix: SCAP Test Numbers
37
SCAP Test: Application to UWBKSCAP Test: Application to UWBKThe SCAP test estimates below are based on 2 year cumulative loss assumptions and represent a hypothetical “what-if”scenario that involves an economic outcome that is more adverse than expected; these estimates are not forecasts or projections of expected losses or revenues. Loan types and amounts are reflective of third party classifications and not representative of the classifications in the Company’s financial statements.Management believes potential loan losses will be lower than assumed in the stress test based on significantly lower default rate and severity rate experience in the Bank’s loan portfolio than implied by the SCAP test.
* Indicative loss rates based on the average of the ranges disclosed by the Board of Governors of the Federal Reserve System (2009) “The Supervisory Capital Assessment Program: Overview of Results”
Indicative Loss Rates * (%)
Potential Loan Losses ($000)
Loan Type(%) Baseline
More Adverse Baseline More Adverse
Construction & Development 408,408$ 26.4 10.0% 16.5% 40,841$ 67,387$ Commercial Real Estate 522,724 33.8 3.9 7.1 20,607 37,352First Lien Mortgages 356,820 23.1 5.5 7.7 19,625 27,653Second/Junior Lien Mortgages 18,994 1.2 10.5 14.0 1,994 2,659Commercial & Industrial 163,037 10.5 3.5 6.5 5,707 10,597Other Consumer 6,414 0.4 5.0 10.0 321 641Other Loans (SBA Guaranteed, net purchase premiums and unearned fees)
69,357 4.5 0.0 0.0 0 0
Total Loans 1,545,754$ 100.0 5.76% 9.46% $89,094 $146,290% of Total Loans 5.76% 9.46%
Balance as of 6/30/09($000)
The SCAP Test’s default and severity rates are significantly higher than the Company’s current experience and expectations
38
Pro Forma Capital Under Loss ScenariosPro Forma Capital Under Loss Scenarios
Source: Company filings(1) Based on June 30, 2009 reserves for held for investment loan portfolio.(2) Pre-Tax Pre-Provision Net Revenue based on second quarter 2009 adjusted core earnings of $4.3 million (see UWBK 2nd quarter earnings release “Reconciliation of Non-GAAP earning
disclosure”); assumed over two years.(3) Reserve build of 1.00% on existing loans, excluding loans held for sale; reserve build netted against pre-tax pre-provision earnings for losses over current reserve.(4) Pro forma for net common equity proceeds of $74.1 million at the Company; pro forma capital of $69.1 million provided for UW Bank from the offering.(5) Pro forma for net common equity proceeds, baseline projected loan losses under third party review, the benefit of pre-tax pre-provision net revenue and reserve build.(6) Management believes that potential loan losses will be lower than assumed in the stress test based on lower default rates and severity rate experience in the UWBK loan portfolio than implied by
the SCAP test.
UWBK should have sufficient capital to cover projected loan losses under the SCAP baseline scenario 6
(Dollar in thousands)AssumptionsAssumes Capital Raise of $80 million $80,000Risk-Weighting for Use of New Capital 25.0%Current Reserves(1) $25,520SCAP Test Baseline Losses $89,094SCAP "More Adverse" Losses $146,290Baseline Projected Loss, net of Reserves $63,574More Adverse Projected Loss, net of Reserves $120,7702-Year Cumulative Pre-Tax Pre-Provision Net revenue(2) $34,400Reserve Build(3) $12,659
Current Current Pro Forma with6/30/2009 Pro Forma (4) Baseline Losses(5)
Company:Equity / Assets 5.35% 8.16% 7.20%Tangible Common Equity Ratio 5.03% 7.86% 6.89%
UW Bank:Core Capital Ratio 7.21% 9.82% 8.35%Tier 1 Risk-based Capital Ratio 9.07% 12.72% 10.82%Total Risk Based Capital Ratio 10.17% 13.82% 11.93%