United Western Bancorp, Inc. Reports 2008 Second-Quarter Results

United Western Bancorp, Inc. (NASDAQ: UWBK) (the "Company”), a Denver-based holding company whose principal subsidiary, United Western Bank, is a community bank focused on expansion across Colorado’s Front Range market and selected mountain communities, reported second quarter 2008 income of $3.1 million, or $.43 per diluted share, compared with $3.4 million, or $.46 per diluted share, for the first quarter of 2008. Income for the quarter ended June 30, 2007 was $2.2 million, or $.31 per diluted share. Net income for the first half of 2008 was $6.4 million or $.89 per diluted share, compared to $4.5 million or $.62 per diluted share for the first half of 2007. Scot T. Wetzel, President and Chief Executive Officer, commented: "We are pleased to report another solid quarter in this challenging economic environment. Our earnings for the second quarter of 2008 were $.43 per diluted share, a 37% increase over the year ago quarter, and reflects the successful execution of our community banking business plan to date. In addition, we have laid the foundation for the future as we added over $113 million of net new community bank loans, maintained satisfactory asset quality and continued to effectively manage our legacy wholesale assets. In the second quarter we identified an infill location between downtown Denver and the Denver Tech Center that will further facilitate our loan and deposit growth prospectively. This branch is scheduled to open in December of 2008. We remain focused on our goal of becoming Colorado's leading community bank and continue to make steady progress toward that end.” William D. Snider, Chief Financial Officer, said: "Colorado has not exhibited the extent of weakness that has occurred in other parts of the country. Nevertheless, the Company is impacted by the economic and financial factors impacting the financial services industry as a whole. The interest rate cuts from the Federal Reserve Bank together with the asset sensitive position of our balance sheet resulted in a 13 basis point decline in net interest margin from the first quarter. However, in comparison to the year ago period, our net interest margin grew 54 basis points as a result of our ongoing balance sheet transition. The Company’s loan growth is high, yet the Company maintains good asset quality overall and particularly in the community bank loan portfolio. We are competing for and winning new high-quality customers, with good collateral at appropriate pricing. At June 30, 2008, nonperforming community bank loans were a modest $4.1 million, or 44 basis points of the community bank loan portfolio. During the second quarter the Company increased the community bank allowance for credit losses to 1.28% of community bank loans, and the total allowance for credit losses equaled 105% of total nonperforming loans. The amount of nonperforming residential loans did increase $738,000 in the second quarter, which is generally consistent with the national trend.” Michael J. McCloskey, Chief Operating Officer, explained: "Sterling Trust Company, our custodial, administrative, and escrow services subsidiary, contributed positively to the overall results of the Company for the second quarter. Total assets under custody grew in the second quarter of 2008 to approximately $4.88 billion, an increase of approximately $26 million since March 31, 2008. At June 30, 2008, total accounts grew to 64,712 from 60,885 at March 31, 2008, and deposits at United Western Bank acquired through Sterling Trust were $375 million compared to $392 million at March 31, 2008. Included in the balance at Sterling Trust is a series of accounts for one life settlement agent for special asset acquisitions and administration with a balance of $59 million and $73 million at June 30, 2008 and March 31, 2008, respectively. In January 2008, we elected to restructure this relationship and terminate certain elements of business with respect to this large life settlement agent account. During the second quarter of 2008, approximately $14 million was withdrawn from this account.” Net Interest Income, Yield on Assets, Cost of Liabilities   Quarter Ended June 30, 2008   March 31, 2008   June 30, 2007 (Dollars in thousands) Interest and dividend income $ 27,494 $ 29,480 $ 30,095 Interest expense   7,608     9,270     13,374   Net interest income before provision for credit losses $ 19,886   $ 20,210   $ 16,721     Yield on assets 5.40 % 5.89 % 6.07 % Cost of liabilities   1.71 %   2.17 %   3.14 % Net interest spread   3.69 %   3.72 %   2.93 % Net interest margin   3.92 %   4.05 %   3.38 % Net interest income before provision for credit losses totaled $19.9 million for the quarter ended June 30, 2008, compared with $20.2 million for the quarter ended March 31, 2008, and $16.7 million for the quarter ended June 30, 2007. The decrease in net interest income before provision for credit losses between the second quarter and the first quarter of 2008 of $324,000 was principally the result of a $206,000 increase in premium amortization of purchased SBA loans and securities, which totaled $992,000 during the second quarter of 2008. The remaining decline in net interest income before provision for credit losses of $118,000 was the result of new customer relationships at current market pricing, higher margins on existing relationships and the lower interest rate environment in which the Company operated. In the second quarter of 2008, the yield on total interest-earning assets declined 49 basis points versus the first quarter of 2008 as a result of the decreases in market interest rates. The yield on assets was 5.40% for the second quarter compared with 5.89% for the first quarter of 2008. The yield on community bank loans declined 80 basis points to 6.35% for the second quarter compared with 7.15% for the 2008 first quarter. For the same periods, the yield on wholesale assets declined to 4.79% versus 5.19% due principally to the lower yield earned on purchased SBA loans and securities. The Company’s cost of interest-bearing liabilities decreased by 46 basis points to 1.71% for the second quarter compared with 2.17% for the first quarter. These decreases were consistent with the decline in market rates of interest and, in particular, to an increased use of short-term borrowings from the FHLBank, and interest rate resets on two repurchase agreements. Our large proportion of funding from institutional sources also contributed to the decline in interest expense. Comparing the second quarter of 2008 to the second quarter of 2007, net interest income before provision for credit losses increased $3.2 million as the cost of liabilities declined by $5.8 million, and for the same periods, interest and dividend income declined by $2.6 million. Average interest-earning assets increased by $58 million between the second quarters of 2008 and 2007. The yield on assets was 5.40% for the second quarter of 2008 compared with 6.07% for the second quarter of 2007. This 67 basis points decline in the yield on interest-earning assets was the result of the decrease in the prime rate and was partially offset by the change in mix of assets. The decline in the prime rate caused the yield on our community bank loans to decline by 198 basis points. However, between the second quarters of 2007 and 2008, the average balance of community bank loans increased by $363 million and the average balance of lower yielding wholesale assets declined by $297 million. Also between the periods, there was higher premium amortization of $90,000 on purchased SBA loans and securities. The cost of interest-bearing liabilities declined by 143 basis points to 1.71% for the second quarter of 2008 versus 3.14% for the same period a year ago. In addition to the factors discussed above, we had a 198 basis point reduction in borrowed money and junior subordinated debt, due to both general market declines in rates and as a result of our retirement of $20 million of trust preferred securities during the third quarter of 2007. Provision for Credit Losses   Quarter Ended June 30, 2008   March 31, 2008   June 30, 2007 (Dollars in thousands) Net interest income before provision for credit losses $ 19,886 $ 20,210 $ 16,721 Provision for credit losses   2,080   1,536   567 Net interest income after provision for credit losses $ 17,806 $ 18,674 $ 16,154 In the second quarter of 2008, provision for credit losses was $2.1 million compared with $1.5 million for the first quarter of 2008 and $567,000 for the second quarter of 2007. The provision for credit losses in the second quarter of 2008 was principally the result of the $113.8 million of growth net of repayments in our community bank loan portfolio during the period, and a $2.9 million nonperforming construction loan that was deemed impaired in the period for which the Company increased the provision for credit losses by $667,000. The provision for credit losses for the first quarter of 2008 of $1.5 million reflected growth of the community bank loan portfolio of $114.3 million net of repayments and $261,000 of provision related to the $2.9 million nonperforming construction loan. The provision for credit losses for the second quarter of 2007 of $567,000 reflected growth of the community bank loan portfolio of $64.3 million net of repayments and was partially offset by repayments of residential wholesale loans and certain improvements in individual loan grades. Noninterest Income   Quarter Ended June 30, 2008   March 31, 2008   June 30, 2007 (Dollars in thousands) Custodial, administrative and escrow services $ 2,580 $ 2,560 $ 2,033 Loan administration 1,202 1,456 1,770 Gain on sale of loans and securities 142 182 81 Other   630   625   805 Total noninterest income $ 4,554 $ 4,823 $ 4,689 Noninterest income was $4.6 million for the quarter ended June 30, 2008, compared to $4.8 million for the quarter ended March 31, 2008, and $4.7 million for the quarter ended June 30, 2007. The decrease between the second quarter and first quarter of 2008 was caused by lower loan administration revenues as a result of our declining mortgage servicing operation and a lower level of gain on sale of SBA originated loans. Custodial, administrative and escrow services revenues from Sterling Trust increased a modest $20,000 in the second quarter to $2.58 million, from $2.56 million between the periods based on continued account growth. Gain on sale of loans was $142,000 for the second quarter of 2008 on sales of $2.7 million of principal balance of originated SBA loans versus gain of $182,000 on sales of $6.2 million of principal balance of originated SBA loans for the first quarter of 2008. Noninterest income for the quarter ended June 30, 2007 included gains from the sale of $2.9 million of principal balance of SBA originated loans from which we realized a gain of $74,000 and a gain of $7,000 from the sale of $23 million of residential loans. Noninterest Expense   Quarter Ended June 30, 2008   March 31, 2008   June 30, 2007 (Dollars in thousands) Compensation and employee benefits $ 7,628 $ 7,707 $ 6,562 Subaccounting fees 4,485 5,215 5,770 Lower of cost or fair value adjustments 207 767 (253 ) Occupancy and equipment 717 810 728 Other   4,938   4,189   5,020   Total noninterest expense $ 17,975 $ 18,688 $ 17,827   Noninterest expense was $18.0 million for the quarter ended June 30, 2008, versus $18.7 million for the quarter ended March 31, 2008, and $17.8 million for the quarter ended June 30, 2007. Noninterest expense for the second quarter of 2008 decreased $713,000, or 3.8% from the first quarter due principally to lower subaccounting fees. Compensation and employee benefits decreased $79,000 to $7.6 million in the second quarter compared with $7.7 million for the first quarter. Lower levels of incentive compensation and payroll taxes offset direct compensation for additional personnel to complement our community banking build-out. Subaccounting fees declined $730,000 based on the reduced interest rate environment. The Company incurred a charge of $207,000 to reduce the carrying value of residential loans held for sale to the lower of cost or fair value in the second quarter of 2008. This was principally the result of the increase in short-term Treasury interest rates that occurred during the period, to which many of our variable rate residential loans are tied. Other expenses increased $749,000 in the second quarter of 2008 versus the first quarter. In the second quarter of 2008, there was an increase of $370,000 related to credit issues in our mortgage company subsidiary. In the second quarter of 2008, we incurred charges of $204,000 to increase certain valuation allowances based on our quarterly analyses of the adequacy of such balances, while in the first quarter of 2008 due to lapse of the statute of limitations on certain claims for loan repurchases we had recorded a reduction of valuation allowances of $166,000. Other factors contributing to higher operating expenses in the period included business development expenditures to attract our new customers and higher professional fees incurred in connection with wholesale loan collection issues. Noninterest expense for the second quarter of 2008 increased $148,000 as compared to the second quarter of 2007. Increases in compensation and employee benefits of $1.1 million was due to an increase in personnel at United Western Bank to staff the growth of our community banking business. The remainder of the increase was the result of the lower of cost or fair value charge during the second quarter of 2008. These increases were offset by lower subaccounting fees, which declined $1.3 million principally due to the decline in market interest rates upon which such fees are based. Income Taxes. For the quarter ended June 30, 2008, the Company’s effective tax rate was 30.1%, unchanged from the first quarter of 2008, and 25.7% for the quarter ended June 30, 2007. The increase between the second quarter of 2008 and 2007 was due to higher pre-tax income, as the fixed amount of New Markets Tax Credits has a diminishing impact on the overall tax rate. The Company’s tax rate for all periods differs from the enacted tax rates principally due to the Company’s utilization of $33 million of New Markets Tax Credits. Balance Sheet. The Company’s assets were $2.17 billion at June 30, 2008, compared with $2.10 billion at December 31, 2007 and $2.04 billion at June 30, 2007. Assets grew $78 million in the first half of 2008, as community bank loans before the community bank allowance for credit losses increased $113.8 million in the second quarter of 2008 to $934.4 million at June 30, 2008, as shown below. Loan Portfolio   June 30, 2008   December 31, 2007   June 30, 2007 (Dollars in thousands) Community bank loans:     Commercial real estate $ 408,345 $ 287,294 $ 238,628 Construction and development 329,286 272,736 153,782 Commercial and industrial 120,398 88,175 67,812 Multifamily 49,050 48,613 55,463 SBA originated, guaranteed portions 4,279 5,602 6,129 Consumer   23,024   3,825   4,873 Total community bank loans 934,382 706,245 526,687   Wholesale loans: Residential 366,847 442,890 504,998 SBA purchased loans - guaranteed   98,555   116,084   139,941 Total loans $ 1,399,784 $ 1,265,219 $ 1,171,626 At June 30, 2008, community bank loans were $934 million, a $228 million increase from $706 million at December 31, 2007. For those same periods, wholesale loans declined $94 million to $465 million as the result of repayments and $18 million of residential loans that were securitized with FNMA. In addition to the wholesale residential portfolio, the Company’s community bank loan portfolio consists of a concentration of commercial real estate and construction and development (C&D) loans as well as multifamily loans and consumer loans collateralized by real estate. In the first half of 2008 commercial real estate loans increased $121.1 million. This growth occurred not only in Colorado including both the Front Range and mountain communities where our regional banking teams are located, but also nationally through our SBA division 504 and 7a lending. The composition consists of a wide mix of property types that were appraised and inspected by our bankers and credit administration team; the loans contain appropriately conservative advance rates and debt service requirements. A part of the growth of commercial real estate lending was also attributed to our decision to reduce the level of C&D concentration in the community bank portfolio. At June 30, 2008 the C&D portfolio represents 35.2% of the community bank loan portfolio compared to 38.6% at December 31, 2007. Within the C&D portfolio, construction loans totaled $214.6 million and land development loans were $114.7 million at June 30, 2008, compared to $162.1 million and $110.7 million, respectively, at December 31, 2007. At June 30, 2008 the construction loan portfolio consists of 39% single family, 37% commercial projects, and 24% multifamily. Of the land development loans, $110.9 million, or 97%, are for land that is under development and is generally intended to either be sold to contractors as lot loans for commencement of construction, or for which the current borrower will commence vertical construction within six to twelve months. Asset Quality The following table sets forth our nonperforming assets as of the dates indicated:   June 30, 2008   March 31, 2008   December 31, 2007   June 30, 2007 (Dollars in thousands) Residential $ 7,701   $ 6,963   $ 7,873   $ 9,498 SBA purchased loans - guaranteed   1,236   767   893   766 Total wholesale 8,937 7,730 8,766 10,264   Commercial real estate 892 1,035 1,152 340 Construction and development 2,900 2,900 – 38 Commercial and industrial 144 2 – 144 SBA originated, guaranteed portions   132   327   557   1,467 Total community bank   4,068   4,264   1,709   1,989   Total nonperforming loans 13,005 11,994 10,475 12,253 REO   2,579   3,808   3,109   3,470 Total $ 15,584 $ 15,802 $ 13,584 $ 15,723 Total nonperforming assets were stable in the second quarter, having declined a modest $218,000 at June 30, 2008 as compared to March 31, 2008. Wholesale nonperforming loans increased in the second quarter of 2008 as compared to the first quarter of 2008 and December 31, 2007 as shown above. Residential nonperforming loans, which typically increase near year end for seasonal reasons declined at March 31, 2008 and then increased approximately $738,000 in the second quarter. The increase in the second quarter is generally consistent with the increase in mortgage delinquencies that has occurred nationally. The wholesale SBA purchased loans, which total $1.2 million at June 30, 2008 is comprised of two loans, fully government guaranteed as to principal, that are in the process of being repurchased through the SBA fiscal transfer agent. Community bank nonperforming loans declined a modest $196,000 in the second quarter, and the balance of $4.1 million at June 30, 2008 represents .44% of community bank loans, down from .52% at the end of the first quarter of 2008. Net of SBA guarantees, at June 30, 2008 and March 31, 2008, community bank nonaccrual loans were unchanged at $3.9 million. Net charge-offs for the second quarter of 2008 were $136,000 compared to $253,000 for the first quarter of 2008. Residential charge offs for those same periods were $120,000, or 13 basis points annualized, compared to $201,000, or 19 basis points annualized. Community bank loan charge-offs were $16,000, or 1 basis point annualized in the second quarter of 2008, compared to $52,000, or 3 basis points annualized in the first quarter of 2008. The allowance for credit losses as a percentage of community bank loans was 1.28%, 1.21%, and 1.31%, at June 30, 2008, December 31, 2007, and June 30, 2007, respectively. The allowance for credit losses as a percentage of residential loans was .45%, .42%, and .44%, at June 30, 2008, December 31, 2007, and June 30, 2007, respectively. The total allowance for credit losses to total nonaccrual loans is 105% at June 30, 2008, compared with 99.7% at December 31, 2007, and 75.2% at June 30, 2007. At June 30, 2008, the Company owned approximately $276,000 of mortgages that met the regulatory definition of "subprime” at the date of purchase or origination. In prior years, the Company originated subprime mortgages through its mortgage banking subsidiary, Matrix Financial Services Corporation, and United Western Bank occasionally purchased subprime mortgages. These activities ceased in February 2003, and the balance represents the remainder of such activities. The Company is not now active, and has no intention of becoming active, in the subprime market. At June 30, 2008, the Company’s mortgage-backed investment security portfolio had an unpaid principal balance of $579.3 million and consisted of 110 separate instruments. The held to maturity portfolio had an unpaid principal balance of $478.3 million. The Company’s available for sale mortgage-backed investment security portfolio had an unpaid principal balance of $100.9 million. Included in the available for sale portfolio were five securities totaling $47.3 million that are collateralized by payment-option, adjustable-rate mortgages. Of these securities, four have received a downgrade from one of the rating agencies; however, all of these securities contain at least one investment grade rating. At June 30, 2008, the fair value of the available for sale securities was $16.9 million less than the cost, net of tax. This loss is an unrealized loss recognized in other comprehensive income. Based on management’s review of analyses performed by independent third parties and consideration of other information, we believe the decline in fair value is due to temporary conditions in the marketplace. Deposits. At June 30, 2008, deposits, including custodial escrow balances, increased $60 million to $1.48 billion as compared with $1.42 billion at December 31, 2007. Community bank deposits increased $20.0 million in the first half of 2008 to $109.3 million at June 30, 2008, versus $89.3 million at December 31, 2007. Institutional deposits increased $40 million during the first half of 2008 as compared to year end 2007. Capital. At June 30, 2008, the Company’s equity leverage ratio was 4.76% compared with 5.41% at December 31, 2007. The decline in the leverage ratio was principally caused by the unrealized loss on available for sale investment securities, and growth in total assets, which was caused by both an increase in the volume of community bank loans, and a slow down of the rate of repayment of wholesale assets. United Western Bank’s tier-1 core capital, total risk-based and tier-1 risk-based capital ratios are approximately 7.24%, 11.62% and 10.83%, respectively, as of June 30, 2008, all of which are well in excess of regulatory requirements of 5%, 10% and 6%, respectively. The Company paid its sixth consecutive quarterly cash dividend in the amount of $.06 per share on June 16, 2008. On August 4, 2008, the Board of Directors declared a quarterly cash dividend of $.06 per common share to shareholders of record on September 5, 2008. The dividend is payable September 15, 2008. During the second quarter of 2008, the Company repurchased 100,000 of its common shares. As of June 30, 2008, there were 265,018 share authorized for repurchase; however, at this time, the Company has no further plans to repurchase additional shares of its common stock. Conference Call Management will host a conference call on Thursday, August 7, 2008 at 9:00 a.m. Mountain Time to review the results of operations for the second quarter ended June 30, 2008, and other topics that may be raised during the discussion. To participate in the teleconference, please call toll-free 800-219-6110 (or 303-205-0033 for local and international callers) approximately 10 minutes prior to the start time. To hear a live web simulcast or to listen to the archived webcast following the completion of the call, please visit the Company’s website at www.uwbancorp.com, click on the "Investor Relations” link and continue onto the "Investors Relations” site. About United Western Bancorp, Inc. Denver-based United Western Bancorp, Inc. is focused on developing its community-based banking network through its subsidiary, United Western Bank, by strategically positioning branches across Colorado’s Front Range market and certain mountain communities. This area spans the eastern slope of the Rocky Mountains – from Pueblo to Fort Collins, and from metropolitan Denver to the Roaring Fork Valley. United Western Bank plans to grow its network to an estimated 10 to 12 community bank locations over the next three to five years. In addition to community-based banking, United Western Bancorp, Inc. and its subsidiaries offer deposit services to institutional customers and custodial, administrative, and escrow services through Sterling Trust Company. For more information, please visit our web site at www.uwbancorp.com. Forward-Looking Statements This press release contains "forward-looking statements” that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to significant risks and uncertainties. Forward-looking statements include information concerning our future results, interest rates, loan and deposit growth, operations, development and growth of our community bank network and our business strategy. Forward-looking statements sometimes include terminology such as "may,” "will,” "expects,” "anticipates,” "predicts,” "believes,” "plans,” "estimates,” "potential,” "projects,” "intends,” "should” or "continue” or the negative thereof or other variations thereon or comparable terminology. However, a statement may still be forward looking even if it does not contain one of these terms. 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 performance or 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 and growth plans; the timing of 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, general economic conditions, competition, legal and regulatory developments, and future additional risks and uncertainties currently unknown to us. 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2007 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 press release. Any forward-looking statements made by the Company speak only as of the date on which the statements are made and are based on information known to us at that time. We do not intend to update or revise the forward-looking statements made in this press release after the date on which they are made to reflect subsequent events or circumstances, except as required by law. UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)   June 30, December 31,   2008   2007 Assets Cash and due from banks $ 23,333 $ 21,650 Interest-earning deposits 1,573 3,156 Federal funds sold 12,000   16,000   Total cash and cash equivalents 36,906 40,806 Investment securities – available for sale, at estimated fair value 74,120 87,676 Investment securities – held to maturity, at amortized cost 534,273 574,105 Community bank loans, net 922,410 697,732 Wholesale loans, net 463,709 557,049 FHLBank stock, at cost 28,656 39,913 Mortgage servicing rights, net 10,653 11,971 Accrued interest receivable 8,788 10,551 Other receivables 16,994 14,120 Premises and equipment, net 21,753 16,949 Bank owned life insurance 24,756 24,279 Other assets, net 11,660 11,737 Deferred income taxes 16,669 6,113 Foreclosed real estate 2,579   3,109   Total assets $ 2,173,926   $ 2,096,110     Liabilities and shareholders’ equity Liabilities: Deposits $ 1,433,033 $ 1,385,481 Custodial escrow balances 46,777 34,172 FHLBank borrowings 431,376 406,129 Borrowed money 103,038 97,428 Junior subordinated debentures owed to unconsolidated subsidiary trusts 30,442 30,442 Income tax payable 910 222 Other liabilities   24,803     28,815   Total liabilities   2,070,379     1,982,689     Shareholders’ equity: Common stock 1 1 Additional paid-in capital 22,730 23,724 Retained earnings 97,691 92,364 Accumulated other comprehensive loss (16,875 ) (2,668 ) Total shareholders’ equity 103,547   113,421   Total liabilities and shareholders’ equity $ 2,173,926   $ 2,096,110   UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except share information)     Quarter Ended Six Months Ended June 30,   June 30,   March 31, June 30,   June 30, 2008 2007 2008 2008 2007 Interest and dividend income: Community bank loans $ 13,587 $ 10,315 $ 13,425 $ 27,013 $ 19,402 Wholesale residential loans 4,970 6,931 5,645 10,613 14,573 Other loans 475 2,172 1,188 1,664 4,147 Investment securities 8,057 9,860 8,652 16,709 20,602 Deposits and dividends 405 817 570 975 1,588 Total interest and dividend income 27,494 30,095 29,480 56,974 60,312   Interest expense: Deposits 2,453 8,767 3,712 6,164 15,396 FHLBank borrowings 3,663 2,257 3,793 7,456 7,741 Other borrowed money 1,492 2,350 1,765 3,258 4,557 Total interest expense 7,608 13,374 9,270 16,878 27,694   Net interest income before provision for credit losses 19,886 16,721 20,210 40,096 32,618 Provision for credit losses 2,080 567 1,536 3,616 925 Net interest income after provision for credit losses 17,806 16,154 18,674 36,480 31,693   Noninterest income: Custodial, administrative and escrow services 2,580 2,033 2,560 5,140 4,025 Loan administration 1,202 1,770 1,456 2,658 3,468 Gain on sale of loans and securities 142 81 182 324 914 Other 630 805 625 1,254 1,624 Total noninterest income 4,554 4,689 4,823 9,376 10,031   Noninterest expense: Compensation and employee benefits 7,628 6,562 7,707 15,334 12,902 Subaccounting fees 4,485 5,770 5,215 9,700 11,754 Amortization of mortgage servicing rights 672 1,004 709 1,381 1,982 Occupancy and equipment 717 728 810 1,527 1,378 Postage and communication 369 326 342 712 629 Professional fees 763 682 601 1,364 1,188 Mortgage servicing rights subservicing fees 457 511 441 898 1,031 Other general and administrative 2,884 2,244 2,863 5,747 4,796 Total noninterest expense 17,975 17,827 18,688 36,663 35,660   Income before income taxes 4,385 3,016 4,809 9,193 6,064 Income tax provision 1,320 774 1,445 2,765 1,569 Net income $ 3,065 $ 2,242 $ 3,364 $ 6,428 $ 4,495   Net income per share – basic $ 0.43 $ 0.31 $ 0.47 $ 0.89 $ 0.62 Net income per share – assuming dilution 0.43 0.31 0.46 0.89 0.62 UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited) (Dollars in thousands)     Six Months Ended June 30, 2008   2007   Average Balance   Interest   Average Rate Average Balance   Interest   Average Rate   Assets Interest-earning assets: Community bank loans: Commercial real estate loans $257,957 $8,728 6.80 % $160,215 $5,934 7.47 % Construction and development loans 290,208 9,137 6.33 109,213 5,050 9.32 Originated SBA loans 100,901 3,999 7.97 98,674 4,609 9.42 Multifamily loans 50,497 1,602 6.34 57,441 1,868 6.50 Commercial loans 101,641 3,386 6.70 35,482 1,560 8.87 Consumer and other loans 6,249   161 5.18   9,924   381 7.74   Total community bank loans 807,453 27,013 6.73 470,949 19,402 8.31 Wholesale assets: Residential loans 400,833 10,613 5.30 557,931 14,573 5.22 Purchased SBA loans and securities 168,151 2,896 3.46 227,928 6,155 5.45 Mortgage-backed securities 591,105   15,477 5.24   703,510   18,594 5.29   Total wholesale assets 1,160,089 28,986 5.00 1,489,369 39,322 5.28 Interest-earning deposits 17,128 231 2.67 18,869 483 5.09 FHLBank stock 39,860   744 3.75   39,451   1,105 5.65   Total interest-earning assets 2,024,530 $56,974 5.64 % 2,018,638 $60,312 6.00 %   Noninterest-earning assets: Cash 18,315 20,494 Allowance for credit losses (11,378 ) (8,990 ) Premises and equipment 19,500 10,150 Other assets 81,956   83,214   Total noninterest-earning assets 108,393   104,868   Total assets $2,132,923   $2,123,506     Liabilities and Shareholders’ Equity Interest-bearing liabilities: Passbook accounts $254 $1 0.82 % $156 $1 1.29 % Money market and NOW accounts 1,162,272 5,571 0.96 1,243,066 14,654 2.38 Certificates of deposit 29,372 592 4.05 35,940 741 4.16 FHLBank borrowings 416,145 7,456 3.54 316,981 7,741 4.86 Repurchase agreements 77,509 1,478 3.77 68,182 1,651 4.82 Borrowed money and junior subordinated Debentures 51,450   1,780 6.84   66,159   2,906 8.74   Total interest-bearing liabilities 1,737,002 16,878 1.93 % 1,730,484 27,694 3.21 %   Noninterest-bearing liabilities: Demand deposits (including custodial escrow balances) 259,470 259,759 Other liabilities 21,525   20,677   Total noninterest-bearing liabilities 280,995 280,436 Shareholders’ equity 114,926   112,586   Total liabilities and shareholders’ equity $2,132,923   $2,123,506     Net interest income before provision for credit losses $40,096 $32,618 Interest rate spread 3.71 % 2.79 % Net interest margin 3.99 % 3.25 % Ratio of average interest-earning assets to average interest-bearing liabilities   116.55 %   116.65 % UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited) (Dollars in thousands)     Three Months Ended June 30, 2008 March 31, 2008 Average Balance   Interest   Average Rate Average Balance   Interest   Average Rate Assets Interest-earning assets: Community bank loans: Commercial real estate loans $286,604 $4,718 6.62 % $229,310 $4,010 7.03 % Construction and development loans 299,432 4,351 5.84 280,984 4,786 6.85 Originated SBA loans 102,589 1,903 7.46 99,213 2,096 8.50 Multifamily loans 51,841 784 6.05 49,153 817 6.65 Commercial loans 112,025 1,742 6.25 91,257 1,644 7.25 Consumer and other loans 7,457   89 4.80   5,042   72 5.74   Total community bank loans 859,948 13,587 6.35 754,959 13,425 7.15 Wholesale assets: Residential loans 381,762 4,970 5.21 419,904 5,645 5.38 Purchased SBA loans and securities 162,120 926 2.30 174,181 1,970 4.55 Mortgage-backed securities 583,533   7,606 5.21   598,677   7,870 5.26   Total wholesale assets 1,127,415 13,502 4.79 1,192,762 15,485 5.19 Interest-earning deposits 14,958 75 1.98 19,298 156 3.20 FHLBank stock 39,802   330 3.33   39,917   414 4.17   Total interest-earning assets 2,042,123 $27,494 5.40 % 2,006,936 $29,480 5.89 %   Noninterest-earning assets: Cash 18,600 18,029 Allowance for credit losses (12,138 ) (10,618 ) Premises and equipment 20,676 18,324 Other assets 82,835   81,079   Total noninterest-earning assets 109,973   106,814   Total assets $2,152,096   $2,113,750     Liabilities and Shareholders’ Equity Interest-bearing liabilities: Passbook accounts $274 $1 0.79 % $235 $– 0.85 % Money market and NOW accounts 1,170,455 2,189 0.75 1,154,089 3,383 1.18 Certificates of deposit 27,305 263 3.87 31,439 329 4.21 FHLBank borrowings 440,110 3,663 3.29 392,179 3,793 3.83 Repurchase agreements 78,346 629 3.18 76,673 848 4.38 Borrowed money and junior subordinated Debentures 51,458   863 6.63   51,442   917 7.05   Total interest-bearing liabilities 1,767,948 7,608 1.71 % 1,706,057 9,270 2.17 %   Noninterest-bearing liabilities: Demand deposits (including custodial escrow balances) 247,729 271,210 Other liabilities 22,531   20,519   Total noninterest-bearing liabilities 270,260 291,729 Shareholders’ equity 113,888   115,964   Total liabilities and shareholders’ equity $2,152,096   $2,113,750     Net interest income before provision for credit losses $19,886 $20,210 Interest rate spread 3.69 % 3.72 % Net interest margin 3.92 % 4.05 % Ratio of average interest-earning assets to average interest-bearing liabilities   115.51 %   117.64 % UNITED WESTERN BANCORP, INC. AND SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Unaudited) (Dollars in thousands, except share information)     Quarter Ended Six Months Ended June 30,   June 30,   March 31, June 30,   June 30,   2008     2007     2008     2008     2007     Weighted average shares – basic 7,198,357 7,256,622 7,217,399 7,207,878 7,256,598 Weighted average shares – assuming dilution 7,210,304 7,298,183 7,238,411 7,222,236 7,296,998 Number of shares outstanding at end of period 7,221,723 7,303,608 7,318,818 7,221,723 7,303,608   Operating Ratios & Other Selected Data (1) Return of average equity 10.76 % 7.91 % 11.60 % 11.19 % 7.99 % Operating efficiency ratios (3) 70.80 % 78.58 % 71.82 % 71.32 % 78.97 % Book value per share (end of period) $ 14.34 $ 15.29 $ 15.38 $ 14.34 $ 15.29 Yield on assets 5.40 % 6.07 % 5.89 % 5.64 % 6.00 % Cost of liabilities 1.71 % 3.14 % 2.17 % 1.93 % 3.21 % Net interest margin (2) 3.92 % 3.38 % 4.05 % 3.99 % 3.25 %   Asset Quality Information (1) Community bank allowance for credit losses $ 11,972 $ 6,906 $ 10,033 $ 11,972 $ 6,906 Allowance to community bank loans 1.28 % 1.31 % 1.22 % 1.28 % 1.31 % Residential allowance for credit losses $ 1,645 $ 2,242 $ 1,635 $ 1,645 $ 2,242 Allowance to residential loans 0.45 % 0.44 % 0.42 % 0.45 % 0.44 % Allowance for credit losses $ 13,665 $ 9,217 $ 11,721 $ 13,665 $ 9,217 Allowance for credit losses to total loans 0.98 % 0.79 % 0.89 % 0.98 % 0.79 % Community bank net charge offs $ 16 $ – $ 52 $ 68 $ 197 Residential net charge offs 120 245 201 321 273 Residential nonaccrual loans 7,701 9,498 6,963 7,701 9,498 Commercial nonaccrual loans 5,304 2,755 5,031 5,304 2,755 Commercial guaranteed nonaccrual loans 1,368 2,233 1,094 1,368 2,233 Total nonaccrual assets and REO 15,584 15,723 15,802 15,584 15,723 Total residential loans allowance to nonaccrual residential loans 21.36 % 23.60 % 23.50 % 21.36 % 23.60 % Ratio of allowance for credit losses to total nonaccrual loans (less guaranteed portion) 117.43 % 91.99 % 107.53 % 117.43 % 91.99 % Ratio of allowance for credit losses to total nonaccrual loans 105.07 % 75.22 % 97.72 % 105.07 % 75.22 % Total nonaccrual residential loans to total residential loans 2.10 % 1.88 % 1.80 % 2.10 % 1.88 % Total nonaccrual commercial loans to total commercial loans 0.51 % 0.41 % 0.54 % 0.51 % 0.41 % Total nonaccrual assets and REO to total assets 0.72 % 0.77 % 0.74 % 0.72 % 0.77 % (1) Calculations are based on average daily balances where available and monthly averages otherwise, as applicable. (2) Net interest margin has been calculated by dividing net interest income before credit losses by average interest earning assets. (3) The operating efficiency ratios have been calculated by dividing noninterest expense, excluding amortization of mortgage servicing rights, by operating income. Operating income is equal to net interest income before provision for credit losses plus noninterest income.